TaxTMI 
TaxTMI 
2023 (7) TMI 1187
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....accused. 3. Notice on this bail petition was issued on 02.06.2022; consequent whereupon the respondent/Serious Fraud Investigation Office ("SFIO" for short) has filed reply/counter-affidavit dated 11.11.2022 opposing grant of bail. 4. Nominal Roll dated 25.02.2023 has been received from the Jail Superintendent, which shows that the petitioner has been in custody for 6 months and 28 days as of that date, and that he has been released on bail in two other matters, and that his jail conduct is 'satisfactory'. Brief Overview 5. Briefly, the petitioner was summonsed in the matter vide summoning order dated 07.03.2022 made by the learned Special Judge (Companies Act), Dwarka Courts (SW), taking cognisance of offences inter-alia under section 447 of the Companies Act, 2013 ("Companies Act" for short), the essential imputation against the petitioner being that he was director of M/s Parul Polymers Pvt Ltd. (accused No. 1) when the offences are alleged to have been committed. 6. Accused No. 1 company was engaged principally in the trade of plastic granules, and the gravamen of the offences alleged inter-alia under section 447 of the Companies Act are that the company indulged....
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....rresting him. 12. That notwithstanding, it is argued, that when, in compliance of summons issued to him by the learned Special Judge, the petitioner appeared before the court on 25.05.2022, the bail application filed by him was rejected by the learned Special Judge there-and-then; he was "taken into custody and sent to J/C" on the spot; and the petitioner has been in prison ever-since. As of today therefore, the petitioner has spent about 14 months in jail as an under-trial. 13. It is further submitted that no material has been cited by the SFIO to support the contention that the petitioner is either a flight-risk or that he may influence witnesses or destroy evidence or commit any offence, if he is enlarged on bail. It is pointed-out that this is very relevant, especially since there is no allegation against the petitioner having done so even during the period of investigation which spanned almost 4 years. 14. On the merits of the case, counsel submits that there is no specific role attributed to the petitioner either in the final Investigation Report dated 16.03.2019 or in the summoning order. It is stated that the final investigation report proceeds essentially on the p....
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....re, in the present case, the learned Special Judge misdirected himself in applying the twin-conditions as specified in section 212(6)(ii) of the Companies Act, since on the date when the petitioner appeared before the learned Special Judge, he was not under incarceration. It is also submitted that at the time when he appeared before the learned Special Judge, the SFIO had not even sought that the petitioner be detained in judicial custody. It is therefore argued, that the order of the learned Special Judge denying bail to the petitioner by applying the twin-conditions, is bad in law. SFIO's Contentions 20. On the other hand, opposing the grant of bail, Mr. Shankar, learned CGSC has urged that since the petitioner is the main accused in the case; that charges are yet to be framed against the petitioner; and evidence is yet to be recorded, there is reasonable apprehension that if released on bail, the petitioner would attempt to intimidate or influence witnesses, especially since the witnesses are either his employees or his close associates. It is also alleged that the petitioner was the 'mastermind' on whose directions the other co-accused worked; and therefore, the petitione....
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....ents : Vijay Madanlal Choudhary & Ors. vs. Union of India & Ors. 2022 SCC Online SC 929, Serious Fraud Investigation Office vs. Nittin Johari & Anr. (2019) 9 SCC 165, Prahlad Singh Bhati vs. NCT. Delhi & Anr. (2001) 4 SCC 280, Gudikanti Narashimhulu & Ors. vs. Public Prosecutor, High Court of Andhra Pradesh (1978) 1 SCC 240 at para 7 and Rohit Tandon vs. Directorate of Enforcement (2018) 11 SCC 46 at para 21. Discussion & Conclusions 25. To begin with, a brief recap of the principles for grant of bail as enunciated by the Supreme Court, including in the context of the stringent, additional twin-conditions imposed under section 212(6) of the Companies Act, as relevant for the present petition, would be useful : 25.1. In Moti Ram & Ors. vs. State of Madhya Pradesh (1978) 4 SCC 47 at para 14. the Supreme Court has observed that the consequences of pre-trial detention are grave, since they subject an undertrial to psychological and physical deprivations of jail life, which are usually even more onerous than those imposed on convicts. It has further been observed that an undertrial in custody is prevented from contributing to the preparation of his defence at the trial, which b....
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....e two paramount considerations for grant of bail, in Ashok Sagar vs. State (NCT of Delhi) 2018 SCC OnLine Del 9548 at para 35(ii) it has been observed that equally it cannot be overlooked that theoretically every undertrial is a flight-risk if granted bail. 25.8. It may also be noticed that though the gravity of an offence is certainly one of the considerations for deciding bail, in P. Chidambaram vs. Directorate of Enforcement 2020) 13 SCC 791 at para 12, the Supreme Court has also observed that the gravity of the offence will beget the length of the sentence, meaning thereby that merely because an offence alleged is serious, does not mean that the court should necessarily deny bail and pre-emptively make an undertrial suffer a sentence, even though such sentence may eventually be awarded to him if he is convicted. 25.9. Most pertinently, interpreting the additional conditions imposed by section 37 of the NDPS Act for grant of bail, which conditions are worded exactly as those in section 212(6) of the Companies Act, in its recent decision in Mohd. Muslim alias Hussain vs. State (NCT of Delhi) 2023 SCC OnLine SC 352, the Supreme Court has said this : "19. The conditi....
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....ie look at the material on record (whenever the bail application is made) that the accused is not guilty. Any other interpretation, would result in complete denial of the bail to a person accused of offences such as those enacted under Section 37 of the NDPS Act. "21. The standard to be considered therefore, is one, where the court would look at the material in a broad manner, and reasonably see whether the accused's guilt may be proved. The judgments of this court have, therefore, emphasized that the satisfaction which courts are expected to record, i.e., that the accused may not be guilty, is only prima facie, based on a reasonable reading, which does not call for meticulous examination of the materials collected during investigation (as held in Union of India v. Rattan Malik (2009) 2 SCC 624). Grant of bail on ground of undue delay in trial, cannot be said to be fettered by Section 37 of the Act, given the imperative of Section 436A which is applicable to offences under the NDPS Act too (ref. Satender Kumar Antil supra). Having regard to these factors the court is of the opinion that in the facts of this case, the appellant deserves to be enlarged on bail." ....
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.... Provided also that no adjournment shall be granted for the purpose only of enabling the accused person to show cause against the sentence proposed to be imposed on him. Explanation 1.- If sufficient evidence has been obtained to raise a suspicion that the accused may have committed an offence, and it appears likely that further evidence may be obtained by a remand, this is a reasonable cause for a remand. Explanation 2.-The terms on which an adjournment or postponement may be granted include, in appropriate cases, the payment of costs by the prosecution or the accused." (emphasis supplied) 25.12. In State through CBI vs. Dawood Ibrahim Kaskar & Ors. (2000) 10 SCC 438, the following observations of the Supreme Court must also be noted : "11. There cannot be any manner of doubt that the remand and the custody referred to in the first proviso to the above sub-section are different from detention in custody under Section 167. While remand under the former relates to a stage after cognizance and can only be to judicial custody, detention under the latter relates to the stage of investigation and can initially be either in police custody or judic....
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....ch word "arrater" meaning "to stop or stay". It signifies a restraint of a person. "Arrest" is thus a restraint of a man's person, obliging him to be obedient to law. "Arrest" then may be defined as "the execution of the command of a court of law or of a duly authorised officer"." (emphasis supplied) 26. Another important decision of the Supreme Court which enunciates the distinction between custody, detention and arrest is also pertinent for purposes of this matter. The following relevant para of Sundeep Kumar Bafna vs. State of Maharashtra & Anr. (2014) 16 SCC 623 may be referred to for this purpose : "16. It appears to us from the above analysis that custody, detention and arrest are sequentially cognate concepts. On the occurrence of a crime, the police is likely to carry out the investigative interrogation of a person, in the course of which the liberty of that individual is not impaired, suspects are then preferred by the police to undergo custodial interrogation during which their liberty is impeded and encroached upon. If grave suspicion against a suspect emerges, he may be detained in which event his liberty is seriously impaired. Where the investi....
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....te [Niranjan Singh v. Prabhakar Rajaram Kharote, (1980) 2 SCC 559 : 1980 SCC (Cri) 508] observed that : (SCC p. 563, para 9) '9. He can be in custody not merely when the police arrests him, produces him before a Magistrate and gets a remand to judicial or other custody. He can be stated to be in judicial custody when he surrenders before the court and submits to its directions.'" (emphasis supplied) If the third sentence of para 48 is discordant to Niranjan Singh [Niranjan Singh v. Prabhakar Rajaram Kharote, (1980) 2 SCC 559 : 1980 SCC (Cri) 508], the view of the coordinate Bench of earlier vintage must prevail, and this discipline demands and constrains us also to adhere to Niranjan Singh [Niranjan Singh v. Prabhakar Rajaram Kharote, (1980) 2 SCC 559 : 1980 SCC (Cri) 508]; ergo, we reiterate that a person is in custody no sooner he surrenders before the police or before the appropriate court. This enunciation of the law is also available in three decisions in which Arijit Pasayat, J. spoke for the two-Judge Benches, namely, (a) Nirmal Jeet Kaur v. State of M.P. [Nirmal Jeet Kaur v. State of M.P., (2004) 7 SCC 558 : 2004 SCC (Cri) 1989], (b) Sunita Devi v....
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....idelines ...." The above guidelines are merely the incidents of personal liberty guaranteed under the Constitution of India. No arrest can be made because it is lawful for the police officer to do so. The existence of the power to arrest is one thing. The justification for the exercise of it is quite another. The police officer must be able to justify the arrest apart from his power to do so. Arrest and detention in police lock-up of a person can cause incalculable harm to the reputation and self-esteem of a person. No arrest can be made in a routine manner on a mere allegation of commission of an offence made against a person. It would be prudent for a police officer in the interest of protection of the constitutional rights of a citizen and perhaps in his own interest that no arrest should be made without a reasonable satisfaction reached after some investigation as to the genuineness and bona fides of a complaint and a reasonable belief both as to the person's complicity and even so as to the need to effect arrest. Denying a person of his liberty is a serious matter. The recommendations of the Police Commission merely reflect the constitutional concomitants of the f....
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....cused will abscond or disobey summons and has, in fact, throughout cooperated with the investigation we fail to appreciate why there should be a compulsion on the officer to arrest the accused. * * * * * "12. In the present case when the appellant has joined the investigation, investigation has completed and he has been roped in after seven years of registration of the FIR we can think of no reason why at this stage he must be arrested before the charge-sheet is taken on record. We may note that the learned counsel for the appellant has already stated before us that on summons being issued the appellant will put the appearance before the trial court." (emphasis supplied) 26.2. The observations of the Supreme Court in Manubhai Ratilal Patel vs. State of Gujarat & Ors. (2013) 1 SCC 314 on the necessity of application of mind before remanding an accused are also extremely relevant : "23. Keeping in view the aforesaid concepts with regard to the writ of habeas corpus, especially pertaining to an order passed by the learned Magistrate at the time of production of the accused, it is necessary to advert to the schematic postulates under the Code relating t....
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....67(2) of the Code available under the Special Act would have the same effect entitling the accused for a default bail. Even here the court will have to consider the satisfaction under Section 440 of the Code. (emphasis supplied) 27. Now, in the backdrop of the legal position summarised above, the following factual aspects appear to be relevant in the present case : 27.1. Section 212(8) of the Companies Act says that an investigating officer of the SFIO has the power to arrest an accused if he has reason to believe on the basis of material available with him that the person is guilty of commission of an offence under section 212(6). Though, no doubt, this power of arrest is meant to enforce 'police custody' in aid of investigation, what is important to note is that arrest is permissible if the investigating officer has reason to believe that the accused is guilty of the offence based on available material. In the present case, the record shows that the investigating officer never arrested the petitioner throughout the investigation, further investigation and other pre-cognizance stages, all of which took more than 06 years. Even at the stage when the final investigati....
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....dge.org/dictionary/english/incarceration. Accessed 17 July 2023], "incarceration" is defined as the "the act of putting or keeping someone in prison or in a place used as a prison; or "the act of keeping someone in a closed place and preventing them from leaving it". Furthermore, in Words and Phrases (Permanent Edition) [34 Words and Phrases (Permanent Edition), Volume 20A, (Thomson Reuters, 2008) at pp. 303, 305] one of its several usages shows that the term "incarceration" means " ... imprisonment or confinement in jail or penitentiary; or, "For purpose of statute governing computation of terms of imprisonment, "incarceration" means to confine in prison or jail, and it does not encompass pre judgement house arrest". 27.4. Therefore, taking cue from what the Supreme Court has held in Satender Kumar Antil (supra), evidently when the petitioner appeared before the learned Special Judge in compliance of the summons issued to him, he was 'in custody' of the court but not 'under incarceration'. Accordingly, the twin-conditions contained in section 212(6) of the Companies Act did not get actuated. Furthermore, in the context of section 170 Cr.P.C, in Siddharth (2022) 1 SCC 676; para ....
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....l statutes would only apply after incarceration, leads to the inevitable conclusion that the twin-conditions in section 212(6) of the Companies Act would not apply to a case where the accused has never been arrested even till the stage of cognisance, and appears against summons issued by the court. 27.8. The above position is also bolstered by a decision of this court in Ashish Mittal vs. Serious Fraud Investigation Office 2023 SCC OnLine Del 2484 at paras 20-24 which takes the view that the opposition by the public prosecutor contemplated in section 212(6) must be reasoned opposition. In the present case, a perusal of the order of the learned Special Judge declining bail shows that no reasoned opposition was offered by the public prosecutor in relation to the offence alleged under the Companies Act, except a pedantic recitation that the allegations inter-alia against the petitioner " ... are of grave nature ... "; that the investigation in the matter was initiated as per directions of the Delhi High Court; and that, according to the final investigation report filed in the matter inter-alia the petitioner has " ... committed offence punishable under Section 447 of Companies Act,....
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....he Investigating Officer to seek that the petitioner be remanded to judicial custody, for justifiable reasons based on material gathered during investigation, which he did not do. 27.13. Even insofar as the usual and ordinary triple-test for bail is concerned, the Investigating Officer nowhere alleged that the petitioner had attempted to tamper with evidence; or that he had influenced witnesses; or that he was a flight risk. In fact, the Investigating Officer had not filed any application seeking that the petitioner be placed in judicial custody, even upto the stage when the petitioner appeared before the learned Special Judge on being summonsed. Since the Investigating Officer did not arrest the petitioner during the more than 06-year long proceedings and investigation, evidently, the Investigating Officer did not consider it necessary to do so based on the material in his possession collected in the course of investigation. 27.14. As observed by this court in Komal Chadha vs. Serious Fraud Investigation 2022 SCC OnLine Del 4543 at para 30.7, without any additional material or evidence having been placed before the learned Special Judge, there was no basis for the court to d....