Bombay High Court Orders CBI SIT Probe Under Art. 226 Into Alleged Multi-Crore Fraud Citing Agencies' Reluctance - 2025-04-26

Bombay High Court Orders CBI Probe into Multi-Crore Fraud Allegations, Criticizes Agencies for 'Passing the Buck'

Mumbai: In a significant ruling, the Bombay High Court has directed the Central Bureau of Investigation (CBI) to form a Special Investigation Team (SIT) to probe extensive allegations of economic fraud, misappropriation, and money laundering running into thousands of crores of rupees against Anand Jaikumar Jain , promoter and director of Jai Corp Ltd , and its subsidiaries. The Court's decision, delivered by a division bench of Justices Revati Mohite Dere and Prithviraj K. Chavan , came after it sharply criticized the Economic Offences Wing (EOW) and the CBI for their apparent reluctance and for "passing the buck" on investigating the serious complaints.

The judgment, pronounced on January 31, 2025 (with arguments concluded on November 29, 2024), stems from a criminal writ petition filed by Mr. Shoaib Richie Sequeira , a public rights activist. Sequeira had filed complaints with the Maharashtra EOW and the Directorate of Enforcement (ED) detailing alleged fraudulent activities by Anand Jaikumar Jain and associated entities.

Background of the Allegations

The petitioner, known for filing public interest litigation on financial scams, presented two detailed complaints (dated December 22, 2021, and April 3, 2023) outlining a complex web of alleged financial crimes. These included:

• Misappropriation of public monies and defrauding investors.
• Round-tripping of funds through shell companies, including those in tax havens.
• Making unsecured advances to subsidiaries with intent to launder money.
• Creation of dubious and fictitious invoices.

The complaints specifically cited misappropriation of funds from various sources, including loans availed from financial institutions (totaling Rs. 4255 Crores ), investor money from the Urban Infrastructure Opportunities Fund (UIOF) ( Rs. 2434 Crores ), profits from alleged fraudulent trading in Reliance Petrochemicals Ltd (RPL) futures ( Rs. 513.12 Crores ), and diversion of foreign currency loans ( Rs. 98.83 Crores ) to entities in Mauritius and UAE.

The petitioner supported these allegations with detailed documentation, including information on loan advances to subsidiaries, alleged laundering through real estate transactions, diversion of UIOF funds, and income tax penalties faced by subsidiary companies. The complaints also highlighted alleged irregularities involving overseas entities in Mauritius, UAE, Australia , and the USA, suggesting a complex trans-border operation.

Agencies' Conduct Under Scrutiny

The petitioner's primary grievance was the failure of EOW and ED to initiate a proper investigation. Initially, the EOW forwarded the complaints to the Securities and Exchange Board of India (SEBI), stating the matter fell under SEBI's jurisdiction. SEBI, impleaded as a respondent later in the court proceedings, filed an affidavit responding to the allegations.

During the course of the High Court proceedings, the EOW recorded the petitioner's statement. Subsequently, the EOW, acknowledging the scale and complexity of the alleged offences – involving "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" – forwarded the complaint to the CBI and the Serious Fraud Investigation Office (SFIO) for "appropriate action."

However, the CBI, through the Superintendent of Police, CBI, EOW, Mumbai, responded by returning the complaint to the EOW on November 26, 2024. The CBI's communication stated that the complaint pertained to SEBI regulations (futures trading) and ED's purview (money laundering), concluding that the matter "cannot be taken up on these allegations" and no inquiry was conducted by the CBI.

Court's Strong Observations and Reasoning

The High Court bench expressed its dismay at the response from the investigative agencies. The judgment states, "We are surprised and shocked to learn that the EOW Mumbai had forwarded the complaint... to the CBI... Shockingly, Superintendent of Police, CBI... has sent a communication... to the Deputy Commissioner of Police, EOW... returning the same... 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... We have no words to demonstrate the conduct of the Investigating Agencies viz: EOW as well as CBI. We may say, we are disappointed."

The Court highlighted the EOW's own internal noting acknowledging the magnitude, multi-jurisdictional nature, involvement of nationalized banks and foreign entities, and the substantial national and international financial implications, which led EOW to believe the matter should be handled by CBI/SFIO. Despite this, the CBI refused to take action.

Citing the Supreme Court's rulings, particularly in State of West Bengal and others Vs. Committee for Protection of Democratic Rights and Dharam Pal Vs State of Haryana and others , the Bombay High Court reiterated its power under Article 226 of the Constitution to direct an independent investigation, including by the CBI, when necessary to "provide credibility and instil confidence in the investigation," or where the case has "national and international ramifications," or where "such an order may be necessary for doing complete justice and enforcing the fundamental rights."

The Court emphasized that it cannot remain a "mute spectator" when it is apparent that agencies are "passing the buck." It found that the circumstances of the case, involving allegations of such magnitude and complexity coupled with the apparent reluctance of the state and central agencies, warranted the intervention of an independent specialized agency.

The Verdict

Concluding that a fair and impartial investigation by the EOW or the current CBI team appeared unlikely given their conduct, the High Court allowed the petition.

The Court issued the following directions:

1. The Zonal Director, CBI, Mumbai , shall form a Special Investigation Team (SIT) comprising necessary officers for a thorough investigation into the petitioner's complaints dated December 22, 2021, and April 3, 2023.
2. The Joint Director of the Central Bureau of Investigation, Mumbai (Anti Corruption Bureau) shall supervise the investigation by the SIT.
3. The EOW is directed to hand over all relevant papers and documents to the SIT within one week from the date of the order.

The Court clarified that these observations are prima facie and the SIT must conduct its investigation impartially and on its own merits, uninfluenced by anyone. The interim applications filed by other parties were disposed of following the main petition's disposal.

This judgment underscores the High Court's role as a guardian of public interest and a check on the executive's duty to investigate serious crimes, particularly complex economic offences involving vast public funds and multiple jurisdictions, where state and central agencies appear unwilling or unable to act effectively.