Karnataka High Court
Directorate Of Enforcement vs Zo Pvt Ltd on 9 March, 2026
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 9TH DAY OF MARCH, 2026
PRESENT
THE HON'BLE MRS. JUSTICE ANU SIVARAMAN
AND
THE HON'BLE MR. JUSTICE VIJAYKUMAR A. PATIL
WRIT APPEAL NO. 492 OF 2026 (GM-RES)
BETWEEN:
DIRECTORATE OF ENFORCEMENT
MINISTRY OF FINANCE
DEPARTMENT OF REVENUE
GOVERNMENT OF INDIA
HMT FACTORY PREMISES
NEAR HMT CINEMA 4K
D.RAJAGOPALA CIRCLE
JALAHALLI-560 013.
...APPELLANT
(BY SRI. KULOOR ARVIND KAMATH, ASGI WITH
SRI. MADHU N RAO, ADVOCATE AND SPP FOR
THE ENFORCEMENT DIRECTORATE)
AND:
ZO PVT LTD
A COMPANY INCORPORATED
UNDER THE COMPANIES ACT, 2013
2
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-110 030.
...RESPONDENT
(BY SRI. SAJAN POOVAYYA, SENIOR ADVOCATE FOR
SRI. ROHAN KOTHARI, ADVOCATE FOR C/R)
THIS WRIT APPEAL IS FILED U/S 4 OF THE KARNATAKA
HIGH COURT ACT, 1961, PRAYING TO (a) SET ASIDE THAT PART
OF THE ORDER NAMELY "B", "C" AND "D" DATED 02.02.2026
PASSED BY THE LEARNED SINGLE JUDGE, HIGH COURT OF
KARNATAKA, BENGALURU IN WP No.962/2026 AND ETC.
THIS WRIT APPEAL HAVING BEEN HEARD AND RESERVED
FOR JUDGMENT ON 23.02.2026 AND COMING ON FOR
PRONOUNCEMENT OF JUDGMENT THIS DAY, ANU SIVARAMAN
J., PRONOUNCED THE FOLLOWING:
CORAM: HON'BLE MRS. JUSTICE ANU SIVARAMAN
and
HON'BLE MR. JUSTICE VIJAYKUMAR A. PATIL
3
CAV JUDGMENT
(PER: HON’BLE MRS. JUSTICE ANU SIVARAMAN)
This writ appeal is preferred by the Directorate of
Enforcement challenging the Order dated 02.02.2026,
passed by the learned Single Judge in W.P.No.962/2026
(GM-RES).
2. We have heard Shri. Kuloor Arvind Kamath,
learned Additional Solicitor General of India with Shri.
Madhu N. Rao, learned Special Public Prosecutor, appearing
for the appellant and Shri. Sajan Poovayya, learned senior
counsel as instructed by Shri. Rohan Kothari, learned
advocate appearing for the caveator/respondent.
3. The learned Additional Solicitor General of India
(ASGI) appearing for the appellant – Authority submits that
the bank accounts of the respondent – Zo Private Limited
have been frozen under Section 17(1A) of the Prevention of
Money Laundering Act, 2002 (‘PMLA’ for short) by an Order
dated 30.12.2025. It is submitted that the learned Single
Judge refused to interfere in the Order freezing the accounts
4
and the writ petition was disposed of with liberty to Zo
Private Limited to contest the proceedings before the
Adjudicating Authority against the continuance of the freeze
of its account. However, Zo Private Limited was permitted to
file a list of employees to whom salaries have to be paid for
the month of January, 2026 and the appellant was directed
to verify the list and communicate to the Bank, forthwith, to
enable Zo Private Limited to pay salaries to the employees
for the month of January, 2026. It is further submitted that
the scope of proceedings under the PMLA is such that any
adjudication as to whether an Order under Sections 5 or 17
of the PMLA is required to be continued is subject to an
adjudication before the Adjudicating Authority as provided
under the PMLA.
4. It is contended that the appellant recorded
Enforcement Case Information Report (ECIR) as per
assigned format No.ECIR/BGZO/25/2025 dated 06.11.2025
against Winzo Games Private Limited and others for
investigation of the offence of money laundering under
Section 3 read with Section 4 of the PMLA. The ECIR was
5
registered on the basis of materials relating to multiple
scheduled offences/FIRs registered in different States
alleging cheating, forgery, conspiracy, and fraud in relation
to the real money gaming operations of Winzo Games
Private Limited.
5. It is further contended that the searches under
Section 17 of the PMLA were conducted from 18.11.2025 to
22.11.2025 and 30.12.2025. The investigation allegedly
revealed fraudulent practices and manipulation of gaming
outcomes causing financial loss to users. Thereafter, the
appellant recorded that Winzo Games Private Limited had
generated total proceeds of crime amounting to Rs.3,522.05
Crores during the period from the financial years 2021-22 till
2025-26 (upto 22.08.2025). Further, the books of accounts
revealed that Winzo Games Private Limited had extended
unsecured loans amounting to Rs.255 Crores to its Indian
wholly owned subsidiary- Zo Private Limited, out of which,
Rs.231.20 Crores remained outstanding and Rs.15 Crores
had been withdrawn from the bank accounts of Zo Private
Limited towards salaries and advances to legal consultants
6
of Winzo Games Private Limited during the period of
Enforcement Directorate custody. On the basis of these
findings, it was concluded that a portion of the proceeds of
crime generated by Winzo Games Private Limited had been
diverted and dissipated to Zo Private Limited. In view of
these findings and the risk of flight of funds, Order of
freezing of accounts was passed under Section 17(1A) of the
PMLA on 30.12.2025 in respect of assets amounting to
approximately Rs.690 Crores. The appellant has also filed a
detailed Prosecution Complaint before the Special PMLA
Court on 23.01.2026.
6. Thereafter, the respondent filed W.P.No.962/2025
seeking to declare the search and seizure conducted on
30.12.2025 as illegal and set aside the freezing Order dated
30.12.2025 passed by the appellant herein under Section
17(1A) of the PMLA. The learned Single Judge disposed of
the writ petition, granting liberty to the respondent herein to
challenge the continuance of the Order of freezing beyond
180 days before the Adjudicating Authority and directed the
respondents to pay the salaries of its employees. Aggrieved
7
by the Order directing the payment of salaries which form
part of the alleged proceeds of crime, the appellant is in
appeal.
7. It is submitted that it is only in specific
circumstances where the Director or other officer not below
the rank of Deputy Director, authorized by the Director, has
reason to believe, on the basis of material in his possession,
that any person has committed any act, which constitutes
money laundering or is in possession of any proceeds of
crime involved in money laundering or is in possession of
any records relating to money laundering or is in possession
of any property related to a crime that a search and seizure
can be carried out. It is submitted that where an attachment
of property under Section 5 of the PMLA is carried out and
where a search and seizure is made and where it is not
practicable to seize such record or property, the Authorized
Officer 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.
8
8. Section 17(4) of the PMLA provides that the
Authority seizing any record or property under subsection
(1) or freezing any record or property under subsection (1A)
shall within a period of 30 days from such seizure or
freezing, file an application requesting for retention of such
record or property or for continuing the order of freezing,
before the Adjudicating Authority.
9. It is submitted that since Zo Private Limited has
been relegated to the Adjudicating Authority for a
consideration whether the freezing of its accounts was in
accordance with the provisions of the PMLA or not, the Order
passed by the learned Single Judge to defray the salary
expenses of not only the writ petitioner – Zo Private Limited
but also its parent entity – Winzo Games Private Limited was
completely uncalled for.
10. The learned ASGI would place reliance on the
decision of the Apex Court in Mangal Rajendra Kamthe v.
Tahsildar, Purandhar and others, reported in 2026 SCC
OnLine SC 297, in support of the contention that where a
9
Constitutional Court refrains from determining the rights of
the parties and relegates them to their statutory remedies,
no interim relief alone could be granted under Article 226 of
the Constitution of India.
11. Further, the learned ASGI has also placed on
record the Prosecution Complaint preferred by the appellant
before the Principal City Civil and Sessions Court, Bengaluru
City, (CCH-1), which is the designated Special Court for
PMLA cases under the PMLA. Reference is made to the
statements recorded from the Directors, Managers and
Employees of the respondent – Zo Private Limited as well as
its parent entity – Winzo Games Private Limited. It is
contended that there is a well planned chain of deception in
operation in the conduct of online gaming by the parent
entity of the respondent and that the criminal activity
relating to the predicate offences has generated Crores of
rupees in revenue, which also amount to proceeds of crime.
Relying on the definition of ‘proceeds of crime’ under the
PMLA and the explanation thereto, it is contended that all
property derived or obtained directly or indirectly as a result
10
of a ‘criminal activity relating to a scheduled offence’ would
amount to ‘proceeds of crime’. It is therefore contended
that the argument of the respondent trying to limit the
proceeds of crime to the amount which was involved in the
offence alleged against the parent entity – Winzo Games
Private Limited, alone, is completely unsustainable.
12. Further, it is contended that the question whether
the property frozen amounts to proceeds of crime or not, is
the specific issue which has been relegated for an
adjudication by the learned Single Judge to the Adjudicating
Authority. It is submitted that in the interregnum, requiring
the payment of salaries to the staff of the respondent – Zo
Private Limited and its parent entity- Winzo Games Private
Limited from the amount which stand frozen was completely
unwarranted and unreasonable.
13. The learned ASGI would also place reliance on the
following decisions:-
• R.D.Chaitra v. Directorate of enforcement, by
order dated 15.10.2025, passed in
W.P.No.26754/2025 (GM-RES);
11
• M/s.Kumar Food Industries Ltd. v. Union of
India & Ors. by order dated 10.03.2022, passed
in W.P.(C) 12033/2021 & CM. No.37418/2021
and 40579/2021;
• Satyendar Kumar Jain Vs. Directorate of
Enforcement, reported in
MANU/SC/0209/2024; and
• JSW Steel Limited others v. Deputy Director,
Directorate of Enforcement and others, passed
in Criminal appeal Nos.4183-4184/2025
(arising out of SLP (CRL) Nos.7828-7829 OF
2022).
14. The learned senior counsel appearing for the
respondent, on the other hand, contended that it is trite law
that the term ‘proceeds of crime’ is to be given a strict
meaning as provided in the enactment and any widening of
the meaning on surmises and conjectures is completely
impermissible. It is contended that for a search and seizure
to be conducted under Section 17 of the PMLA, the Director
or the Authorized Officer has to record reasons that the
respondent has committed any act which constitutes money
laundering or is in possession of any proceeds of crime or
records relating to the same or any property related to the
crime.
12
15. The learned senior counsel further contended that
the freezing of the bank accounts could only be to the extent
relatable to the predicate offences as reflected in the FIRs. It
is contended that the said FIRs do not contain any allegation
against the respondent, nor do they disclose any proceeds of
crime or any element of money laundering so as to attract
the jurisdiction of the Enforcement Directorate.
16. It is further contended that in the FIRs registered
at Police Stations Mehandipur Balaji, Dausa, Rajasthan;
Cyber Police Station, South East Delhi; and Police Station
Central CEN Crime, Bengaluru, no allegations were made
against Winzo Games Private Limited or its affiliates. It is
further contended that in an FIR registered at Police Station
Navai, Tonk, Rajasthan, the allegations against Winzo
Games Private Limited pertain to an amount of
approximately Rs.7 to 8 Lakhs. It is submitted that closure
reports were filed in respect of the said FIRs and were
accepted by the respective jurisdictional Magistrates. It is
further contended that the FIR registered at Central CEN
Crime, Bengaluru, was subsequently quashed by this Court.
13
The FIR dated 24.11.2025 filed at the Cyber Crime Police
Station Gurugram is pending for consideration before the
Punjab and Haryana High Court, alleging that Winzo Games
Private Limited had engaged in cheating through algorithmic
manipulation and digital deception in real money games.
The complainant is stated to have suffered losses of
approximately Rs.42 Lakhs. It is further contended that,
even assuming the allegations to be true, the predicate
offences at their highest involve an amount of approximately
Rs.40 to 50 Lakhs. Therefore, it is contended that no order
freezing an amount of Rs.193 Crores could have been
passed.
17. It is further contended that the Enforcement
Directorate cannot travel beyond the scope of the predicate
offence in view of Section 2(1)(u) of the PMLA and the law
laid down by the Apex Court in the cases of Vijay Madanlal
Choudhary and Others v. Union of India and others,
reported in (2023) 12 SCC 1 and M/s. Rashmi Metaliks
Ltd. and Another v. Enforcement Directorate, order
dated 10.08.2022 passed in W.P.A 17454/2022.
14
18. It is further contended that the allegation that
proceeds of crime amount to more than Rs.3,500 Crores, is
false. In this regard, reliance is placed on the Bail Order of
Shri. Paavan Nanda – Director of Winzo Games Private
Limited, dated 02.02.2026, wherein the Sessions Court
observed that at the stage of consideration of bail, no clear-
cut materials were placed by the appellant herein, to show
exactly how they arrived at the figure of Rs.3,522 Crores.
Reliance is also placed on the loans transferred for
legitimate business requirements of Zo Private Limited by
Winzo Games Private Limited through resolutions dated
13.07.2023, 07.07.2025 and 24.11.2025.
19. It is further contended that the freezing order
cannot be based on suspicion and is bereft of reasons to
believe. It is further contended that the financial assets
frozen were already in the appellant’s knowledge and was
not found as a result of search under Sections 17(1) and
(1A) of the PMLA. In this regard, reliance is placed on two
email communications dated 10.12.2025 and 23.12.2025,
through which documents pertaining to the financial
15
statements of Winzo Games Private Limited were furnished
to M/s. FinAdvantage Consulting Pvt. Ltd. It is further
contended that the Adjudicating Authority does not have the
power to grant interim relief under the PMLA. It is further
contended that the employees of Winzo Games Private
Limited will be deprived of salaries, if the interim relief is not
granted.
20. It is further contended that the accounts can be
frozen without confirmation from the Adjudicating Authority
for a period of 180 days according to Section 20(1) of the
PMLA. Further, the complaint for confirmation for retention
of property has been filed by the appellant herein on
20.01.2026, however, the accused are yet to receive a show
cause notice on the same. In the event that the interim
relief is not granted during the pendency of the proceedings,
220 employees will be deprived of their salaries. It is further
contended that the respondent has no other avenue to pay
salaries as the accounts of Winzo Games Private Limited
were attached on 21.11.2025, respondent – Zo Private
16
Limited on 30.12.2025 and Winzo USA and Winzo Singapore
on 17.02.2026.
21. The learned senior counsel further submitted that
considerable amounts had been transferred from parent
entity – Winzo Games Private Limited to respondent- Zo
Private Limited with proper authority and authentication by
the Board of Directors of both the Companies and this fact
was specifically made known to the appellant at the time
when the initial proceeding for attachment under Section 5
of the PMLA was carried out by the appellant. It is contended
that the entire action by the appellant in seeking to freeze
the entire accounts of the respondent – Zo Private Limited is
completely unwarranted and unsupported by any statutory
mandate. It is contended that the entire amount of money in
the possession of the respondent and its parent entity
concerned can, by no stretch of imagination, be categorized
as ‘proceeds of crime’ in a case where the only surviving FIR
lodged in Gurugram is with regard to a cheating complaint
involving Rs.42 Lakhs. There is no contention whatsoever
that the said amount of Rs.42 Lakhs has been utilised by the
17
respondent – Zo Private Limited or by its parent entity –
Winzo Games Private Limited to arrive at the substantial
amounts which are in the bank accounts of the respondent –
Zo Private Limited, which now stand frozen. It is further
contended that it is only if there is any new material which
comes to the notice of the Authorized Officer in the search
and seizure that an order of freezing of accounts could have
been passed at this juncture.
22. The learned senior counsel appearing for the
respondent has placed reliance on the following decisions:-
• Vijay Madanlal Choudhary and others v. Union
of India and others, reported in (2023) 12
Supreme Court Cases 1;
• Dr.Natesha.D.B v. Directorate of Enforcement,
by order dated 27.01.2025, passed in
W.P.No.32956/2024 (GM-RES);
• R.K.M Powergen Private Limited, v. Assistant
Director, Directorate of Enforcement, Govt. of
India and another, reported in 2025 SCC Online
Mad 3272;
• Wander Ltd., and another v. Antox India P.
Ltd., reported in 1990 (Supp) Supreme Court
cases 727;
18
• DoIT Resort (Goa) Pvt. Ltd. and Ors. v.
Directorate of Enforcement and Ors., by order
dated 29.07.2020, passed in
W.P.NO.1321/2020;
• M/s. Rashmi Metaliks Limited and Anr. v.
Enforcement Directorate & Ors., by order dated
10.08.2022, passed in WPA 17454/2022;
• Abdullah Ali Balsharaf and Anr. v. Directorate
of Enforcement and others, reported in 2019
SCC Online Del 6428; and
• Ravinder Kumar Sharma v. State of Assam and
others, reported in (1999) 7 Supreme Court
Cases 435.
23. We have considered the contentions advanced.
Before going into the merits of the matter, we intend to
place on record, the Scheme and Scope of the PMLA. The
reading of the introduction to the PMLA would show that the
Act is enacted to address the serious threat of
money-laundering and is enacted pursuant to the United
Nations Convention against Illicit Traffic in Narcotic Drugs
and Psychotropic Substances, to which, India was a party.
‘proceeds of crime’ is defined under Section 2(1)(u) of
the PMLA, which reads as follows:
19
“2(1)(u) “proceeds of crime” means any
property derived or obtained, directly or indirectly,
by any person as a result of criminal activity
relating to a scheduled offence or the value of any
such property [or where such property is taken or
held outside the country, then the property
equivalent in value held within the country] [or
abroad]”
Section 2(1)(y) defines ‘scheduled offence’ which reads
as follows:
“2(1)(y) “scheduled offence” means-
(i) the offences specified under Part A of the
Schedule; or[(ii) the offences specified under Part B of the
Schedule if the total value involved in such
offences is [one crore rupees] or more; or][(iii) the offences specified under Part C of the
Schedule;]”
Section 3 defines ‘offence of money-laundering’ which
reads as follows:
“3. Offence of money-laundering.-
Whosoever directly or indirectly attempts to indulge
or knowingly assists or knowingly is a party or is
actually involved in any process or activity
connected with the [proceeds of crime including its
concealment, possession, acquisition or use and
projecting or claiming] it as untainted property
shall be guilty of offence of money-laundering.”
20
24. Section 5 of the PMLA provides for provisional
attachment of property believed to be proceeds of crime.
Once an order of attachment is passed, the copy of the
order along with the material in possession of the Authorized
Officer shall be forwarded in a sealed cover to the
Adjudicating Authority, who shall keep such order and the
material for such period as may be prescribed.
25. Section 5(3) of the PMLA provides that every
order of attachment shall cease to have effect after the
period of 180 days or when an order is passed by the
Adjudicating Authority under Sections 83 or 86 of PMLA as
the case may be, whichever is earlier.
26. Section 11 of the PMLA provides the power
regarding summons, production of documents and evidence.
Section 16 of the PMLA provides a power of survey, while
Section 17 of the PMLA provides for search and seizure.
Section 17 of the PMLA reads as follows:
“17. Search and seizure.- (1) Where [the
Director or any other officer not below the rank of Deputy
Director authorised by him for the purposes of this
section,] on the basis of information in his possession,
21has reason to believe (the reason for such belief to be
recorded in writing) that any person-
(i) has committed any act which constitutes
money-laundering, or
(ii) is in possession of any proceeds of crime
involved in money-laundering, or
(iii) is in possession of any records relating to
money-laundering, [or][(iv) is in possession of any property related to
crime]then, subject to the rules made in this behalf, he may
authorise any officer subordinate to him to-
(a) enter and search any building, place, vessel,
vehicle or aircraft where he has reason to
suspect that such records or proceeds of crime
are kept;
(b) break open the lock of any door, box, locker,
safe, almirah or other receptacle for exercising
the powers conferred by clause (a) where the
keys thereof are not available;
(c) seize any record or property found as a result
of such search;
(d) place marks of identification on such record or
[property, if required or] make or cause to be
made extracts or copies therefrom;
(e) make a note or an inventory of such record or
property;
(f) examine on oath any person, who is found to
be in possession or control of any record or
property, in respect of all matters relevant for
the purposes of any investigation under this
Act:
[***]
22[(1A) Where it is not practicable to seize such
record or property, the officer authorised 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:
Provided that if, at any time before its confiscation
under sub-section (5) or sub-section (7) of section 8 or
section 58B or sub-section (2A) of section 60, it becomes
practical to seize a frozen property, the officer authorised
under sub-section (1) may seize such property.](2) The authority, who has been authorised under
sub-section (1) shall, immediately after search and seizure
[or upon issuance of a freezing order] forward a copy of
the reasons so recorded along with material in his
possession, referred to in that sub-section, to the
Adjudicating Authority in a sealed envelope, in the
manner, as may be prescribed and such Adjudicating
Authority shall keep such reasons and material for such
period, as may be prescribed.
(3) Where an authority, upon information obtained
during survey under section 16, is satisfied that any
evidence shall be or is likely to be concealed or tampered
with, he may, for reasons to be recorded in writing, enter
and search the building or place where such evidence is
located and seize that evidence:
Provided that no authorisation referred to in sub-
section (1) shall be required for search under this sub-
section.
[(4) The authority seizing any record or property
under sub-section (1) or freezing any record or property
under sub-section (1A) shall, within a period of thirty days
from such seizure or freezing, as the case may be, file an
application, requesting for retention of such record or
property seized under sub-section (1) or for continuation
of the order of freezing served under sub-section (1A),
before the Adjudicating Authority.]”
23
27. Section 20 of PMLA provides that where any
property has been seized under Section 17 or frozen under
subsection (1A) of Section 17, and the Authorized Officer
has reason to believe that such property is required to be
retained for the purpose of adjudication under Section 8,
such property may be retained or may continue to remain
frozen, for a period not exceeding 180 days from the date
on which such property was seized or frozen, as the case
may be.
28. It is therefore clear that an order of attachment,
seizure or freezing of property is subject to an adjudication
by the Adjudicating Authority under Section 8 of the PMLA.
Thereafter, there is a full-fledged procedure for appeal
before the Appellate Tribunals and for adjudication before
the Special Courts as well.
29. The Apex Court, in Vijay Mandanlal
Choudhary‘s case (supra) had considered the scope of
property which can be termed as ‘proceeds of crime’. It was
clearly held as under:
24
“105. The other relevant definition is “proceeds of
crime” in Section 2(1)(u) of the 2002 Act. This definition
is common to all actions under the Act, namely,
attachment, adjudication and confiscation being civil in
nature as well as prosecution or criminal action. The
original provision prior to amendment vide the Finance
Act, 2015 and Finance (No. 2) Act, 2019, took within its
sweep any property [mentioned in Section 2(1)(v) PMLA]
derived or obtained, directly or indirectly, by any person
“as a result of” criminal activity “relating to” a scheduled
offence [mentioned in Section 2(1)(y) read with Schedule
to the Act] or the value of any such property. Vide the
Finance Act, 2015, it further included such property
(being proceeds of crime) which is taken or held outside
the country, then the property equivalent in value held
within the country and by further amendment vide Act 13
of 2018, it also added property which is abroad. By
further amendment vide Finance (No. 2) Act, 2019,
Explanation has been added which is obviously a
clarificatory amendment. That is evident from the plain
language of the inserted Explanation itself. The fact that it
also includes any property which may, directly or
indirectly, be derived as a result of any criminal activity
relatable to scheduled offence does not transcend beyond
the original provision. In that, the word “relating to”
(associated with/has to do with) used in the main
provision is a present participle of word “relate” and the
word “relatable” is only an adjective. The thrust of the
original provision itself is to indicate that any property is
derived or obtained, directly or indirectly, as a result of
criminal activity concerning the scheduled offence, the
same be regarded as proceeds of crime. In other words,
property in whatever form mentioned in Section 2(1)(v),
is or can be linked to criminal activity relating to or
relatable to scheduled offence, must be regarded as
proceeds of crime for the purpose of the 2002 Act. It
must follow that the Explanation inserted in 2019 is
merely clarificatory and restatement of the position
emerging from the principal provision [i.e. Section
2(1)(u)].
25
106. The “proceeds of crime” being the core of the
ingredients constituting the offence of money laundering,
that expression needs to be construed strictly. In that, all
properties recovered or attached by the investigating
agency in connection with the criminal activity relating to
a scheduled offence under the general law cannot be
regarded as proceeds of crime. There may be cases
where the property involved in the commission of
scheduled offence attached by the investigating agency
dealing with that offence, cannot be wholly or partly
regarded as proceeds of crime within the meaning of
Section 2(1)(u) of the 2002 Act — so long as the whole or
some portion of the property has been derived or
obtained by any person “as a result of” criminal activity
relating to the stated scheduled offence. To be proceeds
of crime, therefore, the property must be derived or
obtained, directly or indirectly, “as a result of” criminal
activity relating to a scheduled offence. To put it
differently, the vehicle used in commission of scheduled
offence may be attached as property in the case (crime)
concerned, it may still not be proceeds of crime within the
meaning of Section 2(1)(u) of the 2002 Act. Similarly,
possession of unaccounted property acquired by legal
means may be actionable for tax violation and yet, will
not be regarded as proceeds of crime unless the tax
legislation concerned prescribes such violation as an
offence and such offence is included in the Schedule to
the 2002 Act. For being regarded as proceeds of crime,
the property associated with the scheduled offence must
have been derived or obtained by a person “as a result
of” criminal activity relating to the scheduled offence
concerned. This distinction must be borne in mind while
reckoning any property referred to in the scheduled
offence as proceeds of crime for the purpose of the 2002
Act. Dealing with proceeds of crime by way of any process
or activity constitutes offence of money laundering under
Section 3 PMLA.
(emphasis supplied)
xxxxx
26
109. Tersely put, it is only such property which is
derived or obtained, directly or indirectly, as a result of
criminal activity relating to a scheduled offence that can
be regarded as proceeds of crime. The authorities under
the 2002 Act cannot resort to action against any person
for money laundering on an assumption that the property
recovered by them must be proceeds of crime and that a
scheduled offence has been committed, unless the same
is registered with the jurisdictional police or pending
inquiry by way of complaint before the competent forum.
For, the expression “derived or obtained” is indicative of
criminal activity relating to a scheduled offence already
accomplished. Similarly, in the event the person named in
the criminal activity relating to a scheduled offence is
finally absolved by a court of competent jurisdiction owing
to an order of discharge, acquittal or because of quashing
of the criminal case (scheduled offence) against him/her,
there can be no action for money laundering against such
a person or person claiming through him in relation to the
property linked to the stated scheduled offence. This
interpretation alone can be countenanced on the basis of
the provisions of the 2002 Act, in particular Section
2(1)(u) read with Section 3. Taking any other view would
be rewriting of these provisions and disregarding the
express language of the definition clause “proceeds of
crime”, as it obtains as of now.”
Further, the Apex Court clearly held as follows:-
“170. Be it noted that the attachment must be only
in respect of property which appears to be proceeds of
crime and not all the properties belonging to the person
concerned who would eventually face the action of
confiscation of proceeds of crime, including prosecution
for offence of money laundering. As mentioned earlier,
the relevant date for initiating action under the 2002
Act–be it of attachment and confiscation or prosecution,
is linked to the inclusion of the offence as scheduled
offence and of carrying on the process or activity in
connection with the proceeds of crime after such date.
The pivot moves around the date of carrying on the
process and activity connected with the proceeds of
27crime; and not the date on which the property has been
derived or obtained by the person concerned as a result
of any criminal activity relating to or relatable to the
scheduled offence.”
In conclusion, it was held as follows:-
“382.4. The Explanation inserted to clause (u) of
Section 2(1) of the 2002 Act does not travel beyond the
main provision predicating tracking and reaching up to
the property derived or obtained directly or indirectly as a
result of criminal activity relating to a scheduled offence.
382.5. Section 3 of the 2002 Act has a wider reach
and captures every process and activity, direct or indirect,
in dealing with the proceeds of crime and is not limited to
the happening of the final act of integration of tainted
property in the formal economy. The Explanation inserted
to Section 3 by way of amendment of 2019 does not
expand the purport of Section 3 but is only clarificatory in
nature. It clarifies the word “and” preceding the
expression projecting or claiming as “or”; and being a
clarificatory amendment, it would make no difference
even if it is introduced by way of the Finance Act or
otherwise.
382.6. Independent of the above, we are clearly of
the view that the expression “and” occurring in Section 3
has to be construed as “or”, to give full play to the said
provision so as to include “every” process or activity
indulged into by anyone. Projecting or claiming the
property as untainted property would constitute an
offence of money laundering on its own, being an
independent process or activity.
382.7. The interpretation suggested by the
petitioners, that only upon projecting or claiming the
property in question as untainted property that the
offence of Section 3 would be complete, stands rejected.
382.8. The offence under Section 3 of the 2002 Act
is dependent on illegal gain of property as a result of
criminal activity relating to a scheduled offence. It is
28concerning the process or activity connected with such
property, which constitutes the offence of money
laundering. The authorities under the 2002 Act cannot
prosecute any person on notional basis or on the
assumption that a scheduled offence has been
committed, unless it is so registered with the
jurisdictional police and/or pending enquiry/trial including
by way of criminal complaint before the competent forum.
If the person is finally discharged/acquitted of the
scheduled offence or the criminal case against him is
quashed by the court of competent jurisdiction, there can
be no offence of money laundering against him or any
one claiming such property being the property linked to
stated scheduled offence through him.”
30. In the instant case, it is an admitted fact that an
FIR has been registered against Winzo Games Private
Limited, which is admittedly the parent entity of the
respondent herein. As a matter of fact, there were four FIRs
registered earlier which according to the respondent have
ended either in quashing or closure of the FIRs. Be that as
it may, as on today, there is an FIR registered by the Cyber
Crime Police Station, Gurugram, where a specific allegation
of cheating has been made as against the parent entity.
31. It is also not in dispute that cheating is a
scheduled offence. Therefore, the ECIR, registered by the
appellant – Authority as well as the Prosecution Complaint
29
cannot be said to be without authority of law, since there is
a predicate offence in existence, as on today, to justify the
registration of an ECIR and a Prosecution Complaint.
32. It is also clear that the procedure under the PMLA
has been set in motion by the appellant on the basis of the
FIR and the ECIR registered in the case. The specific case of
the respondent is that the fact that a Board Resolution had
been adopted by the parent entity – Winzo Games Private
Limited and the respondent – Zo Private Limited to advance
an inter corporate loan from Winzo Games Private Limited to
Zo Private Limited, which is not involved in any of the
activities complained of, inter alia, in order to meet the
salary liabilities of both the Companies is not in dispute. The
said resolutions were dated 13.07.2023, 07.08.2025 and
24.11.2025.
33. It is contended by the respondent that these
matters were specifically placed before the appellant –
Authority at the initial stage of investigation itself and even
before the procedure under Section 5 of the PMLA was
30
initiated as against Winzo Games Private Limited and Zo
Private Limited. It is submitted that there is no contention
that the entire amounts in the accounts of respondent – Zo
Private Limited are generated from the amount involved in
the sole surviving FIR which involves only an amount of
Rs.42 Lakhs. It is contended that the argument of the
appellant is clearly that there may be other amounts which
would answer the definition of ‘proceeds of crime’, if more
FIRs are registered and that therefore, the entire amount in
account of the respondent is to be held hostage for further
FIRs that are likely to be filed.
34. Having considered the contentions advanced and
the decisions of the Apex Court on the point, especially in
Vijay Madanalal Choudhary‘s case (supra), we notice that
the Apex Court has clearly held that the proceeds of crime
have to be linked to a predicate offence and it is only such
property which is derived or obtained directly or indirectly as
a result of criminal activity relating to a scheduled offence
that can be regarded as ‘proceeds of crime’.
31
35. The Apex Court has further held that the
Authorities under the PMLA cannot resort to action against
any person for money laundering or an assumption that the
property recovered by them must be proceeds of crime and
that a scheduled offence has been committed, unless the
same is registered with the jurisdictional police or pending
enquiry by way of complaint before the competent forum.
36. In the instant case, there is no such allegation as
against the respondent. The predicate offence being one
involving Rs.42 Lakhs and having been registered with
reference to an incident which occurred on 20.09.2024, the
contention of the learned ASGI that the entire amount in the
possession of the respondent – Zo Private Limited as well as
its parent entity – Winzo Games Private Limited represents
proceeds of crime cannot be accepted. Further, it is admitted
before us today that the Adjudicating Authority under
Section 8 of the PMLA has no power to issue any interim
directions or to make any payments from the amounts which
are frozen under Section 17(1A) of the PMLA.
32
37. The Apex Court, in the case of OPTO Circuit
India Ltd. v. Axis Bank and others by Order dated
03.02.2021 passed in Crl.A.No.102/2021, had considered
the question as to when an order of freeze of accounts can
be carried out and it held as follows:-
“9. A perusal of the above provision would indicate
that the prerequisite is that the Director or such other
Authorised Officer in order to exercise the power under
Section 17 of PMLA, should on the basis of information in his
possession, have reason to believe that such person has
committed acts relating to money laundering and there is
need to seize any record or property found in the search.
Such belief of the officer should be recorded in writing.
Subsection (1A) to Section 17 of PMLA provides that the
Officer Authorised under subsection (1) may make an order
to freeze such record or property where it is not practicable
to seize such record or property. Sub section (2) provides
that after search and seizure or upon issuance of a freezing
order the Authorised Officer shall forward a copy of the
reasons recorded along with material in his possession to
the Adjudicating Authority in a sealed envelope. Subsection
(4) provides that the Authority seizing or freezing any record
or property under subsection (1) or (1A) shall within a
period of thirty days from such seizure or freezing, as the
case may be, file an application before the Adjudicating
Authority requesting for retention of such record or
properties seized.
xxxxx
11. The scheme of the PMLA is well intended. While it
seeks to achieve the object of preventing money laundering
and bring to book the offenders, it also safeguards the rights
of the persons who would be proceeded against under the
Act by ensuring fairness in procedure. Hence a procedure,
including timeline is provided so as to ensure that power is
exercised for the purpose to which the officer is vested with
such power and the Adjudicating Authority is also kept in the
loop. In the instant case, the procedure contemplated under
33
Section 17 of PMLA to which reference is made above has
not been followed by the Officer Authorised. Except issuing
the impugned communication dated 15.05.2020 to AML
Officer to seek freezing, no other procedure contemplated in
law is followed. In fact, the impugned communication does
not even refer to the belief of the Authorised Officer even if
the same was recorded separately. It only states that the
Officer is investigating the case and seeks for relevant
documents, but in the tabular column abruptly states that
the accounts have to be ‘debit freezed/stop operations’. It
certainly is not the requirement that the communication
addressed to the Bank itself should contain all the details.
But what is necessary is an order in the file recording the
belief as provided under Section 17(1) of PMLA before the
communication is issued and thereafter the requirement of
Section 17(2) of PMLA after the freezing is made is
complied. There is no other material placed before the Court
to indicate compliance of Section 17 of PMLA, more
particularly recording the belief of commission of the act of
money laundering and placing it before the Adjudicating
Authority or for filing application after securing the freezing
of the account to be made. In that view, the freezing or the
continuation thereof is without due compliance of the legal
requirement and, therefore, not sustainable.
xxxxx
16. Apart from the above consideration, what has
also engaged the attention of this Court is with regard to the
plea put forth on behalf of the appellant regarding the need
to defreeze the account to enable the appellant to pay the
statutory dues. The appellant in that regard has relied on
the certificate issued by the Chartered Accountant,
(Annexure-P/38 at page 231) which indicates the amount
payable towards ITDS, PF, ESI, Professional Tax, Gratuity
and LIC employees’ deductions, in all amounting to
Rs.79,93,124/-. Since we have indicated that the freezing
has been done without due compliance of law, it is
necessary to direct the respondents No.1 to 3 to defreeze
the respective accounts and clear the cheques issued by the
appellant, drawn in favour of the Competent Authority
towards the ITDS, PF, ESI, Professional Tax, Gratuity and
LIC employees’ deductions, subject to availability of the
funds in the account concerned. Needless to mention that if
34
any further amount is available in the account after payment
of the statutory dues and with regard to the same any action
is to be taken by the respondent No.4 within a reasonable
time, it would open to them to do so subject to compliance
of the required procedure afresh, as contemplated in law.”
38. The learned senior counsel appearing for the
respondent has also brought to our notice the decisions of
the High Court of Delhi in Abdullah Ali Balsharaf and
Anr‘s case (supra), as well as the High Court of Calcutta in
M/s. Rashmi Metaliks Limited and Anr‘s case (supra).
39. Having considered the contentions advanced and
in view of the settled position that the Adjudicating
Authority, under Section 8 of the PMLA has no power to
order a partial defreeze in order to pay the salary due to the
employees, we are of the opinion that the exercise of
discretion by the learned Single Judge while relegating the
respondent to its statutory remedy cannot be said to be
perverse or unwarranted.
40. The judgment of the Apex Court in Mangal
Rajendra Kamthe’s case (supra), on which reliance is
placed by the learned ASGI, was a case where the writ
35
petitioner had been relegated to the statutory authority
which had the powers to deal with the situation. This is not
the case in the instant case. Since the issue of payment of
salaries from the frozen accounts could not have been
considered by the Adjudicating Authority, we are of the
opinion that the exercise of discretion by the learned Single
Judge cannot be said to be incorrect.
41. In the above view of the matter, the appeal fails
and the same is accordingly dismissed.
No order as to costs.
All pending interlocutory applications shall also stand
disposed of.
Sd/-
(ANU SIVARAMAN)
JUDGE
Sd/-
(VIJAYKUMAR A. PATIL)
JUDGE
PN/cp*
