The Delhi High Court has affirmed that active participation in a scheme to artificially inflate share prices to secure institutional investment, even without personal financial gain, constitutes sufficient grounds for summoning an accused in a criminal conspiracy case. This ruling clarifies the threshold for initiating proceedings under Section 120B IPC read with the Prevention of Corruption Act, 1988, in complex financial frauds involving shell companies and stock market manipulation.
Background & Facts
The Dispute
The petitioner, Jalaj Batra, a former stock broker, was named as Accused No. 2 in a supplementary charge-sheet filed by the Central Bureau of Investigation (CBI) in connection with a massive financial fraud involving Dewan Housing Finance Corporation Ltd. (DHFL). The core allegation is that DHFL’s promoters, led by Kapil Wadhawan, siphoned Rs. 42,000 crores in bank loans through 87 shell companies between January 2010 and December 2019, causing a wrongful loss of Rs. 34,000 crores to a consortium of 17 banks led by Union Bank of India. To conceal this fraud and facilitate a Qualified Institutional Placement (QIP) of Rs. 3,000 crores, the promoters conspired to artificially inflate DHFL’s share price.
Key Facts
- The main charge-sheet, filed on 15.10.2022, named 75 accused, including DHFL’s promoters and shell companies, but did not include the petitioner.
- The petitioner was debarred by SEBI in 2006; the debarment was cancelled in 2016, but he claimed he had no demat or broker account and no trading activity since.
- Between 2017 and 2018, Rs. 1,293.82 crores were diverted from DHFL to companies controlled by Rajesh Mehta.
- Of this, Rs. 689.32 crores were used to manipulate DHFL’s share price through stock brokers, including the petitioner and Ravindra Biyani.
- DHFL’s share price rose from Rs. 290 in January 2017 to Rs. 690 in September 2018, then crashed to Rs. 350.55 on 21.09.2018.
- To compensate brokers who incurred losses from the crash, 214 flats in the Liv Smart Project (Mumbai) were allotted, but the petitioner received none.
- The petitioner claims he resided in Dubai since 2006 and had no involvement in trading.
Procedural History
- 20.06.2022: FIR RC No. 2242022A0001 registered by CBI against DHFL and 12 others.
- 15.10.2022: Main charge-sheet filed under Sections 120B, 409, 420, 477A IPC and Section 13(1)(d) read with 13(2) of the Prevention of Corruption Act, 1988.
- 18.04.2024: Supplementary charge-sheet filed against 34 new accused, including the petitioner, for offences under Sections 120B, 206, 409, 411, 420, 424, 465, 468, 477A IPC and Section 11, 13(1)(d) read with 13(2) of the PC Act.
- 27.04.2024: Special Judge (PC Act), CBI-08, Rouse Avenue Court, New Delhi, took cognizance and summoned the petitioner and others.
- 04.05.2026: Petitioner filed CRL.M.C. 682/2025 before the Delhi High Court challenging the summoning order.
The Parties' Positions
For the Petitioner: Argued that he had no role in the original loan diversion (2010 - 2019), was not a beneficiary of the scheme, had no trading activity post-2016, and was merely introduced to Kapil Wadhawan by Nimir Mehta. He claimed the prosecution’s narrative was an afterthought, unsupported by evidence, and that he was targeted arbitrarily while active participants were made witnesses.
For the Respondent (CBI): Contended that the petitioner was a key facilitator in the share manipulation scheme, using clandestine trading through third-party accounts (e.g., Hemant Madhusudan Seth), coordinating with brokers, and arranging flat allotments to compensate losses. The CBI asserted that the supplementary charge-sheet was not a new case but a continuation of the same conspiracy.
Relief Sought
The petitioner sought quashing of the summoning order dated 27.04.2024, arguing that there was no material to establish his involvement in the conspiracy.
The Legal Issue
Can a person be summoned for criminal conspiracy under Section 120B IPC if they actively facilitated artificial share price manipulation to support a corporate fundraising effort, even if they derived no direct financial benefit and were not part of the initial loan diversion?
Arguments Presented
For the Appellant/Petitioner
The petitioner relied on Ashok Chaturvedi v. Shitul H Chanchani, Pepsi Foods Ltd. v. Special Judicial Magistrate, and John Pandian v. State to argue that summoning requires prima facie evidence of a meeting of minds and active participation in the conspiracy. He emphasized that his alleged role occurred after the main fraud was complete, that he had no demat account, and that no flats were allotted to him - indicating no complicity. He contended that the CBI’s inclusion of him was arbitrary, especially since those with direct trading roles were made witnesses.
For the Respondent/State
The CBI relied on State of Gujarat v. Afroz Mohammed Hasanfatta, Bhushan Kumar v. State (NCT of Delhi), and A.R. Antulay v. R.S. Nayak to argue that conspiracy need not be proven by direct evidence; it can be inferred from conduct, circumstantial links, and common purpose. The CBI highlighted that the petitioner coordinated trading through multiple brokers, used shell accounts, and was identified by multiple witnesses - including an approver - as the central link between DHFL’s promoters and the stock market operators. The diversion of Rs. 689.32 crores for share manipulation was a continuation of the same conspiracy to conceal financial fraud.
The Court's Analysis
The Delhi High Court emphasized that at the stage of taking cognizance, the court’s role is not to weigh evidence but to determine whether there is sufficient ground to initiate proceedings. The Court observed that the supplementary charge-sheet, supported by witness statements and financial trails, disclosed a clear link between the petitioner and the share price manipulation scheme.
"The petitioner was instrumental in carrying out such trade. He did not indulge in any trading in his own name and entered into transactions in a clandestine manner."
The Court noted that the petitioner’s role was not peripheral but central: he introduced Kapil Wadhawan to key brokers, arranged meetings, coordinated trading through third-party accounts, and was identified by multiple witnesses - including the approver Abhay Adukia - as the operational manager of the scheme. The fact that he received no flats was irrelevant; the law does not require personal gain to establish conspiracy.
The Court distinguished John Pandian v. State, which the petitioner relied upon, by noting that in that case, the accused had no connection to the core criminal act. Here, the petitioner’s actions were directly tied to the objective of the conspiracy - to create a false financial image to attract investment. The Court held:
"Fact remains that the funds of DHFL had been diverted and utilized for artificial jacking up and such ‘diversion of funds’ is common feature, substratum and bedrock of the case of prosecution - be it main charge-sheet or supplementary."
The Court rejected the argument of a "pick-and-choose" policy, noting that key participants like Ravindra Biyani, Pranav Vora, and Abhay Adukia (now an approver) were also charged. The CBI’s use of an approver to expose the conspiracy was deemed lawful and necessary.
The Court further observed that the petitioner’s prolonged absence from proceedings and non-submission of bail bonds, coupled with a Look Out Circular issued against him, undermined his credibility.
The Verdict
The petition was dismissed. The Delhi High Court upheld the summoning order dated 27.04.2024. The Court held that the material on record - including witness statements, financial transfers of Rs. 689.32 crores, and the petitioner’s coordination of clandestine trading - provided sufficient ground to proceed against him for criminal conspiracy under Section 120B IPC and Section 13(1)(d) read with 13(2) of the Prevention of Corruption Act, 1988. The petitioner is directed to appear before the Trial Court and participate in the proceedings with due diligence.
What This Means For Similar Cases
Participation in Financial Manipulation Suffices for Conspiracy
- Practitioners must now argue that even indirect, non-beneficiary roles in market manipulation - such as coordinating trades, using shell accounts, or acting as a liaison between fraudsters and brokers - can establish criminal conspiracy.
- Absence of personal gain or asset receipt does not negate liability under Section 120B IPC if the act furthers the common unlawful objective.
CBI’s Use of Approver Testimony Is Legally Valid
- The Court affirmed that using approvers to expose complex conspiracies is not arbitrary but a legitimate investigative tool.
- Excluding individuals who cooperate with prosecution while charging others does not constitute bias if their roles are demonstrably lesser.
Threshold for Summoning Is Low but Not Arbitrary
-
At the cognizance stage, courts need not conduct a detailed evidentiary analysis.
-
However, mere name inclusion without any factual nexus to the conspiracy will still be struck down. The key is whether the charge-sheet, even superficially, links the accused to the core fraudulent scheme.
-
Always scrutinize whether the accused’s alleged role is part of a continuous, unified conspiracy or a separate, post-facto act.
-
In cases involving stock manipulation, focus on financial trails, third-party account usage, and witness corroboration - not just direct benefit.
-
CBI’s supplementary charge-sheets are permissible if they reveal furtherance of the same conspiracy, not a new offence.
