03 November 2004
Supreme Court


Case number: Crl.A. No.-001265-001266 / 2004
Diary number: 9130 / 2004



CASE NO.: Appeal (crl.)  1265-66 of 2004

PETITIONER: Arvind Mohan Johari & Anr.

RESPONDENT: State of U.P. & Anr.

DATE OF JUDGMENT: 03/11/2004

BENCH: N. Santosh Hegde & S.B. Sinha



(Arising out of SLP (Crl.)  No.2057-2058 of 2004)

                Leave granted.

                The Appellants who are two in number allegedly committed various  offences of cheating, forgery, etc. in respect whereof two First Information  Reports were lodged being FIR No. R.C. No. 8(S)/2001 to R.C. No. 12(S) of  2001/CBI, Lucknow dated 6-7-2001 and R.C. No. 15(S)/2001 to R.C. No.  18(S)/2001/CBI, Lucknow dated 6.7.2001.         The Appellants floated various groups of companies, viz., M/s.  Country Inform Tech. Pvt. Ltd., M/s Kamal Infosys Ltd, M/s. Triputi  Financial Services and M/s. Century Consultant Ltd..  Allegedly, once Shri  G.N. Srivastava, Secretary, City Cooperative Bank Ltd. in criminal  conspiracy with the appellants herein unauthorisedly and fraudulently  permitted purchase of nine cheques of aforementioned two groups, viz.,  Country Inform. Tech. and Kamal Infosys worth of Rs. 1,71,35,000/-.  These  cheques are said to have been signed by Shri A.K. Johri.  Shri Johri  allegedly, furthermore, in conspiracy with Shri G.N. Srivastava got prepared  a demand draft for Rs. 45.00 lacs from Bombay Mercantile Bank out of the  cheques purchased proceeds of Rs. 71,35,000/- on his oral instruction.  He  also allegedly transferred Rs. 99.00 lacks from the account of Country  Inform. Tech. Services at State Bank of Hyderabad, Lucknow and remitted it  to Century Consultant Ltd., Mumbai although he was neither Director nor  Authorised Signatory in respect thereof.  The Appellants herein are said to  have got transferred Rs. 1.45 crores out of cheques purchased proceeds of  Rs. 1,71,35,000/- to Mumbai and got a pay order prepared for Rs.  99,90,000/- in favour of Century Consultant.   

       The other case being Criminal Case No. 51 of 2001 relates to M/s.  Century Consultants Ltd. in which the Appellants are Directors.  They  allegedly with Shri A.K. Shah and Pradeep Narain started a scheme known  as ’Byaz Badla’ in terms whereof they were supposed to deposit the amount  received from investors with the Bombay Stock Exchange but did not do it.   

       By reason of the alleged action on the part of the Appellants and other  accused persons, allegedly a large number of depositors who deposited the  amount in ’Byaz Badla’ Scheme as also the depositors in City Cooperative  Bank Ltd. were invested therein suffered a huge loss.   

       A petition for winding up of the Century Consultants Ltd. was filed.   The said Company was directed to be wound up by the learned Company  Judge.



       The Appellants applied for and were granted a short-term bail by an  order dated 25.6.2003 on certain conditions including that they would make  payments to the investors who are parties to the compromise with the  Directors of Century Consultants in the pending Company Petition by  releasing first instalment of 20% amount within two months as first  instalment and the second instalment of 20% in the next two months.           The Appellants were enlarged on bail for six months on the following  conditions:

"(i)    Accused applicants shall furnish two  sureties and a personal bond of the amount of Rs. 1  lac each to the satisfaction of the Special Judicial  Magistrate, CBI for a period of six months.

(ii)    Both the accused will file an undertaking on  affidavit that they will not leave the jurisdiction of  the court without the permission of the court  during trial.

(iii)   They will not seek any adjournment during  trial on the ground of their ailment or otherwise  and they will always either appear personally or  they will be represented through their counsel on  the date fixed in the trial court.

(iv)    Both the accused will not leave the country  without permission of the CBI for which they will  furnish an undertaking on affidavit.

(v)     They will surrender their passport and visa,  if any, which shall remain in the custody of the  CBI.  In case the accused do not have any passport  and visa, they will make it clear in their affidavits.

(vi)    According to the own statement of the  accused, they have assets more than fifty crores of  rupees, therefore they will honour the proposed  compromise with the depositors and irrespective of  the order in the company petition, they will release  first instalment of 20% amount within two months   by which they will give undertaking on affidavit  that they will comply with this condition by  25.8.2003.

(vii)   They will also make payment of second  instalment of 20% to the depositors in the next two  months i.e. by 25.10.2003 and the third instalment  of 20% by 25.12.2003.

(viii)  The payment will be made to the depositors  as contained in the list annexed to the  compromise."

       The aforementioned directions were issued in view the assertion made  by the Appellants to the effect that the total  amount involved by way of  claim of the depositors of City Cooperative Bank Ltd. would be to the extent  of   Rs. seven crores to Rs. eight crores and  so far as depositors of  M/s  Century  Consultants are concerned, the same may be to the tune of            Rs. nineteen crores; whereas they hold and possess assets worth to                     Rs. twenty three to fifty crores.           It was further asserted that if they are enlarged on bail, they would be  in a position to make the payment due to the investors by disposing of their  properties and assets.  The City Cooperative Bank Ltd. and Century



Consultants Investors Welfare Association did not oppose the bail  application of the Appellants.

       The said order was later on modified in the manner stated hereinafter.

       Condition Nos. (ii), (vi) and (vii) were modified by an order dated  11.7.2003 in the following terms:

"(ii)   Both the accused will file an undertaking on  affidavit, that they will not leave the jurisdiction of  the Court without intimating the court concerned  by giving address on affidavit.

(vi)    The accused \026 applicants will file an  undertaking on an affidavit that they will release  first instalment of 20% amount within three  months to liquidate their debts of the depositors/  investors from the assets shown in para \026 6 of the  supplementary affidavit of Shri Mohit Lal dated  7.7.2003.

(vii)   They will also undertake that they will make  payment of second instalment of the other 20%  amount due to the depositors/ investors as per  compromise with the investors’ association in the  next three months i.e. by 25.12.2003."

       On an application filed by the City Cooperative Bank Ltd. conditions  No. (vi), (vii) and (viii) were further modified by an order dated 9.10. 2003  in the following terms.

"(vi)   The accused-applicants will file an  undertaking on an affidavit that they will release  first instalment of 20% amount within the period  prescribed earlier to liquidate their debts of all the  depositors/investors whether they are depositors of  Century Consultant Limited or they are account  holders in City Cooperative Bank from the assets  shown in para of the supplementary affidavit of  Shri Mohit Lal dated 7.7.2003.

(vii)   They will also undertake that they will make  payment of second instalment of other 20%  amount due to all the depositors/ investors either of  the Century Consultant Limited or the City  Cooperative Bank irrespective of the list annexed  to the compromise within a period prescribed  earlier on 11.7.2003.

(viii)  The payment will be made as indicated  above to all individual depositor/investor except  the financial institutions notwithstanding their  names find place in the list of the investors  association or not".

       However, the prayer of the Bank for direction to make payment to its  depositors only through it was rejected.   

       A Special Leave Petition was filed thereagainst which was marked as  Crl. MP NOs. 9881-9882/2003 wherein the Appellants herein were  restrained from operating the Bank account and parting with the assets and  properties of the Society.

       The period of six months for which the interim bail was granted in the  meantime elapsed and the Appellants filed applications for regular bail.  The



said bail applications having been rejected, the Special Leave Petition filed  by the City Cooperative Bank Limited became infructuous and it was  dismissed as such by this Court by an order dated 27.04.2004.

       This appeal is directed against the order dated 23.04.2004 refusing  regular bail to the Appellants.

       Mr. Soli J. Sorabjee, learned senior counsel appearing on behalf of the  Appellants in support of the appeal would submit that from the records it  would appear that despite directions by the Court in its order dated  23.3.2004 to complete the trial within six months the same has not complied  with as dilatory tactics were adopted by the CBI.  The learned counsel would  contend that the Appellants have no objection if from the assets held and  possessed by them the depositors of Century Consultants and the City  Cooperative Bank Ltd. are paid their dues on a pro-rata basis.  The  Appellants, furthermore would have no objection, Mr. Sorabjee would  argue,  if the depositors of the City Cooperative Bank are paid through the  Bank itself.

       A supplementary affidavit has been filed on behalf of the Appellants  herein wherein it is stated that the value of the assets seized by CBI, as  would appear from a report filed before the Registrar of Companies in the  winding up petition pending with the Allahabad High Court is Rs. 19.75  crores.  Furthermore, an amount of Rs. 17 crores and Rs. 13 crores are  allegedly lying with the Bombay Stock Exchange and National Stock  Exchange respectively in the shape of bank guarantee money, securities  margin money, etc.  A suit for injunction was filed by the Investors Forum  of Century Consultants Ltd. at Lucknow as Civil Suit No. 312 of 2002  praying for an order restraining the CBI from releasing the said amount.  In  the said suit, National Stock Exchange and Bombay Stock Exchange have  filed their written statements admitting that the said monies are lying to the  credit of the company but the CBI has asked them not to release or disburse  these amounts in view of a pending Securities and Exchange Board of India  (SEBI) inquiry into the transactions entered into by the Appellants during  the period January, February and March, 2001.  The Appellants have also  liquid assets of Rs. 2.56 crores as stated at paragraphs (a) to (h) at pages  240-242 of the Paper Book, Vol. I.

       Out of the said assets of Rs. 2.56 crores, a sum of Rs. 1.45 crores were  realized by the Appellants in the shape of release of demat accounts, fixed  deposits, money from one debtor, release back of money by the CBI.  Out of  it, they had disbursed Rs. 81.75 lakhs to 629 investors and a sum of Rs. 65  lakhs are lying with them which could not be disbursed on account of the  restraint order passed by this Court.         Furthermore, a sum of Rs. 5.45 crores are owing to them from various  debtors, the details whereof are at pages 111-113 of the Paper Book, Vol. I.   They have furthermore more than 100 bank accounts which have been  seized by the CBI, the details whereof are at pages 242-243 of the Paper  Book, Vol. I.  Besides that, they are said to be in possession of the following  personal assets, as contended in an Additional Affidavit.

"(i)    The residential house belonging to the Joint  Hindu Family of G.N. Johri at 14, Prem Nagar,  Lucknow has also been seized by the CBI.  The  value of the said house is approximately Rs. 50  lakhs.  CBI has wrongfully attributed this  residential house in the names of the Petitioners.   Later on the CBI has released the house only for  the purpose of its residential use and has restrained  the Petitioners from alienating the house.

(ii)    The Petitioners hold at an average of nearly  5% equity each in Century Consultants Ltd. and in  other group companies in their individual status.



(iii)   The Petitioners hold 12% equity share in  lease-hold plot of Carlton Hotel, Lucknow and  12% in equity partnership of Carton Hotel in their  personal capacity.

(iv)    The Petitioners have given unsecured loans  to almost all the group companies and firms for  exigencies of business and the same are  outstanding as on date.

(v)     The Petitioners hold investments in secured  bonds of Century Consultants Ltd. and in fixed  deposits of Cyber Space."         The details of the said assets and the bank accounts allegedly are not  available to the Appellants as the same have been seized by the CBI.  The  Appellants have furthermore inter alia contended  that they have no  objection if payments are made to the investors of the Century Consultants  Investors Welfare Association and the depositors of City Cooperative Bank   upon proof thereof.  It has been further urged :

"However, it is most respectfully submitted that in  order to disburse these amounts and satisfy these  claims, it is essential that the properties which  have been seized by the CBI may be released and  be placed at the disposal of the Company Court  which may issue appropriate directions for their  protection and realization in order to meet the  established claims of the creditors.  The Company  Court may appoint a Presiding Officer who may  take requisite steps for this purpose.

The Petitioners submit that the Company Court  may disburse the established claims of the  depositors of the City Cooperative Bank to the  depositors directly or through the City Cooperative  Bank as this Hon’ble Court may be pleased to  direct.

The Petitioners submit that they are willing to  abide by all directions of this Hon’ble Court in the  abive matter as this Hon’ble Court may deem fit to  issue."

       Intervention applications have been filed by Century Consultants  Investors Welfare Association, Satya Prakash Choudhary and City  Cooperative Bank Depositors Welfare Association through Ashok Sur.   

       Having heard the learned counsel for the parties, we are of the opinion  that no fruitful purpose would be served by keeping the Appellants in  continued detention.   

We are further of the opinion that all endeavours should be made to   realise as much amount as possible from the personal and other assets of the  Appellants by putting them on sale or otherwise. For  the aforementioned  purpose, we direct :  

1.      All the amounts seized by  CBI shall forthwith be placed at the  disposal of the learned Company Judge.  

2. The Appellants herein shall also furnish details of their personal  assets as also the list of its creditors and the bank accounts.  Bank accounts  of the Appellants seized by the CBI shall be released and the amount lying  in the banks to the credit of the Appellants shall also be deposited before the  Company Judge.  



3. The personal assets of the properties shall be sold in such a manner  as the learned Company Judge deems fit and proper but endeavours should  be made to see that the maximum price is fetched as for as possible by  selling the said properties.   

       4. The National Stock Exchange and the Bombay Stock Exchange are  directed to deposit the money lying in the credit of the Company/Appellants  as early as possible subject to determination of the pending enquiry by SEBI.   If any enquiry is pending, SEBI shall dispose of the same as expeditiously as  possible.   5.  Steps be taken by the learned Company Judge to direct the banks  in which the Appellants have accounts to remit the money lying in their  credit to the court.   

       6.  In fine, all the assets whether movable or immovable including   shares, debentures, promissory notes, etc. lying with the Appellants  themselves or with their creditors or any other persons or authorities  including CBI shall be placed at the disposal of the learned Company Judge.   

7. A bank account shall be opened in a nationalized bank by the  learned Company Judge which may be operated by such person or persons  as may be authorized by it.   

       8.  All the depositors including the depositors of the City Cooperative  Bank shall file their claims before the Company Judge and in case of any  dispute, the claimants would be given opportunities to establish such claims.  

       9.  In order to disperse of claims of the creditors, the learned  Company Judge may appoint such number of Presiding Officer or Officers  as may be necessary for effectuating realisation of  the amount by sale of the  properties and disbursement thereof as well as disposal of the claims as may  be found to be necessary.  For the said purpose  requisite direction(s)  shall  be issued by the learned Company Judge as regard realization and disposal  of the assets including sale of the movable or immovable properties, if any.

       10. The City Cooperative Bank shall within a week from today shall  file the statement of claims in respect of the depositors before the learned  Company Judge.

       The claims of the City Cooperative Bank shall have preference over  the claims of the others.  The depositors of City Cooperative Bank on  establishing  their claims,  shall be paid  through the City Cooperative Bank.

       11. In the event, the amounts and the assets lying at the disposal of the  learned Company Judge are found to be insufficient to satisfy all the claims,  subject to the preference given to the City Cooperative Bank, the claimants  shall be paid on a pro-rata basis.

 12.  All claims which are pending before the learned Company Judge  shall be deemed to have been filed pursuant to this order.                     13. The depositors in relation to City Cooperative Bank shall through  the Bank or otherwise file their claims within one month from the date of  communication of this order for which the City Cooperative Bank shall duly  notify the depositors therefor.

       14. It will be open to the City Cooperative Bank Depositors Welfare  Association and Century Consultants Investors Welfare Association to  represent their respective members before the Company Judge or such  presiding officer(s)  as may be appointed in this behalf.

       15. All further proceedings pending before any Court in relation to the  claim of the depositors both in relation to the Company and City



Cooperative Bank shall remain stayed.   

16. The Company Judge is hereby requested to supervise the  proceedings wherefor he would be entitled to issue such direction or  directions to the Presiding Officer, he may deem fit and proper.  It will also  be open to the learned Company Judge to issue a general direction by way of  guidelines.   

17.  The Appellants herein, the CBI, the City Cooperative Bank and  the official liquidator are hereby directed to render all cooperation to the  learned Company Judge for smooth conduct of the proceedings. 18.  The Appellants herein shall be entitled to scrutinize the Books of  Accounts and other records and documents which have been seized by the  CBI for the purpose of assisting the learned Company Judge in finding out  their assets and debts in presence of the officer authorized in this behalf.   They are also permitted to take notes from the respective Books of Accounts  and other records and documents.

       19. While disbursing the claims, the learned Company Judge or the  Presiding Officer(s)  shall take into consideration the fact that some persons  have  already received some amount from the Appellants herein in terms of  the order of the High Court dated 25.6.2003 as modified on 11.7.2003 and  9.10.2003.

       20.  All Courts, Tribunals and Statutory Authority are hereby directed  to produce all documents and papers which are in their power and  possession in accordance with law, as and when called for by the learned  Company Judge or the Presiding Officer(s) appointed in terms of this order.

 The learned Chief Justice of the High Court is requested to place at  the disposal of the learned Company Judge services of such number of  officers and other employees as may be asked for by the learned Company  Judge.  The High Court shall also consider the desirability of placing  services of such number of judicial officers as may be found to be necessary  for expeditious disposal of the claim cases as also for other purpose, if any  order  in this behalf is passed by the learned Company Judge.

       It would be open to the learned Company Judge to avail the services  of official liquidator as also lawyers and their remuneration  may be fixed by  the learned Company Judge which would be realized from the assets of the  Appellants.  

       We are conscious of the fact that such directions could not have  ordinarily been issued by this Court while disposing of a bail application but  keeping in view the fact that the Appellants herein had been released on  interim bail in terms of the order dated 25.6.2003 on conditions and steps  had already been taken to pay to the depositors their dues, we have issued  the aforementioned directions in exercise of our power under Article 142 of  the Constitution of India to do complete justice to all the parties.  

       The parties shall be at liberty to approach this Court for any  clarification or  direction or directions, if any occasion arises therefor.   

       The Appellants herein shall be released on bail on furnishing personal  bonds of Rs. 50,000/- with one surety of the like amount to the satisfaction  of the Special Judicial Magistrate, CBI subject to the following conditions:

(i)     They would surrender their passports before the Special Judicial  Magistrate, CBI. (ii)    They would also file an undertaking that they would not leave the  jurisdiction of the court without its prior permission. (iii)   They shall, save and except for cogent reasons, shall appear before the  Court on each and every date of hearing. (iv)    They shall not intimidate the witnesses nor interfere in any manner the  trial.  



(v)     They shall not do any act or acts or things which may delay the  disposal of the criminal cases. (vi)    They shall render all cooperation to the learned Company Judge and  the Presiding Officer.

       These Appeals are disposed of with the aforementioned directions.   There shall be no order as to costs.