The Supreme Court has stayed the Bombay high court order that had asked the Housing Development and Infrastructure Ltd (HDIL) promoters Rakesh Wadhawan and his son Sarang to be released from prison and kept at their Bandra East residence.
A bench comprising Chief Justice S A Bobde and justices B R Gavai and Surya Kant took note of the submissions of Solicitor General Tushar Mehta that the high court order to the extent of allowing the release of the from prison needed to be stayed.
Mehta had earlier said that the other aspect of the High Court appointed committee should be allowed to remain operative and the sole objective of the operation was with regard to the release of the Wadhawans from the Arthur Road jail.
Earlier in a landmark judgement, the Bombay HC had directed Wadhawans to be placed under house arrest. In this connection, the HC has asked superintendent of Arthur Road jail to shift the Wadhawans from the prison to their Bandra East residence with four jail guards.
The superintendent of the Arthur Road jail has been further asked to arrange guards. The guards have to ensure that the Wadhawans are not taken beyond the High Court’s jurisdiction. The father-son duo would also be permitted to travel for “ensuring the compliance of the directions of the committee and for assisting in the process of the sale”.
“We are conscious of the plight of lakhs of depositors who had deposited their hard-earned money and life’s (sic) savings in PMC Bank. Such extraordinary situations warrant extraordinary measures so as to ensure speedy recovery of the monies of respondents (Wadhawans),” said a bench of Justice Ranjit More and Justice Surendra Tavade in their judgement on a public interest litigation.
The judges also passed detailed directions on how the committee would function: It would first identify the properties of the companies owned, controlled, managed or promoted by the Wadhwans that are mortgaged solely with PMC Bank. The bank would also give details of the list of depositors. “The amount realised from the sale would be made available for direct distribution to depositors in such a manner as may be devised by the committee,” it added.
If required, the father-son duo will be allowed to travel locally for the recovery of PMC Bank dues. The HC has appointed a committee headed by Justice Radhakrishnan to supervise speedy recovery of dues of PMC Bank dues from HDIL and give away the recovered amounts to depositors of the fraud-hit Bank. The company owes Rs 4,635 crore to PMC Bank. The Wadhawans were arrested on October 3, 2019.
If the amount is not sufficient to meet the bank’s dues, then the committee will dispose of the properties of the companies owned, promoted or mortgaged by Wadhawans. If there is further shortfall, then the committee will dispose of all the unencumbered properties of the companies owned, controlled or mortgaged by Wadhawans as well as their properties. “Respondents will ensure that no roadblocks are created in the smooth sale and distribution by the committee,” they added.
Separately, the High Court has directed lower courts to not entertain any bail plea by Rakesh (68) and Sarang Wadhawan (42) till the next hearing on April 30. The Wadhawans will provide office space for the committee and also bear the cost for the staff and the guards. “The respondents (Wadhawans) are instrumental for the huge fraud perpetuated by them through HDIL and group companies,” the bench said.
The judges said that Wadhawans would be answerable to the committee and neglect on their part would be viewed seriously. The committee has to furnish a progress report by April 30 “while specifying the cooperation and efforts shown” by the Wadhawans “for monetising the assets for ensuring the expeditious repayment of dues” of the bank.
The PIL was filed by advocate Sarosh Damania for speedy recovery of the bank’s dues and urged for a retired high court or Supreme Court judge-headed committee as the “normal process” will take years to repay the depositors.
Wadhawans, in their reply, had told the court they have no objection to the sale of encumbered properties and submitted a list of their encumbered and unencumbered assets. The encumbered assets exclusively mortgaged with PMC Bank or along with other financial institutions, are valued at more than Rs 11,000 crore based on the ready reckoner value. Also, encumbered assets where PMC Bank has no charge but are mortgaged with other financial institutions are valued over Rs 6,000 crore. The unencumbered assets are valued at Rs 2,600 crore. They agreed to the constitution of a committee and urged for bail, saying the maximum punishment under Prevention of Money Laundering Act is seven years. The judges also noted that none of the parties, including ED and PMC Bank, had objected to the setting up of the committee.