TaxTMI 
TaxTMI 
2020 (5) TMI 328
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.... namely Prabhat Kumar Srivastava till 30.06.2016. 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....
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.... to the Banks in complete discharge of loans. The same is 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 prem....
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...., on 31.01.2019, the Investigation Report was filed before the Ld. Special Judge under 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 n....
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....as at logger heads with the petitioner at that time) is also not prima facie reliable inasmuch 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 D....
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.... view that the appellant is entitled to an order of bail pending trial on stringent conditions in order 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.Ma....
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....er, he has also been made an accused for violation of section 36(c) of Companies Act, 2013 which is also punishable under section 447 of Companies 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....
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....OD) approved acceptance of unsecured Loan of Rs. 13.17 Crore from Rishi Kumar Srivastava on 28.03.2015. Thus, he being the whole-time director was having knowledge 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 variou....
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....I. During investigation, it is revealed that RHL had two major sources of funds between FY 2004-05 to FY 2015-16, which were borrowings from the Banks amounting to Rs. 294.65 Crore and Share Capital 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 ....
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....ame & Rs. 1.34 Crore in his spouse name) by holding shares in Aditya Medicose Private Ltd, Mona Infotech Pvt. Ltd, Prabhat Healthcare Services Pvt Ltd, Regal Builders & Promotes Pvt. Ltd, Umesh Pharmaceuticals 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 objec....
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.... Bipin Joshi A8 Y 6. Tarun Kumar Jain A9 Y 7. Mala Srivastava A10 Y 8. Sandeep Narula A11 Y 9. Sandeep Khosla 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 perso....
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....g Act), Government of India, (2015) 16 SCC 1, and State of Bihar v. Amit Kumar, (2017) 13 SCC 751. Thus, it is evident that the above factors must be taken into account while determining whether bail should be granted in cases involving grave economic offences. 12. As already discussed supra, it is apparent that the Special Court, while considering the bail applications filed by Respondent No. 1 both prior and subsequent to the filing of the Investigation Report and complaint, has attempted to 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. St....
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....hould be denied in every case since there is no such bar created in the relevant enactment passed by the legislature nor does the bail jurisprudence provides so. Therefore, the underlining conclusion is that irrespective of the nature and gravity of charge, the precedent of another case alone will not be the basis for either grant or refusal of bail though it may have a bearing on principle. But ultimately the consideration will have to be on case to case basis on the facts involved therein and securing the presence of 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 lo....
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....etitioner had actively connived to book bogus expenses of Rs. 76.03 Crore in the Books of RHL. Further he had actually signed the banking instrument (Cheques/RTGS) etc., for siphoning the funds of RHL as authorized signatory to the Bank Accounts of RHL. 30. During investigation, it is revealed that RHL had two major sources of funds between FY 2004-05 to FY 2015-16, which were borrowings from the Banks amounting to Rs. 294.65 Crore and Share Capital 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. 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. T....
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....nto the affairs of the company. (2) Where an order is passed by a court or the Tribunal in any proceedings before it that the affairs of a company ought to be investigated, the Central Government shall order an investigation into the affairs of that company. (3) For the purposes of this section, the Central Government may appoint one or more persons as inspectors to investigate into the affairs of the company and to report thereon in such manner as the Central Government may direct." Section 212: Investigation into affairs of Company by Serious Fraud Investigation 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, assi....
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....n 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: Provided further that the Special Court shall not take cognizance of any offence referred to this sub-section except upon a complaint in writing made by- (i) the Director, Serious Fraud Investigation Office; or (ii) any officer of the Central 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....
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....under section 173 of the Code of Criminal Procedure, 1973. (16) Notwithstanding anything contained in this Act, any investigation or other action taken or initiated by Serious Fraud Investigation Office under the provisions of the Companies Act, 1956 shall continue to be proceeded with under that Act as if this Act had not been passed. (17) (a) In case Serious Fraud Investigation Office has been investigating any offence under this Act, any other investigating agency, State Government, police authority, income-tax authorities having any information or documents in respect of such offence shall provide all such information or documents available with it to the Serious Fraud Investigation Office; (b) The Serious Fraud Investigation Office shall share any 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, ....
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....in the normal limits (between 17.02.2020 to 29.04.2020). Further, considering that the petitioner is being given all required medical treatment by the Jail Authorities and that his condition is stable from the last two months, it is established that the petitioner is not having any higher susceptibility of getting infected by COVID 19 due to incarceration in the jail environment. 37. Also considering that the height of the petitioner is around 6 feet and his present weight is 78kgs, the Body Mass Index (BMI) of the petitioner is 23.5 Kg/M Sq. Given that the healthy/normal BMI range prescribed by WHO is between 18.5 Kg/M Sq. to 25 Kg/M Sq., by no stretch of imagination can the petitioner be termed as underweight. In fact, the ideal weight range for the petitioners height is between 62 & 82 Kgs. 38. In view of above, I am of the considered 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 respon....
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....not be different parameter for petitioner and other promoters. 44. In the case of Y.S. Jagan Mohan Reddy vs. CBI: (2013) 7 SCC 439, the Hon'ble Supreme Court has held that "while granting bail, the Court has to keep in mind the factors like the nature of accusation, evidence in support thereof, the severity of punishment which conviction will entail, reasonable possibility of securing the presence of the accused during trial, reasonable apprehension of the witnesses being tempered with, the large interests of the public/state and other similar considerations." 45. It is pertinent to mention here that SFIO itself admits that even though the petitioner was a whole time Director of RHL/A-1, he was not signatory to the Financial Statements of said company. Further, 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 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 Joha....