PMLA court denies bail to builder Sanjay Chhabria

While deciding the merit of the application, special judge MG Deshpande noted that any private financial institution like DHFL, even if recognized by the Reserve Bank of India (RBI), could not disburse loans particularly those that were in thousands of crores

MUMBAI: A special PMLA (Prevention of Money Laundering Act) court on Tuesday rejected the bail application of builder Sanjay Chhabria of the Radius group in an alleged money laundering case related to Yes Bank-DHFL loan fraud, observing that he has miserably failed to prime-facie show that he is not guilty of an offence of money laundering.

PMLA court denies bail to builder Sanjay Chhabria

The Central Bureau of Investigation (CBI) arrested Chabarria on April 28, 2022, for his alleged involvement in the fraud case. Furthermore, the ED’s investigation revealed that Chhabria is alleged to have played a prominent role in the laundering of illegally diverted funds. It is alleged that Chhabria, along with Avinash Bhosale conspired to layer funds obtained through fraudulent means.

While deciding the merit of the application, special judge MG Deshpande noted that any private financial institution like DHFL, even if recognized by the Reserve Bank of India (RBI), could not disburse loans particularly those that were in thousands of crores.

“The applicant (Sanjay Chhabria) is involved in placing, layering, and integrating the POC by concealing, possessing, acquiring, and using it by projecting tainted money as untainted. The offence is serious, and its gravity and magnitude cannot be overlooked. The applicant has miserably failed to prima-facie show that he is not guilty of an offence of money laundering,” said special judge Deshpande while rejecting the bail plea.

The court further noted the use of terms like ‘consultancy/ project evaluation fee’ acknowledged by DHFL for any project appeared to be a deliberate effort to create a facade of legality, suggesting a deep-rooted conspiracy to legitimise illegal disbursements under the guise of their recitals.

Relying on loan details and disbursement papers issued by DHFL to Radius Group, outlining the sanction process, advocate Vaibhav Krushna, representing Chhabria, prayed for bail stating the applicant (Chhabria) neither siphoned nor attained any pecuniary gain and that he was the victim.

Emphasising that there was no possibility of Chhabria to tamper with evidence, influence witness or flee from justice, he added that Chhabria satisfied the triple test for granting of bail, considering that the commencement of trial would take as long as the investigation was continuing.

“Money laundering necessitates intention and knowledge, but the applicant is a mere borrower without knowledge of the loan source. Sanjay Chhabria had mortgaged land valued at ₹3,496 crore for loan security. Even if DHFL and Yes Bank were in the conspiracy, the applicant had no knowledge or involvement, making him not liable for alleged POC generation and money laundering as stated in the Prosecution Complaint,” Krushna said.

The PMLA case stems from the FIR registered by the CBI, stating that the former Yes Bank CEO Rana Kapoor, along with Kapil Wadhawan and Dheeraj Wadhawan, the then promoters of DHFL, are alleged to have conspired to siphon off funds amounting to ₹3700 crore from Yes Bank to DHFL. The investigation revealed that Kapoor received kickbacks amounting to ₹600 crore in exchange for facilitating these transactions.

The ED alleges that Chhabria’s actions, in collusion with other accused parties, contributed to the generation, layering, placement, and integration of proceeds of crime, thereby violating provisions of the Prevention of Money Laundering Act.

No sooner after DHFL received ₹2,700 crore from Yes Bank in June 2018, DHFL sanctioned loans of ₹1,100 crore and ₹900 crore to Radius Estate Projects Pvt. Ltd. (REPPL) and Sumer Radius Realty Pvt. Ltd. – both controlled by Chhabria.

Srinivasan Govindan, the then vice-president of DHFL, in his testimony also supports the case furthered by the agency. He stated that in agreements between DHFL and co-accused Avinash Bhosale, the former was identified as the client and the latter as the service provider for the ‘One Mahalaxmi’ project, one of the projects of Radius Group. However, he stated that the agreements for project evaluation and structuring the financial proposal (loan proposal) seemed to be sham agreements, as funds were transferred without any corresponding service.

“Despite the prima facie appearance of such documentation, the transfer of money by DHFL to Avinash Bhosale, indicating alleged services for the project of the applicant, raises concerns, especially when DHFL had not engaged in such services and payments previously. The extensive documentation may seem to portray loan details, but its true intent differs,” the court observed.

Additionally, Chhabria is accused of diverting approximately ₹ 431 crore through a series of sham agreements and transactions. This amount, obtained from DHFL, was purportedly intended for the development of the ‘Avenue 54’ project. However, investigations revealed that a significant portion of these funds was diverted for personal gain and unrelated purposes, including a payment of ₹ 25 Crore to ABIL Dairy, which is beneficially owned by Avinash Bhosale.