SAFEMA Tribunal upholds seizure orders against gaming company in Rs.2850 crore money laundering case under Sections 17 and 20

The Appellate Tribunal under SAFEMA dismissed an appeal challenging seizure and freezing orders in a money laundering case. The appellant company, along with co-entities, allegedly defrauded users of 'Garena Free Fire' game through unauthorized deductions, collecting Rs.2850 crore and transmitting Rs.2320 crore abroad. The Tribunal found proper compliance with procedural requirements under Sections 17 and 20(1) of the Act of 2002, including recording reasons to believe. The company failed to disclose the source of Rs.100 crore as required under Section 8(1). The Adjudicating Authority correctly retained seized property pending trial court determination, noting ongoing investigation and non-cooperation by accused persons with ED proceedings.

---

---

ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment include:

• Whether the seizure and freezing order dated 19.10.2022, confirmed by the Adjudicating Authority on 15.03.2023, was justified under the Prevention of Money-Laundering Act, 2002 (PMLA).
• Whether the amount retained by the authorities exceeded the alleged proceeds of crime.
• Whether the procedural requirements under Sections 20(1) and 8(3) of the PMLA were duly followed by the authorities.
• Whether the appellant's actions constituted money laundering as defined under the PMLA.

ISSUE-WISE DETAILED ANALYSIS

1. Justification of Seizure and Freezing Order

Relevant legal framework and precedents: The seizure and freezing of assets were conducted under the PMLA, specifically under Section 17(1) which allows for such actions if there is a reasonable belief that the property is involved in money laundering.

Court's interpretation and reasoning: The Tribunal concluded that the seizure and freezing were justified given the substantial evidence of money laundering activities by M/s Coda Payments India Private Limited (CPIPL). The Tribunal noted the significant amount of money involved and the cross-border transfer of funds, which substantiated the need for seizure and freezing.

Key evidence and findings: The investigation revealed that CPIPL collected Rs. 2850 crore, out of which Rs. 2320 crore was transmitted outside India. The Tribunal found that the company acted as a conduit for transferring funds to its parent company in Singapore, thereby facilitating money laundering.

Application of law to facts: The Tribunal applied the provisions of the PMLA to the facts, determining that the actions of CPIPL fell within the ambit of money laundering as defined under the Act.

Treatment of competing arguments: The appellant argued that the proceeds of crime amounted to only Rs. 25 lakhs, while the respondent contended that the entire amount of Rs. 2850 crore was involved. The Tribunal sided with the respondent, noting that the appellant's calculation was based on imagination.

Conclusions: The Tribunal upheld the seizure and freezing order, finding that the actions of CPIPL constituted money laundering and justified the retention of assets.

2. Procedural Compliance under Sections 20(1) and 8(3) of PMLA

Relevant legal framework and precedents: Section 20(1) of the PMLA requires the recording of "reason to believe" in writing for retaining seized property, while Section 8(3) mandates an opinion that the property is involved in money laundering.

Court's interpretation and reasoning: The Tribunal found that the procedural requirements were met. Reasons to believe were recorded and sent to the Adjudicating Authority, and the Authority's order was detailed and reasoned.

Key evidence and findings: The Tribunal noted that the reasons to believe were documented and forwarded in compliance with the rules. The Adjudicating Authority's order included a prima facie opinion on the involvement of the property in money laundering.

Application of law to facts: The Tribunal determined that the procedural steps under Sections 20(1) and 8(3) were duly followed, thus validating the actions taken by the authorities.

Treatment of competing arguments: The appellant argued that the procedural requirements were not met, but the Tribunal found these claims unsubstantiated, as the necessary documentation and procedures were in place.

Conclusions: The Tribunal concluded that the procedural requirements under the PMLA were fulfilled, and the appellant's arguments on this ground were not upheld.

SIGNIFICANT HOLDINGS

Preserve verbatim quotes of crucial legal reasoning: "The Tribunal found that the material available on record is sufficient to show that the property/document are involved in money-laundering and for that we can record our finding to cure the defect, if any."

Core principles established: The Tribunal reinforced the principle that substantial evidence of money laundering justifies the seizure and freezing of assets under the PMLA. The procedural requirements under Sections 20(1) and 8(3) must be strictly followed to validate such actions.

Final determinations on each issue: The Tribunal upheld the seizure and freezing order, confirmed the procedural compliance under the PMLA, and determined that CPIPL's actions constituted money laundering. The appeal was dismissed, affirming the Adjudicating Authority's order.

---