# Sujay U. Desai v. Serious Fraud Investigation Office, CGO Complex, Delhi

- **Citation:** (2022) 2 ILRA 22
- **Court:** High Court of Judicature at Allahabad
- **Decided:** 2022-01-28
- **Case number:** Criminal Misc. Bail Application No. 36790 of 2021
- **Bench:** Shekhar Kumar Yadav
- **Source:** https://unisonlegal.in/judgment/allahabad-high-court/sujay-u-desai-v-serious-fraud-investigation-office-cgo-complex-delhi-48110
- **Pages:** 7

## Headnote

A. Criminal Law - Criminal Procedure
Code, 1973 - Section 439 - The Company
Act, 2013 - Section 212(6)(ii) -The offence
committed by the applicant is an economic
offence of huge magnitude affecting economy of
2 All. Sujay U. Desai Vs. Serious Fraud Investigation Office, CGO Complex, Delhi
23
the nation and the interest of public/State. The
Court cannot come to the conclusion that the
applicant if released on bail is not likely to
commit any offence under the Act and
moreover, twin condition for grant of bail as
envisaged under Section 212(6) (ii) of the
Company Act, 2013 are not satisfied. Further,
the court opined that the applicant is not
entitled to get bail even under Section 439
Cr.P.C. even if the bail application is not tested
on the touchstone of twin conditions as
enumerated in Section 212(6) (ii) of the
Company Act, 2013 for the reason that offence
committed by the applicant is an economic
offence which affects the economy of the
nation. (Para 15)

Bail Application Rejected. (E-10)
List of Cases cited:

## Text

22 INDIAN LAW REPORTS ALLAHABAD SERIES

19. Keeping into mind the valuable
right
of
personal
liberty
and
the
fundamental principle not to disbelieve a
person to be innocent unless held guilty and
if he is not arraigned with the charge of an
offence for which the law has put on him a
reverse burden of proving his innocence as,
held in the judgment of Hon'ble the
Supreme Court in Dataram Singh Vs. State
of U.P. and Others reported in [(2018) 3
SCC 22], I find force in the submission of
learned counsel for the accused-appellant to
enlarge him on bail.

20. Let applicant (Chandrakala)
involved in Case Crime No. 358 of 2021,
under Sections 498-A, 304 I.P.C. and
Section 3/4 D.P. Act, Police Station-
Cornailganj, District- Gonda be released on
bail on her furnishing personal bond of Rs.
50,000/- by two different sureties of the
like amount, the social and economic status
of whom to be on the satisfaction and
verification of the court concerned subject
to following additional conditions, which
are being imposed in the interest of justice:-

(i) The applicant shall file an
undertaking to the effect that she shall not
seek any adjournment on the dates fixed for
evidence when the witnesses are present in
court. In case of default of this condition, it
shall be open for the trial court to treat it as
abuse of liberty of bail and pass orders in
accordance with law.

(ii) The applicant shall remain
present before the trial court on each date
fixed, either personally or through her
counsel. In case of her absence, without
sufficient cause, the trial court may proceed
against her under Section 229-A of the
Indian Penal Code.

(iii) In case, the applicant misuse
the liberty of bail during trial and in order
to secure her presence, proclamation under
Section 82 Cr.P.C. is issued and the
applicant fails to appear before the court on
the date fixed in such proclamation, then,
the trial court shall initiate proceedings
against her, in accordance with law, under
Section 174-A of the Indian Penal Code.

(iv) The applicant shall remain
present, in person, before the trial court on
the dates fixed for (i) opening of the case,
(ii) framing of charge and (iii) recording of
statement under Section 313 Cr.P.C. If in
the opinion of the trial court absence of the
applicants is deliberate or without sufficient
cause, then it shall be open for the trial
court to treat such default as abuse of
liberty of bail and proceed against her in
accordance with law.
----------
(2022)02ILR A22
ORIGINAL JURISDICTION
CRIMINAL SIDE
DATED: ALLAHABAD 28.01.2022

BEFORE

THE HON'BLE SHEKHAR KUMAR YADAV, J.

Criminal Misc. Bail Application No. 36790 of
2021

Sujay U. Desai ...Applicant
Versus
Serious Fraud Investigation Office, CGO
Complex, Delhi ...Opposite Party

Counsel for the Applicant:
Ms. Gunjan Jadwani, Sri Kartikeya Saran,
Mr. Amar Gahlot, Sri Anurag Khanna(Senior
Adv.)

Counsel for the Opposite Party:
A.S.G.I., Sri Manoj Kumar Singh

A. Criminal Law - Criminal Procedure
Code, 1973 - Section 439 - The Company
Act, 2013 - Section 212(6)(ii) -The offence
committed by the applicant is an economic
offence of huge magnitude affecting economy of
2 All. Sujay U. Desai Vs. Serious Fraud Investigation Office, CGO Complex, Delhi
23
the nation and the interest of public/State. The
Court cannot come to the conclusion that the
applicant if released on bail is not likely to
commit any offence under the Act and
moreover, twin condition for grant of bail as
envisaged under Section 212(6) (ii) of the
Company Act, 2013 are not satisfied. Further,
the court opined that the applicant is not
entitled to get bail even under Section 439
Cr.P.C. even if the bail application is not tested
on the touchstone of twin conditions as
enumerated in Section 212(6) (ii) of the
Company Act, 2013 for the reason that offence
committed by the applicant is an economic
offence which affects the economy of the
nation. (Para 15)

Bail Application Rejected. (E-10)
List of Cases cited:

1.
P.
Chidrambaram
Vs
Directorate
of
Enforcement (2019) 9 SCC 24

2. Y.S. Jagan Mohan Reddy Vs Central Bureau of
Investigation 2013 (7) SCC 439

3. Anil kumar Yadav Vs State (N.C.T.) of Delhi &
anr. 2018 (1) CCSC 117
(Delivered by Hon'ble Shekhar Kumar
Yadav, J.)

1. Heard Mr. Anurag Khanna, learned
Senior Counsel assisted by Mr. Kartikeya
Saran, Ms. Gunjan Jadwani and Mr. Amar
Gahlot, learned counsel for the applicant
and Mr. S.P. Singh, learned Solicitor
General of India assisted by Mr. Manoj
Kumar Singh, learned counsel for the
respondent.

2. This bail application under Section
439 of Code of Criminal Procedure has
been filed by the applicant seeking
enlargement on bail in Sessions Trial
No.577
of
2020
(Serious
Fraud
Investigation Officer vs. Rotomac Global
Pvt. Limited and 68 others) arising from
Complaint filed under Section 212 (14) of
the Companies Act, 2013 in respect of
offences under Sections 36(c) r/w/s. 447,
448 of the Companies Act, 2013 and
Section 211 r/w/s 628 of the Companies
Act, 1956.

3. It transpires from the record that
initially the applicant moved an interim bail
application before the Apex Court by filing
Writ Petition (Criminal) No.126 of 2020,
which came to be disposed of directing the
applicant to approach this Court by filing
bail
application
and,
thereafter,
the
applicant approached this Court by filing
bail application under section 439 Cr.P.C.
being Criminal Misc Bail Application
No.12047 of 2020, which came to be
disposed of by order dated 05.05.2020
whereby the prayer for interim bail of the
applicant was rejected and liberty was
granted to the applicant to move regular
bail application. However, in the meantime,
the order dated 05.05.2020 has also been
challenged by the applicant before the
Apex Court by filing SLP Criminal
No.2393 of 2020, which came to be
disposed of vide order dated 28.05.2020 as
not maintainable and liberty was granted to
the applicant to file a regular bail
application.
Hence,
the
present
bail
application has been filed seeking regular
bail under Section 439 Cr.P.C. read with
Section 212(6) of the Companies Act,
before this Court.

4. The encapsulated facts of the case
are that the applicant is said to have been
arrested in pursuance of the arrest order
dated 19.03.2020 by the Arresting Officer,
who is Assistant Director of Ministry of
Corporate Affairs for the offence under
Sections 447 and 448 of the Companies
Act, 2013. Copies of grounds of arrest were
also served on the applicant on 19.3.2020.
24 INDIAN LAW REPORTS ALLAHABAD SERIES
In pursuance of Order No.03/117/2018-CLII (NR) dated 21.02.2018 and Order
No.7/117/2108/CL-II
dated
22.08.2019
under Sections 447 and 448 of the
Companies Act, 2013 issued by the
Ministry of Corporate Affairs, Government
of India (hereinafter referred to as the
MCA) which in exercise of power under
Sections 212 (1) (c) of the Companies Act,
2013 had ordered for investigation into
affairs of Rotomac Global Pvt. Ltd.
(hereinafter referred to as the 'RGPL') and
10 others and Frost International Ltd.
(hereinafter referred to as 'F.I.L.') by the
Serious
Fraud
Investigation
Officerespondent (hereinafter referred to as 'the
SFIO') in the public interest. Pursuant to
the order of MCA, the Director SFIO vide
Order No. SFIO/Inv./AOI/2018-19 dated
20.06.2018 had appointed a team of
officers for carrying out investigation into
the affairs of the Company. The applicant is
alleged to be the Director and CEO of M/s
F.I.L.
Public
Limited
Company
incorporated under the Companies Act.

5. During investigation, it is found
that the applicant and similarly placed coaccused, out of whom some are of foreign
entities, who are said to be the Directors in
different
companies,
used
to
run
a
fraudulent
Merchanting
Trade
(MT)
business and submitted false/deceptive
statements/financials to different Banks to
avail credit facility in the form of opening
of Letter of Credit and thereby caused loss
to the Public Sector Banks.

6. It also revealed that out of the
documents required for opening the Letter of
Credit, applicant along with similarly placed
other
co
accused
persons
knowingly
submitted Letter of Credit opening request
along with false/deceptive and misleading
documents so as to induce the banks to rely
upon the said documents and to give credit
facility to them in the form of opening of
Letter of Credit. It is also found that financial
statements submitted to the Bank for opening,
continuation and enhancement of Credit
facilities do not reflect the true and fair
accounts of their affairs. It also revealed that
the accused persons secured financing for
their MT Business and under the guise of MT
Business, accused is said to have violated the
regulations/guidelines issued by Reserved
bank of India. It is also found that the
accused, who is the Director of the company
caused huge loss amounting to Rs.7820/-
crores to the Public Sector Banks in
connivance with other foreign entities coaccused and others Directors-co accused. It is
also found that the applicant abused their
position as Promoter-Director of Frost
International Limited (FIL) to cause wrongful
loss of Rs.4041/- crores to public Sector
Banks. Applicant along with other Directors
utilized the corporate identity of the FIL to
perpetrate fraud of rotating the funds obtained
through Letter of Credit. It is further alleged
that in furtherance of their dishonest
intention,
applicant
along
with
others
manipulated the books of FIL by showing
fake and unrecoverable MT trade receivable
to the tune of Rs.3537.74 crores to deceive
the public sector Banks and allured them to
obtain credit facilities. It is further alleged
that the applicant along with other Directors
were also indulged in speculative currency
trading with banks money and ultimately
public money which resulted in heavy losses.
The applicant along with others have also
done siphoning of money to the tune of
Rs.845 crores which is standing in the books
of FIL in furtherance to the perpetration of
the above mentioned fraud.

7. It is submitted by learned Counsel
appearing for the applicant that applicant is
in jail since 19.3.2020. He has cooperated
2 All. Sujay U. Desai Vs. Serious Fraud Investigation Office, CGO Complex, Delhi
25
with the investigating agency. There is no
need for his further interrogation, as
investigation by SFIO has already been
completed. Since number of witnesses
disclosed in the charge sheet are living out
of the Country, it will not be possible to
conclude the trial expeditiously. It is further
submitted that there is bleak chance for
early conclusion of trial. Entire prosecution
case rests upon documentary evidence.
There is no chance of tempering or
influencing the evidence and witnesses by
the applicant.

8. It is further submitted that no
purpose would be served by keeping the
applicant behind the bar as applicant is
ready to abide the conditions imposed by
the Court. It is further contended that
present prosecution was started against the
applicant on the basis of false facts and no
manipulation has been done by the
applicant in the books of account. No
active role is assigned to him. It is further
submitted that he has not flouted any
guidelines issued by R.B.I. It is further
submitted on the aforesaid basis that since
no prima facie case is made out against the
applicant, he is entitled for bail.

9. In rebuttal to the aforesaid
contentions, the bail is opposed by learned
counsel appearing for SFIO by submitting
that applicant was the Director of the FIL
and was directly associated with the MSL
also. False receivable amount was shown in
the books of account furnished before the
Bank and due to that reason banks issued
letter of credits for use in foreign countries.
In fact Company concerned engaged in
Merchanting Trade business was in loss
and due to that reason advance taken
through letter of credits could not be repaid
and it become NPA. Referring to total
amount of NPA, it was further submitted
that the applicant and its company
furnished false books of accounts and
caused huge loss not only to the Bank
concerned, but interest of public at large
also affected, therefore, prayed that the bail
application of applicant is liable to be
rejected.

10. It is further submitted that
applicant along with other co accused
persons under the garb of Merchantile
Trade have fraudulently induced the Banks
& Public Financial Institutions to obtain
credit facilities. He had knowingly falsified
the books of account and the financial
statements of F.I.L. deliberately concealing
material facts thereby inducing BFIs to
fraudulently extending credit facilities to
F.I.L.
which
ultimately
remained
outstanding as account of F.I.L. became
N.P.A. He submitted that the offence
committed by the applicant being the
Director and the Managing Director of
F.I.L., has come into light during the
investigation, is of grave nature. In support
of his arguments, learned counsel also
relied upon the cases of P. Chidrambaram
vs. Directorate of Enforcement (2019) 9
SCC 24 and Y.S. Jagan Moham Reddy vs.
Central Bureau of Investigation, 2013 (7)
SCC 439, in which the Court has observed
that economic offences constitute a class
apart and need to be visited with a different
approach in the matter of bail.

11. I have considered the rival
submissions advanced by the learned
counsel for the parties and have gone
through the entire material available on
record.

12. Perusal of the record discloses
that the applicant has been arraigned as an
accused no.44 in the complaint filed by the
SFIO. Applicant is stated to be the
26 INDIAN LAW REPORTS ALLAHABAD SERIES
Managing Director, Signatory of the
financial statements of Frost International
Limited, which is a company engaged in
the business of commodities and merchant
trading. The FIL had secured the credit
facilities by way of margin money / FD's as
well as other collaterals. It also revealed
that since its incorporation in 1995 till
February, 2018, FIL had duly serviced all
its loans and obligations towards Banks and
other creditors in a timely manner and over
a period of time, Banks have increased the
sanction limit from time to time. Later on,
on the basis of complaint, Banks initiated
action against FIL based on R.B.I. Circular
dated 12.2.2018 and also before the
National Company Law Tribunal, Mumbai
under the Insolvency and Bankruptcy
Code. FIL had challenged the said RBI
Circular before Apex Court and the NCLT
proceeding was stayed and Circular was
quashed. Thereafter, Banks stopped FIL's
credit limits and the money received as
advance from the buyers for future supplies
were adjusted by the Banks against the
devolved Letters of Credits. It has also
been averred that applicant under the garb
of MT conducted moping of interest
arbitrage thereby, fraudulently inducing the
public sector Banks to obtain credit
facilities to FIL. Applicant had knowingly
falsified the books of accounts and the
financial statements of FIL deliberately
concealing material facts thereby including
public sector Banks to fraudulently credit
facilities to FIL which ultimately remained
outstanding at Rs.4041 Crores as account
of FIL became NPA. Applicant is also
stated to be 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. Falsified financial statements of FIL
signed by the applicant was filed with ROC
and was submitted to public sector Banks
depicted false MT trade receivables. The
applicant
provided
false
and
bogus
documents to the Banks.

13. Allegation against the applicant is
also that he abused his position as
promoter-directors
of
FIL
to
cause
wrongful loss of Rs.4041 Crores to public
sector Banks. He utilized the corporate
identity of FIL to perpetrate fraud of
rotating the funds obtained through Letter
of Credits 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.

14. The applicant used the corporate
identity of FIL 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 is false. Since
mopping of interest was done by keeping
the rotated funds obtained through LC
discounting
in
Fixed
Deposits
to
camouflage the same 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. The sum
and substance of the outcome of the
investigation conducted in the matter and
2 All. Sujay U. Desai Vs. Serious Fraud Investigation Office, CGO Complex, Delhi
27
the facts mentioned in the complaint for
prosecution are that concerned Companies
were engaged in fraudulent Merchanting
Trade and caused wrongful loss to the
Public Sector Bank to the tune of Rs.7820
Crores approximately applying different
modus operandi including siphoning of
Bank funds through Merchanting Trade;
falsification of financial statement of the
Companies involved in the matter by not
showing true and fair views.

15. Considering the role of the
applicant as alleged against him, nature and
gravity of the offence and also the evidence
available on record in support thereof,
prima facie, it appears that huge amount
received by the applicant through Letter of
Credit has become NPA due to nonpayment of advance taken by the Company
on account of falsification in the books of
account furnished by the company before
the
Bank
concerned,
therefore,
the
allegations levelled against the applicant
and the company concerned cannot be
overlooked at this stage. This court is
further of the opinion that on the basis of
allegations appearing on record, it cannot
be held that there are no reasonable
grounds to believe that the accused is not
guilty of the offences alleged against him
and that he is not likely to commit any
offence under the Act while on bail and
thus, twin conditions for grant of bail as
envisaged under Section 212(6) (ii) of the
Company Act, 2013 are not satisfied. This
court is further of the opinion that the
applicant is not entitled to bail even under
Section 439 Cr.P.C. even if the bail
application is not tested on the touchstone
of twin conditions as enumerated in Section
212(6) (ii) of the Company Act, 2013 for
the reason that offence committed by the
applicant is an economic offence which
affects the economy of the nation.

16. In Y. S. Jagan Mohan Reddy Vs
Central Bureau of Investigation, (2013) 7
SCC 439, the Hon'ble Supreme Court has
held that while granting bail, the court has
to keep in mind the factors like the nature
of accusation, the nature of evidence in
support thereof, the severity of punishment
which conviction will entail, the character
of the accused, circumstances which are
peculiar
to
the
accused,
reasonable
possibility of securing the presence of the
accused
during
the
trial,
reasonable
apprehension of the witnesses being
tampered with, the large interests of the
public/State
and
other
similar
considerations.

17. As discussed above, there are
serious allegations against the applicant.
The offence committed by the applicant is
an economic offence of huge magnitude
affecting the economy of the nation and
interest of public/State and, therefore,
requires a stringent approach for grant of
bail. The offence has been committed with
prior planning with an eye on personal
profit totally disregarding the interest of the
community and causing damage to the
economy and ignoring national interest.
The
applicant
was
instrumental
in
submissions
of
false
and
fabricated
documents and siphoning of funds of the
company to the tune of several crores and
indulging in fraudulent and deceptive
methods, and thus, keeping in mind the
nature of accusation as discussed in detail
in earlier paras and the material brought on
record against the applicant by SFIO, this
court is not inclined to release the applicant
on bail even under Section 439 Cr.P.C.

18. In the end, it is contended by
learned counsel for the applicant that the
applicant is suffering from diabetes and
various other ailments and, therefore, on
28 INDIAN LAW REPORTS ALLAHABAD SERIES
that ground, he should be released on bail
and also looking to the present Covid-19
pandemic.

19. However, he has failed to bring on
record any document which may reveal that
accused is not getting proper medical
treatment or care in jail or he requires such
treatment which can only be provided if he
is released on bail. In the absence of any
documentary evidence to the above effect,
this court is of the opinion that the
applicant who is involved in serious
economic offence cannot be granted bail on
the above mentioned medical grounds. The
mere fact that the accused is in custody for
more than one and half years, may not be a
relevant consideration to release such
accused on bail (Anil Kumar Yadav vs.
State (N.C.T.) of Delhi and another, 2018
(1) CCSC 117.

20. Keeping in view the modus
operandi
adopted
by
the
Companies
concerned for obtaining the Letter of
Credit, the amount of NPA, the nature and
gravity of the allegations/offences levelled
against the applicant which not only shake
the conscience of the society but also the
public at large, evidence collected during
investigation, complicity of accused and
without expressing any opinion on the
merits of the case, prima facie the court is
not inclined to grant bail to the applicant.
The bail application is liable to be rejected
and the same is, accordingly, rejected.

21. However, it is expected that the
trial
court
shall
make
all
sincere
endeavours to expedite the proceedings of
the trial and conclude the same as
expeditiously as possible, in accordance
with law, within a period of six months.
----------
(2022)02ILR A28
APPELLATE JURISDICTION
CRIMINAL SIDE
DATED: LUCKNOW 22.02.2022

BEFORE

THE HON'BLE RAMESH SINHA, J.
THE HON'BLE VIVEK VARMA, J.

Capital Sentence No. 1 of 2000
and other connected cases

State of U.P. ...Appellant
Versus
Krishna Murari @ Murli & Ors.
 ...Respondents

Counsel for the Appellant:
From Addl. Session Judge, G.A., Shitla
Prasad Tripathi, Shiv Ganesh Singh, Umesh
Pratap Singh

Counsel for the Respondents:
G.A., Anuj Pandey, I.D. Shukla, S.K.
Merotra

A. Criminal Law - Code of Criminal
Procedure, 1973 - Section 374(2) - Indian
Penal Code, 1860 - Sections 148, 302,
120B-challenge
to-conviction-
death
penalty-rarest of rare case-no evidence on
record to establish that it was a preplanned and premeditated murder -PW-1
and PW-2 failed to narrate the specific
role
of
assault
of
weapon
by
the
appellants upon the deceased persons-no
criminal history of the appellants-crime
has been committed by the appellants by
Gandsa and Banka blows, but there is no
evidence to show or suggest the reason
for the appellants to commit the said
offence-Trial
court
awarded
death
sentence but no rarest of rare case is
made out-Brutality of the manner in which
a murder was perpetrated may be a
ground but not the sole criterion for
judging whether the case is one of the
'rarest of rare cases' as indicated in
Bacchan Singh's case -every murder is
brutal, and the difference between the
one from the other may be on account of