Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2022 Supreme(Ori) 80

IN THE HIGH COURT OF ORISSA, CUTTACK
S.K. Panigrahi, J.
Smruti Ranjan Mohanty - Appellant
Versus
State Of Odisha - Respondent
BLAPL No. 776 of 2021
Decided On : 18-02-2022

Advocates Appeared:
Ajaya Kumar Moharana, Advocate, for the Appellant; Mr. Sunil Mishra, Asc, for the Respondent.

Bail is not to be withheld as a punishment, and there is no justification for classifying offences into different categories and refusing bail on that ground.

Headnote:
BAIL - OGST Act Offences - 132(1)(c), 132(1)(b), 132(1)(i) - The court discussed the concept and philosophy of bail, the consequences of pretrial detention, and the legal position in matters pertaining to bail as laid down in various judgments. The court emphasized that bail is not to be withheld as a punishment and that there is no justification for classifying offences into different categories and refusing bail on that ground. The court also highlighted the need for the prosecution to follow the trail upstream and bring the ultimate beneficiaries of tax fraud to justice.
Fact of the Case:

The Petitioners were in custody for alleged involvement in creating and operating fictitious firms to evade taxes under the OGST Act, 2017. They filed a bail application, contending that the allegations were false and baseless, and that they were mere pawns in the alleged fraudulent activities. They argued that their continued custody was causing hardship to their families.
Finding of the Court:

The court discussed the concept and philosophy of bail, emphasizing that bail is not to be withheld as a punishment and that there is no justification for classifying offences into different categories and refusing bail on that ground. The court also highlighted the need for the prosecution to follow the trail upstream and bring the ultimate beneficiaries of tax fraud to justice. The court found no justification for detaining the Petitioners any longer and granted them bail with specific conditions.
Issues: Alleged involvement in tax evasion, hardship caused by continued custody, and the philosophy of bail.
Ratio Decidendi: Bail is not to be withheld as a punishment, and there is no justification for classifying offences into different categories and refusing bail on that ground. The prosecution should follow the trail upstream and bring the ultimate beneficiaries of tax fraud to justice.
Final Decision: The court granted bail to the Petitioners with specific conditions, emphasizing that the expression of any opinion in the judgment should not be treated as a view on the merits of the case and that the assessment of the tax liability of the Petitioners shall be carried out strictly in accordance with the applicable provisions of applicable law.

Judgement Key Points

Key Points: - Bail is not to be withheld as punishment and there is no justification for classifying offences into different categories and refusing bail on that ground. (!) (!) - The two paramount considerations in bail decisions are the likelihood of the accused fleeing justice and the likelihood of tampering with prosecution evidence. (!) - The High Court has wide discretion under Section 439(1) and must exercise it judiciously, considering the nature of the offence, investigation stage, and other factors, without automatic denial of bail in economic offences. (!) (!) (!) - The Petitioners were granted bail with specific conditions, including cooperation with trial, no witness intimidation, no leaving India without permission, and potential cancellation for breaches or involvement in similar offences. (!) (!) (!) (!) (!) (!) - The court directed that the assessment of tax liability be carried out strictly under applicable law and that its opinion on merits should not be treated as a decision on merits. (!)

What is the correct approach to bail in OGST Act cases and whether bail can be refused as punishment or on a class-based categorization of offences?

What is the standard for granting bail under Section 439(1) and the factors (including likelihood of flight and tampering with evidence) that must be weighed?

What are the directions and conditions imposed on bail in this case for the petitioners charged under OGST Act?

JUDGMENT

S.K. Panigrahi, J. - The present Petitioners, who are in custody since 21.12.2020, have filed the instant bail application under Section 439 of Cr.P.C. corresponding to 2(C)CC Case No.03 of 2020 pending in the court of the Learned J.M.F.C(R), Cuttack for commission of offences under Sections 132(1) (c), 132(1)(b) and 132(1)(i) of the OGST Act, 2017. Prior to the instant application, the Petitioners had approached the learned District and Sessions Judge, Cuttack, vide Bail Application No. 11023 of 2020 which was rejected on 25.01.2021.

2. Shorn of unnecessary details, the prosecution's case is that both the Petitioners alongwith other accused, were involved in the creation and operation of 12 fictious/ bogus firms in the name of unconnected persons by misutilizing their identity proof. The same was done behind their back, in order to avail and utilize bogus input tax credit of an amount of Rs. 20.45 crores on the strength of fraudulent purchase invoices without any physical receipt or actual purchase of goods. As such both of them are alleged to be part of a collusion to evade taxes to the tune of approximately Rs. 42.00 crores and therefore are liable for the payment of the same under Section 132 of the OGST Act, 2017.

3. Per contra, the Ld. Counsel for the Petitioners earnestly submitted that the allegations made against the Petitioners in the prosecution report are bald allegations which are completely false and baseless. It was contended that the Petitioner No. 1 was a mere employee who has dutifully followed the directions and orders of his superiors. Similarly, Petitioner No. 2 was in no way connected to the case as he is a mere paan shop owner and has no nexus to the alleged fraud in any way whatsoever and has been embroiled in the matter merely because he is the brother of Petitioner No. 1. It has bene submitted that the alleged fraud has been perpetrated by someone else and the present Petitioners who are mere pawns, have unduly been made scapegoats despite having no involvement in the alleged fraudulent activities. It is further submitted that the Petitioners have been duly cooperating with the authorities and have on multiple occasions appeared in the OGST offices to assist the authorities with the investigation, but despite their bonafide actions, they were forwarded into custody on 21.12.2020 and have remained in custody ever since. The Petitioners have wives, young children and a widowed mother who are completely dependent on the Petitioners and are on the brink of starvation due to the absence of the only two earning members in the family especially given the pandemic situation. The Ld. Counsel for the Petitioners finally urged that given that there is no risk of the Petitioners fleeing given that they reside locally and that they shall not tamper with evidence, they should be released on bail as even trial has not commenced and they have been in custody for over a year.

4. Heard learned counsel for both parties and perused the records. The core concept and philosophy of bail was discussed by the Hon'ble Supreme Court in Vaman Narain Ghiya v. State of Rajasthan, (2009) 2 SCC 281, wherein it was observed that:

'6. 'Bail' remains an undefined term in CrPC. Nowhere else has the term been statutorily defined. Conceptually, it continues to be understood as a right for assertion of freedom against the State imposing restraints. Since the UN Declaration of Human Rights of 1948, to which India is a signatory, the concept of bail has found a place within the scope of human rights. The dictionary meaning of the expression 'bail' denotes a security for appearance of a prisoner for his release. Etymologically, the word is derived from an old French verb 'bailer' which means to 'give' or 'to deliver', although another view is that its derivation is from the Latin term 'baiulare', meaning 'to bear a burden'. Bail is a conditional liberty. Stroud's Judicial Dictionary (4th Edn., 1971) spells out certain other details. It

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