IMPORTANT POINT
Limitations for grant of bail u/s 212(6)(ii) for offences u/s 477 of Companies Act, 2013 are in addition to those provided in section 439, Code of Criminal Procedure, 1973 and are mandatory.

JUDGMENT :

MOHAN M. SHANTANAGOUDAR, J.

Leave granted.

2. The instant appeal challenges the grant of bail to Respondent No. 1 by the High Court of Delhi in Bail Application No. 1971/2019 in C.C. No. 770/2019, vide the order dated 14.08.2019.

3. The case of the prosecution primarily hinges on the commission of fraud punishable under Section 447 of the Companies Act, 2013 (for short “the Companies Act”), though several other offences under the Companies Act and the Indian Penal Code, 1860 have also been alleged. Briefly put, it is alleged that from FY 2009-10 to FY 2016-17, Brij Bhushan Singal and Neeraj Singal, promoters of Bhushan Steel Ltd. (for short “BSL”), assisted by employees and close associates, used a complex web of 157 companies to siphon off funds from BSL for various purposes, and also fraudulently availed of credit from various lender banks and manipulated the books of accounts and financial statements of BSL, causing wrongful loss to banks and financial institutions amounting to Rs. 20,879 crores and causing wrongful gain to the promoters and their family members, amounting to around Rs. 3500 crores.

Respondent No. 1 herein, Nittin Johari, who was the Chief Financial Officer and Whole Time Director (Finance) of BSL, as well as a member of the Committee of the Board of Directors on Borrowing, Investment and Loans during the relevant period, was alleged to have been a close associate of the promoters and to have played a central role in perpetrating these frauds. In particular, it is alleged that Respondent No. 1 played an active role in using fraudulent letters of credit to avail of credit from lender banks, in inflating Stock-in-Transit figures to avail of greater Drawing Power from banks, and in manipulating statements of accounts and other financial statements of BSL in the garb of adopting the Indian Accounting Standards.

Investigation into the affairs of BSL and certain associated companies had been initiated by the Serious Fraud Investigation Office (for short “the SFIO”), the Appellant herein, pursuant to the order dated 03.05.2016 issued by the Ministry of Corporate Affairs (for short “the MCA”) under Section 212(1)(c) of the Companies Act. Gradually, the scope of investigation expanded to 157 companies and 130 individuals.

4. Respondent No. 1 came to be arrested on 02.05.2019, and was remanded to the Appellant’s custody on 03.05.2019. He has been in judicial custody since 08.05.2019. It is also pertinent to note that previously, co-accused Neeraj Singal had been granted certain interim reliefs (including interim bail) by the High Court of Delhi vide order dated 29.08.2018 in W.P. (Crl.) No. 2453/2018, in which he had challenged the constitutionality of Section 212(6)(ii), (7) and (8) of the Companies Act. The operation and effect of this order (save for his interim release) had been stayed by this Court in appeal, vide order dated 04.09.2018.

5. Respondent No. 1 applied for regular bail under Section 439 of the Code of Criminal Procedure, 1973 (for short “the Cr.P.C.”), which was dismissed by the Special Judge (Companies Act), Dwarka District Courts, Delhi, vide order dated 06.06.2019. The Investigation Report was submitted by the Appellant to the MCA on 27.06.2019, and after obtaining sanction from the MCA, the Petitioner filed the Complaint before the Special Court on 01.07.2019. It may be pertinent to note that as per Section 212(15) of the Companies Act, the Investigation Report filed under Section 212(12) of the Companies Act is deemed to be a report filed by a police officer under Section 173 of the Cr.P.C. (i.e. the charge-sheet).

Respondent No. 1 filed another application under Section 439 of the Cr.P.C. before the Special Judge, which was dismissed vide order dated 02.08.2019. It is pertinent to note that both these orders take note of the mandatory nature of Section 212(6) (ii) of the Companies Act pertaining to the grant of bail for offences, as well as of the gravity of the economic offence committed, t