2026 (1) TMI 259 - SC - Indian Laws

Alleged bank-fund diversion through shell companies: prolonged pretrial delay and mostly documentary case lead to regular bail

The dominant issue was whether regular bail should be granted in a large-scale economic offence alleging diversion of bank funds through shell entities. ... Seeking grant of Regular bail - siphoning off the funds by the appellant by making shell companies - right to speedy trial - case based on documentary evidences - HELD THAT:- There is no gainsaying that under Indian law “bail is the rule and jail is an exception” is etched in the ethos of criminal jurisprudence. This rule stems from the fact that criminal law presumes a person to be innocent unless proven otherwise. Meaning that generally an under-trial prisoner ought not be placed behind bars indefinitely unless there is clear threat to society, influencing witnesses/inquiry or he is a flight risk etc. This rule also ensures that process is also not made punishment, wherein a person is jailed for very many years pending trial. Bail under the Code is a qualified right of an accused before conviction, wherein the accused is not guaranteed bail, rather it puts onus on the prosecution to establish as to why the under-trial prisoner should not be enlarged on bail. Any deviation in the above proposition is constitutionally circumspect. There has been many cases before this Court, which indicate that a separate treatment is meted out in large scale economic offenses regarding grant of bail. Wherein this Court has on many occasions held that strictest standards have to be applied while granting bail involving large scale economic fraud. In V. Senthil Balaji Versus Deputy Director, Directorate of Enforcement [2024 (9) TMI 1497 - SUPREME COURT], this Court noted that even under special penal statutes prescribing a higher threshold for grant of bail, these stringent conditions are premised on the legislative expectation of expeditious completion of trial. Consequently, inordinate delay in trial and prolonged pre-trial incarceration cannot coexist with such rigors. While highlighting the “bail is the rule and jail is the exception”, this Court stated that provisions like Section 45 of the PMLA, Section 43D(5) of the UAPA or Section 37 of the NDPS Act cannot be used as tools to incarcerate an undertrial for an unreasonably long period without conclusion of trial. It is clear that the appellant was made accused on account of non-payment of loan and credit facility availed from a consortium of 17 Banks and divesting of the money in 81 shell companies. Admittedly, this is a case based on documentary evidence and all the accused persons connected with these companies, except the appellants herein have been granted bail. In the present case, total 11 cases have been registered against the appellant as indicated in para 3 above. In all other cases, the appellants have been released on bail. The chargesheet filed by the CBI is voluminous in nature containing more than 4 lakh pages and having 736 witnesses. In addition, 17 trunks of documents are those which are not relied upon and may be brought on record subsequently if deemed necessary by the prosecution. The proceedings against the assets have already been taken up by the NCLT and the CIRP is in progress. In the present case, pending trial, the charges have not yet been framed by the Court. Thus, it appears that if the case is taken up on day-to-day basis, even in two to three years, the conclusion is not possible. Considering all the facts and circumstances of the case, subject to putting the restrictions on movement of appellants out of India, and without expressing any opinion on the merits of the case, while disposing of these appeals, it is deemed appropriate to release the appellants on bail subject to fulfilment of conditions imposed. Bail application allowed. 1. ISSUES PRESENTED AND CONSIDERED (i) Whether, notwithstanding the seriousness of alleged large-scale economic offences, the appellants were entitled to regular bail having regard to prolonged pre-trial custody, non-framing of charges, and the apparent impossibility of early conclusion of trial. (ii) Whether the interpretation urged by the prosecution regarding Section 479 of the BNSS could operate as a bar against grant of bail to accused facing offences punishable up to life imprisonment, even where prolonged incarceration and delay in trial are established. 2. ISSUE-WISE DETAILED ANALYSIS Issue (i): Regular bail in a large economic offence despite seriousness, where custody is prolonged and trial is unlikely to conclude within a reasonable time Legal framework: The Court applied settled bail jurisprudence that 'bail is the rule and jail is an exception', anchored in the presumption of innocence and the constitutional protection of personal liberty. The Court treated the right to speedy trial as an inseparable facet of Article 21, and held that unduly long pre-trial incarceration risks converting process into punishment. The Court also recognised that economic offences may attract stricter scrutiny, but reiterated that economic offences are not a uniform class warranting automatic denial of bail. Interpretation and reasoning: On the facts, the Court treated the case as predominantly documentary, noted that investigation qua the appellants was complete, and emphasised that charges had not yet been framed. It relied on the magnitude of the record (over four lakh pages and extensive additional material) and the very large witness list (736), coupled with judicial observations that even day-to-day hearing would not conclude the trial within two to three years. The Court also considered parity and consistency: all other accused connected with the relevant companies (except the appellants) had been granted bail, and the appellants had already been granted bail in the other cases arising from the same transaction. The Court rejected the prosecution's position that seriousness and economic magnitude, by themselves, could justify indefinite pre-trial incarceration when timely trial appeared unrealistic. Conclusion: The Court held that continued detention, in the circumstances of prolonged custody, absence of charge-framing, voluminous evidence, and low likelihood of early trial completion, warranted grant of bail, subject to stringent conditions to address flight risk and witness influence. Issue (ii): Whether Section 479 BNSS bars bail for offences punishable with life imprisonment, and how it operates alongside ordinary bail principles Legal framework: The Court examined Section 479 of the BNSS as a liberty-oriented provision intended to reduce overcrowding and provide an additional route to seek bail after substantial undertrial incarceration. The Court treated statutory provisions affecting liberty as requiring interpretation consistent with Article 21. Interpretation and reasoning: The Court rejected the prosecution's restrictive reading that delay cannot benefit an accused charged with grave offences and that invocation of life-imprisonment-eligible charges should effectively preclude bail. The Court reasoned that such an interpretation would defeat the provision's purpose and be 'restrictive and antiliberty.' It clarified that Section 479 creates an additional ground enabling eligible undertrials to apply for bail after serving specified fractions of the maximum sentence, and imposes a positive obligation on jail authorities to facilitate such bail where conditions are met. At the same time, the Court drew a distinction: while an accused facing maximum punishment of life imprisonment cannot claim the statutory 'benefit' under Section 479, this does not translate into a mandate to keep such accused incarcerated until trial concludes. Bail in such cases must still be assessed under general bail standards in the Code read with constitutional liberty. Conclusion: The Court conclusively held that Section 479 BNSS cannot be construed as a bar to bail merely because life-imprisonment-eligible offences are alleged; rather, even where Section 479's specific threshold benefit is unavailable, bail remains open to be granted on conventional bail principles and Article 21 considerations. Final determination and operative directions (material to decision) The Court granted regular bail, without expressing any view on merits, imposing conditions including: substantial personal bonds and sureties; disclosure of residence and contact details; monthly marking of presence at the police station and appearance before the trial court after charge-framing; surrender of passports and restriction on leaving India without prior permission; non-interference with witnesses on pain of cancellation; attendance before the trial court without seeking unnecessary adjournments; liberty to the trial court to add conditions; and cancellation upon violation.