[Yes Bank Loan Fraud] Public money under garb of Term loan siphoned off, resulting in generation of ‘proceeds of crime’ as well as its layering and ultimate projection as untainted money: Del HC while denying bail to Gautam Thapar

Delhi High Court: While addressing a matter wherein bail of Gautam Thapar accused in Yes Bank Loan Fraud case, was sought, Manoj Kumar Ohri, J., expressed that it is well settled that, economic offences constitute a class apart and need to be visited with a different approach, given their severity and magnitude. Albeit these offences are likely to adversely impact the economic fabric of the country, bail shall not be denied to a person accused of an economic offence in a routine manner.

The present application had been filed under Section 439 of the Criminal Procedure Code seeking regular bail filed under Sections 45/44 of the Prevention of Money Laundering Act, 2002 (PMLA) and arising out of ECIR registered under Sections 3 /4 PMLA by the respondent/ED.

Factual Background

After the removal of Rana Kapoor, the then MD and CEO of Yes Bank Ltd., certain complaint came to be filed assailing his role in the grant of various credit facilities to borrowers, in violation of banking norms and against receipt of illegal gratification, which resulted in huge loss to the Bank

One of the above-stated complaints was in relation to Oyster Buildwell Pvt. Ltd. (OBPL) a real estate company, which was extended credit facilities to the tune of Rs 514.27 crores resulting in loss of Rs 466.51 crores to the Bank.

Hence, an FIR was registered under Sections 120B/406/420/468/471 by the CBI against OBPL, the applicant and other including unknown public servants and private persons for having committed criminal breach of trust, cheating, criminal conspiracy and forgery for diversion/misappropriation of the public money during the period from 2017 to 2019.

The investigation in the case is still pending.

Analysis and Discussion

As per Article 21 of the Constitution of India, it guarantees a right to personal liberty to every person, and thus, there is no gainsaying that bail is the rule and jail an exception.

In matters of regular bail under Section 439 CrPC, a Court must consider aspects, including but not limited to the larger interest of the State of public, whether the accused is a flight risk, whether there is a likelihood of this tampering with evidence, whether there is the likelihood of influencing witnesses, etc.

Another factor relevant to the question of bail would be the gravity of the alleged offence and/or nature of the allegations levelled, which may serve as an additional test and can be applied while keeping in view the severity of the punishment that the offence entails.

The embargo imposed by Section 45(1) PMLA on grant of bail took form of twin conditions:

(i) that the Public Prosecutor shall be given an opportunity to oppose the application for release, and (ii) where the Public Prosecutor opposes such application, the Court should be satisfied that there are reasonable grounds for believing that the accused is not guilty of the offence and that he is not likely to commit any offence while on bail.

In 2017, the constitutional validity of Section 45 PMLA was challenged before the Supreme Court in Nikesh Tarachand Shah v. Union of India,    (2018) 11 SCC 1, whereby a decision rendered in 2018, explicating the defects inherent in the provision and the challenges posed thereby, the Supreme Court held that the twin conditions imposed by Section 45(1) PMLA were manifestly arbitrary, discriminator and violative of Articles 14 ad 21 of the Constitution of India.

Post the above-said decision, an amendment was made to Section 45 PMLA vide the Finance Act, 2018. The new Section 45(1) PMLA reads as follows:

“45. Offences to be cognizable and non-bailable.—(1) [Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), no person accused of an offence [under this Act] shall be released on bail or on his own bond unless—]

(i) the Public Prosecutor has been given an opportunity to oppose the application for such release; and 

(ii) where the Public Prosecutor opposes the application, the court is satisfied that there are reasonable grounds for believing that he is not guilty of such offence and that he is not likely to commit any offence while on bail :

Provided that a person, who, is under the age of sixteen years, or is a woman or is sick or infirm [or is accused either on his own or along with other co-accused of money-laundering a sum of less than one crore rupees], may be released on bail, if the Special Court so directs :

Provided further that the Special Court shall not take cognizance of any offence punishable under Section 4 except upon a complaint in writing made by—

(i) the Director; or 

(ii) any officer of the Central Government or a State Government authorised in writing in this behalf by the Central Government by a general or special order made in this behalf by that Government.”

This Court concurred with the decision of the Special Judge that the apprehensions of the applicant tampering with evidence and influencing witnesses were unfounded.

With regard to the apprehension of the applicant being a flight risk was concerned, it was noted that the respondent had already issued LOCs against the applicant, who was willing to surrender his passport.

In view of the above, High Court opined that the applicant’s presence during the trial can be secured by taking adequate measures, including surrender of his passport, and imposing necessary conditions in terms of P. Chidambaram v. Central Bureau of Investigation, (2020) 13 SCC 337.

Further, the Bench added that, at this stage, it would be deemed apposite to refer to the observations made in Rohit Tandon v. Directorate of Enforcement, (2018) 11 SCC 46 where while relying on its earlier decisions in Ranjitsing Brahmajeetsing Sharma v. State of Maharashtra,(2005) 5 SCC 294 and State of Maharashtra v. Vishwanath Maranna Shetty, (2012) 10 SCC 561, the Supreme Court outlined the parameters for adjudication of bail application in terms of Section 45(1)(ii) PMLA.

The applicant was the ultimate beneficiary, being the Founder and Chairman of the Avantha Group and in total, an amount of Rs 500.11 crores was stated to be the ‘proceeds of crime’ in the case.

It was noted that as per the prosecution complaint, certain Bank Officials colluded with the applicant for the grant of Term Loan, which was ostensibly obtained by OBPL to furnish security deposit in favor of JPIL, however, in reality the same was sought with malafide intentions to be siphoned off and diverted towards repayment of facilities availed by Avantha Group companies and for meeting other expenses.        

Adding to the above, Court found that the bank was fully aware of the real purpose for which the loan was obtained.

Public money under the garb of Term loan was siphoned off in this way, resulting in generation of ‘proceeds of crime’ as well as its layering and ultimate projection as untainted money.

In view of the above-discussed position, High Court held that it cannot be stated that the applicant was not guilty of the alleged offences or that he was not likely to commit any such offence while on bail.

Therefore, bail was declined. [Gautam Thapar v. Directorate of Enforcement, 2022 SCC OnLine Del 642, decided on 2-3-2022]


Advocates before the Court:

For the Petitioner:

Mr Mukul Rohatgi, Sr. Advocate with Mr Sandeep Kapur, Mr Virinder Pal Singh Sandhu, Mr Vivek Suri, Ms Niharika Karanjawala, Mr Abhimanshu Dhyani, Mr Sahil Modi and Ms Kajal, Advocates

For the Respondent:

Mr Amit Mahajan, CGSC with Mr Kritagya Kumar Kait, Advocate

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