The Supreme Court held that bail, including
anticipatory bail, for offences under Section 447 (punishment for fraud) of the
Companies Act, 2013, cannot be granted unless the twin conditions laid down in
Section 212(6) are satisfied.
According to Section 212(6), which pertains
to investigations by the Serious Fraud Investigation Office (SFIO), offences
under Section 447 are cognizable and subject to stricter bail conditions. These
conditions require: (1) that the Public Prosecutor is given an opportunity to
oppose the bail application; and (2) if opposed, the court must be satisfied
that there are reasonable grounds to believe that the accused is not guilty and
is unlikely to commit any offence while on bail. A bench comprising Justices
Bela M. Trivedi and Satish Chandra Sharma emphasized that these conditions are
mandatory. The Court relied on the precedent set in Vijay Madanlal Choudhary
& Others v. Union of India & Others, which upheld the constitutional
validity of similar twin conditions under Section 45 of the Prevention of Money
Laundering Act (PMLA), asserting that these stringent standards apply even to
anticipatory bail. Additionally, the Court cited Union of India through
Assistant Director v. Kanhaiya Prasad, where it was held that bail orders
lacking proper reasoning and not addressing mandatory bail conditions are
perverse and liable to be overturned.
This
observation came in the context of setting aside a bail order passed by the
Punjab and Haryana High Court, which had drawn a distinction between the PMLA
and the Companies Act while granting bail to the respondents.
The High
Court observed, "The Companies Act, is a complete Statute in itself and
distinguishable from PMLA Act which was brought out to prescribe the procedures
and penalties for economic offences. The gravity for the economic offences will
have to be gathered from the facts and circumstances of each case and in such
circumstances, while considering the application for bail, the Court will have
to deal with the same, being sensitive to the nature of allegation made against
the accused. This Court also cannot lose sight of the fact that even if the
allegation is one of grave economic offence, it is not a rule that bail should
be denied in every case since there is no such bar created in the relevant
enactment passed by the legislature nor does the bail jurisprudence provide
so."
The High
Court had also observed that a review petition against the Vijay Madanlal
judgment is still pending, along with the constitutional challenge to Section
212(6) of the Companies Act, which is currently under consideration by the
Supreme Court.
In the
present case, the Respondents, including companies under the Adarsh Group, were
accused of committing economic offences. Following these allegations, the
Ministry of Corporate Affairs directed the Serious Fraud Investigation Office
(SFIO) to investigate various violations under the Companies Acts of 1956 and
2013. The SFIO found that Adarsh Credit Cooperative Society Limited (ACCSL), a
Multi-State Cooperative Society, had illegally disbursed loans worth Rs.1700 crore
to 70 Adarsh Group companies under its control, as well as to other related
entities. These transactions violated legal norms since companies are barred
from being members of multi-state credit cooperative societies, and the loans
were procured using forged financial documents.
Following
the SFIO investigation, a criminal complaint was filed in the Special Court
under several provisions of the Companies Acts, the LLP Act, and the CrPC. The
Respondents failed to appear despite being summoned, leading the court to issue
non-bailable warrants and initiate proceedings under the proclamation of
offenders. Their anticipatory bail plea was rejected by the Special Court,
after which they approached the Punjab and Haryana High Court, which granted
them bail. However, the Supreme Court, while cancelling the bail, criticized
the High Court for overlooking the Respondents’ non-cooperation with
investigative authorities.
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