2022 (7) TMI 413 - HC - Indian Laws

Second bail application under Section 439, The Code of Criminal Procedure, 1973 - inflation of some figures of the Stock in Transit in order to avail Drawing Power (DP) facilities from the cash credit accounts - it is claimed that the accused had conducted stock audits based on the information and documents provided by the Companies - HELD THAT - The petitioner is a Chartered Accountant and a partner in M/s. A.C.Gupta Company, Chartered Accountant. They were appointed as Stock Auditor for the Financial Year 2015-16 of Punjab National Bank to conduct stock audit of Bhushan Steel Limited first limited. The role of the petitioner is that of a data aggregator who conducted stock audit based on the information and the documents provided by the Company. The allegations against the petitioners are that they were negligent in conducting the audits by not verifying the documents diligently and to raise a red flag about the deficiencies in the documents in respect of the Bhushan Steel Limited Company. It is significant to note that the accused had been summoned to appear before the Investigating Officer on 29.6.2018 and he thereafter, joined the investigation on 27.09.2018, 29.10.2018 and 20.03.2018. The statements of the petitioner were duly recorded under Section 207 of the Companies Act, 1956. It is evident that the petitioner had also co-operated and joined the investigations - The chargesheet had been filed in the court on 16.8.2019 when the cognizance was taken by the learned Trial Court. Even thereafter, the petitioner continued to appear before the learned trial court regularly. Bail application was filed by the petitioner on 7.11.2019 which and was heard on various dates till 01.06.2022. However, on the said date, the learned Trial Court directed the accused to be taken into judicial custody since he had no interim protection from any superior Court. Thus, it is evident that the accused was not arrested either by the Investigating agency during the period of investigations or even thereafter when the chargesheet was filed in the Court. In fact, the bail application was heard for about three years and the accused was not taken into judicial custody despite being present in Court on every date. The respondent has nowhere averred that the custody of the accused was required for the purpose of the investigations or thereafter not any assertion was made for taking the petition into consideration - The accused has been appearing before the Investigating Officer and thereafter before the Court diligently and his custody was never sought by the respondent. The role of the petitioner is that of the Stock Auditor wherein the Stock verifications of the documents and statements as submitted by the Company to the Banks was carried out by the accused. The main accusations against him are that he did not conduct the Stock Audits diligently and did not raise red flag about the inconsistency as submitted in the documents to the Banks by the Companies. Further, the primary accused, namely, Mr. Neeraj Singhal and Mr. Nitin Johari have already been granted interim bail. The allegations pertain to years-2014-2015 and 2015-2016 and the petitioner neither before nor after has been involved in any criminal offence. The petitioner is hereby admitted to bail on submitting a Bail Bond and Surety Bond in the sum of Rs.1,00,000/- to the satisfaction of the trial court/Special Judge - Bail application allowed.

Issues Involved:
1. Bail Application under Section 439 of the Code of Criminal Procedure, 1973.
2. Role and Responsibility of the Accused in the Stock Audit.
3. Allegations of Negligence and Collusion in Conducting Stock Audits.
4. Investigation and Statements Recorded.
5. Custody and Interim Bail Considerations.
6. Economic Offences and Public Interest.

Issue-wise Detailed Analysis:

1. Bail Application under Section 439 of the Code of Criminal Procedure, 1973:
The present second bail application was filed by the accused under Section 439 of the Code of Criminal Procedure, 1973. The accused had previously filed a bail application which was dismissed by the learned ASJ on 02.06.2022. The petitioner sought interim bail on the grounds of parity, asserting that he had not enriched himself or his firm in any manner and had always cooperated with the investigation.

2. Role and Responsibility of the Accused in the Stock Audit:
The accused, a Chartered Accountant and partner in M/s. A.C. Gupta & Associates, was appointed by Punjab National Bank and State Bank of India to conduct stock audits for Bhushan Steel Limited (BSL) for the financial years 2014-2015 and 2015-2016. The accused's role was limited to data aggregation by physically visiting various locations of the company and verifying the stocks and debtors' report in the stock statement. The accused claimed that the stock audit was conducted based on the information and documents provided by the companies and adhered to the guidelines issued by the Institute of Chartered Accountants of India (ICAI).

3. Allegations of Negligence and Collusion in Conducting Stock Audits:
The allegations against the accused included negligence in conducting the audits by not verifying the documents diligently and failing to raise a red flag about the deficiencies in the documents. The Investigation Report indicated that BSL, along with its associated companies and officials, allegedly connived to inflate figures of the Stock in Transit to avail Drawing Power facilities from cash credit accounts. The accused was alleged to have colluded with the officers of BSL in providing and using wrong information to calculate the DP figures wrongly based on the figures given by the BSL management.

4. Investigation and Statements Recorded:
The accused was summoned by the Serious Fraud Investigation Office (SFIO) on multiple occasions and joined the investigation, during which detailed interrogations were carried out. The accused's statements were recorded under Section 207 of the Companies Act, 1956. The accused explained his limited role in the stock audit and stated that the audit was conducted based on the information provided by the companies.

5. Custody and Interim Bail Considerations:
The accused was not arrested during the investigation or after the chargesheet was filed in court. The bail application was heard for about three years, and the accused was not taken into judicial custody despite being present in court on every date. On 01.06.2022, the learned Trial Court directed the accused to be taken into judicial custody, citing the absence of interim protection from any superior court. The accused had always cooperated with the investigation and appeared before the court diligently. The primary accused, Mr. Neeraj Singhal and Mr. Nitin Johari, had already been granted interim bail.

6. Economic Offences and Public Interest:
The respondent opposed the bail application, asserting that the offence committed was an economic offence with deliberate design for personal profit, regardless of the consequences to the community. The respondent cited various judgments to argue that the accused was not entitled to bail in such white-collar crimes. However, the court considered the circumstances, including the accused's cooperation with the investigation, the limited role in the stock audit, and the fact that the primary accused had been granted interim bail.

Conclusion:
Considering all the circumstances, the petitioner was admitted to bail on submitting a Bail Bond and Surety Bond in the sum of Rs.1,00,000/- to the satisfaction of the trial court/Special Judge. The application was accordingly allowed.

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