Karnataka High Court Asks WinZo Subsidiary To Share Employee Details With ED In Account Freeze Case

The Karnataka High Court on Tuesday directed Zo Private Limited, a subsidiary of gaming company WinZo, to submit details of its employees to the Enforcement Directorate (ED) while considering the company's interim plea seeking de-freezing of its bank account to enable payment of salaries.

Justice B. M. Shyam Prasad was hearing Zo Private Limited's petition challenging the ED's freezing of its bank account involving about Rs 193 crore in connection with an Enforcement Complaint Information Report registered against WinZo.

The court said the ED must be given an opportunity to verify the petitioner's claim regarding payment of salaries. It directed Zo Private Limited to furnish the names of employees, their designations and the bank accounts to which salaries are to be paid.

"The jurisdictional question apart which will have to be considered, respondent (ED) must have an opportunity to have their say whether they could dispute at all the strength of the employees to whom the petitioner has to pay salaries.Therefore, the petitioners representative is called upon to furnish names of the employees, the designation and the account details to which the salaries are to be paid, to the respondent at the earliest calling upon the respondent to take a stand based on such details to facilitate an order,” the court said.

Senior advocate Sajjan Poovaya, appearing for Zo Private Limited, submitted that there was no justification for the ED to assume jurisdiction under Section 17(1A) of the Prevention of Money Laundering Act.

He submitted that pursuant to inter-corporate investments and loans extended by WinZo, board resolutions were passed obliging the petitioner to disburse salaries and meet statutory obligations.

He further submitted that permitting limited operation of the frozen account solely for salary payments would not allow WinZo to seek similar relief.

It was argued earlier that WinZo had invested in the petitioner in 2023. It was also submitted that there was no ECIR against Zo Private Limited and no allegation that its activities attracted proceedings under the PMLA. The petitioner stated that Zo Private Limited is not a gaming company.

It was further submitted that the freezing order was passed after a search was conducted at the office of the company's accountants, during which information was received that WinZo had extended a loan to the petitioner. The petitioner said the freezing order brought its operations to a standstill.

The ED alleged that the search revealed diversion of proceeds of crime by WinZo Games into Zo Private Limited's account.

The ED further alleged that WinZo engaged in criminal activities by making users play real-money games against bots, AI or algorithms without disclosure, and that it made winnings of around Rs 177 crore through such practices.

The court directed the petitioner to furnish the employee details to the ED over email at the earliest and listed the matter on January 29 for consideration of interim relief.