Mumbai: The Bombay High Court on Tuesday ordered the formation of a Special Investigation Team (SIT) to probe an alleged financial fraud exceeding Rs 7,300 crore involving businessman Anand Jaikumar Jain, promoter and director of Jai Corp Ltd.

The court expressed strong displeasure over the “reluctance” of investigating agencies, including the Economic Offences Wing (EOW) of the Mumbai Police and the Central Bureau of Investigation (CBI), to take up the matter.

A bench of Justices Revati Mohite-Dere and Prithviraj Chavan was hearing a petition filed by public rights activist Shoaib Richie Sequeira, who sought an independent probe into the alleged misappropriation of public funds, investor fraud, and money laundering.

Sequeira had initially lodged complaints with the EOW in December 2021 and April 2023, detailing alleged financial irregularities, including round-tripping of funds through shell companies, unsecured advances, and fraudulent trading in stock futures.

Instead of conducting an inquiry, the EOW forwarded the complaint to the CBI, citing the case’s “significant financial implications” spanning multiple jurisdictions, including Mauritius, the US, Australia, and the UAE.

The CBI, however, declined to investigate, stating that the matter fell under the purview of the Securities and Exchange Board of India (SEBI), as it involved violations of securities laws and fraudulent trading. SEBI had previously imposed a penalty of Rs 30 crore on two companies linked to Jain for fraudulent stock futures trading.

The court took serious note of this back-and-forth and said, “Looking at the conduct of both the EOW and CBI, we as a Constitutional Court cannot remain a mute spectator when it becomes apparent that the agencies are passing the buck.”

A division bench remarked that it was “shocked and surprised” at the manner in which the investigating agencies had handled the case. The court observed that both the EOW and CBI had exhibited reluctance to investigate, despite the allegations involving nationalised banks, overseas financial transactions, and large-scale public fund misappropriation.

Given the magnitude of the alleged offenses, the court directed the Zonal Director of CBI, Mumbai, to constitute an SIT for a “thorough and impartial” investigation into Sequeira’s complaints. The SIT will be supervised by the Joint Director of the CBI’s Anti-Corruption Bureau in Mumbai. The EOW has been directed to hand over all relevant documents and materials to the SIT within a week.

The plea alleged that Jain and his subsidiaries allegedly laundered public funds through various means, including misappropriation of Rs4,255 crore borrowed by Jai Corp Ltd and its subsidiaries from financial institutions; diversion of Rs 2,434 crore collected from investors through Urban Infrastructure Opportunities Fund (UIOF); fraudulent trading worth Rs 513 crore in Reliance Petrochemicals Ltd (RPL) futures, diversion of Rs 98.83 crore in foreign currency loans to Mauritius and the UAE; and fictitious export invoices allegedly raised for transactions in Australia and the US.

The petitioner also highlighted that SEBI, in its forensic audit of Urban Infrastructure Venture Capital Fund (UIVCF), found irregularities in the winding up of investment schemes. He argued that a forensic audit was necessary to ascertain the true extent of the financial misconduct.

The court emphasized that a fair and impartial probe was crucial to uphold public confidence in the justice system. “Our justice system will acquire credibility only when the people at large will be convinced that the justice is based on the foundation of truth, provided the investigation is carried out impartially, fairly and in an unbiased manner,” the bench noted.

The bench also emphasised that it was equally important to strengthen the faith and confidence of the people in the law enforcing agency and also in the institution for administration of justice, else, it would be shaken.

The HC clarified that ordering an SIT probe did not imply any ruling on guilt but was necessary to ensure a proper investigation. It expressed hope that the SIT would “make every endeavor to uncover the truth and take the case to its logical end.”