Supreme Court Cancels Bail After 3 Years In Economic Offence Case, Says Interest Of Scam Victims Must Be Protected

In a peculiar case, the Supreme Court on August 28 cancelled the bail of an accused after almost 3 years of his release in connection with offences punishable under Sections 409, 420, 467, 468, 471 and 120B of the Indian Penal Code and Section 3 of the Maharashtra Protection of Interest of Depositors (in Financial Establishments) Act, 1999.

Brief facts

In this case, respondent no.1 in question was enlarged on bail by the Bombay High Court on October 13, 2021. The High Court reasoned there that respondent no. 1 is not a member of the Society and he is incriminated based on the allegations made by some appellants, which does not indicate that there is sufficient material to establish his complicity.

As per brief facts, respondent no. 1 in connivance with one accused, who is the President of Jai Shriram Urban Credit Co-operative Society Limited, misappropriated Rs.79, 54, 26, 963. Further, the deposits of 798 depositors aggregating Rs. 29, 06, 18, 748 were also misappropriated.

It is also alleged that respondent no. 1 deposited Rs. 2,38,39,071 with the Society but withdrew Rs 9,69,28,500/. And that he purchased properties in the name of the President of the Society.

The criminal appeal has been filed against the order by some depositors before the Supreme Court.

What did the Supreme Court find?

A bench of Justices Hima Kohli and Ahsanuddin Amanullah found that the exercise of discretion in granting bail under Section 439 (Special powers of High Court or Court of Session regarding bail) of the Code of Criminal Procedure by the High Court cannot be sustained.

Courts while granting bail must consider relevant facts

The Court stated that while exercising Section 439 powers, the Courts must consider the nature of the accusation, role ascribed to the accused concerned, possibilities or chance of tempering with evidence, antecedents, flight risks etc.

"Courts while granting bail are required to consider relevant factors such as nature of the accusation, role ascribed to the accused concerned, possibilities/chances of tampering with the evidence and/or witnesses, antecedents, flight risk et al."

It referred to a recent judgment Ajwar v Waseem (2024), in which the court speaking through Justice Kohli held: "26. While considering as to whether bail ought to be granted in a matter involving a serious criminal offence, the Court must consider relevant factors like the nature of the accusations made against the accused, the manner in which the crime is alleged to have been committed, the gravity of the offence, the role attributed to the accused, the criminal antecedents of the accused, the probability of tampering of the witnesses and repeating the offence, if the accused are released on bail, the likelihood of the accused being unavailable in the event bail is granted, the possibility of obstructing the proceedings and evading the courts of justice and the overall desirability of releasing the accused on bail." (as underlined by court).

The judgment further notes: "27. It is equally well settled that bail once granted, ought not to be cancelled in a mechanical manner. However, an unreasoned or perverse order of bail is always open to interference by the superior Court. If there are serious allegations against the accused, even if he has not misused the bail granted to him, such an order can be cancelled by the same Court that has granted the bail. Bail can also be revoked by a superior Court if it transpires that the courts below have ignored the relevant material available on record or not looked into the gravity of the offence or the impact on the society resulting in such an order."

It adds: "In P v. State of Madhya Pradesh (supra) decided by a three judges bench of this Court [authored by one of us (Hima Kohli, J)] has spelt out the considerations that must weigh with the Court for interfering in an order granting bail to an accused under Section 439(1)of the CrPC in the following words: “24. As can be discerned from the above decisions, for cancelling bail once granted, the court must consider whether any supervening circumstances have arisen or the conduct of the accused post grant of bail demonstrates that it is no longer conducive to a fair trial to permit him to retain his freedom by enjoying the concession of bail during trial [Dolat Ram v. State of Haryana, (1995) 1 SCC 349 : 1995 SCC (Cri) 237]. To put it differently, in ordinary circumstances, this Court would be loathe to interfere with an order passed by the court below granting bail but if such an order is found to be illegal or perverse or premised on material that is irrelevant, then such an order is susceptible to scrutiny and interference by the appellate court.""

On the cancellation of the bail, the judgment in Ajwar stated: "28. The considerations that weigh with the appellate Court for setting aside the bail order on an application being moved by the aggrieved party include any supervening circumstances that may have occurred after granting relief to the accused, the conduct of the accused while on bail, any attempt on the part of the accused to procrastinate, resulting in delaying the trial, any instance of threats being extended to the witnesses while on bail, any attempt on the part of the accused to tamper with the evidence in any manner. We may add that this list is only illustrative and no exhaustive. However, the court must be cautious that at the stage of granting bail, only a prima facie case needs to be examined and detailed reasons relating to the merits of the case that may cause prejudice to the accused, ought to be avoided. Suffice it is to state that the bail order should reveal the factors that have been considered by the Court for granting relief to the accused."

In State of Haryana v Dharamraj (2023), speaking through Justice Amanullah, the Court said: "It is well settled that, among other circumstances, the factors to be borne in mind while considering an application for bail are:

(i) whether there is any prima facie or reasonable ground to believe that the accused had committed the offence;

(ii) nature and gravity of the accusation;

(iii) severity of the punishment in the event of conviction

(iv) danger of the accused absconding or fleeing, if released on bail;

(v) character, behaviour, means, position and standing of the accused;

(vi) likelihood of the offence being repeated;

(vii) reasonable apprehension of the witnesses being influenced; and

(viii) danger, of course, of justice being thwarted by grant of bail."

Contradictory findings of High Court

The Court particularly notes that the High Court finding that “no positive finding need be recorded on the sufficiency of the said material to establish conspiracy, which issue will be addressed by the trial Court, after the evidence is adduced” is without any basis.

The Court notes that the High Court goes on to record that in his “prima facie opinion, it is extremely debatable whether such material is sufficient to establish conspiracy.”

Against these findings of the High Court, it makes an observation that respondent no.1 was not involved in the affairs of the Society nor was he responsible for the financial irregularities alleged.

The Supreme Court finds against this objection. It says that the chargesheet filed reveals some material indicative of this involvement in withdrawing money much more than the investment, as could be shown from other records, cash-book entries and other books of accounts. This is corroborated by the Forensic Audit Report.

Therefore, the court observes: "We bear in mind the submission that respondent no.1 was a close associate of the President of the Society with regular business/other dealings between the two. Investigation also indicates that out of the monies withdrawn from the Society's account by the respondent no.1, investments were later made in property in the name of his relatives."

On the High Court's order, the court finds: "Further, the High Court has completely lost sight of the fact that the deposits in/to the Society were made by people having meagre earnings without anything else to fall back upon. Tentatively speaking, it seems that the President of the Society systematically siphoned off these funds, with the aid of other office-bearers as also through respondent no.1."

Economic offences require stricter bail conditions

The bench of Justice Kohli notes that where the allegations are in the nature of economic offence affecting a larger number of people coupled the material on record through investigation "reveals the active role of the accused seeking anticipatory or regular bail, it would be fit for the Court granting such bail to impose appropriately strict and additional conditions."

However, in this case, the Court notes that the High Court has imposed usual conditions simpliciter.

The High Court's bail order reads: "8. The applicant be released on bail in connection with Crime 217/2019, registered with Police Station Kotwali, Nagpur, for offences punishable under sections 409, 420, 467, 478, 471, 120-B of Indian Penal Code, Section 3 of the Maharashtra Protection of Interest of Depositors (in Financial Establishments) Act, on executing PR bond of Rs. 16,000/- (Rupees Sixteen Thousand) with one solvent surety of the like amount.

9. The applicant shall attend Economic Offences Wing, Nagpur as and when required by the Investigating Officer.

10. The applicant shall not, directly or indirectly, make any attempt to influence the witnesses or otherwise tamper with the evidence.

11. The applicant shall not leave the country without the permission of the trial Court.”

The Supreme Court finds that the High Court "erred in law" by not imposing stricter bail conditions.

Therefore, on the basis of all these considerations, the Supreme Court found that the exercise of discretion under 439 CrPC was "not in tune with the principles conventionally governing exercise of such powers..."

Cancelling the bail of the accused, the court notes: "yet in view of the nature of the alleged offence, his release on bail can seriously lead to dissipation of the properties where investments have allegedly been made out of Society funds. At the end of the day, the interests of the victims of the scam have also to be factored in."

Case Details: Manik Madhukar Sarve & Ors. v. Vitthal Damuji Meher & Ors, Criminal Appeal No. 3573 of 2024

Citation : 2024 LiveLaw (SC) 619

Click Here To Read/Download Order.