The Lucknow Bench of Allahabad High Court has granted bail to Dewan Housing Finance Ltd’s (DHFL) former CMD Kapil Wadhawan in a multi-crore provident fund fraud case.
A single-judge bench of Justice Subhash Vidyarthi passed this order while hearing a Criminal Misc Bail Application filed by Kapil Wadhawan.
The application has been filed seeking release of the applicant on bail in Criminal Case registered with Police Station CBI/ACB, Lucknow, under Section 120-B read with Sections 409, 420, 467, 468, 471 IPC and Section 7-A, 8 and Section 13 (2) read with Section 13 (1) (d) of Prevention of Corruption Act, 1988, pending in the Court of Additional District Judge/Special Judge, Anti Corruption, CBI (West), Lucknow.
On 02.11.2019, a First Information Report bearing Case under Sections 409, 420, 467, 468 and 471 IPC was lodged in Police Station Hazratganj, Lucknow by I.M. Kaushal, Secretary of Uttar Pradesh Power Corporation Contributory Provident Fund Trust against (1) Praveen Kumar Gupta, the then Secretary of the Trust and (ii) Sudhanshu Dwivedi, the then Director Finance, stating that on 09.05.2013, the Board of Trustees of the Trust had decided that the amount of General Provident Fund will be invested in Fixed Deposit Schemes of Nationalized Banks for 1 to 3 years.
On 21.04.2014, a decision was taken by the Board of Trustees to consider other options, which are secured like investments made in the bank and which give higher assured interest and the Director Finance was authorized to take the services of a Financial Consultant, if necessary.
Till October 2016, the amount of provident fund was invested in fixed deposit schemes of Nationalized Banks. In December 2016, on a proposal made by Praveen Kumar Gupta, Secretary of the trust, which was approved by Sudhanshu Dwivedi, the then Director Finance and A. P Mishra, the then Managing Director, amounts of General Provident Fund and Contributory Provident Fund were started being invested in Fixed Deposit Schemes of PNB Housing.
In March 2017, the aforesaid named accused persons Praveen Kumar Gupta and Sudhanshu Dwivedi started investing the amounts of GPF and CPF in DHFL in violation of the procedure laid down by the Notification dated 02.03.2015 issued by the Ministry of Finance, Government of India, as per which a maximum of 50% of non-government Provident fund can be invested in Scheduled Commercial Banks.
The FIR further states that in a meeting of the Board of Trustees held on 24.03.2017, it was agreed to consider the investment proposals as per Government Notification dated 02.03.2015 in securities other than deposits of Nationalized Banks, in AAA rated companies giving higher security and high interest rates.
In contravention of the clear guidelines of the government of India contained in the notification dated 02.03.2015 prohibiting investment of amounts of the employees Provident Fund in institutions other than Scheduled Commercial Banks, Secretary of the Trust Praveen Kumar Gupta invested Rs 2,631.90 crore in DHFL, after obtaining approval from Director Finance Sudhanshu Dwivedi, knowing fully well that DHFL is not a scheduled commercial bank and it is an unsecured private institution.
The FIR alleged that the named accused persons Praveen Kumar Gupta and Sudhanshu Dwivedi had committed the offence of criminal breach of trust.
The matter was subsequently transferred to CBI and on 05.03.2020 the CBI registered a fresh First Information Report for commission of offences under Sections 409, 420, 467, 468 and 471 IPC. Thereafter CBI conducted investigation in furtherance of the aforesaid FIR and it filed the fourth supplementary charge-sheet on 29.12.2020 against another accused person.
On 22.08.2022, the CBI submitted another charge-sheet against (i) Kapil Wadhawan (the applicant), (ii) Dheeraj Wadhawan and (iii) M/s Dewan Housing Finance Ltd (DHFL) alleging commission of offences under Sections 120 B read with 420, 409, 467, 468, 471 IPC and Section 7-A, 8 & 13 (2) read with 13 (1) (d) of Prevention Of Corruption Act, 1988 and substantive offences thereof.
The chargesheet states the huge amounts of General Provident Fund and Contributory Provident Fund were transferred in the bank accounts of DHFL for the creation of fixed deposits illegally and the applicant Kapil Wadhawan was the Chairman and Managing Director of DHFL and the co-accused Dheeraj Wadhawan was a Director of the Company during the relevant period and both of them entered in a criminal conspiracy with co-accused persons Praveen Kumar Gupta, Amit Prakash, Mahesh Gupta, and Alok Garg in and around March 2017 and in furtherance of the said criminal conspiracy, the applicant and Dheeraj Wadhawan dishonestly and fraudulently obtained the investments of surplus funds of UPPCL trust in fixed deposits of DHFL in contravention of investment guidelines dated 02.03.2015 issued by the Ministry of Finance, Government of India 02.03.2015.
The charge-sheet further states that the accused persons dishonestly and fraudulently obtained higher ratings from rating agencies on the basis of false and bogus audited balance sheets and bogus financial statements and thereby dishonestly and fraudulently obtained investments to the tune of 4,122 Crore of UPPCL funds in fixed Rs 2,631.90 Crore in DHFL, after obtaining approval deposits of DHFL during March 2017 to December 2018, out of which surplus funds to the tune of Rs 2267.9 Crore were Rs 2,631.90 Crore in DHFL, after obtaining approval misappropriated by the applicant and co-accused Dheeraj Wadhawan in criminal conspiracy with other co-accused persons and they diverted the said funds from the bank accounts of DHFL to bank accounts of other companies by way of sanctioning bogus project loans and further diverted the said funds to their own companies and used the said funds.
The Court observed,
When we examine the facts of the case as the same appear from the material placed before the Court at this stage, the accusation against the applicant is that (i) he entered in a criminal conspiracy with other co accused persons and in furtherance of the said criminal conspiracy, the surplus funds of UPPCL trust were got invested in fixed deposits of DHFL in contravention of investment guidelines dated 02.03.2015 issued by the Ministry of Finance, Government of India, (ii) the accused persons had dishonestly and fraudulently obtained higher ratings from rating agencies on the basis of false and bogus audited balance sheets and bogus financial statements, (iii) the applicant and co-accused Dheeraj Wadhawan in criminal conspiracy with other co accused persons diverted funds from the bank accounts of DHFL to bank accounts of other companies by way of sanctioning bogus project loans and further diverted the said funds to their own companies and used the said funds.
Thus it appears that the deposit of amounts in fixed deposits with DHFL would create a relationship of creditor and debtor between the Trust and DHFL and it would not amount to entrustment, so as to attract the offence of breach of trust. So far and the offences under 420, 467, 468 and 471 IPC are concerned, it is not alleged that the aforesaid acts were committed by the applicant himself and it is alleged that he conspired and got it done through certain officials of DHFL, and those officials have already been granted bail. However, as the Court is concerned with the applicant’s prayer for grant of bail only, it is not permissible to hold a mini trial and record any conclusive finding, and the same will be done by the trial Court at the appropriate stage.
The Court said that,
The charge-sheet mentions the names of as many as 57 witnesses of the case and the trial is yet to commence and it would certainly take a very long time to conclude and keeping the applicant incarcerated without his guilt having been established would not be proper, unless his case falls within any exception disentitling him to be enlarged on bail.
When the applicant was already in judicial custody in another case, on 24.05.2020, the applicant was taken from Jail and was produced before the Special Judge, CBI, Lucknow on 26.05.2020, from where he was initially remanded to the custody of CBI for 14 days and his custodial interrogation has already been done. Thereafter he was sent to judicial custody and since then the applicant is languishing in jail in the case.
Nothing has been placed on record to give rise to a reasonable ground of apprehension that in case the applicant is released on bail, he would influence the witnesses or tamper with the evidence.
The applicant has already been ordered to surrender his passport before the Investigating Officer by means of the order dated 21.02.2020 passed by the Additional Sessions Judge, City Sessions Court/Special Court, Mumbai, in Remand Application and, therefore, he does not appear to be at flight risk.
As all other accused persons, against whom there is allegation of commission of the offences, have been granted bail in the case, the applicant, against whom there is an allegation of entering into conspiracy with the other co-accused persons, is also entitled to be granted bail on the ground of parity.
“In view of the aforesaid discussion and without making any observations which may affect the merits of the case, I am of the view that the applicant is entitled to be released on bail pending conclusion of the trial”, the Court observed while allowing the bail application.
The Court noted that,
Let the applicant – Kapil Wadhawan, be released on bail in Criminal Criminal Case registered with Police Station CBI/ACB, Lucknow, under Section 120-B read with Sections 409, 420, 467, 468, 471 I.P.C and Section 7-A, 8 and Section 13 (2) read with Section 13 (1) (d) of Prevention of Corruption Act, 1988, pending in the Court of Additional District Judge/Special Judge, Anti Corruption, C.B.I (West), Lucknow, on his furnishing a personal bond and two reliable sureties for Rupees 10 Lakh ( 10,00,000/-) each to the satisfaction Rs 2,631.90 Crore in DHFL, after obtaining approval of the trial Court, subject to following conditions:—
(i) The applicant will not tamper with the evidence during the trial.
(ii) The applicant will not influence any witness.
(iii) The applicant will appear before the trial court on the dates fixed, unless his personal presence is exempted.
(iv) The applicant shall not directly or indirectly make inducement, threat or promise to any person acquainted with the facts of the case so as to dissuade him from disclosing such facts to the Court to any police officer or tamper with the evidence.
In case of breach of any of the above conditions, the prosecution shall be at liberty to move an application before this Court seeking cancellation of bail.