Karnataka High Court Grants Relief To WinZo's Subsidiary Seeking Payment Of Salaries To Employees After Account Freeze By ED

The Karnataka High Court has asked Gaming company WinZo's subsidiary Zo Private Limited to approach the ED with a list of its employees to whom salaries are to be paid, directing the agency to verify the same and communicate it to the concerned bank enabling the company to make payments. The petitioner company, whose account was frozen by the ED, had sought for a declaring that the agency's search and seizure at the office of M/s FinAdvantage Consulting [P] Limited–the petitioner's outsource accounting firm, is illegal and void.It had questioned the panchanama drawn during the search and seizure and the order dated 30.12.2025 under Section 17(1A) of the Prevention of Money Laundering Act freezing its account. The company had argued before the high court that it be permitted to operate its frozen bank accounts, to disburse the salaries and contractual/statutory dues. The court had permitted the petitioner to file, with the ED, the details of its employees who have to be paid the salaries. The petitioner had filed those details, but the ED had not considered them.Justice BM Shyam Prasad in his order observed that when there is an initiation of initial freezing under Section 17[1A] PMLA, the prohibition on the operation of the account is subject to prior permission of the Authorized Officer. This would mean that in a given case, it would be open to the concerned Officer to permit the operation of the account. "This Court, when it is not in dispute that the petitioner and the Holding Company 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 to communicate to the concerned bank for authorization to pay salaries to the employees after due verification...The petitioner is reserved with liberty to file with the respondent, within a week from today, the list of employees to whom the salaries have to be paid for the month of January 2026. The respondent is directed to verify the list within three [3] days from the date of receipt thereof and communicate to the Bank forthwith to enable the petitioner to pay salaries to the employees for the month of January 2026". The court further said that the petitioner for the months of February/March 2026 shall be at liberty to file the details of the employees before 15th of these months. It directed the ED to verify the same and communicate to the concerned Bank permitting the petitioner to operate the account to defray the salary expenses. The court said that it had passed the direction for the next two months, subject to the Adjudicating Authority's decision. The company argued that the records show beyond doubt that the ED was aware that Holding Company had extended an unsecured loan of Rs.231 Crores to the petitioner much prior to the date of the search. If the ED had known about this transaction, it could not have been the basis for an order under Section 17[1A] of the Act during the search and seizure proceedings. The ED said that the concerned Officer is authorized under Section 17[1] PMLA while recording reasons, to conduct search and seizure; and the authorized Officer during the search, based on the information gathered during the proceedings and the information furnished earlier, has directed freezing of the petitioner's account because it was the only practical recourse to ensure that the proceeds are not dissipated. It was contended that petitioner is essentially invoking the jurisdiction of the High Court under Article 226 of the Constitution of India to examine the merits of the decision based on the subjective satisfaction of the officer/s and that cannot be in permitted in law. For context the authorized officer had on January 22 continued the operation of the freezing order. "This Court must observe that the petitioner's case hinges not just against the subjective satisfaction that could be, but also on the specific assertion that there was no material permissible under Section 17[1A] of the Act to record the subjective satisfaction. The petitioner contends that the decision to freeze the account is based on the information which is furnished even before the date of search, but 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 question is answered accordingly," the court said. The court disposed of the petition giving 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. Case title: ZO PVT. LTD. v/s DIRECTORATE OF ENFORCEMENTWRIT PETITION NO.962/2026 (GM-RES) Click Here To Read/Download Order

Karnataka High Court Grants Relief To WinZo's Subsidiary Seeking Payment Of Salaries To Employees After Account Freeze By ED

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