[Cites 8, Cited by 0]
Karnataka High Court
Zo Pvt. Ltd vs Directorate Of Enforcement on 2 February, 2026
Author: B M Shyam Prasad
Bench: B M Shyam Prasad
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WP No. 962/2026
HC-KAR
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 2ND DAY OF FEBRUARY, 2026
BEFORE
THE HON'BLE MR. JUSTICE B M SHYAM PRASAD
WRIT PETITION NO.962/2026 (GM-RES)
BETWEEN:
ZO PVT. LTD.
A COMPANY INCORPORATED UNDER
THE COMPANIES ACT, 2013
HAVING ITS REGISTERED OFFICE AT
NO.55, 2ND FLOOR, LANE-2,
WESTEND MARG,
SAIDULLAJAB, NEAR SAKET
METRO STATION,
GADAIPUR, SOUTH-WEST DELHI,
NEW-DELHI, DELHI, INDIA-110030
REPRESENTED BY ITS
AUTHORISED REPRESENTATIVE,
MS. SAUMYA SINGH RATHORE
Digitally
signed by ...PETITIONER
VANAMALA
N (BY SRI.SAJAN POOVAYYA, SENIOR ADVOCATE FOR
Location: SRI.ROHAN KOTHARI., ADVOCATE)
HIGH
COURT OF
KARNATAKA AND:
DIRECTORATE OF ENFORCEMENT
MINISTRY OF FINANCE,
DEPARTMENT OF REVENUE,
GOVERNMENT OF INDIA
BANGALORE ZONAL OFFICE,
3RD FLOOR, BLOCK B,
BMTC BUILDING,
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SHANTINAGAR, TTMC, K. H. ROAD,
SHANTINAGAR, BANGALORE,
KARNATAKA - 560 027.
...RESPONDENT
(BY SRI.MADHU N RAO, STANDING COUNSEL)
THIS W.P. IS FILED UNDER ARTICLES 226 AND
227 OF THE CONSTITUTION OF INDIA PRAYING TO (A)
DECLARE THAT THE IMPUGNED SEARCH AND SEIZURE
CARRIED OUT BY THE RESPONDENT AT THE OFFICE
OF M/S FINADVANTAGE CONSULTING (P). LTD.IN
FURTHERANCE OF INVESTIGATION OF
ECIR/BGZO/25/2025 (AS RECORDED IN PANCHANAMA
DATED 30.12.2025 ANNEXED AS ANNEXURE-A) WAS
ILLEGAL AND VOID; (B) QUASH AND SET ASIDE THE
SEARCH AND SEIZURE CARRIED OUT BY THE
RESPONDENT AT THE OFFICE OF M/S FINADVANTAGE
CONSULTING (P) LTD. ON 30.12.2025 IN FURTHERANCE
OF INVESTIGATION OF ECIR/BGZO/25/2025 (AS
RECORDED IN PANCHANAMA DATED 30.12.2025
ANNEXED AS ANNEXURE-A). (C) DECLARE THAT ALL
ACTIONS UNDERTAKEN BY THE RESPONDENT AS A
CONSEQUENCE OF AND IN FURTHERANCE OF THE
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IMPUGNED SEARCH AND SEIZURE CARRIED OUT BY
THE RESPONDENT AT THE OFFICE OF M/S
FINADVANTAGE CONSULTING (P) LTD. ON 30.12.2025
IN FURTHERANCE OF INVESTIGATION OF
ECIR/BGZO/25/2025 (AS RECORDED IN PANCHANAMA
DATED 30.12.2025 ANNEXED AS ANNEXURE-A), ARE
ALSO ILLEGAL; (D) QUASH AND SET ASIDE ALL
ACTIONS TAKEN CONSEQUENT TO AND IN
FURTHERANCE OF THE IMPUGNED SEARCH AND
SEIZURE INCLUDING THE IMPUGNED FREEZING
ORDER DATED 30.12.2025 PASSED BY THE
RESPONDENT UNDER SECTION 17(1A) PMLA IN ECIR
BEARING NO. ECIR/BGZO/25/2025 (ANNEXURE-B)
FOR FREEZING THE PETITIONER'S BANK ACCOUNTS,
MUTUAL FUND INVESTMENTS AND FIXED ACCOUNTS,
IN THE INTEREST OF JUSTICE AND EQUITY.
THIS PETITION, COMING ON FOR PRELIMINARY
HEARING, THIS DAY, ORDER WAS MADE THEREIN AS
UNDER:
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CORAM: HON'BLE MR. JUSTICE B M SHYAM PRASAD
ORAL ORDER
The petitioner, a subsidiary of M/s. Winzo
Private Limited [the Holding Company], has filed this
petition for a declaration that the search and seizure
at the office of M/s FinAdvantage Consulting [P]
Limited [the petitioner's outsource accounting firm] is
illegal and void calling in question the panchanama
drawn during the search and seizure and the order
dated 30.12.2025 [Annexure-A] under Section 17[1A]
of the Prevention of Money Laundering Act, 2002 [for
short, 'the Act'].
2. This Court, on 19.01.2026, has heard
Sri.Sajan Poovayya, the learned Senior Counsel for
the petitioner, on the petitioner's limited request for
an order to operate the accounts under the impugned
order dated 30.12.2025 to disburse the salaries and
contractual/statutory dues. This Court has permitted
the petitioner to file, with the respondent, the details
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of the employees to whom the petitioner proposes to
defray the salaries observing, on 27.01.2026, that the
respondent must have an opportunity. The petitioner
has filed those details, but the respondent has not
considered them as it would rather invite the decision
of this Court on merits.
3. The petitioner's grievance is examined in
the light of the scheme under the Act on freezing
under Section 17[1A] thereof. The order to freeze an
account must be when the officer, who is authorized
to conduct the search and seize the records or
property, is of the opinion that it is not practical to
seize the property1. The authorized officer who directs
freezing will have to apply, as contemplated under
Section 17[4] of the Act, with the Adjudicating
1 Where it is not practicable to seize such order or property,
the officer authorized under sub-section (1), may make an
order to freeze such property whereupon the property
shall not be transferred or otherwise dealt with, except
with the prior permission of the officer making such order,
and a copy of such order shall be served on the person
concerned.
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Authority under Section 8 of the Act and for the
continuation of the freezing, the officer authorized by
the Director must, in exercise of power under Section
20 of the Act2, record reasons to believe why there
must be continuance and after recording the reasons
for belief may continue the freezing for a period not
exceeding 180 days. On the expiry of the
continuation of freezing, the person concerned must
be at liberty to operate their account as envisaged
under Section 20[3]3 of the Act unless the
Adjudicating Authority permits further continuation.
2 Where any property has been seized under section 17 or
section 18 or frozen under sub-section (1A) of Section 17
and the officer authorized by the Director in this behalf,
has, on the basis of material in his possession, reason to
believe (the reason for such belief to be recorded by him in
writing) that such property is required to be retained for
the purposes of adjudication under section 8, such
property may, if seized, be retained or if frozen, may
continue to remain frozen, for a period of not exceeding
one hundred and eighty days from the day on which such
property was seized or frozen, as the case may be.
3 On the expiry of the period specified in sub-section(1), the
property shall be returned to the person from whom such
property was seized or whose property was ordered to be
frozen unless the Adjudicating Authority permits retention
or continuation of freezing of such property beyond the
said period.
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4. During the pendency of this petition, the
Officer who is authorized has passed an order for
continuance on 22.01.2026, and the petitioner has
not called in question this order. However, Sri Sajan
Poovayya canvasses that if the impugned order dated
30.12.2025 freezing the account under Section
17[1A] of the Act is impermissible, the Order dated
22.01.2026 for continuance of such freezing must
also be impermissible and therefore it would be open
to the petitioner to successfully contend that,
notwithstanding the order dated 22.01.2026, this
Court must intervene in exercise of jurisdiction under
Article 226 of the Constitution of India.
5. On merits of the petitioner's grievance
with the impugned order dated 30.12.2025 under
Section 17[1A] of the Act, Sri Sajan Poovayya submits
that the records show beyond doubt that the
respondent was aware that Holding Company had
extended an unsecured loan of Rs.231 Crores to the
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petitioner much prior to the date of the search and if
the respondent 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 and at the most there could be a
cause to invoke jurisdiction under Section 5 of the
Act. The learned Senior Counsel, relying upon these,
emphasizes that the impugned order dated
30.12.2025 is without jurisdiction.
6. Sri Madhu N Rao, the learned standing
counsel for the respondent, submits that the Officer
is authorized under Section 17[1] of the Act,
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. The learned counsel contends that
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the petitioner is essentially invoking the jurisdiction
of this 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 law.
7. These submissions are examined to decide
the following question.
Whether this Court must intervene
when the Authority under Section 20 of
the Act has already passed an order for
the continuance of freezing of the
account which will not be beyond 180
days unless the Adjudicating Authority
decides on further continuing the
freezing.
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
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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.
8. The next question presented for
consideration is whether this Court, while relegating
the petitioner to work out its remedy as against the
continuance of freezing of its account, must permit
operation of the account for defraying the salary
expenses of the employees on the rolls of the
Petitioner and the Holding Company in exercise of
jurisdiction under Article 226 of the Constitution of
India. A crucial fact, apart from the allegation that
the petitioner is extended an unsecured loan from out
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of the proceeds of crime, 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.
9. The petitioner contends that if its
employees are engaged in generating Micro-drama
content, the Holding Company's employees are on the
rolls for the conduct of the Non-Real Money Games
segment of the business. These employees have been
on the rolls prior to the proceedings. The crime
alleged as against the petitioner [and its Holding
Company] is that it has engaged in Real Money
Games which would be impermissible. If the amount
frozen in the petitioner's account is about Rs.230
Crores, [the respondent contends that amount frozen
is Rs.193 Crores], the petitioner seeks to
incur/defray a sum of Rs.8 Crores to Rs.11 Crores
per month.
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10. When there is an initiation of initial
freezing under Section 17[1A] of the Act, the
prohibition on the operation of the account is subject
to prior permission of the Officer, and this would
mean that in a given case, it would be open to the
concerned Officer to permit the operation of the
account. Further, Sri Sajan Poovayya, relying upon
the orders of the High Court of Delhi in M/s Art
Housing Finance [India] Limited v. Directorate of
Enforcement and Ors, submits that the respondent
has agreed even when there is an attachment under
Section 5 of the Act to permit the concerned to pay
the salaries of the employees and that the respondent
has also reported compliance with the directions
issued in exercise of jurisdiction under Article 226 of
the Constitution of India.
11. This Court, when it is not in dispute that
the petitioner and the Holding Company are engaged
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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 continuation
of the prohibition against the use of the account,
because of the order under Section 20 of the Act
which is dated 31.12.2025, will be until 31.03.2026.
Therefore, this Court's direction is for the present
month [January 2026] and the next two months,
subject to the Adjudicating Authority's decision. As
such, the following:
ORDER
[A] 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.
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[B] 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.
[C] 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.
[D] The petitioner for February/March 2026 shall
be at liberty to file the details of the employees
before 15th of these months. The respondent
shall also verify the same and communicate to
the Bank/s permitting the petitioner to operate
the account to defray the salary expenses.
Sd/-
[B M SHYAM PRASAD]
JUDGE
SA
List No.: 3 Sl No.: 1
