2022 (7) TMI 413 - HC - Indian Laws

Chartered Accountant Granted Bail in Stock Audit Case

PANKAJ MAHAJAN Versus SERIOUS FRAUD INVESTIGATION OFFICE

PANKAJ MAHAJAN Versus SERIOUS FRAUD INVESTIGATION OFFICE - TMI Issues Involved:1. Bail Application under Section 439 of the Code of Criminal Procedure, 1973.2. Role and Responsibility of the Accused in the Stock Audit.3. Allegations of Negligence and Collusion in Conducting Stock Audits.4. Investigation and Statements Recorded.5. Custody and Interim Bail Considerations.6. Economic Offences and Public Interest.Issue-wise Detailed Analysis:1. Bail Application under Section 439 of the Code of Criminal Procedure, 1973:The present second bail application was filed by the accused under Section 439 of the Code of Criminal Procedure, 1973. The accused had previously filed a bail application which was dismissed by the learned ASJ on 02.06.2022. The petitioner sought interim bail on the grounds of parity, asserting that he had not enriched himself or his firm in any manner and had always cooperated with the investigation.2. Role and Responsibility of the Accused in the Stock Audit:The accused, a Chartered Accountant and partner in M/s. A.C. Gupta & Associates, was appointed by Punjab National Bank and State Bank of India to conduct stock audits for Bhushan Steel Limited (BSL) for the financial years 2014-2015 and 2015-2016. The accused's role was limited to data aggregation by physically visiting various locations of the company and verifying the stocks and debtors' report in the stock statement. The accused claimed that the stock audit was conducted based on the information and documents provided by the companies and adhered to the guidelines issued by the Institute of Chartered Accountants of India (ICAI).3. Allegations of Negligence and Collusion in Conducting Stock Audits:The allegations against the accused included negligence in conducting the audits by not verifying the documents diligently and failing to raise a red flag about the deficiencies in the documents. The Investigation Report indicated that BSL, along with its associated companies and officials, allegedly connived to inflate figures of the Stock in Transit to avail Drawing Power facilities from cash credit accounts. The accused was alleged to have colluded with the officers of BSL in providing and using wrong information to calculate the DP figures wrongly based on the figures given by the BSL management.4. Investigation and Statements Recorded:The accused was summoned by the Serious Fraud Investigation Office (SFIO) on multiple occasions and joined the investigation, during which detailed interrogations were carried out. The accused's statements were recorded under Section 207 of the Companies Act, 1956. The accused explained his limited role in the stock audit and stated that the audit was conducted based on the information provided by the companies.5. Custody and Interim Bail Considerations:The accused was not arrested during the investigation or after the chargesheet was filed in court. The bail application was heard for about three years, and the accused was not taken into judicial custody despite being present in court on every date. On 01.06.2022, the learned Trial Court directed the accused to be taken into judicial custody, citing the absence of interim protection from any superior court. The accused had always cooperated with the investigation and appeared before the court diligently. The primary accused, Mr. Neeraj Singhal and Mr. Nitin Johari, had already been granted interim bail.6. Economic Offences and Public Interest:The respondent opposed the bail application, asserting that the offence committed was an economic offence with deliberate design for personal profit, regardless of the consequences to the community. The respondent cited various judgments to argue that the accused was not entitled to bail in such white-collar crimes. However, the court considered the circumstances, including the accused's cooperation with the investigation, the limited role in the stock audit, and the fact that the primary accused had been granted interim bail.Conclusion:Considering all the circumstances, the petitioner was admitted to bail on submitting a Bail Bond and Surety Bond in the sum of Rs.1,00,000/- to the satisfaction of the trial court/Special Judge. The application was accordingly allowed.