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INTHEHIGHCOURTOFJUDICATUREATBOMBAY

CRIMINALAPPELLATEJURISDICTION

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CRIMINALBAILAPPLICATIONNO.1263of2014

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JIGNESHPRAKASHSHAH ..APPLICANT
Versus

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THESTATEOFMAHARASHTRA ..RESPONDENT

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Mr.MaheshJethmalani,SeniorAdvocatewithMr.AmeetNaik,Mr.Aniket
U.NikamandMs.GunjanMangalai/bMr.AniketNikam,Advocatefor
theapplicant.
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Mr.A.B.Avhad,SpecialPublicProsecutor.
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Mr.V.B.KondeDeshmukh,APPfortheRespondentState.
Mr.SandeepR.Karnik,AdvocatefortheIntervenor.

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CORAM: ABHAYM.THIPSAY,J.
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DATED:22ndAUGUST,2014.

ORALORDER:
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1 The applicantisthe Accusedno.10in C.R.No.89of2013

registered by the Economic Offences Wing (EOW). The crime was

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initiallyregisteredvideC.R.No.216/13ofMRAMargPoliceStationon

thebasisofareportdated30 th September2013lodgedbyonePankaj

Saraf,inrespectofoffencespunishableundersections120BIPC,409

IPC,465IPC,467IPC,468IPC,471IPC,474IPC,477AoftheIPC.

Lateron,investigationofthecasewastransferredtoEOW,whereafter

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theprovisionsoftheMaharashtraProtectionofInterestofDepositors

Act(forshort'MPIDAct'),wereappliedtothefactsofthecase.

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2 The applicant was arrested on 7th May 2014. Before his

arrest,anumberofotheraccusedinthiscasewerearrestedfromtimeto

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time, and were released on bail. The applicant was arrested after

chargesheet had already been filed against some of the arrested

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accused.
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3 When thisapplication wasmade, investigation asregards
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thepresentapplicantwasproceeding,andnochargesheetagainsthim

had been filed. The hearing of the Bail Application consumed quite
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sometime,andwhenthehearingconcluded,theapplicanthadalready
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beenincustodyforabout85days.Itwas,therefore,thoughtproperto

deferthedecisionontheBailApplicationtillthefilingofthecharge
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sheet,whichwasanywayexpectedtobefiledwithin90daysfromthe

detention of the applicant in custody. On 90th day from the day on

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whichapplicant'sdetention in custodywasfirstauthorized,acharge

sheet came to be filed against him, whereafter, a copy thereof was

providedtothisCourt,andalsotothelearnedcounselfortheapplicant.

ThoughthematterhadalreadybeenarguedfullybythelearnedSpecial

PublicProsecutorandthelearnedcounselfortheapplicant,inviewof

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the filing of the chargesheet, the learned counsel were permitted to

advancefurtherarguments,ifsodesired,andaccordingly,conciseoral

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argumentswereadvancedbythelearnedSpecialPublicProsecutoras

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alsothelearnedcounselfortheapplicantafterthefilingofthecharge

sheet.InterventionoftheFirstInformantPankajSarafinthematter

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was permitted and the Intervenor has, apart from advancing oral

argumentsthroughhiscounsel,filedwrittenargumentsinthematter.

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4
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IhaveheardMr.MaheshJethmalani,learnedcounselforthe

applicant.IhaveheardMr.A.B.Avhad,SpecialPublicProsecutor.Ihave
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heard Mr.Sandeep Karnik, learned counsel for the First Informant at

length. I have also heard one Ketan Shah who claimed to be an

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'investor',andexpressedadesiretomakesubmissionsonbehalfofthe
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'investors',anumberofwhomwerecrowdingtheCourthallduringthe

hearingofthebailapplication.
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5 The case relates to the alleged scam that is said to have

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takenplaceintheactivitiesandworkingofNationalSpotExchangeLtd

(forshort'NSEL'),aCompanyincorporatedundertheCompaniesAct,

1956,inMay2005.

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6 Itwillbeappropriatetoexaminewhatistheallegationin

the First Information Report lodged by the Intervenor. The First

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InformantPankajSarafisaDirectorofaPrivateLimitedCompanydoing

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thebusinessof'investment,tradingandfinancing'. That,hehadbeen

'investing' in the traders contracts offered by the NSEL through his

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brokers M/s.Capital Financial Commodities Ltd and Way to Wealth

Pvt.Ltd. Mr.Pankaj Saraf had entered into a clientbroker agreement

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withhisbrokers,andhadsubmittedthenecessarydocumentstothem.
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Thebrokersweremembersofthe NSEL. PankajSarafwasprimarily

transactinginT+2andT+25contracts.Hisgrievanceisthatduring
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theperiodfromOctober2008toJuly2013,NSELallowed25members

(whoarenamedasaccused)totradeontheexchangeassellers. Itis
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alleged that in admittingthese companiesasmembers,due diligence

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wasnotobserved.Itisalsoallegedthatthese25members(sellers)had

conspiredwiththeapplicantandtheseniormanagementofNSELandin
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connivance with NSEL, traded fictitious stocks on the exchange by

raisingfakedocuments.That,theapplicantandotherseniorofficersof
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theNSELwerehandinglovewiththedefaultingparties,andhave,in

collusionwiththem,defraudedtheFirstInformant.Though,duringthe

initialcontractsbetweenthesemembercompaniesassellersandbuyers,

theCompanysquaredoffthecontractsonthedateofmaturitybutlater,

whentheinvestmentinthesecompaniesgrewsubstantially,theydidnot

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honor their commitments and caused a wrongful loss to the tune of

Rs.2.2crorestotheFirstInformant. Itisallegedthatalossofabout

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5600croreswascausedtotheother'investors', numberingmorethan

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13000.

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7 InwhatmannerNSELwassupposedtoact,howthetrading

transactions were to take place, and how the offences came to be

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committed, can be best gathered from the relevant details given in
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column no.16 of the printed prescribed proforma of the police

report/chargesheet.
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National Spot Exchange Limited (NSEL) is a spot
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exchangewhichwasoriginallyconceptualizedbyJignesh
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Shahintheyearintheyear2006.NSELismeanttobe
an electronic platform that facilitated trading in 52

commoditiesthroughoutthecountry.
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8 In order to understand the nature of the transactions in

question,itwouldbenecessarytounderstand how thebusinessofthe

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NSELwastobetransacted,andthishasbeenexplainedinthepolice

report/chargesheetasfollows:

Commodity spot trading is about buying and selling a

commodity,payingcashforandreceivingyourgoodsonthe
'spot'.Thisiscalled'readydeliverycontract'underFC(R)Act,

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1952, which signifies that the buyer and seller agree on a

price and 'deliver' their side of the contract immediately.

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NSELisaspotexchangedesignedtohelpthisactivity,with
theaddedfeatureofbeingelectronic(sobuyersandsellers

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canbeindifferentlocations)andanonymous(thebuyerand
seller don't know who the other side is). The important
feature of any such exchange is that the exchange has to

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standguaranteesubjecttoitsbyelawstoeitherpartythatit
will ensure that the contract is settled. If the buyer can't

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bringinthemoneyforanyreason,theexchangeshouldthen
sell thegoods tosomeoneelseandrecoverthemoney(and
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makeupthedifference).Andasimilarexerciseiftheseller
defaults.Now,whenthesellerandbuyerarefarawayfrom
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eachother,howdoestheexchangeguaranteedelivery?The
ideaisthatthesellermustcometoanexchangedesignated
warehouse and give his goods, which are then tested and
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verified for quality and weight. He then gets a warehouse

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receipt(WR)thatisusedforelectronictrading.Whenhesells
ontheexchange,thewarehousereceiptistransferredtothe
buyer;thisreceiptentitlesthebuyertotakethegoodsoutof
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thewarehouse,orifhechooses,toretainthegoodsthere(to
sellthemlater)bypayingthewarehouserentalcharges.
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9 Howthetraders'contractsweretowork,hasbeenexplained

asfollows:

The seller was required to deposit his stocks in

warehouseswhichwereapprovedanddesignatedbyNSEL
on or before T, with T being the 'trade date'. NSEL was
responsible for checking and verifying the quality and

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quantity of he underlying commodities and goods are

requiredtobecompulsorilyweighedatthedesignatedweigh

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bridge/weighscaleandwillbemonitoredandcertifiedbythe
warehouse supervisor. Upon NSEL certifying the same,

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NSEL issued a warehouse receipt which was evidencing
proofofownershipofastatedquantityofcommoditiesofa
stated grade and quality by the beneficial owner or the

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holder of the certified warehouse receipt. The depositor
receivesthephoto/scannedcopyofthewarehousereceipt

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andtheoriginalisretainedbytheExchangetotransferto
the buyer upon the onward sale by the depositor.
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Additionally,adeliverymarginofaround10%ofthevalueof
thegoodswastobepaidbythedepositortotheExchange.
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On T, the investor enter into a contract to buy the
commodities with T + 2 delivery cycle. Simultaneously, he
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wouldalsoenterintoacontracttosellthecommoditieswith
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aT+25deliverycycle.OnT+2,NSELwouldissueadelivery
allocation report in which the quantity and location of the
commodities purchasedwould be mentioned. The allocation
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reportcontaineddetailsoftheendclient,warehousereceipt
No,Lot/QCNo.andwarehouselocation.Further,itincludeda
confirmationfromNSELthattheoriginalwarehousereceipts
wereinit'scustody.
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Astheoriginalwarehousereceiptswere1nthecustody
of the Exchange, NSEL vide its policy asked the investors
(whowerethesellersintheT+25contract)toretainthegoods
intheExchangecertifiedanddesignatedwarehouseuntil25
dayspassedasprepayinthroughwarehousereceiptsagainst

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sale obligation.Onthe25th day,the Exchangewouldthen

collectthemoneyfortheinvestorandwouldthenreleasethe

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goodstothebuyer.NSELwasthereforethecustodianofthe
goodsfromthetimeofpurchaseundertheT+2contracttill

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thetimeofitssaleandwasresponsibleforitssafecustody.

As is usually the norm in any electronic exchange,

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whenaclienttradesontheanonymousorderdriventrading
systemontheExchange,thebuyerdoesnotknowtheseller

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andinthesameway,thesellerdoesnotknowthebuyer.But
incaseofthepairedcontracts,alwaysthecounterpartyis
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knownthroughinvoices.
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NotonlydidNSELpermitinvestorstoparticipatein
thesecontracts,but,infact,NSELactivelyencouragedand
induced investors to enter into such dual transactions.This
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activeinducementwasnotjustbyhighlightingthepossible
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benefits available due to the price differential but also by

providingeconomicrationaletoinvestorsbywaivingstorage
chargesforthosemembersandtheirconstituentswhosellthe
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product on the longer duration contract out of delivery

receivable against the purchase position of the shorter
contract.Accordingly,manymembersalsoactivelymarketed
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these contracts. Moreover, NSEL retained the warehouse

receipts issued by it which were to be used to discharge
marginobligationsonthetrades.

NSELhas820membersofdifferentcategorieswhich
areasunder:

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TCMTradingCumClearingMember,TMTrading
Member,ITCMInstitutionalTradingCumTradingMember,

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PCM Professional Clearing Member, TCM A For All
AgriCommoditiesallDeliveryCentresinaState,TCMB

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ForSingleAgriCommodityAllDeliveryCentresinaState,
TCMCForSingleAgriCommoditySingleDeliveryCentre
inaState,TCMPulsesForPulsesinaParticularState.

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Thememberswererequiredtoregistertheclientprior

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to executing trades on their behalf. For this purpose, the
members required theirclientsto submitthedulyfilledin
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prescribed 'Know Your Customer' form and execute the
memberclientagreementwiththemembers.Thereafter,the
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memberswoulduploadtherelevantdetailsintheExchange
software in order to generate the Unique Client Code
("UCC"). Once the UCC was generated, the client was
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permittedtoexecutetradesthroughthemembers.Thereare
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around13,000clientsoftheaboveMembersoftheNSEL.

Thetradesweregenerallyexecutedbymembersonbehalfof
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theirclientsinthefollowingmanner:

i. Onthe'TradeDate(T),thefollowingactionstakeplace:
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a thetradeisexecutedbythememberonbehalfof the
client
and
bpursuanttoexecutionofthetrade,aconfirmationEmail
wassentbythemembertotheclientalongwiththeprovisional
returncomputationonthetrade;

ii. OnT+1,acontractnoteisissuedbythemembertothe
clientfortheBuyandSellside;

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iii. Onthesamedayorpriortoit,membercollectsmonies
fromtheclients

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iv. OnT+2,thefollowingactionswilltakeplace:

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a.payinoffundsbythememberonbehalfoftheclient
forthetrade;and
b. pay out of commodity (the Warehouse Receipt for

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whichis retainedbytheExchangeasearlypayinforthe
payinobligationsfortheT+25trade);

v. On T+3, client wise delivery allocation report for the

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executed tradeisavailableontheExchangeinterfacefor
downloadbythe member;
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vi. OnT+25,thetradeissettledbywayofpayoutoffunds.
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All trades, T+2 and T"T25, are settled in accordance
withtheSettlementCalendarissuedbyNSELforthatmonth.
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10 Indeed,itappearsthattheNSELdeviatedfromitsbusiness
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model. Italsoappearstherehadbeennoactualphysicaldeliveryof

commodities, and bogus warehouse receipts were issued. NSEL was

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actuallysupposedtotradeincommodities,butinsteadofdoingthat,it

permittedbogustransactionsoftradingtobeintroducedandresultantly,

ineffect,permittedfinancialtransactionsoflendingandborrowing.
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11 I have carefully considered the whole matter in all its

perspectives. Thecontentionsadvancedonbehalfoftheapplicant,as

alsothecontentionsadvancedbythelearnedSpecialPublicProsecutor,

have undergone slight changes when certain aspects of the matter

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becameclear.Similaristhecasewiththecontentionsadvancedbythe

FirstInformant/Intervenor.

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12 Thefirstandforemostcontentionadvancedonbehalfofthe

applicantis thatthe applicantisnotresponsible for these illegalities,

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irregularities and wrongs that have taken place in the affairs of the

NSEL.ItissubmittedthattheapplicantisaNonExecutiveDirectorin

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the NSEL. It is submitted that the wrongs of permitting trading in
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fictitiousstocks,issuingwarehousereceiptswithouttherebeingstocks

depositedinthe warehouse,etc,havetakenplaceatthelevelofthe
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employeesconcernedofNSEL,andatthemost,attheleveloftheactive

DirectorsoftheNSEL. Itwascontendedthatthereisnothingtoshow
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thattheapplicantwasawareoftheseirregularities/illegallities.
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13 In view of this contention, the emphasis of the learned

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SpecialPublicProsecutorandthelearnedcounselfortheIntervenorhas

beenonunacceptabilityofsuchacontention. Itwaspointedoutthat
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NSEL waspromoted andcontrolledby Financial Technologies(India)

Ltd(forshort'FTIL'),andthatFTILowns99.99%oftheshareholdingof

NSEL. ItwascontendedthattheapplicantisaPromoterDirectorof

NSEL, and that he and his family hold about 44% of the total

shareholding of the FTIL. It is submitted that it was, therefore,

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impossible to believe that the applicant was not aware of what was

happeninginrespectoftheNSELtransactions.Duringthependencyof

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the present application, the statements of some persons came to be

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recorded, from which certain facts making it clear that the applicant

couldnothavebeenunawareofthebogusandfictitioustransactionsof

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saleandpurchasethatweretakingplaceontheNSELplatform,have

beenrevealed.

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14
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IntheviewthatIamtaking,itisnotnecessarytodiscuss

suchmaterialindepth,andwhatneedstobeobservedisthat,goingby
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thefactsofthecase,asreflectedfromtheinvestigationthathasbeen

carriedoutsofar,andjudgingbythebroadprobabilitiesofthecaseas
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should be done at the stage of bail it cannot be accepted that the

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applicant had noknowledge of the illegalities/fraudulenttransactions

thatweretakingplaceintheactivitiesofNSEL.
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15 What,however,issignificantisthatthoughtheseillegalities
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orthis'fictitioustrading'issoughttobehighlightedasmaterialagainst

theapplicant, therealgrievanceoftheFirstInformantandevenofthe

otherinvestorsisnotwithrespecttothefactthatsuchfictitioustrading

wastakingplace.Theirgrievanceisthattheirmoneyhasbeenlost.A

biguproarhasbeencreatedbythem,andforshowingthemagnitudeof

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theallegedoffences,itistermedasa'scamofaboutRs.5600crores'.In

thisconnection,certainbasicaspectsofthemattercannotbelostsight

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of. Thepersonswhosemoniesarelost,includingtheFirstInformant,

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areapparently,notthegenuinetradersforwhomNSELwassupposedto

provideaplatform. Theveryfactthatthesepersonsare,asalsothe

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Investigating Agency is, freely using the terms as the investors'
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'borrowers', indicates that, that the transactions in question were not

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genuinetransactionsofsaleorpurchasewaswellknowntothesocalled
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buyersalso,whonowchoosetodescribethemselvesas'investors'

clearthatfromtheirpointofview,itwasonly aninvestmentyielding
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highreturnsfortheirmoney. Theseinvestorsarenotmiddleclassor

lowerclasspeople,butarethemselvesbusinessmen.Thetransactionsin
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questionwerebeingenteredthroughbrokerswhohadknowledgeofthe
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commercial market. Going by the broad probabilities of the case, it

cannotbeacceptedthatthepersonswhoarenowcryingfoul,werenot
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awareofthefactthattheirtransactionswerenotgenuine.Theywere

lookingatthesetransactionsclearlyasaninvestmentoftheirmonies
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yieldingsafereturns. Theirestimateorbeliefaboutthesafetyofthe

transactionshasbeenprovedtobewrong,andthatisthereasonforthe

uproarwhichisnowbeingmadebypointingouttheillegalitiesinthe

transactionsundertakenbyNSEL.Undoubtedly,thesewrongsappearto

havetakenplace,andundoubtedly,itcannotbesuggestedthatthose

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who permitted such fictitious trading have not committed serious

offences, still, the fact remains that the persons who are raising the

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grievance about such fictitious tradings were themselves not genuine

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traders, and had entered into the transactions purely as financial

investments.Thereiseveryreasontobelievethatasizablenumberof

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socalled'investors'whosetransactionswerebeingenteredintothrough

brokers, actually did not bother about the fictitious trades, and

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knowingly participated in such illegal activities, without raising any

issueofillegalitythereof.
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16 Thereisgreatsubstanceinthecontentionsadvancedbythe

learnedcounselfortheapplicantthatthebrokersthroughwhomtheso
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called trade transactions were entered into, do have their own legal
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teamandafullknowledgeofhowthemarketoperates.Thelegalitiesof

thetransactionswerequiteexpectedtobeknowntothebrokersandthe
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traderswhodonothesitatetotermthemselvesas'investors',andthey

wereexpectedtoassessthelegalitiesofthetransactions. Thebrokers
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beingquiteexperienced,andtheinvestorsbeinginformedpersons,itis

apparentthattheissueofillegalityofthetransactionsraisedbythemis

notoutoftheirconcerntoadheretolegalities,butinordertoproject

theapplicantasthemainoffender,ratherthanthedefaultingparties.

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17 Itmaybeobservedinthiscontext,thatthelegalityofthe

applicationoftheprovisionsoftheMPIDActtothiscaseisnotfreefrom

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doubt. Whether the monies paid by the buyers for purchasing the

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commodities would amount to 'deposit' as defined in clause (c) of

section2oftheMPIDAct,wouldneedseriousconsideration.Whether

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NSEL can be termed as a 'financial establishment' as defined under

clause (d) of section 2 of the MPID Act, would need equally serious

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consideration.SinceIamdealingonlywithaBailApplicationitwould
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beneithernecessarynorpropertogodeeperintothisaspect,butwhat

needstobesaiditthatthe'investors'inthiscasearenotthetypeof
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personsforwhoseprotectionMPIDActhasbeenenacted,asreflected

fromthestatementsofobjectsandreasonsbehindthesaidenactment.
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18 Thoughthecasehasbeenprojectedasa'scamofRs.5600

crores',itneedstobekeptinmindthattheseamountshavenotbeen
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receivedbyNSEL.Asalreadyobserved,itisdifficulttoacceptthatthe

brokersand/ortheirclientsforwhomtheywereworkingwere'deceived'
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bytheNSELinasmuchasinallprobability,thebrokersandtheinvestors

werewellawarethattheywerenotenteringintoagenuinesaleand

purchasecontract. Whenthereisaclearandobviouspossibilitythat

thesepersonsknewaboutthetransactions,the'deception'ifany,caused

to them cannot be said to have been caused by the nature of the

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transactionsand,atthemost,theycanbesaidtohavebeenmisledbya

propogandathat'investing'moneyinthosetransactions,wassafe. The

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moneyinvestedhasnotcometoNSEL,buthasgonetotheborrowers.

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i.e.bogussellers. Itistheborrowerswhohavebeenbenefitedbythe

transactionsandthemoneyof'investors'hasgonetothem.Thenames

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of25differentcompanieswhoarethedefaultershavebeenmentioned

intheFIRitself.Thus,thoughprojecteda'scamofRs.5600crores',the

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illgottenamounthasnotgonetotheapplicant,orforthatmatter,to
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NSEL.Infact,itisnotthecaseofanyone.
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19 Thepicturethatemergesisasfollows. Indeed,illegaland

bogustransactionsof saleandpurchasewere shown ashavingtaken

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place. This has been possible because the NSEL did not stick to its
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businessmodel.Insteadofprovidingaplatformforgenuinebuyersand

traders,thisplatformwaspermittedtobeusedandactuallyused
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bybusinessmenwhowantedsafeinvestmentsfortheirmoney. These

investments were made through brokers who were well experienced

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withtheworkingofthemarket.Toshowbogussales,bogusdocuments

werecreatedbythebogussellers/brokers,andthishasbeenpossible

withtheconnivanceoftheofficersanddirectorsofNSEL.Thoughthe

applicant'scontentionthathewasnotawareoftheillegalities,orthathe

being a NonExecutive Director of NSEL was not concerned with the

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illegal activities, cannot be accepted, it is also clear that, that the

transactions were not genuine, was in all probability, known to the

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'investors'atleasttoagreatnumberofthemandinanycase,certainly

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known to the brokers who were entering into the contracts for their

customersinvestors. ThisfactisobvioustotheInvestigatingAgency

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also,inasmuchthebuyersandsellersarefreelydescribedas'investors'

and'borrowers'. TheNSEL,byitsimproperandwrongworking,did

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provideanopportunityfortheunscrupulous'borrowers'tohavehuge
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fundsforthemselves.However,inthezealofopposingtheapplicant's

applicationforbail,itis,perhaps,convenientlyignoredthatthefunds
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hadnotcometoNSEL,buthadgonetosuchborrowers. Though a

numberofcontentionsshowinghiscomplicityinthewholematterare
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raised,onacarefulconsiderationandscrutinyofthematter,theonly
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realallegationagainsttheapplicantisthat heallowedNSELtoviolate

therulesandregulations,anditsownbusinessmodel, whichenabled

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the'borrowers'todupethe'investors'
.
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20 Undoubtedly,anallegationthatthishasbeendonebythe

borrowers in conspiracy with the NSEL and consequently with the

applicanthasbeenmade.However,thereisnomaterialtoshowthe

same. Thereisnoallegationthattheapplicanthasacquiredfromthe

borrowers any part of the illgotten money earned by them, as a

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considerationformakingitpossibleforthemtocommitsuchfrauds,or

that,anypartofthemoneyearnedbytheborrowersinsuchadishonest

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manner, has been received from them by the applicant. It is almost

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concededthattherehasbeennomaterialtoshowanydirectconnection

orlinkbetweenthedefaultingborrowersandtheapplicant.Whenthis

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aspectofthematterwasdiscussedinthecourseofhearing,anumberof

contentionsshowinghowtheapplicantstoodbenefitedbythefraudulent

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transactions, were advanced. It is submitted that these transactions
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resulted in increasing the turnover of NSEL, improved its market

reputation and consequently, benefited the FTIL Group of which the

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applicantisamajorshareholder.Itissubmittedthattheapplicanthas

receivedbenefitsfromthesefraudsbywayofincreaseintheincomeof
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FTILandtheconsequentbenefitsaccruingtotheapplicantfromsalaries,
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commission etc. However, it is obvious, prima facie, that had the

applicantconspiredwiththebogussellers/borrowers/defaultersandhad
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he permitted the illegal activities to take place so that such bogus

sellers/borrowers/defaultersshouldmakehugemoneyforthemselves,
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he would never be content with the indirect and incidental benefits,

whichallegedlyaccruedtohimthroughFTIL.

21 When this aspect of the matter was discussed, it was

suggestedthattheremightbeapossibilityofsomecashthroughhawala

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transactionshavingbeenpassedovertotheapplicantbythedefaulting

borrowers. It is submitted that to detect such transactions, indepth

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investigationisnecessaryandthat,investigationisproceedinginthat

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direction. That,certainly,is possible. Suchinvestigation,however, is

admittedly,likelytotakemuchtime,anditisnotpossibletoholdthat

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the applicant needs to be detained merely because such a possibility

exists.Itisafactthatasoftoday,thereisnomaterialtoshowanydirect

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linkbetweentheamountsdishonestlyearnedbytheborrowersandthe
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amountsreceivedbytheapplicant.Thebenefitswhichtheapplicantis

saidtohavegainedfromthesetransactionsareonlyindirectbenefits
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suchasincreaseinthevolumeofbusinessandconsequentincreasein

theprofitofFTIL,andarenotsufficient,initself,tosupportatheoryof
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conspiracy. The very fact that it would take quite some time to
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investigatewhethertheproceedsofcrime,orapartthereofhasbeen

received by the applicant from the defaulting borrowers, (which

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undoubtedly would support the conspiracy theory) would weigh in

favourofgrantingbailtotheapplicant,ratherthanweighinginfavour
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ofdetaininghimincustodytillthisaspectwouldbeclear. Sufficient

timehasalreadybeengiventotheInvestigatingAgencyandinspiteof

this, no link or connection between the proceeds of crime and the

applicant,hasbeenrevealedsofar.

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22 Itwassubmittedonbehalfoftheintervenorandalsobyone

KetanShah whoclaimedtobearepresentativeofthe investors, and

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whowaspermittedtomakebriefsubmissionsopposingthegrantofbail

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thattheapplicantisamoniedpersonandthatheshouldgivesome

offerofreturningthemoneytotheinvestors,toprovehisbonafides.

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ItwassubmittedthatasinthecaseofSubrataRoy(SaharaVs.Unionof

India&ors(WritPetition(Criminal)No.57of2014)decidedon6 thMay

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2014,whohasbeendetainedbyTheirLordshipsoftheSupremeCourt
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ofIndia,theapplicantshouldalsobedetainedincustodytillhegives

suchoffer.Thissubmission andthisexpectationisnotproper.Inthe
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firstplace,thoughthisistermedasa'scamofRs.5600croresbyNSEL',

itisnotthatmonieshavebeenreceivedbyNSEL,buttheyhavegone
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fromonebogustrader(investing)toanotherbogustrader(borrower).
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Atthecostofrepetition,itneedstobeobserved,thatfromananalysisof

theallegations,itbecomesclearthattherealandonlyallegationagainst
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NSEL is that it adopted such modus operandi that permitted the

borrowerstodupetheinvestors. ThebenefitsreceivedbyNSELand
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FTIL and consequently, by the applicant from these fraudulent

transactions, are only incidental. Therefore, merely because the

applicantisamoniedpersonandislikelytobeinpositiontosatisfy

someinvestorsaswasstatedbeforethisCourtonbehalfoftheinvestor

andtheinvestorshecannotbedetainedincustodyforthepurposeof

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forcinghimtodoso.Theexpectationisnotthatthemoneygoneinhis

pocketshouldbetakenoutbyhim,buttheexpectationisthathehaving

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beeninstrumentalinthedupingofinvestorsbytheborrowersbemadeto

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paytotheinvestorsashehassufficientmeanstodoso.Perhaps,theFirst

Informant and the investors feel that by putting the applicant in a

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difficultsituation,itwouldbeeasierforthemtorecovertheirmoney.

Theculpabilityoftheapplicantcannotsuccessfullybeprojectedtobeof

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ahigherdegreethanthatofthe'borrowers'(bogussellers)andtheir
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brokers, who have actually taken away the money. The example of

Subrata Roy is most inappropriate as the facts of that case and the
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circumstancesinwhichTheirLordshipsoftheSupremeCourtdirected

hisdetentionareentirelydifferent.Moreover,byvirtueofArticle142of
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the Constitution, the Supreme Court has full power and authority to
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make any order for doing complete justice between the parties. Such

power,thisCourtdoesnothave.
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23 There are also some other aspects, a mention of which

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would be necessary. Though there are direct allegations against the

applicantintheFIRitself,theapplicantwasnotputunderanyarrest.

Fiveotheraccusedwerearrestedandchargesheeted.(Itisonlyatabout

that time that the applicant was arrested). Three of them are the

officials of NSEL and two, are the 'borrowers' who have made huge

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defaults.Thereafter,withoutanynewmaterial,theapplicantcametobe

arrested.ThecaseoftheInvestigatingAgencyearlierwasthattheco

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accused Anjani Sinha, the CEO of NSEL had taken the entire

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responsibilityofthewrongsuponhim.ThoughIamnotsuggestingthat,

that should be accepted as a fact and would certify the applicant's

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innocence, the fact remains that no necessity was felt by the

InvestigatingAgencyofarrestinganddetainingtheapplicantincustody

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forthe purposeof investigation. In fact, the investigation proceeded
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aheadandresultedinfilingofchargesheetagainsttheaccusedpersons

whohadearlierbeenarrested.Certainpropertyofthearrestedaccused
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and also of the applicant, has been attached in the course of

investigation. Therefore, it is not that the applicant's detention in

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custodyisessentialforfurtherinvestigation.
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24 Allsaidanddone,thereisnochangeinthelegalprinciple
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that pretrial detention can never be authorized as and by way of

inflictionofpunishment.
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25 Theapplicantisnotlikelytoabscondif releasedonbail.

Appropriateconditionscanbeimposedupontheapplicanttoensurehis

availabilitytotheInvestigatingAgencyandtotheCourt.

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26 Applicationisallowed.

27 Applicantisorderedtobereleasedonbailinthesumof

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Rs.5,00,000/(RupeesFivelakhsonly)withonesuretyinlikeamount,

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on the condition that the applicant shall report to the office of the

Investigating Agency on every Monday and every Thursday between

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11.00 a.m to 1.00 p.m for a period of two months from today, and

thereafteruntilfurtherordersofthetrialcourt.

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28 At this stage, the learned counsel for the applicant prays
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thatasthehealthoftheapplicantisdeteriorating,andasitwouldtake

quitesometimetofurnishsuretiesintheamountofbail,theapplicant
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betemporarilyreleasedonhisdepositingcashinlieuofsurety.SinceI

donotthinktherethereisanypossibilityoftheapplicantabsconding,if
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permittedtodepositcashinlieuofsurety,Iaminclinedtograntsucha
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prayer.

29 TheapplicantmaydepositcashofRs.5,00,000/inlieuof
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surety,temporarily,foraperiodoftwoweekswithinwhichperiodthe

applicantisexpectedtofurnishsolventsuretyintheamountofbail.
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30 The counsel for the intervenor prays for the stay of the

operationofthisorder.

31 Prayerrejected.

(ABHAYM.THIPSAY,J)

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