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TMI Blog2022 (7) TMI 413X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the actual stock statements. The role of the Accused was only limited to data aggregation by physically visiting the various locations of the Company and verifying the stocks and debtors report in the stock statement, which was duly signed by the senior officials of the Company and have already been submitted to the Banks. Upon the completion of the said assignment, the Report was submitted by the Accused to Punjab National Bank and State Bank of India. While the applicant has been made as accused, but SFIO has failed to array as accused, the erring officials of Punjab National Bank and State Bank of India, who were the employers of the accused. Despite being aware that the accused has conducted the Stock Audit solely on the basis of the information provided by the Companies. The Central Government/Ministry of Corporate Affairs ( MCA ) in exercise of powers under Section 212(1) (c) and 219 of the Companies Act, 2013 initiated investigation in the affairs of M/s. Bhushan Steel Ltd( BSL ) and other Companies associated with ex-promoters of BSL. The investigation was carried out by SFIO and they submitted an Investigation Report on 27.06.2019 to Ministry of Corporate Affairs (MCA) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tute of Chartered Accountants of India ( ICAI ) of which the applicant was a member. The accused was never involved in any inducement to creditors or lenders. The Stock Audit was conducted using professional scepticism, as is required for conducting stock audits. The Guidance Notice issued by the Institute of Chartered Accountants of India ( ICAI ) regarding the conduct of Stock Audits categorically provides that conducting Stock Audit does not necessarily guarantee absolute veracity of the stock records or even healthy financial position. It also provides that the Auditors appointed cannot be expected to be aware of the industry scenario precisely. The scope of the auditor s work is limited and is not allowed to delve deep into the technical aspects. Moreover, it is not humanely possible for the Auditor to be conversant with the technical details. Furthermore, the Guidance Note observes that the system of allocation of Stock Audit is not based on a well worked out methodology and the audit should be designed in such a manner that if the inventories are large, an extensive check should be made of the material control system. 10. The accused during the course of investigation had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; reported as [2021 SCCOnline SC 941], Anil Kumar Yadav vs. State (NCT of Delhi)' reported as [(2018) 12 SCC 129], 'Neeru Yadav vs. State of Uttar Pradesh' reported as [(2016) 15 SCC 422], 'Prasanta Kumar Sarkar vs. Ashish Chaterjee and Anr. 'reported as [(2010) 14 SCC 496], 'CBI vs. K. Narayan Rao' reported as [((2012) 9 SCC 512)} 14. The respondent in its reply has explained that the investigations revealed that ex-promoters of BSL namely Neeraj Singal and Brij Bhushan Singal were controlling directly or indirectly 157 Companies including BSL, which were under investigation. The promoters of BSL needed to infuse capital in the Company in order to avail credit facilities from lender Banks for its steel plant, for which purpose they required a level of debt equity, therefore, the ex-promoters assisted by their employees and close associates, through a serious of concerted actions, using a complex web of Companies and financial transactions, siphoned off funds from BSL and Bhushan Energy Limited (BEL) starting from the year 2009-2010 and also used the fund to purchase immovable and movable properties. 15. During the year 2009-2010 and 2010-2011, an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hem to adhere to the sanctioned limit. The Banks reviewed the Drawing Power limits against the credit facilities using financial statements, and the periodic stock statements submitted by the Company to banks, and reports submitted by its appointed Stock Auditor in the subsequent periods/years. 18. The SIT figures in the books of accounts and in the stock statements were found to be inflated. The Stock Auditor did not raise any red flag or alarm in respect of inflated stock position and hereby huge amont of public money of the banks were lost since the banks were made to believe that the actual stock existed. The finances were given to the BSL on the basis of falsified and fabricated documents including the inflated SIT. 19. It is further asserted that during the course of investigation, the bank officers of the Punjab National Bank and the State Bank of India stated that they have relied on Stock Audit Report submitted by the Stock Auditor and the financial statements audited by Statutory Auditor for sanctioning of Drawing Power. It is submitted that the very purpose of conducting of Stock Audit was not fulfilled as the auditor failed to raise the red flag and also failed to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sfied and the accused is not entitled to bail. 23. The reliance has been placed on State of M.P vs. Kajad, (2001) 7 SCC 673 , which is under NDPS Act and contains a similar provision for bail under Section 37 of the NDPS Act. Reliance has also been placed on Bijando Singh v. Md. lbocha (2004) 10 SCC 151 , Union of India Vs. Rattan Mallik@ Habul-(2009) 2 SCC 624Narcotics , Control Bureau v. Kishan Lal (1991) 1 SCC 705, Customs New Delhi v. Ahmadalieva Nodira 2004 3 SCC 549 , Union of India v. Shiv Shanker Kesari - (2007) 7 SCC 798, Satpal Singh v. State of Punjab (2018) 13 SCC 813 24. It is further submitted that the offence committed is economic offence with deliberate design with an eye on personal profit regardless to the consequence to the community and is not entitled to bail in such white collar crimes as has been held in State of Gujarat v. Mohanlal Jitamalji Porwal and others (1987) 2 SCC 364 , Rohit Tandon v. Directorate of Enforcement, (2018) 11 SCC 46 , . The bail application is therefore opposed. 25. Submissions heard and my observations are as under; 26. The petitioner is a Chartered Accountant and a partner in M/s. A.C.Gupta Company, Chartere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isted since last about three years. Moreover, being the Trial Court, it was competent to pass appropriate orders in the circumstances. The bail application was listed for further arguments for 02.06.2022 on which date the application was dismissed. 30. 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. Considering all the circumstances, the petitioner is hereby admitted to bail on submitting a Bail Bond and Surety Bond in the sum ..... X X X X Extracts X X X X X X X X Extracts X X X X
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