Mr K Ramakrishna vs Directorate Of Enforcement
2022 Latest Caselaw 9546 Kant

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       IN THE HIGH COURT OF KARNATAKA AT BENGALURU

            DATED THIS THE 24TH DAY OF JUNE, 2022

                           BEFORE

            THE HON'BLE MR. JUSTICE H.P. SANDESH

               CRIMINAL PETITION NO.2561/2022
BETWEEN:

MR. K. RAMAKRISHNA
S/O MR. KRISHNAIAH
AGED 72 YEARS
PRESIDENT
SRI GURU RAGHAVENDRA
SAHAKARA BANK NIYAMITHA
AT No.32/70, BHAGYALAKSHMI NILAYA
3RD STREET, BASAVANAGUDI
BENGALURU-560 004

ALSO AT M/s. GRAVITY LEGAL COMPANY
No.64, 3RD FLOOR, 41ST CROSS
3RD MAIN, JAYANAGAR 8TH CROSS
BENGALURU-560 070.                           ... PETITIONER

       (BY SRI KIRAN S. JAVALI, SENIOR COUNSEL A/W. SRI
                I.S.PRAMOD CHANDRA, ADVOCATE)

AND:

DIRECTORATE OF ENFORCEMENT
REPRESENTED BY ITS ASSISTANT DIRECTOR
GOVT. OF INDIA
MINISTRY OF FINANCE
DEPARTMENT OF REVENUE
BENGALURU ZONAL OFFICE
3RD FLOOR, B-BLOCK
BMTC BUS STAND
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DOUBLE ROAD, SHANTHINAGAR
BENGALURU - 560027.                              ... RESPONDENT

           (BY SRI MADHUKAR DESHPANDE, ADVOCATE)

     THIS CRIMINAL PETITION IS FILED UNDER SECTION 439
OF CR.P.C., PRAYING TO ENLARGE THE PETITIONER ON BAIL IN
ECIR/BGZO/09/2020 REGISTERED WITH DIRECTORATE OF
ENFORCEMENT, BENGALURU ZONAL UNIT, BENGALURU, FOR
THE OFFENCES PUNISHABLE UNDER SECTIONS 3 AND 4 OF
PREVENTION OF MONEY LAUNDERING ACT, PENDING ON THE
FILE OF PRINCIPAL CITY CIVIL AND SESSIONS JUDGE,
BENGALURU, (CCH-01).

     THIS CRIMINAL PETITION HAVING BEEN HEARD AND
RESERVED FOR ORDERS ON 10.06.2022 THIS DAY, THE COURT
PRONOUNCED THE FOLLOWING:

                            ORDER

This petition is filed under Section 439 of Cr.P.C., seeking

regular bail of the petitioner/accused in ECIR/BGZO/09/2020

registered with Directorate of Enforcement, Bengaluru Zonal

Office, Bengaluru, for the offences punishable under Sections 3

and 4 of Prevention of Money Laundering Act, 2002 ('PMLA Act'

for short).

2. Heard the learned senior counsel appearing for the

petitioner and the learned counsel appearing for the respondent.

3. The factual matrix of the case of the prosecution is

that on 07.02.2020 at about 2:10 p.m, the S.H.O., of

Banasawadi police Station received the Type Written information

of Mr. A. Santhosh Kumar, the then C.E.O., of Sri Guru

Raghavendra Sahakara Bank Niyamitha, Bengaluru and on the

basis of the same, a case in Crime No.69/2020 came to be

registered for the offences punishable under Sections 406, 420,

409, 120B read with 34 of IPC and also invoked Section 9 of the

Karnataka Protection of Interest of Depositors in Financial

Establishments Act. A case was registered against seven accused

persons in connection with misappropriation of funds and fraud

committed in connection with the affairs of Sri Guru

Raghavendra Sahakara Bank, Netkallappa Circle, Bengaluru.

The said FIR is transferred to Basavanagudi Police Station on the

point of jurisdiction. One more case has been registered in Crime

No.37/2020 for the same offences. Thereafter, the investigation

of the case was transferred to the CID and the Investigating

Officer gave requisition to delete the offence under Section 9 of

the Karnataka Protection of Interest of Depositors in Financial

Establishments Act and after the investigation the said case is

numbered as C.C.No.28892/2021.

4. In the meanwhile, the Assistant Director, Directorate

of Enforcement, Bengaluru Zonal Office has collected the source

of information receiving the letter from the office of the Registrar

of Co-operative Societies. First information in respect of Crime

No.69/2020 and in respect of Crime No.37/2020, invoked the

scheduled offences under Section 2(1)(x) & (y) of the PMLA Act

and found that there is a prima facie case for offence of money

laundering under Section 3 of the PMLA Act, punishable under

Section 4 of the said Act. Hence, based on the report, registered

a case in ECIR/BGZO/9/2020 and initiated the investigation

under PMLA Act and also to attach the properties involved in the

money laundering.

5. It is an allegation against this petitioner that he was

the President of Sri Guru Raghavendra Sahakara Bank

Niyamitha, Bengaluru, and the said Bank is a Co-operative Bank

registered under the Karnataka Co-operative Societies Act. The

said Bank has obtained requisite license from R.B.I. for banking

activities in the year 1999. The RBI also conducted a statutory

inspection and found major lapses and serious irregularities.

After registration of the Enforcement case Information report,

the Assistant Director, Directorate of Enforcement, Bengaluru,

started investigation under PMLA and during the course of the

investigation, it is revealed that another entity Sri Guru

Sarvabhouma Credit Co-operative Limited was also established

by the petitioner in the year 2015 and the said Society was

established for the purpose of avoiding TDS. This petitioner was

holding the common post of President of the said Bank and

Society and he was having full control over both the Bank and

the Society; that the petitioner started the Bank in the year

1999 and from the year 1999-2006 he acted as Vice-President of

the Bank and later assumed charge as President of the said Bank

in the year 2005. The petitioner was responsible for supervising

the day-to-day functioning of the Bank; that under the

Chairmanship of the petitioner, total loan to the extent of

Rs.892.85 Crores was mis-appropriated by creating advances

against the deposits in the system without obtaining the

mandate from the depositors. Advances were allowed to

withdraw over and above the actual deposits held and advances

were allowed to withdraw over and above the sanctioned

amount. The loans were sanctioned by just obtained partial

coverage of mortgages and the Bank did not create charge in EC

in respect of the properties mortgaged to it by the borrowers.

Bank used to release the charges created against the collateral

securities even as the loan account remained active and the limit

of the overdraft accounts were being enhanced as and when

needed without any genuine basis of the same. The Loan

Committee did not record any observations regarding continuous

ever-greening of the loan accounts and siphoned the amounts

with the knowledge. Hence, the Assistant Director, Directorate

of Enforcement, Bengaluru, issued summons under Section

50(2) of the Act, calling upon the petitioner to appear before

him. But he did not co-operate with it and when he was

appeared on 14.02.2022, he was taken into the custody and the

petitioner failed to share information about the actual

beneficiaries who are in possession of proceeds of the crime. The

petitioner was remanded to judicial custody and extended from

time to time. An approach was made to the Sessions Court

invoking Section 439 of Cr.P.C., and the same was dismissed.

Hence, the present petition is filed before this Court.

6. The main contention of the learned senior counsel for

the petitioner before this Court is that he is an innocent and the

entire materials collected by the Police are not sufficient to hold

that the petitioner has committed the offences in question. It is

also contended that after initiation of the proceedings by the

Enforcement Directorate, properties belonging to the petitioner

and his family members were subjected to Provisional

Attachment vide order dated 17.09.2020 and subsequently the

Adjudicating Authority vide order dated 10.03.2021 has

confirmed the provisional attachment order.

7. It is contended that during the course of

investigation, the petitioner was summoned to appear and he

was subjected to interrogation and the information sought from

the petitioner was submitted to the concerned to the extent that

was available and illegally he detained in custody. When already

properties were attached, question of continuing him in custody

does not arise. The petitioner had no knowledge about the

misappropriation of the funds from the Bank and the staff

including the former C.E.O. and the petitioner was not

responsible for the day to day affairs. The investigation by the

CID discloses that 5 staff including the C.E.O. had withdrawn

cash to the tune of about 76 Crores from the Bank and this came

to the knowledge of the Bank only by the Administrator of the

Bank, who lodged a complaint with the Police and the Staff have

been arrested and later released on bail. Though the petitioner

was co-operating with the investigation, he was arrested. The

petitioner has not admitted to having committed any offences

under the PMLA Act and nothing on record to show the petitioner

had laundered any money. The petitioner has no nexus with any

other accused and in the proceedings before the Adjudicating

Authority has placed materials to show his innocence and also

brought to the notice of the authorities that the acts committed

by the other accused were not within the knowledge of this

petitioner. The petitioner had been granted anticipatory bail in

Crime No.37/2020, the same is now pending in

C.C.No.28892/2021 and Crime No.18/2020 registered with ACB,

Bengaluru. The petitioner had also obtained bail in Crime

No.08/2020 and Crime No.11/2020. There are no allegations

regarding the fact that the petitioner had misused the liberty of

bail.

8. The learned senior counsel appearing for the

petitioner would vehemently contend that the petitioner is aged

about 71 years and suffering from heart ailments and undergone

surgery. In support of the same, he produced Annexure 'F' and

no question of fleeing away from justice. The offences are not

exclusively punishable with death or imprisonment for life. He

is ready to obey the conditions that may be imposed by this

Hon'ble Court.

9. The learned senior counsel for the petitioner would

vehemently contend that till February he was not taken into

custody and the statements should be corroborated in trial. The

Aujudicating Authority order is also questioned and the appeal is

pending. The learned senior counsel also would vehemently

contend that the maximum punishment is only seven years and

the properties already attached. It takes time to decide with

regard to the misappropriation and substantial investigation has

already been done and he has been arrested before filing of the

complaint. Hence, he may be enlarged on bail.

10. The learned senior counsel for the petitioner in

support of his arguments he relied upon the order passed by this

Court in Crl.P.No.1189/2022 dated 30.03.2022 and referring

to this order would vehemently contend that this Court in detail

discussed the relevant provisions of the PMLA Act viz., Sections

19, 45 and 50 of the PMLA Act. Having considered the matter in

depth, the Special Court has to charge the accused for the

offences under Section 3 of the PMLA Act after taking cognizance

of the said offences. When once complaint/final report under

Section 45 of the PMLA Act is filed with the opinion of the

investigating agency for the purpose of arrest under Section 19

of the PMLA Act, that an accused under the Act prima facie guilty

of the offences under the provisions of the Act. It is only for the

purpose of arrest and not binding on the subject code and the

same is to safeguard the proposed accused from the wrongful

arrest and nothing more. It is also taken note of the bail

granted in respect of the predicated offences. The Agency is

also very well aware of the said fact; despite the same

proceeded to effect the arrest of the petitioner by resorting to

the powers vested in it under Section 19 and granted bail. The

learned senior counsel would vehemently contend that the same

is applicable to the facts of the case on hand.

11. The learned senior counsel for the petitioner also

relied upon the order passed by this Court in

Crl.P.No.2344/2021 dated 28.10.2021 and brought to the

notice of this Court that granting of bail, wherein, an observation

is made that the petitioner is not required to be detained in

custody for any other purpose except to ensure his presence

before the Trial Court and to see that he will not commit such

offence while on bail. Hence, granted bail. The learned senior

counsel would vehemently contend that this judgment also

comes to the aid of the petitioner herein.

12. Per contra, the learned counsel for the respondent

has filed a detailed statement of objections and the learned

counsel in his arguments would vehemently contend that under

Section 45 of the PMLA Act, the offences are cognizable and non

bailable and the accused has to make out the case to enlarge

him on bail. The very contention of the learned senior counsel

for the petitioner is not acceptable. The learned counsel for the

respondent would vehemently contend that the family members

including the son, wife and daughter also accused and received

the letter from the Co-operative Bank regarding

misappropriation. Based on these proceedings are initiated and

the fact that this petitioner is the Chairman of the Bank and the

Society as well as he is the Chairman of the Loan Committee, is

not in dispute. The learned counsel for the respondent would

vehemently contend that when the loan was dispersed there was

no any charge on the property. Apart from that, the very same

documents are returned to the beneficiaries and opened fictitious

loan accounts and commissions are received and money

laundering is accepted and no explanation. The deposit amount

was used for the family benefits and committed fraud and

acquired huge properties in the name of the family by using the

depositors' money. Hence, the learned counsel for the

respondent would vehemently contend that it is not a case for

exercising the discretion in favour of the petitioner.

13. The learned counsel for the respondent in support of

his arguments he relied upon the judgment of the Delhi High

Court in the case of Sekar v. Union of India and others

reported in 2018 SCC OnLine Del 6523, and referring to this

judgment, the learned counsel brought to the notice of this Court

that the Delhi High Court has taken note of the background to

the PMLA and the Key provisions of the PMLA and the Judicial

Review of the Provisional Attachment Order and taken note of

Section 5 and contend that the reasons to believe should

constitute reasons has to be recorded that means sufficient

cause to believe that thing but not otherwise. The reasons to

believe has to meet the safeguards in between the second

proviso to Section 5(1) of PMLA Act read with Section 5(1) of

PMLA that means to satisfy the requirement of law. In the case

on hand, the petitioner failed to make out a case to enlarge him

on bail.

14. The learned counsel for the respondent also relied

upon the judgment of the Apex Court in the case of Central

Bureau of Investigation v. Ramendu Chattopadhyay

reported in (2020) 14 SCC 396, wherein, the Apex Court has

cancelled the bail granted in favour of the accused and brought

to the notice of this Court paragraph No.4, wherein, the Court

discussed with regard to the respondent was the founding

Director of the accused company. He was a key decision -

making authority of the company, and used to sign certificates

issued to the investors and other important documents. He was

also an authorized signatory of all bank accounts of the company

and used to conduct agents' meetings. As per the allegations, he

used to mislead the agents by stating that the company had

necessary permissions from the regulatory authorities to collect

funds, and also used to project in the meetings that the returns

paid by the accused company to its investors were higher than

any other agency. As per the charge-sheet, the accused

company used to receive cash from the investors so that the

respondent, who used to receive cash directly from the company

account frequently, without proper accounting, could easily

siphoned off the money.

15. The learned counsel also brought to the notice of this

Court paragraph No.7, wherein, the Apex Court discussed that

the Court is conscious of the need to view such economic

offences having a deep-rooted conspiracy and involving a huge

loss of investors' money seriously. Though further investigation

is going on, as of now, the investigation discloses that the

respondent played a key role in the promotion of the chit fund

scam described supra, thereby cheating a large number of

innocent depositors and misappropriating their hard-earned

money and found that since the huge amount of money

belonging to the investors has been siphoned off, as well as for

the aforesaid reasons, the High Court should not have released

the respondent on bail.

16. Having heard the respective counsel and also on

perusal of the material available on record, this Court has to

examine whether the petitioner has made out the case to

enlarge him on bail. Admittedly, a case has been registered

earlier in Crime No.69/2020 and he has been enlarged on bail,

wherein, PMLA offences are not invoked and one more case was

registered in Crime No.37/2020, wherein, an offence under

Section 9 of the Karnataka Protection of Interest of Depositors in

Financial Establishments Act was invoked. The matter was also

earlier referred to CID and got it deleted Section 9 of the

Karnataka Protection of Interest of Depositors in Financial

Establishments Act and also a case has been registered and

numbered as C.C.No.28892/2021 which is pending before the

Court.

17. It is also important to note that the Assistant

Director, Directorate of Enforcement, Bengaluru Zonal Office has

collected the source of information and the report was also

received from the office of the Registrar of Co-operative

Societies and collected all information and issued summons

invoking Section 50 of the PMLA Act and a case was registered in

ECIR/BGZO/09/2020. The allegation that this petitioner did not

co-operate and the allegation is that the Crores of rupees more

than 1000 Crores was misappropriated and the said amount was

depositors' money. Without obtaining the mandate from the

depositors' created advances and allowed to withdraw over and

above the actual deposits and also an allegation is that the loans

were sanctioned by just obtained partial coverage of mortgages

and the Bank did not create charge in respect of the said

properties in favour of whom, the loans were advanced. This

petitioner is in custody. No doubt, the provisional order has

been passed and the same has been confirmed and also

questioned, which is pending.

18. The very contention of the learned senior counsel for

the petitioner is that the punishment is only for a period of seven

years and already the property has been attached and it takes

time to decide the misappropriation of funds and substantial

investigation has already been done. The fact that a separate

complaint is filed is also not in dispute. The learned counsel for

the respondent has also brought to the notice of this Court that

the beneficiaries are the family members of this petitioner and

the family members viz., wife, son and daughter, are also made

as accused. The specific allegation is made acquiring the

property in the name of the family. The learned counsel brought

to the notice of this Court that the wife is unable to explain the

source of income for investing the money for acquiring the

property and loan of Rs.892.85 Crores was sanctioned only to 24

major beneficiaries including the President and Vice-President

and an allegation is also that the same is advanced violating RBI

directions. Having taken note of the contents of the complaint,

which is filed under Sections 44 and 45 read with Sections 3, 70,

4, 8(5) of the PMLA Act, the specific allegation is made that the

Bank has created bogus/fake deposit accounts by debiting loans

and advances and Fixed Deposit were sanctioned without Fixed

Deposits loan documents were not found in respect of 2876 loan

accounts amounting to Rs.1544.43 Crores and the same was

found without any securities.

19. The learned counsel also brought to the notice of this

Court the written statements given by the accused and the

answers given particularly to question Nos.1 and 2, admitting

that the properties are acquired. The learned counsel also

brought to the notice of this Court that the petitioner was

examined in the custody. The total investment in the Company

by the share holders is approximately Rs.53 Lakhs. Declared

activity of the Company is development of agriculture,

horticulture, dairy and others. However, the Company has not

started its operations yet, because of his health issues. Himself

along with his son and his wife together have purchased 110

acres of agriculture land at Huligere, Kadur Taluka,

Chikkamagaluru District, but claims for the above Company.

20. Having taken note of the allegations made in the

complaint and also analysis of Bank Statement held by this

petitioner and his family members and the fact is that he is the

Chairman and earlier he was the Vice-President, is not in dispute

and collected the source of information having acquired the

deposits made by this petitioner and his family members i.e.,

son, wife and daughter. The learned counsel also would

vehemently contend that this is not a case for granting bail. The

fact that the huge amount of depositors money was siphoned is

prima-facie discloses when the custodial interrogation was made.

Apart from that, the petitioner has to make out a case that he

has not committed an offence and there must be satisfaction of

reasons to believe i.e., missing. The fact that the family

members are also the part of the Bank affairs is not in dispute.

The properties were acquired is also not in dispute. But learned

counsel would vehemently contend that the explanation was

given and explanation has not been accepted. The main

allegation is that while advancing the loan amount to 24

borrowers, the properties were not taken as security and the

fictitious loan accounts are opened and money laundering to the

tune of Crores of rupees utilized and depositors' money has been

siphoned by creating the fictitious loan. When such being the

factual aspects, it is not a fit case to exercise the powers under

Section 439 of Cr.P.C. No doubt, the learned senior counsel

brought to the notice of this Court the orders passed by this

Court referred supra. The factual aspects to be kept in mind

while passing an order of granting bail and exercising the

discretion and those two judgments will not comes to the aid of

this petitioner instead of the judgment referred by the learned

counsel for the respondent of the Apex Court while canceling the

bail comes to the conclusion that the High Court failed to take

note of the fact that the huge amount of money belonging to the

investors has been siphoned off has not been considered. Apart

from the fact as observed in paragraph No.4, this petitioner was

the chairman and having the responsibility of all the affairs of

the Bank and the Society. As observed in paragraph No.7 that

the petitioner has played a key role in the promotion of scam.

When such allegations are made, it is clear that it is a case of

cheating a large number of innocent depositors and

misappropriating their hard-earned money. In the case on hand

also, the very same accusations have been made. The judgment

of Apex Court in Ramendu Chattopadhyay's case (supra), is

applicable to the facts of the case on hand. Hence, I do not find

any merit in the petition to enlarge him on bail.

21. In view of the discussions made above, I pass the

following:

ORDER

The bail petition is rejected.

Sd/-

JUDGE

cp*