Mumbai, March 12, 2024 – The Designated Court under the Maharashtra Protection of Interest of Depositors (in Financial Establishments) Act, 1999 (MPID Act), at the City Civil & Sessions Court, Mumbai, presided over by HHJ Abhijeet A. Nandgaonkar (Court No. 20), has rejected the bail application of Umesh Shivram Naik, accused No. 3 in Crime No. 404 of 2023 registered with the Kandivali Police Station. Naik was seeking bail under Section 437 of the Code of Criminal Procedure, 1973, in connection with offences punishable under Sections 420 (Cheating), 406 (Criminal breach of trust), and 34 (Acts done by several persons in furtherance of common intention) of the Indian Penal1 Code (IPC), along with Sections2 3 and 4 of the MPID Act. The order was dictated and pronounced in open court on March 12, 2024.
Ld. Adv. Mr. Maheshchandra Gupta appeared for the Applicant/Accused, while Ld. APP. Ms. Chaitrali Panshikar represented the Respondent/State-EOW, along with the investigating officer.
Applicant’s Arguments for Bail:
Ld. Adv. Mr. Gupta argued that his client, Umesh Naik, is a respectable citizen with no prior criminal record apart from the present case. He contended that Naik was not a promoter, director, manager, or employee of the firm “HAPPINESS 4 ALL” and was himself a victim, having invested approximately ₹12,00,000 with accused No. 1, which remains due.
Mr. Gupta submitted that the allegations in the FIR were false, baseless, and conjectural, with no supporting evidence. He pointed out that the original complainant had not deposited any money directly with the applicant. While the applicant had initially received some interest from accused No. 1, he did not know the other witnesses mentioned in the case and had no involvement with them.
It was also argued that the FIR was lodged after a 15-month delay from the last alleged cause of action (April 16, 2022). The applicant claimed no involvement in the transactions between the complainant and accused No. 1, which were based on notarized stamp papers where the applicant was not even present during signing. He asserted that all allegations against him were oral and that he had not received any money from the complainant in his account, thus the offences under Sections 420 and 406 of the IPC and Sections 3 and 4 of the MPID Act were not applicable to him.
Mr. Gupta concluded by stating that the applicant was innocent and falsely implicated, ready to abide by any conditions imposed if granted bail, and would not tamper with evidence or witnesses. He offered to provide surety or cash security as directed by the Court.
Prosecution’s Opposition:
The investigating officer, through Ld. APP., opposed the bail, stating that the applicant was arrested on February 8, 2024, and was in police custody until February 20, 2024, and subsequently lodged in magisterial custody. Investigation revealed that the absconding accused Deepak Mhaskar had transferred money from his bank account to the applicant’s accounts with Bassien Catholic Co-op Bank Ltd. and Union Bank, both in Vasai (West). During interrogation, the applicant allegedly gave evasive answers and did not cooperate with the investigation. The main accused, Deepak Mhaskar, remains absconding.
The prosecution highlighted that despite two notices under Section 41(A)(1) of the CrPC, the applicant remained absent and was found hiding his identity in society. The applicant and another accused, Shyamsundar Madhukar Malvankar, had previously sought anticipatory bail (ABA No. 1832/2023), which was rejected on merit by another designated MPID court on October 9, 2023. Despite this rejection, both accused allegedly continued to live in society by concealing their identities until the applicant’s arrest.
The investigation further revealed that the applicant, along with Deepak Mhaskar and Shyamsundar Malvankar, had allegedly told the complainant and other investors that “HAPPINESS 4 ALL” was registered with SEBI and the Reserve Bank of India to lure them into investing, promising high returns. They allegedly received approximately ₹53,05,000 from these investors and failed to return the amounts. Besides the complainant, other investors, including Smt. Pankaja Mangesh Lad, Mr. Harishchandra Virappa Amin, and Deepak Kumar Ravindra Sinha, also had their investments unpaid as per their statements.
The prosecution stated that the complainant, a LIC agent, was allegedly persuaded by the accused, including the applicant, to sell his house for ₹47,00,000 and invest the proceeds with Deepak Mhaskar based on assurances given by the applicant and Shyamsundar Malwankar. Thus, the complainant and other investors were defrauded of ₹53,05,000.
The prosecution argued that the applicant had also deceived other investors, whose information and statements were yet to be collected. They feared that if released on bail, the applicant might tamper with crucial documentary evidence and prosecution witnesses, engage in similar activities, abscond, and not be present for trial. Therefore, they strongly objected to the bail application.
Court’s Analysis and Findings:
Upon inquiry by the Court, the applicant’s advocate submitted the applicant’s bank statement and a copy of an order passed by another designated MPID court in Anticipatory Bail Application No. 584 of 2024, dated March 6, 2024. The Ld. APP strongly objected, citing the earlier rejection of Anticipatory Bail Application No. 1832 of 2023.
The Court noted the applicant’s failure to mention the earlier bail application and its rejection in the present application, deeming it a willful suppression of fact.
However, based on the applicant’s submitted bank statement, the Court observed that the applicant had received ₹50,000 via NEFT from the absconding accused No. 1, Deepak Mhaskar, on December 21, 2018, indicating that the applicant had received amounts from the invested money.
The Court further noted the complaint’s allegation that the applicant had induced investors by promising high returns and had even received valuable gifts for bringing in more investors, despite allegedly knowing the true nature of the scheme. The applicant and Shyamsundar Malwankar allegedly insisted that the complainant sell his house and invest the proceeds in “HAPPINESS 4 ALL,” accepting the amount but failing to return it as promised, thus constituting an offence under Sections 3 and 4 of the MPID Act. The applicant and Shyamsundar Malwankar also allegedly assured investors that “HAPPINESS 4 ALL” was registered with SEBI and the Reserve Bank of India to attract investments.
The Court highlighted that the applicant was also not traceable and was arrested only after significant police effort. With the investigation still ongoing and revealing the applicant’s vital role in the commission of the offence, a prima facie case was established by the prosecution. The Court found a chance of the applicant absconding and tampering with evidence and witnesses if released on bail. The initial amount involved was ₹53,05,000, with the potential for this amount to increase as more investors come forward. The earlier rejection of the applicant’s anticipatory bail application on merit was also considered.
The Court distinguished the applicant’s reliance on the Supreme Court’s observations in Bimla Tiwari Vs. State of Bihar and C. B. I. –vs— P. S. Jayaprakash, stating that while the process of criminal law is not for mere money recovery and the role of each accused should be considered, the present case involved serious economic fraud and the applicant’s alleged active participation and benefit from the crime proceeds.
The Court also considered the guidelines laid down by the Supreme Court in Nimmagadda Prasad Vs. Central Bureau of Investigation and Y. S. Jagmohan Reddy .Vs. Central Bureau of Investigation regarding the factors to be considered while granting bail, particularly emphasizing that economic offenses with deep-rooted conspiracies and huge losses of public funds need to be viewed seriously.
Order of the Court:
In light of the above discussion, the Court concluded that the offence was a serious economic fraud, and considering the facts, circumstances, and gravity of the offence, the applicant/accused was not entitled to bail at this stage, even though he claimed to be an investor as well. The Court held that his alleged active participation in the commission of the offence and being a beneficiary of the proceeds of the crime disentitled him from bail, even with stringent conditions.
Therefore, HHJ Abhijeet A. Nandgaonkar passed the following order:
- Bail Application No. 175/2024 moved by Applicant/Accused No. 3 – Umesh Shivram Naik in C.R.No.404/2023 registered with Kandivali Police Station for the offence punishable under Sections 420 and 406 r/w 34 of IPC and under Section 3 and 4 of MPID Act in R.A.No.178/2024 is rejected.
- Case papers be filed.
- Concerned authority to take note.
- Accordingly, Bail Application No. 175/2024 is disposed of.
This order emphasizes the Court’s stringent approach towards economic offenses and the denial of bail to individuals found to have actively participated in and benefited from such crimes, even if they claim to be victims themselves. The applicant’s alleged role in luring investors and receiving funds played a significant factor in the rejection of his bail application.