Karnataka HC Directs ED to Verify and Clear WinZO Staff Wages

Karnataka High Court has granted interim relief to employees of WinZO by allowing the disbursement of salaries despite an ongoing investigation by the Directorate of Enforcement (ED).

The ruling, delivered by Justice B.M. Shyam Prasad in early February 2026, ensures that hundreds of staff members do not face financial hardship due to frozen corporate accounts.

The Legal Gridlock: ED vs. WinZO

The dispute began following an ED search on December 30, 2025, at the premises of an outsourced accounting firm linked to WinZO’s subsidiary, Zo Pvt. Ltd.

Under Section 17(1A) of the Prevention of Money Laundering Act (PMLA), the ED froze assets estimated between ₹193 crore and ₹230 crore, citing concerns over “proceeds of crime” linked to real-money gaming activities.

The agency alleged that user funds were being mismanaged and that some operations involved bot-based gameplay without user consent.

Humanitarian Grounds and Judicial Logic

Zo Pvt. Ltd. challenged the freeze, arguing that while the legal battle over PMLA continues, employee livelihoods should not be “paralysed.”

The petitioner noted that the subsidiary is responsible for day-to-day operations and requires approximately ₹8–11 crore monthly for salaries.

The Court observed that WinZO and its subsidiary are engaged in legally permissible business segments, such as non-real money gaming and content creation.

Justice Shyam Prasad ruled that the PMLA Adjudicating Authority must decide on the legality of the account freeze.

However, he clarified that the company is permitted to operate its accounts specifically for paying salaries and statutory dues.

The Roadmap for Salary Disbursement

To ensure transparency, the High Court established a strict verification mechanism:

• January 2026 Salaries: The company must submit a detailed list of employees, including names and bank details, to the ED. The agency is required to verify this list within three days.
• Ongoing Relief: Similar permission can be sought for February and March 2026.
• Banking Communication: Once verified, the ED must immediately notify the concerned banks. This notification will allow the release of funds specifically for employee wage payments.

This ruling underscores the judiciary’s attempt to balance aggressive financial enforcement.

It also protects the fundamental right of employees to receive timely compensation.

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