R.MARIMUTHU Vs. STATE

JUDGEMENT

(1.) The petitioner is A8 in C.C.No.8 of 2002 on the file of XI Additional Special Court, CBI cases Court, Chennai and he has filed this petition to call for the records in the said case and quash the same.

(2.) Based on the complaints received and also on the basis of the source information, case was registered against the petitioner/A8 and others for the alleged commission of the offences punishable under Sections 120-B read with 420 and 420, 467, 468, 467 read with 471, 468 read with 471, 477-A Penal Code and Sections 7, 12 and 13(2) read with 13(1)(d) of the Prevention of Corruption Act. The petitioner herein / A8 is facing trial along with the other accused persons for the above said offences. It is the case of the prosecution that the petitioner herein is the promoter and Managing Director of M/s.India Housing Finance and Development Limited (for short, 'IHFD'). The National Housing Bank (for short, 'NHB') was formed by the National Housing Bank Act and it is a wholly owned subsidiary of Reserve Bank of India (RBI), completely under its supervision and superintendence. It finances companies by giving loans towards purchase/construction of dwelling houses and to mobilise household finances and provide housing finance to middle and higher income groups through recognised Housing Finance Companies. NHB would give approval/recognition to a public limited company as Housing Finance Company, if it satisfies the guidelines provided by NHB. Approval should be given to a public limited company formed with the main object of carrying on the business providing long term finance for construction or purchase of houses in India for residential purpose. The public limited company to be approved as Housing Finance Company, should engage only in finance activity. The grant of approval is considered on the basis of the recommendations of the Regulatory Inspection Committee in the Inspection Report and subsequent discussions/clarifications and analysis, if any, required in the process. If a public limited company satisfies the statutory requirements, NHB will approve such companies as Housing Finance Companies (HFC). There are various guidelines for the HFC provided by NHB. If a public limited company is approved by the NHB as HFC, it will be eligible to claim re-finance from NHB in lieu of the loans already given to various customers for construction/purchase of a flat/house. The purpose behind the giving of re-finance is to encourage construction of new houses/flats and extension/upgradation of existing housing stock by persons belonging to low income category by extending need-based housing loans to them. There are various procedures for claiming re-finance, the terms and conditions, funds, release, scrutiny and repayment. The petitioner/A8, who is a Chartered Accountant, is the Managing Director of IHFD and A9, who is a close friend of A8, is the Chartered Accountant of IHFD. A8 and others took over a construction firm M/s.Saccraman Engineering Associates Private Limited in 1986 and on 03.12.1986, the name was changed as IHFD Constructions Limited. Though this sister concern was formed by A8 and others, the actual construction of flats/houses was carried out by IHFD Ltd. The RBI, while classifying IHFD as a Housing Finance Company, imposed a condition that IHFD should not indulge in construction activities and it should only be a Finance Company. Therefore, IHFD stopped construction activities and the same was carried out by IHFD Constructions Limited. A8 was the Managing Director for both IHFD and Chairman of IHFD Constructions Limited. The petitioner/A8, in his capacity as Managing Director, applied for approval/recognition of IHFD as Housing Finance Company for claiming re-finance to NHB, Mumbai. When the application for approval of re-finance was pending with NHB, complaints were received in the office of the NHB, Mumbai. The complaints were given by the customers of IHFD with regard to the non- payment of deposits on due dates, delay in handing over possession of flats, delay in sanction and release of loans, unauthorised collection of portion of the proposed loan as deposit, etc. by A8. The complaints establish that everything was not normal in the matter of finance and functioning of IHFD of A8 and that they were not financially sound as projected by them on the basis of manipulated books of accounts. The investigation further revealed that the officials of NHB ignored the adverse factors against M/s.IHFD before the recognition of the said company as Financial Company. The petitioner/A8, along with other accused persons/officials and employees of M/s.IHFD Limited, Chennai, in the matter of recognition of M/s.IHFD as a Finance Company, to cheat the NHB, by fabricating the records and to use the same as genuine and to commit criminal misconduct and in pursuance of the conspiracy, fraudulently and dishonestly prepared forged loan applications, deed of guarantees, loan agreements, sanction letters, loan documents and salary/income certificates and submitted false claims for re-finance to NHB for the loans that were not disbursed at all by IHFD. They have claimed re-finance on 22 occasions to the tune of Rs.32.43 crores including the ad-hoc loans of Rs.1.50 crores each, which otherwise they are not eligible. Hence, based on the above allegations, the respondent-authority registered case and after investigation, they filed charge-sheet before the Court below, which was taken on file in C.C.No.8 of 2002 and the petitioner/A8 has filed this Crl.O.P. to quash the said criminal proceedings in the said C.C.No.8 of 2002.

(3.) Learned counsel appearing for the petitioner/A8 submitted that the purpose of constituting NHB is to provide re-finance under the guidelines and the minimum capital of Rs.1 crore is required and 51% from the promoters which was contributed by the promoters of IHFD, to qualify as Housing Finance Company, for promotion of house building among the economically weaker sections of the public at large and it is only after a thorough scrutiny, a company is accorded the seal and approval by the RBI as Housing Finance Bank and IHFD Limited was the third institution in India which was accorded such recognition by the RBI and the Government of India through Ministry of Finance. He further contended that IHFD would give loans for house buildings to weaker and middle class sections of society, either directly or through a recognised builder, if the borrower purchases a flat. As per the regulations of NHB, IHFD Limited can give a maximum loan of Rs.1 lakh only and for repairs - Rs.30,000.00 only. He further submitted that NHB employees will be conducting inspection in respect of the Housing Finance Companies under the Act for giving re-finance approval and they will be conducting annual inspections, wherein, they will be inspecting the borrowers at random. The particulars of loan given by the Financial Company should be submitted every month by the Housing Finance Company under HFC-3 Form for scrutiny and checking and only then, re-finance will be given to the companies by the NHB.