Familial relationships do not establish culpability in financial crimes without direct evidence of involvement in the alleged misconduct.

COMMON ORDER

A broad opening statement may be made. The petitioners herein are sisters, and are daughters of a certain Farouk Irani. He was the Managing Director of M/s.First Leasing Company of India Ltd., (FLCIL), and he along with few others, while in the management of the affairs of the company, are alleged to have manipulated the accounts of the company and diverted the public deposits made by the general public for their personal benefit of the company. In all nine cases were registered. After investigation into the allegations the CBI had filed its final reports implicating the petitioners of committing offences under Sec.120-B r/w 201, 409, 420, 468 471, and 477A IPC .

1.2 The petitioners individually have taken out separate petitions before the trial court in each of the nine cases under Sec.239 Cr.P.C, for discharging them. They came to be dismissed by separate Orders in all the nine cases, dated 26.05.2023. Challenging these Orders, the petitioners have preferred these revisions.

FACTS

2. The facts are as below:

a) M/s.First Leasing Company of India Limited (FLCIL), the Accused No.1 in all the nine cases was engaged in the business of lease finance; Hire purchase; General purpose loan to corporates; and re-financing of hire purchase loan on old assets. The Company is now under liquidation.

b) Broadly the business of FLCIL was leasing and hire-purchase of capital assets. It enables its customers who enter into Hire Purchase Agreements with it to pay the cost of the fixed assets on instalment basis, and FLCIL would transfer ownership of the said asset to the lessee thereof on payment of the last instalment. M/s.FLCIL, for its business purposes, approached the banks for finance against the value of stock and the lease rentals receivable by it from those whom it had financed under Leasing and Hire Purchase agreements.

c) On account of the huge exposure of the credit limits and consideration of various factors, including the norms of the various banks in the consortium, a Steering Committee consisting of few banks, who have substantial exposure in the consortium, was put in place.

d) The Company being a Non-Banking Financial Company (NBFC) was subjected to inspection by the RBI. And, between 02.04.2008 and 04.07.2013, FLCIL was stated to be performing creditably.

e) Inspections were carried out by the Consortium bankers periodically. i.e. quarterly on a rotation basis. Since FLCIL is a non-banking financial institution, it is subjected to the scrutiny of the RBI.

f) Be that as it may, on 13.09.2013, RBI directed that the business activities of the company be frozen until further orders. In essence, it directed FLCIL not to alienate or encumber its property and assets without prior written permission of RBI; not to declare or distribute any dividend; transact any business; or incur any further liabilities.

g) Consequent to the RBI’s press release, a consortium meeting was called on. Mr.Farouk Irani, MD (A-2) informed that the assets creation was not in line with the liabilities taken by the Company; not enough income generation to meet the repayment of dues, and that the loans obtained by FLCIL from the banks were used to service the interest payable on earlier loans, income tax and sales tax and salary to staff etc. In short bad time struck the company very badly.

h) Thereafter, the RBI had appointed M/s. N.C.Rajagopal & Co., Chartered Accountants, Chennai to carry out a special audit. This was followed by a forensic audit at the instance of the Consortium of banks. The forensic Auditor submitted a preliminary report on 15.02.2014 and a final report on 28.05.2014. The quintessence of the report is that FLCIL had been showing inflated income and assets in the financial statements by creating unsubstantiated entries in the books of accounts since 1998, and that most of the loans advanced by it were fictious and the borrowers did not have any inco