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INTHEHIGHCOURTOFJUDICATUREATBOMBAY

CRIMINALAPPELLATEJURISDICTION

CRIMINALBAILAPPLICATIONNO.1263of2014

JIGNESHPRAKASHSHAH ..APPLICANT

Versus

THESTATEOFMAHARASHTRA ..RESPONDENT

Mr.MaheshJethmalani,SeniorAdvocatewithMr.AmeetNaik,Mr.AniketU.NikamandMs.GunjanMangalai/bMr.AniketNikam,Advocatefortheapplicant.

Mr.A.B.Avhad,SpecialPublicProsecutor.

Mr.V.B.KondeDeshmukh,APPfortheRespondentState.

Mr.SandeepR.Karnik,AdvocatefortheIntervenor.

CORAM: ABHAYM.THIPSAY,J.

DATED:22ndAUGUST,2014.

ORALORDER:

1 Theapplicant is theAccusedno.10inC.R.No.89of2013

registered by the Economic Offences Wing (EOW). The crime was

initiallyregisteredvideC.R.No.216/13ofMRAMargPoliceStationon

thebasisofareportdated30thSeptember2013lodgedbyonePankaj

Saraf,inrespectofoffencespunishableundersections120BIPC,409

IPC,465IPC,467IPC,468IPC,471IPC,474IPC,477AoftheIPC.

Lateron,investigationofthecasewastransferredtoEOW,whereafter

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theprovisionsoftheMaharashtraProtectionofInterestofDepositors

Act(forshort'MPIDAct'),wereappliedtothefactsofthecase.

2 Theapplicantwasarrestedon7th May2014. Beforehis

arrest,anumberofotheraccusedinthiscasewerearrestedfromtimeto

time, and were released on bail. The applicant was arrested after

chargesheet had already been filed against some of the arrested

accused.

3 Whenthisapplicationwasmade, investigationasregards

thepresentapplicantwasproceeding,andnochargesheetagainsthim

hadbeenfiled. Thehearingof theBail Applicationconsumedquite

sometime,andwhenthehearingconcluded,theapplicanthadalready

beenincustodyforabout85days.Itwas,therefore,thoughtproperto

deferthedecisionontheBailApplicationtillthefilingofthecharge

sheet,whichwasanywayexpectedtobefiledwithin90daysfromthe

detentionof theapplicant in custody. On90th day fromthedayon

whichapplicant's detentionincustodywasfirstauthorized,acharge

sheet came to be filed against him, whereafter, a copy thereof was

providedtothisCourt,andalsotothelearnedcounselfortheapplicant.

ThoughthematterhadalreadybeenarguedfullybythelearnedSpecial

PublicProsecutorandthelearnedcounselfortheapplicant,inviewof

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the filingof thechargesheet, the learnedcounsel werepermittedto

advancefurtherarguments,ifsodesired,andaccordingly,conciseoral

argumentswereadvancedbythelearnedSpecialPublicProsecutoras

alsothelearnedcounselfortheapplicantafterthefilingofthecharge

sheet.InterventionoftheFirstInformantPankajSarafinthematter

was permitted and the Intervenor has, apart from advancing oral

argumentsthroughhiscounsel,filedwrittenargumentsinthematter.

4 IhaveheardMr.MaheshJethmalani,learnedcounselforthe

applicant.IhaveheardMr.A.B.Avhad,SpecialPublicProsecutor.Ihave

heard Mr.Sandeep Karnik, learned counsel for the First Informant at

length. I have also heard one Ketan Shah who claimed to be an

'investor',andexpressedadesiretomakesubmissionsonbehalfofthe

'investors',anumberofwhomwerecrowdingtheCourthallduringthe

hearingofthebailapplication.

5 Thecaserelates totheallegedscamthat is said tohave

takenplaceintheactivitiesandworkingofNationalSpotExchangeLtd

(forshort 'NSEL'),aCompanyincorporatedundertheCompaniesAct,

1956,inMay2005.

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6 Itwillbeappropriatetoexaminewhatistheallegationin

the First Information Report lodged by the Intervenor. The First

InformantPankajSarafisaDirectorofaPrivateLimitedCompanydoing

thebusinessof'investment,tradingandfinancing'. That,hehadbeen

'investing' in the traders contracts offered by the NSEL through his

brokers M/s.Capital Financial Commodities LtdandWay to Wealth

Pvt.Ltd. Mr.Pankaj Saraf hadentered into a clientbroker agreement

withhisbrokers,andhadsubmittedthenecessarydocumentstothem.

ThebrokersweremembersoftheNSEL. PankajSarafwasprimarily

transactinginT+2andT+25contracts.Hisgrievanceisthatduring

theperiodfromOctober2008toJuly2013,NSELallowed25members

(whoarenamedasaccused)totradeontheexchangeassellers. Itis

allegedthat inadmittingthesecompaniesasmembers, duediligence

wasnotobserved.Itisalsoallegedthatthese25members(sellers)had

conspiredwiththeapplicantandtheseniormanagementofNSELandin

connivance with NSEL, traded fictitious stocks on the exchange by

raisingfakedocuments.That,theapplicantandotherseniorofficersof

theNSELwerehandinglovewiththedefaultingparties,andhave,in

collusionwiththem,defraudedtheFirstInformant.Though,duringthe

initialcontractsbetweenthesemembercompaniesassellersandbuyers,

theCompanysquaredoffthecontractsonthedateofmaturitybutlater,

whentheinvestmentinthesecompaniesgrewsubstantially,theydidnot

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honor their commitments andcausedawrongful loss to the tuneof

Rs.2.2crorestotheFirstInformant. Itisallegedthatalossofabout

5600croreswascausedtotheother 'investors', numberingmorethan

13000.

7 InwhatmannerNSELwassupposedtoact,howthetrading

transactions were to take place, and how the offences came to be

committed, can be best gathered from the relevant details given in

column no.16 of the printed prescribed proforma of the police

report/chargesheet.

National Spot Exchange Limited (NSEL) is a spot

exchangewhichwasoriginallyconceptualizedbyJignesh

Shahintheyearintheyear2006.NSELismeanttobe

an electronic platform that facilitated trading in 52

commoditiesthroughoutthecountry.

8 In order to understand the nature of the transactions in

question,itwouldbenecessarytounderstand how thebusinessofthe

NSELwastobetransacted,andthishasbeenexplainedinthepolice

report/chargesheetasfollows:

Commodity spot trading is about buying and selling a

commodity,payingcashforandreceivingyourgoodsonthe

'spot'.Thisiscalled'readydeliverycontract'underFC(R)Act,

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1952,whichsignifies thatthebuyerandselleragreeona

price and 'deliver' their side of the contract immediately.

NSELisaspotexchangedesignedtohelpthisactivity,with

theaddedfeatureofbeingelectronic(sobuyersandsellers

canbeindifferentlocations)andanonymous(thebuyerand

seller don't know who the other side is). The important

feature of any such exchange is that the exchange has to

standguaranteesubjecttoitsbyelawstoeitherpartythatit

will ensure that the contract is settled. If the buyer can't

bringinthemoneyforanyreason,theexchangeshouldthen

sell thegoodstosomeoneelseandrecoverthemoney(and

makeupthedifference).Andasimilarexerciseiftheseller

defaults.Now,whenthesellerandbuyerarefarawayfrom

eachother,howdoestheexchangeguaranteedelivery?The

ideaisthatthesellermustcometoanexchangedesignated

warehouse and give his goods, which are then tested and

verified for quality andweight. He thengets a warehouse

receipt(WR)thatisusedforelectronictrading.Whenhesells

ontheexchange,thewarehousereceiptistransferredtothe

buyer;thisreceiptentitlesthebuyertotakethegoodsoutof

thewarehouse,orifhechooses,toretainthegoodsthere(to

sellthemlater)bypayingthewarehouserentalcharges.

9 Howthetraders'contractsweretowork,hasbeenexplained

asfollows:

The seller was required to deposit his stocks in

warehouseswhichwereapprovedanddesignatedbyNSEL

on or before T, with T being the 'trade date'. NSELwas

responsible for checking and verifying the quality and

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quantity of he underlying commodities and goods are

requiredtobecompulsorilyweighedatthedesignatedweigh

bridge/weighscaleandwillbemonitoredandcertifiedbythe

warehouse supervisor. Upon NSEL certifying the same,

NSEL issued a warehouse receipt which was evidencing

proofofownershipofastatedquantityofcommoditiesofa

stated grade and quality by the beneficial owner or the

holder of the certified warehouse receipt. The depositor

receivesthephoto/scannedcopyofthewarehousereceipt

andtheoriginalisretainedbytheExchangetotransferto

the buyer upon the onward sale by the depositor.

Additionally,adeliverymarginofaround10%ofthevalueof

thegoodswastobepaidbythedepositortotheExchange.

On T, the investor enter into a contract to buy the

commodities with T + 2 delivery cycle. Simultaneously, he

wouldalsoenterintoacontracttosellthecommoditieswith

aT+25deliverycycle.OnT+2,NSELwouldissueadelivery

allocationreport in whichthequantityand locationof the

commoditiespurchasedwouldbementioned. Theallocation

reportcontaineddetailsoftheendclient,warehousereceipt

No,Lot/QCNo.andwarehouselocation.Further,itincludeda

confirmationfromNSELthattheoriginalwarehousereceipts

wereinit'scustody.

Astheoriginalwarehousereceiptswere1nthecustody

of the Exchange, NSELvide its policy asked the investors

(whowerethesellersintheT+25contract)toretainthegoods

intheExchangecertifiedanddesignatedwarehouseuntil25

dayspassedasprepayinthroughwarehousereceiptsagainst

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saleobligation.Onthe25thday,theExchangewouldthen

collectthemoneyfortheinvestorandwouldthenreleasethe

goodstothebuyer.NSELwasthereforethecustodianofthe

goodsfromthetimeofpurchaseundertheT+2contracttill

thetimeofitssaleandwasresponsibleforitssafecustody.

As is usually the norm in any electronic exchange,

whenaclienttradesontheanonymousorderdriventrading

systemontheExchange,thebuyerdoesnotknowtheseller

andinthesameway,thesellerdoesnotknowthebuyer.But

incaseofthepairedcontracts,alwaysthecounterpartyis

knownthroughinvoices.

NotonlydidNSELpermitinvestorstoparticipatein

thesecontracts,but,infact,NSELactivelyencouragedand

inducedinvestors toenter intosuchdual transactions.This

activeinducementwasnotjustbyhighlightingthepossible

benefits available due to the price differential but also by

providingeconomicrationaletoinvestorsbywaivingstorage

chargesforthosemembersandtheirconstituentswhosellthe

product on the longer duration contract out of delivery

receivable against the purchase position of the shorter

contract.Accordingly,manymembersalsoactivelymarketed

these contracts. Moreover, NSEL retained the warehouse

receipts issued by it which were to be used to discharge

marginobligationsonthetrades.

NSELhas820membersofdifferentcategorieswhich

areasunder:

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TCMTradingCumClearingMember,TMTrading

Member,ITCMInstitutionalTradingCumTradingMember,

PCM Professional Clearing Member, TCM A For All

AgriCommoditiesallDeliveryCentresinaState,TCMB

ForSingleAgriCommodityAllDeliveryCentresinaState,

TCMCForSingleAgriCommoditySingleDeliveryCentre

inaState,TCMPulsesForPulsesinaParticularState.

Thememberswererequiredtoregistertheclientprior

to executing trades on their behalf. For this purpose, the

membersrequiredtheirclientstosubmitthedulyfilledin

prescribed 'Know Your Customer' form and execute the

memberclientagreementwiththemembers.Thereafter,the

memberswoulduploadtherelevantdetailsintheExchange

software in order to generate the Unique Client Code

("UCC"). Once the UCC was generated, the client was

permittedtoexecutetradesthroughthemembers.Thereare

around13,000clientsoftheaboveMembersoftheNSEL.

Thetradesweregenerallyexecutedbymembersonbehalfof

theirclientsinthefollowingmanner:

i. Onthe'TradeDate(T),thefollowingactionstakeplace:

a thetradeisexecutedbythememberonbehalfof theclient

andbpursuanttoexecutionofthetrade,aconfirmationEmail wassentbythemembertotheclientalongwiththeprovisional returncomputationonthetrade;

ii. OnT+1,acontractnoteisissuedbythemembertothe clientfortheBuyandSellside;

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iii. Onthesamedayorpriortoit,membercollectsmonies fromtheclients

iv. OnT+2,thefollowingactionswilltakeplace:

a.payinoffundsbythememberonbehalfoftheclient forthetrade;and

b. pay out of commodity (the Warehouse Receipt for whichis retainedbytheExchangeasearlypayinforthe payinobligationsfortheT+25trade);

v. OnT+3, client wise delivery allocation report for the executed tradeisavailableontheExchangeinterfacefor downloadbythe member;

vi. OnT+25,thetradeissettledbywayofpayoutoffunds.

All trades, T+2andT"T25, aresettled inaccordance withtheSettlementCalendarissuedbyNSELforthatmonth.

10 Indeed,itappearsthattheNSELdeviatedfromitsbusiness

model. Italsoappearstherehadbeennoactualphysicaldeliveryof

commodities, andbogus warehouse receipts were issued. NSELwas

actuallysupposedtotradeincommodities,butinsteadofdoingthat,it

permittedbogustransactionsoftradingtobeintroducedandresultantly,

ineffect,permittedfinancialtransactionsoflendingandborrowing.

11 I have carefully considered the whole matter in all its

perspectives. Thecontentionsadvancedonbehalfoftheapplicant,as

alsothecontentionsadvancedbythelearnedSpecialPublicProsecutor,

have undergone slight changes when certain aspects of the matter

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becameclear.Similaristhecasewiththecontentionsadvancedbythe

FirstInformant/Intervenor.

12 Thefirstandforemostcontentionadvancedonbehalfofthe

applicant is thattheapplicant is notresponsible forthese illegalities,

irregularities and wrongs that have taken place in the affairs of the

NSEL. ItissubmittedthattheapplicantisaNonExecutiveDirectorin

the NSEL. It is submitted that the wrongs of permitting trading in

fictitiousstocks,issuingwarehousereceiptswithouttherebeingstocks

depositedinthewarehouse,etc,havetakenplaceatthelevelofthe

employeesconcernedofNSEL,andatthemost,attheleveloftheactive

DirectorsoftheNSEL. Itwascontendedthatthereisnothingtoshow

thattheapplicantwasawareoftheseirregularities/illegallities.

13 In view of this contention, the emphasis of the learned

SpecialPublicProsecutorandthelearnedcounselfortheIntervenorhas

beenonunacceptabilityofsuchacontention. Itwaspointedoutthat

NSELwaspromotedandcontrolledbyFinancial Technologies(India)

Ltd(forshort'FTIL'),andthatFTILowns99.99%oftheshareholdingof

NSEL. ItwascontendedthattheapplicantisaPromoterDirectorof

NSEL, and that he and his family hold about 44% of the total

shareholding of the FTIL. It is submitted that it was, therefore,

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impossible to believe that the applicant was not aware of what was

happeninginrespectoftheNSELtransactions.Duringthependencyof

the present application, the statements of some persons came to be

recorded, fromwhichcertain facts making it clear that theapplicant

couldnothavebeenunawareofthebogusandfictitioustransactionsof

saleandpurchasethatweretakingplaceontheNSELplatform,have

beenrevealed.

14 IntheviewthatIamtaking,itisnotnecessarytodiscuss

suchmaterialindepth,andwhatneedstobeobservedisthat,goingby

thefactsofthecase,asreflectedfromtheinvestigationthathasbeen

carriedoutsofar,andjudgingbythebroadprobabilitiesofthecaseas

shouldbedoneat thestageof bail it cannotbeacceptedthatthe

applicanthadnoknowledgeof theillegalities/fraudulenttransactions

thatweretakingplaceintheactivitiesofNSEL.

15 What,however,issignificantisthatthoughtheseillegalities

orthis'fictitioustrading'issoughttobehighlightedasmaterialagainst

theapplicant, therealgrievanceoftheFirstInformantandevenofthe

otherinvestorsisnotwithrespecttothefactthatsuchfictitioustrading

wastakingplace. Theirgrievanceisthattheirmoneyhasbeenlost. A

biguproarhasbeencreatedbythem,andforshowingthemagnitudeof

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theallegedoffences,itistermedasa'scamofaboutRs.5600crores'.In

thisconnection,certainbasicaspectsofthemattercannotbelostsight

of. Thepersonswhosemoniesarelost,includingtheFirstInformant,

areapparently,notthegenuinetradersforwhomNSELwassupposedto

provideaplatform. Theveryfactthatthesepersonsare,asalsothe

Investigating Agency is, freely using the terms as the ' investors' ,

'borrowers', indicates that, that the transactions inquestionwerenot

genuinetransactionsofsaleorpurchasewaswellknowntothesocalled

buyersalso,whonowchoosetodescribethemselvesas' investors' . Itis

clearthatfromtheirpointofview,itwasonly aninvestmentyielding

highreturnsfortheirmoney. Theseinvestorsarenotmiddleclassor

lowerclasspeople,butarethemselvesbusinessmen.Thetransactionsin

questionwerebeingenteredthroughbrokerswhohadknowledgeofthe

commercial market. Goingby the broadprobabilities of the case, it

cannotbeacceptedthatthepersonswhoarenowcryingfoul,werenot

awareofthefactthattheirtransactionswerenotgenuine.Theywere

lookingatthesetransactionsclearlyasaninvestmentoftheirmonies

yieldingsafereturns. Theirestimateorbeliefaboutthesafetyofthe

transactionshasbeenprovedtobewrong,andthatisthereasonforthe

uproarwhichisnowbeingmadebypointingouttheillegalitiesinthe

transactionsundertakenbyNSEL.Undoubtedly,thesewrongsappearto

havetakenplace,andundoubtedly, itcannotbesuggestedthatthose

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who permitted such fictitious trading have not committed serious

offences, still, the fact remains that the persons whoare raising the

grievance about such fictitious tradings were themselves not genuine

traders, and had entered into the transactions purely as financial

investments.Thereiseveryreasontobelievethatasizablenumberof

socalled'investors'whosetransactionswerebeingenteredintothrough

brokers, actually did not bother about the fictitious trades, and

knowingly participated in such illegal activities, without raising any

issueofillegalitythereof.

16 Thereisgreatsubstanceinthecontentionsadvancedbythe

learnedcounselfortheapplicantthatthebrokersthroughwhomtheso

called trade transactions were entered into, dohave their own legal

teamandafullknowledgeofhowthemarketoperates.Thelegalitiesof

thetransactionswerequiteexpectedtobeknowntothebrokersandthe

traderswhodonothesitatetotermthemselvesas'investors',andthey

wereexpectedtoassessthelegalitiesofthetransactions. Thebrokers

beingquiteexperienced,andtheinvestorsbeinginformedpersons,itis

apparentthattheissueofillegalityofthetransactionsraisedbythemis

notoutoftheirconcerntoadheretolegalities,butinordertoproject

theapplicantasthemainoffender,ratherthanthedefaultingparties.

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17 Itmaybeobservedinthiscontext,thatthelegalityofthe

applicationoftheprovisionsoftheMPIDActtothiscaseisnotfreefrom

doubt. Whether the monies paid by the buyers for purchasing the

commodities would amount to 'deposit' as defined in clause (c) of

section2oftheMPIDAct,wouldneedseriousconsideration.Whether

NSEL can be termed as a 'financial establishment' as defined under

clause(d)of section2of theMPIDAct, wouldneedequallyserious

consideration.SinceIamdealingonlywithaBailApplicationitwould

beneithernecessarynorpropertogodeeperintothisaspect,butwhat

needstobesaiditthatthe 'investors'inthiscasearenotthetypeof

personsforwhoseprotectionMPIDActhasbeenenacted,asreflected

fromthestatementsofobjectsandreasonsbehindthesaidenactment.

18 Thoughthecasehasbeenprojectedasa'scamofRs.5600

crores',itneedstobekeptinmindthattheseamountshavenotbeen

receivedbyNSEL.Asalreadyobserved,itisdifficulttoacceptthatthe

brokersand/ortheirclientsforwhomtheywereworkingwere'deceived'

bytheNSELinasmuchasinallprobability,thebrokersandtheinvestors

werewellawarethattheywerenotenteringintoagenuinesaleand

purchasecontract. Whenthereisaclearandobviouspossibilitythat

thesepersonsknewaboutthetransactions,the'deception'ifany,caused

to them cannot be said to have been caused by the nature of the

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transactionsand,atthemost,theycanbesaidtohavebeenmisledbya

propogandathat'investing'moneyinthosetransactions,wassafe. The

moneyinvestedhasnotcometoNSEL,buthasgonetotheborrowers.

i.e.bogussellers. Itistheborrowerswhohavebeenbenefitedbythe

transactionsandthemoneyof'investors'hasgonetothem.Thenames

of25differentcompanieswhoarethedefaultershavebeenmentioned

intheFIRitself.Thus,thoughprojecteda'scamofRs.5600crores',the

illgottenamounthasnotgonetotheapplicant,orforthatmatter,to

NSEL.Infact,itisnotthecaseofanyone.

19 Thepicturethatemergesisasfollows. Indeed,illegaland

bogustransactionsof saleandpurchasewereshownashavingtaken

place. This has beenpossible because theNSELdidnot stick to its

businessmodel.Insteadofprovidingaplatformforgenuinebuyersand

traders,thisplatformwaspermittedtobeusedandactuallyused

bybusinessmenwhowantedsafeinvestmentsfortheirmoney. These

investments were made through brokers who were well experienced

withtheworkingofthemarket.Toshowbogussales,bogusdocuments

werecreatedbythebogussellers/brokers,andthishasbeenpossible

withtheconnivanceoftheofficersanddirectorsofNSEL. Thoughthe

applicant'scontentionthathewasnotawareoftheillegalities,orthathe

beingaNonExecutiveDirector of NSELwasnot concernedwiththe

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illegal activities, cannot be accepted, it is also clear that, that the

transactions were not genuine, was in all probability, known to the

'investors'atleasttoagreatnumberofthemandinanycase,certainly

knownto thebrokers whowereentering into thecontracts for their

customersinvestors. ThisfactisobvioustotheInvestigatingAgency

also,inasmuchthebuyersandsellersarefreelydescribedas' investors'

and 'borrowers'. TheNSEL,by its improperandwrongworking,did

provideanopportunityfortheunscrupulous 'borrowers'tohavehuge

fundsforthemselves.However,inthezealofopposingtheapplicant's

applicationforbail,itis,perhaps,convenientlyignoredthatthefunds

hadnotcometoNSEL,buthadgonetosuchborrowers. Though a

numberofcontentionsshowinghiscomplicityinthewholematterare

raised,onacarefulconsiderationandscrutinyofthematter,theonly

realallegationagainsttheapplicantisthat heallowedNSELtoviolate

therulesandregulations,anditsownbusinessmodel, whichenabled

the'borrowers'todupethe' investors' .

20 Undoubtedly,anallegationthatthishasbeendonebythe

borrowers in conspiracywith the NSEL andconsequently with the

applicanthasbeenmade.However,thereisnomaterialtoshowthe

same. Thereisnoallegationthattheapplicanthasacquiredfromthe

borrowers any part of the illgotten money earned by them, as a

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considerationformakingitpossibleforthemtocommitsuchfrauds,or

that,anypartofthemoneyearnedbytheborrowersinsuchadishonest

manner, hasbeenreceived fromthembytheapplicant. It is almost

concededthattherehasbeennomaterialtoshowanydirectconnection

orlinkbetweenthedefaultingborrowersandtheapplicant.Whenthis

aspectofthematterwasdiscussedinthecourseofhearing,anumberof

contentionsshowinghowtheapplicantstoodbenefitedbythefraudulent

transactions, were advanced. It is submitted that these transactions

resulted in increasing the turnover of NSEL, improved its market

reputation and consequently, benefited the FTIL Group of which the

applicantisamajorshareholder. Itissubmittedthattheapplicanthas

receivedbenefitsfromthesefraudsbywayofincreaseintheincomeof

FTILandtheconsequentbenefitsaccruingtotheapplicantfromsalaries,

commission etc. However, it is obvious, prima facie, that had the

applicantconspiredwiththebogussellers/borrowers/defaultersandhad

he permitted the illegal activities to take place so that such bogus

sellers/borrowers/defaultersshouldmakehugemoneyforthemselves,

he wouldnever becontent with the indirect and incidental benefits,

whichallegedlyaccruedtohimthroughFTIL.

21 When this aspect of the matter was discussed, it was

suggestedthattheremightbeapossibilityofsomecashthroughhawala

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transactionshavingbeenpassedovertotheapplicantbythedefaulting

borrowers. It is submitted that to detect such transactions, indepth

investigationisnecessaryandthat, investigationisproceedinginthat

direction. That,certainly,is possible. Suchinvestigation,however, is

admittedly,likelytotakemuchtime,anditisnotpossibletoholdthat

theapplicantneeds to bedetainedmerely becausesuchapossibility

exists.Itisafactthatasoftoday,thereisnomaterialtoshowanydirect

linkbetweentheamountsdishonestlyearnedbytheborrowersandthe

amountsreceivedbytheapplicant.Thebenefitswhichtheapplicantis

saidtohavegainedfromthesetransactionsareonly indirectbenefits

suchasincreaseinthevolumeofbusinessandconsequentincreasein

theprofitofFTIL,andarenotsufficient,initself,tosupportatheoryof

conspiracy. The very fact that it would take quite some time to

investigatewhethertheproceedsofcrime,orapartthereofhasbeen

received by the applicant from the defaulting borrowers, (which

undoubtedly would support the conspiracy theory) would weigh in

favourofgrantingbailtotheapplicant,ratherthanweighinginfavour

ofdetaininghimincustodytillthisaspectwouldbeclear. Sufficient

timehasalreadybeengiventotheInvestigatingAgencyandinspiteof

this, no link or connection between the proceeds of crime and the

applicant,hasbeenrevealedsofar.

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22 Itwassubmittedonbehalfoftheintervenorandalsobyone

KetanShah whoclaimedtobearepresentativeoftheinvestors, and

whowaspermittedtomakebriefsubmissionsopposingthegrantofbail

thattheapplicantisamoniedpersonandthatheshouldgivesome

offerofreturningthemoneytotheinvestors,toprovehisbonafides.

ItwassubmittedthatasinthecaseofSubrataRoy(SaharaVs.Unionof

India&ors(WritPetition(Criminal)No.57of2014)decidedon6thMay

2014,whohasbeendetainedbyTheirLordshipsoftheSupremeCourt

ofIndia,theapplicantshouldalsobedetainedincustodytillhegives

suchoffer. Thissubmission andthisexpectationisnotproper. Inthe

firstplace,thoughthisistermedasa'scamofRs.5600croresbyNSEL',

itisnotthatmonieshavebeenreceivedbyNSEL,buttheyhavegone

fromonebogustrader(investing)toanotherbogustrader(borrower).

Atthecostofrepetition,itneedstobeobserved,thatfromananalysisof

theallegations,itbecomesclearthattherealandonlyallegationagainst

NSEL is that it adopted such modus operandi that permitted the

borrowerstodupetheinvestors. ThebenefitsreceivedbyNSELand

FTIL and consequently, by the applicant from these fraudulent

transactions, are only incidental. Therefore, merely because the

applicantisamoniedpersonandislikelytobeinpositiontosatisfy

someinvestorsaswasstatedbeforethisCourtonbehalfoftheinvestor

andtheinvestorshecannotbedetainedincustodyforthepurposeof

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forcinghimtodoso.Theexpectationisnotthatthemoneygoneinhis

pocketshouldbetakenoutbyhim,buttheexpectationisthathehaving

beeninstrumentalinthedupingofinvestorsbytheborrowersbemadeto

paytotheinvestorsashehassufficientmeanstodoso.Perhaps,theFirst

Informant and the investors feel that by putting the applicant in a

difficultsituation,itwouldbeeasierforthemtorecovertheirmoney.

Theculpabilityoftheapplicantcannotsuccessfullybeprojectedtobeof

ahigherdegreethanthatofthe 'borrowers' (bogussellers)andtheir

brokers, whohave actually takenaway the money. Theexample of

Subrata Roy is most inappropriate as the facts of that case and the

circumstancesinwhichTheirLordshipsoftheSupremeCourtdirected

hisdetentionareentirelydifferent.Moreover,byvirtueofArticle142of

theConstitution, theSupremeCourt has full powerandauthority to

make any order for doing complete justice between the parties. Such

power,thisCourtdoesnothave.

23 There are also some other aspects, a mention of which

would be necessary. Though there are direct allegations against the

applicantintheFIRitself,theapplicantwasnotputunderanyarrest.

Fiveotheraccusedwerearrestedandchargesheeted.(Itisonlyatabout

that time that the applicant was arrested). Three of them are the

officials of NSELand two, are the 'borrowers' whohave made huge

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defaults.Thereafter,withoutanynewmaterial,theapplicantcametobe

arrested. ThecaseoftheInvestigatingAgencyearlierwasthattheco

accused Anjani Sinha, the CEO of NSEL had taken the entire

responsibilityofthewrongsuponhim.ThoughIamnotsuggestingthat,

that should be accepted as a fact and would certify the applicant's

innocence, the fact remains that no necessity was felt by the

InvestigatingAgencyofarrestinganddetainingtheapplicantincustody

forthepurposeof investigation. Infact, the investigationproceeded

aheadandresultedinfilingofchargesheetagainsttheaccusedpersons

whohadearlierbeenarrested.Certainpropertyofthearrestedaccused

and also of the applicant, has been attached in the course of

investigation. Therefore, it is not that the applicant's detention in

custodyisessentialforfurtherinvestigation.

24 Allsaidanddone,thereisnochangeinthelegalprinciple

that pretrial detention can never be authorized as and by way of

inflictionofpunishment.

25 Theapplicantisnotlikelytoabscondif releasedonbail.

Appropriateconditionscanbeimposedupontheapplicanttoensurehis

availabilitytotheInvestigatingAgencyandtotheCourt.

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26 Applicationisallowed.

27 Applicant isorderedtobereleasedonbail inthesumof

Rs.5,00,000/(RupeesFivelakhsonly)withonesuretyinlikeamount,

on the condition that the applicant shall report to the office of the

Investigating Agency on every Monday and every Thursday between

11.00a.mto 1.00p.mfor a period of twomonths fromtoday, and

thereafteruntilfurtherordersofthetrialcourt.

28 At this stage, the learnedcounsel for theapplicantprays

thatasthehealthoftheapplicantisdeteriorating,andasitwouldtake

quitesometimetofurnishsuretiesintheamountofbail,theapplicant

betemporarilyreleasedonhisdepositingcashinlieuofsurety.SinceI

donotthinktherethereisanypossibilityoftheapplicantabsconding,if

permittedtodepositcashinlieuofsurety,Iaminclinedtograntsucha

prayer.

29 TheapplicantmaydepositcashofRs.5,00,000/inlieuof

surety,temporarily,foraperiodoftwoweekswithinwhichperiodthe

applicantisexpectedtofurnishsolventsuretyintheamountofbail.

30 The counsel for the intervenor prays for the stay of the

operationofthisorder.

31 Prayerrejected.

(ABHAYM.THIPSAY,J)

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