Jalaj Batra vs Central Bureau Of Investigation

Manoj Jain, J

A supplementary charge-sheet was filed against 34 accused persons. Petitioner herein is shown as A-2 therein. He is aggrieved by order dated 27.04.2024 whereby learned Trial Court 'Special Judge (PC Act), CBI-08, Rouse Avenue Court, New Delhi ' has taken cognizance of offences and summoned him and others.

Let me narrate factual matrix, in brief.

An FIR 'RC No. 2242022A0001' was registered on 20.06.2022.

It emanated from one complaint lodged by Mr. Vipin Kumar Shukla, Deputy General Manager, Union Bank of India. Such complaint was directed against DHFL 'M/s Dewan Housing Finance Corporation Ltd' and 12 others and as per allegations, Mr. Kapil Wadhawan 'Chairman and Managing Director of DHFL', Mr. Dheeraj Rajesh Kumar Wadhawan 'Director of DHFL', Mr. Sudhakar Shetty, M/s Amaryllis Realtors LLP, M/s Gulmarg Realtors LLP along with other companies, individuals and public servants entered into a "criminal conspiracy"to cheat the Consortium of 17 Banks, led by Union Bank of India.

It was alleged that pursuant to criminal conspiracy, the Consortium Banks were induced to sanction and disburse huge loan amount aggregating to Rs. 42,000 crores approximately. The promoters of DHFL created entities in the names of their associates, friends and employees and used these entities as "vehicles to divert the funds". As many as 87 shell companies were created and amount was diverted and siphoned off to those companies, without any formal process and in violation of applicable policies. Books of Accounts were also falsified. Thus, loan amount was misappropriated and wrongful loss of Rs. 34,000 crores was caused to Consortium Banks during January 2010 to December, 2019.

Main charge-sheet was filed on 15.10.2022 for commission of offences under Sections 120B read with Sections 409/420/477A IPC 'Indian Penal Code, 1860' read with Sections 13(2) read with 13(1)(d) of PC Act 'Prevention of Corruption Act, 1988'.

It was directed against 75 persons (18 individuals and 57 companies).

Name of petitioner did not figure therein. M/s DHFL was also not charge-sheeted as it had already been taken over by Piramal Capital Housing Finance Limited and thus got immunity from prosecution, in terms of Section 32A of IBC 'Insolvency and Bankruptcy Code, 2016'.

However, since further investigation was going on, the abovesaid supplementary charge-sheet was filed before the learned Trial Court on 18.04.2024. It was directed against 34 new accused persons (including the petitioner herein) for offences 120-B/206/409/411/420/424/465/468/477A IPC & Section 11,13(2) read with Section 13(1)(d) of PC Act.

Let me, now, consider the averments appearing against the petitioner in such supplementary charge-sheet.

During the year 2017, Sh. Kapil Wadhawan wanted to do QIP 'Qualified Institutional Placement' to raise Rs. 3000 crores as equity for DHFL. He discussed proposal with few institutional investors including M/s T.K. Capital but they were not ready for the placement at the price quoted by such investors. Therefore, in order to project sound financial position of the company contrary vis-à-vis the actual status, it was decided to enhance the trade volume and the value of the DHFL shares in the stock market, so that based on such false projection, the investment is made in DHFL. To achieve such objective, Kapil Wadhawan was introduced to Sh. Jalaj Batra, a stock broker by Sh. Nimir Mehta. Sh. Jalaj Batra, thereafter, further introduced Kapil Wadhawan to Sh. Ravindra Biyani, a stock broker and Sh. Rajesh Mehta, a financer. Sh. Kapil Wadhawan discussed the matter with petitioner, Sh. Ravindra Biyani and Sh. Rajesh Mehta and it was decided that Kapil Wadhawan would fund the trading of shares of DHFL through Sh. Rajesh Mehta and would provide margin money required for such trade. Sh. Jalaj Batra and Sh. Ravindra Biyani would use that money themselves or through the stock operators under them to trade in the shares of M/ s DHFL. Accordingly, the funds from DHFL were routed to the stock brokers/ persons trading in various companies, owned/ controlled by Sh. Rajesh Mehta.

Rs. 1293.82 crores were transferred to the accounts of Rajesh Mehta Group Companies by accused Kapil Wadhawan through DHFL/entities owned/ controlled by DHFL. Out of the said amount, Rs. 279.50 crores were remitted back to the accounts of M/ s DHFL; Rs. 275 crores were transferred into the accounts of other Wadhawan group companies; Rs. 50 crores were transferred into the account of HDIL. However, the remaining amount of Rs. 689.32 crores was transferred into the accounts of various stock brokers/entities for manipulating the share prices of DHFL by way of targeted trading in the shares of M/s DHFL at the behest of Wadhawan brothers. The petitioner was instrumental in trading which was being carried out to jack up the price of share of DHFL. He also traded in the shares of DHFL through M/s Narayan Securities Ltd. (of Sh. Ramesh Saraf) and M/s Arcadia.

The share price though increased, eventually, it saw a steep decline on 21.09.2018.

This decline in the share prices of DHFL led to severe losses to the persons/brokers/ traders who were trading in the shares of DHFL in furtherance of said conspiracy. It was decided to compensate them by allotting flats in Liv Smart Project at Kurla, Mumbai. This project was being developed by Sh. Dinesh Bansal through M/s D.K. Realty India Pvt. Ltd. Both Sh. Dinesh Bansal and M/s D.K. Realty India Pvt. Ltd. have been arraigned as accused in the main charge sheet.

That the investigation revealed that Sh. Jalaj Batra, Sh. Ravindra Biyani, Sh. Pranav Vora, Sh. Rakesh Rathi, Sh. Arvind Kayan, Sh. Ramesh Chandra Saraf and Sh. Abhay Adukia conspired with Sh. Kapil Wadhawan and Sh. Rajesh Mehta (since expired) and traded in the shares of DHFL using the funds diverted from DHFL, routed though the companies of Sh. Rajesh Mehta and others.

Thus, they actively facilitated diversion of funds from M/ s DHFL for its utilization in trade of shares of DHFL for the ultimate objective of Kapil Wadhawan to enhance the trade volume and share price of DHFL shares to project its sound financial position in the market so as to induce lender banks and investors.

Learned Trial Court, after perusal of the matter, came to the conclusion that there existed sufficient grounds to summon the accused persons named in the chargesheet. Accused no. 17, a public servant, was, however, no summoned for want of sanction.

Rest of the accused have been summoned.

Such order of taking cognizance against them is under challenge.

Mr. Mohit Mathur, learned Senior Counsel for petitioner submits that the impugned order is mechanical in nature and there was no material on record suggesting any involvement or complicity of the petitioner. According to him, as per the main charge-sheet, Wadhawan Brothers had induced Consortium Banks to obtain loan and conspired to siphon off the same. Such loan was taken way back in the year 2010 and at the time of sanction of the loan or during the period when the loan amount was siphoned off, petitioner was nowhere in the picture and the conspiracy was already over. The story of jacking up the share value is afterthought and artificial one and petitioner had no association of any nature whatsoever with Rajesh Mehta, Ravindra Biyani, Sudhir Jain, Abhishek Kayan or Ramesh Saraf. Even if such story is believed, it does not make him co- conspirator as there was neither any meeting of minds nor petitioner is stated to be beneficiary.

According to him, petitioner was merely a financial advisor by profession who worked in Mining Industries and, later, became hotelier. He had nothing to do with stock-trading ever since he was debarred in the year 2006. Though such debarment was cancelled in the year 2016, he did not enter into any transaction as he did not have broker or demat account and, therefore, had no occasion to carry out any transaction and to manipulate the stock price. Moreover, petitioner is residing in Dubai every since 2006 with his family and story projected by the prosecution is false and unbelievable. 22. He contends that despite the alleged jacking up, there were huge losses which compelled several such brokers to seek compensation and as many as 214 flats were allotted to different persons/entities, to make up such loss. Petitioner was neither working for Wadhawan Brothers nor for any of their alleged associates and no allotment of any flat was made to him which also indicates that he had no connection or involvement. Thus, common thread of conspiracy is conspicuously missing. Reference has also been made to the testimony of several witnesses in order to show that even if their statements are accepted to be true, these do not pinpoint any wrongdoing on the part of the petitioner. It is also argued that CBI has adopted a pick and choose policy and the persons, who had some active role in artificially jacking up the price, have been made witnesses whereas petitioner, who is not concerned with the conspiracy and to whom no role has been attributed, has been made accused. Learned Senior Counsel places his reliance upon Ashok Chaturvedi & Ors. v. Shitul H Chanchani & Anr. 1998(7) SCC 698, Pepsi Foods Ltd. v. Special Judicial Magistrate and Others (1998) 5 SCC 749, A.P. Narang v. CBI (DHC) (2011) SCC OnLine Del 212, Vikas Jain v. State (Through CBI) 2006 SCC OnLine Del 1558, John Pandian v. State (2010) 14 SCC 129 and Esher Singh v. State of A.P. (2004) 11 SCC 585.

All such contentions have been refuted.

Mr. Anupam Sharrma, learned Special Public Prosecutor for CBI submits that there was comprehensive transaction audit of the accounts of DHFL by KPMG 'Klynveld Peat Marwick Goerdeler, a global firm providing audit, tax, and advisory services' and thereafter only the case was registered. DHFL obtained credit facilities and got sanctioned loan of huge amount and did not use such loan amount for the mandated purpose. Such amount was rather siphoned off by, inter alia, transferring to some shell companies for its own use and purpose. Funds were diverted to shell companies without any documentation and to falsify the record, these funds were shown to have been given to 2,60,315 fictitious persons as retail loan. In order to cover up the blatant divergent of funds, accused Kapil Wadhawan decided to have fresh funds/investment in DHFL. However, in view of the low share price and trade volume of DHFL on stock-exchange, he was finding it difficult to bring in fresh investment. To enhance the share price and trade volume of DHFL and to have QIP 'qualified institutional placement', he came in contact of petitioner and then it was conspired that the shares of DHFL would be got traded through different stock brokers to be engaged and arranged by petitioner and Ravindra Biyani. Accused Kapil Wadhawan decided to provide margin money required for trade using the companies of Rajesh Mehta and in order to achieve the aforesaid objective, a sum of Rs. 1293.02 crores was diverted from DHFL to the companies owned and controlled by Rajesh Mehta. He submits that transfer of such huge amount is, in itself, sufficient to indicate the complicity and involvement of petitioner. It is argued that statements of various witnesses would go on to indicate that jacking up of the price was being done, with the active connivance and participation of petitioner and he was the one who used the ports allotted to others and thereby jacked up the trade volume and share price, artificially. He deliberately did not do any trade in his own name and rather traded in a clandestine manner and also in the name of Hemant Madhusudan Seth and such facts can be deciphered from the statements of various witnesses including Hemant Madhusudan Seth (LW273), Jayesh Kuwadia (LW274), Nimin Mehta (LW275), Sonpal Jain (LW24) and Yashpal Mendiratta (LW656).

He submits that prosecution also relies upon testimony of approvers and very recently, Ajay Abhay Kumar Adhukia has also turned approver and has been granted pardon and his affidavit also indicts petitioner Jalaj Batra. He contends that since the shares were jacked up artificially, these were bound to fail which resulted in losses to several persons to whom some flats were promised.

It is contended that conspiracy is very much discernible and the case is voluminous in nature, based on number of documents and statements of witnesses and approvers. According to him, conspiracy is generally hatched in secrecy and direct evidence is seldom available and in a criminal conspiracy of existing nature, any co-conspirator would be liable for omission, commission and overt acts of the others. According to him, it is not necessary that all the conspirators must know each and every detail of the conspiracy as long as they cooperate one another to achieve the main object of the conspiracy and at times, there would be novel techniques adopted to attain common goal and there might be division of performances in the chain of actions. He submits that the predominant aspect is to see whether there is clear-cut unity of object and purpose and in the case in hand, there is clear-cut material showing meeting of minds as the petitioner had met principal offender and in terms of the agreement, funds were further siphoned off in order to jack up the share value of DHFL. Sh. Sharrma has relied upon State of Gujarant v. Afroz Mohammed Hasanfatta 2019 CRI. L.J. 3366, Bhushan Kumar & Anr; V. State (NCT of Delhi) & Anr. AIR 2012 SC 1747 SC, Bhagwan Swarup Lal Bishan Lal v. The State of Maharashtra AIR 1965 SC 682, Mohd. Hussain UMar Kochra etc. v. K.S. Dalipsinghji and another AIR 1970 SC 45, S. Swamirathnam v. State of Madras AIR 1957 SC 340, Yashpal Mittal v. State of Punjab AIR 1977 SC 2433, A.R. Antulay v. R.S. Nayak & Anr. AIR 1988 SC 1531, Laxmipat Choraria & Ors. v. State of Maharashtra 1968 Crl. L.J. 1124, Chandran @ Manichan @ Maniyan v. State of Kerala AIR 2011 SC 1594, Girish Sharma & Ors. v. State of Chhattishgarh AIR 2017 SC 4973 and Hariom Haji Abdulla v. State of Maharashtra AIR 1968 SC 832.

Evidently, the order, under challenge, is an order passed at a very nascent stage of the case.

It's an order taking cognizance.

Learned Trial Court, on the basis of the material disclosed in the supplementary charge-sheet, has taken mere cognizance and at such initial stage, generally speaking, there is no real obligation to go for in-depth analysis and comprehensive assessment of evidence. Sh. Sharrma submits that contentions, which have been raised herein, can always be raised by the petitioner at the time of arguments on charge and, therefore, this Court should dismiss the petition, right away. Relying on Afroz Mohammed Hasanfatta, he submits that such order taking cognizance, even otherwise, cannot be interfered by Revisional Court as it cannot go into the merits or demerits of the case.

Needless to underline, cognizance does not involve any formal action. It occurs as soon as the Court applies its mind to the suspected commission of offence(s). At this threshold stage, the purpose is just to determine whether there is sufficient ground for taking judicial notice of an offence, with a view to initiate further proceedings. Unquestionably, at such stage, Court is not required to weigh and critically evaluate the evidentiary value of the material collected by the investigating agency. The Court merely considers the material, albeit, with due application of mind for the abovesaid limited purpose.

Cognizance is of an offence and not of the offender. Once the Court, after application of mind, takes decision to proceed further with the matter, it becomes duty of the Court to find out as to who are the offenders and then to proceed against them by initiating further proceedings.

The impugned order is comprehensive one, apparently suggestive of application of mind and, though, there is no purpose in going into minute evaluation, since the revisional jurisdiction has been invoked, this Court can, at least, reassure itself whether the material placed before the learned Trial Court disclosed initiation of further proceedings or not. To that extent, it cannot be said that the petition is not maintainable albeit, this Court is not required to weigh the evidentiary value of such material, meticulously and intensively.

Therefore, the analysis has to be a surface-level only. 34. The case relates to criminal conspiracy.

Invariably, there would not be any explicit or direct evidence to decipher the same.

Conspiracy, as the cliché goes, is hatched in secrecy and has to be, most of the times, inferred.

Essence of conspiracy is existence of tacit agreement amongst the accused and such agreement can be proved in many ways - by oral evidence, direct evidence, circumstantial evidence, by inference or by conduct. Fact, however, remains that there must be a common design and to achieve the such common design, each conspirator may play some role or the other and as long as there is 'single conspiracy' which continues and does not get terminated in the interregnum, every player, irrespective of the role played by it, would be liable if the act is done to achieve a common purpose and objective. To that extent, there cannot be any scope of discussion or debate with respect to precedents cited at the Bar by both the sides, including John Pandian v. State relied upon by the petitioner.

According to the averments made in the main charge-sheet, the criminal conspiracy was to misappropriate and siphon off the huge loan aggregating to Rs. 42,000 crores approximately. The amount was misappropriated by deploying multiple methods, including creating shell companies and the loss is stated to be to the tune of Rs. 34,000 crores. The supplementary charge-sheet also suggests that the petitioner, in collusion with his other co-accused, used dubious means to enhance the trade volume and thereby value of DHFL share in the stock-market. It was done because accused Kapil Wadhawan wanted to raise Rs. 3000 crores as equity for DHFL and was not getting investors, therefore, to project a sound financial position of the company, the petitioner and others were roped in and they traded in the share of DHFL in order to give impression that the company was having a sound financial position so that once the price is jacked up, the investors are tempted to invest in the company.

Qualified Institutional Placement (QIP) and Initial Public Offering (IPO) are capital-raising methods.

QIP allows quick capital infusion, without extensive regulatory filings and is a faster and cheaper mode vis-à-vis IPO which is long, highly regulated public sale of shares to all investors, including retail.

Therefore, accused, seemingly to cover the gap created by diversion of funds, preferred QIP and to achieve the aforesaid objective and to attract investors, a whopping sum of Rs. 689.32 crores was further siphoned off by transferring the same into the accounts of several stock-brokers/entities.

Statements of various witnesses would indicate that petitioner was instrumental in carrying out such trade.

The petitioner did not indulge in any trading in his own name and entered into transactions in a clandestine manner. Though the supplementary charge-sheet may indicate that the share price of DHFL, which, though initially increased substantially, saw a steep decline on 21.09.2018 which was simultaneous with the bond-sale, during course of the arguments, Sh. Sharrma seemed justified in asserting that since share price had been jacked up artificially, it was bound to fall. Due to eventual decline in the share price of DHFL, all these brokers/traders started feeling the pinch and when protested, they were promised allotment of certain flats, as a compensatory measure. It does not matter whether such promised flats were given or not or whether petitioner got any such flat or not. Fact remains that the funds of DHFL had been diverted and utilized for artificial jacking up and such 'diversion of funds is common feature, substratum and bedrock of the case of prosecution - be it main charge-sheet or supplementary'. Such diversion is consequent upon a single conspiracy. The commonality is, thus, writ large.

The Court had requested learned Special PP for CBI to provide soft complete copy of the charge-sheet i.e. main as well as supplementary. The data being voluminous was provided in a hard disc. The averments made in the charge-sheets and statements of various witnesses have been seen, particularly in connection with the role of petitioner. Reference be made to statements of Hemant Madhusudan Seth (LW 273), Jayesh Kuwadia (LW 274), Nimir Mehta (LW 275), Sonpal Jain (LW 24), LW143 Sh. Sanjay Bansal and Yashpal Mehndiratta (LW 656).

These witnesses have emphasized the role of the petitioner in the commission of offences in question. Sh. Hemant Madhusudan Seth has stated that Sh. Jalaj Batra started trading in the shares of DHFL with the brokers referred by him. He though introduced Sh. Jalaj Batra to Sh. Jayesh Kuwadia and others but claimed that he was apprehensive of intention of Jalaj Batra as his reputation was not good. He also stated that it was Sh. Jalaj Batra who offered to compensate the losses by way of allotment of flats. Sh. Jayesh Kuwadia has stated that Sh. Jalaj Batra was trading in shares of DHFL using the port allotted to Sh. Hemant Madhusudhan Seth by his company and that due to further decline in the share price of DHFL, he had asked Sh. Jalaj Batra to compensate him. Sh. Sonpal Jain has stated that Sh. Kapil Wadhawan had told him that he has already instructed Sh. Rajesh Mehta to purchase the shares of DHFL through some brokers namely Sh. Ravindra Biyani, Sh. Jalaj Batra and Sh. Pranav Vora to increase the volume of shares in BSE/NSE. Sh. Nimir Mehta has stated that he introduced Sh. Kapil Wadhawan to Sh. Jalaj Batra. Thereafter, Sh. Jalaj Batra arranged a meeting of Sh. Kapil Wadhawan with Sh. Ravindra Biyani, and Sh. Rajesh Mehta. Sh. Yashpal Mendiratta has stated that DHFL/its related entities have agreed to compensate for the losses suffered by traders/brokers as mentioned above as the said trade was done as per their directives conveyed through Sh. Ravindra Biyani/Sh. Jalaj Batra. He has also claimed that Sh. Jalaj Batra was middleman, who was dealing on behalf of M/s DHFL in respect of its stock-trading and used to arrange deals for such trading. He also claimed that companies used to indulge in high volume of trading of their shares in order to manage their market rating high and keep their share-price at a certain level to give positive market outcome and to attract prospective investors by presenting a stable financial status of the company. He also claimed that such status used to help the company to easily borrow from the market and financial institutions, including banks. He believed that even DHFL did the same and for that purpose only the share transactions were carried out. Subsequent affidavit of Abhay Adukia also contains incriminating material against the petitioner as he claimed that petitioner was having the control over the companies indulging in trading and that the money transferred therein was being used for funding of the margin money used in trading of DHFL shares and that such exercise was being carried out at instance of Wadhawan brothers. According to Sh. Sanjay Bansal, Sh. Jalaj Batra was working in the share market and had a reputation of making stocks bullish and bearish and that he was working for Sh. Kapil Wadhawan and Sh. Dheeraj Wadhawan to enhance their share trade volume on the stock exchange and managed huge transactions in the shares of DHFL which resulted in steep hike in the shares of DHFL which became almost double in the first half of year 2018.

There does not seem to be any pick-and-choose policy as Ravindra Biyani, Pranav Vora, Ramesh Saraf, Abhay Adukia (now granted pardon) and Arvind Kayan have been arraigned as accused. Sh. Sharrma states that Rajesh Mehta has already expired and, therefore, could not have been prosecuted. He states that role of Nimir Mehta was limited and, therefore, he has been cited as a witness. It is argued that he had no role in the trading of the shares of DHFL and he had, merely, introduced the petitioner to Kapil Wadhawan.

It is, and rightly so, contended by CBI that to decipher conspiracy and to reach other key perpetrators, if prosecution falls back on statement of any person who is helpful in exposing conspiracy, such approach cannot be said to be biased or illegal. If such contention of petitioner is accepted, the provision regarding 'grant of pardon' and making someone approver would stand redundant, nugatory and superfluous.

As per material collected by the investigation agency, share price of DHFL rose from Rs. 290 per share to Rs. 690 per share from January, 2017 to September, 2018 and on 21.09.2018, it fell to Rs. 350.55 per share from Rs. 615.15 per share. The funds were diverted to jack up the share worth and then to portray a rosy picture about the financial status of DHFL. The allegations appearing against the petitioner cannot be, thus, said to be, beyond those averred in the main charge-sheet. These are, rather, complementing and in synchronization with the main allegations and have to be read in conjunction with the main chargesheet. Therefore, it cannot be said that the prosecution has come up with any new case. The common intent, as already noticed above, was to siphon off the money and the role of the petitioner seems quite apparent and the devious tactics employed by him indicate him to be part of conspiracy. Sh. Sharrma contends that manipulative and deceptive tactics of petitioner, being barred under Section 12 of SEBI Act 'Securities and Exchange Board of India Act, 1992', the Board has already been apprised about the same.

As already noted above, the impugned order, merely, takes cognizance and in view of the averments made in the supplementary charge- sheet and the statements of prosecution witnesses, including the ones referred to above, it is quite evident that there existed sufficient material to proceed further with the matter. Therefore, this Court does not find any reason to interfere with the impugned order.

Undoubtedly, the scope of consideration would be broader when the Court embarks upon ascertainment of charges. At that particular stage, learned Trial Court would, naturally, go for deeper evaluation. Such exercise, certainly, would be without prejudice to the observations made hereinabove.

Before parting, this Court would also like to mention about the conduct of the petitioner.

According to CBI, there are several other cases against the petitioner and he, on one pretext or the other, continues to stay abroad and has not even appeared once before the learned Trial Court and has not even cared to submit bail-bonds. According to Mr. Sharrma, he is using his living abroad as a ruse to misguide everyone. So much so, a Look Out Circular (LOC) has been issued against him by another investigating agency.

This Court can only expect that petitioner participates in the ongoing proceedings, with all due diligence.

In view of the foregoing discussion, the petition stands dismissed.

Needless to emphasize, aforesaid observations shall not be taken as final expressions over the merits of the case.