The Delhi High Court overturned a tribunal's interim order which allowed M/s ZO Pvt. Ltd.'s frozen funds to pay salaries for WinZO Games. The court sided with the ED, which argued the funds were 'proceeds of crime' under the PMLA.

The Delhi High Court on Friday set aside an interim order passed by the Appellate Tribunal under SAFEMA allowing funds from a frozen bank account of M/s ZO Pvt. Ltd. to be used for payment of salaries of employees of WinZO Games Pvt. Ltd. and its statutory dues.

A bench comprising Justices Navin Chawla and Ravinder Dudeja directed the Tribunal to decide ZO Pvt. Ltd.'s appeal as expeditiously as possible, preferably within two months.

The High Court passed the directions while dealing with an appeal filed by the Directorate of Enforcement (ED) under Section 42 of the Prevention of Money Laundering Act (PMLA), challenging the Tribunal's July 31, 2026 interim order.

The ED was represented by Panel Counsel Vivek Gurnani, along with advocates Kanishk Maurya and Chief Abhinandan Patra.

Appearing for M/s ZO Pvt. Ltd., Senior Advocate Abhishek Malhotra appeared with advocates Stuti Gujral, Shubhangani Jain, Priti Verma, Piyush Kumar, Vipin Kumar, Vishal Ramdawaj and H. Iyer.

ED Argues Funds are 'Proceeds of Crime'

The Tribunal had permitted the arrangement subject to safeguards, including verification of outstanding salaries for the financial year 2025-26 and statutory dues, following which banks were to be informed to enable payment of the verified amounts.

The ED opposed the arrangement, submitting that the Tribunal had effectively permitted alleged "proceeds of crime" in the possession of ZO Pvt. Ltd. to be used towards liabilities of WinZO Games Pvt. Ltd., which, according to the agency, was the primary accused in the matter.

The ED also pointed out that a similar direction passed earlier by the Karnataka High Court had subsequently been set aside by the Supreme Court in an order dated May 15, 2026, in proceedings titled Directorate of Enforcement v. M/s ZO Private Limited.

High Court Sets Aside Tribunal Order

Senior Advocate Abhishek Malhotra submitted that the Tribunal had balanced the equities by restricting the use of the frozen funds to salaries and statutory dues of WinZO Games. He argued that ZO Pvt. Ltd. had been granted a loan by WinZO Games and there was an agreement that the amount would be utilised for payment of salaries and statutory dues.

The High Court, however, said it was not inclined to accept the submission at this stage.

The bench noted that, according to the ED, the funds in question were proceeds of crime in the possession of ZO Pvt. Ltd. and had been frozen, with the freezing order having been affirmed by the Adjudicating Authority.

The court further observed that the interim order was not permitting payment of ZO Pvt. Ltd.'s own liability but that of WinZO Games Pvt. Ltd., which was stated to be the primary accused.

The High Court accordingly set aside the impugned Tribunal order, while directing the Tribunal to decide the pending appeal preferably within two months. The bench clarified that its observations would not influence the Tribunal while deciding the appeal on its own merits. The appeal was accordingly allowed, the pending application disposed of, and there was no order as to costs. (ANI)

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