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March 22, 2021

SC stays bail granted by Delhi HC to Unitech Promoters

by CA Jessica Nagaonkar in Compliance Law, Corporate Law

SC stays bail granted by Delhi HC to Unitech Promoters

The Supreme Court (SC) expressed its strong disapproval at the orders passed by the Delhi High Court (HC) and a Chief Metropolitan Magistrate (CMM) which eventually culminated in bail being granted to Unitech promoters, Sanjay Chandra and Ajay Chandra. The National Company Law Tribunal (NCLT), in February 2017, had suspended all the eight directors of Unitech, over allegations of mismanagement and siphoning of funds and authorised the centre to appoint 10 nominees on its board. This was the second time after the new Companies Act came into force that the centre had sought to take over the control of a private company – the first was the Jignesh Shah-led National Spot Exchange Ltd.

History of Bail Application in the current case:

  • A status report was filed on behalf of the Delhi Police by the Additional Deputy Commissioner of Police, Economic Offences Wing, New Delhi.
  • An interlocutory application was filed by the Delhi Police for staying the order passed by Dr Pankaj Sharma, Chief Metropolitan Magistrate on 13th January 2021 granting bail to the accused, Sanjay Chandra and Ajay Chandra.
  • A FIR was registered at the behest of the home buyers of Unitech Limited on 31 July 2015.
  • The Sessions Judge, by an order dated 9 August 2017, dismissed the bail application filed by the accused.
  • The Delhi High Court (HC) by an order dated 11 August 2017, declined to grant interim bail.
  • The Economic Offences Wing filed a charge-sheet before the Chief Metropolitan Magistrate under Sections 406, 420 and 409 read with Section 120B of the Indian Penal Code on 21 September 2017.
  • Special Leave Petitions (SLP) were moved before SC against the order of the Delhi HC.
  • By an order dated 30 October 2017, the two accused were admitted to bail subject to the condition that they shall deposit a sum of Rs 750 crores in the Registry SC by 31st December 2017.
  • Subsequently, on 30th August 2018 and 7th January 2019, two supplementary charge-sheets were filed by the Economic Offences Wing.

Denial of Bail by SC

  • On 14 August 2020, SC considered the applications filed by the accused, for the grant of bail on the basis of their submission that they had complied with the order for the grant of bail.
  • The submissions were not accepted by SC for two reasons.
  • First, there was a breach in adhering to the time line indicated by the order of this Court for deposit by 31 December 2017.
  • Second, SC noted that the amount which was realized in the Registry was as a result of the monetization of the assets of Unitech Limited under the auspices of the SC appointed Committee.
  • In other words, the accused had not complied with the direction to deposit Rs 750 crores.
  • Consequently, observing that both the conditions which were imposed in the order dated 30 October 2017, had not been complied with, SC declined to grant bail.

Forensic Audit also conducted on assessee

  • Apart from above reasons, SC noted the circumstance that a forensic audit had been conducted and a report was submitted, following which SC issued directions for taking over the management of Unitech Limited by a Board which was constituted by the Union of India.
  • SC noted that the contents of the forensic report warrant an investigation into serious allegations of money laundering and siphoning of funds to offshore locations by the erstwhile management of Unitech Limited.

Accused released on interim bail

  • At this stage that during the pendency of the matter before SC, the accused had applied for the grant of interim bail before SC on the ground of the Covid-19 pandemic affected their family.
  • They were released on interim bail for a specific period after which they surrendered back.
  • After the rejection of the application for bail, an application was moved before the HC of Delhi by which permission was sought and granted for withdrawing the application with liberty to approach the trial court since the charge-sheet was filed.
  • In the meantime, one of the accused, Ajay Chandra moved the Metropolitan Magistrate and he was granted interim bail on 23rd October 2020 on the ground that his spouse has tested positive for Covid-19.
  • Subsequently, the Chief Metropolitan Magistrate granted interim medical bail to accused Sanjay Chandra on 3rd December 2020.
  • It was thereafter, that the application before the Delhi HC was withdrawn with liberty to move the trial Judge. Eventually, on 13th January 2021, the Chief Metropolitan Magistrate at Patiala House Courts, directed that the accused be released on bail.

Observations of the SC

  • SC was of the view that the manner in which the accused were granted liberty by the HC to move the Metropolitan Magistrate for the grant of bail and the order of the Metropolitan Magistrate were a shocking exercise of judicial power and a breach of judicial discipline.
  • There were specific findings in the order of SC that the deposit of Rs 750 cores was directed by Mr Sanjay Chandra and Mr Ajay Chandra and the amount which was realized in the Registry was as a result of the monetization of the assets of Unitech Limited under the auspices of the Justice Dhingra Committee.
  • That apart, SC adverted to the serious circumstances which had come on the record in the form of the report of the forensic auditors, M/s Grant Thornton which indicated money laundering and siphoning of company funds to offshore locations.
  • These funds were the moneys paid by the home buyers.
  • SC found that the conduct of the accused in moving an application for withdrawal before the HC with liberty to move the Magistrate for bail and seeking regular bail before the Metropolitan Magistrate is an overreach of the jurisdiction of SC.
  • The order of SC dated 14th August 2020 expressly directed that the deposit which was required in terms of the order was by the accused and that the amounts which were realized by the monetization of assets of the company could not be regarded as a deposit by the accused.
  • Moreover, it was evident that the accused themselves were moving SC in the interim for bail on medical grounds.
  • Though, SC was seized of the entire dispute pertaining to the defaults by Unitech Limited and a Board of Management appointed by the Union of India was placed in charge, several other steps were taken including conducting a forensic audit and directing the agencies of the Union of India to investigate into all aspects of the matter.
  • In this backdrop, it would be unacceptable for the accused, during the pendency of the proceedings before SC to seek the liberty of the HC and then move the Chief Metropolitan Magistrate and obtain an order of bail.
  • The finding of the Magistrate to the effect that the accused have already deposited more than Rs 750 crores as directed by the SC with its Registry was plainly incorrect and a deviation from the findings specifically recorded in the order.

SC, therefore, of the clear view that an attempt was made to overreach the process of SC and an order of bail was sought and obtained, to defeat the control which was being exercised by SC. SC ordered and directed that pending the return of notice, the accused shall on or before 22nd March 2021 surrender to the Tihar Jail. The order of the Chief Metropolitan Magistrate, Patiala House Courts dated 13 January 2021 was stayed pending further orders.

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