Dismissed

Lata Jagdish Mistry v. State of Maharashtra, through Central Bureau of Investigation, Anti Corruption Branch, Pune

Bombay HC4 Sept 2023REVN/34/2023

Case brief

AI extract

What is this about?

High Court rejected revision application seeking discharge for a bank Branch Head charged with criminal conspiracy and corruption. The court held prima facie material proved her failure to verify loan documents, leading to dismissal.

What did the court decide?

The impugned order refusing discharge was affirmed; the revision application was dismissed.

Lata Jagdish Mistry Vs State of Maharashtra, through Central… — Corruption | Bombay HC (2023)

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MANDIRAMILINDSALGAONKAR Digitally signed byMANDIRA MILINDSALGAONKARDate: 2023.10.0719:03:10 +0530

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1/9 18 REVN-34-23.odt

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IN THE HIGH COURT OF JUDICATURE AT BOMBAY CRIMINAL APPELLATE JURISDICTION

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CRIMINAL REVISION APPLICATION NO.34 OF 2023

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Lata Jagdish Mistry .. Applicant

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Versus

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The State of Maharashtra, through .. Respondent CBI, ACB, Pune

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Mr.Sandeep Phatak for the Applicant. Mr.Kuldeep Patil for the CBI/Respondent. Mr.S.H.Yadav for the State/Respondent.

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CORAM: BHARATI DANGRE, J. DATED : 04^th SEPTEMBER, 2023

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P.C:-

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The Applicant was arraigned as Accused No.1 in a F.I.R. registered with CBI, ACB, Pune, which invoked Section 120-B read with Section 420 of the Indian Penal Code (for short, “the IPC” ) and Section 13(2) read with Section 13(1)(d) of the Prevention of Corruption Act (for short, “the PC Act” ) on 07/04/2017.

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The Applicant, at the relevant time, was working as Branch Head of Bank of Maharashtra, Sahakar Nagar Branch, Pune from 01/08/2012 to 17/10/2015 and she retired from service on 30/06/2020.

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M.M.Salgaonkar

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The case of the prosecution in nut shell is, the Branch Head of Bank of Maharashtra, Sahakar Nagar Branch, Pune, during the period 2012-2013 entered into criminal conspiracy with other accused persons and in furtherance of the same, has fraudulently and dishonestly sanctioned a term loan of Rs.7.8 crores for purchase of plant and machinery and cash credit limit of Rs.2 crores, as working capital. It is further alleged that the loan amount was diverted by the borrowers, Shri Satish Dharane and Shri Mahest Kothe, resulting in the account becoming NPA and causing wrongful loss to the bank and corresponding gain to the borrowers.

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On completion of investigation, the charge-sheet was fled before the Special Judge, CBI ACB, Pune against the accused persons on 30/03/2019.

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Pursuant thereto, the Applicant fled application for discharge, by invoking Section 227 of the Criminal Procedure Code (for short, “the Cr.P.C.”) , but since this application was rejected on 12/12/2022, the Applicant has fled the present Revision Application.

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Heard the learned counsel Mr.Sandeep Phatak for the Applicant, the learned counsel Mr.Kuldeep Patil for the CBI and the learned A.P.P. Mr.S.H.Yadav for the State.

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With the able assistance of the respective counsel, I have perused the Revision Application accompanied with the First Information Report as well as the statements of the several witnesses, which are collated during the course of investigation.

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M.M.Salgaonkar

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I have also perused the impugned order annexed to the Application, which has, in my considered opinion, clearly gathered the crux of the accusations levelled against the Applicant and a conclusion is derived that the Applicant, being the Branch Head, without scrutinizing and checking the genuineness of the documents, is responsible for disbursement of loan for purchase of the plant and machinery and C.C. limit as working capital to M/s.Vishnu Gayatri Biocoal and Agro Products Pvt. Ltd. The impugned order has crystallized the role of the Applicant and a fnding is recorded that the Applicant had failed to ensure the terms and conditions at the pre-disbursement stage and facilitated the borrowers and disbursed the Term Loan and CC limit, without ensuring the end use of the funds.

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Recording the existence of prima facie material and her involvement in the alleged fraud, the discharge, as sought for, is refused.

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The special case in which the Applicant is arraigned as Accused is registered on the basis of the written complaint by Shri G. V. Ramana, the then Zonal Manager, Pune City Zone, Bank of Maharashtra, Pune, alleging that the present Applicant, as Branch Head, Bank of Maharashtra, Sahakar Nagar Branch, Pune, entered into criminal conspiracy with the Directors of M/s.Vishnu Gayatri Biocoal and Agro Products Pvt. Ltd. alongwith the Valuer to cheat the Bank of Maharashtra, by sanctioning a Term Loan and Cash Credit limit as working capital. The investigation revealed that Accused Nos.2 and 3, the borrowers, in criminal conspiracy

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M.M.Salgaonkar

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with each other and the Offcers of the Bank of Maharashtra, registered a company, M/s.Vishnu Gayatri Biocoal and Agro Products Pvt. Ltd. (Accused No.9) with the ROC, Pune on 30/08/2012 and fraudulently attempted to avail credit facility amounting to Rs.19.00 crores from Bank of Maharashtra, by submitting their application to Accused No.8- Shri P.N.Deshpande, the then General Manager and Zonal Manager, Pune City Zone. The proposal was processed urgently through Accused No.11, who prepared the Preliminary Information Memorandum (PIM) for New Business Group and the Applicant signed on the same. On this proposal being processed, it was declined due to negative outlook of the project.

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Despite aforesaid rejection, Accused No.2-Satish Dharane, dishonestly submitted another proposal, this time for Term Loan of Rs.7.80 crores and Cash Credit limit of Rs.2.00 crores and in order to facilitate the sanction of loan, forged technical and fnancial feasibility report in the name of nonexistent frm M/s.M.V.Mulay & Associates and Chartered Engineers from the panel of Bank of Maharashtra. Thereafter, Accused No.8, the then General Manager and Zonal Manager, Pune City Zone, in conspiracy with the borrowers, dishonestly and with an intention to accommodate and show undue favour to the borrowers, considered the re-submitted proposal and sanctioned the same. This was done by different bank offcials i.e. Accused No.1(Applicant), Accused Nos.5, 6, 7, 8, 10 and 11, as these bank offcials showered undue favours in processing, sanctioning and disbursement of the credit facility to the borrowers.

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M.M.Salgaonkar

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As far as the present Applicant, who was the Chief Manager and Branch Head of Bank of Maharashtra, Sahakar Nagar Branch is concerned, her role in awarding the credit facility is signifcant, as at the time of initial application as well as at the stage of disbursement. The investigation reveal that after the sanction of Cash Credit facilities, it was conveyed to the company by the Applicant. The frst loan application was processed by the Applicant on 24/12/2012 and this was done on the basis of a visit to the offce of the company and she submitted the PIM on 24/12/2012. The Applicant had clear knowledge of the rejected proposal and as a part of conspiracy, the sanctioned loan proposal was given to the Applicant for disbursement. The company submitted various letters addressed to the Branch Manager for disbursement of amount, enclosing the invoices of M/s.Ninad Traders and these invoices are signed by Accused No.2-Satish Dharane, which had an endorsement of the Applicant. The amount was disbursed to the company, based on the invoices and receipts of M/s. Ninad Traders and worth it to mention that the invoices were printed on the plain paper, without any contact number, Sales Tax Registration details etc. It is the Applicant, who was to confrm its genuineness, but she failed in her duty to confrm its genuineness and authenticity and rather disbursed the amount in quick succession. It was also her duty, as a Branch Manager, to ensure before disbursing the credit facilities to the borrower that the terms and conditions of the sanction order are complied or not, but she did not ensure the terms and conditions of the sanction order. The investigation has further revealed that the amount, which was disbursed in the account

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M.M.Salgaonkar

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of M/s.Ninad Traders from the credit facility sanctioned to M/s.Vishnu Gayatri Biocoal & Agro Products Pvt. Ltd. (A-9) was further diverted to various accounts of Accused No.2Satish Dharane. The investigation also revealed that the account in the name of M/s. Ninad Traders was itself a bogus account opened by Accused No.2.

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The Applicant in her capacity as a Branch Manager was expected to assess the genuineness of the initial proposal and credentials of the borrowers. However, she signed the PIM, without verifying the credentials of the borrowers, which contained false facts and projections. The proposal was rejected by the Head of Bank of Maharashtra, but at a subsequent point of time, it was dishonestly considered for a lower value i.e. Rs.9.8 crores at Zonal level and sanction was accorded. The Applicant is also responsible for permitting opening of Current Account of the borrower company, without availing the KYC documents and without proper introduction. The opening form of the company revealed that the personal information of the Directors was not flled.

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After disbursement of loan, the Applicant was expected to oversee proper utilization of funds sanctioned to the borrower company. The investigation further revealed that no tax invoices of the machineries were submitted by M/s.Ninad Traders and neither the quotations nor the proforma invoices submitted by M/s.Ninad Traders, bear any GST/VAT numbers. The receipts obtained from M/s.Ninad Traders were bereft of

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M.M.Salgaonkar

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the necessary details like Demand Draft number, date of receipts, signature on revenue stamp and also the name of the person who received the Demand Drafts.

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The Applicant, working as the Branch Manager, is responsible for not collecting proper documents, invoices, after disbursing the loan amount. She also failed to verify the assets created and also failed to obtain bills/invoices in proper format, but still disbursed the loan in favour of the borrowers. She did not ensure that the CC amount is released for running the manufacturing unit and purchasing the raw material, but before utilization of Term Loan, which was for installation of machinery, the CC facility was disbursed, which was for running the business and the Applicant has an active role to play in the whole episode.

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The statements of various witnesses, in particular, that of Shri G. V.Ramana, the complainant, clearly refect as under :-

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“Remaining amount of Term Loan Rs.7,42,000/- was disbursed by Smt. Lata Mistry by transferring to the CC account of the company. The Branch Manager Smt.Lata Mistry had obtained receipts from M/s.Ninad Traders for Rs.1,71,60,000.00, Rs.2,75,00,000.00 and Rs.1,00,23,000.00 and these receipts did not have details of DD numbers, dates of receipts, signatures on the revenue stamps and also name of the person with address who received the DDs. No proper invoices of M/s.Ninad Traders were submitted to the Bank for the release of above amounts as the invoices purportedly of M/s.Ninad Traders did not contain Sales Tax Registration numbers, VAT Registration Numbers and Telephone numbers. The Branch Manager, Sahakar Nagar Branch, Pune Smt.Lata Mistry was responsible for collecting proper documents/Invoices before disbursing the loan amounts. Smt.Lata Mistry as Branch Manager was also responsible for the disbursement of CC limit to ensure that the CC limit was

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M.M.Salgaonkar

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utilized for running the plant. She did not collect proper documents/bills from the borrower before disbursing the CC limit.”

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The statement of high ranking bank offcial allege that the Zonal Manager should not have considered the proposal, which was initially declined by Head Offce, NBG approval committee, without change in it’s business structure, since it was not in the interest of the bank. Reliance is placed on the operative guidelines for exercise of delegated sanctioning powers for lending and related matter of Bank of Maharashtra, with the specifc direction as under :-

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“Rejected/declined proposals by higher authorities should not be entertained at lower levels even if such sanctions fall within delegated powers of lower level functionary, without the written permission from higher authority”.

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The material against the Applicant is suffcient to make her face the trial, who face a serious accusation and the submission that the prosecution is based on conjectures and surmises, is an incorrect statement, as the Applicant who was in helm of affairs of the bank, ought to have ensured appropriate inquiry before the amount was disbursed by verifying the credential of the borrower, as it was subsequently revealed that the facts and projections were completely misguiding and even the fund that was granted, was not properly utilized by the borrower company.

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The Applicant, a public servant, is charged for facilitating the misutilization of funds by the accused borrower. She, prima facie, is responsible for not disbursing the amount, on ensuring the particulars of disbursement, in

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M.M.Salgaonkar

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the account of the supplier of the machinery, but she has given the DDs to the Directors of the borrower company, which has facilitated them to deposit it as per their convenience in the account fraudulently opened in a fctitious name of M/s. Ninad Traders.

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On completion of investigation, the charge-sheet is now fled and the contention that the accusations are general in nature, is falsifed from the material compiled in the chargesheet in form of various documents. Holding a responsible position of Branch Manager, the Applicant ought to have carried out a detailed search report, which could have exposed the borrowers, but instead, she facilitated the disbursement and did not ensure its proper utilization. She is, therefore, rightly charged for being part of a criminal conspiracy alongwith the co-accused persons and, since, no case for discharge is made out, the impugned order has rightly refused her discharge.

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In the wake of the above, there is no merit in the present Revision Application and the same is dismissed.

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( SMT. BHARATI DANGRE, J.)

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M.M.Salgaonkar

Lata Jagdish Mistry v. State of Maharashtra, through Central Bureau of Investigation, Anti Corruption Branch, Pune

Case brief

What is this about?

What did the court decide?

Lata Jagdish Mistry v. State of Maharashtra, through Central Bureau of Investigation, Anti Corruption Branch, Pune

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

Issues for consideration

Statutes considered

Parties & counsel

Coram

Case details

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