Kerala High Court Orders CBI Investigation Into Kerala Advocates Welfare Fund Scam

A single-judge Bench of Kerala High Court comprising of Justice Sunil Thomas was considering Writ Petitions filed before it and ordered for a CBI probe.

The Petitioners in two writ petitions and an intervenor Respondent supporting the Petitioners were represented by Counsel Mr. T. Asafali, Mr. Sooraj T.Elenjickal and Mr. C. Rajendran.

It was alleged by the Petitioners before the Court that the investigation which was being conducted by the Vigilance and Anti-Corruption Bureau (VACB) was not progressing as was expected. It was further alleged that the investigation was being conducted in a lackadaisical manner and the vigilance was not taking a keen interest in the investigation.

Further, the Petitioners argued that every attempt was made to place the entire burden on the accountant, as the sole person who was only responsible for the illicit act. The Petitioners had sought the relief of entrusting the investigation in the case of VACB to the Central Bureau of Investigation (CBI).

Whereas, VACB denied all the allegations of the Petitioners. It contended that the investigation was progressing in a steady manner and substantial evidence had been collected. Further, it was argued that in the course of its investigation, two audits were conducted, one by the Kerala Local Fund Audit that revealed a loss of Rs. Rs.6,72,51,250/- and another one by the Statutory Auditor appointed by the Kerala Advocates Welfare Fund Trust Committee, which revealed misappropriation of Rs.7,61,24,725/-.

As per the investigating agency VACB, an amount of Rs.35,668,480/- was misappropriated by accused Nos. 1 and 2 and there was a shortage of unsold welfare stamps worth Rs.31,582,800/-. The investigation also revealed that the first and the second accused had entered into a criminal conspiracy and the second accused abetted the first accused in committing the offence of misappropriation. It was ultimately contended that there was no need for a CBI investigation.

The Kerala Advocates' Welfare Trust Committee was in support of the contentions raised by the VACB that the vigilance investigation was progressing fairly and there was no need for CBI investigation.

The Bar Council of India was in agreement with the contentions of the Writ Petitioners.

Important Findings:-

• Court held that there is no basis for the conclusion arrived at by the investigating agency that no fake welfare stamps were issued during the relevant time.
• Court held that it is absolutely unbelievable that an accountant single handedly swindled money without the knowledge of any other staff or the Trust. 
• Court held that even going by the version of the investigating agency, there is absolute and gross negligence on the part of the Secretary and full abdication of his powers and duties. Secretary knowingly misled the committee by giving false statement about auditing of accounts. Court held that reinstatement of the Secretary after his suspension, to the same post or in any other post of the committee cannot be appreciated.
• Court held that there is a possibility of Muthu, a person who is supposed to have received huge amounts in the scam, being a fictitious person and that the possibility of the amount so misappropriated being parked elsewhere cannot be ruled out.

Reasoning:-

The Court on a perusal of records noted that the investigation in the case is continuing for a long time and it hasn't progressed much. In this context, the Court observed –

"At the time of hearing, learned Additional Advocate General submitted that, investigation has now been entrusted to a new team and it was expected to continue with all earnestness. Had this been done at the initial stage investigation could have progressed substantially."

"Considering the huge amounts involved, the complexity of crime, lack of various records and that materials were spread over two states, it should have been investigated effectively with a larger team of investigation, even from the beginning. Hence, there were limitations in the Inspector conducting the investigation," the Court opined.

Additionally, the Court observed, "What shocks the conscience of anybody is that, during the above long period of ten years, no records were maintained and the records whatever meant were shabbily retained. It is also surprising that during the above period, nobody cared to verify how the money was being collected, maintained and utilised. Shockingly, nobody verified the records and that during this long period, the records were not even audited, even though Trustee Committee was under an obligation to get the records audited."

"Though ritually, every Board meeting resolved to conduct the auditing, in the next board meeting nobody tried to verify whether records were audited and placed before the Board for verification. The Trustee Committee also never insisted that, it should be got audited. During the relevant period, nobody cared to verify the accounts, how the funds were being kept and utilised. This indifference from the Trust Committee has led to this enormous squandering of the money by the persons concerned," the Court held.

The Court added that as per the report of the auditor an amount of Rupees seven and a half Crores has been swindled, however, there is every possibility of this being a rough estimate, and substantially huge amounts might have been swindled.

"There are indications that records were also manipulated, and that, most of the records were not properly maintained. Even this amount seems to have been arrived at on the basis of available records alone", the Court held.

The Court emphasized the need of carrying out a proper check of the records available with the various Bar Associations to identify the actual number of stamps sold in Kerala and the corresponding amounts collected.

The Court held that only a forensic audit in an extensive manner could reveal the amount collected as this exercise is essential to ascertain whether fake stamps were sold and also to ascertain whether the higher amount is involved.

"The allegation of the investigation agency seems to be is that, during the long period of ten years, without maintaining any records, single handedly the said accountant, swindled the money without the knowledge of any other staff or the Trust. This is prima facie absolutely unbelievable," observed the Bench.

"It is evident from the record that Bar Council of Kerala suspended the Secretary, pending enquiry. However, after conducting an enquiry, holding that there was only supervisory latches on the part of the Secretary, he was reinstated. This conduct of the Welfare Committee in reinstating person against whom very serious allegations were made and who ought not have been accommodated for his callous negligence, is surprising. Evidently, the role of the Secretary needs a closer and detailed investigation, which the present investigating agency has not done," the Court held.

The Court was of the opinion that the investigation team till now has not reached its logical conclusion. Several matters need to be further investigated.

The High Court further held that the matter needs investigation by a specialized agency. the fact that the investigation has to progress forward and to be conducted in two States, and the fact that detailed investigation further required to be conducted by a specialized agency in the nature of CBI.

In the light of these observations, the Court allowed the Writ Petitions and ordered for a CBI investigation.

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