Can an appellate tribunal cure a lower authority’s failure to record a mandatory statutory finding by simply recording that finding itself? The Bombay High Court answered no in Coda Payments India Pvt. Ltd. v Dy. Director, Directorate of Enforcement1, setting aside orders sustaining the freezing of bank accounts and payment aggregator accounts valued at approximately Rs 100 crore. A Division Bench of Justices A.S. Gadkari and Kamal Khata held that gross business turnover and foreign remittances cannot, by themselves, establish that a company’s entire banking infrastructure constitutes proceeds of crime under the Prevention of Money Laundering Act, and separately held that an Appellate Tribunal cannot supply a mandatory finding that the Adjudicating Authority itself failed to record. For practitioners handling PMLA attachment and freezing challenges, the order addresses both a procedural defect and a substantive evidentiary standard.
Coda Payments India, a wholly owned subsidiary of a Singapore parent, operates a platform through which digital content publishers and gaming companies receive payments, processed through aggregators such as Paytm and MobiKwik. The Enforcement Directorate registered an ECIR in December 2021 based on ten FIRs alleging that users of an online game were subjected to unauthorised deductions after an initial transaction, and the ED alleged that Coda functioned as a conduit collecting money from Indian users and remitting it abroad. Following a search in September 2022, the ED initiated freezing action against five bank accounts and multiple merchant IDs. The Adjudicating Authority confirmed continuation of the freeze in March 2023, and the Appellate Tribunal dismissed Coda’s appeal in March 2025. By the time the matter reached the High Court, nine of the ten FIRs had been closed, leaving only one, involving Rs 85,650, while the frozen assets remained valued at roughly Rs 100 crore.
A Threshold Jurisdictional Defect
Before reaching the merits, the Court addressed an objection to how the Adjudicating Authority’s bench was constituted, and found that the Appellate Tribunal had entirely disregarded this objection rather than recording any finding on it. The Court held that this disregard rendered the Adjudicating Authority’s order “ipso facto a nullity,” describing the resulting defect as one of coram non judice, meaning the authority was not properly constituted to take cognizance of the matter at all. Having found this threshold defect, the Court nonetheless proceeded to examine the case on its merits as well.
The Missing Section 8(2) Finding
Section 8(2) of the PMLA2 requires the Adjudicating Authority, after considering the notice and hearing the parties, to record a finding on whether the properties in question are involved in money laundering. The Court found the Adjudicating Authority’s 2023 order fell short of this: it recorded the ED’s allegations at length but concluded only that the material was “sufficient to arrive at satisfaction that continuation of the freezing” was required for adjudication, without separately identifying which properties were involved in money laundering or explaining the nexus between the frozen funds and the alleged offence. The Court drew a firm distinction between finding that material is sufficient to justify continuing a freeze for adjudication, and recording the actual statutory finding that property is involved in money laundering, holding these are not the same exercise.
The Appellate Tribunal had itself noticed this gap, but concluded it could cure the defect by recording the finding on its own. The Court held this was impermissible: “Once the Appellate Tribunal itself noticed the omission, it ought to have set aside the order and required the statutory authority to undertake the exercise mandated by law or otherwise granted the relief consequential upon the failure to comply with the statutory requirement. The Tribunal’s statement that it could ‘cure the defect’ is therefore the precise error which vitiates the impugned order.” Relying on the Constitution Bench decision in Mohinder Singh Gill v Chief Election Commissioner3 and its reaffirmation in 63 Moons Technologies v Union of India4, the Court held that an order must stand or fall on the reasons actually contained in it, and an appellate authority cannot retrospectively supply the foundational reasoning the original authority was required to record.
Turnover Is Not Proceeds of Crime
On the substantive question, the Court turned to Section 2(1)(u) of the PMLA5, which defines proceeds of crime as property derived or obtained as a result of criminal activity relating to a scheduled offence, and to the Supreme Court’s decision in Vijay Madanlal Choudhary v Union of India6, which held that property connected to a scheduled offence is not, merely by reason of that connection, automatically proceeds of crime. Applying this, the Court held that “gross business turnover, however, cannot by itself establish that the entirety of the turnover represents ‘proceeds of crime.’ The fact that money has moved from India to an overseas group entity may be relevant to an investigation. It does not, without more, establish that every amount in the company’s bank accounts constitute ‘proceeds of crime.’ The Court found the ED had produced no evidence establishing the alleged unauthorised auto-debit mechanism, and held that the investigating authority had failed to establish three things: that the roughly Rs 2,850 crore received by Coda’s Singapore entity was unlawfully received, that this sum was the subject of money laundering, or that the Rs 100 crore attached in India specifically represented proceeds of crime.
The Court set the scale of the coercive action against the scale of the alleged offence: the ten FIRs together involved only about Rs 25 lakh, nine of which had by then been withdrawn, leaving a single FIR for Rs 85,650, against an asset freeze of roughly Rs 100 crore. It held this disparity was “ex-facie excessive and disproportionate,” and that a statutory authority extending coercive action to an entity’s entire banking infrastructure must provide reasoned justification for why each category of property is liable to be retained, an exercise the Court found had simply not been undertaken.
Why This Matters
The order operates on two distinct levels that practitioners should keep separate. Procedurally, it limits the ability of appellate tribunals to cure a statutory omission of this kind: where a lower authority skips a mandatory statutory finding, the tribunal’s own agreement with the underlying material does not substitute for that finding; in these circumstances the defect called for remand or consequential relief, not appellate self-correction. Substantively, the order draws a clear line for money laundering cases involving payment intermediaries and platforms with high transaction volumes: a large gross turnover, or the fact that funds moved to an overseas group entity, is relevant context for an investigation but is not itself proof that the funds are tainted. The Court was careful to note that its findings go only to the legality of the freezing and adjudication orders, and do not determine whether Coda committed any scheduled offence or engaged in money laundering, leaving that question for the underlying proceedings.
Citations
Expositor(s): Adv. Pratistha Dahiya
