Bombay High Court Quashes ₹100 Crore Asset Freeze on Coda Payments India

The Bombay High Court has set aside an Enforcement Directorate (ED) order that froze approximately ₹100 crore in assets belonging to Coda Payments India Pvt Ltd. The ruling, delivered on September 2, 2026, by a division bench of Justices A. S. Gadkari and Kamal Khata, concluded that the ED and the relevant adjudicating authorities failed to establish a clear, legally required nexus between the frozen properties and the alleged offences. The court’s decision marks a significant legal development for payment intermediaries and online gaming entities currently navigating investigations under the Prevention of Money Laundering Act (PMLA).

The legal challenge originated from an Enforcement Case Information Report (ECIR) registered by the ED in December 2021, which was predicated on ten FIRs alleging cheating and unauthorized deductions from users of online games, including Garena Free Fire. Following searches in September 2022, the agency froze five bank accounts and various merchant IDs associated with Coda Payments India. By the time the case reached the High Court, nine of the ten original FIRs had been settled or closed, leaving only a single pending FIR involving an alleged amount of ₹85,650. The court found the freezing of ₹100 crore in this context to be "ex-facie excessive and disproportionate."

The court’s primary criticism centered on the failure of the Adjudicating Authority to comply with the mandatory requirements of Section 8(2) of the PMLA. The bench observed that the authority had not recorded an independent, reasoned finding regarding whether the specific properties in question were actually involved in money laundering. Instead, the order merely stated that the material presented was sufficient to justify the continuation of the freeze for the purpose of adjudication. The court emphasized that this requirement is not an "empty formality" and that the authority must separately identify the property found to be involved in the offence.

the bench clarified that the PMLA Appellate Tribunal could not retrospectively cure this fundamental defect by supplying its own findings. The court held that if an Adjudicating Authority omits the mandatory finding under Section 8(2), the tribunal cannot simply fill that gap based on the same material. This ruling underscores the necessity for strict procedural compliance by investigative and adjudicating bodies when exercising coercive powers under the PMLA, particularly when the value of the attached assets vastly exceeds the alleged predicate offence.

A central point of contention in the proceedings was the scale of the asset freeze relative to the alleged criminal activity. The court expressed significant skepticism regarding the ED's decision to attach ₹100 crore when the total amount involved across all ten original FIRs was approximately ₹25 lakh. The judges noted that the agency had failed to provide evidence supporting the claim that the entire banking and payment infrastructure of the company was linked to fraudulent activity. The court remarked, "We are also unable to comprehend the basis on which the E.D. has attached a sum total of Rs. 100 crores without establishing that all the transactions made on the Apps were done by minors or were on account of an unauthorized 'auto-debit'."

The bench also rejected the ED’s reliance on the company’s gross turnover and foreign remittances as a basis for determining the proceeds of crime. The court held that a company’s bank account does not automatically become proceeds of crime simply because the entity is under investigation. It further noted that the ED failed to produce evidence establishing the alleged unauthorized auto-debit mechanism, questioning how transactions totaling ₹2,854 crore could be categorized as fraudulent without material showing a lack of authentication, such as OTPs or UPI PINs.

This judgment provides a critical legal reference for other companies in the online gaming and payment aggregation sectors, such as Gameskraft, WinZO, and Probo, which have faced similar asset-freezing actions. While the court clarified that its findings were confined to the legality of the specific PMLA orders in the Coda Payments case, the ruling establishes a clear precedent that a relatively small or quantified predicate offence cannot be used to justify the freezing of an entity’s entire banking infrastructure without a demonstrated statutory nexus.

The court’s emphasis on the distinction between legitimate business receipts and actual proceeds of crime serves as a warning against the overreach of investigative agencies. By setting aside the impugned order, the Bombay High Court has reinforced the principle that the power to freeze assets under the PMLA must be exercised with proportionality and strict adherence to the statutory framework. The decision is expected to influence how future challenges to asset attachments are framed, particularly in cases where the scale of the freeze appears disconnected from the underlying allegations.

Beyond the merits of the asset freeze, the court also addressed procedural concerns regarding the composition of the Appellate Tribunal. The bench expressed reservations that the tribunal, which comprised only a Chairperson, had not fully complied with the mandate of Section 6 of the PMLA. The court observed that the tribunal should have recorded a finding to substantiate that its bench composition was in accordance with the law, rather than disregarding the appellant's objections. This procedural observation adds another layer of scrutiny to the functioning of PMLA appellate bodies.

While the immediate relief for Coda Payments India is clear, the broader investigation into the underlying allegations remains a separate matter. The court explicitly stated that its judgment should not be interpreted as a finding on whether the company had committed the scheduled offences or engaged in money laundering. As the legal landscape for digital payment intermediaries continues to evolve, this case highlights the ongoing tension between aggressive investigative enforcement and the protection of legitimate business operations under Indian law.