C. Vasanth Kumar vs State of Karnataka

A.V. Chandrashekara, J.—Petitioner is accused No. 3 in a criminal case in Crime No. 230/14 on the file of Seshadripuram police station. A case is registered against the petitioner and three others for the offences punishable under Sections 406, 408, 409, 478, 471 and 420 read with Section 34, I.P.C.

Apprehending arrest at the hands of the respondent police, the petitioner has filed this anticipatory bail application under Section 438, Cr.P.C. He has undertaken to obey any condition that may be imposed upon him.

Seshadripuram police have already transferred the case to City Crime Branch, Bengaluru, for investigation. Therefore CCB has taken up investigation on the basis of FIR lodged by the financial member of Bangalore Development Authority (BDA, for short), Mr. Gangadhar. The bail application filed under Section 438, Cr.P.C. has been dismissed by the 51st Additional City Civil and Sessions Judge in Crl. Misc. 7190/14. Hence this bail application has been filed under Section 438, Cr.P.C.

The petitioner herein was appointed as a Second Division Assistant in BDA and his services were regularized on 1.1.1996. Thereafter he was posted to work in Cash Section. While so working in the Cash Section, the petitioner came to know about the transaction of mutual funds investment and 1st accused-Sandeep Dash was the financial member in BDA at that point of time. Later on Mr. Seshappa was the finance member.

What is argued before this court by the learned senior counsel for the petitioner, Mr. Prabhuling Navadgi is that the petitioner has virtually followed the directions given by accused Nos. 1 and 2 pursuant to the resolution dated 1.6.2002 in No. 153/02 based on the meeting of BDA Board. It is argued that the petitioner, as a subordinate, has only followed the directions of accused Nos. 1 and 2 from time to time and the amount was invested in mutual funds and the interest earned thereon was credited on the date of maturity and the same procedure was adopted for the period commencing from June 2005 and ending till June 2008. It is argued that the petitioner is in no way directly responsible for investment of the amount in mutual funds or the loss caused due to market crash. It is argued that he was not competent to take any decision in financial matters, and being a clerk, was duty bound to carry out the instructions and directions of higher officials from time to time. It is argued that he is innocent of the offences alleged and that he has already given his version to the BDA in writing on 28.11.2014, the day on which the case was registered against him.

Learned HCGP has vehemently opposed bail application by filing detailed objections. According to the learned HCGP, this accused along with two others committed the offences punishable under Sections 406, 408, 409, 478, 471 and 420 read with Section 34, I.P.C. it is alleged that the Accountant General in Karnataka, vide letter dated 11.7.2014 addressed to the Chairman, BDA, has reported that during the year 2008, a sum of rupees three crores was transferred to Bangalore Metro Rail Corporation Limited unauthorizedly and therefore, he had requested BDA to take suitable action. On the basis of such letter written by the Accountant General, BDA requested Karnataka Institute of Public Auditors (KIPA, for short) to undertake reconciliation of audit in respect of BDA accounts for the period January 2006 to 2014.

It is alleged that after thorough investigation, KIPA has submitted a detailed report on 19.11.2014 stating that the accounts pertaining to BDA showed large scale misuse of funds and it needs to be investigated at a higher level. In its report, KIPA has pointed out 17 major and glaring discrepancies. The same are reproduced below:

"1. According to the letter dated 20.06.2000 issued by the Finance Member, huge funds have been transferred to mutual funds on the basis of the oral instructions issued to IOB Bank.

As per the records in BDA the investment in mutual funds are not shown/recorded as investments in mutual funds but are shown as bank deposit in many cases.

The Finance Member has opened temporary accounts in which mutual fund transaction was carried out through cashier.

As per the resolution of the Board meeting dated 01.06.2002 at item No. 153 a decision for investment of 100 crores in mutual fund was taken on the ICRA rating basis huge investment was made in mutual funds. On the basis of the above decision there is misuse of the authority.

Mutual fund transactions were done by the Finance Members without bring the transactions to the knowledge of the Chief Accountant and hence, the transactions are suspicious.

The investment was made in Birla Mutual Fund by giving the address of BDA cashier C. Vasanth Kumar and transactions have been with his e-mail address. As per the Test Check of KIPA, the investment in Birla Sun Life was caused a total loss in 33.53 crore.

The mutual funds have been transacted through agents.

The investments in mutual funds have been, recycled many times against the financial rules.

All the documents collected during the investigation in respect of mutual funds are signed by C. Vasanth Kumar and in some documents as FM.

The opening of temporary accounts and the details recorded in the accounts of BDA are suspicious.

The returns on investments in mutual funds have been transferred from one bank to another bank and from one mutual fund to another mutual fund leading to confusion and thereby giving no scope for reconciliation.

The mutual fund investment does not disclose the name of the person.

The account opened at Corporation Bank being a temporary account bearing No. 42 is opened in the name of FM-BDA and not in the name of BDA and the transactions carried out through the signature of FM only are suspicious.

Accountant No. IOB being a temporary account needs detailed investigation.

The transfer of Rs. 3.00 crore to BMRCL is from the temporary account.

All documents have been obtained from the bank and are not transacted from BDA. Under these circumstances a detailed investigation at the higher level is required for the period 1999 to March 2014.

What was the overall investment in mutual fund and under the names of which person, the details of total interest earned and whether any loss is accrued in the principal investment? And whether the principal amounts have come back to BDA account are all to be investigated including bank transactions?"

What is argued by the learned HCGP before this court is that this petitioner was working in the Accounts Department as a clerk and he had conspired with other accused and is responsible for transfer of huge amount from BDA for parking the same in some the institutions and later on investing the same in mutual funds. It is further alleged that this petitioner has given his own address while investing money in mutual funds and has given his personal e-mail address for correspondence. It is alleged that a huge amount had been invested in the name of the financial member by opening temporary accounts. It is argued that all the four accused are responsible for misusing their power and causing loss to the extent of several crores of rupees to the public organization.

It is further argued that three crores of rupees had been transferred from the temporary account of BMRCL to BDA and the same was invested in mutual funds through its agents. It is alleged that all the accused have created false documents and kept the money of BDA in private mutual funds. It is argued that large scale scam has taken place in BDA by transferring huge amounts of BDA to various financial institutions without any authority and thereby huge loss is caused and in turn accused have made huge financial gain. It is argued that to unearth many things, the present petitioner is absolutely required for custodial interrogation.

Learned HCGP has vehemently argued that the report submitted by KIPA is only a tip of the iceberg and therefore an auditor has been appointed to conduct special audit of the accounts of BDA from 2002 to 2014.

Per contra, learned senior counsel representing the petitioner has argued that the petitioner has already submitted his detailed version just a few hours prior to registration of the case by the respondent police and that he has undertaken to obey any condition that may be imposed upon him. It is argued that the entire investigation is based on documents and they are available in BDA and therefore petitioner is not required to be arrested.

This court is unable to accept the submission made by the learned senior counsel for the reason that the report submitted by KIPA points out grave irregularities and illegalities in dealing with public money. Money has been transferred to mutual funds on a very large scale. Who were the agents of mutual funds, what is the commission obtained from agents and who received the commission, will have to be ascertained and unless the petitioner and other accused are subjected to custodial interrogation, it would be very difficult to unearth many things in a case like this. Requesting the Accountant General in Karnataka to appoint a special team for special audit does not give any leverage to the present petitioner to contend that he is not required for further investigation. Such a request made to the Accountant General is to unearth more murky details of the financial transactions and not to corroborate the report of KIPA.

In the light of a serious allegation made against all the accused and the report submitted by a reputed institution of retired auditors, it is too premature to disbelieve the same. Hence this is not a fit case to exercise discretionary power under Section 438, Cr.P.C. at this stage in favour of the petitioner. Accordingly the petition is liable to be dismissed.

In the result, I pass the following order:

ORDER

"The petition is dismissed.

Since there is a serious allegation of misuse of public money on a large scale purportedly using dubious means, it need not be reiterated that City Crime Branch would conduct a thorough investigation without undue delay."