TaxTMI 
TaxTMI 
2026 (6) TMI 63
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.....2020 was registered by the Central Bureau of Investigation [hereafter 'CBI'], Anti-Corruption Branch-V, New Delhi, for commission of offence under Sections 403, 420, 467, 468, 471 read with Section 120B of the Indian Penal Code, 1860 [hereafter 'IPC'] and Section 13(2) read with Section 13(1)(d) of the Prevention of Corruption Act, 1988 [hereafter 'PC Act'] against M/s Best Foods Ltd., its Chairman Sh. Mohinder Pal Jindal (since deceased), Managing Director Sh. Dinesh Gupta (the applicant herein), and other unknown persons. The FIR arose from a complaint lodged by State Bank of India alleging fraudulent diversion and siphoning of bank funds, submission of forged and fabricated documents, criminal breach of trust and misuse of loan facilities obtained from a consortium of banks led by State Bank of India. 3. As per the prosecution case, M/s Best Foods Ltd., engaged in the business of processing and export of Basmati rice, had availed substantial credit facilities including working capital limits, term loans and export-related facilities from the consortium banks on the basis of project reports, financial statements and stock records which were allegedly false and misleading. It ....
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....to be continuing with regard to tracing additional beneficiaries and utilization of the diverted funds. 6. Insofar as the investigation with respect to the role of the present applicant is concerned, it is the case of the DoE that the applicant, being the Managing Director and key controlling person of M/s Best Foods Ltd., was in overall control of the affairs and financial operations of the company and had allegedly orchestrated the diversion and laundering of loan funds obtained from the consortium banks. As per the prosecution complaint, the applicant had fraudulently availed credit facilities by using inflated stock statements, fabricated invoices, bogus debtors and fictitious trading transactions, and thereafter diverted and layered the funds through a network of shell and benami entities allegedly created in the names of employees, relatives and other persons acting under his instructions. It is further alleged that substantial amounts of the loan funds were diverted to entities such as M/s Homestead Infrastructure Development Pvt. Ltd. and M/s Golden Peacock Residence Pvt. Ltd., which were allegedly controlled by the applicant and were unrelated to the business activities....
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....ed from a consortium of banks led by State Bank of India. It is the case of the applicant that the company had availed loans and credit facilities aggregating to about Rs.1,740 crore over a period of time, which were secured against stocks, receivables and mortgaged properties. According to the applicant, the company subsequently faced severe financial stress on account of adverse market conditions, decline in exports, fall in international demand, liquidity constraints, high operational costs and debt servicing obligations, which ultimately affected its cash flow and business operations. 10. The applicant further states that the consortium lenders had constituted a Joint Lenders Forum (JLF), pursuant to which a forensic audit was conducted by Grant Thornton for the period from 01.04.2013 to 30.11.2016. According to the applicant, the said forensic audit did not find any direct or apparent evidence of diversion or misutilization of bank funds during the aforesaid review period. It is further stated that despite efforts for restructuring of the company's debt, recovery proceedings were initiated against the company and subsequently insolvency proceedings under the Insolvency and ....
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.... of India & Ors., wherein the High Court, by judgment dated 27.05.2024, had set aside such declarations of fraud, on the ground of violation of principles of natural justice, and had also quashed FIRs which had been registered solely on the basis of such fraud declarations. 15. It is the case of the applicant that since the FIR registered by the CBI against the applicant and other accused persons was also based on the fraud declaration made by the consortium banks, an application for amendment was moved in the pending writ petition seeking challenge to the said FIR as well. It is stated that vide order dated 12.12.2024, the High Court disposed of the writ petition while permitting continuation of investigation by the CBI, however directing that no final report be filed without further orders. It is also stated that eventually, a batch of petitions pertaining to the issue in question, was decided by the Hon'ble Supreme Court in CBI v. Surender Patwa: 2025 SCC OnLine SC 934, wherein the Supreme Court held that the High Courts had exceeded their jurisdiction by quashing the FIRs and the subsequent criminal proceedings while quashing the declarations of 'fraud', and categorized case....
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....st Foods Limited amounting to about Rs.1,740 crore as "proceeds of crime", despite the fact that the complaint lodged by State Bank of India itself alleged diversion/misappropriation to the extent of about Rs.1,006 crore only. It is submitted that the total outstanding liability includes interest, penalties and other charges and, therefore, the entire outstanding amount cannot be treated as proceeds of crime. It is also argued that the forensic audit conducted by M/s Haribhakti & Co. LLP pertained only to the review period from 01.04.2015 to 31.03.2018, whereas another forensic audit conducted earlier by Grant Thornton for the period from 01.04.2013 to 30.11.2016 had not found any direct or apparent evidence of diversion or misutilization of funds. It is further contended that the prosecution complaint filed by the DoE is incomplete and premature inasmuch as, despite alleging laundering of about Rs.1,740 crore, the DoE has allegedly been able to identify only about Rs.325 crore as proceeds of crime. 19. It is further argued that the DoE has failed to establish foundational facts necessary for invocation of the provisions of the PMLA and that there are material inconsistencies be....
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....entire case of the DoE substantially rests upon statements recorded under Section 50 of the PMLA of various persons, who have allegedly shifted the entire responsibility upon the applicant while making exculpatory statements qua themselves. It is argued that such statements cannot by themselves form the sole basis either for arrest or for continued incarceration at the stage of consideration of bail. Reliance is this regard is placed on the decisions in Sanjay Jain v. Enforcement Directorate: (2024) SCC Online Del 165 and Prem Prakash v. Directorate of Enforcement: (2024) SCC Online SC 2270. 22. Lastly, it is contended that the prosecution complaint was filed on 04.10.2025 and cognizance thereon was taken on 29.11.2025, however the matter is still at the stage of scrutiny of documents. It is pointed out that the predicate offence is still under investigation and there is no likelihood of commencement of trial in the near future. The learned senior counsel submits that the prosecution has cited 54 witnesses and relied upon voluminous documents running into about 20,000 pages. It is also submitted that as per the case of the DoE itself, investigation qua the present applicant alre....
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..... and utilized associates and relatives for reacquiring properties of M/s Best Foods Limited in violation of the scheme of the IBC. 25. The learned counsel also contends that the allegations against the applicant are supported by substantial oral and documentary evidence collected during investigation. Reliance has been placed upon the forensic audit report of M/s Haribhakti & Co. LLP, which allegedly disclosed fictitious trading, bogus receivables, circular transactions and diversion of funds. It is also contended that statements recorded under Section 50 of the PMLA from employees, associates and other persons corroborate the prosecution case that several shell entities and bank accounts were created and operated under the directions of the applicant for diversion and laundering of bank funds. It is further argued that in his own statements recorded under Section 50 of the PMLA, the applicant admitted diversion of more than Rs.200 crore through shell entities and use of employees and relatives as dummy directors/proprietors for routing funds into various real estate ventures and benami acquisitions. According to the DoE, statements of multiple employees and associates further ....
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..... Manik Bhattacharaya v. Ramesh Malik: 2022 SCC OnLine SC 1465 and Vijay Madanlal Choudhary v. Union of India: 2022 SCC OnLine SC 929. 28. With regard to the contention relating to existence of two ECIRs, the learned counsel submits that there is no duplication of proceedings inasmuch as the earlier ECIR recorded by the Chandigarh Zonal Office was subsequently merged with the present ECIR after approval of the Competent Authority in order to avoid multiplicity of proceedings and overlapping investigations. It is submitted that thereafter, investigation was centrally conducted by the Headquarter Investigation Unit for effective tracing of proceeds of crime and identification of tainted assets. It is further argued that in any event, an ECIR is merely an internal administrative document of the DoE and is not equivalent to an FIR, as held by the Hon'ble Supreme Court in Vijay Madanlal Choudhary v. Union of India (supra). 29. As regards the challenge to the legality and necessity of arrest, the learned counsel contends that such challenge cannot be examined in the present bail proceedings and that the grounds of arrest clearly disclose the necessity for custodial interrogation an....
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.... fictitious trading transactions, inflated stock statements, bogus invoices and a network of entities allegedly floated in the names of employees, relatives and associates. The prosecution has relied upon the forensic audit report, bank account analysis and statements recorded under Section 50 of the PMLA to contend that the applicant was controlling and operating such entities and that loan funds were routed through them without any genuine underlying business transactions. This Court also notes that the prosecution has further alleged that the diverted funds were thereafter layered and utilized through various entities, including real estate concerns, and substantial cash withdrawals were also made through accounts of the alleged dummy entities. It is further the case of the DoE that even after M/s Best Foods Limited entered liquidation proceedings, assets of the company were sought to be reacquired through other entities and persons allegedly acting on behalf of the applicant. The prosecution has, therefore, sought to establish a money trail showing generation, diversion, concealment, possession and use of the alleged proceeds of crime through multiple transactions and entities ....
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....ls for the crimes under these statutes is contemplated. Moreover, such statutes contain provisions laying down higher threshold for the grant of bail. The expeditious disposal of the trial is also warranted considering the higher threshold set for the grant of bail. Hence, the requirement of expeditious disposal of cases must be read into these statutes. Inordinate delay in the conclusion of the trial and the higher threshold for the grant of bail cannot go together. It is a well-settled principle of our criminal jurisprudence that "bail is the rule, and jail is the exception." These stringent provisions regarding the grant of bail, such as Section 45(1)(iii) of the PMLA, cannot become a tool which can be used to incarcerate the accused without trial for an unreasonably long time. 26. There are a series of decisions of this Court starting from the decision in the case of K.A. Najeeb2, which hold that such stringent provisions for the grant of bail do not take away the power of Constitutional Courts to grant bail on the grounds of violation of Part III of the Constitution of India. We have already referred to paragraph 17 of the said decision, which lays down that the rigou....
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.... the hands of the ED to continue incarceration for a long time when there is no possibility of a trial of the scheduled offence and the PMLA offence concluding within a reasonable time. If the Constitutional Courts do not exercise their jurisdiction in such cases, the rights of the undertrials under Article 21 of the Constitution of India will be defeated. In a given case, if an undue delay in the disposal of the trial of scheduled offences or disposal of trial under the PMLA can be substantially attributed to the accused, the Constitutional Courts can always decline to exercise jurisdiction to issue prerogative writs. An exception will also be in a case where, considering the antecedents of the accused, there is every possibility of the accused becoming a real threat to society if enlarged on bail. The jurisdiction to issue prerogative writs is always discretionary." 38. Further, in Arvind Dham v. Enforcement Directorate: 2026 SCC OnLine SC 30, the Hon'ble Supreme Court while granting bail to the petitioner therein had observed as under: "16. A two-Judge Bench of this Court in V. Senthil Balaji's case has held that under the statutes such as PMLA, where maximum sen....
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....ng. There is no likelihood of trial commencing in the near future. The continued incarceration in such circumstances, particularly where the evidence which is primarily documentary in nature, is already in custody of the prosecution, violates the right of the appellant to speedy trial under Article 21 of the Constitution of India." 39. Therefore, considering the overall facts and circumstances of the present case, though without expressing any opinion on the merits of the allegations levelled against the applicant, this Court is of the opinion that the applicant has remained in judicial custody since 08.08.2025 and has undergone incarceration for about ten months; the FIR for predicate offence was registered in the year 2020, followed by registration of the first ECIR in the year 2022, whereas the present ECIR came to be recorded only in the year 2025; concededly, no coercive action was taken against the applicant between 2020 and 2025; the investigation by the DoE qua the present applicant stands concluded and the prosecution complaint has already been filed; cognizance thereof was taken on 29.11.2025 and the matter continues to remain at the stage of scrutiny/supply of documen....