2024 (4) TMI 38 - HC - Money Laundering

Managing Director's bail denied in Rs. 1,300 crore money laundering case involving diverted power plant funds

The HC dismissed a bail petition in a money laundering case involving misappropriation of bank credit facilities. The petitioner, as Managing Director of ... Seeking grant of bail - money laundering - proceeds of crime - misappropriation of credit facilities extended by the banks for personal gain - creation of shell companies - main allegation of the respondent is that the petitioner, in his capacity as Managing Director of Surana Power Ltd., had presented a project for construction of 25 MW electric plant at Raichur in Karnataka and in this regard had sought loan from a consortium of Banks. It is seen from the records that more than 1,300 crores had been sanctioned - HELD THAT:- It is the specific case of the respondent that towards the said project the said contracts were granted to other companies which were under the direct control of the petitioner. This allegation is denied by the petitioner. But that allegation is a matter of evidence. But it has to be noted that the allegation that those companies were under the direct control of the petitioner is a very serious allegations, since any contract issued has to be done only by a transparent policy being issued. Shell companies - HELD THAT:- A detailed list has been given in the counter affidavit about the various shell companies which are alleged to have been incorporated by this petitioner - It is also seen that though it is contended that two forensic audits had been conducted and no irregularity had been found, third audit was conducted over the affairs of the companies and the report is not to the advantage of the petitioner. All these aspects require deep investigation. In the instant case, the allegation against the petitioner with respect to diversion and misappropriation of funds is that SPL had borrowed funds of Rs. 1,4945.76 crores and had not even started the 2 X 210 MW power plant at Raichur in Karanataka. The account was also declared as NPA. It is also seen that for construction, SPL had awarded sub-contracts to entities which were, according to the respondent, controlled by the petitioner. Further very specifically shell companies were incorporated and there was only paper transaction reflecting the turn over. The amounts diverted back to the companies showing them as contribution of the petitioner. All these are series allegations. It is thus seen that the petitioner will have to satisfy two conditions for grant of bail namely, that there are reasonable grounds that the petitioner would be held not guilty and that there must also be a trust that the petitioner would not indulged in similar activities in future. Unfortunately, the petitioner had not satisfied either of the two conditions. Petition dismissed. Issues involved:The judgment involves the bail application of the first accused in a case pending before the Principal Sessions Court at Chennai under Section 3 & 4 of the Prevention of Money Laundering Act, 2002.Details of the Judgment:Allegations and Defense:The prosecution alleges that the petitioner, as the Managing Director of Surana Power Ltd., caused a loss of Rs. 1,495.76 crores to banks by misappropriating funds. The petitioner denies these allegations, citing delays in loan disbursement and external factors affecting the project progress. Forensic audits were conducted, with conflicting reports. The prosecution further claims that the petitioner diverted funds through shell companies, which the petitioner disputes.Prosecution's Counter:The respondent contends that the petitioner misappropriated credit facilities, manipulated accounts, and engaged in money laundering activities across multiple companies under his control. Specific details of transactions and fund diversions are provided, alleging systematic financial irregularities and laundering of loan amounts. The respondent argues that the petitioner poses a flight risk and may tamper with evidence or influence witnesses.Court Observations and Legal Precedents:The court noted the seriousness of allegations regarding control of companies, diversion of funds, and systematic money laundering. Legal precedents emphasizing the elements of money laundering offenses were cited to analyze the case. It was highlighted that the petitioner failed to satisfy the conditions for bail as per the Prevention of Money Laundering Act, specifically regarding the likelihood of guilt and future misconduct.Conclusion:Based on the allegations, defense, prosecution's counter, and legal precedents, the court dismissed the bail application, emphasizing the need to establish the petitioner's innocence and prevent potential future offenses. The judgment underscores the gravity of financial crimes and the stringent conditions for bail under the relevant legal framework.