The Delhi High Court ruled that the twin conditions contained in section 212(6) of the 2013 Act are in addition to the usual and ordinary criteria for deciding a bail petition as contained in section 439 Cr.P.C.
Facts
M/s. Educomp Solutions Ltd. was incorporated in 1994. One Shantanu Prakash was its managing director and his father Jagdish Prakash was a whole-time director. In 2013 ESL faced a severe liquidity crunch for various reasons and had to therefore opt for Corporate Debt Restructuring vide Master Restructuring Agreement signed with the consortium of lenders (banks) led by the State Bank of Patiala (which bank has later merged with State Bank of India).
Vide order the Ministry of Corporate Affairs assigned the investigation into the affairs of ESL to the SFIO. After commencement of investigation against ESL, approval was also obtained for investigation into the affairs of two other companies M/s. Educomp Infrastructure and School Management Ltd and M/s. Edu Smart Services Pvt. Ltd., both of which are subsidiaries of ESL.
After a detailed investigation in the matter, the SFIO has filed a prosecution complaint under section 439(2)/436/212 of the 2013 Act, which is the equivalent of a chargesheet, arraigning 70 persons as accused. Of the accused, 15 are corporate entities and 55 are various persons alleged to have been associated with ESL and other subsidiary companies in various ways.
Submissions
Senior Advocate Hariharan and Advocate Mir appearing for the petitioner, submitted that the main promoters of the ESL including the MD/CEO Shantanu Prakash, Whole-Time Director/Chairman Jagdish Prakash and Whole-Time Director Vinod Kumar Dandona were all granted interim protection by a Coordinate Bench of the court.
He submitted that the above-named main promoters/key managerial personnel, who are the main beneficiaries of the alleged fraud as per SFIO‟s own case, along with 53 other individuals who have been assigned a greater role than the petitioner by the SFIO, were all chargesheeted without arrest.
However, the SFIO chose to arrest only the petitioner and one co-accused Dr. Bindu Rana, who (latter) was subsequently admitted to bail by a Co-ordinate Bench of this court.
Advocate Ajay Digpaul, CGSC appearing for the SFIO n that Shantanu Prakash had invested directly as well as through A.P Eduvision, money as promoter’s contribution in succeeding years starting FY 2013-14 to FY 2016-17, and during this period the petitioner was the CFO of ESL. Furthermore, the statement of Pramod Thatoi suggests that the petitioner was looking after the finances of ESSPL which was not a subsidiary of ESL.
He argued that as regards the charge of siphoning-off funds of ESL, EISML, and ESSPL into the accounts of the close associates of Shantanu Prakash, the SFIO submits that though the petitioner says that the amount of Rs 5.50 crore received by him was a loan, in fact this amount was siphoned-off from ESL and was received by the petitioner from Group-I Companies.
Decision
The single judge bench of Justice Anup Jairam Bhambhani said that since in the course of deciding a bail petition, this court is not required to render any finding in relation to the allegations in the complaint and is required to decide the matter on broad probabilities, the court refrains from deliberating further upon the facts as propounded in the complaint.
The bench observed that though it is alleged that the Petitioner was advising ESL in his professional capacity as a Chartered Accountant/financial consultant even before that, at that time the petitioner was clearly not an officer of the company and could not, therefore, have been a key managerial personnel or an officer in default.
It was noted by the court that the investigation report rendered by M/s Grant Thornton, which conducted a forensic audit of the financial affairs of ESL for the period from 01.04.2012 to 31.03.2016, also did not find anything amiss, in particular, relating to siphoning-off funds and roundtripping them as promoter contribution.
“In the circumstances, for the limited purpose of the bail plea, this court is satisfied that there are reasonable grounds for believing that the petitioner is not guilty of the offence charged under the 2013 Act. Furthermore, considering that the investigation is complete and the prosecution complaint has been filed before the learned Special Judge, this court is also satisfied that the petitioner is not likely to commit any offence while on bail” the court said.
Case title: Ashish Mittal V/S Serious Fraud Investigation Office
Citation: Bail Appln. 251/2023 & Crl.M.(Bail) 115/2023, Crl.M.A. 2074/2023, Crl.M.A. 2470/2023