Supreme Court restores SFIO proceedings against Bhushan Steel's non-executive director

The Supreme Court recently restored the proceedings initiated by the Serious Fraud Investigation Office (SFIO) against Dr. Rajesh Kumar Yaduvanshi, a nominee director of Punjab National Bank (PNB) on the board of Bhushan Steel Limited (BSL) [SFIO v. Rajesh Kumar Yaduvanshi]..A Bench of Justices MM Sundresh and Rajesh Bindal set aside the Delhi High Court judgment that had quashed the summons issued against Yaduvanshi in connection with a fraud case being investigated by SFIO. “The impugned judgment(s) stand set aside and the appeals stand allowed with liberty to the respondents to work their remedies in the manner known to law, including the seeking of a discharge, in which case, our order will not come in their way,” the Court stated. .The case revolves around allegations of financial fraud at Bhushan Steel Limited, where the promoters, Brij Bhushan Singal and Neeraj Singal, stand accused of siphoning off funds through a network of 157 associated companies. The SFIO filed a complaint against 287 individuals and entities including Yaduvanshi for their alleged involvement in the fraud, which involved inflating asset values, manipulating financial statements and diverting funds..Yaduvanshi, who served as a non-executive nominee director of PNB on the board of BSL from 2015 to 2017, was summoned by the trial court in August 2019. The SFIO alleged that he failed to question the fraudulent financial statements approved by the board, particularly during the transition to Indian Accounting Standards (IndAS) in 2017, which led to significant write-off of inflated assets..In September 2020, the Delhi High Court quashed the summons against Yaduvanshi after finding that there was no material evidence to suggest his complicity in the fraud. The High Court emphasised that nominee directors of public sector banks are immune from liability for acts done in good faith under Section 16A of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970..However, the Supreme Court found that the High Court had erred by conducting a "mini trial" and making factual presumptions at the summoning stage, which is not permissible under law..The apex Court reiterated that High Courts, while exercising revisional or discretionary jurisdiction under Section 482 of the Code of Criminal Procedure (CrPC), should not conduct a "mini trial" or delve into factual adjudication at the summoning stage. Such matters should be left to the trial court."We find that the High Court has conducted a mini trial and has gone into areas which require a factual adjudication, which is impermissible under law. Suffice it is to state that the impugned judgment cannot be sustained in the eye of law as the High Court has ventured into a factual adjudication by indulging in presumption," the apex court underlined. .However, it granted liberty to Yaduvanshi to seek remedies available under the law, including filing for discharge before the trial court. The Court also dispensed with the requirement for Dr. Yaduvanshi’s personal appearance before the trial court unless specifically directed..SFIO was represented by Additional Solicitor General Brijender Chahar, along with advocates Naman Tandon, Kanu Agrawal, Sairica Raju, Rahul Mishra, Guntur Promod Kumar and Sudarshan Lamba..Yaduvanshi was represented by Senior Advocate Siddhartha Dave and advocates Sanjay Kapur, Surya Prakash, Divya Singh Pundir, Devesh Dubey, Annu Mishra, Nakul Chengappa and Himanshu Tyagi.Punjab National Bank was represented by Senior Advocate Pinaki Mishra along with advocates Prity Sharma, Akshay Anand, Sandeep Ratra and Manikya Khanna..[Read Judgment]