2025 (1) TMI 957 - HC - Companies Law

Seeking grant of Regular bail - allegations of serious fraud and financial mismanagement under the Companies Act 2013 and 1956 - twin conditions under Section 212(6) of the Companies Act 2013 which pertain to the grant of bail in cases involving serious frauds investigated by the SFIO satisfied or not - HELD THAT - It is observed by this Court that it is a common ground between the CSL and the investors that the liquidation of the Company is not in the interest of the investors as substantial amounts have been invested by them in residential/commercial projects proposed by the CSL and the said fact has been duly noted by the concerned Company Court in its order dated 24th August 2023 (which is part of the record). It is pertinent to mention here that the said facts and circumstances were also taken into consideration by the Predecessor Bench of this Court while deciding the grant of interim bail to the applicants. It would not be impermissible under the law to consider the aspect of grant of regular bail in order to allow the accused applicants to revive the CSL in furtherance to the completion of the pending projects - This Court is well cognizant of the fact that the Courts ought to bear in mind that in a matter of regular bail under Section 439 of the CrPC (now Section 483 of the BNSS) the larger interest of the State must be taken into consideration. Further a sensitive approach is required to be acquired by the Courts while dealing with the offences constituting economic offences which are increasing plight of this nation as the same impacts the individual roots of the society which is a common man ultimately leading to minimize the trust of the public in law. Section 212(6) of the Companies Act imposes twin conditions for granting bail to accused persons in cases involving serious frauds investigated by the SFIO. These conditions are that an offence covered under Section 447 of the Companies Act shall be cognizable and no person accused thereof shall be released on bail or on his own bond unless the Public Prosecutor has been given an opportunity to oppose the application for such release and where the Public Prosecutor opposes the application the Court is satisfied that there are reasonable grounds for believing that he is not guilty of such offence and that he not likely to commit an offence while on bail. In the present case this Court while refraining from adjudicating on the merits of the allegations observes that the applicants have made bona fide efforts to revive the projects and safeguard the interests of the investors. The said actions not only reflect their intent to rectify the consequences of the alleged offences rather than perpetuating fraudulent activities but also prima facie satisfies this Court that there are reasonable grounds to believe that the applicants might not be guilty of the offences and they are not likely to commit any offence while on bail as they have sought bail so that they may make efforts towards revival of the CSL and complete the pending projects. This Court holds that the applicants meet the twin conditions under Section 212(6) of the Companies Act and their release on bail would serve the larger public interest without compromising the ongoing legal proceedings. Conclusion - This Court is of the considered view that directing the applicant to first physically surrender and then proceeding with the adjudication of the instant regular bail applications would not serve any substantial purpose and accepting the argument of the respondent might hinder the applicants ongoing pending efforts to resolve the grievances of the investors by implementing the proposed revival schemes. Both the applicants be released on regular bail subject to fulfilment of conditions imposed - bail application allowed.

1. ISSUES PRESENTED and CONSIDERED

The judgment primarily addresses the following legal issues:

Whether the applicants should be granted regular bail under Section 439 of the CrPC (now Section 483 of the BNSS) in the context of allegations of serious fraud and financial mismanagement under the Companies Act, 2013 and 1956.
Whether the applicants have satisfied the twin conditions under Section 212(6) of the Companies Act, 2013, which pertain to the grant of bail in cases involving serious frauds investigated by the SFIO.
Whether the applicants' efforts to revive the company and complete pending projects justify the grant of bail.
Whether the applicants are in "constructive custody" while on interim bail, and if so, whether this suffices for considering their regular bail applications without requiring them to surrender physically.
Whether the applicants' continued custody serves any purpose in the ongoing proceedings, given the delay in trial and the applicants' efforts towards company revival.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Grant of Regular Bail

Legal Framework and Precedents: The applicants seek bail under Section 439 of the CrPC, now Section 483 of the BNSS, in light of allegations under the Companies Act, 2013 and 1956. The principle that "bail is the rule and jail is the exception" is central to the consideration of bail applications.
Court's Interpretation and Reasoning: The court emphasized the need to balance the interests of justice with the applicants' rights to liberty. It considered the applicants' efforts to revive the company and complete pending projects as indicative of their bona fide intentions.
Key Evidence and Findings: The court noted the applicants' active engagement in revival schemes and their cooperation with investors and developers, which suggested a focus on resolution rather than furtherance of criminality.
Application of Law to Facts: The court applied the principle of granting bail as a rule, noting that the applicants have been in custody for over two years without trial commencement and have shown intent to rectify the situation.
Treatment of Competing Arguments: The prosecution opposed bail, citing the seriousness of the allegations and potential influence on witnesses. However, the court found the applicants' efforts towards revival and cooperation with authorities as mitigating factors.
Conclusions: The court granted regular bail, subject to conditions, emphasizing the applicants' constructive efforts and the lack of progress in trial proceedings.

Issue 2: Satisfaction of Twin Conditions under Section 212(6) of the Companies Act

Legal Framework and Precedents: Section 212(6) imposes twin conditions for bail: the Public Prosecutor's opportunity to oppose and the court's satisfaction of the accused's non-guilt and non-likelihood of committing an offence while on bail.
Court's Interpretation and Reasoning: The court observed that the applicants' actions, such as engaging in revival schemes, indicated a lack of intent to commit further offences.
Key Evidence and Findings: The applicants' bona fide efforts to revive the company and address investor grievances were seen as indicative of non-guilt.
Application of Law to Facts: The court found reasonable grounds to believe the applicants were not guilty and unlikely to commit further offences, thus satisfying the twin conditions.
Treatment of Competing Arguments: The prosecution argued the applicants' potential influence on the trial process, but the court prioritized the applicants' constructive actions.
Conclusions: The court held that the applicants met the twin conditions and granted bail accordingly.

Issue 3: Constructive Custody

Legal Framework and Precedents: Constructive custody refers to a legal state where an individual, though not physically confined, remains under judicial supervision. The concept is supported by precedents such as Manish Jain v. Haryana State Pollution Control Board.
Court's Interpretation and Reasoning: The court recognized the applicants' interim bail status as constructive custody, sufficient for considering regular bail applications.
Key Evidence and Findings: The applicants' compliance with interim bail conditions and ongoing cooperation with the court supported the notion of constructive custody.
Application of Law to Facts: The court deemed physical surrender unnecessary, given the applicants' constructive custody status.
Treatment of Competing Arguments: The prosecution's argument for physical surrender was dismissed in light of established legal principles on constructive custody.
Conclusions: The court proceeded with the regular bail application without requiring physical surrender, recognizing constructive custody.

3. SIGNIFICANT HOLDINGS

Preserve Verbatim Quotes of Crucial Legal Reasoning: The court emphasized, "The grant of bail is rule and the refusal is an exception," highlighting the principle's application to the case.
Core Principles Established: The judgment reinforced the principle of granting bail as a rule, the satisfaction of twin conditions under Section 212(6), and the recognition of constructive custody in bail considerations.
Final Determinations on Each Issue: The court granted regular bail to the applicants, recognizing their constructive efforts towards company revival and the lack of trial progress, subject to conditions ensuring their continued cooperation and non-interference with the judicial process.

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