Businessman must face trial over alleged diversion of ₹2 crore in STC export-finance fraud, Bombay High Court rules

The CBI alleged that funds advanced by the State Trading Corporation for exports were diverted through intermediary entities, including into the account of Sahara Exim Pvt. Ltd.

The Applicant, a former director, was alleged to have continued managing the company and its banking transactions and to have assisted in diverting ₹2 crore in concert with other accused.

The Applicant disputed his involvement, relied on his absence from the company’s directorship at the relevant time and offered an innocent explanation for the funds.

The Special Judge rejected his discharge application and framed charges under Sections 467 and 471 read with Section 120B IPC. The Applicant challenged both orders under Section 482 CrPC.

1. Whether the prosecution material, taken at face value, disclosed a prima facie case or grave suspicion sufficient to refuse discharge and proceed to trial against the Applicant.

2. Whether the alleged deficiencies in the charge-framing order and the Applicant’s prior examination as a witness warranted quashing the discharge and charge orders under Section 482 CrPC.

Under Sections 227 and 228 CrPC, the court may sift and weigh the prosecution material for the limited purpose of deciding whether a prima facie case exists; it must not conduct a mini-trial or assess whether conviction is likely.

A charge may be framed where the material, taken at face value, raises grave or strong suspicion and supports a presumptive view that the accused might have committed the offence; discharge is appropriate where the charge is groundless or the material, even if unrebutted, makes out no case.

The High Court’s jurisdiction under Section 482 CrPC does not permit a meticulous reassessment of evidence at the discharge stage; interference is warranted where, among other circumstances, the allegations and material taken at face value do not constitute an offence.

The alleged offences included conspiracy and forgery-related offences under the IPC.

The Court found that statements by Sahara Exim’s accountant and directors prima facie indicated that the Applicant continued to control the company’s affairs and banking transactions after its sale.

The alleged ₹2 crore transfer into Sahara Exim’s account through two intermediary entities, despite no corresponding export by the Applicant, supported a prima facie inference of participation in the alleged diversion and raised grave suspicion.

The Applicant’s explanation that the money related to a cash payment for clothing materials, and his reliance on having previously been examined as a witness, did not displace the prosecution material at this stage; those matters were for trial.

Applying the limited discharge-stage test, the Court held that the case could not be characterised as groundless and found no basis to interfere with the orders.

It found no ground to quash the impugned orders on the second issue.

The application under Section 482 CrPC was dismissed, and the trial was directed to proceed independently, without being influenced by the Court’s prima facie observations.