"Large-Scale Scam": Gujarat HC Denies Anticipatory Bail To Businessman Booked In ₹6000 Crore Financial Fraud Case

The Gujarat High Court has dismissed the anticipatory bail plea of businessman and head of BZ group Bhupendrasinh Zala in connection with an alleged financial fraud amounting to ₹6000 crores observing that it appeared to be a “large scale scam” wherein “large number of people appear to have been duped by him”.

Justice M.R. Mengdey in his December 23 order observed “The investigation carried out so far indicates that the present appears to be a large-scale scam committed by the present applicant, wherein the large number of people appear to have been duped by him. Having regard to the same, no case is made out to release the present applicant on bail. Hence, the present application stands dismissed”. 

The Court examined the FIR and supporting documents and said that the same  revealed that the complaint was filed by an Officer from the Economic Offences Wing on the basis of an anonymous tip received by the State Home Department about a potential financial fraud. Zala was summoned for questioning at the stage of preliminary inquiry but he did not appear.

The Court further observed that a raid on the applicant's (Zala) premises revealed multiple firms linked to him—some were registered companies, while others operated informally. Numerous bank accounts were opened under these firm names, and the applicant allegedly used a money-lending license to present himself as authorized by the state government to accept public deposits, wherein the material available on record indicated that the applicant had promised return at the rate of 18% per annum. 

The Court then noted that the applicant collected Rs. 3,60,72,65,524 crores from investors and promised return gifts to the investors like T.V., Mobile Phone and trip to Goa.

The Court thus observed “The material available on record indicates that the applicant herein started making defaults for repayments since the Year-2022, and therefore, it does not appear to be correct on the part of learned advocate for the applicant to contend that since there were no defaults committed by the present applicant till registration of the present FIR, the offence under the GPID Act is not made out against him. It is sought to be contended on behalf of the applicant that no depositors have come forward to lodge any FIR against the present applicant. Be that as it may, the fact remains that the applicant had committed default in repayment of the amounts of deposits with the returns since the Year-2022.”

Zala–the applicant, sought for Anticipatory Bail in connection with the FIR registered with CID Crime Gandhinagar under BNS Sections 316(5) (Criminal breach of trust by a public servant or by a banker, merchant, or agent, etc.), 318(4) (cheating and dishonestly inducing the delivery of property), 61(2) (Commission of offence by criminal conspiracy). The FIR also includes Section 3 (fraudulent defaults by financial establishment) of Gujarat Protection of Interest of Depositors (in Financial Establishments) Act, 2003 (GPID) and Sections 21 (A deposit taker who solicits deposits in violation under the Act can be imprisoned for up to five years and fined up to Rs 10 lakh) and 23 (Deals with punishment for contravening the Act) of the Banning of Unregulated Deposit Scheme Act (BUDS), 2019.

It was alleged in the FIR that Zala and his alleged associates, through multiple firms under BZ Group solicitated funds from pubic amounting to ₹6000 crores as investment under the pretext of offering television, mobile phone and with an investment of a sum of over Rs.10 lakh, a trip to Goa.

Zala had earlier applied for anticipatory bail before the District and Sessions Court, Ahmedabad which came to be rejected on December 12.

Before the high court Zala's counsel argued that even though the FIR alleges offences under the BNS for criminal breach of trust, cheating, fraud, the GPID Act, and Sections of the BUDS Act, 2019, there is no claim that the applicant defaulted on payments to investors till the date of filing of the FIR.

It was stated that he had promised 7% per annum returns to depositors, which the applicant  had continued to repay with the said rate of return to the depositors till his accounts got frozen by the investigating agency.

It was contended that prosecution's claim that applicant had promised return of 18%, was inadmissible as under Section 92 of the Indian Evidence Act  only written agreements hold validity in the eyes of law, and as per the agreement the applicant had offered 7% return. The Counsel then contended that the applicant has enough money to repay investors if the accounts are de-freezed and he agreed to cooperate with the investigation. Further, the Counsel argued that the FIR was lodged by a policeman and not by an investor and no victim lodged any complaint and hence, fraud was not committed. 

The Pubic Prosecutor (PP) opposed the bail application contending that Zala is involved in systematic financial fraud affecting the state and the investors. The applicant allegedly obtained a license for money-lending and used it to collect 360 crore Rupees from the investors via multiple bank accounts linked to the various firms owned and managed by him. It was then argued that these funds were transferred in accounts and withdrawn in cash.

It was then pointed out by the PP that the applicant is unable to pay back the investors since 2020 and several criminal cases have been registered against him. It was also contended that he used the funds of the investors for his personal expenses and purchased movable and immovable properties using the money. The PP then contended that it is a systematic fraud which is a tip of the iceberg and hence, urged the court to dismiss the bail application.

The court after considering the submissions also noted that the records suggested that the applicant used the investor funds for personal expenses and to buy properties in his name. The record also indicated that he was running educational trust–Grow More Foundation, which received a ₹81 Lakh government grant. Of this, ₹75 lakh was diverted to BZ Financial Services for personal use. Further, the trust took loans from Unity Small Bank and the amount was diverted to BZ Profit Plus Advisors and that the applicant had issued cheques in the name of his driver. 

In view of the above the court dismissed Zala's anticipatory bail plea. 

Case Title: Bhupendrasinh Parbatsinh Zala vs State of Gujarat

Counsel for the Applicant: Mr. Bhadrish Raju, with Mr. Tatsat Bhatt, Advocate.

Counsel for the State: Mr. Hardik Dave, Public Prosecutor

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