Jammu & Kashmir High Court Grants Bail To State Cooperative Bank's Ex-Chairman In Alleged 233 Crore Money Laundering Scam

Allowing Dar's bail petition a bench of Justice Rahul Bharti observed,

“The petitioner is well within his right to say and agitate that so long as the decision to grant loan on behalf of the J&K State Cooperative Bank, Kashmir, Srinagar is to be reckoned as having been taken by the Board of Management then the liability and the responsibility for the said decision cannot be individualized to the petitioner alone and absolving the rest of the board members”.

Dar had been arrested by the ED under Section 19 of the Prevention of Money Laundering Act, 2002, and had been in continuing judicial custody since November 30, 2023. After his bail was rejected by the court below he had moved before the High Court seeking relief under Section 439 of the Criminal Procedure Code, 1973, read with Section 44(2) of the Prevention of Money Laundering Act, 2002.

The case revolved around the petitioner's alleged involvement in facilitating a loan of 250 crores to a fictitious society, the River Jhelum Cooperative House Building Society, purportedly for the development of a satellite township in Shivpora, Srinagar.

Opposing his bail ED contended that the petitioner sanctioned and facilitated the loan without proper documentation, KYC norms, or tangible security, thereby laundering the proceeds of crime.

Upon meticulously examining the facts and circumstances of the case, the court noted that the petitioner, as chairman of the Board of Management of the bank, was not the sole decision-maker regarding the loan sanction.

The petitioner had argued that the decision to grant the loan could not be solely attributed to him, as it was a collective decision of the Board and the court found merit in this argument, acknowledging that the petitioner did not possess veto authority and that the decision-making process involved the participation of the entire Board.

“The petitioner was not having any vetoauthority as chairman of the Board of Management of the Bank as a result whereof the decision to sanction the loan was carried out solely by the petitioner by force of his own discretion and dictate over ruling and making the rest of the Board of Management as non-participant in the decision making and the decision itself”.

Justice Bharti also recognized the complexity of the decision-making dynamics within the Board and questioned whether it was fair to individualize the liability solely to the petitioner.

“The petitioner is well within his right to say and agitate that so long as the decision to grant loan on behalf of the J&K State Cooperative Bank, Kashmir, Srinagar is to be reckoned as having been taken by the Board of Management then the liability and the responsibility for the said decision cannot be individualized to the petitioner alone and absolving the rest of the board members”, the court remarked.

While acknowledging the seriousness of the accusations, the court also considered the petitioner's health condition, emphasizing the need for medical attention, especially given his age. The petitioner, aged 63, reportedly suffers from heart-related complications.

In conclusion, the court granted conditional bail to the petitioner of furnishing a personal bond of ten lacs rupees and two sureties, staying within Srinagar's jurisdiction unless permitted otherwise, refraining from interfering with the investigation, and appearing when summoned.

Case Title: Mohammad Shafi Dar Vs Directorate of Enforcement and another

Citation: 2024 LiveLaw (JKL) 21

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