Case Details

  • Case Name: Civil Appeal No. ___ of 2026 (SLP(C) No.12671/2026)
  • Parties: DIRECTORATE OF ENFORCEMENT (Appellant) vs M/S ZO PRIVATE LIMITED (Respondent)
  • Court/Authority: Supreme Court of India, Civil Appellate Jurisdiction
  • Order No.: Not specified; Order dated 15 May 2026
  • Date of Order: 15‑05‑2026
  • Relevant Prior Order: Impugned final judgment and order dated 09‑03‑2026 in WA No. 492/2026 passed by the High Court of Karnataka, Bengaluru
  • Statutory Provision: Section 17(1A) of the Prevention of Money Laundering Act, 2002

Parties Involved

  • Appellant: Directorate of Enforcement (DoE)
  • Respondent: M/S ZO PRIVATE LIMITED
  • Counsel for Appellant: Mr. Suryaprakash V. Raju (A.S.G.), Mr. Zoheb Hussain, Adv. Mr. Annam Venkatesh, Adv. Mr. Vivek Gurnani, Adv. Ms. Sairica Raju, Adv. Mr. Arvind Kumar Sharma, AOR
  • Counsel for Respondent: Mr. Mukul Rohtagi (Senior Adv.), Mr. Abhishek Malhotra (Senior Adv.), Ms. Stuti Gujral (Senior Adv.), Adv. Ms. Shubhangni Jain, Adv. Ms. Mitali Umat, Adv. Mr. Abhay Pratap Singh, AOR, Mr. Ayush Kaushik (Adv.)
  • Judges: Hon'ble Mr. Justice M.M. SUNDRESH and Hon'ble Mr. Justice NONGMEIKAPAM KOTISWAR SINGH

Issues / Allegations / Violations

  • Whether the High Court correctly exercised its discretion by allowing withdrawal of funds from bank accounts frozen under Section 17(1A) of the PMLA for the purpose of paying the respondent’s employees’ salaries, while the proceedings before the Adjudicating Authority were pending.
  • The appellant argued that such a practice should not be approved in light of existing Supreme Court jurisprudence.
  • The respondent contended that the offence pertained to the parent company and that the High Court rightly permitted salary payments to employees of the subsidiary.

Findings & Observations

  • The Supreme Court observed that after directing the respondent to seek statutory remedy before the Adjudicating Authority, the High Court should not have exercised discretion to permit fund withdrawals.
  • The Court held that such discretion “cannot be countenanced” and therefore the High Court’s order permitting the withdrawals is set aside to that extent.
  • The Court expressly refrained from expressing any view on the merits of the underlying money‑laundering allegations.

Penalties / Settlements / Directions

  • No monetary penalties, disgorgements, or settlements were imposed by the Supreme Court.
  • The Court directed that the Adjudicating Authority must conclude the proceedings, either affirming or rejecting the freezing order, in accordance with the law and the statutory mandate.

Corrective Actions & Future Obligations

  • The respondent (ZO Private Ltd) is required to await the final determination of the Adjudicating Authority regarding the continuation or release of the frozen assets.
  • All observations made by the High Court concerning salary withdrawals are to be disregarded for the purpose of the pending adjudication.

Final Ruling & Enforcement

  • The Supreme Court set aside the High Court’s discretion to allow withdrawal of frozen funds for salary payments.
  • The appeal is disposed of with the above observations; any pending applications in the matter are also ordered to stand disposed.
  • The matter is remitted to the Adjudicating Authority for final determination as per the provisions of the Prevention of Money Laundering Act, 2002.