Delhi HC grants interim bail to Rahul, Mukesh Modi in Adarsh fraud case

The Delhi High Court has granted interim bail to Founder of Adarsh Credit Cooperative Society Mukesh Modi and Managing Director Rahul Modi, in connection with the alleged Ponzi scam they were implicated in..While doing so, the Court held that the arrest of a person by the Special Fraud Investigation Office (SFIO) after the time period within which it has to carry out its investigation expires, is unlawful and illegal. A statutory body must be strictly held to the standards by which it professes its conduct to be judged, the Court has stated..The order was passed by a Division Bench of Justices Siddharth Mridul and Sangita Dhingra Sehgal in petitions preferred by Rahul and Mukesh Modi..They were arrested by the SFIO on December 10 for allegedly committing fraud by siphoning off more than ₹200 crore through Ponzi schemes..Before the High Court, the petitioners claimed that the power of the SFIO to carry out an investigation under Section 213 (3) of the Companies Act, 2013 after the expiry of the stipulated time period, was illegal and unconstitutional. They had, therefore, sought their “immediate ad interim, ex parte release” from the illegal arrest..On June 20, the Joint Director of the Union Ministry of Corporate Affairs had directed the SFIO to investigate into the affairs of 120 companies and 5 limited liability partnerships, and to furnish a report in that regard within three months..The SFIO was, however, unable to complete its investigation into the affairs of the subject entities within the stipulated period of three months, ending September 19. Under the mandate of Section 212 of the Companies Act, an extension of time to carry out and conclude the investigation was made by the SFIO on December 13, almost two and a half months after the initial period of three months granted had already lapsed..On December 14, the Competent Authority granted ex post facto, retrospective extension of the investigation up to June 30, 2019..The petitioners argued that their arrest on December 10, after the specified period had expired and prior to the ex post facto extension, suffered from the vice of illegality and lack of jurisdiction. They also challenged the extension granted by the Competent Authority, stating that the it was without application of mind, as it was granted without the formulation of a prior opinion in terms of Section 212..Noting that it is prima facie axiomatic that the period specified in the June 20 order had already lapsed and that the SFIO had neither applied nor obtained the ex post facto extension of the period at the time of the arrest, the Court held that the arrest was without jurisdiction and was unlawful..“It is in these circumstances, read in conjunction with the norms set out by the SFIO itself, warranting investigation to be completed within the time frame, stipulated by the Central Government, that we are of the considered view that the order of arrest suffers from the vice of lack of jurisdiction, is unlawful and illegal”., it stated..It was further affirmed that the arrest of the Modis was “an absolute illegality” and patently suffers from “the vice of lack of legal sanction and jurisdiction.”.The Court further remarked that in a petition of Habeas Corpus, it cannot justify the continued illegal detention of the petitioners merely on account of the circumstance that the concerned Magistrate has rendered remand orders. Moreover, since they were arrested at the SFIO office at New Delhi, the remand orders passed by the concerned Magistrate in Gurugram are wholly without jurisdiction, the Court observed..Hence, in the absence of lawful sanction, further custody of the petitioners would violate the principles pf personal liberty, enshrined in Article 21 of the Constitution, the order states..Before ordering the release of the petitioners, the Court also recorded that they had joined the investigation throughout and extended their complete cooperation. It also noted that no cogent material was produced by the SFIO to urge that the petitioners were a flight risk or that they would misuse the liberty granted to them by the Court..Further recording that Rahul and Mukesh Modi have deep roots in the society and belong to a respectable business family, with no criminal antecedents, the Court granted interim bail to them, on furnishing a personal bond of Rs. 5 lakh each..The petitioners were represented by Senior Advocates Kapil Sibal and Sudhir Nandrajog..The respondents were represented by Additional Solicitor General Maninder Acharya with Central Govt. Standing Counsel Amit Mahajan and Anurah Ahluwalia..The matter will next be heard on January 31, 2019..Read the order: