2023 (4) TMI 1397 - HC - Companies Law

Bail denied for accused in shell company fraud case under Section 447 Companies Act 2013

The Madras HC dismissed a bail petition filed by an accused charged under Section 447 of the Companies Act, 2013 for siphoning public money through shell ... Seeking grant of bail - Siphoning of huge public money availed by way of financial assistance from various banks in the name of some shell Companies and puppet Companies - offence punishable under Section 447 of the Companies Act, 2013 - HELD THAT:- This court feels that it is needless to once again harp on the same and it would be suffice to ensure as to whether there is any change of circumstances warranting this court to consider the present bail petition. The main change of circumstance pleaded by the learned Senior Counsel for grant of bail is filing of a private complaint by the respondent on 9.9.2022 and cognizance having been taken by the court below. True that, as pointed out by the learned Senior Counsel appearing for the petitioner that bail has been granted in respect of the offences punishable under the Prevention of Money Laundering Act, 2002 by the Apex Court in Kiran Prakash Kulkarni vs. Enforcement Directorate and Another [2019 (4) TMI 1973 - SUPREME COURT] observing that charge sheet has been filed and it is true that Section 45(1) of the Prevention of Money Laundering Act 2002, which imposes twin conditions is akin to Section 212(6) of the Companies Act. In the case on hand, it appears that the investigation so far done by the respondent reveals that the petitioner had indulged in fraud as explained under Section 447 of the Companies Act and the statements recorded from the witnesses so far points out the guilt of the petitioner. According to the respondent the case, being one with high stake, they have widened the investigation and there is every likelihood of bringing home the guilt of the petitioner and in the event of the petitioner being released on bail, he would tamper with the evidence and shatter the entire case of the respondent. This court has, recently, declined to grant bail, considering the fact that it is a case of economic offence of grave magnitude affecting the society and having arrived at a conclusion that the petitioner has not satisfied the twin conditions imposed under Section 212(6) of the Companies Act for grant of bail for the offence punishable under Section 447 of the Companies Act and also holding that it is highly premature to grant bail to the petitioner. Conclusion - In cases of serious economic offenses, bail should not be granted unless there is a clear change in circumstances and the accused satisfies the twin conditions under Section 212(6) of the Companies Act. This court finds that the petitioner is not entitled to grant of bail at this stage. Accordingly, the Criminal Original Petition stands dismissed. ISSUES PRESENTED and CONSIDEREDThe core legal questions considered in this judgment include:Whether the petitioner is entitled to bail under Section 447 of the Companies Act, 2013, given the allegations of economic offenses involving significant public funds.Whether there has been a change in circumstances since the previous bail petitions that would warrant granting bail to the petitioner.Whether the principles established in previous judgments, such as the twin conditions under Section 212(6) of the Companies Act, are applicable in this case.Whether the petitioner's personal liberty under Article 21 of the Constitution of India should be prioritized over the allegations and severity of the offense.ISSUE-WISE DETAILED ANALYSISRelevant legal framework and precedents:The legal framework primarily revolves around Section 447 of the Companies Act, 2013, which deals with fraud, and Section 212(6), which imposes conditions for granting bail in cases involving serious fraud. The Court also considered precedents from the Apex Court and other High Courts, including the twin conditions for bail under special legislations as upheld in Vijay Madanlal Choudhary and others vs. Union of India and others.Court's interpretation and reasoning:The Court noted that the offense is a serious economic crime involving the siphoning of public money through fraudulent means. The Court emphasized that such white-collar crimes are particularly harmful due to their calculated nature and the involvement of educated individuals who should act responsibly. The Court found that there was no substantial change in circumstances since the previous bail petitions were denied, and the petitioner failed to meet the twin conditions required for bail under Section 212(6).Key evidence and findings:The evidence included statements from statutory auditors and other witnesses indicating the petitioner's pivotal role in the fraudulent activities. The petitioner was alleged to have signed various documents related to financial transactions and was involved in creating shell companies for siphoning funds.Application of law to facts:The Court applied the legal principles to the facts by considering the severity of the offense and the evidence presented. The Court emphasized the lack of change in circumstances and the petitioner's failure to satisfy the legal conditions for bail. The Court also referenced the need to ensure that the petitioner does not tamper with evidence or impede the investigation.Treatment of competing arguments:The petitioner's counsel argued for bail based on the petitioner's personal circumstances, the delay in trial, and precedents where bail was granted in similar cases. However, the Court found these arguments insufficient to override the seriousness of the offense and the lack of change in circumstances. The Court also distinguished the petitioner's case from other cases cited, noting differences in the legal and factual context.Conclusions:The Court concluded that the petitioner is not entitled to bail due to the gravity of the offense, the lack of change in circumstances, and the potential risk of tampering with evidence.SIGNIFICANT HOLDINGSPreserve verbatim quotes of crucial legal reasoning:'The fraudulent activity in siphoning of public money by defrauding the financial institutions is unlike any other offense which could have been committed by sudden provocation as it is a well-calculated one with the deep understanding as to the consequences and with the ideology to conquer them.'Core principles established:The judgment reinforces the principle that in cases of serious economic offenses, bail should not be granted unless there is a clear change in circumstances and the accused satisfies the twin conditions under Section 212(6) of the Companies Act. The Court also highlighted the importance of protecting public interest and ensuring the integrity of the judicial process.Final determinations on each issue:The Court determined that the petitioner is not entitled to bail at this stage due to the severity of the allegations, the lack of change in circumstances since the previous petitions, and the potential risk of interference with the investigation. The Criminal Original Petition was dismissed.