Bhushan Steel Case: Delhi High Courts Grant Bail To CA For Alleged Negligence In Stock Audit

The single judge bench of Justice Jasmeet Singh has observed that the ex-promoters/directors and similarly situated chartered accountants have been granted bail, so there is no reason why the applicant should be treated any differently.

The applicant is a senior citizen and a chartered accountant by profession. The applicant has filed an application seeking a grant of bail.

The allegation against the applicant was that he was a chartered accountant and one of the partners at ASRN & Associates failed to perform his duty independently and diligently by not verifying the stock in transit. The applicant is accused of being in collusion with the office bearers of M/s Bhushan Steel Limited.

Bhushan Steel Limited (BSL) is a company under investigation on account of allegations of syphoning off by its promoters.

The applicant was allegedly involved in providing and using wrong information to calculate the drawing power figures wrongly based on the figures given by M/s Bhushan Steel Limited.

The applicant contended that, as per the complaint, the main allegation was that the promoters of BSL, along with other accused persons, filed various false and misleading statements and information to various banks to avail working capital limits from 2013–14 till 2015–16. It is further alleged that the applicant's firm was appointed by the bank, Punjab National Bank, and they colluded with the BSL and did not discharge their duties diligently.

The applicant submitted that, as per the appointment letter, the applicant was not an Auditor of M/s Bhushan Steel Limited during the period under investigation, i.e., Financial Year 2013-14 to 2015-16.

The applicant submitted that, as per the "Implementation Guide to Standard on Audit (SA) 530 Audit Sampling" issued by the ICAI, the auditor is not expected to carry out physical verification of each and every transaction. The volume and spread of transactions in modern businesses are incredibly enormous. In that case, it is recommended by the institute that only "test check" be carried out.

The department contended that the stock auditor did not check the records to substantiate the claim of consumption of a huge quantity of coal. The applicant failed to check the bills of stock in transit of Rs. 5,389.58 crore during the stock audit. The company would have had huge quantities of coal and other stocks appearing in stock in transit amounting to Rs. 5389.58 crore during the month of September 2016 alone, specifically when the company was in financial crunch.

The court was of the prima facie view that the applicant was not guilty of the offence with which he was charged. Therefore, he was not likely to commit any further offences while on bail.

The court allowed the bail application of the applicant by imposing various conditions.

Firstly, the applicant shall furnish a personal bond with two local sureties in the sum of Rs. 25,000/- each, to the satisfaction of the Trial Court.

Secondly, the applicant shall appear before the Court as and when directed.

Lastly, if he changes his address, he will inform the IO concerned and the Court also.

Case Title: Sunil Bhatia Versus Serious Fraud Investigation Office

Citation: 2022 LiveLaw (Del) 671

Citation: BAIL APPLN. 1802/2022&CRL.M.(BAIL) 737/2022

Dated: 07.07.2022

Counsel For Applicant: Senior Advocate P.V. Kapur

Counsel For Respondent: Advocate Ripu Daman Bhardwaj

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