Karnataka High Court
Mr K Ramakrishna vs Directorate Of Enforcement on 24 June, 2022
Author: H.P. Sandesh
Bench: H.P. Sandesh
1
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
2
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
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 4 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 5 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 6 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 7 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 8 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 9 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 10 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 11 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 12 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
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 14 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.
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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 16 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 17 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 18 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 19 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 20 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 21 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*