2021 (3) TMI 1142 - HC - Companies Law

Enlargement on Bail - Intermediate business on the basis of bill of lading is permissible - bail sought on the old age of accused and also that he has medical ailments - HELD THAT - The sum and substance of the outcome of the investigation conducted in the matter and the facts mentioned in the complaint for prosecution are that concerned Companies were engaged in fraudulent merchantine trade and caused wrongful loss to the Public Sector Bank to the tune of ₹ 7820 Crores approximately applying different modus operandi including siphoning of Bank funds through merchantine trade; falsification of financial statement of the Companies involved in the matter by not showing true and fair views. So far as the order granting interim protection passed in favour of Sunil Verma, Anoop Kumar Wadhera as well as Vikram Kothari is concerned, if the prohibition contained under Section 212(6) of the Companies Act is declared unconstitutional and struck-down from the Statute, then in that situation also merits of the present matter will not change. Thus, on the the basis of interim protection granted to co-accused by the Apex Court, the applicant cannot be enlarged on bail. Further, keeping in view the modus operandi adopted by the Companies concerned for obtaining the Letter of Credit and the amount of NPA, applicant can also not be enlarged on bail on the ground that his daughter is suffering from Cancer. Considering the entire facts and circumstances of the case, submissions of learned counsel for the parties and keeping in view the nature of offence, evidence, complicity of accused and without expressing any opinion on the merits of the case, the Court is of the view that there is no substance in the submissions made by the learned counsel appearing for the applicant - Application dismissed.

Issues Involved:
1. Maintainability of the bail application directly filed before the High Court.
2. Interim protection granted to co-accused and its applicability to the applicant.
3. Role of the applicant and the nature and gravity of the alleged offences.
4. Health condition of the applicant and humanitarian grounds for bail.
5. Alleged falsification of financial statements and fraudulent merchanting trade practices.
6. Impact of the alleged offences on public sector banks and public interest.

Issue-wise Detailed Analysis:

1. Maintainability of the Bail Application:
The prosecution raised a preliminary objection regarding the maintainability of the bail application directly filed before the High Court without approaching the lower court first. The Court noted that the applicant had sought relief from the Apex Court in Special Leave to Appeal (Criminal) No. 2393 of 2020, and an order dated 28.5.2020 was passed by the Apex Court. Therefore, the objection by the prosecution was deemed meaningless.

2. Interim Protection Granted to Co-accused:
The applicant argued for bail on the grounds that co-accused had been granted interim protection by the Apex Court. However, the Court clarified that even if Section 212(6) of the Companies Act is declared unconstitutional, the merits of the case would remain unchanged. Thus, the interim protection granted to co-accused could not be a basis for enlarging the applicant on bail.

3. Role of the Applicant and Nature and Gravity of the Alleged Offences:
The Court examined the role of the applicant, who was the Managing Director and signatory of financial statements of Frost International Limited (FIL) and involved in Mohan Steels Limited (MSL). The prosecution alleged that the applicant falsified books of accounts, misrepresented financial statements, and engaged in fraudulent merchanting trade practices, causing a wrongful loss of ?4041 Crores to public sector banks. The Court compared the allegations with guidelines from Supreme Court cases (Y.S. Jaganmohan Reddy vs. CBI and P. Chidambaram vs. CBI) and found that the nature and gravity of the offences were serious, involving public interest and economic fraud.

4. Health Condition of the Applicant and Humanitarian Grounds for Bail:
The applicant's counsel argued for bail on medical and humanitarian grounds, citing the applicant's age, health conditions, and the illness of his daughter. The Court acknowledged the applicant's health issues but noted that proper treatment was being provided by jail authorities. The Court concluded that the applicant's health condition and family circumstances did not warrant bail, given the seriousness of the alleged offences.

5. Alleged Falsification of Financial Statements and Fraudulent Merchanting Trade Practices:
The prosecution alleged that the applicant and his company engaged in fraudulent merchanting trade, falsified financial statements, and manipulated revenue to obtain credit facilities from banks. The Court noted that the applicant showed false trade receivables, engaged in speculative currency trading, and caused significant financial losses to banks. The Court found the allegations substantiated by the investigation and considered them serious enough to deny bail.

6. Impact of the Alleged Offences on Public Sector Banks and Public Interest:
The Court emphasized that the alleged offences involved significant financial losses to public sector banks and affected public interest. The modus operandi adopted by the applicant and the companies involved in obtaining Letters of Credit and causing Non-Performing Assets (NPA) was considered detrimental to the banking sector and public trust. The Court held that the nature and gravity of the allegations shook the conscience of society and warranted the rejection of the bail application.

Conclusion:
Considering the entire facts and circumstances, the nature of the offence, evidence, and complicity of the accused, the Court concluded that the applicant had not made out a case for bail. The bail application was accordingly rejected.

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