Laxmi Vilas Udaipur Disinvestment: Rajasthan HC stays arrest warrant against owner, directs management to be handed back to Bharat Hotels

Providing respite to the proprietor of the Laxmi Vilas Palace Hotel, the Rajasthan High Court today stayed arrest warrants issued by a CBI Special Judge, Jodhpur in the case..Issuing notice in a plea challenging the Special Judge order, Justice Dinesh Mehta has restrained the Police from arresting Jyotsana Suri..Jyotsana Suri has been directed to present herself in the lower court on October 8, furnishing a personal bond of Rs 5 Lakhs, with two sureties of Rs 2.5 Lakhs each..Arrest warrants were earlier issued by the CBI Court against Jyotsana Suri, Ashish Guha, Pradip Baijal and others, who have been charged with financial irregularities in the conduct of the hotel’s disinvestment..Jyotsana Suri is the wife of the erstwhile proprietor of Bharat Hotels, the group that acquired Laxmi Vilas from the Government after the disinvestment process. Suri's husband was at the helm during the disinvestment..Interestingly, the Central Bureau of Investigation (CBI), which was tasked with inquiring into the process, had filed two closure reports. Despite these, the CBI Special Judge rejected the final closure report and directed the arrests of Suri, Gupta, Baijal, and others on September 15. .The counsels for the petitioners (Suri and others) vehemently assailed the Special Judge’s actions before the High Court, contending that the questions relating to Judge's jurisdiction and the like were germane even to a grant of interim relief..Senior Advocate Harish Salve, who appeared for Suri, submitted that there was no material available with the court below to show that the accused had defrauded the Central Government of any sum..Even if there had been such material as was alleged, the Court below was not justified in issuing an arrest warrant, the Senior Counsel asserted..As per the Supreme Court’s holding in Inder Mohan Goswami & Ors. v. State of Uttaranchal & Ors, an arrest warrant was the last step a Court could resort to in order to secure the presence of a person in court. The first step was issuing the summons, failing which, a bailable warrant could be issued. Only on the failure of the first two steps could an arrest warrant be issued. .No such circumstance existed before the lower Court, Salve argued. He added that Suri, a law-abiding senior citizen, was not even informed about the CBI's closure reports in the case. .Salve further argued that the property, which was attached pursuant to the Special CBI Judge Order, could not have been attached without providing the owner of the property a hearing. The Counsel averred that at best, the property could be attached provisionally..The Court found substance in these arguments observing that the Special Judge had not recorded findings specifying the need for Suri’s custodial interrogation. This became all the more crucial since Suri was not at the helm during the process of disinvestment. Justice Mehta observed,."Court below has not recorded any finding as to why petitioner’s custodial interrogation is required, particularly when all the relevant documents are on the record of the Court below and the transaction dates back to the year 2001, when she was not at the helm of affairs of the Company.".The attachment of property was also found to be prima facie illegal. On this aspect, the Court stated:."Attaching the property of a running hotel business for a transaction which took place way back in 2001, that too, without notice to the petitioner or her hotel, is beyond anybody’s comprehension; particularly when a final decision about petitioner’s involvement/guilt is yet to be taken by the Court."Justice Dinesh Mehta.The Court said that it was constrained to issue a status quo ante order (order reversing the previous state of affairs) because the business in question was a functioning hotel. .Relying on a letter written by the District Collector, who was appointed as the Receiver of the Property, expressing inability to manage the hotel, the Court ruled:.“... this Court is of the considered opinion that if the order of appointment of receiver is not stayed, the hotel in question would suffer irreparable loss. Not only the guests who have got bookings and the business of the hotel would suffer but also the employees of the hotel would lose their livelihood particularly because the District Collector – receiver is not in a position to operate the hotel.”.The Court has, therefore, asked the receiver to hand the property back to an authorised representative of the company. Nevertheless, the Reciever has been directed to draw up a list of assets and table the same in Court..The case involved the auction of the Laxmi Vilas Palace Hotel, Udaipur by the Disinvestment Department of India to Bharat Hotel Ltd. in 2002. It was alleged that the sale to Bharat Hotels Ltd. was illegal and done with the connivance of the then-Secretary of Department of Disinvestment, Pradip Baijal; Managing Director of Lazard India, Ashish Guha; the financial advisor to the Department of Disinvestment, and others..Ashish Guha was represented by Senior Advocate Sanjiv Sen, assisted by a team from Karanjawala & Company led by Senior Partner Sandeep Kapur and comprising of Vir Sandhu, Vivek Suri, Abhimanshu Dhyani, Sahil Modi and Anirudh Singh Shekhawat..Pradip Baijal was represented by Senior Advocate Mukul Rohatgi..Senior Advocate Harish Salve, assisted by Advocate Harish Nadda and Senior Advocate PP Choudhary, assisted by Advocate Umesh Kant Vyas appeared for Suri..Read the Order here: