2020 (5) TMI 540 - HC - Companies Law

Grant of Interim Bail - COVID-19 pandemic situation - main thrust which has been canvassed by learned counsel for the applicants is that due to Covid-19 (Corona Virus) infection, the applicants being diabetic patients have great risk to their lives if they are kept in jail where there are much chances of they being infected by Corona Virus - HELD THAT - As a result of fraudulent activities, the Company has defaulted against outstanding liabilities of ₹ 3578/- crores approximately to Banks and Public Financial Institutions thereby causing wrongful loss to them and their acts and omission are punishable under section 447 and 448 of the Companies Act, 2013. Learned Assistant Solicitor General appearing on behalf of the respondents through his objection filed has drawn the attention of the Court that the applicants have been arrested for the commission of offence of fraud with Public Sector Banks and Financial Institutions involving total amount of ₹ 7500/- crores approximately (₹ 4000/- crores approximately in RGPL and ₹ 3500/- crores in F.I.L.) and the Ministry of Corporate Affairs vide order dated 21.2.2018 ordered investigation into the affairs of 11 Companies of Rotomac Group and Frost International Ltd. and during investigation, it has been revealed that the approval was taken from Ministry of Corporate Affairs to investigate the affairs of another Company, i.e., F.I.L. and Ministry of Corporate Affairs vide order dated 22.8.2019 granted the said approval. Taking into account the nature and gravity of the offence which shakes the conscience of the society and public at large, the investigation being still pending and there are strong apprehensions that there would be chances of tampering of evidence by the applicants, the prayer for grant of interim bail is hereby refused.

Summary

Issues Involved:
1. Application for interim bail under Section 439 Cr.P.C.
2. Health risks due to COVID-19.
3. Nature and gravity of the alleged economic offenses.
4. Previous applications and orders regarding bail.

Issue-wise Detailed Analysis:

1. Application for Interim Bail under Section 439 Cr.P.C.:
The applicants sought interim bail under Section 439 Cr.P.C. due to the health risks posed by COVID-19. The application emphasized the urgency of the matter, citing the World Health Organization's declaration of COVID-19 as a Public Health Emergency and the increased risk for individuals with diabetes.

2. Health Risks Due to COVID-19:
The applicants argued that their health conditions (Type-II diabetes and asthma for applicant no. 1, and Type-II diabetes and diminished lung capacity for applicant no. 2) made them particularly vulnerable to severe illness from COVID-19. They highlighted the overcrowded conditions in District Jail, Kanpur Nagar, which hindered social distancing measures, increasing their risk of contracting the virus. The applicants referenced the Supreme Court's orders in Suo Motu Writ Petition (Civil) No. 1 of 2020, which directed states to consider releasing prisoners to decongest jails due to the pandemic.

3. Nature and Gravity of the Alleged Economic Offenses:
The respondents opposed the interim bail, emphasizing the serious nature of the offenses under Sections 447 and 448 of the Companies Act, 2013, involving fraudulent activities and significant financial losses to public financial institutions and banks. The applicants were accused of using corporate identities to deceive institutions and obtain credit facilities, resulting in outstanding liabilities of approximately ?4,000 crores for RGPL and ?3,500 crores for FIL. The respondents argued that releasing the applicants could hamper the ongoing investigation and increase the risk of tampering with evidence.

4. Previous Applications and Orders Regarding Bail:
The applicants had previously approached the Supreme Court, which directed them to file bail applications with the High Court. The High Court noted that the applicants had not filed regular bail applications and were seeking interim bail solely on the grounds of COVID-19. The court considered the Supreme Court's guidelines and the High Powered Committee's resolution, which recommended interim bail for undertrial prisoners facing charges with a maximum sentence of 7 years or less. Since the applicants faced charges with a maximum sentence of 10 years, their case did not fall within the recommended category for interim bail.

Judgment:
The High Court rejected the application for interim bail, citing the serious nature and gravity of the offenses, the ongoing investigation, and the potential risk of evidence tampering. The court directed the I.G. (Prison), State of U.P., to ensure the applicants' safety in jail, taking necessary precautions against COVID-19. The court also instructed the respondent to expedite the investigation. The court clarified that its observations would not prejudice the consideration of any future regular bail applications filed by the applicants.