2018 (8) TMI 2115 - HC - SEBI

Freezing of Bank account of petitioner - Seeking withdrawal of amount held in Bank Account - imposition of condition of furnishing bank guarantee of any nationalized bank of an amount equal to the amount lying on such account on the date of withdrawal - HELD THAT - Before the Supreme Court, the petitioner sought permission to sell further shares - the Supreme Court permitted the petitioner to sell its remaining shares and securities through recognized stock exchanges and registered stock brokers and credit the sale proceeds in the bank account maintained by the petitioner with ICICI Bank. It is a matter of record that the sale proceeds of the remaining shares brought a sum of Rs.42.51 crores which was deposited in the petitioner's said bank account. One may recall, the initial order restraining the petitioner from dealing in Indian Stock Market was passed by SEBI. However, when these proceedings were on going, the CBI restraint order dated 26.10.2006 also came to be passed. The Appellate Tribunal had permitted the petitioner-Company to sell some of the shares and to deposit sale proceeds in the bank account. Along with existing balance added by the sale proceeds, the total came to approximately Rs.38 crores. The Supreme Court further permitted the petitioner to sell shares proceeds of which came to Rs.42.51 crores - All along, the Supreme Court had made a clear distinction between the two amounts. Insofar as, sum of Rs.42.51 crores is concerned, the Supreme Court had concluded that the same was not covered under CBI's restraint order. The petitioner was allowed to withdraw the same unconditionally. However, with respect to rest of the amount, the Supreme Court granted no relief except allowing the petitioner to challenge such restraint order passed by CBI. Thus, the first contention of the counsel for the petitioner that there was no distinction between the two amounts is not well founded. Had the case been so simple, surely the Supreme Court itself would have released both the amounts. Quite apart from the various aspects emerging from the affidavit, it is neither possible nor correct on my part to interfere at this interim stage in the present proceedings and hold that all the above assertions made by CBI are incorrect and there is no trail of tainted money having been routed through foreign destinations back into the said account in ICICI Bank. Discharge of Dharmesh Doshi, accused No.8 - HELD THAT - Learned Magistrate noted that he has already been discharged. It is primarily on this basis that he permitted the petitioner to withdrawal of the amount. He, however, imposed condition for providing bank guarantee of a matching sum. If the discharge of accused No.8 had attained finality perhaps the petitioner was justified in contending that petitioner should have been allowed withdrawal of the amount unconditionally. However, discharge of Dharmesh Doshi accused No.8 is not yet final. Revision Petition filed by CBI against the order of the Magistrate is pending before the Sessions Court. To safeguard the interest of the respondents, it would be absolutely necessary to maintain the condition imposed by the learned Magistrate. Petition dismissed.

Summary

Issues Involved:
1. Legality of the condition imposed by the Magistrate for withdrawal of funds.
2. Distinction between amounts allowed for withdrawal by the Supreme Court and the remaining funds.
3. Validity of the CBI’s restraint order under Section 102 of Cr.P.C.
4. Impact of the discharge of accused Dharmesh Doshi on the case.

Detailed Analysis:

1. Legality of the Condition Imposed by the Magistrate for Withdrawal of Funds:
The petitioner, a Dubai-based company, challenged a portion of an order dated 2nd November 2012 by the Additional Chief Judicial Magistrate, CBI, Ahmedabad (Rural), which allowed withdrawal of funds from Account No. 405075325 in ICICI Bank but imposed a condition of providing a bank guarantee of an equal amount. The petitioner argued that the Supreme Court had previously allowed withdrawal of Rs. 42.51 crores without any condition and contended that the remaining Rs. 38 crores should also be allowed for withdrawal unconditionally. The Magistrate had imposed the condition to safeguard the interests of the respondents, considering the ongoing investigations and the pending revision petition against the discharge of accused Dharmesh Doshi.

2. Distinction Between Amounts Allowed for Withdrawal by the Supreme Court and the Remaining Funds:
The Supreme Court had made a clear distinction between the proceeds from the sale of shares permitted by the Tribunal and those permitted by the Supreme Court. The Supreme Court allowed the withdrawal of Rs. 42.51 crores without any condition, noting that it was not covered under CBI’s restraint order. However, for the remaining Rs. 38 crores, the Supreme Court did not grant unconditional withdrawal but allowed the petitioner to challenge the CBI’s restraint order. The High Court noted that this distinction was crucial and justified the Magistrate's condition for a bank guarantee.

3. Validity of the CBI’s Restraint Order Under Section 102 of Cr.P.C.:
The CBI had frozen the petitioner’s bank account under Section 102 of Cr.P.C. due to an investigation into a large-scale fraud in Madhavpura Mercantile Cooperative Bank Ltd. (MMCB) involving several accused, including Dharmesh Doshi. The CBI believed that the funds in the petitioner’s account were linked to the defrauded amounts from MMCB, routed through foreign destinations. The High Court found that it was not appropriate at the interim stage to interfere with the CBI’s assertions and the ongoing investigation, thus upholding the restraint order.

4. Impact of the Discharge of Accused Dharmesh Doshi on the Case:
The petitioner argued that since Dharmesh Doshi, an employee of the petitioner’s bank and an accused in the MMCB case, had been discharged by the Magistrate, the restraint order should be lifted. However, the High Court noted that the discharge was not final as the CBI’s revision petition against the discharge was pending before the Sessions Court. Therefore, to protect the respondents' interests, the condition of providing a bank guarantee was deemed necessary.

Conclusion:
The High Court dismissed the petition, upholding the Magistrate’s order that allowed withdrawal of funds with the condition of providing a bank guarantee. The Court emphasized the distinction made by the Supreme Court between the two amounts and the ongoing investigation by the CBI, which justified the restraint order and the imposed condition. The pending revision petition against the discharge of Dharmesh Doshi further warranted maintaining the condition to safeguard the respondents' interests.