Bombay High Court: A Single Judge Bench of R.N. Laddha, J., heard a revision application by Shyam Radhakrishna Malpani (‘the applicant’) challenging the order dated 17-3-2021 of the Additional Sessions Judge (Special Judge) rejecting the discharge application filed by him in a money laundering case against Bhujbal’s in connection with the Maharashtra Sadan scam. The Court opined that it would be unreasonable to expect the applicant, merely by virtue of being an auditor to assume the role of an investigator or to be under an obligation to examine and investigate the genuineness of the documents provided to him by the companies’ authorised persons. The Court held that there was no substantive proof to establish the applicant’s involvement in the said scam, thus quashed the impugned order dated 17-3-2021.
Background:
The Enforcement Directorate registered a case against Maharashtra Minister and Senior NCP leader Chhagan Bhujbal and his family, alleging money laundering of around Rs 1000 crores. The applicant was the Chartered Accountant of Bhujbals and argued that he had neither been named as an accused in any of the FIRs nor had been charge-sheeted in connection with any of the offences. He submitted that the auditor was not expected to function as an investigator, nor was he obliged to scrutinise every individual transaction recorded in the company’s books. He said that negligence, by its nature, could not be equated with involvement in money laundering, and it was not an element required to attract the offence under Section 3 of the Prevention of Money-Laundering Act, 2002 (‘PMLA’). Further, he stated that he audited the financial accounts only for the period from the financial year ending March 2012 to 2015 whereas the crime-tainted proceeds were stated to have originated around 2007-2008. He was appointed as the statutory auditor for specific companies within the Bhujbal Group, rather than for those connected to Jagdish Purohit and therefore he could not reasonably have been aware of the financial activities of the companies linked to Jagdish Purohit.
The prosecution alleged that the applicant actively participated in the offence of money laundering through both acts of omission and commission and was aware of the suspicious transactions and sham arrangements carried out by these entities. He failed to fulfil his professional obligations as an auditor and thereby enabled the Bhujbals to accumulate and launder illicit funds. The prosecution then stated that the investigation conducted under the PMLA revealed that the Bhujbals had laundered proceeds of crime through various methods. One such modus operandi involved routing illicit funds by collecting inflated share premiums from fictitious entities. It was discovered that the share price of Bhujbal Group companies remained consistently at Rs 9,900 per share despite the shares being acquired over four different financial years from 2007-2011.
Analysis:
The Court opined that it was a settled cannon of criminal jurisprudence that the jurisdiction vested in a revisional court was inherently limited and supervisory in nature. It was empowered to examine the correctness, legality, or propriety of any finding, sentence, or order passed by the trial court but not to re-appreciate the evidence or re-evaluate the factual findings, as was permissible in appellate jurisdiction.
The Court emphasised that where the material-on-record did not disclose any legal evidence establishing a nexus between the accused and the alleged offence, the very act of framing a charge would be unwarranted and unsustainable. The allegations levelled against the applicant centred on his role as a statutory auditor of certain companies controlled by the Bhujbals. The core allegation remained that the applicant, through professional negligence and wilful oversight, facilitated the laundering of illicit gains by others.
Significantly, the Special Judge, while allowing the applicant’s application under Section 88 CrPC had noted that there were no allegations which suggested that the applicant was involved in money laundering and that no proceeds of crime (‘PoC’) were attributable to him. Instead, the complaint only raised issues of alleged negligence in the applicant’s duties as an auditor for the Bhujbals. This Court also noted that the Special Judge also explicitly observed that the accusations levelled against the applicant were neither of a serious nor a grave nature. Despite these observations, the Special Judge erroneously rejected the applicant’s discharge application based on apparent mistakes and incorrect assumptions.
The Court also held that the applicant had no professional association with Purohit, nor was he connected with the financial affairs of any company linked with Purohit. Accordingly, it would be unreasonable to expect the applicant, merely by virtue of being an auditor to assume the role of an investigator or to be under an obligation to examine and investigate the genuineness of the documents provided to him by the companies’ authorised persons.
The Court noted that the paragraph titled ‘Estimation of PoC’ transpired that the applicant was not a beneficiary of the proceeds of crime. Further, Purohit provided two distinct statements during the course of the investigation. In the subsequent statement given by the co-accused Purohit, there were no allegations or reference that implicated the applicant in any manner and in his later statement, he expressly acknowledged that the earlier statement he made was factually incorrect and had been made under duress. Additionally, the prosecution, in its complaint, alleged that the proceeds of crime originated around the years 2007-2008. In contrast, the applicant’s professional engagement as an auditor was confined strictly to the financial years ending March 2012 to March 2015. The Court opined that this clear chronological gap between the purported origin of the illicit assets and the applicant’s period of audit involvement negated any rational or legal inference of a connection between two.
The Court held that the trial Court committed an error in law by rejecting the applicant’s application for discharge. Thus, the impugned order dated 17-3-2021 was quashed and set aside and the revision application stood disposed of accordingly.
[Shyam Radhakrishna Malpani v. State of Maharashtra, Criminal Revision Application No. 129 of 2023, decided on 16-6-2025]
Advocates who appeared in this case :
For the Applicant: Pranav Badheka, Senior Advocate, along with Aishwarya Sharma i/by Prashant Pawar.
For the Respondents: SS Pednekar, APP, for Respondent 1-State; HS Venegavkar, along with Ayush Kedia, for Respondent 2-Enforcement Directorate.
Nitin Sharma, EO, ED, present.
