ED questions salary claims of WinZO arm ZO as Karnataka HC hears plea on frozen funds

The Karnataka High Court on Tuesday directed online gaming company Zo Pvt Ltd, a wholly owned subsidiary of WinZO Pvt Ltd, to furnish detailed information of employees whose salaries it claims are due, as the court examined its plea seeking partial defreezing of bank accounts attached by the Enforcement Directorate (ED) under the Prevention of Money-Laundering Act (PMLA), 2002.

A Bench led by Justice B M Shyam Prasad was hearing ZO’s petition seeking permission to operate its frozen accounts for the limited purpose of disbursing salaries to around 220 employees and meeting statutory and operational expenses. The assets in question form part of enforcement action initiated by the ED in connection with an ongoing probe into alleged financial irregularities linked to WinZO.

Dispute over employee strength and salary claims

During the hearing, Madhu Rao, counsel for the ED raised objections to ZO’s claim that it was liable to pay salaries to 220 employees, contending that the numbers were inconsistent with the company’s financial and operational profile.

The ED submitted that ZO was incorporated only on May 25, 2023, and that its financial statements showed negligible income and limited expenditure. According to the ED, the company’s income since incorporation was only around ₹4–5 lakh, while total expenses were under ₹50 lakh, which, it argued, did not justify a monthly salary outgo of ₹11.5 crore as claimed by the petitioner.

The agency further contended that ZO had no independent employee strength to support such a claim and alleged that similar relief had already been sought earlier by the holding company, WinZO Pvt Ltd, before another coordinate Bench as well as during proceedings before the PMLA court. Allowing the subsidiary to seek similar relief, the ED argued, would amount to duplicative claims across forums.

ED flags inter-corporate transfers and PMLA proceedings

The ED also placed on record that substantial sums — approximately ₹230–239 crore — were transferred from WinZO to ZO in the form of inter-corporate loans and investments between August and October. It argued that prior to these transfers, ZO had no meaningful business operations or employee-related expenses.

The agency informed the court that it had filed a detailed prosecution complaint on January 23, stating that the alleged proceeds of crime identified during investigation amounted to approximately ₹3,500 crore. Any release of funds from the attached accounts at this stage, the ED submitted, could result in dissipation of alleged proceeds of crime.

The ED further argued that once a freezing order is passed under Section 17(1A) of the PMLA, the statutory mechanism for seeking relief lies before the adjudicating authority under Section 8 of the Act, following submission of records within 30 days of attachment.

ZO cites board resolutions, denies “double claim”

Appearing for ZO, senior counsel Sajan Poovayya countered the ED’s objections, stating that the salary claim did not relate to separate or new employees, but to a common pool of 220 employees who were earlier on WinZO’s rolls.

According to the submission, when WinZO faced regulatory action and attachment of its accounts, board resolutions were passed by both companies under which ZO assumed responsibility for managing WinZO’s day-to-day operations and disbursing salaries, wages and employee-related dues on an interim basis.

The counsel placed reliance on board resolutions authorising ZO to take over operational, administrative and financial responsibilities, including payment of employee salaries and statutory dues of WinZO. He maintained that this was not a case of “two bites at the cherry,” and clarified that if ZO were permitted to pay the salaries, WinZO would not seek similar relief.

Poovayya also raised a jurisdictional challenge to the ED’s freezing order, arguing that the information relied upon by the agency was already available prior to the search, and therefore the power under Section 17(1A) of the PMLA could not have been validly invoked. He submitted that this issue could only be examined by the High Court and not by the adjudicating authority.

Court seeks verification, posts matter to Thursday

After hearing both sides, the court noted that there was a clear dispute regarding the existence, number and liability of employees for whom salaries were claimed. The Bench directed ZO to furnish details of the employees, including their names, designations and bank account details, to the ED at the earliest.

The ED was directed to examine the information and place its response on record, taking a definitive stand on whether it disputes the employee strength and salary liability arising from the board resolutions.

The court clarified that the issue of jurisdiction under the PMLA would be examined separately, but at this stage, the focus was on verifying the salary-related claims to decide whether interim relief could be granted.

The matter has been posted for further hearing on January 29, when the court is expected to consider whether ZO should be permitted limited access to its frozen accounts to meet salary and related obligations.

The Enforcement Directorate (ED) has filed a prosecution complaint—equivalent to a chargesheet—against online real-money gaming platform Winzo Pvt. Ltd., accusing the company of orchestrating a large-scale, bot-driven manipulation of games that allegedly resulted in proceeds of crime amounting to Rs 3,522.05 crore between FY22 and FY26.

The prosecution complaint was filed on January 23, 2026, before the Special Court under the Prevention of Money Laundering Act (PMLA) in Bengaluru. Winzo has been named as the principal accused, along with its directors Paavan Nanda and Saumya Singh Rathore, and its wholly owned subsidiaries in India and overseas—Winzo US Inc (USA), Winzo SG Pte Ltd (Singapore) and ZO Pvt Ltd.