Delhi High Court - Orders
Mr. Hem Singh Bharana vs Reserve Bank Of India & Ors on 15 February, 2024
$~79
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ W.P.(C) 2240/2024 & CM APPL. 9275/2024, CM APPL. 9276/2024,
CM APPL. 9277/2024
MR. HEM SINGH BHARANA ..... Petitioner
Through: Mr. Dayan Krishnan, Mr. Apoorv
Agarwal, Ms. Prachi Darji, Mr.
Bhanu Karan Singh and Mr. Sukrit
Seth, Advocate
Mob: 7984830374
versus
RESERVE BANK OF INDIA & ORS. ..... Respondents
Through: None.
CORAM:
HON'BLE MS. JUSTICE MINI PUSHKARNA
ORDER
% 15.02.2024 CM APPL. 9276/2024 (For Exemption)
1. Exemption allowed, subject to just exceptions.
2. Application is disposed of.
CM APPL. 9277/20243. The present application has been filed seeking permission to file lengthy list of dates and synopsis.
4. Considering the submissions made in the present application, the present application is allowed.
This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 19/02/2024 at 22:44:26
5. Application is disposed of.
W.P.(C) 2240/2024 & CM APPL. 9275/2024
6. The present petition has been filed inter alia with the following prayers:
"xxx xxx xxx a. A Writ of Mandamus and/or any other Writ, order, and/or direction in the nature thereof may kindly be issued in the matter, thereby setting aside and quashing the investigation process of determining and declaring the accounts of the Company and in consequence the accounts of the Petitioner as "Fraud" undertaken by the Respondent No. 2, against the Petitioner; and/or b. A Writ of Mandamus and/or any other Writ, order, and/or direction in the nature thereof may kindly be issued in the matter, whereby in case the Respondent No. 2 or any other member of the Consortium of Lenders, has already categorized the accounts of the Company and in consequence the accounts of the Petitioner as "Fraud" in any ex-parte order, the said categorisation and any action taken in furtherance of such categorisation be set aside and quashed; and/or xxx xxx xxx"
7. Learned counsel appearing for the petitioner submits that the petitioner is aggrieved by the arbitrary action of the respondent no. 2, who is the lead bank of the consortium of lenders of Era Infra Engineering Limited.
8. It is submitted that the respondent no. 2 who is the lead bank has vide letters dated 3rd August, 2023 and 11th August, 2023 has once again initiated the process of investigating, determining and declaring the accounts of the company and in consequence the petitioner as 'fraud' under the RBI Master Directions on frauds dated 1st July, 2016. It is submitted that the aforesaid action has been taken despite the Forensic Audit Report for the period of 1st April, 2013 to 31st March, 2016 and despite legal opinion procured by the consortium of lenders on the findings of the Forensic Audit Report, wherein This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 19/02/2024 at 22:44:26 no adverse findings of any fraud on the part of the company and the petitioner herein has been found. It is submitted that these actions of the respondent no. 2 are in clear violation of Article 14, 19, 20(2) and 21 of the Constitution of India and the Principles of Natural Justice.
9. Learned Senior Counsel appearing for the petitioner submits that respondent no. 2 has failed to provide the requisite documents to the petitioner and such act of not providing the requested documents by the respondent no. 2 prevents the petitioner from replying effectively to the respondent no. 2's letters, on the basis of which fraud is to be investigated. Thus, it is submitted that non-supply of the documents by the respondent no. 2 inherently takes away the petitioner's right to be heard and therefore, is against the rule of audi alteram partem.
10. It is submitted that if such re-initiation of the investigation is allowed, then the same will have the effect of prosecuting the petitioner again. Thus, it is submitted that grave prejudice and irreparable harm is being caused to the petitioner.
11. Attention of this court has been drawn to the Show Cause Notice dated 3rd August, 2023 issued to the company, wherein reliance has been placed upon Forensic Audit Report by M/s Rajan Beri & Associates dated 1st May, 2018. In reply to the said Show Cause Notice, letter dated 16th August, 2023 was written by the petitioner, wherein the petitioner prayed for supply of certain documents. The letter dated 16th August, 2023 written to the Union Bank of India reads as under:
"Ref: HSB/2023-24/CMO/D/10 16th August, 2023 To, UNION BANK OF INDIA, Zonal Office, This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 19/02/2024 at 22:44:27 Konnectus Building, 6th Floor, Tower-2, Unit No, 602-A, Opp. New Delhi Railway Station, Ajmeri Gate Side, New Delhi-110002 Ref: ZO-Delhi/FM/11/2023-24 dated 03.08.2023 Sub: Examination of irregularities observed in the Loan A/cs of Era Infra Engineering Limited from the Fraud angle as per the guidelines of Reserve Bank of India.
Dear Sir, We are in receipt of the above-mentioned letter on 5th of August 2023. In the said letter you have called upon me to submit my response/reply, regarding certain irregu1adties/anomalies/allegations/commissions/ omissions as pointed out in the Forensic Audit report to enable you to place your response before the appropriate committee for a suitable decision.
Having gone through the report, I note that certain important documents have not been shared with me along with the captioned letter. I request you to share the following additional documents which are in the records of the bank for me to submit my replies regarding the irregularities/anomalies/allegations/commissions/omissions as pointed out in the Forensic Audit report.
The list of the documents are mentioned below:
i. Report dated 17.08.2018 submitted by M/s/ Rajan Beri and Associates after examination of the transactions between Adel Landmarks Limited (earlier known as Era Landmarks Limited) and Era Infra Engineering Limited for the period 01.04.2005 to 31.03.2018.
ii. The Legal opinion dated 19.09.2018 which was procured by the bank on the Forensic Audit report.
iii. Minutes of all the joint lender meeting where the forensic audit report, additional report dated 17.08.2018 submitted by M/s Rajan Beri and Associates and the legal opinion report dated 19.09.2018 were discussed.
As you are aware Era Infra Engineering Limited has been in CIRP for the last 5 years. As such the Company records are in the custody of the Resolution Professional and I as the erstwhile director have no access to those records.
This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 19/02/2024 at 22:44:27 Nonetheless, I will attempt to locate any information that I might have and submit my replies regarding the irregularities/anomalies/ allegations/commissions/omissions as pointed out in the Forensic Audit report within 4-6 weeks of receipt of the above mentiond documents from your side.
Thanking You, Yours Sincerely, Hem Singh Bharana"
12. Attention of this Court has been drawn to the Show Cause Notice dated 11th August, 2023, wherein reliance has been placed upon the Forensic Audit Report issued by M/s Rajan Beri & Associates dated 1st May, 2018. In reply to the same, letter dated 19th August, 2023 was written, wherein again request was made for supplying the requisite documents. Letter dated 19th August, 2023 issued to the Union Bank of India by the petitioner reads as under:
"Ref: HSB/2023-24/CMO/D/11 19th August, 2023 To, UNION BANK OF INDIA, Zonal Office, Konnectus Building, 6th Floor, Tower-2, Unit No, 602-A, Opp. New Delhi Railway Station, Ajmeri Gate Side, New Delhi-110002 Ref:
ZO-Delhi/FM/11/2023-24 dated 03.08.2023 ZO-Delhi/FM/11-02/2023-24 dated 11.08.2023 HSB/2023-24/CMO/D/10 dated 16.08.2023 This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 19/02/2024 at 22:44:27 Sub: Examination of irregularities observed in the Loan A/cs of Era Infra Engineering Limited from the Fraud angle as per the guidelines of Reserve Bank of India.
Dear Sir, Please refer to our letter referred to above regarding the above subject. You are again requested to provide me the documents as requested in the said letter and as listed under to enable me to submit my replies as required by you:
i. Report dated 17.08.2018 submitted by M/s/ Rajan Beri and Associates after examination of the transactions between Adel Landmarks Limited (earlier known as Era Landmarks Limited) and Era Infra Engineering Limited for the period 01.04.2005 to 31.03.2018. ii. The Legal opinion dated 19.09.2018 which was procured by the bank on the Forensic Audit report.
iii. Minutes of all the joint lender meeting where the forensic audit report, additional report dated 17.08.2018 submitted by M/s Rajan Beri and Associates and the legal opinion report dated 19.09.2018 were discussed.
iv. Claim Verification Report by SAPR prepared in 2023 under the instruction of the CoC of Era Infra Engineering Limited. As mentioned in my earlier letter, I would require between 4-6 weeks from receipt of these documents from your side to submit my replies. Thanking You, Yours Sincerely, Hem Singh Bharana"
13. Learned Senior Counsel appearing for the petitioner has drawn the attention of this Court to the letter dated 5th October, 2023 received from the Union Bank, wherein the respondent-bank has refused to supply the documents to the petitioner on the ground that these are their internal documents. Letter dated 5th October, 2023 issued by the Union Bank reads as under:
This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 19/02/2024 at 22:44:27
14. Learned Senior Counsel relies upon the Minutes of the Joint Lender's Meeting held on 27th September, 2018, wherein the following decisions were taken:
"xxx xxx xxx This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 19/02/2024 at 22:44:27
7. Substantial funds are receivable from the Subsidiary /Sister/Associate/Concerns, Advances to Contractors, advances to Organizations for supply of material and for the clients for whom EIEL has. undertaken work but not billed due to un certification of work.
The Company's reply to various audit observations are already incorporated in the Forensic Audit Report and also submitted to lenders vide letter dated 17.07.2018.
The Forensic Auditor has closed his report with the observations are that overall there has been complete mis-management of funds in EIEL, failure of internal controls and non-recovery of funds from the sister/subsidiary concerns and sundry debtors which led to total financial crunch in the Company. Further, during the course of discussion in the meeting held on 21.08.2018, he had confirmed that no fraudulent transaction was observed during the period of Audit conducted by him i.e. from 01.04..2013 fraudulent transaction was observed during the period of Audit conducted by him i.e. from 01.04.2013 to 31.03.2016.
However, few of the lenders were of the view that legal opinion on the forensic Audit Report may be obtained to examine fraud as defined by RBI. Sh. Jain informed that they had approached their empanelled advocate for the same, who expressed their inability to do so considering that they had no past experience in forensic Audit. Thereafter they approached, Sh. Vivek Sood, Senior Advocate Delhi High Court through another advocate (as Sh. Vivek Sood cannot take any assignment directly) to examine the Forensic Audit Report of Era Infra Engineering Limited from fraud Angle as defined in RBI Master Directions on fraud dated 1st July 2016 and submit his legal opinion on the same. His opinion dated 17.09.2018 has been received and copy of the same has been shared with all the lenders. The Advocate has examined the reports from the following aspects:
a) Dishonest misappropriation of Property defined and punishable u/s 403 IPC and/or cheating defined and punishable u/s 415-420 IPC, and criminal breach at trust defined and punishable u/s 405-409 of IPC: "The offence of dishonest misappropriation of property defined section 403 IPC is not established/proven from the said audit report of RBA, as against EIEL and its principal officers/directors/management/employees"
"In clause 1.4 of the Audit Report titled summary of findings, it has been inter alia observed that some of the traders/beneficiaries of LCs were not available at the addresses given in the documents. Merely because the beneficiaries/ traders were not available at the addresses This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 19/02/2024 at 22:44:28 given in the documents, does not imply or prove that they did not exist. Even otherwise, the said finding does not establish or prove misappropriation of property by EIEL.
As per the report, the offence of cheating defined and punishable u/s 415-410 IPC is also not established proven against EIEL and Its principal officers/directors/management/employees, from the audit report of RBA. Further, none of the ingredients of the offence of criminal breach of trust are proven/established from the report of RBA, as against EIEL and its principal officer/directors/ management/ employees ...........
As per his, "There are no findings in the report of RBA as to any dishonestly or fraudulent intention as against EIEI and its principal officers/directors/ management/employees. Hence, in my opinion the audit report does not establish/ prove any fraud as against EIEL and its principal officers/directors/ management/employees. ................
Since as per the Legal Opinion on forensic Audit Report, the Report does not establish/prove any Dishonest misappropriation of Property defined and punishable u/s 403 IPC and/or cheatings defined and punishable u/s 415-420 IPC, criminal breach of trust defined and punishable u/s 405-409 of IPC and Fraud as defined by Reserve bank of India under Master Directions on Frauds classification and Reported by Commercial Banks and Select Fis dated July 01.2016 against EIEL and its principal officers/directors/management/ employee, the Forensic Audit Report is treated as closed. xxx xxx xxx"
15. By reference to the aforesaid Minutes of the Joint Lenders' Meeting, learned Senior Counsel for the petitioner submits that no dishonest misappropriation or cheating was found against the company. Further, the Forensic Audit Report was treated as closed. Learned Senior Counsel for the petitioner further submits that the Forensic Report dated 01st May, 2018 which has formed the basis of the various Show Cause Notices to the petitioner was the same report that was considered in the Minutes of the Joint Lenders' Meeting held on 27th September, 2018 and which has been treated to be closed. It is submitted that despite the Forensic Report having This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 19/02/2024 at 22:44:28 been put to an end, the proceedings have again been initiated against the petitioner in a total illegal manner.
16. The matter requires consideration.
17. Issue notice to the respondents by all modes.
18. Let reply be filed within four weeks. Rejoinder thereto, if any, be filed within two weeks thereafter.
19. Considering the submissions made before this Court, this Court stays the process of investigating, determining and declaring the accounts of the company and in consequence petitioner as 'fraud' by the respondent no. 2.
20. Re-notify on 19th July, 2024.
MINI PUSHKARNA, J FEBRUARY 15, 2024 ak This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 19/02/2024 at 22:44:28