G.S.C. Rao vs State Of U.P. And 2 Others
2018 Latest Caselaw 2833 ALL

HIGH COURT OF JUDICATURE AT ALLAHABAD
 
 

A.F.R.
 
Court No. - 1
 

 
Case :- CRIMINAL REVISION No. - 3333 of 2018
 
Revisionist :- G.S.C. Rao
 
Opposite Party :- State Of U.P. And 2 Others
 
Counsel for Revisionist :- Kali Azad,Akshay Mohiley
 
Counsel for Opposite Party :- G.A.,Gyan Prakash
 

 
Hon'ble Ramesh Sinha,J.

Hon'ble Dinesh Kumar Singh-I,J.

Supplementary affidavit filed today on behalf of the revisionist is taken on record.

Heard Sri Rohan Gupta, holding brief of Sri Akshay Mohiley, learned counsel for the revisionist and Sri Gyan Prakash, learned counsel for the C.B.I. And perused the record.

By means of the present revision, the judgment and order dated 11.9.2018 passed by Special Judge, Anti Corruption (C.B.I.), Court No.1, Ghaziabad in Criminal Misc. Case No.4/2018 - CBI -v- M/s Simbhaoli Sugars Ltd. And others, under Section 120-B read with Section 420 and 409 IPC alongwith Section 13/2 read with Section 13 (1)(d) of the Prevention of Corruption Act, 1988, P.S.- C.B.I., BS & FC, New Delhi, has been assailed. It has been prayed that the revisionist be permitted to travel abroad to Philippines for a period of 10 days, subject to reasonable conditions.

The facts of the case are that an FIR was lodged on the basis of complaint made by one Shri Manohar Dhingra, Assistant General Manager, Oriental-Bank of Commerce, Meerut against the revisionist as well as other co-accused being FIR No. RC BDI/2018/E0002 dated 22.2.2018 at P.S. C.B.I. BS & FC u/s 120-B read with Section 420 & 409 IPC, Section 13 (2) read with Section. 13 (1) (d) of P.C. Act, 1988 stating therein that the Oriental Bank of Commerce had sanctioned financial liability to revisionist's company registered as Simbhaoli Sugars Ltd. Hapur, Ghaziabad for financing individuals/JLGs/SHGs/Sugarcane farmers under tie up arrangement with M/s Simbhaoli Sugars Ltd., Simbhaoli (hereinafter referred to 'the company') which was engaged in the business of manufacturing of refined sugar, white crystal sugar and specialty sugar etc. and the revisionist is Chief Executive Officer of the said company. In pursuance of RBI Master Circular dated 1.7.2011, a scheme for financing the sugarcane farmers was approved by the O.P. No.3-Bank and in pursuance to it, the proposal was submitted by O.P. No.3-Bank to erstwhile Regional Office of the Oriental Bank of Commerce at Ghaziabad on 8.11.2011, for financing the sugarcane farmers (5762 farmers) under the tie-up arrangement with the company of revisionist (max. limit of Rs. 3 lac per farmer) within the overall exposure cap of Rs.150 crores, which was approved by the O.P. No.3-Bank on 19.12.2011. After approval of the said scheme, the revisionist's company supplied the names of the individual farmers along with their details of land holding, sugarcane supplied by them in the previous season to the erstwhile Regional Office of O.P. No.3-Bank at Meerut. As per tie up agreement, the company of revisionist was also required to submit KYC and other requisite documents along with the loan application of individual farmers. All the applications were submitted by the company directly to the erstwhile Regional Office of O.P. No.3-Bank, Meerut where the same were processed. Thereafter, loan applications of the erstwhile Regional Office, Meerut with the list of farmers was forwarded to the Hapur Branch of the OP No.2 and on the basis of said list, Hapur Branch of O.P. No.2 disbursed loans to 5762 farmers between 25.1.2012 to 13.3.2012 with total amount aggregating to Rs.148.59 crores. All these 5762 accounts were opened and thereafter disbursement of loans were made through individual loan accounts of all the 5762 farmers and consolidated amount of each disbursement was credited in the Escrow (current) account of the company as per tie up agreement and based on the undertaking given by the company to the effect that inputs like seed, fertilizers and other necessary equipments etc. had been supplied by it to all the individual farmers. The farmers had to submit declaration stating therein that the proceeds of the loan amount was to be credited in the account of the company in lieu of the supply of the input materials equipments like seed, fertilizers and other necessary equipments etc. by the company to the farmers. Accordingly, the said declaration was submitted by all the borrower farmers. For implementing the scheme of financing farmers, Memorandum of Understanding (MoU) dated 18.1.2012 was executed between the company and O.P. No.3-Bank whereby the company had undertaken the responsibility of distributing the materials like seed, fertilizers and other necessary equipments etc to the farmers. The relevant clause of the MoU are reproduced hereinbelow :-

8.3 The sugar mill shall route the payment of sugarcane supplied by the borrower through his loan account opened by the borrower with the bank.

8.4 In case of any default on part of the company or its field functionaries or other employees in paying to the bank or routing the payment of sugarcane supplied by the borrower through their loan accounts with the Bank, then the company shall be liable as borrower to the Bank to the extent of the amount not paid to the bank or not so routed through the loan account of the borrower with the bank as well as interest due, penal interest and any other charges related thereto.

8.5 As the loan sanctioned is disbursed by the Bank to the farmer directly by crediting the account of the company with the Bank in case the borrower fails to supply sugarcane crop to the Company, then the company is liable as borrower to the Bank for the amount outstanding in the loan account of the farmer including interest due, penal interest and any other charges related thereto.

8.6 The Company shall itself be liable for and shall arrange to remit the entire outstanding dues of the borrower arising as a result of improper identification of the borrower by the company or on account of any other default/negligence on part of the Company.

The company had also executed the corporate guarantee for repayment of loan. The loan was sanctioned/disbursed by the O.P. No.3-Bank to respective farmers for payment of the cost of inputs (supply of materials like seed, fertilizers and other necessary equipments etc.) already supplied by the company to the borrowing farmers in accordance with the terms and conditions as stipulated in MoU. As per MoU, after supply of sugarcane by farmers to the company out of the sugarcane price to be paid by the company to the farmers, loan liability were to be adjusted by the company and the remaining amount was to be paid by the company to the farmers. But the company issued improper KYC certificates in the names of individual farmers and submitted the same to the O.P. No.3-Bank along with the loan documents. Upon verification, it was further revealed that disbursement of the loan was made through individual loan account of 5762 farmers and consolidated amount was credited to Escrow (Current) Account No.05371131001453) of the company. The company, thereafter, transferred the funds from this current account to other accounts maintained by it with State Bank of India, Punjab National Bank and UCO Bank through RTGS. In this manner, the company has misappropriated money lent by O.P. No.3-Bank and that there was clear cut diversion of funds. The company vide its letter dated 28.5.2013 while admitting its liability and requesting for charging of normal rate of interest had also admitted that the funds were utilized for payment of arrears of sugarcane supplied earlier to their mills and thus, had admitted diversion of funds for the purposes other than that agreed between the company and O.P. No.3-Bank, thus, committed the offence of fraud, cheating and criminal breach of trust. The accounts of the borrower farmers were also declared NPA (Non Performing Assets) on 31.3.2015. The company had committed breach of terms of MOU by diverting the funds for the purpose other than agreed apart. A recovery suit of Rs.112.94 crores was filed by the O.P. No.3-Bank in DRT (Debt Recovery Tribunal) against the company where the company was making payments in piecemeal and approached the Bank for the purpose of financing a fresh corporate loan to the tune of Rs.110.00 crores so that it could clear the entire liability of all those loans of the farmers which they had diverted. Upon acknowledgment of the liability by the company and converting the loan into secured loan, the company undertook to gradually reduce the bank's dues. A corporate loan of Rs.110.00 crores was sanctioned by the O.P. No.3-Bank on 28.1.2015 with multiple banking arrangements with SBI as the lead with following securities :-

(a) subservient first pari-passu charge on all the movable and immovable fixed assets, present and future including equitable mortgage on land of the company with FACR of 1.25 times (minimum).

(b) Personal Guarantee of Directors/Promoters of the company.

The joint application was filed before the DRT Lucknow for recording the liquidation of liability of the company and passing of consent order for disposing of the case filed by the Bank. The DRT, while recording the same, has allowed the withdrawal of the said case and disposed of the matter on 16.3.2016. Thereafter, a total liability of Rs. 112,93,99,471/- was finally adjusted on 30.6.2018 by way of deposit of Rs.110.00 crores sanctioned on 28.1.2015 by Bank and by way of depositing Rs.2,93,99,471/- by the company from their own sources. The said corporate loan of Rs. 110.00 crores advanced by the Bank under multiple banking arrangements led by SBI slipped into NPA on 29.11.2016 due to non-payment of the installment by the company and Rs.109.08 crores is still outstanding. A number of lapses were committed by the company employees such as failure to complete the KYC compliance and relying upon the loan documents as provided by the company etc. which were found improper, regarding which disciplinary action was made in accordance with Officer Employees under (Discipline and Appeal) Regulations, 1982. Thus, the company had induced the Bank to give Rs.110.00 crores to get the fraudulent account adjusted, therefore, the criminal liability of the company still persists and is required to be investigated.

Learned court below by impugned order has rejected the application of the revisionist (3-ka) seeking permission to go abroad (Philippines), holding that the revisionist was the Director of M/s Simbhaoli Sugars Ltd. and that his company has misappropriated more than Rs.100 crores which was meant to be distributed as credit to the farmers and that it would not have any impact whether he was Director at the relevant point of time or not. Certainly there could be possibility of his fleeing away from the country to avoid investigation in the case of his trial.

Learned counsel for the revisionist has contended that Look Out Circular cannot be issued by Investigating Agency in cognizable offences unless there are chances of accused deliberately evading arrest and not appearing before the trial court despite issuance of NBW. In this case, Look Out Circular has been issued even though there was no hint or allegation that the revisionist would not be available for interrogation during investigation or during trial, if required and despite the fact that he had always been presenting himself before the Investigating Agency for the purpose of investigation. There is no possibility of the revisionist fleeing the country as he would leave his wife and daughter behind. He had sought only 10 days permission to leave the country which was badly needed for the purpose of conducting business abroad. It is further argued that CBI has failed to submit charge-sheet in the matter despite the FIR having been registered on 22.2.2018. He has relied upon law laid down in "Saroj Kumar Poddar vs. State (NCT of Delhi) and Another", reported in 2007 (5) SCC 691 in which it has been laid down that for prosecution of the director of a company, a clear case has to be spelt out which is not the case in hand. As he had already left the company in September 2013 and had nothing to do with the company since then. It is further argued that the revisionist intends to travel abroad to earn his livelihood which right cannot be whittled down as the same would be a fundamental right under Articles 19 and 21 of the Constitution. There was no specific role levelled in the FIR against him. Further it is argued that the trial court has not considered that at the time of fresh corporate loan which came to be sanctioned on 28.1.2015, the same was classified as NPA on 29.11.2016 while he had already left the company in September 2013. Further it is argued that the joint application was filed before the DRT Lucknow for recording the liquidation of liability of the company and passing of consent order for disposing of the case, filed by the Bank which was allowed by the DRT and the case was disposed of by withdrawal of the same vide order dated 16.3.2016. Thereafter, the total liability of Rs.112,93,99,471/- was finally adjusted by sanction of corporate loan of Rs. 110.00 crores granted by O.P. No.3-Bank by way of depositing of Rs.2,93,99,471/- by the company from its own sources. Thus, the entire loan granted earlier to the farmers by the O.P. No.3-Bank stood cleared, and a fresh loan was sanctioned on 28.1.2015, in pursuance of which earlier claim which was being agitated by the O.P. No.3-Bank before the DRT, had already been taken to its logical conclusion. Lastly, he has prayed the court to permit the petitioner to leave the country for ten days to go to Philippines on urgent basis.

Learned counsel for the revisionist has mainly relied upon the judgment passed in "Karti P. Chidambaram vs. Bureau of Immigration and Others" decided on 23.8.2018 by the High Court of Madras where writ petitions are directed against a Look Out Circular issued in respect of the petitioner by Bureau of Immigration under the Ministry of Home Affairs of Government of India. In this case, FIR against the petitioner was lodged u/s 120-B read with Section 420 IPC and Sections 8 and 13 (2) of the read with Section 13 (1) (d) of the Prevention of Corruption Act, 1988 and it was held by the court that the Look Out Circulars are coercive measures to make the person surrender to the Investigating Agency or in the court of law in accordance with the order dated 26.7.2017 of the High Court of Delhi. The Ministry of Home Affairs had issued the Office Memorandum dated 27.10.2010, laying down the guidelines for the issuance of the Look Out Circulars which provided that recourse to the Look Out Circular is to be taken in cognizable offence under IPC or other penal laws. The details in column IV in the enclosed proforma or regarding reason for issuing LOC's (Look Out Circular) must invariably be provided without which the subject of an LOC will not be arrested/detained. Therefore, it was clarified that a request for issuance of LOC would necessarily have to contain reasons for such request. Further it was held that the conditions precedent for arrest under Section 41 of the Code of Criminal Procedure without warrant as set forth in sub-sections (a) to (i) of Section 41(1) were wholly absent atleast on the date of the Look Out Circular. The legality or validity of LOC has to be adjudged having regard to the circumstances prevailing on the date on which the request of issuance of LOC has been made. It is further observed that FIR against the petitioner was lodged on 15.5.2017 while notice was issued on 15.6.2017 calling upon the petitioner to appear before the Station House Officer/Investigating Officer on 29.6.2017 and on the very next date i.e. 16.6.2017 the impugned LOC was issued which shows that there could have been no reason to suppose that the petitioner would not appear before the Station House Officer/Investigating Officer. Further, it is held that the issuance of LOC is governed by the executive instructions as contained in Office Memoranda dated 5.9.1979 and dated 27.12.2000, as modified by Office Memorandum dated 27.10.2010. Such LOCs cannot be issued as a matter of course, but only when reasons exist, where the acused deliberately evades arrest or does not appear in the trial court. In these circumstances, the Court held that condition precedent for issuance of the impugned LOC were absent, and the same was held liable to be set aside.

We are not inclined to extend the benefit to the revisionist-accused of the law laid down in the judgment of Karti P. Chidambaram (Supra) because in the present case, the LOC has been issued with a view to interrogating the revisionist in the matter at hand wherein the FIR has already been lodged and the investigation is going on. Merely because the revisionist so far had been co-operating with the investigation, may not lead us to believe that he would not evade his arrest in future. If some incriminating evidence comes on record against him, the possibility cannot be ruled out in this case of his fleeing abroad.

After having gone through the facts of the case and having perused the documents on record, we are of the view that the revisionist is an accused in the present case and is stated to be involved in huge financial scam of an amount of Rs. 100 crores approximately which according to the O.P. No.3-Bank has been embezzled by the said company. The investigation is still going on and the learned Special Judge (Anti-corruption) has expressed apprehension that there could be possibility of the accused-revisionist fleeing from the country so as to avoid his arrest (if required) during investigation or trial, in our view as well such a possibility may not be ruled, hence, we do not find any infirmity in the impugned order and are not inclined to give any relief to the revisionist. Accordingly, the present revision deserves to be dismissed.

The present revision is, hereby, dismissed.

 

 
Order Date:-26.9.2018
 
Rishabh
 

 
(Dinesh Kumar Singh-I, J.)      (Ramesh Sinha, J.)