Mumbai: The Bombay High Court has ordered the release of bank accounts and payment gateway accounts of Coda Payments India Pvt. Ltd. containing around Rs 100 crore, holding that the authorities failed to make the mandatory finding that the assets were linked to money laundering.
The Court also ruled that the Appellate Tribunal could not later cure this defect by recording a finding that the Adjudicating Authority itself was required to make under the Prevention of Money Laundering Act (PMLA).
A division bench of Justices Ajey Gadkari and Kamal Khata was hearing an appeal against an Appellate Tribunal order that had upheld the continuation of the freezing of the company’s accounts.
The case arose from an ECIR registered on the basis of ten FIRs alleging cheating and criminal conspiracy under Sections 420 and 120-B of the IPC. The FIRs concerned allegations that users of online games faced unauthorised deductions after an initial transaction. Following searches, the Enforcement Directorate froze five bank accounts and merchant IDs maintained with payment aggregators and gateways.
What Is Coda Payments?
Coda Payments, a global leader in digital content monetization and distribution, argued that the Adjudicating Authority had not independently recorded a finding under Section 8(2) that the properties were involved in money laundering. It also questioned the freezing of assets worth around Rs 100 crore when the alleged amount involved in the ten FIRs was about Rs 25 lakh.
The Court agreed, observing that the statutory requirement under Section 8(2) could not be treated as a mere formality.
“The Order however does not separately identify the property… found to be involved in money laundering,” the bench noted.
It further held that the Appellate Tribunal could not subsequently make the finding that the Adjudicating Authority was required to record.
“If an Adjudicating Authority omits the mandatory finding under Section 8(2), the Appellate Tribunal cannot thereafter supply that finding on the basis of the same material,” the Court said.
The bench also disagreed with the Tribunal’s reliance on the company’s gross revenue and alleged overseas remittances to determine “proceeds of crime”.
“Gross business turnover… cannot by itself establish that the entirety of the turnover represents ‘proceeds of crime’,” the Court observed.
Questioning the freezing of more than Rs 100 crore, the Court said it was difficult to understand how transactions worth Rs 2,854 crore could all be treated as fraudulent auto-debits.
Accordingly, the High Court allowed the appeal and quashed the orders continuing the freezing of Coda Payments’ accounts.
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