Himachal Pradesh High Court
Shivam Seth vs Traders- A Brick Kiln Company( Bhatha) ... on 17 March, 2022
Author: Jyotsna Rewal Dua
Bench: Jyotsna Rewal Dua
IN THE HIGH COURT OF HIMACHAL PRADESH AT SHIMLA
ON THE 17th DAY OF MARCH 2022
.
BEFORE
HON'BLE MS. JUSTICE JYOTSNA REWAL DUA
CRIMINAL MISC. PETITION (MAIN) Nos. 317, 361, 362,
396, 397, 398 & 399 OF 2022
Between:-
1. CR.MP(M) No. 317 OF 2022
SHIVAM SETH
AGED 28 YEARS,
SON OF VIKRAM KUMAR SETH,
RESIDENT OF HOUSE NO. 525 B,
ADARSH NAGAR, PHAGWARA,
KAPURTHALA, PUNJAB 144401.
.....PETITIONER
(BY SH. SARDAVINDER GOYAL
AND SH. NITIN KANT SETIA, ADVOCATES)
AND
STATE OF HIMACHAL PRADESH
.....RESPONDENT
(BY SH. ASHOK SHARMA, ADVOCATE GENERAL,
WITH NARENDER GULERIA, ADDITIONAL
ADVOCATE GENERAL AND SH. RAM LAL
THAKUR, ASSISTANT ADVOCATE GENERAL,
INSPECTOR RAKESH KUMAR, CONSTABLE SUNEEL
KUMAR AND CONSTABLE MANOJ KUMAR,
PS, SV & ACB, UNA,IN PERSON)
2. CR.MP(M) No. 361 OF 2022
CHETAN NEGI
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2
AGED ABOUT 35 YEARS,
SON OF PURAN CHAND NEGI,
RESIDENT OF FLAT NO. X8,
.
ROYAL VIEW HOMES,
OMAXE ROYAL RESIDENCY,
PAKHOWAL ROAD,
LUDHIANA, PUNJAB.
.....PETITIONER
(BY SH. SARDAVINDER GOYAL
AND SH. NITIN KANT SETIA, ADVOCATES)
AND
r to
STATE OF HIMACHAL PRADESH
.....RESPONDENT
(BY SH. ASHOK SHARMA, ADVOCATE GENERAL,
WITH NARENDER GULERIA, ADDITIONAL
ADVOCATE GENERAL AND SH. RAM LAL
THAKUR, ASSISTANT ADVOCATE GENERAL,
INSPECTOR RAKESH KUMAR, CONSTABLE SUNEEL
KUMAR AND CONSTABLE MANOJ KUMAR,
PS, SV & ACB, UNA, IN PERSON)
3. CR.MP(M) No. 362 OF 2022
SUNITA SETH
AGED 52 YEARS
WIFE OF VIKRAM KUMAR SETH,
RESIDENT OF HOUSE NO. 525 B,
ADARSH NAGAR, PHAGWARA,
KAPURTHALA, PUNJAB 144401.
.....PETITIONER
(BY SH. SARDAVINDER GOYAL
AND SH. NITIN KANT SETIA, ADVOCATES)
AND
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STATE OF HIMACHAL PRADESH
.
.....RESPONDENT
(BY SH. ASHOK SHARMA, ADVOCATE GENERAL,
WITH NARENDER GULERIA, ADDITIONAL
ADVOCATE GENERAL AND SH. RAM LAL
THAKUR, ASSISTANT ADVOCATE GENERAL,
INSPECTOR RAKESH KUMAR, CONSTABLE SUNEEL
KUMAR AND CONSTABLE MANOJ KUMAR,
PS, SV & ACB, UNA,IN PERSON)
4. CR.MP(M) No. 396 OF 2022
PARKASH CHAND RANA,
S/O SHRI SOHAN SINGH,
AGED 73 YEARS,
RESIDENT OF VILLAGE AND POST OFFICE
SALOH BERI, TEHSIL GHANARI,
DISTRICT UNA, H.P.
.....PETITIONER
(BY SH. AJAY SHARMA, SENIOR ADVOCATE WITH
SH. AJAY THAKUR, ADVOCATE)
AND
STATE OF HIMACHAL PRADESH
.....RESPONDENT
(BY SH. ASHOK SHARMA, ADVOCATE GENERAL,
WITH NARENDER GULERIA, ADDITIONAL
ADVOCATE GENERAL AND SH. RAM LAL
THAKUR, ASSISTANT ADVOCATE GENERAL,
INSPECTOR RAKESH KUMAR, CONSTABLE SUNEEL
KUMAR AND CONSTABLE MANOJ KUMAR,
PS, SV & ACB, UNA,IN PERSON)
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5. CR.MP(M) No. 397 OF 2022
YOG RAJ,
.
S/O SHRI LACHHMAN DASS,
AGED 65 YEARS,
RESIDENT OF VILLAGE BEATEN,
HAROLI, DISTRICT UNA, H.P.
.....PETITIONER
(BY SH. AJAY SHARMA, SENIOR ADVOCATE WITH
SH. AJAY THAKUR, ADVOCATE)
AND r to
STATE OF HIMACHAL PRADESH
.....RESPONDENT
(BY SH. ASHOK SHARMA, ADVOCATE GENERAL,
WITH NARENDER GULERIA, ADDITIONAL
ADVOCATE GENERAL AND SH. RAM LAL
THAKUR, ASSISTANT ADVOCATE GENERAL,
INSPECTOR RAKESH KUMAR, CONSTABLE SUNEEL
KUMAR AND CONSTABLE MANOJ KUMAR,
PS, SV & ACB, UNA, IN PERSON)
6. CR.MP(M) No. 398 OF 2022
KARNAIL SINGH RANA,
S/O SHRI KANSHI RAM,
AGED 66 YEARS,
RESIDENT OF VILLAGE KANDI,
P.O. BHUGNARA,
TEHSIL NURPUR,
DISTRICT KANGRA, H.P.
.....PETITIONER
(BY SH. AJAY SHARMA, SENIOR ADVOCATE WITH
SH. AJAY THAKUR, ADVOCATE)
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AND
.
STATE OF HIMACHAL PRADESH
.....RESPONDENT
(BY SH. ASHOK SHARMA, ADVOCATE GENERAL,
WITH NARENDER GULERIA, ADDITIONAL
ADVOCATE GENERAL AND SH. RAM LAL
THAKUR, ASSISTANT ADVOCATE GENERAL,
INSPECTOR RAKESH KUMAR, CONSTABLE SUNEEL
KUMAR AND CONSTABLE MANOJ KUMAR,
PS, SV & ACB, UNA, IN PERSON)
7. CR.MP(M) No. 399 OF 2022
LEKH RAJ,
S/O SHRI MEHAR CHAND,
AGED 67 YEARS,
RESIDENT OF VILLAGE UPPER BHALWAL,
POST OFFICE TIAMBAL,
TEHSIL DADA SIBBA,
DISTRICT KANGRA, H.P.
.....PETITIONER
(BY SH. AJAY SHARMA, SENIOR ADVOCATE WITH
SH. AJAY THAKUR, ADVOCATE)
AND
STATE OF HIMACHAL PRADESH
.....RESPONDENT
(BY SH. ASHOK SHARMA, ADVOCATE GENERAL,
WITH NARENDER GULERIA, ADDITIONAL
ADVOCATE GENERAL AND SH. RAM LAL
THAKUR, ASSISTANT ADVOCATE GENERAL
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6
INSPECTOR RAKESH KUMAR, CONSTABLE SUNEEL
KUMAR AND CONSTABLE MANOJ KUMAR,
.
PS, SV & ACB, UNA,IN PERSON)
RESERVED ON: 11.03.2022
PRONOUNCED ON: 17.03.2022
WHETHER APPROVED FOR REPORTING? YES.
______________________________________________________
These petitions coming on for pronouncement
of orders this day, the Court passed the following:
ORDER
These petitions under Sections 438 of Code of Criminal Procedure are in relation to FIR no.7/2021 dated 10.12.2021 under Sections 409, 420, 467, 468, 471, 120B of the Indian Penal Code and Section 13(1) of the Prevention of Corruption Act, registered at Police Station State Vigilance & Anti Corruption Bureau, Una, Himachal Pradesh.
2. The FIR emanates from an inquiry conducted by the State Vigilance Department on a complaint received through the office of ADGP/SV&ACB HP Shimla vide letter dated 20.12.2018 enclosing therein a letter dated 5.12.2018 of the Principal Secretary (Vigilance) to the Government of HP conveying approval of the Government to conduct detailed inquiry into the allegations that a loan of Rs. 19.50 Crores was disbursed to a bogus firm M/S UR Sinter Pvt. Ltd. Amb District Una ( hereinafter referred to as the ::: Downloaded on - 17/03/2022 20:11:53 :::CIS 7 Company) by the Kangra Central Cooperative Bank (KCCB for short).
.
The FIR has been registered against ;-(i) the loan committee members of KCCB namely S/Sh. Karnail Singh Rana [petitioner in Cr.MP(M) No. 398/22], Lekh Raj Kanwar [petitioner in Cr. MP(M) No. 399/22], Yog Raj[ petitioner in Cr.MP(M) No. 397/22], Prakash Chand Rana [petitioner in Cr.MP(M) No. 396/22] (ii) the then MD of KCCB Ms Rakhil Kahlon (iii) the directors of the Company M/S UR Sinter Pvt. Ltd namely S/Sh. Shivam Seth [petitioner in Cr.MP(M) No. 317/22], Bhuvnesh Uppal, Chetan Negi [petitioner in Cr.MP(M) No. 361/22], Pradeep Jamwal (iv) owners of concerned firms namely M/S Maa Chintpurni, M/S Madan Foundry, M/S Supra Enterprises, M/S V.S. Traders & (v) valuers S/Sh.
Rajinder Dhiman and Narinder Paul Saini.
In the first set of petitions bearing no. Cr.M.P.(M) Nos.
317 & 361, the petitioners are the directors/promoters of the Company and in petition No. Cr.MP(M) No. 362/22, petitioner Sunita Seth is a beneficiary of the loan amount and is mother of Shivam Seth [petitioner in Cr.MP(M) No. 317/22].
In the second set of four petitions bearing Cr.MP(M) Nos. 396-399 of 2022, petitioners are members of the Loan Committee of Kangra Central Cooperative Bank (KCCB) and also ::: Downloaded on - 17/03/2022 20:11:53 :::CIS 8 the elected directors of KCCB, a cooperative society with Dharamshala as its Head Office.
.
Being interconnected, with interwoven facts and arising out of same FIR, these petitions have been taken up together for adjudication.
3. Based upon the inquiry conducted thus far, the prosecution case is that;-
3.i) Stage A ( Loan applied for by the Company for the first time)
3.i)a) M/S UR Sinter Pvt. Ltd ( the Company) was registered with the Registrar of Companies Punjab, HP and Chandigarh on 19.10.2012. The registered office of the Company is situated at village Bambloo, Tehsil Amb District Una. It had four directors namely S/Sh. Shivam Seth, Bhuvnesh Uppal, Pradeep Jamwal and Chetan Negi.
3.i)b) On 25.1.2014, the Company applied for a composite loan of Rs. 19.50 Crores [ Term Loan(TL) of Rs. 4.50 Crore & Cash Credit Limit(CCL) of Rs. 15 Crores] to the KCCB Amb, Una. Loan was applied for installation of a unit for sintering and manufacture of grass cutting machines at village Bambloo, Teshil Amb, District Una H.P. ::: Downloaded on - 17/03/2022 20:11:53 :::CIS 9
3.i)c) The loan application was turned down by the Loan Committee of KCCB on 26.2.2014 for the reason that majority of the .
promoters of Company were from Punjab and the immovable properties offered as collateral were also situated outside Himachal.
The Loan Committee reasoned that the KCCB had a very restricted area of operation therefore it was not possible to keep a close watch on such securities situated outside the State.
3.ii) Stage B ( Company applied for loan the second time)
3.ii)a) Within two months of rejecting the loan application of the Company, the loan committee on 23.4.2014 resolved to refer the Company's proposal for appraisal to NABCONS (NABARD Consultancy Service Pvt. Ltd.).
3.ii)b) NABCONS concluded that the project was technically feasible and financially viable. Based on this report, the Loan Committee in its meeting on 27.3.2015, accorded in principle approval for the loan in favour of the Company.
3.iii) Stage C ( Events after the grant of in-principle approval of loan)
3.iii)a) After grant of in principle approval for the loan by the Loan Committee, the Branch Manager KCC Amb scrutinized the documents of the Company and found that the collateral properties ::: Downloaded on - 17/03/2022 20:11:53 :::CIS 10 offered by the Company were purchased only 3 months back for Rs.
2.29 Crores only, whereas for obtaining the loan the Company's .
valuers had shown the value for the same properties as Rs. 21.3 Crores and Rs. 16.72 Crores as their distress value. He also mentioned that most of the offered plots did not have either the boundaries or the numbers and that it would be difficult to realize the value mentioned by the valuer in case of forced sale by the bank.
He brought all this to the notice of the KCCB HQ on 22.5.2015 and recommended for obtaining good quality collaterals with higher value, change of securities, guarantors, net worth of guarantors-
collaterals-directors, new CIBIL reports and revised viability report from NABCONS.
3.iii)b) On 9.6.2015, the Company intimated the KCCB Amb the names and bank account numbers of 3 firms to which the amount of Rs. 1,63,27,875/- was to be transferred from the loan account of the Company. Accordingly on 9.6.2015 from the loan account of the Company, an amount of Rs. 1,63,27,875/- was transferred to 3 different firms. Out of this amount;-
(a) Rs. 32,71,800/- were credited into the account of M/S VS Traders- a brick kiln company( bhatha) owned by Smt Sunita Seth w/o Sh. Vikram Seth and mother of Sh. Shivam ::: Downloaded on - 17/03/2022 20:11:53 :::CIS 11 Seth. M/S VS Traders further transferred Rs. 16,00,000/- to the bank account of Sh. Suraj Seth s/o Sh. Vikram Seth.
.
(b) Rs. 45,13,950/- were credited into the account of M/S Supra Enterprises at Kotak Mahindra Bank Phagwara. The same day, Rs. 15,11,000/- and Rs. 30,00,000/- were transferred from the bank account of M/S Supra Enterprises to the account of Sh. Satvinder Singh.
The bank account in the name of M/S Supra Enterprises was opened on 9.6.2015. It remained operative only for 3 days i.e. from 9.6.2015 to 11.6.2015. The registration of M/S Supra Enterprises has been cancelled.
On 11.6.2015, Rs. 25,00,000/- were credited into the bank account of M/S Madan Foundry Works. From the account of M/S Madan Foundry Works, Rs. 24,25,000/- were transferred in installments during 13 to 15.6.2015 to the bank accounts of M/S BL Seth Agro Mills.
Sh Om Parkash- owner of M/S Madan Foundry Works statedly disclosed that he had returned the money in the account of M/S BL Seth Agro Mills Ltd. at the request of Mr Vikram Seth. He also admitted that though he had issued bills amounting to Rs.
18,23,760/- in favour of the Company but did not deliver any material.
::: Downloaded on - 17/03/2022 20:11:53 :::CIS 12In the above manner, a total amount of Rs.
1,88,27,875/- was disbursed from 9.6.2015 to 11.6.2015 as first .
installment of the loan.
3.iv) Stage D ( further events)
3.iv)a) After the disbursal of loan amount of Rs. 1,88,27,875/-, Sh. Gurdyal Singh the then Branch Manager KCCB Amb on 10.2.2016 reported to the KCCB HQ that the loan amount disbursed till that time did not appear to have been utilized in the field. The Loan Committee ignored this report. The Loan Committee also ignored the report dated 31.10.2015 of Sh. S.S. Sachdeva - the professional hired by it. The Loan Committee moved ahead and approved the disbursement of remaining amount of loan as well as CCL to the Company.
3.iv)b) The inquiry revealed that the Company submitted the bills issued by M/S Maa Chintpurni Enterprises Phagwara for Rs.
25,15,525/- & 28,17,600/- for supply of fabrication of plates for chimney and shed allegedly paid by the Company from margin money. However the vehicle numbers from which the material was reported to have been transported were that of two wheelers.
Registration of M/S Maa Chintpurni firm was cancelled on 25.2.2016.
The bills raised by M/S Maa Chintpurni were found to be false as no material was actually delivered by it to the Company against these ::: Downloaded on - 17/03/2022 20:11:53 :::CIS 13 bills. The owners of the firms M/S Maa Chintpurni, M/S Madan Foundry, M/S Supra Enterprises, M/S V.S.Traders had issued false .
bills in favour of the Company without delivering any material. These bills were used by the Company for release of 2nd installment of loan.
3.iv)c) The inquiry also established that empanelled valuers S/Sh. Rajinder Dhiman & Narinder Paul Saini in connivance with the beneficiaries i.e. S/Sh. Animesh Uppal, Shivam Seth, Chetan Negi and Pradeep Jamwal----the directors of the Company had overvalued the assets of the loanee.
3.iv)d) The inquiry also established that members of the Loan Committee - S/Sh. Karnail Singh Rana, Lekh Raj Kanwar, Prakash Chand Rana, Yog Raj and the then M.D. of the KCCB Ms Rakhi Kahlon in connivance with the beneficiaries had released 2 nd installment of the loan despite knowledge that the loanee firm had not even used the 1st installment of the loan for the intended purpose and had diverted the sanctioned amount to other accounts. In order to give undue benefits to the loanee, the Loan Committee members overlooked the expert opinion given by the financial consultant Sh.
S.S. Sachdeva.
3.iv)e) During the inquiry, the Naib Tehsildar Gagret reported that according to the revenue record, the factory in the shape of tin shed exists over an area of 00-31-00 Hect. in part of khasra no. 124.
::: Downloaded on - 17/03/2022 20:11:53 :::CIS 14No construction whatsoever was carried out over khasra numbers 147-347-348. The land has been attached by the Department of .
State Taxes & Excise Control Enforcement Zone, Una H.P.
3.v) Stage D ( action on inquiry report)
3.v)a) Upon completion of the inquiry, the report was sent to the Vigilance HQ Shimla recommending registration of criminal case. In response, the ADGP, SV&ACB HP Shimla vide office letter dated 11.11.2020 and Superintendent of Police SV&ACB(NR) Dharamshala vide letter dated 25.11.2020 conveyed the permission of the Government of Himachal Pradesh through Principal Secretary (Vigilance) under section 17A of the Prevention of Corruption Act for registration of case against the then members of the Loan Committee.
3.v)b) Requisite permission of the State Government under section 17A of the Prevention of Corruption Act for registration of case against the then M.D. of the bank Ms Rakhil Kahlon was also issued by the Principal Secretary (Vigilance) to the Government of Himachal Pradesh on 18.11.2021. Accordingly the FIR was registered on 10.12.2021.
4. Contentions ::: Downloaded on - 17/03/2022 20:11:53 :::CIS 15
4.i) Contentions of Ld. Counsels for the petitioners S/Sh.
Shivam Seth, Chetan Negi and Sunita Seth[ Cr.M.P.(M) Nos. 317, .
361 and 362/2022]. Ld. Counsels submitted that;-
4.i)a) The matter regarding illegalities and irregularities in sanctioning of composite loan amounting to Rs. 19.50 crores by the KCCB in favour of the Company was raised in HP Vidhan Sabha.
Whereafter a fact finding preliminary inquiry was ordered into the matter by the Registrar Cooperative Societies (RCS) on 13.5.2016.
The District Inspector Cooperative Societies, Una inquired into the matter and submitted his report on 15.10.2016. On the basis of this report, the Registrar Cooperative Societies in exercise of powers under section 67 of the HP Cooperative Societies Act, on 11.11.2016 ordered for holding statutory inquiry into the entire matter.
4.i)b The Statutory inquiry report was submitted by the Assistant Registrar Cooperative Societies Dharamshala. Major irregularities on part of Loan Committee of KCCB were reported in it.
The RCS directed the KCCB to furnish its comments on the report.
The MD KCCB submitted a reply to the RCS on 8.2.2017 on the issues pointed out by the inquiry officer. In this reply the MD stated that;- there had been no irregularities in the sanction of loan;
physical verification and documentation formalities of securities were carried out; disbursement of loan was withheld on receipt of ::: Downloaded on - 17/03/2022 20:11:53 :::CIS 16 complaints; loan was disbursed only after further safeguarding the interest of bank; the disbursed amount was utilized by the borrower .
as per utilization carried out by the empanelled valuer; CCL will be allowed after the compliance of set out pre-conditions. The bank in its comments prayed for dropping the proceedings. The Company also requested to review the inquiry proceedings.
4.i)c) After examining the Statutory inquiry report, the response thereto of the KCCB, the other related documents, the RCS on 6.3.2017 ordered for immediate recalling of the entire loan amount disbursed to the Company along with interest. Failing which, surcharge proceedings under Section 69 of the HP Cooperative Societies Act were to be initiated against the erring bank officials.
4.i)d) Against the order dated 6.3.2017 passed by the RCS, the Company as well as the KCCB filed revision petitions before the Secretary Cooperation to the Government of Himachal Pradesh under Section 94(1) of the HP Cooperative Societies Act. The Secretary Cooperation vide its order dated 3.5.2017 quashed the order dated 6.3.2017 stating that;- the loan was sanctioned following detailed procedure; the Company has already invested Rs. 6.04 Crores against the bank guarantee of Rs. 4 crores as per the evaluation carried out by the bank evaluators; and left it to the ::: Downloaded on - 17/03/2022 20:11:53 :::CIS 17 wisdom of the bank to decide as to whether the loan is to be disbursed or not.
.
4.i)e) In light of facts in paras 4.i)a) to 4.i)d) above, Ld. Counsels for the petitioners Shivam Seth, Chetan Negi and Sunita Seth submitted that the order passed by the Secretary Cooperation on 3.5.2017 had closed the lid on the matter. The order was accepted by the State also. With the change in political guard, the closed matter cannot be opened. It was also argued that there was delay in lodging the FIR. The cause of action, if any, had accrued in the year 2015-16 whereas the FIR was lodged in December 2021.
Further it was submitted that the allegations of insufficiency of collaterals and securities offered by the Company in lieu of the loan for safeguarding the KCCB's interest are all ill-founded. The KCCB has no problems with the Company/petitioners/directors etc. The Company had offered 21 sets of immovable properties which till date are mortgaged with the KCCB. The bank's interests are safe. The Company is a going concern and had in all returned the Term Loan to the extent of Rs. 2.65 Crore and interest on the CCL to the extent of Rs. 2.65 Crores. The loan account of the Company has been declared Non Performing Asset (NPA). The Company has preferred a petition under Section 10 of the Insolvency and Bankruptcy Code before the National Company Law Tribunal, which is pending ::: Downloaded on - 17/03/2022 20:11:53 :::CIS 18 adjudication. It was submitted that FIR is based upon documentary evidence. The investigating agency is already in possession of the .
relevant documents. Ld. Counsel emphasized that pursuant to the ad-interim bail order, the petitioners have joined the investigations and their custodial interrogation of the petitioners is not required in the facts and circumstances.
4.ii) Contentions of Ld. Senior counsel for the petitioners S/Sh. Karnail Singh Rana, Lekh Raj Kanwar, Yog Raj and Prakash Chand Rana [Cr.MP(M) Nos. 396-399/22]---- members of the Loan Committee:
Ld. Senior Counsel reiterated the submissions of the ld.
Counsel for the directors/promoters of the Company.
4.ii)a) Ld. Senior counsel additionally submitted that the accusations leveled against the members of Loan Committee are under the Prevention of Corruption Act. But the members of Loan Committee do not fall within the definition of the 'public servant' given in Section 2(c ) of the Prevention of Corruption Act. Therefore sanction of prosecution given by the State of Himachal Pradesh in their cases, under Section 17A of the ibid Act, is of no consequence.
They cannot be prosecuted under the Prevention of Corruption Act.
4.ii)b) It was emphasized that the petitioners -Loan Committee members had acted on the basis of collective decisions of the ::: Downloaded on - 17/03/2022 20:11:53 :::CIS 19 House. The House consisted not just of 4 members of the Loan Committee but also of other Directors and Government nominees .
besides the Managing Director. The other persons have not been named as accused in the FIR. No investigations have been carried out so far from the then MD even though the then MD has been arraigned as an accused in the FIR. It was also highlighted that it was the Loan Committee which had initially turned down the loan proposal. Thereafter the loan was sanctioned keeping in view the report of NABCONS. The appraisal of documents and adequacy of offered securities was to be seen by the KCCB and not by the Loan Committee. The Loan Committee had no role whatsoever in disbursal of the amount. Ld. Senior Counsel joined the submissions of directors of the Company that pursuant to the ad-interim bail protection, the petitioners have joined the investigations. They are old aged people and still manning the posts of directors of the KCCB. Their custodial interrogation is not warranted.
Prayers were made on behalf of all the petitioners for confirmation of the interim bail orders.
4.iii) Contentions of Ld. Advocate General Ld. Advocate General vehemently opposed the bail pleas of all the petitioners. According to the ld. Advocate General, loan amount was sanctioned by the Loan Committee in breach of ::: Downloaded on - 17/03/2022 20:11:53 :::CIS 20 law and procedure. The bank officials, the field staff time and again submitted their reports and objections against sanctioning of the loan .
amount. Despite their objections, the loan amount was sanctioned.
Even at different stages of disbursal of the loan amount, serious concerns were raised against the disbursal. These concerns were also ignored by the Loan Committee. Ld. Advocate General argued that the net result is that at present the entire loan amount has been siphoned off by the Company. The loan amount has been diverted by the Company and not used for the purpose for which it was sanctioned. The members of Loan Committee in connivance with the directors of the Company, the beneficiaries and other accused persons have acted illegally to give undue favour to the loanees and the beneficiaries. It was also submitted that inquiry into the matter was ordered in the year 2018. On completion of the inquiry, the report was submitted and prosecution sanctions were obtained. Ld. Advocate General also disputed the arguments that the members of Loan Committee are not public servants within the meaning of Section 2(c ) of the Prevention of Corruption Act. According to him, they deal with public money and hence are public servants. He also submitted that allegations in the FIR against them are not just under the Prevention of Corruption Act but also w.r.t. various offences under the Indian Penal Code. It was also submitted that custodial ::: Downloaded on - 17/03/2022 20:11:53 :::CIS 21 interrogation of all the accused is necessitated in the facts and circumstances for further investigation into the matter. Only .
thereafter, further investigations can be carried out. Based on such further investigations, requisite action in accordance with law will be taken against all those found to be violating the law. Ld. Advocate General prayed for dismissal of the bail petitions.
5. Observations I have heard at length Ld. Counsel for all the petitioners and the Ld. Advocate General. With their assistance I have also gone through the documents on record as well as the record produced by the respondents.
All the Ld. Counsels relied upon the judgment of Hon'ble Apex Court in (2019) 9 SCC 24, titled P. Chidambaram Vs. Directorate of Enforcement, wherein following was held in respect of grant of anticipatory bail:-
"69. Ordinarily, arrest is a part of procedure of the investigation to secure not only the presence of the accused but several other purposes. Power under Section 438 Cr.P.C. is an extraordinary power and the same has to be exercised sparingly. The privilege of the pre-arrest bail should be granted only in exceptional cases. The judicial discretion conferred upon the court has to be properly exercised after application of mind as to the nature and gravity of the accusation; possibility of applicant fleeing justice and other factors to decide whether it is a fit case for grant of anticipatory bail. Grant of anticipatory bail to some ::: Downloaded on - 17/03/2022 20:11:53 :::CIS 22 extent interferes in the sphere of investigation of an offence and hence, the court must be circumspect while exercising .
such power for grant of anticipatory bail. Anticipatory bail is not to be granted as a matter of rule and it has to be granted only when the court is convinced that exceptional circumstances exist to resort to that extraordinary remedy.
72. We are conscious of the fact that the legislative intent behind the introduction of Section 438 Cr.P.C. is to safeguard the individual's personal liberty and to protect him from the possibility of being humiliated and from being subjected to unnecessary police custody. However, the court must also keep in view that a criminal offence is not just an offence against an individual, rather the larger societal interest is at stake. Therefore, a delicate balance is required to be established between the two rights- safeguarding the personal liberty of an individual and the societal interest. It cannot be said that refusal to grant anticipatory bail would amount to denial of the rights conferred upon the appellant under Article 21 of the Constitution of India.
74. Ordinarily, arrest is a part of the process of the investigation intended to secure several purposes. There may be circumstances in which the accused may provide information leading to discovery of material facts and relevant information. Grant of anticipatory bail may hamper the investigation. Pre-arrest bail is to strike a balance between the individual's right to personal freedom and the right of the investigating agency to interrogate the accused as to the material so far collected and to collect more information which may lead to recovery of relevant information. In State Rep. By The CBI v. Anil Sharma (1997) 7 SCC 187, the Supreme Court held as under:-
"6. We find force in the submission of the CBI that custodial interrogation is qualitatively more elicitation-
::: Downloaded on - 17/03/2022 20:11:53 :::CIS 23oriented than questioning a suspect who is well ensconced with a favourable order under Section 438 of .
the Code. In a case like this effective interrogation of a suspected person is of tremendous advantage in disinterring many useful informations and also materials which would have been concealed. Success in such interrogation would elude if the suspected person knows that he is well protected and insulated by a pre- arrest bail order during the time he is interrogated. Very often interrogation in such a condition would reduce to a mere ritual. The argument that the custodial interrogation is fraught with the danger of the person being subjected to third-degree methods need not be countenanced, for, r such an argument can be advanced by all accused in all criminal cases. The Court has to presume that responsible police officers would conduct themselves in a responsible manner and that those entrusted with the task of disinterring offences would not conduct themselves as offenders."
75. Observing that the arrest is a part of the investigation intended to secure several purposes, in Adri Dharan Das v. State of W.B. (2005) 4 SCC 303, it was held as under:
"19. Ordinarily, arrest is a part of the process of investigation intended to secure several purposes. The accused may have to be questioned in detail regarding various facets of motive, preparation, commission and aftermath of the crime and the connection of other persons, if any, in the crime. There may be circumstances in which the accused may provide information leading to discovery of material facts. It may be necessary to curtail his freedom in order to enable the investigation to proceed without hindrance and to protect witnesses and persons connected with the victim of the crime, to prevent his disappearance, to maintain law and order in the locality.::: Downloaded on - 17/03/2022 20:11:53 :::CIS 24
For these or other reasons, arrest may become an inevitable part of the process of investigation. The legality .
of the proposed arrest cannot be gone into in an application under Section 438 of the Code. The role of the investigator is well defined and the jurisdictional scope of interference by the court in the process of investigation is limited. The court ordinarily will not interfere with the investigation of a crime or with the arrest of the accused in a cognizable offence. An interim order restraining arrest, if passed while dealing with an application under Section 438 of the Code will amount to interference in the investigation, which cannot, at any rate, be done under Section 438 of the Code."
76. r In Siddharam Satlingappa Mhetre v. State of Maharashtra and Others (2011) 1 SCC 694, the Supreme Court laid down the factors and parameters to be considered while dealing with anticipatory bail. It was held that the nature and the gravity of the accusation and the exact role of the accused must be properly comprehended before arrest is made and that the court must evaluate the available material against the accused very carefully. It was also held that the court should also consider whether the accusations have been made only with the object of injuring or humiliating the applicant by arresting him or her.
77. After referring to Siddharam Satlingappa Mhetre and other judgments and observing that anticipatory bail can be granted only in exceptional circumstances, in Jai Prakash Singh v. State of Bihar and another (2012) 4 SCC 379, the Supreme Court held as under:
"19. Parameters for grant of anticipatory bail in a serious offence are required to be satisfied and further while granting such relief, the court must record the reasons therefor. Anticipatory bail can be granted only in exceptional circumstances where the court is prima facie of the view that the applicant has falsely been enroped in ::: Downloaded on - 17/03/2022 20:11:53 :::CIS 25 the crime and would not misuse his liberty. (See D.K.Ganesh Babu v. P.T. Manokaran (2007) 4 SCC 434, .
State of Maharashtra v. Mohd. Sajid Husain Mohd. S. Husain (2008) 1 SCC 213 and Union of India v. Padam Narain Aggarwal (2008) 13 SCC 305.)"
In light of above parameters in my considered view these petitions for grant of anticipatory bail deserve to be dismissed for the following reasons;-
5.i) According to the prosecution case, the Loan Committee on 26.2.2014 did not deem it appropriate to sanction the composite loan amount of Rs. 19.50 Crores in favour of the Company for the reasons that not only majority of its Promoters were from Punjab but the offered collaterals were also not in Himachal. It was therefore reasoned that having restricted area of operation, it will not be possible for KCCB to keep close watch on such securities and properties. However a couple of months later, the Company again submitted the loan proposal. This time, the same Loan Committee on 27.3.2015 accorded in principle approval to the composite loan in favour of the Company for the given reason that NABCONS had found the proposal technically feasible and financially viable. It is not forthcoming whether NABCONS had affirmed regarding the soundness of the collaterals and immoveable properties offered by the Company. Appraisal of documentation, sanction and disbursal of ::: Downloaded on - 17/03/2022 20:11:53 :::CIS 26 loan by safeguarding the interests of bank is an aspect different from examining the viability and feasibility of the proposal.
.
5.ii) From the documents, it appears that field staff of the KCCB had reported that primary & collateral properties offered by the Company against the loan were purchased by it only 3 months ago at the cost of Rs. 2.29 Crores but for the purpose of obtaining composite loan of Rs. 19.50 Crores the Company showed the value of these properties as Rs. 21.3 Crores and distress value of Rs.
16.72 Crores. Prima facie, it appears that these aspects were not given due consideration by the petitioners- - -members of the Loan Committee.
5.iii) The field staff also statedly reported that the most of the plots offered by the Company had neither any boundaries nor the identifiable numbers. That it would be difficult to realize the value mentioned by the Company's valuers in case of forced sale by the Bank. The staff recommended for taking additional collateral securities from the Company in the shape of immovable properties located within the State. Obtaining good quality collateral with higher value, change of securities, guarantors, net worth of guarantors-
collateral-directors, CIBIL reports and revised viability report from NABCONS was also recommended by the field staff. These ::: Downloaded on - 17/03/2022 20:11:53 :::CIS 27 concerns prima-facie appear to have been ignored by the Loan Committee.
.
5.iv) As per the status report and record, on the asking of the Company, on 9.6.2015 & 11.6.2015 the KCCB transferred an amount of Rs. 1,88,27,875/- in all towards first installment of the loan amount into the accounts of 3 different firms i.e. M/S VS Traders, M/S Supra Enterprises and M/S Madan Foundry Works.
M/S VS Traders, a brick kiln (batha) manufacturing firm is statedly owned by Smt. Sunita Seth w/o Sh. Vikram Seth and mother of one of the petitioners -Shivam Seth. M/S VS Traders transferred the amount to the bank account of Suraj Seth, Balbir and Vikram.
M/S Supra Enterprises opened its bank account on 9.6.2015.
The account remained operative for 3 days. The registration of the firm was cancelled on 10.9.2015.
The owner of M/S Madan Foundry has statedly disclosed that the loan amount received by his firm on 11.6.2015 from KCCB was transferred in installments from 13 to 15.6.2015 to the bank account of M/S BL Seth Agro Mills at the request of Vikram Seth. He is further said to have stated that he had issued bills worth lacs of rupees to ::: Downloaded on - 17/03/2022 20:11:53 :::CIS 28 the Company but had not actually delivered any article to the Company.
.
Further according to the prosecution, some of the loan amount was transferred at the instance of the Company to the account of M/S RS Traders Bijapur, Gagret. However no such firm could be located at Bijapur, Gagret. Mobile number of one of the petitioners Shivam Seth is statedly registered for this company in the bank account of this firm. Similarly there are other firms in whose accounts the loan amount was transferred by KCCB on the asking of the Company but the amount was retransferred by these firms to the accounts of the Company/directors etc. At present there is no money in these accounts. All this is still being investigated.
5.v) The Company submitted bills dated 24.6.2015 of lacs of rupees issued by M/S Maa Chintpurni Enterprises for supply of fabrication of plates for chimney and shed. The Company showed the payments of these bills from the margin money. Goods were shown to have been transported from M/S Maa Chintpurni Enterprises to the premises of the Company. However as per status report, the inquiry revealed that the registration number of the vehicles used for transportation were that of two wheelers.
Registration of M/s Maa Chintpurni is stated to have been cancelled on 25.2.2016.
::: Downloaded on - 17/03/2022 20:11:53 :::CIS 29According to the prosecution, accused Shivam Seth along with his parents Sunita Seth and Vikram Seth are defaulters of .
various Banks. Sh. Vikram Seth is stated to be in custody of Enforcement Directorate.
5.vi) Prima-facie in the face of inquiry conducted, the apprehension of prosecution that the accounts were created by the directors of the Company/beneficiaries/petitioners herein only for the diverting the loan amount and preparation of fictitious bills for securing the disbursal of loan cannot be ruled out at this stage.
5.vii) The field staff of KCCB is said to have reported that 1 st installment of loan amount sanctioned by that time did not appear to have been utilized in the field. Another Financial Consultant of the Bank is said to have reported that Seth family has defrauded several banks and their names appear in the caution advice of Reserve Bank of India for Rs. 418 million. AGM KCCB Amb also endorsed these concerns and advised against further disbursal of loan as the Company had statedly not complied with the terms and conditions of sanction of loan amount. The higher official and the members of Loan Committee prima-facie remained unmindful of the concerns voiced and released further installments of the loan.
5.viii) According to the prosecution, during investigations the Naib Tehsildar reported that the factory constructed by the Company ::: Downloaded on - 17/03/2022 20:11:53 :::CIS 30 is in form of a tin shed over an area on 00-31-00 Hect. over part of khasra number 124 and that no construction whatsoever was raised .
over khasra numbers 147-347-348. The land has statedly been attached by the Department of State Taxes & Excise Control Enforcement Zone, Una.
5.ix) In a very subtle manner, the comments furnished by the Bank to the Statutory Inquiry Report ordered by the Registrar of Cooperative Societies, also point accusing fingers at the members of the Loan Committee. The comments also state that RBI had also mailed a complaint to the Bank against the Company. The RBI had advised the KCC Bank to re-examine the matter of releasing the credit facilities. However the Loan Committee of KCC Bank in its meeting dated 23.3.2016 resolved that there was no sound reason for the bank to withhold further disbursement. In light of these submissions, serious allegations leveled against all the petitioners in all these petitions cannot be simply brushed aside at this stage. As per status report, even though the irregularities & illegalities, one after the other in the matter, were brought to the notice of the Loan Committee yet no action was taken by the Loan Committee for safeguarding the bank's interest. In view of the facts highlighted in the inquiry report, the apprehension that such acts were carried out with a view to favour the beneficiaries cannot be ignored at this ::: Downloaded on - 17/03/2022 20:11:53 :::CIS 31 stage. It is a fact that the loan account has become NPA. The Company's land has statedly been attached by the Department of .
State Taxes & Excise Control Enforcement Zone, Una. In the name of the factory, a tin shed is reported to be there over an area measuring 00-31-00 Hect. over part of khasra number 124 and no construction is stated to have been carried out over the other khasra numbers. The Company has statedly itself approached the NCLT under Section 10 of the Insolvency and Bankruptcy Code. This petition is stated to be pending adjudication there.
5.x) The Registrar of Cooperative Societies (RCS) on 13.5.2016 had ordered for conducting a preliminary inquiry into the matter. The report was submitted by the District Inspector, Una on 15.10.2016 pointing out serious violations. Based on this report, the RCS ordered for holding a statutory inquiry in exercise of powers under Section 67 of the HP Cooperative Societies Act. The statutory report was submitted by the Assistant Registrar Cooperative Societies highlighting major irregularities on part of Loan Committee.
Comments upon the report were called from the Bank. After examining entire relevant material, the RCS on 6.3.2017 ordered for immediate recalling of entire loan amount with interest. The matter was carried further in revision petitions by the Bank and the Company before the Secretary Cooperation to the Government of ::: Downloaded on - 17/03/2022 20:11:53 :::CIS 32 Himachal Pradesh. The Secretary Cooperation allowed the revision petitions on 3.5.2017 and quashed the order passed by RCS on .
6.3.2017. However what is significant to notice at this stage is that while quashing the order, the Secretary had not gone into the merits of the matter. He simply observed that it would neither be in the interest of the Bank nor of public at large to restrain the bank from giving loans. On one hand while holding in para 6 of the order that the merits of the revision petitions were not gone into, he, on the other hand held in the same para that the bank had sanctioned the loan in favour of the Company after following detailed procedure and taking due diligence and bank has no doubt or apprehension whatsoever regarding recovery of loan amount. Under the circumstances and in view of the inquiry conducted into the matter by the prosecution, not much importance can be given to the order passed by the Secretary Cooperation at this stage to contend that a matter closed by the order of the Secretary cannot be opened or that the Secretary had given clean chit for the sanction, disbursal and utilization of the loan amount in question.
5.xi) Allegations leveled by the prosecution are very serious.
Irrespective of the issue as to whether the members of the Loan Committee are 'public servants' within the meaning of the Prevention of Corruption Act or not as contended by their Ld. Senior ::: Downloaded on - 17/03/2022 20:11:53 :::CIS 33 Counsel, fact remains that they are facing accusations at present not only the Prevention of Corruption Act but also under the .
provisions of Indian Penal Code. Looking to the nature and graveness of the accusations being faced by all the petitioners, their custodial interrogation cannot be refused at this initial stage of the investigation merely because the allegations pertain to economic offences or that according to the petitioners the investigating agency can statedly carry out further investigation only on the strength of documents collected by it. The inquiry into the matter was ordered in December 2018. It was completed in November 2020. The prosecution sanction was granted by the State in November 2021.
The FIR was registered on 10.12.2021. Trail of entire loan amount disbursed to the Company is still being investigated by the investigating agency. Various firms linked with the loan amount & their accounts are still being investigated. The extent of the role played by the members of the Loan Committee of the KCC Bank in the entire episode is still being investigated. According to the Ld. Advocate General, no meaningful cooperation has been extended by the petitioners to the investigating agency. As per one of the status reports petitioners Shivam Seth, Chetan Negi and Sunita Seth were not found to be residing at the addresses supplied by them. The matter is still being investigated by the Police.
::: Downloaded on - 17/03/2022 20:11:53 :::CIS 34Apprehension of the prosecution that there could be many more dubious transactions, there could be many more persons whose .
dubious role in the matter may come to light on custodial investigation from the petitioners and other accused persons, is well founded at this stage. The petitioners are all well placed and influential persons. Their influencing the investigations and evidence also cannot be ruled out at this preliminary stage.
For every single reason of the above observations, in my considered view, the custodial interrogation of the petitioners cannot be denied to the investigating agency at this stage. Their custodial interrogation is also necessary not only for protecting the interests of the bank but in the interest of public at large who deposit their hard earned money in the banks. Hence all these petitions under Section 438 of Code of Criminal Procedure are dismissed.
It is clarified that observations & expressions in this order shall not be construed as an opinion on the merits of the matter and the same shall remain confined only to the adjudication of the instant bail petitions.
Jyotsna Rewal Dua Judge 17th March, 2022 (vs) ::: Downloaded on - 17/03/2022 20:11:53 :::CIS