High Court Shouldn't Have Stayed Investigation & Granted Blanket Protection From Arrest : Supreme Court Sets Aside Relief To Indiabulls Officers

The Supreme Court (on February 13) set aside the interim protection granted to Indiabulls Housing Finance Ltd. officers in an FIR registered against on a complaint by the Director of Shipra Estate and the consequent investigation by the Enforcement Directorate. Last year, the Allahabad High Court stayed the criminal proceedings, thus protecting the officers from arrest.

The Division Bench of Justices Bela M. Trivedi and Prasanna B. Varale heavily criticized the High Court for staying the investigation. The Bench opined that the impugned orders were 'in utter disregard' and 'in the teeth' of the guidelines issued in M/s Neeharika Infrastructure Pvt. Ltd. vs. State of Maharashtra. In Neeharika, the Supreme Court had cautioned the High Courts against passing orders not to arrest or "no coercive steps to be taken" pending the investigation.

“Without elaborating any further, suffice it to say that judicial comity and judicial discipline demands that higher courts should follow the law. The extraordinary and inherent powers of the court do not confer any arbitrary jurisdiction on the court to act according to its whims and caprice.,” the Court added.

The brief allegations are that, between 2017 and 2020, IHFL sanctioned 16 loan facilities to Rs. 2,801 crores to the Shipra Group/ Borrowers. However, Shipra Group defaulted on the loan payment to IHFL. Thus, the property of Shipra Group, specifically Shipra Mall, was auctioned by IHFL. Himri Estate emerged as a successful bidder and purchased the mall.

One Mohit Singh, a representative of the Shipra Group, filed multiple FIRs against the officers of IHFL and Himri Estate Pvt. Ltd, alleging that the sale of Shipra Mall was illegal as it was sold at a lesser valuation. The sale had caused a great loss of revenue to the State. Further, it was alleged that IHFL had illegally shown the Shipra group to be the defaulters so that they may misappropriate the properties owned by the Group.

Pertinently, the FIRs were registered against several provisions of the Indian Penal Code of 1860. Based on these FIRs, the Directorate of Enforcement (ED) registered an ECIR to investigate the offences of money laundering under the Prevention of Money Laundering Act, 2002.

Aggrieved by this, the concerned officers approached the High Court seeking quashing of the FIR and consequential proceedings in the money laundering matter.

The High Court observed that the case was related to financial transactions- The loan, its non-payment, and the subsequent auction of the defaulter's properties. Accordingly, it was held:

“…looking to the nature of the incident being related to financial institutions of money lenders who were pursuing recovery proceedings of their enforceable debts and the proceedings thereof satisfy the same, it is a fit case for grant of interim protection to the petitioners."

It is against this order that the ED preferred the present appeal.