Telangana High Court

B.Appalanarasamma vs The Central Bureau Of ... on 6 June, 2022

Bench: G.Radha Rani

          * THE HON'BLE Dr. JUSTICE G. RADHA RANI

                    + WRIT PETITION No.12595 of 2019

% 06.06.2022

# B. Appalanarasamma W.o. Late Sri B. Satyanarayana Raju,
Age: 85 years, Occ: Household, R/o.H.No.2-74,
Satyam Enclave, Jeedimetla, Hyderabad.
                                                         .... Petitioner
            Vs.

$ The Cntral Bureau of Investigation,
Rep. by its Joint Director, 3rd Floor,
Kendriya Sadan, Sultan Bazar, Koti,
Hyderabad, Telangana and others.
                                                            ..... Respondents

!Counsel for the Petitioner         :    Sri Vinod Kumar Deshpande


Counsel for the Respondents     :        Sri N. Nagender, Special Public
                                         Prosecutor for CBI.

<Gist :

>Head Note:

? Cases referred:

 NIL
                                                                             Dr.GRR,J
                                    2                            WP No.12595 of 2019



           THE HON'BLE Dr. JUSTICE G. RADHA RANI

                 WRIT PETITION No.12595 OF 2019

ORDER:

This writ petition is filed by the petitioner seeking Writ of

Mandamus directing the 1st respondent to defreeze the bank account and

fixed deposits of the petitioner and savings bank account held in the

respondent Nos. 2 to 4/Banks and for consequential directions.

2. Heard learned counsel for the petitioner Sri Vinod Kumar

Deshpande and the learned Special Public Prosecutor for CBI Sri N.

Nagender for the respondent No.1.

3. Learned counsel for the petitioner submitted that the petitioner was

the mother of Sri B.Ramalinga Raju, Sri B.Suryanarayana Raju and Sri B.

Rama Raju. She was aged about 85 years. Her husband was a businessman.

She opened an account in the respondent No.4 bank in her name and she

also had fixed deposits with respondent Nos.2 and 3 at Jubilee Hills,

Kalyannagar Branch. The Central Bureau of Investigation (CBI) has

registered cases against her sons by showing them as accused in

C.C.No.1,2,3 of 2010 and all the accounts of the accused, their family

members and relatives were freezed. In the process, the bank account Dr.GRR,J

pertaining to the petitioner was also freezed by the 1st respondent. After

detailed investigation, the 1st respondent filed charge sheet by showing few

members as accused. The petitioner was not made as an accused nor the

charge sheet referred to the accounts and fixed deposits of the petitioner as

connected to the said case. The XXI ACMM-cum-Special Sessions Judge

Nampally convicted the accused in the above case and sentenced them to

imprisonment on 09.04.2015.

4. He further submitted that the petitioner was arrayed as accused

before the Special Judge for Economic Offences, Hyderabad in

C.C.No.134 of 2014 for insider trading. The Hon'ble Apex Court cleared

the name of the petitioner in the proceedings launched by the Securities

Exchange Board of India (SEBI) for alleged Insider Trading vide

C.A.No.17303 of 2017, dated 14.05.2018. Subsequent to the judgment in

C.A.No.17303 of 2017, the petitioner filed discharge petition in

C.C.No.134 of 2014 and the same was pending for adjudication.

Immediately after the Apex Court's order, SEBI issued notice dated

21.06.2018 to the trading members of the Exchange indicating that the

period of restraint imposed on the petitioner stood vacated. After the

Hon'ble Apex Court Order, petitioner made an application to the Dr.GRR,J

respondents seeking to know the status of her accounts and also requested

the respondents to defreeze her accounts and fixed deposits. The

respondent Nos.2 to 4 replied vide letters dated 09.10.2018 and

05.11.2018 respectively that the 1st respondent had addressed letter dated

07.04.2015 to continue the freezing of the accounts and therefore, the

accounts could not be defreezed. The letter dated 07.04.2015 was not

served on the petitioner. The judgment in C.C.No.1,2,3 of 2010 was

delivered two days thereafter on 09.04.2015. The petitioner also gave

representation to the 1st respondent on 22.11.2018 to which the 1st

respondent had not replied. The action of the 1st respondent in directing

the respondent Nos.2 to 4 to continue freezing all the savings bank

accounts and fixed deposits of the petitioner was arbitrary, illegal, contrary

to law and without jurisdiction. The petitioner filed Income Tax returns

before the Income Tax Authority. She declared the income in the above

accounts to the Income Tax Department. The money in the SB Account

and Fixed Deposits was the personal money of the petitioner, saved for any

eventuality of expenditure during her old age. The petitioner was suffering

from old age ailments and would need to operate the account to meet her Dr.GRR,J

day-to-day requirements. Her husband died in the year 2001. She needed

money during her life time and prayed to allow the petition.

5. The counter affidavit was filed by the 1st respondent. The Special

Public Prosecutor for CBI contended that the petitioner was one of the end

beneficiaries of fraud perpetrated by the promoters of M/s.Satyam

Computer Services Ltd. (M/s.SCSL) viz., Sri B.Ramalinga Raju, Sri

B.Rama Raju and their family members. The petitioner was holding

3,92,500 shares in her name. Over a period of time from 1999 to 2001, Sri

B.Ramalinga Raju and other promoters of the company falsified books of

accounts of the company through wrong projections of the sale figures and

profits of the company and lured thousands of innocent and gullible

investors to buy shares at artificially higher prices. The promoters of the

company, fraudulently offloaded their shares indirectly through the

accounts of 17 individuals who were their family members and trusted

employees. The petitioner was one among them. The modus operandi

adopted was initially to transfer the physical shares through endorsement

in the names of these 17 individuals who in turn deposited the same in

their de-mat accounts and got them offloaded in the market through

investment companies viz., M/s. Elem, M/s.Fincity, M/s.High Grace, Dr.GRR,J

M/s.Veeyes Investments and M/s. High Sound etc. Subsequently the

investment companies sold these shares in the market and transferred the

amounts to the individual accounts of 17 persons. Then from their

accounts, amounts were transferred to the accounts of the promoters

through cheques. During the year 2000-2001, the proceeds obtained

through sale of shares was gifted to the family members of Sri

B.Ramalinga Raju by the promoters who offloaded the shares through the

investment companies. In the subsequent period, Sri B.Ramalinga Raju

and other promoters of the company including the petitioner pledged their

shares in M/s.SCSL and availed loans from various NBFCs to a tune of

Rs.1,951 crores by offloading their shares when the share prices were

artificially kept high and also by resorting to insider trade practice as they

were having access to unpublished and inside information about the

fabrication of the financial statements of the company. Further, the

promoters gained wrongfully by receiving the dividends which was

declared on the basis of the false and inflated profits. By these fraudulent

acts of the promoters of the company, 15 Indian Institutional Investors who

invested in the shares of M/s.SCSL suffered wrongful losses to a tune of

Rs.1,611 crore. The promoters of the company and their family members Dr.GRR,J

including the petitioner invested the wrongful gains in bank accounts and

fixed deposits maintained in different banks and also acquired huge chunk

of immovable assets in the form of 6,000 acres of land, 37,000 square

yards of housing plots and 87,439 square feet of built-up area. A total of

1,065 properties were acquired by the accused and their family members

worth around Rs.350 crores in the name of 327 companies.

6. He further submitted that the amounts for creation of fixed deposits

and savings accounts in question with Karur Vysya Bank and HDFC

Banks in the name of the petitioner were the proceeds of the crime and

hence were seized during the investigation. They were liable to be

confiscated as such could not be released under any circumstances. He

contended that the petitioner was not made as an accused because, the

transactions made in the name of the petitioner were done by her sons Sri

B. Ramalinga Raju, Sri B.Rama Raju and Sri B. Suryanarayana Raju. The

trial Court convicted the accused on the basis of evidence produced by the

Central Bureau of Investigation (CBI). The CBI filed appeal for

enhancement of the sentence. The accused Nos.1 and 2 also filed appeal

against the conviction. The appeals filed by them were pending before

Metropolitan Sessions Judge, Nampally. Therefore, it was not desirable for Dr.GRR,J

defreezing the accounts, as the amounts involved were liable for

confiscation in favour of the State exchequer and prayed to dismiss the

petition.

7. Perused the record.

8. As seen from the record, the bank accounts of the petitioner and her

fixed deposits were freezed by the 1st respondent during the course of

investigation in C.C.No.1,2,3 of 2010 registered against the sons of

petitioner and others. The contention of the 1st respondent was that the

amounts which were kept in the Savings Bank account of the petitioner

and fixed deposits in the name of the petitioner were the proceeds of crime

and they were liable to be confiscated. The Special Public Prosecutor for

1st respondent contended that the trial Court convicted the accused on the

basis of evidence produced by the Central Bureau of Investigation (CBI)

and the transactions pertaining to the petitioner were part of documentary

evidence which were marked as Exs.604, 608, 651, 728, 742, 746, 763,

775, 788, 897, 899, 1448, 1698 to 1744, 1746, 1779 to 1781, 2623 to 2626,

2752, 2805 and 2806.

Dr.GRR,J

9. Admittedly, the petitioner was not shown as accused by the 1st

respondent in CC.No.1,2,3 of 2010 registered against her sons. She was

neither the promoter nor the Director of Satyam Computers Services

Limited. The Hon'ble Apex Court in Civil Appeal No.17303 of 2017,

which was filed against the proceedings launched by the SEBI for alleged

insider trading wherein the petitioner was also arraigned as an accused,

observed that:

"In this appeal, Shri C.A. Sundaram, learned senior counsel appearing on behalf of the appellant, states that the present appellant is the mother of B. Ramalinga Raju, B. Rama Raju and B. Suryanarayana Raju. She was neither a promoter nor a director of Satyam Computers Services Limited (SCSL) and had lost her husband in the year 2001. She sold her shares in Satyam Computers Services Limited (SCSL) on 12th and 15th December, 2003 to three group companies, in an off-market sale, as she needed money considering that she had to sustain herself as a widow. According to Shri Sundaram, though his client would be a relative of B. Ramalinga Raju and, therefore, a connected person, yet, it is obvious that the off market transactions made way back in the year 2003 at a price of around Rs.340/- per share did not attract the 1992 Regulations as the price of these shares rose sharply only thereafter touching a figure of Rs. 966.80/- in the year ending of 2006. According to the learned senior counsel, there was no evidence whatsoever of any complicity of this lady with the fraud perpetrated by her son and his cohorts. He referred to the judgment of the Whole Time Member and to the majority judgment of the Appellate Tribunal holding that all that has been found against his client is that she is a close relative of B. Ramalinga Raju and by virtue of this close relationship, it, therefore, must be presumed that she had access to Unpublished Price Sensitive Information (UPSI). Indeed, this is the basis of both the Whole Time Member's judgment as well as the majority judgment of the Appellate Tribunal. Given the fact that this lady was not proceeded against by the Central Bureau of Investigation (CBI) or by the Dr.GRR,J

Enforcement Directorate and that the Serious Fraud Investigation Officer (SFIO) report does not, in any manner, refer to her, and given the fact that she was neither promoter nor director of Satyam Computers Services Limited (SCSL), it is obvious that the test of the second part of clause 2(e)(i) is not met in the facts of this appeal. Also, it must be remembered that had she been in possession of Unpublished Price Sensitive Information (UPSI), she would also have sold shares at their peak price instead of selling them at a depressed price in the year 2003. For all these reasons, this appeal is also allowed, and the majority judgment of the Appellate Tribunal is set aside."

10. Considering the contentions of the learned Special Public Prosecutor

of CBI as stated in the counter affidavit by the 1st respondent and the

observations of the Hon'ble Apex Court in the above aspect that she had

made the off market transactions way back in the year 2003 at a price of

around Rs.340 per share and the price of the shares rose sharply in the year

2006 touching the figure of Rs.966.80 and that the petitioner, if she was in

position of Unpublished Price Sensitive Information (UPSI) would have

sold the shares during peek price inspite of selling at depressed price in the

year 2003 and cleared her name in the proceedings launched by SEBI and

considering that no attachment orders were issued by the Court during the

trial or in the final judgment and considering the age of the petitioner who

was at the fag end of her life and the submission of the learned counsel for