Supreme Court Grants Bail To CA Sanjay Raghunath Agarwal In ₹318 Crores Global Depository Receipts Fraud Case

The Supreme Court has granted bail to Sanjay Raghunath Agarwal, Chartered Accountant, suspected of committing fraud of Global Depository Receipts to the tune of Rs. 318 Crores.

The Bench of Justice V. Ramasubramanian and Justice Pankaj Mithal directed the appellant-CA to be enlarged on bail while observing that no final report has been filed in the FIR for the predicate offense, for the past nine years.

In this case, FIR was registered against six persons, including the appellant for offences under Sections 406, 407, 415 to 420, 120B read with Section 34 of the Indian Penal Code, 1860 (IPC). The FIR was registered based on a complaint lodged by one M. Srinivas Reddy, who was the Managing Director of a Company by name M/s Farmax India Limited (Farmax).

Senior Advocate R. Basant appeared for the appellant and Additional Solicitor General S.V. Raju appeared for the respondent.

Factual Background

Farmax had availed the services of the appellant and other accused in raising Global Depository Receipts (GDRs) to the tune of INR 318 crores. But only a sum of INR 2.20 crores was transferred to Farmax. And, upon enquiry with the bank, Farmax came to know that the accused had misappropriated the balance amount by forging the signatures, with the help of the pledged documents.

The FIR was registered 9 years ago, pursuant to an order passed by Metropolitan Magistrate under Section156(3) of the Code of Criminal Procedure, 1973 but no final report was filed till date.

However, the raising of GDR by Farmax became the subject matter of enquiry by Securities and Exchange Board of India (SEBI). SEBI passed an Order wherein it held that there were violations of various provisions of SEBI Act, 1992 and various regulations of Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003.

Pursuant to this, the Enforcement Directorate filed an information report wherein six individuals and nine entities were named as persons suspected of committing the offence of money-laundering under Section 3 of the Prevention of Money-laundering Act, 2002 (PMLA).

Thereafter, the appellant was arrested, and Enforcement Directorate filed a prosecution complaint under Sections 44 and 45 of PMLA.

The Apex Court noted that the appellant acted as an intermediary for almost all communications with the various participants and gave instructions to Farmax before and after the offering. Therefore, the second condition found in Clause (ii) of sub-section (1) of Section 45 of PMLA was satisfied qua the appellant.

The Apex Court further noted that the registration of the Enforcement Case Information Record and the lodging of the prosecution complaint in the year 2022 were a sequel to the registration of the FIR for the predicate offence, way back in the year 2013 and a sequel to the order passed by SEBI in the year 2020.

“Therefore, the continued incarceration of the appellant, in our opinion, may not be justified.” observed the Court. Accordingly, the appeal was allowed.

Cause Title- Sanjay Raghunath Agarwal v. The Directorate of Enforcement

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