TMI Blog2011 (4) TMI 1547X X X X Extracts X X X X X X X X Extracts X X X X ..... uter Services Limited (in short M/s SCSL ) addressed a confessional letter to the Board of Directors revealing certain financial irregularities in M/s SCSL. As per this letter, the balance-sheet as on 30.09.2008 showed inflated (non-existent) cash and bank balances of Rs. 5,040/- crores, an accrued interest of Rs. 376/- crores which is non-existent and an understated liability of Rs. 1,230/- crores on account of funds arranged by him and an overstated debtors position of Rs. 490/- crores (as against Rs. 2,651/- crores reflected in the books). He also revealed several other factual details which resulted an increase in artificial cash and bank balances. (b) He also revealed several frauds and cooking books of accounts ever happened in India's corporate history. Due to the fraud on the part of the persons in Management including the Financial Advisors, Auditors, etc., many investors suffered loss and on the complaint of one of such investors, a First Information Report (in short FIR ) was registered on 09.01.2009 by the Andhra Pradesh State Crime Investigation Department against the then Chairman, Directors and Auditors of M/s SCSL and others under Section 120B read with Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n by the Auditors addressed to the banks seeking confirmations about the balances. (h) Though deficiencies were found in Information Technology General Check, no substantial and elaborate examination of the financial accounts was conducted by him. (i) Control deficiencies identified in the integrated audit were not brought to the notice of the Audit committee. (j) The above overt acts of A4 reveal the offences punishable under Section 120B read with Sections 420, 419, 467, 471 and 477A of IPC. 5 . The role of Sri S. Gopalakrishnan (A4), in CC 3/2010 : (a) He failed to comply with the Audit Assurance Standards while conducting Statutory Audit in case of M/s SCSL. (b) He failed to point out the existence of forged and fabricated invoices in the Invoice Samples. (c) As a quid pro quo for his role he received very high remuneration. (d) The above overt acts of A4 reveal the offences punishable under Section 120B r/w 420, 471 477A IPC. The role of Sri V.S. Prabhakara Gupta (A10), Head Internal Audit, M/s SCSL in the Supplementary Charge-sheet: (a) He was the Associate In-charge - Internal Audit and was the Global Head of Internal Audit of M/s SCSL dur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ars i.e. from 2000-07. He also relied on the order of this Court in Criminal Appeal No. 2068-2072 of 2010 dated 26.10.2010 wherein this Court cancelled the bail granted by the High Court insofar as A1, A2, A3, A7, A8 and A9 are concerned. 8. On the other hand, Mr. Mukul Rohatgi, learned senior counsel appearing for A4 highlighted the alleged role between those accused, i.e. A1, A2, A3, A7, A8 and A9 whose bail has been cancelled by this Court and that of A4. According to him, the order of this Court dated 26.10.2010 in Criminal Appeal No. 2068-2072 of 2010 is not applicable. A4 had been in custody for one year and five months before he was enlarged on bail. He also demonstrated that even according to the prosecution the role assigned to A4 and A5 is identical and when A5 was ordered to be released by this Court even as early as on 04.02.2010, the High Court rightly applied parity between them and granted bail. He also contended that A4 was not an employee of M/s SCSL but was partner in M/s Price Waterhouse and has nothing to do with the alleged claim in M/s SCSL. 9. Shri D. Rama Krishna Reddy, learned Counsel appearing for A10 submitted that though he was an internal auditor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oposes to examine 470 witnesses; (iii) a very large volume of records have been produced in this case; (iv) therefore, it can be easily assumed that the trial of this case will take a long time even to start. Considering these factual details without expressing any opinion on the merits of the case regarding the nature of offence or gravity thereof allegedly committed by A5 and having regard to the fact that he had been in custody for more than a year released him on bail on 04.02.2010 by imposing certain conditions. 14. Now the question is whether the same reasoning's are applicable to the Respondents herein, i.e. A4 and A10? 15. We have already pointed out that in view of the appeal filed by Talluri Srinivas (A5) against the dismissal of his bail application by the High Court, this Court considering the facts stated in the earlier paragraph passed an order on 04.02.2010 releasing A5 on bail subject to certain conditions. First of all, there is no similarity in respect of the role assigned to A4 and A5. Mr. Mukul Rohtagi, learned senior counsel, after taking us through several materials, submitted that even as per the prosecution, the role assigned to A4 and A5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at out of 697 witnesses, the prosecution has dropped 470 witnesses and only 227 witnesses are to be examined. Out of this, 193 witnesses have already been examined and some of them are to be cross-examined. According to the him, only 30 more witnesses have to be produced and examined. 18. In view of the directions of this Court in the subsequent order dated 26.10.2010, the trial is proceeding on day-to-day basis and likely to be concluded by 31.07.2011. We are satisfied that the reasons stated while granting bail for Talluri Srinivas (A5) by this Court on 04.02.2010 are not applicable to the Respondents herein. Accordingly reliance on the basis of the bail order granted in favour of A5 cannot be applied to these Respondents. 19. Mr. Mukul Rohatgi, learned senior counsel, appearing for A4 and Mr. D. Rama Krishna Reddy, learned Counsel appearing for A10 strongly commented the conduct of the CBI in not challenging the order of the High Court granting bail to these persons and failure on their part to place these matters before the Court at the appropriate time. It is not in dispute that the High Court granted bail to these Respondents on 25.06.2010 and the CBI challenging the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut considering whether any supervening circumstances have rendered it no longer conducive to a fair trial to allow the accused to retain his freedom by enjoying the concession of bail during the trial. We have already pointed out that the issue before us is not for cancellation of bail granted earlier, the question is whether in the facts and circumstances of the magnitude of the scam, the bail granted in favour of all the main accused have been cancelled and the Respondent Nos. A4 and A10 being external and internal auditors respectively, their role being paramount in inflating processing assets and bank balances of M/s SCSL, we are of the view that the High Court is not justified in granting bail. 22. In view of the specific allegation by the prosecution that A4 and A10 were party to the criminal conspiracy showing inflated (non-existent) cash and bank balances reflected in the books, inflated proceeds over a period of last several years , frauds and cooking books of accounts, we are satisfied that the High Court ought not to have granted bail to these Respondents. Considering the subsequent order of this Court dated 26.10.2010 cancelling the bail in respect of other accused a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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