Orissa High Court Upholds Conviction, 3 Yrs Imprisonment Of Congress MLA Mohammed Moquim In Loan Fraud Case

The Orissa High Court, on Wednesday, upheld the conviction of Congress MLA from Cuttack-Barabati constituency Mohammed Moquim in the Orissa Rural Housing Development Corporation (ORHDC) loan fraud matter, wherein he was sentenced to rigorous imprisonment for three years by the Special Judge (Vigilance), Bhubaneswar in 2022.

While denying relief to the legislator, the Single Bench of Justice Bibhu Prasad Routray held–

“When the Appellant is the undisputed Managing Director of M/s. Metro Builders Pvt. Ltd. and he has played his active role for getting the building plan approved and the loan amount was sanctioned in favour of the company on his application, the same coupled with the irregularities committed while sanctioning the loan, the criminal intent of the appellant is established having direct nexus with the offences committed.”

Background of the Case

The ORHDC was incorporated as a government-owned corporation with an objective of financing, promoting and developing rural housing, Moquim being the Managing Director of M/s. Metro Builders Pvt. Ltd. had applied for a loan to the tune of Rs. 1.5 crores to the ORHDC for its project Metro City II.

While applying for the said loan, his company was known to be a defaulter which had not completely repaid the previous debt sanctioned in its favour. However, despite such status of the company, the Managing Director of ORHDC along with its Company Secretary hatched a conspiracy with the appellant-Moquim to grant and disburse the loan of Rs. 1.5 crores in his favour,

It was alleged that while applying for the said loan, the appellant had forged several documents like estimate and plan approved by the Bhubaneswar Development Authority (BDA) and fire prevention certificate. It was also alleged that though the MD of ORHDC had no authority to grant the loan amount, he granted and disbursed the same without even consulting the financial advisor and legal consultant of the ORHDC.

Taking into account the above allegations and evidence on record, the trial Court had found the appellant, along with other accused persons, guilty under Sections 468/471/420/120-B of the IPC and sentenced him to undergo rigorous imprisonment for three years for each of such offences and to pay a fine of Rs. 50,000/-.

Appellant's Contentions

Senior Counsel Pitambar Acharya, while appearing for the appellant-legislator, argued that mere inability to repay the loan amount cannot be treated as cheating and the same cannot give rise for criminal prosecution against the defaulter.

It was his further contention that the Managing Director of a company cannot be held liable for the actions of the company unless sufficient evidences of his active role are there coupled with criminal intent.

Court's Observations

The Court, at the outset, held that the position of the appellant as the Managing Director of M/s. Metro Builders Pvt. Ltd. is undisputed so also the fact that the said company obtained a loan of Rs. 1.5 crores from ORHDC.

Justice Routray then examined the testimony of the then Secretary to the State Government in Housing and Urban Development Department and Chairman of ORHDC, who had categorically stated that the MD of ORHDC had no authority to sanction loans to any person or corporation before 31.08.2000. But strikingly, the last disbursement of loan in this case was made on 28.08.2000.

The Secretary further clarified that the authority to grant loan was given to the MD of ORHDC on 31.08.2000 and only to the tune of Rs. 5 lakhs and thus, he had absolutely no authority to grant such a huge of amount of loan. Also, the Department did not give post facto approval to the said loan.

The financial advisor to the ORHDC also deposed that he was not consulted with while disbursing such loan and thereby the MD and Company Secretary by-passed him in sanctioning such illegal loan.

So far as allegations of forged approval from BDA as well as fire department are concerned, the Court examined the evidence of relevant authorities and held:

“Undoubtedly, 'No Objection Certificate' regarding fire safety is one of the essential documents required to be submitted for getting approval of the plan in respect of a multi-storey building complex. When the 'No Objection Certificate' under Ext.C is proved to be a forged document and utilized by the Appellant to get the plan approved by BDA, the consequent approval of the plan in plan approval letter under Ext.3/17 is proved to be the forged one also.”

As far as project estimate was concerned, it was also found that the signature and seal of the authorized officer of 'Development Engineers', the institution which allegedly approved the estimate, were also forged. In addition to that, the legal opinion which was obtained to process the sanction of loan was found to be given by an advocate who was not empanelled lawyer of ORHDC.

Above all, the Court found that no equitable mortgage in respect of the property has been created for the loan amount keeping the original title deeds. Also, against the valuation of the property at Rs.25 lakhs, loan of Rs.1.5 crores was disbursed. Further, not a single original document was kept in the file before disbursal of the loan amount.

Considering all the above irregularities, the Court was of the considered opinion that the appellant knowingly used forged documents to obtain loan for his company.

“It is true that mere inability to repay the loan amount would not give rise to criminal prosecution. But here in the present case, fraudulent and dishonest intention of the Appellant as the M.D. of the accused company has been established through prosecution evidence to show his intention to get the loan sanctioned and such conduct of the Appellant from the very date of application for loan is clear on record to satisfy the existence of mens rea on his part,” the Court further observed.

Resultantly, the order of conviction and ensuing sentence passed by the Special Judge (Vigilance), Bhubaneswar were upheld by the High Court.

Notably, in the last month, the High Court had declared the 2019's election of Moquim from Cuttack-Barabati as void as he suppressed some criminal antecedents in the affidavit which was submitted along with his nomination form. However, the order of the High Court was later stayed by the Supreme Court, granting him relief for the time being.

Case Title: Mohammed Moquim v. State of Odisha (Vigilance)

Case No: CRLA No. 880 of 2022

Date of Judgment: April 10, 2024

Counsel for the Appellant: Mr. Pitambar Acharya, Senior Advocate

Counsel for the State: Mr. S. Das, Senior Standing Counsel (Vigilance) & Mr. S.K. Das, Standing Counsel (Vigilance)

Citation: 2024 LiveLaw (Ori) 27

Click Here To Read/Download Order