Mr Avinash Aradhya vs Central Bureau Of Investigation ...
2021 Latest Caselaw 5461 Kant

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     IN THE HIGH COURT OF KARNATAKA AT BENGALURU

         DATED THIS THE 4TH DAY OF DECEMBER, 2021

                          BEFORE

           THE HON'BLE MR. JUSTICE K.NATARAJAN

            CRIMINAL PETITION No.1427 of 2021
BETWEEN
MR. AVINASH ARADHYA,
S/O. MALLOK ARADHYA,
AGED ABOUT 41 YEARS,
No.5F, CRESCENT COURT,
CRESCENT ROAD,
BENGALURU - 560 001,
ADDRESS AS PER FIR,
No.26/9, GLENMORE, SANKEY ROAD,
ABSHOT LAYOUT,
BENGALURU URBAN.                           ... PETITIONER
(BY SRI KIRAN JAVALI, ADVOCATE)
AND

1.    CENTRAL BUREAU OF INVESTIGATION,
      ANTI CORRUPTION BRANCH,
      No.36, BELLARY ROAD, GANGANAGAR,
      BENGALURU - 560 032,
      REPRESENTED BY SUPERINTENDENT OF
      POLICE,
      (ACB, BENGALURU).

2.    PUTTA LAKSHMI NARAYANA,
      DEPUTY GENERAL MANAGER/ZONAL
      MANAGER,
      INDIAN BANK, ZONAL OFFICE,
      4TH FLOOR, RAHEJA TOWERS,
      Nos.26, 27, M.G. ROAD,
      BENGALURU - 560 001.
                                        ... RESPONDENTS
(BY SRI P. PRASANNA KUMAR, ADVOCATE FOR R1
 SRI U.S. YOGESH KUMAR, ADVOCATE FOR R2)
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      THIS CRIMINAL PETITION IS FILED UNDER SECTION 482
OF THE CODE OF CRIMINAL PROCEDURE, PRAYING TO QUASH
THE FIR BEARING No.RC0372021A0002 DATED 21.01.2021 AT
ANNEXURE-B IN CASE No. RC No.02(A)/2021/CBI/ACB/Blr
REGISTERED WITH THE 1ST RESPONDENT POLICE AGAINST THE
PETITIONER HEREIN AND QUASH THE ENTIRE PROCEEDINGS IN
R.C.No.02(A)/2021 PENDING BEFORE THE XXI ADDITIONAL
CITY CIVIL AND SESSIONS JUDGE AND PRINCIPAL SPECIAL
JUDGE FOR CBI CASES, BENGALURU (CCH-4) AGAINST THE
PETITIONER HEREIN.

     THIS CRIMINAL PETITION HAVING BEEN HEARD AND
RESERVED FOR ORDERS ON 04.10.2021 AND COMING ON FOR
PRONOUNCEMENT THIS DAY, THE COURT PRONOUNCED THE
FOLLOWING

                          ORDER

This petition is filed by the petitioner-accused No.2

under Section 482 of Cr.P.C. for quashing the FIR bearing

No.RC0372021A0002 dated 21.01.2021 in Case No./RC

No.02(A)/2021/CBI/ACB/BLR registered with the first

respondent-CBI against the petitioner which is pending on

the file of XXI Additional City Civil and Sessions Judge and

Principal Special Judge for CBI cases, Bengaluru (CCH-4).

2. Heard the arguments of learned counsel for the

petitioner and learned Special counsel appearing for

respondent No.1-CBI and learned counsel for respondent

No.2-defacto complainant.

3. The case of the prosecution is that respondent

No.2, who is the Deputy General Manager/Zonal Manager

of Indian Bank, Bengaluru has filed a complaint to the CBI

on 18.01.2021 against three accused persons alleging that

respondent No.2-complainant-Bank had financed to

Accused No.1-M/s.Aradhya Steel Private Limited under

consortium arrangement with Union Bank of India (Leader

of Consortium) Industrial Finance Branch, situated at

Bengaluru, presently handled by Mid Corporate Branch at

Mithra Towers, Kasturba Road, Bengaluru. The above said

persons had entered into criminal conspiracy and

intentionally inducing the Indian Bank and other members

of the consortium to grant credit facilities by suppressing

various material, relevant facts from the knowledge of the

consortium members. After availing the credit facilities,

they had dishonestly misutilised and misappropriated the

Bank's amount and thereby caused wrongful loss to the

consortium of Banks, out of which, Indian Bank to the tune

of Rs.30.50 Crores as on 05.01.2021 (comprising of Book

Balance of Rs.24.45 Crores plus unapplied interest of

Rs.6.05 Crores plus applicable interest).

4. It is further alleged that the petitioner availed

loan through consortium and the account of Indian Bank

slipped to NPA category on 30.06.2019 and the other

members of the consortium also declared the account as

NPA and the case was referred to National Company Law

Tribunal (for short 'NCLT') under (Insolvency Resolution

Process for Corporate Persons) Regulations, 2016 (CIRP

Regulations) and the process commenced on 09.09.2019.

There are certain lapses observed after the account slipped

into NPA. There are no serious lapses observed on the part

of the Bank Officials. However, during the course of

investigation, the role of unknown public servants, if any

may be examined.

5. It is further alleged that in February, 2019 on

account of persistent delay in servicing of the debt and

frequent devolvement of the bills drawn under Inland letter

of credit, an internal investigation was done and on perusal

of the same, the beneficiary did not have any office at the

address available in the Letter of Credit (LC) document and

it could be inferred that the sales and purchases were only

on books and there is no physical movement of goods, the

receipts were found fake, there was no lorry transport

existing in the name of Sri Rajalakshmi Transport. The

investigation conducted by one Sri Amarnath, Chief

Manager (Credit) and Sri V.Sridharan, Chief Manager

(Vigilance) and their reports were confirmed. The

consortium meeting was held on 06.05.2019 which clearly

pointed out that these are Shell companies who used to

show the transactions on paper. M/s.Spiegel Enterprises

Private Limited is also a Shell company. M/s. Aradhya Steel

company-accused No.1 indulged in trading without

movement of actual goods with an intention to fraudulently

avail the Input Tax Credit. The Forensic audit was

commissioned by the leader of Consortium conducted by

M/s. Sarath and Associates, Charted Accountant, Chennai

which reveals that the irregularities committed by the

company were treated as fraud. Therefore, requested the

Police-CBI to register the complaint against the Borrower-

company and to take action against them. Based upon the

complaint, respondent No.1 registered a case against the

petitioner and being aggrieved by the same, the petitioner

being the Managing Director named as accused No.2 filed

this petition for quashing the FIR.

6. Respondent No.1 has filed the statement of

objections stating that the petition is devoid of merits. The

case was registered on the written complaint filed by the

Manager of the Bank and contended that accused No.1 had

availed credit facilities from respondent No.2. Respondent

No.2 took the credit facilities in a consortium lead by the

Union Bank of India. Accordingly, the letter of credit has

been given for Rs.22.70 Crores towards working capital to

accused No.1. Subsequently, accused No.1 closed the

account and later renewed the OCC limit for Rs.16.35

Crores and the credit limit was 11.35 Crores and accused

No.2 has given personal guarantee as on 31.03.2017 and

later, the account was declared as NPA. The petitioner

was having due for an amount of Rs.30.50 Crores. The

amount was received by the beneficiary company, but, all

these companies are Shell companies and transactions

were fake transactions. The investigation is in preliminary

stage. The unknown public servants are required to be

identified. However, there is no serious lapse on the part

of the Banker. The offence is serious one and cognizable

offence. The investigation agency is required to conduct

detailed investigation. Therefore, prayed for dismissing the

petition.

7. Respondent No.2 has filed the statement of

objections contending that accused No.1-Company has

availed financial assistance with the Bank by Open Cash

Credit (OCC) and letter of credit i.e., for total amount of

Rs.27.70 Crores with a promise to pay the said loan

amount along with interest. The petitioner along with his

father Mallok Aradhya who are the Directors of the

borrower company have availed Consortium loan facilities

with Union Bank of India, Bank of Baroda, HDFC Bank,

Hero Fin Corp Limited, Indian Bank for total amount of

Rs.226.56 Crores. Those accounts were classified as NPA.

Respondent No.2 has also declared the account as NPA on

30.06.2019. The proceedings initiated before NCLT under

Corporate Insolvency Resolution Process, wherein, a

Resolution Plan has been accepted by the NCLT, Bengaluru

and an order was passed on 24.08.2020. Respondent No.2

being the member of the consortium bank have received

an amount of Rs.8,29,80,000/- and further recovery suit

has been filed by the Debts Recovery Tribunal (DRT) under

Securitization Act. An internal investigation has been

conducted regarding genuineness of the transaction which

was found that the said beneficiary company of the LC has

given fake address, where no company is situated. The

transaction was bogus transaction. The said Spiegel

Enterprises Private Limited sold the product to the

petitioner-Company, but, these transactions were all only

on papers and no transaction has been taken place. Even

the lorry transport receipt is also found to be fake and no

such lorry transport is in existence in the name of

Rajalakshmi Transport. The address given by them is of

Residential Apartment. The borrower has given false

address of a fictitious company only to receive the letter of

credit for Rs.11.35 Crores from this bank. As per the

Directorate of Enforcement Office and as per the order

dated 4.2.2021, the alleged offence attracts Prevention of

Money Laundering Act, 2002 (for short 'PMLA'). There are

irregularities, illegalities and financial fraud committed by

the petitioner and thereby caused huge loss to the Bank.

As per the RBI guidelines, the Bank can file complaint

before the CBI and accordingly, the case has been

registered. The petitioner is required for investigation and

the matter requires thorough investigation. Therefore,

prayed for dismissing the petition.

8. Learned counsel for the petitioner has also filed

a Rejoinder to the statement of objections of respondent

No.2 stating that the RBI's frame work of Revitalizing

Distressed Assets in the economy - guidelines and Joint

Lenders' Forum (JLF) and corrective action plan under the

frame work of Revitalizing Distressed Assets in the

economy dated 26.02.2014 reviewed on 24.09.2015. The

consortium banks create JLF on identification of stress in

the company and the exit option for disagreeing the lender

is to sell their exposure to a new or existing lender within

the prescribed timeline. The Master Directions on frauds

for taking action, there must be a decision for at least 60%

of shares in the total lending agreeing for such decision.

The Minutes of the lenders meeting dated 23.01.2020,

majority of 88%, the balance is 12% of the respondent

No.2 has been decided not to report the account as fraud.

The Indian Bank is voted in favour of the resolution and

now they have taken u-turn which is contrary to the

decision taken in the Joint Lenders Forum. The forensic

audit report dated 30.09.2019 clearly held that there is no

fraud. As per the resolution of the company under the

Insolvency and Bankruptcy Code, 2016 (for short 'IBC'),

the role and decision making Authority of the Committee of

Creditors (CoC) is established and the approval of the

Committee in respect of the Transaction Auditor and upon

considering their report, it was held that there is no

fraudulent trading or wrongful trading as contemplated

under Section 66 of the IBC. Respondent No.2 has voted in

favour of the resolution and now cannot turn around and

file a case against the petitioner. The Indian Bank has filed

their report to RBI without following protocol laid by the

RBI. The internal report of the Bank by its Officers was

inaccurate and factually wrong. The 4th Meeting of the

Consortium of Creditors dated 27.11.2019 wherein, a

delegation of three Officers from the Indian Bank and they

have voted in favour of the resolution. By taking various

contention by denying the averments made in the

statement of objections, the petitioner prayed for allowing

the petition.

9. Having heard the arguments of both the

counsel and on perusal of the records, which reveals that it

is not in dispute that the petitioner-accused No.1 contacted

the Union Bank of India for availing financial assistance by

way of letter of credit who is said to be the borrower who

purchased the goods from Spiegel Enterprises Private

Limited and has given the letter of credit to the Banker.

Accordingly, the Banker has given the money to the

Spiegel Enterprises. It is also not in dispute that

respondent No.2 has paid money through the consortium

of Banks consisting other banks i.e., Union Bank of India,

Bank of Baroda, HDFC Bank, Hero Fin Corp Limited and

accused No.1 has availed loan from the complainant Bank

for an amount of Rs.24.45 Crores. It is also not in dispute

that accused No.2 stood as guarantor. It is alleged that

after availing of the loan, the account became Non-

Performance Assets (NPA) category as on 30.06.2019.

After the account slipped into NPA and on internal

investigation, it was found that the transaction between

accused No.1 and Spiegel Enterprises are bogus. The

Spiegel Enterprises is the beneficiary company itself

alleged to be a Shell company and actually no goods were

transferred from Spiegel Company to accused No.1

company. They prepared fake bills and shown the transfer

of goods and accused No.1 has issued a letter of credit and

on verifying the address of the Spiegel company, there is

no such company situated at the said address, it was a

residential apartment and it was also revealed that

accused No.1 in collusion with other accused have created

fake documents and shown the transaction of purchase

from the Spiegel Enterprises Private Limited. The accused

said to be created the documents fraudulently and

obtained the loan from the Bank by availing the benefit of

the letter of credit. In fact, the Rajalakshmi Transport

through which the goods were transferred but no such

transport is there and no goods have been transferred

physically and everything is done only on the paper.

10. Further it is an admitted fact that after the

account become NPA, an application was filed before NCLT

under the IBC where the NCLT has held a conciliation and

during the conciliation meeting, respondent No.2 has given

vote in support of the resolution and voted 11.41% and

subsequently, the present complaint came to be filed and

also they have filed an application for recovery of the

remaining amount by filing the suit before the DRT under

the Securitization Act.

11. The order passed by the National Company

Law Tribunal reveals that the resolution was passed in the

presence of the Bankers (totally nine Bankers) as per

Regulations 38(1)(a) of the CIRP Regulations. The

resolution plan dated 10.07.2020 was approved by the

Committee of creditors on 23.07.2020 for M/s.Bansal Wire

Industries Private Limited and the members of the NCLT

passed the order as per Section 31(1) of the IBC as the

creditors/bankers were appealed for resolution in respect

of Bansal Wire Industries and resolution plan has been

approved by the complainant-Indian Bank and they voted

in favour of the resolution. The voting percentage

regarding share of CoC voting was 11.41%. Some of the

financiers like Tata Capital Siemens and Sundaram, HDFC

were also descendants. The descending vote was 20.98%

and the favourable vote was 79.02% which is also not in

dispute.

12. The contention of the learned counsel for the

petitioner is that once the Banker agreed to receive the

amount and voted in favour of the resolution before NCLT

and now they cannot file any complaint against the

petitioner-company.

13. Per contra, learned counsel appearing for CBI

opposed the same mainly on the ground that the

transaction itself is fraudulent transaction, accused No.1

has created a fabricated document and given a false letter

of credit. Absolutely there is no goods transferred from

any of the company to accused No.1. All the transactions

are sham transactions and the company is also Shell

company. No company is existing and therefore, prayed

for allowing the CBI to investigate the matter.

14. The learned counsel for the petitioner has

relied upon the judgment of Division Bench of this Court in

W.A.No.2575/2018 (T-TAR) wherein, the Hon'ble Division

Bench has held that once the order is passed by the NCLT

on the resolution plan was approved, the question of

reopening or remanding the matter back does not arise

and Section 238 of the IBC having overriding effect. There

is no second opinion in respect of the judgment of the

Division Bench of this Court in respect of the order passed

by the NCLT and approving the plan by resolution, where

respondent No.2 was also a party who voted in favour of

the resolution. However, the resolutions moving the

applications before the NCLT and filing the case before the

DRT were all subsequent to declaring the account of the

petitioner as NPA. Of course, it is not in dispute that the

loan obtained by the petitioner and later declared as NPA

account, but, the allegation against the petitioner is that

the transaction of loan and issuing the letter of credit by

the petitioner itself is a sham transaction and no goods

were transferred and there is no existence of the

beneficiary company as contended by the petitioner-

company for issuing the letter of credit. Therefore, the

matter required to be investigated by the CBI as regards

to the fabrication, creation of false document and

producing it as genuine for the purpose of borrowing loan

for non-existing and a Shell company. Though the learned

counsel for the petitioner has relied upon the orders of the

Co-ordinate Bench of this Court in Crl.P.3817/2017 and

connected matter in the case of M.Rama Reddy and

others vs. CBI, K.Prabhakar Rao and another vs. CBI

and others wherein, this Court has quashed the criminal

proceedings after repayment and issuing the no objection

certificates. In another judgment in the case of M/s

Ghataprabha Sahakari vs. CBI and another in

W.P.No.66630/2012 and connected matter, the Co-

ordinate Bench has quashed the Criminal proceedings on

the ground that the payment has been made and after

issuance of no objection, the CBI cannot investigate the

matter.

15. But here in this case, the allegation against the

petitioner is that the goods were not at all transferred from

the Spiegel company to the petitioner-company but, they

created all the documents including a transport company

in the name of Rajalakshmi transport and in the said

address, there is no such transport company or seller

company is situated. All the transactions are only on the

paper. Though the learned counsel for the respondent

contends that there is no Bank officials involved in the

sanction of loan by accepting the letter of credits, but the

matter required to be investigated by the CBI to find out

whether any Bank officials were also colluded in sanction

of loan. A huge Crores of rupees sanctioned by the Banks

under the consortium of Banks, it cannot be said that they

have verified everything before sanction of loan. The

officials of the Banker definitely could have involved in

sanctioning Crores of rupees to the petitioner-company,

otherwise, an amount of Rs.22.70 Crores cannot be

possible for sanction without the connivance of the Bank

officials. Though the learned counsel for the petitioner

relied upon the judgments, but those judgments were all

subsequent to the declaring the accounts of the borrower

as NPA account. But here in this case, subsequent to the

NPA, rising the dispute before the NCLT and recovering the

arrears are all together different from those cases. In this

case the very inception or beginning stage of obtaining

loan by producing the fabricated document itself is an

offence under Sections 465, 468, 471 and 420 of IPC.

Therefore, merely the resolution is passed and approved

by the consortium banks is not a ground for quashing the

FIR. Therefore, the judgment relied by learned counsel will

not come to the aid of the petitioner.

16. On perusal of the entire records, it is necessary

for the CBI to investigate the matter and to find out the

truth as to whether the seller Spiegel Enterprises Private

Limited is in existence or it is a Shell company and the

goods were actually moved from beneficiary of the letter of

credit to accused No.1 and whether the Rajalakshmi

transport company is also in existence or not, were all

required to be verified as the learned counsel for

respondent No.2 has categorically stated that the address

given by the beneficiary company is false and there are

residential houses existing in the said address. Such being

the case, merely the Banker or Bank officials have agreed

to settle the matter in a resolution that was held after

filing of the case before NCLT, the FIR cannot be quashed.

Therefore, I hold that the contention of learned counsel for

the petitioner cannot be acceptable for quashing the FIR.

The petition is devoid of merits and hence, liable to be

dismissed.

17. Accordingly, the criminal petition filed by

accused No.2 under Section 482 of Cr.P.C. is hereby

dismissed.

Sd/-

JUDGE

GBB