Bail Cannot Be Refused As An Indirect Method Of Punishment Before Conviction: Orissa High Court

While granting bail to the petitioners herein, a Single Judge Bench of Justice Sanjeeb Kumar Panigrahi observed,

"Bail, as it has been held in a catena of decisions, is not to be withheld as a punishment. Bail cannot be refused as an indirect method of punishing the accused person before he is convicted. Furthermore, it has to be borne in mind that there is as such no justification for classifying offences into different categories such as economic offences and for refusing bail on the ground that the offence involved belongs to a particular category. It cannot, therefore, be said that bail should invariably be refused in cases involving serious economic offences. It is not in the interest of justice that the Petitioners should be in jail for an indefinite period."

Factual Background and Contentions of Both the Sides:

Both the Petitioners alongwith other accused, were allegedly involved in the creation and operation of 12 fictious/ bogus firms in the name of unconnected persons by mis-utilizing their identity proofs. The same was done without their knowledge, 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. Thus, both of them were alleged by the Respondent to be part of a collusion to evade taxes to the tune of approximately Rs. 42 crores and therefore, are liable for the payment of the same under Section 132 of the Odisha Goods and Services Tax Act, 2017 ("the Act").

The counsel for the Petitioners submitted that the allegations made against them in the prosecution report are bald accusations, which are completely false and baseless. It was argued that the Petitioner No. 1 was a mere employee who had 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 entangled in the matter merely because he is the brother of Petitioner No. 1.

It was also submitted that the alleged fraud had been perpetrated by someone else and the present Petitioners who were mere pawns, had 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 bona fide actions, they were forwarded into custody on 21.12.2020 and have remained in custody ever since.

It was vehemently pressed that the Petitioners have family members, who are completely dependent on them 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. It was argued that there is no risk of the Petitioners fleeing given that they reside in the local area 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.

Judgment:

The Court held that refusal of bail cannot be used as a method for punishing the accused persons before they are actually convicted. It noted that no doubt, the offence alleged against the Petitioners is a serious one in terms of alleged huge loss to the State exchequer, that, by itself, however, should not deter the Court from enlarging them on bail when there is no serious contention of the Respondent that the Petitioners, if released on bail, would interfere with the trial or tamper with evidence.

The Court relied upon the judgments of the Apex Court in Vaman Narain Ghiya v. State of Rajasthan, (2009) 2 SCC 281; Moti Ram v. State of M.P., (1978) 4 SCC 47, to discuss the importance bail and grave consequences of pretrial detentions.

It also cited Sanjay Chandra v. CBI, (2012) 1 SCC 40, which dealt with a case involving an economic offence of formidable magnitude, touching upon the issue of grant of bail and had observed that deprivation of liberty must be considered a punishment unless it is required to ensure that an accused person would stand his trial when called upon. It was further held therein that the courts owe more than verbal respect to the principle that punishment begins after conviction and that every man is deemed to be innocent until duly tried and found guilty. Again, detention in custody of under-trial prisoners for an indefinite period would amount to violation of Article 21 of the Constitution.

The Court accordingly concluded that having regard for the entire facts and circumstances of the case, especially the fact that both the 'bread earning sons' of a family have been in custody for over a year now, there is no justification for detaining the Petitioners in custody for any longer. Consequently, it enlarged them on bail on certain conditions.

Before parting with the judgment, the Court expressed its concern over the increased cases where real masterminds behind such tax frauds are using pawns as their scapegoats. It observed,

"As a side note it is observed that more and more such cases are brought to the fore where the mere pawns who have been used as a part of larger conspiracy of tax fraud have been brought under the dragnet by the prosecution. It is perhaps time that the prosecution will do well to follow the trail upstream and bring the "upstream" parties who are the ultimate beneficiaries who are the gainers in these evil machinations."

Case Title: Smruti Ranjan Mohanty v. State of Odisha & another connected matter

Case No.: BLAPL No. 776 of 2021 & another connected case

Date of Judgment: 18 February 2022

Coram: Justice Sanjeeb Kumar Panigrahi

Citation: 2022 LiveLaw (Ori) 14