Jharkhand High Court Directs CBI Investigation Into Rs. 727.67 Crore Loss To CMPFO From DHFL Investment

A Division Bench of Chief Justice M.S. Sonak and Justice Manoj Prasad was hearing a PIL concerning the alleged loss suffered by CMPFO on account of its investment in DHFL.

The Court noted that CMPFO had invested approximately Rs. 1,300 crores in DHFL despite financial experts advising and subsequently warning its officials to withdraw the investment to avoid considerable losses. The investment was not withdrawn and CMPFO ultimately suffered a loss of approximately Rs. 727.67 crores.

The petitioners alleged that the matter had not been seriously investigated and apprehended that the authorities were interested in covering up the matter or shielding the officials involved. They sought a direction for the CBI/Enforcement Directorate to register a case, investigate the loss and prosecute those responsible.

The Court noted that the Regional Commissioner-II, CMPFO, Pankaj Kumar, had filed an affidavit stating that since DHFL's role was being investigated, CMPFO did not propose to take any action in the matter. The affidavit also stated that a major penalty chargesheet had been issued against former CMPFO Commissioner Animesh Bharti on 17.05.2024 and that the matter was pending.

However, the Court took exception to the affidavit giving Bharti a clean chit even before the departmental proceedings against him had concluded. The affidavit described the matter as a “purely commercial loss arising out of a resolution process under the Insolvency and Bankruptcy Code” and stated that it did not disclose criminal conspiracy or criminal breach of trust warranting registration of a separate FIR by the CBI. The Court had earlier expressed surprise at how such a conclusion could be reached before completion of the departmental proceedings.

The Bench observed that the loss of Rs. 727.67 crores was virtually admitted, yet the matter was being sought to be passed off as a mere commercial loss “without any element of criminal conspiracy or breach of trust, even without any inquiry or investigation worth the name.”

The Court further observed that the circumstances supported the petitioners' apprehension that CMPFO was interested in either hushing up the matter or giving a clean chit to its officials without a meaningful inquiry or investigation. It also noted that DHFL was now being wound up, making recovery of the losses remote, and said it was “indeed surprised and pained” that CMPFO officials had taken the matter so lightly by refusing to seriously inquire into it and proceeding to give a clean chit to the officials involved.

The Court also considered the contention that the concerned authorities had discretion to initiate criminal proceedings. It held that even if such discretion existed, it could “never be unfettered, unguided, or untrammelled.” Where the material prima facie points towards wrongdoing, public officials cannot exercise their discretion by ignoring relevant circumstances. Pasted markdown

The Bench clarified that every investment loss does not constitute a criminal offence and that negligence or an error of commercial judgment, by itself, does not attract criminal liability without dishonest intention. However, it found that the present matter involved the investment of approximately Rs. 1,300 crores of public trust funds in an entity itself under CBI investigation, continuation of that exposure despite repeated warnings from financial experts, and the resultant loss of Rs. 727.67 crores.

The Court therefore found that a prima facie case existed warranting investigation into the possible commission of offences including criminal breach of trust and criminal conspiracy. It held that this was an exceptional case where handing over the investigation to the CBI was necessary “to lend credibility to the investigation and instil public confidence that a matter involving public funds to the tune of Rs 727.67 Crores was not hushed up without even a fair investigation.”

The Bench also held that the matter could not be left to the authority responsible for prudent investment of the funds when its officials had prima facie prejudged the issue. It clarified that departmental proceedings were no substitute for a proper investigation, as the two involve different standards of proof and procedures.

Accordingly, the Court directed the CBI to register an FIR in respect of the investment of CMPFO funds in DHFL and the resulting loss, and to take over the investigation into the role of all persons concerned, whether officials or otherwise. The investigation was directed to be conducted expeditiously and in accordance with law.

The Court declined to order compensation at this stage, holding that the issue would depend upon the outcome of the investigation, while granting the petitioners liberty to seek compensation at the appropriate stage.

The Court clarified that its observations were prima facie, confined to determining whether a case was made out for directing a CBI investigation, and would not constitute findings against persons who had not been heard or influence the CBI's investigation.

Appearance:

For the Petitioners: Mr. Anil Kumar Singh, Advocate

For CMPFO: Mr. Prashant Kumar Singh, DSGI; Mr. Karbir, AC to DSGI

For CBI: Mr. Deepak Kumar Bharti, Advocate

For ED: Mr. Amit Kumar Das, Sr. Advocate; Mr. Shivam Utkarsh Sahay, Advocate

For SBI: Mr. Rajesh Kumar, Advocate

For Respondent No.10: Mr. Ranjeet Kushwaha, Advocate