Gujarat High Court
Sumit Suresh Bhatnagar vs Centrl Bureau Of Investigation on 24 August, 2018
Author: J.B.Pardiwala
Bench: J.B.Pardiwala
R/CR.MA/14891/2018 ORDER
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/CRIMINAL MISC.APPLICATION NO. 14891 of 2018
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SUMIT SURESH BHATNAGAR
Versus
CENTRL BUREAU OF INVESTIGATION
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Appearance:
MR VIRAT G POPAT(3710) for the PETITIONER(s) No. 1
KSHITIJ M AMIN(7572) for the RESPONDENT(s) No. 1
MR RC KODEKAR(1395) for the RESPONDENT(s) No. 1
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CORAM: HONOURABLE MR.JUSTICE J.B.PARDIWALA
Date : 24/08/2018
ORAL ORDER
1. This is an application at the instance of an accused for regular bail in connection with the R.C. No.-RC0292018A0006 dated 26.03.2018 registered with the CBI/ACB-Gandhinagar.
2. In the past, the applicant had come before this Court praying for bail, but as the investigation was in progress, I declined to entertain the bail application. In such circumstances, the application was not pressed with a liberty to file a fresh application after filing of the charge-sheet.
3. On the investigation being completed and filing of the charge-sheet, the applicant preferred a fresh bail application before the court below, which came to be rejected. In such circumstances, the applicant is, once again, here before this Court with the prayer that he may be released on bail, subject to the terms and conditions.
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4. The case of the prosecution and the allegations levelled against the applicant-accused, as stated in the charge-sheet, is as under;
"16.1 That, Central Bureau of investigation (CBl), ACB, Gandhinagar had registered the instant Criminal Case No. RC.0292018A0006 dated 26.03.2018 on the basis of source information against S/Shri Suresh Narain Bhatnagar, Amit Suresh Bhatnagar and Sumit Suresh Bhatnagar who are also the Managing Director and Joint Managing Director respectively of M/s DPIL and unknown public servants of Bank of India u/s. 120-8, 420, 467, 468 & 471 of IPC and sections 13(2) r/w. 13(1)(d) of PC Act. 1988.
Allegations in brief, as per FIR:
16.2 it is alleged that Mls. Diamond Power infrastructure Limited (DPIL), promoted by Shri Suresh Narain Bhatnagar and his two sons, S/Shri Amit Bhatnagar and Sumit Bhatnagar who are also the Managing Director and Joint Managing Director respectively of DPlL, was engaged in the manufacture of cables and other electrical equipment.
16.3 It is alleged that M/s. DPIL, through its management, has fraudulently availed Credit Facilities from a Consortium of 11 Banks (Public Sector and Private Sector) since 2008, leaving behind an outstanding debit of Rs. 2654.40 Crores as on 29.06.2016. 16.4 it is further alleged that the company and its Directors managed to get the term loans and Credit facilities, in spite of the fact that they were already appearing in the RBI's Defaulters List and ECGC Caution List at the time of initial sanction of Credit Limits by the Consortium. 16.5 It is further alleged that at the time of formation of Consortium in 2008, Axis Bank was the Lead bank for the Term Loan and Bank of India was the Lead bank for CC Limits.
16.6 It is further alleged that the present exposure of credit Facilities from various Member Banks availed by the company, is as under:
Sr. No. Name of Banks Overall Exposure
(Rs. In Crores)
1 Bank of India 670.51
2 Bank of India 348.99
3 ICICI Bank 279.46
4 Allahabad Bank 227.96
5 Axis Bank 255.32
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R/CR.MA/14891/2018 ORDER
6 Dena Bank 177.19
7 SBI 266.37
8 IOB 71.59
9 IFCI 58.53
10 EXIM Bank of India 81.92
11,. Corporation Bank 109.12
12 Corporation Bank-NCD 8.22
13 Dena Bank Employee Pension Fund- 9.24
NCD
14 Dena Bank Employee Gratuity Fund- 4.11
NCD
15 Tata Capital Financial Services Limited- 19.9
NCD
16 L&T Finance Limited-NCD 35.24
17 Bank of Maharashtra-NCD 11.87
18 Syndicate Bank-NCD 11.26
19 CSEB Gratuity & Pension Fund Trust- 7.6
NCD
Total 2654.4
16.7 it is further alleged that the company, with the active connivance of officials from various Banks has managed to obtain enhancement in Credit facilities. During the year 2011 when M/s. DPIL had projected turnover of Rs.2197.60 Crores for the year 2012 whereas the actual turnover was Rs.1267.60 Crores only for the year 2011 and and thereof M/s. DPIL go the Credit facilities enhanced from Rs.285 Crores to Rs.480 Crores. In the next year, against the estimates of Rs.2197.60 crores, M/s. DPIL actually achieved a turnover of Rs.1740.38 Crores as on 31.03.2012, which was less by Rs.457.22 Crores from the projected turnover figure, in spite of fact that the CC limit was fully availed by the company. In spite of consistent failure to achieve the inflated figures of estimates, the Bank of India officials while conducting the credit review, did not decrease the cash credit limit, but kept it unchanged at Rs.480 crores even though such figures were based on grossly exaggerated sales figures.
16.8 It is further alleged that M/s. DPIL was submitting Page 3 of 10 R/CR.MA/14891/2018 ORDER false stock statements to the lead Bank by treating the receivables more than 180 days (Non-Current Asset) to less than 180 days (Current Asset) to get more drawing power in their Cash Credit Accounts. The receivables were also dated from the date of payment instead of the date of invoice, as are required by the banking guidelines. In this manner, M/s. DPlL had fraudulently shown higher net working capital indicating their cushion to take up higher working capital exposure.
16.9 It is also alleged that M/s DPIL had extensively utilized the Cash Credit limits for obtaining large number of Letter of Credits and many of which could not be honoured by the company and were thus forced charged on the Credit limit. It is learnt that since 2008, about 1000 such LCs issued by Bank of India alone devolved, which included at least 16 LCs amounting to Rs.110.79 Crores issued in the name of M/s. Ruby Cables (Sister Concern of M/s. DPIL). These LCs in favour of sister concerns were issued by bank officials in gross violation of bank's guidelines in order to give undue pecuniary favour to the borrowers.
16.10 It is also alleged that M/s.DPIL had invested an amount of Rs. 16.70 Crores in Group Companies out of the CC Limit, which was not as per the terms of sanction. Similarly, interest free loans amounting to Rs. 32.96 Crores were given to group related parties without any supporting documents and against the terms of the sanction of CC Limits. Thereby M/s. DPIL was able to fraudulently divert the bank funds.
16.11 It is alleged that the account of company started becoming overdue in 2014 and this was first reported under SMA2 by ICE, Exim Bank and State Bank of Hyderabad on 01.12.2014. Thereafter, Joint Lending Forum (JLF) of the consortium banks was created on 02.01.2015. For restructuring the account, JLF decided for restructuring under Corrective Action Plan (CAP) by way of restructuring under Corporate Debt Restructuring (CDR). At this stage Bank of India was made Lead bank for all types of loans. Accordingly accounts were restructured on 31.03.2015.
Page 4 of 10R/CR.MA/14891/2018 ORDER 16.12 It is further alleged that in. the meantime, the
accounts of M/s. DPIL in Bank of India and Bank of Baroda were declared NPA on 16.02.2016 (w.e.f. 9.1.2015) by RBI based on Asset Quality Report conducted by RBI. The accounts of the company with other banks were declared NPA from December, 2017.
16.13. It is further alleged that, as the CDR could not succeed, JLF decided for Strategic Debt Restructuring (SDR) Scheme, with reference date as 29.6.2016. Under this outstanding loan of Rs. 828.42 Crores was converted into equity at the rate of Rs.41.28 per share and were distributed between the consortium members. At this stage, JLF directed the borrower to deposit all receivables in Trust and Retention Account (TRA) with Bank of India, of which 2% was to be deducted towards the outstanding. However, with the intention to cheat the banks, M/s.DPIL opened accounts with banks outside consortium like Kotak Mahindra bank, HDFC Bank and Karur Vysya Bank, where it received the realization of the receivables which should have been repaid to the banks to clear their outstanding dues. It is alleged that M/s.DPlL has diverted funds through these accounts with other Banks, which are not part of consortium, to the tune of about Rs. 70 Crores.
16.14. It is also alleged that DGGSTI, Vadodara has issued a Show Cause Notices to M/s. DPIL and its group companies, who had fraudulently availed CENVAT Credit, out of which such claims of M/s DPIL itself are to the tune of Rs. 100.80 Crores till 2013 by submitting bogus purchase invoices against which no material was received. This shows fictitious purchase figures of about Rs. 500 Crores were used to avail these CENVET credits as well as huge working capital facilities from Banks. In this manner, M/s. DPIL has also cheated Govt. of India to the tune of Rs. 100.80 Crores by fraudulently claiming CENVAT Credit. This also showed the fraudulent manner in which M/s. DPIL used to falsify their books of accounts.
16.15. It is alleged that due to the diversion of the CC limits by the Borrower Company, by using different Page 5 of 10 R/CR.MA/14891/2018 ORDER manipulative methods, few of which are mentioned above, out of the total securities with present worth of Rs.1418.83 crores, the present value of the Stock is only Rs.338.44 crores. Thus, the underlying securities are grossly inadequate to cover the outstanding dues of the consortium of banks amounting to Rs.2654.40 Crores.
16.16 About Accused Persons:
(I) M/s Diamond Power Infrastructure Ltd.: M/s.
Diamond Cables Private Limited was incorporated in the year 1992 and was subsequently converted into a limited company in the year 1993-94 and renamed as M/s. Diamond Cables Limited. Subsequently, in the year October, 2007, the company was renamed as M/s Diamond Power Infrastructure Limited, wherein accused Sh. Suresh Bhatnagar, Sh. Amit Bhatnagar and Sh. Sumit Bhatnagar were whole time Directors and all the fraudulent transactions were carried out in the company by or on the instructions of these directors only. M/s. Diamond Cables Limited had defaulted on its loans taken from a consortium of banks and was figuring in the Defaulter's List maintained by Reserve Bank of India on the basis of inputs received from the banks. M/s. Diamond Cables Limited had entered into one time settlement against this default by agreeing to pay Rs. 52.61 Crores as well as assigning the receivables to the tune of Rs. 33.00 Crores to the earlier lenders against the outstanding defaulted loan amount of Rs. 130.31 Crores. In the year 2007, it again approached another set of banks for fresh working capital limits. Apart from this, company also availed term loan from the consortium of banks.
(ii) Shri Suresh Narain Bhatnagar S/o Shri Luvkush Narain Verma: He is the founder of M/s. Diamond Cables Private Limited, formed in, 1992 which subsequently became a limited company and was named as M/s. Diamond Cables Limited and subsequently, renamed as M/s Diamond Power Infrastructure Ltd. (DPIL) in the year 2007. After settling its earlier dues with the earlier lending banks, where the company had earlier became defaulter and had gone for one time settlement, the company M/s DPIL had approached for fresh lending for working capitals from Banks comprising of Bank of India, Page 6 of 10 R/CR.MA/14891/2018 ORDER Bank of Baroda, lClCI and Axis Bank. Sh. Suresh Narain Bhatnagar was holding the post of Chairman and Managing Director at the time of requesting of fresh lending. He had provided his personal guarantee for availing the credit facilities amounting to a total of Rs. 178 Crores. He was a part of the Board of M/s DPIL and involved in the decision making activity of the company during the relevant period.
(iii) Shri Amit Suresh Bhatnagar slo Shri Suresh Narain Bhatnagar: He was the Director of M/s Amit Associates which was converted into M/s Diamond Projects Ltd. in 1993-94. M/s Diamond Projects Ltd. was supplier of cables' manufacturing machines throughout India. He was earlier Joint Managing Director of M/s. Diamond Power Infrastructure Limited and became Managing Director in the year 2010. At the time of availing working capital limits during the year 2008 from banks including Bank of India, he had provided his personal guarantee for the purpose of availing loans. He was one of the signatories in the banking transactions. He was also found to be responsible for the fraudulent transactions as elaborated in the subsequent paragraphs. He is also director in M/s Diamond Power Transmission Ltd, M/s Apex Power Equipments Pvt. Ltd., M/s Maktel Control & Systems Pvt. Ltd., M/s Diamond Power Transformers Ltd., M/s Maktel Power Ltd., M/s Diamond Projects Ltd. and M/s Madhuri Finserve Private Ltd.
(iv) Shri Sumit Suresh Bhatnagar slo Shri Suresh Narain Bhatnagar: He is also the Jt. Managing Director, M/s Diamond Power Infrastructure Limited (DPIL). He was also the Managing Director in M/s Diamond Infosystems Ltd. At the time of availing working capital limits from Bank of India during initial sanction in 2008, he had provided his personal guarantee. He was one of the signatories in the banking transactions. He was also found to be responsible for the fraudulent transactions as elaborated in the subsequent paragraphs. He was the director in M/s Diamond Power Transmission Ltd, M/s Apex Power Equipments Pvt. Ltd., M/s Maktel Control & Systems Pvt. Ltd., M/s Diamond Power Transformers Ltd., M/s. Maktel Power Ltd., M/s Diamond Projects Ltd. and M/s Madhuri Finserve Private Ltd.
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(v) Shri Vijay Venkatesh Agnihotri, the then AGM, Zonal Office, Bank of India, Vadodara: Sh. Vijay Venkatesh Agnihotri joined Bank of India as a Direct Recruit Officer in the: year 1975. He» was posted as the Asst. General Manager in the zonal office of the bank at Vadodara in the year 2008-09. He retired from the bank as GM in the year 2013. He had recommended the proposal of DPIL for sanction of working capital limits despite of the company being ineligible for fresh lending as per the Bank's NPA Management Policy.
(vi) Sh. Pradip Kumar Srivastava, the then DGM & Zonal Head, Zonal Office, Bank of India, Vadodara: He joined as Probationary Officer with Bank of India in 1975. He remained posted as DGM & Zonal Head of Bank of India at Vadodara during 2007-08. He retired in the year 2012.
(vii) Shri Chirag Nemchand Gada, Director of M/s Ruby Cables Ltd.: He is Managing Director of M/s. Ruby Cables Ltd. since 13.10.2015 till date. He had joined this company as Addl. Director on 31.07.2010 and became Director on 29.09.2012.
(viii) Shri Niraj Kaniyalal Sheth, Asstt. Officer, Finance Department, M/s DPIL: He had joined M/s. DPIL in the year 21.07.2008 as Asst. Officer and was working with the company in the same capacity at the relevant period."
5. This application was heard by me on 24th August, 2018. The same was kept for orders.
6. In the course of the hearing of this bail application, it was brought to my notice that the brother of the applicant herein, namely, Amit Suresh Bhatnagar is also one of the accused persons, against whom, charge-sheet has been filed. The allegations against both the brothers are the same. In fact, both the brothers are the directors of the Company. However, the bail application filed by the brother of the applicant herein is being heard by a Coordinate Bench. It is brought to my Page 8 of 10 R/CR.MA/14891/2018 ORDER notice that the Coordinate Bench passed the following order dated 18th July, 2018 in the Criminal Misc. Application No.11793 of 2018 filed by the brother of the applicant-accused herein.
"Mr. Virat Popat, learned advocate for the applicant places on record documents indicating that the properties which are running in the name of the Company in which the present applicant is a Director and it is capable of clearing the entire loan amount. The same is ordered to be taken on record.
In view of the above, Mr. R.C.Kodekar, learned Standing Counsel for respondent no.1CBI, is directed to see the modalities, in order to clear the entire loan amount as early as possible by way of sale of the properties in presence of the learned advocate and representatives of the applicant as well as officials of lead Bank, are worked out expeditiously.
The modalities shall be worked out in consultancy with a responsible officer of the lead Bank and may be submitted to this Court on the next date of hearing. In case, if the Investigating Officer is in need to consult with the accused, he shall be at liberty to meet him in jail for consultation.
The copy of this order may be made available to the learned Standing Counsel for CBI, learned APP for the State and Investigating Officer as well as lead Bank.
Stand over to 14.08.2018."
7. Thus, two different courts are hearing two bail applications arising from a common charge-sheet. As pointed out above, the two applicants are brothers and directors of the Company. The case of the prosecution, and the allegations against both, remain the same.
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8. I am conscious of the fact that as the applicant herein had earlier not pressed the bail application before this Court, this being a successive bail application filed upon filing of the charge-sheet, it has to be heard by this Court itself. However, in the peculiar facts and circumstances of the case, I am of the view that it would not be appropriate for me to hear this bail application as the Coordinate Bench, taking up regular bail matters, is hearing the bail application of the brother of the applicant on the same set of evidence and allegations. This, perhaps, may lead to conflict in the orders. In such circumstances, I am of the view that let an appropriate submission be placed before the Hon'ble the Chief Justice in this regard, and subject to the orders passed by the Hon'ble the Chief Justice, this application shall be heard by a particular Court. Registry to act accordingly.
(J.B.PARDIWALA, J) Vahid Page 10 of 10