Rs. 150 Crores Financial Fraud by Employees of Mahindra & Mahindra Finance: Gauhati HC refuses to allow Transfer of case to Assam [Read Order]

The Gauhati High Court, in its recent case refused to allow transfer of a financial fraud case from mizoram to assam holding that a sufficient number of witnesses have been listed by the IO to prove the case, therefore no compelling reason is there to transfer the cases from Aizawl to Assam or to any other District in Assam.

The court was considering a case of Rs. 150 Crores Financial Fraud by Employees of Mahindra & Mahindra Finance by creating fake customer profiles and fabricated Documents.

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The application has been filed under Section 447 of the Bharatiya Nagarik Suraksha Sanhita, 2023 seeking transfer of criminal proceedings at Crime & Economic Offences Police Station, Aizawl, Mizoram, from the Courts in Aizawl, Mizoram to the corresponding Courts in Guwahati, Assam.

Mahindra and Mahindra Financial Services Ltd, the petitioner, is a Non-Banking Financial Company registered under the Companies Act, 1956, engaged in the business of providing vehicle loans, with pan-India operations including in Mizoram where it has provided vehicle loans to over 23,000 beneficiaries. It is represented by its authorised representative, Mr. Baikuntha Nath, duly authorised through a board resolution dated 26.10.2020 and a power of attorney dated 04.01.2024.

It is the case of the petitioner that during an internal audit, it has been came to the light of the petitioner that a large scale financial fraud to the extent of over Rs. 150 crores has been allegedly perpetrated to it by its own employees in connivance with certain automobile dealers and other individuals by way of sanctioning loans based on fictitious customer profiles and forged documents.

Accordingly, based on a complaint lodged by one Mr. Ankit Bagree, Circle Head of Mahindra & Mahindra Financial Services (‘MMFSL’), who is now no more associated with the company, an FIR was registered at Aizawl Police Station under Sections 408/467/468/34 of the Indian Penal Code.

Based on the investigation, it revealed that an employee of the petitioner company, namely, one Jakir Hussain, along with certain other co-accused persons, opened a fictitious bank account in the name of “Mahindra Finance Limited” at Mizoram Rural Bank through which approximately Rs. 80 crores were routed.

During the investigation, it was revealed that a large-scale conspiracy was made to avail fake loans by creating fake customer profiles using fake and fabricated government documents. The said fake loans were applied for purchasing vehicles from certain automotive dealers.

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However, no vehicles were delivered, and the funds were diverted to fake and benami accounts. Several dealers, including Aidu Motors, National Business Enterprises, C.K. Hyundai, and Standard Motors (Bajaj), have been named in the alleged scheme. It is further alleged that during the investigation, certain accused persons were arrested but subsequently granted bail under questionable circumstances.

The petitioner also alleged that there have been repeated delays, noncompliance with court orders, and failure of the accused, namely, Mr. paul Zothanpuia Johan and Dr. Madhurjya Sarmah, to appear before the Court as directed. The petitioner also challenged various procedural irregularities in the handling of bail, including unnotified changes in hearing dates and remand proceedings by the Trial Courts at Aizawl.

The petitioner contended that the investigation has been compromised following reconstitution of the SIT and that the newly appointed officers have, without explanation, exonerated individuals previously identified as accused. Moreover, the charge-sheet in relation to C&EO PS FIR and Aizawl PS FIR was filed by the SIT on 26.06.2024 & 10.07.2024, respectively, stating that further investigation was underway in respect of certain accused persons, but the petitioner was not allowed to access the charge-sheets for nearly two months.

The petitioner has also preferred SLP before the Supreme Court seeking cancellation of bail granted to another accused, Dr. Madhurjya Sarmah, wherein notice has been issued. It is the petitioner’s grievance that despite the gravity of the alleged offence, involving economic offences of public importance, the investigation and trial are being adversely affected due to local influences and procedural irregularities.

In addition, the petitioner contended that the earlier authorised representative of the petitioner/company, namely, Mr. Ankit Bagree, was changed to one Mr. Prakash Mishra, as the said Mr. Ankit Bagree was also found to be party to the fraud perpetrated against the petitioner. Further alleged that crucial electronic evidence, including a mobile phone and iPad seized from the main accused, Mr. Jakir Hussain, has been misplaced.

During cross-examination, a seizure witness claimed to have mistaken the seized iPad for a MacBook, and did not confirm the seizure of any phone. A complaint has also been lodged by the petitioner before the Directorate of Enforcement under the Prevention of Money Laundering Act, 2002, and the PMLA proceedings are being investigated at Guwahati.

The petitioner asserted that given the magnitude and sensitivity of the alleged fraud and the trial being hindered by local influences and procedural irregularities, the criminal proceedings which are, presently pending before Courts in Aizawl, Mizoram, be transferred to the Courts at Kamrup (Metro), Guwahati, Assam, including the Principal Seat of the Gauhati High Court, in the interest of justice and also to ensure a fair, impartial and effective adjudication.

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Mr. Goswami, Senior Counsel for the petitioner has submitted that there is a reasonable apprehension that the petitioner may not receive proper justice in the Trial Courts of Aizawl, where the cases are presently pending for disposal.

In this regard, Mr. Deb, Advocate General, submitted that the Gauhati High Court has a Permanent Bench at Aizawl, and hence, if any transfer was required in connection with this case, the matter could have been brought before the Aizawl Bench. There is no justification for approaching the Principal Seat for transfer of the case when the Permanent Bench at Aizawl, functioning under the Gauhati High Court, is already available.

Mr. Deb further submitted that, during the investigation, the I.O seized 100 vehicles in connection with these cases. Thus, the investigation in both matters has been completed, the trial has commenced in one case, and the other is fixed for consideration of charge, with a subsequent date scheduled for the commencement of trial.

He also submitted that most of the witnesses are residents of the State of Mizoram, and therefore, requiring them to travel from Aizawl to depose before any court in Kamrup (M) or elsewhere in Assam would cause considerable hardship. It would likewise be difficult for the prosecution to transport all material exhibits and documents from Aizawl to Assam for production in Court.

Additionally, as some of the accused persons are still in custody, the prosecution would face challenges in producing them before a Court outside Mizoram, given that they are lodged in the Aizawl Jail.

On the other hand, Mr. Goswami, counsel for the petitioner, submitted that the convenience of the accused and the witnesses cannot be placed on a higher pedestal than the need to ensure that substantial justice is done. He argued that it is the apprehension of the complainant/victim regarding the possibility of getting a fair trial or justice in the Courts at Aizawl, where the cases are presently pending for disposal.

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A single bench of Justice Mitali Thakuria viewed that, based on two complaints, one filed by Mr. Ankit Bagree and another by a representative of the company, two separate cases were registered at Aizawl Police Station and Crime & Economic Offences Police Station, Aizawl, respectively. A Special Investigation Team (SIT) was constituted, and accordingly, the matters were investigated and charge sheets were filed in both cases.

As the cases have already been investigated by the newly constituted SIT, there appears to be no reason to interfere with the investigation at this stage, particularly since both matters have already been chargesheeted. If the apprehension is that the petitioner may not get proper justice in the Courts of Aizawl (i.e., in the Courts of the Chief Judicial Magistrate and District & Sessions Judge, where the cases are currently pending), the petitioner could have approached the Gauhati High Court, Aizawl Bench at Aizawl to seek transfer of the cases to any other District Court within the State of Mizoram.

It also cannot be denied that both the witnesses and the accused would face considerable difficulty in attending Court proceedings in the State of Assam, particularly in Kamrup (M), as most of them are residents of Aizawl. Moreover, some of the accused are still in custody, and the prosecution would face challenges in producing them before a court located outside Mizoram, such as in Guwahati or any other District in Assam. Further, since both cases have already been charge-sheeted, the possibility of tampering with evidence or influencing witnesses at this stage is minimal.

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It is also observed that a sufficient number of witnesses have been listed by the IO to prove the case. Therefore, there appears to be no compelling reason to transfer the cases from Aizawl to Assam or to any other District in Assam.

The court held that the petitioner may approach the Gauhati High Court, Aizawl Bench at Aizawl to seek transfer of the cases from the Courts of the Chief Judicial Magistrate, Aizawl and learned District & Sessions Judge, Aizawl to any other Courts within Mizoram for the purpose of ensuring a proper and fair trial in the interest of justice.

The court dismissed the application on finding that this is not a fit case for transferring the matters from the State of Mizoram to the State of Assam or Kamrup (M) for disposal.

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