Bombay High Court Grants Bail To Gokulnath Shetty, Prime Accused In PNB Fraud Case Citing Long Incarceration

The Bombay High Court has granted bail to Gokulnath Raghu Shetty, prime accused in the Punjab National Bank (PNB) fraud case involving over Rs 7,000 crore.

Justice M.S. Karnik passed the order on Thursday, expressing concerns over the prolonged incarceration of the applicant for nearly six years without the trial commencing.

“The reason why I am inclined to enlarge the applicant on bail is only on the ground of long incarceration. The applicant was arrested on 06.03.2018 and is now in custody almost for six years. The charge has not been framed so far. There are around hundred witnesses to be examined. The trial is not likely to conclude any time soon. The applicant is 65 years of age.”

The case pertains the fraud by diamond merchants Mehul Choksi and his nephew Nirav Modi, among others, by obtaining fraudulent Letters of Undertaking (LoUs) from PNB in connivance with certain bank officials.

Shetty, who was employed as a Deputy Manager in PNB's Forex Department, stands accused of conspiring with the main accused and abusing his official position to issue LoUs/Foreign Letters of Credit in violation of established banking norms.

While acknowledging the serious nature of the allegations and their potential impact on the country's economy, Justice Karnik noted that Shetty's continued incarceration was unjustified given the glacial pace of the trial proceedings. The court observed that with around 100 witnesses yet to be examined, the trial is unlikely to conclude anytime soon.

Referring to the Supreme Court's recent order granting bail to a co-accused, Hemant Bhatt, the judge remarked that Shetty's age of 65 years and prolonged custody warranted his release on bail. However, to allay the prosecution's concerns about potential tampering with the investigation, stringent conditions were imposed.

Shetty has been directed to furnish a personal bond of Rs 1 lakh and surety of the same amount. He must report to the CBI office weekly, refrain from contacting co-accused or influencing witnesses, and not leave the Mumbai metropolitan area without court permission. Significantly, he has been barred from applying for a passport until the trial concludes.

The court clarified that its observations were prima facie in nature and warned Shetty of severe consequences, including cancellation of bail, if he attempted to tamper with the investigation. The order will take effect after six weeks, as requested by the prosecution considering the magnitude of the offence.

The PNB fraud case, which came to light in 2018, sent shockwaves through India's banking sector and triggered a concerted effort to strengthen regulatory oversight and internal controls within financial institutions.

Appearances - Adv. Sandeep Karnik for the applicant. SPP Hiten Venegavkar for the CBI

BAIL APPLICATION NO.2489 OF 2023

Click Here To Read/Download Order