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Synopsis

The Delhi High Court, on October 24, granted bail to Pankaj Kumar Tiwari VP (Finance) and Pankaj Kumar VP (Accounts) noting “the fact that the main accused are out on bail, the period of custody undergone and that the trial is yet to commence”. 

The bench of Justice Manoj Kumar Ohri remarked “Thus, where it is evident that the trial is not likely to conclude in a reasonable time, Section 45 cannot be allowed to become a shackle which leads to unreasonably long detention of the accused persons”. 

The case was initiated after ED filed a complaint, based on the SFIO investigation, alleging that the former promoters of M/s Bhushan Steel Ltd. (BSL), Brij Bhushan Singhal and Neeraj Singhal, had secured loans amounting to Rs. 56,000 crores from various banks and financial institutions before BSL entered insolvency and the Corporate Insolvency Resolution Process (CIRP) was initiated. The accused were required to inject capital into BSL to obtain credit facilities for its steel plant in Orissa, and to maintain the necessary debt-to-equity ratio. 

Assisted by employees and close associates, Brij Bhushan Singhal and Neeraj Singhal allegedly siphoned funds from BSL and Bhushan Energy Ltd. (BEL) using a complex network of companies and financial transactions starting from the year 2009-10. Funds were transferred from BSL and BEL to approximately 150 interconnected companies, categorized as 'B' and 'C' companies, which were under the promoters' control, with BSL employees serving as Directors or signatories. These transfers were designated as 'Capital Advances,' and the recipient companies subsequently funneled the funds back into BSL as promoter equity and for the issuance of preference shares. The consolidated funds were managed through bank accounts held by Uma Singhal and Ritu Singhal, the wives of Brij Bhushan Singhal and Neeraj Singhal, respectively.

Moreover, it was alleged that the accused had utilized forged documents to avail credit facilities from banks. BSL reportedly opened Letters of Credit (LCs) with consortium banks for non-fund-based limits based on fraudulent invoices for goods supposedly supplied by M/s Jindal Steel Works (JSW) and M/s Hindustan Zinc Ltd. (HZL). The LCs were discounted using BSL's account number and request letters from JSW and HZL, despite no actual goods being supplied. 

The fraudulent activities were allegedly concealed through false asset valuations and inflated Stock-in-Transit figures. As a result, public funds amounting to Rs. 45,818 crores were allegedly diverted between 2013-14 and 2016-17. It was further asserted that the applicants had aided the primary accused in these activities.

In the previous court hearing, Tiwari argued that he was merely an employee of Bhushan Steel Ltd, the parent company. It was also argued that he was neither a shareholder, promoter, nor director of the parent company. His involvement with the company was limited to that of an employee. 

The court noted that the investigation commenced in 2019, and the prosecution identified 156 individuals as accused while listing 82 witnesses. The case involved the examination of 250,000 pages of documents. The court also noted that the Special Judge took cognizance of the supplementary chargesheet through an order dated 26.07.2024. Additionally, in the supplementary complaint dated March 8, 2024, the ED sought permission under Section 173(8) of the Code of Criminal Procedure (Cr.P.C.) for further investigation. Consequently, the trial had not yet begun.

Given the large number of accused, the voluminous evidence to be reviewed, and the extensive list of witnesses, it was unlikely that the trial would conclude in the near future, the court emphasized. Notably, the delay could not be attributed to the accused, and using Section 45 of the PMLA to justify prolonged detention was deemed impermissible. The right to liberty could not be curtailed solely by invoking Section 45 without considering all relevant factors. It was the duty of Constitutional Courts to protect the constitutional right to liberty and uphold the principles of Article 21.

“Constitutional Courts can always exercise their powers to grant bail on the grounds of violation of Part III of the Constitution of India and stringent provisions for the grant of bail such as those provided in Section 45 of the PMLA do not take away the power of Constitutional Courts to do so” the court added. 

Furthermore, the court highlighted that the right to liberty and a speedy trial, as enshrined in Article 21, was a fundamental right that required protection, even in cases governed by special legislation. In instances of conflict, the stringent provisions had to be interpreted in line with Article 21, and where necessary, Section 45 of the PMLA would yield to these constitutional guarantees.

The court considering the unlikelihood of an early conclusion of the trial, noted that Section 45 could not be used as a means to impose excessively long detention. The assessment of what constituted reasonable or unreasonable delay had to take into account the maximum and minimum sentences prescribed by the statute. Under the PMLA, except for a few exceptional cases, the maximum sentence was seven years, which had to be considered when evaluating the period of incarceration already served.

In the present case, the court observed that the applicants were arrested on January 11, 2024, and had been in custody for over nine months. The trials in both the predicate and current complaints had not yet commenced and were expected to take considerable time to conclude. Consequently, the court granted bail with a personal bond in the sum of Rs.1,00,000/. 

For Petitioners: Senior Advocates Sanjay Jain and Rebecca M. John with Advocates Abhijit Mittal, Anukalp Jain, Palak Jain, Harshita Sukhija, Nishank Tripathi, Tapan Sangal, Dharmendra Singh and Pravir Singh
For Respondents: Special Counsel Manish Jain with Advocates Sougata Ganguly, Snehal Sharda and Gulnaz Khan
Case Title: Pankaj Kumar Tiwari v Enforcement Directorate (2024:DHC:8280)