Ishoo Narang and 3 Others v. The State of Telangana and Another
Court: High Court for State of Telangana
Bench: K.LAKSHMAN
Judgment date:
Case summary
High Court for State of Telangana judgment dated 2020-12-22. Ishoo Narang and 3 Others v. The State of Telangana and Another. Read the judgment and case...
Judgment text
IN THE HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD TUESDAY, THE TWENTY SECOND DAY OF DECEMBER TWO THOUSAND AND TWENTY PRESENT THE HONOURABLE SRI JUSTICE K. LAKSHMAN CRIMINAL PETITION NO: 3966 398 2 ANO 4272 0F 2020 I CRIMINAL PETITION NO: 3966 OF 2020 Betwee n: 1. lshoo Narang, S/o. V. S. Narang, aged about 50 years, Managing Director, M/s. Kyori Oremin Limited, Hyderabad, R/o. Flat No. A-204, My Home Abhra, Madhapur, Hyderabad,4th Floor. 500081 and also registered office at Flat No 101, GRC Residency, Khanamet, Madhapur, Hyderabad. 500081. 2. Chandulal Patel, S/o. Harjivan Patel, aged about 53 years, Non-Executive Director, tr//s. Kyori Oremin Limited, Hyderabad, registered office at Flat No 101, GRC Residency, Khanamet, Madhapur, Hyderabad. 500081. 3. Rudra Raju Srinivas Shah, S/o. R. V. Raju, aged about 51 years, Non-Executive Director, M/s. Kyori Oremin Limited, registered office at Flat No 101, GRC Residency, Khanamet, Madhapur, Hyderabad. 500081. 4. IM/s.
Kyori Oremin Limited, Hyderabad, represented by its Managing Director, lshoo Narang, S/o. V. S. Narang, registered office at Flat No 101 , GRC Residency, Khanamet, Madhapur, Hyderabad. 500081. ... Petitioner/Accused No. 1 to 4 AND '1 . The State of Telangana, represented by its lnspector of Police, CBI/BS and FC, Bangalore (through the Special Public Prosecutor for CBI and ACB Cases, High Court for the State of Telangana, at Hyderabad). 2. Central Bank of lndia, represented by its Assistant General Manager, Corporate Finance Branch, Bank Street, Koti, Hyderabad - 500 095. ... Respondents/Complainants Petition under Section 482 of Cr. P. C praying that in the circumstances stated in the Memorandum of Grounds of Criminal Petition, the High Court may be pleased to quash the compliant and investigation in FIR No. RC-11(E) of 2018 of CBl, BS and FC, Bangalore in so far as the petitioners are concerned. l. A. NO: 2 OF 2020 Petition under Section 482 of Cr. P.
C praying that in the circumstances stated in the Memorandum of Grounds of Criminal Petition, the High Court may be pleased to grant stay of all further proceedings including arrest and direction for production of documents which are in the custody of the petitioners in connection with/concerning FIR No. RC-11(E) of 2018 of CBl, BS and FC, Bangalore, on the compliant of the 2nd respondent, pending disposal of the quash petition. l. A. NO: 3 OF 2020 Between: The State of Telangana, represented by its lnspector of Police, CBI/BS and FC, Bangalore (through the Special Public Prosecutor for CBI and ACB Cases, High Court for the State of Telangana, at Hyderabad). ... Petitioner/ComplainanURespondent No. 2 AND '1 . lshoo Narang, S/o. V. S. Narang, aged about 50 years, Managing Director, IVI/s. Kyori Oremin Limited, Hyderabad, R/o. Flat No. 4-204, My Home Abhra, Madhapur, Hyderabad, 4th Floor. 500081 and also registered office at Flat No 101 , GRC Residency, Khanamet, [Vladhapur, Hyderabad.
500081. 2. Chandulal Patel, S/o. Harjivan Patel, aged about 53 years, Non-Executive Director, M/s. Kyori Oremin Limited, Hyderabad, registered office at Flat No 101, GRC Residency, Khanamet, Madhapur, Hyderabad. 500081. 3. Rudra Raju Srinivas Shah, S/o. R. V. Raju, aged about 51 years, Non-Executive Director, M/s. Kyori Oremin Limited, registered office at Flat No 101 , GRC Residency, Khanamet, Madhapur, Hyderabad. 500081 . 4. M/s. Kyori Oremin Limited, Hyderabad, represented by its Managing Director, '101 lshoo Narang, S/o. V. S. Narang, registered office at Flat No , GRC Residency, Khanamet, Madhapur, Hyderabad. 500081. ... Petitioners/Accused/Respondents 5. Central Bank of lndia, represented by its Assistant General Manager, Corporate Finance Branch, Bank Street, Koti, Hyderabad - 500 095 ... Respondent-1 /Respondent Petition under Section 482 of Cr. P.
C praying that in the circumstances stated in the Memorandum of Grounds of Criminal Petition, the High Court may be pleased to vacate the stay granted on 1510912020 in CRLP. No. 3966 o'f 2O2O, in the interest of J ustice. CRIMINAL PETITION NO: 3982 OF 2020 Between: 1. lshoo Narang, S/o. V. S. Narang, aged about 50 years, Managing Director, M/s. Kyori Oremin Limited, Hyderabad, Rl/o. Flat No. A-204, My Home Abhra, Madhapur, Hyderabad, 500081 and also registered office at Flat No 101 , GRC Residency, Khanamet, Madhapur, Hyderabad. 500081 . 2. Chandulal Patel, S/o. Harjivan Patel, aged about 53 years, Non-Executive Director, M/s. Kyori Oremin Limited, Hyderabad, registered office at Flat No 101, GRC Residency, Khanamet, Madhapur, Hyderabad. 500081. 3. Rudra Raju Srinivas Shah, S/o. R. V. Raju, aged about 5'1 years, Nor-Executive Director, Ivl/s. Kyori Oremin Limited, Hyderabad, registered office at Flat No 101 , GRC Residency, Khanamet, Madhapur, Hyderabad. 500081. 4. M/s.
Kyori Oremin Limited, Hyderabad, represented by its Managing Dire_ct_or, lshoo Narang, Sio. V. S. Narang. registered office at Flat No 101 , GRC Residency, Khanamet, Madhapur, Hyderabad. 500081 . ... Petitioner/Accused No. 1 to 4 AND 1 The State of Telangana, represented by its lnspector of Police, CBI/ACB' Hyderabad (through the Special Public Prosecutor for CBI and ACB Cases, High Court for the State of Telangana at Hyderabad). -j- 2. Bank of lvlaharashtra, represented by its Deputy General Manager and Zonal lvlanager, Stressed Asset lvlanagement Branch, H. No. 4-3-448 to 460and 465 to 468, First Floor, Vinoothna Pittle's [\,4ajesty, Gopal Bagh, Near Bank Street, Koti, Hyderabad. ... Respondents/Complainants Petition under Section 482 oI Cr. P. C praying that in the circumstances stated in the lMemorandum of Grounds of Criminal Petition, the High Court may be pleased to quash the complaint and investigation in FIR No.
RC03520A0002, CBI/ACB, Hyderabad in so far as the petitioners are concerned. LA. NO: 3 OF 2020 Petition under Section 482 o'f Cr. P. C praying that in the circumstances stated in the l/emorandum of Grounds of Criminal Petition, the High Court may be pleased to direct the respondents to forthwith return the registered sale deeds/security documents of the petitioners in respect of which security interest was created by the petitioners while securrng credit facilities from the 2nd respondent bank since the loan account is ready liquidated and no due certificate was issued by the 2nd respondent bank/ pending disposal of the quash petition. l. A. NO: 2 OF 2020 Petition under Section 482 ol C,r. P.
C praying that in the circumstances stated in the lt/emorandum of Grounds of Criminal Petition, the High Court may be pleased to grant stay of all further proceedings including arrest and direction for production of documents which are in the custody of the respondents in connection with/concerning FIR No. RC0352020A0002, CBI/ACB, Hyderabad, on the compliant of the 2nd respondent, pending disposal of the quash petition. CRIMINAL PETITION NO:4272OF 2020 Between: 1. lshoo Narang, S/o. V. S. Narang, aged about 50 years, Managing Director, M/s. Kyori Oremin Limited, Hyderabad, Rl/o. Flat No. "101, Plot No. 19/C, GRC Residency, Khanamet, Madhapur, Hyderabad - 500 081. 2. Chandulal Patel, S/o. Harjivan Patel, aged about 53 years, Non-Executive Director, M/s. Kyori Oremin Limited, Hyderabad, R/o. Flat No. 101, Plot No. 19/C, GRC Residency, Khanamet, lvladhapur, Hyderabad - 500 081. 3. Rudra Raju Srinivas Shah, S/o. R. V. Raju, aged about 51 years, Non-Executive Director, M/s.
Kyori Oremin Limited, Hyderabad, Fi. /o. Flat No. '10'l , Plot No. 19/C, GRC Residency, Khanamet, Madhapur, Hyderabad - 500 081 . 4. IV/s. Kyori Oremin Limited, Hyderabad, represented by its fvlanaging Director, lshoo Narang, S/o. V. S, Narang, registered office at Rl/o. Flat No. 101, Plot No. '19/C, GRC Residency, Khanamet, li/adhapur, Hyderabad - 500 081. .. Petitioner/Accused q- AND 1 . Assrstant Director, Enforcement Directorate, Government of lndia, Ministry of Finance, No. 5-10-'174, 3rd Floor, Shakar Bhavan, Basheerbagh, Hyderabad - 500 004. 2. lnspector of Police, Central Bureau of lnvestigatio n/B S and FC, Bengaluru (through Special Public Prosecutor for CBI and ACB Cases, High Court for the State of Telangana, at Hyderabad) 3. Central Bank of India, rep. by its Assistant General Manager, Corporate Finance Branch, Bank Street, Koti, Hyderabad - 500 095. ... RespondenUComplainants Petition under Section 482 of Cr. P.
C praying that in the circumstances stated in the Memorandum of Grounds of Criminal Petition, the High Court may be pleased to quash the complaint and investigation in ECIR/HY2O1031201912420, 2421 and 2422, daled 11. 08. 2020 by the 1st respondent which is based on FIR RC-11(E) of 2018 of CBl, BS and FC, Bangalore and 3rd respondent, in the interest of justice. l. A. NO: 1 OF 2020 Petition under Section 482 of Cr. P. C praying that in the circumstances stated in the Memorandum of Grounds of Criminal Petition, the High Court may be pleased to dispense with the filing of the complaint copy in ECIR/HYZO/o31201912420,2421 and 2422, dated '1 1. 08,2020 for the present, in the interest of justice since the same is not made available to the petitioners by the 1st respondent despite conducting a search panchanama on 16. 09. 2020, pending disposal of the quash petition. l. A. NO: 2 OF 2020 Petition under Section 482 of Cr. P.
C praying that in the circumstances stated in the Memorandum of Grounds of Criminal Petition, the High Court may be pleased to grant stay of all further proceedings relating to the enqu irylinvestigation including arrest of the petitioners or issuing summons to the petitioner for appearance in ECIR/HYZOI031201912420,2421 and 2422, dated 11. 08. 2020, pending disposal of the quash petition. l. A. NO: 3 OF 2020 Between: Assistant Director, Enforcement Directorate, Government of lndia, Ministry of Finance, No. 5-10-174, 3rd Floor, Shakar Bhavan, Basheerbagh, Hyderabad - 500 004 ... Petitioner AND 1. lshoo Narang, S/o. V. S. Narang, aged about 50 years, Managing Director, M/s. Kyori Oremin Limited, Hyderabad, Fl/o. Flat No. 101, Plot No. 19/C, GRC Residency, Khanamet, Madhapur, Hyderabad - 500 081. . ,,Respondent No. 1 2. Chandulal Patel, S/o. Harjivan Patel, aged about 53 years, Non-Executive Director, M/s. Kyori Oremin Limited, Hyderabad, Fl/o. Flat No. 101 , Plot No.
'19/C, GRC Residency, Khanamet, Madhapur, Hyderabad - 500 081 . ... Respondent No. 2 3. Rudra Raju Srinivas Shah, S/o. R. V. Raju, aged about 51 years, Non-Executive Director, M/s. Kyori Oremin Limited, Hyderabad, Rl/o. Flat No. 101, Plot No. 19/C, GRC Residency, Khanamet, Madhapur, Hyderabad - 500 081. ... Respondent No. 3 4. M/s. Kyori Oremin Limited, Hyderabad, represented by its Managing Director, lshoo Narang, S/o. V. S. Narang, registered office at Rl/o. Flat No. 101, Plot No. 19/C, GRC Residency, Khanamet, Madhapur, Hyderabad - 500 08'1 lnspector of Police, Central Bureau of lnvestigation/BS and FC, Bengaluru (through Special Public Prosecutor for CBI and ACB Cases, High Court for the State of Telangana, at Hyderabad) ... Respondent No. 4 5. lnpector of Police, Central Bureau of lnvestgation/SB and FC, Bengaluru. ... Respondent No. 5 6. Central Bank of lndia, rep, by its Assistant General Manager, Corporate Finance Branch, Bank Street, Koti, Hyderabad - 500 095. ...
Respondent No. 6 ... Respondents Petition under Section 482 ol Cr. P. C praying that in the circumstances stated in the Memorandum of Grounds of Criminal Petition, the High Court may be pleased to vacate the interim stay dated 19. 10. 2020 in CRL. MP 01 ol 2020 in the above Criminal Petition No. 4272 of 2020. These Petitions coming on for hearing, upon perusing the Memorandum of Grounds of Criminal Petition and upon hearing the arguments of Sri Vedula Venkata Ramana, Learned Senior Counsel for Sri D. B. Chaitanya, Advocate for the Petitioners and Sri B. Narasimha Sharma, Learned Standing Counsel for Respondent No. 1 and Sri K. Surender, leaned Special Public Prosecutor on behalf of the Respondent No2. The Court made the following: COMMON ORDER KI,,. I Crl. P. i'io. J966 of 2020 & hutch HONOURABLE SRI JUSTICE K. LAKSHMAN CRIMINAL PETITION Nos. 3966. 3982 & .
1272 OF 2020 COMMON ORDER: All these Crirninal Petitions, though relating to different crimes but concerning the sarne petitioners/acc used and relating to similar nature of of-fences, have been considered together and are being taken up tbr disposal by u,ay' of a comrnon order. 2. Crl. P. No. l966 of 2020 is flled to quash FIR No. l1 of 2018 on the llle of CBI, BS & FC, Bangalore. The petitioners are accused Nos. l to 4 in the said clime. The offences alleged against therr are under Sections - 409, 420. 167, 468 and 4ll read with 120-B ollPC and also under Section - 13 (1) (d) read with 13 (2) ofthe Prevention olCormption Act. 1988 (for short 'Act, 1988'). 3. The very same petitioners have filed Crl. P. No. 3982 of 2020 to quash FIR No. RC035202040002 on the file of CBI ACB, Hyderabad. The petitioners are accused Nos. 1 to 4 in the said crime.
The oft-ences alleged against them are under Section - 420 read with 120-8 of IPC and r-rnder Section - 13 (l) (d) read with 13 (2) of the Act. 1988. 4. The very same petitioners have filed Crl. P. No. 4272 of 2020 to quash the cornplaint and investigation in ECIR/HYZO|I3| 2019/2420, 2421 and 2422 on the flle of Assistant Director, Er-rtbrcement Directorate, Ministry of Finance, Government of India, tit_,J J Crl. P. . \'o-3966 of 2l)21) & bntch Basheerbagh, Hyderabad. The petitioners are accused Nos. l to 4 in the said ECIR. 5. Heard Sri Vedula Venkata Rarnana, learned Senior Counsel representing Sri D. B. Chaitanya, learned counsel lbr the petitioners, Sli B. Narasimha Sharma, learned Standing Counsel fbr Enforcement Directorate and Sri K. Surender, learned Special Public Prosecutor for Central Bureau of Investigation. 6. The allesations against the petitioners in FIR No. l l/2018 on the file of CBI.
BS & FC, Bansalore: i) The Central Bank of India is de complainant in the said facto complaint, dated 30. 06. 20 I B. ii) Petitioner No. 4 was incorporated on 14. 09. 2007 and was engaged in procuring coal from Indonesia for selling the same in domestic market and iron ole in Chinese market. Petitioner No. l -accused No. 1 along with others has floated petitioner No. 4. Petitioner No. 1 is the Managing Dilector of petitioner No. 4. It also owned M/s. Jumbo Mining Lirrited, a Hyderabad based Mining and Ceramic Raw, Vaterial Export Companr . iii) Petitioner No. 4 was recognized by the Government of India as a Star Export House ancl it became second largest Exportel fi'om India for Ceramic Raw Material. The said M/s. Jumbo Mining Limited was sold to IMERYS, a Euro 6 Billion Company in the year 2007. Petitioner No. 3 - accused No. 3 is a pronloter of RHI Clasil KI. ,. I (' -l -l'. ,\o. -J966 of 202 & hdch I-inrited. a . loir. rt Vcnturc Reliactory' [,nit and part of Er,rro 1.
9 Billion Rlll AG Group, Germany. He was proposed to be responsible for planning the long term strategy of petitioner No. 4. iv) Petitioner No. 2 - accused No. 2 has more than 2/z decades of experience in cement industry. He is also the promoter of M/s. CH Patel Agency, Hyderabad, which is engaged in high value cement trading business in India. Petitioner No. 2's contacts in the trade have helped petitioner No. 4 to establish rnany custorners engaged in cement manufacturing. v) Petitioner No. 4 availed credit facilities from different banks including the Central Bank ollndia, the State Bank of India, tlie Bank of Baroda. ICICI Bank and the Bank ol Maharashtra under multiple banking arrangements fbl the purpose 01'doing the business ol'trading ol coal. vi) The Central Bank of India alleged that petitioner No. 4 viz. , M/s.
Kyori Orernin Limited along with its Directors, the other accused, have committed fraud and cheated the Bank and on account of their deliberate act and omission, caused wrongful loss to a tune of Rs. 60. 00 Crores approximately to the bank vii) In the year 2012, petitioner No. 4 represented by petitioner Nos. I to 3 have approached the Central Bank of India, the de . facto . complainant, tbr flnancial assistance and working capital requirement by way of cash credit hypothecation and letter of credit f-acilities KI-,J CzLP. ni,. 3966 of 2020 & brttch under the multiple banking arrangements. They have offered security fbr the facilities to be granted by the Central Bank of India. The details of the property are specifically mentioned in the complaint dated 30. 06. 2018.
The details of loan and the personal guarantees offered by the petitioners were also specifically mentioned in the complaint viii) After assessing the requirements, the Central Bank of India has sanctioned an amount of Rs. 20. 00 Crores by way of cash credit hypothecation and Rs. 40. 00 Crores by rvay of letter of credit facility on 19. 03. 2012 on a pre-condition that other banks shall give no objection certificate for sharing the primary securities. On receipt of no objection cerlificate fiom other banks and atier execr. rtion o1' necessary documents/creation of security, the Company staned availing the loan t'acilities. ix) Initially, petitioner No. 4 maintained the cash credit account within the limits and adjusted the LCs on due date without any devolvement. Subsequently, during the year 2014, petitioner No. 4 made a request for enhancement of limit liont existing Rs. 60. 00 Crores to Rs. 85.
00 Crores and the same was sanctioned under the proposed consoftium arrangement with the Central Bank of India as a lead bank. However, formation of consortium did not materialize due to non-tie-up of the assessed limits with other banks. I KL,J 6 Crl. P, No. 3966 o12020 & bstch x) Stock audit was conducted by the Central Bank of India and the details of the same were specifically mentioned in paragraph - l0 of the complaint dated 30. 06. 2018. Internal audit and statutory audits were conducted and till September 20 15, there has been no ma. jor adverse remark. Petitioner No. 4 continued to enjoy the existing loan sanctioned lirnits of Rs. 60. 00 Crore with the bank. The company utilized the loan sanctioned limits fullv under cash credit hypothecation and LC facilities. The tenns of sanctior. r conveyed to the petitioners herein and the same was acknowledged by them. However, the terms and conditions of the loan sanctioned were not conrplied with.
The account was classified as Non-Performing Asset (NPA) on 30. 09. 2015 as per the guidelines of the Reserwe Bank of India since petitioner No. 4 lailed to repay the loan over dues. The balance outstanding on the date oINPA is Rs. 62. 47 Crore. The fraud is registeled with the Resen'e Bank of India on 30. I I . 2016. The account has been declared as fraud on 30. I1. 20 16 for the reasons specifically mentioned therern. xi) The bank has decided to conduct forensic audit and the sarre was allotted to M/s. S. P. Rungta and Associates, Charlered Accountants, Murrbai, which in turn, conducted forensic audit and submitted its report on 1 3. 10. 20 I 6 pointing out serious lapses including the lapse that petitioner No. 4 has not followed the prudent accounting policy. The audited financial staterirents do not reflect true and fair view. The auditors have declared that the balances of KL,J Crl. P. ,\o. 3966 of 202t) & b tch debtors/credits etc. , are not reliable. Petitioner Nos.
l to 3 have not co-operated with the auditors in canying the financial audit and not made available the books and records to assess the inventorv position. Petitioner No. 4 has not filed annual returns for the vear 2013-1. 4 and 2014-15. Petitioner No. 4 does not adopt tl. re prudent accounting policy to hide and prevent untrue and unfair financial position of the company. The said criminal fraud is evident and apparent from the books of the company. xii) The Central Bank of India has conducted exarnination ol staff accountability and found that three of its staff members are accountable for procedural lapses. With the said allegations, the Central Bank of India has requested the Superintendent of Police, CBl, Bangalore, to take action against the petitioners herein. 7. The allesations against the petitioners in FIR No. RC0352020A0002 on the file of CBI ACB, Hvderabad: i) The Bank of Maharashtra is the tle in the fcrcto courplainant said complaint, dated 29. 02. 2020. Petitioner No.
4 availed loans liorn the bank including cash credit of Rs. 5 cores and inland/fbreign letter of credit of Rs. 15. 00 Crores. The same was enhanced to Rs. 23. 00 Crores on 0 1 . 01 . 20 I 4. ii) After running for about 1-2 years, petitioner No. 4 posted loss for 2014-15 and started default in its payment obligations iiom May 2015. Petitioner No. 4 could not meet the obligations under' KL,J 8 C . P. No. 3966 of 2020 & hotch letters of credit already established by the bank and bank has to repay it on behalf of petitioner No. 4. With default persisting, the account finally slipped as NPA on 29. 08. 201-5. iii) A joint lenders forurn rvas set up by all the lenders and fbrensic audit u. as conducted to asceftain the status of funds and irregularities if any. The auditors i. e. , M/s. S. P. Rungta and Associates, have conducted forensic audit and submitted their report in October. 201 6. In the report, it is specificalll, mentioned that petitioner No.
4 did not provide all required documents and books of accounts for a meaningful audit under the pretext of books having been seized by IT authorities. Petitioner No. 4 has written off receivables worrh Rs. 1 I 1 . 51 Crores during last three years. Purchase transactions under LC and corresponding sales transactions performed by the company are not genuine as physical movement ofgoods could not be established. Hence, diversion of funds was suspected. Thus, the auditors have specifically mentioned several lapses during the forensic audit and the details of tlre same are mentioned in the complaint dated 29. 02. 2020 8. The allesations against the petitioners in ECIR r-o. 03/HYZO dated 18. 03. 2019 on the file of Assistant Director Enforcement Directorate, Ministrv of Finance, Goverlrmen1 of India, Basheerbagh. Hvderabad: i) Based on the courplaint of loan fraud filed by the Central Bank of India, the Inspector of Police, CBI, BS & FC, Bangalore, has regiltered the above crime in FIR No.
RC-ll of 2018. As per the KL,J ('rl. P. \o. 3966 o. l 2lDl) & bokh mandate of the Prevention of Money Laundering Act,2002 (lbr short, PMLA), as they have invoked Sections - 120-B, 420 and 471 of IPC which are scheduled off'ences under PMLA, the Directorate of Enforcement initiated money-laundering investigation against the petitioners in File No. ECIR/HYZO/031201912420, 2421 and 2422 under the PMLA. ii) Accordingly, Assistant Director, Enforcement Directorate, Basheerbagh, Hyderabad, has issued summons under Section - 50 (2) (3) of the PMLA and directed petitioner Nos. l to 3 to appear before hirn on 01. 09. 2020. He has issued the said summons only for the purpose of conducting investigation. iii) According to hirn, the FIR issued by the Inspector of Police, CBI, BS & FC, Bangalore, at the stage of investigation. The CBI ACB, Hyderabad, has also issued another FIR i. e. , FIR No. RC0352020A0002 against the petitioners on the complaint lodged by the Bank of Maharashtla.
The allegations in the said FIR are senous ln nature. iv) Bank loan frauds are a scourge on Country's economy and Enforcement Directorate is duty bound to investigate all bank tl'auds in which there is loss of more than Rs. 25. 00 Crores to the banks. As per Section - 45 of the PMLA, all offences under the said Act are cognizable and non-bailable. KL. J l0 Crl,P. . \i,. J966 of 2020 & h ch v) The PMLA deals with three aspects i. e. , (i) Offence of Money-Laundering, (ii) Attachment, Adjudication and Confiscarion and (iii) Summons, Searches and Seizures etc. , Chapter III of the said Act deals with Attachment, Adjudication and Confiscation, Chapter V deals with Summons, Searchers and Seizures, etc. , and Chapter VI deals ivith Appellate Provisions. vi) After registration of ECIR, the Enfbrcement Directorate sta(ed collecting various documents including bank account statenlents. inconre tax returns.
details of n-roveable/immovable propefiies in the names of the petitioners and other related persons, credit audit reports, stock audit reports, etc. On perusal of the said docurnents, it is fbund that, prima. facie, there appears to be substantial case of fraud and diversion of loan amounts by the management of petitioner No. 4. Investigation of the case is at very crucial stage and Ihe Enforcernent I)il'ectorate has conducted searches on the premises of the Directors of petitiorrer No. 4 on I 6. 09. 2020. Certain crucial and '['he inclinrinating materials have beerr recovered. allegations against the petitioners are of serious nature and are specilic in nature and require a detailed investigation. 9. Contentions of the Petitioners: (i) There is abnormal delay in lodging the complaints by both the banks. (ii) The alleged forensic audit alleged to have been conducted by M/s. S. P. Rungta and Associates is behind back of the I( L,J Crl. P. ,\o.
-|966 r1 2020 & buclr petitioners and they have not given any opportunity to the petitioners. (iii) Complaints were given on 30. 06. 2018 and 29. 02. 2020, but registration of FIRs was done on 03. 07. 2018 and 1 6. 04. 2020 respectively. (iv) The ingredients of the offences alleged against the petitioners are lacking. (v) Petitioner No. 4 has availed One Time Settlement (OTS) as announced by the banks and the said OTS proposals were accepted by the banks as per the guidelines issued by the Reserve Bank of lndia. Thereafier, petitioner No. 4 has paid the entire amount to the banks, in terms of the said OTS. (vi) There is no complaint of violation ol any ol the guidelines issued by the Reserve Bank of India, while avaiting OTS by the petitioners. (vii) The banks, having accepted the OTS proposals submitted by petitioner No. 4 and received the amounts, cannot prosecute the petitioners by pursuing with the complaints already lodged.
(viii) The banks have already initiated proceedings under the provisions of the Securitization and Reconstruction of Financial Assets and Enforcernent of Securities Interest Act,2002 (SARFAESI Act), after declaring the accounts of petitioner No. 4 as NPA. (ix) The petitioners have repaid the entire loan amount in accordance with OTS and the banks have also issued no objection certifi cates on 25. 08. 2020. KL,J l2 Crl. P- No. 3966 of 2020 & hutch (x) The complaints lodged by the banks do not disclose cornmission of any criminal offence. (xi) A loan transaction cannot be converted into a criminal prosecution since the bank loan is always supported with heavy surety and third pafty personal guarantees of the Directors also. (xii) There are no specific allegations against petitioner Nos. l to 3. (xiii) Utilization ol loan amount fbr a purpose other than for which it is sanctioned is not a matter on which the bank has any' control.
(xiv) Lending of money by the bank is linked to the security of the guarantees. (xv) As per lhe panchanama conducted by the Enforcement Directorate, no incriminating material was found in the house or office of the petitioners. (xvi) The petitioners are ready to co-operate with the CBI and the Enforcement Directorate in concluding the investigation and enqu iry. (xvii) Reliance was placed on the principle laid down by the Apex Court in Central Bureau of Investigation v. Sadhu Ram Singlar, Indian Oil Corpn. v. NEPC India Ltd. 2, Satishchandra Ratanlal Shah v. State of Gujaratr and Gian Singh v. State of Punjab{. (xviii)As per the principle laid down by the Apex Coufi in Sadhu Ram Singlar, the prosecution by the CBI itself is ' AIR 20 l7 sc 1312 (2006) ' 6 scc 736 ' (. )o I 9) 9 SCC I48 '(2Q12) ro scc 303 KL. J . \'o. 3966 t. l Crl. P. of 202(.
t & bttch baseless and it is an abuse ol process ol law and hence, on the complaint of the CBI, registration of crime by the Enforcement Directorate under the provisions of the PMLA is again an abuse of process ol law. (xix) There is no basis much less proceeds of crime and hence, the provisions of the PMLA do not attract at all. (xx) The investigation/enquiry by the Enfbrcement Directorate in ECIR/HY2O1031201912420,2421 and 2422 is again an abuse of process of law. 10. Contentions of Enforcement Directorate: (i) Based on the complaint of loan fraud filed by the Central Bank of India and Bank of Maharashtra, the Central Bureau of Investigation has registered two crimes against the petitioners and the of'fences alleged are scheduled offences under PMLA. Theretbre, the Enforcement Directorate has initiated money-laundering investigation in respect of the said bank loan fiaud in File /HYZ No. ECIR O I 03 I 20 I 9 I 2420, 242 | and, 2422 under the provisions of the PMLA.
It is only at enquiry stage. (ii) Enforcement Directorate is duty bound to register a case and initiate PMLA investigation. (iii) The allegations against the petitioners are serious in nature. (iv) As per Section - 45 of the PMLA, all olTences under the said Act are cognizable and non-bailable. (v) The investigation is at very crucial stage and Enforcemer-rt Directorate has conducted searches and recovered ceftain crucial incrin-rinating ntaterial. KI-,. 1 l-l Crl. P. . \o. -j966 of 2020 & botch (vi) There is irnmediate requirement of confronting the Directors of petitioner No. 4 to the documents gathered during the investigation. For the said purpose only, the Enforcement Directorate has issued summons under Section - 50 of the PMLA directing petitioner Nos,1 to 3 to appear before it for the purpose of recording their statements and conducting investigation.
(vii) The petitioners, instead of appearing before the Enforcement Directorate, have filed the present Criminal Petitions under Section - 482 of Cr. P. C. (viii) Reliance was placed on the decisions of the Apex Court in Parbatbhai Aahir alias Parbatbhai Bhimsinhbhai Karmur v. State of Gujrats and Suman Singh v. Sanjay Singh6 and also an unreported judgment of the High Court ofJudicature at Hyderabad for the State ofTelangana and the State of Andhra Pradesh in Dalmia Cement (Bharat) Limited v. The State of A. P. , rep. by its Prl. Secretary, Rev. Department. Hyderabad . I l. Contentions of the Central Bureau of Investigation: (i) On the complaints received from Central Bank of India and Bank of Maharashtra, the CBI has registered the above said two crimes. (ii) There are serious allegations against the petitioners even in the letters dated 2l . 09. 2019 and 26. 12. 2019 issued by the Central Bank of India and 31. 12.
2019 issued by the Bank of Maharashtra, it is specifically mentioned that the OTS is being considered by the bank as a commercial decision and shall have no bearing whatsoever on the ' AIR ,o 1 7 sc 4843 " ArR 2017 sc 13r6 '. Judgrirent in w. P. Nos. 168. :18 of 201,1 and ill4iof20l5. decidedon29. 02. 20l6 / KL,J C . P. No. 3966 of2020 & botch l5 criminal cases/investigation, if any, being carried out by the CBI/Police and the same shall proceed as per the law. (iii) It is also made clear that recovery of the loan taken by the borrower and the criminal action of the fraud committed by the borrower are two separate and distinct matters. It is also clarified that the compromise settlement shall relate only to the recovery proceedings and shall not in any way affect the criminal action taken. if any, which shall continue.
(iv) Therefore, having accepted the said OTS proposals and also the terms therein, now the petitioners cannot say that the complaints lodged by the above said banks is illegal and they are trying to criminalize the civil disputes. (v) The petitioners have paid rneager amounts by availing the benefits under OTS and there is allegation ol misappropriation of Rs. 140. 00 Crores of public money by the petitioners which is an economic offence. (vi) The said action of the petitioners is unjust enrichment of public money by the petitioners. (vii) Investigation is pending. (viii) Reliance was placed on the decisions of the Apex Court in Central Bureau of Investigation v. Hari Singh Ranka8, Central Bureau of Investigation v. Maninder Singhe, Parbattrhai Aahir alias Parbatbhai Bhimsinhbhai Karmurs and Gopakumar B Nair v. Central Bureau of Investigationro. '2018(l) RCR (crl. ) 336 " 20 r 6(1) scc 389 'n 2ot4(2) scc (crl) 853 I KL,J t6 Crl. P. ,\o.
-1966 of 2020 & bdtch (ix) By placing reliance on the above said decisions, it is contended by the CBI that in the matter of economic of'fence, exercise of inherent power under Section - 482 of Cr. P. C. , by the High Court is uniust. CONSlDhlLAl'lO\ OF THE COt. IIT: 12. ln view of the above stated rival contentions, the undisputed facts are as follows: i) Petitioner Nos. 1 to 3 are Managing Director and Directors respectively of petitioner No. 4 Company. ii) Petitioner No. 4 Company has availed the credit facilities fi'orn different Banks including State Bank of India, Bank of Baroda, ICICI Bank and Bank of Maharashtra under rrultiple banking arrangernents fbr the pr,rrpose ol doing the business ol trading of coal prirnarily. iii) Petitioner No. 4 failed to repay the loans within the time schedule, the petitioners have resofted to criminal activities, and as such, the accounts of petitioner No. 4 in all the above said banks have been classified as NPA. The account of petitioner No.
4 was declared as fraud account on 30. 11. 2016 bv the Central Bank of India. The balance outstanding loan ol petitioner No. 4 with the Central Bank of India as on 30. 06. 2018 was Rs. 62. 47 Crores. iv) A Joint Lending Forum of all the above said Banks was tbrrned and it has decided to conduct a Forensic Audit of the accounts KL,J Crl. P. N0. 3966 of 2020 & butch 1t' Directors the of petitioner No. 4 Company on the ground that the of said company have not co-operated with the bank officials by producing relevant documents for the purpose of conducting audit. Accordingly, the said Forensic Audit was entrusted to M/s. S. P. Rungta and Associations which has conducted Forensic Audit and submitted its report pointing out various lapses on the parl of petitioners herein. The said lapses were specifically mentioned in the complaints dated 30. 06. 2018 and 29. 02. 2020 lodged by the Central Bank of India and the Bank of Maharashtra respectively. 13.
The petitioners did not challenge the proceedings issued by the Banks declaring the accounts of petitioner No. 4 Company as NPA and fraud accounts and. therefore, the said proceedings attained finalitv. \4. Petitioner No. 4 has availed OTS facilitv offered bv the Banks by submitting appropriate proposals. The said OTS proposals submitted by petitioner No. 4 \\ ere accepted b1' the Banks and proceedings were issued informing petitioner No. 4 about acceptance of the OTS. The auourtt to be paid and the tin. re also specifically n-rentioned therein. 15. In the letter dated 31. 12. 2019 issued bv the Bank of Maharashtra, it is specifically mentioned that the Competent Authority has approved the compromise proposal of petitioner No. 4 I KL,J l Crl. P. No. 3966 of 2020 & htclr Cornpany fbr Rs. 8.
60 Crores under OTS in lull and final settlement of the dues on ce(ain conditions including the following condition: "O'fS is being considcrcd b1' thc bank as a cornmercial decision and shall havc no bearing uhatsoerer on thc ongoing crirninal case / investigation. il'anl or not known to the bank. heing carricd out by thc CIll / Policc and the sarrc shall procccd as per lau,. The settlemenl agreed betrveen the parties shall not in any wa1' af'flect or construed as a settlement of on-going criminal case / proceedings pending in the Court against the borrorver. No dues certificate will be issued on specific request of the bonower mentioning clearly therein that the dues are settled by mutually agreed settlement involving sacrifice on the part of the Bank. " 16. In the letter dated 14. 05. 2020 issued by the Bank of Maharashtra, it is specifically mentioned that "sacrifice in ledger balance" is Rs. I 7. 60 Crores. 17.
It is also relevant to mention that the Central Bank of India in the letter dated 21. 09. 20 l9 informed petitioner No. 4 that the Higher Authorities of the bank have sanctioned the offer to settle the account under OTS for Rs. 17,95,00,000/- in full and final settlement of the dues on ceftain conditions including the tbllowing conditions: "OTS is being considered by the bank as a commercial decision and shall have no bearing whatsoever on criminal case / investigation, if any being carried out by the CBI / Police and the sanre shall proceed as per law. " KL,J I9 Ctl. P. l\i,. 3966 of 2020 & butch In the No Dues Certificate dated 25. 08. 2020, the Central Bank of lndia has specifically reiterated the above said condition. 18. Vide letter dated 26. 12. 2019.
the Bank ol Baroda has informed the 4tl' petitioner company about sanction ol contpromise proposal on ceftain conditions including the following condition: "lt is rnade clear that the recovery of loan taken by the borrower and the criminal action of the lraud committed by the borrorver are two separate distinct matters. It is also clarified that the compromise settlement shall relate only to the recovery proceedings and shall not in any way aff'ect the criminal action, if any, rvhich shall continue. The settlement rvill not have an1 bearing whatsoever on the ongoing / tuture criminal cases / proceedings initiatcd / to be initiated by the bank and pending in the Courts against the borrower and that such cornpromise settlernent r'vill relate only to the recovery proceedings for dues outstanding. 'l'his should also form pafi ol the consent terrns to be flled with the Court / DRT. " 19.
It is relevant to mention that the 4tl'petitioner cornpany has received the above said proceedings and sought revised OTS acceptance proposal in respect ofone Bank, the same were issued and thereafter petitioner No. 4 has paid amounts to the respective banks. Thus, the petitioners have accepted the terms and conditions of the respective banks while accepting the OTS proposals. They have not challenged / disputed any of the terms and conditions imposed by the KL,J l0 Crl. P. No. 3966 of 2020 & hatch banks. Therefore, the petitioners now cannot contend that the defacto cornplainants viz. , the Central Bank of India and Bank of Maharashtra, having accepted the OTS proposals, having received the entire arTlounts cannot pursue crirninal proceedings and cannot file complaints against the petitioners. Therefore, the contention of the Iearned senior counsel to the said eff-ect cannot be accepted. 20.
In Sadhu Ram Singlar, the Apex Couft had an occasion to deal with the case of compounding of olfbnces under Section - 320 of Cr. P. C. against the corr. rpany after accepting OTS, and after filing of charge sheet against the company for causing financial loss to the bank with crirninal conspiracy. In the said case, the company has obtained loan from the bank and did not repay the same, and therefole, the account of the cornpany was declared as NPA. On verification of the stocks, it was found that the company therein had fiaudulently obtained higher credit limits on the basis of false and labricated stock statements by tbrging the signatures. The law was set into nlotion and FIR was registered. Duririg the pendency ol the proceedings belore the Coun, a compromise was arrived at between the company therein and the bank under OTS. An application was filed by the company therein for compounding the offences under Section - 320 (2) of Cr. P. C.
and the sarne was dismissed by the trial Court on the ground that Section - 427 read with Section - 468 of IPC is a non-compoundable oftbnce. Ii L,J 2t Ctl. P. l'o. 3966 of2020 & b tch 2l . Thereafter, they have approached the High Court ol Punjab and Haryana invoking its powers under Section - 482 of Cr. P. C.. lbr quashing the FIR and the resultant proceedings. The High Court of Punjab and Haryana quashed the criminal proceedings on the ground that the bank and the company therein have entered into a settlement and entire amount was paid. Then the matter was carried to the Apex Court.
The Apex Court, by relying upon various judgments, held that law relating to the continuance of criminal cases where the complainant and the accused had settled their differences and had arrived at an arnicable arrangement, continuance of criminal proceedings would amount to abuse ol process of Court and an exercise in futility since the trial would be prolonged and ultimately, it rnay end in a decision which may be of no consequence to any of the partles. 22. The said principle is not applicable to the facts of the present case, as the facts in the said case are distinguishable with the f'acts of the present case. As discussed supra, in the letters dated 21. 09. 2019,26. 12. 2019 and 31. 12. 2019, both the banks have informed the petitioners that acceptance of OTS will not absolve the criminal proceedings and the criminal proceedings will go on and that both are different and distinct. The petitioners have accepted the said terrns and conditions without any dispute.
It appears that the said telms and conditions are not there in respect of the company in Sadhu KL,J 22. Crl. P. ,\o. 3966 of 2020 & botch Ram Singlar. Therefore, the principle laid down by the Apex Court in the said case is r. rot applicable to the facts of the present case. 23. The details of the loans availed from the lender banks urrder multiple banking arrangement, their book balance and OTS are as follows: (in Rs. in C rores) Ne t loss to NPA OTS \ I'A l ith thc hank Narnc of the llank amount settlcmcnt intercst after thc (principal) amou nt OTS Central Bank of India 55. 66 7 4. 79 11. 95 59. 8,+ State llank ol lndia 29 41. 84 14. 7 5 27. 09 Bank ol'Maharashtra 19. 85 36. 11 8. 60 21 . 8t Bank of Baroda 1. t. 96 29. 58 15. 80 I 3. 78 ICICi Bank t4. 71 59. 3 l 4. 84 54. 47 Total 131. l8 241. 93 61. 94 182. 99 24. The above stated facts would reveal that it is a case of "loan fraud". Petitioner No. 4-company represented by petitioner Nos.
1 to 3 has obtained loans and credit facilities from the above said banks in the manner stated supra. According to the banks, the petitioners have taken loan, purposefirtly defaulted in payment of loan, and in the end, get away by doing OTS with the banks, wherein they have paid only a small percentage of loan amounts due and thus caused undue loss to the banks while enriching themselves. According to the banks. the petitioners have caused thern a massive loss of Rs. 182. 99 Crores. The said money ultin. rately belongs to the public/tax payers. Thus, prima lhe petitioners have committed facie, fraud not only against the banks, but also against the public in general Ii L,J (rl. P. l-1 . \'o. 3966 tf 2020 & batch Such economic frauds adversely affbct the financial and economic well-being of the Nation and have irnplications which lie beyond the domain of a mere dispute between petitioner No. 4 and the above said banks including Central Bank of India and Bank of Maharashtra.
The mere fact that the banks which are already under stress to clear the NPAs from their books accepted the OTS, will not absolve the petitioners from criminal charges. 25. At the cost of repetition, it is relevant to mention that, in the above said lettels, both the banks have specifically rnentioned that acceptance of OTS proposals by the banks will not absolve the criminal liability of the petitioners. According to the banks, Central Bureau of Investigation and Enforcement Directorate, out of f'ear of fbcing punishment stipulated under the provisions of law, the petitioners have approached the banks with OTS proposals. The source of funds used by the petitioners for completing the OTS is also suspect and it is part ol Enforcement Directorate's fund trial investigation. Petitioner No. 4 has defaulted the credit facilities availed frorn 5 banks and caused huge losses to the banks despite the OTS and the details of the same are mentioned in the tabular form mentioned supra. 26.
In all the above OTS, it has been found that all the banks were put to a total loss to a tune of Rs. 182. 99 Crores approxintately The Enforcement Directorate has initiated investigation/enquiry under I KL,J 21 C . P- No. 3966 of 2020 & hatch the provisions of PMLA since the o1-fences alleged against the petitioners are scheduled offences under the said Act. There are serious allegations against the petitioners. Bank loan frauds are a scourge on our economy and therefore it is the duty of the Enforcement Directorate to investigate all bank frauds in which there is loss of more than Rs. 25. 00 Crores to the banks. The present case is not f'alling in any ol the exceptions tnentioned by the Apex Couft in State of Haryana v. Bhajan Lalrr. 27.
The Apex Court in Parbatbhai Aahir alias Parbatbhai Bhimsinhbhai Karmurs categorically held that economic offences involving the financial arrd economic well-being of the State have implications which lie beyond the dornain of rnere dispute between private disputants. The High Court would be justified in declining to quash where the offender is involved in an activity akin to a financial or economic fraud or misdemeanor. The consequences of the act complained of upon the financial or economic system will weigh in the balance. 28. Sirnilar principle was laid down by the Apex Court in Gopakumar B Nairr0. In the said. judgrnent, it was fufther held that the of'lences are cerlainly more serious. They are not private in nature. The charge of conspilacy is to cornrnit offence under the Prevention of CorrLrption Act. The accused has also been charged fbr ll)9lSupp. (l)SCC3i5 I KL,J ,i Crl. P. . \'0. 3966 0f 2020 & botch commission of substantive offence under Section - 471 of IPC.
Though the amounts due have been paid, the same is under private settlement between the parties. There is no acknowledgement on the part of the Bank of the exoneration of the criminal liability of the accused unlike the terms of compromise decree. 29. In view of the said principle, it is also relevant to point out that in the present case, the complainants' bank have specifrcally incorporated in the acceptance of OTS proposals terms and conditions that the acceptance of OTS r,"'ill not absolr,e the criminal liability of the petitioners and OTS and criminal liability are difl'erent and d istinct. 30. In Hari Singh Rankas, the Apex Coun considered the affect of OTS and held that the OTS merely deals with the civil liability that too by making of payrnent of Rs. 25. 00 Crores whereas outstanding liability was Rs. 44. 00 Crores though it was submitted loss caused was approximately Rs. 13. 00 Crores.
The amount which has been settled in OTS scheme cannot be legally sufticient to wipe out the criminal liability of the accused persons. The OTS could wipe oll only the civil liability, but not the clirr. rinal one. 31. In the present case, it is specilically mentioned in the letter dated 14. 05. 2020 issued by the Bank of Maharasl. rtra that the sacrifice in ledger balance is Rs. 17. 60 Crores. According to above said flve banks, the total loss caused to the banks due to the criminal acts of the KL,J (-rl. P. No. 3966 of 2020 & batch petitioners herein, is Rs. 182. 99 Crores. The details of the same are specifically rnentioned in the tabular fornr mentioned supra. 32. In Maninder Singhe, the Apex Court held that the inherent powers of the High Court under Section - 482 of Cr. P. C. should be sparingly used.
Only when the Court comes to the conclusion that there would be manilest injustice or there would be abuse of the process ofthe Court if such power is not exercised, Court would quash the proceedings. In economic offences Couft rnust not only keep in view that money has been paid to the bank which has been del'rar. rded but also the society at large. It is not a case of simple assault or a theft o1'a tlivial arrount: but the of'fence rvith which the Couft concerned is a well planned and was corrrmitted with a deliberate design with an eye of personal profit regardless of consequence to the society at large. To quash the proceeding merely on the ground that the accused has settled the amount with the bank would be a misplaced sympathy. If the prosecution against the economic offenders is not allowed to continue, the entire community is aggrieved. 33. A Three-Judge Bench of Hon'ble Apex Coun in State of Madhya Pradesh v. Laxmi Narayant2 by referring to its various earlier .
iudgments surnrnarized the law fbr exelcise of inherent powers to quash the crirninal proceedings under Section - 482 of Cr. P. C. by (20t9) ''. i scc 688 KL,J Crl. P- ,\'o. 3966 uf 2020 & batch the High Court. It held that the High Court has to examine facts of each case on case to case basis including nature oi offence, its impact on the society etc. 34. In Gian Singa, a Three-Judge Bench olthe Apex Courl laid down guidelines and also categories of cases in which power of High Court under Section - 482 of Cr. P. C. to quash criminal proceedings can be exercised. It held that in what cases power to quash the criminal proceedings or complaint or FIR may be exercised where the offender and the victim have settled their dispute rvould depend on the facts and circumstances of each case and no category can be prescribed. However, before exercise of such power, the High Court must have due regard to the nature and gravity of crime. 35.
As stated above, there are serious allegations and the lraud alleged to have been committed by the petitioners is Rs. 182. 99 Crores. Therefore, according to this Courl, it is not a fit case to exercise the inherent power of this Courl under Section - 482 of Cr. P. C. to quash the criminal proceedings against the petitioners. 36 ln Satishchandra Ratanlal Shah3, the disputes arise out of a loan transaction between the parties, the attendant circumstances before lending loan wele known to the loanee. In order to recover the loan, the Financial Institution had instituted a summary civil suit which was pending adjudication. While considering the said lacts, the Apex Courl held that in view of the breach of promise, agreement or K L,J 2lt Crl. P. No. -|966 rtf 2020 & bdch contract does not ipso f'act constitute the offbnce of the criminal breach oltrust contained in Section - 405 of IPC without there-being a clear case of entrustment.
The mele inability of the appellant to return the loan amount cannot give rise to a criminal prosecution for cheating unless fraudulent or dishonest intention is shown right at the beginning of the transaction, as it is this mens rea which is the crux of the otfence. 37. But, whereas, in the present case, the accounts of the petitioner No. 4 Company were declared as NPA and for the criminal activities resorted to by its Directors. The said accounts were identified as fraud accounts. The petitioners herein did not challenge the said proceedings and thus, the said proceedings attainted finality. The fraud played by the petitioners is specifically mentioned in the tabular lorrn mentioned supra which is Rs. 182. 99 Crores and it is a loan fraud and it is an economic offence. Therefbre, the said principle in Laxmi Narayan'2 is not applicable to the fbcts of the present case. 38. As discussed supra, there are serious allegations against the petitioners. M/s. S. P.
Rungta and Associates has rnentioned in its report about the lapses of the petitioners. The said lapses were specifically mentioned in the complaints dated 30. 06. 2018 and 29. 02. 2020. The account of petitioner No. 4 in Central Bank of India was declared as t'r"aud on 30. 11. 2016 and at paragraph No. l4 of the complaint dated 30. 06. 2018, the Central Bank of India specifically KL,J . \0. 3966 of 2020 batch :9 Ctl. P. & mentioned the details of the same. There are serious allegations tl-rat the funds of petitioner No. 4 were diverted by petitioner Nos. I to 3 fbr their personal needs. Petitioner No. 4 has not 1l led tlnancial statements for the years 2013-14 and 20 l4-15. Petitioner Nos. I to 3, being the Managing Director and Directors of petitioner No. 4 respectively have not co-operated with the auditors in carrying the financial audit and also have not made available the books and records to assess the inventory position.
Therefore, Joint Lending Forum was fbrmed by the Bankers, and in the meeting of the said Forum, the banks have taken a decision to conduct forensic audit and the same was entrusted to M/s. S. P. Rungta and Associates. Thus, prima . facie, in all, petitioner No. 4 has committed fraud to the tune of Rs. 182. 99 Crores and it is a wrongful loss to the public exchequer and it is tax payers' money. It is a loan fraud which is a serious lraud and there are serious allegations against the petitioners. 39. The Enforcernent Directorate has issued surnmons under Section - 50 (2) of the PMLA, conducted searches on the premises of the Directors of petitionel No. 4 and certain crucial and incriminating material has been recovered. Thus, there is an immediate requirement of confronting the Directors of petitioner No. 4 to the documents collected during investigation. For the said purpose, the summons were issued to them for their appearance under Section - 50 (2) of the PMLA.
The petitionels instead of appearing before the Authorized Oft'icer of the Enforcement Directorate and co-operating with the KL. J 30 Crl. P. No. 3966 of 2020 & httch investigation/enquiry, filed the present Criminal Petitions seeking to quash the said summons. 40. Sri B. Narasirnha Sl. rarrna, learned Standing Counsel for Enforcement Directorate. has produced copy of ECIR/HYZOl03/2019 in a sealed cover. This Court has perused the said ECIR, wherein it is specifically mentioned the above source of information, material received, place of occurrence of crime, details of accused, property initially suspected to be proceeds of crirne and rnaterial of commission of offence and reasons to believe that an offence of Monev Laundering has been committed and offence thereof. By mentioning the said facts, it is specifically mentioned in the ECIR that a prima case lbr an offerrce of money laundering under Section - 3 of .
/bcie PMLA and punishable under Section - 4 of the Act appears to have been made out. Therefore, the Enforcement Directorate has registered a case and is taken up fbr investigation under the provisions of the PMLA and the Rules made thereunder. 4l . The investisation ts an exclusively reserved for the Enforcernent Directorate and it is collecting the evidence. Thereafter, E,nfbrcement Directol'ate will follow the procedure laid down under Chapter III of the PMLA i. e. , Attachment, Adjudication and Confiscation. It will follow the procedure under Chapter - V i. e. , Sumrnons, Searchers and Seizures, etc. On completion of the same, including orders passed by the adjudicating authority, there is a KL,J C . P. . \'0. 3966 of2020 & butch JI provision for filing appeal by invoking the procedure laid down under Chapter VI of the said Act. According to the Enfbrcement directorate, instead of co-operating with the Investigating Officer of the Enforcement Directorate pursuant to the summons.
the petitioners have filed the present Criminal Petitions under Section - 482 of Cr. P. C. and, therefore, the present petitions are not maintainable since ECIR cannot be equated with FIR. 42. In view of the above said submissions of the learned standing Counsel for Enforcement Directorate, it is relevant to refer to the definition of investigation' as per Section - 2 (na) of the PMLA, which includes all the proceedings under this Act conducted by the Director or by an authority authorized by the Central Government under this Act lor the collection of evidence. Section - 2 (u) deals with proceeds of crime which means any propelly derived or obtained, directly or indirectly,, by any person as a result of criminal activity relating to a scheduled olfence or the value of any such property.
Section - 3 of the PMLA deals with Offence of money- Laundering, as per which, whosoever directly or indirectly attempts to indulge or knowingly assists or knowingly is a party or is actually involved in any process or activity connected proceeds ol' crime including its concealment, possession, acquisition or use and projecting or claiming it as untainted property shall be guilty of oflence of money-laundering. Section - 5 deals with attachment of property involved in the money-laundering. Section - 44 of PMLA KL,J J2 Crl. P. No. 3966 of 2020 & hatch deals with offences triable by Special Courts, and as per Section - 44 (1) (b), a Special Court rray upon a complaint made by an Authority authorized in this behalf under this Act take cognizance of offence under Section - 3 without the accused beine comrritted to it tbr trial. 43.
A learned single Judge of High Court of Judicature at Hyderabad in Dalmia Cement (Bharat) LimitedT had an occasion to deal with the scope of enquiry under the provisions of the PMLA, registration of crime, issuance of ECIR and also various provisions of the PMLA. By considering the submissions of the parlies and also principle laid down by the Apex Court in various judgments, it was held that investigation under the provisions of the PMLA is only for the purpose of collecting evidence with regard to proceeds of crime in the hands of the persons suspected and their involvement, if any, in the offence under Section - 3 of the PMLA. It was furlher held that it could not able to equate ECIR registered by Enforcement Directorate to an FIR under Section - 154 Cr. P. C. The persons whom sumnrons were issued under Section - 50 of the PMLA cannot be treated as they are accused at present. 44. In the said judgment, the principle laid down by the Apex Court in Ramesh Chandra Mehta v.
State of West Bengal 1970 SC 9401 was referred, wherein it was held that normally a [AIR person stands in the character of an accused when a first information reporl is lodged against him in respect ofan offence before an Officer KL,J Crl. P. . No. 3966 of 2020 & botcl, J3 competent to investigate it, or when a complaint is made relating to the commission of an of-fence before a Magistrate competent to try or send to another Magistrate tbr trial the oft'ence, where a Customs Officer arrests a person and informs that person of the grounds of his arrest fbr the purpose of holding an enquiry into the infringement of the provisions of the Sea Customs Act which he has reason to believe has taken place, there is no formal accusation of an offence. In the case of an offence by infringement of the Sea Customs Act and punishable at the trial befbre a Magistrate there is an accusation when a complaint is lodged by an officer competent in that behalf betbre the Magistrate. 45.
By ref'erring to the same, it was further held that when an ECIR is lodged with the Directorate of Enforcement, there is no Magisterial intervention unlike an FIR and mere registration of ECIR against the suspects of off'ence under Section - 3 of the PMLA cannot go to mean that such persons are accused. The protection against testimonial compulsion as under Cr. P. C as well as under Article - 20 (3) of the Constitution of India would not be available as claimed by the petitioners therein. 46. Even in the present case also, ECIR was registered by the Enfbrcement Directorate basing on the case registered by CBI fbr the schedule offences under PMLA. Thev have conducted searches and seized documents f'rom the premises of the petitioners. It has issued KL,J JJ Crl. P. No.
3966 of 2020 & botch summons under Section - 50 (2) of PMLA, directing the petitioners to appear before it for the puryose of recording their statements and to produce records as part of investigation and also to confront the documents collected by it during searches. The petitioners instead of co-operating with the Investigating Officer in completing the investigation filed the present petitions to quash the sumrnons issued by the E,nfolcement Directorate. As held by High Court of Judicature at Hyderabad in Dalmia Cement (Bharat) LimitedT, the petitioners herein are not accused under PMLA and, therelbre, protection against testimonial compulsion as urrder Cr. P. C. as well as under Arlicle - 20 (3) of the Constitution of India could not be available to the petitioners herein. 47.
In view of the said authoritative pronouncement of law, coming to the facts of the case on hand, as discussed supra, the Enforcement Directorate has initiated investigation under the provisions of the PMI-A considering the fact that the ofTences alleged against the petitioners in both the FIRs registered by Central Bureau ol'lnvestigation are scheduled of-fences. The modus operandi adopted by the petitiorrers in availing the loans and getting the accounts NPA/fiaud and availing OTS by paying meager amounts is specifically mentioned in the complaints dated 30. 06. 201 8 and 29. 02. 2020. KL,J Crl. P. No. J966 l5 oJ 2020 & batch 48. The Enforcernent Directorate has been investigating the present case like other cases where the company takes loan, purposefully defaults on the loans and in the end get away by paying OTS with the bank, where they pay only small percentage of the loan dues and thus cause undue loss to the bank while enriching themselves. It is at investigation stage.
The petitioners have to co-operate with the Investigating Oftlcer by appearing befbre him pursuant to the summons issued by the Enforcement Directorate. 49. In the present case also, the total OTS payment done by 'lhe petitioner No. 4 is only a small fraction ol total dues. details of tlie same are specifrcally nlentioned in the tabular fbrrr mentioned supra. The allegation against petitioner No. 4 is that it has caused a massive loss of Rs. 182. 99 Crores to the public sector banks and the same is also specifically mentioned in the con. rplaints dated 30. 06. 2018 and 29. 02. 2020 by the Central Bank ol India and Bank ol Maharashtra. The said money ultimately belongs to the public and tax payers. Thus, prima the petitioners have committed fraud facie, not only against one or two banks, but against the public in general and it is a 'loan fraud'and it is an'econornic offence' 50.
Such economic tiauds adversely affect the financial and economic well-being of the Nation and have implications which lie beyond the domain of a mere dispute between petitioner No. 4 and the above said banks. The mere fact that the banks which are alreadv KL.. I J6 Crl. P. No. 3966 of 2020 & hatch under stress to clear the NPAs fiom their books accepted the OTS. will not absolve the petitioners frorn criminal charges. The Apex Court in the above said judgments categorically held that in economic oflfences, it is not proper for the High Couft to exercise its inherent powers under Section - ,182 of the Cr. P. C to quash the FlRs/charge sheets. It is nothing but stalling investigation / enquiry initiated by the Authorized Offlcer under the provisions of PMLA. 5l The Apex Coun, in a recent in Sau. Kamal . iudgrrent Shivaji Pokarnekar v.
The State of Maharashtrarr, categorically held that quashing the crirninal proceedings is called for only in a case where the cornplaint does not disclose any offence, or is frivolous, vexatious, or opplessive. If the allegations set out in the complaint do not constitute the offence of which cognizance has been taken by the Magistrate, it is open to the High Court to quash the same. It is not necessaly that a meticulous analysis of the case should be done before the Trial to find out whether the case would end in conviction or acquittal. If it appears on a reading ofthe complaint and consideration of the allegations therein, in the light of the statement made on oath that the ingredients of the offence are disclosed, there would be no justification for the High Couft to interfere. Defences that may be available, or facts/aspects which when established during the trial, may lead to acquittal. are not grounds for quashing the complaint at the threshold.
At that stage, the only question relevant is whether the ' arn zors Se. a+z KI,. ,I Crl. P. . \o. 3966 of 2(t20 & btth . l-averments in the complaint spell out the ingredients of a criminal ofJ-ence or not. 52. It is further held that the correctness or otherwise of the said allegations has to be decided only in the Trial. At the initial stage of issuance of process it is not open to the Courls to stifle the proceedings by entering into the merits of the contentions made on behalf of the accused. Criminal complaints cannot be quashed only on the ground that the allegations made therein appear to be of a civil nature. If the ingredients of the offence alleged against the accused are prima facie made out in the complaint, the crirninal proceeding shall not be interdicted. 53. In view of the above said authoritative pronouncement of law,, coming to the facts of the case on hand, as discussed supra, there are specific allegations against the petitioners herein.
The modus operandi adopted by the petitioners is also specifically mentioned in the complaints as stated above. 54. At the cost of repetition, it is once again reiterated that prima it appears that the petilioners are economic Jitcie ot'tenders. 'l-he 'fhe crimes are at investigation stage. Investigating Ot'ticer of Central Bureau of lnvestigation is collecting the evidence and he has to record the statements ol witnesses including the rnaterial rvitnesses. The Enforcernent Directorate is conducting only investigation and it has to proceed further in accordance with the provisions of the PMLA. KL. J Crl. P. . \'rt. 3966 ttf 2020 & borth -1lt ECIR cannot be equated with FIR. The petitioners herein whom sumlrrons under Section - 50 of tlte PMLA were served cannot be treated as accused 55.
Considering the said aspects, and also the seriousness of the offences committed by the petitioners and also the modus operandi adopted by thern, this Court is not inclined to quash the above said FIRs and the ECIR / Summons issued by the Enforcement Directorate. Therefore, al I the Crirninal Petitions lack merit and the sanre are Iiable to be disrnissed. 56. Accordingly. the Crirrinal Petitions are disn. rissed. The interim orders passed by this Courl on 15. 09. 2020 in Crl. P. Nos. 3966 and 3982 of 2020 and on 19. 10. 2020 in LA. No. 2 of 2020 in Crl. P No. 4272 of 2020 stand vacated. As a sequel, miscellaneous petitions, if any, pending in all the Criminal Petitions shall stand closed. I SD/. K. AMMAJI I ASSISTNAT REGISTRAR \ //TRUE COPY// J SECTION OFFICER To, One Fair Copy to the Hon,ble Sri Justice K. LAKSHMAN (For His Lordships kind perusal) l The station House officer, cBr/BS AND FC porice statron, Bangarore. 2. One CC to Sri D. B. Chaitanya, Advocate tOpUCl 3.
One CC to Sri D. B. Narasimha Sharma, AOro. rtu tOpUCl 4 Two ccs to K. surender (speciar pubric prosecutoi, tor c'et;Hign court for the S"tate of Telangana, at Hyderabad _ [OUT] 5. 6LR Copies 6. The Under Secretary, Union of lndia Ministry of law, Justice and Company Affairs, New Delhi T The secretary Advocates Association (TG) Library, High court Buirdings Hyderabad 8. Twro CD Copies \z HIGH COURT KLJ DATED:2211212020 I It E 14 ( o. ( 24 DECIMr, t COMMON ORDER CRLP. No. 3966, 3982 and 4272 ot 2020 DISMISSING THE CRIMINAL PETITIONS 1N \fcojt "L l/"qq \,{*-
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