Introduction:

In WINZO Pvt. Ltd. v. Directorate of Enforcement (WP No. 36998/2025), the Karnataka High Court, presided over by Justice Suraj Govindaraj, was seized of a significant challenge to the exercise of powers by the Enforcement Directorate under the Prevention of Money Laundering Act, 2002 (PMLA). The petition arose from a series of searches and seizures conducted by the ED between 18 November 2025 and 22 November 2025 at the offices of the online gaming company, following which more than ₹500 crore worth of bank balances and financial instruments were frozen. The petitioner-company approached the High Court seeking a declaration that the search and seizure operations, as well as the consequential freezing of accounts, were illegal, void, and unconstitutional. During the hearing, the Court expressed concern over the proportionality of the ED’s actions vis-à-vis the alleged predicate offences and directed the agency to place on record, by the next day, the total number of complaints against the company and the aggregate amounts involved therein, indicating a close judicial scrutiny of the balance between investigative powers and fundamental rights.

Arguments:

On behalf of the petitioner-company, Senior Advocates Satvik Upadhya and Sandesh J. Chouta mounted a strong challenge to the ED’s actions, contending that the freezing of over ₹500 crore across more than 25 bank accounts was wholly disproportionate, arbitrary, and destructive of the company’s very existence. It was argued that at the time when the search under Section 17 of the PMLA was conducted, the alleged predicate offence involved only ₹5–8 lakh, and even subsequently, the complaints referred to amounts of roughly ₹7–10 lakh. Despite this, the ED had proceeded to seize and freeze assets running into hundreds of crores, effectively paralysing the company’s operations. Senior Counsel submitted that Section 17 permits seizure or freezing only of property or records found as a result of the search and having a nexus with the alleged proceeds of crime, and not a sweeping freezing of all assets to somehow reach the statutory threshold for attachment. It was forcefully argued that such an approach converts investigative powers into punitive tools and amounts to a “civil death” of the company, especially when no adjudication on guilt had yet taken place.

The petitioner further alleged serious procedural violations during the search and seizure operations. It was submitted that raids were admittedly conducted on 18.11.2025, during which employees and persons present were allegedly detained for prolonged hours, with some being kept inside the premises until 5 a.m. The counsel argued that individuals who were not present at the premises were summoned and their statements recorded during the search, which, according to the petitioner, is impermissible in law. It was also contended that the mandatory audio-video recording of search and seizure, as required under the Bharatiya Nagarik Suraksha Sanhita (BNSS), was not carried out. The ED’s response—that these facts were not reflected in the panchnama—was challenged by pointing to CCTV footage that had been made available pursuant to court directions, which allegedly showed prolonged detention and recording of statements late into the night. On this basis, the petitioner sought not only quashing of the freezing orders but also a declaration that all consequential actions flowing from the allegedly illegal search were void.

On the other hand, counsel appearing for the Enforcement Directorate defended the actions taken under the PMLA, submitting that the amounts involved varied across complaints and that there were several hundred complaints pending against the petitioner-company. It was argued that the allegations went beyond isolated sums and involved a larger pattern of fraudulent practices, including the alleged use of bots and algorithms in real-money gaming without informing customers that they were playing against software rather than human players. The ED contended that such practices resulted in the generation of proceeds of crime, comprising the amounts wagered and lost by real customers, which were ultimately credited to the company’s accounts. The freezing of assets amounting to approximately ₹505 crore, according to the ED, was justified under Section 17(1A) of the PMLA, pending further investigation. With regard to the CCTV footage, the ED sought time to obtain instructions on whether copies could be furnished to the petitioner, stating initially that the footage could be placed before the Court.

Judgment:

After hearing the rival submissions, Justice Suraj Govindaraj adopted a measured but probing approach, signalling judicial concern over the scale and manner of the enforcement action. The Court recorded that the respondent-ED sought a day’s time to take instructions on the issue of providing copies of the CCTV footage to the petitioner, particularly in light of allegations concerning prolonged detention and recording of statements during the search. Importantly, the Court directed the ED to place on record the total number of complaints filed against the petitioner-company and, if possible, the total amounts involved in those complaints, observing that such information was necessary to assess the proportionality and legality of the freezing of assets. This direction followed the petitioner’s specific contention that an amount of around ₹500 crore had been frozen on the basis of complaints involving comparatively minuscule sums. The Court did not pass any final adjudication on the merits at this stage but made it clear that these aspects would be closely examined. The matter was accordingly adjourned and directed to be relisted the following day, underscoring that the Court intended to scrutinise both the substantive justification and procedural compliance of the ED’s actions before arriving at a conclusion on the legality of the search, seizure, and freezing orders.