Authority: Bombay High Court, Criminal Appellate Jurisdiction

Order Date: 2 September 2026 (Reserved on 11 August 2026)

Case Overview

  • Parties: Appellant – M/s Coda Payments India Pvt. Ltd.; Respondents – Government of India, Ministry of Finance, Department of Revenue and the State of Maharashtra.
  • Nature of Proceeding: Criminal Appeal (ST) No. 13953 of 2025 under Section 42 of the Prevention of Money Laundering Act, 2002 (PMLA), challenging the Appellate Tribunal’s order dated 6 March 2025 which affirmed the Adjudicating Authority’s order dated 15 March 2023.
  • Background: Coda Payments India, a wholly‑owned Indian subsidiary of Singapore‑based Coda Payments Pte. Ltd., provides technology‑enabled services for monetising digital content (brands ‘Codashop’, ‘Codapay’) and processes payments through aggregators such as Paytm, MobiKwik, Freecharge, LazyPay.
  • Allegations: Enforcement Directorate (ED) alleged that the company acted as a conduit to collect monies from Indian users of online games (notably ‘Garena Free Fire’) and remit them abroad, citing ten FIRs (Sections 420 and 120‑B IPC) for unauthorized deductions. The ED claimed turnover of Rs 2,850 crore, of which Rs 2,320 crore was remitted outside India.
  • Procedural History:
  • ECIR/HYZO/35/2021 dated 28 Dec 2021 initiated the investigation.
  • Search on 23 Sep 2022 seized physical records and a MacBook Pro; bank accounts and merchant IDs were frozen under Section 17(1A) PMLA (five bank accounts, multiple merchant IDs).
  • Orders under Sections 20(1) and 21(1) PMLA issued on 27 Sep 2022 for retention of seized assets and records.
  • ED filed Original Application No. 750 of 2022 on 19 Oct 2022 seeking continuation of the freeze.
  • Adjudicating Authority ordered continuation on 15 Mar 2023.
  • Appellant appealed to Appellate Tribunal (Section 26 PMLA); Tribunal dismissed appeal on 6 Mar 2025.
  • Current appeal filed before the Bombay High Court.

Submissions

  • Appellant (Counsel Mr. Sanjiv Punalekar) argued that:
  • The Adjudicating Authority did not make an independent, reasoned finding under Section 8(2) PMLA that the attached properties were ‘proceeds of crime’.
  • The Tribunal exceeded its jurisdiction by treating the company’s gross turnover (Rs 2,850 crore) and foreign remittances (Rs 2,320 crore) as sufficient basis for freezing assets worth ~Rs 100 crore.
  • Coda Payments acted only as an intermediary; authentication was performed by payment aggregators via OTP/UPI PIN.
  • No forensic evidence proved unauthorized deductions; nine of ten FIRs were closed, leaving only one FIR (No. 582/2021) involving Rs 85,650.
  • Respondent – Enforcement Directorate (Counsel Dr. Nilesh V.B. Pawaskar) contended that:
  • The freeze was necessary to preserve property and records for adjudication.
  • The alleged revenue and remittances demonstrated a prima facie nexus to money‑laundering.
  • The AD‑Authority had complied with statutory requirements under Sections 17 and 20.
  • The amount frozen could not be directly compared with FIR amounts because the investigation covered a broader trail of proceeds.

Judicial Analysis

  • The Court held that the Adjudicating Authority failed to fulfil the mandatory requirement of Section 8(2) PMLA to record a prima‑facie finding that the specific frozen properties were proceeds of crime.
  • The Tribunal’s attempt to “cure” this defect by its own finding was impermissible; an appellate authority cannot substitute the statutory reasoning required of the original adjudicating authority.
  • The Court reiterated statutory provisions (Section 6, Section 8) and cited precedents (Mohinder Singh Gill v. Chief Election Commissioner, 63 Moons Technologies Ltd. v. UOI) emphasizing that an order must stand or fall on the reasons contained therein.
  • The Court emphasized that gross business turnover alone does not constitute ‘proceeds of crime’; a clear nexus between the specific property and the scheduled offence is essential.
  • Considering that nine FIRs were withdrawn and the sole pending FIR involved only Rs 85,650, the freezing of assets worth ~Rs 100 crore was deemed disproportionate and excessive.
  • The Court found no evidence that the company’s payment mechanism allowed unauthorised auto‑debits; transactions were secured by OTP/UPI PINs.
  • The Court concluded that the ED had not established the three critical elements: (i) that the Rs 2,850 crore was unlawfully received, (ii) that it constituted money‑laundering, and (iii) that the Rs 100 crore frozen in India were proceeds of crime.

Final Outcome

  • The appeal is allowed; the impugned order of the Appellate Tribunal dated 6 March 2025 is quashed and set aside.
  • The interim application No. 3418 of 2025 seeking continuation of the freeze does not survive and is disposed of.

Topics: Money Laundering, Regulatory Enforcement