The Bombay High Court has granted bail to Anil Khandelwal, Chief Financial Officer of Cox & Kings Limited (CKL), and internal auditor Naresh Jain. The decision, delivered on February 27, 2025, was influenced by their prolonged pre-trial detention and the Supreme Court’s earlier bail approval for the primary accused, Ajay Ajit Peter Kerkar.
Background of the Case
The financial turmoil surrounding CKL traces back to extensive borrowings between 2011 and 2019. The company secured substantial loans from various financial institutions, allegedly under false pretenses of financial stability. Key financial entities affected include:
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Yes Bank: Faced a significant default of ₹525 crore in working capital loans.
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Tourism Finance Corporation of India Limited (TFCIL): Reported non-repayment of Rs.110.48 crore.
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HDFC Bank: Experienced a default on a corporate credit facility amounting to Rs.50.17 crore.
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Kotak Mahindra Bank: Sought recovery of Rs.174.32 crore.
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Kurlon Enterprises: Filed complaints regarding two short-term loans of Rs.10 crore each.
The Enforcement Directorate (ED) arrested Khandelwal and Jain on March 2, 2021, accusing them of collaborating in falsifying accounts and financial records to facilitate these fraudulent activities.
Legal Proceedings and Bail Considerations
Senior advocate Ashok Mundargi, representing Khandelwal, argued for bail based on parity, highlighting the Supreme Court’s decision to grant bail to the principal accused, Ajay Ajit Peter Kerkar. Advocates Satyavrat Joshi and Sayee Sawant, representing Jain, supported this stance, emphasizing the extended incarceration of their clients without a definitive trial timeline.
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Additional Public Prosecutor Megha S. Bajoria opposed the bail applications, underscoring the severity of the offenses, which she described as detrimental to the nation’s economic fabric. She highlighted the significant roles both Khandelwal and Jain allegedly played in the fraud, suggesting malicious intent in their actions.
Justice Milind N. Jadhav, presiding over the single-judge bench, acknowledged the prolonged detention of the accused and the uncertainty surrounding the trial’s commencement. He also noted that both Khandelwal and Jain had previously secured bail in related cases under the Prevention of Money Laundering Act (PMLA) in May 2024. Consequently, the court granted bail to both individuals upon furnishing personal bonds of Rs.1 lakh each.
Observations on Financial Institutions’ Due Diligence
The court expressed concerns regarding the due diligence practices of financial institutions involved in extending substantial loans to CKL. Justice Jadhav pointed out that while stringent measures are typically applied to individual borrowers, large corporate loans often seem to bypass rigorous scrutiny. He emphasized that the funds loaned by banks constitute public money, thereby imposing a responsibility on these institutions to conduct thorough due diligence. The court remarked that even if CKL presented seemingly robust balance sheets to procure loans amounting to hundreds of crores, it remained the banks’ duty to verify the authenticity and accuracy of such financial statements.
Implications and Future Outlook
The bail granted to Khandelwal and Jain underscores the judiciary’s recognition of the rights of the accused, especially concerning prolonged pre-trial detention. This decision may influence similar cases where individuals face extended incarceration without trial.
Furthermore, the court’s observations serve as a critical reminder to financial institutions about the imperative of meticulous due diligence, particularly when dealing with large corporate entities. Ensuring the integrity of financial assessments can prevent potential frauds and safeguard public funds.
As the legal proceedings continue, stakeholders, including financial institutions, regulatory bodies, and the public, will closely monitor the developments. The case highlights the intricate interplay between corporate governance, financial oversight, and judicial processes in addressing complex financial frauds.
In conclusion, the Bombay High Court’s decision to grant bail to the CKL executives reflects a balanced approach, considering both the rights of the accused and the broader implications for financial accountability and institutional responsibility.
