Bombay High Court
Rana Kapoor vs Directorate Of Enforcement Through The ... on 25 January, 2021
Author: Prakash D. Naik
Bench: Prakash D. Naik
G. Lokhande & D.Ethape 1 of 28 ba-1999-2020.doc
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CRIMINAL APPELLATE JURISDICTION
CRIMINAL BAIL APPLICATION NO (ST). 4999 OF 2020
Rana Kapoor ...Applicant
Versus
Directorate of Enforcement & Anr. ...Respondents
.....
Mr. Harish Salve, Sr. Adv. a/w. Mr. Mahesh Jethmalani, Sr. Adv.
i/b.Mr. Subhash Jadhav, Advocate for the Applicant.
Adv. H. S. Venegavkar, Special P. P. for Respondent No. 1.
Mr. S. S. Pednekar, APP for the State.
.....
CORAM : PRAKASH D. NAIK, J.
DATE : 25th JANUARY, 2021.
PC :
1. The applicant is seeking bail in ECIR No.
MBZO-I/03/2020 registered by Directorate of Enforcement, Mumbai
for offence under Sections 3 r/w. 4 of Prevention of Money
Laundering Act ("PMLA" Act) The ECIR was registered on 7 th March,
2020. The applicant was arrested on 8th March, 2020.
Digitally
signed by
RajeP.
RajeP. Aher
Aher Date: 2. On 7th March, 2020 CBI registered an FIR under Section
2021.01.30
20:44:29
+0530
120-B r/w. 420 of Indian Penal Code, 1860 ("IPC" for short) and
Sections 7, 12, 13(2) r/w. 13(1) (d) of Prevention of Corruption Act.
("P. C. Act" for short). In the FIR it was alleged that during 2018-
2019, Rana Kapoor (applicant) entered into criminal conspiracy with
Kapil Wadhwan, Promoter Director of M/s.DHFL and others for
G. Lokhande & D.Ethape 2 of 28 ba-1999-2020.doc
extending financial assistance to M/s. Dewan Housing Finance
Corporation Ltd ("DHFL" for short) in lieu of substantial undue
benefit to applicant and his family members through companies held
by them. During April-June, 2018 YES Bank invested Rs.3,700 Crores
in short term debentures of DHFL. Around the same time, Mr. Kapil
Wadhwan paid kick back of Rs.600 Crores to applicant and his family
members by extending loan of Rs.600 Crores by DHFL to M/s. DOIT
Urban Ventures (India) Pvt. Ltd ("DUVPL" for short) a wholly owner
subsidiary of M/s. RAB Enterprises (India) Private Ltd in which
Bindu Kapoor, wife of applicant is a Director and 100% shareholder.
Daughters of applicant Roshni Kapoor, Radha Kapoor Khanna and
Rakhee Kapoor Tandon are 100% shareholders of M/s. DOIT Urban
Ventures (India) Pvt. Ltd through Morgan Credit Private Ltd. The
loan of 600 Crores was sanctioned by DHFL to DOIT on the basis of
mortgage of sub-standard property having meagre value and by
considering its future conversion from agriculture land to the
residential land. M/s. DHFL has not redeemed amount of Rs.3700
Crores invested by M/s.YES Bank in debentures. YES Bank also
sanctioned loan of Rs.750 Crores to M/s. RKW Developers which is
DHFL group company for their Bandra Reclamation Project, Mumbai
and whole amount was siphoned off by Kapil Wadhwan since entire
amount was transferred by M/s. RKW Developers to M/s.DHFL
G. Lokhande & D.Ethape 3 of 28 ba-1999-2020.doc
without investment in Bandra Reclamation Project for which loan
was sanctioned thus applicant obtained undue pecuniary advantage
from M/s. DHFL in matter of investment in debentures of M/s.DHFL
by YES Bank through companies held by wife and daughters.
3. ECIR was registered on same day i.e. 3 rd July, 2020
against applicant, his family members, DHFL and others. ECIR refers
to registration of FIR and its contents. The aforesaid facts reflected in
FIR were referred in ECIR. In concluding paragraph it is stated that
prima-facie case for an offence of money laundering as defined under
Section 3 of PMLA 2002 punishable under Section 4 of PMLA
appears to have been made out against accused/suspected persons.
4. The applicant was arrested on 8 th March, 2020. He was
produced before the Special Court under the PMLA Act. He was
remanded to custody. By subsequent order, he was further remanded
to custody. Complaint was filed before the Special Court.
5. The complaint filed by the Directorate of Enforcement
alleges that the applicant was MD/CEO of YES Bank. He misused his
position to gain financial benefits for himself and for his family
members, through companies controlled by them for sanctioning
huge loans through YES Bank. He received kick back over bogus
G. Lokhande & D.Ethape 4 of 28 ba-1999-2020.doc
loans extended by YES Bank to DHFL company, which was owned by
Kapil Wadhwan and Dheeraj Wadhwan and to its Group companies
and those kick back amounts were misused by the applicant for
purchasing properties in the name of his family members. The
applicant deliberately used, projected and claimed those proceeds of
crime as untainted by laundering the same for personal gain. The
daughters of the applicant are arrayed as accused No. 2 to 4 in
complaint. They were holding 33.33 percent shares each in
M/s. DOIT Urban Ventures (India) Pvt. Ltd company which is arrayed
as accused No. 6 in the complaint. M/s. Morgan Credits Pvt Ltd
Company ("MCPL" for short) is impleaded as accused No. 7. The said
company was holding 99.99 percent shares of the company. Yes
Bank had bought debentures of Rs.3,700 Crores of DHFL company
controlled by Kapil Wadhwan and Dheeraj Wadhwan during the
period from April 2018 to June 2018 and thereafter DHFL had paid
kick back to applicant under the garb of loan of Rs.600 Crores to
accused No. 6. The said loan was given without adequate collateral,
though DHFL had not redeemed the amount of Rs.3700 Crores
invested in its debentures by YES Bank, and though accused No. 6
did not have any business activity to repay the loan. Loan of Rs.750
Crores was fraudulently given in the year 2018 from YES Bank by
applicant to M/s. Belief Realtors Pvt. Ltd, which was a group
G. Lokhande & D.Ethape 5 of 28 ba-1999-2020.doc
company of R.K.W of Wadhwan's for SRA redevelopment of Bandra
Reclamation Project. Deposits of people were used to purchase the
debentures, and as such loan was given to accused No. 6 to
camouflage. The amounts were further invested through subsidiary
companies to divert the proceeds of crime and used for which
accused No. 2 to 4 were hand in glove with applicant/accused. Wife
of applicant arrayed as accused No.5, is the owner of M/s. RAB
Enterprises India Pvt. Ltd., Co. which is impleaded as accused No. 8
in the complaint. The said company received a gift of Rs. 87 Crores
from applicant. Wife of applicant is house-wife having no source of
funds, yet her company made huge investments in its subsidiary
companies, which fact was within her knowledge and thereby she
had abetted commission of crime of money laundering by the
applicant. The applicant illegally obtained money for accused No. 6
to 8 in connivance with Kapil Wadhwan, Dheeraj Wadhwan and
others by entering into conspiracy in respect to which CBI had
registered a crime for the offences under Sections 120-B, 420 of IPC
and Sections 7, 12, 13(2) r/w. 13(1) (d) of Prevention of Corruption
Act against the applicant, Kapil Wadhwan, Dheeraj Wadhwan and
Others. This kick back amount was used by applicant and his family
members for acquiring various properties and it is projected that the
properties are untainted. The Court took cognizance of the complaint
G. Lokhande & D.Ethape 6 of 28 ba-1999-2020.doc
for offences under Sections 3 r/w. 4 of the PMLA Act.
6. Pursuant of filing of the complaint, further investigation
was conducted. Supplementary complaint was filed on 11 th July,
2020. In the supplementary complaint, it was alleged that during the
investigation, details of more than 100 companies owned by the
applicant and his family members, were found. In these companies,
applicant's family members had majority share holding, and all
financial transactions were handled by the applicant. It was noticed
that many of those companies are not operative and are used for
siphoning off illegally obtained money i.e. proceeds of crime by
applicant. It is also found that dummy Directors were appointed by
the applicant on the board of many of these companies.
7. The applicant preferred an application for bail before the
Special Court under the PMLA Act. It was opposed by the
respondents by filing reply. By Order dated 21st July, 2020 the
application for bail was rejected.
8. Mr. Salve, Learned Senior Advocate appearing for the
applicant pointed out averments in complaints filed by respondent
to indicate the nature of allegations against the applicants. He
submitted that the applicant is in custody from 8th March, 2020. He
has undergone custody for a period of about 10 months. The entire
G. Lokhande & D.Ethape 7 of 28 ba-1999-2020.doc
investigation is over. The first complaint was filed on completing
investigation on 6th May, 2020. Subsequently, it was claimed that
further investigation is in progress. However, even thereafter, the
supplementary complaint was filed on 11th July, 2020. Hence,
further detention of the applicant is not necessary. Statements of
several witnesses were recorded. Properties have been attached.
Provisional attachment orders were already issued by the
Enforcement Directorate attaching immovable and movable
properties worth Rs.600 Crores belonging to applicant and his family
members. This secures the interest of ED in the present case and
thus, further incarceration of the applicant is unwarranted. The
respondent/ED in various provisional attachment orders, have
themselves attached the properties worth Rs.600 Crores qua the
applicant. Alleged proceeds of crime are not in applicant's hand. The
applicant has not received money. Learned counsel adverted to
averments in the application for bail with regards to grounds for bail.
It is submitted that this is not a case of money laundering. The
amount of Rs.600 Crores was not a kick back but a genuine bonafide
loan. Kickback is money paid to somebody illegally in return for
facilitating financial advantage to another. Kickback is a bribe which
is paid to facilitator of an illegal financial advantage by recipient of
that financial advantage from proceeds received by him but at any
G. Lokhande & D.Ethape 8 of 28 ba-1999-2020.doc
rate as consideration for that financial advantage. In this case,
amount of Rs.600 Crores was disbursed to DUVPL on 8 th May, 2017
pursuant to loan of 27th February, 2017. It is not money laundering
but projecting the amount of Rs.600 Crores in the balance-sheet as a
loan received from DHFL, which is in fact as per the annual report
audited and reflected in Income Tax Returns. DUVPL has neither
diverted the funds to outside companies for the purpose of layering,
siphoning or parking them. The entire 600 Crores was invested by
wholly owned subsidiaries of DUVPL. The debentures issued by
DHFL were advertised. At the time of issuance, the debentures were
at the highest possible rating by multiple credit agencies and upon
issuance on 22nd May, 2018 were over subscribed by almost four
times by 24th May, 2018. This fact is not disputed by the respondents.
DHFL had regularly paid interest on these debentures throughout the
applicant's tenure at YES bank and credit agencies also maintained a
stable rating rights upto 31st January, 2019. There was no occasion
for YES Bank to claim default by DHFL or 'redeem' the debentures
during applicants tenure at YES Bank. DHFL defaulted on payment of
interest on these debentures at the time when applicant was not in
management of YES Bank. No offence under PMLA Act is made out
in respect of the receipt of Rs.600 Crores by DUVPL from DHFL. The
amount is neither the proceeds of crime nor the applicant is involved
G. Lokhande & D.Ethape 9 of 28 ba-1999-2020.doc
in any process or activity projecting or claiming the amount of 600
Crores. Out of the amount of Rs.600 crores, and amount of 300
Crores were disbursed to DUVPL previously known as DOIT
Enterprises (India) Pvt. Ltd. by DHFL as long as on 08 th May, 2017
pursuant to a loan sanction. It was not even remotely in either
parties contemplation that DHFL would issue NCD's one year later in
2018 or that YES bank would subscribe towards the said issue of
NCD's of DHFL. The applicant is aged about 63 years. The applicant
is suffering from various ailments. The averments with regards to the
health condition of the applicant are reflected in the application for
bail. The applicant is suffering from multiple chronic ailment
including Asthama and hyper tension and there is high risk for
medical complications. The health condition of applicant is rapidly
deteriorating in jail conditions where he had undergone, prolonged
incarceration. The applicant is suffering from long standing
Hyper immunoglobulin E-syndrome, a chronic immunodeficiency
syndrome. The applicant's medical reports reveal that his IGE levels
are greater than three time the normal level in adults. This syndrome
causes recurrent infections for the applicant. This is further
evidenced by his history of sinus infections requiring antibiotics and
his recent history of a bladder infection which was severe. He needs
to be placed in a safe living environment at his residence in order to
G. Lokhande & D.Ethape 10 of 28 ba-1999-2020.doc
be protected from severe infection and high risk of death. The
applicant has history of long standing bronchial asthama and
seasonal allergy since childhood, that was severe. The applicant has
severe hyper tension. He has major depressive disorder anxiety with
panic attacks, hallucinations and amnesia since last 24 months. The
depression has acutely worsened the applicant's health. The
applicant has history of abnormal liver function, hiatal hernia,
gastroesophageal reflux disease and elevated gastrin and
chromogranin levels which needs to be closely monitored, as they are
markers for developing liver failure and malignant of cancer of
esophagus, stomach, small intestine or pancreas cancer. Reliance is
placed on the medical case papers which are annexed to this
application. The applicant need not be detained in custody. Bail can
be granted on stringent conditions. The applicant has presently no
connection with the YES bank and the question of tampering with
the evidence does not arise. To take care of the apprehension that
the applicant would abscond, the passport of the applicant can be
retained. The tripod test laid down by the apex court in the case of
P. Chidambaram V/s. Directorate of Enforcement may be applied in
this case and bail may be granted to the applicant.
9. Mr. Venegaonkar, learned counsel appearing for the
Directorate of Enforcement submitted that the offence is clearly
G. Lokhande & D.Ethape 11 of 28 ba-1999-2020.doc
made out against the applicant. The applicant is one of the main
accused in this case. He was MD/CEO of YES Bank during the
relevant period. He misused his official position to gain undue
financial benefit for him and his family members and associates.
He is found involved in money laundering activities. There is
voluminous material showing involvement of the applicant in the
crime. M/s. DUVPL is the company owned by the applicant through
his daughters who were the shareholders therein. The applicant was
the CEO of YES Bank and had entered into conspiracy with Kapil
Wadhawan and Dheeraj Wadhawan of DHFL and received kickback.
The investigation revealed that YES bank had extended loans to
entities despite they incurring losses and having negative net worth
with regards to medical ground, urged by applicant he relied on
avertment in his reply. Learned counsel drew my attention to
statement of Rajendra Mirashi recorded on 7th March 2020. In the
said statement, the question was asked to the said witness, as to
whether he had interacted with Mrs.Rakhe Kapoor Tandon, Roshni
Kapoor and Radha Kapoor Khanna in connection with the loan. He
stated that he never interacted with these persons, in connection
with a loan or otherwise. Subsequently he was questioned as to who
used to co-ordinate from DUVPL for the said loan. He replied that
Mr. Dave, Senior Executive Secretary of the applicant used to
G. Lokhande & D.Ethape 12 of 28 ba-1999-2020.doc
co-ordinate with him for the said loan. He used to get instructions in
the matter from CMD from his Kapil Wadhawan and Shri.Govindan
Executive Assistant to CMD. At senior level the applicant used to talk
to CMD in the matter. There is no active or operating business in the
company in DUVPL at the time of proposed loan. The loan proposal
was approved on the basis of properties furnished as security by
DUVPL and as per the instructions of the CMD of DHFL. As per his
knowledge, there is no activity and as such no revenue of DUVPL.
As of today, DUVPL may not be able to repay the loan considering its
present business activity and revenue. Mr. Venegaonkar then pointed
the statement of applicant's wife dated 17 th June 2020. She stated
that she is a housewife looking after her husband and daughters. She
do not have any independent source of income. She is dependent on
her husband. She do not have any idea about M/s.RAB enterprise
(India Private Limited). She had heard the name of the said company
however, she do not have idea about the company. She do not know
what type of business activities M/s. RAB Enterprises India Private
Limited has been engaging in and what is the net worth of the
said company. She do not know about the source of fund of
M/s.RAB enterprises (India Private Limited) and its subsidiaries.
Mr.Venegaonkar is relied on statement of Ajita Potdar dated
17th June 2020. She stated that M/s. DOIT Urban infrastructure was a
G. Lokhande & D.Ethape 13 of 28 ba-1999-2020.doc
company promoted by the applicant, and was in the business of
project fit outs maintenance, administration and documentation. This
company used to set up offices for the group companies promoted by
applicant only. She further stated that she was transferred to DOIT
on 31st May 2019. This was a group company promoted by
applicant. The employees of DOIT infrastructure was transferred to
M/s. DOIT Urban Ventures Private Limited. Their work profile
remains same. She is not aware about the actual business initiatives
carried out under M/s. DUVPL. Learned counsel that pointed out
statement of Bharat Bhalla recorded on 24th June, 2020. He stated
that he was offered to join M/s. DOIT Enterprises Private Limited as
an investment manager. He worked in various companies and
evaluated investment opportunities. He further stated that he was
made Director in 36 companies of MCPL group on the instructions
of the applicant. Mr. Venegaonkar also relied on statement of
Ballamnath Chaturvedi recorded on 26 June 2020. He has stated that
on papers he was shown to be employed with dish hospitality and
thereafter with Mercury Reality. However, he was working at the
house of Dheeraj Wadhawan. The work assigned to him was to visit
house of Dheeraj Wadhawan and perform household work. He was
told that he would be made Director in some of the companies of
Dheeraj Wadhawan. He had no option but to agree for the same. He
G. Lokhande & D.Ethape 14 of 28 ba-1999-2020.doc
had no role to play in those companies. He cannot read English.
Mr.Venegaonkar also took me through statements of Mahesh Varakh,
Ashish Jain and Sonpal Jain. Mr.Varakh has stated that he had joined
YES Bank in 2015. He explained the procedure for sanction of project
loan in YES Bank. He also explained the procedure for sanction of
loan to Belief Relator Pvt. Ltd by Yes Bank. Belief Realtor is one of
watchman group of companies owned, controlled, manged by
Dheeraj Wadhwan and Kapil Wadhwan which was developing SRA
project in Bandra Reclamation. In May 2018, they had approached
YES Bank for loan of 750 Crores for said project. Applicant
forwarded mail of risk development plan to risk team for evaluation.
Applicant gave his ok to mail from Rajiv Anand which was also
forwarded to Risk and business team. Loan was sanctioned by MCC
headed by applicant. Ashish Jain provided details about loan
sanctioned to Belief Realtor Pvt. Ltd. Sonpal Jain gave details about
loan sanctioned to Belief Realtors. He stated that said company is
beneficially owned by Wadhwan group. After disbursement of loan of
Rs.750 Crores, this loan was ultimately transferred to DHFL after
layering and never used for declared purpose. He gave money trail
regarding this loan. Mr. Venegaonkar refers to Section 24 of PMLA
Act and contended that burden of proof enumerated there is upon
accused. He referred to Apex Court decision in the case of Union of
G. Lokhande & D.Ethape 15 of 28 ba-1999-2020.doc
India V.s. Hassan Ali
10. Mr. Venegaonkar submitted that for granting bail for the
offence under Section 3 read with Section 4 of the PMLA Act, the
twin conditions stipulated under Section 45 of the Act are required
to be fulfilled. Even otherwise the offence is of serious nature. It is
submitted that, Apex Court in the case of Nikesh Tarachand Shah Vs.
Union of India and another 2018 11 SCC twin conditions under
Section 45 of the Act were struck down by the Apex Court.
Therefore, Section 45 has been amended by adding word "under this
Act". It is submitted that in view of the said amendment, the twin
conditions stipulated therein, stand revived and applicable to
offences under this Act. Mr. Jethmalani appearing for the applicant
countered the submissions of Mr. Venegaonkar. It is submitted that in
the Judgment of Nikesh Shah, the twin conditions under Section 45
of the PMLA Act, were struck down as unconstitutional. Merely
adding the word "under this Act" to Section 45 does not revive the
said conditions. He further submitted that this Court in the case of
Sameer Bhujbal Vs. Assistant Director, Directorate of Enforcement
delivered in Bail Application No.286 of 2018 has rejected similar
contention. This Court has observed that once the condition were
struck down by Court, by amendment it would not get revived. He
G. Lokhande & D.Ethape 16 of 28 ba-1999-2020.doc
further submitted that similar view is also adopted by Delhi High
Court in the case of Upendra Rai Vs. Directorate of Enforcement
2019 SCC OnLine Del 9086. The Delhi High Court had referred to
the decision in the case of Sameer Bhujbal as well as the decision of
Madhya Pradesh High Court. Mr. Venegaonkar contended that the
Judgment in the case of Upendra Rai has been challenged before the
Apex Court. The Court has issued notice in Special Leave Petition
No.5150 of 2020, and operation of order passed by the High Court of
Delhi, is stayed. Mr.Jethmalani submitted that the order of the Apex
Court in the aforesaid appeal does not indicate stay to the Judgment
of the Delhi High Court. The Apex Court has directed that there shall
be stay of operation of impugned order passed by High Court of
Delhi if respondent has not already been released on bail. Although,
the Judgment and order passed by this Court, in the case of Sameer
Bhujbal has been challenged before the Apex Court there is no stay
by Apex Court to the said order. Mr. Jethmalani further submitted in
rejoinder that there is no kick back is involved in this case. It was a
genuine loan transaction. The loan was transparent. Hence, no
offence under Section 3 of PMLA Act is made out. Learned Senior
Advocate Mr. Salve submitted that there are no proceed of crime in
the present case, which is requirement to initiate proceeding under
the PMLA Act. In any case by attachment of property amount is
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secured and further detention of the applicant is not warranted. It is
not the case of the prosecution that the applicant had received
Rs.600 Crores. Investigation is over, trial will be delayed. The
applicant cannot be detained in custody for indefinite period. Hence,
bail may be granted to the applicant.
11. I have perused the documents on record. The case of
complainant/respondents is that the ECIR was registered on
07th March 2020 in pursuant to registration of FIR by CBI. During the
course of investigation, it was noticed that M/s. YES Bank Limited
had subscribed to debenture issued by DHFL worth Rs.3700 Crores
during the period April to June 2018. It was further noticed that
simultaneously DHFL had sanctioned loan of Rs.600 Crores to
M/s.DOIT Urban Venture Limited of family Enterprise of applicant.
As the said, the transactions appeared suspicious in nature, searches
were conducted at the residential premises of the applicant on 06 th
March 2020 in connection with said transactions and crucial
document were recovered. CBI registered FIR No. RC-219-2020-
E0004 dated 07th March 2020 against DHFL, M/s. DOIT Urban
Venture India Limited, applicant, promoter director CEO of M/s. YES
Bank Limited, Kapil Wadhawan, promoter director of M/s. Diwan
Housing Finance Limited, Mr. Dheeraj Wadhawan Director of RKW
Developers Private Limited and others, under Section 120-B read
G. Lokhande & D.Ethape 18 of 28 ba-1999-2020.doc
with Section 420 IPC and Section 7, 12, 13(2) of P. C. Act. As per the
FIR, the applicant had entered into criminal conspiracy with Mr.
Kapil Wadhawan and others for extending financial assistance to
M/s. DHFL by YES Bank Limited in lieu of substantial undue benefit
to himself and his family members through the companies held by
them. Investigation was initiated by respondent No.1 into offences of
money laundering. The main accused applicant is the promoter of his
family group companies being operated under flagship of MCPL,
YCPL and RAB. These companies were used by him for layering and
parking proceeds of crime. He was controlling authority and the
decision maker. He is prime accused who with the help of Associates
devised the mode of fraud, conspiring with other accused to cheat
the bank in the manner explained in complaint. The proceeds of
crime has been siphoned off and laundered for concealment layering
through acquisition of properties. During the course of investigation,
it was revealed that while working as MD/CEO of YES Bank
applicant had connived with Kapil Wadhwan, Promoter of DHFL and
others to extend undue financial benefit to M/s. DHFL by YES Bank
and to get return undue benefit from Wadhwans for himself and
family through companies held by them. During April to June 2018
M/s. YES Bank invested Rs.3700 Crores in the short term debentures
of M/s. DHFL and simultaneously Kapil Wadhwan paid kick back of
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Rs.600 Crores under garb of loan to DOIT Urban Ventures (India)
Pvt. Ltd. The daughters of the applicant are 100% shareholder of
DOIT Private Limited through M/s. Morgan Credits Private Limited.
Loan of Rs. 600 Crores was sanctioned by M/s. DHFL to M/s. DOIT
Urban Venture India Private Limited, on the basis of mortgage of
substandard properties having meagre value and considering its
future conversion from agriculture land to residential land.
M/s.DHFL has not redeemed the amount of Rs.3700 Crores invested
by M/s. YES Bank in its debentures till date. M/s. YES Bank had also
sanctioned loan of 750 Crores to M/s. Belief Realtors one of RKW
Developers group of companies beneficially owned by Wadhawans
for its Bandra Reclamation Project but the whole amount was
siphoned off by Kapil Wadhawan and Dheeraj Wadhwan to
M/s.DHFL without making investment in Bandra Reclamation
Project. Investigation revealed that Wadhwans had criminally
conspired with applicant for illegal sanction of loans to their
respective entities.
12. According to complainant details of several companies
beneficially owned by the applicant and his family members were
collected. The accused are involved in diverting proceeds of crime
and layering, siphoning funds. The complaint refers to the chart of
flow of funds. The accused had fraudulently obtained and siphoned
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off crores of rupees by cheating and defrauding the YES Bank. The
investigation conducted so far reveals that total estimated proceed of
crime is to the tune of Rs. 5050 Crore (3700+600+750). The figure
has been disputed by the applicant. It is contended by the applicant
that Rs.600 Crores has been added once again. The complainant
further mention that the group of companies beneficially owned by
the applicant and his family members are controlled by Applicant.
The modus operandi devised by the applicant, with criminal intent
was to enjoy loan facility without providing proper collateral. The
said money being proceeds of crime was laundered by the applicant.
It is clearly established that the fund acquired by the accused
were obtained without proper collaterals and as per prescribed
requirement. The complainant also provides role played by each of
the accused in transaction. The complainant mentioned that during
the tenure of the applicant, YES Bank had extended loan to entity,
despite them incurring losses and having negative net worth. There
entities extended loans to the companies beneficially owned by
applicant. Applicant's family members having no substantial business
and on the basis of artificially inflated value of mortgage. During the
tenure of the applicant with YES Bank, amount of 750 Crores was
sanctioned to M/s. Belief Realtors Pvt. Ltd. which is one of the group
company of RKW adventure. The proceeds of crime were Rs.5050
G. Lokhande & D.Ethape 21 of 28 ba-1999-2020.doc
Crores. The applicant was the founder of DOIT Urban Ventures.
Findings of the investigating agency were that huge economic
scam was brewing since many years in YES Bank during the tenure
of the applicant. It came to notice that there was poor credit
culture, poor compliance culture, centralization of power and lack of
institutionalization prevailing in YES Bank.
13. The statement of witnesses shows the complicity of the
applicant in the crime. Further investigation was conducted and
supplementary complaint has been filed before the competent Court.
The supplementary complaint also discloses great details as to how
the accused have indulged in the alleged acts. The findings of the
further investigation as reflected in the supplementary complaint and
the documents therein indicate that huge economic scam was
brewing in YES Bank and DHFL. The perpetrators of scam in YES
Bank was the applicant and in DHFL, they were Kapil Wadhawan
and Dheeraj Wadhawan. Effective and honest governance of
banks/financial institutions is critical to proper functioning of the
banking sector and the economy as a whole. The applicant while
working as MD/CEO of the YES Bank had connived with the co-
accused with intention to extend undue financial benefit to M/s.
DHFL by YES Bank and to get in return benefits from DHFL for
himself and his family through companies held by them. Yes Bank
G. Lokhande & D.Ethape 22 of 28 ba-1999-2020.doc
had brought debentures worth Rs. 3700 Crore between April 2018 to
June 2018 from DHFL and DHFL gave loan of Rs.600 Crore to DOIT
which is beneficially owned by applicant and his family. The
applicant's family member had majority shareholding and all
financial transactions were handled by applicant. it was noticed that
there companies were not operating and used for siphoning off
illegally obtained money i.e. proceeds of crime by the applicant.
14. The case of the complainant is that M/s.DUVPL is a
company beneficially owned by the applicant through his daughters.
The applicant entered into conspiracy with Kapil Wadhawan and
Dheeraj Wadhawan. YES Bank extended loan to entity despite
incurring losses. These entities extended loan to company owned by
the applicant, applicant's family members having no business which
indicate the case of the Quid pro quo. According to the complainant
there was no active or operating business in M/s. DUVPL at the time
of proposal of loan. The loan proposal had been approved by DHFL
on the basis of substandard properties furnish as security by DUVPL a
company owned by daughters of applicant. The said company has no
business activity and not generating any revenue. The applicant and
Promoter/Director of DHFL conspired to get sanctioned loan to the
respective entities from YES Bank and DHFL respectively. The
Applicant was the person on ground interacting with Wadhawans.
G. Lokhande & D.Ethape 23 of 28 ba-1999-2020.doc
During the course of investigation, it was revealed that loan of
Rs.7500 Crores disbursed by YES Bank to M/s. Belief Realtors Private
Limited. It was not utilized for the purpose to which is sanctioned.
The proceeds of crime according to complainant involved in this case
is Rs.5050 Crores. It is also revealed that the applicant had siphoned
off huge amount out of India through his family/group owned
controlled companies. It is found that out of the proceeds of crime
of Rs.600 Crores, Rs.378 Crores were invested overseas. The
investigation in relation to exact foreign proceeds of crime is still
under investigation. The applicant and his family members have
incorporated or beneficially interest in various companies. The
applicant is desperately trying to dispose of his property. He has
given online advertisement for sale of his London based property.
The said property is attached by ED vide provisional attachment
order dated 25th September 2020 being proceeds of crime in terms of
Section 2 (1) (u) of PMLA Act. According to complainant if the
applicant is released on bail, he will try to sell that property. Further
investigation is still in progress.
15. The offence is of serious nature. There is voluminous
evidence showing involvement of the applicant in the crime. In the
light of nature of evidence, no case for grant of bail is made out. It is
settled law that while granting bail the Court has to keeping in mind
G. Lokhande & D.Ethape 24 of 28 ba-1999-2020.doc
the nature of accusations, evidence in support thereof. Huge loss of
public fund is required to be viewed seriously. The Special Court
under PMLA has analysed the material on record. In paragraph 23 of
the order rejecting bail the following observations were made which
is worth noting.
"There are allegations that applicant/accused has
accepted kickback from DHFL & those kickback amounts
have been utilized by applicant/accused for acquiring
properties overseas and thereby applicant/accused
knowingly indulged in laundering the proceeds of crime
to the tune of Rs.5050 Crores by committing scheduled
offences in collusion with Kapil Wadhawan and Dheeraj
Wadhawan. Allegations in complaint are prima facie
supported by the statements of applicant/accused, his
family members and other witnesses recorded under
Section 50 of PML Act. Considering the said material and
definition of proceeds of crime, I could not find any force
in the argument of learned advocate for
applicant/accused, at least at this stage, that amounts
allegedly received by the applicant/accused cannot be
termed as kickback amounts because, there are
allegations that the valuation of the mortgaged properties
offered as securities by DUVPL to DHFL was much less
than the actual loan amounts & as such, adequate
securities were obtained. Having regards to those aspects,
this court is of the opinion that the allegations made in
complaint are prima-facie sufficient for accepting that
applicant/accused is indulged in commission of offence
under Section 3 of Prevention of Money Laundering
which is punishable under Section 4 of the said Act."
16. I do not find any reason to deviate from the said
observation. The applicant being MD/CEO of YES Bank has allegedly
misused his position to gain undue financial gain to him and his
G. Lokhande & D.Ethape 25 of 28 ba-1999-2020.doc
family members. The applicant and his family earned beneficial. The
statement of witnesses shows the modus operandi of the accused.
Investigation revealed that YES Bank extended loans to entities
despite incurring losses. These entities extended loan to company
owned by family members of applicant. There was no active or
operating business in DUVPL. The loan proposal was approved by
DHFL on the basis of standard properties furnished as security by
DUVPL, a company owned by daughters of applicant. DUVPL has no
business activity and not generating revenue. Investigation revealed
that money was laundered to buy properties at several places in
India and abroad.
17. There are specific allegations against applicant that he
has gained financial benefits. The submissions urged by applicant is
in the nature of defense. It cannot be disputed that money lying with
YES Bank is public Money.
18. The Trial Court has also dealt with ground of ill-health
of the applicant. In reply filed by respondent, it is stated that medical
documents enclosed with bail application pertain to period prior to
arrest of the accused. He has been repeatedly examined during
custody with complainant and no such findings were found in the
reports of doctors who examined him. Certain documents submitted
by applicant are merely obtained certificates and not medical
G. Lokhande & D.Ethape 26 of 28 ba-1999-2020.doc
certificates in proper sense as respective doctors have not actually
examined applicant. Out of the certificate annexed to application is
issued on request of his wife.
19. It is settled law that, the Court has to take into
consideration nature of accusations, evidence in support, severity of
punishment which conviction will entail, reasonable apprehension of
witnesses being tampered with larger interest of public/state. It is
also settled law that economic loss of public offences involving huge
funds to be viewed seriously.
20. Learned counsel for applicant had urged that the test
enumerated in the decision of P. Chidambaram's case be applied in
this case. Paragraph 23 of said decision reads as follows: -
"Thus from cumulative perusal of the judgments cited on
either side including the one rendered by the
Constitution Bench of this Court, it could be deduced that
the basic jurisprudence relating to bail remains the same
in as much as the grant of bail is the rule and refusal is
the exception so as to ensure that the accused has the
opportunity of securing fair trial. However, while
considering the same the gravity of the offence is an
aspect which is required to be kept in view by the Court.
The gravity for the said purpose will have to be gathered
from the facts and circumstances arising in each case.
Keeping in view the consequences that would befall on
the society in cases of financial irregularities, it has been
held that even economic offences would fall under the
category of "grave offence" and in such circumstance
while considering the application for bail in such matters,
the Court will have to deal with the same, being sensitive
G. Lokhande & D.Ethape 27 of 28 ba-1999-2020.doc
to the nature of allegation made against the accused. One
of the circumstances to consider the gravity of the
offence is also the term of sentence that is prescribed for
the offence the accused is alleged to have committed.
Such consideration with regard to the gravity of offence
is a factor which is in addition to the triple test or the
tripod test that would be normally applied. In that regard
what is also to be kept in perspective is that even if the
allegation is one of grave economic offence, it is not a
rule that bail should be denied in every case since there is
no such bar created in the relevant enactment passed by
the legislature nor does the bail jurisprudence provides
so. Therefore, the underlining conclusion is that
irrespective of nature and gravity of change, the
precedent of another case alone will not be the basis for
either grant or refusal of bail though it may have a
bearing on principle. But ultimately the consideration
will have to be on case to case basis on the facts involved
therein and securing the presence of the accused to stand
trial."
Thus, even in this case it was observed that gravity of
the offence is an aspect which is required to be kept in view by
Court.
21. In the facts of the case, considering the magnitude of the
offence, I am not inclined to grant bail in the present case. On the
basis of evidence on record no case for grant of bail is made out.
Order of this Court in Sameer Bhujbal case is under challenge before
Apex Court. Apparently, there is no stay. The order of Delhi High
Court is under challenge before Apex Court. Since, considering
gravity and magnitude of offence, I am not inclined to grant bail, it is
not necessary to adjudicate on the issue of Amendment to Section 45
G. Lokhande & D.Ethape 28 of 28 ba-1999-2020.doc
of PMLA. Considering the observations herein above, the application
deserves to be rejected.
ORDER
(i) Criminal Bail Application No.4999 of 2020, is rejected.
(ii) The Jail Authority shall provide appropriate medical treatment to the applicant.
(PRAKASH D. NAIK, J.)