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TMI Blog2019 (12) TMI 1097X X X X Extracts X X X X X X X X Extracts X X X X ..... document required by, or for, the purposes of any of the provisions of this Act or the rules made thereunder, any person makes a statement which is false in any material particulars, knowing it to be false or which omits any material fact, knowing it to be material, would fall within the ambit of Sections 448 and 447 of the Companies Act, 2013 as sought to be contended on behalf of the petitioner. In the present case, the relevant documents attributed against the applicant were stated to have been collected from the office of Jitender Kumar, Chartered Accountant, the co-accused (A-79), which the SFIO submitted were statutory records like minutes book prepared after the occurrence of the event in order to complete the legal formalities but were not the documents prepared during the course of actual functioning of the company and that the minutes books and other documents were not required to be signed by the petitioner and the same were not signed - In as much as it has been submitted on behalf of the petitioner that the documents have not been filed with any statutory authorities and the same were only draft documents prepared from the statutory records available and downloaded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yed as accused No.88) summoned for the alleged commission of offences punishable under Sections 477A read with Section 120B Indian Penal Code, 1860 and under 628 of the Companies Act 1956 and under Section 448 of the Companies Act, 2013. 2. The facts as put forth through the complaint case No.720/2017 filed by the Serious Fraud Investigation Office under Section 439 read with Section 212(15) of the Companies Act, 2013 and Section 193 of the Cr.P.C., 1973 bring forth that pursuant to WP(C) No.818/2015 Ranvir Singh vs. UOI filed in the Hon ble Supreme Court of India pursuant to the order dated 14.12.2015 wherein it was alleged that Mohd. Iqbal, a resident of Saharanpur had : Amassed disproportionate assets; Incorporated a number of sham companies under the Companies Act, 1956, many of which have dummy directors or fictitious shareholders. Acquired lands buildings in the names of these companies, using laundered money earned from illegal mining through contracts taken in the names of Companies/partnership firms owned by his family members, investigations were made into allegations against the accused No.1 Mohd. Iqbal and others and investigation w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... seven Clusters based on common attributes of functionality as mentioned in the order of summoning dated 24.1.2019. As per the investigation conducted it is stated to have been revealed that the entire network of entities under investigation (EUIs) was created under the single objective of creating/acquiring legal assets out of the wealth amassed through illegal sand mining activities and that in order to achieve this goal Mohd. Iqbal and his network of companies/family members/key associates (hereinafter referred to as the Group) created a complex grid of EUIs to camouflage the source of funds. It has been alleged, however, through the complaint that the fictitious assets acquired through accommodation entry operators were liquidated to create real assets and a set of dummy/ghost shareholders and directors were used as a front to facilitate the liquidation and acquisition of assets. The said Group is alleged to have indulged in the large scale falsification of the books of accounts and as per the complaint pliable auditors and accounting professionals including the present applicant have totally disregaded the fundamental principles of accounting to please the kingpin of the Group ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e acts done by the directors and other authorized persons were null and void and that no resolution for allotment of shares, either on face value or on premium was passed and all such allotments were void. The SFIO has further contended that no register of members or register of shares were prepared and share transfer deeds were not actually executed and that the books of accounts were not prepared by the company and that such financial statements do not reflect a true and fair view of the companies. The statutory auditors were also stated to have not audited the financial affairs of the companies as per prescribed manner nor as per the guidelines of ICAI. 5. As per the SFIO the flow of funds in the said companies reflected the following attributes: No company did substantial business except Safety Plus Power Limited. The companies allotted shares on high share premium without any appropriate underlying worth of the company. The investigation revealed such inflow of funds as accommodation entries. The inflow of funds in the companies of this cluster was basically from Share Premium Share Application Money (51%), Loans from other EUI, related parties or unrelat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2013 on 08.02.2017, who stated that since his partner CS Shruti Kumari had earlier worked with CS Vijay Kumar Sharma in VS Associates, hence his firm got the assignment of preparing statutory registers and records for the period FY 2008-09 to 2014-15 of some 58 companies under investigation during February-March 2016 from CS Vijay Kumar Sharma/co-accused and that the required details and information to prepare such records and registers were taken from the MCA website and no original documents were provided to them and as they could not prepare the registers for all 58 companies, therefore some records were returned incomplete. It is alleged by the SFIO that the assignments were handed in piecemeal to VS Associates till June 2016. However, V S Associates again requested CS Shruti Kumari in the first week of February 2017 to provide soft-copies of the same work which was sent to them on 06.02.2017 through email. 8. The SFIO further states that during the course of investigation, as per documents collected from the office of the co-accused, the CS Jitender Kumar Sharma and other materials clearly indicated that the statutory records like minute books were prepared much after occu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h accommodation entry operators were liquidated to create real assets. It was further submitted by the SFIO that a set of dummy / ghost shareholders and directors were used as a front to facilitate the liquidation and acquisition of assets and that the group had indulged in large scale falsification of the books of accounts and that the pliable auditors and accounting professionals had totally disregarded the fundamental principles of accounting to please the king pin of the group. It was further submitted by the SFIO that the Group had scant regard and fear of the laws of the land and that investigation reveal that among the many illegal acts committed by the group included a stockpiling of unaccounted money and large-scale money laundering for legitimizing the proceeds of crime. 13. The order dated 24.1.2019 of the learned Special Judge (Companies Act), District Courts, Dwarka Delhi vide which the applicant has been summoned vide para 4.5. thereof observes to the effect that: A-86, Company Secretary, Shri Vijay Kumar Sharma entered into an oral agreement with A-79 Jitender Kumar Sharma for completion of statutory registers of 58 entities for back date period and he furth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... got the permission to conduct investigation in the matter on 8.1.2016 and that the documents allegedly prepared during the period February to March, 2016 were for the period 2008-2009 till the year 2014-15 The applicant submits that he has absolutely no role to play with the principal accused persons and that his role comes into play only after the commission of the alleged crime. 17. The applicant has further submitted that it was alleged in the investigation report dated 6.6.2017 that the applicant fabricated the statutory records of the EUI as per directions of CS Vijay Kumar Sharma (A86) and thus has been charged u/s 628 Companies Act, 1956, u/s 448, Companies Act, 2013 and Section 477A r/w Section 120B IPC, 1860. 18. The Applicant submits that he is alleged to have also given his statement purportedly u/s 217 (4) of the Companies Act, 2013 wherein he has allegedly stated that he got the assignment of preparing the statutory registers and records for the year 2008-2009 to 2014-15 during the period of February-March 2016 and states that he did this only to gain experience and not for any monetary gain and he was never paid for this work and that he only prepared this on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... good the default. 22. The applicant has further contended that the assignment for the same was received by the Applicant in Feb-March 2016 and thus the Applicant cannot be held liable for statutory records filed in the year 2008-09 to 2014-2015 available on the MCA website and thus seeks to contend that since the role of the Applicant only commences from February-March 2016, the provisions of Section 628 Companies Act, 1956 cannot be applied to the Applicant. 23. The applicant has further submitted that the offence under Section 477A IPC is not made out against the Applicant since the applicant has not falsified any document and that as stated through the investigation report, the documents were seized from the possession of Jitender Kumar Sharma (Accused No. 79) and all these documents were unsigned and unfiled and admittedly do not bear the signature of the applicant or any other person and none of them have been seized from the possession of the applicant and no material has been placed on record to substantiate the said offence. The applicant has further submitted that the offence under Section 120B, IPC is also not made out against the him since his role only began ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 212(6) of the Companies Act 2013 was amended and the words ''the offences covered under sub sections (5) and (6) of section 7, section 34, section 36, subsection (1) of section 38, sub-section (5) of section 46, sub-section (7) of section 56, sub-section (10) of section 66, sub-section (5) of section 140, sub-section (4) of section 206, section 213, section 229, subsection (1) of section 251, sub-section (3) of section 339 and section 448 which attract the punishment for fraud provided in section 447 were replaced with offence covered under section 447 . 26. It has thus been submitted by the applicant that the amended Section 212(6) of the Companies Act, 2013 along with the Statement of Objects and Reasons to Section 212(6) makes it amply clear that the rigour of the said Section would only be applicable if a person has been charged under Section 447 Companies Act, 2013,which is not the case in the present matter. 27. Inter alia, the applicant submitted that even if it is assumed that the rigours of Section 212(6) Companies Act apply even to Section 448 of the Companies Act, the test is satisfied as there is no reasonable ground to believe that the applicant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on 8.08.2019 by the High Court of Delhi. 3. Viresh Verma (Accused No. 84) Interim protection granted on 1.08.2019 and 1.09.2019 by the Allahabad High Court 4. 4. Ashwini Aggarwal (Accused No. 85) Interim protection granted on 01.08.2019 and 11.09.2019 by the Allahabad High Court 5. 5. Vijay Kumar Sharma (Accused No. 86) Regular Bail granted on 15.07.2019 by the Trial Court 6. Shriti Kumari (Accused No. 89) Regular Bail granted on 15.07.2019 by the Trial Court 7. Brij Bhushan Sharma (Accused No. 90) Anticipatory Bail granted on 31.05.2019 by the High Court of Delhi. 8. Ashish Aggarwal (Accused No. 91) Regular Bail granted on 31.05.2019 by the High Court of Delhi. 30. Inter alia, the applicant submits that the charge sheet i.e. the investigation report in the present matter has been filed and the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n submitted on behalf of the respondent that this is further buttressed by the fact that Section 212 (6) of the Companies Act, 2013 uses the words no person accused of any offence under those sections , clearly meaning thereby that the conditions for bail enumerated under Section 212 covers more than one section as plural is used. It is further submitted that many offences under the Companies Act provide for punishment under section 447 of the Companies Act, 2013. It is further submitted that thus, the sweep and ambit of Section 212 (6) is wide enough to cover more than one offence, i.e., offences under the Companies Act, 2013 which provide for punishment under Section 447 (as per comprehensive list attached). It is further submitted that any interpretation to the contrary would render the same redundant and defeat the very purpose of the Act. 34. The respondent SFIO has further submitted that it is settled law that when Courts are faced with the task of interpretation of statutes, in the first instance, the grammatical meaning of the word is to be adhered to, as held by the Hon'ble Supreme Court in PUCL versus Union of India, reported as (2005) 5 SCC 363. It is further ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the SFIO that investigation revealed that most of the companies who purchased shares of the companies under this Cluster III were companies controlled by Vivek Kumar Jain, self-acknowledged entry operator and controller of several shell companies whose statement and role had been discussed in cluster I and that a total of ₹ 2879.60 Lakhs was infused in the companies through accommodation entries in the guise of share capital by Vivek Kumar Jain and that all these shares were transferred to the group companies within a year at face value, which was evident from the corresponding returns of the companies. 38. The SFIO has thus submitted that Section 212(6) and Section 212(7) of the Companies Act, 2013 read to the effect:- 212. Investigation into affairs of Company by Serious Fraud Investigation Office. (6) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), 1 [offence covered under section 447] of this Act shall be cognizable and no person accused of any offence under those sections shall be released on bail or on his own bond unless- (i) the Public Prosecutor has been given an opportunity to oppose the applicatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt that there are reasonable grounds for believing that the petitioner is not guilty of the offences alleged to have been committed by him and that the petitioner is not likely to commit any offence while on bail. 41. Reliance was also placed on behalf of the SFIO on the verdict of the Hon ble Supreme Court in State of Gujarat V. Mohanlal Jitamalji Porwal (1987) 2 SCC 364 wherein, it was observed vide para 5 to the effect:- 5. The entire community is aggrieved if the economic offenders who ruin the economy of the State are not brought to book. A murder may be committed in the heat of moment upon passions being aroused. An economic offence is committed with cool calculation and deliberate design with an eye on personal profit regardless of the consequence to the community. A disregard for the interest of the community can be manifested only at the cost of forfeiting the trust and faith of the community in the system to administer justice in an even-handed manner without fear of criticism from the quarters which view white collar crimes with a permissive eye unmindful of the damage done to the national economy and national interest. 42. On a consideration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any other person, whether or not there is any wrongful gain or wrongful loss; (ii) wrongful gain means the gain by unlawful means of property to which the person gaining is not legally entitled; (iii) wrongful loss means the loss by unlawful means of property to which the person losing is legally entitled. 45. It is apparent thus that in terms of the ambit of Explanation-(i) to Section 447 of the Companies Act, 2013 which defines fraud for the purpose of the said Section, a false statement in relation to in any return, report, certificate, financial statement, prospectus, statement or other document required by, or for, the purposes of any of the provisions of this Act or the rules made thereunder, any person makes a statement which is false in any material particulars, knowing it to be false or which omits any material fact, knowing it to be material, would fall within the ambit of Sections 448 and 447 of the Companies Act, 2013 as sought to be contended on behalf of the petitioner. 46. However, in the facts and circumstances of the instant case, the reply affidavit filed on behalf of the SFIO through its Assistant Director and the written submissions submi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... utory register and records by taking details and information for preparation of the record of companies from the MCA website when no original document had been submitted without such prepared records being submitted to any authority, the aspect of such records falling within the realm of an attempt to submit a false statement has to be considered taking into account the factum that A-86 Shri Vijay Kumar Sharma who is stated to have given the assignment to the petitioner, A-88 and his partner Shriti Kumari, A-89 are both on bail vide order dated 15.07.2019 of the learned trial Court. 49. As regards the contention that has been raised on behalf of the SFIO that orders under Section 439 of the Cr.PC, 1973 as sought by the petitioner herein, cannot be granted without reference to the provisions of Section 212(6) and 212(7) of the Companies Act, 2013 without entering a finding on the required level of satisfaction of the Court that there are reasonable grounds for believing that the petitioner is not guilty of the offences alleged to have been committed by him and that the petitioner is not likely to commit any offence while on bail and further submission made by the SFIO that as lai ..... X X X X Extracts X X X X X X X X Extracts X X X X
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