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TMI Blog2020 (4) TMI 916X X X X Extracts X X X X X X X X Extracts X X X X ..... hat economic offences constitute a class apart and need to be visited with a different approach in the matter of bail. While granting bail, the court has to keep in mind the nature of accusations, magnitude and gravity of offence and nature of evidence in support of the accusations. The present case involves a scam of huge magnitude involving money of 42000 employees of three Electricity Corporations who had invested it with a hope that they would get good return on it at the time they would need money. Trust has been breached in criminal conspiracy by the accused which has resulted huge loss to the two Trusts resultantly to the employees. The accused is an influential person. The money trail is yet to be completely discovered and, therefore, at this stage, the accused-applicant cannot be released on bail. The trial court in a well considered order has rejected the bail application of the accused applicant - the bail application of the accused-applicant is rejected. - Hon'ble Dinesh Kumar Singh, J. For the Applicant :- Anchal Mishra,Amit Kr. Singh Bhadauriya,Nadeem Murtaza For the Opposite Party :- G.A. ORDER HON'BLE DINESH KUMAR SINGH, J. 1. The present applications unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The First Trustees are: (i) Chairman cum Managing Director, U.P.P.C.L. Chairman of the Trust; (ii) Chairman cum Managing Director of U.P.R.V.U.N.L. Member; and (iii) Chairman cum Managing Director, U.P. Hydro Power Corporation Ltd. , Member. 6. The other Trustees are to hold office on appointment by nomination or otherwise, in the manner as provided in the Uttar Pradesh State Power Sector Employees General Provident Fund Rules, 2000. 7. Clause 7 of the Trust-deed reads as under:- 7. That the trustees of the Board shall hold the Funds and the amounts accruing in Trust for the Members and beneficiaries of the said Funds and shall administer and apply the same in accordance with these presents and the Rules, nevertheless subject to the Provisions of the Employees Provident Funds and Miscellaneous Provisions Act, 1952 and the Schemes framed thereunder, and the Income Tax Act, 1961 and the Income Tax Rules, 1962. 8. For the management of provident fund of the employees joining the U.P.P.C.L. on 14.01.2000 or later, Uttar Pradesh Power Corporation Contributory Provident Fund Rules, 2004 were enacted and made applicable with effect from 1st April, 2004. Uttar Pradesh Power Corporation Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the G.P.F. and C.P.F. funds in the P.N.B. Housing term deposits. In the same series, the G.P.F. and C.P.F. funds were invested as term deposits by Mr. Sudhanshu Dwivedi and Mr. Praveen Kumar Gupta from March, 2017 in a private institution named Deewan Housing Finance Ltd (hereinafter referred to as DHFL ) with the approval of the Managing Director, U.P.P.C.L. the present accusedapplicant without any authority of law in illegal and mala fide manner for personal gains. The present accused-applicant granted approval for investing the amount of two Funds in NBFC with sole purpose of earning illegal brokerage by the accused. 14. It is further alleged that appropriation of funds was not done in accordance with the notification dated 2nd March, 2015 issued by the Ministry of Finance, Government of India. It is further alleged that according to the aforesaid notification, the funds of non Government Provident Fund could have been invested in the unscheduled commercial banks to the maximum limit of 50%. 15. It is alleged that the forged and fabricated minutes of the meeting of the Board of Trustees of the Contributory Provident Fund allegedly held on 24th March, 2017 were prepared to suppl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Fund and Uttar Pradesh Power Corporation Limited Contributory Provident Fund in DHFL, a company incorporated under the Companies Act. Their malafide decision has caused huge loss to these funds to the amount of Rs.2267.9 crores (Principal Amount) besides interest. The investigation has revealed that the investments have been made in the DHFL by the accused for personal gain as they have received the huge amount from DHFL as commission for making such investments. 19. The aforesaid two trusts were created under the Employees Provident Fund and Miscellaneous Provisions Act, 1952 and rules made thereunder as well as the provisions of Indian Trust Act, 1882. 20. Rule 11 of the Uttar Pradesh State Sector Employees General Provident Fund Rules 2000 which provides power and function of the secretary of the Trust reads as under:- (a) The Company Secretary of the UPPCL shall function as the Secretary of the Board. (b) The Secretary will be assisted by such staff for the efficient discharge of his function as the Board may decide. (c) The Director (Finance) of UPPCL and the Secretary of the Board shall jointly operate the accounts of the Fund. 21. Rule 22 provides investment of the Assets ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing investment pattern shall be followed for making investment. (ii) All expenses incurred in respect of, and loss, if any, arising from any investment shall be charged to the Fund. 25. Thus, 2004 Rules are Pari materia provisions with the 2000 rules. 26. Section 20 of the Indian Trust Act, 1982 postulates that the investment shall be made in the security satisfying clause (a) to (d) for investment of Trust money reads as under:- 20. Investment of trust-money. Where the trust property consists of money and cannot be applied immediately or at an early date to the purposes of the trust, the trustee is bound (subject to any direction contained in the instrument of trust) to invest the money on the following securities and on no others: (a) in promissory notes, debentures, stock or other securities 3 [of any 4 [State Government] or] of the 5 [Central Government], or of the United Kingdom of Great Britain and Ireland: 6 [Provided that securities, both the principal whereof and the interest whereon shall have been fully and unconditionally guaranteed by any such Government, shall be deemed, for the purposes of this clause, to be securities of such Government; (b) in bonds, debentures and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... India under any unit scheme made under section 21 of the Unit Trust of India Act, 1963 (52 of 1963); or] (f) on any other security expressly authorized by the instrument of trust, 22[or by the Central Government by the notification in the Official Gazette] or by any rule which the High Court may from time to time prescribe in this behalf: Provided that, where there is a person competent to contract and entitled in possession to receive the income of the trust property for his life, or for any greater estate, no investment on any security mentioned or referred to in clauses (d), (e) and (f) shall be made without his consent in writing. 27. Section 418 of the Companies Act, 1956 provides that the amount of provident fund shall be deposited in the post office, State Bank of India or in a Nationalised Schedule Bank. The aforesaid provision is applied to safeguard the provident fund deposits of the employees. However, it has been alleged that in clear departure from the statutory provisions, the accused-applicant and co-accused for the purpose of earning illicit brokerage, deposited the provident funds amounts in DHFL, a private entity and such investment was completely unsafe and haza ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as its own contributions, if any, to the trustees 2 within fifteen days from the date of collection]; but in other respects, the obligations laid on the company by this section shall devolve on the trustees and shall be discharged by them instead of by the company. 29. Relevant portion of the notification dated 2nd March, 2015 issued by Ministry of Finance is reproduced hereunder:- F. No. 11/14/2013 PR. In partial modification of this Ministry s Notification No. 5(88)/2006-PR dated 14th August, 2008, the pattern of investment to be followed by Non-Government Provident Funds, Superannuation Funds and Gratuity Funds shall be as follows, effective from 1st April, 2015: Category Investment Pattern Percentage amount to be invested (i) Government Securities and Related Investments Government Securities, Other Securities { Securities as defined in section 2(h) of the Securities Contracts (Regulation) Act, 1956} the principal whereof and interest whereon is fully and unconditionally guaranteed by the Central Government or any State Government. The portfolio invested under this sub-category of securities shall not be in excess of 10% of the total portfolio of the fund. Units of Mutual Funds ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f India: Provided that fresh investment in Debt Mutual Funds shall not be more than 5% of the fresh accretions invested in the year and the portfolio invested in them shall not exceed 5% of the total portfolio of the fund at any point in time. The following infrastructure related debt instruments: Listed (or proposed to be listed in case of fresh issue) debt securities issued by body corporates engaged mainly in the business of development or operation and maintenance of infrastructure, or development, construction or finance of low cost housing. Further, this category shall also include securities issued by Indian Railways or any of the body corporates in which it has majority shareholding. This category shall also include securities issued by any Authority of the Government which is not a body corporate and has been formed mainly with the purpose of promoting development of infrastructure It is further clarified that any structural obligation undertaken or letter of comfort issued by the Central Government, Indian Railways or any Authority of the Central Government, for any security issued by a body corporate engaged in the business of infrastructure, which notwithstanding the te ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bt securities covered under category (i) (b) above are excluded from this category (ii) Minimum 35%and upto 45% (iii) Short-term Debt Instruments and Related Investments Money market instruments: Provided that investment in commercial paper issued by body corporates shall be made only in such instruments which have minimum rating of A1+ by at least two credit rating agencies registered with the Securities and Exchange Board of India. Provided further that if commercial paper has been rated by more than two rating agencies, the two lowest of the ratings shall be considered. Provided further that investment in this subcategory in Certificates of Deposit of up to one year duration issued by scheduled commercial banks, will require the bank to satisfy all conditions mentioned in category (ii) (d) above. Units of liquid mutual funds regulated by the Securities and Exchange Board of India. Term Deposit Receipts of up to one year duration issued by such scheduled commercial banks which satisfy all conditions mentioned in category (ii) (d)above. Upto 5% (iv) Equities and Related Investments Shares of body corporates listed on Bombay Stock Exchange (BSE) or National Stock Exchange (NSE), wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tity floating the trust. Provided further that if the securities/entities have been rated by more than two rating agencies, the two lowest of the ratings shall be considered. Upto 5% 30. Heard Mr. J.N. Mathur, Senior Advocate assisted by Mr. Nadeem Murtaza and Amit Singh Bhadauriya, learned counsels for the applicant, Mr. V.K Shahi, learned Additional Advocate General and Mr. Anurag Verma, learned A.G.A. for the State. 31. The accused-applicant was appointed as Managing Director of U.P.P.C.L. on 31.12.2012 and he worked in that capacity till 23rd March, 2017 as per the affidavit filed in support of the bail application. 32. It is submitted that on 17.12.2016, the then Secretary Trust, Mr. P.K. Gupta, the then Director (Finance), Mr. Sudhanshu Dwivedi who are authorized persons for financial matters as per the Trust-deed and as per resolution dated 21.04.2014, came to the office of the accused along with the prepared resolution to invest the amount in P.N.B. Housing Finance Ltd. They apprised the accused-applicant that quotations were taken from nationalized banks which were providing interest rates between 5% to 6% and the employees were to be paid @ 8% interest, therefore, a decis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hi, learned Additional Advocate General has submitted that the management and investment of the GPF/PPF amount of all the 42000 employees of the Power Corporation was required to be carried out in conformity with GPF Rules, 2000, CPF Rules, 2004 and the Gazette notification of Government of India dated 2nd March, 2015. These rules specifically provide that the investment is to be made in accordance with the rules and the notifications issued by the Government of India. He, therefore, has submitted that there is no substance in the submission of the learned counsel for the accused-applicant that the Government of India notification dated 2nd March, 2015 has no application in respect of the two Trusts whose money was invested in DHFL. He has further submitted that the notification dated 2nd March, 2015, spells out in detail the investment patterns, which is required to be followed and adhered to in making investments of CPF amounts. He has further submitted that investment in DHFL has been made in blatant violation of the guidelines, contained in the notification dated 2nd March, 2015 as well as GPF Rules, 2000 and CPF Rules 2004 as well as provisions of Indian Trust Act and Indian C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appended the signature on the said date. If he had tendered his resignation on 17.03.2017 and his resignation was accepted on 23.03.2017, it is strange that how he could have been present in the alleged meeting of the Board held on 24.03.2017. 38. Thus, it is submitted that only the Board of Trustees comprising 10 members was empowered to take appropriate decisions with regard to investment of CPF and GPF amounts. However, the accused-applicant being Managing Director, P.K. Gupta, (Secretary,Trust) and Mr. Sudhanshu Dwivedi, Director (Finance) of U.P.P.C.L. and trustee in furtherance of criminal conspiracy and to earn illicit brokerage amount, without convening any meeting of the Board of trustees, carried out authorized and illegal investments of the provident fund amounts in clear breach and violation of the Rules and provisions of Indian Trust Act and Companies Act, Provident Funds and Miscellaneous Provisions Act, 1952 and Government of India notifications. 39. It has been further submitted that the amount of brokerage was transmitted from DHFL to 14 companies including Alpine Associates, a company run and operated by one Ashish Chaudhari, a close confidant of accused, Abhinav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the matter of bail. The economic offences having deep-rooted conspiracies and involving huge loss of public funds need to be viewed seriously and considered as grave offences affecting the economy of the country as a whole and thereby posing serious threat to the financial health of the country. 35. Economic offences constitute a class apart and need to be visited with a different approach in the matter of bail. The economic offences having deep-rooted conspiracies and involving huge loss of public funds need to be viewed seriously and considered as grave offences affecting the economy of the country as a whole and thereby posing serious threat to the financial health of the country. 45. The Supreme Court in the case of Nimmagadda Prasad vs CBI: (2013) 7 SCC 466 has observed that the alarming rise in white collar crimes has affected the fibre of country's economic structure. Economic offences have serious repercussions on the development of the country as a whole. Economic offences constitute a class apart and a different approach has to be adopted in the matter of bail. Para 23 to 25 of the aforesaid judgment are extracted hereinbelow:- 23. Unfortunately, in the last few year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c funds needs to be viewed seriously and considered as a grave offence affecting the economy of the country as a whole and thereby posing serious threat to the financial health of the country. 46. In judgment rendered in the case of State of Bihar Vs. Amit Kumar (2017) 13 SCC 751, it has been held that while considering the bail involving socio-economic offences stringent parameters should be applied. Paras 8-9 of the said judgment are extracted hereunder:- 8. A bare reading of the order impugned discloses that the High Court has not given any reasoning while granting bail. In a mechanical way, the High Court granted bail more on the fact that the accused is already in custody for a long time. When the seriousness of the offence is such the mere fact that he was in jail for however long time should not be the concern of the courts. We are not able to appreciate such a casual approach while granting bail in a case which has the effect of undermining the trust of people in the integrity of the education system in the State of Bihar. 9. We are conscious of the fact that the accused is charged with economic offences of huge magnitude and is alleged to be the kingpin/ringleader. Further ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anised Crime Act, 1999. It has been expounded that the Court at the stage of considering the application for grant of bail, shall consider the question from the angle as to whether the accused was possessed of the requisite mens rea. The Court is not required to record a positive finding that the accused had not committed an offence under the Act. The Court ought to maintain a delicate balance between a judgment of acquittal and conviction and an order granting bail much before commencement of trial. The duty of the Court at this stage is not to weigh the evidence meticulously but to arrive at a finding on the basis of broad probabilities. Further, the Court is required to record a finding as to the possibility of the accused committing a crime which is an offence under the Act after grant of bail. 48. The Supreme Court in its judgment in Serious Fraud Investigation Office Vs. Nitin Johri and another, (2019) 9 SCC 165, while considering the factors to be taken into account while considering the bail involving serious economic offences in para 24- 27 has held as under:- 24. At this juncture, it must be noted that even as per Section 212(7) of the Companies Act, the limitation under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh Court, after referring to certain portions of the complaint to ascertain the alleged role of Respondent 1, came to the conclusion that the role attributed to him was merely that of colluding with the co-accused promoters in the commission of the offence in question. The Court referred to the principles governing the grant of bail as laid down by this Court in Ranjitsing Brahmajeetsing Sharma v. State of Maharashtra [Ranjitsing Brahmajeetsing Sharma v. State of Maharashtra, (2005) 5 SCC 294 : 2005 SCC (Cri) 1057] , which discusses the effect of the twin mandatory conditions pertaining to the grant of bail for offences under the Maharashtra Control of Organised Crime Act, 1999 as laid down in Section 21(4) thereof, similar to the conditions embodied in Section 212(6)(ii) of the Companies Act. However, the High Court went on to grant bail to Respondent 1 by observing that bail was justified on the broad probabilities of the case. 27. In our considered opinion, this vague observation demonstrates non-application of mind on the part of the Court even under Section 439 CrPC, even if we keep aside the question of satisfaction of the mandatory requirements under Section 212(6)(ii) of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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