2024 (9) TMI 1226 - HC - GST

Bail denied in GST fraud case involving fake firms and stolen identity documents worth crores

Kanika Dhingra Versus State of U.P.

Allahabad HC dismissed bail application in GST fraud case involving fake firms registered using stolen identity documents. Court found applicants ... Seeking grant of bail - no direct evidence of being in any way connected with the fake GST firms - Validity of FIRs under Sections 420, 467, 468, 471, and 120B IPC - HELD THAT:- In the facts of the present case, the involvement, knowledge and actions following the deposit determines that the applicants were well connected with Sanjay Dhingra in respect of transactions which he had with GST firms which were registered by using PAN Card and Aadhaar Card of the informant. Money trail/ financial transaction and the records that have been traced to track the flow of funds, detect illegal activity which can be analyzed from the bank account of the applicants wherein it is not clear as to from where such huge amount of money came into accounts of the alleged accused persons and have been deposited in other accounts. The Investigating Officer has, while submitting the charge sheet, found unusual and unexplained transactions which indicate some illegal activity as showing involvement of the applicants in the criminal offence. Fraudsters, like all the alleged accused in the present case set up companies only on paper to generate fake transactions and claim ITC. Such companies are abandoned or shutdown after a short period. The present case relates to economic offences. Such offence like large scale fraud, money laundering and corruption, are often viewed seriously because they affect the economic fabric of the society. The Courts may deny bail in such cases especially if the accused holds a position of influence or power. In the present case, money trail of crores, which affects the society at large scale, is involved which started from registration of fake firms by using Aadhaar and PAN Cards of the informant who had not applied for such registration. The Apex Court in the case of Prahlad Singh Bhati v. NCT, Delhi and another [2001 (3) TMI 1053 - SUPREME COURT], has held that while granting bail, the court has to keep in mind nature of accusations, nature of evidence in support thereof, severity of punishment which conviction will entail, the character, behaviour, means and standing of the accused, circumstances which are peculiar to the accused, reasonable possibility of securing the presence of the accused at the trial, reasonable apprehension of the witnesses being tampered with, larger interest of the public or State and similar other considerations. The Apex Court has, in the case of P. Chidambaram v. Directorate of Enforcement [2019 (12) TMI 186 - SUPREME COURT], held that precedent of another case alone will not be the basis for either grant or refusal of bail though it may have bearing on principle and the consideration will have to be on case-to-case basis on facts involved therein and securing the presence of the accused to stand trial. Having gone through the submissions of learned counsel for the parties, nature of accusation of offence, role of the applicants as well as reasons given in judgement, it is found that this is not a fit case for granting bail. Bail application dismissed. Issues Involved:1. Validity of FIRs under Sections 420, 467, 468, 471, and 120B IPC.2. Involvement of applicants in the alleged crimes.3. Evidence against applicants.4. Economic offenses and their gravity.5. Bail considerations.Issue-wise Detailed Analysis:1. Validity of FIRs under Sections 420, 467, 468, 471, and 120B IPC:The judgment discusses three FIRs related to fraudulent GST registrations and the misuse of PAN cards and Aadhaar details. The FIRs were lodged under Sections 420 (cheating), 467 (forgery of valuable security), 468 (forgery for the purpose of cheating), 471 (using as genuine a forged document), and 120B (criminal conspiracy) IPC. The court finds that the FIRs were validly lodged based on the allegations of forgery and cheating.2. Involvement of Applicants in the Alleged Crimes:The applicants, Kanika Dhingra and Mayank Dhingra, were implicated based on their financial transactions with firms involved in the scam. The court noted that the applicants were not initially named in the FIRs but were later implicated due to the money trail linking them to the fraudulent activities. The involvement of Sanjay Dhingra, who had already been released on bail for a related GST Act offense, was also considered.3. Evidence Against Applicants:The court examined the case diaries and found substantial evidence linking the applicants to the fraudulent activities. Key points include:- Transactions between M/s Good Health Pvt. Ltd. (connected to Sanjay Dhingra) and M/s Radhey Krishna Marketing (owned by Mayank Dhingra).- The transfer of Rs. 16.35 crore from M/s Radhey Krishna Marketing to Kanika Dhingra's account.- Statements from employees and the investigation revealing that the applicants benefited from the illegal funds.- The use of a SIM card registered to Deepak Murjani, which was linked to the fraudulent firms.4. Economic Offenses and Their Gravity:The court emphasized the seriousness of economic offenses, noting that they affect the economic fabric of society. The judgment references several Supreme Court cases, highlighting that economic offenses involving large-scale fraud and money laundering require a different approach in bail considerations. The court stressed the importance of the larger public interest and the potential impact on the economy.5. Bail Considerations:The court applied the principle that 'bail is the rule, jail is the exception,' but noted exceptions for economic offenses. The judgment discussed various factors, including the nature of the accusations, the severity of the punishment, the character of the accused, and the potential for tampering with evidence. The court found that the applicants' involvement in the fraudulent transactions and the substantial evidence against them warranted the denial of bail.Conclusion:The bail applications of Kanika Dhingra and Mayank Dhingra were rejected based on the gravity of the economic offenses, the substantial evidence of their involvement, and the potential impact on the public and the economy. The court emphasized the need to address economic crimes seriously and ensure that those involved are held accountable.