Karnataka High Court
Avinash Aradhya vs Central Bureau Of Investigation on 19 February, 2024
Author: K.Natarajan
Bench: K.Natarajan
1
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 19TH DAY OF FEBRUARY, 2024
BEFORE
THE HON'BLE MR JUSTICE K.NATARAJAN
CRIMINAL PETITION NO.6496 OF 2023
BETWEEN:
1 . AVINASH ARADHYA
S/O SHRI. I. P. MALLOKARADHYA,
AGED ABOUT 45 YEARS,
R/AT NO.26/9,
GLENMORE, SANKEY ROAD,
ABSHOT LAYOUT,
BENGALURU - 560 001.
PRESENTLY R/AT
NO.5F, 5TH FLOOR,
CRESCENT COURT APARTMENT,
CRESCENT ROAD,
BENGALURU - 560 001.
2. ARADHYA WIRE ROPES
PRIVATE LIMITED,
385, ARADHYA HOUSE,
K B EXTENSION,
DAVANAGERE, KARNATAKA,
PINCODE - 577 002.
REPRESENTED BY ITS DIRECTOR
MR. AVINASH ARADHYA(A-2)
...PETITIONERS
(BY SRI. SHIVAJI H. MANE, ADVOCATE)
2
AND:
CENTRAL BUREAU OF INVESTIGATION
(ANTI CORRUPTION BUREAU),
NO.36, BELLARY ROAD,
GANGA NAGAR,
BENGALURU - 560 032.
REPRESENTED BY SPECIAL PUBLIC
PROSECUTOR,
HIGH COURT,
BENGALURU - 01.
...RESPONDENT
(BY SRI. P. PRASANNA KUMAR, ADVOCATE)
THIS CRIMINAL PETITION IS FILED UNDER SECTION
482 OF CR.P.C. PRAYING TO
1.QUASH THE ENTIRE PROCEEDINGS IN C.C.NO.6082/2023
PENDING BEFORE THE HONBLE XVII A.C.M.M, BENGALURU
FOR THE OFFENCE P/U/S 120B R/W SEC.420, 468, 471 OF
IPC AS AGAINST THE PETITIONERS HEREIN AS PER
ANNEXURE-A.
THIS CRIMINAL PETITION HAVING BEEN HEARD AND
RESERVED FOR ORDERS ON 05.02.2024 THIS DAY, THE
COURT PRONOUNCED THE FOLLOWING:
3
ORDER
This petition is filed by the petitioner-accused under
Section 482 of Cr.P.C. for quashing the criminal proceedings
in C.C.No.6082/2023 pending on the file of XVII ACMM,
Bengaluru arising out of FIR registered by the CBI in
R.C.No.2(A)/2021 and charge sheeted for the offence
punishable under Section 120B read with Sections 420, 468,
471 of IPC.
2. Heard the learned Senior counsel appearing for
the petitioner and learned Special counsel appearing for the
respondent-CBI.
3. The case of the prosecution is that the defacto-
complainant who is the Bank filed complaint to the CBI on
18.01.2021 alleging that the Bank had financed to accused
No.1- M/s. Aradhya Steel Pvt. Ltd. under the consortium
arrangement with Union Bank of India (leader of
consortium) Industrial finance branch situated at Bengaluru
presently handled by MID Corporate Banks at Mitra towers,
Kasturba Road, Bengaluru. The above said persons had
entered into criminal conspiracy with an intention to cheat
the Bankers intentionally induced the Indian banks and
other members of the consortium to grant credit facilities by
suppressing the materials, relevant facts from the
knowledge of the consortium members. After availing the
credit facilities, they have dishonestly mis-utilised and
misappropriated the amount, thereby caused wrongful loss
to the consortium Banks, out of which, Rs.30,50,00,000/- to
the Indian Bank as on 05.01.2021 (comprising of book
balance of Rs.24,45,00,000/- and unapplied interest of
Rs.6,05,00,000/- with applicable interest.
4. It is further alleged that the petitioner availed
loan from Indian Bank slipped into NPA category on
30.06.2019. The other members of the consortium also
declared the accounts as NPA. The case referred to the
National Company Law Tribunal (NCLT) under (Insolvency
Resolution Process for Corporate Persons) Regulations, 2016
and process commenced on 9.9.2019. There are certain
lapses observed after the account slipped into NPA.
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 and 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). It could be
inferred that the sales and purchases were only on books
and there is no physical movement of books. The receipts
were found fake. There was no lorry transport existing in
the name of Sri Rajalakshmi transport. The investigation
conducted by one Amarnath, Chief Manager (Credit) and V.
Sridharan, Chief Manager (Vigilance) and their reports were
confirmed. The consortium of Bankers meeting was held on
6.5.2019 which clearly pointed out that these are Shell
companies who used to show the transactions on paper.
M/s. Spiegel Enterprises Pvt. Ltd. is also Shell Company,
M/s. Aradhya Steel Pvt. Ltd., the accused No.1 indulged in
trading without movements 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 Sharath and Associates, Charted
Accountant, Chennai which reveals irregularities committed
by the company were treated as fraud. Hence, they
requested the CBI to register the complaint against the
borrower. Based upon the complaint, the CBI registered the
FIR. The petitioner is the Managing Director of M/s. Aradhya
Steel Pvt. Ltd. who is arraigned as accused No.2.
6. The petitioner previously challenged the FIR by
filing Crl.P.No.1427/2021 which came to be dismissed by
this Court on 4.12.2021 and permitted the CBI to
investigate the matter. Subsequently, the CBI filed the
charge sheet against the petitioner and once again the
petitioner is before this Court.
7. The learned Senior counsel appearing for the
petitioner has contended that this petitioner is the Director
of the company- accused No.11 submitted the Letter of
Credit for having purchased the goods on credit. The
amount has been paid by the Banker and prior to the
complaint, the forensic audit was conducted on 30.09.2019
where it is stated that there is no element of fraud. A writ
petition also filed before the High Court in
W.P.No.6771/2023 which was disposed on 10.07.2023
where it is stated that there is no fraud. The DRT
proceedings was conducted, the matter was settled between
the parties. A OTS facilities were given. The amount has
been paid. The committee of creditors also held meeting and
agreed to receive the amount. The payment was made by
the company. There is no cheating or wrongful loss to the
Bank. The petitioner has not violated the conditions.
Absolutely, there is no case made out against the petitioner
for conducting trial. The internal audit report says that there
is no fraud committed. The GST council also verified the
records, taxes were paid and absolutely, there is no material
to show that the petitioner committed any offence.
Therefore, prayed for quashing the criminal proceedings.
8. Per contra, learned counsel for CBI has objected
the petition and contended that this Court on the earlier
petition considered the case on merits, dismissed the
petition and permitted the CBI to investigate the matter.
The Spiegel company is the Shell company, all the
transactions were on paper. There is no physical movement
of goods. There is no existence of transport company. The
address of the Spiegel company and on verification, there is
no company situated in the address and also contended that
the internal audit report has clearly mentioned the
disclaimer clause as they stated that they have not
physically verified the offence, but they have only verified
the papers. Subsequently, the CBI investigated the matter,
they found the truth which clearly reveals, they created the
documents for the purpose of getting the benefit from the
Bank by way of letter of credit. Learned Special counsel
further contended that merely the amount was paid by the
accused by way of settlement, the criminal case cannot be
exonerated as the recovery was under the civil proceedings
under the Securitization and Reconstruction of Financial
Assets and Enforcement of Security Interest Act, 2002 (for
short 'SARFAESI Act') and hence, prayed for dismissing the
petition.
9. Having heard the arguments and on perusal of
the records, it is the contention of the complainant before
the Police that the petitioner-company obtained the letter of
credit from the Bank and placed some order for supplying
the steels from Spiegel Enterprises and after receipt of the
invoice, they sent to the Banker accordingly, the Banker
cleared the amount to the Spiegel Company. Subsequently
the petitioner-company become default in payment of loan
and subsequently, came to know that there is no movement
of goods, only the invoice is prepared and set up the case as
good as a transaction took place between the Spiegel
Enterprises and the petitioner-company. Later, the matter
referred to the National Company Law Tribunal (NCLT),
where the consortium banks had meeting and they agreed
to receive the amount from the petitioner by giving OTS
facilities. There was settlement between the bankers and
the petitioner-company. The FIR was registered against the
petitioner-company and the petitioner alleging that they
have cheated the bank by committing fraud, but during the
investigation stage, the petitioner approached this Court for
quashing the FIR which came to be dismissed and permitted
to continue the investigation. The petitioner once again
before this Court mainly on three grounds:
1) There was compromise between the
bankers and the petitioner-company.
The matter has been settled before the
NCLT. A DRT proceedings initiated
under SARFAESI Act where the matter
has been settled by giving one time
settlement (OTS) facility. Accordingly,
amount has been paid by the petitioner-
company and matter has been settled.
Therefore, it is contended that once the
matter has been settled between the
parties in the competent court of law,
the question of continuing the criminal
proceedings does not arise. In view of
the judgment of the Hon'ble Supreme
Court in the case of Gian Singh vs.
State of Punjab and Another
reported in 2012 CRI.L.J.4934.
2) The learned Senior counsel has
contended that there was internal audit
conducted by the Chartered Accountant
where he has given report that there is
no fraudulent activities committed and
they have given clean chit and based
upon the same, the settlement were
arrived between the parties. Once
settlement was arrived, the question of
continuing the criminal proceedings
does not arises since the company is a
Shell company. It is existing for last 40
to 50 years from 2011 onwards and
there are transactions between them.
Therefore, it cannot be said that the
Spiegel company is the Shell company
as there were employees working,
salaries were paid, GST was paid to the
Department and GST Department also
made enquiry and found the existence
of this company, therefore, the
contention of the respondent-Police
shall not be sustainable.
3) The another contention taken by the
petitioner is that the banker freezed the
account of the petitioner on the ground
of fraud, subsequently, the petitioner
approached the High Court by filing writ
petition where the Co-ordinate Bench of
this Court has held that there is no
fraud committed by the petitioner and
directed to defreeze the account in writ
petition No.6771/2023 dated
10.07.2023. When the High Court itself
has stated in the order that there is no
fraud committed by the petitioner, once
again the criminal proceedings cannot
be sustainable and hence, prayed for
quashing the criminal proceedings.
10. Considering the contention raised by the learned
counsel for the petitioner where there was minutes of the
consortium Bankers' meeting produced by the counsel which
reveals the committee of creditors meeting was held on
01.06.2020. They verified the report of the auditors and
committee requested the auditor to remove the report in the
light of the observation made in the meeting. It is pertinent
to note that in the auditors report, it has been already
mentioned that there is no fraud committed. Subsequently,
the National Company Law Tribunal (NCLT) also passed an
order on 24.08.2020 considering the resolution passed by
the Insolvency Resolution Process for Corporate Persons,
Regulations, 2016 and disposed the petition by giving some
directions. It is also an admitted fact that the DRT
proceedings were initiated under the SARFAESI Act which
was settled by filing compromise application. A meeting
was held by the lenders on 23.01.2020, where it is
mentioned that the Forensic audit does not reveal any
fraudulent transactions under valued transactions,
defrauding creditors, extortionate credit transactions,
fraudulent trading or wrongful trading. It was agreed
by majority of Banks like Union Bank of India, Bank of
Baroda, HDFC and Hero Fin Corporation that not to report
the account as fraud in terms of RBI master directions of
fraud and sharing pattern also mentioned which reveals in
the meetings of the bankers as they have come to the
conclusion that there is no fraudulent transactions or
fraudulent trading. Such being the case, the contention of
the learned counsel for the respondent that the trading was
fraudulent and no goods moved cannot be acceptable.
11. Once the matter has been settled between the
parties, the question of continuing the proceedings against
the petitioner does not arises in view of the judgment of the
Hon'ble Supreme Court in the case of Gian Singh stated
supra.
12. As regard to the fraudulent transactions alleged
by the respondent in the FIR and charge sheet that no
goods were moved etc., but the Co-ordinate Bench of this
Court in W.P.6771/2023 (GM-RES) dated 10.07.2023 has
held as under:
"Both the sides having argued the
matter vociferously for some time, this Court
suggested and they fairly agreed that the
Respondent - Bank should retrace its steps
concerning the subject loan account being
branded fraudulent inasmuch as, deeper
enquiry having been accomplished, there is no
blameworthy conduct attributable to the
Petitioner; the Respondent - Bank should tell
the RBI that the allegation of fraud after
enquiry is found to be not true and therefore,
the earlier communication made by it to the
RBI on a wrong assumption of fraud should be
accordingly recalled and rescinded."
13. The Co-ordinate Bench of this Court has
categorically held in the aforementioned writ
petition that there is no fraud committed by the
petitioner or his company and has stated it is a wrong
assumption of fraud and accordingly, the accounts were
defreezed by the Co-ordinate Bench. The order of the Co-
ordinate Bench has not been challenged by the CBI or any
other Authorities. Once the Co-ordinate Bench held that
there is no fraudulent act committed by the petitioner,
question of continuing the criminal proceedings in this case
does not arise.
14. That apart, the GST Department also verified
the transactions and has held that there is no such fraud
committed and GST also paid by the petitioner. If the
transaction is fraudulent transaction, the question of paying
GST does not arise.
15. Apart from that, learned Senior counsel for the
petitioner argued that the company alleged have been
involved in the fraudulent transaction is not correct. The
said Spiegel company is running business from the year
2011 onwards. There were several persons working in the
company, salaries were paid and they are paying the taxes
etc. The same was not controverted by the respondent
counsel.
16. The learned Senior counsel for the petitioner
produced the credit information report of M/s Spiegel
Enterprises Ltd., which reveals the company is doing
business with the Bank from 2016 and the company was
established from 29.04.2011 onwards with paid up capital of
Rs.25,22,870/- and it is also registered with Central Tax
GST Commissionerate which reveals the company was
existing from 2011, whereas the allegation made by the
respondent that there is no such company existing cannot
be acceptable. On the other hand, the Co-ordinate Bench of
this Court after considering the arguments in the writ
petition, has held that there is no fraud committed by the
petitioner. That apart, the Bankers also held in their
meeting that there is no fraudulent transactions. The
National Company Law Tribunal (NCLT) also settled the
dispute between the petitioner and the Bankers. Matter has
been settled between the parties by way of compromise in
DRT proceedings, the consortium Bankers headed by the
complainant who filed the complaint to the Police and
thereafter, they themselves held the meeting and stated
that there is no siuch fraudulent transactions occurred and
the co bench also in W.P.No.6771/2023 has held that there
is no fraud committed by the petitioner. Such being the
case, continuing the criminal proceedings against this
petitioner in the charge sheet filed by the respondent
amounts to abuse of process of law and hence, liable to be
quashed.
17. Accordingly, the petition is allowed.
The criminal proceedings against the petitioner-
accused in C.C.No.6082/2023 pending on the file of XVII
ACMM, Bengaluru arising out of FIR registered by the CBI in
R.C.No.2(A)/2021 is hereby quashed.
Sd/-
JUDGE
GBB
CT:SK
