Central Bureau of Investigtation Vs Kapil Wadhawan (Delhi High Court)
Delhi High Court held that if the investigation is not completed then merely because the report has been filed, the right of statutory bail cannot be defeated. Merely filing of chargesheet, whether incomplete or piecemeal, cannot defeat the basic purpose of section 167(2) of Cr. P.C.
Facts- This is a petition u/s 482 r/w 439 (2) Cr. P.C. moved on behalf of petitioner CBI seeking quashing and/ or cancellation of order passed by Spl. Judge, whereby the respondents have been granted default bail u/s. 167 (2) Cr. P.C.
M/s Dewan Housing Finance Corporation Ltd. (DHFL), Kapil Wadhawan, the then Chairman & MD of DHFL, Dheeraj Wadhawan, Director of DHFL, Shri Sudhakar Shetty, M/s Amaryllis Realtors LLP (ARLLP) and other unknown persons including public servants, entered a criminal conspiracy thereby cheating and inducing a consortium of 17 banks led by Union Bank of India (UBI) to sanction huge loans aggregating to Rs. 42,000 Crores approx. The respondents accused siphoned off, and misappropriated a significant portion of the said funds by falsifying the books of account of DHFL and deliberately and dishonestly defaulted on repayment of the legitimate dues, thereby causing a wrongful loss of Rs. 34,000 Crores approx. to the consortium lenders during the periods January 2010 to December 2019.
Basis the said allegations, the petitioner FIR was registered by the petitioner CBI. Subsequently, chargesheet u/s. 173 Cr.P.C. was filed before the Special Judge (CBI), New Delhi on 15.10.2022 against eighteen individuals including Respondents and fifty-seven companies/entities for the commission of offences punishable u/s. 120B r/w 206, 409, 411, 420, 424, 465, 468 & 477A of Indian Penal Code (IPC), 1860 and u/s. 13(2) r/w 13(1)(d) of the Prevention of Corruption Act, 1988 and substantive offences thereof.
Conclusion- The Court is very clear in its mind that merely because in the charge sheet if the investigating agency has stated they want to conduct further investigation, the charge sheet cannot be termed as a preliminary charge sheet. The police have a right to conduct further investigation. However, at the same time, the investigating agency under the garb of further investigation cannot be allowed to file the police report without completion of the investigation, only to defeat the right of statutory bail. The basic concept is that to fulfil the provision of Section 167, the charge sheet has to be filed upon completion of the investigation. It may be possible that the investigation against the persons who are charge-sheeted is complete and further investigation of other accused persons is continuing, then the persons against whom the investigation is complete cannot be extended the benefit of the statutory bail.
Held that merely because cognizance has been taken, the right to statutory bail cannot be extended or defeated. The basic parameter is that the charge sheet has been filed after the completion of the investigation or not. We have not to go by the label of the charge sheet but to examine whether actually investigation has been completed or not. If the investigation is not completed then merely because the report has been filed, the right of statutory bail cannot be defeated.
FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT
1. This is a petition under sections 482 r/w 439 (2) Cr.P.C moved on behalf of petitioner CBI seeking quashing and/or cancellation of order dated 03.12.2022 passed by Ld. Spl. Judge, P.C. Act, Rouse Avenue District Courts, New Delhi, whereby the respondents no. 1 & 2 have been granted default bail under Section 167 (2) Cr.P.C.
2. Allegations in brief are that M/s Dewan Housing Finance Corporation Ltd. (hereinafter referred to as DHFL), Kapil Wadhawan, the then Chairman & MD of DHFL, Dheeraj Wadhawan, Director of DHFL, Shri Sudhakar Shetty, M/s Amaryllis Realtors LLP (ARLLP), M/s Gulmarg Realtors LLP (GRLLP), M/s Skylark Buildcon Pvt. Ltd., M/s Darshan Developers Pvt. Ltd., M/s Sigtia Constructions Pvt. Ltd., M/s Creatoz Builders Pvt. Ltd., M/s Township Developers Pvt. Ltd., M/s Shishir Reality Pvt. Ltd., M/s Sunblink Real Estate Pvt. Ltd. and other unknown persons including public servants, entered into a criminal conspiracy thereby cheating and inducing a consortium of 17 banks led by Union Bank of India (UBI) to sanction huge loans aggregating to Rs. 42,000 Crores approx. The respondents accused siphoned off, and misappropriated a significant portion of the said funds by falsifying the books of account of DHFL and deliberately and dishonestly defaulted on repayment of the legitimate dues, thereby causing a wrongful loss of Rs. 34,000 Crores approx. to the consortium lenders during the periods January, 2010 to December, 2019.
3. Basis the said allegations, the present FIR- RC 2242022A0001 u/s 120B, 409, 420, 477A of IPC, 13(2) r/w 13(1)(d) of PC Act, 1988 (as amended in 2018) was registered by the Petitioner CBI, AC-VI/SIT, New Delhi on 20.06.2022 against fourteen persons/entities including M/s Dewan Housing Finance Corporation Limited (DHFL), its Chairman cum MD namely Kapil Wadhawan who is respondent No.1 herein and its director at the relevant time namely Dheeraj Wadhawan respondent No. 2 herein and certain others. Respondents Kapil Wadhawan and Dheeraj Wadhawan were formally arrested by the Petitioner-CBI in connection with the instant case on 19.07.2022. Thereafter, respondents Kapil and Dheeraj Wadhawan were remanded to JC on 30.07.2022.
4. Subsequently, chargesheet u/s 173 Cr.P.C. was filed before the Ld. Special Judge (CBI), New Delhi on 15.10.2022 against eighteen individuals including Respondents and fifty-seven companies/entities for commission of offences punishable u/s 120B r/w 206, 409, 411, 420, 424, 465, 468 & 477A of IPC and u/s 13(2) r/w 13(1)(d) of PC Act, 1988 and substantive offences thereof. The chargesheet was filed within the expiry of the stipulated time of 90 days.
5. However, as per the chargesheet itself, further investigation u/s 173 (8) Cr.P.C. with regards to ascertaining roles of certain persons and entities who were mentioned in the FIR and other connected issues were still continuing. Para 66 of the chargesheet reads as under:
“With regard to ascertaining roles of remaining FIR named accused persons namely Sh. Sudhakar Shetty, M/s Amaryllis Realtors & M/s Gulmarg Realtors, remaining CAs (who had audited balance sheets of e-DHFL & Shell companies and who had facilitated the promoters), ultimate beneficiaries/end use of diverted funds through shell companies & other Wadhawan Group Companies, the DHFL officials, insider share trading of DHFL shares, bank officials, NHB officials and other connected issues, further investigation u/s 173 (8) of Cr. PC is continuing. List of additional witnesses and additional documents will be filed as and when required.”
6. Respondents Kapil Wadhawan and Dheeraj Wadhawan filed an application u/s 167 (2) Cr. PC before the Court of Ld. Special Judge, CBI-08, RAC, New Delhi on 29.10.2022.
7. Vide order dated 26.11.2022, the Ld. Special Judge, (PC Act) CBI-08, New Delhi, took cognizance of the offences against all charge-sheeted seventy-five accused persons/entities including Respondents.
8. Vide impugned order dated 03.12.2022, the Ld. Special Judge (PC Act) granted statutory bail under Section 167 (2) Cr.P.C to the Respondent nos. 1 and 2 holding that the chargesheet filed although within stipulated time is incomplete and hence Respondents were entitled to mandatory bail as per law. The relevant excerpt of the impugned order reads as under:
“40) The proposition advanced on behalf of CBI that when chargesheet is already filed and court has taken cognizance upon the same, then no relief of statutory bail can be granted to accused as provisions of Section 167 (2) Cr.P.C. applies to pre cognizance stage and not to post cognizance stage. However, this rule applies only when the investigation is complete and then chargesheet is filed. Filing of incomplete chargesheet cannot deprive the accused to the statutory bail. No doubt, this application was moved by the accused persons after filing of the chargesheet but when the chargesheet filed is not disclosing complete investigation, then this application is still maintainable. Plea taken by CBI that investigation qua the present accused persons is fully completed is not acceptable due to reasons already given above. Taking of cognizance on the chargesheet is not a ground to reject this application when on the face of it is found incomplete and number of other offences which the present accused persons have also on the face of it are committed is not clear.
41) Had the discussions taken place on merits of the case, then keeping in view the gravity and seriousness of the case perhaps accused persons might not be entitled to any bail but this court is compelled to release them under statutory law from custody by giving mandatory concession of default bail due to incomplete chargesheet. CBI cannot be entirely blamed for filing incomplete chargesheet because it was not humanly possible and was also practically very difficult to complete the very big investigation task within a period of 90 days especially when the accused persons themselves took several years altogether to complete the offences. It could not have been expected from CBI to unearth each and every accused, find out every comer of conspiracy, collect entire evidence and trace out the huge embezzled amount etc. within such short period of 90days when some part of the investigation has to take place out of country also. Legislation wants that if the chargesheet is not filed within the period of 60/90 days from the date of arrest of accused person as the case may be and if it is filed but is not complete, then the accused gets an indefeasible right to be released on bail without any discussion on merits.
42. The court is not blaming investigating agency for any lapse, intentional delay, lethargy, negligence and for not doing its homework before filing chargesheet, if the practical difficulties of it and fact of shortage of time are taken into consideration. Otherwise also, investigating officers are human being and it will be highly unreasonable to expect from them to work for entire 24 x 7 days and to run from one place to another without any break. There may be some highly remote intention on the part of the investigating agency to deprive the benefit of statutory bail to the accused persons but apparently chargesheet was filed with intention to disclose the labour and hard work done by CBI officials so far in a very short period of90 days which they could do with their sincere and best efforts. Unfortunately, the chargesheet filed is found incomplete qua various aspects already discussed above even for these two accused though this court is satisfied with the work already done and labour already put on the job by CBI so far. Grant of this statutory bail without discussing any merits of case to accused person may be some setback to CBI but it is informed by Counsel for CBI that despite such default bail, accused persons will not come out of jail as they are still confined in other different cases in different states. Bye-passing of mandatory provisions of Section 167 (2) Cr.P.C. through incomplete chargesheet is not permissible under law but in some situations where offence is highly serious and heinous in nature, investigation spread over to different states and out of country and is of big magnitude as well as when economy of the county is at stake, then this maximum period of 60/90 days needed to be increased by the legislature through necessary amendments in the law as per my view besides giving some additional powers to court to extend the period to complete the investigation in such situations. In view of the above facts and circumstances, both the accused persons are entitled to statutory bail u/s 167 (2) Cr.P.C…….”
9. Aggrieved thus, the petitioner CBI, has impugned the said order as the Ld. Spl. Judge granted default bail to respondents herein without appreciating the correct standpoint of law. CBI has primarily challenged the said order on the ground that the right to claim default bail u/s 167(2) Cr.P.C. can be invoked only if the chargesheet is not filed within the stipulated time. However once chargesheet is filed, the accused is no longer entitled to default bail under Section 167 Cr.P.C. It is also the contention of Petitioner CBI that moreover, a chargesheet is a final report within the meaning of Section 173(2) Cr.P.C. if the same is filed so as to enable the Court to apply its judicial mind as to whether cognizance of the offence thereupon should be taken or not. The petitioner thus contends that the chargesheet in the present case was complete and the respondents were not entitled to default bail. Hence the present petition.
Background Facts:
10. The present FIR No. RC2242022A0001 was lodged pursuant to a written complaint by the DGM of Union Bank of India on behalf of a consortium of 17 banks against Diwan Housing Finance Corporation Ltd. (DHFL), the respondents and certain other officials. However, since DHFL enjoys immunity granted by the NCLT under specific provisions of the Insolvency and Bankruptcy Code, it has not been charge sheeted.
11. The primary culprits, namely the Chairman and Managing Director of DHFL, along with a Director, who are the respondents herein, are alleged to be the main orchestrators of the various offenses. They exercised complete financial control over DHFL, including the management of bank loans and public deposits.
12. Allegedly, in a coordinated conspiracy, the accused persons deceitfully diverted approximately Rs. 34,926.77 crores from DHFL by engaging in forgery, cheating, criminal breach of trust, and falsification of accounts. They established 87 Shell Companies to siphon off funds, executing fictitious transactions while disregarding standard lending norms and security requirements.
13. Allegedly the disbursed loan amounts, obtained from various banks, were ostensibly intended for construction of buildings, but instead, they were funnelled towards fictitious individuals and Shell Companies. Additionally, the funds were used for investments in shares, debentures, and securities linked to DHFL’s promoters. Guidelines set forth by RBI and the National Housing Board were wilfully ignored. Detailed audit reports demonstrate the misuse and misappropriation of the borrowed funds.
14. Allegedly the main accused individuals formed 87 Shell Companies under the names of their employees, associates, and friends, through which they funnelled DHFL’s funds. Most of these companies are now defunct and deregistered at the Registrar of Companies. The fraudulent disbursements were facilitated through a fictitious branch known as ‘Bandra branch-001,’ which was non-existent and created only virtually with the code name. The software Fox Pro used in the system of DHFL was manipulated to generate fictitious small retail home loan customers, to falsify accounts, to forge documents, and to produce dummy data.
15. Allegedly the embezzled funds were also extensively misused for personal expenses, including the purchase of jewellery and watches amounting to Rs. 174 crores, expensive paintings valued at Rs. 63 crores, credit card payments, foreign trips, chartered plane expenses, as well as repayment of personal and marketing borrowings. Moreover, a substantial investment of Rs. 9 crores was made to acquire shares in a helicopter. Enormous amounts were transferred to overseas companies from the accounts of the fictitious Bandra Books entities. The chargesheet provides details about the specific Shell Companies, their directors, associates, and employees involved in the illegal retention bonus scheme, wherein they received illicit payments in collaboration with the main accused. Additionally, the chargesheet identifies officials who hindered internal audits, suppressed vital account information of DHFL, and facilitated the deletion of negative audit observations.
16. The chargesheet further alleges that certain Chartered Accountant (CA) firms engaged by the accused individuals provided false certificates and fabricated audit reports to deceive the lending banks. Data, monthly returns and audit reports submitted to NHB were also found to contain inaccurate data. The chargesheet includes numerous facts and circumstances outlining the modus operandi employed by the accused, encompassing offenses such as cheating, forgery, criminal misappropriation of funds, falsification of accounts, destruction of evidence, and criminal misconduct under the Prevention of Corruption Act.
17. Admittedly, further investigation by the CBI is ongoing and encompasses the remaining accused individuals, officials associated with Shell companies who facilitated the DHFL promoters, insider share trading by the respondents herein, the involvement of NHB and bank officials, as well as other aspects of the extensive and separate conspiracy. Additionally, overseas investigation also has to carried out to trace the trail of DHFL’s funds. It has been submitted that the chargesheet reveals that the respondents herein were the masterminds acting as the main conspirators and culprits behind all the offences, and were primarily involved in criminal activities between 2010 and 2019.
18. Contentions on behalf of the petitioner CBI
I. On the issue of law regarding grant of mandatory bail u/s 167(2) Cr.P.C.
a) SPP for the petitioner CBI submits that the right to claim default bail u/s 167(2) Cr.P.C. can be invoked only if the chargesheet is not filed. Once chargesheet is filed, the custody of an accused is not governed by the provision of Section 167 Cr.P.C. but under different provisions of Cr.P.C. Ld. SPP has relied on the judgements in Sanjay Dutt v State Through CBI, (1994) 5 SCC 410; Uday Mohanlal Acharya v. State of Maharashtra, 2001 Cri.L.J. 1832.
b) SPP submits that it is settled law that the investigating agency even subsequent to the filing of chargesheet is empowered to conduct further investigation u/s 173(8) Cr.P.C. Both amendments to section 167 Cr.P.C. regarding statutory bail, as well as to section 173 (8) Cr.P.C. regarding further investigation were brought into the Cr.P.C. 1973 which did not exist in the earlier Cr.P.C. 1898. Ld. SPP has referred to the judgement dated 27.03.2023 in Crl.A Nos. 701-702 of 2020 titled Enforcement Directorate v Kapil Wadhawan and Ors. relied upon by Respondents to buttress this contention.
c) SPP submits that the chargesheet is a final report within the meaning of Section 173 (2) Cr.P.C. if it is filed so as to enable the Court to apply its mind as to whether cognizance of the offence should be taken or not. Ld. SPP has referred to the judgement in Dinesh Dalmia v CBI, 2008 Cri. L.J.337.
d) It has been submitted that a similar view has been adopted in Abdul Azeez P.V. v National Investigation Agency, 2014 AIR SCW 6537; S. Jagan Mohan Reddy v CBI, 2013 AIR SCW 2800; Akash & Ors. v State of Maharashtra &Ors., Crl. A No. 429 of 2021 decided on 21.02.2022.
e) SPP further submits that the meaning of an incomplete chargesheet was explained by a Full Bench of the Hon‟ble Supreme Court in State of Maharashtra v Sharad Vinayak Dogre & Ors., AIR 1995 SC 231, whereby it was held that the purpose of submission of the police report with the details mentioned in sub-section (2) of Section 173 is to enable the Magistrate to satisfy himself, whether on the basis of the report and the material filed along with the police report, a case for taking cognizance has been made out or not. After applying his mind to the police report and the material submitted therewith, if the Magistrate is satisfied that cognizance of the offence is required to be taken, he shall proceed further in accordance with the provisions of the Code of Criminal Procedure. The court held that section 190(1)(b) CrPC provides that a Magistrate has the power to take cognizance upon a police report of such facts as are provided therein, on being satisfied that the case is a fit one for taking cognizance of the offence. Therefore, if the police report and the material filed therewith is sufficient to satisfy the Magistrate that he should take cognizance, his power is not fettered by the label which the investigating agency chooses to give to the report submitted by it under Section 173(2) CrPC. It was held that merely, because the prosecution had filed an application, after submission of the charge-sheet, seeking permission to file “supplementary charge-sheet”, it could not affect the jurisdiction of the Magistrate to take cognizance, if he was otherwise satisfied from the material placed before him along with the charge-sheet that cognizance of the offence was required to be taken. It is the jurisdiction of the Magistrate and Magistrate alone to decide whether the material placed by the prosecution with the report (charge-sheet) was sufficient to take cognizance or not. The Apex court held that the power of the Magistrate to take cognizance cannot be controlled by the investigating agency, whose duty is only to investigate and place the facts and the evidence before the Magistrate. In the said case the High Court quashed the order only because it was influenced by the application filed by the prosecution seeking permission to record additional evidence and file a “supplementary charge-sheet” and from that it inferred that the report filed by the prosecution was ‘incomplete’. It was held that it cannot be said if the investigating officer terms a police report as ‘incomplete’, it takes away the jurisdiction of the Magistrate to take cognizance of the offence, even if in the opinion of the Magistrate, the material is sufficient for him to be satisfied that it was a fit case for him to take cognizance of the offence. The Magistrate is not bound by the label given to the report is or the charge-sheet by the investigating officer and it is for him to decide whether the report and the material on which it is based, is sufficient for him to take cognizance or not.
f) Ld. SPP thus contends that once chargesheet has been filed within the stipulated time, right of accused to statutory bail would come to an end. It has been submitted that filing of chargesheet would be sufficient compliance of provisions of Section 167(2) Cr.P.C. Ld. SPP has relied upon the judgements in SFIO v Rahul Modi, AIR 2022 SC 902; Narendra K. Amin v CBI, 2015 Cri.L.J. 1334; Suresh Kumar Bikamchand Jain v State of Maharasthra, 2013 Cri.L.J. 1625, to support this contention.
g) Ld. SPP has further drawn the attention of this Court to a judgement of this Court in Chitra Ramakrishna v CBI, 2022 SCC OnLine Del 3124, which has been relied upon by Respondents, to say that even in the said case it has been held that chargesheet can be said to be complete when it enables the Court whether to take or not to take cognizance of the offence and if certain facets call for further investigation it would not render such report other than a final report. In the said case it was observed that even if the police report is termed as incomplete by the investigating officer, the power of a Magistrate to take cognizance would not be lost. The said judgement was upheld by the Hon‟ble Apex Court in CBI vs Chitra Ramakrishna vide order dated 13.02.2023 in SLP (Crl) Nos. 1550-1552 of 2023.
h) Ld.SPP submits that thus, it is immaterial whether the Court has taken cognizance or not, what is material is that investigating officer has been able to procure sufficient material for the trial of „accused‟ by the court. Ld. SPP has referred to the judgement in Crl. A Nos. 1011-1012 of 2023 titled Judgebir Singh @ Jasbir & Ors. v. NIA relied upon by the Respondents.
i) It has been submitted that in Dalmia (supra), the Hon‟ble Apex Court held that a chargesheet is final if is it sufficient for the court to apply its mind whether cognizance should be taken or not. It was further held that one of the requirements for submission of a police report is whether „any offence‟ appears to have been committed and if so, by whom. Ld. SPP submits that in the present case, since upon investigation, offences mentioned therein appeared to have been committed, report u/s 173 Cr.P.C. was filed qua Respondents and other accused/entities whereby vide order dated 26.11.2021 the Ld. Special Judge took cognizance. Ld. SPP submits that a reference was also made in Dalmia (supra) to K Veerswami v Union of India & Ors. (1991) 3 SCC 655, wherein it was observed that a report under section 173 (2) Cr.P.C. is an intimation to the Magistrate that investigating officer has procured sufficient evidence for trial of an accused by the Court and as such, it is not important whether evidence would be added later or not.
j) Ld. SPP submits that the job of investigating agency is over the moment sufficient evidence is filed before the Court for taking cognizance and for trial of the accused persons so charge-sheeted. Ld. SPP contends that cognizance is one thing whilst filing of a police report is another. The filing of police report may come much earlier whilst cognizance may be taken much later. There is a thin line between the two and the respondents are trying to disrupt and create confusion on this issue. Ld. SPP has drawn the attention of this Court to the earlier judgements rendered by this Court dated 15.03.2022 in Bail Appl No.120/2022 titled Suraj v State NCT of Delhi & judgement dated 04.08.2006 in Bail Appl No. 2542/2006 titled Deepender Kumar Srivastava v State (CBI).
k) Ld. SPP urges that merely since investigation was pending against other accused regarding certain aspects, it would not justify grant of statutory bail to an accused against whom chargesheet has been filed and there is sufficient evidence against him to face trial. Reference has been made to the following judgements to support this contention.
