2022 (12) TMI 827 - HC - Companies Law

Seeking grant of regular bail - money laundering - siphoning off/diversion of the funds - false statements - beneficiary of the transactions - Dummy director or not - applicability of twin-stringent conditions stipulated under Section 212(6) of the Companies Act 2013 - HELD THAT - The petitioner claims himself to be a Dummy Director. However there is nothing on record to authenticate the said plea. As per the Companies Act a Director is required to discharge his duties with due diligence ensuring that there is no siphoning off and/or diverting of the funds. Still further having actively participated in the affairs of the Company and having signed the Financial Statements the petitioner cannot take the plea that him being a dormant Director no liability can be fastened upon him. The economic offences being against the Society at large have been strictly dealt with in the recent past. Very recently the Hon ble Apex Court in Vijay Mandanlal Choudhary Ors. Vs. Union of India Ors. 2022 (7) TMI 1316 - SUPREME COURT while considering the constitutional validity and applicability of restrictive conditions of bail provided under Section 45 of the Prevention of Money Laundering Act 2002 has held that money laundering is an offence against the sovereignty and integrity of the country. The allegations against the petitioner are serious in nature. The complaint was filed only after detailed investigation report. The said investigation reveals the petitioner s involvement in 88 Companies of SRS Group. The Directors of the said Companies including the petitioner had submitted false statements of the debtors inflated purchase and sale figures and deliberately concealed the material facts. The said Companies are accused of siphoning off the funds to the tune of Rs.671.48 crore and diverting the funds of Rs.645.86 crore from SRS Group of Companies by way of separate/distinct transactions. The petitioner does not deserve the concession of bail - Petition dismissed.

Summary

Issues Involved:
1. Whether the petitioner, as a dummy Director, is liable for the offences under Sections 448 of the Companies Act, 2013 and 628 of the Companies Act, 1956.
2. Applicability of twin conditions under Section 212(6) of the Companies Act, 2013.
3. Delay in filing the complaint.
4. Petitioner's involvement and liability in financial mismanagement and fraud.
5. Parity with co-accused who were granted bail.

Issue-wise Detailed Analysis:

1. Liability as a Dummy Director:
The petitioner argued that he was merely a dummy Director and not involved in the day-to-day affairs of the company. However, the court found no evidence to support this claim. The Companies Act mandates that a Director must discharge duties with due diligence, ensuring no siphoning or diversion of funds. The petitioner actively participated in the company's affairs and signed financial statements, thereby incurring liability.

2. Applicability of Section 212(6) of the Companies Act, 2013:
The petitioner contended that since he was not charged under Section 447, the stringent conditions under Section 212(6) should not apply. However, the court clarified that Section 448(b) entails punishment under Section 447 for false statements, thus the twin conditions under Section 212(6) are applicable. The court emphasized that economic offences are serious and have been strictly dealt with, referencing the Supreme Court's judgment in Vijay Mandanlal Choudhary's case, which upheld stringent conditions for bail in economic offences.

3. Delay in Filing the Complaint:
The petitioner highlighted a four-year delay in filing the complaint, arguing that he was neither called for investigation nor issued any summons during this period. The court did not find this argument sufficient to grant bail, given the seriousness of the allegations and the detailed investigation report.

4. Involvement and Liability in Financial Mismanagement and Fraud:
The respondent's counsel argued that the petitioner was involved in a large-scale financial fraud involving 88 companies, which obtained loans based on false statements and did not repay them, resulting in a loss of Rs.1596.94 crores. The petitioner was linked to five companies associated with the SRS Group, which diverted Rs.645.86 crore. The court found sufficient material on record to prove the petitioner's involvement in the fraudulent activities.

5. Parity with Co-accused Granted Bail:
The petitioner sought bail on the grounds of parity with co-accused who were granted interim bail. However, the court noted that those bail concessions were granted before the Supreme Court's judgment in Vijay Mandanlal Choudhary's case. The court emphasized that the stringent conditions for bail in economic offences, as laid down in the said judgment, are applicable in this case, making the petitioner's plea for parity ineffective.

Conclusion:
The court dismissed the bail petition, citing the seriousness of the allegations, the petitioner's active involvement in the fraudulent activities, and the applicability of stringent bail conditions as per the Supreme Court's judgment in Vijay Mandanlal Choudhary's case. The court concluded that the petitioner does not deserve the concession of bail.