The Kerala High Court (HC) has stayed proceedings under the Prevention of Money Laundering Act (PMLA) against cross-border payment platform Nium India for one month, according to a Bar and Bench report. Nium challenged a PMLA court’s decision to take cognisance of a complaint filed by the Enforcement Directorate (ED) without first giving the company a hearing, and the court agreed to pause the case.
On September 11, Justice V.G. Arun ruled that Section 223 of the Bharatiya Nagarik Suraksha Sanhita (BNSS) requires courts to give the accused an opportunity to be heard before taking cognisance. He cited the Supreme Court’s ruling in Kushal Kumar Agarwal v. Directorate of Enforcement and held that the ED had failed to comply with this mandate.
Background: Chinese loan app scam
The case began with 11 FIRs in Kerala and Haryana from individuals who reported extortion after taking small loans through mobile apps. Investigators said operators of these apps hacked users’ phone data and used it to blackmail them.
Furthermore, the ED claimed that the operators laundered more than Rs. 230 crore from these activities. According to the agency, they routed the money through shell entities and disguised it as payments for software, digital services, or travel. The ED further alleged that the operators transferred part of these funds through Nium’s platform in addition to regular banking channels.
Why Nium is implicated
The ED filed a complaint naming Nium India and its director as accused. It claimed that the company’s platform allowed the accused to bypass reporting requirements under the Income Tax Act, 1961. On May 7, a PMLA court in Ernakulam took cognisance of the complaint and summoned Nium.
However, Nium rejected the allegations. In its plea before the High Court, the company argued that neither the FIRs nor the Enforcement Case Information Report (ECIR) named it as an accused. Nium described itself as a collection agent that only facilitated cross-border payments on behalf of foreign sellers and remitted the funds to Nium Singapore.
“The petitioner does not have the ability to identify the ultimate source of the funds or the original remitter in the entire chain of transactions through which monies came to be deposited in the INR Collection Account, let alone any intent to launder such monies,” the company told the court. Nium insisted that it had followed all regulatory requirements and that the ED could not hold it responsible for how third parties used its platform.
Moreover, Nium asked the High Court to quash the ED complaint and the PMLA court’s order. It also requested the release of properties that the ED had frozen or attached in connection with the case.
Why this matters
This case highlights how regulators are increasing scrutiny of financial intermediaries. The ED has argued that payment platforms enable illicit fund flows from predatory lending apps, while fintech companies like Nium…
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