2025 (4) TMI 572 - AT - Money Laundering

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 ... Money Laundering - challenge to seizure and freezing order - generation of proceeds of crime by cheating and defrauding Indian user of ‘Garena Free Fire’ by M/s Garena International with the help of M/s Coda Payments India Private Limited. - reasons to believe - HELD THAT:- Due to lack of transparency, the people were not knowing that appellant’s company was an entity behind the unauthorized deductions from their accounts and hence the appellant’s name may not appear in all the FIRs, but the Company has collected the money. An amount of Rs.2850 crore was collected and out of it Rs.2320 crore was transmitted out of India. The appellant company was keeping its ratio of profit. The appellant company otherwise failed to disclose source of Rs.100 crore in their account though required under Section 8(1) of the Act of 2002 for which show cause notice was given by the Adjudicating Authority. In view of the above, first ground of challenge to the order is not made out. It has come on record that reasons to believe were recorded under Section 20(1) of the Act of 2002. It was sent to the Adjudicating Authority and has been quoted by us. The procedure under Section 17 of the Act of 2002 was also followed. The reasons to believe under section 20(1) of the Act of 2002 were recorded in writing and forwarded to the Adjudicating Authority. It is, thus, not correct on the part of the appellant to state that the procedure given under section 20(1) of the Act of 2002 has been flouted - The compliance of the aforesaid provisions has been made and while raising the issue, the appellant has failed to show basis for alleging the violation of Section 20(1) of the Act of 2002. Thus, even the second argument raised by the appellant is not made out. The third argument is in reference to alleged violation of Section 8(3) of the Act of 2002. It is alleged that the Adjudicating Authority has failed to record its findings that the property is involved in money-laundering. In the absence of such a finding, the order of seizure and retention could not have been confirmed. The final finding on it is to be recorded by the Trial Court otherwise it would create two parallel jurisdictions of the Court and Authority on one in the same subject. The Adjudicating Authority found that in pursuance to the FIRs, investigation is going on and it has further noted that the Company integrated its APIs with the website of game publishers, including Garena Free Fire and when customers purchase digital content on the game’s website, they were not knowing who is collecting the money. It was with the further opinion that the main persons of the accused company did not come forward to join the investigation rather they avoided their appearance before the ED. All these grounds were considered by the Adjudicating Authority to justify further retention of the documents and the property. The Adjudicating Authority was thus cautious to record that the finding on commission of crime would be recorded by the Special Court trying the criminal case. Conclusion - The detailed facts about the working and involvement of appellant company and others have been given, substantiate the findings that the documents would be required for further investigation and otherwise property has rightly been seized and retained by the respondent as is involved in money-laundering, which would obviously subject to final outcome of the Trial. There are no reason to cause interference in the impugned order and hence the appeal is dismissed ISSUES PRESENTED and CONSIDEREDThe 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 ANALYSIS1. Justification of Seizure and Freezing OrderRelevant 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 PMLARelevant 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 HOLDINGSPreserve 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.