Bail denied to ECL executive in alleged ₹315-crore fund diversion case involving inflated Bentley purchase and five-month evasion of arrest

An FIR was registered by the Economic Offences Wing, Delhi, against the applicant and other directors/key managerial personnel of Exclusive Capital Ltd. (ECL), an NBFC, under Sections 420, 409, 468, 471, 477A and 120B of the IPC.

The prosecution alleged that the accused, while exercising control over ECL, diverted approximately ₹315 crores raised from investors and creditors through unsecured related-party loans, inflated vehicle purchases, loans to entities lacking business or repayment capacity, and falsification of accounts.

The applicant was an Executive Director and shareholder of ECL, CFO/director in related companies, and an authorised signatory for ECL’s bank accounts.

The chargesheet attributed to him participation in board decisions, sanctioning of unsecured loans, diversion of funds, manipulation of financial records, and creation of false documents.

The applicant contended that he held only one share, had not personally benefited, most loans had been repaid, the investigation was complete, and the chargesheet had been filed.

The prosecution opposed bail on the grounds of the seriousness of the economic offences, the applicant’s alleged non-cooperation, evasion of arrest for approximately five months, and the risk of tampering with financial evidence.

Whether the applicant was entitled to regular bail despite the serious allegations of diversion and misappropriation of ECL’s funds through related-party transactions and falsification of accounts?

Whether the applicant’s limited shareholding, absence of direct personal benefit, repayment of most loans, and the complainants’ subsequent acquisition of shares/CCPS negated the offences of criminal breach of trust and cheating?

Whether the applicant’s prior non-cooperation with the investigation and alleged evasion of arrest justified refusal of bail?

The Court applied Sections 420, 409, 468, 471, 477A and 120B of the IPC, concerning cheating, criminal breach of trust by a banker/agent, forgery for the purpose of cheating, use of forged documents, falsification of accounts, and criminal conspiracy.

It held that entrustment for the purposes of criminal breach of trust need not be made by the complainant personally and that criminal law may be set in motion by any person; directors exercising dominion over company funds may fall within the principle of trusteeship or agency.

The Court relied on Bhim Sain Arora v. State, Shivnarayan Laxminarayan Joshi v. State of Maharashtra, and R.K. Dalmia v. Delhi Administration for the proposition that directors may possess dominion over company assets and may be liable for breach of trust.

It further relied on State of Gujarat v. Mohanlal Jitamalji Porwal, Y.S. Jagan Mohan Reddy v. CBI, and Anil Kumar Yadav v. State (NCT of Delhi), which recognise the heightened seriousness of economic offences and require consideration of the nature of the offence, evidence, flight risk, witness influence, and possibility of tampering while deciding bail.

The Court also followed Centrum Financial Services Ltd. v. State of NCT of Delhi, which cautions against granting bail merely by characterising a serious financial crime as a civil or commercial dispute.

The Court found prima facie material indicating that ECL’s funds were diverted through unsecured and undocumented related-party loans, inflated purchase of a Bentley vehicle, loans to entities without repayment capacity, and false accounting entries.

The applicant’s position as Executive Director, authorised signatory, director/CFO in related entities, and participant in board meetings was considered more significant than his nominal one-share holding.

The Court rejected the argument that repayment of loans erased the alleged offences, holding that the original dishonest diversion or misappropriation constituted the relevant offending act and subsequent repayment did not necessarily cure it.

It also held that the complainants’ later acquisition of shares or CCPS did not negate entrustment, since the funds belonged to ECL and the applicant allegedly exercised dominion over them.

The seriousness and complexity of the alleged financial manipulation, together with the applicant’s failure to comply with an undertaking to join the investigation, prior evasion of arrest, evasive responses during investigation, and potential ability to interfere with financial trails, weighed against release on bail.

The Court clarified that it was not conducting a mini-trial and that its observations were confined to the bail determination.

It held that the prima facie allegations of large-scale diversion of ECL’s funds, the applicant’s alleged managerial and operational role, the seriousness of the economic offences, and his conduct in evading and failing to cooperate with the investigation justified continued custody.

The application for regular bail was accordingly dismissed.

The Court clarified that its observations would not affect the merits of the trial or other proceedings.