Rakesh Kumar Gulati v. Directorate of Enforcement

1. The present application under Section 483 of the Bharatiya Nagarik Suraksha Sanhita, 2023, (for short, ‘BNSS’), read with Section 45 of the Prevention of Money Laundering Act, 2002, (for short, ‘PMLA’), has been filed seeking regular bail in CC No. 01/2024, arising out of ECIR No.: GNZO/09/2021, under Sections 3/4 of the PMLA, registered with Directorate of Enforcement/respondent. The said ECIR was registered in respect of predicate/scheduled offence in FIR bearing No. RCCHG2020A0021, dated 31.12.2020, under Section 120B read with Sections 406, 409, 420 of the Indian Penal Code, 1860, (for short, ‘IPC’), and Section 13(2) read with Section 13(1)(d) of the Prevention of Corruption Act, 1988, (for short, ‘PC Act’), registered with CBI, ACB, Chandigarh. Factual Background

2. The present ECIR arises out of FIR/RC being RCCHG2020A0021 which was registered with CBI on a complaint filed by the then Chief Manager of Punjab National Bank, Hindu College Branch, Sonipat, Haryana, against M/s Sunstar Overseas Ltd. (for short, ‘accused company’) and its directors. As per the said FIR, accounts of 5 banks, namely, PNB, ICICI Bank, IDBI Bank and State Bank of India were declared NPAs (Non- Performing Assets). It was alleged that the accused company had availed various credit facilities from ‘Consortium of 9 lender Banks’ 1 and had diverted/siphoned off the said loan amount, thereby, failing to repay the said loan amounts to the banks. It was also alleged that the accused company had also violated terms and conditions of the loan agreements in respect of hypothecated goods as the said goods were disposed of without depositing sale proceeds in their Cash Credit Accounts. The case of CBI is that M/s Sunstar Overseas Ltd., accused company, through its directors/promoters/employees and others, had committed fraud by siphoning Punjab National Bank; Corporation Bank; City Union Bank; Karur Vysya Bank; Karnataka Bank; Canara Bank; ICICI Bank; IDBI Bank; and State Bank of Patiala and diverting funds, criminal misappropriation, criminal breach of trust, cheating, fraud etc., thereby causing wrongful loss of approximately, Rs.951.88 Crores to the consortium of 9 lender banks. It was further alleged that the accused company, after July 2017, failed to submit stock report for as undertaken by it to the consortium of lender banks and subsequently, the said loan accounts of the accused company were declared NPAs w.e.f. 31.03.2015 by the Statutory Auditor on 31.03.2017 which was approved by the consortium of lender banks approved a Master Restructuring Agreement Package on 07.11.2015. The allegation against the accused company was that it through its directors had sold its entire stocks, but the sale proceeds were not being deposited with the bank in the loan accounts. It was also alleged that the accused company had advanced sums received by way of the credit facilities for investment in real estate, which is non-core business activity of the accused.

3. In correspondence to the aforesaid, on an application filed by ICICI Bank Ltd. under Section 7 of the Insolvency and Bankruptcy Code, 2016, (for short, ‘IBC’) before the National Company Law Tribunal (for short, ‘NCLT’) Corporate Insolvency Resolution Process (for short, ‘CIRP’) proceedings were initiated against M/s Sunstar Overseas Ltd. on 20.07.2018, wherein, an Interim Resolution Professional was appointed for the accused company. NCLT vide order dated 12.09.2019 approved the resolution plan of the Resolution Applicant, Ajay Yadav & Co., body of individuals, through its Special Purpose Vehicle, M/s Umaiza Infracon LLP, (‘Umaiza’) for a total amount of Rs. 196 Crores. Thus, on implementation of the same, total shareholding of the accused company was to be held by Umaiza. It is alleged that, during the course of investigation, it was revealed that Ajay Yadav &Co., held by Ajay Yadav, as well as active partner of Umaiza, was acting on the directions and advice of the ex-directors/promoters of the accused company so that they can indirectly acquire the accused company while it was undergoing CIRP.

4. In view of the aforesaid facts, investigation was undertaken by ED/respondent through which it was revealed that the accused company through its directors/promoters was indulged in generation of proceeds of crime to the tune of Rs. 539 Crores approximately. It was further revealed that groups of firms/companies[2] were created as fictitious debtor of the accused company for the sole purpose of generation of ‘proceeds of crime’ by diversion/siphoning off of rice stocks procured out of loan availed from the aforesaid consortium. It was further revealed that the said entities were owned and controlled by ex-directors, promoters of the accused company and were diverting ‘proceeds of crime’ to a NBFC, namely, Kalptaru Fincap Ltd., (Kalptaru), through layers of ARCs (Asset Reconstruction Companies). It had further emerged that dummy entities, i.e., M/s Shivakriti Agro Ltd., Shivakriti, allegedly owned and controlled by ex-directors and promoters of the accused company, was used as mode for diversion of stocks of rice from the accused company and its fictitious debtor company (SGMV), as noted hereinabove. It was further revealed that proceeds of crime to the tune of Rs.1.35 Crores were possessed and diverted from SGMV to Shivakriti through a fictitious seller/buyer firm, i.e., M/s Aastha Enterprise, under the garb of sham trade transactions. It is further alleged that a sum of Rs. 146 M/s Star Global Multi Ventures Pvt. Ltd./SGMV and M/s. Star Rice Land Pvt. Ltd./SRLP Crores was diverted through Shivakriti during the period commencing from 24.09.2019 to 20.03.2020 under the garb of a sham instrument, i.e., Facility Agreement dated 30.09.2019 which was intended to take over the assets of the accused company. As per the case of the respondent/ED, the exdirectors/promoters of the accused company were able to regain the actual control of the accused company indirectly through Umaiza and Shivakriti whereby wrongful loss was caused to the said consortium of lender banks.

5. During the course of investigation, the present applicant along with Ajay Yadav and Paramjeet Sharma was arrested in the ECIR registered with the respondent/ED on 01.07.2024 and was arrayed as accused No. 11 in the complaint filed before the learned Special Court. Learned Special Court took cognizance of the offences alleged in the complaint filed vide order dated 25.09.2024. Role of the Present Applicant as Highlighted in the Complaint filed before learned Special Court

6. The role of the present applicant, as per the complaint filed by the respondent/ED before the learned Special Court, reads as under: - “10.20 Role and Conduct of Rakesh Kumar Gulati 10.20.[1] That he was the Chartered Accountant /Auditor of M/s. Sunstar Overseas Ltd. and almost all its related entities and has been looking after their audit and statutory compliances. His e-mail id is found registered with many Sunstar Group companies/ firms. He was also looking after audit and accounts of M/s. Shivakriti Agro Pvt. Ltd. and M/s. Star Global Multi Ventures Pvt. Ltd. which have major role in this case, as per material evidences presented and discussed in preceding paras. In his capacity of chartered accountant and auditor of all said companies, he had hold of books of accounts and other financial records/ documents of the M/s. Sunstar Overseas Ltd, its related companies/firms and also of M/s Shivakriti Agro Pvt. Ltd. 10.20.[2] That the investigation revealed that Rakesh Kumar Gulati has acted beyond his professional capacity of being a CA and auditor of aforesaid entities found involved in the money-laundering and he knowingly assisted and knowingly indulged himself in the generation, acquisition, concealment, diversion and finally, projecting the ‘proceeds of crime' involved in the case as untainted property. 10.20.[3] That to verify and ascertain above facts, his very good friend- Mr. Ajay Soni, ex-director and shareholder of M/s Shivakriti Agro Pvt. Ltd. (SAPL) in his recorded statement discussed supra, wherein he inter alia stated and accepted that on the directions/ instructions/ requests of Mr. Rakesh Kumar Gulati, he handed over his company- M/s Shivakriti Agro Pvt. Ltd. for operational purposes to Rohit Aggarwal, who was director and controller of M/s Sunstar Overseas Ltd.. Thereafter, exdirectors of M/s. Sunstar Overseas Ltd. appointed new employees in M/s. Shivakriti Agro Pvt. Ltd. from a pool of ex-employees of M/s. Sunstar Overseas Ltd. By this, they assumed control of M/s. Shivakriti Agro Pvt Ltd. and commenced business operations but in the name of Ajay Soni, as he was still director and shareholder. Ajay Soni further revealed that he also signed many documents, such as agreements and board resolutions, as per the instructions of Rakesh Kumar Gulati, without questioning their contents. Ajay Soni further revealed that he had no knowledge of any transactions involving M/s. Shiva Kriti Fashion Pvt Ltd. (later renamed as Shivakriti Agro Pvt. Ltd.) as he signed all the documents presented to him by Rakesh Kumar Gulati believing in good faith and without questioning him about their contents. He also revealed that Rakesh Kumar Gulati and Rohit Aggrawal conspired together with regard to investments received in M/s Shivakriti Agro Pvt. Ltd. from overseas investors, transactions made to M/s Umaiza Infracon LLP for Facility Agreement done with the said entity and export advances received from overseas buyers- Jashan Trading LLC and Meenaraj Trading LLC during his tenure as director and shareholder. It therefore emerges that it was Rakesh Kumar Gulati who was acting as the face of Ajay Soni, the then Director of M/s Shivakriti Agro Pvt. Ltd., and the same had been accepted by them in their above referred statements tendered U/s 50 of PMLA. 10.20.[4] That besides above, the seized digital records, specifically email of Rakesh Kumar Gulati with e-mail id: rkgulati@rakeshgulati.com, it is found that Ajay Soni had sent an e-mail dated 19.07.2022 to Ajay Yadav, Rakesh Gulati and other wherein he categorically mentioned the name of his friend Rakesh Kumar Gulati as official deal maker /agent who actually got him involved in frauds and scams by Rohit Aggarwal and other directors of Sunstar Overseas Ltd. He further stated that they are continuing very smartly and bluntly in business using his company with benami directors despite the blanket ban by various banks and all the investigating agencies of Govt of India on Rohit Aggarwal and other directors of Sunstar. Further, screen-shot of E-mail dated 03.01.2022 made by Mr. Ajay Soni to M/s Zephyrus and Eternity Legal reveals that: “We have resigned upon getting to know the actual promoters are indulged in various illegal business practices and the past records of all of them are so very suspicious. Every investigation department of Gout of India are investigating their..... The matter with Umaiza Infracon too seems to be another scam by them We are also assessing possible actions, we can take towards Shiva Kriti Agro P Ltd., its promoters and associates M/s, Rakesh Gulati and associates, who attempted to entangle us to help them by giving our company Shiva Kriti Fashion Pvt Ltd., basis false informations." 10.20.[5] That, investigation revealed that Mr. Ajay Soni and his wife Mrs. Madhu Soni transferred 100% shareholding of their company- M/s Shivakriti Agro Pvt. Ltd. to Mr. Paramjeet and his wife Mrs. Seema Sharma on the instructions of Rakesh Kumar Gulati, who was the common auditor & CA for M/s Sunstar Overseas Ltd. as well as M/s Shivakriti Agro Pvt. Ltd. That some of above facts were also admitted by Rakesh Kumar Gulati in his Statement dated 16-17.01.2024 tendered on oath U/s 17 and testified on 01.07.2024 Us 50 of the PMLA, 2002. 10.20.[6] That to further very the facts disclosed supra, statement dated 27.05.2024 of Mr Navin Kanjwani, M/s. Kalptaru Fincap Ltd. recorded U/s 50 of the PMLA revealed that Rakesh Kumar Gulati arranged the meeting of Rohit Aggarwal with the authorized representatives of M/s. Kalptaru Fincap Ltd, to facilitate major siphoning-of /diversion of the funds of Rs.40 Crore which is nothing but the "proceeds of crime" from M/s. Star Global Multi Ventures Pvt. Ltd., an erstwhile related entity of Sunstar Overseas Ltd., to M/s. Umaiza Infracon LLP which was used for acquisition of Sunstar Overseas Ltd. in NCLT. That furthermore, Vijay Inder Bhatia of Compact Capital Ltd. also stated in his statement that Rakesh Kumar Gulati gave him contact no. of Ajay Yadav and asked him to divert the funds to Umaiza Infracon LLP and Rakesh Kumar Gulati arranged Rs.[1] Crore to Compact Capital Ltd from Star Global Multi Ventures Pvt. Ltd. 10.20.[7] That therefore, it would constitute that he consiuosly acted beyond his professional limits to facilitate and mediate at every important stage of money-laundering activities and processes connected to proceeds of crime involved in money laundering. He used his relationship and connections with Ajay Soni, NBFCs, etc. to execute the conspiracy hatched by ex-directors/promoters /benefial owners of M/s. Sunstar Overseas Ltd. and as a result of his conscious involvement in this whole conspiracy, ex-directors/promoters succeeded in regaining the indirect but actual control of assets and properties of M/s Sunstar Overseas Ltd. by way of him arranging network of sham and dummy entities and in appropriating sham transactions in the books of accounts of accused entities for which he was auditor and CA. 10.20.[8] That from the above facts and circumstances, it thus emerges that Rakesh Kumar Gulati knowingly assisted and actually involved himself in the processes and activities connected with the said proceeds of crime, including its generation, acquisition, possession, concealment, use and projecting it as untainted property and hence, he is guilty of committing the offence of money-laundering in terms of provisions of Section 5 of the PIMLA. 2002 and hence, liable for punishment U/s 4 of the PMLA.” Submissions on behalf of the Applicant

7. Learned Senior Counsel appearing on behalf of the applicant has submitted that latter is Chartered Accountant and running his own partnership firm and is an external statutory auditor of the accused company which is owned and promoted by Aggarwal family and its directors. He submitted that the present applicant has not been arrayed as an accused in the predicate/scheduled offence and has been arrested in the present ECIR by the respondent/ED without any evidence. It is pointed out that the present applicant was neither named in the FIR in the predicate/scheduled offence nor kept in column No. 12 of the final report filed by CBI in the predicate/scheduled offence and was only cited as prosecution witness. It is further submitted that the present applicant, being an external auditor of the accused company, was neither involved in managing day-to-day affairs of the said company nor was holding any key managerial personnel position in the said company. It is further submitted that the persons who were, in fact, actively participating in the management of the affairs of the accused company have not been arrested by the respondent/ED in the present complaint case. Reliance has been placed on Himansh @ Himanshu Verma v. Enforcement Directorate 3, to contend that in the present case the respondent/ED has arrested the accused persons in a pick and choose manner and based on this ground alone, the present applicant is to be granted bail.

8. Learned Senior Counsel for the applicant has further submitted that the latter was accountant and auditor of the accused company and Shivakriti and the respondent/ED has arrayed him as accused in the present ECIR merely on the said basis without ascribing any specific role. It is further submitted that being an external auditor the applicant never had control over the financial records of the aforesaid companies and he was only providing professional services in respect of nothing incriminatory has surfaced during investigation Order dated 08.07.2024 passed by Hon’ble Supreme Court in SLP (Crl.) Nos. 2438/2024 undertaken in present ECIR as well as predicate offence. It is further submitted that he was known to the director of Shivakriti, Paramjeet, as the latter was an erstwhile employee in the accused company. It is further pointed out that the applicant had ceased to be the statutory auditor of the accused company as well as Star Global Multiventures Private Limited in 2017. Attention of this Court has been drawn towards the ADT forms in this regard. Reliance has been placed on para 26 of the judgment passed by a Coordinate Bench of this Court in Manish Kothari v. Director of Enforcement[4], to contend that in similar circumstances wherein, the applicant was arrayed as an accused as an external auditor by the respondent/ED in the said case, bail was granted.

9. It is further submitted that the allegations of the respondent/ED that the email id of the applicant was found associated with many Sunstar Group of Companies, is without any cogent evidence and even otherwise, he was statutory auditor of the said companies and it is in normal course of business to a company to have the email id of their auditors and the same in no manner incriminates the applicant. Insofar as the allegations of acting beyond his professional limits, it is submitted that Resolution Professional for the accused company had, in his statement under Section 50 of the PMLA, stated that he knew the present applicant only in his capacity as an external auditor and had only met him once. It is further submitted that Ajay Yadav had himself stated that the present applicant had no involvement in the CIRP proceedings or any activity related to the same and was also not involved in arranging funds for Umaiza.

10. Learned Senior Counsel has submitted that the whole case of the respondent/ED against the applicant is based on the statement under Section 50 of the PMLA of Ajay Soni, who had alleged that the applicant was running Shivakriti. It is submitted that it has not been alleged by the said Ajay Soni that he was made to sign on blank papers at the instance of the applicant and it is the respondent/ED which had twisted the statement of Ajay Soni in order to foist a narrative against the applicant. It is further submitted that Ajay Soni had attended various meetings, board resolutions which, in fact, shows that he was actively involved in taking of various key decisions of Shivakriti. Attention of this Court was drawn towards the Statement of Paramjeet, recorded under Section 50 of the PMLA, wherein, in respect of question that who used to take decisions in Shivakriti, he had stated that it was Ajay Soni, who used to manage affairs of Shivakriti. It is also submitted that neither respondent/ED nor Ajay Soni has ever produced any document whereby it can be concluded that the present applicant was discharging any role relating to the internal affairs of Shivakriti.

11. It is the case of the respondent/ED, the present applicant was involved in aiding and assisting Rohit Aggarwal to facilitate funds for Umaiza so that it could acquire the accused company indirectly during CIRP. Learned Senior Counsel has submitted that the said allegation is based on the statement of Navin Kanjwani and the same is in contradiction with his own statement as well as to that of Navin Gupta, who was the director of Kalpataru. It is pointed out that Navin Kanjwani is not associated with M/s Kalpataru in any capacity and any statement made by him in respect of the affairs of the said entity is completely hearsay. It is further submitted that Navin Gupta, who was director and shareholder of Kalpataru had, in his statement under Section 50 of the PMLA, stated that he had neither met nor ever heard of the present applicant. It is further submitted that the case of the respondent/ED that the applicant had given Vijay Inder Bhatia contact information of Ajay Yadav and asked him to divert funds to Umaiza is false and contradictory as the applicant had not known any such person by the said name prior to November

2019. Moreover, other allegations based on the statement of Vijay Inder Bhatia are also self-contradictory and no proof of the applicant ever meeting him has been provided by the respondent/ED.

12. Learned Senior Counsel has further submitted that it is an admitted case of the respondent/ED that the present applicant is not a beneficiary of any of the proceeds of crime and has not received any remuneration besides his fees for being a statutory auditor of the accused company. Attention of this Court has also been drawn towards the order dated 09.07.2024 passed by Coordinate Bench of this Court in W.P.(C) 10526/2019 whereby the fraud declaration by PNB dated 31.03.2017, which led to the registration of FIR in the predicate/scheduled offence, has been set aside and it is submitted that since the existence of the predicate/scheduled offence is under doubt, thus, in view of the decision of Hon’ble Supreme Court in V. Senthil Balaji v. The Deputy Director, Directorate of Enforcement 5, the applicant’s further incarceration would not be warranted. Learned Senior Counsel has further submitted that the twin conditions as provided in the present case are satisfied and the respondent/ED has failed to demonstrate reasonable grounds for 2024 SCC OnLine SC 2626: 2024 INSC 739 believing that the applicant is guilty of the alleged offences or was involved in the generation, acquisition or disposing off of the proceeds of crime. It is further submitted that the applicant is not a flight risk as well as has roots in the society and had cooperated with the investigation prior to his arrest. Thus, the triple test has been satisfied.

13. Learned Senior Counsel has further submitted that the matter in the predicate/scheduled offence is at the stage of Section 207 of the CrPC (supply of documents) and CBI/prosecution therein has cited 98 witnesses. The complaint in the present ECIR has been filed and learned Special Court has taken cognizance of the offence alleged therein. The respondent/ED has cited 26 witnesses in the present complaint and the applicant has been in custody since 01.07.2024. It is further submitted that in view of the V. Senthil Balaji (supra) the trial in both the predicate/scheduled offence as well as the ECIR/complaint case registered with the respondent/ED has to be simultaneous, which is not likely to culminate in near future and keeping the applicant under prolonged incarceration will not serve any purpose. Reliance has also been placed on Pankaj Kumar Tiwari & Anr. v. Enforcement Directorate[6], in support of this contention. Submissions on behalf of the Respondent/Directorate Of Enforcement

14. Learned SPP for respondent/ED has submitted that the present applicant is prima facie guilty of commission of offence of money laundering and has not been able to satisfy the twin conditions provided under Section 45 2024:DHC:8280 of the PMLA. It is further submitted that the present applicant, while acting as Chartered Accountant/Auditor of the accused company and its other related entities, was looking after their financial accounts and audits by making statutory compliances and has played a vital role in siphoning off more than Rs. 539 Crores whereby the accused company had defaulted in repayment of the loan/credit facilities availed from the consortium of 9 lender banks. He further submitted that, during the investigation in the present ECIR, it has come on record that the present applicant was looking after the audit and accounts of M/s Shivakriti Agro Pvt. Ltd. and M/s Star Global Multi Ventures Pvt. Ltd., which were fictitious debt firms/companies created solely for the purpose of diversion of stocks, and has played an essential role by assisting the ex-directors/promoters of the accused company in the siphoning/disposing of the money taken from the consortium. It is the case of the respondent/ED that the present applicant was knowingly indulged and had assisted in generation, acquisition, concealment, diversion and projecting of the proceeds of crime as tainted money in the present case. It is further submitted that the present applicant was a person who was possessed with knowledge and skills and by misusing the same, diversion of money was facilitated. He has by acting in such manner exceeded his professional capacity.