No Parity or Change in Circumstances for Second Pre-Arrest Bail in ₹115.8 Cr Co-op Scam; Custodial Interrogation Vital: Kerala High Court (S.482 BNSS, 2023) - 2025-06-19

Kerala High Court Denies Second Anticipatory Bail Pleas in ₹115.8 Crore Co-operative Society Scam

Ernakulam, Kerala – June 18, 2025 – The Kerala High Court, presided over by Justice A.Badharudeen , has dismissed the second anticipatory bail applications filed by three former Managing Committee members of the Angamaly Urban Co-operative Society allegedly involved in a massive financial scam amounting to ₹115.8 crores. The Court found no substantial change in circumstances to warrant a different outcome from their previously rejected pleas and underscored the necessity of custodial interrogation for effective investigation.

The petitioners, Elsy Varghese (70 years, Accused No. 13), V.D. Tomy (64 years, Accused No. 8), and P.C. Tomy (73 years, Accused No. 5), had approached the High Court seeking pre-arrest bail for the second time under Section 482 of the Bharatiya Nagarik Suraksha Sanhita, 2023, in Crime No. 338/CB/EOW/EKM/R/2024 of the Crime Branch, Ernakulam.

Background of the Alleged Scam

The case revolves around allegations that the accused, as members of the Managing Committee of the Angamaly Urban Co-operative Society, abused their positions to sanction fictitious loans, renew loans using existing documents, and misappropriate society funds. The initial reported misappropriation of ₹55 crores has escalated to ₹115.8 crores as per the ongoing investigation. The accused face charges under various sections of the Indian Penal Code, including 406 (criminal breach of trust), 420 (cheating), and forgery-related offences (465, 467, 468, 471), read with Section 34 (common intention), as well as sections 13(1)(a) and 13(2) of the Prevention of Corruption Act, 1988.

Petitioners' Arguments for Bail

The petitioners' counsel argued for pre-arrest bail, citing alleged changes in circumstances.

* Elsy Varghese : Contended she was a 70-year-old lady who had also deposited funds in the society. While admitting to signing minutes where fake loans were approved, she claimed no intent to misappropriate. She sought parity with another board member, T.V. Benny (Accused No. 4), who was granted anticipatory bail as the prosecution had not opposed it.

* P.C. Tomy : Argued that the allegations against him were primarily civil and lacked criminal culpability, especially in the absence of a conspiracy charge connecting him to other accused.

* V.D. Tomy : Claimed his directorship was limited to 2017-2018, during which no new loans were allegedly granted, and he only participated in renewing existing loans under the belief they were legitimate. He also sought parity with T.V. Benny . All petitioners highlighted their age, health conditions, and willingness to cooperate with the investigation.

Prosecution's Vehement Opposition

The Additional Director General of Prosecution (ADGP) strongly opposed the bail pleas, detailing the gravity of the scam. * The ADGP submitted that P.C. Tomy allegedly verified and valued 53 fake loans and participated in board meetings sanctioning 599 fake loans. * V.D. Tomy was accused of valuing 130 fake loans and participating in meetings that approved 621 fake loans. * Elsy Varghese allegedly participated in meetings approving 306 fake loans and granted a total of 379 loans, including fake ones.

The prosecution asserted that there was no change in circumstances warranting a review of the earlier dismissal orders. Regarding T.V. Benny 's bail, the ADGP clarified that it was not opposed because investigation revealed Benny had not signed the minutes for meetings where fake loans were passed and had, in fact, recorded his dissent. This, the prosecution argued, made his situation distinct from the petitioners. The ADGP emphasized that custodial interrogation of the petitioners was crucial for the investigation into the large-scale fraud affecting numerous depositors. Counsel for victim depositors also opposed the bail pleas, highlighting the plight of those who lost their savings.

Court's Rationale for Dismissal

Justice Badharudeen , in a common order, meticulously examined the arguments and the material on record. The Court recalled its earlier orders dismissing the petitioners' initial bail applications (B.A. No. 522/2024 and B.A. No. 6961/2024), where it had found their custodial interrogation necessary.

The Court held that the grant of anticipatory bail to T.V. Benny did not constitute a "change in circumstances" for the current petitioners. Justice Badharudeen noted, "The submission of the learned ADGP in this regard is found as acceptable. Therefore, it could not be held that, grant of anticipatory bail to Sri.T.V. Benny on the above grounds is a change in circumstances to consider anticipatory bail applications at the instance of the petitioners."

Dismissing P.C. Tomy 's argument about the civil nature of the allegations, the Court observed, "Grant of fake loans amounting to Crores of rupees by creating fake documents, being a member of a Registered Co-operative Society and getting benefit out of it, as alleged by the prosecution, are very serious offences and the same could not be limited to mere civil liability."

The Court also found V.D. Tomy 's claims of limited involvement contradicted by the Investigating Officer's report, which detailed his participation in meetings sanctioning hundreds of fake loans in 2022 and 2023, and his role in valuing 130 fake loans in 2023. Similar detailed reports from the IO regarding the extensive involvement of P.C. Tomy and Elsy Varghese were also relied upon by the Court.

Quoting its previous order which detailed the modus operandi of the fraud, the Court reiterated the seriousness of the allegations: > "Allegations levelled are quite serious in nature that loans are seen passed in the name of fictitious persons in some cases; and in some others, in favour of certain persons without their knowledge... The same property is allegedly mortgaged for several loans... loans are granted on the strength of photocopies of the title deeds and even based on prior deeds." (Para 15 of B.A. No.3342/2024 order, as quoted).

The Court concluded that the investigation into the "huge scam" was still at a primary stage and that "arrest and custodial interrogation of the petitioners are very much essential to effectuate meaningful investigation."

Final Decision and Court's Displeasure

The High Court dismissed all three bail applications, directing the petitioners to surrender before the Investigating Officer forthwith. It further instructed the IO to arrest the petitioners if they failed to surrender, noting the ADGP's submission that their custodial interrogation was necessary.

Significantly, Justice Badharudeen expressed "extreme displeasure" with the Investigating Officer for not arresting the petitioners despite the dismissal of their earlier bail applications in October 2024. The Court observed that this inaction "shall have adverse impact on effective investigation of a very serious crime."

The decision reaffirms the judiciary's stern stance on large-scale financial frauds and the importance of custodial interrogation in unearthing complex conspiracies, especially when second or subsequent bail applications are moved without genuine changes in circumstances.