2023 (2) TMI 1028 - HC - Companies Law

Seeking grant of Regular Bail - Conspiracy involving huge loss of public funds - siphoning of huge funds through various paper companies/entities from CUIS through a myriad of companies - HELD THAT - After the arrest of the applicant on 14.10.2022, the SFIO has already filed their compliant on 12.12.2022. It is pertinent to note that the provisions of Section 167(2) have been made applicable in relation to arrests made under the Companies Act - In terms thereof, if the chargesheet (complaint) is not presented before the expiry of 60 days from the date of arrest, the accused is entitled for the grant of default bail. It is not in dispute that economic offences have deep rooted conspiracies involving huge loss of public funds and need to be viewed seriously. They have a tendency of affecting the economy of the country as a whole and cause serious consequences to the community at large - It is apparent that no person accused of an offence under Section 447 shall be released on bail unless the Court is satisfied that there are reasonable grounds for believing that he is not guilty of such offence and that he is not likely to commit any offence while on bail. From the perusal of the complaint, it is apparent that even in relation to the charges which are alleged against the present applicant, there are various other accused persons who have been named as co-accused. The role assigned to them at this stage is no different than the Applicant. However, surprisingly the SFIO did not feel any need or ground to arrest those co-accused persons and proceeded to file the complaint praying the learned Special Court to take cognizance of the offences - the investigation, even though is stated to have started in the year 2018, the applicant was called on few occasions in the year 2020, then in February 2021 and thereafter information was sought from the applicant in July and September, 2022 and she was ultimately arrested on 14.10.2022. From the very nature of investigation and the complaint filed by the SFIO, the evidence appears to be documentary in nature which is already in custody of SFIO - the SFIO also has not been able to point out the need for continuing the custody of the applicant. Even though they have stated in cursory manner in the Status Report that the applicant is a flight risk, the same, however, can be taken care of by putting appropriate conditions. The very fact that the SFIO did not feel the need to keep 53 out of 55 accused persons in custody and did not feel that their custody would be relevant in order to complete investigation, shows that it does not apprehend any tampering with the evidence or influencing of the witnesses. From the perusal of the complaint the role of Applicant does not appear to be graver than other co-accused persons. In fact the same has not even been contended by SFIO during the course of arguments. As reiterated by the Hon'ble Apex Court from time to time, the object of bail is neither punitive nor preventive and deprivation of liberty must be considered as a punishment. The applicant is, therefore, directed to be released on bail on furnishing a personal bond for a sum of ₹ 5 lakh with one surety of the like amount to the satisfaction of the Special Judge/Duty Magistrate on the conditions imposed - application allowed.

Issues Involved:
1. Application for regular bail under Section 212(8) of the Companies Act, 2013.
2. Allegations of fraud under Section 447 of the Companies Act, 2013.
3. Role of the applicant in the alleged fraud.
4. Conditions for granting bail under Section 212(6) of the Companies Act, 2013.
5. Considerations for bail in economic offences.

Detailed Analysis:

1. Application for Regular Bail:
The application was filed seeking regular bail for the applicant, who was arrested under Section 212(8) of the Companies Act, 2013, in connection with an investigation by the Serious Fraud Investigation Office (SFIO) for offences under Section 447 of the Companies Act, 2013. The investigation was initiated by the Ministry of Corporate Affairs (MCA) on 17.08.2018, targeting Educomp Solutions Limited (ESL) and its subsidiaries.

2. Allegations of Fraud:
The investigation revealed that Shantanu Prakash, the Managing Director of ESL, along with his associates, including the applicant, allegedly siphoned off funds amounting to Rs. 240.76 crores through various paper companies. The funds were then infused back into personal accounts and used to create assets. The applicant was accused of being involved in siphoning funds to acquire shares and construct a school.

3. Role of the Applicant:
The applicant, closely associated with Shantanu Prakash and the Educomp group, was a former Research Head of ESL and a Director of MEMPL and MEF. She allegedly signed financial statements knowing they did not reflect a true and fair view, received substantial funds in her personal account, and was an authorized signatory in bank accounts receiving funds from companies controlled by Shantanu Prakash. The applicant was implicated in two of the eleven charges against the accused persons: siphoning off funds to acquire shares and build a school, and committing fraud by divesting assets and using funds for unauthorized purposes.

4. Conditions for Granting Bail:
Section 212(6) of the Companies Act, 2013, imposes limitations on granting bail for offences under Section 447. The court must be satisfied that there are reasonable grounds for believing the accused is not guilty and is not likely to commit any offence while on bail. However, exceptions are made for women, minors, and those who are sick or infirm. The court emphasized that the basic jurisprudence of bail still applies, considering factors like the risk of tampering with evidence, influencing witnesses, and flight risk.

5. Considerations for Bail in Economic Offences:
Economic offences are considered grave and have serious consequences on the community and the economy. The court noted that despite the gravity of economic offences, bail should not be denied solely on this basis. Each case must be considered on its merits, and the basic test for granting bail remains the same. The investigation was complete, and the complaint had been filed, reducing the risk of tampering with evidence. The court also noted that the main accused and other co-accused with similar roles had not been arrested, and the applicant had cooperated with the investigation.

Conclusion:
The court granted regular bail to the applicant, considering her cooperation, the completion of the investigation, and the lack of evidence tampering. The applicant was directed to furnish a personal bond of Rs. 5 lakh with one surety, surrender her passport, and comply with other conditions to ensure her presence during the trial and prevent any further offences. The court emphasized that the observations made were solely for deciding the bail application and should not influence the trial's outcome.

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