AI Drafter 
TaxTMI 
TaxTMI 
2023 (2) TMI 374
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....t and both have been rejected vide orders dated 05.10.2021 and 01.11.2021 respectively. 5. The brief facts giving rise to filing of the present bail application are as under: 6. On 31.12.2020, the CBI registered a FIR bearing No. RC0742020E0014 against M/s Shakti Bhog Foods Ltd. (hereinafter called as SBFL) and Mr. Kewal Krishan Kumar, Director/ Promoter of M/s SBFL under Section 120B read with Section 420/ 467/ 468/ 471 and 13(2) read with Section 13(1)(d) of the Prevention of Corruption Act, 1988 (hereinafter called as PC Act). 7. The FIR was registered based on a written complaint dated 11.06.2020 lodged by the State Bank of India (SBI). The allegations in the FIR pertain to financial irregularity and siphoning of funds in relation to credit facilities obtained by SBFL from a consortium of banks led by the SBI and thereby causing a loss of Rs. 3269.42 crores. 8. The Ld counsel for the applicant states that the applicant was not named as an accused/ suspect in the FIR. As per the FIR, the review period/period under enquiry of offence was between 2013 and 2017. 9. The applicant was an internal auditor of the SBFL for the financial year 2008-09 till 2013-14, and a st....
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....sposing off the first regular bail application. At that stage, the argument of 'applicant's deep roots in the society' was considered to be multidimensional and hence, rejected. At this stage however, the same consideration would not apply due to change in circumstance i.e. filing of supp. complaint arraigning the applicant. Though it has been stoutly argued by the ld. Spl. PP that investigation qua the role of the applicant is still on-going, the facts suggest a different picture. The supp. compliant was filed on 11.10.2021. Since then, the IO has not examined a single witness to further investigate the role of applicant. It was not until the present application came to be filed on 1.11.2021 that an application was moved to further question the applicant in jail premises and submission was put forth during the course of arguments on behalf of the ED that 3 more persons have been summoned for questioning to understand role of the applicant in the alleged offence. I have perused the case diary. 2 of those 3 persons have also been questioned, on 11.11.2021 and 13.11.2021. More importantly, the line of questioning of these 2 persons was only to further confirm the (alleged) role of th....
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....e of voluminous data and electronic records is already in the safe possession of the ED leaving no scope of its tampering by the applicant." 17. The Special Judge (PC Act) rejected the bail application of the applicant on considerations of parameters of Section 45of the Prevention of Money Laundering Act, 2002 (hereinafter called as PMLA). 18. In the prosecution complaint, the allegations against the applicant are that the applicant had designed the entire plan of laundering of loan funds through dummy entities. By virtue of this mechanism on one hand the turnover and the stock of the company was inflated and on the other hand the loan funds were laundered. On analysis of the bank statement of shell corporations, it was revealed that funds received from SBFL were either withdrawn in cash or re-routed to further shell companies. It is submitted that all the entities mentioned in the prosecution complaint do not name the applicant. The applicant had nothing to do with these accommodation entries made by SBFL through various shell companies. Accommodation entries through shell companies: 19. Mr Devki Nandan Garg and Mr Ashok Kumar Goel have been cited as accommodation entr....
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....@ Pathak etc. for the said fictitious bills for discounting of bills and inland LC's purposes and accordingly arranged the same as per their requirements without actual movement of stock. The said persons had also stated detail of rate, quantity, types of grains, load, commission etc. for preparation of the said fake documents and accordingly I got prepare the said fake set of documents i.e bills, invoices, transport receipts etc. which were finally submitted by these personal banks for realisation of LC's and other purposes." Devki Nandan Garg Statement dt.12.07.2021 "These firms used to provide accommodation entries by charging commission. I was aware of this fact because whenever I used toad more layers to any transactions by using their firms and buying and selling fake purchase sale and transport bills/invoices for Shakti Bhog Food ltd. Business. I had to rotate some money through their accounts and purchased some bills from them to complete cycle. Even, monument of Shakti Bhog Food Ltd. Sh. Kewal Krishan Kumar and Mr Tarun had also asked to rotate the funds some more channel" Devki Nandan Garg Statement dt. 13.07.2021 "On being asked I further state that i....
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....ent dt. 21.09.2021 "On being asked about cash withdrawn from bank accounts of my dummy entities and end use of this cash, I want to state that I used to withdraw cash also from bank accounts of my dummy entities as per instructions received from Shri KK Kumar, Shri Siddharth Kumar, Shri Raman Bhuraria, Shri Tarun Kumar or Shri Sandeep Mishra." "On being asked about purpose of above-mentioned bogus transactions, I want to state that SBFL used to divert funds availed as credit facilities to my dummy entities and these funds are further transferred into bank accounts of SBFL or into other dummy entities or into group companies of SBFL or withdrawn as cash as per directions received from Shri KK Kumar, Shri Siddharth Kumar, Shri Raman Bhuraria, Shri Tarun Kumar or Shri Sandeep Mishra." Statement dt. 22.09.2021, "On being asked about commission charged by me for providing accommodation entries, I want to state that I used to charge commission ranging from .5% to 1.5% on fake invoice value provided to SBFL. On being asked about mode of receipt of this commission, I want to state that I used to deduct amount of commission from funds received from banks accounts of SBFL and ....
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....rocedure to transfer/rotation of funds from dummy entities to SBFL or group companies, I want to state that Shri AH Ansari used to provide me fake bills to transfer funds from my dummy entities to SBFL or group concerns and Shri Tarun Kumar used to communicate as to how much amount is required to be transferred in which account of SBFL or sister concerns. He used to provide me details of bank accounts of SBFL and its sister concerns to transfer funds on strength of fake bills without actual movement of goods." 20. The Ld. Counsel for the applicant states that on bare perusal of the disclosure statements clearly demonstrate that they are pure cut, copy, paste job where even coma, inverted comas, exclamations are identical. Mr Khurana, also states that Mr Devki Nandan Garg has subsequently retracted from his statement. The statement of Mr Devki Nandan Garg reads as under: "L. That on repeated query from the Investigating Agency, every time I have informed the Investigating Agency that I do not know Raman Bhuraria and I had never met him. The same was also confirmed by Raman Bhuraria himself, which is revealed from his Statement dated 07.07.2021. Howeve....
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....ri Kewal Krishna Kumar dated 28.08.2021 [Founder and Managing Director of SBFL]. B. Shri Devki Nandan Garg Retraction dated 14.12.2021 [Accommodation Entry Operator]. C. Shri Ashok Kumar Goel Retraction dated 10.04.2022 [Accommodation Entry Operator]. D. Shri Tarun Kumar has also filed Retraction dated 14.07.2022 (Key Managerial Personnel and also Nephew of Promoter - Kewal Krishan Kumar). (Arrested on 22.06.2022) E. Shri Sidharth Kumar has also filed Retraction dated 06.08.2022 (Key Managerial Personnel and also Son of Promoter - Kewal Krishan Kumar). (Arrested on 22.06.2022). 25. Lastly and most importantly it is submitted that besides the two statements of Ashok Kumar Goel and Devki Nandan Garg there is nothing else that links the applicant with the allegations made by the ED. 26. The next allegation is that fictitious stock damage report was got prepared at the applicant's instance and he attended the meeting as a special invitee where decision for disposal for damage stock was taken. It is stated by the applicant that the stock damage report dated 01.02.2016 is prepared by HUMS & Associates. Vide Board Resolution, HUMS & Associates wer....
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....e. B. The applicant was beneficiary of the proceeds of crime 29. The respondent submits that the applicant had two main firms namely (i) Raman Bhuraria & Associates, which was a CA firm engaged by SBFL for internal audit and by group companies as statutory auditor, and (ii) Bhuraria Consultants Pvt Ltd. In addition to receiving cash in the amount of Rs. 6.14 Crore, the applicant, his firm, and company also received proceeds of crime (PoC) worth Rs. 8.47 Crore, which are PoC obtained by aiding SBFL and its directors in commission of offence. 30. Additionally, the applicant was involved in the projection of a fictitious and false stock position as well as other SBFL financial data to consortium banks. He managed bank officials' visits for stock verification. Email correspondence from the applicant, dated 20.10.2011, which was discovered during the investigation, showed that he was involved in stock and related bank verification/audit matters. In this email, the Applicant has stated : "As discussed with Mr. Tarun yesterday is not stock audit. It is just quarterly visit of bank to be conducted by outside agency, assigned to a CA firm on panel. No....
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.... in its latest decision in the case of Vijay Madanlal Chaudhary & Ors. vs. Union of India & Ors. 2022 SCC OnLine SC 929. D. Other material alleging the role of the applicant 35. The respondent also submits that the averment of the applicant accused that there is no material apart from statements in the present case is incorrect. There is also other material recovered against the applicant. This material placed on record is sufficient to persuade this Hon'ble Court that no satisfaction, as required u/s 45 of the PMLA, can be reached i. The statement of Sh. Abdul Hasan Ansari is corroborated by the email correspondence dated 02.12.2015 between applicant and Abdul Hasan Ansari (with copy to CMD and Siddharth Kumar) by which applicant had demanded documents of the group companies. ii. Evidences show that applicant was directly involved in arranging fake bills from entry operators like Devki Nandan Garg. While analysing the seized material, an email had been recovered from email correspondence between applicant and Abdul Hasan Ansari which contains the details of payments made by SBFL to the dummy entries operated by Devki Nandan Garg. iii. SBFL booked s....
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....routed to bank accounts of various members of the family, sums receivable towards business, etc. They also included documents relating to purchase of property. The statements were made under oath on 18-04-2006 and 03-05-2006. No doubt, they were not during the course of search. Yet, they were made voluntarily. There was no allegation ever that the assessee or any of her family members, including Abhay and Varun Gupta, who made the main statements under oath, were pressurized to do so; there was in fact no contemporaneous retraction. Indeed, the assessee appears to have resiled from the statement, only through the returns, filed after receipt of notice under Section 153A. The probative value of these statements is to be seen not from only whether it was allowed to stand, or whether it was resiled from. The stage when such statement is resiled, whether the assessee was able to give any explanation for the statement, its connection with the material seized, all are relevant, in the opinion of the court, to judge if it is to be considered in an assessment. In other words, there cannot be a rule carved in stone, as it were, that statements that are resiled cannot be considered ....
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....e 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 punishable under section 4 except upon a complaint in writing made by- (i) the Director; or (ii) any officer of the Central Government or State Government authorised in writing in this behalf by the Central Government by a general or a special order made in this behalf by that Government." 43. The twin conditions, are independent of each other and require the Court to weigh each one of them and adjudicate on the potential guilt of the offender based on the material relied upon by the accused and the opposition made to the same by the prosecution. 44. Hence the Hon'ble Court is not required to render a finding of guilt or acquittal at this stage, nor is it required to conduct a mini trial or meticulously examine the evidence but rather is to examine whether the applicant has made out reasonable grounds for believ....
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....s transactions which resulted in inflation of their financials. It was on the strength of these audited but falsely inflated financials that SBFL was able to obtain loans from banks. The borrowed funds were then channelized through the bank accounts of several Shakti Bhog group entities which had actually provided a platform for changing the colour of the borrowed funds from liabilities to assets and then, for siphoning off the same by creating a web of complex transactions leading to commission of the offence of money laundering. The applicant was auditor of several group companies during the period when offence took place. For this purpose, he received the commission in form of fees and hence is involved in the offence of money laundering. 49. The timeline of the applicant with SBFL is reproduced hereinbelow: 3. Applicant's timeline in M/s. Shakti Bog Food Limited: FY 2006-07 Conducted Statutory audit (Appointed on 20.04.2007) FY 2007-08 to 2013-14 Conducted Internal Audit. The Internal Audit process for FY 2013-14 was ended by September 2014. Applicant also provided Tax and Banking Consultancy. June 2015 Applicant resigned as Internal Auditor of SBF....
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....2016 which underlines the role of the Applicant in arranging fake bills from entry operators and banks made payments for devolved LCs directly to the entry operators. Applicant was confronted with the Email dt. 08.01.2016. A perusal of the concerned Mail shows that it was sent by Mr. Anshu Gautam (SBFL Employee) to AH Ansari @ Pathak. Applicant was only copied along with other persons. The email does not again not directly or indirectly point to the guilt of the applicant as he was only copied in the email. The applicant was neither the originator not the original primary recipient. C. Applicant used to operate shell companies from his office building. Prima facie no documentary material on record to show that Applicant was involved in creation or operation of these companies. D. Applicant used to stock the godown in such a manner that it could not be accessed which made physical verification impossible. Again, prima facie, the ED has not provided any documentary proof to show that the applicant was engaged in decision making involving the stocking the godowns. In addition, the applicant has provided extracts of the Fire & Burglary Risk Based Inspection R....
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....m the email), however, the attachments shown by the ED relate to Lakshmi Vilas Bank for the FY 2012-13. Since the veracity of the contents of these emails have been denied and there is a plausible explanation given by the applicant, these emails cannot be the factum which cliches the guilt of the applicant. Moreover, the veracity of these emails and their relevance can only be examined after detailed evidence is led. G. The other documents relied by the ED are the relevant parts of the books of accounts of SBFL viz-a-viz the relevant Bank Account Statement. SBFL booked some fake transactions in its books of accounts. From a perusal of the bank account no. 010100063801 of Indraprastha Sehkari Bank Ltd., it has been observed that the said bank account was made only on 20.12.2011. But, SBFL falsely reflected cheque payments through this bank account w.e.f. 03.04.2011 i.e., several months prior to opening and actual operation of the account. All the transactions made through this account before 20.12.2011 were nothing but fictitious entries. I am of the view that even if these documents are considered to be true, prima facie, these documents do not disclose a....
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....s of crime which may have been attached and pending adjudication before the Adjudicating Authority. In respect of such action, the designated officials have been empowered to summon any person for collection of information and evidence to be presented before the Adjudicating Authority. It is not necessarily for initiating a prosecution against the noticee as such. The power entrusted to the designated officials under this Act, though couched as investigation in real sense, is to undertake inquiry to ascertain relevant facts to facilitate initiation of or pursuing with an action regarding proceeds of crime, if the situation so warrants and for being presented before the Adjudicating Authority. It is a different matter that the information and evidence so collated during the inquiry made, may disclose commission of offence of money-laundering and the involvement of the person, who has been summoned for making disclosures pursuant to the summons issued by the Authority. At this stage, there would be no formal document indicative of likelihood of involvement of such person as an accused of offence of money-laundering. If the statement made by him reveals the offence of money-l....
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....provision has been made authorising them to do so and by a legal fiction, deemed it to be a statement recorded in a judicial proceeding by virtue of Section 50(4) of the 2002 Act. A regular police officer will neither be in a position to take cognizance of the offence of money-laundering, much less be permitted to record the statement which is to be made part of the proceeding before the Adjudicating Authority under the 2002 Act for confirmation of the provisional attachment order and confiscation of the proceeds of crime for eventual vesting in the Central Government. That may entail in civil consequences. It is a different matter that some material or evidence is made part of the complaint if required to be filed against the person involved in the process or activity connected with money-laundering so as to prosecute him for offence punishable under Section 3 of the 2002 Act. The next point which has been reckoned by this Court in the said decision is that in the provisions of NDPS Act, upon culmination of investigation of crime by a designated officer under that Act (other than a Police Officer), he proceeds to file a complaint; but has no authority to further investigate the of....
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....reliability'. It is the latter requirement that warrants a judicial authority to seek, as a rule of prudence, some corroboration of such retracted statement by some other reliable independent material. This is the approach adopted by the CESTAT and the Court finds it to be in consonance with the settled legal position in this regard." 58. In the present case as well, the question is not regarding the admissibility but the reliability. The statements had concretely named the applicant. However, in their subsequent retraction the reliability of the statements themselves become doubtful. Statements of Employees of SBFL, Accommodation Entry Operators (Devki Nandan Garg & Ashok Kumar Goel) are a cut copy paste job with even the punctation marks of commas, full stops not differing. 59. Prima facie in view of the retraction, the reliability of these statements is questionable. The retracted statements cannot form the basis of the guilt of the applicant of the offences as alleged. Prima facie, I find it difficult to place the guilt of the offence under PMLA on the applicant, based on these statements. Further, the questions as to why the statements were retracted are questions of tri....
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.... Section 44 of PMLA trials in FIR No. 205/2016 for the scheduled offence as well as Section 4 PMLA in ECIR No. 18/DLZOII/2016 are required to be held together. Hence the trial is likely to take some time. Thus, this Court deems it fit to grant bail to the petitioners." 62. In the present case, there is no relevant document to support the allegations. Admittedly the applicant has the 15-year association with SBFL, but despite the allegation that he was the mastermind of the whole operation the ED has relied on 5 documents to show the applicant's complicity. For the reasons as noted, the documents do not show that the applicant is guilty of offences as alleged against him. In addition, there is not satisfactory explanation given by the ED for the lack of documents that directly point to the applicant as the "mastermind." 63. In addition, the observation of the IO also assumes importance in determining whether the applicant is prima facie not guilty. The IO in the column No.12 of the FIR, noted that the account the SBFL was declared NPA on account of commercial reason and, more importantly, there were no apparent mala fides in the monitoring of the account though there are some ....
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.... Section 167 of the 1973 Code, an indefeasible right is triggered in favour of the accused the moment the investigating agency commits default in filing the chargesheet/complaint within the statutory period. The provision in the form of Section 436A of the 1973 Code, as has now come into being is in recognition of the constitutional right of the accused regarding speedy trial under Article 21 of the Constitution. For, it is a sanguine hope of every accused, who is in custody in particular, that he/she should be tried expeditiously - so as to uphold the tenets of speedy justice. If the trial cannot proceed even after the accused has undergone one-half of the maximum period of imprisonment provided by law, there is no reason to deny him this lesser relief of considering his prayer for release on bail or bond, as the case may be, with appropriate conditions, including to secure his/her presence during the trial. 418. Learned Solicitor General was at pains to persuade us that this view would impact the objectives of the 2002 Act and is in the nature of super imposition of Section 436A of the 1973 Code over Section 45 of the 2002 Act. He has also expressed concern that the same....