The Delhi High Court Single Judge Bench, led by Hon’ble Justice Amit Sharma, elucidated the requirement for the prosecution to showcase how the evidence gathered during the investigation corroborates the accusations stated in the complaint.
Moreover, the Court emphasised that the prosecution must establish the applicability of these allegations to the accused, especially in cases where additional conditions are stipulated by the law for granting bail related to particular offences.
Brief Facts:
A Petition was filed before the High Court seeking a grant of regular bail in a case registered under Section 120B read with Sections 417 and 420 of the Indian Penal Code, 1860 (hereinafter referred to as “IPC”), Section 36(c) read with Section 447 of the Companies Act, 2013 (hereinafter referred to as “Act, 2013”); Sections 129 and 448 read with Section 447, and Sections 211 and 628 of the Companies Act, 1956 (hereinafter referred to as “Act, 1956”), pending before the Court of the Additional Sessions Judge, New Delhi.
Brief Background:
The Ministry of Corporate Affairs, Government of India (hereinafter referred to as “MCA”), exercised its powers conferred under Section 212(1)(c) of the Act, 2013 and assigned the investigation into the affairs of Bhushan Power and Steel Ltd. (hereinafter referred to as “BPSL”) and its associated companies to the Serious Fraud Investigation Office (hereinafter referred to as “SFIO”) through an order.
The SFIO appointed officers as inspectors to conduct the investigation. Subsequently, the MCA granted approval under Section 219(b) & 219(c) of the Act, 2013 to investigate twenty group companies associated with BPSL.
The petitioner, a Chartered Accountant, was involved in handling financial matters of BPSL from 2000 until May 2019. During the investigation, it was alleged that goods worth Rs. 1,023 crores were illegally removed from the BPSL plant and sold in the open market without issuing sale invoices, causing wrongful loss to BPSL and wrongful enrichment of those controlling its affairs.
The investigation uncovered syphoning of funds and fraudulent practices, including false financial statements, bogus infusion of equity, and availing credit facilities through false documents and fraudulent discounting of Inland Letters of Credit (hereinafter referred to as “LC”). Based on the material collected, the SFIO arrested the Petitioner and filed a complaint, charging him with multiple instances of fraud amounting to Rs. 5,435 crores.
Contentions of the Petitioner:
It was argued that the petitioner had an unblemished reputation in the workplace and social life. I was claimed that the case against him by SFIO was based on conjectures and surmises without material facts.
It was asserted that the Petitioner had been in judicial custody since March 24, 2022, and had cooperated with the investigation. It was argued that the Petitioner deserved bail to prevent interference with personal liberty.
Contentions of the Respondents:
It was argued that the Accused, along with others, committed fraud with the intent to harm the company and enriched themselves through dubious transactions, causing losses to lenders. Large amounts of funds were syphoned off from the company, as revealed during the investigation. It was further alleged that the accused played a significant role in the company's affairs and knowingly signed balance sheets that did not reflect the true financial situation.
It was alleged that the Accused, along with others, misused the corporate structure of several companies to facilitate the fraud and manipulated their financial statements for the purpose of equity infusion into the main company. Further, that the bail conditions were not satisfied, considering the serious nature of the economic offences and the specific requirements set by the Companies Act.
Observations of the Court:
The Court evaluated the two conditions specified in Sections 212(6)(i) and (ii) of the Act, 2013. These conditions are additional to the bail conditions under Section 439 of the CrPC. As mentioned earlier, the Respondent's case against the Petitioner centred around the fact that he served as the Chief Financial Officer and, as a Key Managerial Person, had signed the financial statements from 2013-14 to 2016-17. The Respondent's entire case primarily relied on this status attributed to the Petitioner.
However, the available evidence, including statements from entry operators, co-accused individuals, employees of the companies, and various documents such as attendance registers of board meetings and audit committee meetings, as discussed earlier, prima facie suggested the opposite. Overall, the allegations against the Petitioner involve various instances of financial irregularities and fraudulent practices at BPSL.
The Bench concluded that when additional conditions are prescribed by a statute for granting bail in relation to specific offences, it was not sufficient for the prosecution to merely mention in the complaint or assert that it has evidence against the Accused regarding such offences. It was opined that the prosecution must demonstrate how the evidence collected during the investigation supports the allegations in the complaint, and more importantly, how these allegations are applicable to the accused.
However, the specific involvement and culpability of the petitioner were contested, and evidence from co-accused individuals did not consistently implicate the Petitioner.
The decision of the Court:
Based on the aforementioned findings, the Delhi High Court granted bail subject to conditions.
Case Title: Arun Kumar Aggarwal v Serious Fraud Investigation Office
Case No.: Bail Application No. 3178 of 2022
Coram: Hon’ble Mr. Justice Amit Sharma
Advocates for Petitioner: Advs. Mr. Arvind K. Nigam, Senior Advocate, Mr. Abhir Datt, Mr. Manu Padalia, Mr. Bhanu Sanoriya and Mr. Rohit Hooda
Advocates for Respondent: Advs. Mr. Ripu Daman Bhardwaj, CGSC, Mr. Shriram & Mr. Salman
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