TaxTMI 
TaxTMI 
2020 (5) TMI 328
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.....2016. The Rockland Group was managed by Late Rajesh Srivastava and his family. The petitioner was a close friend of Srivastavas and was given employment by Late Rajesh Srivastava on this account. After 30.06.2016, RHL was taken over by VPS Healthcare Pvt. Ltd. and on the wishes and directions of Late Mr. Rajesh Srivastava, the Applicant, was designated on paper as a Director of RHL and some other group companies. But since this was primarily an honorary position given to the petitioner, on account of his continued years of service he was never involved in the day-to-day affairs of the said companies and his Share Holding was negligible. The petitioner was never a Guarantor of the Loans obtained by RHL. 3. The above said position of facts is squarely admitted by Serious Fraud Investigation Office (SFIO) inasmuch as the SFIO itself admits that even though the petitioner was a whole time Director of RHL/A1, he was not a signatory to the Financial Statements of RHL/Al (Page no.34 of the I.O. Report). Further, the petitioner has been found NOT GUILTY of the alleged offence under Sections 129, 134 and 448 of Companies Act, 2013 in respect of alleged 'False Statement in the Balance ....
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....evident from the NOC dated 24.04.2017 issued by Lead Bank. Moreover, there is no complaint alleging cheating or misappropriation of their funds made against the petitioner by any Bank or financial institution, till date. In addition, all the banks and lenders of RHL that existed before the sale of the Company to VPS Healthcare had been duly paid back and no shareholder, creditor or lender has ever raised any complaints about any alleged siphoning off of funds. Moreover, VPS Healthcare owned RHL obtained fresh bank loan of Rs. 400 crores from Federal Bank for running of the operations of the Company vide Sanction Letter dated 04.01.2017. However, petitioner is in no manner related to the said fresh bank loan, as he was neither the Borrower nor the Guarantor of the said new loan obtained by VPS Healthcare. 7. Learned senior counsels further submitted that pursuant to the takeover of RHL by VPS Healthcare, various disputes arose between the parties and the same led to: i. Passing of Order dated 20.01.2017 by this Court restraining the Srivastava Family and their agents including the petitioner from entering the premises of RHL, copy whereof is annexed with the petition as Annexure-....
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.... Section 173 Cr.P.C. Pursuant to this, an application under Section 437 of the Cr.P.C. seeking the petitioner's enlargement on regular bail was filed on 11.02.2020, however, vide order dated 02.03.2020, the Ld. Special Judge dismissed the same. 11. Learned Senior Counsels argued that it is not a case where any public funds/ public interest is involved and that till date there has not been a single complainant or victim in the present case. Inasmuch as all the loans obtained by RHL, during the period the petitioner was its whole time Director, have been paid back in full. However, the allegation of the SFIO that even though the banks have been paid, at the time of disbursal of the loan, the banks were "deceived" on account of presentation of window-dressed accounts before the banks. The said fact falls flat on its face inasmuch as despite notice of the present case by SFIO, none of the banks have stated that they were deceived in any manner, hence, the alleged offences of S 36 (c) read with Section 447, 448 of the Companies Act, 2013 are prima facie not made out. Admittedly, the petitioner was neither the Borrower nor the Guarantor of the loan obtained by RHL. 12. Further argued t....
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.... as the said Report issued by the Auditor is counter blast to the abovesaid FIR No.81/2017 dated 24.08.2017 lodged by the petitioner against VPS led RHL and the said Auditor on account of various facts such as preparation of balance sheet of RHL within a period of one day and manipulation of accounts/ financial statements. The SFIO's allegation that the abovesaid report of the Auditor was thereafter considered by the ROC and Report dated 19.02.2018 under section 208 of the Companies Act, 2013 was issued by ROC whereby also falls flat as the said report did not recommend inquiry by SFIO. 14. Further argued that SFIO has no jurisdiction to investigate the present matter since none of the pre-requisites that confer such jurisdiction upon the SFIO, exist in terms of Section 212 (a) (b) and (c). The petitioner was not arrested for almost 1 ½ years during investigation, which means that even the SFIO felt that there was no apprehension that he would abscond or hamper the investigation in any manner. The petitioner has been languishing in Judicial Custody for the past more than 92 Days and Charge Sheet/Complaint has also been filed. However, during the term of J.C., the petiti....
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....r to safeguard the interest of CBI." (Emphasis Supplied) 18. Though Section 212(6) of the Companies Act, 2013 provides for satisfaction of the twin conditions for grant of regular bail, the proviso to Section 212(6) of the Companies Act, 2013 itself carves out an exception in cases where the Accused is Sick and the same reads as under: (6) Notwithstanding anything contained in the Code of Criminal Procedure, 1973... no person accused of any offence under those sections shall be released on bail or on his own bond unless- (i) the Public Prosecutor has been given an opportunity to oppose the application for such release; and (ii) where the Public Prosecutor opposes the application, the court is satisfied that there are reasonable grounds for believing that he is not guilty of such offence and that he is not likely to commit any offence while on bail: Provided that a person, who, is under the age of sixteen years or is a woman or is sick or infirm, may be released on bail, if the Special Court so directs." 19. On the other hand, Ms.Maninder Acharya, learned Additional Solicitor General submitted that based on order dated 31.05.2018 issued by the Ministry of Corporate Affai....
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....ies Act, 2013. 21. Further submitted that Rockland Hospitals Limited (RHL) was a company incorporated in the year 2004. It was incorporated with the objective of carrying out the business of establishing and operating Hospitals. RHL had managed three (3) Hospitals, one at Qutub, Dwarka and Manesar. While the operations of hospital at Qutub was taken over by RHL in the FY 2008-09, hospital at Dwarka was made operational in the year 2011 and the hospital at Manesar started its operation in the year 2013. Accordingly, 100% shareholding of RHL was transferred by the shareholders i.e. promoters of RHL in the FY 2016-17 to VPS Health Care Private Limited for a consideration of Rs. 165 Crores. The promoters including petitioner have committed inter-alia frauds by various manners: I. Rockland Hospitals (Qutub) started its commercial operations from 2003-04 and was operated and managed by a trust Foundation of Applied Research in Cancer (FARC), the management and operations were transferred from FARC to RHL from 2008-09 onwards. Municipal Corporation of Delhi (MCD) directed RHL to deposit a sum of Rs. 13.21 Crores towards additional Floor Aspect Ratio (FAR) charges for the expansion of H....
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....edge of accounts of RHL but, facilitated the Srivastava brothers in consummating their fraudulent scheme of siphoning off Rs. 13.17 Crore received for RHL by FARC for the undue enrichment of Rishi Kumar Srivastava. III. RHL had maintained a Hospital Information System (HIS) wherein details of patients availing facilities/services at its hospitals were captured and these entries including patient registration, billing, discharge etc., are carried out by their respective departments. However only with respect to a category of patients called "Doctor Referred Patients (DRP)", such entries were made by IT Team of RHL as per the instructions and knowledge of its MD Prabhat Kumar Srivastava and Group CFO Nikhil Sharma. The doctors whose names have been recorded in the HIS had stated under oath that such quantum or nature of surgeries conducted on DRP were false and fake, hence the DRP transactions were fictitious in nature and was one of the means for fudging the books of accounts. This was also substantiated by the various registers of Hospital such as OT Register, Cath Lab register maintained at the Hospitals. IV. The petitioner was a part of audit committee of RHL in FY 2014-15 to....
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....ital Infusion of Rs. 221.20 Crore. Share capital infusion brought into the books of RHL was Rs. 9.61 Crore, World Bank (IFC) had brought in Rs. 40 Crore and 21 Promoter Controlled Companies had brought in Rs. 168.38 Crore. While the net income earned by all promoters of RHL and their spouses shown in the income tax returns filed by them during the period 2005-06 to 2016-17 was Rs. 8.53 Crore only, however, they have shown to have infused share capital of Rs. 179 Crores into RHL. The promoters of RHL had designed a dubious scheme whereby Rs. 168.38 Cr of share capital was brought into RHL through a web of 21 Companies controlled by them with the help of 266 accommodation entry operator-controlled companies spread across Delhi, West Bengal, Assam, Bihar, Himachal Pradesh, Haryana, Karnataka, Kerala, Maharashtra, Orissa, Telangana, Tamil Nadu & Uttar Pradesh. The promoters of RHL had ultimately purchased 100% of shares of all Layer-1 Companies but without any consideration and they were unable to provide any documentary evidence for purchase of these shares from the original share subscribers or from any other party, including bank transactions and share transfer agreements. The modus....
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....euticals Pvt.Ltd, A.B. Medicos Pvt. Ltd, Vaibhav India Surgicals Pvt Ltd (7 of the 21 Layer-1 Companies). IX. On 06.06.2008 IFC, World Bank had invested Rs. 40 Crore in the equity share capital of RHL and by deceit, fraudulent conduct of business and act of omission IFC was made to sell the shares it had purchased at Rs. 40 Crore at Rs. 11 Crore to Mala Srivastava on 27.06.2016 and these shares were resold to VPS Health Care Private Limited at a price of Rs. 19.15 Cr on 29.06.2016 thus obtaining an unlawful gain of Rs. 8.14 Cr. The purchase and resale of share of IFC was not just in violations of provisions of the share purchase agreement and share sale agreement but also against the duty cast on directors of RHL Mala Srivastava & Prabhat Kumar Srivastava who had the fiduciary duty of protecting the interest of all the shareholders as laid down in section 166 of Companies Act, 2013 which states that a director of a company shall act in good faith in order to promote the objects of the company for the benefit of its members as a whole, and in the best interests of the company, its employees, the shareholders. However the promoters had with full knowledge of sale of share of RHL to....
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....a A20 Y 22. To strengthen her arguments, learned Additional Solicitor has relied upon the case of Serious Fraud Investigation Office vs. Nittin Johari & Ors.: AIR 2019 SC 4380, wherein Hon'ble the Supreme Court has observed as under: "10. It is pertinent to begin our discussion by referring to the mandatory conditions imposed under Section 212(6)(ii) for the grant of bail in connection with offences under Section 447 of the Companies Act. Sub-clause (ii) of Section 212(6) reads as follows: "(6) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), offence covered under section 447 of this Act shall be cognizable and no person accused of any offence under those sections shall be released on bail or on his own bond unless- (ii) where the Public Prosecutor opposes the application, the court is satisfied that there are reasonable grounds for believing that he is not guilty of such offence and that he is not likely to commit any offence while on bail" Although arguments have been advanced touching upon the scope and validity of the above provision, particularly in the aftermath of the decisi....
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....account not only for the conditions laid down in Section 212(6) of the Companies Act, but also of the general principles governing the grant of bail. 13. In our considered opinion, the High Court in the impugned order has failed to apply even these general principles. The High Court, after referring to certain portions of the complaint to ascertain the alleged role of Respondent No. 1, came to the conclusion that the role attributed to him was merely that of colluding with the co-accused promoters in the commission of the offence in question. The Court referred to the principles governing the grant of bail as laid down by this Court in Ranjitsing Brahmajeetsingh Sharma v. State of Maharashtra, (2005) 5 SCC 294, which discusses the effect of the twin mandatory conditions pertaining to the grant of bail for offences under the Maharashtra Control of Organised Crime Act, 1999 as laid down in Section 21(4) thereof, similar to the conditions embodied in Section 212(6)(ii) of the Companies Act. However, the High Court went on to grant bail to Respondent No.1 by observing that bail was justified on the "broad probabilities" of the case. In our considered opinion, this vague observation d....
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.... the accused to stand trial." 24. Learned ASG submitted that while granting bail twin test to be tested in the present case as held by Hon'ble the Supreme Court, in this case, petitioner has played active role in committing fraud, therefore, he does not deserve bail. 25. I have heard learned counsel for the parties at length and perused the material available on record. 26. The allegations against the petitioner are that he was one of the promoters and close associate of Srivastava's and whole time director of RHL between financial year 2011-12 to 2014-15 when funds were deposited with MCD and when the refund from MCD was masqueraded and shown as unsecured loan repayable to Rishi Kumar Srivastava. The petitioner had signed the Management and Operations Licence Agreement (MOLA) on 14.02.2007 on behalf of RHL with FARC. He was the authorized representative of FARC in its legal matters and he filed the Writ Petition No.4195/2013 of FARC, seeking refund of Rs. 13.17 crores. He as part of the Board of Directors (BoD) approved acceptance of Unsecured Loans of Rs. 13.17 crores from Rishi Kumar Srivastava on 28.03.2015. Thus, petitioner being the whole time Director was having knowledge....
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....L was Rs. 9.61 Crore, World Bank (IFC) had brought in Rs. 40 Crore and 21 Promoter Controlled Companies had brought in Rs. 168.38 Crore. While the net income earned by all promoters of RHL and their spouses shown in the Income Tax Returns filed by them during the period 2005-06 to 2016-17 was Rs. 8.53 Crore only, however, they have shown to have infused share capital of Rs. 179 Crores into RHL. Thus, promoters of RHL had designed a dubious scheme whereby Rs. 168.38 Crore of share capital was brought into RHL through a web of 21 Companies controlled by them with the help of 266 accommodation entry operator-controlled companies spread across the country. The promoters of RHL had ultimately purchased 100% of shares of all Layer-1 Companies but without any consideration and they were unable to provide any documentary evidence for purchase of these shares from the original share subscribers or from any other party, including bank transactions and share transfer agreements. The modus operandi followed by the promoters was to transfer funds of RHL falsely as advances to Somya Constructions Private Limited (SCPL), RSH Meditech System Private Limited (RSH) towards capital expenditure or dir....
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....gation Office: (1) Without prejudice to the provisions of section 210, where the Central Government is of the opinion, that it is necessary to investigate into the affairs of a company by the Serious Fraud Investigation Office- (a) on receipt of a report of the Registrar or inspector under section 208; (b) on intimation of a special resolution passed by a company that its affairs are required to be investigated; (c) in the public interest; or (d) on request from any Department of the Central Government or a State Government, the Central Government may, by order, assign the investigation into the affairs of the said company to the Serious Fraud Investigation Office and its Director, may designate such number of inspectors, as he may consider necessary for the purpose of such investigation. (2) Where any case has been assigned by the Central Government to the Serious Fraud Investigation Office for investigation under this Act, no other investigating agency of Central Government or any State Government shall proceed with investigation in such case in respect of any offence under this Act and in case any such investigation has already been initiated, it shall not be proceeded....
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....al Government authorised, by a general or special order in writing in this behalf by that Government. (7) The limitation on granting of bail specified in subsection (6) is in addition to the limitations under the Code of Criminal Procedure, 1973 or any other law for the time being in force on granting of bail. (8) If the Director, Additional Director or Assistant Director of Serious Fraud Investigation Office authorised in this behalf by the Central Government by general or special order, has on the basis of material in his possession reason to believe (the reason for such belief to be recorded in writing) that any person has been guilty of any offence punishable under sections referred to in subsection (6), he may arrest such person and shall, as soon as may be, inform him of the grounds for such arrest. (9) The Director, Additional Director or Assistant Director of Serious Fraud Investigation Office shall, immediately after arrest of such person under sub-section (8), forward a copy of the order, along with the material in his possession, referred to in that sub-section, to the Serious Fraud Investigation Office in a sealed envelope, in such manner as may be prescribed and ....
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....ny information or documents available with it, with any investigating agency, State Government, police authority or income tax authorities, which may be relevant or useful for such investigating agency, State Government, police authority or income-tax authorities in respect of any offence or matter being investigated or examined by it under any other law." 33. Regarding medical condition of the petitioner, as per reports dated 06.03.2020, 18.03.2020 & 17.04.2020 show that the Petitioner is a case of Diabetes with a history of Laparospic sleeve gastrectomy surgery on 16.01.2015 and is receiving all medications as prescribed and his condition is stable. In fact, attention is drawn to the following aspects of the report given by the medical officer: a) Petitioner didn't require any hospitalization during the judicial custody (Report dated 17.04.2020 Para b) b) Petitioner has never been sent to hospital outside jail premises (Report dated 06.03.2020 Para 3) c) Petitioner is getting all requisite medication (Report dated 06.03.2020 Para 4 & Report dated 17.04.2020 Para c) d) Petitioner's condition is stable (Report dated 06.03.2020 Para 5 & Report dated 17.04.2020 Para c). 34.....
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....sidered opinion that there are no medical grounds available to the petitioner for grant of bail. 39. It is pertinent to mention here that vide order dated 20.04.2020 while disposing of the Criminal Miscellaneous Application No.5825/2020 and thereby allowing urgent hearing of present bail application (through video conferencing) directed the respondent to file the status report in the matter under consideration more specifically, showing the difference between the role of the petitioner herein against that of accused nos.5, 7 to 11 and 20. As per the above tabulation of 9 accused, they all are booked under section 447 and section 36(c) of Companies Act, 2013 in the 7 instances of Fraud as per status report. However, on perusal of said table, role of petitioner and role of Rishi Kumar Srivastava (A-5) is same. But A-5 has not been arrested and chargesheet has already been filed. However, there is no explanation to this effect. As per the table, role of accused nos.7 to 11 & 20 are very less, therefore, there is justification on not arresting them. 40. It is pertinent to mention here that in respect of Finding No.1- Instance VI, the petitioner has not been arraigned as an accused. H....
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....and 448 of Companies Act, 2013 in respect of alleged 'False Statement in the Balance Sheet of RHL as per finding No.2 at page 8 of complaint.' 46. Admittedly, there is no loss caused either to any financial institution or Central/State Government. Moreover, there is no complaint from any share holders. Whereas, in case of Nittin Johary (supra,) huge loss has been caused to the Banks, shareholders and other stake holders. Moreover, in the present case under section 447 the Companies Act, if fraud is proved, the accused shall be punishable with imprisonment for a term which shall not be less than six months but which may extend upto ten years and fine not less than the amount involved. Thus the judgments relied upon by the respondent are not applicable in the facts and circumstances of this case as petitioner is concerned. 47. It is not in dispute that investigation is complete, criminal complaint has been filed and charges are yet to be framed. Presently, our country is under 'Lock-down' due to COVID-19, therefore, regular functioning of the courts may take more time. Thus, in the present situation, trial of the present case is not possible in the near future. Further, there is no....