ED moves SC against Karnataka HC relief to WinZO on salary payments

The Enforcement Directorate (ED) has moved the Supreme Court challenging a Karnataka High Court order that allowed salary payments to employees of online gaming platform WinZO, escalating a legal tussle over the freezing of funds linked to alleged money laundering.

In a Special Leave Petition (SLP) filed before the apex court, the federal agency has sought a stay on the High Court’s directions permitting the release of funds for salary disbursement. According to court filings, the ED has specifically urged the court to set aside the relief granted to WinZO’s subsidiary, Zo Pvt Ltd., arguing that the funds form part of assets under investigation.

Anticipating the move, WinZO had filed a caveat in the Supreme Court to ensure that no adverse order is passed without hearing its side. The matter is expected to be listed in April. 

The dispute stems from a Karnataka High Court ruling that enabled Zo Pvt Ltd. to pay salaries to employees, even as the ED continued to freeze its bank accounts.

Justice BM Shyam Prasad had held that while the legality of the freezing action must be examined under the statutory mechanism of the Prevention of Money Laundering Act (PMLA), salary payments could not be brought to a standstill.

Zo Pvt Ltd., a subsidiary of WinZO, had approached the High Court challenging a search and seizure operation conducted by the ED on December 30, 2025, at the premises of its outsourced accounting firm, FinAdvantage Consulting Pvt Ltd.

Following the search, the agency issued an order under Section 17(1A) of the PMLA to freeze Zo’s bank accounts, mutual fund holdings and fixed deposits, citing the need to prevent dissipation of alleged proceeds of crime linked to impermissible real-money gaming activities. 

The company, however, argued that the ED was already aware of an unsecured loan of over ₹230 crore extended by WinZO to Zo prior to the search, and that this transaction could not justify invoking Section 17(1A). It contended that, at most, the agency could have resorted to provisional attachment under Section 5 of the PMLA.

During the pendency of the writ petition, the ED’s authorised officer issued a subsequent order on January 22, 2026, continuing the freezing of accounts under Section 20 of the PMLA, which allows such action for up to 180 days pending adjudication.

On the question of salary payments, the High Court recorded that WinZO had, even prior to the search, assigned Zo the responsibility of handling day-to-day operations, including payroll. The company informed the court that between ₹193 crore and ₹230 crore remained frozen in its accounts, while it required approximately ₹8–11 crore per month to pay employees engaged in permissible business segments such as non-real money gaming and content generation.

Taking note of these submissions, the court allowed limited relief to ensure salaries were paid, while declining to adjudicate on the validity of the ED’s freezing order at this stage. It observed that the statutory framework under the PMLA provides for such disputes to be examined by the designated adjudicating authority.

Zo was represented by senior advocate Sajan Poovayya along with advocate Rohan Kothari, while the ED was represented by standing counsel Madhu Rao.