Mumbai, December 10, 2015 – The Designated Court under the Maharashtra Protection of Interest of Depositors (in Financial Establishments) Act, 1999 (MPID Act),1 at the Bombay City Civil & Sessions Court, Mumbai, presided over by Special Judge D.P. Surana (C.R. No. 36), has granted bail to Rajeev Mahavirprasad Todi, an adult businessman, who was arrested in connection with the massive ₹5,600 crore National Spot Exchange Ltd. (NSEL) scam. The bail was granted vide an oral order on December 7, 2015, with the signed order uploaded on December 10, 2015.
The applicant, Rajeev Todi, was arrested on October 9, 2015, in EOW C.R. No. 89/2013, registered by the Economic Offences Wing (EOW), Unit-V, CB CID, Mumbai. He was charged with offences punishable under Sections 409 (Criminal breach of trust), 465 (Forgery), 467 (Forgery of valuable security, will, etc.), 468 (Forgery for purpose of cheating), 471 (Using as genuine a forged document or electronic record), 474 (Having possession of document knowing it to be forged with intent to use it as genuine), 477A (Falsification of accounts), 120B (Criminal conspiracy) of the Indian Penal Code, and Section 3 of the MPID Act, 1999.
Advocate Pasbola appeared for the applicant, while SPP Advocate Avinash Avhad represented the State, and Advocate Karnik appeared for the informant/intervener.
Prosecution’s Allegations:
The prosecution’s case revolves around the alleged fraudulent activities on the electronic platform of NSEL, which facilitated pair contracts (T+2 and T+25) for commodity trading. It is alleged that NSEL, its directors, Financial Technologies India Ltd. (FTIL), its directors, 25 borrowers, and brokers conspired to defraud approximately 13,000 investors of their hard-earned ₹5,600 crores.
Specifically, NSEL allegedly deviated from its business model of facilitating genuine sale and purchase of commodities by promising assured returns of 14% per annum. The prosecution contends that NSEL officials, in collusion with 25 borrowers and brokers appointed by NSEL, generated false and bogus electronic warehouse receipts without the underlying physical stock of commodities in NSEL-accredited warehouses. This allegedly induced around 13,000 investors to invest approximately ₹3,500 crores under the guise of commodity trading, leading to fraudulent default.
The allegations against the applicant, Rajeev Todi, are significant. He was a director of M/s. N.K. Industries Ltd. (NKP) from 1998 to 2013 and played a key role in enrolling NKP as a member of NSEL. NKP’s total outstanding liability to NSEL is a staggering ₹969.89 crores. Furthermore, Todi allegedly introduced M/s. Swastik Overseas Corporation to NSEL, which received funds to the tune of ₹102.98 crores.
The prosecution claims that Todi was instrumental in diverting these funds to his family-owned companies, Krishna Horticulture and Mannan Agro. Rajesh Kumar Mehta, who was previously arrested in the case, is a director with a 30% stake in Mannan Agro. It is alleged that Todi, in connivance with Rajesh Mehta and NSEL officials, issued bogus stock offer letters to NSEL, falsely claiming the availability of Castor seed stock worth ₹102.98 crores for trade, based on which bogus warehouse receipts were generated. By July 31, 2013, the alleged stock was missing from the warehouses.
The fund flow investigation allegedly revealed that ₹68.56 crores were diverted to Todi, his companies, and family members. Additionally, M/s. Shriram Horticulture Developers and Processors Pvt. Ltd., where Todi is a director and his son Umang Todi is also a director, received ₹2.15 crores from Swastik Overseas Corporation. Todi also allegedly transferred substantial amounts from Swastik Overseas Corporation’s account to his own account (₹1.80 crores), his wife Suchita (₹3.09 crores), his son (₹2.33 crores), his daughter (₹1.03 crores), and other relatives and friends (₹10.70 crores). The prosecution portrayed Todi as the key orchestrator of these financial manipulations, with the earlier arrested Rajesh Mehta being merely a “puppet.”
Applicant’s Arguments for Bail:
Advocate Pasbola argued that the applicant is a permanent resident of Ahmedabad and was not absconding, having filed an Anticipatory Bail Application (ABA). He submitted that there was no possibility of the applicant tampering with evidence, as he had already been interrogated and had provided the names of individuals to whom he had given amounts. It was also stated that these amounts were paid to landowners, who were being investigated by the Investigating Officer (IO) and had acknowledged receiving the payments and were willing to repay.
The defense further pointed out that the applicant’s bank account was already frozen, and the title deeds of his flat were with the bank due to a loan. A chargesheet had already been filed in the case on January 6, 2014, in which the applicant was not named.
Advocate Pasbola argued that while the applicant was alleged to have borrowed ₹68.56 crores, a settlement was entered for ₹77.08 crores. Out of this, ₹32 crores went to Mannan Agro and were invested in land in Madosa, Gujarat, with the agriculturists acknowledging receipt of payment and expressing readiness to pay. He emphasized that the applicant was not a direct borrower from NSEL; the borrower, Falguni Mehta, was the wife of Rajesh Mehta of Swastik Corporation. Finally, he argued for parity, noting that other co-accused, including Rajesh Mehta, had already been granted bail, and keeping the applicant in custody would serve no purpose.
State and Informant’s Opposition:
SPP Advocate Avhad and the IO opposed the bail, contending that the accused had been absconding for a long time, had not cooperated with the investigation, and had failed to provide information about the utilization of funds received from NSEL. They argued that a significant amount was yet to be recovered at the applicant’s instance and that he possessed crucial information about cash withdrawals and assets acquired from the crime proceeds. The prosecution also argued that the applicant, being a resident of Ahmedabad, was likely to threaten witnesses and obstruct the investigation and that he would abscond if released on bail, citing his past conduct.
Advocate Karnik, representing the informant/intervener, opposed the bail on the grounds that the applicant was a director of NKP, the largest defaulting company of NSEL, and there was prima facie evidence of his involvement in the crime. He alleged that the applicant had siphoned off funds, benefiting himself and his family. Karnik also pointed out that the applicant had not offered any suitable proposal to deposit his admitted liability and that while other accused were released after the filing of the chargesheet, no chargesheet had been filed against the applicant yet, making him ineligible for bail.
Court’s Reasoning for Granting Bail:
Special Judge D.P. Surana acknowledged that the applicant was a director of NKP, the largest defaulting member of NSEL. However, the court also noted that the co-accused directors of NKP and the office bearers of NSEL had already been granted bail, and their bail orders were not challenged. The court found it unsatisfactory as to why the applicant’s custody was necessary for further investigation, especially considering that 60 days since his arrest (October 9, 2015) were about to expire, regardless of whether a chargesheet had been filed against him or further investigation was pending.
The court opined that the applicant was entitled to bail based on the principle of parity. It stated that the mere fact that the applicant had not come up with a suitable proposal to repay his alleged liability was not a sufficient ground to detain him.
The court found no substantial material to suggest that keeping the applicant in custody was essential for facilitating further investigation. The IO had not even sought permission to interrogate him in jail during his judicial custody. Therefore, the grounds put forth by the prosecution were deemed insufficient to refuse bail.
The IO did not dispute that the applicant had paid amounts to some farmers for land purchases, and the properties of NKP were already secured. The title deeds of the applicant’s flat were also with the banks. The court noted the lack of specific details from the IO regarding any remaining properties or documents to be seized or instances of non-cooperation from the applicant.
The allegations of tampering or absconding were considered general in nature. The co-accused who were already released on bail were not alleged to have absconded or tampered with witnesses or evidence. The applicant’s address was also not disputed.
The court observed that most of the investigation was based on documentary evidence already in the possession of the IO. In conclusion, Special Judge Surana found that none of the grounds cited by the prosecution were sufficient to keep the applicant behind bars. To allow the IO an opportunity for further interrogation pending investigation, the court decided to grant bail with strict conditions.
Order of the Court:
Special Judge D.P. Surana passed the following order:
Criminal Bail Application No. 68/2015 is hereby allowed.
Applicant Rajeev Mahavirprasad Todi is ordered to be released on bail in EOW Crime No. 89/2013 for offences under Sections 409, 465, 467, 468, 471, 474, 477-A r/w Section 120-B of the IPC and Section 3 of the MPID Act, on executing a PR bond of ₹5 Lakhs (Five Lakhs Only) with one or more sureties for the like amount, subject to the following conditions:
- The applicant shall mark his presence at the concerned police station with the investigating officer on the coming ten alternate Saturdays between 10:00 a.m. and 1:00 p.m. and as and when called by the IO.
- The applicant shall not leave India without the permission of this court.
- The applicant shall not directly or indirectly make any inducement, threat, or promise to any person acquainted with the facts of the case so as to dissuade him from disclosing any facts to any police officer or court.
- The applicant shall not alienate or dispose of, in any manner, any of his immovable properties without the permission of the court.
The order, pronounced on December 7, 2015, and signed on December 8, 2015, grants conditional release to a key accused in the multi-crore NSEL scam, highlighting the court’s emphasis on parity with other accused and the need for specific and compelling reasons for continued custodial detention.