2019 (11) TMI 1736 - HC - Companies Law

Cancellation of default bail granted - very allegation against the petitioner is that the petitioner and his companies colluded with other co-accused in getting created these artificial entries to route and adjust the cash and the money given to them and by creating and showing the entries of in the records of the companies; through cobweb of companies, of the transactions and of the entries - HELD THAT - Although the learned Counsel for the petitioner has submitted that the since the statement of the petitioner was recorded by the investigating officer who has powers akin to the police powers, therefore, the alleged admission by the petitioner has to be treated as a confession, which is not admissible under section 25 of the Evidence Act, however, this court does not find any substance in this argument. The Companies Act 2013 is a special statute. As per the provision contained in section 212(3) the investigation of the offences by the authorities under this Act has to be carried out only as per the provisions of this Act. Still further, under sections 435, 436 and section 439 the trial of an offender under this Act is to be conducted by the Special Court in accordance with Cr.P.C. and the procedure as modified under this Act. Section 217(7) specifically provides that the statement made by a person before the investigating officer shall be admissible against such person and can be used against him. The Companies Act is a special statute; therefore any provision specifically enacted under this Act shall have overriding effect over any other provision in any other general law, like Cr.P.C. and the Evidence Act, dealing with the same aspect. Otherwise also, to repose confidence in and to provide due protection to the corporate world, unlike the free-hand powers of the police qua arrest, search and seizure, the powers of the investigating officers under the Companies Act are far more controlled and circumscribed by the conditions, restrictions and even the prohibitions under the relevant provisions of the Companies Act. Accordingly, under the Companies Act the investigating officer has also been conferred commensurate sanctity and his work has been conferred more authenticity as compared to that of the ordinary police officers. Therefore, under the provisions of the section 217(4) and section 217(5) Companies Act the investigating Officers has been given the power to record even the statements on oath and to summon person as the civil court does. There is nothing on record that the prosecution shall not prove this statement during the trial or that it would be prohibited from proving the same during the trial. Although in the first blush it can occur to the mind that such provision; which makes the statement made before the investigating officers as admissible in evidence; is in negation of fair trial due to inbuilt possibility of pressure and coercion in making such statement, however, it deserves to be noted that the trial of an accused is only a mean to achieve the end i.e. to do substantial justice. The end-product of the criminal trial can very well be the total deprivation of the liberty of the accused. Therefore, some element of coercion is bound to creep-in in all the procedures of criminal trial. Legal coercion to speak the truth; accompanied by the legal protection against unjust harassment; cannot be branded as unfair process. If at all the individual investigating officers is alleged to have exercised actual coercion; as of fact or the pressure; in some case, the accused would be at liberty to expose such aspect by getting an opportunity to cross-examine such an investigating officer and by leading other evidence to this effect. Hence this court finds no ground to discard the statement of the petitioner and his co-accused; even for the purpose of consideration of bail - this court also does not find any substance in the argument of the counsel for the petitioner that since the petitioner had joined investigation and he was also granted default bail but he has never made any effort to run away from the process of the law, therefore there is no material with the prosecution that either the petitioner would influence the witnesses or he shall flee from country if he is released on bail. This court finds substance in the argument of the learned Counsel for the SFIO that since, as per the charge-sheet the petitioner is given to manipulations, for earning money, therefore, it cannot be denied that by nature, the petitioner could be manipulative. Hence, this court has no reason to believe that if the petitioner is released on bail, he is not likely to influence the witnesses of the case and also not likely to destroy the evidence against him. The past conduct of the petitioner has also not been exemplary. The argument of the learned Counsel for the petitioner that the petitioner had been joining the investigation and was released on bail as well; and that during that duration he had not made any attempt to influence the witnesses or to destroy the evidence also does not find favour with this court - this court finds force in the argument of the counsel for the SFIO that at that time the petitioner was not sure of him being made an accused in the case, and being made an accused of a serious offence on multiple counts. Therefore he might not have resorted to that exercise. But now, when the petitioner is fully aware that his alleged crime on multiple counts has been detected, it may not be in the fitness of the things to expect the same straightforward conduct from the petitioner, who is alleged to be manipulative by disposition. Also the argument of the counsel for the SFIO that since the vocation of the petitioner and his Companies is only to commit crimes to earn money, therefore, by any means, it cannot be said that if the petitioner is released on bail, he would not commit any offence again, also finds favor with this court. Petition dismissed.

Summary

Issues Involved:
1. Quashing of the order dated 22-07-2019 canceling the default bail.
2. Seeking regular bail pending trial.

Issue-Wise Detailed Analysis:

1. Quashing of the Order Canceling Default Bail:

The petitions were filed under Section 482 and Section 439 of the Code of Criminal Procedure to quash the order dated 22-07-2019, which canceled the default bail granted to the petitioner. The petitioner was initially granted default bail under Section 167(2) Cr.P.C. due to the investigation not being completed within the statutory period. However, during the investigation, new and multiple offenses surfaced against the petitioner, leading to a comprehensive charge-sheet being filed. The Special Judge allowed the prosecution's application for cancellation of bail, citing the petitioner's involvement in multiple frauds through various companies.

The court held that the default bail granted under Section 167(2) Cr.P.C. does not act as a permanent shield against new and multiple offenses discovered later. The court emphasized that the addition of serious offenses after the initial grant of bail can be a valid ground for canceling the bail. The court found no illegality or impropriety in the order passed by the lower court canceling the default bail, as the petitioner was now charged with multiple counts under Section 447 of the Companies Act, which were not in the knowledge of the investigating officer at the time of the initial arrest.

2. Seeking Regular Bail Pending Trial:

The petitioner sought regular bail pending trial, arguing that the additional offenses were of similar nature or lesser gravity than the initial offense for which he was granted default bail. The petitioner contended that there was no misuse of bail, no attempt to influence witnesses, and no risk of fleeing the jurisdiction, as his passport was already deposited with the court.

The court considered the applicability of the twin conditions prescribed under Section 212(6) of the Companies Act, 2013, which restricts the grant of bail unless the court is satisfied that the accused is not guilty and is not likely to commit any offense while on bail. The court referred to the Supreme Court's judgment in Nikesh Tarachand Shah v. Union of India, which declared similar conditions in the Prevention of Money Laundering Act as ultra vires. The court also referred to its own judgment in Ankush Kumar @ Sonu v. State of Punjab, where it held that the twin conditions are in conflict with the rights guaranteed under Articles 14 and 21 of the Constitution of India.

Despite this, the court emphasized the seriousness of economic offenses and the criteria laid down by the Supreme Court in Y.S. Jagan Mohan Reddy v. Central Bureau of Investigation, which requires considering the nature of accusations, evidence, severity of punishment, character of the accused, and the larger interests of the public/state. The court found that the petitioner was pivotal in the fraudulent transactions involving a significant amount of money, and there was substantial material against him, including his own admissions and statements of co-accused.

The court concluded that the petitioner was manipulative by nature and likely to influence witnesses or destroy evidence if released on bail. The court dismissed the petitions, finding no merit in granting regular bail to the petitioner.