Centrum Financial Services Limited vs State of NCT of Delhi

Centrum Financial Services Limited vs State of NCT of Delhi - Supreme Court Case 2022 - 

[REPORTABLE]
IN THE SUPREME COURT OF INDIA
CRIMINAL APPELLATE JURISDICTION
CRIMINAL APPEAL NO.94 OF 2022
Centrum Financial Services Limited …Appellant
                                                                                       
Versus
State of NCT of Delhi and Anr.            …Respondents
J U D G M E N T
M. R. Shah, J.
1. Feeling aggrieved and dissatisfied with the impugned
judgment and order dated 14.09.2020 passed by the High
Court of Delhi at New Delhi in Bail Application No.2442 of
2020   by   which   the   High   Court   has   allowed   the   said
application preferred by the Respondent No.2 herein and
has directed that he be released on bail in connection with
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FIR No.128 of 2019 PS Economic Offences Wing in New
Delhi for the offences under Sections 409, 420, 467, 468,
471 and 120B IPC, the original complainant has preferred
the present appeal.
2. That   the   appellant   herein   a   non­banking   financial
company   (NBFC)   lodged   an   FIR/complaint   with   the
Economic Offences Branch, New Delhi against the company
M/s Sri Aranath Logistics Limited (formerly known as M/s
LMJ   Logistics   Limited),   Respondent   No.2   herein   Jayant
Kumar Jain – Managing Director and others for the offences
under Sections 409, 420, 467, 468, 471 and 120B IPC.  It
was alleged against the accused – Respondent No.2 herein
that he is the Managing Director of M/s Aranath Logistics
Limited engaged in the business of multi­commodity trading
of agricultural and non­commodities agricultural.  That by
way   of   written   agreement   accused   availed   loan   credit
facilities to the tune of Rs.25 crores for a term of 180 days
from the complainant company.  It was alleged that the said
amount of Rs.25 crores was disbursed in the year 2017.  It
was   alleged   that   the   said   amount   of   Rs.25   crores   was
required to be used by the company for its own purpose.  It
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was further alleged that for the purpose of repayment of
loan, no stock statement was submitted and mortgage was
also  not  created as agreed between the parties.   It was
further alleged that instead of using the amount for the
purpose   mentioned   in   the   agreement   the   same   was
transferred to several fake/shell companies.  It was further
alleged that at the time of availing the loan the accused
misrepresented   to   the   complainant   about   the   financial
health of the company of the accused.  It was further alleged
that the amount of around Rs.8 crores stated to have been
diverted into such shell companies which were created by
the accused in the name of his employees and bank account
was opened for transaction of those companies by using
forged   and   fabricated   documents   of   identities   of   those
employees and the said amount was further siphoned off to
other companies which were connected to the accused.  It
was further alleged that  Directors of those shell entities
have stated that they have not opened the bank account in
the said name or said firm and their KYC form was misused
by the accused. It was further alleged that a sum of Rs.15
crores   was   transferred   to   another   company   –   LMJ
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International Ltd. and the said amount was used for the
purpose of setting off against the previous liability of the
said company with the Corporation Bank, Calcutta.   That
after the preliminary investigation on the complaint of the
appellant   herein   –   original   complainant,   the   Economic
Offences   Wing   having   found   a   prima   facie   case   against
Respondent No.2 and others, FIR being FIR No.128 was
registered.   The Respondent No.2 came to be arrested on
03.07.2020.     The   Respondent   No.2   filed   an   application
before   the   learned   Metropolitan   Magistrate   seeking   bail
under Section 437 Cr.P.C.   One another bail application for
regular   bail   being   Bail   Application   No.903   of   2020   was
moved on behalf of the Respondent No.2 – Accused before
the Court of Sessions Judge, Patiala House Courts, New
Delhi.  The said bail application was opposed by the I.O.  A
status report was filed pointing out how the amount of 25
crores   was   siphoned   off   and   transferred   to   other   shell
companies   and   how   the   said   amount   was   used   by   the
Respondent No.2 for other companies.   Vide order dated
04.08.2020   by   a   detailed   speaking   order,   the   learned
Sessions   Judge   dismissed   the   bail   application.   That
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thereafter, respondent no.2 – accused filed the present bail
application before the High Court. The detailed status report
was filed on behalf of the I.O.  It was also submitted that the
charge­sheet has been filed against Respondent No.2 and
other   co­accused.     The   detailed   status   report   was   filed
pointing out how a sum of Rs.25 crores to be used by M/s
LMJ  Logistic   Limited  was   transferred  to   shell  and   other
companies such as M/s LMJ Logistic Limited and how a
systematic fraud was committed.  Despite the above, by the
impugned judgment and order, the High Court has directed
to release Respondent No.2 on bail merely on the ground
that the case arises out of a commercial transaction and is
based on documents already seized.
3. Feeling aggrieved and dissatisfied with the impugned
judgment and order passed by the High Court directing to
release   Respondent  No.2   –   accused   on   bail,  the   original
complainant has preferred the present appeal.
3.1 At the outset, it is required to be noted that after this
Court directed to issue notice to the respondents vide order
dated 17.12.2020 and thereafter the matter was adjourned
from time to time, on 08.01.2022 the petitioner(appellant)
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moved   an   application   being   Criminal   Miscellaneous
Application   No.4818   of   2022   seeking   permission   to
withdraw the present Special Leave Petition submitting that
during the pendency of the present Special Leave Petition, a
settlement agreement has been entered into between the
petitioner(appellant) and Respondent No.2 on 08.01.2022
and   therefore,   the   Petitioner(appellant)   is   no   longer
interested in pursuing the present Special Leave Petition in
view of the settlement.  The said application was heard by
this   Court   on   10.01.2022.     This   Court   shown   its
disinclination to permit the petitioner(appellant) to withdraw
the   Special   Leave   Petition   by   observing   that   the
petitioner(appellant) cannot be permitted to withdraw the
Special   Leave   Petition   in   view   of   the   serious   allegations
against Respondent No.2 and others.   That thereafter the
learned   counsel   appearing   on   behalf   of   the
petitioner(appellant) withdrew the said application.   That
thereafter the present Special Leave Petition was adjourned
to 17.01.2022, at the request of the learned counsel for the
respective   parties   to   consider   the   present   Special   Leave
Petition on merits.
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4. Shri   Mukul   Rohatgi,   learned   Senior   Advocate
appearing   on   behalf   of   Respondent   No.2   has   made   the
following   submissions   in   support   of   his   prayer   and
requested not to cancel the bail granted by the High Court.
4.1 It is vehemently submitted by Shri Rohatgi, learned
Senior Advocate appearing on behalf of Respondent No.2
that   in   the   facts   and   circumstances   of   the   case   and
considering the fact that the dispute is of a civil nature
arising out of commercial transactions and the investigation
is concluded and the case rests on documentary evidence
already   collected   by   the   Investigating   Officer   during   the
investigation which have been seized and that the impugned
order passed by the High Court releasing Respondent No.2
on bail is as far as back on 14.09.2020 and thereafter there
are no allegations that Respondent No.2 has misused the
liberty   in   between   and   that   during   the   investigation
Respondent   No.2   has   cooperated   and   neither   the
complainant nor the State are opposing the bail application
seriously, this Court may not cancel the bail.
4.2 It is further submitted by Shri Rohatgi, learned Senior
Advocate for Respondent No.2 that in the present case out
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of Rs.25 crores, Rs.15 crores were transferred to the sister
concern LNJ International Limited and the sister concern
paid off its loan which cannot be said to be an offence.
4.3   Shri Rohatgi, learned Senior Advocate on  behalf  of
Respondent   No.2   –   accused   has   heavily   relied   upon   the
decisions of this Court in the case of Dolat Ram vs. State
of Haryana, (1995) 1 SCC 349; X vs. State of Telangana,
(2018) 16 SCC 511; Prabhakar Tewari vs. State of U.P.,
(2020) 11 SCC 648 as well as the decision of this Court in
the   case   of  Gurcharan   Singh   vs.   State   (Delhi
Administration)   (1978)   1   SCC   118  in   support   of   his
submissions that once the bail has been granted by the
High Court and/or the Court below the same may not be
cancelled unless it is found that the accused has violated
any of the terms and conditions of the bail order and/or has
misused any liberty shown to him while releasing him on
bail and/or there are any other peculiar circumstances. 
4.4. Making the above submissions it is prayed to dismiss
the present appeal.
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5. Present   appeal   is   opposed   by   learned   Counsel   on
behalf of Respondent – State.  A status report on behalf of
the State has been filed in which it is stated that the State
had filed a status report on 09.09.2020 before the High
Court   and   before   the   High   Court,   the   State   vehemently
opposed the bail of Respondent No.2.   However, at that
stage,   further   investigation   was   underway   and   a
supplementary charge­sheet was yet to be filed.  The same
has   now   been   filed.     The   State   shall   abide   by   the
directions/order passed by this Hon’ble Court.
6. In   the   status   report   it   has   been   pointed   out   how
systematic fraud has been committed by Respondent No.2
and   others   siphoning   off   huge   amount   of   Rs.25   crores
through other Shell Companies who are found to be fake
and non­existent.   A supplementary charge­sheet is also
filed on further investigation.  A detailed status report has
been   filed   pointing   out   how   shell   entities   were   used   as
conduit entities to transfer money to the main company of
the accused i.e., LMJ Logistics Limited.
7. We have heard learned counsel appearing on behalf of
the respective parties at length.
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8. Having   gone   through   the   impugned   judgment   and
order passed by the High Court directing to release the
Respondent No.2 on bail it appears that the High Court has
directed to release the Respondent No.2 on bail mainly on
the   ground   that   the   case   arises   out   of   a   commercial
transaction   and   is   based   on   documents   already   seized.
Para   16   contains   the   only   reasoning   while   releasing
Respondent No.2 on bail, which reads as under:
“16.  Coming to the facts of the present case, it is an
admitted   fact   that   the   co­accused   namely   Navin
Kumar Jain and Hulash Chand Jain were the other
Directors and shareholders of SALL as well as LMJIL.
They also signed/undertook personal guarantee to the
complainant company in their capacity as Directors of
the SALL against the “Working Capital Demand Loan”.
Navin   Jain   had   also   signed   the   Tripartite   Off­take
Agreement in the capacity of Director of LMJIL.  Both
of them were not even arrested and the charge sheet
against them was filed without arrest.   During two
years   of   enquiry/investigation,   the   petitioner   joined
investigation on multiple occasions.   After his arrest,
the EOW sought only one day PC remand.  Neither in
the Status Report nor during the course of arguments,
any apprehension was shown that the petitioner is a
“flight   risk”.     The   case   arises   out   of   a   commercial
transaction and is based on documents that already
stand seized.   The petitioner has already approached
the   NCLT   where   a   moratorium   on   the
assets/properties has been declared and an IRP has
been   appointed.     The   complainant   has   already
approached NCLT.”
9. From the aforesaid it can be seen that while releasing
the Respondent No.2 on bail the High Court has not at all
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adverted to and/or considered the nature of accusation and
the   material   found/collected   during   the   course   of
investigation and the serious allegations of siphoning off the
huge amount through various shell companies.   The High
Court has not at all dealt with and/or considered any of the
allegations and/or material collected during the course of
the investigation which were specifically pointed out and
mentioned in the status report filed by the I.O.  From the
status   report   and   even   the   charge­sheet/supplementary
charge­sheet papers it has been found during the course of
the investigation that a sum of Rs.25 crores was disbursed
by the complainant to Respondent No.2 and its company
M/s   LMJ   Logistics   Limited.     The   said   amount   was
disbursed   for   its   own   use.     During   the   course   of   the
investigation, it has been found that the said amount was
debited to the various companies/entities as under:
Sr.
No.
Date Beneficiary
Firm
Voucher
No.
Amount (In
Rs.)
1. 03.11.17 LMJ
International
Ltd.
Corporation
Bank Kolkata
860388 1500,00,000/
­
2. 06.11.17 Sairam
Agrocorp   Pvt.
860391 2,49,25,720/­
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Ltd. Bandhan
Bank,
Connaught
Place, Delhi
3. 30.11.17 LMJ Logistics
Ltd.   RBL
Bank   Ltd.,
Connaught
Place,   New
Delhi
860407 2,00,00,000/­
4. 30.11.17 Vasudev Agro
Foods   Pvt.
Ltd.
ICICI   Bank,
Parliament
Street,   New
Delhi
860410 2,51,30,176/­
5. 30.11.17 Sairam
Agrocorp   Pvt.
Ltd. Bandhan
Bank,
Connaught
Place, Delhi
860405 99,98,874/­
6. 30.11.17 Vasudev Agro
Foods   Pvt.
Ltd.,
Bandhan
Bank,
Connaught
Place, Delhi
860406 99,96,387/­
7. 30.11.17 Sairam
Agrocorp   Pvt.
Ltd. Bandhan
Bank,
Connaught
Place, Delhi
860409 98,74,563/­
9.1 During the course of the investigation, it has been
found   that   Rs.15   crores   was   transferred   to   another
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company/LMJ International Limited through some of the
fake companies and the said another company – M/s LMJ
International Limited used that amount to clear its dues of
Corporation Bank, Kolkata.  During the investigation it has
been found that a sum of Rs.2,49,25,720/­ was transferred
to   one   Sairam   Agrocorp   Pvt.   Ltd.   and   it   was   further
transferred to LMJ International Limited on the same day.
Similarly, the amount of Rs.2,51,30,176/­ was transferred
in the account of Vasudev Agro Foods Pvt. Ltd. out of which
Rs.1.82 crores approximately was transferred into account
of Aldera Traders Pvt. Limited and it was further transferred
to LMJ International Limited on the same day.  During the
course   of   the   investigation,   it   has   been   found   that   an
amount   of   Rs.99,98,874/­   and   Rs.98,74,563/­   were
transferred in the account of Sairam Agrocorp Pvt. Ltd. and
consolidated   amount   of   Rs.1,98,72,914/­   was   further
transferred to LMJ International Limited on the same day.
It has been further found that an amount of Rs.99,96,387/­
was transferred to Vasudev Agro Foods Pvt. Limited and it
was further transferred to LMJ International Limited on the
same day.  Thus, it has been found that the credit facility to
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the   tune   of   Rs.25   crores   availed   by   M/s   LMJ   Logistics
Limited were not used for any business purposes i.e., sale
purchase   of   agri   or   non­agri   products   but   it   has   been
rotated through shell entities and immediately transferred
to other company M/s LMJ International Limited to square
off the liabilities through the shell companies. During the
course of the investigation/further investigation it has been
revealed that Sairam Agrocorp Pvt. Ltd. and Vasudev Agro
Foods Pvt. Ltd. are fake and shell companies and they do
not exist at the registered address.  During the course of the
investigation, it has been found that some of the employees
were made directors without their knowledge and their KYC
and   other   documents   were   misused   without   their
knowledge. As per the charge­sheet/supplementary chargesheet it appears that the investigation revealed that the
accounts in question were created to inflate the turnover of
the company so that they could avail the credit facility from
various banks.  It further reveals that the shell companies
were   created   to   misappropriate/siphoned   off   the   money
entrusted to them as a loan to the tune of Rs.25 crores.  It
has been revealed that there was no genuine transaction of
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sale and purchase but it was simply routing and re­routing
of the amount received from the complainant to different
entities which were in actual being operated by Respondent
No.2.     All   these   aforesaid   allegations   and   the   material
collected during the course of the investigation which are
being part of the charge­sheet and supplementary chargesheet are not taken note of by the High Court and the High
Court has just simply ignored the same and has released
Respondent   No.2   on   bail   by   simply   observing   that   case
arises out of a commercial transaction and the dispute is of
a civil nature.   Therefore, the High Court has not at all
taken into consideration the relevant considerations while
grant of bail.  Even the High Court has not at all taken note
of the reasoning given by the learned Sessions Court while
rejecting the bail application of Respondent No.2.
9.2 In the light of the above facts, it is required to be
considered  whether   the   High   Court  is  at   all  justified  in
releasing Respondent No.2 on bail.  
10. At   this   stage   few   decisions   of   this   Court   on   the
relevant considerations to be considered by the High Court
while grant of bail are required to be referred to.  In the case
15
of Prasanta Kumar Sarkar vs. Ashis Chatterjee and Anr.,
(2010) 14 SCC 496, while cancelling the bail and quashing
and   setting   aside   the   order   passed   by   the   High   Court
granting the bail to the accused it is observed in para 9 to
12 as under:
“9. We are of the opinion that the impugned order
is clearly unsustainable. It is trite that this Court does
not, normally, interfere with an order passed by the
High Court granting or rejecting bail to the accused.
However, it is equally incumbent upon the High Court
to exercise its discretion judiciously, cautiously and
strictly in compliance with the basic principles laid
down in a plethora of decisions of this Court on the
point.   It   is   well   settled   that,   among   other
circumstances, the factors to be borne in mind while
considering an application for bail are:
(i)   whether   there   is   any   prima   facie   or
reasonable ground to believe that the accused
had committed the offence;
(ii) nature and gravity of the accusation;
(iii) severity of the punishment in the event
of conviction;
(iv) danger of the accused absconding or
fleeing, if released on bail;
(v) character, behaviour, means, position
and standing of the accused;
(vi) likelihood of the offence being repeated;
(vii)   reasonable   apprehension   of   the
witnesses being influenced; and
(viii)   danger,   of   course,   of   justice   being
thwarted by grant of bail.
[See State of U.P. v. Amarmani Tripathi [(2005) 8 SCC
21] (SCC p. 31, para 18), Prahlad Singh Bhati v. NCT of
Delhi [(2001)   4   SCC   280],   and Ram   Govind
Upadhyay v. Sudarshan Singh [(2002) 3 SCC 598].
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10. It is manifest that if the High Court does not
advert   to   these   relevant   considerations   and
mechanically grants bail, the said order would suffer
from the vice of non­application of mind, rendering it to
be illegal. In Masroor [(2009) 14 SCC 286], a Division
Bench of this Court, of which one of us (D.K. Jain, J.)
was a member, observed as follows: (SCC p. 290, para
13)
“13. … Though at the stage of granting bail
an   elaborate   examination   of   evidence   and
detailed   reasons   touching   the   merit   of   the
case,   which   may   prejudice   the   accused,
should  be  avoided,  but  there  is  a need  to
indicate in such order reasons for prima facie
concluding   why   bail   was   being   granted
particularly where the accused is charged of
having committed a serious offence.”
11. We are constrained to observe that in the instant
case, while dealing with the application of the accused
for grant of bail, the High Court completely lost sight
of   the   basic   principles   enumerated   above.   The
accused,   in   the   present   case,   is   alleged   to   have
committed a heinous crime of killing an old helpless
lady by strangulation. He was seen coming out of the
victim's house by a neighbour around the time of the
alleged occurrence, giving rise to a reasonable belief
that he had committed the murder. We feel that under
the given circumstances, it was not the stage at which
bail under Section 439 of the Code should have been
granted to the accused, more so, when even charges
have not yet been framed.
12. It is also pertinent to note that, as stated above,
the Additional Chief Judicial Magistrate had rejected
three bail applications of the accused but the High
Court   did   not   find   it   worthwhile   to   even   make   a
reference to these orders. In this regard, it would be
useful  to  refer to the following observations echoed
in Kalyan Chandra Sarkar v. Rajesh Ranjan [(2004) 7
SCC 528]: (SCC p. 536, para 12)
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“12. In regard to cases where earlier bail
applications   have   been   rejected   there   is   a
further   onus   on   the   court   to   consider   the
subsequent application for grant of bail by
noticing   the   grounds   on   which   earlier   bail
applications   have   been   rejected   and   after
such   consideration   if   the   court   is   of   the
opinion that bail has to be granted then the
said court will have to give specific reasons
why   in   spite   of   such   earlier   rejection   the
subsequent   application   for   bail   should   be
granted.”
10.1 In the case of  Neeru Yadav  vs. State of UP & Anr.,
(2016) 15 SCC 422, it is held by this Court in para 11 as
under:
“11. It   is   a   well­settled   principle   of   law   that   while
dealing with an application for grant of bail, it is the
duty of the Court to take into consideration certain
factors   and   they   basically   are:   (i)   the   nature   of
accusation and the severity of punishment in cases of
conviction and the nature of supporting evidence, (ii)
reasonable   apprehension   of   tampering   with   the
witnesses   for   apprehension   of   threat   to   the
complainant, and (iii) prima facie satisfaction of the
Court   in   support   of   the   charge.   (See Chaman
Lal v. State of U.P., (2004) 7 SCC 525)”
10.2 In  Anil  Kumar  vs.  State   (NCT  of  Delhi),   (2018)  12
SCC 129, it is observed and held by this Court that while
granting bail, the relevant considerations are, (i) nature of
seriousness of the offence; (ii) character of the evidence and
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circumstances which are peculiar to the accused; and (iii)
likelihood of the accused fleeing from justice; (iv) the impact
that his release may make on the prosecution witnesses, its
impact on the society; and (v) likelihood of his tampering.
10.3 In the case of Prahlad Singh Bhati vs. NCT of Delhi
& Ors., (2001) 4 SCC 280,  it is observed and held by this
Court that the jurisdiction to grant bail has to be exercised
on the basis of well settled principles having regard to the
circumstances of each case and not in an arbitrary manner.
It is observed and held as under:
“The jurisdiction to grant bail has to be exercised on
the basis of well settled principles having regard to the
circumstances of each case and not in an arbitrary
manner.  While granting the bail, the court has to keep
in   mind   the   nature   of   accusations,   the   nature   of
evidence   in   support   thereof,   the   severity   of   the
punishment   which   conviction   will   entail,   the
character,   behaviour,   means   and   standing   of   the
accused,   circumstances   which   are   peculiar   to   the
accused,   reasonable   possibility   of   securing   the
presence   of   the   accused   at   the   trial,   reasonable
apprehension of the witnesses being tampered with,
the larger interests of the public or State and similar
other considerations.   It has also to be kept in mind
that   for   the   purposes   of   granting   the   bail   the
Legislature has used the words ‘reasonable grounds
for believing’ instead of “the evidence” which means
the court dealing with the grant of bail can only satisfy
it as to whether there is a genuine case against the
accused   and   that   the   prosecution   will   be   able   to
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produce   prima   facie   evidence   in   support   of   the
charge.”
11. Applying   the   law   laid   down   by   this   Court   in   the
aforesaid decisions to the facts of the case on hand and the
grounds   on   which   the   High   Court   has   released   the
Respondent No.2 on bail, we are constraint to observe that
in the instant case while dealing with the application of the
accused for grant of bail, the High Court has completely lost
sight of the basic principles enumerated above.  The High
Court has not at all considered the modus operandi adopted
by   the   accused   in   commission   of   serious   offence   of
siphoning   and/or   transferring   the   huge   sum   to   another
company through shell companies.   The High Court has
also not taken into consideration the status report filed by
the I.O. in which in detail it has been pointed out how
systematically the accused have committed the offence and
misappropriated/siphoned off the huge sum through shell
companies.  Thus, it appears that the High Court has not
adverted to the relevant considerations and has granted the
bail mechanically by observing that the case arises out of a
commercial transaction.  
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12. Now so far as the submission on behalf of the accused
that as the accused has been released on bail as far as back
on 14.09.2020 and that thereafter there are no allegations
of misusing the liberty and therefore the bail may not be
cancelled and reliance placed upon the decisions of this
Court referred to hereinabove more particularly in the case
of X (Supra) are concerned at the outset it is required to be
noted that this is a case where it is found that the order
passed   by   the   High   Court   releasing   the   accused   –
Respondent No.2 on bail has been passed mechanically and
without   adverting   to   the   relevant   facts   and   without
considering the nature of accusation and allegations and
the nature of the gravity of the accusation.   Even in the
decisions which are relied upon by Shri Rohatgi, learned
Senior Advocate appearing on behalf of Respondent No.2,
there is no absolute proposition of law laid down by this
Court   in   the   aforesaid   decisions   that   once   the   bail   is
granted by the High Court, though the High Court could not
have granted the bail, in absence of any allegation of misuse
of liberty and/or breach of any of the conditions of the bail,
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the bail cannot be set aside when grant of bail is itself
subject matter of challenge in appeal/revision.
12.1 What is observed and held is that the rejection of bail
in a non­bailable case at an initial stage and cancellation of
bail so granted has to be dealt with and considered on
different   basis   and   that   very   cogent   and   overwhelming
circumstances   are   necessary   for   an   order   directing   the
cancellation of the bail already granted. Therefore, on very
cogent and overwhelming circumstances the bail can be
cancelled.   At this stage the decision of this Court in the
case   of  Mahipal   vs.   Rajesh   Kumar   alias   Polia   and
Another,  (2020) 2 SCC 118 is required to be referred to.
In the said decision, it is observed and held by this Court
that though this Court does not ordinarily interfere with the
order of the High Court granting bail, however, where the
discretion of the High Court to grant bail has been exercised
without due application of mind and in contravention of the
directions of this Court, such an order of granting bail is
liable   to   be   set   aside.     Thereafter   after   drawing   the
distinction   between   the   power   of   an   appellate   court   in
assessing the correctness of an order granting bail and an
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application for the cancellation of the bail, in paragraph 16
it is observed and held as under: 
“16. The considerations that guide the power of an
appellate   court   in   assessing   the   correctness   of   an
order granting bail stand on a different footing from an
assessment of an application for the cancellation of
bail. The correctness of an order granting bail is tested
on   the   anvil   of   whether   there   was   an   improper   or
arbitrary exercise of the discretion in the grant of bail.
The test is whether the order granting bail is perverse,
illegal   or   unjustified.   On   the   other   hand,   an
application   for   cancellation   of   bail   is   generally
examined on the anvil of the existence of supervening
circumstances or violations of the conditions of bail by
a person to whom bail has been granted. 
In Neeru Yadav v. State of U.P., (2014) 16 SCC 508],
the   accused   was   granted   bail   by   the   High   Court
[Mitthan Yadav v. State of U.P., 2014 SCC OnLine All
16031].   In   an   appeal   against   the   order   [Mitthan
Yadav v. State of U.P., 2014 SCC OnLine All 16031] of
the   High   Court,   a   two­Judge   Bench   of   this   Court
surveyed the precedent on the principles that guide
the grant of bail. Dipak Misra, J. (as the learned Chief
Justice   then   was)   held:   (Neeru   Yadav   case [Neeru
Yadav v. State of U.P., (2014) 16 SCC 508], SCC p.
513, para 12)
“12.   …   It   is   well   settled   in   law   that
cancellation of bail after it is granted because
the accused has misconducted himself or of
some supervening circumstances warranting
such   cancellation   have   occurred   is   in   a
different   compartment   altogether   than   an
order granting bail which is unjustified, illegal
and perverse. If in a case, the relevant factors
which   should   have   been   taken   into
consideration   while   dealing   with   the
application for bail have not been taken note
of,   or   bail   is   founded   on   irrelevant
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considerations,   indisputably   the   superior
court can set aside the order of such a grant
of   bail.   Such   a   case   belongs   to   a   different
category   and   is   in   a   separate   realm.   While
dealing   with   a   case   of   second   nature,   the
Court   does   not   dwell   upon   the   violation   of
conditions by the accused or the supervening
circumstances   that   have   happened
subsequently. It, on the contrary, delves into
the   justifiability   and   the   soundness   of   the
order passed by the Court.”
12.2 Thus, as per the law laid down by this Court where a
Court   while   considering   an   application   for   bail   fails   to
consider   the   relevant   factors,   an   Appellate   Court   may
justifiably set aside the order granting bail.  Appellate Court
is thus required to consider whether the order granting bail
suffers from a non­application of mind or a prima facie view
from the evidence available on record.
13. From   the   aforesaid   it   emerges   that   while   releasing
Respondent no.2 on bail, the High Court has not at all
considered the relevant factors including the nature and
gravity of accusation; the modus operandi and the manner
in which the offences have been committed through shell
companies and creating the false/forged documents and/or
misusing the PAN Cards, Aadhar Cards and KYCs of the
employees and showing them as Directors of the fake and
24
shell companies.  As observed hereinabove, the High Court
has not at all considered and taken into consideration the
status report and the evidence collected during the course
of the investigation.  Therefore, the impugned judgment and
order passed by the High Court releasing Respondent No.2
on bail is unsustainable as the High Court while releasing
Respondent No.2 on bail has not exercised the jurisdiction
judiciously   and   has   not   considered   the   relevant   factors
which are required to be considered while grant of bail.  
14. In view of the above and for the reasons stated above,
the impugned judgment and order passed by the High Court
releasing Respondent No.2 on bail deserves to be quashed
and set aside and is accordingly quashed and set aside.
Now on quashing and setting aside the impugned judgment
and order passed by the High Court releasing Respondent
No.2 on bail and consequently the bail being set aside, the
Respondent   no.2   –   accused   to   surrender   before   the
concerned Court/Jail Authority forthwith. Present Appeal is
accordingly allowed.  
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However, it is made clear that any observations by this
Court in the present order shall not affect the trial and the
observations made in the present order be treated to be
confined to the  impugned judgment granting bail.   It is
further observed that after surrender it will be open for
Respondent No.2 to move an appropriate application for bail
before the High Court afresh after a period of three months,
which shall be considered by the High Court in accordance
with   law   and   on   its   own   merits   and   after   taking   into
consideration   the   relevant   material   collected   during   the
course   of   the   investigation   which   is   part   of   the   chargesheet/further   charge­sheet   and   taking   into   consideration
the relevant factors to be considered while grant of bail.
……………………………….J.
               [M.R. SHAH]
NEW DELHI;            ……………………………….J.
JANUARY 28, 2022.          [SANJIV KHANNA]
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