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[Delhi HC] Seriousness of Allegations cannot be Justification for Pre-Trial Incarceration.

The Delhi High Court recently rendered a pivotal judgment in the case of Suman Chadha v. Serious Fraud Investigation[i], which has underscored a fundamental legal principle: that punishment should only follow conviction, and the mere gravity of allegations cannot serve as the sole basis for denying bail. Even in cases involving economic offences of significant import, the default stance should not be pre-trial incarceration.


Facts:

  • The applicant served as the director of Parul Polymers Pvt. Ltd., a company accused of violating Section 447 of the Companies Act, 2013 ('the Act'). These violations included fictitious food grain sales, misuse of cheque discounting facilities, and manipulation of financial records to deceive banks and divert funds.

  • The Serious Fraud Investigation Office (SFIO) submitted a complaint in February 2021, akin to a chargesheet or police report, listing the applicant as accused no. 2, alongside 12 others, for offences dating back to 2011-14. Notably, during the extensive six-year investigation, the SFIO did not arrest the applicant.

  • The trial court took cognizance of the complaint in March 2022, and the applicant, upon receiving the summons, appeared before the court in May 2022. Subsequently, the court took him into judicial custody.

  • The summoning order implicated the petitioner as an 'officer who is in default,' as per Section 2(60) of the Act.

  • In a related matter, involving Indian Penal Code, 1860 (‘IPC’) offences arising from the same set of allegations, the applicant was granted regular bail by the Central Bureau of Investigation (‘CBI’) court in September 2022.

Held, while granting regular bail:

  • The Court imposed several conditions, including the submission of bail bonds with sureties, surrender of the passport, and prohibiting the applicant from contacting or engaging in transactions with bank or financial institution officials or employees linked to the case. Additionally, the Court directed the Investigating Officer (‘IO’) to request the appropriate authority to immediately issue a Look-out-Circular (‘LOC’) in the applicant's name to prevent him from leaving the country without the Special Judge's permission.

  • The Court emphasized that while the power to arrest under Section 212(8) of the Act is intended to aid in investigations, it is crucial to recognize that an arrest is only warranted if the IO has reasonable grounds to believe that the accused is guilty based on available evidence.

  • The Court pointed out that the IO did not seek the arrest or remand of the applicant when he appeared before the Special Judge and was not arrested during the six-year investigation. Furthermore, the Court noted that the Special Judge had erred in applying Section 212(6) of the Act, mistakenly believing that this was the stage to decide whether to grant bail. This stage is where the court determines whether the accused needs to be remanded to judicial custody at all.

The Court stressed that pre-trial detention should not be the default approach, even in cases of serious economic offences. It reiterated that punishment should only follow a conviction. The Court questioned why the applicant was remanded to judicial custody without an arrest warrant and merely upon appearing in response to a summons.


Analysis:

A reasonable interpretation of the twin conditions outlined in Section 212(6) of the Act suggests that these conditions should only apply if the accused has been arrested, and the IO has sought police or judicial custody for the accused. In this particular case, the accused had not been arrested during the entire investigation, and the IO had not sought custody.


Lower courts often apply the twin conditions specified in Special Acts without adequately considering the potential consequences the accused may face during pre-trial detention. However, this does not imply that the accused would automatically be entitled to bail if the IO does not request custody. The accused must still meet the criteria for release on bail under Section 439 of the Criminal Procedure Code, 1973.


Additionally, the Court emphasized the necessity for a swift trial, even when special statutes apply, and stressed that the gravity of allegations alone is insufficient to deny bail to an accused.


End Notes:


[i] 2023 SCC OnLine Del 4174


Authored by Jitin Bharadwaj, Advocate at Metalegal Advocates. The views expressed are personal and do not constitute legal opinion.

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