Case Note & Summary
The Serious Fraud Investigation Office (SFIO) appealed against the grant of bail to Nittin Johari, the former Chief Financial Officer and Whole Time Director (Finance) of Bhushan Steel Ltd. (BSL), by the Delhi High Court. The case involved a massive corporate fraud where promoters of BSL, along with employees and associates, allegedly siphoned off funds and fraudulently availed credit from banks, causing wrongful loss of Rs. 20,879 crores to banks and financial institutions. Johari was arrested on 02.05.2019 and had been in custody. His bail applications before the Special Judge were dismissed, but the High Court granted bail. The Supreme Court set aside the High Court's order, holding that the High Court failed to apply the mandatory twin conditions under Section 212(6)(ii) of the Companies Act, 2013, which require the court to record satisfaction that there are reasonable grounds for believing the accused is not guilty and not likely to commit any offence while on bail. The Court emphasized the gravity of the economic offence and its impact on the national economy, and rejected the argument of parity with co-accused Neeraj Singal, whose interim bail was granted on constitutional grounds and had been criticized by the Supreme Court. The Court also noted that the filing of the chargesheet does not automatically entitle the accused to bail. The appeal was allowed, and the bail granted by the High Court was set aside.
Headnote
A) Criminal Law - Bail - Economic Offences - Section 212(6)(ii) Companies Act, 2013 - Twin Conditions - The court must record satisfaction that there are reasonable grounds for believing the accused is not guilty and not likely to commit any offence while on bail - The High Court failed to apply these conditions and did not adequately consider the gravity of the offence involving huge loss to banks and national economy - Held that bail granted by High Court is set aside (Paras 7-10).
B) Criminal Law - Bail - Parity with Co-accused - Section 212(6)(ii) Companies Act, 2013 - The interim bail granted to co-accused Neeraj Singal was on constitutional challenge and not on merits, and was criticized by the Supreme Court - Therefore, parity cannot be claimed - Held that the High Court erred in granting bail on ground of parity (Paras 7-8).
C) Criminal Law - Bail - Investigation Report - Section 212(12) and (15) Companies Act, 2013 - The investigation report filed by SFIO is deemed to be a chargesheet under Section 173 Cr.P.C. - Filing of chargesheet does not automatically entitle the accused to bail; the twin conditions must still be satisfied - Held that the High Court's reasoning based on filing of chargesheet was insufficient (Paras 5-6).
Issue of Consideration
Whether the High Court was justified in granting bail to Respondent No. 1 under Section 439 Cr.P.C. without properly considering the mandatory twin conditions under Section 212(6)(ii) of the Companies Act, 2013 and the gravity of the economic offence.
Final Decision
The Supreme Court allowed the appeal, set aside the order of the High Court granting bail to Respondent No. 1, and directed that Respondent No. 1 shall continue to be in custody. The Court held that the High Court failed to apply the mandatory twin conditions under Section 212(6)(ii) of the Companies Act, 2013 and did not adequately consider the gravity of the economic offence.
Law Points
- Twin conditions for bail under Section 212(6)(ii) of Companies Act
- 2013
- Gravity of economic offence
- Parity with co-accused
- Reasonable grounds for believing accused not guilty
Case Details
Criminal Appeal No. 1381 of 2019 (@ S.L.P. (Crl.) No. 7437 of 2019)
Serious Fraud Investigation Office
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Nature of Litigation
Criminal appeal against grant of bail by High Court in a case of corporate fraud investigated by SFIO.
Remedy Sought
Appellant (SFIO) sought setting aside of the bail granted to Respondent No. 1 by the High Court of Delhi.
Filing Reason
The High Court granted bail to Respondent No. 1 without properly considering the mandatory twin conditions under Section 212(6)(ii) of the Companies Act, 2013 and the gravity of the economic offence.
Previous Decisions
Bail applications of Respondent No. 1 were dismissed by the Special Judge on 06.06.2019 and 02.08.2019. The High Court granted bail on 14.08.2019, which was stayed by the Supreme Court on 16.08.2019.
Issues
Whether the High Court was justified in granting bail without properly applying the twin conditions under Section 212(6)(ii) of the Companies Act, 2013?
Whether the High Court adequately considered the gravity of the economic offence and its impact on society?
Whether the grant of bail on the ground of parity with co-accused Neeraj Singal was valid?
Submissions/Arguments
Appellant (SFIO) argued that the High Court failed to consider the mandatory twin conditions under Section 212(6)(ii) of the Companies Act, the gravity of the offence, and the huge loss to banks and national economy. It also argued that parity with co-accused Neeraj Singal was not applicable as his interim bail was granted on constitutional grounds and was criticized by the Supreme Court.
Respondent No. 1 argued that once chargesheet is filed, the nature of allegations is not a factor; the court should consider cooperation and possibility of tampering or absconding. He also argued that there was no allegation of tampering with evidence against him.
Ratio Decidendi
For grant of bail in offences under Section 447 of the Companies Act, 2013, the court must mandatorily record satisfaction that there are reasonable grounds for believing that the accused is not guilty of the alleged offence and is not likely to commit any offence while on bail, as per Section 212(6)(ii). The gravity of the economic offence and its impact on the national economy are relevant factors. Parity with co-accused is not a valid ground if the co-accused's bail was granted on different considerations.
Judgment Excerpts
The instant appeal challenges the grant of bail to Respondent No. 1 by the High Court of Delhi in Bail Application No. 1971/2019 in C.C. No. 770/2019, vide the order dated 14.08.2019.
the High Court ought to have applied the broad contours required to be kept in mind for grant of bail under Section 439 Cr.P.C., which aspect, we find, has not been adverted to at all in the impugned order.
the mandatory conditions under Section 212(6)(ii) of the Companies Act, which require the Court to record its satisfaction that there exist reasonable grounds for believing that the accused is not guilty of the alleged offence and is not likely to commit any offence while on bail.
Procedural History
Investigation initiated by MCA order dated 03.05.2016 under Section 212(1)(c) of Companies Act. Respondent No. 1 arrested on 02.05.2019, remanded to SFIO custody on 03.05.2019, judicial custody from 08.05.2019. Bail applications dismissed by Special Judge on 06.06.2019 and 02.08.2019. Investigation Report submitted on 27.06.2019, complaint filed on 01.07.2019. High Court granted bail on 14.08.2019. Supreme Court stayed the order on 16.08.2019 and set it aside in the present appeal.
Acts & Sections
- Companies Act, 2013: 212(1)(c), 212(6)(ii), 212(7), 212(8), 212(12), 212(15), 447
- Code of Criminal Procedure, 1973: 173, 439
- Narcotic Drugs and Psychotropic Substances Act, 1985: 37(1)(b)(ii)
- Prevention of Money Laundering Act, 2002: 45
