Rahul Kothari vs Serious Fraud Investigation ...
2022 Latest Caselaw 4194 ALL

HIGH COURT OF JUDICATURE AT ALLAHABAD
 
 

		         	              Judgement reserved on : 16.05.2022
 
			              Judgment delivered on :  26.05.2022 
 

 
Case :- CRIMINAL MISC. BAIL APPLICATION No. - 8620 of 2022
 

 
Applicant :- Rahul Kothari
 
Opposite Party :- Serious Fraud Investigation Office Through Assistant Director
 
Counsel for Applicant :- Sankalp Narain
 
Counsel for Opposite Party :- A.S.G.I.
 

 

 
Hon'ble Om Prakash-VII, J.

Heard Shri Vikram Chaudhary, learned Senior Advocate assisted by S/Shri Imran Ullah, Pranjal Krishna and Sankalp Narain, learned counsel for the applicant, Shri Gyan Prakash, learned Senior Advocate assisted by Shri Sanjay Kumar Yadav, learned counsel for the S.F.I.O. and learned A.G.A. for the State.

This Application for bail has been moved on behalf of the applicant - Rahul Kothari with the prayer to enlarge him on bail in Sessions Trial No.577 of 2020 (S.F.I.O. Vs. Rotomac Global Pvt. Ltd. and others) arising out of MCA Order No. 03/117/2018-CL II (NR) dated 21.02.2018 and MCA Order No.07/117/2018-CL II (NR) dated 22.08.2019, under Sections 36 (c) r/w 447, 185, 186, 447, 448 r/w 447 of the Companies Act, 2013 and Section 211 r/w 628 of the Companies Act, 1956 registered with the Serious Fraud Investigation Office, New Delhi (S.F.I.O.,New Delhi) and pending in the court of Learned Additional District & Sessions Judge-9, Kanpur.

It was submitted by Shri Chaudhary, learned senior counsel appearing for the applicant that although technically this is the second bail application of the accused-applicant, but merit of the case has not been touched upon while deciding the first bail application of the applicant. It was next submitted that no prima facie case is made out against the applicant. Embargo created under section 212 (6) of the Companies Act will not come in the way in releasing the applicant on bail by a constitutional Court, as many other co-accused, having identical role, have been allowed on bail by the Apex Court. Next argument of the learned counsel was that father of the applicant namely, Vikram Kothari (since died) had approached the Apex Court challenging the vires of the provision of section 212 (6) of the Companies Act and interim relief was granted in the said petition staying the arrest of the father of the applicant. Learned counsel further contended that applicant, after rejection of the first bail application before this Court, approached the Apex Court where he was allowed on interim bail. Special leave to appeal petition moved by the applicant before the Apex Court was withdrawn with liberty to approach the trial court / High Court. It was next submitted that the Apex Court extended the interim bail granted to the applicant time to time. This Court also on moving the second bail application, has allowed the applicant on interim bail, which was also extended time to time. It was further argued that earlier one F.I.R. had been lodged on part of the C.B.I. for the same set of facts against the applicant and other co-accused. Applicant was arrested in that case. Thereafter he moved bail application before the coordinate Bench (Lucknow Bench) of this Court and applicant was allowed on bail vide order dated 30.11.2018 passed in bail application nos. 2920 of 2018 and 3492 of 2018. Referring to the order passed in the aforesaid bail applications, it was further argued that the Court, while allowing the bail applications, has specifically observed that applicant has not played any representative role in the business affairs of the Company R.G.P.I.L. When the applicant was released on bail, he was immediately thereafter arrested by the S.F.I.O. Since entire interrogation has been completed, complaint has been filed, cognizance has also been taken and there is no need of personal interrogation of the applicant, thus on this ground also, prayer for bail was made. It was next contended that almost all the accused, who were either arrested or applied for anticipatory bail in this matter, have been granted relief and they are released on bail. Other co-accused, who are residing in abroad, have not been arrested till today nor they have surrendered before the court. There is no likelihood of early hearing of the trial in near future. Applicant was in jail in this matter for a considerable period in regard to the F.I.R. lodged on behalf of the C.B.I. Father of the applicant (co-accused in this case) had died. Mother was suffering from COVID-19 long-term effects and symptoms. She is still under treatment and some one is required to look after her. Applicant is the only son of his ailing mother. There is no one in the family to look after her. Applicant has also not misused the liberty granted to him by the Apex Court or by this Court in the form of interim bail. All the conditions imposed upon him have been fulfilled. It is next argued that co-accused Udai J. Desai had also approached this Court for bail and after rejection of the same, he approached the Apex Court and he was allowed on regular bail through S.L.P. (Crl.) No.3479 of 2021. Similarly, co-accused Vishwanath Gupta had approached this Court for anticipatory bail, which was allowed by coordinate Bench of this Court. S.F.I.O. approached the Apex Court challenging the anticipatory bail order granted in favour of the co-accused Vishwanath Gupta, but the said Special Leave to Appeal was dismissed. Other co-accused Kejriwal brothers had also approached this Court for anticipatory bail. On rejection of their bail application, they approached the Apex court wherein the Apex court granted interim bail to them.

Sri Imran Ullah, learned counsel for the applicant also submitted that no fruitful purpose would be served directing the applicant to surrender before the court concerned and to keep him into custody till the disposal of the trial, as there is no likelihood of of the trial being concluded at an early date.

In support of their contention, learned counsel appearing for the applicant also placed reliance on the following case laws :

1. Gurbaksh Singh Sibia Vs. State of Punjab, (1980) 2 SCC 565

2. Sanjay Chandra Vs. C.B.I., (2012) 1 SCC 40

3. P. Chidambram Vs. Directorate of Enforcement, (2020) 13 SCC 791 : 2019 SCC OnLine SC 1549

4. Dataram Singh Vs. State of U.P and another

(2018) 3 SCC 22

5. Union of India Vs. K.A. Najeeb, (2021) 3 SCC 713

6. Ranjitsing Brahmajeetsing Sharma Vs. State of Maharashtra, (2005) 5 SCC 294

7. Babu Singh and Others Vs. State of U.P. and Others, (1978) 1 SCC 579

8. Sukhwant Singh & Others Vs. State of Punjab, (2009) 7 SCC 559

9. Mukesh Kishanpuria Vs. State of West Bengal, (2010) 15 SCC 154.

10. Rajesh Seth Vs. State of Chhattisgarh, SLP (Crl.) No. 1247 of 2022, Order dated 21.2.2022

11. Jainam Rathod Vs. State of Haryana & Another, SLP (Crl.) No. 1554 of 2022, Order dated 18.4.2022

12. Mohan Krishna Kejriwal & Others Vs. State of U.P. and another, SLP (Crl.) No. 2312 of 2022, Order dated 30.3.2022

13. Sujay U. Desai Vs. Serious Fraud Investigation Office, SLP (Crl.) No. 1185 of 2022, Order dated 13.5.2022

Sri Gyan Prakash, learned Senior Advocate appearing for the S.F.I.O. argued that this is the second bail application moved on behalf of the accused-applicant. No new ground has been taken in it. All the issues raised in this second bail application have already been discussed and decided while rejecting the first bail application. It was further submitted that the applicant has directly approached this Court for bail. Thus, on this ground also, second bail application is not maintainable. Accused-applicant was the main culprit of the crime. To substantiate this argument, leaned counsel for the S.F.I.O. referred to the conclusion drawn by the Investigating Agency as disclosed in the complaint. Embargo created under section 212 (6) of the Companies Act will come in the way in releasing the applicant on bail. A prima facie case is made out against the applicant. Mere release of co-accused Udai J. Desai and Vishwanath Gupta on bail will not be a ground to enlarge the applicant on bail. It was further argued that applicant has played an active role in committing the present offence. A huge loss has occurred to the Public Sector Bank and due to non-payment of the advance taken by the concerned Companies, a large amount has become N.P.A.

In reply, Sri Chaudhary, learned Senior Advocate appearing for the applicant refuting the submissions raised by the learned Sr. Advocate appearing for the S.F.I.O. further argued that technically it is a second bail application, but same is well maintainable and can be considered on merits. Many co-accused have been released on bail. Thus, at this stage, when trial is actually not proceeding and applicant has fully cooperated with the Investigating Agency at all times, he has not committed any breach of terms and conditions imposed upon him during interim bail, thus argument advanced by the learned counsel for the S.F.I.O. are not sufficient to deny the applicant from bail. Referring to the aforesaid facts it was contended that the applicant is entitled to be released on bail.

Prosecution case in nutshell, as disclosed in the bail application and affidavits filed by the parties are that the applicant has been arrayed as an accused no. 42 in the complaint dated 15.05.2020 filed by the S.F.I.O.. It has been averred in the said complaint that applicant was one of the promoter-Director of the Rotomac Global Private Limited (hereinafter will be referred as R.G.P.L.), Crown Alba Writing Instruments Private Limited; Kothari Foods and Fragrances Private Limited; Rotomac Exports Private Ltd and also Rotomac Exim Private Limited and other sister companies which caused wrongful loss to the public sector banks to the tune of Rs. 4168 crores as N.P.A. Aforesaid companies and sister companies of the Rotomac Group of Companies were engaged in the business of commodities and merchant trading (MT). Aforesaid companies had secured the credit faciltiies by way of margin money/FDs as well as other co-lateral. It has also been averred that since its incorporation R.G.O.C. had duly serviced all its loan and obligation towards bank and other creditors in a timely manner and over a period of time banks have increased sanctioned limit from time to time. Later on, on the basis of complaint, M.C.A. (Ministry of Corporate Affairs) vide order dated 21.02.2018 in exercise of powers conferred under Section 212 (1) & (3) of the Companies Act formed an opinion that the investigation into affairs of 11 Companies of Rotomac Group is necessary to be conducted by the S.F.I.O. and pursuant to the aforesaid order complainant was appointed as Investigating Officer. On completion of investigation, investigation report dated 06.05.2020 was submitted to the M.C.A. who in turn granted direction to initiate prosecution against the accused whose name appears in the complaint. Complaint also reveals that R.G.O.C. and its promoters and directors have fraudulently induced the banks to obtain credit facility. False/deceptive documents for opening of Letter of Credit was also furnished before the banks concerned manipulating and misrepresenting the financial statement. Allegations is also that aforesaid group of companies flouting the R.B.I. Guidelines obtained M. T. finances and credit facility from the banks. Complaint also reveals that fictitious M.T. Trade were also shown in the financial statement showing it to be profitable. Aforesaid companies were also engaged in speculative currency transaction. For the aforesaid reason and showing the false M.T. Trade over the years Rs. 4168 crores became outstanding which in turn became N.P.A. Thus, aforesaid group of companies caused a loss of multi-crores rupees to the public sector banks. Complaint also reveals that aforesaid companies adopting aforesaid modus operandi obtained bad debts write off. They also made manipulation in share capital. They have not shown true and fair picture of the business done by them and also furnished wrong reflection of sales and purchase figure. They have also wrongly classified the interest income.

It has also been averred that applicant under the garb of MT conducted moping of interest arbitrage thereby, fraudulently induced the public sector Banks to obtain credit facilities. Applicant had knowingly falsified the books of accounts and the financial statements deliberately concealing material facts. It is also averred that applicant was also indulged in speculative currency trading unrelated to MT being undertaken by RGC thereby gambling with Banks money which resulted in huge loss. Applicant was instrumental in holding the currency losses in the books of accounts under the garb of debit notes. These debit notes were raised against foreign parties and made part of trade receivable. Later on these debit notes were adjusted against the payment received from the LC rotated funds.

Allegation against the applicant is also that he abused his position as promoter-director and caused wrongful loss of Rs. 4188 Crores to public sector Banks. He utilized the corporate identity to perpetrate fraud of rotating the funds obtained through Letter of Credit discounting for mopping the interest arbitrage available between LC issuance and discounting charges and that between the interest on fixed deposits. This whole conspiracy was played under the garb of doing MT.

Applicant and co-accused also used the corporate identity to rotate LC funds for mopping the interest arbitrage and showed it in the books as Merchanting Trade business. Since it was not actually into MT business, the corresponding sales and purchase shown in the financial statements and books of accounts was false. Since mopping of interest was done by keeping the rotated funds obtained through LC discounting in Fixed Deposits to camouflage the same and the interest income from FD was shown as part of revenue from operation in the financial statements to give a false picture of profitability of MT business. A large amount of these fictitious trade receivables were standing against their undisclosed related parties.

Thus, the sum and substance of the investigation conducted in the matter and the facts mentioned in the complaint for prosecution are that concerned Companies were engaged in fraudulent merchantine trade and caused wrongful loss to the Public Sector Banks to the tune of Rs. 7820 Crores approximately applying different modus operandi including siphoning of Bank funds through merchantine trade; falsification of financial statement of the Companies involved in the matter by not showing true and fair views.

I have considered the rival submissions made by the learned counsel appearing for the parties and have gone through the entire record including the case laws relied upon by the parties.

In this matter, as is evident from the record, earlier an F.I.R. was lodged on behalf of the C.B.I. on the basis of same set of facts on which present compliant has been filed. Applicant was enlarged on bail. Thereafter, he was again arrested in the present matter started by the S.F.I.O. Applicant moved bail application before this Court, which was rejected. Thereafter, he approached the Apex Court and was allowed on interim bail. Applicant withdrew the Special Leave Petition with liberty to approach the High Court or the court below. Thereafter, this second bail application has been moved.

Although, technically, this is the second bail application moved before this Court, but submission raised on behalf of the S.F.I.O. that bail application is not maintainable directly before the High Court is not tenable. Present bail application can be entertained and decided by the High Court. Perusal of the record also reveals that one Udai J. Desai had also approached this Court for bail, but bail prayer made by him was rejected by this Court. Thereafter, he approached the Apex Court and he was allowed on bail. Another co-accused Vishwanath Gupta had applied for anticipatory bail, which was allowed by the coordinate bench of this Court, as is clear from the record. Order passed on the anticipatory bail application was challenged before the Apex Court, which was dismissed.

Thus, keeping in view the entire facts and circumstances of the case, hearing the parties and keeping in view this fact that the first bail application moved before this Court was rejected on sole ground of the provision of Section 212 (6) of the Companies Act, but thereafter, having identical role, the co-accused Udai J. Desai has been allowed on bail through S.L.P. (Crl.) No.3479 of 2021, applicant has not misused the liberty of interim bail, nothing is on record to show that the applicant has committed any breach of the condition imposed upon him while he was on interim bail granted by the Apex Court and this Court, trial has commenced, investigation has been been completed, applicant has fully cooperated with the investigating agency, thus the Court is of the opinion that prayer made by the applicant for regular bail is also liable to be allowed and is hereby allowed. Thus, bail application of the applicant is allowed.

Let the applicant Rahul Kothari be released on bail in Sessions Trial No.577 of 2020 (S.F.I.O. Vs. Rotomac Global Pvt. Ltd. and others) arising out of MCA Order No. 03/117/2018-CL II (NR) dated 21.02.2018 and MCA Order No.07/117/2018-CL II (NR) dated 22.08.2019, under Sections 36 (c) r/w 447, 185, 186, 447, 448 r/w 447 of the Companies Act, 2013 and Section 211 r/w 628 of the Companies Act, 1956 registered with the Serious Fraud Investigation Office, New Delhi (S.F.I.O.,New Delhi) and pending in the court of Learned Additional District & Sessions Judge-9, Kanpur, on furnishing a personal bond and two heavy sureties each in the like amount to the satisfaction of the court concerned subject to following conditions :

1. The applicant will not tamper with the evidence during the trial.

2. The applicant will not pressurize/ intimidate the prosecution witnesses.

3. The applicant will appear before the trial court on the date fixed, unless personal presence is exempted.

4. The applicant shall not commit an offence similar to the offence of which he is accused, or suspected, of the commission of which he is suspected.

5. The applicant shall not directly or indirectly make any inducement, threat or promise to any person acquainted with the facts of the case so as to dissuade him from disclosing such facts to the Court or to any police officer or tamper with the evidence.

6. The applicant shall deposit his passport immediately, if not already deposited and shall not leave the Country without prior permission of the court concerned.

Since the applicant is on interim bail, there is no need to surrender. If the sureties filed in lieu of interim bail order are willing and ready to take sureties in compliance of the present bail order, then the applicant will be released on same bail bonds / surety bonds. In case sureties are not agreed to take the fresh surety bonds, applicant is hereby directed to immediately file the fresh bail bonds / surety bonds to the satisfaction of the trial court.

Order dated : 26.5.2022

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