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TMI Blog2025 (2) TMI 144X X X X Extracts X X X X X X X X Extracts X X X X ..... ndent No. 3 (SEBI): Mr. Rafique Dada, Senior Advocate a/w Mr. Bhushan Shah, Mr. Akash Jain a/w Mr. Abhishek Nair i/b Mr. Mansukhlal & Co.,. For the Respondent No. 4 - CBI: Mr. Kuldeep S. Patil, Special Public Prosecutor a/w Mr. Dhavalsinh Patil, Mr. Ashish Kumar Srivastava and Ms. Sampada S. Patil,. For the Respondent No. 5 - SFIO: Mr. H.S. Venegavkar a/w Mr. Aayush Kedia a/w Ms. Divya Gontia i/b Mr. Pradeep Yadav,. For the Applicants in Interim Application: Mr. Ravi Kadam, Senior Advocate a/w Mr. Vikram Nankani, Senior Advocate a/w Mr. Vineet Naik, Senior Advocate a/w Mr. Ameet Naik, Mr. Abhishek Kale, Ms. Vaibhavi Bhure, Mr. Aditya Ajgaonkar, Mr. Harish Khedkar, Mr. Vivek Dwivedi, Mr. Nevil Chopra, Ms. Antara Kulkarni and Ms. Rebecca Singh i/b M/s. Naik Naik & Co., for Applicants in Interim Application [Stamp] No. 24376 of 2024 and Interim Application [Stamp] No. 24377 of 2024. For the Applicant in Interim Application [Stamp] No. 24444 of 2024: Mr. Pranav Badheka a/w Mr. Rajendra Barot, Mr. Dhirajkumar Totala a/w Ms. Vaibhavi Bhure, Mr. Vivek Shetty, Ms. Harsha Uppal, Mr. Prince Todi, Mr. Harsh Sethi i/b AZB & Partners,. Mr. Nikhit Mishra Joint C.P. a/w Mr. Sangramsinh Nisha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of approximately Rs. 76 Crores availed as loan from a consortium of six banks wherein Union Bank of India was the lead Bank. After filing the aforesaid two PILs' sometime in the month of April, 2009, the banks have collectively recovered approximately Rs. 14,00,00,000/- (Rs. Fourteen Crores only) from M/s. Autoriders Finance Limited. This Court, by a common order dated 9th July, 2009 disposed of the aforesaid two PILs' by entrusting the investigation of the subject matter therein to the State C.I.D, Pune, Maharashtra State under the overall supervision of Additional Director General of Police, C.I.D, Maharashtra State, Pune. 4. The present petition is filed seeking limited directions, inter alia, issuance of an appropriate writ of mandamus directing the respondent Nos.1 and 2 to jointly act upon the complaint dated 22nd December, 2021 (First EOW complaint) and the complaint dated 3rd April, 2023 (Second EOW complaint) filed by the petitioner wherein he has prayed for conducting preliminary investigation/inquiry into the fraudulent activities undertaken by one Anand Jaikumar Jain-the Director/Promoter of Jai Corporation Ltd (Jai Corp Ltd) which includes; (i) misappropriation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lic money for his personal gain by collecting, collating and analyzing voluminous data over a span of eleven months. Having analyzed the aforesaid, the petitioner filed the first EOW complaint with respondent No. 1 and respondent No. 2 disclosing various offences committed by Jai Corp Ltd and its subsidiary Companies at the behest of Anand Jaikumar Jain which attract the provisions of the PMLA and IPC. The respondent No. 1 vide communication dated 25th January, 2021 replied to the First EOW Complaint stating therein that the contents of the complaint pertain to jurisdiction of SEBI and hence, the complaint was forwarded to SEBI for necessary action. No response was received from SEBI with reference to his first EOW complaint. 7. The petitioner contends that in 31st October, 2022, SEBI passed an order (UIVCF Winding Up Order) in the matter of Urban Infrastructure Venture Capital Fund (UIVCF) (registered with SEBI as a Venture Capital Fund) directing that UIVCF be wound up in the terms, more particularly, contained therein. Admittedly, Jai Corp Ltd, being a company promoted by Anand Jaikumar Jain and his related entities, own a 100% stake in Urban Infrastructure Venture Capital Limi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ased in tax havens, diversion of funds by way of buy back of equity shares, round tripping of funds for personal gain, making unsecured advances to sister/subsidiary concerns, recording fictitious entries in books of accounts and writing off projects. As such, the first EOW complaint and the second EOW complaint disclose commission of cognizable offences under the IPC and the PMLA which is within the exclusive jurisdiction of respondent No. 1 and 2 to investigate and take necessary action in pursuance thereof. 11. The petitioner has enclosed the following documents; (a) A list of individuals who are associated with Anand Jaikumar Jain by virtue of being Directors in the sister/subsidiary concerns, annexed as "Exhibit L" to this petition; (b) A list of subsidiary companies of Jai Corp Ltd incorporated in India having played a role in the entire conspiracy to defraud investors and launder public money, annexed as "Exhibit M" to this petition; (c) A list of subsidiary companies of Jai Corp Ltd incorporated abroad having played a role in the entire conspiracy to defraud investors and launder public money, annexed as "Exhibit N" to this petition; 12. The petitioner had given chr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... EBI has imposed a penalty of Rs.20 Crores and Rs.10 Crores on Navi Mumbai SEZ and Mumbai SEZ respectively, for aiding and abetting in the fraud while stating in Paragraph 87 that, "Noticee No. 3 and Noticee No. 4 actively aided and abetted RIL by providing funds to Vinamra, which was ultimately used in providing margin money to stock brokers for taking the short positions by the Agents of RIL in RPL futures for earning illegitimate profits from the said positions." (ix) SEBI has held in Paragraph 82 that Vinamra Traders was incorporated on 11th July 2007 and immediately thereafter, on 4th August, 2007 and 22nd September, 2007, Navi Mumbai SEZ and Mumbai SEZ entered into unsecured facility agreements (ICDRs) with Vinamra Traders for staggering amounts of Rs.2775 Crores and Rs.550 Crores respectively days within it's incorporation. The relevant excerpt of Paragraph 82 is being reproduced hereinbelow; "Therefore, I note that both Noticee No. 3 and Noticee No. 4 have advanced unsecured loans to vinamra at concessional rates of interest, despite their claims that they are not connected with Vinamra. However, I am of the view that placing of ICDs at such a low interest rate with a ne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1.1994 01.36 00.93 00.43 Hill Rock Construction Ltd 13.10.2005 10.42 00.58 09.84 Hari Darshan Realty Ltd 14.10.2005 07.86 01.06 06.80 Vasant Bahar Realty Ltd 18.10.2005 00.25 00.80 01.14 Welldone Real Estate Ltd 21.02.2006 04.72 00.12 04.60 Hind Agri Properties Ltd 04.12.2006 09.44 09.44 Yug Developers Ltd 03.02.2007 11.39 01.07 10.32 Swar Land Developers Ltd 05.03.2007 31.00 00.38 30.62 Swastik Land Developers Ltd 05.03.2007 08.76 08.76 Krupa Land Ltd 06.08.2007 23.60 04.22 19.38 Novelty Realty & Developers Ltd 20.08.2007 12.23 09.53 02.70 Iconic Realtors Ltd 20.08.2007 119.41 30.35 89.06 Krupa Realtors Ltd 21.08.2007 08.26 00.04 08.22 Ekdant Realty & Developers Ltd 21.08.2007 16.80 14.00 02.80 Rainbow Infraprojects Ltd 27.09.2007 15.00 11.50 03.50 Rudradev Developers Ltd 01.10.2007 11.74 10.00 01.74 Jailaxmi Realty & Developers Ltd. 09.01.2008 19.42 17.31 02.11 Ashok Realty & Developers Ltd 09.10.2008 17.36 06.96 10.40 Total 329 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lopers Ltd 02.07 01.77 00.288 Krupa Realtors Ltd 01.33 01.04 00.29 Ekdant Realty & Developers Ltd 00.60 00.48 00.12 Yug Developers Ltd 00.48 00.374 00.1159 Welldone Real Estate Ltd 00.329 00.255 00.073 Vasant Bahar Realty Ltd 00.24 00.10 00.14 Novelty Realty & Developers Ltd 00.23 00.15 00.08 Krupa Land Ltd 00.13 00.07 00.06 TOTAL 47.259 27.529 19.73 17. The petitioner has contended about fraud through Real Estate Private Funds in India by Jai Corp Ltd being a company promoted by Anand Jaikumar Jain and his related entities who own a 100% stake in UIVCL and UITL. Between May, 2006 and June, 2008, an amount of Rs.2423 Crores was mobilized from the public at large for and on behalf of UIOF. An amount of Rs.555 Crores out of 2423 Crores was diverted to four Real Estate Companies, which are depicted in the chart below; Name of Company Amounts/ Inventories of UIOF diverted to the Company in (Rs. Crore) Amounts spent on purchase of benami land/development rights and construction thereon in (Rs. Crore) Loss to Investors/Contributors of UIOF in (Rs. Crore) Vidhant Reality Pvt Ltd 72.92 +6.85 [A] 47.73 79.77 Urban Reality Pvt Ltd 59.27 65.27 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Urban Infrastructure Opportunities Fund. d) A total of 1060 Crores is still to be paid to Investors of UIOF as on 30 June 2021. (ix) Advisory and Management Fee of Rs.340.035 Crores earned by Anand Jaikumar Jain through UIVCL is demonstrated in the table hereinbelow; Financial Year Name of Entity paying Advisory/Management Fees Amount in (Crore Rupees) 2007-08 Urban Infrastructure Opportunities Fund-India 00.07 2008-09 Urban Infrastructure Trustees Ltd - India & Urban Infrastructure Opportunities Fund - India 55.00 +00.10 2009-10 Urban Infrastructure Trustees Ltd - India & Urban Infrastructure Opportunities Fund - India 54.96 +00.10 2010-11 Urban Infrastructure Trustees Ltd - India & Urban Infrastructure Opportunities Fund - India 53.00 +00.10 2011-12 Urban Infrastructure Trustees Ltd - India & Urban Infrastructure Opportunities Fund - India 50.34 + 00.09 2012-13 Urban Infrastructure Trustees Ltd - India & Urban Infrastructure Opportunities Fund - India 51.36+00.085 2013-14 Urban Infrastructure Trustees Ltd - India & Urban Infrastructure Opportunities Fund - India 29.79+00.08 2014-15 Urban Infrastructure Trustees Ltd - India & Urban Infrastructure O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Thus, due to the unlawful elongation of the Fund's tenure, SEBI conducted a forensic inspection of UIVCF's books, which was completed in February 2021, for the period 1 April 2019 till 31 March 2020 ("the Inspection"). The UIVCF Winding Up Order inter alia recorded that "By not complying with the terms specified in PPM in respect of tenure of the scheme, not winding up of the Fund within the time specified in PPM, the Fund has violated provisions of Regulation 16 (1) (a) and 23 (1 (a) of VCF regulations". (xiii) The Petitioner has also filed a Complaint with SEBI on 25 March 2023, whereby the various facts pertaining to the fraud perpetuated by Anand Jaikumar Jain vis-a-vis winding up of the Fund were demonstrated. The petitioner craved leave to refer to and rely upon a copy of the Complaint dated 25 March 2023 filed with SEBI. C. FORMATION OF REAL ESTATE FUNDS IN MAURITIUS AND JERSEY - CHANNEL INSLANDS I. Urban Infrastructure Capital Advisors-Mauritius ("UICA Mauritius") is a private equity company registered in Mauritius. UICA Mauritius has made a filing before the competent authorities in the USA on 19 March 2019 which reveals that: (i) UICA Mauritius is a real estate pri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... subsidiary of Jai Realty. Currently, Jai Realty has been merged with the Jai Corp Ltd on 21 August 2019. Hence, Belle Terre is a 100% subsidiary of Jai Corp Ltd. (ii) Belle Terre is the parent company of (i) Searock Developers FZC (Sharjah UAE) ("Searock Sharjah") and (ii) Oasis Holding FZC (Sharjah UAE) ("Oasis Sharjah"). Hence, Belle Terre, Searock Sharjah and Oasis Sharjah are 100% subsidiaries of Jai Corp Ltd. (iii) Between 4 June 2008 and 31 March 2020, Belle Terre transferred USD 1,56,42,554 to Searock Sharjah and USD 68,87,929 to Oasis Sharjah, for purchase of property in Sharjah. (iv) Searock Sharjah and Oasis Sharjah collectively utilised USD 86,00,803 i.e approximately Rs.36,98,34,529/-, for purchase of land on a 50 year lease. (v) Upto March 2020, a sum of USD 88,65,335 which is equivalent to approximately Rs. 53,19,20,100/- has been utilised by Searock Sharjah and Oasis Sharjah for construction of labour accommodation camps in Sharjah, UAE and it seems that a total amount of Rs. 90,17,54,629/- has been spent collectively on construction of these camps. (vi) Importantly, neither Searock Sharjah nor Oasis Sharjah are involved in any business activities which re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... invited our attention to a communication dated 25.01.2022 addressed to the Chairman, SEBI, by the Assistant Commissioner of Police, Economic Offences Wing, Mumbai. Learned Senior Counsel would submit that the copy of the said communication has also been forwarded to the petitioner, however, the petitioner is unaware with regard to steps, if any, being taken by the respondents' in respect of the allegations levelled by the petitioner as well as in respect of the complaints dated 22.12.2021 and 03.04.2023. 3. Looking to the enormity of the alleged fraud / misappropriation involved in this case, learned Senior Counsel seeks directions to the respondent nos. 1 and 2 to place on record a report in that respect. 4. Learned Special P.P. and the learned APP seek two weeks time to place on record an inquiry report or investigation, if any, carried out by them. 5. Meanwhile, liberty to the petitioner to implead the SEBI as a party respondent. Necessary amendment shall be carried out within one week. After amending the petition, a notice be issued to the newly added respondent, which shall be made returnable on the next date. 6. List on 7th October, 2024" Order dated 7th October, 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of rupees, span multiple jurisdictions, and implicate nationalized banks, a Mauritius-based private equity fund, and trans-boarder transactions with the USA, Australia, and the UAE. Therefore, these matters carry substantial financial implications at both national and international levels. In the best interest of conducting a through inquiry /investigation, we are forwarding this matter to your esteemed office for appropriate action." 3. In view of the aforesaid, learned Senior Counsel for the petitioner seeks leave to amend to implead the CBI and SFIO as party respondents. Leave granted. Amendment to be carried out forthwith, during the course of the day. 4. On amendment being carried out, issue notice to the newly added respondents i.e. the Joint Director, CBI, EOB, Mumbai as well as to the Joint Director, SFIO, Regional Office, Mumbai, returnable on 25th November, 2024. In addition to Court notice, learned Senior Counsel for the petitioner to ensure that the private notice is served on the newly added respondents and affidavit of service is filed in the Registry before the next date. 5. Stand over to 25th November, 2024. To be listed under the caption 'Due Admission'. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the petitioner to implead State Crime Investigation Department (CID) as party respondent. 23. The Deputy Commissioner of Police, EOW, Mumbai vide his communication dated 7th November, 2024 forwarded the complaint of the petitioner to the Joint Director Central Bureau of Investigation EOB, Mumbai as well as to the Joint Director, Serious Fraud Investigation Office, Regional Office, Mumbai by informing both the Authorities as regards; (a) Misappropriation of public funds for personal enrichment; (b) Defrauding investors; (c) Round-tripping of funds through shell companies to evade taxes; (d) Misappropriation of public funds by granting unsecured advances to subsidiary companies; (e) Creation of dubious and fictitious invoices. 24. Admittedly, detailed statement of the petitioner came to be recorded by the EOW on 28th October, 2024. Looking to the enormity of the offences and the fact that it involves thousands of crores of rupees, spans multiple jurisdictions and implicate nationalized Banks as well as foreign entities based in Mauritius, USA, Australia and UAE involving substantial financial implications, at both, national and international levels, the D.C.P, EOW, Mumbai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us based private equity fund plus trans-border transactions with USA, Australia and UAE, it is in the best interests of investigation that the matter be handled by CBI, SFIO. This is the noting by the Joint Commissioner of Police EOW on 4th November, 2024. The reluctance to inquire/investigate was writ large during the hearing of the petition. 27. Looking to the conduct of both the EOW and CBI, we as Constitutional Court cannot remain a mute spectator when it becomes apparent that the Agencies are passing the buck from each other. We must clarify, that transferring the investigation to SIT does not mean that we have ruled on the guilt of the person/persons named as that is not the scope of the petition. In the case of State of West Bengal and others Vs. Committee for Protection of Democratic Rights and others (2010) 3 SCC 571, an issue was referred to the opinion of the Constitution Bench as to whether in exercise of jurisdiction under Article 226 of the Constitution of India, the High Court could direct the CBI established under Delhi Special Police Establishment Act, 1946 to investigate into a cognizable offence alleged to have taken place within the territorial jurisdiction of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laid down the following legal position. In exercise of its jurisdiction under Article 226 of the Constitution of India has power to direct the CBI to investigate a cognizable offence alleged to have been committed within the territory of a State without the consent of that State and such direction will not entrench upon the federal structure of the Constitution. The direction to transfer the investigation to the CBI also does not violate the doctrine of separation of power. The Superior Courts are the protectors of civil liberties and have not only the power and jurisdiction but also an obligation to protect the fundamental rights, more particularly those guaranteed under Article 21 of the Constitution. There are however certain self-imposed limitations on the exercise of these Constitutional powers, but no inflexible guidelines can be laid down to decide whether to transfer the case or not. The power of transfer should not be exercised as a matter of routine or merely because a party has leveled some allegations against the local police. The power to transfer the investigation can be used when it becomes necessary to provide credibility and instil confidence in the investigation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alt with by the Apex Court in two decisions rendered in the year 2016. The first being Pooja Pal Vs. Union of India and others (2016) 3 SCC 135 and second in Dharam Pal Vs State of Haryana and others (2016) 4 SCC 160. Both these decisions reiterated a duty on the Superior Court to ensure complete justice. The decision took a review of the earlier law on the subject. 22. The gist of the legal position expounded in the decision of Pooja Pal and Dharam Pal, which will serve as a guideline in the present case, is as follows. Crimes affect the entire society and thus the interest of the society in the investigation is not to be entirely ignored. The society at large, the victims or their family members and relatives have a right to be dealt with fairly in a criminal trial. Denial of fair investigation thereof is as much injustice as to the victim and the society as to the accused. A victim cannot be treated as an alien or a total stranger in the criminal trial. With the passage of time, there is a greater emphasis on victimology, and the crime has to be viewed from the perspective of the criminal as well as the victim when judged in the social context. The justice system will acquire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n. Paramount consideration for directing the transfer of investigation is the advancement of the cause of justice and to instil confidence in the mind of the victims as well as the public. If the investigation is neither effective nor purposeful or fair, it would be the duty of the courts, if considered necessary, to order further investigation or reinvestigation to prevent the miscarriage of justice". 29. Investigating Agency will do well keeping in mind the words of the Supreme Court in the case of Dharam Pal (supra); "2. Cry for fair trial by the accused as well as by the victim sometimes remains in the singular and individualistic realm, may be due to the perception gatherable from the facts that there is an attempt to contest on the plinth of fairness being provoked by some kind of vengeance or singularity of "affected purpose"; but, irrefutably a pronounced and pregnant one, there are occasions when the individual cry is not guided by any kind of revengeful attitude or anger or venom, but by the distressing disappointment faced by the grieved person in getting his voice heard in proper perspective by the authorities who are in charge of conducting investigation and the fru ..... X X X X Extracts X X X X X X X X Extracts X X X X
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