2003 (5) TMI 417 - HC - Companies Law

Summary

Issues Involved:
1. Whether the applicants should be released on bail.
2. Grounds for opposing the bail application.

Issue 1: Whether the applicants should be released on bail.

The applicants, Dr. Suresh Motwani and Mr. Madan Relwani, were arrested for alleged offences under sections 406, 420, 120B of the Indian Penal Code and sections 3 and 4 of the Maharashtra Protection of Interest of Depositors (in Financial Establishments) Act, 1999, for defaulting on payments to depositors. They applied for bail after being remanded to police custody. The court had to decide whether to grant bail and under what terms and conditions.

Issue 2: Grounds for opposing the bail application.

The prosecution and investors opposed the bail on the following grounds:
1. The necessity of the applicants' presence for ongoing investigation to determine the investment and diversion of depositors' money and properties acquired.
2. Lack of cooperation from the applicants in the investigation.
3. The need for deterrence to prevent future economic offences.
4. The belief that detention would aid in the recovery of the investors' money.

Detailed Analysis:

Regarding ground No. (iii):
The court clarified that pre-trial detention is not punitive but to facilitate investigation. The Supreme Court in Bhagiratsingh Judeja v. State of Gujarat stated that detention is not for punishment but to ensure the accused's presence for trial and prevent tampering with evidence. Thus, the investors' contention that bail should be denied to deter future scamsters was rejected.

Regarding ground No. (iv):
The court emphasized that criminal prosecution is for punishing the guilty, not for recovering investors' dues. Detention of the applicants would hinder the companies' business operations, which are necessary for repaying investors. Hence, this ground was also rejected.

Regarding contention Nos. (i) and (ii):
The court noted that the police had commenced investigation in July 2002 and submitted a report on 8th January 2003. The need for further custodial presence was not substantiated with specific details. The applicants could be directed to attend the police station as required without being in custody. Allegations of non-cooperation were unsubstantiated, as the applicants had shown cooperation by depositing their passports and significant amounts of money.

Conclusion:
The court decided to grant bail to the applicants with stringent conditions to ensure their cooperation and presence during the investigation and trial. The applicants were required to post a P.R. Bond of Rs. One crore each and a cash security of Rs. 70,00,000, already deposited in court. They were to attend the Investigating Officer's office regularly and submit their contact details. Their passports were retained, and they were restricted from leaving the country without permission.

Order:
The applicants were released on bail under the specified conditions, balancing the need to protect investors and the applicants' right to liberty until proven guilty.