TaxTMI 
TaxTMI 
2023 (6) TMI 1444
X X X X Extracts X X X X
X X X X Extracts X X X X
....e other co-accused in the present FIR - Malvinder Mohan Singh (BAIL APPLN. 2810/2021), Kavi Arora (BAIL APPLN. 1059/2022) and Rajender Aggarwal (BAIL APPLN. 1384/2021). Factual Background 2. The FIR in the present case was registered upon a complaint received from Mr. Manpreet Singh Suri, Authorized Representative of Religare Finvest Limited ('RFL') alleging a financial fraud perpetrated by the promoters of Religare Enterprises Limited ('REL') - Shivinder Mohan Singh and Malvinder Mohan Singh, the then Chairman-cum-Managing Director - Sunil Godhwani (applicant herein) and Narendra Kumar Ghoushal. 2.1. RFL is a company registered with the Reserve Bank of India ('RBI') and is licensed to undertake the business of financial services as a Non- Banking Financial Company ('NBFC'). It operates as an NBFC focused on financing small and medium enterprises ('SME') and extends SME working capital loans, secure SME business expansions, loans, short term trade finance and other loans to various entities. The complainant company is a subsidiary of REL which is a public company listed on the stock exchange. The majority shareholding of REL was owned by Malvinder Mohan Singh and Shivinder Moha....
X X X X Extracts X X X X
X X X X Extracts X X X X
....has observed that the RFL had a practice of parking a major chunk of surplus funds with fellow subsidiary/group companies/other companies which were often being used for taking positions in securities. RBI had further pointed out that the reports pertaining to monitoring of the said loans was not available on record. The RBI had also pointed out that the top borrowers of RFL under the CLB portfolio were related entities. There were inter-linkages between the borrowers, as funds were routed from one borrower to another. 2.4. During the course of investigation, it was revealed that REL was a public listed Core Investment Company ('CIC'), which had made major investments in its subsidiary companies, i.e., RFL, Religare Health Insurance Co. Ltd. ('RHL') and Religare Broking Limited ('RBL'). REL had invested 57.77% percents of its assets and 89.78% of its net-worth in RFL. REL owned 85.64% of the equity-share capital in RFL. Since REL had major investments in RFL, any loss caused to RFL due to the alleged diversion of funds resulted in a direct loss to the shareholders of REL. Investigation revealed that the CLB was created since the inception of RFL, primarily for the purpose of utili....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... had assured the applicant, the then Chairman and Managing Director of REL that they are willing to purchase the CLB from RFL upon completion of the sale of a substantial part of their shareholding in REL to one or more institutional/strategic investors. 2.12. An investigation report received from the SEBI further revealed that out of Rs. 676.10 Crores lent by RFL to 5 companies under Group-2, Rs. 210.05 Crores was diverted for the benefit of RHC Holding Pvt. Ltd. 2.13. An Indemnification-cum-Release Agreement dated 14.11.2017 was signed between Malvinder Mohan Singh, Shivinder Mohan Singh, RFL, Religare Securities Ltd., Religare Commodities Ltd., Religare Capital Market Ltd. and Religare Comtrade Ltd. At that point in time, the accused persons were on the Board of Directors and they diverted funds from the complainant company, i.e., RFL to square off the liabilities/borrowings from lenders in their parent company - RHC Holdings Pvt. Ltd. to the tune of Rs. 1,260 Crores. With respect to the liability created with RFL, over which they had control by virtue of their positions at REL, the accused persons indemnified themselves. The said Indemnification-cum-Release Agreement was revo....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... that the borrower company was known either to him or to Malvinder Mohan Singh and Shivinder Mohan Singh. 3.2. The applicant was the member of the Related Party Transaction Committee (RPT). Based on the minutes of the meetings of the RPT Committee dated 24.02.2016 and 31.08.2016, it was alleged that loans were illegally extended to companies known to the promoter group, on the instructions of the applicant without any due diligence or proper documentation. 3.3. The applicant, in his capacity as the CMD, alongwith accused Kavi Arora addressed a letter dated 12.07.2016 to the RBI stating as under: "as advised during the captioned meeting we wish to confirm that RFL will not further increase its exposure under corporate loan book (CLB) beyond Rs. 1719.65 crores (loan outstanding as on June 30th 2016). We also confirm that RFL will not roll over any of its existing CLB loans effective immediately." 3.4. It is alleged that the applicant signed financial statements of REL which gave an overview of the CLB and thus, he had full knowledge of the transactions. 3.5. It was alleged that the applicant held key managerial positions in the organization and played an instrumental role in th....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... in the year 2016 RBI called REL along with RFL and thus Petitioner being the chairman of REL attended the said meeting on behalf of REL on 08.07.2016. It was communicated to RBI that the repayment of CLB shall be done in the next 18 months and the said period was duly agreed and granted by RBI. Vide letter dated 12.07.2016 it was further undertaken that "we wish to confirm that RFL will not further increase its exposure under Corporate Loan Book (CLB) bevond 1719.65 crore (loan outstanding as on June 30, 2016). We also confirm that RFL will not rollover any of its existing CLB loans, effective immediately". 4.3. The applicant and his team started expediting the de-merger process. In the meantime, Malvinder Mohan Singh and Shivinder Mohan Singh sought information with regard to same vide letter dated 22.07.2016. The intention of the applicant can be gathered from the reply letter dated 28.07.2016 whereby he refused to divulge any such detail or schedule any meeting as desired by Malvinder Mohan Singh and Shivinder Mohan Singh. Thereupon petitioner was immediately removed from the post of Chairman and Managing Director and made CEO on 29.07.2016. 4.4. Even the post of CEO also did....
X X X X Extracts X X X X
X X X X Extracts X X X X
....does not breach the terms of undertaking given to the RBI by way of letter dated 12.07.2016. It has been alleged that the applicant approved the loans despite the objection of another member of the said committee, Mr. Monish Dutt was false and not borne from record, in as much as the record clearly showed that the objection of Mr. Monish Dutt was only in respect to one loan transaction, which was already sanctioned by Loan sanctioning committee. Mr. Monish Dutt even after stepping down of petitioner continued granting loans and raised the CLB to Rs. 2,400 Crores, and as a matter of record 13 out of 16 objectionable loans have been sanctioned and disbursed after petitioner stopped going to REL. The said Mr. Monish Dutt was still there on the Related RPT subcommittee and he has passed all such loans. Thus it is apparent that it was not petitioner who was approving such loans, but the officials who were there in company, before and after petitioner left the company. The terms of reference of RPT sub- committee as formed and detailed in supplementary chargesheet reveals that nothing can be said to have been acted upon by Petitioner which was against the terms of the said committee and ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....romoters got the said loans transferred to their other company, i.e., Fern healthcare Private Limited. Even huge amount of interest/ repayments have been made by the applicant from his own funds in the said period and the said amount was a loan only. Any and every transfer of money between RFL and RHC cannot be said to be bad. Financial statements of audited balance sheets of RFL for the said period shows that RFL has taken loans from RHC and have made repayment of loans to RHC in the said year and RFL also made payments to RHC Holdings Pvt. Ltd. on account of reimbursements/interest/interest on debentures, etc. Further RFL has given loans amounting to Rs. 1,013 Crores to RHC Holdings Pvt. Ltd. and around Rs. 813 Crores has been repaid. The bank statements of RFL-RHC-Today- Fern and the applicant show that on 30.3.2012, RFL had transferred a sum of Rs. 40 Crores to RHC Holdings Pvt. Ltd. and the said sum was immediately transferred by the next entry in the statement to Religare Corporate Services Limited. The money which was eventually received in the account of the applicant was transferred by RHC Holdings Pvt. Ltd. from its own funds. Thus, the whole premise of the allegation was....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tances has taken place which would justify the maintainability of a second application. 5.2. It was submitted that several of the loans in the CLB portfolio of RFL were disbursed on the instructions of the applicant on the basis that the borrower company was known either to him or to Malvinder Mohan Singh and Shivinder Mohan Singh. It was also submitted that the applicant is responsible for misappropriation of a loan amount of approximately Rs. 40 Crores disbursed by RFL. The amount so disbursed is alleged to have been finally received by the applicant who used his influence to show the same as a loan from the shell entity, Fern Healthcare Pvt. Ltd. 5.3. At the outset, attention of this Court was drawn to the report of AZB & Partners, wherein the following observations have been made: i. REL is the holding company of RFL and presently holds approximately 85.64% of the equity share capital of RFL. Since REL is a public listed company, the funds of RFL are also public money and therefore, by committing the alleged offence and siphoning of the funds, the accused persons in the present case have caused loss of public money. ii. The following observations made in the aforesaid rep....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., loan against property & loan against shares due to weak credit appraisal, no system for verification of end use of money after sanction. loan sanctioning mechanism & assessment of credit worthiness of the borrower, documents for follow up post disbursement were not operating effectively. b.) Updated documentation for Micro Small & Medium Enterprises as per MSMED Act 2006 and control over Information Technology General Controls. c.) The Company's internal control process for its business in respect of the following needs to be strengthened in respect of regular updation of risk control matrix, comprehensiveness for coverage of all process." v. A preliminary review of the ledger of the subject loans suggested that certain loans were extended to repay twelve other loans extended by RFL to some entities which were disbursed prior to the review period, i.e., 01.09.2016 to 30.09.2017. vi. Disbursal of loans under the CLB portfolio was initiated on the basis of oral instructions received either from Hemant Dhingra or Narendra Kumar Ghoushal. These instructions would then be communicated to Kavi Arora (erstwhile CEO) or Bipin Kabra (erstwhile CFO). The said instructions, in some ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....itted to RBI that (i) it will not roll-over any of its existing loans; and (ii) there will be no additional increase to the principal amount of the CLB. The RBI Exposure Limit was however breached from time to time and despite concerns being raised and discussed during the RMC meetings, loans were ultimately disbursed to the proposed borrower based on a convenient interpretation, as discussed in paragraph 5.4.3 above." 5.4. It was submitted that in the present FIR, a coordinate bench of this Court, vide judgment dated 14.06.2021 passed in CRL.MC. 796/2021 titled 'Religare Finvest Ltd. v. State of NCT of Delhi & Anr.' cancelled the bail granted by the learned Trial Court to co-accused Shivinder Mohan Singh in the present FIR. It was held as under: "55. In the present case, nature and gravity of accusation again t respondent No.2 is serious. The grant of bail in a case involving cheating, criminal breach of interest by an agent of such a large magnitude of money, affecting a very large number of people would also have an adverse impact not only on the progress of the case but also on the trust of the criminal justice system that people repose. Thus, the parameters set out by the H....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Pvt. Ltd. was not brought to notice before the coordinate bench of this Court during the hearing of the first application for bail. It was further submitted that while dismissing the application, the coordinate bench had categorically recorded that the investigation qua the alleged transaction was still ongoing. It was contention of the learned Senior Counsel that since then, the investigation has been completed and a supplementary chargesheet has been filed, which in itself amounts to a change in circumstance and therefore, the present application would be maintainable. Discussion 7. Heard learned counsel for the parties and perused the record. 8. As far as the maintainability of a second application for bail is concerned, it was the contention of learned Senior Counsel appearing on behalf of the applicant that the coordinate bench of this Court, while dismissing the first application for bail vide judgment dated 23.07.2020 passed in BAIL APLN. 1100/2020 titled Sunil N. Godhwani v. State, had observed as under: "27. On perusal, the Petitioner received an amount of Rs. 34 crores from Fern Healthcare Private Limited, one of the shell companies, as part of the benefits for wor....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ence to show the same as a loan received from a shell entity, i.e., Fern Healthcare Pvt. Ltd. On the other hand, it was contended on behalf of the applicant, that the applicant and his team had started expediting the de-merger process and on account on differences with the promoters, the applicant was removed from the post of CMD and was made CEO on 29.07.2016. It was further contended that even the said post of CEO did not last long and thereafter, the applicant was once again removed from the position of CEO and Whole Time Director to non-key managerial personnel on 21.10.2016 and was also removed from all working committees. It is pointed out that being in a non-key managerial position, the applicant did not have any executive post. It is also the case of the applicant that thirteen out of the nineteen loans which are subject matter of the chargesheet were disbursed after the aforesaid date, i.e., 21.10.2016. It is further contended on behalf of the applicant that out of the remaining six loans, three were secured against property and the remaining were found as arms' length transaction by Company Secretary and were approved by relevant Credit Committees. It is also contended th....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Section 409 of the IPC has been invoked, which is punishable with life. A perusal of the aforesaid judgments reflects that the judgment in Virupakshappa (supra) was rendered in relation to a case of murder, punishable under Section 302 of the IPC. In Amit Kumar alias Bachha Rai (supra), it has been recorded that investigation in the said case was still continuing. 12. Learned Senior Counsel for the complainant sought to distinguish Sanjay Chandra (supra) on the ground that the offences for consideration before the Hon'ble Supreme Court therein did not include Section 409 of the IPC, which carries a sentence of life imprisonment. It is pertinent to note that a similar contention was raised before a learned Single Judge of this Court in Sharad Kumar and Ors. v. Central Bureau of Investigation, 2011 (126) DRJ 525, wherein the other co-accused persons had claimed parity in terms of bail granted by the Hon'ble Supreme Court in Sanjay Chandra (supra). After taking note of the said contention raised, it was held as under: "22. Seen in the aforesaid backdrop, the question which arises for consideration is as to whether the petitioners who are charged for an offence of conspiracy under ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ffence of conspiracy under Section 120B IPC red with section 409 IPC which carries the life imprisonment. It will be also in my view would be violative of Article 141 of the Constitution, which lays down that the High Court being the subordinate to the Supreme Court must show compliance and the respect to the orders, of the Apex Court. In this regard, I am tempted to reproduce para 6 of the case titled Assistant Collector of Central Excise, Chandan Nagar, West Bengal v. Dunlop India Ltd., (1985) 1 SCC 260, wherein it has been stated as under:- "...............It will never be necessary for us to say so again that "in the hierarchical system of courts" which exists in our country, "it is necessary for each lower tier", including the High Court, "to accept loyally the decisions of the High tiers". "It is inevitable in hierarchical system of courts that there are decisions of the Supreme appellate tribunal which do not attract the unanimous approval of all members of the judiciary...... But the judicial system only works if someone is allowed to have the last word and that last word, once spoken, is loyally accepted." The better wisdom of the court below must yield to the higher wis....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nces (Category D) 90. What is left for us now to discuss are the economic offences. The question for consideration is whether it should be treated as a class of its own or otherwise. This issue has already been dealt with by this Court in P. Chidambaram v. Directorate of Enforcement [P. Chidambaram v. Directorate of Enforcement, (2020) 13 SCC 791 : (2020) 4 SCC (Cri) 646] , after taking note of the earlier decisions governing the field. The gravity of the offence, the object of the Special Act, and the attending circumstances are a few of the factors to be taken note of, along with the period of sentence. After all, an economic offence cannot be classified as such, as it may involve various activities and may differ from one case to another. Therefore, it is not advisable on the part of the court to categorise all the offences into one group and deny bail on that basis. Suffice it to state that law, as laid down in the following judgments, will govern the field: Precedents 91.P. Chidambaram v. Directorate of Enforcement [P. Chidambaram v. Directorate of Enforcement, (2020) 13 SCC 791 : (2020) 4 SCC (Cri) 646] : (SCC pp. 804-805, para 23) "23. Thus, from cumulative perusal....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ffence alleged against the accused persons is very serious involving deep-rooted planning in which, huge financial loss is caused to the State exchequer; the secondary ground is that of the possibility of the accused persons tampering with the witnesses. In the present case, the charge is that of cheating and dishonestly inducing delivery of property and forgery for the purpose of cheating using as genuine a forged document. The punishment for the offence is imprisonment for a term which may extend to seven years. It is, no doubt, true that the nature of the charge may be relevant, but at the same time, the punishment to which the party may be liable, if convicted, also bears upon the issue. Therefore, in determining whether to grant bail, both the seriousness of the charge and the severity of the punishment should be taken into consideration. 40. The grant or refusal to grant bail lies within the discretion of the court. The grant or denial is regulated, to a large extent, by the facts and circumstances of each particular case. But at the same time, right to bail is not to be denied merely because of the sentiments of the community against the accused. The primary purposes of ba....
X X X X Extracts X X X X
X X X X Extracts X X X X
....i) 834] , has observed that : (SCC pp. 471-72, para 67) "67. Human liberty is a precious constitutional value, which is undoubtedly subject to regulation by validly enacted legislation. As such, the citizen is subject to the edicts of criminal law and procedure. Section 482 recognises the inherent power of the High Court to make such orders as are necessary to give effect to the provisions of CrPC 'or prevent abuse of the process of any court or otherwise to secure the ends of justice'. Decisions of this Court require the High Courts, in exercising the jurisdiction entrusted to them under Section 482, to act with circumspection. In emphasising that the High Court must exercise this power with a sense of restraint, the decisions of this Court are founded on the basic principle that the due enforcement of criminal law should not be obstructed by the accused taking recourse to artifices and strategies. The public interest in ensuring the due investigation of crime is protected by ensuring that the inherent power of the High Court is exercised with caution. That indeed is one-and a significant-end of the spectrum. The other end of the spectrum is equally important : the recognition b....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... Liberty across human eras is as tenuous as tenuous can be. Liberty survives by the vigilance of her citizens, on the cacophony of the media and in the dusty corridors of courts alive to the rule of (and not by) law. Yet, much too often, liberty is a casualty when one of these components is found wanting." (emphasis supplied) 96. We wish to note the existence of exclusive Acts in the form of Bail Acts prevailing in the United Kingdom and various States of USA. These Acts prescribe adequate guidelines both for investigating agencies and the courts. We shall now take note of Section 4(1) of the Bail Act of 1976 pertaining to United Kingdom: "General right to bail of accused persons and others.- 4. (1) A person to whom this section applies shall be granted bail except as provided in Schedule 1 to this Act." 97. Even other than the aforesaid provision, the enactment does take into consideration of the principles of law which we have discussed on the presumption of innocence and the grant of bail being a matter of right. 98. Uniformity and certainty in the decisions of the court are the foundations of judicial dispensation. Persons accused with same offence shall never be t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y demands that some unconvicted persons should be held in custody pending trial to secure their attendance at the trial but in such cases, "necessity" is the operative test. In this country, it would be quite contrary to the concept of personal liberty enshrined in the Constitution that any person should be punished in respect of any matter, upon which, he has not been convicted or that in any circumstances, he should be deprived of his liberty upon only the belief that he will tamper with the witnesses if left at liberty, save in the most extraordinary circumstances. 23. Apart from the question of prevention being the object of refusal of bail, one must not lose sight of the fact that any imprisonment before conviction has a substantial punitive content and it would be improper for any court to refuse bail as a mark of disapproval of former conduct whether the accused has been convicted for it or not or to refuse bail to an unconvicted person for the purpose of giving him a taste of imprisonment as a lesson." 14.3. In Gurbaksh Singh Sibbia v. State of Punjab, (1980) 2 SCC 565, a Constitution Bench of the Hon'ble Supreme Court, while determining the scope of Section 438 of the C....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nocent person he is therefore entitled to freedom and every opportunity look after his own case. A presumably innocent person must have his freedom to enable him to establish his innocence." 14.4. In Vaman Narayan Ghiya v. State of Rajasthan, (2009) 2 SCC 281, the Hon'ble Supreme Court held as under: "7. Personal liberty is fundamental and can be circumscribed only by some process sanctioned by law. Liberty of a citizen is undoubtedly important but this is to balance with the security of the community. A balance is required to be maintained between the personal liberty of the accused and the investigational right of the police. It must result in minimum interference with the personal liberty of the accused and the right of the police to investigate the case. It has to dovetail two conflicting demands, namely, on the one hand the requirements of the society for being shielded from the hazards of being exposed to the misadventures of a person alleged to have committed a crime; and on the other, the fundamental canon of criminal jurisprudence viz. the presumption of innocence of an accused till he is found guilty. Liberty exists in proportion to wholesome restraint, the more restra....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ect of bail is neither punitive or preventative and the same is to secure the presence of the accused at the trial. The underlying principle in the aforesaid judicial pronouncements is that a person, who otherwise has roots in the society and is satisfying the other general conditions for grant of bail should, after completion of investigation, should not be kept in continued judicial incarceration as a matter of punishment, even before the conclusion of trial. In the present case, this Court is of the opinion that no possible prejudice can be caused to the case of the prosecution before the learned Trial Court if the applicant is released on bail with necessary considerations, safeguarding the interests of the prosecution, especially when other co-accused persons have also been granted bail. 16. In the present case, co-accused Maninder Singh was granted bail vide order dated 05.05.2021, passed by a co-ordinate bench of this Court in BAIL APPLN. 3952/2020. The Hon'ble Supreme Court, vide order dated 12.07.2021, passed in SLP (CRL.) 4948/2021, dismissed a challenge to the said order granting bail to Maninder Singh. Co-accused Anil Saxena was granted bail vide order dated 17.06.2020....