TaxTMI 
TaxTMI 
2020 (11) TMI 27
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....the accused persons. The case was then numbered as Case No.6 of 2019. The applicant is one of the accused who has been alleged to have indulged in money laundering according to the said complaint. 3 Learned counsel Shri Ponda appearing for the complainant would urge that the applicant is a sexagenarian and is a qualified Civil Engineer who had joined the Infrastructure Leasing and Financial Services Ltd (hereinafter referred to as 'IL&FS'). He was sent to deputation to the IL&FS Transportation Networks Limited (ITNL). He came to be appointed as Managing Director of ITNL and continued on the said post till he was asked to tender his resignation in October 2018. The learned counsel would submit that on an ECIR numbered above, being registered on 19th February 2019, the applicant was summoned by Enforcement Directorate for investigation and he co-operated with the investigation throughout. The applicant was arrested on 19th June 2019 and the Enforcement Directorate was granted his custody. From 20th June 2019, he was remanded to judicial custody and since then, is incarcerated. The submission of Mr.Ponda is to the effect that on perusal of the complaint, the alleged case of ED i....
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.... IFIN being Shri Ravi Parathasarathy, Shri Ramesh Bawa and Shri Hari Sankaran were not arrested by ED and in fact, they have been granted bail under Section 88 of the Cr.P.C. by the designated Court on 23rd September 2019. Same is the case of another co-accused C. Sivasankaran. According to the learned counsel, the applicant is only a non-Director, non-key managerial personnel and a non-employee and non-consultant of IFIN who has been arrested by ED, whereas other Directors and members of COD who were at the helm of the affairs have been spared. Thus, the very basis of his arrest is erroneous. He would submit that in the complaint, ED has apportioned an amount of Rs. 27,78,00,000/- (Rupees Twenty Seven Crore Seventy Eight Lakhs) towards proceeds of crime under Section 2(1)(u) of PMLA being PRP, deputation cost and proceeds receipts from sale of shares received by the applicant during financial year 2015 to 2018, out of which the submission advanced is, the deputation cost is not paid to the applicant but it has gone to the IL&FS from ITIN. The submission is that the properties worth Rs. 21,50,00,000/- are already provisionally attached by the ED and the competent authority appointe....
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....t the present applicant. He has also referred to the FIR registered with EOW, Delhi which was the trigger point for commencement of investigation by the DRI under the PMLA. He also refer to a complaint filed by Serious Fraud Investigation Office (SFIO) on 30th May 2019 for commission of offence under Section 447 of the Companies Act, 2013 read with Section 120B and Section 420 of the IPC. Further, responding to the submission that the applicant is the only one who has been discriminated, Shri Venegaonkar submit that the present applicant along with one of the Members of COD of IFIN was arrested on 19th June 2019, the other two members Shri Ramesh Bawa and Hari Sankaran were also arrested by SFIO and they are already in jail custody. He has also placed reliance on the statement given by various officials of IFIN and relied on documents including the Forensic Audit Report submitted by Grant Thorton reflecting substantial anomalies in sanctioning loan to third parties. 6 Relying on the said documents, Venegaonkar would urge that IFIN business model has focussed on working with select groups with relationship driven by top management team comprising of Mr.Ravi Parthasarathy, Mr.Hari....
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....ubsidiaries, 136 indirect subsidiaries, 6 joint ventures and 4 associate companies. IL&FS had institutional shareholders which included LIC (25.34%), Orix Corporation of Japan (23.54%), ADIA (12.56%), HDFC (9.2%), Central Bank of India (7.67 %) and State Bank of India (6.42%). The IL&FS Finance Services Ltd (IFIN) was incorporated as IL&FS Asset Management Co. in 1995 and in the year 2005, obtained a Non-Banking Finance Company licence (NBFC) and was renamed as IL&FS Invest Limited. Subsequently, in the year 2006, the banking team from ILFS and the syndication team from ILFS Investment Ltd were integrated and integrated team was renamed as ILFS Financial Services Ltd (IFIN). It is a 100% subsidiary of Infrastructure Leasing and Financial Services Limited. IFIN is responsible for undertaking corporate advisory services, syndication, project finance and lending transactions. IFIN was led and managed by Ravi Parthasarathy, Ramesh Bawa as Managing Director and Chief Executive Officer since its inception. Milind Patel was the joint Managing Director of IFIN who oversaw the asset and structured finance and Corporate Advisory Business. Rajesh Kotian was the Dy. Managing Director and....
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.... 2000. Transportation Infrastructure Development was initially taken up in IL&FS and thereafter transportation vertical IL&FS transportation was formed wherein the projects undertaken and implemented by IL&FS were domiciled. ITNL benefits significantly from its affiliation with IL&FS which had an established track record in promoting and financing range of public infrastructure in India over the last decades. The applicant along with Shri Ravi Parthasarathy, Hari Sankaran, Arun Saha was incorporated in the Board of Directors of ITNL since 2010- 11 and continued till he resigned in the year 2018. The applicant also continued to be in the COD of ITNL till 2018. The brief working of ITNL was that after successful bidding for a project, SPV was formed and named after the name of the project to be undertaken. Subsequent to formation of SPV, there was bidding process for award of contract and a separate SOP was drawn. ITNL was entrusted the responsibility of executing the entire project and from the SOP, it is discerned that the Managing Director, the Executive Director and the Committee of Directors had a key role to play in execution of any project. After the company defaulted on it....
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....e amounting to Rs. 65.50 crore. A facade was being projected and it is alleged that in connivance and collusion with each other, all the accused persons indulged in initially locating and identifying dubious companies which have been engaged in infrastructure development and later, issued fictitious purchase orders for non-existent works. The forte of such companies lie in providing accommodation entries in form of bogus billing, inducting bogus share capital and advancing unsecured loan(s) to the beneficiaries in lieu of commission. Thus, with regard to ILFS Rail Ltd, bogus entities were allocated bogus work orders and invoices were raised by those companies, and the money was received and layered through their accounts and cash was taken and handed back. The investigation reveal a common thread in the work orders issued to such bogus companies as nearly all the work orders were issued to either resettle the shopkeepers or for road repairs or road widening and it is alleged that the accused persons siphoned a sum approximated at Rs. 74.00 crores and more. The Income Tax department also mentioned the investigation into the bogus nature of work awarded to shell companies in the a....
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....vertible debentures. The complaint contained the minute details in respect of lending to M/s.Siva Group. The entire routing of fund sanctioned from IFIN in the various group of companies of Siva Group is elaborated in form of an annexure. The COD of IFIN in connivance with C. Siva Sankaran continued to re-fiance huge loans to various Siva Group Companies against which there was already a huge outstanding. At the time of re-financing, no proper collateral security was obtained. The said groups which were already in financial stress were chosen, is the allegation. 13 The investigation till date has revealed that ILFS Financial Service Ltd had the sole mandate to carry out the debt and equity syndication for ITNL. IFIN would approach bank, financial institutions and other market players like Mutual Funds to source finances, to match requirements of ITNL. The investigation has revealed that RBI in its inspection report for the Financial Year ending on 31st March 2016 clearly instructed IFIN to run down its exposures to group companies with no fresh lending. The said inspection is carried out under Section 45N of the Reserve Bank of India Act, 1934. In spite of the said advice, ITNL ....
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.... The directives of RBI contained in its letter dated 1st November 2017 are in pursuance of the inspection carried out of the IL&FS Financial Services Ltd and is under Section 45N of the RBI Act, 1934. The RBI by virtue of the said provision is competent to cause inspection of any non-banking institution including a financial institution for the purposes of verifying the correctness or completeness of any statement, information or particulars furnished to the Bank. The RBI is also empowered to carry out inspection of any non-banking institution, being a financial institution if the bank considers it necessary or expedient. The advise given is to revisit the framework for assessing group exposure and the classification of group companies in order to arrive at the NOF and CAR in terms of Section 45(1)(A), which relate to requirement of registration before commencement of any business by a non-banking financial institution. The registration is mandatory before a non-banking financial company commence its business as Non-banking Financial Institution (NBFI) and having net owned fund of Rs. 25 lakhs. The provision inserted in the year 1997 is the reason for the inspection carried out and....
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.... of crime are involved, where a person is charged with offence of money laundering. The burden under Section 24 is cast on the accused to prove that proceeds of crime are not involved in purchasing the properties owned by the accused. The applicant who has been arraigned as an accused in the capacity as the Managing Director of ITNL and one of the members of the Committee of Directors of IFIN (for infrastructure projects) is attributed a key role. IFIN who was shouldering the responsibility of syndicating the debt and equity for ITNL and ITNL would post its requirement for the projects to IFIN, the RBI had advised IFIN to run down its exposure to group companies with no fresh lending. In spite of that, ITNL for whom the applicant was working as Managing Director received fund from IFIN. It is revealed during investigation that loans were sanctioned to various entities who were undertaking various projects and the applicant had given letter of assurance dated 29th March 2018 on behalf of ITNL. The CFO of one of the groups in his statement has admitted that he had meetings with K. Ramchand for obtaining fund from IFIN in favour of M/s.GHV Hotels Ltd which is running in loss for la....
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....o be considered on its own merit, the only rider is that the Court has to exercise the discretion judiciously and not arbitrarily. 18 In Y.S. Jagan Mohan Reddy, (2013) 7 SCC 439, Their Lordships while dealing with an offence involving conspiracy to commit economic offence of huge magnitude involving public monies and public properties have laid down the following parameters. 34 Economic offences constitute a class apart and need to be visited with a different approach in the matter of bail. The economic offence having deep rooted conspiracies and involving huge loss of public funds needs to be viewed seriously and considered as grave offences affecting the economy of the country as a whole and thereby posing serious threat to the financial health of the country. 35. While granting bail, the court has to keep in mind the nature of accusations, the nature of evidence in support thereof, the severity of the punishment which conviction will entail, the character 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,....
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.... imposes twin stringent condition for offences classified thereunder, direction was issued to reconsider all Bail Applications denied under Section 45 on merits without applying the twin stringent conditions. In the wake of the said authoritative pronouncement, the complaint of the applicant would be entitled to be considered by applying the parameters applicable while availing bail under Section 439 of the Cr.P.C and the seriousness of the accusation, the nature of involvement, the penalty to be imposed on conviction and the possibility of tampering with the prosecution evidence, if released on bail, will have to be properly weighed and each factor be given due weightage. The magnitude of the offence involving the applicant is enormous and the amount involved is huge. The effect of the conspiracy on behalf of the accused persons focusing on a desired result makes it a serious economic offence. The IL&FS Financial Services which was facing a serious liquidity crisis leading to their inability to fulfil debt obligation and the investigation has revealed that those in helm of affairs played a hoax and in a disguised way duped the stakeholders and general public whose monies were a....