2019 (10) TMI 1523 - HC - Indian Laws

Seeking grant of pre-arrest bail - diversion of loan amount by the company - non-compliance with the conditions of agreement - fraud of inter-State ramification - petitioner seek for pre-arrest bail on the ground that the transaction is commercial one and they have already paid a substantial amount of Rs.30 Crore to the Bank on the basis of One time settlement with the Bank - HELD THAT - In this case, the petitioners had obtained certain loan amounts for execution of a project work which could not be completed in time and, as such, their contract was terminated, and the petitioners are now in dispute with the Madhya Pradesh Road Development Corporation Limited for termination of the said contract. The other allegation with regard to diversion of funds is there. Sanction and disbursement of the loan is not in dispute. The allegation is that the petitioners failed to comply with the contract by not purchasing machinery and other things and hypothecating the same with the Bank. But, the Bank in the meanwhile has settled the claim at Rs.40 Crore in One Time Settlement basis out of which Rs.30 Crore has already been paid by the petitioners leaving the balance of Rs.10 crore to be paid by the end of December, 2019. The entire evidence is documentary in nature. In the context of the allegation that the petitioners diverted the loan amount by not utilizing the same for execution of the work, and thereby impeded chance of the Bank to get back the amount, it may be reiterated that the Bank has already worked out one time settlement and a major part of the amount has already been received by the Bank - In the aforesaid circumstance, when there being least chance of absconding of the petitioners, more particularly their release on pre-arrest bail would not have any serious impact on a free and fair investigation, this Court, is of the view that the petitioners deserve to be released on pre-arrest bail subject to certain conditions. This Court directs that in the event of arrest of the petitioners in connection with the aforesaid case, they shall be released on bail by the Officer effecting arrest on such terms and conditions as deemed fit and proper including the condition that they shall cooperate with the investigation by remaining present personally as and when directed / noticed by the Investigating Officer concerned, and making payment of Rs.10 Crore (Rupees Ten Crores) to the Bank as agreed, within the time stipulated and if required to deposit their passport - Application allowed.

Summary

Issues:
Release on pre-arrest bail in a case involving alleged diversion of public money and economic offences under the Prevention of Corruption Act, 1988.

Detailed Analysis:

1. Background of the Case:
The petitioners sought pre-arrest bail in a case registered by the CBI for offences under the Prevention of Corruption Act, 1988. The case involved the alleged diversion of public funds amounting to over Rs.62 Crore by a construction company, M/s. ARSS Damoh-Hirapur Tolls Pvt. Limited, in connection with a highway construction project in Madhya Pradesh.

2. Arguments of the Petitioners:
The petitioners argued that the transaction was commercial in nature, and they had already paid a substantial amount of Rs.30 Crore to the Bank as part of a One Time Settlement. They contended that they were cooperating with the investigation, ready to pay the remaining amount, and there was no risk of absconding.

3. Prosecution's Stand:
The prosecution, represented by the Asst. Solicitor General of India, opposed pre-arrest bail, citing the serious nature of economic offences and the alleged diversion of public funds. However, it was acknowledged that a One Time Settlement had been reached with the Bank, and the petitioners had paid a significant portion of the outstanding amount.

4. Court's Decision:
The Court recognized the seriousness of economic offences but noted that the petitioners' contract had been terminated due to project delays and disputes with the Madhya Pradesh Road Development Corporation. The Court highlighted that a major part of the loan amount had been settled through the One Time Settlement with the Bank, reducing the impact of the alleged diversion of funds.

5. Bail Conditions:
Considering the circumstances, the Court granted pre-arrest bail to the petitioners with certain conditions. The petitioners were directed to cooperate with the investigation, pay the remaining Rs.10 Crore to the Bank as agreed, and possibly deposit their passport. However, the passport deposit was not to restrict their travel abroad if permission was obtained from the appropriate authority.

6. Conclusion:
The Court allowed the petitioners' application for pre-arrest bail, emphasizing the commercial nature of the transaction, the ongoing settlement with the Bank, and the lack of evidence tampering risk. The decision aimed to balance the interests of justice with the petitioners' business activities and cooperation with the investigation.

This detailed analysis of the judgment outlines the key aspects of the case, including the arguments presented by both parties, the Court's reasoning, and the conditions imposed for granting pre-arrest bail in a complex matter involving economic offences and allegations of fund diversion.