Kerala High Court denies bail to ousted CPI leader and son in alleged money laundering case related to Kandala Bank

“Based on a careful analysis of the facts and circumstances of the cases, the incriminating materials on record against the petitioners, the law relating thereto and taking into account that there are reasonable grounds to believe that the petitioners have committed the aforesaid offense and that they i I firmly believe that the plaintiffs are not entitled to bail at this stage” said the court.

Both defendants have been in custody since November 21, 2023. The special court had also rejected the duo’s bail applications. Bhasurangan was the former president of the bank and held the post for 35 years. CPI reportedly fired him after the Enforcement Directorate (ED) arrested him in the matter.

background

Several complaints were lodged against Bhasurangan, the bank’s president, and the secretary, alleging that they had accepted deposits from the bank after offering a high interest rate. However, when the bank was asked to return the money, it did not comply. Complaints have been lodged against them for committing the offense of cheating under Section 420 of the Indian Penal Code (IPC). It was alleged that they accepted the deposits with the intention of defrauding the complainants.

Since the offense of cheating is a scheduled offense under the PMLA, Bhasurangan was charged under Sections 3 and 4 of the PMLA. During investigation, ED booked Bhsurangan’s son, wife, daughter and son-in-law as accused, alleging that they were also part of the scam. His wife, daughter and son-in-law are already out on bail. The present applications were submitted by him and his son.

Objections

The petitioners argued that the complaint did not allege that they embezzled the money. All the money collected was credited to the bank. Loan repayments were affected and the bank was unable to return deposits to depositors due to the COVID-19 pandemic. The claim that the secretary and the president of the bank accepted the deposits at a high interest rate is false. Bhasurangan also stated that he had suffered from heart disease in the past.

The ED’s counsel stated that during its investigation it was found that several FIRs had been registered against Bhasurangan.

He submitted that during investigation into the allegations in these FIRs, it was found that the accused and his associates earned undue profits and caused consequential losses to the bank through various irregularities, which included illegal expenditure of funds for appointment of employees Provision of salaries and promotions etc.

Counsel for ED argued that all this could be termed as proceeds of crime under the law. They said an investigation was underway to determine money laundering activities related to the proceeds of crime.

They further submitted that while Bhasurangan was president of the bank, he had availed 28 loans in his name and that of his family members. The total outstanding amount of these loans was more than Rs.187.21 lakh.

It was said that all these loans were taken by producing the title deed of the same property without any certificate of value. The bank has not initiated recovery proceedings regarding these loans.

The ED argued that the bank was unable to repay the depositors as the accused had embezzled money from the bank.

Insights

The court noted from the documents before it that the Joint Registrar of Co-operative Societies upon inspection had found that the accused had defrauded the bank of Rs. 57,24,18,750 by making illegal appointments, providing salaries and promotions to employees, spending money on construction works, sanctioning loans/MDS, purchasing vehicles etc.

The order notes that the 28 loans taken by the accused and his family with an outstanding amount of Rs 187.21 lakh will not be declared as non-performing assets; Instead, arbitration proceedings were initiated to recover the lost amount.

“The investigations so far show that the 1st defendant opened bank accounts in the name of Benamies. The overdue amount of agricultural loans availed from the bank is ₹12.05 crore” said the court.

The court observed that under Section 45 of the PMLA, an accused can be granted bail only if there are reasonable grounds to believe that the accused is not guilty. The court said there were reasonable grounds to believe that the plaintiffs had committed the offenses with which they were charged and were likely to commit those offenses if their bail was extended. It therefore rejected their bail applications.

Title of the case: N. Bhasurangan vs. Deputy Director and Akhiljith JB vs. Assistant Director

Counsel for the defendant: lawyers PT Jose, PV Baby

Counsel for the respondent: Adv. Jaishankar V. Nair

Case No.: BA 1215 of 2024, BA 1216 of 2024

Citation: 2024 LiveLaw (Ker) 609