GST Fraud | Benefit Of S. 437 CrPC Can't Be Given To Women Who Are 'Powerful' & When Offence Affects Public At Large: Allahabad HC

A bench of Justice Manju Rani Chauhan observed that bail could be denied in cases relating to economic offences that affect the economic fabric of society, especially if the accused holds a position of influence or power.

The Court also added that the benefit of Section 437 CrPC cannot be given to such women "who themselves are powerful or connected with such powerful persons, and the offence is such that it affects the public at large".

For context, in terms of Section 437 of the CrPC, bail can be granted in a non-bailable offence on three circumstances as depicted in the proviso: (i) a person below 16 years of age, (ii) a woman and (iii) a person who is sick or infirm.

Further, noting that in the present case, a money trail of crores, which affects society at a large scale, is involved, starting from the registration of fake firms using the Aadhaar and PAN Cards of the citizens who had not applied for such registration, the Court denied bail to Kanika Dhingra and her son Mayan Dhingra.

The case against the applicants

The UP Police have accused Kanika Dhingra (54) and her son Mayank Dhingra (27) of causing revenue losses to the exchequer through input tax credits, which were being claimed by thousands of bogus companies floated using forged documents.

They both were booked under sections 420 (cheating), 467, 468, 471 (all related to forgery), and 120B (party to criminal conspiracy) of the IPC.

Seeking bail in the case, they moved to the HC, wherein their counsels argued they had been falsely implicated in the present case without any credible evidence against them.

It was contended that neither applicants' collusion with any of the fake firms nor disclosure of any proof of forging or creating any such document was found, and only money transactions from one account to another were considered for implicating them in the present case.

In view of this, it was argued that the applicants could not be charged with criminal conspiracy under Section 120-B IPC as there is no direct evidence to establish conspiracy and no agreement or connection with fake GST firms.

It was also argued that there was no direct evidence of being in any way connected with the fake GST firms, and even if it is presumed that there were any transactions of the applicants with the Company of Sanjay Dhingra (husband of Kanika Dhingra and father of Mayank Dhingra), he has already been released on bail.

It was also contended that the transaction of money in her account from her son's account would not hold her guilty of participating in the crime in criminal offence.

On the other hand, substantiating the allegation against the applicants, Additional Advocate General Manish Goel, assisted by AGA-I Amit Singh Chauhan, AGA Nitesh Srivastava, and Brief Holder Mayank Awasthi, appearing for the State, submitted that the applicants (along with one Sanjay Dhingra, who is the husband of applicant-Kanika Dhingra and father of applicant-Mayank Dhingra) formed a syndicate and their modus operandi configured four segments:

• (i)assignment of job of collection of SIM Cards and personal data of people that have been uploaded on the portal of Goods & Services Tax; (
• (ii)to use personal data for creation of fake firms by uploading it on GST Portal;
• (iii)there will be one actual firm which will be working and money transaction will flow to this actual firm and the input tax credit will be availed; and
• (iv)distribution of monetary benefits amongst all.

It was strongly argued that to divulge the applicants' involvement, the dots must be joined to examine who did it. It was also submitted that in all, 2600 fake firms were found to be registered, and the input tax credit availed of these 2600 firms was more than Four Thousand Crore rupees.

It was also argued that the entire family was involved in the case, and granting bail to even one person would perpetuate illegality.

Further, it was apprised to the bench that during the investigation, it had been found that there were 71 consecutive transactions in the account of applicant – Mayank Dhingra and 168 times in the account of applicant – Kanika Dhingra and these transactions were of about Rs. 300 crores which revealed that they both were involved in hatching up entire 24 conspiracy for gaining wrong financial benefits along with other accused persons, and the accused persons have not appropriately replied it.

Regarding the offence of forgery, it was submitted that by forging a fake GST number using the informant's PAN card, fake GST invoices were created for financial benefit. Thus, it was argued that the very basis of the present case was forgery done by the accused persons, on the basis of which they availed themselves of financial gains in terms of ITC.

High Court's observations

At the outset, the Court noted that if the relatives, mother and son in the present case, knowingly benefit from money/ transactions even without directly participating in the crime, they shall be implicated in the legal proceedings as an offence against them is made out.

The Court also found from the case diary that the mother and son personally gained from the illegal funds, and thus, the Court observed that it could not be said that they are not guilty as they are not directly involved in registering fake firms.

“In these transactions, suspicious financial activity, especially a large sum of money has been deposited in the account of Kanika Dhingra unexpectedly. Such financial activity has to be reported and failure to report deposition of huge amount of funds is an activity which might lead to legal consequence even if the person concerned being relative was not actively involved in fraud,” the Court further noted.

The Court also emphasised that nowadays, money laundering has become a frequent feature and if there is evidence that the recipient attempted to conceal the source of funds or participated in transferring the money in ways that suggest intentional wrong doing, it creates circumstantial evidence as in the present case to hold them involved in the criminal activity.

The Court also found that the involvement, knowledge and actions following the deposit determined that the applicants were well connected with Sanjay Dhingra in respect of transactions he had with GST firms, which were registered by using the PAN Card and Aadhaar Card of the informant and the intention of all the accused of having transactions with fake GST firms, was for claiming input tax credit.

In view of this, the Court denied them bail as it noted that the offences under the relevant sections were prima facie made out and such offences had been adequately investigated by the Investigating Officer after lodging of FIRs.

Senior Advocate Anoop Trivedi assisted by Advocate Nafees Ahmad appeared for the bail applicants.

Case title - Kanika Dhingra vs. State of U.P. and connected matters

Case citation :

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