Mumbai, Maharashtra – A Special Judge for CBI cases at Greater Bombay has denied bail to Mohammed Hussain Hanif Shaikh, aged 33, a Mumbai-based businessman, who is accused of orchestrating and facilitating a massive ₹724 crore forex remittance fraud. The order was passed by Special Judge Shri V.C. Barde (Court Room No. 50) on April 27, 2022.

Shaikh, designated as Accused No. 2, had sought bail under Section 439 of the Code of Criminal Procedure in connection with CBI RC. No. 4/E/2017/CBI/EOB/Mumbai. He faces serious charges under Sections 420 (cheating), 467 (forgery of valuable security), 468 (forgery for purpose of cheating), 471 (using as genuine a forged document) read with Section 120-B (criminal conspiracy) of the Indian Penal Code (IPC), and Sections 13(2) and 13(1)(d) of the Prevention of Corruption Act (P.C. Act).

Prosecution Allegations: A Sophisticated Hawala Network

The CBI E.O.B., Mumbai, represented by Ld. P.P. Mr. J.K. Sharma, vehemently opposed the bail. The prosecution’s case, detailed in their reply, paints a picture of a sophisticated and large-scale economic fraud amounting to a staggering ₹2252.82 Crores. The core allegation is that between 2014 and 2016, a conspiracy was hatched to fraudulently transfer huge unaccounted cash abroad, particularly to Hong Kong.

According to the CBI, Mohammed Hussain Hanif Shaikh, in furtherance of this criminal conspiracy, allegedly:

• Mobilized poor and illiterate individuals, offering them petty sums to obtain their Know Your Customer (KYC) documents.
• Floated various shell entities in the names of these unsuspecting individuals, including M/s. Fine Touch Impex, M/s. Azure Enterprises, M/s. Seabird Enterprises, and M/s. Iconic Enterprises.
• Obtained Import Export Codes (IEC) and other necessary authorizations for these entities from the DGFT, Mumbai.
• Opened bank accounts in Punjab National Bank (PNB) under the names of these shell entities, showing the unwitting individuals as proprietors.
• Collected vast sums of unaccounted cash from various parties seeking to send money to Hong Kong.
• Layered this unaccounted cash through Angadias, cheque discount brokers, and members of various Multi-State Co-operative Societies (Renukamata, Vishwakalyan, Mangaldeep, Venkatesh, Dyaneshwari, etc.).
• Received funds back into the shell entities’ accounts through RTGS (Real-Time Gross Settlement).
• Arranged for low-value imports of Chinese goods through these entities at Jawaharlal Nehru Customs House (JNCH), Nhava Sheva, and New Customs House (NCH), BPT, Mumbai, clearing consignments by filing Bills of Entry for significantly lower values.
• Prepared false and fabricated documents, specifically Bills of Entries and invoices, for these namesake entities, showing exorbitant values (twenty to thirty times higher) than the actual import value. These forged documents allegedly bore forged signatures and seals/stamps of Customs Officials.
• Submitted these forged documents to PNB, thereby facilitating fraudulent forex remittances of approximately ₹724 Crores to various entities maintained with HSBC, Hong Kong, in 388 individual instances.
• Diverted these foreign remittances by debiting various parties, causing wrongful loss to the foreign exchange reserves and gaining substantial commissions.

The CBI asserted that Shaikh played a “major role” in this intricate scheme, which involved systematic forgery and manipulation of financial documents to siphon off foreign currency from India.

Defense Contentions: Claims of False Implication and No Incriminating Evidence

Ld. Counsel Dr. Sujay Kantawala, appearing for Mohammed Hussain Hanif Shaikh, argued that his client was falsely implicated. Shaikh was arrested on February 22, 2022, despite the FIR being registered in 2017, which his counsel termed “suspicious.” He claimed that his client’s real brother, Mohd. Farooq Shaikh, was the prime accused and that no role was initially assigned to him in the FIR.

The defense highlighted that Shaikh had cooperated fully with the CBI, attending their office 50 times and submitting all required documents prior to his arrest. He denied involvement in hawala activities, forging customs rubber stamps, or creating forged bills of lading or invoices. He stated that a house search by the DRI (Directorate of Revenue Intelligence) in the same case had yielded no incriminating material.

Shaikh’s counsel also pointed out that his client was not arraigned as an accused by the Enforcement Directorate (ED) in their parallel investigation under the Prevention of Money Laundering Act (PMLA) for the same offense. He also mentioned that his brother, Mohd. Farooq, though in custody, had been granted concessions by the Hon’ble Bombay High Court and Supreme Court to attend to his ailing wife.

Furthermore, the defense argued that Shaikh, a readymade cloth shop owner, was not involved in opening bank accounts with credit societies or depositing cash. He claimed to be a permanent Mumbai resident with a family, including a four-year-old son and an elderly, dependent mother, and asserted no likelihood of absconding. He also raised a personal grievance, alleging that his brother, Mohammed Feroz Shaikh, had threatened to falsely implicate him in the case if he did not provide money.

Dr. Kantawala contended that the investigation, as far as Shaikh’s role was concerned, was complete, and his continued custody was unwarranted. He cited several Supreme Court judgments emphasizing that bail is the rule and jail is the exception, especially when the investigation is over and there is no risk of tampering with evidence or absconding. He stated that no loss to the State Exchequer had been proved.

Court’s Rationale for Rejecting Bail

Special Judge Shri V.C. Barde meticulously reviewed the submissions and the evidence presented by both sides.

The court acknowledged the defense’s points regarding the DRI’s and ED’s separate investigations but stated that the allegations and Shaikh’s role in the CBI’s specifically investigated offense needed to be considered independently. The court noted that while Shaikh was not named in the initial FIR lodged in 2017, Sections 467, 468, and 471 of the IPC were subsequently added in February 2022 with the court’s permission, leading to his apprehension and search of his premises. The court found that the CBI had followed due procedure by obtaining 14 days of police custody after being satisfied with the material.

Crucially, the court found substantial prima facie material in the case diary and records to support the CBI’s allegations regarding Shaikh’s active involvement. The judge specifically pointed to his alleged role in:

• Inducing poor individuals for KYC details to open bank accounts and form companies.
• Adopting the same modus operandi as prime accused Mohd. Farooq.
• Incorporating various entities (M/s. Fine Touch Impex, M/s. Azure Enterprises, M/s. Seabird Enterprises, and M/s. Iconic Enterprises) in the names of “name lenders.”
• Obtaining IECs and other authorizations.
• Collecting huge unaccounted cash for foreign remittances.
• Layering cash through various channels.
• Arranging low-value imports of Chinese goods and preparing false and fabricated Bills of Entries and invoices with magnified values.
• Using forged seals and rubber stamps of customs officials to create these fabricated documents.
• Submitting these false documents to PNB to facilitate fraudulent forex remittances of ₹724 Crores to Hong Kong entities.

The court concluded that Mohammed Hussain Hanif Shaikh’s role was “major one” and that the economic offenses, particularly the fraudulent forex remittances affecting the country’s economy, were grave. It emphasized that allowing bail at this “nascent stage of investigation” would provide the accused “ample scope to hoodwink or threaten the witnesses… to temper with the evidence and hamper with the smooth ongoing investigation.”

Given the serious nature of the economic offense, the substantial amount of fraud alleged, and the ongoing investigation to uncover further incriminating material and examine witnesses, the court found no merit in granting bail at this juncture.

Consequently, the court rejected Bail Application No. 163 of 2022, ordering Mohammed Hussain Hanif Shaikh to remain in judicial custody.