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2020 (12) TMI 1355 - HC - Money LaunderingMoney Laundering - proceeds of crime - staff members accountable for procedural lapses - genuinty of purchase transactions under LC and corresponding sales transactions performed by the company - diversion of funds - abnormal delay in lodging the complaints by both the banks - alleged forensic audit alleged to have been conducted by M/s. S.P. Rungta and Associates is behind back of the petitioners and they have not given any opportunity to the petitioners - loan transaction can be converted into a criminal prosecution or not - Utilization of loan amount for a purpose other than for which it is sanctioned. HELD THAT - In all the OTS it has been found that all the banks were put to a total loss to a tune of Rs.182.99 Crores approximately. The Enforcement Directorate has initiated investigation/enquiry under the provisions of PMLA since the offences 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 falling in any of the exceptions mentioned by the Apex Court in State of Haryana v. Bhajan Lal 1990 (11) TMI 386 - SUPREME COURT . The Apex Court in Parbatbhai Aahir alias Parbatbhai Bhimsinhbhai Karmur 2017 (10) TMI 1194 - SUPREME COURT categorically held that economic offences involving the financial and economic well-being of the State have implications which lie beyond the domain of mere 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. Similar principle was laid down by the Apex Court in GOPAKUMAR B. NAIR VERSUS C.B.I. AND ORS. 2014 (4) TMI 1291 - SUPREME COURT . In the said judgment it was further held that the offences are certainly more serious. They are not private in nature. The charge of conspiracy is to commit offence under the Prevention of Corruption Act. The accused has also been charged for 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. There are serious allegations against the petitioners. M/s. S.P. Rungta and Associates has mentioned 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 fraud on 30.11.2016 and at paragraph No.14 of the complaint dated 30.06.2018 the Central Bank of India specifically mentioned the details of the same. There are serious allegations that the funds of petitioner No.4 were diverted by petitioner Nos.1 to 3 for their personal needs. Petitioner No.4 has not filed financial statements for the years 2013-14 and 2014-15. Petitioner Nos.1 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 - It is a loan fraud which is a serious fraud and there are serious allegations against the petitioners. The Enforcement Directorate has initiated investigation under the provisions of the PMLA considering the fact that the offences alleged against the petitioners in both the FIRs registered by Central Bureau of Investigation are scheduled offences. The modus operandi adopted by the petitioners in availing the loans and getting the accounts NPA/fraud and availing OTS by paying meager amounts is specifically mentioned in the complaints dated 30.06.2018 and 29.02.2020. There are specific allegations against the petitioners herein. The modus operandi adopted by the petitioners is also specifically mentioned in the complaints - Petition dismissed.
Issues Involved:
1. Quashing of FIRs 2. Allegations of loan fraud 3. Delay in lodging complaints 4. Forensic audit and lack of opportunity for petitioners 5. Acceptance of One Time Settlement (OTS) and its impact on criminal liability 6. Investigation by Enforcement Directorate under PMLA 7. Economic offences and their implications Detailed Analysis: 1. Quashing of FIRs: The petitioners sought to quash FIR No.11 of 2018 and FIR No.RC0352020A0002, arguing that the complaints do not disclose any criminal offence and that the acceptance of OTS should absolve them of criminal liability. The court, however, found that the allegations of loan fraud and the substantial loss caused to the banks justified the continuation of criminal proceedings. The court emphasized that economic offences have broader implications beyond the immediate parties involved and affect the financial and economic well-being of the nation. 2. Allegations of Loan Fraud: The petitioners were accused of committing fraud and cheating the banks, causing a wrongful loss of approximately Rs.182.99 Crores. The court noted that the petitioners obtained loans and credit facilities from various banks, defaulted on repayments, and ultimately settled for a fraction of the dues through OTS. The forensic audit revealed serious lapses, including non-cooperation with auditors and diversion of funds. 3. Delay in Lodging Complaints: The petitioners contended that there was an abnormal delay in lodging the complaints. The court acknowledged the delay but emphasized that the seriousness of the allegations and the substantial loss caused to the banks warranted a detailed investigation. 4. Forensic Audit and Lack of Opportunity for Petitioners: The petitioners argued that the forensic audit conducted by M/s. S.P. Rungta and Associates was done behind their backs without giving them an opportunity to respond. The court found that the audit was conducted as part of the banks' due diligence and that the petitioners' non-cooperation with the auditors was a significant factor in the findings. 5. Acceptance of One Time Settlement (OTS) and Its Impact on Criminal Liability: The petitioners claimed that the acceptance of OTS by the banks should absolve them of criminal liability. The court rejected this argument, noting that the banks had explicitly stated in their acceptance letters that OTS would not affect ongoing criminal proceedings. The court cited precedents where the Supreme Court held that OTS could only settle civil liability, not criminal liability. 6. Investigation by Enforcement Directorate under PMLA: The Enforcement Directorate initiated an investigation under the Prevention of Money Laundering Act (PMLA) based on the scheduled offences alleged in the FIRs. The court emphasized that the Directorate is duty-bound to investigate bank frauds involving losses of more than Rs.25 Crores. The court found that the petitioners were not cooperating with the investigation and had filed petitions to quash the summons issued by the Directorate. 7. Economic Offences and Their Implications: The court highlighted that economic offences have far-reaching implications beyond the immediate parties and affect the public and taxpayers. The court cited various Supreme Court judgments emphasizing that economic offences should not be quashed merely because the accused settled the amount with the bank. The court stressed that such offences adversely affect the financial and economic well-being of the nation. Conclusion: The court dismissed the criminal petitions, emphasizing the seriousness of the allegations and the need for a thorough investigation. The court vacated the interim orders and directed the petitioners to cooperate with the ongoing investigations by the Central Bureau of Investigation and the Enforcement Directorate. The court reiterated that economic offences have broader implications and should be dealt with rigorously to ensure the financial and economic stability of the nation.
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