Karnataka High Court grants relief to Winzo employees, says their salaries must be paid

The Karnataka High Court has issued directions to enable the payment of salaries to online gaming platform Winzo's employees, even as the Directorate of Enforcement (ED) continues to freeze the bank accounts of its subsidiary Zo, which is responsible for salary payments [Zo Vs Directorate of Enforcement].

Justice BM Shyam Prasad held that the challenge to the freezing of accounts would have to be pursued before the adjudicating authority under the Prevention of Money Laundering Act, 2002 (PMLA), but salary payments could not be paralysed meanwhile

"This Court, when it is not in dispute that the petitioner and the Holding Company (Winzo) are engaged in the business which is permissible in law and they are seeking permission to use the account frozen for payment of salary, is of the view that there must be a direction to the respondent (ED) to communicate to the concerned bank for authorization to pay salaries to the employees after due verification," the Court said.

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

Pursuant to the search, the ED passed an order under Section 17(1A) of the PMLA, freezing Zo’s bank accounts, mutual fund investments and fixed deposits. The ED stated that the freezing was necessary to prevent dissipation of alleged proceeds of crime arising from impermissible real-money gaming activities.

Zo contended that the ED was already aware, prior to the search, that Winzo had extended an unsecured loan of over ₹230 crore to Zo, and that this transaction could not have formed the basis for invoking Section 17(1A) [which empowers ED to freeze property, including bank accounts] during the search. According to Zo, at the highest, the ED could have proceeded under Section 5 of the PMLA, which deals with provisional attachment.

During the pendency of the writ petition, the authorised officer under PMLA passed an order dated January 22, 2026, continuing the account freezing under Section 20 of the PMLA - which permits the continuation of seizure or freezing for up to 180 days, subject to adjudication.

On the issue of salary disbursement, the Court recorded that much before the search and seizure, Winzo had resolved to entrust Zo with the responsibility of managing day-to-day operations, including payment of salaries.

“A crucial fact… will be that the Holding Company has resolved, much before the date of search and seizure, to entrust to the petitioner the day-to-day operations of its business with the responsibility of paying salaries.”

The Court also noted that employees of both Zo and Winzo were already on the rolls prior to the ED action.

“These employees have been on the rolls prior to the proceedings.”

The Court took note of Zo’s submission that while approximately ₹193–230 crore stood frozen in its accounts, it sought permission to disburse ₹8–11 crore per month towards salaries of employees engaged in permissible segments of the business, including non-real money gaming and content generation.

The High Court declined to examine the legality of the freezing order in writ jurisdiction at this stage, noting that the statutory scheme under the PMLA required such issues to be examined by the adjudicating authority.

“Whether any further information was gathered during the search is a question of fact which can be examined by the Adjudicating Authority to decide whether the freezing of the petitioner’s account must continue beyond 180 days," the February 2 order reads.

The Court accordingly left it open to Zo to contest the continuation of the freeze before the adjudicating authority.

“The petition stands disposed of with liberty to the petitioner to contest in the proceedings with the Adjudicating Authority against the continuance of the order to freeze its account beyond the period of 180 days.”

However, it told Zo to submit employee salary list for January 2026 within one week to the ED. The ED is then to verify the list within three days and inform banks to enable salary payment.

Zo may seek similar permission for the months of February and March 2026 as well, by filing employee details. The ED has been directed to verify and permit account operation only for salary payments

Zo was represented by Senior Advocate Sajan Poovayya with Advocate Rohan Kothari.

The ED was represented by Standing Counsel Madhu Rao.

[Read Judgment]