TaxTMI 
TaxTMI 
2023 (6) TMI 1444
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....ns seeking regular bail filed on behalf of the 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....
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....g. In its inspection report dated 06.01.2012, the RBI 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 ....
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....tter dated 29.12.2014, Malvinder Mohan Singh and Shivinder Mohan Singh 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 indem....
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.... loan approvals were marked to the applicant. He was also responsible for approval of many of the loans. 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. 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 s....
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....t of time RBI ever took any penal action or cancelled the NBFC license. It is submitted that if something is illegal the same could not have been allowed by RBI for such a long period and RBI would have cancelled the license of NBFC. Finally, 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....
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....s one of the members of the said committee considered some of the loans, and upon express advice of the Company Secretary that the same were at arm's length and in the interest of Company, the same were approved. But, the applicant ensured that the same 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 aft....
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....at the loans given to the applicant by RHC Holdings Pvt. Ltd. started from the year 2006, even before REL became a public listed company or RFL got established. It was submitted that the same continued form year to year and eventually in the year 2012, the promoters 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 transfer....
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.... It was submitted that the first application seeking regular bail filed on behalf of the applicant has already been dismissed by a coordinate bench of this Court vide judgment dated 23.07.2020 passed in BAIL APPLN. 1100/2020. Since then, no material change in circumstances 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 RE....
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....year 2017-18, the auditors of RFL also raised concerns about the CLB portfolio. In the said report, the auditors also identified certain material weaknesses, which are as under: "a.) The Company's internal financial control system over financial reporting is not operating effectively in respect of Corporate Loan Book, 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....
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....loans given to whom were outstanding as of March 31, 2018 (INR 2,086.7 crore). However, we are of the view that the circumstantial evidence suggests linkages between the above referred 20 (twenty) borrower entities and the Promoters. (iii) The RBI had regularly been making adverse remarks against the CLB portfolio of RFL since the Financial Year 2012-13. RFL had on more than one occasion committed 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, n....
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.... was to be deployed. The said company was a mere vehicle for disbursement used by RFL to advance moneys to intended recipients. Rejoinder on behalf of the Applicant/Sunil Naraindas Godhwani 6. In rejoinder to the preliminary objection qua the maintainability of the present second application for bail, learned Senior Counsel for the applicant submitted that the fact that the sum of Rs. 34.20 Crores was in fact transferred to RHC Holdings 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....
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....ohan Singh and Shivender Mohan Singh enabled the disbursement of loans to companies known to them without any due diligence or proper documentation. It is also alleged that he received a loan of approximately Rs. 40 Crores from Fern Healthcare Pvt. Ltd. which is an entity belonging to RHC Holdings Pvt. Ltd., in the year 2012. The said amount is alleged to actually have been disbursed by RFL and that it was finally received by the applicant who used his influence 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 executiv....
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.... was submitted that socio-economic offences are a class apart and stand at a different footing as compared to other offences while deciding an application for bail. It was further submitted that both the above judgments have distinguished the judgment in Sanjay Chandra v. CBI, (2012) 1 SCC 40, on the ground that Sanjay Chandra (supra) was applicable to a case where the offence was punishable with a maximum of 7 years. It was pointed out that in the present case, 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....
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....herefore, they ought not to be denied the benefit of bail. Moreover, the Supreme Court order, which is passed in Sanjay Chandra's case (supra) is binding on the High Court. The High Court cannot while considering the bail applications of the present accused persons do hair splitting of the order of the Supreme Court and make out a distinction when there is none so as to deny the benefit of said order to the petitioners by saying that the petitioners are charged for the offence 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 l....
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.... Undoubtedly, the allegations qua the present applicant are grave in nature, for which he claims to have a defence, as noted in the preceding paragraphs. The veracity of the case of the prosecution as well as the defence will be determined during the course of the trial. 14. At this stage, it would be relevant to refer to the following judicial precedents in relation to bail:- 14.1. In Satender Kumar Antil v. CBI, (2022) 10 SCC 51, the Hon'ble Supreme Court held as under: "Economic offences (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 i....
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....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." 92.Sanjay Chandra v. CBI [Sanjay Chandra v. CBI, (2012) 1 SCC 40 : (2012) 1 SCC (Cri) 26 : (2012) 2 SCC (L&S) 397] : (SCC pp. 62-64, paras 39-40 & 46) "39. Coming back to the facts of the present case, both the courts have refused the request for grant of bail on two grounds : the primary ground is that the offence 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 li....
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....he Code, has to be preserved, protected, and enforced by the criminal courts. Any conscious failure by the criminal courts would constitute an affront to liberty. It is the pious duty of the criminal court to zealously guard and keep a consistent vision in safeguarding the constitutional values and ethos. A criminal court must uphold the constitutional thrust with responsibility mandated on them by acting akin to a high priest. 95. This Court in Arnab Manoranjan Goswami v. State of Maharashtra [Arnab Manoranjan Goswami v. State of Maharashtra, (2021) 2 SCC 427 : (2021) 1 SCC (Cri) 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 S....
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....he need to safeguard the public interest in ensuring that the due enforcement of criminal law is not obstructed. The fair investigation of crime is an aid to it. Equally it is the duty of courts across the spectrum-the district judiciary, the High Courts and the Supreme Court-to ensure that the criminal law does not become a weapon for the selective harassment of citizens. Courts should be alive to both ends of the spectrum-the need to ensure the proper enforcement of criminal law on the one hand and the need, on the other, of ensuring that the law does not become a ruse for targeted harassment. 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 ....
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....t of bail is to secure the appearance of the accused person at his trial by reasonable amount of bail. The object of bail is neither punitive nor preventative. Deprivation of liberty must be considered a punishment, unless it is required to ensure that an accused person will stand his trial when called upon. The courts owe more than verbal respect to the principle that punishment begins after conviction, and that every man is deemed to be innocent until duly tried and duly found guilty. 22. From the earliest times, it was appreciated that detention in custody pending completion of trial could be a cause of great hardship. From time to time, necessity 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 ....
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....d to the fact that the legislature itself left the discretion of the court unfettered. According to the High Court, the variety of cases that may arise from time to time cannot be safely classified and it is dangerous to make an attempt to classify the cases and to say that in particular classes a bail may be granted but not in other classes. It was observed that the principle to be deduced from the various sections in the Criminal Procedure Code was that grant of bail is the rule and refusal is the exception. An accused person who enjoys freedom is in a much better position to look after his case and to properly defend himself than if he were in custody. As a presumably innocent 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....
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....tuations require it to do so. In that process a person whose application for enlargement on bail is once rejected is not precluded from filing a subsequent application for grant of bail if there is a change in the fact situation. In such cases if the circumstances then prevailing require that such persons be released on bail, in spite of his earlier applications being rejected, the courts can do so." Conclusion 15. After an examination of the aforesaid judgments, it can be said that gravity of an offence would be a factor at the time of consideration for grant of bail, but, at the same time, it cannot be the only criteria for denying bail either. As laid down in the aforesaid precedents, the object 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, thi....