Greater Bombay, April 12, 2018 – The Special Judge (CBI) for Greater Bombay, Shri Vivek V. Kathare (Court Room No. 53), has rejected the bail application of Hasmukh Lilachand Shah, a 62-year-old accused in a significant bank fraud case amounting to a staggering Rs. 4625.43 Crores. Shah was arrested by the CBI in connection with case No. RC 15/E/2016, CBI/BS & FC/Mumbai, which involves allegations of criminal conspiracy and cheating under the Indian Penal Code (IPC) and offenses under the Prevention of Corruption Act, 1988.

Shah was apprehended on March 12, 2018, and subsequently remanded to police custody until March 26, 2018. Following the expiry of his police custody, he was placed in judicial custody, where he remains.

The Allegations Against Hasmukh Lilachand Shah:

The case originates from a complaint filed by Mr. Anil Manohar Rokade, Deputy General Manager of Canara Bank, alleging fraudulent borrowing by M/s. Forever Precious Jewellery & Diamond Ltd. from a consortium of banks, with Punjab National Bank as the lead.

The prosecution’s case reveals that Canara Bank had sanctioned substantial credit facilities, including fund-based limits of Rs. 12 Crores and non-fund-based limits of Rs. 150 Crores (including standby letters of credit – SBLCs). These SBLCs were utilized to purchase gold from bullion banks abroad, which was then allegedly exported to buyers in the UAE. However, M/s. Forever Precious Jewellery & Diamond Ltd. failed to make payments for the imported gold, leading to the invocation of the SBLCs and a wrongful loss of Rs. 146.35 Crores to Canara Bank alone. The total alleged loss to the consortium of banks is a massive Rs. 4625.43 Crores.

The CBI alleges that Hasmukh Lilachand Shah was a very close confidante of Mr. Jatin Mehta, the Promoter and Guarantor of M/s. Forever Precious Jewellery & Diamond Ltd. Despite purportedly holding the position of a Head Clerk in Su-Raj Diamond Industries Ltd., Shah was allegedly a former Director and authorized signatory of Forever Precious Jewellery & Diamond Ltd. He is accused of instructing and pressuring other employees to become authorized signatories, signing documents related to the opening of SBLCs, and coordinating with banks to avail credit facilities. The prosecution further claims that Shah oversaw all export and import operations from the company’s Chennai and Cochin units, directly giving instructions to the Unit Heads.

Accused’s Defense: Mere Head Clerk Performing Clerical Duties:

Ld. Adv. Mr. Tariq Khan, representing Hasmukh Lilachand Shah, argued that the Investigating Authority had failed to produce any concrete documentary evidence to prove that his client was a former director or an authorized signatory of M/s. Forever Precious Jewellery & Diamond Ltd. He maintained that Shah was merely a Head Clerk performing clerical duties and was innocent, having been falsely implicated in the alleged transactions. It was also argued that Shah was not educated enough to create or manipulate the complex financial documents involved. The defense also highlighted Shah’s limited tenure as an additional director in Su-Raj Diamond Industries Ltd. between 2003 and 2005, and his alleged resignation from a similar position in M/s. Forever Precious Jewellery & Diamonds Ltd. in 2005.

Furthermore, the defense pointed to the sudden resignation of Mr. Jai Begani, the CEO of M/s. Forever Precious Jewellery & Diamonds Ltd., a day before the first Letter of Credit (LC) default, suggesting he might be the key person responsible for the financial affairs. The defense contended that there was no further need for custodial interrogation, no recoveries to be made from Shah, and no evidence that he induced the complainant bank. Considering Shah’s age and ailment, and the absence of any prior criminal record, the defense sought his release on bail. Reliance was placed on the Supreme Court judgments in Sanjay Chandra V/s. CBI and Dattaram Singh V/s. State of Uttar Pradesh & another regarding the principles of bail and the need for a humane approach.

CBI’s Strong Opposition: Key Role and Potential Tampering:

SPP Mr. Limosin, representing the CBI, vehemently opposed the bail, asserting that the agency had collected substantial documentary and oral evidence establishing Shah’s involvement in the commission of the offense. Despite his formal designation as Head Clerk, the CBI argued that Shah wielded significant influence, akin to the absconding prime accused Jatin Mehta, directing other directors in the passing of resolutions. The prosecution highlighted Shah’s role as an authorized signatory for SBLCs worth crores and his active participation in securing banking credit facilities.

The CBI further alleged that Shah had been influencing witnesses and instructing them not to disclose information to the investigating agency. The agency also pointed to the substantial expenditure on Shah’s son’s education in the UK (over Rs. 25 Lakhs) and his purchase of a flat worth Rupees One Crore in Borivali in 2013-2014, in addition to his existing property, suggesting potential benefits from the alleged fraud.

Crucially, the CBI argued that during Shah’s police custody, existing directors and employees claimed their inability to produce certain crucial documents, stating that these were solely in Shah’s possession and knowledge. The CBI expressed a strong apprehension that if released on bail, Shah would tamper with or destroy these vital documents.

Court’s Observations and Conclusion:

Special Judge Kathare, after perusing the case records, noted that the investigation revealed Shah to be a close confidante of Jatin Mehta and a former Director and authorized signatory. The investigation indicated Shah’s involvement in pressuring employees to become authorized signatories, signing SBLC documents, coordinating with banks for credit facilities, and overseeing export-import operations. The court also highlighted Shah’s attendance at consortium meetings, board meetings, and meetings with banks in Dubai alongside Jatin Mehta.

The court acknowledged the CBI’s claim that Shah was the key person in the company’s operations after Jatin Mehta and had signed numerous export-import documents. The fact that UAE buyer companies were allegedly controlled by Jatin Mehta and that Shah coordinated with his employees abroad further strengthened the prosecution’s case in the court’s view. The allegations of witness intimidation also weighed heavily against granting bail.

Regarding the defense’s reliance on the Sanjay Chandra judgment, the court distinguished the present case, noting that the observations in the cited judgment were made post the filing of the charge sheet, whereas in Shah’s case, the investigation was still ongoing.

Considering the nature of the accusations, the severity of the potential punishment, and the supporting evidence on record, the court concluded that there was a reasonable apprehension of tampering with witnesses and evidence if Shah were released on bail. The court emphasized that the alleged offense was an economic crime with significant societal impact, causing substantial damage to the nation’s financial status.

Final Order:

In light of these observations, Special Judge Vivek V. Kathare passed the following order:

1. Bail Application No. 233/2018 in CBI Remand Application No. 277/2018, filed by the applicant/accused Hasmukh Lilachand Shah, is hereby rejected.

2. Application is disposed off accordingly.

The order, pronounced in open court on April 11, 2018, and the certified copy released today, underscores the judiciary’s firm stance against large-scale economic offenses and the cautious approach adopted when considering bail in such matters, especially when there is a risk of evidence tampering and witness intimidation. The investigation into the multi-crore bank fraud case is expected to continue.