Bombay HC Orders Release Of ₹100 Crore Coda Payments Accounts

The Bombay High Court has ordered the release of bank accounts and payment gateway accounts of Coda Payments India Pvt. Ltd. containing around ₹100 crore. The court held that the authorities failed to make the mandatory finding that the assets were linked to money laundering.

The case arose from an Enforcement Case Information Report (ECIR) registered on the basis of ten First Information Reports (FIRs) alleging cheating and criminal conspiracy under Sections 420 and 120-B of the Indian Penal Code (IPC). The FIRs concerned allegations that users of online games faced unauthorized deductions after an initial transaction.

Following searches, the Enforcement Directorate froze five bank accounts and merchant IDs maintained with payment aggregators and gateways. 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.

The company also questioned the freezing of assets worth around ₹100 crore when the alleged amount involved in the ten FIRs was about ₹25 lakh. The Court agreed, observing that the statutory requirement under Section 8(2) could not be treated as a mere formality.

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 bench noted that the Order did not separately identify the property found to be involved in money laundering.

The Court further held that the Appellate Tribunal could not subsequently make the finding that the Adjudicating Authority was required to record. The bench also disagreed with the Tribunal’s reliance on the company’s gross revenue and alleged overseas remittances to determine “proceeds of crime”.

The Court observed that gross business turnover cannot by itself establish that the entirety of the turnover represents ‘proceeds of crime’. Questioning the freezing of more than ₹100 crore, the Court said it was difficult to understand how transactions worth ₹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. The ruling is a significant victory for Coda Payments, which had argued that the authorities had failed to follow the proper procedure in freezing its assets.

The case highlights the importance of following the proper procedure in money laundering cases. The Prevention of Money Laundering Act (PMLA) requires that the Adjudicating Authority make a finding that the assets are involved in money laundering before they can be frozen.

The ruling also raises questions about the use of gross revenue and alleged overseas remittances to determine “proceeds of crime”. The Court’s decision is likely to have implications for other companies facing similar allegations.

In conclusion, the Bombay High Court’s ruling is a significant development in the case of Coda Payments. The court’s decision to release the company’s accounts and quash the orders continuing the freezing of its assets is a major victory for the company.

The ruling highlights the importance of following the proper procedure in money laundering cases and raises questions about the use of gross revenue and alleged overseas remittances to determine “proceeds of crime”. The decision is likely to have implications for other companies facing similar allegations and will be closely watched by the business community.

The Bombay High Court’s decision is a reminder that the courts will carefully scrutinize the actions of authorities in money laundering cases. The ruling is a significant development in the ongoing efforts to combat money laundering and will be closely watched by the business community and law enforcement agencies.

The case of Coda Payments is a complex one, involving allegations of cheating and criminal conspiracy. The company had argued that the authorities had failed to follow the proper procedure in freezing its assets. The Bombay High Court’s ruling is a significant victory for the company and highlights the importance of following the proper procedure in money laundering cases.

In the end, the Bombay High Court’s decision to release the company’s accounts and quash the orders continuing the freezing of its assets is a major victory for Coda Payments. The ruling is a significant development in the case and will be closely watched by the business community and law enforcement agencies.

The significance of the ruling cannot be overstated. The Bombay High Court’s decision is a reminder that the courts will carefully scrutinize the actions of authorities in money laundering cases. The ruling highlights the importance of following the proper procedure in money laundering cases and raises questions about the use of gross revenue and alleged overseas remittances to determine “proceeds of crime”.