Interim Order 20

Order Details: COPY OF ORDER
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In the Court of Sh. Ashwani Kumar Sarpal, Special Judge
(P.C. Act), CBI-08, Rouse Avenue Court, New Delhi.
CT No. 21/2023
Directorate of Enforcement
vs.
M/s Raj Fibres Pvt. Ltd. & Others
ECIR no. ECIR/DLZO/302/2009
************
20.05.2024.
ORDER:-
1) Hon’ble Supreme Court discussed the law relating to framing of
charge in cases State of Karnataka vs. L. Muniswamy (1977) 2
SCC 699, Union of India vs. Prafulla Kumar (1979) 3 SCC 4,
State of M.P. vs. Mohanlal Soni (2000) 6 SCC 338, Kanti
Bhadra Shah vs. State of West Bengal 2000 (1) SCC 722,
Sajjan Kumar vs. CBI (2010) 9 SCC 368, Sheoraj Singh
Ahlawat vs. State of U.P. (2013) 11 SCC 476, wherein it is held
that at the stage of framing of the charge, the court has to apply
its mind to the question whether or not, there is any ground for
presuming the commission of offence by the accused and the
court has to see as to whether the material brought on record
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could reasonably connect the accused with the trial. Nothing
more is required to be inquired into. Truth, veracity and effect
of the evidence which the prosecutor proposes to adduce are not
to be meticulously judged. The standard of test, proof and
judgment which is to be applied finally before finding the
accused guilty or otherwise, is not exactly to be applied at the
stage of framing of charge under Section 227 or 228 Cr.P.C. At
the stage of framing of charge, the court has to prima facie
consider whether there is sufficient ground for proceeding
against the accused. The court is not required to appreciate
evidence to conclude whether the materials produced are
sufficient or not for convicting the accused. The charges can be
framed on the basis of strong suspicion. Marshaling and
appreciation of evidence is not in the domain of the court at that
point of time. Magistrate is not required to analyze all the
materials including pros and cons, reliability or acceptability
etc. while framing of charge. It is at the trial, the court has to
appreciate the evidentiary value, credibility or otherwise of the
statements, veracity of various documents and then to take a
decision one way or another. At the time of framing of charge,
material brought by the prosecution on record must be believed
to be true and its probative value cannot be decided at this
stage. The accused is entitled to urge his contentions only on
material submitted by the prosecution. He is not entitled to
produce any of his material at this stage and the court is not
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required to consider any such material, if submitted. Whether
the prima facie case made out depends upon facts and
circumstances of each case.
2) Hon’ble Supreme Court in case Shashikant Sharma vs. State of
UP, 2023 SCC Online SC 1599 held that at the stage of framing
of charge, the court is not required to undertake a meticulous
evaluation of evidence and even grave suspicion is sufficient to
frame charge but if from the report under Section 173 Cr.P.C.
and the documents filed by the Investigating Officer, if the
necessary ingredients of an offence are not made out, then court
is not obliged to frame charge.
3) In cases Onkar Nath Mishra vs. State (2008) 2 SCC 561 and
State vs. S. Selvi (2018) 12 SCC 455, Hon’ble Supreme Court
held that court is not expected to go deep into the probative
value of the material on record but has to form a presumptive
opinion as to existence of factual ingredients constituting the
offence. For this purpose, court has power to sift and weigh the
evidence for the limited purpose of finding out whether or not a
prima facie case against the accused has been made out or not.
Where the material placed before the court discloses grave
suspicion against the accused which has not been properly
explained, the court will be justified in framing the charge.
However, if two views are possible and materials indicate mere
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suspicion but not grave suspicion against the accused, then he
may be discharged. The court has to consider broad
probabilities of case, total effect of evidence and documents
produced before it but it should not act as mouthpiece of
prosecution and it is impermissible to have roving inquiry at the
stage of framing of charge.
4) In State of MP vs. Mohan Lal Soni (2000) 6 SCC 338 it is held
that at the stage of framing of charge, court has only to prima
facie satisfied about the existence of sufficient ground for
proceeding against the accused. For this limited purpose, court
can evaluate material and documents on record but it cannot
appreciate the evidence to conclude whether the material
produced are sufficient or not for convicting the accused. If the
court is satisfied that a prima facie case is made out for
proceeding further, then a charge has to be framed but if such
evidence even if remains unrebutted cannot show that the
accused committed the particular offence, then the charge
cannot be framed.
5) Accused no. 1 is a company in which accused no. 3 & 4 are
now the directors and they are representing this company.
Accused no. 2 was also one of the directors of this company as
well as father of accused no. 3 and 4 but he has expired and
proceedings against him are already abated. Accused no. 5 is
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the brother of accused no. 3 and 4 and son of deceased accused
no. 2 and was also a proprietor of one firm M/s. M.S. Traders,
whereas accused no. 6 & 7 are the bank officers. All these
above mentioned accused persons allegedly committed offence
of Money Laundering as defined under Section 3 of the
Prevention of Money Laundering Act (PML Act) which is
punishable under Section 4 of this Act.
6) A complaint was filed by United Bank of India dated
04.06.2009 with the CBI for commission of offences of
cheating and forgery etc. CBI investigated the matter and filed
the chargesheet in the court. The trial of the said case ended in
the conviction of accused no. 2 to 7 (named in the present
complaint) and one Mr. Kailash Garg (who is one of the
witnesses in the present complaint) vide judgment passed by
Special Court dated 07.08.2015. Vide order dated 11.08.2015
they were awarded different terms of sentences. It is informed
by counsels for accused persons that appeal against conviction
and sentence has been filed by the accused persons in the
Hon’ble High Court but only sentence is suspended and not
their conviction. Thus, the commission of scheduled offences
by the accused persons is already established.
7) According to the complaint of United Bank of India dated
04.06.2009, accused no. 1 company availed credit facility of Rs.
2,95,000,00/- including the term loan for construction of shed
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and purchasing machinery worth Rs. 1,75,000,00/- from M/s.
G.M. Engineering Co. on the basis of forged documents on
20.06.2005. As per allegations, total sum of Rs. 1,71,48,600/-
was disbursed by bank, out of which major portion was
transferred in the fake bank account no. 512 opened in the name
of M/s. G.M. Engineering Co. in Andhra Bank, Overseas
Branch, Panipat in connivance with bank officials i.e. accused
no. 6 &7 and Kailash Garg, manager of accused no. 1 company.
Infact the real and actual firm M/s. G.M. Engineering Co.
owned by Sh. Pritam Singh had no concern with accused no. 1
company and was having no transaction with it. Thus, the funds
obtained from United Bank of India under term loan were
misutilised by the accused persons in conspiracy with each
other and most of this amount was withdrawn in cash or was
diverted to other accounts.
8) ED recorded ECIR on 16.12.2009 and carried out investigation
but the complaint was filed in the court only after 13½ years on
27.07.2023. Since, no limitation period is applicable in such
type of cases, so this complaint can be entertained. ED however
was able to attach movable or immovable properties belonging
to accused persons worth Rs. 8,96,724/- only.
9) At the request of accused persons, ED supplied the copy of list
of unrelied documents and material but refused to supply the
copy of ECIR as demanded. Counsel for accused no. 7 stated
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that ECIR copy can be withheld from the accused persons only
till the investigation is pending but once the investigation is
complete and the complaint is filed in the court, then the ECIR
copy has to be supplied. On this point as well as on point of
charge, I have heard counsel for both the parties and gone
through the record, case laws and written synopsis filed by
accused no. 6.
10) Hon’ble Supreme Court in para no. 456 to 459 of case Vijay
Madanlal Chowdhary vs. Union of India 2022 SCC Online SC
929 discussed and distinguished between ECIR and FIR. It is
held that ECIR is an internal document created by the
Enforcement Directorate before initiating penal action or
prosecution against the person involved with process or activity
connected with proceeds of crime. According to Hon’ble
Supreme Court, ECIR is not a statutory document nor there is
any provision in PML Act requiring authority to record ECIR or
to furnish copy thereof to the accused as is done in the Cr.P.C.
It is also held that supply of ECIR in every case to the accused
is not mandatory and mere fact that in some cases, ED has
furnished copy of the ECIR to the concerned person does not
mean that in every case, same procedure must be followed
because ECIR cannot be equated with an FIR which is
mandatorily required to be recorded and supplied to the accused
under Cr.P.C. Non supply of ECIR which is an internal
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document of ED cannot be cited as violation of constitutional
right of the accused.
11) Punjab & Haryana High Court also in case Pawan Insaa vs.
Directorate of Enforcement CRM-M no. 6378 of 2023 decided
on 10.04.2024 held that ECIR cannot be kept at the same
pedestal as an FIR as it is not registered under Cr.P.C. unlike
FIR which is mandatorily registered u/s 154 Cr.P.C. and
subsequently forwarded to the Illaqa Magistrate as per the
provisions of Section 157 of Cr.P.C. There exists no legal
obligation to provide a copy of ECIR to an accused and the
absence of such provision does not in any manner impinge upon
constitutional or statutory right of an accused. ECIR is an
administrative document prepared by the officers of ED and
precedes the stage of criminal prosecution and proceedings
against individuals involved in offence of money laundering
who are governed by special statute i.e. PML Act.
12) The law regarding supply of copy of ECIR to the accused is
already settled by the Hon’ble Supreme Court and thus, the
submission made by the counsel that ECIR can be withheld
only where investigation is pending has no force. No doubt, ED
cannot dispute the fact that in some cases, copy of the ECIR
was annexed with the complaint or was supplied to the accused
but it is not mandatory in each and every case and depends upon
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the entire discretion of the ED. Judgment of Vijay Madanlal’s
case nowhere made distinction about non supply of copy of
ECIR prior to filing of complaint or thereafter. Accordingly, the
request made by the accused persons for supply of copy of the
ECIR to them is declined.
13) As per allegations, accused no. 1 company through its directors
accused no. 2 (since deceased), accused no. 3 and 4 applied to
United Bank of India, Asaf Ali Road, Delhi for cash credit
account facility of Rs. 1,20,000,00/- and another term loan of
Rs. 1,75,000,00/- for construction of shed and purchase of
machinery. Alongwith their application, they also submitted
four fake cash receipts and one fake quotation of M/s G.M.
Engineering Co., Panipat showing details of machinery and its
rates. Accused no. 6, the then Chief Manager and accused no. 7,
the then Senior Manager of United Bank of India recommended
for grant of cash credit facility and term loan on 17.06.2005
which was finally sanctioned on 20.06.2005. The cash credit
account no. 18233 and term loan account no. 5330 were opened
in favour of accused no. 1 company in the United Bank of India.
14) Out of the term loan of Rs. 1,75,000,00/-, United Bank of India
actually disbursed an amount to the tune of Rs. 1,71,48,600/- in
the fake account no. 512 of M/s. G.M. Engineering Co. in
Andhra Bank, Panipat. Accused no. 1 gave an undated letter to
the bank making request for disbursement of first instalment
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and on 21.06.2005, sum of Rs. 8 lacs was transferred from the
term loan account no. 5330 to cash credit account no. 18233
and on the same day sum of Rs. 7 lacs was withdrawn from that
account through self cheque by accused no. 3. Sum of Rs.
1,39,26,000/- was transferred from the term loan account no.
5330 through DD in favour of fake company M/s. G.M.
Engineering Co., Panipat for purchase of machinery as per 4
quotations already submitted alongwith the application by the
accused no. 1 and those quotations submitted with the bank
were found forged because real M/s. G.M. Engineering Co.,
actually belonged to one Pritam Singh denied issuing of any
such quotation or having any dealing with accused no. 1
company. This DD of Rs. 1,39,26,000/- alongwith forwarding
letter dated 22.06.2005 was handed over to accused no. 3
instead of sending to M/s. G.M. Engineering Co. directly by the
United Bank of India. The forwarding letter was containing
directions to M/s. G.M. Engineering Co. to deliver the
machinery to accused no. 1 company and bill be raised jointly
in the name of the accused no. 1 and bank. However, the DD of
Rs. 1,39,26,000/- was deposited in fake account of M/s. G.M.
Engineering Co. maintained in Andhra Bank on 27.06.2005.
15) It was found during investigation that a fake account bearing
no. 512 in the name of M/s. G.M. Engineering Co. was opened
in Andhra Bank, Overseas Branch, Panipat by one Kailash Garg
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who was the manager of the accused no. 1 company but the
accused no. 5 was its authorized signatory. Said Kailash Garg is
shown as witness by ED in this complaint but was an accused in
CBI case and was convicted.
16) Further, sum of Rs. 18,16,950/- was disbursed on 21.07.2005
through DD out of term loan account no. 5330 favoring M/s.
G.M. Engineering Co. by bank for purchase of two diesel
generator sets. The margin money of Rs. 6,05,650/- paid by the
accused no. 1 through draft in favour of M/s. G.M. Engineering
Co. and both these drafts were deposited in the fake account of
M/s. G.M. Engineering Co. on 22.07.05 in Andhra Bank.
17) Rs. 70,000,00/- was transferred from the fake account of M/s.
G.M. Engineering Co. to the current account no. 3320 in the
name of M/s. M.S. Traders belonging to accused no. 5 who is
the brother of accused no. 3 and 4. Further Rs. 40,000,00/- was
transferred from account of M/s. G.M. Engineering Co. to the
account no. 3311 of M/s. Matu Ram Shiv Charan Das which
was the firm owned by accused no. 2 himself. Thereafter, Rs.
40 lacs which was transferred in the account of M/s. Matu Ram
Shiv Charan Das was again transferred in the account of M/s.
M.S. Traders on the same day. Both the accounts in the names
of M/s. M.S. Traders and M/s. Matu Ram Shiv Charan Das
were opened only on 19.03.2005 in the Oriental Bank of
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Commerce, Overseas branch, Panipat where account of accused
no. 1 company was operative. Thus, total sum of Rs.
1,38,90,000/- out of total disbursed term loan of Rs.
1,71,48,600/- was withdrawn in cash by means of self cheques
from account of M/s. M.S. Traders. It is alleged by ED that the
amount deposited in the bogus account of M/s. G.M.
Engineering Co. was siphoned of by accused no. 2 (since
deceased) and accused no. 3, 4 and 5 in conspiracy with each
other and accused no. 6 and 7 joined hands with them who
facilitated the commission of offence of money laundering.
18) According to the disbursement requirement, accused no. 1
company was to submit the bills to the bank to show the supply
of machinery and diesel generator sets but no such bills were
submitted and even accused no. 6 and 7 bank officials did not
ask for the same and thus facilitated in the commission of
offence as per ED allegations. The allegations are levelled
against accused no. 6 and 7 bank officials that they entered into
conspiracy with other accused persons and fraudulently
sanctioned cash credit limit of Rs. 1,20,000,00/- and term loan
of Rs. 1,75,000,00/- to the accused no. 1 company on the basis
of four fake bills and one fake quotation of M/s. G.M.
Engineering Co. and they were fully aware since beginning that
the accused no. 1 was not maintaining proper books like stock
register, production register, employment register etc. Accused
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no. 6 and 7 even accepted four fake cash receipts and one fake
quotations of M/s. G.M. Engineering Co. given at the time of
applying of term loan and they even did not ensure the end use
of funds. They allowed accused persons to misutilise the bank
funds to the tune of Rs. 1,73,38,600/- by violating the bank
norms. The draft meant for M/s. G.M. Engineering Co. was
given by accused no. 7 directly to accused no. 3 and they also
did not insist for submission of bills/invoices to show the proper
utilization of funds by accused no. 1. The disbursed amount was
siphoned of by the accused no. 1 company and its directors as
well as accused no. 5 by opening a fake account no. 512 in
Andhra Bank, Panipat in the name of M/s. G.M. Engineering
Co. through Kailash Garg who was none else but the Manager
of accused no. 1 company itself.
19) According to the complainant, sum of Rs. 1,71,48,600/-
received in the bogus account of M/s. G.M. Engineering Co. is
the proceeds of the crime. During investigation, ED collected
the copies of the record from the CBI, recorded the statement of
different persons including accused persons under Section 50 of
PMLA, ascertained the procedure for sanctioning and
disbursement of the loan to accused no. 1 etc. Complainant
United Bank of India which had given the loan was lateron
merged with Punjab National Bank, whereas Andhra Bank
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wherein the fake account of M/s. G.M. Engineering Co. was
opened merged with Union Bank.
20) M/s. G.M. Engineering Co. at the time of opening of fake
account bearing no. 512 in Andhra Bank through Kailash Garg
on 24.06.2005 declared its annual business income at Rs.
60,000/- only and the firm was described as engaged in the
business of sale and purchase of machines and its repairs.
However, three demand drafts worth Rs. 1,63,48,600/- were
credited in its account in the period of only one month from the
amount of term loan which was sanctioned to accused no. 1.
Sum of Rs. 50,000,00/- was withdrawn on seven occasions
either by Kailash Garg or accused no. 5 (who was the
authorized signatory) or both within the period of 1¼ months
through self cheques which were signed by account holder
Kailash Garg but endorsed by accused no. 5 on its back whereas
as per bank guidelines, the account holder himself has to sign
on front as well as on back side of the self cheque to show
endorsement. Ultimately, this account was closed on
23.12.2005. All these facts shows that this fake account was
opened only for a specific purpose of receipt, withdrawn and
transfer of the term loan amount obtained from bank by
committing fraud and fake documents.
21) The term loan was processed on 17.06.2005 whereas it was
sanctioned on 20.06.2005. Accused no. 7, the then senior
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Manager at pre-sanction stage had submitted the appraisal
report of accused no. 1 company on 16.06.2005 and reported
that stock of Rs. 1.05 Crore was lying in the factory premises
whereas accused no. 6 earlier had given contradictory report on
30.05.2005 that accused no. 1 company was not maintaining
stock, sales and employment register. Despite existence of these
two contradictory reports, accused no. 6 & 7 still in connivance
with other accused persons sanctioned the term loan and CC
loan and disbursed sum of Rs. 171.49 lacs for purchasing
machinery and construction within the period of about one
month which was mis-utilized by accused no. 1 company and
its directors. Accused no. 6 and 7 bank officials did not verify
the quotations and other documents submitted by accused no. 1
company and sanctioned the credit limit without securing
interest of the bank. Accused no. 6 himself had introduced the
loan account of accused no. 1 which was processed and
recommended by accused no. 7 against the General Banking
Principles. The huge part of the sanctioned amount was
disbursed in one go within three days of issuing sanction letter
dated 20.06.2005 instead of in phased manner according to the
progress of procurement of machinery and construction in
undue haste and without ensuring compliance of General
Banking procedures. Even no original bills to support the
purchase of machinery were taken from the accused no. 1
company. They even committed default in verifying the
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quotations submitted by accused no. 1 and assisted the directors
of accused no. 1 in acquisition of proceeds of the crime to the
tune of Rs. 1,71,48,600/-. The appraisal form signed by accused
no. 7 in fact containing the handwriting of accused no. 4 and he
could not give any explanation about it which leads to the
conclusion that there was a connivance between accused no. 7
and the directors of accused no. 1 in order to cheat United Bank
of India. The same allegations of non-verification of quotations,
non-following of the proper guidelines of the bank and not
ensuring the end use of the funds etc. as levelled against
accused no. 6 were also levelled against accused no. 7.
22) ED in its complaint relied upon the statements even of the
accused persons recorded under Section 50 of PMLA. Kailash
Garg who was convicted in CBI case is now witness of this
complaint who informed that he had signed certain documents
regarding his proprietorship of M/s. G.M. Engineering Co. on
the directions of accused no. 2 to 5 and they also got his
signatures on certain blank cheques by misleading him. Kailash
Garg showed ignorance about issuing of any quotations by M/s.
G.M. Engineering Co. The conclusion arrived at by the ED after
investigation is that the accused no. 2, 3, 4 were the directors
and responsible for day to day activities of accused no. 1
company and the sum of Rs. 1,71,48,600/- was disbursed in the
fake account of M/s. G.M. Engineering Co. in Andhra Bank,
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Panipat for the purpose of purchase of machinery and generator
set and ultimately was misappropriated and siphoned of through
either M/s. M.S. Traders belonging to accused no. 5 or M/s.
Matu Ram Shiv Charan Das belonging to accused no. 2. Out of
this amount, sum of Rs. 142.4 lakhs was withdrawn in cash and
the remaining Rs. 31.05 lakhs was used for business purpose of
accused no. 1 company.
23) Section 2 (1) (u) of PML Act defines ‘proceeds of crime’,
whereas Section 3 define offence of Money Laundering. As per
Section 3 whosoever directly or indirectly attempts to indulge
or knowingly assist or knowingly is a party or is actually
involved in any process or activity connected with the proceeds
of crime including its concealment, possession, acquisition or
use and projecting or claiming it as untainted property shall be
guilty of offence of Money Laundering. Section 4 prescribe the
punishment for this offence.
24) Hon’ble Supreme Court in Y. Balaji vs. Karthik Desari SLP
(Crl.) no. 12779-81 of year 2022 decided on 16-5-2023
beautifully discussed about the scope and purview of Section 3
of PML Act in para no. 96 as under;
“If the main part of Section 3 is dissected with forensic
precision, it will be clear that Section 3 addresses itself
to three things (we may call them 3 ‘P’s), (i) person;
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(ii) process or activity; and (iii) product. Insofar as
persons covered by Section 3 are concerned, they are
(i) those who directly or indirectly attempt to indulge;
or (ii) whose who knowingly assists; or (iii) those who
are knowingly a party; or (iv) those who are actually
involved. Insofar as process is concerned, the Section
identifies six different activities, namely (i)
concealment; (ii) possession; (iii) acquisition; (iv) use;
(v) projecting; or (vi) claiming as untainted property,
any one of which is sufficient to constitute the offence.
Insofar as product is concerned, Section 3 identifies
‘proceeds of crime’ or the property representing the
proceeds of crime as the product of the process or
activity.
25) Record shows that account of accused no. 1 was opened
Oriental Bank of Commerce, Panipat on 14.02.2006 and closed
on 02.02.2006 whereas both accounts of M/s. M.S. Traders firm
belonging to accused no. 5 and of M/s. Matu Ram Shiv Charan
Das belonging to deceased accused no. 2 were also opened in
the same branch on 19.03.2005 and closed on 02.02.2006. The
statements of accounts lying on record pertaining to M/s. M.S.
Traders and M/s. Matu Ram Shiv Charan Das shows that these
accounts were opened only for the purposes of receiving,
transferring and withdrawing the loan amount taken from the
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complainant bank and bank entries of both these accounts
nowhere shows any other substantial entries relating to their
business activities. Thus, it is clear that bank accounts of M/s.
M.S. Traders and M/s. Matu Ram Shiv Charan Das were
specifically used for purpose of siphoning of the cheated
amount. Above facts and circumstances show that accused no. 1
company through its directors accused no. 2 (since deceased)
and accused no. 3 and 4 obtained term loan from complainant
bank by submitting forged and fabricated documents and
thereafter firstly it was got transferred in the fake account of
M/s. G.M. Engineering Co. and subsequently in M/s. M.S.
Traders and M/s. Matu Ram Shiv Charan Das accounts. Atlast
the amount lying in M/s. Matu Ram Shiv Charan Das was also
transferred to the account of M/s. M.S. Traders from where it
was withdrawn either in cash and misutilised. The amount was
obtained from complainant bank on the basis of forged
documents and by playing fraud upon it. The arguments
advanced that in respect of total liability of Rs. 1,71,28,600/-
against accused no. 1 company, complainant bank without filing
any suit settled at Rs. 2.05 crores out of which it has already
recovered Rs. 2.01 crores, the loan account smoothly continued
till year 2009 and bank received regular interest from accused
no. 1 company, security given to complainant bank was much
higher than loan amount, bank carried out regular post sanction
inspections and did not find any problem for few years, or it
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was purely a civil liability, accused were not convicted for
offence of cheating by CBI court, complainant and other banks
gave favourable reports of A+ borrower to accused no. 1
company on some occasions and PNB also gave loan facility to
this company which was repaid, certain contradictory unrelied
record if compared with the CBI record etc. are of no
consequence. Counsel for accused no. 1, 2 to 5 referred to
certain evidence portion of CBI case and raised certain issues
such as machinery was purchased, no complaint by Kailash
Garg against accused persons for misusing him for opening
bank account etc. which are relating to defence and are to be
proved so the same cannot be considered at this stage. Thus, a
clearcut prima facie case u/s 4 read with Section 3 of PML Act
is made out against accused no. 1 company and accused no. 3 to
5 for framing charge at this stage.
26) ED is only alleging that accused no. 6 and 7 knowingly assisted
the other accused persons for misutilising the proceeds of crime
obtained through cheating and fraud from complainant bank. It
is not the case of the complainant that accused no. 6 who was
working as Chief Manager in complainant bank and accused no.
7 who was working as Senior Manager in complainant bank at
relevant time obtained any part of the proceeds of the crime or
received any benefit of any type from other co-accused persons
or anything was recovered from them which was a part of the
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loan amount. Role of accused no. 6 and 7 bank officials in
transaction in question is briefed as under as per complaint;-
(a) That they processed the term loan application of accused no.
1 company for construction of the shed and purchase of
machinery moved by its directors on 17.06.2005 and after
receipt of sanction got opened the loan accounts in the
branch on 20.06.2005.
(b) That while processing the loan application of accused no. 1
company, they did not get verify the four fake cash receipts
and one fake quotation enclosed with it issued by fake M/s.
G.M. Engineering Co.
(c) That accused no. 6 had submitted the report on 30.05.2005
that accused no. 1 company was not maintaining proper
stock/production register and employees register as well as
any record through which value of the stock can be
ascertained etc., whereas accused no. 7 gave the report on
16.06.2005 that stock worth Rs. 1.05 crores was found lying
in the premises of the accused no. 1 company. Thus, both
had allegedly submitted contradictory reports at pre-sanction
stage but still processed the loan application of this company
in order to give undue benefit to it and its directors.
(d) That they did not verify the genuineness of the account of
M/s. G.M. Engineering Co. Panipat before releasing the term
loan amount of Rs. 1,39,26,000/- on 23.06.2005.
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(e) That they handed over the DD of Rs. 1,39,26,000/- along
with forwarding letter issued in the name of M/s. G.M.
Engineering Co. to accused no. 3 instead of sending the
same directly to this company.
(f) That they again did not verify the genuineness of M/s. G.M.
Engineering Co. before releasing sum of Rs. 18,16,950/-
from term loan account on 21.07.2005 for purchase of two
generator sets.
(g) That they did not ask the accused no. 1 company or its
directors to submit original bills issued by M/s. G.M.
Engineering Co. regarding supply of machinery and
generator sets for which sum of Rs. 1,39,26,000/- and Rs.
18,16,950/- were released on 23.06.2005 and 21.07.2005
respectively.
(h) That instead of releasing the amount in phased manner as
required under clause IV of the terms and conditions of the
sanction order, they released the big part of the loan amount
i.e. 1,40,000,00/- just within three days of sanction order
dated 20.06.2005 and balance within one month.
(i) That they had also not ensured the end use of the funds in
connivance with other co-accused and allowed them to
misutilise the total bank funds to an extent of Rs.
1,73,38,600/- by violating certain guidelines and norms of
the bank. They also allegedly were having no proper
supervision and control of the matter.
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23
27) Hon’ble Supreme Court in Yogesh vs. State of Maharashtra
(2008) 10 SCC 394 held that if two views are equally possible
and the Judge is satisfied that evidence produced gives rise to
suspicion only as distinguished from grave suspicion, he would
be fully within his right to discharge the accused.
28) ED is relying upon the above facts (mentioned in para no. 26
above) to show that these two bank officials had assisted or
facilitated the accused no. 1 company and its directors accused
no. 2 to 5 in commission of offence of money laundering by
committing the above acts, so they are equally liable for this
offence. Complaint is totally silent to this aspect that they got
any share/profit in the proceeds of crime. ED cannot deny the
fact that complainant bank has not conducted any internal
inquiry against accused no. 6 and 7 which found them involved
in any manner for sanctioning the loans against banking norms
or they committed any illegality or even any irregularity in the
said process or they had not completed the entire formalities as
required before sanction or release of the loan amount. Infact
the complainant bank has no grievances against accused no. 6
and 7. Even if for sake of arguments, it is presumed that
allegations of ED as referred in para no. 26 above are correct,
then also the possibility cannot be ruled out that these two
accused committed some irregularity due to their negligence or
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24
inaction for which they are liable for departmental action but
not for commission of any offence. ED has not placed on record
norms or guidelines of the bank which were allegedly violated
by these two accused persons. Non following some rules while
performing official duty does not mean that they were having
any criminal intention or even knowledge or even any
conspiracy regarding commission of offence of money
laundering done by others. The alleged banking rules could
show that they were required to contact M/s. G.M. Engineering
Co. first before processing of file and sanctioning of loan
regarding its four cash receipts and quotations enclosed with the
loan application but no such rules are brought on record. The
fake account in the name of M/s. G.M. Engineering Co. was
opened in Andhra Bank, Panipat and these two officials were
working in United Bank of India at Delhi i.e. in different banks
and at different places, so they cannot be any instrumental in
opening of the fake account at all. They were not under
obligation to check whether officials of Andhra Bank had
opened the fake account of M/s. G.M. Engineering Co.
correctly or not. Accused no. 6 and 7 could presume that
account of M/s. G.M. Engineering Co. was legally and validly
opened by Andhra Bank as per rules and accordingly, they were
also not required to check the genuineness of the receipts and
quotations before releasing the money because money was
being transferred only through DD from account to account.
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25
Handing over DD to accused no. 3 instead of sending to M/s.
G.M. Engineering Co. by post was not an illegality as the
amount of said DD was only to be credited in the bank account
of this firm in both the situations. The inspection reports
submitted by accused no. 6 and 7 at pre sanction stage cannot
be said as contradictory because accused no. 6 stated in his
report dated 30.05.2005 that accused no. 1 company was not
maintaining proper registers and value of stock/production
could not be ascertained due to non maintaining of proper
register but there was no finding that no stock was lying in the
factory premises which was described by accused no. 6 in his
subsequent report dated 16.06.2005 that he found stock of Rs.
1.05 crores in the factory premises. Non existence of stock in
factory and non showing the same in the register are two
different things. When in subsequent report of accused no. 7,
everything was found ok, then only the process was started to
deal with the loan application of accused no. 1 company which
also leads to the inference that accused no. 1 company had filled
up the deficiency of incomplete registers by that time. ED is
also unable to explain why it has adopted pick and choose
policy by making Kailash Garg as a witness, who was convicted
by CBI Special Court for opening of fake account in the name
of M/s. G.M. Engineering Co. in Andhra Bank. The situation of
this person remained same earlier and presently also. Accused
no. 2 to 5 in their statements under Section 50 of the Act did not
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26
name these two bank officials for entering into any conspiracy
with them. This court is not concerned with the civil liability
aspect of the accused persons but on the face of it, no criminal
liability as defined under Section 3 of PML Act is attracted in
case of these two accused bank officials.
29) Thus, if on one hand, above mentioned facts and circumstances
as well as role of these bank officials can indicate that they
might be or suspected to be in connivance with the accused no.
1 company and its directors but on the other hand, it can also
point out that they were negligent in performance of their duties
to some extent or there was some inaction on their part. All the
allegations of ED as described in para no. 26 above otherwise
also not substantiated on record and are simple averments. No
definite conclusion can be arrived at even at this stage of
framing of charge in respect of accused no. 6 and 7 that they
had knowingly or intentionally helped other co-accused in
obtaining the loans and thereafter allowed them to misutilise it.
When there are two views possible at the stage of charge, then
the view going in favour of accused has to be adopted and they
are liable to be discharged in view of the case laws referred
above. Mere fact that they were convicted in CBI case itself is
not sufficient to frame charge against them in this case also as
ingredients of offences of both cases are different.
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30) In view of above discussions, accused no. 6 and 7 both bank
officials are hereby discharged whereas prima facie charge u/s 4
read with Section 3 of PML Act is made out against accused no.
1 company (represented by its directors accused no. 3 and 4) as
well as accused no. 3 to 5. Let the formal charge be framed
against them.
Dt: 20.05.2024. (Ashwani Kumar Sarpal)
Special Judge (P.C. Act), CBI-08
Rouse Avenue Court, New Delhi.
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