Mumbai: In a significant setback for Kapil Wadhawan and Dheeraj Wadhawan, key accused in the Yes Bank-DHFL money laundering and fraud case, the Special Judge for CBI at Greater Bombay, S.U. Wadgaonkar, rejected their applications for default bail on July 31, 2020. The brothers had sought bail under Section 167(2) of the Criminal Procedure Code (Cr.P.C.), arguing that the Central Bureau of Investigation (CBI) had failed to file a complete charge sheet within the stipulated 60-day period.
The Arrest and Allegations
Kapil and Dheeraj Wadhawan were arrested on April 26, 2020, in connection with FIR R.C. No. 219/2020, registered by the CBI. They were produced before the court on April 27, 2020. The FIR leveled serious charges against them and others, including offences punishable under Sections 420 (cheating) read with 120-B (criminal conspiracy) of the Indian Penal Code (IPC), and Sections 7, 12, 13(1)(d) read with 13(2) of the Prevention of Corruption Act (PC Act).
The core of the CBI’s allegations revolved around a criminal conspiracy hatched between April and June 2018 involving Rana Kapoor, then Promoter/Director of Yes Bank Limited, and the Wadhawan brothers. Pursuant to this conspiracy, Yes Bank allegedly invested ₹3,700 crores in short-term debentures of Diwan Housing Finance Corporation Limited (DHFL), where Kapil Wadhawan was a Promoter/Director. Simultaneously, Kapil Wadhawan, through DHFL, purportedly paid a kickback of ₹600 crores to Rana Kapoor and his family members. This kickback was disguised as a builder loan to M/s DOIT, a company owned by Kapoor’s family members, sanctioned on the basis of a “sub-standard property having very meager value.” The CBI alleged that DHFL had not redeemed the ₹3,700 crores from Yes Bank.
Further allegations stated that Yes Bank sanctioned a loan of ₹750 crores to M/s RKW Developers, a DHFL Group company with Dheeraj Wadhawan as a director. This loan, intended for the Bandra Reclamation Project in Mumbai, was allegedly siphoned off by Kapil Wadhawan, with the entire amount transferred from M/s RKW Developers to M/s DHFL without any investment in the project. The CBI asserted that these transactions involved “gross violation of rules and regulations.”
Defense Claims of Incomplete Charge Sheet
The Wadhawan brothers’ applications, filed on June 30, 2020, contended that their statutory 60-day remand period was set to expire on June 26, 2020. While the CBI filed a purported charge sheet on June 25, 2020, the defense, led by Senior Counsel Mr. Amit Desai, argued it was “not as required in law” and “incomplete.” They claimed it was not accompanied by any statements of witnesses under Section 161 Cr.P.C. or any documents that the prosecution intended to rely upon. The complete set of documents was only filed on July 9, 2020, well after the 60-day period, thus, according to the defense, an “indefeasible right” to default bail had accrued to them.
Mr. Desai heavily relied on Supreme Court judgments, including Satya Narain Musadi Vs. State of Bihar and the Constitution Bench decision in K. Veeraswami Vs. Union of India, to argue that a charge sheet is complete only when accompanied by all relevant documents and witness statements as mandated by Section 173(2) and (5) of Cr.P.C. He also cited Rakesh Kumar Paul Vs. State of Assam, which emphasized that the right to default bail, once ripened, cannot be frustrated by any “subterfuge.” Bombay High Court decisions in NDPS cases, such as Sunil Vasantrao Phulbande Vs. State of Maharashtra, where the absence of a Chemical Analyzer’s report rendered the charge sheet incomplete, were also cited.
CBI’s Counter and Court’s Stance
The CBI, represented by Special Public Prosecutor Mr. Ashok Kumar Bagoria, countered that the charge sheet filed on June 25, 2020, was indeed “complete in the eye of law” and submitted within the 60-day period. Mr. Bagoria placed strong reliance on the Supreme Court’s decision in Narendra Kumar Amin Vs. CBI & Anr. (Criminal Appeal No.94/2015). He argued that this case was “similar and identical” to the present one, where the police report was filed within the prescribed time, but supporting documents and witness statements were submitted later. In Narendra Amin, the Supreme Court upheld that the filing of a police report containing particulars under Section 173(2) Cr.P.C. amounted to the completion of filing the report, even if unaccompanied by Section 173(5) documents.
The court, after careful consideration, sided with the CBI’s interpretation. Special Judge Wadgaonkar noted that the charge sheet filed on June 25, 2020, “set out all the details as required by Section 173(2) of the Code,” including the accused’s names, nature of the offense, and lists of documents and witnesses. It concluded that there was “enough prima facie material” for the court to apply its mind.
Crucially, the court distinguished the judgments cited by the defense. It observed that while Section 173(5) documents are part of the charge sheet, their non-simultaneous submission with the Section 173(2) report does not invalidate it. The court explicitly stated that the Narendra Amin judgment “squarely applicable to the present case” and further emphasized that the K. Veeraswami judgment, cited by the defense as a Constitution Bench precedent, was distinguishable as it arose in a different context (PC Act, not default bail under Cr.P.C.). The court also found the other High Court judgments cited by the defense distinguishable, particularly those related to NDPS cases where a Chemical Analyzer report is considered a fundamental document.
Offence under Section 409 IPC and 90-Day Period
A crucial alternative argument by the CBI, and accepted by the court, was the applicability of Section 409 IPC (criminal breach of trust by public servant, or by banker, merchant or agent). The CBI contended that since an offense punishable with life imprisonment (like Section 409 IPC) was prima facie made out, the prescribed period for filing the charge sheet under Section 167(2) Cr.P.C. would be 90 days, not 60. This 90-day period would have expired on July 25, 2020. Since the charge sheet was filed on June 25, 2020, and the documents on July 9, 2020, both fell within this extended 90-day window.
The defense countered that merely referencing Section 409 IPC in the charge sheet without specific allegations of “entrustment” or “dominion over property,” essential ingredients for the offense, was insufficient. They cited several Supreme Court cases to argue that a loan transaction does not constitute entrustment. They also pointed out that DHFL, being an owner of the property and itself an accused, could not commit criminal breach of trust of its own property.
However, the court rejected these arguments. It observed that while the investigating officer’s “say” did not explicitly mention Section 409 IPC, the charge sheet’s Paragraph 51 clearly stated that the enumerated facts constituted the offense under Section 120-B read with Section 409 IPC. The judge reasoned that Rana Kapoor, as the then Promoter/Director of Yes Bank, had “dominion over the financial affairs of institution,” making it unnecessary to make specific averments regarding entrustment. The court found that the allegations, involving a criminal conspiracy to fraudulently siphon funds through loan sanctions and investments in violation of rules, were sufficient to prima facie constitute offenses under both Section 420 and 409 IPC.
The court also dismissed the defense’s argument regarding the owner not being able to commit breach of trust of their own property, stating that in this “peculiar facts of the case,” the “victims or aggrieved person is the public at large, who invested/deposited money in those Yes Bank or DHFL or having shares.”
Conclusion and Future Proceedings
Based on the detailed analysis, the Special Judge concluded that no grounds were made out to enlarge the accused on default bail. The court reiterated that the charge sheet, even without simultaneous submission of all documents, was complete for the purpose of default bail consideration, and additionally, the prima facie applicability of Section 409 IPC extended the remand period to 90 days, which was also complied with.
The court’s observations regarding the prima facie constitution of offenses, including Section 409 IPC, were explicitly clarified to be “for the purpose of consideration of bail applications only,” and the Metropolitan Magistrate would proceed with the case “in accordance with law without any influence of observations made herein above.”
Both Bail Application No. 844 of 2020 for Kapil Wadhawan and Bail Application No. 845 of 2020 for Dheeraj Wadhawan were accordingly rejected.