Delhi HC Grants Bail To Chartered Accountant In Bhushan Steel Matter

On July 7, 2022, the Delhi High Court enlarged Chartered Accountant (CA) Sunil Bhatia on bail. Bhatia is an accused in the Bhushan Steel case. Serious Fraud Investigation Office (SFIO) had registered the case in 2019 against the Company and its office bearers.

It was alleged that the Chartered Accountant and one of the partners at ASRN & Associates [the firm appointed as stock auditors by the consortium of banks led by Punjab National Bank (PNB)) for Financial Year 2015-16] failed to perform his duty independently and diligently by not verifying the stock in transit, and he is accused to be in collusion with the office bearers of M/s Bhushan Steel Limited.

Bhushan Steel Limited (BSL) has been under the lens of investigating agencies for the alleged siphoning off by its promoters.

Justice Jasmeet Singh while granting bail, observed, “I do not find merit in the contentions and submissions of Central Government standing counsel (CGSC).”

Senior Advocate P V Kapoor, the counsel for the accused, had contended that the complaint against the petitioner was not maintainable.

He further argued that the appointment letter clearly showed that the applicant was not an Auditor of M/s Bhushan Steel Limited during the period under investigation i.e. Financial Year 2013-14 to 2015-16 to show his Bhatia’s non-involvement. The counsel had relied on the judgment of the High Court of Delhi, Gaurav Kumar v. Serious Fraud Investigation Office [2019] to show that the applicant cannot be held liable for acts done during a period which did not concern them

On the other hand, Central Government Standing Counsel Ripu Daman Bhardwaj vehemently opposed the bail application by asserting that the petitioner did not do any physical verification and relied upon the stock position given by the BSL. It was also agitated that the stock auditor did not check the records to substantiate the claim of the consumption of such a huge quantity of coal, and also failed to check the bills of stock in the transit of Rs 5,389.58 crores during the audit assigned.

The Court said, “A bare perusal of the above answer shows that the Punjab National Bank (PNB) did not lay much emphasis to the audit report given by the applicant. Even if I see the audit report, the audit report shows that the applicant had raised serious issues, and no loan should have been advanced based on the asset classification and Position of Accounts in the stock audit report.”

“I am of the view that since the ex-promoters/directors and similarly situated chartered accountants have been granted bail, there is no reason why the Applicant should be treated any differently,” the Court further stated.

The allegations against Bhatia are that being a CA he failed to perform his duty independently and with due care and caution by not verifying the stock in transit. He is also accused to be in connivance with the office bearers of M/s Bhushan Steel Limited (BSL).

Bhatia was one of the partners in the firm ASRN and Associates, which was appointed as stock auditors by the consortium of banks led by the Punjab National Bank for the financial year 2015-16. On the basis of the Investigation Report of SFIO, Bhatia was summoned by the trial court on 16 August 2019 and was taken into custody by the court when his bail application was dismissed on 1 June 2022.