CENTRUM FINANCIAL SERVICES LIMITED vs. STATE OF NCT OF DELHI

[REPORTABLE] IN THE SUPREME COURT OF INDIA CRIMINAL APPELLATE JURISDICTION CRIMINAL APPEAL NO.94 OF 2022 Centrum Financial Services Limited …Appellant                                                                                         Versus State of NCT of Delhi and Anr.            …Respondents J U D G M E N T M. R. Shah, J. 1. Feeling aggrieved and dissatisfied with the impugned judgment and order dated 14.09.2020 passed by the High Court of Delhi at New Delhi in Bail Application No.2442 of 2020   by   which   the   High   Court   has   allowed   the   said Signature Not Verified Digitally signed by R Natarajan Date: 2022.01.28 16:53:10 IST Reason: application preferred by the Respondent No.2 herein and has directed that he be released on bail in connection with 1 FIR No.128 of 2019 PS Economic Offences Wing in New Delhi for the offences under Sections 409, 420, 467, 468, 471 and 120B IPC, the original complainant has preferred the present appeal. 2. That   the   appellant   herein   a   non­banking   financial company   (NBFC)   lodged   an   FIR/complaint   with   the Economic Offences Branch, New Delhi against the company M/s Sri Aranath Logistics Limited (formerly known as M/s LMJ   Logistics   Limited),   Respondent   No.2   herein   Jayant Kumar Jain – Managing Director and others for the offences under Sections 409, 420, 467, 468, 471 and 120B IPC.  It was alleged against the accused – Respondent No.2 herein that he is the Managing Director of M/s Aranath Logistics Limited engaged in the business of multi­commodity trading of agricultural and non­commodities agricultural.  That by way   of   written   agreement   accused   availed   loan   credit facilities to the tune of Rs.25 crores for a term of 180 days from the complainant company.  It was alleged that the said amount of Rs.25 crores was disbursed in the year 2017.  It was   alleged   that   the   said   amount   of   Rs.25   crores   was required to be used by the company for its own purpose.  It 2 was further alleged that for the purpose of repayment of loan, no stock statement was submitted and mortgage was also   not   created   as   agreed   between   the   parties.     It   was further alleged that instead of using the amount for the purpose   mentioned   in   the   agreement   the   same   was transferred to several fake/shell companies.  It was further alleged that at the time of availing the loan the accused misrepresented   to   the   complainant   about   the   financial health of the company of the accused.  It was further alleged that the amount of around Rs.8 crores stated to have been diverted into such shell companies which were created by the accused in the name of his employees and bank account was opened for transaction of those companies by using forged   and   fabricated   documents   of   identities   of   those employees and the said amount was further siphoned off to other companies which were connected to the accused.   It was   further   alleged   that   Directors   of   those   shell   entities have stated that they have not opened the bank account in the said name or said firm and their KYC form was misused by the accused. It was further alleged that a sum of Rs.15 crores   was   transferred   to   another   company   –   LMJ 3 International Ltd. and the said amount was used for the purpose of setting off against the previous liability of the said company with the Corporation Bank, Calcutta.   That after the preliminary investigation on the complaint of the appellant   herein   –   original   complainant,   the   Economic Offences   Wing   having   found   a   prima   facie   case   against Respondent   No.2   and   others,   FIR   being   FIR  No.128   was registered.   The Respondent No.2 came to be arrested on 03.07.2020.     The   Respondent   No.2   filed   an   application before   the   learned   Metropolitan   Magistrate   seeking   bail under Section 437 Cr.P.C.    One another bail application for regular   bail   being   Bail   Application   No.903   of   2020   was moved on behalf of the Respondent No.2 – Accused before the Court of Sessions Judge, Patiala House Courts, New Delhi.  The said bail application was opposed by the I.O.  A status report was filed pointing out how the amount of 25 crores   was   siphoned   off   and   transferred   to   other   shell companies   and   how   the   said   amount   was   used   by   the Respondent No.2 for other companies.   Vide order dated 04.08.2020   by   a   detailed   speaking   order,   the   learned Sessions   Judge   dismissed   the   bail   application.   That 4 thereafter, respondent no.2 – accused filed the present bail application before the High Court. The detailed status report was filed on behalf of the I.O.  It was also submitted that the charge­sheet has been filed against Respondent No.2 and other   co­accused.     The   detailed   status   report   was   filed pointing out how a sum of Rs.25 crores to be used by M/s LMJ   Logistic   Limited   was   transferred   to   shell   and   other companies such as M/s LMJ Logistic Limited and how a systematic fraud was committed.  Despite the above, by the impugned judgment and order, the High Court has directed to release Respondent No.2 on bail merely on the ground that the case arises out of a commercial transaction and is based on documents already seized. 3. Feeling aggrieved and dissatisfied with the impugned judgment and order passed by the High Court directing to release   Respondent   No.2   –   accused   on   bail,   the   original complainant has preferred the present appeal. 3.1 At the outset, it is required to be noted that after this Court directed to issue notice to the respondents vide order dated 17.12.2020 and thereafter the matter was adjourned from time to time, on 08.01.2022 the petitioner(appellant) 5 moved   an   application   being   Criminal   Miscellaneous Application   No.4818   of   2022   seeking   permission   to withdraw the present Special Leave Petition submitting that during the pendency of the present Special Leave Petition, a settlement agreement has been entered into between the petitioner(appellant)   and   Respondent  No.2   on   08.01.2022 and   therefore,   the   Petitioner(appellant)   is   no   longer interested in pursuing the present Special Leave Petition in view of the settlement.  The said application was heard by this   Court   on   10.01.2022.     This   Court   shown   its disinclination to permit the petitioner(appellant) to withdraw the   Special   Leave   Petition   by   observing   that   the petitioner(appellant) cannot be permitted to withdraw the Special   Leave   Petition   in   view   of   the   serious   allegations against Respondent No.2 and others.   That thereafter the learned   counsel   appearing   on   behalf   of   the petitioner(appellant)   withdrew   the   said   application.     That thereafter the present Special Leave Petition was adjourned to 17.01.2022,   at the request of the learned counsel for the respective   parties   to   consider   the   present   Special   Leave Petition on merits. 6 4. Shri   Mukul   Rohatgi,   learned   Senior   Advocate appearing   on   behalf   of   Respondent   No.2   has   made   the following   submissions   in   support   of   his   prayer   and requested not to cancel the bail granted by the High Court. 4.1 It is vehemently submitted by Shri Rohatgi, learned Senior Advocate appearing on behalf of Respondent No.2 that   in   the   facts   and   circumstances   of   the   case   and considering the fact that the dispute is of a civil nature arising out of commercial transactions and the investigation is concluded and the case rests on documentary evidence already   collected   by   the   Investigating   Officer   during   the investigation which have been seized and that the impugned order passed by the High Court releasing Respondent No.2 on bail is as far as back on 14.09.2020 and thereafter there are no allegations that Respondent No.2 has misused the liberty   in   between   and   that   during   the   investigation Respondent   No.2   has   cooperated   and   neither   the complainant nor the State are opposing the bail application seriously, this Court may not cancel the bail. 4.2 It is further submitted by Shri Rohatgi, learned Senior Advocate for Respondent No.2 that in the present case out 7 of Rs.25 crores, Rs.15 crores were transferred to the sister concern LNJ International Limited and the sister concern paid off its loan which cannot be said to be an offence. 4.3     Shri   Rohatgi,   learned   Senior   Advocate   on   behalf   of Respondent   No.2   –   accused   has   heavily   relied   upon   the decisions of this Court in the case of  Dolat Ram vs. State of Haryana, (1995) 1 SCC 349; X vs. State of Telangana, (2018) 16 SCC 511; Prabhakar Tewari vs. State of U.P., (2020) 11 SCC 648  as well as the decision of this Court in the   case   of   Gurcharan   Singh   vs.   State   (Delhi in   support   of   his Administration)   (1978)   1   SCC   118   submissions that once the bail has been granted by the High Court and/or the Court below the same may not be cancelled unless it is found that the accused has violated any of the terms and conditions of the bail order and/or has misused any liberty shown to him while releasing him on bail and/or there are any other peculiar   circumstances.  4.4. Making the above submissions it is prayed to dismiss the present appeal. 8 5. Present   appeal   is   opposed   by   learned   Counsel   on behalf of Respondent – State.  A status report on behalf of the State has been filed in which it is stated that the State had  filed a status report on 09.09.2020 before the  High Court   and   before   the   High   Court,   the   State   vehemently opposed   the   bail  of   Respondent   No.2.     However,   at  that stage,   further   investigation   was   underway   and   a supplementary charge­sheet was yet to be filed.  The same has   now   been   filed.     The   State   shall   abide   by   the directions/order passed by this Hon’ble Court. 6. In   the   status   report   it   has   been   pointed   out   how systematic fraud has been committed by Respondent No.2 and   others   siphoning   off   huge   amount   of   Rs.25   crores through other Shell Companies who are found to be fake and   non­existent.    A  supplementary  charge­sheet  is  also filed on further investigation.  A detailed status report has been   filed   pointing   out   how   shell   entities   were   used   as conduit entities to transfer money to the main company of the accused i.e., LMJ Logistics Limited. 7. We have heard learned counsel appearing on behalf of the respective parties at length. 9 8. Having   gone   through   the   impugned   judgment   and order   passed   by   the   High   Court   directing   to   release   the Respondent No.2 on bail it appears that the High Court has directed to release the Respondent No.2 on bail mainly on the   ground   that   the   case   arises   out   of   a   commercial transaction   and   is   based   on   documents   already   seized. Para   16   contains   the   only   reasoning   while   releasing Respondent No.2 on bail, which reads as under: “16.  Coming to the facts of the present case, it is an admitted   fact   that   the   co­accused   namely   Navin Kumar Jain and Hulash Chand Jain were the other Directors and shareholders of SALL as well as LMJIL. They also signed/undertook personal guarantee to the complainant company in their capacity as Directors of the SALL against the “Working Capital Demand Loan”. Navin   Jain   had   also   signed   the   Tripartite   Off­take Agreement in the capacity of Director of LMJIL.  Both of them were not even arrested and the charge sheet against them was filed without  arrest.   During two years   of   enquiry/investigation,   the   petitioner   joined investigation on multiple occasions.   After his arrest, the EOW sought only one day PC remand.  Neither in the Status Report nor during the course of arguments, any apprehension was shown that the petitioner is a “flight   risk”.     The   case   arises   out   of   a   commercial transaction and is based on documents that already stand seized.   The petitioner has already approached the   NCLT   where   a   moratorium   on   the assets/properties has been declared and an IRP has been   appointed.     The   complainant   has   already approached NCLT.” 9. From the aforesaid it can be seen that while releasing the Respondent No.2 on bail the High Court has not at all 10 adverted to and/or considered the nature of accusation and the   material   found/collected   during   the   course   of investigation and the serious allegations of siphoning off the huge amount through various shell companies.   The High Court has not at all dealt with and/or considered any of the allegations and/or material collected during the course of the investigation which were specifically pointed out and mentioned in the status report filed by the I.O.   From the status   report   and   even   the   charge­sheet/supplementary charge­sheet papers it has been found during the course of the investigation that a sum of Rs.25 crores was disbursed by the complainant to Respondent No.2 and its company M/s   LMJ   Logistics   Limited.     The   said   amount   was disbursed   for   its   own   use.     During   the   course   of   the investigation, it has been found that the said amount was debited to the various companies/entities as under:

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9.1 During   the   course   of   the   investigation,   it   has   been found   that   Rs.15   crores   was   transferred   to   another 12 company/LMJ International Limited through some of the fake companies and the said another company – M/s LMJ International Limited used that amount to clear its dues of Corporation Bank, Kolkata.  During the investigation it has been found that a sum of Rs.2,49,25,720/­ was transferred to   one   Sairam   Agrocorp   Pvt.   Ltd.   and   it   was   further transferred to LMJ International Limited on the same day. Similarly, the amount of Rs.2,51,30,176/­ was transferred in the account of Vasudev Agro Foods Pvt. Ltd. out of which Rs.1.82 crores approximately was transferred into account of Aldera Traders Pvt. Limited and it was further transferred to LMJ International Limited on the same day.  During the course   of   the   investigation,   it   has   been   found   that   an amount   of   Rs.99,98,874/­   and   Rs.98,74,563/­   were transferred in the account of Sairam Agrocorp Pvt. Ltd. and consolidated   amount   of   Rs.1,98,72,914/­   was   further transferred to LMJ International Limited on the same day. It has been further found that an amount of Rs.99,96,387/­ was transferred to Vasudev Agro Foods Pvt. Limited and it was further transferred to LMJ International Limited on the same day.  Thus, it has been found that the credit facility to 13 the   tune   of   Rs.25   crores   availed   by   M/s   LMJ   Logistics Limited were not used for any business purposes i.e., sale purchase   of   agri   or   non­agri   products   but   it   has   been rotated through shell entities and immediately transferred to other company M/s LMJ International Limited to square off the liabilities through the shell companies. During the course of the investigation/further investigation it has been revealed that Sairam Agrocorp Pvt. Ltd. and Vasudev Agro Foods Pvt. Ltd. are fake and shell companies and they do not exist at the registered address.  During the course of the investigation, it has been found that some of the employees were made directors without their knowledge and their KYC and   other   documents   were   misused   without   their knowledge. As per the charge­sheet/supplementary charge­ sheet   it  appears   that   the   investigation   revealed   that   the accounts in question were created to inflate the turnover of the company so that they could avail the credit facility from various banks.  It further reveals that the shell companies were   created   to   misappropriate/siphoned   off   the   money entrusted to them as a loan to the tune of Rs.25 crores.  It has been revealed that there was no genuine transaction of 14 sale and purchase but it was simply routing and re­routing of the amount received from the complainant to different entities which were in actual being operated by Respondent No.2.     All   these   aforesaid   allegations   and   the   material collected during the course of the investigation which are being part of the charge­sheet and supplementary charge­ sheet are not taken note of by the High Court and the High Court has just simply ignored the same and has released Respondent   No.2   on   bail   by   simply   observing   that   case arises out of a commercial transaction and the dispute is of a civil nature.   Therefore, the High Court has not at all taken into consideration the relevant considerations while grant of bail.  Even the High Court has not at all taken note of the reasoning given by the learned Sessions Court while rejecting the bail application of Respondent No.2. 9.2 In the  light of  the above facts, it is required to be considered   whether   the   High   Court   is   at   all   justified   in releasing Respondent No.2 on bail.   10. At   this   stage   few   decisions   of   this   Court   on   the relevant considerations to be considered by the High Court while grant of bail are required to be referred to.  In the case 15 of  Prasanta Kumar Sarkar vs. Ashis Chatterjee and Anr., (2010) 14 SCC 496,  while cancelling the bail and quashing and   setting   aside   the   order   passed   by   the   High   Court granting the bail to the accused it is observed in para 9 to 12 as under:

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12.  It is also pertinent to note that, as stated above, the Additional Chief Judicial Magistrate had rejected three bail applications of the accused but the High Court   did   not   find   it   worthwhile   to   even   make   a reference to these orders. In this regard, it would be useful  to  refer   to   the  following  observations  echoed in  Kalyan Chandra Sarkar  v.  Rajesh Ranjan  [(2004) 7 SCC 528]: (SCC p. 536, para 12) 17

10.1 In the case of   Neeru Yadav vs. State of UP & Anr., (2016) 15 SCC 422 , it is held by this Court in para 11 as under:

10.2 In   Anil Kumar vs. State (NCT of Delhi), (2018) 12 SCC 129 , it is observed and held by this Court that while granting bail, the relevant considerations are, (i) nature of seriousness of the offence; (ii) character of the evidence and 18 circumstances which are peculiar to the accused; and (iii) likelihood of the accused fleeing from justice; (iv) the impact that his release may make on the prosecution witnesses, its impact on the society; and (v) likelihood of his tampering. 10.3 In the case of  Prahlad Singh Bhati vs. NCT of Delhi & Ors. ,  (2001) 4 SCC 280,  it is observed and held by this Court that the jurisdiction to grant bail has to be exercised on the basis of well settled principles having regard to the circumstances of each case and not in an arbitrary manner. It is observed and held as under: “The jurisdiction to grant bail has to be exercised on the basis of well settled principles having regard to the circumstances of each case and not in an arbitrary manner.  While granting the bail, the court has to keep in   mind   the   nature   of   accusations,   the   nature   of evidence   in   support   thereof,   the   severity   of   the punishment   which   conviction   will   entail,   the character,   behaviour,   means   and   standing   of   the accused,   circumstances   which   are   peculiar   to   the accused,   reasonable   possibility   of   securing   the presence   of   the   accused   at   the   trial,   reasonable apprehension of the witnesses being tampered with, the larger interests of the public or State and similar other considerations.   It has also to be kept in mind that   for   the   purposes   of   granting   the   bail   the Legislature has used the words ‘reasonable grounds for believing’ instead of “the evidence” which means the court dealing with the grant of bail can only satisfy it as to whether there is a genuine case against the accused   and   that   the   prosecution   will   be   able   to 19 produce   prima   facie   evidence   in   support   of   the charge.” 11. Applying   the   law   laid   down   by   this   Court   in   the aforesaid decisions to the facts of the case on hand and the grounds   on   which   the   High   Court   has   released   the Respondent No.2 on bail, we are constraint to observe that in the instant case while dealing with the application of the accused for grant of bail, the High Court has completely lost sight of the basic principles enumerated above.   The High Court has not at all considered the modus operandi adopted by   the   accused   in   commission   of   serious   offence   of siphoning   and/or   transferring   the   huge   sum   to   another company through shell companies.   The High Court has also not taken into consideration the status report filed by the I.O. in which in detail it has been pointed out how systematically the accused have committed the offence and misappropriated/siphoned off the huge sum through shell companies.  Thus, it appears that the High Court has not adverted to the relevant considerations and has granted the bail mechanically by observing that the case arises out of a commercial transaction.   20 12. Now so far as the submission on behalf of the accused that as the accused has been released on bail as far as back on 14.09.2020 and that thereafter there are no allegations of misusing the liberty and therefore the bail may not be cancelled and reliance placed upon the decisions of this Court referred to hereinabove more particularly in the case of  X (Supra)  are concerned at the outset it is required to be noted that this is a case where it is found that the order passed   by   the   High   Court   releasing   the   accused   – Respondent No.2 on bail has been passed mechanically and without   adverting   to   the   relevant   facts   and   without considering the nature of accusation and allegations and the nature of the gravity of the accusation.   Even in the decisions which are relied upon by Shri Rohatgi, learned Senior Advocate appearing on behalf of Respondent No.2, there is no absolute proposition of law laid down by this Court   in   the   aforesaid   decisions   that   once   the   bail   is granted by the High Court, though the High Court could not have granted the bail, in absence of any allegation of misuse of liberty and/or breach of any of the conditions of the bail, 21 the  bail cannot be set aside when grant of bail is itself subject matter of challenge in appeal/revision. 12.1 What is observed and held is that the rejection of bail in a non­bailable case at an initial stage and cancellation of bail  so  granted   has   to  be   dealt   with  and  considered   on different   basis   and   that   very   cogent   and   overwhelming circumstances   are   necessary   for   an   order   directing   the cancellation of the bail already granted. Therefore, on very cogent   and   overwhelming   circumstances   the   bail  can   be cancelled.   At this stage the decision of this Court in the case   of   Mahipal   vs.   Rajesh   Kumar   alias   Polia   and   is required to be referred to. Another, (2020) 2 SCC 118 In the said decision, it is observed and held by this Court that though this Court does not ordinarily interfere with the order of the High Court granting bail, however, where the discretion of the High Court to grant bail has been exercised without due application of mind and in contravention of the directions of this Court, such an order of granting bail is liable   to   be   set   aside.     Thereafter   after   drawing   the distinction   between   the   power   of   an   appellate   court   in assessing the correctness of an order granting bail and an 22 application for the cancellation of the bail, in paragraph 16 it is observed and held as under: 

23 considerations,   indisputably   the   superior court can set aside the order of such a grant of   bail.   Such   a   case   belongs   to   a   different category   and   is   in   a   separate   realm.   While dealing   with   a   case   of   second   nature,   the Court   does   not   dwell   upon   the   violation   of conditions by the accused or the supervening circumstances   that   have   happened subsequently. It, on the contrary, delves into the   justifiability   and   the   soundness   of   the order passed by the Court.” 12.2 Thus, as per the law laid down by this Court where a Court   while   considering   an   application   for   bail   fails   to consider   the   relevant   factors,   an   Appellate   Court   may justifiably set aside the order granting bail.  Appellate Court is thus required to consider whether the order granting bail suffers from a non­application of mind or a prima facie view from the evidence available on record. 13. From   the   aforesaid   it   emerges   that   while   releasing Respondent   no.2   on   bail,   the  High  Court  has   not  at  all considered  the   relevant  factors  including   the  nature  and gravity of accusation; the modus operandi and the manner in which the offences have been committed through shell companies and creating the false/forged documents and/or misusing the PAN Cards, Aadhar Cards and KYCs of the employees and showing them as Directors of the fake and 24 shell companies.  As observed hereinabove, the High Court has not at all considered and taken into consideration the status report and the evidence collected during the course of the investigation.  Therefore, the impugned judgment and order passed by the High Court releasing Respondent No.2 on bail is unsustainable as the High Court while releasing Respondent No.2 on bail has not exercised the jurisdiction judiciously   and   has   not   considered   the   relevant   factors which are required to be considered while grant of bail.   14. In view of the above and for the reasons stated above, the impugned judgment and order passed by the High Court releasing Respondent No.2 on bail deserves to be quashed and set aside and is accordingly quashed and set aside. Now on quashing and setting aside the impugned judgment and order passed by the High Court releasing Respondent No.2 on bail and consequently the bail being set aside, the Respondent   no.2   –   accused   to   surrender   before   the concerned Court/Jail Authority forthwith. Present Appeal is accordingly allowed.   25 However, it is made clear that any observations by this Court in the present order shall not affect the trial and the observations made in the present order be treated to be confined   to   the   impugned   judgment   granting   bail.     It   is further   observed   that   after   surrender   it   will   be   open   for Respondent No.2 to move an appropriate application for bail before the High Court afresh after a period of three months, which shall be considered by the High Court in accordance with   law   and   on   its   own   merits   and   after   taking   into consideration   the   relevant   material   collected   during   the course   of   the   investigation   which   is   part   of   the   charge­ sheet/further   charge­sheet   and   taking   into   consideration the relevant factors to be considered while grant of bail. ……………………………….J.                [M.R. SHAH] NEW DELHI;            ……………………………….J. JANUARY 28, 2022.          [SANJIV KHANNA] 26