Bombay HC Orders Release of Frozen Coda Payments Accounts Holding ₹100 Crore
The Bombay High Court in Mumbai has ordered the release of bank accounts and payment gateway accounts belonging to Coda Payments India Pvt. Ltd. containing around ₹100 crore. A division bench comprising Justices Ajey Gadkari and Kamal Khata held that statutory authorities failed to record a mandatory finding linking the company's assets to money laundering.
The court was hearing an appeal challenging an order of the Prevention of Money Laundering Act (PMLA) Appellate Tribunal, which had earlier upheld the continuation of the freeze on the company's financial accounts. The high court quashed those orders, ruling that the Appellate Tribunal could not later cure a failure by the Adjudicating Authority to independently establish statutory findings.
The proceedings originated from an Enforcement Case Information Report registered by the Enforcement Directorate on the basis of ten police first information reports. Those FIRs alleged cheating and criminal conspiracy under Sections 420 and 120-B of the Indian Penal Code, claiming that users of online games faced unauthorised deductions following an initial transaction. Following searches, the Enforcement Directorate froze five bank accounts and merchant IDs maintained with payment aggregators and gateways.
Coda Payments, a digital content monetisation and distribution company, argued before the court that the Adjudicating Authority had not independently recorded a finding under Section 8(2) of the PMLA that the properties were involved in money laundering. The company also challenged the freezing of accounts holding roughly ₹100 crore when the total sum implicated across the ten FIRs amounted to about ₹25 lakh.
The bench agreed with the company's submissions, ruling that compliance with Section 8(2) cannot be treated as a mere formality. The judges noted that the underlying order did not separately identify the specific property found to be involved in money laundering, and ruled that the Appellate Tribunal could not supply that finding on the same material if omitted by the Adjudicating Authority.
The court further rejected the Tribunal's reliance on the company's overall revenue and overseas remittances, observing that gross business turnover cannot establish that an entire turnover represents proceeds of crime. Questioning the basis of the ₹100 crore freeze, the bench observed that it was difficult to understand how transactions totalling ₹2,854 crore could all be treated as fraudulent auto-debits before allowing the appeal.
