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2019 Supreme(P&H) 2471
IN THE HIGH COURT FOR THE STATES OF PUNJAB AND HARYANA AT CHANDIGARH
Rajbir Sehrawat, J.
Surender Singh - Appellant
Versus
Serious Fraud Investigation Office - Respondent
Criminal Miscellaneous (Main) No. 41761 of 2019
Decided On : 13-11-2019
Preetinder Singh Ahluwalia, Advocate, Chetan Mittal, Advocate, Alok Kumar Jain, Advocate, Himanshu Gupta, Advocate
The court emphasized that the serious nature of economic offenses under the Companies Act warrants a stringent approach to bail, particularly when substantial evidence of fraud exists, justifying continued custody pending trial.
Headnote:(A) Companies Act, 2013 - Sections 212 and 447 - Criminal Procedure Code, 1973 - Section 439 - Grant of bail pending trial - Bail denied due to serious allegations of economic fraud involving substantial amounts collected from investors by the Adarsh Group of Companies - Investigation revealed manipulation of accounts and creation of fictitious agreements to siphon off funds - The petitioner, a director in accused companies, argued he joined investigation and faced no prior arrest - Court held that mere absence of arrest does not preclude custody when substantial fraud is alleged - Material against petitioner includes admissions and lack of supporting documentation for claimed transactions - Bail denied as risk of tampering with evidence and potential flight risk was evident. (Paras 1-49)
Facts of the case:
The petitioner, as a director of two companies implicated in serious fraudulent activities, sought bail after being charged under economic offenses connected to a massive fraud involving claims of substantial loans that were never returned to the investors of a co-operative society.
Findings of Court:
The material established a pattern of deceitful financial operations, justifying denial of bail due to the risk of influencing witnesses and evidence destruction.
Issues: Whether the absence of prior arrest justified automatic bail; the nature of economic offenses and standard for evaluating bail in such cases; the applicability of provisions regarding the conduct of trials for economic crimes.
Ratio Decidendi: The court highlighted the seriousness of economic offenses particularly under the Companies Act and emphasized the need for stringent scrutiny of bail applications in light of potential irreparable harm to public interest.
Result: Petition for bail dismissed.
| Table of Content |
|---|
| 1. case involves serious fraud investigation. (Para 1 , 2 , 3 , 4) |
| 2. allegations include embezzlement and misrepresentation. (Para 5 , 6 , 7) |
| 3. arguments for bail focus on procedural issues. (Para 8 , 9 , 10 , 11 , 12) |
| 4. investigation officer's discretion not to arrest does not guarantee bail. (Para 13 , 14) |
| 5. economic offences require distinct considerations for bail. (Para 15 , 16 , 17) |
| 6. statements and financial irregularities are critical evidence. (Para 18 , 19) |
| 7. constitutional rights vs statutory provisions in bail considerations. (Para 20 , 21) |
| 8. court's discretion over bail must consider nature of offences. (Para 22 , 23) |
| 9. court acknowledges previous case law regarding economic offences. (Para 24 , 25) |
| 10. evidence and the potential for witness tampering weigh heavily. (Para 26 , 27 , 28) |
| 11. dismissing bail highlights seriousness of corporate fraud. (Para 29 , 30) |
| 12. legal requirements necessitate thorough documentation of transactions. (Para 31 , 32) |
| 13. twin conditions of granting bail are under scrutiny. (Para 33 , 34) |
| 14. past judgments guide current bail considerations. (Para 35 , 36) |
| 15. arguments against public interest considerations for bail. (Para 37 , 38) |
| 16. ongoing economic harm solidifies rationale for denying bail. (Para 39 , 40) |
| 17. nature of fraud requires caution in granting bail. (Para 41 , 42) |
| 18. court concludes risk of witness tampering justifies bail denial. (Para 43 , 44) |
| 19. final judgment dismisses the bail application. (Para 49) |
JUDGMENT
Rajbir Sehrawat, J. - This petition under Section 439 of the Code of Criminal Procedure has been filed for grant of regular bail pending trial in Criminal Complaint No. 5 (wrongly typed as No.3 in the cognizance order) of 18.05.2019 CIS No. COMA/05/2019, CNR NO. HRGR01-007022-2019 titled as SFIO VS. ADARSH BUILD ESTATE ETC., under Sections Section 447 of Companies Act 2013, and section 120-B IPC read with sections 417, 418 and 420 , which is pending in the Court of Special Judge, Gurugram.
2. It deserves to be pointed out at the outset that this case is one of the cases in a bunch; which were heard together. However, for making the things more distinct these cases are being decided vide separate judgments. However, since several aspects of the matter are common to all the cases and have even been argued on similar lines and even jointly, therefore, some aspects of the matter would form part of all the judgments.
3. The brief facts constituting allegations in this case are that one Multilevel Co-operative Society was got registered by one Mukesh Modi and family in the name of Adarsh Credit Co-operative Society Ltd. (hereinafter referred to as the Co-operative Society or (ACCSL). That Co- operative Society collected deposits from about 22 lakh investors. In the process about Rs.5000Crores were collected from investors from general public; which remained unreturned to the investors and, accordingly an amount of approximately Rs.9253Crores, including interest, is reflected in the accounts of the Society ACCSL, as payable to the investors. After collecting this money from the public, Mukesh Modi and family created a large number of Companies under the aegis of Adarsh Group of Companies Ltd. (AGCL), with their associates and relatives as the Directors. Subsequently these companies were shown having been advanced the loans of about Rs.1700Crores by the Co-operative Society ACCSL. Loans were required to be returned to the Co-operative Society by these Companies with interest, as per the alleged agreements of advancement of money. However, the same were not returned by the Companies. Therefore the money of the Co-operative Society was allegedly, being siphoned off through the Companies created by Adarsh Group of Companies Limited. When the matter came to knowledge of the Central Government, the Central Government, through Ministry of Corporate Affairs, vide the order dated 28/06/2018, passed in exercise of powers conferred under section 212 (1)(c ) of Comp
