2025 (2) TMI 855 - HC - Companies Law

Seeking enlargement of bail - Siphoning of public money - active and managerial role in the offences by making misrepresentation to the banks in obtaining loans and siphoning the funds using puppet companies and by writing off the stocks and inventories - offence punishable under Section 447 of the Companies Act - HELD THAT - This court feels that the present petition being one seeking personal liberty during the trial it would be suffice to restrict the consideration of such materials to decide the question whether the petitioner is entitled to grant of bail. A perusal of the materials would disclose that the present petition is the fifth one and on rejection of earlier three petitions the petitioner appears to have approached the Apex Court however could not succeed in obtaining bail and the subsequent bail petition moved by him before the Apex Court was withdrawn seeking liberty to move the trial Court. Such application moved by the petitioner before the Trial Court also stood dismissed and thereupon the present petition has been filed by the petitioner. It is not a simple case where the petitioner was charged only for nonrecovery of certain outstanding amounts from the debtors but the petitioner is alleged to have indulged into cheating of Banks and siphoning off the public money using puppet Companies writing off the stocks inventories and receivables and thereby he is facing serious economic offences and fraud of a great magnitude. Though investigation has been completed in the case the presence of the petitioner is very much required at the stage of framing of charges and the evidence like statements given by witnesses to the SFIO and the communication addressed by the petitioner to the Banks would clinchingly establish the role played by the petitioner and the control he has over the witnesses and thus the petitioner has not complied with the twin conditions stipulated under Section 212(6) of the Companies Act 2013 and in the event of grant of bail to the petitioner there is every possibility for the evidence being tampered and the witnesses being influenced by him. On the aspect of long incarceration and application of the decision in V. Senthil Balaji vs. The Deputy Director Directorate of Enforcement 2024 (9) TMI 1497 - SUPREME COURT it has been brought to the notice of this court that the Apex Court has granted bail in that case considering the long incarceration of the petitioner therein coupled with the aspect that the trial in that case could be delayed due to the fact that existence of proceeds of crime under Section 3 of PMLA can be proved only if the scheduled offence is established and even if the trial of the case under PMLA proceeds is concluded it cannot be finally decided unless the trial of scheduled offences concludes and the dictum laid down in Senthil Balaji s case is not applicable to the present case as the trial in the present case being one for offences under Companies Act is not dependent on proving offences under any other Act and thereby the concept of long incarceration alone cannot be a ground for grant of bail. Grounds of parity - HELD THAT - So far as the question of parity in consideration the petitioner pleads that a co-accused viz. A30-Devarajan has been granted bail by this court. However it has been brought to the notice of this court by the respondent that such order has been under challenge before the Apex Court in SLP (Crl.) Diary No.21112 of 2023 and the same is pending. This court has also been apprised by the respondent that other co-accused viz. A4-Dineshchand Surana and A5-Vijayraj Surana who failed before this court in their consecutive bail applications had moved the Apex Court and their petitions in SLP (Crl.) No.15535 of 2024 and SLP (Crl.) No.17007 of 2024 respectively are pending as on date and thus the Apex Court has seized of the matter. Conclusion - The petitioner is alleged to have indulged into cheating of Banks and siphoning off the public money using puppet Companies writing off the stocks inventories and receivables and thereby he is facing serious economic offenses and fraud of a great magnitude. This court finds that the present petition seeking bail cannot be entertained in the circumstances of the case. Petition dismissed.

Summary

ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment include:

1. Whether the petitioner is entitled to bail given the allegations of economic offenses and fraud of significant magnitude.

2. Whether the petitioner's long incarceration justifies the granting of bail, particularly in light of Article 21 of the Constitution of India.

3. Whether the principle of parity applies, considering a co-accused has been granted bail.

4. Whether the petitioner's role in the alleged offenses and the potential to tamper with evidence or influence witnesses affects the decision to grant bail.

ISSUE-WISE DETAILED ANALYSIS

1. Entitlement to Bail in Light of Economic Offenses

- Relevant Legal Framework and Precedents: The petitioner is charged under Section 447 of the Companies Act, which involves fraud and requires satisfaction of twin conditions under Section 212(6) of the Companies Act, 2013, for bail.

- Court's Interpretation and Reasoning: The Court emphasized the gravity of the offenses, including the alleged siphoning of public money and fraud using puppet companies, which are serious economic offenses.

- Key Evidence and Findings: The Court noted the petitioner's managerial role and misrepresentation to banks, as well as evidence from witness statements and communications that established his involvement.

- Application of Law to Facts: Given the serious nature of the offenses and the petitioner's active involvement, the Court found that the conditions for bail were not met.

- Treatment of Competing Arguments: The Court considered the petitioner's argument of innocence and lack of control over financial transactions but found the evidence of his involvement compelling.

- Conclusions: The Court concluded that the petitioner is not entitled to bail due to the serious nature of the offenses and the lack of compliance with the statutory conditions for bail.

2. Long Incarceration and Article 21 of the Constitution

- Relevant Legal Framework and Precedents: The petitioner argued for bail based on long incarceration, citing the principle that bail is the rule and jail is an exception under Article 21.

- Court's Interpretation and Reasoning: The Court acknowledged the principle but noted that long incarceration alone does not justify bail in cases of serious economic offenses.

- Key Evidence and Findings: The Court considered the duration of the petitioner's incarceration and the pending trial but emphasized the seriousness of the charges.

- Application of Law to Facts: The Court distinguished the present case from precedents where long incarceration led to bail, noting that the trial's dependency on other factors was not applicable here.

- Treatment of Competing Arguments: The Court weighed the petitioner's right to personal liberty against the need to prevent potential tampering with evidence.

- Conclusions: The Court found that long incarceration did not warrant bail in this case, given the nature of the offenses.

3. Parity with Co-Accused

- Relevant Legal Framework and Precedents: The petitioner argued for bail based on parity, as a co-accused had been granted bail.

- Court's Interpretation and Reasoning: The Court noted the pending challenge to the co-accused's bail order in the Apex Court and considered the unique circumstances of each accused.

- Key Evidence and Findings: The Court considered the ongoing legal proceedings involving other co-accused and the petitioner's specific role in the offenses.

- Application of Law to Facts: The Court found that the principle of parity did not automatically apply, given the differing circumstances and roles of the accused.

- Treatment of Competing Arguments: The Court acknowledged the petitioner's argument but emphasized the pending legal challenges and the petitioner's specific involvement.

- Conclusions: The Court concluded that parity did not justify bail in this case.

4. Potential to Tamper with Evidence or Influence Witnesses

- Relevant Legal Framework and Precedents: The potential for tampering with evidence is a critical consideration in bail decisions.

- Court's Interpretation and Reasoning: The Court noted the petitioner's managerial role and the evidence suggesting his control over company operations and potential influence over witnesses.

- Key Evidence and Findings: Witness statements and organizational charts were considered, indicating the petitioner's significant influence.

- Application of Law to Facts: The Court found that the risk of evidence tampering justified denying bail.

- Treatment of Competing Arguments: The Court considered the petitioner's assurances but prioritized the integrity of the trial process.

- Conclusions: The Court concluded that the risk of tampering with evidence warranted denying bail.

SIGNIFICANT HOLDINGS

- Verbatim Quotes of Crucial Legal Reasoning: "The petitioner is alleged to have indulged into cheating of Banks and siphoning off the public money using puppet Companies, writing off the stocks, inventories and receivables and thereby, he is facing serious economic offenses and fraud of a great magnitude."

- Core Principles Established: The Court reaffirmed the principle that serious economic offenses require strict compliance with statutory conditions for bail and that long incarceration alone does not justify bail.

- Final Determinations on Each Issue: The Court dismissed the petition for bail, emphasizing the seriousness of the offenses, the potential for evidence tampering, and the lack of change in circumstances since previous bail applications.