Mumbai, Maharashtra [India] – [March 21, 2024]: A designated court under the Maharashtra Protection of Interest of Depositors (MPID) Act in Mumbai has rejected the bail application of Manohar Raghunath Shetty, an accountant accused in a multi-crore fraud case involving the Malaika Co-operative Credit Society. The order, passed by His Honour Judge Abhijeet A. Nandgaonkar (Court No. 20), was delivered on March 14, 2024.

Shetty, aged 53, was arrested on February 20, 2024, in connection with Crime No. 752/2021 registered at the Mulund Police Station. He is accused of offences punishable under Sections 406 (criminal breach of trust), 409 (criminal breach of trust by a banker, merchant or agent), and 420 (cheating and dishonestly inducing delivery of property) read with Section 34 (acts done by several persons in furtherance of common intention)¹ of the Indian Penal Code (IPC), and Sections² 3 and 4 of the MPID Act, 1999, which deals with fraudulent default by financial establishments.

The applicant’s counsel, Shri Vikram V Tare-Patil, argued that Shetty was falsely implicated, with no incriminating evidence recovered from him. He claimed Shetty was not connected to the alleged offences, had not induced any investors, and that the properties of other accused were already attached. He also stated that Shetty was a long-time Mumbai resident with community ties and no risk of absconding. The defense further argued that despite Shetty being in judicial custody in another case, the investigating officer had not interrogated him further, and his continued detention was unwarranted as the investigation was complete. They asserted Shetty would not tamper with evidence and would abide by bail conditions.

The prosecution, represented by Ld. APP. Ms. Chaitrali Panshikar, strongly opposed the bail. The investigating officer revealed that Shetty worked as an accountant in the Malaika Co-operative Credit Society and was privy to its financial affairs. The investigation allegedly revealed that Shetty, in collusion with other accused, cheated investors and profited, using these profits to purchase immovable properties. The prosecution emphasized the seriousness of the offence, involving 71 investors who had come forward with claims totaling ₹8,46,28,334. They argued that granting bail would lead to the destruction of evidence and witness tampering. The prosecution also highlighted Shetty’s alleged criminal antecedents, including a similar case registered at the Mira Road police station and another in Mangalore, Karnataka.

Upon inquiry by the court, Shetty’s counsel provided bail orders granted to him in the Mira Road case and a bail order granted to another accused in the same Mulund case by the Bombay High Court. However, the court noted the applicant’s failure to mention the earlier offences and bail applications in his current application, which it deemed a willful suppression of facts.

Despite acknowledging Shetty’s receipt of funds from the co-operative society, likely as salary, and bank statements showing transactions, the court focused on the allegations that Shetty actively lured investors with promises of high returns and even received valuable gifts for bringing in more investors, despite knowing the scheme’s fraudulent nature. The court emphasized the gravity of the offence under the MPID Act.

The court noted the ongoing investigation and the potential for more duped investors to come forward. It cited Supreme Court judgments, including Bimla Tiwari Vs. State of Bihar and C. B. I. –vs— P. S. Jayaprakash, emphasizing that bail proceedings are not for money recovery and the need to consider each accused’s role. The court also relied on Nimmagadda Prasad Vs. Central Bureau of Investigation and Y. S. Jagmohan Reddy .Vs. Central Bureau of Investigation, highlighting the factors to consider while granting bail in economic offences, which are treated with a different approach due to their impact on the national economy.

The court concluded that considering the serious economic fraud, the gravity of the offence, and the applicant’s alleged active participation and benefit from the crime’s proceeds, Shetty was not entitled to bail at this stage, even though he claimed to be an investor himself. The court found that his alleged active role in luring investors outweighed his claim as a victim.

Order:

1. Bail application No. 185/2024 moved by Applicant/Accused No. 2 – Manohar Raghunath Shetty in C.R.No. 752 of 2021 registered with Mulund Police Station for the offence punishable under Sections 406, 409, 420 read with 34 of IPC and under Section 3 and 4 of MPID Act in R.A.No.233 of 2024 is rejected.
2. Case papers be filed.
3. Concerned authority to take note.
4. Accordingly, Bail Application No. 185/2024 is disposed of Dt. 14/03/2024.

The order was dictated, pronounced, signed, and uploaded on March 14, 2024.

This judgment underscores the stringent approach taken by designated MPID courts in dealing with financial fraud cases, especially where there are allegations of active involvement in luring investors and misappropriating funds. The court prioritized the gravity of the economic offence and the ongoing investigation over the applicant’s claims and his bail in other similar cases.