1appln-4652-09 IN THE HIGH COURT OF JUDICATURE AT BOMBAY CRIMINAL APPELLATE JURISDICTION CRIMINAL APPLICATION No. 4652 of 2009 (FOR ANTICIPATORY BAIL) Mustafa Abdulla Surka .. Applicant. versus State of Maharashtra .. Respondent. Mr A. P. Mundargi, Sr Counsel, with Mr Hrishikesh Mundargi for the Applicant. Mrs A. S. Pai, A.P.P.,for the State. Mr P.M. Rustomkhan for original complainant-Company. Mr S. V. Kotwal for Third Party. CORAM:- A.R. JOSHI, J. DATE :- 13TH AUGUST, 2010. P.C.:- 2appln-4652-09 1. Heard rival arguments on this application for anticipatory bail preferred by the applicant - original accused No.1 in the matter of C.R.No. 192/2009 registered with Naupada Police station, in furtherance to M.E.C.R.No.42/2009 with Economic Offences Wing, Unit No.III. The applicant is apprehending his arrest in the said matter. 2. One Cyrus Bahadurji, Director of Private Limited Company by name Tytan Organics Pvt Ltd filed a private complaint before the M.M.Court at Vikhroli Mumbai against the present applicant, posing him as Accused No.1, and also against other three accused for the offence punishable under Sections 406, 408, 465, 468 and 471 read with Section 34 of the Indian Penal Code. Orders were passed under Section 156 (3) of Cr.P.C.and matter was sent to Gamdevi Police Station. Said Police Station registered the F.I.R.vide C.R.No.192/2009 on 5.8.2009. 3appln-4652-09 3. The allegations against the applicant  accused No.1 are that he was employed in Tytan Organics Pvt Ltd (hereinafter referred to as the Complainant- Company ) in the commercial Section and thereafter he was appointed as General Manager. Accused No.2 one Ketan Khedekar was working as Assistant Manager  accused No.3 is one Shri Lalit Shah, a proprietor of M/s Laxmi Dyechem and Accused No.4 Smt Sushila Khedekar is the mother of accused No.2. Present application for anticipatory bail is preferred by only accused No.1- applicant. 4. In short, the allegations against the applicant are that while working as Chartered Accountant and General Manager of the Complainant - Company during the years from 2005 to 2008, he purchased the specific chemical i.e. Napthalene, at the higher rates than the prevailing market rate. However, in the Management Information System Report (MISR), he mentioned the purchase price much less than the actual price. By that way, financial loss was 4appln-4652-09 caused to the complainant Company. For the sake of ready reference such total financial loss during the relevant years can be mentioned as under. Financial Year Loss in Rupees 2005 Rs. 285.60 lakhs 2006 Rs. 347.53 lakhs 2007 Rs. 478.08 lakhs 5. According to the complainant-company, considering then prevailing market rate of the Naphthalene, the difference in the actual purchase price and the market price was respectively Rs.15/- 16.27 and 16/-per kilogram for the respective years. 6. According to the complainant Company, such market rate prevailing during the said years was obtained by getting information from the Government run Steel Authority of India Limited (SAIL), which is the Undertaking actually manufacturing the said Chemical item Naphthalene. Said relevant market 5appln-4652-09 prices and the price at which the Chemical was purchased during different months from April, 2006 to October, 2008, are detailed in the Chart which is annexed to the affidavit-in-reply filed by the original complainant in the present application. 7. It is also alleged that on 9.6.2008 the applicant had purchased the said chemical at Rs.60/- per kilogram from Arihant Chemicals and similar chemical was purchased from one Jay Ambe Chemical @ Rs.72/- per kilogram. According to the complainant company, in the entire bulk of chemical naphthalene purchased on that date caused loss to the tune of Rs.45 lakhs and odd to the complainant company. 8. It is also alleged that during the relevant years naphthalene was purchased mainly from M/s Jay Ambe and also from Laxmi Die-Chem. The co-accused Ketan Khedekar allegedly received commission huge amounts from Laxmi Die-Chem and that according to the complainant company, the Bank account of accused No.4 Sushila Khedekar was credited up to Rs.50 lakh 6appln-4652-09 and it was the amount received from accused No.3 Laxmi Die- Chem. 9. It is also alleged that the Management Information System Reports (MISR) were fabricated by Accused Nos. 1 and 2 and they have caused the loss to the complainant company to the tune of Rs.15 Crores and odd. 10. In order to appreciate the allegations against the applicant, it is required to be explained, in short, as to what is the Management Information System. It means a sort of study and report prepared during the internal administration of the company and it mentions the details such as the costs incurred on different items of raw material as to its purchase price, expenditure towards the processing, other incidental out-goings and then on the basis of such information a decision is taken by the management as to considering the profit margin what should be the selling price of the final product. Admittedly, it was the duty of 7appln-4652-09 the present applicant to prepare and place before the Directors of the Company the MIS Report. Any information wrongly mentioned in the MIS Report can cause a misleading position to the Top Management of the Company. Because on the basis of such information the decisions are taken so as to fix the selling price of the final goods so as to achieve a particular level of profit. So far as the present matter is concerned, the purchase price of naphthalene is shown less though in practice such raw material commodity was obtained from the usual supplier i.e. Jay Ambe and also from Laxmi Die- Chem, at the higher rates. Due to this the selling price of the final products of the complainant- company was fixed at certain lower amount because of the mentioning of lower price of purchase of raw material. As such, consequently, there was loss in the earning of the Company and this happened for the years from 2005 to 2008. 11. During the arguments, learned Senior Counsel 8appln-4652-09 Shri Mundargi for the applicant submitted that such figures quoted in the MIS Report were at the behest of the Top Management level and actually the Management wanted to show that the Company is incurring profits in order to have sound reputation in the business world. It is further argued on behalf of the applicant that even the internal audit and Government audit was conducted during the relevant years mentioned above. However, still this alleged fraud could not be revealed and it is surprising, further argued. It is also submitted that, in all probability, it must be accepted that management was knowing regarding the truthfulness or otherwise of the prices quoted in the MIS Report because that was done in order to suite the purpose of the Company, and now the blame cannot be put to the present applicant, then being the Chartered Accountant and General Manager. These arguments are to be tested on the factual position which is detailed in the affidavit-in-reply filed by the 9appln-4652-09 Director of the Complainant-company. 12. Counter to the above arguments advanced on behalf of the applicant, learned Advocate for the Complainant-Company pointed out various details in the reply-affidavit and also various documents including the Invoices vide which the naphthalene was purchased from M/s Jay Ambe. On inspection of the Vouchers, the Balance-Sheets and the Account Statements and other relevant documents, it must be said that there is prima facie substance in the allegations imputed against the present applicant, so far as his involvement is concerned and also so far as giving the incorrect information in the MIS Report. 13. During the arguments on behalf of the Complainant-company, attention is drawn towards various accounts statements and the Profit and Loss account of the said Company. From the years 1988 to 1994 said Company was, in fact, a partnership concern and it was incurring profits. After 1994 it 10appln-4652-09 became a Private Limited Company . However, still there were profits. 14. As mentioned earlier, present applicant was employed with complainant-Company in the year 2002 as Chartered Accountant and prior to that his father was in the employment of the Company, since 2001. Thereafter, present applicant was appointed as General Manager of the Complainant-company. However, since the year 2005 till 2008 there were losses as detailed earlier and as mentioned in the complaint. This was mainly due to the higher purchase price of the raw material  naphthalene but showing it in the MIS Report as at the lower rate. Thus, creating the false impression to the Top Management/Directors of the Company that Company is incurring profits. However, on the contrary, there were losses. 15. During the arguments, on behalf of the complainant-Company, it is also brought to the notice of the Court that the applicant had taken a 11appln-4652-09 loan of Rs.71 lakh from M/s Jay Ambe and that also at the interest rate of 36%. As per the Company Law, such loan could not have been taken from a private person and it must have been taken from a Financial Institution. It is also alleged that the present applicant continued to import the naphthalene, however, failed to clear it expeditiously from the docks. As a result, the complainant company was compelled to pay the demurrage / detention charges, port storage charges and custom duty. Due to the non clearance of the container there was compulsion for auction of the other material leading to the loss of the entire consignment and thereby causing expenditure to the complainant company about more than Rs.35 lakhs. It is also argued that the present applicant supplied incorrect information in the MIS report, relating to the financial matters and due to this the balance-sheet of the Company showed inflated figures of the profit. However, in fact, Company had incurred losses. But, on such 12appln-4652-09 showing of the profit, Company had to pay the income-tax to the tune of more than Rs.20 lakhs for the financial year end 2006-2007. Had there been authentic information mentioned in the MIS Report by the present applicant, such payment of income-tax could have been avoided, as, in practice there could not have been any tax payable. 16. It is also argued that the complainant- company was enjoying credit facility from its Bankers. As such, if any third party cheques are deposited in the account of the Company, then even prior to the honour of the cheque the credit is given in the account. Because of such credit facility, knowing well, the present applicant procured the cheques from various employees of the Company and lodged them for crediting in the account of the company. However, subsequently, the cheques were dishonoured and the Company s bank account was debited to the extent of such amounts. This was done allegedly in order to portray a picture of the 13appln-4652-09 financial condition of the company that it has got sufficient amount in the bank. By this indigenous way, it was alleged desire of the present applicant that the Directors of the Company would be unaware as to actual loss incurred by the Company. This was revealed to the Complainant Company only when some employees of the Company confessed that they gave cheques at the behest of the present applicant. By pointing out this and earlier mentioned actions of the applicant, it is strongly submitted on behalf of the complainant company that this is a matter which requires thorough custodial interrogation of the present applicant so as to unearth long drawn well designed, cheating and fraud practiced by the applicant and his other associates co-accused. 17. During the arguments, following authorities were cited before this Court, on behalf of the Complainant-company, mainly emphasizing the aspect of the custodial interrogation and need of the same, even, in the cases based on documentary evidence. 14appln-4652-09 1.(1997) 7 Supreme Court Cases 187 (Central Bureau of Investigation vs. Anil Sharma). 2.A.I.R. 2001 Supreme Court 3810 (Narendarjit Singh Sahani and anr versus Union of India and others) 3.AIR 2003 Supreme Court 2748 (Ram Narain Poply versus Central Bureau of Investigation). 4.(2005) 4 Supreme Court Cases 303 (Adri Dharan Das versus Sate of West Bengal). 5.2010 (2) Bom.C.R. (Cri.)93 (HDFC Bank Ltd versus J.J.Mannan) 18. During the arguments, learned A.P.P.for the State submitted that the investigation is, still, pending and though called to attend the E.O.W.office, on very few occasions present applicant attended the office. In fact, on one 15appln-4652-09 occasion, even he did not attend to give detail information and only once he gave written submissions on 19th January, 2010. Letters are shown to the Court, having the dates, from February, 2009 to June, 2009, December, 2009. 19. In short, it is the submission on behalf of the State that though called for interrogation and getting the detailed account from the applicant, he chose to give a written submission and that also in January, 2010. It is further brought to the notice of the Court, that there was no effective interrogation of the present applicant, which is required to go to the root of the matter, and to find out the commercial transaction allegedly controlled and conducted by the present applicant along with his associates. 20. During the arguments, it is also submitted on behalf of the State that the defalcated amount is about Rs.15 crores and odd and as such thorough interrogation of the applicant is needed in order to 16appln-4652-09 find out the end use of such huge amount. 21. Counter to the above arguments, advanced on behalf of the State, in reply, it is submitted on behalf of the applicant that he had every time co- operated with the Investigating Agency and even gave written submissions. 22. It is further submitted that it is not a case in which the custodial interrogation of the applicant is needed when for almost ten months he is protected by ad-interim orders. If suitable conditions are imposed on the applicant as to attendance to the office of E.O.W.for giving information, it would serve the purpose of the investigation, further argued. 23. In many of the matters involving the economic offences, though the documentary evidence play major role, still the interrogation of the accused at the hands of the Investigating Agency, when particularly, the accused is not protected by any order of the Court, has different impact. In 17appln-4652-09 other words, it must be said that the aspect of cusdtodial interrogation even in such type of matters mainly based on the documents, is of much importance and has been accepted in various cases and also specifically in the matter of H.D.F.C.Bank Vs. J.J. Mannan (Supra). 24. During the arguments it is submitted on behalf of the applicant that he is also facing another Criminal Case bearing No. 369/SS/2009 before the M.M.Court at Vikhroli, Mumbai for the offence punishable under Sections 138 and 141 of the Negotiable Instruments Act. Said criminal complaint has been filed by M/s Jay Ambe Enterprises on account of dishonour of various cheques issued on behalf of the present complainant-company. Said cheques were given by the present applicant,official signatory for and on behalf of the complainant and such cheques were for repayment of the total outstanding towards purchase of naphthalene from M/s Jay Ambe Enterprises. By pointing out this, it is 18appln-4652-09 further submitted on behalf of the applicant that in the said complaint it is alleged against the present applicant that he had conspired with present complainant-company i.e. M/s Tytan Organics Pvt Ltd and had cheated M/s Jay Ambe Enterprises. As against this, according to the applicant, he is also facing the present matter filed by the complainant company alleging conspiracy between him and the proprietor of M/s Jay Ambe Enterprises. 25. It is further argued that in both the matters there is nothing to accept that the applicant is conspirator either with the present complainant-company or M/s Jay Ambe Enterprises. It is further brought to the notice of the Court on behalf of the applicant that apart from the above criminal complaint under Sections 138 and 141 of the N.I.Act filed by M/s Jay Ambe Enterprises, same proprietor had lodged another criminal complaint bearing No.34/2009 against present applicant and present complainant company M/s Tytan Organics Pvt 19appln-4652-09 Ltd for the offences punishable under Sections 406, 420 read with section 34 of I.P.Code. 26. It is brought to the notice of this Court that a summary suit No.2519/2009 is filed by present complainant company before Original Side of the High Court of Judicature at Bombay. Said suit is filed against the present applicant and other co-accused in the present matter and also proprietor of Jay Ambe Enterprises and proprietor of Laxmi Dyechem and it is for the recovery of Rs.41 crores and odd, and the same is still pending. Said suit is filed, based on the cause of action, as mentioned in the present complaint,inasmuch as the fraud practiced on the complainant-company and raw-material naphthalene was purchased from both the above proprietory concerns at the higher rate than the prevailing market rate. 27. Considering the above rival submissions and the allegations levelled against the applicant, it would not be in the fitness of situation to grant discretionary relief in favour of the applicant 20appln-4652-09 though the present applicant is earlier protected from his arrest for the last ten months. In the result, present application is disposed of with following order. ORDER (a) Bail application is rejected. (b) Any observations made in this order shall not be construed as any finding or any expression of opinion on the merits of the case at the time of trial. (A. R.JOSHI,J)