Kerala High Court Denies Bail To Ousted CPI Leader, Son In Alleged Money Laundering Case Linked To Kandala Bank

"On a careful analysis of the facts and circumstances of the cases, the incriminating materials placed on record against the petitioners, the law on the point, and on considering that there are reasonable grounds to hold that the petitioners have committed the above offence and that they are likely to commit the offences if they are enlarged on bail, I am of the definite view that the petitioners are not entitled to be released on bail at this stage," the court said. 

Both the accused have been in custody since November 21, 2023. The Special Court had also dismissed the duo's bail pleas. Bhasurangan was the former president of the Bank and was in the position for 35 years. CPI reportedly ousted him after the Enforcement Directorate (ED) arrested him in this matter.

Background

Several complaints were registered against Bhasurangan who was the President of the Bank, and the Secretary alleging that they accepted deposits to the Bank after offering a high rate of interest. However, when requested to return the money, the Bank failed to do so. Complaints were filed against them for committing the offence of Cheating under Section 420 of the Indian Penal Code (IPC). It was alleged that they accepted the deposits with the intention of cheating the complainants.

As the offence of 'Cheating' is a scheduled offence under PMLA, Bhasurangan was booked under Sections 3 and 4 of PMLA. During the investigation, ED arraigned 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 filed by him and his son.

Contentions

The petitioners argued that the complaint did not say they had misappropriated the money. All the money collected was credited to the Bank. The repayment of loans was affected and the Bank could not pay back the deposit to the depositors due to the COVID-19 pandemic. The allegation that the Secretary and President of the Bank accepted the deposits by offering a high rate of interest is false. Bhasurangan also submitted that he has a history of heart disease.

The Counsel for the ED submitted that during their investigation, it was discovered that several FIRs were registered against Bhasurangan.

He submitted that when inquiries were conducted into the allegation of these FIRs it was found out that the accused and his associates have made unlawful gain and caused corresponding loss to the Bank by indulging in several irregularities which includes illegal spending of money for appointments of staff by providing them salaries and promotions, etc.

The Counsel for ED argued these all can be termed as proceeds of crime under the Act. They submitted that an investigation is in process to ascertain the money laundering activities connected with the proceeds of crime.

They further submitted that while Bhasurangan was President of the Bank, he had availed 28 loans in his and his family members' names. The total outstanding amount of these loans came up to more than Rs. 187.21 Lakh.

It was said that all these loans were taken by submitting the title deed of the same property, without a valuation certificate. The Bank has not initiated any recovery proceedings regarding these loans.

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

Findings

The Court noted from the documents before it that the Joint Registrar of Co-operative Societies in an audit had found that the accused had cheated the bank of Rs. 57,24,18,750 by making illegal appointments, providing salaries and promotions for staff, spending money on constructions, sanctioning loans/MDS, purchasing vehicles etc.

The order notes that the 28 loans–with an outstanding of Rs.187.21 Lakh, taken by the accused and his family are not declared as Non-Performing Assets; instead, an arbitration reference case has been initiated to recover the defaulted amount.

"The investigation conducted to date shows that the 1st accused has opened bank accounts in the name of benamies. The overdue amount towards the agricultural loans availed from the Bank is Rs.12.05/- Crore," the court said. 

The Court noted that as per Section 45 of PMLA, an accused can be given bail only if there are reasonable grounds to believe the accused is not guilty. The Court said that there are reasonable grounds to hold that the petitioners have committed the offences alleged against them and will likely commit these offences if they are enlarged on bail. It therefore rejected their bail applications. 

Case Title: N. Bhasurangan v The Assistant Director & Akhiljith J. B. v The Assistant Director

Counsel for the Accused: Advocates P. T. Jose, P. V. Baby

Counsel for the Respondent: Adv. Jaishankar V. Nair

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

Citation: 2024 LiveLaw (Ker) 609