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IN THE HIGH COURT OF DELHI AT NEW DELHI
Amit Sharma, J.
Arun Kumar Aggarwal – Appellant
Versus
Serious Fraud Investigation Office – Respondent
Bail Appln. 3178 of 2022
Decided On : 01-06-2023
Applicant, a Chartered Accountant, was associated with BPSL from 2000 to 2019 and was appointed as Chief Financial Officer in 2007. SFIO alleged that he was involved in the commission of fraud with the intent to injure the interest of the company and is punishable under Section 447 of the Companies Act. The investigation revealed that Sanjay Singal (erstwhile CMD of BPSL) and his associates committed fraud upon BPSL by siphoning off funds in the form of bogus capital advances, advances to suppliers, and through purchase of property. The applicant was allegedly involved in the preparation of false financial statements and balance sheets, which were used for raising funds. The applicant denied the allegations and claimed that he was not involved in the day-to-day activities of the company and was just a namesake CFO/KMP. The Court, after examining the evidence and submissions, found that the applicant was not named by any of the entry operators through whom the funds were allegedly siphoned off. The balance sheets and financial reports were prepared at the Chandigarh office of BPSL, while the applicant was working out of the Delhi office. The Court also noted that the applicant had joined the investigation on each and every occasion and had not misused the liberty granted to him during the pendency of the bail application. Hence, the Court allowed the bail application and directed the applicant to furnish a personal bond and two sureties of like amount.
Fact of the Case:
The applicant, a Chartered Accountant, was associated with BPSL from 2000 to 2019 and was appointed as Chief Financial Officer in 2007. SFIO alleged that he was involved in the commission of fraud with the intent to injure the interest of the company and is punishable under Section 447 of the Companies Act. The investigation revealed that Sanjay Singal (erstwhile CMD of BPSL) and his associates committed fraud upon BPSL by siphoning off funds in the form of bogus capital advances, advances to suppliers, and through purchase of property. The applicant was allegedly involved in the preparation of false financial statements and balance sheets, which were used for raising funds.
Finding of the Court:
The Court, after examining the evidence and submissions, found that the applicant was not named by any of the entry operators through whom the funds were allegedly siphoned off. The balance sheets and financial reports were prepared at the Chandigarh office of BPSL, while the applicant was working out of the Delhi office. The Court also noted that the applicant had joined the investigation on each and every occasion and had not misused the liberty granted to him during the pendency of the bail application.
Issues: Whether the applicant was involved in the commission of fraud with the intent to injure the interest of the company?
Ratio Decidendi: The Court held that the applicant was not involved in the commission of fraud with the intent to injure the interest of the company. The Court found that the applicant was not named by any of the entry operators through whom the funds were allegedly siphoned off. The balance sheets and financial reports were prepared at the Chandigarh office of BPSL, while the applicant was working out of the Delhi office. The Court also noted that the applicant had joined the investigation on each and every occasion and had not misused the liberty granted to him during the pendency of the bail application.
Final Decision: The Court allowed the bail application and directed the applicant to furnish a personal bond and two sureties of like amount.
JUDGMENT
Amit Sharma, J.
1. The present application under Section 439 of the Code of Criminal Procedure, 1973 (`CrPC') read with Section 212(6) of the Companies Act, 2013 seeks grant of regular bail in Complaint Case No. 374/2022 titled Serious Fraud Investigation Office v. Bhushan Airways Services Pvt. Ltd. & Ors., registered under Section 120B read with Sections 417 and 420 of Indian Penal Code (`IPC'), Section 36(c) read with Section 447 of the Companies Act, 2013 (`Companies Act'); Sections 129 and 448 read with Section 447, and Sections 211 and 628 of the Companies Act, 1956, pending before the Court of the learned Additional Sessions Judge-03/Special Judge (Companies Act), Dwarka Courts, New Delhi.
Background
2. The Ministry of Corporate Affairs, Government of India (`MCA'), in exercise of its powers conferred under Section 212(1)(c) of the Companies Act, assigned the investigation into the affairs of Bhushan Power and Steel Ltd. (`BPSL'), its ten group companies and Bhushan Steel Limited (`BSL') with its two group companies to Serious Fraud Investigation Office (`SFIO'), vide order F. No. 5/5/2016/CL-II dated 03.05.2016.
3. The Director, SFIO, appointed officers of the SFIO as inspectors to investigate the aforementioned companies. Thereafter, MCA vide order No. 5/5/2016/CL-II dated 08.01.2018 granted approval under Section 219(b) & 219(c) of the Companies Act to investigate twenty group companies associated with BPSL.
4. The applicant herein, a Chartered Accountant, was associated with BPSL since the year 2000 till May 2019, handling financial matters of the company.
5. As per the allegations leveled by the SFIO, during investigation, it was revealed that in furtherance of a fraudulent modus operandi, finished goods lying in the plant of BPSL were removed from the plant allegedly without issuing sale invoices and were sold in the open market. The funds generated from the said sale were never given to BPSL and were systematically never reflected in the books of account of BPSL. The alleged illegal movement of the goods worth Rs. 1,023 crores from the plant without raising invoices inter alia caused wrongful loss to BPSL and wrongful enrichment of persons who were controlling the affairs of BPSL.
6. In the Status Report that as on 31.03.2017, BPSL had outstanding liability to the tune of Rs. 37,000 crores approximately, towards banks and financial institutions which were classified as Non-Performing Assets (`NPAs') in the books of said banks and financial institutions. The goods that were illegally removed from the plant, were the security for the said loans availed by BPSL from banks/institutions. Furthermore, the books of accounts were falsified by not accounting for sale of such goods valued at Rs.1,023 crores, while the freight payments of seventy railway receipts were booked under the head `Capital Work in Progress'(`CWIP').
7. Upon examination of the bank accounts of BPSL and its associated companies, it has been alleged that a huge amount of funds was diverted to various paper companies and through a myriad of companies, it was infused back to associated companies of the former Chief Managing Director (`CDM') of BPSL, Sanjay Singal. The investigation revealed siphoning of monies by creating bogus capital advances to paper companies through a web of complex transactions by the controllers of BPSL. In pursuance thereof, the same funds were introduced in the accounts of Adarsh Infotech Pvt. Ltd. (A- 7) that made payment to BPSL on behalf of Shree Ankleshwar Pvt. Ltd. (A- 33) for purchase of immovable property from BPSL situated at Flat No. 109 to 112 at International Trade Tower, Nehru Place, New Delhi. The funds so siphoned were also given to Silver Star Commercial Company Pvt. Ltd. (A- 34) through BSN Enterprise Pvt. Ltd. (A-3), it has been alleged that both the end receiver companies are managed by Sanjay Singal, the former CMD of BPSL.
8. The report alleges that the promoters and controllers of BPSL induced
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