The Delhi High Court elucidated the role of the public prosecutor and the necessity for their reasoned opposition in bail applications governed by Section 212(6) of the Companies Act, 2013.
The High Court outlined that the public prosecutor, in their capacity as a court officer, had an obligation to conduct themselves fairly and reasonably, without being swayed by the influence of the investigating agency.
Brief Facts:
A Bail Application was filed before the Delhi High Court seeking bail in a Criminal Complaint under Section 439 of the Code of Criminal Procedure, 1973 (hereinafter referred to as “CrPC”) and Section 212(6) of the Companies Act, 2013 (hereinafter referred to as “Act, 2013”)
Brief Background:
In 1994, M/s. Educomp Solutions Ltd. (hereinafter referred to as “ESL”) was incorporated with Shantanu Prakash as its managing director and his father Jagdish Prakash as a whole-time director.
In 2013, ESL encountered financial difficulties and opted for Corporate Debt Restructuring (hereinafter referred to as “CDR”) through a Master Restructuring Agreement (hereinafter referred to as “MRA”) signed with a consortium of lenders, led by the State Bank of Patiala (which later merged with State Bank of India).
The accusation was that Shantanu Prakash fraudulently showed that they fulfilled the conditions by using funds that they had syphoned off through various companies, intending to deceive investors and CDR lenders. The primary offence alleged against the Accused individuals, including ESL and the other 69 entities, was that they committed fraud by round-tripping funds, which constitutes a violation of Section 447 of the Act, 2013, in addition to other offences under the Companies Act, 1956 (hereinafter referred to as “Act, 1956”) and the Indian Penal Code, 1860 (hereinafter referred to as “IPC”)
Contentions of the Petitioners:
It was contended that the main promoters were granted interim protection and were charge-sheeted without arrest. The SFIO did not challeng the interim protection granted to them.
It was asserted that the alleged syphoning-off of funds could have only been done by the Procurement Department reporting directly to the promoter, which was not under the Petitioner's charge. The petitioner did not sign any vouchers or cheques and was not involved in the purchase process.
Observations of the Court:
It was emphasised the necessity of reasoned opposition from the public prosecutor, rather than the investigating agency, to satisfy the court regarding the additional twin conditions in section 212(6) of the Act, 2013. The public prosecutor, as a court officer, was expected to act fairly and reasonably, independent of the investigating agency's influence. This requirement aligned with the constitutional guarantee of Article 21, ensuring a fair and reasonable procedure when depriving an individual of their liberty.
It was further noted that the failure of the Public Prosecutor to establish foundational facts would lead the Court to believe that there were reasonable grounds to consider the Accused as not guilty. Only after the prosecution met this threshold would the burden shift to the accused to explain their position and satisfy the court regarding their innocence.
It was held that the Petitioner was not guilty of the offence charged under the Act, 2013. Since the investigation was complete and the prosecution complaint was filed, the Court also concluded that the Petitioner was not likely to commit any offence while on bail.
The decision of the Court:
Therefore, the Delhi High Court allowed the bail application.
Case Title: Ashish Mittal v Serious Fraud Investigation Office
Case No.: Bail Application 251 of 2023
Coram: Hon'ble Mr. Justice Anup Jairam Bhambhani
Advocates for Petitioners: Advs. Mr. N. Hariharan, Mr. Tanveer Ahmed Mir, Mr. Shikhar Sharma, Mr. Kartik Venu, Mr. Punya Rekha Angara, Mr. Prateek Bhalla Adv. and Mr. Mohammed Qasim
Advocates for Respondents: Advs. Mr. Ajay Digpaul, Mr Arib Ansari, Ms. Shivani Sharma, Ms. Ikshita Singh, Mr. Kamal Digpaul and Ms. Swati Kwatra
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