Whether to grant bail or not to an accused involved in a case of serious nature of offence has been the question bothering the judiciary quite often. The liberty of the individual and prolonged judicial custody on one side and the magnitude of the offence, its impact on society and the apprehension of the prosecution that the accused who are powerful and influential may win over the witnesses or tamper the prosecution evidence are certain of the important issues which may arise for consideration while deciding bail applications.
The brief facts of the case are as follows. M/s. Satyam Computer Services Limited was initially registered as Satyam Computer Services Private Limited under the Companies Act, 1956 with the Registrar of Companies, Andhra Pradesh, Hyderabad on 24th June, 1987. Its name was changed as M/s Satyam Computer Services Limited and a fresh certificate of incorporation consequent on change of name was issued by the Registrar of Companies on 26th August 1991 and Certificate No.01-07564 was allotted to Satyam Computer Services Limited. The Satyam Computers Services Limited (hereinafter referred as ?Satyam Computers?). The Satyam Computers, thus, became a public limited company since 26th August 1991 and went public in the year 1991 by giving shares to the public to the tune of 81.22%, as such the promoters share holding as on 1992 was 18.78%. The 1st accused B. Ramalinga Raju in his letter dated 7th January 2009 addressed to the Board of Directors confessed that the balance sheet carries as on September 30, 2008 inflated (non-existent) cash and bank balances of Rs.5040 Crores (as against Rs.5,361 crores reflected in the books), an accrued interest of Rs.376 crores which is non-existent, an understated liability of Rs.1,230 crores on account of funds arranged by him and an overstated debtors position of Rs.490 crores (as against Rs.2651 crores reflected in the books). It also reveals that for the September Quarter (Q.2) reported a revenue of Rs.2,700 Crores and an operating margin of Rs.649 crores (24% of revenues) as against the actual revenue of Rs.2112 crores and an actual operating margin of Rs.61 crores (3% revenues) and this has resulted in artificial, cash and bank balances going up by Rs.588 crores in Q.2 alone. He (A1) has also mentioned that the gap in the balance sheet has arisen purely on account of inflated profits over a period of last several years and what started as a marginal gap between actual operating profit and the one reflected in the books of accounts continued to grow over the years. The differential gap in the real profits and the one reflected in the books was further accentuated by the fact that the company had to carry additional resources and assets to justify higher level of operations thereby significantly increase the cost. The Satyam Computers has shown in their balance sheets the cash and bank balances position in the scheduled banks over the years as follows.
The investigation has revealed the following actual position with regard to the cash and bank balances i.e., balances available in the current accounts with various banks and cash available in deposit accounts (FDRs) over the years as shown in the table below.
Thus, it is revealed that huge amounts of cash and bank balances were fraudulently and dishonestly reflected in the balance sheets of Satyam Computers by the accused, whereas only very less amounts of cash and bank balances were actually available. The cash and bank balances shown in the balance sheets and the actual position of cash and bank balances with various scheduled banks are shown in the following table.
From the above table for the second quarter (Q.2) in the year 2008, the cash and bank balances as shown in the balance sheets were to the tune of Rs.5160,33,54,789/-, whereas the actual cash and bank balances available with Satyam Computers were to the tune of Rs.139,78,22,664/-. Thus the non-existent cash and bank balances were to the tune of Rs.5020,55,32,125/- i.e., Rs.5020.55 crores.
There are many other allegations such as TDS on non-existent accrued interest, inflation of sales by generating false invoices, back tracking reports from the PBMS, ONTIME and OPTIMA, inflated debtor position, off-loading of shares of Satyam Computers by the accused and other promoters of Satyam Computers, floating of 327 companies and their financial activities and inflated revenues etc.
The petitioner herein is the accused No.5. He is one of the auditors. The accounts have to be prepared in accordance with the law with generally accepted auditing practices (GAAP), the financial statements must show a true and fair view, all required information and records must be made available and the auditors have to verify the correctness of the financial statements given by the management by various sources. They have to directly secure information from various banks with regard to actual financial position and the amounts lying in the form of FDRs etc., from the banks.
In this case, M/s Price Waterhouse Chartered Accountants were employed as statutory auditors for Satyam Computers by the shareholders of the Company. Thus, some times the role of statutory auditors would become the role of investigators and fact-finding machinery and they are responsible to place all the facts before the shareholders. They are not expected to blindly accept the information furnished by the board of directors. The shareholders depending upon the reports prepared by the statutory auditors have an opportunity to raise any question they wish at the Annual General Meeting (AGM) to the directors. The petitioner A-5 had signed as partner for and on behalf of Price Waterhouse Chartered Accountants. He had categorically certified that the financial statements give a true and fair view in conformity with the accounting principles generally accepted in India.
The prosecution case is that the petitioner is a partner in the firm M/s Price Waterhouse, Bangalore and not in M/s Price Waterhouse and by affixing his signature on the audit reports for and on behalf of M/s Price Waterhouse deliberately with the knowledge of its implications and consequences violated the requirements of Auditing and Assurance Standards (AAS) 28. The allegation is that the petitioner had intentionally cheated the shareholders and other stakeholders by personating himself as partner in M/s Price Waterhouse on which the shareholders and investors placed their reliance. It is further alleged that the petitioner in furtherance of the conspiracy with the other accused deliberately did not take into account the huge variation in the figures of fixed deposit balance between the bank confirmation received directly and the one received through the company, deliberately did not verify the sources of new fixed deposit receipts, did not verify the advice of domestic/international transfer issued by the authorized signatory of the bank, did not obtain direct confirmation of balances, did not follow-up the international confirmations as envisaged in their own internal guidelines, contrary to the accepted general practices relied upon photo copies of the fax messages received for confirmation of current account balances and other willful violations in derogation to their professional responsibilities, thereby he had accommodated the fraudulent and dishonest acts of A1 to A3 and other co-conspirators, knowing fully well the implications and consequences of their overt acts and intentional omissions. It is also alleged that the petitioner had been compensated through exorbitant audit fees by A1 to A3. Audit fees of only Rs.0.83 crores and 1.10 crores have been paid by M/s Infosys and M/s Wipro respectively, but Satyam Computers had paid 3.73 crores for the year 2007-08 towards audit fees to the petitioner (A-5). He is also alleged to have received in addition to the above audit fees an amount of Rs.1.27 crores towards rendering other services and these amounts were not reflected separately in the accounts though mandated as per the reporting norms.
It is further alleged that the petitioner received the confirmations from the banks which are in great variance with the figures provided by the management and appearing in the books of accounts. Despite this glaring discrepancy and having both the confirmations i.e., the original confirmations received from the banks and the forged bank confirmations provided by the other accused and the petitioner in furtherance of the conspiracy, had chosen the forged bank confirmations provided by the accused, certified the same and incorporated in the final accounts. He had flouted the prescribed audit and assurance standard number 30 of Institute of Chartered Accountants of India (ICAI) thereby facilitated the projection of falsified data in the annual financial statements of the company continuously. The presentations made by the petitioner to the audit committee about the health of the company were misleading and in fact he gave very good certification regarding the financial discipline and controls available in the company contrary to the reality. The petitioner had consciously overlooked the accounting irregularities committed by Satyam Computers since 2007 showing his complicity in the commission of the above said offences and he is liable as co-conspirator. It is further alleged that the letters on the letter pads of M/s Price Waterhouse were recovered from the computer systems of Satyam Computers. These letters were supposed to be written by the auditors addressed to the banks seeking confirmations about the balances. The petitioner as part of the conspiracy got these letters generated in the computer systems of Satyam Computers for the purpose of creation of records which depicts his privy and involvement in the conspiracy. He also made Satyam Computers to generate certain letters addressed to the banks directing the banks to directly inform the auditors. However these letters were generated merely for the purpose of record which shows the role of the petitioner in the conspiracy. But for his active cooperation this would not have taken place for the period since 2007.
The petitioner was arrested on 24-01-2009 and since then he is in judicial custody. Earlier he filed bail applications before the IV Addl. Metropolitan Sessions Judge, Hyderabad, but they were dismissed. The petitioner has also filed bail petition in Crl. P. No. 3985 of 2009 and this Court, by its order dated 29-06-2009, dismissed the same. Charge sheet has been filed against the petitioner and other accused alleging that they have committed offences punishable under Sections 120-B read with Sections 420, 419, 467, 468, 471, 477-A and 1212201 IPC. It is not in dispute that from among above mentioned Sections, Section 467 I.P.C. is punishable with imprisonment for life. Consequently Section 471 I.P.C.
The petitioner?s case is that he is aged 48 years and permanent resident of Hyderabad since 1984 and presently residing in Hyderabad with his wife, school going son and daughter and aged mother. His further case is that the present application raises some new pleas which were not raised in the previous application or pleas which have arisen after passing of order in previous bail application by this Court on 29-06-2009 in Crl. P. No.3985 of 2009. He was appointed as the engagement partner of Price Waterhouse (FRN 007568S) for the audit of Satyam Computers in 2007. His further case is that he is in no manner concerned with the accounts or the audit of Satyam Computers prior to 2007. The Institute of Chartered Accountants of India (ICAI) a specialized body constituted under the Chartered Accountants Act, 1949 the object of which is to regulate the conduct of its members initiated disciplinary proceedings arising out of Satyam Computers audit, under Section 21 of the Chartered Accountants Act, 1949 against the petitioner. It is also his case that the CBI has not interrogated/questioned him at any time other than March 10 to March 17, 2009 and thereafter since the order dated 29-06-2009 was passed in Crl. P. No.3985 of 2009 and therefore it is clear that the CBI does not require his custody any longer. His further case is that second FIR was illegally registered which has no basis in law and could not result in the charge sheet. According to the petitioner, SEBI also interrogated him on several occasions. Petitioner was arrested on 24-01-2009 and charge sheet was filed on 07-04-2009. The petitioner would not abscond and would be made available himself for further investigation if necessary. He will not tamper the investigation or any evidence or witnesses. He is the sole breadwinner of the family and continued incarceration is causing grave agony and hardship to his family members.
The CBI filed objections. The main contention of the CBI is that this is the 9th bail application filed by the petitioner without any change in the circumstances. The CBI is no way connected with the investigation initiated by the Institute of Chartered Accountants of India (ICAI). The further investigation in this case is at crucial stage. The CBI has filed an application before the XIV Addl. Chief Metropolitan Magistrate, Nampally, Hyderabad, seeking permission to subject A1 to A3 to polygraph and brain mapping tests. Though the said application was allowed A1 to A3 had challenged the said order before this Court and the same is pending vide Crl. Petition Nos.5554, 5464 and 5569 of 2009 before the Division Bench of this Court. Since A1 to A3 had not divulged several facts during their custodial interrogation, therefore enlargement of the petitioner at this stage would adversely effect the prosecution case. It is further submitted that the investigation is transferred from CBCID, A.P., to CBI, as such the FIR registered by CBCID and the case records had merged with the case records of the present case, therefore it is incorrect to allege that there are two FIRs registered in this case. When further reliable information was received by the investigating agency about the diversion of funds and misappropriation of monies by A1 and others a petition in Crl.M.P No.2214 of 2009 was filed before the trial Court under Section 173(8) Cr.P.C on 13-04-2009 for grant of permission for conducting further investigation and to look into the diversion and misappropriation aspects and the same was allowed by the said Court on 25-04-2009. Further investigation has already started and considerable progress has been made. The CBI, MDIT after filing charge sheet requested the Government of A.P., to designate an exclusive court for trying this case in order to conduct speedy trial on 20-05-2009 and this Court addressed a letter to the Government for establishment of Addl. Chief Metropolitan Magistrate Court at Hyderabad for conducting trial of this case and orders of the Government are awaited. The petitioner is highly influential and if he is released on bail there is every possibility that he would impede and interfere with the process of further investigation and tamper with the evidence and influence the witnesses already examined and to be examined in this case and the release of the petitioner will certainly hamper further investigation and adversely effect the case. This case is a rarest of rare case and it is a gigantic fraud committed in the history of the country perpetrated by the management with active connivance of the petitioner. The C.B.I. has also referred to various allegations made against the petitioner in the charge sheet in its objections. Their further case is that the petitioner under Section 227 4(A) of the Companies Act, 1956 is duty bound to report the instances of fraud perpetrated by or on the company. The funds of Satyam Computers have been sent to third parties across the globe during the fraud period and Letters Rogatory have been issued by the XIV ACMM, Nampally to the competent judicial authorities at USA, UK, Mauritius, Singapore, Belgium and British Virgin Islands on 10-09-2009 and replies are awaited. The petitioner will also influence the witnesses in India and abroad as the accused is a co-conspirator and is a high profile and influential person. The Registrar of Companies (ROC), Securities and Exchange Board of India (SEBI), Serious Fraud Investigation Office (SFIO) and Enforcement Directorate (ED) are also investigating into the monumental fraud of gigantic proportion committed in this case by the accused including the petitioner. The petitioner is not a member of M/s Price Waterhouse and therefore he is violated Section 229 of the Companies Act. The monies paid by Satyam Computers towards audit fees have actually reached the account of M/s Lovelock and Lewes where the petitioner is a partner and it shows that the audit was actually done by the firm M/s Lovelock and Lewes and not the firm M/s Price Waterhouse. The investigation revealed that Rs.1425 crores which were brought into Satyam Computers was clandestinely and dishonestly shown as sale proceeds and records were fabricated is if to show that these were money transfers from Bank of Baroda, New York branch into the local banks. It is also alleged that even when a whistle blower e-mail received by one of the independent directors was sent to the petitioner for comments, the petitioner did not react and has stated that there is no truth in the contents of that e-mail, which reflects the intentions of the petitioner.
Heard the arguments.
The points which arise for consideration are: (1) Whether the second application for bail is maintainable? (2) Whether there are prima-facie grounds to believe that the petitioner had committed the offences charged with? (3) Whether the petitioner is entitled to bail? and (4) What are the considerations for granting bail?
The learned Senior Counsel for the petitioner had relied on the following judgments.
1) Babu Singh v. State of UP 1978 (1) SCC 579,
2) Moti Ram v. State of M.P. 1978(4) SCC 47,
3) Babanrao Tukaram Ranjane v. State of Maharashtra 2006(9) SCC 422,
4) Anil Kumar Tulsiyani v. State of UP and another (2006) 9 SCC 425,
5) Jayendra Saraswathi Swamighal v. State of Tamil Nadu 2005(2) SCC 13,
6) Chandraswami and another v. CBI 1996(6) SCC 751,
7) Ram Narayan Singh and others v. State of Bihar 2000(9) SCC 55,
8) Ashok Dhingra v. NCT of Delhi 2000(9) SCC 533,
9) Mehmood Mohammed Sayeed v. State of Maharashtra 2002(10) SCC 677,
10) Sukhwant Singh v. State of Punjab 2009(7) SCALE 700,
11) Jagdish and another v. State of A.P. 2009(1) SCC 681,
12) State of Orissa v. Debendra Nath Padhi 2005(1) SCC 568,
13) Tri Sure India Ltd v. A.F. Ferguson and Co. 1987 (61) Comp case 548 (Bom),
14) Anil Mahajan v. Commissioner of Customs 2000 Cri.L.J. 2094,
15) Lambert Kroger v. Enforcement Directorate 2000 Cri.L.J. 2125,
In Babu Singh v. State of UP (1 supra) principles had been laid down for considering the bail applications.
In Moti Ram v. State of M.P. (2 supra) whether the Court is justified to seek local sureties and to direct a mason to furnish sureties of Rs.10,000/- was the issue that came up for consideration. 0
In Babanrao Tukaram Ranjane v. State of Maharashtra (3 supra), the Supreme Court observed that detailed discussion on the scope of the Maharashtra Control of Organised Crime Act, 1999 or materials against the appellant on merits not called for at the stage of bail. In that case, the appellant was in custody for more than two years and three months. Taking into the period of custody bail was granted to the appellant therein. However, the Supreme Court observed that we have necessarily to keep in mind the magnitude of the alleged crime and the consequences that have flowed from such a crime.
In Anil Kumar Tulsiyani v. State of U.P. and another (4 supra), the Supreme Court, while considering the bail application filed by an accused who was an advocate, observed that reasonable apprehension of the witnesses being tampered with or won over, coerced, threatened or intimidated by the accused using his influence and position could not be ruled out. It was also held that there are no mitigating circumstances to grant bail in that case.
In Jayendra Saraswathi Swamigal v. State of Tamil Nadu (5 supra), the Supreme Court considered the issue how to use the confession made by the co-accused under Section 10 of the Evidence Act.
In Chandraswami and another v. CBI (6 supra), the Supreme Court considered the circumstances that the offence under Section 120-B read with Section 420 IPC registered about 16 years ago and which is not covered by the exception clauses (i) and (ii) of Section 437(1) Cr.P.C and other circumstances that the examination of the main witnesses was already over and that there was any evidence which could be tampered with or influenced by the accused ordered release of the accused in the peculiar circumstances of that case.
The Supreme Court in Ram Narayan Singh and others v. State of Bihar (7 supra) granted bail to an accused where the allegation is that the accused misappropriated to the tune of Rs.75,000/- for giving employment. It appears that the trial was not proceeding as per the directions of the Supreme Court and that the petitioner was in jail for more than nine months. Taking into consideration those circumstances, the bail was granted in that case.
Similarly, in Ashok Dhingra v. NCT of Delhi (8 supra) the accused was in jail for about nine months and the allegation is that he cheated a Japanese national of a whopping sum exceeding Rs.65 lakhs. The Supreme Court has made useful observations in the above referred case, which is as follows.
?If the respondent State finds for any valid reason that the appellant is misusing his bail we permit the respondent to move for cancellation of the bail as provided under Section 439(2) of the Criminal Procedure Code. If the trial is to get delayed on account of the delay in apprehending the co-accused, it is open to the trial court to split up the case as against this appellant and proceed therewith, so that, it can be disposed of as expeditiously as possible. If the trial is delayed on account of dilatory tactics adopted by the appellant, that itself can be treated as aground for cancellation of bail. With these observations, this appeal is disposed of.?
In Mehmood Mohammed Sayeed v. State of Maharashtra (9 supra) the Supreme Court holding that the accused was in judicial custody from 18-01-2000 and observing that they do not know how long the trial will take, particularly, seeing the condition of the trial courts in Maharashtra, granted bail to the petitioner on 16-02-2001.
In Sukhwant Singh v. State of Punjab (10 supra), it was held that if the accused is arrested his reputation may be tarnished in the society and that the reputation of a person is his valuable asset.
The decision in B. Jagdish and another v. State of Andhra Pradesh (11 supra) deals with quashing of proceedings. It was observed that at the time of quashing of order the accused cannot use material which would be available to him only as his defence.
The decision in State of Orissa v. Debendra Nath Padhi (12 supra) deals with the filing of documents by the accused, wherein the Supreme Court held that there is no provision in Cr.P.C to enable the accused to file any material or document at the stage of framing of charges.
The decision in Tri Sure India Ltd., V. A.F. Ferguson and Co.,(13 supra) deals with the duties and responsibilities of an auditor.
In Anil Mahajan v. Commissioner of Customs (14 supra) and in Lambert Kroger v. Enforcement Directorate (15 supra), it was held that where there is apprehension that the petitioner would tamper with the evidence if released on bail he can be granted bail.
The learned counsel for the CBI has relied on the following judgments.
1) Kalyan Chandra Sarkar v. Rajesh Ranjan 2005 SCC (Cri) 489,
2) Kalyan Chandra Sarkar v. Rajesh Ranjan 2004 SCC (Cri) 1977,
3) Prahlad Singh Bhati v. NCT, Delhi and another (2001) 4 SCC 280,
4) Ram Govind Upadhyay v. Sudarshan Singh and others (2002) 3 SCC 598,
5) Satish Jaggi v. State of Chhattisgarh and others 2007 Cri.L.J. 2766,
6) State of UP v. Amarmani Tripathi 2005 SCC (Cri) 1960(2),
The decisions in Kalyan Chanda Sarkar v. Rajesh Ranjan (16 and 17 supra) will be discussed in the later paras.
In Prahlad Singh Bhati v. NCT, Delhi and another (18 supra), the Supreme Court observed as follows.
?The jurisdiction to grant bail has to be exercised on the basis of well-settled principles having regard to the circumstances of each case and not in an arbitrary manner. While granting the bail, the court has to keep in mind the nature of accusations, the nature of evidence in support thereof, the severity of the punishment which conviction will entail, the character, behaviour, means and standing of the accused, circumstances which are peculiar to the accused reasonable possibility of securing the presence of the accused at the trial, reasonable apprehension of the witnesses being tampered with, the larger interests of the public or State and other similar considerations. It has also to be kept in mind that for the purposes of granting the bail the legislature has used the words ?reasonable grounds for believing? instead of ?the evidence? which means the court dealing with the grant of bail can only satisfy itself as to whether there is a genuine case against the accused and that the prosecution will be able to produce prima facie evidence in support of the charge. It is not expected, at this stage, to have the evidence establishing the guilt of the accused beyond reasonable doubt.?
In Ram Govind Upadhyay v. Sudarshan Singh and others ((19 supra) the Supreme Court observed as follows.
?Certain other relevant considerations, which are only illustrative and not exhaustive, are as follows:
a) not only the nature of accusations but the severity of punishment in case of conviction and the nature of the supporting evidence,
b) reasonable apprehension of tampering with the witnesses or apprehension of threat to the complainant,
c) prima facie satisfaction of the court in support of the charge, and
d) frivolity and genuineness of the prosecution, and it is only the element of genuineness that has to be considered in the matter of grant of bail, and in the event of some doubt as to the genuineness of the prosecution, in the normal course of events, the accused is entitled to an order of bail.?
In Satish Jaggi v. State of Chhattisgarh (20 supa) the Supreme Court observed that in granting bail in non-bailable offence, the primary consideration is the gravity and the nature of the offence and its impact on the democratic fabric of the society should be taken into consideration.
In State of U.P. v. Amarmani Tripathi (21 supra) the Supreme Court held that besides other considerations, reasonable apprehension of the witnesses being tampered with and danger of justice being thwarted by granting bail should be taken into consideration.
The main objection of the learned counsel for C.B.I. is that second application on the same facts is not maintainable. His main submission is that this Court by common order dated 29-06-2009 in Criminal Petition Nos.3984 of 2009 and 3985 of 2009, dismissed the bail application of the petitioner herein (Petitioner?s application No.3985 of 2009) and that since there is no change in the circumstances from the date of passing of earlier bail application, the present application is not maintainable.
The learned counsel for the petitioner submitted that the principles of res judicata are not applicable to bail applications and the second application for bail is maintainable. In support of his contention he had relied upon a case of Babu Singh Vs State of U.P (1 supra), wherein the Hon?ble Supreme Court observed as follows :
?An order refusing an application for bail does not necessarily preclude another, on a later occasion, giving more materials, further developments and different considerations. While we surely must set store by this circumstance, we cannot accede to the faint plea that we are barred from second consideration at a later stage. An interim direction is not a conclusive adjudication, and updated reconsideration is not over-turning an earlier negation?.
The learned counsel for C.B.I. relied upon the judgment in Kalyan Chandra Sarkar Vs Rajesh Ranjan alias Pappu Yadav
(16 supra), wherein the Apex Court observed as follows:
?Though an accused had a right to make successive applications for grant of bail, the Court entertaining such subsequent bail applications has duty to consider the reasons and grounds on which the earlier bail applications were rejected and in such cases the Court also has a duty to record what are the fresh grounds which persuaded it to take a view different from the one taken in the earlier application?.
It was further held that;
?Even though there is a room for filing a subsequent bail application in cases where earlier applications have been rejected, the same can be done if there is a change in the fact situation or in law which requires the earlier view being interfered with or where the earlier finding has become obsolete?.
What emerges from the above is that the principles of res judicata are not applicable to successive bail applications. An application for enlargement of bail does not preclude from filing the subsequent application for grant of bail if there are changes in the circumstances. The learned counsel for C.B.I. submits that though the subsequent application is maintainable if there are changes in the circumstances but as far as the present case is concerned, there are no changes in the circumstances. It is also his submission that the findings of the Higher Court or a coordinate Bench must receive serious consideration at the hands of the Court entertaining a bail application at a later stage when the same had been rejected earlier. He had relied on a decision of Kalyan Chandra Sarkar Vs Rajesh Ranjan alias Pappu Yadav (16 supra) in support of his contention, wherein it was held as follows :
?The findings of a higher Court or a coordinate Bench must receive serious considerations at the hands of the Court entertaining a bail application at a later stage when the same had been rejected earlier. In such an event, the Courts must give due weight to the grounds which weighed with the former or higher Court in rejecting the bail application. Ordinarily, the issue which has been canvassed earlier would not be permitted to be re-agitated on the same grounds, as the same would lead to a speculation and uncertainty in the administration of justice and may lead to forum hunting?.
Coming to the facts of the case, admittedly the petitioner earlier filed a bail application in Criminal Petition No. 3985 of 2009. In the said bail application the points considered were whether there was a prima-facie case against the petitioner or not? Whether M/s. Price Waterhouse and Price Waterhouse, Bangalore are not different legal entities and Whether signing of the audit reports by the petitioner for and on behalf of M/s. Price Waterhouse is with an intention to play fraud. This Court in its common order dated 29-06-2009 held as follows:
?The fact however, remains that the material available on record prima facie shows that they have signed the annual financial statements and the balance sheets ?for and on behalf of the M/s Price Waterhouse,? statutory auditors appointed by the company, though in fact, they are not the partners of the said firm, but are partners of M/s price Waterhouse, Bangalore, which is a separate legal entity with separate registration number and that they violated the requirements of Auditing and Assurance Standards (AAS) 28. The report of the I.C.A.I. shows that a number of irregularities have been committed in the course of audit?.
On the issue whether the petitioners had ignored the original confirmations received from the banks and obtained fabricated and forged documents provided by Satyam Computers management in furtherance of the conspiracy and certified the same and incorporated the final accounts?, this Court held as follows: ?Prima facie, the material on record shows that the letters of confirmation of bank balances received from various banks and financial institutions, which according to the prosecution are false and fabricated have been taken into account by the statutory auditors and the figures contained therein are also projected in the financial statements and the balance sheets and they were certified to be true and correct by A-4 and A-5 (Petitioner herein is A-5). It is further alleged that the petitioners have not merely certified them to be true and correct, but also gave misleading presentation to the audit committee about the health of the company and gave certification regarding the financial disciplinary controls available in the company contrary to the reality.? With regard to not finding of several deficiencies in the audit report, this Court observed as follows: ?Prima facie, the fact remains that the deficiencies pointed out during the I.T. general check were allowed to continue and the financial statements and balance sheets were prepared notwithstanding the deficiencies which have severe impact on the internal control and financial accounting and were certified by the petitioners as true and correct?.
What is the role of an Auditor was also considered in the earlier order. In the decisions cited by the learned counsel for the petitioner earlier, the decision in Tri Sure India Limited Vs. A.A.F. Ferguson and Company and others (13 supra) was also cited and this Court has elaborately dealt with the same in the above referred earlier order. Whether there is alleged knowledge on the part of the petitioner and sharing common decision on the other accused and whether they are part of the conspiracy and facilitated the perpetration of fraud on the shareholders and investors, these aspects also were considered in the earlier order. In view of the same, there is no need to deal with these aspects in detail.
I am of the view that all the points which have been earlier considered need not be reconsidered in detail in this petition. Now, we have to see what are the other points raised by the petitioner and what are the considerations for granting or refusing bail.
The learned Senior Counsel for the petitioner submitted that the petitioner was a Chartered Accountant and he has to verify the statements and accounts furnished by the management and accordingly, he has verified the records and also had sought clarifications from various banks and he has received the clarifications from the banks and based on which, he has certified the accounts of Satyam Computers. It is his further submission that subsequently it came to light that certain information said to have been received from the banks were not in fact sent by the banks and that information was generated in the computers of the Satyam Computers and thus there are circumstances to show that he may be an innocent. The learned counsel for the petitioner has filed certain documents and submitted that those confirmation letters were received by the petitioner through the computers of the Satyam Computers Company. Those confirmation letters are from BNP Paribas dated 04-07-2007, 03-10-2007, 04-01-2008, 03-04-2008, 04-04-2008 and 03-10-2008 respectively.
The learned counsel for C.B.I. submitted that the petitioner had in fact obtained independent bank balance confirmations from some of the banks which was received with the seal and signatures of the bankers and that the petitioner was in possession of the same forged letters generated by the management purported to have been written by the bankers which letters show inflated bank balances and deposits and that the petitioner had chosen to ignore the genuine confirmation letters collected by him and relied upon the forged letters.
It is not necessary to examine all the confirmation letters. One such letter is examined as an example. The petitioner has received confirmation letters from BNP Paribas i.e., the details of the confirmation for the period ended 30th June, 2008 and in fixed deposit account No.10002709787 Rs.8,26,00,000/- (Rupees eight crores twenty six lakhs only) were shown whereas the confirmation letter dated 04-07-2008 claimed to have been sent by BNP Paribas shown the fixed deposits of Rs.48,99,44,762/- (Rupees forty eight crores ninety nine lakhs forty four thousand seven hundred and sixty two only). The confirmation dated
30-06-2008 bears the signatures of two authorized signatories and also bears the seal of BNP Paribas, whereas the confirmation letter dated 04-06-2008 which is subsequently found as not genuine and not sent by BNP Paribas and forged one, bears the signature of one authorized signatory and no seal. It has to be seen that the persons who signed the confirmation letter dated 26-06-2008 details of confirmation for the period ended 30-06-2008 and the person who seems to have signed confirmation letter dated 04-07-2008 appears to be different persons, when Rs.8,24,00,000/- (Rupees eight crores twenty four lakhs only) have been shown as Rs.48,00,00,000/- (Rupees forty eight crores only) and odd, the petitioner as an ordinarily prudent man ought not to have relied upon the confirmation letter dated 04-07-2008. First of all it does not bear the signatures of two authorized signatories, secondly, it does not bear the seal of the BNP Paribas and thirdly the petitioner knows very well the format of the confirmations received from BNP Paribas. Even according to the petitioner, he is an experienced Chartered Accountant. Admittedly, he received more than Rs.3,00,00,000/- (Rupees three crores only) remuneration for the year 2007-2008 as his fees. He is an empowered Auditor. His version that he has innocently relied upon the confirmation letters received through the computers of Satyam Computers cannot be accepted at this stage. In fact he ought to have used his own computers and he ought to have directly contacted the concerned banks. Normally, the banks sent confirmation letters with the signatures of two authorized signatories with the seal. The record itself shows that the petitioner has accepted the confirmation letters without seal and without the two authorized signatories of the bank. Therefore, it appears that the petitioner had not made out any prima-facie case for grant of bail on facts.
The learned counsel for the petitioner submitted that the petitioner has signed as representative of M/s Price Waterhouse. The learned Additional Public Prosecutor submitted that the shareholders have appointed M/s Price Waterhouse, Hyderabad as their Chartered Accountants to verify the statements and accounts and that petitioner is not a partner of M/s. Price Waterhouse, Hyderabad. It is further submitted that the petitioner is a partner in M/s. Price Waterhouse, Bangalore and M/s Lovelock and Lewes, Hyderabad. The learned counsel for C.B.I. further submitted that the monies which were paid by Satyam Computers towards audit fees have actually reached to the account of M/s Lovelock and Lewes, where this petitioner is a partner and it shows that audit was actually done by the firm Lovelock and Lewes and not by M/s Price Waterhouse, which was appointed by the shareholders of M/s SCSL. The C.B.I. also filed several documents and statements i.e., 1) Statement of Srikant Pola, who is working as an associate in M/s. Lovelock and Lewes, 2) statement of A. Sabesan, Branch Manager, BNP Paribas, 3) A copy of CARO (Companies Auditors Report Order) Order 2003, 4) Report No.1-CA(HPC)/2009 of the Institute of Chartered Accountants of India, New Delhi, 5) Statement of T. Karthikeyan, Secretary, the I.C.A.I. New Delhi, 6) Statement of Smt. Vandana Nagpal, Director (Discipline) I.C.A.I. New Delhi, 7) Management letter of M/s. Price Waterhouse, Hyderabad pointing out 135 deficiencies in the Integrated audit for the year ended 31-03-2009, 8) Statement of N. Ramu, M/s. Lovelock and Lewes, Gurgaon, 9) Extracts of the Government Examiner of questioned documents, Hyderabad, Report No. CCH-64/2009/1042, 10) Balance confirmation letter of BNP Paribas as on 31-03-2006, 11) Balance confirmation letter of BNP Paribas as on 31-03-2006 in the prescribed proforma, 12) Balance Confirmation letter of BNP Paribas as on 31-06-2008, 13) Balance confirmation letter of BNP Paribas as on 30-06-2008, 14) Balance confirmation letter of BNP Paribas as on 30-09-2008, 15) Balance confirmation letter of BNP Paribas as on 30-09-2008 and 16) Statement of Sri A. Sabesan, Branch Manager, BNP Paribas, in support of its contention. I feel that there is no need to examine all those documents at this stage.
At the time of considering the bail application, it has to be seen whether a prima-facie case has been made out or not. In a case between Kalyan Chandra Sarkar Vs Rajesh Ranjan alias Pappu Yadav (17 supra) it was held as follows:
?Where circumstances exist which provide grounds to believe the guilt of the person the Court is not required to speculate as to quantum and nature of the evidence which would be led by the prosecution at the stage of trial?.
Therefore, there is no need to evaluate or critical examination of evidence on record at this stage as the same is required to be done after the full-fledged trial.
Point Nos. 3 and 4:
The learned counsel for the petitioner submitted that the petitioner has been in judicial custody since last nine (9) months and that till today the trial has not been commenced and that various investigating agencies have been still continuing their investigation and there is no hope that in near future the investigation would be completed and therefore, the petitioner cannot be made to suffer for the delay in completing the investigation. It is also his submission that liberty is too precious and cannot be curtailed in the name of pending investigation. He has relied on a decision of Babu Singh and others Vs State of U.P (1 Supra). Personal liberty, deprived when bail is refused, is too precious a value of our constitutional system recognized under Article 21 that the curial power to negate it is a great trust exercisable, not casually but judicially, with lively concern for the cost to the individual and the community. To glamorize impressionistic orders as discretionary may, on occasions, make a litigative gamble decisive on a fundamental right. After all, personal liberty of an accused or convict is fundamental, suffering lawful eclipse only in terms of ?procedure established by law?.
The learned counsel for the C.B.I. has relied on the judgment in case of Kalyan Chandra Sarkar Vs Rajesh Ranjan alias Pappu Yadav (17 supra). A person accused of offences which are non bailable is liable to be detained in custody during the pendency of trial unless, he is enlarged on bail and such detention can not be questioned as being violative of Article 21 of the Constitution of India.
In the above referred decision, the Supreme Court has dealt with the issue of personal liberty and custody by authorized law as follows :
?It is trite law that personal liberty cannot betaken away except in accordance with the procedure established bylaw. Personal liberty is a constitutional guarantee. However, Article 21 which guarantees the above right also on templates deprivation of personal liberty by procedure established by law. Under the criminal laws of this country, a person accused of offences which are non bailable is liable to be detained in custody during the pendency of trial unless he is enlarged on bail in accordance with law. Such detention cannot be questioned as being violative of Article 21, since the same is authorized by law. But even persons accused of non bailable offences are entitled to bail the court concerned comes to the conclusion that the prosecution has failed to establish a prima facie case against him and/or if the court is satisfied for reasons to be recorded that in spite of the existence of prima facie case there is a need to release such persons on bail where fact situations require it to do so?.
In view of the above referred decision in Kalyan Chandra case, it is clear that the detention in custody during the pendency of the trial in accordance with the law is not violative of Article 21 as the same is authorized by law. The further submission of the learned counsel for the petitioner is that since Clauses 1 and 2 of Section 437 Cr.P.C. are not applicable in this case, the petitioner is entitled to bail. Clause 1 of Section 437 of Cr.P.C. is as follows :
(i) such person shall not be so released if there appear reasonable grounds for believing that he has been guilty of an offence punishable with death or imprisonment for life;
The learned counsel for C.B.I. submitted that since the accused are charged with an offence punishable under Section 467 IPC, which is punishable with imprisonment for life, the above submission of learned counsel for the petitioner has no force.
The learned counsel for the petitioner submitted that the confession made by A-1 cannot be used against the petitioner unless there is prima facie evidence to show that a person was a party to the conspiracy before his acts or statements can be used against his co conspirators. It is further argued that the statements by one conspirator with reference to past acts done in actual course of carrying out conspiracy after the completion of the conspiracy is inadmissible against accused under Section 10 of the Evidence Act. The learned counsel for the petitioner has placed reliance on the judgment of Jayendra Saraswathi Swamighal Vs State of Tamil Nadu (5 supra), wherein the confessions of A-2 and A-4 were recorded long after the murder when the conspiracy had culminated and therefore, it was argued that Section 10 of the Evidence Act cannot be pressed into service. The Apex Court finally observed as follows. ?However, I do not feel the necessity of expressing a concluded opinion on this question in the present case as the matter relates to grant of bail only and the question may be examined more deeply at the appropriate stage. Thus the Apex Court did not express its final opinion since it was considering bail petition. Detailed examination of evidence analyzing of evidence is not required to be done at the time of considering bail applications. Therefore, at this stage, it is not desirable to discuss whether the confession made by A-1 can be used against the petitioner or not. The Hon?ble Supreme Court in case between Kalyan Chandra Sarkar Vs Rajesh Ranjan alias Pappu Yadav (17 supra) observed as follows: ?The admissibility or otherwise of the confessional statement and the effect of the evidence already adduced by the prosecution and the merit of the evidence that may be adduced hereinafter including that of the witnesses sought to be recalled are all matters to be considered at the stage of the trial?.
Though the petitioner has mentioned in his petition, that he is not vicariously liable for the acts committed by the other accused no specific arguments have been advanced on this point. Moreover, as seen from the charge sheet allegations, the petitioner is alleged to be held responsible for his own acts of preparing the audit reports. This Court on the earlier occasion has dealt in detail about the role played by the petitioner and another auditor. The petitioner had also raised a point that second F.I.R. was illegally registered and it has no basis in law and could not result in filing charge sheet. Though this point was raised in the grounds of bail petition, no specific arguments have been advanced. However, the respondent in its counter has categorically stated that the C.B.I. has merely registered a case, issued F.I.R. and sent it to the Jurisdictional Magistrate Court. It is further averred as follows : ?As such all the case records including the F.I.R. registered by C.B.C.I.D. have been transferred to the jurisdictional Magistrate Court of C.B.I. and made part of this case records. Further, immediately after re-registration of the case by the C.B.I., pursuant to the notifications issued by the Government of India and Government of A.P. under D.S.P.E. Act, 1946, C.B.C.I.D. has stopped the investigation and handed over all the records including the case diaries to C.B.I. This is the standard and legally accepted procedure that is being adopted in respect of all the cases transferred form the Stage Government to C.B.I. throughout the country. Further the notification issued by the government of A.P. and Government of India under D.S.P.E. Act have authorized the transfer of the case from C.B.C.I.D., A.P. to C.B.I. As such, it is submitted that the investigation is merely transferred from one investigating agency namely C.B.C.I.D. to the another investigating agency i.e. C.B.I. by way of notifications issued under D.S.P.E. Act. As such the F.I.R. registered by C.B.C.I.D. and the case records have merged with the case records of the present case. Therefore, it is incorrect for the petitioner to allege that there are two F.I.R.s registered in this case?.
The learned counsel for the petitioner submitted that I.C.A.I. has initiated disciplinary proceedings and directed the petitioner to submit his explanation and even declined to extend time for the petitioner?s response to the notice dated 10-01-2009. His further case is that in view of his continued detention in this case, he is unable to defend his case before ICAI and seeking extension of time to give reply to the show cause notice in the disciplinary proceedings initiated against him. If the name of the petitioner is removed from the register of members of Chartered Accountants it would be a life time stigma for him and that he may be put to irreparable loss and that this plea is taken for the first time in this application. Though, there appears to be some force in the contention of the learned counsel for the petitioner that the petitioner is having some difficulty in sending reply to the notice of the I.C.A.I, but the same cannot be a ground to grant bail to the petitioner. Suffice to say that the investigating officer shall furnish the copies of all the required documents available with C.B.I. to enable the petitioner to send reply to notice issued by I.C.A.I. Accordingly, the Superintendent of the Jail is directed to provide all the facilities to the petitioner to prepare and send his reply to I.C.A.I.
The learned counsel for the petitioner further submitted that the petitioner was already taken into police custody and was interrogated and even while in custody, he was interrogated by several other institutions and agencies including the S.E.B.I., Serious Fraud Investigation Office (SFIO), I.C.A.I. and the Enforcement Directorate (E.D.) and that it is not the case of the respondent that further detention of the petitioner is required. The learned counsel for C.B.I. submitted that further investigation is being continued and it revealed that funds of Satyam Computers have been sent to third parties across the globe during the fraud period and that after taking approval of the Government of India a petition has been filed before the XIV Additional Chief Metropolitan Magistrate, City Criminal Courts, Nampally, Hyderabad and letters rogatory have been issued by the XIV Additional Chief Metropolitan Magistrate, City Criminal Courts, Nampally, Hyderabad, to the competent judicial authorities at USA, UK, Mauritius, Singapore, Belgium and British Virgin Islands on 10-09-2009 and the said letters rogatory have been sent to the concerned countries and replies are awaited. It is further submitted that at this stage, the release of the petitioner would not only hamper the further investigation but there is every possibility that the petitioner would influence the influential in India and abroad as he is co-conspirator and he is high profile and influential person. Since further investigation is being continued in several countries, it appears that it is not desirable to grant bail to the petitioner when it is apprehended that there is every likelihood of he influencing the influential witnesses in India and abroad.
The learned counsel for the petitioner vehemently argued that since the respondent and several other investigating agencies have been continuing investigation, it is not clear as to how long they would continue the investigation and there is no likelihood of the investigation being completed within a reasonable time, it is just and necessary to release the petitioner on bail. It is also submitted that it is not clear as to when the charges will be framed and when the trial will commence and in view of this delay the petitioner may be enlarged on bail. It is also submitted that the petitioner has a right to prepare his defence and unless he is released on bail, he cannot prepare his defence. No doubt the petitioner would have better chance to prepare or present his case but the interests of both parties have to be safeguarded when extremely influential persons are the accused, the apprehension of the prosecution that they may influence the witnesses and tamper the records appears to have some force. The Criminal Justice Delivery system would be a failure one if the influential, powerful accused are allowed to influence the witnesses, win over them or threaten the witnesses and there is no check for the same. Therefore, when there is apprehension that the petitioner may influence the witnesses and tamper the evidence, the same cannot be taken lightly in view of the magnitude of the offence involved. Even according to the prosecution, with regard to the confessional statement of A-1 dated 07-01-2009, the balance sheet of Satyam Computers reflected inflated cash and bank balances to a tune of Rs.5040 crores, non-existent accrued interest of Rs.376 crores and overstated debtors position of Rs.490 crores. The magnitude of the offence can be pursued. The affected persons are not only the hundreds and thousands of employees of M/s SCSL but, millions of shareholders of Satyam Computers Company. Even, the Public sector banks namely UCO Bank, Punjab National Bank, Union of India Bank, Corporation Bank, Indian Bank, Ahmedabad Bank, Oriental Bank of Commerce have suffered wrongful loss for an audit amount of Rs.10.13 crores. The L.I.C. of India alone has suffered a loss of Rs.950/- crores. Accounts are forged, inflated figures projecting a rosy picture about the health of the company was shown and investors, shareholders were cheated. The unprecedented and gigantic fraud not only affected millions of people but the economy and prestige of this Country.
The considerations which normally weigh with the Court in granting bail in Non bailable offences had been examined by the Supreme Court in The State Vs. Captain Jagjit Singh AIR 1962 SC 253. Hence, the points that arise for consideration at the time of considering the bail applications are the nature and gravity of the offence, whether there are reasonable grounds to believe that the accused has committed offence punishable with imprisonment for life or not, nature of the evidence in support of the accusation, the possibility of securing the presence of the accused at the time of trial, chances of accused tampering the evidence (threatening the witnesses) and larger interests of the public.
This Court while dealing with the main petition for A-9 in Criminal petition Nos. 3192 and 3194 of 2009 by order dated 13-05-2009 observed as follows : ?The nature of the offence, its gravity, its impact on the society and larger interests of public are some of the factors which have to be taken into consideration while considering the bail applications. Where th
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e paramount aspect has to be taken into consideration is the personal liberty of the petitioner at the same time the magnitude of the economic offence and its impact and injury caused to the national economy and national prestige has to be taken into consideration?. In view of the same, merely because the petitioner would have a better chance to prepare his defence if released on bail cannot be a ground to release him on bail. The learned counsel for the petitioner submitted that the daughter of the petitioner is very much attached to the petitioner and she is unable to concentrate on her education. Some difficulty and some inconvenience cannot be avoided. However, in view of the submission of the learned counsel for the petitioner, the Superintendent of the Central Prison, Chanchalguda, Hyderabad, is directed to allow the family members of the petitioner i.e. wife and daughter to meet him as and when a request is made by them in accordance with the prison rules. The learned counsel for the petitioner submitted that how long the petitioner would be kept in judicial custody when there is no likelihood of completing the investigation in near future and that speedy trial is recognized as a part of right to life. In Babu Singh and others Vs. State of U.P. (1 supra) it was observed as follows : ?All deprivation of liberty is validated by social defence and individual correction along an anti criminal direction. Public Justice is central to the whole scheme of bail law. Fleeing justice must be forbidden but punitive harshness should be minimized. Restorative devices to redeem the man, even through community service, meditative drill, study classes or other resources should be innovated, and playing foul with public peace by tampering with evidence, intimidating witnesses or committing offences while on judicially sanctioned ?free enterprise?, should be provided against. No seeker of justice shall play confidence tricks on the court or community. Thus, conditions may be hung around bail orders, not to cripple but to protect. Such is the holistic jurisdiction and humanistic orientation invoked by the judicial discretion correlated to the values of our Constitution?. Speedy trial has been recognized as integral part of fundamental right to life guaranteed in Article 21 of the Constitution of India. Every endeavour has to be made to see that the investigation and the trial of Criminal cases is completed as early as possible. The very purpose of fixing the time schedule for filing charge sheet under Section 167 of Cr.P.C. shows that the investigation should be completed without any delay. The delay in holding the trial may result in un-justice to both the parties. The witnesses may not be available, they may not remember the details of the incidents which they perceived at the time of occurrence because their memory may fade. Even in some cases, the parties and witnesses may die and it may be impossible to secure their presence. Therefore, there is every need for early disposal of cases. The Hon?ble Apex Court in case between Hussainare Khatoon Vs. Home Secretary, State of Bihar A.I.R. 1979 SC.1360 observed as follows : ?Speedy trial meaning reasonable expeditious trial is an integral and essential part of the fundamental right to life and liberty enshrined in Article 21 of the Constitution.? The learned counsel for C.B.I. filed a memo that the further investigation into the present case is nearing completion and second charge sheet will be filed by the end of November, 2009. The trial in C.C. No.187 of 2009 can proceed without waiting for filing of the second Charge sheet. The matter before trial Court is posted to 28-10-2009 as the trial can commence immediately in the present C.C. No.187 of 2009. The High Court has already recommended for establishing of Special Metropolitan Sessions Judge?s Court exclusively for conducting the trial in Satyam Computers case and that once the cabinet approval is secured the Court would be established within a period of two months and the Law Secretary to Government of A.P. informed that the matter has to be placed before the cabinet for approval and after granting approval by the cabinet, the Court would be established within a few months. Taking into consideration the memo filed by the C.B.I. the following directions are given; (1) The XIV Additional Chief Metropolitan Magistrate, City Criminal Courts, Nampally, Hyderabad, is directed to commence the trial in C.C. No.187 of 2009 without waiting for filing of the second charge sheet. (2) It is further directed that the framing of charges may be completed within a period of one month from the date of receipt of a copy of this order and the trial shall commence within a period of two months from the date of receipt of a copy of this order. If the trial in C.C. No.187 of 2009 is not commenced within a period of three months from the date of receipt of a copy of this order, the petitioner is at liberty to file fresh bail application. I hope and trust that the investigation by C.B.I. would be completed as per the memo filed by it as early as possible including the filing of second charge sheet by the end of November 2009. I also hope and trust that the Government of A.P. would finalise the establishment of Special Metropolitan Sessions Judge?s Court, exclusively for the trial of this case as early as possible and it is desirable if the process of establishing Special Court is completed within two months from the date of receipt of a copy of this order. (3) The Superintendent of the Central Jail, Chanchalguda, Hyderabad, is hereby directed to give facilities to the petitioner to prepare his replies to the show cause notices issued by the ICAI to defend himself in the disciplinary proceedings. The CBI is also hereby directed to furnish the copies of all documents required by the petitioner in this regard i.e., to prepare reply to the show cause notices issued by the ICAI. Though I have fixed a time schedule, if the accused are responsible for the delay, the period of such delay shall be excluded in calculating the above mentioned period in the directions given supra. With the above observations, the Criminal Petition is dismissed.