Bombay HC Denies Anticipatory Bail To Ecstasy Realty Directors In ₹480 Crore Debenture Diversion Case

Mumbai, March 16: The Bombay High Court has refused anticipatory bail to three directors of Ecstasy Realty Private Limited, Shobhit Rajan, Pulin Bole and Shivani Varma, in a case alleging diversion of over Rs 480 crore raised through debentures for a housing project.

Court cites need for custodial interrogation

Justice NR Borkar noted that custodial interrogation was necessary to probe the alleged siphoning and layering of funds through shell companies.

The case was initially registered at Juhu Police Station in 2025 and later transferred to the Economic Offences Wing under the provisions of the IPC.

Allegations of fund diversion through debentures

According to the prosecution, Rajan, one of the directors of Ecstasy Realty Private Limited (ERPL), approached ECL Finance Ltd. in 2018 to raise funds for developing a residential project comprising two phases. The company issued 600 non-convertible debentures worth Rs 600 crore under a Debenture Trust Deed executed with Catalyst Trusteeship Ltd., with companies from the Edelweiss group subscribing to the debentures.

The complaint was lodged by Edelweiss Asset Reconstruction Company Limited, which later acquired rights over 598 of the 600 debentures after the loan account of ERPL was declared a non-performing asset in 2022. While the company repaid Rs 142.65 crore of the principal in March 2022, the remaining dues of over Rs 480 crore allegedly remained unpaid.

Forensic report flags alleged misuse of funds

A forensic due diligence report submitted in October 2024 claimed that the debenture funds were diverted to personal bank accounts and shell companies rather than being used for the real estate project as specified in the Debenture Trust Deed.

The prosecution and the complainant argued that the accused had carried out layered financial transactions through several entities and had obtained a false end-use certificate from a chartered accountant to conceal the diversion of funds.

Court rejects defence arguments

Counsel for the applicants argued that the dispute was essentially civil in nature arising from contractual terms and that lenders had been informed about the utilisation of funds as early as 2018. It was also contended that two of the applicants were non-executive directors and had no role in the alleged transactions.

However, the court observed that prima facie material indicated diversion of funds. “Prima facie, it appears that a substantial amount from the said funds was diverted to the applicants’ personal accounts and shell company accounts incorporated for layering siphoned funds,” Justice Borkar said.

On the delay in filing the FIR, the court noted that in large-scale economic offences involving concealed transactions, “the cause of action runs from discovery and not the date of commission of the offence”.

Interim protection extended

The court, while rejecting the pleas, extended interim protection granted earlier by four weeks to allow them to approach the Supreme Court.

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