Allahabad HC Raps ED Over 'Utter Failure' To Probe Multi-Crore 'Shine City Scam' Properly, Seeks Progress Report

Piqued over the Enforcement Directorate's (ED) failure to properly investigate the multi-crore Shine City Scam Cases, the Allahabad High Court on Friday strongly criticised the ED, Serious Fraud Investigation Office (SFIO), and Uttar Pradesh Police's Economic Offences Wing (EOW) and called for their status report showing the progress of the investigation in this matter.

"This Court feels that all these agencies have utterly failed to carry out the investigation properly. The entire investigation has been carried out in most lackadaisical manner. All these investigating agencies are directed to carry out proper investigation against the accused and the Companies and further put sincere efforts to find out the trail of all the money," a bench of Justice Siddharth and Justice Prashant Kumar observed while dealing with a writ petition filed by Shriram Ram, an investor in the company, seeking a fair probe into fraud allegations against Shine City scam. 

Noting that even after the court intervened in the cases at several points, the agencies have not been able to properly investigate the scam, the Court asked the Director of the Enforcement Directorate to personally look into the matter, find out why the investigation was not being carried out properly, and ensure that the investigation is carried out.

The Court also directed the Ministry of External Affairs to file an affidavit/better affidavit showing the day-to-day progress of extradition of the fugitive accused from the date the request has been made.

The alleged scam by a Lucknow-based Multilevel Marketing Company (M/s Shine City Infra Project Pvt. Ltd) concerns several crores of investors' money allegedly siphoned by the accused persons.

About the alleged scam

Apart from the M/S Shine City, the accused persons incorporated around 34 more companies, creating a web of Companies under which they launched various kinds of schemes, including certain schemes that were not legal and were being operated without proper permission/licence from the authorities. 

According to the allegations levelled by several company investors, thousands of crores of rupees were collected under various schemes from lakhs of investors, and the accused illegally took the same away.

The complaints against the company and its managerial staff further allege that the accused were involved in the laundering of money of various Mafias, including a local Mafia, namely, Ateeq Ahmad.

In fact, in one of the schemes, the accused promised to give a plot to the investors; they collected around 237 crores of rupees and, thereafter, cheated and duped around 1647 customers, with the result that around 284 FIRs have been registered against the accused.

Only after the filing of the writ petitions and the intervention of this Court were a few of the accused arrested. Still, the main accused, Rashid Nasim, who was arrested in Nepal for identical activities, managed to slip out of the country (to Dubai) and presumably stay there.

In spite of several directions, the accused have not been arrested, and no action has been taken against them, leading to the present order of the High Court. Earlier, the High Court ordered three top officials of the ED, SFIO and UPEOW to appear before it.

Responses of the ED in Court

The Investigating Officer/Assistant Director of the Enforcement Directorate, Ravi Gautam, appeared before the Court and apprised the Court that the ED took over the investigation into the matter in January 2021. Since then, land and other properties worth Rs.127 crores have been attached.

However, when the Court asked the IO about a specific question regarding how much money/money trail had been collected to date, the answer was zero.

The Court also noted that apart from the 28 companies named by the Court, the Enforcement Directorate made no effort to find out or to investigate the other companies involved in the scam.

The Court further noted that the petitioners' counsels (duped customers) had given the ED a list of 60 Companies claiming they were involved in the scam; however, the ED had not taken any steps to investigate these Companies. 

In fact, as per the Court's order, the Enforcement Directorate couldn't even explain to the Court why it did not attach Rs. 6 crores to one of the land managers and did not investigate the role of other land managers to date.

Apart from the above, the Court was also apprised of the following facts by the IO:

* Various brokers were given an advance brokerage of Rs.39.18 crores; however, the ED has not investigated those brokers or taken any steps to attach this amount.

* An advance of Rs.10.24 crores was given as a loan, but the E.D. made no efforts to find out to whom the money was given or to trace the money trail.

* Rs.361 crores were shown as expenses, and nothing has been done to verify their veracity.

* Rs. 70 crores have been advanced to the vendors, but still, ED couldn't find out about those vendors and to attach this amount.

* The advance brokerage of Rs.39.18 crores was given; however, none of them has been interrogated to date, nor have any efforts been made to attach this amount.

* Rs.10.24 crores were given as loans. However, no action has been taken to date against the people to whom the loans were given.

* Rs.361 crores were shown towards expenses. However, ED did not probe into the genuineness/authenticity of these expenses.

Further, when the ED was specifically asked how many bank accounts and transactions they had checked, the IO was silent in the court.

Taking note of the ED's above responses, the Court, while holding back any comments against the IO, requested the Director of the Enforcement Directorate to personally look into why the investigation was not being carried out properly and ensure that it was carried out. The Court thoroughly flagged a lack of seriousness on the part of agencies to take up a proper probe in the matter.

The Court also called it a shocking state of affairs that the investors and lawyers are providing information to the investigating agencies on their own, and yet, after getting the same, none of the investigating agencies have acted upon it.

Against this backdrop, the Court directed the probe agencies to make serious efforts to get breakthroughs in the matter and investigate how hundreds of crores of cash were withdrawn from the bank, and concerned departments/agencies had no knowledge about the same. 

"The Investigating Officer would also look into as to whether the banks (from which huge amount of cash was withdrawn and deposited), had ever made any such report to the Head Officer and if yes, why no action was taken against the accused. A proper investigation should be carried out to find out as to where all the cash withdrawn from the bank has been parked/invested. E.D. shall further to find the trail of the said amount. Apart from it the trail of money through bank transactions shall also be investigated," the Court added while posting the matter for further hearing on July 1.