The Supreme Court held that bail, including anticipatory bail, cannot be granted for an offence under Section 447 (punishment for fraud) of the Companies Act 2013 unless twin conditions are satisfied.
Section 212(6) (investigation into affairs of Company by Serious Fraud Investigation Office) of the Companies Act states that the offences covered under Section 447 are cognizable in nature and no person can be released on bail unless he satisfies the twin conditions, that are: (1) that a Public Prosecutor should be given an opportunity to oppose the application for such release; (2)where the Public Prosecutor opposes the application, the Court is satisfied that there are reasonable grounds for believing that the person is not guilty and is unlikely to commit any offence while on bail.
A bench of Justices Bela M. Trivedi and Satish Chandra Sharma stated that the bail conditions are mandatory in nature while relying on Vijay Madanlal Choudhary and Others vs. Union of India and Others. In this case, the Supreme Court upheld the constitutional validity of various provisions of the Prevention of Money Laundering Act, 2002 including a similar twin-condition for bail. It was held that the restrictive conditions of bail prescribed under Section 45 are to be mandatorily met, even for anticipatory bail.
It relied on another judgment in Union of India through Assistant Director vs. Kanhaiya Prasad and observed that cryptic orders granting bail without adverting to the facts or the consideration of such restrictive conditions are perverse and liable to be set aside.
The Court was referring to the Punjab and Haryana High Court’s order, which while granting bail to the Respondents distinguished between PMLA and Companies Act.
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 also further noted that a review petitions against the Vijay Madanlal judgment is also pending. In fact, the validity of Section 212(6) of the Companies Act is also pending before the Supreme Court.
In the present case, allegations of economic offences were made against the Respondents, Companies of Adarsh Group, and the Ministry of Corporate Affairs directed the Serious Fraud Investigation Office (SFIO) to investigate them for the various offences under the Companies Act, 1956 and 2013.
Upon investigation, it was found that funds to the tune of Rs.1700 crores were given by the Adarsh Credit Cooperative Society Limited (ACCSL), a Multi-State Credit Cooperative Society, as illegal loans to its own controlled 70 Adarsh Group of Companies (CUIs) and certain other companies belonging to the other groups of persons.
It was found contrary to settled the position that a company could not be a member of a multistate credit cooperative society and therefore loans could not have been given to such companies by the ACCSL. These loads were obtained on the basis of forged financial documents.
Subsequent to the investigation by SFIO, a criminal complaint was filed by them in the Special Court under Section 439(2) read with Section 436(1)(a), (d) and (2) read with Section 212 of the Companies Act, 2013, read with Section 621(1) of the Companies Act, 1956, read with Section 50 of the Limited Liability Partnership Act, 2008, read with Section 193 of the Code of Criminal Procedure.
However, the Respondents absconded after the Special Court issued a summon compelling it to subsequently issue a non-bailable warrant and a proclamation offenders’ proceedings. Their anticipatory bail was also rejected by the Special Court, consequent to which the Respondents approached the Punjab and Haryana High Court which granted them bail.
The Supreme Court while cancelling their bail, noted that the High Court, in its impugned judgments, failed to note the conduct of the accused persons who refused to cooperate with the authorities.
In these cases, there is a brazen attempt made on the part of the respondents-accused to stall the criminal proceedings initiated against them, in respect of the serious economic offences allegedly committed by them, by not respecting the summons/warrants issued by the Special Court from time to time and thereby causing obstruction in the administration of justice.
Case Details:Serious fraud investigation office V/S Aditya sarda|special leave petition (criminal) no. 13956
Citation: 2025 (SC) 414