TMI Blog2020 (4) TMI 670X X X X Extracts X X X X X X X X Extracts X X X X ..... f Abhinav Gupta s/o Praveen Kumar Gupta has prima facie disclosed that the brokerage amount of ₹ 30 crores was given by DHFL for making investment and this brokerage amount was divided among three accused - The economic crime of such scale and magnitute are carefully and meticulously planned and executed. It is well settled that economic offences constitute a class apart and need to be visited with a different approach in the matter of bail. While granting bail, the court has to keep in mind the nature of accusations, magnitude and gravity of offence and nature of evidence in support of the accusations. The present case involves a scam of huge magnitude involving money of 42000 employees of the Three Electricity Corporations who had invested it with a hope that they would get good return on it at the time they would need money. Trust has been breached in criminal conspiracy by the accused which has resulted huge loss to the two Trusts resultantly to the employees. The accused is an influential person - The money trail is yet to be completely discovered and, therefore, at this stage, the accused-applicant cannot be released on bail. Considering the allegation and the evi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adesh State Power Sector Employees General Provident Fund , Uttar Pradesh State Power Sector Employees Gratuity Fund and Uttar Pradesh State Power Sector Employees Pension Fund . These funds collectively would be referred to as Funds . 5. As per the Trust-deed, the funds vest in Board of Trustees who shall administer the Funds in accordance with the Rules as set out in the Schedule of the Trust-deed. The First Trustees are: (i) Chairman cum Managing Director, U.P.P.C.L. Chairman of the Trust; (ii) Chairman cum Managing Director of U.P.R.V.U.N.L. Member; and (iii) Chairman cum Managing Director, U.P. Hydro Power Corporation Ltd. , Member. 6. The other Trustees are to hold office on appointment by nomination or otherwise, in the manner as provided in the Uttar Pradesh State Power Sector Employees General Provident Fund Rules, 2000. 7. Clause 7 of the Trust-deed reads as under:- 7. That the trustees of the Board shall hold the Funds and the amounts accruing in Trust for the Members and beneficiaries of the said Funds and shall administer and apply the same in accordance with these presents and the Rules, nevertheless subject to the Provisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Fund amounts of the two Trusts were deposited in the Nationalised Banks in term deposits accruing interest. 13. However, in the month of December, 2016 on the proposal of the then Secretary of the Trust, Mr. Praveen Kumar Gupta, after obtaining the approvals from the then Director (Finance), Mr. Sudhanshu Dwivedi and the then Managing Director, U.P.P.C.C.L., Mr. A.P. Mishra, co-accused,they started investing the G.P.F. and C.P.F. funds in the P.N.B. Housing term deposits. In the same series, the G.P.F. and C.P.F. funds were invested as term deposits by Mr. Sudhanshu Dwivedi and Mr. Praveen Kumar Gupta from March, 2017 in a private institution named Deewan Housing Finance Ltd (hereinafter referred to as DHFL ) without taking the recommendation/cognizance of M.D./Chairman and without any authority of law in illegal and mala fide manner for personal gains. 14. It is further alleged that appropriation of funds was not done in accordance with the notification dated 2nd March, 2015 issued by the Ministry of Finance, Government of India.It is further alleged that according to the aforesaid notification, the funds of non Government Provident Fund could have been invested in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 2nd March, 2015 and investing more than 50% of the amount of employees GPF and CPF in DHFL have committed the offence of Criminal Breach of Trust. 19. Thus, allegations in sum and substance are that the accused in furtherance of criminal conspiracy with malafide intention for personal gain and in violation of the relevant provisions of law, have invested huge amount of two funds i.e. Uttar Pradesh Power Sector Employees General Provident Fund and Uttar Pradesh Power Corporation Limited Contributory Provident Fund in DHFL, a company incorporated under the Companies Act. Their malafide decision has caused huge loss to these funds to the amount of ₹ 2267.9 crores (Principal Amount) besides interest. The investigation has revealed that the investments have been made in the DHFL by the accused for personal gain as they have received the huge amount from DHFL as commission for making such investments. 20. The aforesaid two trusts were created under the Employees Provident Fund and Miscellaneous Provisions Act, 1952 and rules made thereunder as well as the provisions of Indian Trust Act, 1882. 21. Rule 11 of the Uttar Pradesh State Sector Employees General Providen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th of recovery subject to such directions the Board may give from time to time. The investments shall be in the securities mentioned or referred to in clause (a) to (d) of Section 20 of the Indian Trust Act, 1882 (II of 1882), provided that such securities are payable both in respect of capital and in respect of interest in India and in such other securities as the Central Government may from time to time approve in this regard. Furthermore guidelines issued by the Ministry of Finance and Ministry of Labour regarding investment pattern shall be followed for making investment. (ii) All expenses incurred in respect of, and loss, if any, arising from any investment shall be charged to the Fund. 26. Thus, 2004 Rules are Pari materia provisions with the 2000 rules. 27. Section 20 of the Indian Trust Act, 1982 postulates that the investment shall be made in the security satisfying clause (a) to (d) for investment of Trust money reads as under:- 20. Investment of trust-money.-Where the trust property consists of money and cannot be applied immediately or at an early date to the purposes of the trust, the trustee is bound (subject to any direction contained in the instrum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay of March, 1948, no money shall be invested in any securities issued by or on behalf of a municipal body, port trust or city improvement trust in Rangoon Town, or by or on behalf of the trustees of the port of Karachi;] (e) on a first mortgage of immovable property situate in 20[any part of the territories to which this Act extends]: Provided that the property is not a lease hold for a term of years, and that the value of the property exceeds by one-third, or, if consisting of buildings, exceeds by one-half, the mortgagemoney; 21 [***] 22[(ee) in units issued by the Unit Trust of India under any unit scheme made under section 21 of the Unit Trust of India Act, 1963 (52 of 1963); or] (f) on any other security expressly authorized by the instrument of trust, 22[or by the Central Government by the notification in the Official Gazette] or by any rule which the High Court may from time to time prescribe in this behalf: Provided that, where there is a person competent to contract and entitled in possession to receive the income of the trust property for his life, or for any greater estate, no investment on any security mentioned or referred to in clauses (d), (e) and (f) shall b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t fund to obtain advances from or to withdraw money standing to his credit in the fund, where the fund is a recognised provident fund within the meaning of clause (a) of section 58A of the Indian Incometax Act, 1922 (11 of 1922 ) 3, or where the rules of the fund contain provisions corresponding to rules 4, 5, 6, 7, 8, and 9 of the Indian Income- tax (Provident Funds Relief) Rules. (4)Where a 1 trust has been created by a company with respect to any provident fund referred to in sub- section (1), the company shall be bound to collect the contributions of the employees concerned and pay such contributions as well as its own contributions, if any, to the trustees 2 within fifteen days from the date of collection]; but in other respects, the obligations laid on the company by this section shall devolve on the trustees and shall be discharged by them instead of by the company. 30. Relevant portion of the notification dated 2nd March, 2015 issued by Ministry of Finance is reproduced hereunder:- F. No. 11/14/2013 PR.- In partial modification of this Ministry s Notification No. 5(88)/2006-PR dated 14th August, 2008, the pattern of investment to be followed by Non-Government ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty of at least 3 years issued by institutions of the International Bank for Reconstruction and Development, International Finance Corporation and Asian Development Bank. Term Deposit receipts of not less than one year duration issued by scheduled commercial banks, which satisfy the following conditions on the basis of published annual report(s) for the most recent years, as required to have been published by them under law: having declared profit in the immediately preceding three financial years; maintaining a minimum Capital to Risk Weighted Assets Ratio of 9%, or mandated by prevailing RBI norms, whichever is higher; having net non-performing assets of not more than 4% of the net advances; having a minimum net worth of not less than Rs. 200 crores. Units of Debt Mutual Funds as regulated by Securities and Exchange Board of India: Provided that fresh investment in Debt Mutual Funds shall not be more than 5% of the fresh accretions invested in the year and the portfolio invested in them shall not exceed 5% of the total portfolio of the fund at any point in time. The following infrastructure related debt instruments: Liste ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Company and for the subcategory (f) (iv) the ratings shall relate to the investment in eligible securities rated above investment grade of the scheme of the fund. Provided further that if the securities/entities have been rated by more than two rating agencies, the two lowest of all the ratings shall be considered. Provided further that investments under this category requiring a minimum AA rating, as specified above, shall be permissible in securities having investment grade rating below AA in case the risk of default for such securities is fully covered with Credit Default Swaps (CDSs) issued under Guidelines of the Reserve Bank of India and purchased along with the underlying securities. Purchase amount of such Swaps shall be considered to be investment made under this category. For sub-category (c), a single rating of AA or above by a domestic or international rating agency will be acceptable. It is clarified that debt securities covered under category (i) (b) above are excluded from this category (ii). Minimum 35%and upto 45% (iii) Short-term Debt Instruments and Related Investments Money market in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t be in excess of 5% of the total portfolio invested in sub-categories (a) to (d) above. Minimum 5% and upto 15% (v) Asset Backed, Trust Structured and Miscellaneous Investments Commercial mortgage based Securities or Residential mortgage based securities. Units issued by Real Estate Investment Trusts regulated by the Securities and Exchange Board of India. Asset Backed Securities regulated by the Securities and Exchange Board of India. Units of Infrastructure Investment Trusts regulated by the Securities and Exchange Board of India. Provided that investment under this category No. (v) shall only be in listed instruments or fresh issues that are proposed to be listed. Provided further that investment under this category shall be made only in such securities which have minimum AA or equivalent rating in the applicable rating scale from at least two credit rating agencies registered by the Securities and Exchange Board of India under Securities and Exchange Board of India (Credit Rating Agency) Regulations, 1999. Provided further that in case of the sub-categories (b) and (d) the ratings shall relate t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ustees including the applicant. Learned counsel has submitted that role of the applicant was only to the extent of recommending on the financial health and viability of the DHFL. The applicant conducted an extensive research and found that the top investors of the DHFL were the various scheduled banks including State Bank of India and many other well recognised companies and investment funds. After making such exercise, he approved DHFL for investment. It is also submitted that some dispute erupted between the DHFL and Reliance Nippon Asset Management Limited and the matter went to the Bombay High Court in Commercial Suit (Lodging) No.1034 of 2019 and, the Bombay High Court by an oral order dated 30th September, 2001 restrained the DHFL from making any payments to any of its other creditors without the leave of the Court. 35. Learned counsel for the accused-applicant has also submitted that notification of the Government of India dated 2nd March, 2015 is not applicable on the twoTrusts as they are not registered with the EPFO which regulates the Provident Funds which are registered with it and are exempted in accordance with the Employees Provident Fund and Miscellaneous Provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... overnment of India dated 2nd March, 2015. These rules specifically provide that the investment is to be made in accordance with the rules and the notifications issued by the Government of India. He, therefore, has submitted that there is no substance in the submission of the learned counsel for the accused-applicant that the Government of India notification dated 2nd March 2015 has no application in respect of the two Trusts whose money was invested in DHFL. He has further submitted that the notification dated 2nd March, 2015, spells out in detail the investment patterns, which is required to be followed and adhered to in making investments of CPF amounts. He has further submitted that investment in DHFL has been made in blatant violation of the guidelines, contained in the notification dated 2nd March, 2015 as well as GPF Rules, 2000 and CPF Rules 2004 as well as provisions of Indian Trust Act and Indian Companies Act, 1956. 39. It has been further submitted that the Director (Finance), Secretary and Managing Director of UPPCL being trustees were under duty and responsibility to invest GPF and CPF contributions of the employees safely and in accordance with law. However, for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Rules and provisions of Indian Trust Act and Companies Act, Provident Funds and Miscellaneous Provisions Act, 1952 and Government of India notifications. 42. It has been further submitted that the amount of brokerage was transmitted from DHFL to 14 companies including Alpine Associates, a company run and operated by one Ashish Chaudhari, a close confidant of accused, Abhinav Gupta s/o Mr. P. K. Gupta. The brokerage amount was subsequently transferred to several other firms through RTGS with the assistance of certain Chartered Accountants. The said firms in turn, for the purposes of justifying their proscribed money, made cash payments to several Chartered Accountants and the money after exchange of several hand, reached Abhinav Gupta s/o Praveen Kumar Gupta, Secretary (Trust). 43. Mr. Abhinav Gupta has stated in his statement before the investigating officer that a sum of approximately 30 crores was received as brokerage from C.A., Lalit Goyal and, the said amount was divided amongst the present applicant Director (Finance), P.K.Gupta (Secretary,Trust) and A.P. Mishra (Managing Director). A copy of the statement given by accused, Abhinav Gupta has been placed on re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idered as grave offences affecting the economy of the country as a whole and thereby posing serious threat to the financial health of the country. 48. In judgment rendered in the case of State of Bihar Vs. Amit Kumar (2017) 13 SCC 751 , it has been held that while considering the bail involving socioeconomic offences stringent parameters should be applied. Paras 8-9 of the said judgment are extracted hereunder:- 8. A bare reading of the order impugned discloses that the High Court has not given any reasoning while granting bail. In a mechanical way, the High Court granted bail more on the fact that the accused is already in custody for a long time. When the seriousness of the offence is such the mere fact that he was in jail for however long time should not be the concern of the courts. We are not able to appreciate such a casual approach while granting bail in a case which has the effect of undermining the trust of people in the integrity of the education system in the State of Bihar. 9. We are conscious of the fact that the accused is charged with economic offences of huge magnitude and is alleged to be the kingpin/ringleader. Further, it is alleged that the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... htra Control of Organised Crime Act, 1999. It has been expounded that the Court at the stage of considering the application for grant of bail, shall consider the question from the angle as to whether the accused was possessed of the requisite mens rea. The Court is not required to record a positive finding that the accused had not committed an offence under the Act. The Court ought to maintain a delicate balance between a judgment of acquittal and conviction and an order granting bail much before commencement of trial. The duty of the Court at this stage is not to weigh the evidence meticulously but to arrive at a finding on the basis of broad probabilities. Further, the Court is required to record a finding as to the possibility of the accused committing a crime which is an offence under the Act after grant of bail. 50. The Supreme Court in its judgement in Serious Fraud Investigation Office Vs. Nitin Johri and another, (2019) 9 SCC 165 , while considering the factors to be taken into account while considering the bail involving serious economic offences in para 24-27 has held as under:- 24. At this juncture, it must be noted that even as per Section 212(7) of the Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the impugned order has failed to apply even these general principles. The High Court, after referring to certain portions of the complaint to ascertain the alleged role of Respondent 1, came to the conclusion that the role attributed to him was merely that of colluding with the co-accused promoters in the commission of the offence in question. The Court referred to the principles governing the grant of bail as laid down by this Court in Ranjitsing Brahmajeetsing Sharma v. State of Maharashtra [ Ranjitsing Brahmajeetsing Sharma v. State of Maharashtra , (2005) 5 SCC 294 : 2005 SCC (Cri) 1057] , which discusses the effect of the twin mandatory conditions pertaining to the grant of bail for offences under the Maharashtra Control of Organised Crime Act, 1999 as laid down in Section 21(4) thereof, similar to the conditions embodied in Section 212(6)( ii ) of the Companies Act. However, the High Court went on to grant bail to Respondent 1 by observing that bail was justified on the broad probabilities of the case. 27. In our considered opinion, this vague observation demonstrates non-application of mind on the part of the Court even under Section 439 CrPC, even if we keep ..... X X X X Extracts X X X X X X X X Extracts X X X X
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