The Karnataka High Court on Friday rejected an interim application by WinZO US Inc. seeking permission to transfer funds lying in its US bank accounts to another bank in the United States while keeping the Enforcement Directorate’s (ED) attachment over the funds intact. Justice C.M. Poonacha observed that allowing such a transfer would “tantamount to diluting the Provisional Attachment Order and the subsequent Confirmation Order,” which are under challenge before the Court.

The ruling came in a case where two foreign subsidiaries of the online gaming platform WinZO have challenged the attachment of assets worth ₹505 crore under the Prevention of Money Laundering Act, 2002 (PMLA), besides questioning the constitutional validity of the PMLA Adjudicating Authority. The interim application specifically arose after Silicon Valley Bank informed WinZO US Inc. that their banking relationship would be terminated and the accounts closed.

Banking Relationship Termination Triggers Application

WinZO US Inc. argued that the funds would remain attached even after being transferred to another US bank and that the company needed to maintain a US presence because it was carrying on business there. The petitioners contended that the termination of the banking relationship by Silicon Valley Bank left them with no choice but to move the funds to a new institution. They sought the court’s permission to effect the transfer while keeping the attachment intact, emphasizing that the ED’s interest in the funds would not be prejudiced.

Senior Advocate Siddharth Aggarwal, appearing for the petitioners, submitted that the funds were already subject to the provisional attachment order and that a simple account transfer would not alter the legal status of the attachment. The court, however, was not persuaded.

ED Alleges Siphoning of Proceeds of Crime

The Enforcement Directorate strongly opposed the plea, arguing that transfer of the attached funds posed a risk of their dissipation. The agency submitted that attempts had allegedly been made to dissipate ₹22.48 crore while the company’s directors were in judicial custody. The ED further informed the court that its investigation was ongoing and involved alleged siphoning of proceeds of crime amounting to around ₹3,522 crore through overseas transfers to WinZO’s wholly owned subsidiaries.

The agency’s counsel, Advocate Madhukar Deshpande, argued that allowing the transfer would create a practical difficulty in tracing and recovering the funds if the attachment order were ultimately confirmed. The ED maintained that the funds should remain where they were until the final adjudication of the writ petition challenging the attachment.

Court Refuses to Dilute Attachment Order

Justice Poonacha noted that the investigation was still continuing and that the details of the operations and business activities of the US subsidiary had not been placed on record. The court observed that the funds were already subject to the provisional attachment order and its subsequent confirmation, the validity of which was yet to be adjudicated in the pending writ petition.

“Allowing the transfer would tantamount to diluting the Provisional Attachment Order and the subsequent Confirmation Order,” the judge held. The court also noted that the petitioners had not provided sufficient information about the US subsidiary’s business activities or the necessity of transferring the funds to a different bank.

However, the court granted liberty to the petitioners to approach Silicon Valley Bank for release and subsequent transfer of the funds in accordance with the directions of the ED. This means that WinZO US Inc. can seek the ED’s permission directly for any transfer, and if the ED agrees, the funds may be moved without court intervention.

Amendment of Writ Petition Allowed

In a related development, the court allowed the petitioners to amend their writ petition to challenge the confirmation order dated August 4, 2026. This order had confirmed the provisional attachment of assets, and the petitioners now seek to bring it under judicial scrutiny alongside their existing challenge to the original attachment.

The writ petition also questions the constitutional validity of the PMLA Adjudicating Authority, a statutory body that confirms provisional attachment orders. The petitioners argue that the authority’s composition and procedures violate fundamental rights. This broader challenge, if successful, could have implications beyond the present case.

Next Steps in the Case

The Karnataka High Court will now proceed to hear the main writ petition challenging the attachment of assets and the validity of the PMLA Adjudicating Authority. The ED’s investigation into the alleged siphoning of proceeds of crime is ongoing, and the court has not set a timeline for final arguments.

For WinZO US Inc., the immediate consequence is that its funds will remain frozen in the Silicon Valley Bank accounts until the ED approves any transfer or the court rules on the attachment’s validity. The company must now decide whether to seek the ED’s consent for a transfer or await the outcome of the writ petition.

Legal experts note that this ruling reinforces the strict approach courts take in PMLA cases, particularly when attachment orders are under challenge. The court’s emphasis on not diluting the attachment order, even for a routine bank account transfer, signals that it will carefully scrutinize any action that could affect the availability of attached assets.

The case is likely to be listed for further hearing in the coming months. Until then, the attached funds remain with Silicon Valley Bank, and the ED continues its investigation into the alleged money laundering network involving WinZO’s foreign subsidiaries.