Morimisetty Pandu vs. State Of U.P. Thru. Prin. Secy. Home Lko.

Facts

The applicant, Morimisetty Pandu, sought bail in a case involving alleged fraud and misuse of subsidized sugar for export. The FIR alleged that the company, M/s. Shri Venkateshwara Global Trading Pvt. Ltd., where the applicant was a former Director, entered into contracts with Shravasti Cooperative Sugar Mill Ltd. for sugar export. The company lifted a portion of the sugar but failed to provide necessary export documents, resulting in the loss of a subsidy amount of Rs. 1,53,14,541.70/- to the mill. Post-dated cheques issued by the firm were dishonored. The applicant claimed he resigned as Director in May 2017, before the alleged agreements were made, and his identity documents were misused. The prosecution contended that the applicant, as Managing Director, signed bid documents, IT returns, and other company documents in 2019-2020, contradicting his resignation claim. The applicant also had a history of 21 similar cases across India.

Held

The Court held that, prima facie, the applicant's complicity in the alleged fraud was made out. The applicant's claim of resignation in May 2017 was found unconvincing due to discrepancies in the resignation documents and the presence of his signatures on company bid documents, Income Tax Returns, and resolutions dated well after his alleged resignation, specifically for the years 2019-2020. The Court noted that even if the agreements were post-resignation, the applicant's continued signing as Managing Director on crucial company documents lacked plausible explanation. The Court also observed that the applicant had not taken any action against the directors he claimed misused his identity. The Court found that the applicant was instrumental in allegedly embezzling public funds, attempting to discharge liability through dishonored cheques, and employing a similar modus operandi in other sugar mills. Therefore, the Court was unable to grant bail. The observations were made for prima facie consideration only and not on the merits of the case.

Key Issues

1. Whether the applicant, having allegedly resigned as a Director in May 2017, can be held liable for fraudulent activities and financial loss to the Sugar Mill occurring in 2019-2020, particularly concerning the misuse of subsidized sugar meant for export? (Question of law and fact, turning on Sections 120-B, 420, 409, 467, 468, 471 of the Indian Penal Code and principles of corporate liability). Petitioner's Arguments: The applicant argued that he resigned as a Director in May 2017, and all subsequent agreements were made after his resignation. He claimed his identity documents were misused by the current directors of the company. He also pointed out that the dispute between the Sugar Export Firm and the Cooperative Sugar Mill was being resolved through arbitration, making the matter civil in nature. He relied on his resignation documents, including Form DIR-12, and previous bail orders in similar cases. Revenue/State's Arguments: The State and complainant argued that the applicant, as Managing Director, actively participated in the fraudulent scheme. They presented evidence, including bid documents, Income Tax Returns for Assessment Years 2017-18, 2018-19, and 2019-20, and company resolutions dated 28.01.2020, all bearing the applicant's signatures as Managing Director, which contradicted his claim of resignation in May 2017. They emphasized that the applicant arranged transportation, duped transporters, and used the same modus operandi in multiple states, indicating his complicity.