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TMI Blog2020 (6) TMI 261X X X X Extracts X X X X X X X X Extracts X X X X ..... 212 (6) has prescribed the twin conditions to be considered by the court, in case the prosecutor raises his objection to the grant of bail, however a similar language existing in the Prevention of Money Laundering Act, which was para materia to the language of the twin conditions contained in section 212(6) of the new Companies Act, had earlier come-up for consideration of the Supreme Courts in case of Nikesh Tarachand Shah [ 2017 (11) TMI 1336 - SUPREME COURT ] case and such language has already been declared to be ultra vires by the Supreme Court in that case. This court is under obligation to consider the nature of offence and the material placed on record before the special court, by way of charge-sheet against the petitioner, for consideration of question of granting bail to petitioner. In the present case, not keeping the books and records qua the dealings between the Cynosure Real Estate Company of the co-accused Vivek Harivyasi and the companies of the petitioner, in their respective offices; despite impending legal threat of severe punishment prescribed above provisions itself creates initiation of deceitful intention. There is nothing on record to even remotely suggest t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t finds force in the argument of the counsel for the SFIO that at that time the petitioner was not sure of him being made an accused in the case. Therefore he might not have resorted to that exercise. But now, when the petitioner is fully aware that his alleged crime has been detected, it may not be in the fitness of the things to expect the same straightforward conduct from the petitioner, who is alleged to be manipulative by disposition. Petition dismissed. - HON'BLE MR. JUSTICE RAJBIR SEHRAWAT Present: Mr. S. K. Garg Narwana, Senior Advocate with Mr. Sukesh K. Jindal, and Mr. Naveen Gupta, Advocates for the petitioner. Mr. Chetan Mittal, Assistant S.G.I. with Mr. Alok Kumar Jain, Senior Panel Counsel and Mr. Himanshu Gupta, Advocate for SFIO. Mr. Parshant Baliyan, Investigating Officer; in person. RAJBIR SEHRAWAT, J. This petition under Section 439 of the Code of Criminal Procedure has been filed for grant of regular bail pending trial in Criminal Complaint No.3 (or 5) of 18.05.2019 CIS No. COMA/05/2019, CNR NO. HRGR01-007022-2019 titled as SFIO VS. ADARSH BUILD ESTATE ETC . under Sections Section 447 of Companies Act, 2013, read with section 120-B IPC and sections 418 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the affairs of the companies. During investigation it came out that 70 Companies of the Adarsh Group of Companies Ltd. had shown ₹ 4140Crores approximately, including interest, as payable to the said Co-operative Society; as the loan yet to be repaid. Still further, during investigation some persons and companies out-side the Adarsh Group of Companies were also found to be the alleged collaborators of the Adarsh Group and those companies were also taken under investigation. Accordingly, a total of about 125 Companies (hereinafter referred to as CUIs), and some individuals, including the petitioner and his Companies as conspirators; were taken under investigation. After completion of the investigation and taking necessary permissions from the Central Government, SFIO presented the investigation report in the form of a statutory Complaint before the Special Court at Gurugram on 18.5.2019. In this Complaint/ report the petitioner is arrayed as Accused No.176, and his companies are arrayed as the accused at Sr. No. 99 and 100. Under the provisions of section 212 (15) of Companies Act 2013, such a report be taken as a report presented under section 173 of Cr.P.C. After receipt of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , namely, Cynosure Real Estates Private Limited (CREP), EOS Developers Private Limited, Headstrong International Exports Private Limited, Adler Infra Ventures Private Limited and A3G Infra Private Limited. He misappropriated the funds, which had come from the Co- operative Society (ACCSL) to purchase property, Riyasat Green Farm, Chattarpur in the name of his one company Cynosure Real Estates Private Limited (CREP) for an amount of ₹ 24.49 Crores. Out of this amount ₹ 4 Crores are alleged to have been routed through the two companies of the petitioner, namely, Dinkar Commercial Pvt. Ltd. ₹ 2.30 Crores and Amrendra Finance Pvt. Ltd. ₹ 1.7 Crores. To acquire the farm house and to route the money a conspiracy was, allegedly, hatched by the co-accused Vivek Harivyasi; in connivance with Peeyush Aggarwal - who was also the Statutory Auditor and the shareholder, Paramvir Singh Sangwan - the Shareholder, Vijay Jhindal and the petitioner Raj Kumar Modi. The amount of ₹ 17 Crores, which was actually the money coming from the Co- operative Society (ACCSL) though the CUIs of Adarsh Group; was actually provided by the Vivek Harivyasi in cash and was sent to Peeyus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... companies of the petitioner, namely, Dinkar Commercial Private Limted (DCPL) and Amrendra Financial Private Limited (AFPL), to the company of Vevek Harivyasi, namely, Cynosure real Estates Private Limited (CREP), on 03-04-2017, on 05-04-2017 and on 06-04-2017. Amount so transferred was ₹ 4 Crores. So as per the allegations and even the statement of the petitioner his companies transferred ₹ 4 Crores to a one week old company having paid up capital of only ₹ 1 Lakh. This amount was used for purchase of the above-said Riyasat Green Farm House. Out of the remaining auction amount ₹ 10 lakhs is alleged to be contributed by Paramvir Singh Sangwan; and the balance came from other shell companies controlled by Vivek Harivyasi. Hence, it is alleged that the petitioner and his companies have been the conspirators and the participants in the fraud whereby the funds of CUIs of the Adarsh Group, which in turn had come from the Co-operative Society, were embezzled. Arguing the case learned counsel for the petitioner submitted that starting with September 2018, the petitioner had joined the investigation by appearing before the investigating officer of the case, as and w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rant; is present in the court the court may require him to execute a bond with or without sureties for his appearance. Hence it is argued that when an accused is already present before the court then the court is not empowered to issue warrant for taking a person in custody. Such a person is entitled to be released on bail on bonds or sureties. Therefore, once the petitioner had appeared before the trial court, pursuant to the summons issued by that court, then the petitioner had got an un-defeatable right to get bail as per the provisions contained in section 88 of Cr.P.C. Ld. Counsel has relied upon the judgment of the Supreme Court in case of Data Ram Singh V/s State of Uttar Pradesh and another, 2018 SCC Online SC 88 and a judgment of this court in case of CRM-M-28490 of 2015, decided on 01-10-2015 Dalip Singh Mann and another V/s Niranjan Singh, Assistant Director, Directorate of Enforcement, Govt. of India. Carrying forward the arguments, Ld. Counsel for the petitioner submitted that under the provisions of section 212(8) the investigating officer has been given power to arrest a person, if on the basis of the material in his possession; he has reasons to believe, and such re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Prevention of Money Laundering Act, as ultra vires. Hence the twin conditions, as contained in section 212 (6) of the new Companies Act, has also to be treated as ultra vires the Constitution of India and as infringing upon the rights of the individual. Hence the trial court could not have invoked the twin conditions, as prescribed under section 212 (6) of the new Companies Act, for declining bail to the petitioner. Referring to the same judgment, and Counsel for the petitioner has submitted that even if those twin conditions are to be applied, those would have been applicable only in case the petitioner would have been arrested during the investigation by the investigating officer and then produced before the trial court in custody. However, in the present case the investigating officer himself had not found a case against the petitioner sufficient to justify the arrest of the petitioner, therefore, the twin conditions prescribed under section 212 (6) of the new Companies Act have no application in case of the petitioner. Still further it has been argued by the Counsel for the petitioner that even if the twin conditions are taken to be existing on the statute book, still the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said witness by the investigating officer of the case by referring him to the alleged records of the petitioner. Therefore even the statement of the said witness is no evidence in the eyes of law. Still further, it is submitted by the Counsel that the petitioner is not involved in directly dealing with the public money, which was allegedly in the hands of the Company of Adarsh Group of Companies. The embezzlement of the money, even as per the case of the prosecution, has been committed by the controllers of the Adarsh Group of Companies Limited, through their subsidiary entities. Petitioner was not connected with those companies, as such. Learned Counsel for the petitioner has further submitted that the petitioner and his companies were not even part of the sanction initially granted by the Central Government for investigation of the Companies. Subsequently 20 more companies were also involved in the investigation with the prior sanction of the central government. However, the companies of the petitioner were not involved even at this stage. No separate approval was taken as required under section 219 of the Companies Act. Hence any investigation qua the petitioner or his comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e loans were not returned by the Cynosure Real Estates Private limited then repeated efforts were made to recover the said amounts. Ultimately, the proceedings have also been initiated before the National Company Law Tribunal. Hence there is no question of the petitioner or his companies being the conspirators or the participants in the fraud as alleged in the complaint. Otherwise, the petitioner has no concern with the money of CUIs of the Adarsh Group. The petitioner had no equity transaction with those companies. Hence it is clear that petitioner is an innocent person and he is a law abiding gentleman and legitimate businessman. He has not committed any crime as alleged against him. Hence he deserves to be released on bail during the pendency of the trial. On the other hand, learned Assistant Solicitor General of India, appearing for SFIO, has argued that the fact that the investigating officer had not arrested the petitioner during the investigation is totally inconsequential. Referring to the provision of section 212(8) of the new Companies Act, learned counsel appearing for SFIO has submitted that the provision itself speaks of the words investigating officer may arrest such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The court below has exercised its statutory discretion. The petitioner has not been able to find fault with this exercise of discretion by the court below. Relying upon the judgment of the Supreme Court in Serious Frauds Investigation Office V/s Nitin Johari 2019 SCC Online 1178 ; and drawing parallel therewith, learned Counsel for SFIO has submitted that merely because the petitioner had himself appeared before the court after the charge-sheet was filed against him or merely because he was granted interim bail, in the first instance, does not mean that the bail cannot be denied to the petitioner during the pendency of the trial or that such person cannot be taken into custody. Question of bail still has to be considered and decided by the court as per the relevant and applicable factors. It is, accordingly, submitted by the Counsel that in case of Nitin Johari (Supra) also, though the charge-sheet had been filed and the High Court had granted bail, yet the Supreme Court set aside the order of the High Court and remanded the matter to the High Court for fresh consideration, by considering the relevant factors. Had this been the valid proposition of law; that when the charge-sheet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld be required to be considered by this court as well. Referring to the reliance of the counsel for petitioner upon the case of Nikesh Tarachand Shah (supra) case, qua vires of the twin conditions, ld. Counsel for the SFIO has submitted that after that judgment of the Supreme Court, the Parliament has amended the Prevention of Money Laundering Act and has removed the inconsistency qua the offences punishable under the Prevention of Money Laundering Act, and therefore, has rectified the aspect which had earlier led to declaration of the twin conditions under that Act as ultr-vires. Still further it is submitted by the ld. Counsel that although constitutional validity of the twin conditions, as prescribed under section 212 (6) of the Companies Act is under challenge before the Supreme Court in case of Serious Frauds Investigation Office V/s Neeraj Singhal 2018 SCC Online SC 1573 and other cases, however, the Supreme Court has again reiterated the applicability of the twin conditions for the purpose of consideration for bail, in case of Nitin Johari (supra). So far as the reliance of the Counsel for the petitioner upon the judgment of this Court in case of Ankush Kumar (Supra) is conc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cial Pvt. Ltd. - ₹ 2.30 Crores and Amrendra Finance Pvt. Ltd. - ₹ 1.7 Crores. To acquire the farm house and to route the money a conspiracy was hatched by the co-accused Vivek Harivyasi; in connivance with Peeyush Aggarwal - who was also the Statutory Auditor and the shareholder, Paramvir Singh Sangwan - the Shareholder, Vijay Jhindal and the petitioner Raj Kumar Modi. The amount of ₹ 17 Crores, which was the money coming from the Co-operative Society (ACCSL) through the CUIs of Adarsh Group; was, actually, provided by the Vivek Harivyasi in cash and was sent to Peeyush Aggarwal through one Saurav Gupta. All this money was, thereafter, routed through the shell companies controlled by Peeyush Aggarwal, Vijay Jhindal and the petitioner Raj Kumar Modi, by creating accommodation bank entries; and was ultimately; utilized to purchase the above-said Farm House in the name of Cynosure Real Estates Pvt.Ltd (CREP), the company controlled by Vivek Harivyasi. The petitioner has even admitted that his companies; Dinkar Commercial Private Limited (DCPL) and Amarendra Financials Private Limited (AFPL), provided unsecured loans for amounts mentioned above; to Cynosure Real Estat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of CUIs of the Adarsh Group, which in turn had come from the Co-operative Society, were embezzled. The argument of the petitioner that the money transferred by his companies to Cynosure real Estates Private Limited (CREP) was received on account of return of it loan amounts is also totally farce. The record of the companies of the petitioner reveals that there are entries of the alleged loan amounts, showing advancement to and return by certain companies on the same date or after a lapse of just 2 days. Hence these are only paper entries to route the hawala money. The claim of the petitioner that the amounts were transferred as unsecured loans to the Cynosure real Estates Private Limited (CREP) is totally false and has no basis. These amounts were transferred by the companies of the petitioner without any supporting agreements, deeds or the requisite paperwork in this regard. The companies of the petitioner would have kept proper books of account; had these transactions been the genuine business transactions between the companies. There are no corresponding deeds, documents and the agreements even in the records of Cynosure real Estates Private Limited (CREP). It is further argue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsel for the petitioner had submitted that the petitioner is not directly involved in embezzlement of the cash-in-hand of the companies of the Adarsh Group, however, the fraud, as defined under the new Companies Act, does not contemplate any gain by one person and the loss to another person or to a company. Participation of the petitioner in the crime of embezzlement of the money, per se, is sufficient for conviction of the petitioner. It is also submitted that as per the record; the companies had authorized the petitioner to collect cash from 30 companies of the Adarsh Group of Companies. That cash amount is stated to have been received by the petitioner, but is not found to have been deposited in the bank accounts. These facts were confirmed even by the confirmation ledger signed by the petitioner. The participation of the petitioner has duly been established as per the record. Conduct of the petitioner has also not been exemplary in the past. Appreciating it from the disposition of the petitioner, it cannot be ruled out that the petitioner is likely to influence the witnesses and to destroy the evidence against him. Hence the petitioner does not deserve to be granted bail. The c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of bail relates to the life and liberty of the petitioner, therefore, the court has to be liberal in granting the bail, because bail is the rule and the jail is only an exception. This court has heard the learned Counsel for the parties at length and has perused the record. But at the outset it deserves mention that although the counsel for the parties have raised the arguments in extensive details; concerning all the aspects of the matter, including those of the facts and the questions of law, including the ones touching upon the constitutional validity of certain provisions involved in this case, however this court is of the opinion that it may not be appropriate to deal with and decide all the arguments in the same extensive details; in the present proceedings, lest the case of either side should be prejudiced at this stage itself. However, since in this fiercely contested matter the parties have pressed the arguments, therefore, this court is, obviously, expected to deal with the same, at least, in skeletal manner. Accordingly, the arguments are being considered by this court. First of all, although it is much stressed by the counsel for the petitioner that since he was not ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issuing summons, bailable warrant and; preferably; only thereafter the issuance of the non- bailable warrant. However, section 87 of the Cr.P.C. creates an exception to this general procedure and empowers the court to issue warrant of arrest in the first instance itself; if it is of the opinion of the existence of the factors mentioned in this section. Likewise, Section 88 contemplates a general provision for making sure that a person whom the court has already called through the summons or warrant or whom the court considered appropriate to remain present in subsequent dates; can be bound down for such appearance. In fact, this section is more in the nature of inclusive power of the criminal court to seek presence of any person connected with the case, in any manner whatsoever, even if such person may not be mentioned in the case; either as an accused or as a witness. This provision is intended to include even those persons who may be present before the court by chance or who might be watching the proceedings as such. Even if a person is otherwise present before the court, the court may ask such a person to execute the bonds or the securities for his appearance in future. The onl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n case of Dalip Singh (Supra), being relied upon by the petitioner, has been considered by the Supreme Court and it has been held that question of grant of bail is primarily a matter of judicial discretion of the court and not any right of the accused. Although learned Counsel for the petitioner has also raised an allied argument on the same lines, by submitting that question of Bail would arise only if a person is first arrested by the investigating officer and then he is brought before the court, and further that if a person himself has appeared before the court; pursuant to the summons issued by the court, then he is not to be sent to the custody, rather, he should be released on bail by asking him to furnish the bonds/sureties under section 88 of Cr.P.C. However, this court does not find any substance even in this allied argument. As observed above, Chapter VI; which contains section 88, is relating only to ensure the presence of a person before the court. If a person is summoned by the court as an accused, then the question of bail to him is to be decided by the court as per the provisions contained in Chapter XXXIII of Cr.P.C. This is so made clear by the bare language of sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sonment for seven years or more, or he had been previously convicted on two or more occasions of a cognizable offence punishable with imprisonment for three years or more but not less than seven years. Provided that the Court may direct that a person referred to in clause (i) or clause (ii) be released on bail if such person is under the age of sixteen years or is a woman or is sick or infirm: Provided further that the Court may also direct that a person referred to in clause (ii) be released on bail if it is satisfied that it is just and proper so to do for any other special reason: Provided also that the mere fact that an accused person may be required for being identified by witnesses during investigation shall not be sufficient ground for refusing to grant bail if he is otherwise entitled to be released on bail and gives an undertaking that he shall comply with such directions as may be given by the Court]: [Provided also that no person shall, if the offence alleged to have been committed by him is punishable with death, imprisonment for life, or imprisonment for seven years or more, be released on bail by the Court under this sub-section without giving an opportunity of hearin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... offence and before judgment is delivered, the Court is of opinion that there are reasonable grounds for believing that the accused is not guilty of any such offence, it shall release the accused, if he is in custody, on the execution by him of a bond without sureties for his appearance to hear judgment delivered. 439: SPECIAL POWERS OF HIGH COURT OR SESSIONS COURT REGARDING BAIL:- (1) A High Court or Court of Session may direct (a) that any person accused of an offence and in custody be released on bail, and if the offence is of the nature specified in sub- section (3) of Section 437, may impose any condition which it considers necessary for the purposes mentioned in that sub- section. (b) that any condition imposed by a Magistrate when releasing any person on bail be set aside or modified : Provided that the High Court or the Court of Session shall before granting bail to a person who is accused of an offence which is triable exclusively by the Court of Session or which, though not so triable, is punishable with imprisonment for life, give notice of the application for bail to the public prosecutor unless it is, for reasons to be recorded in writing, of opinion that it is not prac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nvestigation into affairs of company:- (1) Where the Central Government is of the opinion, that it is necessary to investigate into the affairs of a company,- (a) on the receipt of a report of the Registrar or inspector under section 208; (b) on intimation of a special resolution passed by a company that the affairs of the company ought to be investigated; or (c) in public interest, it may order an investigation into the affairs of the company. (2) Where an order is passed by a court or the Tribunal in any proceedings before it that the affairs of a company ought to be investigated, the Central Government shall order an investigation into the affairs of that company. (3) For the purposes of this section, the Central Government may appoint one or more persons as inspectors to investigate into the affairs of the company and to report thereon in such manner as the Central Government may direct. Section 212: Investigation into affairs of Company by Serious Fraud Investigation Office.-( 1) Without prejudice to the provisions of Section 210, where the Central Government is of the opinion, that it is necessary to investigate into the affairs of a company by the Serious Fraud Investigation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at 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: Provided that a person, who, is under the age of sixteen years or is a woman or is sick or infirm, may be released on bail, if the Special Court so directs: Provided further that the Special Court shall not take cognizance of any offence referred to this sub-section except upon a complaint in writing made by:- (i) the Director, Serious Fraud Investigation Office; or (ii) any officer of the Central Government authorised, by a general or special order in writing in this behalf by that Government. (7) The limitation on granting of bail specified in sub-section (6) is in addition to the limitations under the Code of Criminal Procedure, 1973 (2 of 1974) or any other law for the time being in force on granting of bail. (8) If the Director, Additional Director or Assistant Director of Serious Fraud Investigation Office authorised in this behalf by the Central Government by general or special order, has on the basis of material in his possession reason to believe (the reason for such belief to be recorded in writing) that any person has been gui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Companies Act, 1956 shall continue to be proceeded with under that Act as if this Act had not been passed. (17) (a) In case Serious Fraud Investigation Office has been investigating any offence under this Act, any other Investigating agency, State Government, police authority, income-tax authorities having any information or documents in respect of such offence shall provide all such information or documents available with it to the Serious Fraud Investigation Office; (b) The Serious Fraud Investigation Office shall share any information or documents available with it, with any investigating agency, State Government, police authority or income tax authorities, which may be relevant or useful for such investigating agency, State Government, police authority or income-tax authorities in respect of any offence or matter being investigated or examined by it under any other law. 217. Procedure, powers etc., of inspectors.- (1) It shall be the duty of all officers and other employees and agents including the former officers, employees and agents of a company which is under investigation in accordance with the provisions contained in this Chapter, and where the affairs of any other b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd production of books of account and other documents, at such place and time as may be specified by such person; (b) summoning and enforcing the attendance of persons and examining them on oath; and (c) inspection of any books, registers and other documents of the company at any place. (6) (i) If any director or officer of the company disobeys the direction issued by the Registrar or the inspector under this section, the director or the officer shall be punishable with imprisonment which may extend to one year and with fine which shall not be less than twenty- five thousand rupees but which may extend to one lakh rupees. (ii) If a director or an officer of the company has been convicted of an offence under this section, the director or the officer shall, on and from the date on which he is so convicted, be deemed to have vacated his office as such and on such vacation of office, shall be disqualified from holding an office in any company. (7) The notes of any examination under sub-section (4) shall be taken down in writing and shall be read over to, or by, and signed by, the person examined, and may thereafter be used in evidence against him. (8) If any person fails without reason ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oduce any document or thing, which may be in his possession pertaining to the case, and to forward all the evidence so taken or collected or the authenticated copies thereof or the things so collected to the court in India which had issued such letter of request: Provided that the letter of request shall be transmitted in such manner as the Central Government may specify in this behalf: Provided further that every statement recorded or document or thing received under this sub-section shall be deemed to be the evidence collected during the course of investigation. (12) Upon receipt of a letter of request from a court or an authority in a country or place outside India, competent to issue such letter in that country or place for the examination of any person or production of any document or thing in relation to affairs of a company under investigation in that country or place, the Central Government may, if it thinks fit, forward such letter of request to the court concerned, which shall thereupon summon the person before it and record his statement or cause any document or thing to be produced, or send the letter to any inspector for investigation, who shall thereupon investigate i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the destruction, mutilation or falsification or concealment or tampering or unauthorised removal of, documents relating to the property, assets or affairs of the company or the body corporate; (b) makes, or is a party to the making of, a false entry in any document concerning the company or body corporate; or (c) provides an explanation which is false or which he knows to be false, he shall be punishable for fraud in the manner as provided in section 447. SECTION 436. OFFENCES TRIABLE BY SPECIAL COURTS:- (1) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974): (a) all offences specified under sub-section (1) of section 435 shall be triable only by the Special Court established for the area in which the registered office of the company in relation to which the offence is committed or where there are more Special Courts than one for such area, by such one of them as may be specified in this behalf by the High Court concerned; (b) where a person accused of, or suspected of the commission of, an offence under this Act is forwarded to a Magistrate under sub-section (2) or sub-section (2A) of section 167 of the Code of Criminal Procedure, 1973 (2 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Code of Criminal Procedure 1973 (2 of 1974), shall apply to the proceedings before a Special Court and for the purposes of the said provisions, the Special Court shall be deemed to be a Court of Session and the person conducting a prosecution before a Special Court shall be deemed to be a Public Prosecutor. Section 446-A: The Court or the Special Court while deciding the amount of fine or imprisonment under this Act, shall have due regard to the following factors, namely:- (a) Size of the company; (b) nature of business carried on by the company; (c) injury to public interest ; (d) nature of the default ; and (e) repetition of the default. Section 447: Punishment for fraud:- Without prejudice to any liability including repayment of any debt under this Act or any other law for the time being in force, any person who is found to be guilty of fraud, shall be punishable with imprisonment for a term which shall not be less than six months but which may extend to ten years and shall also be liable to fine which shall not be less than the amount involved in the fraud, but which may extend to three times the amount involved in the fraud: Provided that where the fraud in question involves p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in his possession and on the basis of that material, is required to record reasons in writing that a person has been guilty of offence punishable under sections, which are mentioned in section 212 (6) of this Act. Therefore despite having the material in his possession justifying the arrest of a person, the investigating officer under the Companies Act may not choose to arrest a person, so as to avoid onerous duty of recording reasons. The section itself confers discretion upon the investigating officer; to arrest or not to arrest an accused. This again; is clear from the fact that the section is using the word may and it is not casting any mandatory duty upon the Investigating Officer to arrest the accused. On the other hand, after the investigation report is filed before the court, which is given a deeming fiction of being a charge-sheet filed under Section 173 of Cr.P.C. under section 212(15) of the Companies Act, the Special Court would have that entire material before it on the basis of which such a person is sought to be prosecuted. The trial court is under a mandatory duty to appreciate the said material in the manner a judicially trained minds should appreciate, while consi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may grant him the bail during the pendency of the trial; on its appreciation of the evidence filed in the charge-sheet. On the contrary; the trial court may not grant any bail to the accused, on the appreciation of the material placed before it in the form of the charge-sheet, despite the fact that the accused was not arrested by the investigating officer even in the face of the availability of the same material before him. However, whether there is any material available against the petitioner in this case, is separately argued by the Counsel for the petitioner and, therefore, would be dealt with in the coming paragraph separately. This Court does not find any force in the other argument of the counsel for the petitioner as well, that since the investigating officer had not obtained prior approval from Central Government for investigating the petitioner or his companies separately, therefore, the investigation qua him is unauthorized and, hence, even the cognizance by the Court taken upon such investigation stands vitiated. To understand this argument one need to read the Chapter XIV of the Companies Act relating to Inspection, Inquiry and Investigation, as a whole. Rather the ent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... faction of being an 'Inspector' for the purpose of powers of Investigating Officer; defined under Section 217 of the Companies Act. Hence all the Investigating Officers, whether investigating at the instance of Central Government under Section 208 or Section 210 or acting at the instance of Tribunal under Section 213 or acting at the instance of SFIO under Section 212, are to be known as 'Inspector' and are to conduct investigation as per procedure prescribed under Section 217. But Officer of SFIO, authorized to conduct investigation under Section 212; is further bound by the restrictions and prohibitions as prescribed under Section 212 of Companies Act as well. One more fact which comes out is that if an investigation is ordered by the Central Government, whether under Sections 208, 210, 213 or 212, and in the process the affairs of some other subsidiary or controlled company of the company under investigation are also found worth investigation, then even for the investigation of the affairs of subsidiary or controlled company; a separate approval from the Central Government is required and the same is to be granted by the Government, as required under Section 219 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of SFIO and nature of the offences; which SFIO is required to investigate. Reason for prescribing condition of requiring approval only from Director, SFIO is because, originally, the investigation is entrusted by the Central Government under Section 212 to SFIO only and not to any Inspector. The Inspector is specified, further, only by the SFIO. Hence, being delegate of Director, SFIO, the Inspector requires prior approval only from the Director, SFIO under Section 217(4)(b) proviso. In the present case the approval from the Director SFIO has been obtained by the investigation officer. Therefore, there is nothing wrong with joining the petitioner also qua the investigation of affairs of the Companies of the Adarsh Group. Since, as per the provisions of Section 212 (14), on receipt of investigation report the Central Government can order initiation of prosecution; not only against the officers and employees etc. of the Company under investigation; but also against 'any person' directly or indirectly connected with affairs of the company under investigation as well, therefore, if a person, not otherwise the employee or officer etc. of the Company under investigation, is al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 212 (6) has prescribed the twin conditions to be considered by the court, in case the prosecutor raises his objection to the grant of bail, however a similar language existing in the Prevention of Money Laundering Act, which was para materia to the language of the twin conditions contained in section 212(6) of the new Companies Act, had earlier come-up for consideration of the Supreme Courts in case of Nikesh Tarachand Shah (Supra) case and such language has already been declared to be ultra vires by the Supreme Court in that case. Not only this, even this court had an occasion of considering the nature and scope and the operational functionality of the language of these twin conditions, as contained in the Narcotic Drugs and Psychotropic Substances Act, in case of Ankush Kumar (supra). After threadbare analyzing the operational functionality of the language of the twin conditions, as used in the statute, this court had come to conclusion that the language of the twin conditions requires impossibility from the court, besides defying the human logic in its operational functionality. This language, if made operational in a case, even by adopting the semi-cooked concept of re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atter of the operational functionality of the twin conditions; the said judgment has to be read as an organic whole. Since the said judgment is reported one, thus, the reasoning given in that judgment can be taken as a supplement to the decision of the present case as well. Although the learned Counsel for the SFIO has, additionally, referred to the language used in Section 437 of Cr.P.C to argue that a similar language is already used in the said provision of bail; and has also relied upon the judgment of the Supreme Court rendered in Kartar Singh V/s State of Punjab, 1994 (3) SCC 569, wherein referring to the language of section 437 Cr.P.C. the para materia language of twin conditions used in Terrorist and Disruptive Activities Act was upheld. However, although this court has no competence to comment upon this judgment of the Supreme Court, yet it has to be noted that the same judgment was cited even before the Supreme Court in Nikesh Tarachand Shah (Supra) case and the Hon ble Supreme Court had not found it worth reliance to the extent of being sufficient for upholding the para-materia language of twin conditions used in the Prevention of Money Laundering Act. Beyond that; this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... person is not guilty the court surpasses the level of satisfaction required for framing charge itself; and goes near to recording the satisfaction required for his discharge. Similarly, holding the twin conditions to be mandatorily followed in all situations for release of an accused on bail; can lead the court to hit against the wall in a given situation. This can be clear from another inconvenient question, which has not been shown by the learned Counsel for the SFIO to have been answered by any court so far, including the Hon ble Supreme Court. The question is - for how long an accused can be kept in custody on the basis of non-fulfillment of the requirement prescribed under section 212(6)? This question was specifically referred to Delhi High Court by way of reference by a judicial officer, in case of Court on its Own Motion (Supra) case. However, even there the question does not find any answer. Unless this question is categorically answered to say that till the conclusion of the trial such a person cannot be released on bail without satisfying the conditions mentioned in section 212(6), the twin condition cannot be held to be mandatory. This is so because if a person can be r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t; in that case, the Hon ble Supreme Court has also observed that even if conditions prescribed under section 212(6) are not to be followed, still the criteria meant for bail in cases of economic offences was required to be considered by the High Court of Delhi. Hence, the primary reason for remand in that case was that the High Court of Delhi had not considered the material on record of the case and had granted bail even without adverting to the factors considered relevant by the Supreme Court for economic offences. Additionally, the Supreme Court had also directed the Delhi High Court to consider the scope and effect of the twin conditions prescribed under section 212(6) of the Companies Act. However, in the present case, as mentioned above, this court has already considered the scope and effect of the operational functionality of the language para materia to the one contained in the twin conditions, as prescribed under section 212(6) of the Companies Act and has found in the case of Ankush Kumar (Supra) that the languages is in conflict with the right of the accused guaranteed under Article 14 and Article 21 of the Constitution and thus has to give way to the fundamental rights ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore the special court, by way of charge-sheet against the petitioner, for consideration of question of granting bail to petitioner. To discredit the concept of economic offences being a class apart; learned Counsel for the petitioner has submitted that concept of economic offences constituting a class apart has not been carried forward consistently even by the Supreme Court. He has also submitted that the Supreme Court has granted bail to the accused in cases involving economic offices. Not only this, the Supreme Court has granted bail to such accused even by writing that it was conscious of the fact that the offences involved in those cases were economic offences and that offences would have an adverse effect upon the economy as such. The counsel has relied upon the judgment in case of Sanjay Chandra (Supra) and in case of D. K. Sethi (Supra). Therefore, it is submitted that applying the concept of economic offences selectively would tantamount to discrimination in application of law. Hence it is submitted by the Counsel for the petitioner and the distinction between economic offences and the other offences; qua the consideration of bail to the accused; no more holds good. Sayin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of out of total swindled amount of ₹ 1700 Crors (₹ 4140Crores including interest); which was, allegedly, swindled by the Adarsh Group of Companies through their subsidiaries and co-conspirators. The petitioner or his companies are alleged to have conspired with Vivek Harivyasi to defraud the CUIs of Adarsh Group. As mentioned above, the petitioner is not even denying the facts alleged against him qua transactions of money with the company of Vivek Harvyasi but has taken a stand regarding nature and purpose of transactions. But there is no record qua such nature and purpose in the of books of account of his companies or of the company of Vivek Harvyasi; to substantiate his stand, despite the fact that maintaining and keeping such records was mandatory; as discussed below. The charge-sheet against the petitioner is under section 447 of the Companies Act, which is a serious offence, inviting punishment of imprisonment up to 10 years. Although the Counsel for the petitioner has submitted that the petitioner is not directly involved in embezzlement of the cash-in-hand of the companies of the Adarsh Group, however, the fraud, as defined under the new Companies Act, 2013 does ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and other relevant papers may be kept at such other place in India as the Board of Directors may decide and where such a decision is taken, the company shall, within seven days thereof, file with the Registrar a notice in writing giving the full address of that other place: Provided further that the company may keep such books of account or other relevant papers in electronic mode in such manner as may be prescribed. (2) Where a company has a branch office in India or outside India, it shall be deemed to have complied with the provisions of sub-section (1), if proper books of account relating to the transactions effected at the branch office are kept at that office and proper summarized returns periodically are sent by the branch office to the company at its registered office or the other place referred to in sub-section (1). (3) The books of account and other books and papers maintained by the company within India shall be open for inspection at the registered office of the company or at such other place in India by any director during business hours, and in the case of financial information, if any, maintained outside the country, copies of such financial information shall be mai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Not only this, all such records, for the past 8 years; were to be kept safe and ready for inspection of the authorities. However, no such records are available or even claimed to have been maintained in this regard; either in the companies of the petitioner or in the Cynosure Real Estate company of the co-accused Vivek Harivyasi. Ledger and financial statements were prepared by concealing or not preparing these relevant records. This omission/concealment is despite the fact that under section 448 of the Companies Act, even any omission of facts or false claim or making wrong representation in any return or records or any document; required by provisions of this Act, in itself is an offence which is punishable under section 447 only. Even the fact that petitioner and his companies transferred ₹ 4 Crores to a one week old company having paid up capital of only ₹ 1Lakh, even that as unsecured, also adversely reflects upon the petitioner. In the present case, not keeping the books and records qua the dealings between the Cynosure Real Estate Company of the co-accused Vivek Harivyasi and the companies of the petitioner, in their respective offices; despite impending legal t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the tax record has been created. Those transactions/ entries are not under investigation because the affairs of the companies of the petitioner were not under investigation directly. However, the fakeness of these entries and tax return transaction is exposed by the fact that there are no records of any agreements of loans, claimed to be as such in the income tax return. Nor is there any record showing that the companies of the petitioner ever initiated any proceedings for recovery of the said loans. The proceedings before the NCLT has been initiated only after the investigation in the matter had been started by the SFIO. Coming to the material against the petitioner, learned Counsel for the SFIO has pointed out that investigation has led to the seizure of the material and recovery of fudged entries and the data. The petitioner himself has also made admission regarding the said transaction and entries and the concerned data. Hence there is an admission on oath by the petitioner and also the admission of the co-accused Peeyush Aggarwal; who has specifically stated that the petitioner had got the cash from him and that cash was supplied to him by the co-accused Vivek Harivyasi. Hence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... officer. Such a statement recorded by the investigating officer under Companies Act, even if it is of admission of certain fact; though could not be taken as sufficient for conviction on its own, however, the same would not be discarded as a confession hit by section 25 of the evidence Act. As per the mandate of the section 217(7) of the Companies Act, this can certainly be relied upon as evidence against the petitioner. Therefore, the same can be considered for the purpose of bail as well. For the same reasons, even the statement of a co-accused would be relevant under section 10 of the Evidence Act, and the same can be relied upon under section 30 of the Evidence Act. Although, the question of reliance upon such statement as evidence would come-up during the trial only after the same is proved , however, for the purpose of bail its relevance as material against the petitioner cannot be excluded at this stage. There is nothing on record that the prosecution shall not prove this statement during the trial or that it would be prohibited from proving the same during the trial. Although in the first blush it can occur to the mind that such provision; which makes the statement made be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... darsh Group, however, the fraud, as defined under the new Companies Act, 2013 does not contemplate any gain by one person and the loss by another person or a company. Participation of the petitioner in the crime of embezzlement of the money, per se, is sufficient for conviction of the petitioner, if otherwise proved. Cash amount is stated to have been received by the petitioner, but is not found to have been directly deposited in his bank accounts or returned to the company of the co-accused Vivek Harivyasi. Rather, a route was; allegedly; adopted to show the same as loan to his company Cynosure Real Estate Private Ltd. The said loan is not finding support from any contemporary loan agreement nor is any effort to recover the said alleged loan reflected in the records of the company of the petitioner. Therefore, the participation of the petitioner in the alleged fraud, if any, has duly been reflected as for the record. Lastly, this court also does not find any substance in the argument of the counsel for the petitioner that since the petitioner had joined investigation, was never arrested by the arresting officer and has never made any effort to run away from the process of the law, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld have any material or anticipation that a Member of Parliament would flee from the country after committing alleged huge economic crime and the country would be forced to contest his extradition proceeding in a foreign land for years together; just to bring him to the justice, or that the business tycoons owning hundreds of companies and business of hundreds of billions of rupees would flee from the country after committing the alleged crime and would even start denying their Indian Citizenship. Although one can say that a few individuals cannot be made example to deny bail in deserving cases, but then, there is no pressing necessity for the courts to create concepts which neither withstands test of logic nor are contemplated by the statutory law. Grant or not to grant bail is discretion of the court. This discretion is better left to be guided by the material on record qua the crime and the attending possible conclusion which can be drawn therefrom than to be pushed to frontiers unchartered for the investigating agency. Therefore in view of this court; the possibility of the petitioner influencing the witnesses, fleeing from the process of the law or destroying the evidence, if ..... X X X X Extracts X X X X X X X X Extracts X X X X
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