The Delhi High Court in a recent case of Praveen Kumar Agarwal vs Central Bureau of Investigation (CBI) Bail Appln. 716/2022 passed a Judgment dated 13-06-2022 and reiterated the conditions for bail in financial fraud cases.
In this case, an FIR No. RCBD1/2014/E/0004/CBI/BS & FC was registered on 19-02-2014 against two companies, namely PGF Limited (PGF) and PACL Limited (PACL) (Accused Companies), and their officers for carrying out a Collective Investment Scheme (CIS) in the guise of sale and development of agricultural land, before the Central Bureau of Investigation (CBI) under various provisions of the Indian Penal Code, 1860 (IPC) and the Prize Chit and Money Circulation Schemes (Banning) Act, 1978 [PCMCS Act] as listed below. These Accused Companies sought investments of about INR 332 Crores in a piece of land in exchange for fixed return on the land and then fraudulently diverted / misappropriated those funds, when in fact the Companies did not have any ownership of the land:
- Section 120B IPC (Punishment of criminal conspiracy),
- Section 409 IPC (Criminal breach of trust by public, servant. or by banker, merchant or agent),
- Section 411 IPC (Dishonestly receiving stolen property),
- Section 420 IPC (Cheating and dishonestly inducing delivery of property),
- Section 467 IPC (Forgery of valuable security, will, etc),
- Section 468 IPC (Forgery for purpose of cheating),
- Section 471 IPC (Using as genuine a forged document or electronic record),
- Section 474 IPC (Having possession of document described in section 466 or 467, knowing it to be forged and intending to use it as genuine) read with
- Section 4 of PCMCS Act (Penalty for contravening the provisions of section 3),
- Section 5 of PCMCS Act (Penalty for other offences in connection with prize chits or money circulation schemes) and
- Section 6 PCMCS Act (Offences by companies).
Some of the officers of the Accused Companies, including their directors and managing directors, were arrested in 2016 and later, the promoters/directors of few companies who facilitated the financial fraud were arrested in 2021. The promoters/directors of those companies who facilitated the financial fraud applied for bail and the Learned Chief Metropolitan Magistrate, West, Tis Hazari Courts, Delhi remanded the Petitioners herein to police custody for a period of two days [from 23-12-2021 to 25-12-2021], and since then they have been in judicial custody. The Special Court rejected the Bail Applications of the Petitioners as it was a complicated financial fraud case.
Aggrieved, the Bail Applications were filed before the Hon’ble Delhi High Court. The Delhi High Court passed a Judgment dated 13-06-2022 and made the following observations regarding grant of bail in a commercial fraud case:
1) That the purpose of grant of bail is not punitive or preventative, but is for the purpose of securing the appearance of the person at trial. Deprivation of liberty prior to conviction is a great hardship and should only be resorted to if release on bail is likely to prejudice the trial. ..in case of economic offences, the seriousness of the charge cannot be the sole ground for denial of bail.
2) That the Petitioners herein have not been accused of inducing investors to participate in the Investment Scheme established by the Accused Companies. Their role came in at a later stage for routing of the funds collected by the Accused Companies.
3) Further, the investigation has been going on for eight years and after passage of considerable period of time, the chances of tampering with evidence and witnesses and manipulating books of accounts has been diminished.
4) Further, CBI has not been able to establish criminal antecedents of the Petitioners or that they have failed to appear before the Investigating Officer when called upon for investigation.
Thus, based on the aforesaid observations, the Delhi High Court held that the Petitioners are liable to be released on bail with stringent conditions to ensure their presence at the trial including furnishing of personal bond of Rs. 30 Lakhs each with two sureties, etc.
The Indian Lawyer