Case title:
Sanjay Raghunath Agarwal Vs. The Directorate of Enforcement
Date of Order:
20th April 2023
Bench: Justice Pankaj Mithal and V. Ramasubramanian
Parties:
Petitioner: Sanjay Raghunath Agarwal
Defendant: The Directorate of Enforcement
Facts:
- On October 29, 2013, the Cyberabad Police filed a criminal complaint in FIR No. 664/2013 against six people, including the appellant in this case, for alleged violations of Sections 406, 407, 415 to 420, 120B read with Section 34 IPC. A complaint made by M. Srinivas Reddy, the MD of an organisation called M/s Farmax India Limited, led to the filing of the FIR.
- The main allegations in the complaint were that Farmax used the accused's services to raise GDRs for USD 71.09 million, which is equal to INR 318 crores; that, despite raising the aforementioned amount, the accused only transferred to Farmax a sum of USD 0.4 million, which is equal to INR 2.20 crores; and that, upon inquiry with the bank, the complainant's company learned that the accused had misappropriated the remaining amount by forging the sign.
- It is important to note that the aforementioned FIR was filed in accordance with a decision made by the VI Metropolitan Magistrate, Cyberabad, under Section 156(3) of the Code of Criminal Procedure, 1973, at Medchal, Rangareddy District.
- Despite the fact that the FIR was initially filed more than nine years ago, no final report has yet to be submitted. However, the Securities and Exchange Board of India started to look into Farmax's raising of GDR.
- In response to the aforementioned, the Enforcement Directorate filed an information report in, listing six people and nine entities as persons suspected of violating Section 3 of the Prevention of Money-laundering Act, 2002, which prohibits money-laundering.
- The appellant was taken into custody by the Enforcement Directorate on September 26,2022, following the filing of the Enforcement Case Information Report. The Hyderabad Metropolitan Sessions Judge confined the appellant to judicial detention by order dated September 27, 2202. The Enforcement Directorate was given custody of the appellant by the court for a six-day period from October 6 to October 11, 2022.
- The appellant provided Board Resolution formats and assisted in transferring funds from Farmax's account with EURAM Bank to its subsidiary, M/s. Farmax International FZE in the UAE, according to the Enforcement Directorate. The appellant was in charge of setting up the entire infrastructure for Farmax and Arun Panchariya to bring about the fraudulent GDR issue.
Arguments:
- In light of the aforementioned circumstances, Shri R. Basant, a knowledgeable senior counsel, asserts: (i) The appellant has been imprisoned since September 26, 2012, and more than nine years have passed since his arrest without a charge being brought against him for the underlying offence; (ii) Even Srinivas Reddy, on whose behalf a FIR was first lodged in 2013 for the predicate offence, was detained by the Enforcement Directorate; nevertheless, the court denied the Enforcement Directorate's request for his continued detention; (iii) the appellant's profession as a Chartered Accountant and the fact that he solely provided professional services within the bounds of the law; and
- The exact role given to the appellant in the prosecution complaint filed by the Enforcement Directorate must be examined because the learned Additional Solicitor General's principal argument centres on Section 45 of the PMLA.
- Let's go back to the facts presented and the arguments put forth while keeping in mind the special function that the appellant was given. The following facts are undisputed at the outset:
- the filing of the prosecution complaint and registration of the ECIR in 2022 were a result of the filing of the FIR for the underlying offence in 2013, at the request of one M. Srinivas Reddy, managing director of Farmax, as well as a result of the order issued by SEBI in 2020; (ii) that, over the last nine years, no final report has been submitted in the FIR for the underlying offence; (iii)the Enforcement Directorate's request for remand was denied; that even M. Srinivas Reddy, the de facto complainant in the FIR for the predicate offence, was requested to be arrested as an accused in connection with the ECIR; (iv) The appellant is a Chartered Accountant by trade and has been imprisoned since September 26, 2022.
- That a convincing argument can be made that the appellant satisfies the second condition found in Clause (ii) of sub-section (1) of Section 45 of the PMLA, according to the relevant portion of paragraph 8 of the prosecution complaint submitted by the Enforcement Directorate that we have extracted in the previous paragraph. As a result, in our opinion, the appellant's continuing incarceration may not be necessary.
- But the Enforcement Directorate's concern that the appellant is a flight risk and would leave the country if released on bail must be addressed by placing the proper limitations.
- Due to the aforementioned, the appeal is granted, and the appellant is instructed to be released on bail in ECIR No. HYZO/26/2022 dated 05.05.2022, subject to whatever restrictions and conditions the Metropolitan Sessions Judge-cum-Special Court under PMLA, Nampally, Hyderabad may impose. The following additional conditions shall be a part of the restrictions that the Special Court imposes: (i) Before the Special Court, the appellant must turn in his passport; and (ii) The appellant must consistently show up in front of the Special Court whenever the prosecution complaint submitted by ED is posted.
Analysis:
- A chartered accountant who was detained by the Enforcement Directorate as part of an investigation into a Rs 318 crore global depository receipts (GDRs) fraud was granted bail by the Supreme Court on Thursday. A court panel made up of Justices V Ramasubramanian and Pankaj Mithal noted that no final report had been submitted with the FIR and that the appellant's extended detention might not be necessary.
- By imposing suitable conditions (for bail), the bench said it will address the Enforcement Directorate's concern that the appellant is a flight risk and would leave the country if released on bail.
- Sanjay Raghunath Aggarwal was granted bail by the supreme court, with any terms and conditions set by the Metropolitan Sessions Judge-cum-Special Court under PMLA, Nampally, Hyderabad.
- The bench ordered Aggarwal to turn over his passport to the special court and to show up there without fail on a regular basis whenever the ED prosecution complaint is scheduled for hearing.
- A complaint from the managing director of Farmax India Limited, a manufacturing and retail business that deals in fast-moving consumer goods, led to the filing of the lawsuit against Aggarwal.
- Farmax employed the accused's services to raise 318 crore rupees through Global Depository Receipts (GDRs). A GDR is a bank-issued, tradable certificate. A local stock exchange trades shares of a foreign business represented by the certificate.
- Bail was granted to Sanjay Raghunath in this case.
Conclusion:
In the present case, Farmax employed the accused's services to raise 318 crore rupees through Global Depository Receipts (GDRs). According to the allegation, even though the accused raised Rs 318 crore, he only deposited Rs 2.20 crore to Farmax. The complaining company learned from the relevant bank that the accused had misappropriated the remaining money by faking signatures using the documents that were pledged. Sanjay Raghunath Aggarwal was granted bail by the supreme court, with any terms and conditions set by the Metropolitan Sessions Judge-cum-Special Court under PMLA, Nampally, Hyderabad.
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