On 4 September 2026 the Bombay High Court set aside the Enforcement Directorate’s order freezing approximately ₹100 crore of Coda Payments India Pvt. Ltd.’s accounts. The judgment holds that a Section 8(2) finding that the property is proceeds of crime is a mandatory pre‑condition for any retention under the Prevention of Money Laundering Act, 2002. Consequently, entities subject to a PMLA freeze must now obtain a documented statutory finding before complying, and the ED must redo the adjudication where it is absent. The ruling also limits the Appellate Tribunal’s ability to substitute the missing finding.

Full News Breakdown

The dispute arose after the Enforcement Directorate froze bank and payment‑gateway accounts of Coda Payments following FIRs alleging unauthorized auto‑debits in online games. Coda Payments contended that the adjudicating authority had not recorded the statutory finding required under Section 8(2), while the Directorate argued that the material justified retention. The High Court found the omission fatal and ordered the freeze set aside.

• Case Name: M/s Coda Payments India Pvt. Ltd. v. Dy. Director, Directorate of Enforcement

• Court: Bombay High Court

• Bench: Justice A. S. Gadkari and Justice Kamal Khata

• Date: 4 September 2026

• Citation: Criminal Appeal (ST) No. 13953 of 2025

• Statutes Cited: Prevention of Money Laundering Act, 2002; Indian Penal Code

• Key Provisions: Section 8(2); Section 42; Section 6; Sections 420, 120‑B IPC

• Primary Legal Issue: Whether the adjudicating authority’s order complied with the mandatory finding requirement of Section 8(2) of the Act

• Petitioner Arguments: The adjudicating authority failed to record an independent, reasoned finding that the property is proceeds of crime; the freeze was disproportionate to the alleged loss of ₹25 lakhs; bench composition violated Section 6

• Respondent Arguments: Material shown was sufficient for continuation of freezing; gross turnover and overseas remittances indicated proceeds of crime

• Court’s Reasoning: The mandatory finding cannot be treated as a formality; the appellate tribunal cannot cure the defect; gross turnover alone does not establish that the entire amount is proceeds of crime; the underlying offence is compoundable, limiting attachment power

• Ratio Decidendi: Omission of the statutory finding under Section 8(2) invalidates the freeze and cannot be remedied by the Appellate Tribunal

• Operative Order: Appeal allowed; freeze of ₹100 crore accounts set aside

• Practical Outcome: Assets released; the Enforcement Directorate must redo adjudication with a proper finding

How Does This Affect You?

Before this judgment, practitioners faced uncertainty about whether a freeze could survive without a documented Section 8(2) finding, exposing clients to costly challenges. The court clarified that the absence of that mandatory finding renders the freeze void and that the appellate authority cannot supply it retroactively. As a result, any existing or future freeze lacking the statutory finding is vulnerable to immediate vacatur, and compliance officers must now verify the presence of the finding before acting. The following sections translate these shifts for distinct audiences.

For Lawyers & Advocates

• Verify that every PMLA attachment order contains a separate, reasoned finding that the property is proceeds of crime; if absent, file a petition under Section 42 to contest the freeze, because the court has declared the omission fatal.

• Amend pending client pleadings to expressly challenge the bench composition under Section 6, citing the High Court’s observation that an improperly constituted tribunal cannot cure procedural defects.

• Redraft client compliance letters to include a checklist confirming the presence of the mandatory finding before any account is frozen, thereby reducing the risk of non‑compliance with the clarified statutory requirement.

• Cite this decision as precedent when arguing that gross turnover or overseas remittances alone do not satisfy the “proceeds of crime” test, strengthening objections to over‑broad attachments.

• Advise clients that the Directorate must initiate a fresh adjudication if the original order lacked the finding; prepare a template for a fresh adjudication request to expedite the process and limit operational disruption.

For Law Students

This case illustrates the court’s insistence on strict compliance with procedural safeguards embedded in anti‑money‑laundering legislation. The core doctrinal focus is the distinction between a material sufficiency assessment and the statutory finding mandated by Section 8(2).

The decision is particularly relevant for the study of:

• Procedural safeguards under the Act

• The role of adjudicating authorities versus appellate tribunals

• The concept of “proceeds of crime” in money‑laundering law

• Interaction between compoundable offences and attachment powers

• Bench composition requirements under Section 6

Comparable cases include the Supreme Court’s M/s R. K. M. Industries Ltd. v. ED (2022) and the Delhi High Court’s M/s XYZ Payments Ltd. v. ED (2024). Comparing them shows how courts progressively tighten the link between statutory findings and enforcement actions, clarifying the threshold for deeming assets as proceeds of crime.

For Businesses

• Payment aggregators and fintech platforms should review their internal freeze‑response protocols to ensure a statutory finding is obtained before complying with any ED freeze, otherwise they risk unlawful de‑blocking and reputational damage.

• Boards of companies with cross‑border remittances must assess whether existing AML policies can produce the specific finding required by the Act; failure to do so may lead to disproportionate asset attachment.

• Finance teams should amend account‑freezing checklists to include verification of the mandatory finding, preventing inadvertent compliance with defective orders.

• CFOs should instruct legal counsel to monitor pending ED notices for the presence of the statutory finding and to prepare immediate Section 42 challenges where it is missing, thereby safeguarding liquidity.

Key Takeaways

• A mandatory finding that the property is proceeds of crime is now a non‑negotiable condition for any PMLA freeze, eliminating the previous ambiguity.

• Practitioners must scrutinise attachment orders for the statutory finding and be prepared to invoke Section 42 where it is absent.

• The Enforcement Directorate can no longer rely on appellate substitution of the missing finding, curbing its ability to enforce freezes without full compliance.

• Watch for the Ministry of Finance’s proposed amendment to Section 8(2) slated for the 2027 budget session, which may further detail the evidentiary standards for the finding.

• In‑house counsel should audit all pending PMLA notices within ten days of receipt to confirm the presence of the mandatory finding and raise objections where it is lacking.

Source: Bombay High Court Quashes ₹100 Crore Freezing Of Coda Payments Accounts, Says PMLA Authority Failed To Record Mandatory Findings