Ms. Baba Beti v. State of U.P. (2024) – High Court Judgment Notes

• Case Background

  • Criminal Misc. Writ Petition No. $9949/2021$ filed before High Court of Judicature at Allahabad.

  • Bench: Hon’ble Vivek Kumar Birla, J. & Hon’ble Vinod Diwakar, J.

  • Judgment reserved: $19.12.2023$ – Delivered in chambers: $19.3.2024$ (Neutral Citation: $2024{:}AHC{:}48697{-}DB$).

  • Petitioner: Ms. Baba Beti – teacher & social worker.

  • Respondents:
    • State of U.P.
    • Director General of Police, U.P.
    • SHO P.S. Zafrabad, Jaunpur
    • State Bank of India (SBI).

  • Impugned FIR No. $0115/2021$ dated $26.9.2021$, P.S. Zafrabad, Jaunpur under IPC §§ $120B, 420, 467, 468, 471, 474, 476, 506, 507, 511$.

Counsels Present

• Petitioner: Shri Vivek Srivastava (argued via holding brief by Shri Gyanendra Kumar Mishra).

• Union of India: Shri R.P.S. Chauhan.

• Enforcement Directorate (ED): Shri Kuldeep Srivastava.

• State Bank of India: Shri Satish Chaturvedi.

• State of U.P.: Shri M.C. Chaturvedi (Additional Advocate General) assisted by Shri G.P. Singh, AGA.

• Central Bureau of Investigation (CBI): Shri Gyan Prakash, Sr. Counsel assisted by Shri Sanjay Kumar Yadav.

• SKS Ispat & Power Ltd.: Shri G.S. Chaturvedi, Sr. Counsel assisted by Shri Aditya Gupta.

Factual Allegations & Sequence of Events

• Petitioner read news of massive corporate fraud by SKS Power Generation (Chhattisgarh) Ltd. – SKSPGL.

• $17.3.2021$: She visits SBI, Jaunpur to enquire; asked for supporting papers.

• Same day: unidentified men forcibly enter her house, threaten her to back off.

• Teams in police uniform from four states later visit her home, pressurise withdrawal of complaint dated $13.8.2021$ pending before CJM, Jaunpur.

• CJM directs registration of FIR; investigation transferred to Economic Offences Wing (EOW) Varanasi.

• EOW files Closure Report (No. $8/2022$ dated $20.12.2022$; filed $25.1.2023$) citing:
  • Petitioner “not traceable”.
  • No substantiation of assault.

Corporate Fraud Narrative (Petitioner’s Version)

• SKSPGL operates $2 imes 300 ext{ MW}$ thermal plant at Villages Binjkote & Durramuda, Raigarh (Chhattisgarh); allotted two coal blocks in $2008$.

• Borrowings between FY $2010{-}11$ and $2017{-}18$:
  • SBI $5170$ crore
  • L&T Infra Finance $500$ crore
  • PTC India Finance $400$ crore
  • State Bank of Bikaner & Jaipur $100$ crore
  ⇒ Total $6170$ crore.

• Alleged misappropriation patterns:
  • Transfer of large sums to shell entities in British Virgin Islands (BVI) & Bermuda.
  • Round-tripping via $46$ fictitious Indian companies; bogus share trades; issue of undervalued Compulsorily Convertible Debentures (CCDs).
  • Money parked in stock market; fraudulent CCDs generated illicit gains.
  • Claimed cumulative loss to exchequer ≈ $5000$ crore.

• Default engineered; SBI seizes assets → bids invited.
  • Successful bidder: Agritrade Resources Ltd. (ARL) (Bermuda; listed Singapore) acting through subsidiary Entwickeln India Energy Pvt. Ltd.
  • Deal: acquire 100 ext{%} equity for Rs.$300$ crore + assume debt $5717$ crore for nominal consideration; SBI allegedly writes back interest $820$ crore.

• Subsequent structure:
  • Entwickeln merges into SKS Ispat & Power Ltd. (SKSIPL) $2019$; SKSIPL & SKSPGL now same address in Andheri (Mumbai).
  • Series of high-value sham share deals: Shree Krishna, Citywings, Compact Agencies, Labheshwari Agencies, Asia Power FDI (Mauritius) etc.
  • Interest-free advances $173$ crore given to $9$ entities (reduced to $50$ crore by $2020$) with no proofs of receipt.

Petitioner's Grounds for Transfer to CBI

1. EOW investigation casual; focused on locating petitioner, not offence.

2. Complex, multi-state & trans-national transactions – beyond state-police skillset.

3. Allegations against senior SBI officials (loan underwriting, interest waiver, write-off $2446$ crore) require independent probe.

4. KYC of Agritrade not verified; RBI norms flouted.

5. National-interest magnitude (public funds $\approx 5000$ crore) demands central agency.

SBI’s Preliminary Objections & Merits Reply

• Maintainability: efficacious remedy before Magistrate under $156(3)$ CrPC; relies on Satya Prakash ruling.

• Parallel petitions:
  • Lucknow Bench Misc. Bench $21453/2021$.
  • High Court of Orissa CRLMP $2069/2021$.

• Territorial jurisdiction: no SBI transaction in Allahabad zone.

• On merits:
  • Term Loan $5170$ crore sanctioned $19.12.2011$ (agreement executed Raipur).
  • Consortium stress → Stressed Asset Mgmt Branch, Bhopal.
  • Change-in-Management resolution per RBI $12.2.2018$ circular; ARL wins bid $5.6.2018$; remits Rs.$1721$ crore $18.3.2019$; residual Rs.$2446$ crore written-off.
  • Forensic audit had “no adverse remarks” (meeting $19.12.2019$).

Counter Affidavit – State / EOW Highlights

• State Govt approved EOW transfer $11.1.2022$; directed completion in $3$ months.

• Security provided to petitioner.

• Closure report findings:
  • Petitioner untraceable at Jaunpur & Lucknow addresses.
  • Bank staff & locals deny incident.
  • Balance sheets & loan-settlement seen – ‘no illegality’.
  • Closure endorsed by Home Dept Confidential Section-8 (letter $13.7.2022$).

Enforcement Directorate (ED) Stand

• MoF letter $4.4.2022$ asks ED to respond.

• ECIR No. $ECIR/ALSZO/01/2022$ registered $10.2.2022$ (Prayagraj Sub-Zone).

• Chennai Zonal ECIR $7.8.2019$ against Cethar Ltd. (EPC contractor) – assets $Rs.9.08$ crore + $Rs.517.81$ crore attached (includes SKS Ispat properties).

Legal Principles on Transfer of Investigation

• State of Punjab v. CBI: High-Court’s Art. $226$ power to order CBI probe – sparingly, cautiously, exceptional situations.

• State of W.B. v. CPDR (Const. Bench): Transfer only when needed to instil confidence, national ramifications, or enforce fundamental rights; else CBI burdened.

• Minor Irrigation v. Sahngoo Ram Arya; KV Rajendran; Himanshu Kumar – reiterated “rare & extraordinary”, need prima-facie material, bias or inept state probe.

Court’s Assessment of EOW Investigation

• IO spent effort tracing petitioner instead of following money trail – diversion of scope.

• Statements recorded of villagers, petty witnesses, branch staff – irrelevant to fraud chain.

• Recorded accused & SBI officials’ statements but no forensic audit, no scrutiny of $46$ shell companies, no probe of offshore links.

• Closure report signed by Inspector – violates U.P. Police Reg. $523$ & CrPC norms.

• Home Department approved closure perfunctorily despite Court’s $2.12.2021$ direction to consult Union Ministries.

Key Findings / Prima-Facie Indicators of Fraud (Court)

• Loan $6170$ crore siphoned offshore via dummy entities; assets worth $\approx 5000$ crore auctioned at Rs.$1721$ crore; remaining Rs.$2446$ crore written-off.

• Same promoter family (Guptas) indirectly re-acquired company through overseas fronts after default.

• Shell companies in BVI, Bermuda, Singapore, Mauritius; $46$ Indian “fictitious” firms used for round-tripping & bogus CCD / NCD deals.

• Absence of SBI due diligence during underwriting $2011$; interest $820$ crore reversed as “deemed capital contribution”.

Final Directions / Disposition

1. CBI, New Delhi to conduct investigation into SKSPGL, group entities & bank-officer complicity.

2. Serious Fraud Investigation Office (SFIO) to perform forensic audits of SKSPGL, ARL, Entwickeln, SKSIPL, Fair Thermal, Labheshwari, Citywings, Compact Agencies, Asia Power FDI, & any allied entities.

3. SEBI to assist & act within jurisdiction.

4. ED to continue tracing proceeds of crime under ECIR; coordination expected.

5. SBI Chairman & U.P. Principal Secy (Home) to preserve original records & furnish to agencies.

6. Entire FIR & papers to be handed to CBI/SFIO within 15 days of order.

7. Directors CBI, ED, SFIO to supervise; Registrar (Compliance) to send certified copy to:
   • Chief Secretary, U.P.
   • Directors CBI, ED, SFIO
   • SEBI Chairman
   • SBI Chairman.

8. Writ Petition allowed; investigation transferred accordingly.

Policy Observations & Recommendations

• Need for state-level guidelines to avert miscarriage of justice in high-value corporate fraud investigations.

• Importance of coordination among police, ED, SFIO, SEBI, CEIB.

• Call for specialised police training:
  • Financial analysis & forensic accounting.
  • Legal modules on PMLA, Companies Act, SEBI Act, RBI norms.
  • Digital forensics & cyber-tools.
  • Collaborative protocols with regulators & central agencies.

• Suggests strengthening regulatory oversight, cyber-security infrastructure, public awareness, and transparent corporate governance.

Important Procedural Timeline

• $17.3.2021$: Petitioner visits SBI Jaunpur; threats follow.

• $13.8.2021$: Complaint before CJM, Jaunpur.

• $26.9.2021$: FIR registered.

• $2.12.2021$: High Court interim order seeking DGP & Union response.

• $10.2.2022$: ED registers ECIR.

• $20.12.2022$: EOW closure report.

• $25.1.2023$: Closure filed before CJM.

• $19.3.2024$: Judgment pronouncing transfer to CBI.

Statutory & Regulatory References

• IPC §§ $120B, 420, 467, 468, 471, 474, 476, 506, 507, 511$.

• CrPC § $156(3)$ – Magistrate’s monitoring powers.

• RBI Circular $12.2.2018$ on Resolution of Stressed Assets.

• Companies Act, $2013$ (SFIO powers).

• Prevention of Money-Laundering Act, $2002$ (PMLA).

• SEBI Act, $1992$ & Listing obligations.

Ethical / Practical Implications Discussed

• Botched state-police probes erode public trust, hinder justice & risk national financial security.

• Large-scale fraud necessitates multi-agency synergy; isolation leads to leakages & repeat offences.

• Training & regulatory reforms pivotal to dismantle sophisticated white-collar crime networks.