Bombay HC Under Art. 226 Orders CBI SIT Probe Into Alleged Multi-Crore Fraud, Citing EOW & CBI's Reluctance and Case's National/International Ramifications - 2025-05-11

Bombay High Court Orders CBI SIT Probe into Alleged Multi-Crore Financial Fraud, Cites Agency Reluctance

Mumbai, India – The Bombay High Court, in a significant ruling, has directed the Zonal Director of the Central Bureau of Investigation (CBI), Mumbai, to form a Special Investigation Team (SIT) to conduct a thorough investigation into allegations of a massive financial fraud involving thousands of crores of rupees. The division bench, comprising Justices Revati Mohite Dere and Prithviraj K. Chavan , delivered the judgment on January 31, 2025, expressing strong disappointment with the conduct of the Economic Offences Wing (EOW) and the CBI in handling the complaints.

The Court exercised its writ jurisdiction under Article 226 of the Constitution of India, emphasizing the need to instill confidence in investigations, especially in cases with national and international ramifications.

Case Overview

The Criminal Writ Petition (No. 4248 of 2024) was filed by Mr. Shoaib Richie Sequeira , a public rights activist. He sought a directive for a preliminary investigation based on his complaints dated December 22, 2021, and April 3, 2023. These complaints detailed alleged fraudulent activities by Mr. Anand Jaikumar Jain , Director/Promoter of Jai Corporation Ltd (Jai Corp Ltd), and its subsidiaries.

The allegations included: * Misappropriation of public monies (approximately Rs. 4255 Crores from financial institutions, Rs. 2434 Crores from investors in Urban Infrastructure Opportunities Fund). * Defrauding investors. * Round-tripping of funds through shell companies in tax havens. * Making unsecured advances to launder public money. * Creation of dubious and fictitious invoices. * Fraudulent trading in Reliance Petrochemicals Ltd. (RPL) futures (generating Rs. 513.12 Crores). * Diversion of funds to Mauritius and Sharjah, UAE (Rs. 98.83 Crores).

The petitioner contended that these acts constituted cognizable offences under the Indian Penal Code (IPC) and the Prevention of Money Laundering Act, 2002 (PMLA).

Arguments and Agency Responses

The petitioner argued that the EOW, instead of investigating, forwarded his complaints to the Securities and Exchange Board of India (SEBI), claiming the matter fell under SEBI's jurisdiction.

During the court proceedings, the EOW acknowledged the gravity of the allegations, noting that the offences involved "significant sums amounting to thousands of crores of rupees, span multiple jurisdictions, and implicate nationalized banks, a Mauritius-based private equity fund, and trans-border transactions with the USA, Australia, and the UAE." Consequently, on November 7, 2024, the EOW forwarded the complaint to the CBI and the Serious Fraud Investigation Office (SFIO) for appropriate action.

Shockingly, the CBI, via a communication dated November 26, 2024, returned the complaint to the EOW. The CBI stated that the matter pertained to fraudulent trading in stocks (SEBI's purview) and money laundering (Enforcement Directorate's purview) and that the CBI would not conduct an inquiry.

Court's Rationale and Pivotal Excerpts

The High Court expressed its dismay at the agencies' approach: > "We have no words to demonstrate the conduct of the Investigating Agencies viz: EOW as well as CBI. We may say, we are disappointed. We feel that there will be no fair and impartial investigation into the alleged crimes either by the EOW or by the Superintendent of Police, CBI, EOW..."

The Court noted the reluctance of both agencies to investigate: > "It can thus be seen, that both the EOW as well as the CBI, for the reasons best known to these Agencies, are reluctant to inquire/investigate into the complaints made by the petitioner having such large scale alleged misappropriation of public funds as well as laundering..." > > "Looking to the conduct of both the EOW and CBI, we as Constitutional Court cannot remain a mute spectator when it becomes apparent that the Agencies are passing the buck from each other."

The judgment extensively cited legal precedents on the High Court's power to transfer investigations to the CBI under Article 226, including:

* State of West Bengal and others Vs. Committee for Protection of Democratic Rights and others (2010) 3 SCC 571 : Affirmed High Court 's power to direct CBI probe without state consent, especially for credibility, national/international ramifications, or complete justice.

* Minna Pirhonen Vs. The State of Goa and another (Criminal Writ Petition No.134 of 2017, Bombay HC) : Reiterated principles for transferring investigation.

* Pooja Pal Vs. Union of India and others (2016) 3 SCC 135 and Dharam Pal Vs State of Haryana and others (2016) 4 SCC 160 : Emphasized fair investigation as part of constitutional rights and the court's duty to ensure complete justice.

The Court underscored: > "The need to instill confidence in the investigations and consequently, in the administration of justice, is of utmost concern. The case in question, has national and international ramifications." > > "Our justice system will acquire credibility only when the people at large will be convinced that the justice is based on the foundation of truth, provided the investigation is carried out impartially, fairly and in an unbiased manner."

Final Decision and Implications

The High Court allowed the petition and made the rule absolute, ordering: 1. The Zonal Director, CBI, Mumbai, shall form a Special Investigation Team (SIT) comprising necessary officers for a thorough investigation into the petitioner's two complaints. 2. The Joint Director of the CBI, Mumbai (Anti Corruption Bureau), shall supervise the investigation. 3. All papers and documents are to be handed over to the SIT by the EOW within one week from the date of the order (January 31, 2025).

The Court clarified that its observations were prima facie and the SIT must conduct the investigation impartially, uninfluenced, and on its own merits. Interim applications were also disposed of.

This judgment serves as a strong reminder to investigating agencies of their duties and reaffirms the High Court's role in ensuring justice and upholding the rule of law when confronted with agency inaction or reluctance, particularly in complex cases of significant public interest.