PNB Fraud Case: Ex-Chief Internal Auditor Mohinder Kumar Sharma Granted Bail by Mumbai CBI Court

Mumbai, Maharashtra – In a significant development, a Special Judge for CBI cases in Greater Bombay, Shri Jayendra C. Jagdale (C.R. No. 51), granted regular bail to Mohinder Kumar Sharma, former Chief Internal Auditor of Punjab National Bank (PNB). Sharma, 54, was arrested in connection with a fraud case amounting to over Rs. 9 crore. The order was issued on January 19, 2019, for Bail Application No. 959 of 2018.

Sharma, who served at PNB’s Mid Corporate Branch, Brady House, Mumbai, from November 26, 2015, to July 15, 2017, was facing charges under sections 120-B (criminal conspiracy) read with 409 (criminal breach of trust by public servant) and 420 (cheating) of the Indian Penal Code, 1860, along with sections 13(2) read with 13(1)(d) (criminal misconduct by a public servant) of the Prevention of Corruption Act, 1988.

Prosecution Allegations

The case, registered as R.C. No. BSM/2018/E/0004 by the CBI’s Bank Securities & Fraud Cell, Mumbai, stemmed from a complaint lodged by PNB DGM Shri Avneesh Nepalia on March 9, 2018.

The prosecution alleged that during April 2017, PNB officials, including Dy. Manager Shri Gokulnath Shetty and Single Window Operator Shri Manoj Hanumant Kharat (both from PNB, Brady House), conspired with Shri Aditya Rasiwasia and Shri Ishwardas Agarwal, Directors of M/s. Chandri Paper and Allied Products Pvt. Ltd. This conspiracy led to the fraudulent issuance of two Letters of Undertaking (LOUs) totaling USD 1,421,311.82 (equivalent to Rs. 9,09,63,956.48) in favor of SBI, Antwerp, Belgium, on April 25, 2017.

These LOUs were allegedly issued without any sanctioned credit limit for Chandri Paper & Allied Products Pvt. Ltd. and without the company providing the required 110% margin. The accused bank officials reportedly bypassed necessary request applications, documents, and approvals, and failed to make proper entries in the bank’s system before transmitting the LOUs to overseas banks.

Mohinder Kumar Sharma, as the Concurrent Auditor in the Forex Department during this period, was accused of dishonestly and deliberately failing to report on the checking and reconciliation of SWIFT transactions with related data in the CBS System. The CBI contended that this failure facilitated the fraud.

Defense Arguments

Mr. Aabad H.H. Ponda, the learned Advocate for Sharma, argued that his client was arrested on December 18, 2018, nearly nine months after the FIR was registered. He highlighted that Sharma’s role was confined to that of Chief Concurrent Auditor, operating strictly under guidelines and an e-RBIA template provided by the bank’s Inspection and Audit Division. He asserted that Sharma regularly submitted daily and periodical reports.

The defense emphasized that Sharma was never provided with a user ID or password for SWIFT, a system that was not integrated with CBS, meaning SWIFT transactions would not reflect in CBS. It was argued that the unlimited power given to co-accused Gokulnath Shetty was only discovered by PNB’s top management in February 2018 after the LOUs became due and the scam was revealed. The bank subsequently issued a circular on February 12, 2018, introducing user-based limits for LOU issuance.

Mr. Ponda further stated that Sharma had no prior experience in the Forex Department, had limited CBS viewing access, and was not a beneficiary of any proceeds from the crime. He contended that the entire case was based on documents, with nothing recovered or discovered at Sharma’s instance, making the allegations mere suspicion without concrete material.

Additionally, the defense cited Sharma’s health issues, including known diabetes, a history of jaundice, and being HCV Ab Positive, requiring continuous medication and a restricted diet.

Court’s Observations

Special Judge Jayendra C. Jagdale referred to the Supreme Court’s observations in Nimmagadda Prasad v/s. Central Bureau of Investigation, which outlines considerations for bail applications, including the nature of accusations, evidence, severity of punishment, character of the accused, possibility of securing presence at trial, apprehension of witness tampering, and larger public/State interests.

Applying these criteria, the court noted that the prosecution did not raise any difficulties regarding securing Sharma’s presence at trial or any concerns about larger State interests. The CBI’s apprehension that Sharma might “thwart an investigation by tampering with the evidence” or “influence the witnesses” was deemed vague by the court. Justice Jagdale pointed out that no specific details were provided by the prosecution as to which witnesses Sharma might influence or what evidence he might tamper with.

Crucially, the court observed that investigation against Sharma was already complete, and a charge-sheet had been filed against him. The judge stated that on the basis of vague allegations, an applicant’s personal liberty could not be curtailed, and there was no proper reason to keep him in judicial custody indefinitely, especially after the filing of the charge-sheet.

Bail Granted with Conditions

Considering these points, the court concluded that Sharma should be released on bail, subject to certain conditions.

The order released Mohinder Kumar Sharma on:

Executing a Personal Recognizance (P.R.) Bond of Rs. 50,000/-.
Furnishing one or more sureties of the like amount within two months.
He is allowed to be released provisionally by furnishing a cash bail of Rs. 50,000/- for two months, pending the submission of a surety.

The bail is subject to the following conditions:

Sharma is not to leave India without prior court permission.
He must surrender his passport (if any) to the CBI until the surety is furnished.
He must furnish his permanent address and contact numbers to the CBI.
He must also provide the addresses and contact numbers of two relatives to the CBI.
He is directed not to tamper with prosecution evidence and to assist in the disposal of the trial.
He shall not commit any offense while on bail.
He must remain present before the investigating officer every Tuesday between 10:00 a.m. and 4:00 p.m. until further order.
Breach of any of these conditions will lead to the cancellation of bail.

The bail application stands disposed of accordingly.