Supreme Court Cancels Anticipatory Bail in Corruption Case: CBI vs. Santosh Karnani (2023)

Introduction

Date of the Judgment: April 17, 2023

Citation: 2023 INSC 380

Judges: Surya Kant, J. and J.K. Maheshwari, J.

Can a public servant accused of demanding a bribe be granted anticipatory bail? The Supreme Court of India recently addressed this critical question in a case involving allegations of corruption against an Income Tax officer. The Court overturned a High Court decision, emphasizing the need for thorough investigation in corruption cases. This judgment underscores the importance of maintaining public trust and ensuring accountability of public servants.

Case Background

The case revolves around allegations against Santosh Karnani, an IRS officer and Additional Commissioner of Income Tax, Ahmedabad. In February 2019, Mr. Karnani conducted a survey under Section 133A of the Income Tax Act, 1961 against Safal Construction Pvt. Ltd., a company owned by the complainant, Rupesh Balwantbhai Brambhatt. This survey led to the disclosure of an additional income of Rs. 50 crores by the company.

In September 2021, the Income Tax Department initiated search and seizure operations against Safal Construction. Mr. Brambhatt alleged that Mr. Karnani, who was handling his case, threatened to ruin his business and demanded a bribe. On September 29, 2022, Mr. Karnani allegedly contacted Mr. Brambhatt, asking him to meet on October 3, 2022. During this meeting, Mr. Karnani allegedly demanded Rs. 30 lakhs to help with the case. Mr. Brambhatt recorded this conversation and subsequently lodged a complaint with the Anti-Corruption Bureau (ACB) on October 4, 2022.

A trap was set, and Mr. Brambhatt’s employee deposited the bribe money at Dhara Angadia firm. Mr. Brambhatt then contacted Mr. Karnani via WhatsApp, which was recorded by the ACB, where Mr. Karnani acknowledged the payment. When the ACB team tried to arrest Mr. Karnani, he allegedly assaulted them and escaped, also handing his mobile phone to a colleague.

Timeline

Course of Proceedings

The City Civil & Sessions Court at Ahmedabad rejected Mr. Karnani’s anticipatory bail application on November 3, 2022, noting his non-cooperation and attempts to evade the process of law. The Special Judge observed that custodial interrogation was necessary to unearth the larger conspiracy.

Aggrieved by this order, Mr. Karnani applied for anticipatory bail before the High Court of Gujarat. On December 19, 2022, the High Court granted anticipatory bail, observing a doubt regarding the acceptance of illegal gratification, as the money was deposited in the account of Vardhman in Dhara Angadia firm, and there was no direct evidence of Mr. Karnani accepting the amount. The High Court also directed that despite the grant of anticipatory bail, the CBI could apply for police remand, but Mr. Karnani would be set free immediately after the remand period.

Legal Framework

The case primarily involves Section 7 of the Prevention of Corruption Act, 1988, which deals with offences related to public servants taking gratification other than legal remuneration.

Section 7 of the Prevention of Corruption Act, 1988 states:

“Offence relating to public servant being bribed. – Any public servant who obtains or accepts or attempts to obtain from any person, for himself or for any other person, any gratification whatever, other than legal remuneration, as a motive or reward for doing or forbearing to do any official act or for showing or forbearing to show, in the exercise of his official functions, favour or disfavour to any person, or for rendering or attempting to render any service or disservice to any person, with the Central Government or any State Government or Parliament or the Legislature of any State or with any local authority, corporation or Government company referred to in clause (c) of section 2, or with any public servant, whether named or otherwise, shall be punishable with imprisonment for a term which shall not be less than three years but which may extend to seven years and shall also be liable to fine.”

The Court also considered Section 17A of the Prevention of Corruption Act, 1988, which mandates prior approval for investigating offences related to decisions taken by public servants in their official capacity. However, the first proviso of Section 17A states that such approval is not necessary in cases involving arrest of the person on the spot on the charges of accepting undue advantage.

Arguments

The following are the arguments presented by both sides:

Arguments by the CBI

• The High Court erred in granting anticipatory bail considering the gravity of the offense and Mr. Karnani’s position as an IRS officer.

• The High Court did not appreciate the evidence of demand and acceptance of the bribe, including voice recordings of Mr. Karnani demanding Rs. 30 lakhs and acknowledging payment.

• The High Court incorrectly observed a delay in registering the FIR, as the CBI had re-registered an FIR initially registered by the ACB.

• Mr. Karnani’s service record is not clean, as his name was included in the ‘Agreed List’ for Group A officers in 2015.

• Mr. Karnani evaded arrest, used criminal force against the ACB team, and handed his mobile phone to a colleague to avoid seizure.

• Forensic reports confirm the genuineness of the audio and video evidence.

• Mr. Karnani misled the investigating agency by falsely claiming he was on leave and sending replies via an email ID of a hotel where he had never stayed.

• Evidence suggests other Income Tax officials were involved, necessitating custodial interrogation to uncover the larger conspiracy.

• Mr. Karnani did not hand over his mobile phones, crucial evidence, and thus is not cooperating with the investigation.

• Custodial interrogation is essential for effective investigation, as per the judgment in State Rep. By The CBI v. Anil Sharma [(1997) 7 SCC 187].

• Anticipatory bail should not be granted to an absconder, as per Prem Shankar Prasad v. State of Bihar [2021 SCC OnLine SC 955], State of Madhya Pradesh v. Pradeep Sharma [(2014) 2 SCC 171] and Lavesh v. State (NCT of Delhi) [(2012) 8 SCC 730].

• The High Court’s order allowing police remand while granting anticipatory bail is unusual and prevents custodial interrogation.

Arguments by the Complainant

• The High Court ignored the Sessions Court’s observations that custodial interrogation was necessary.

• The High Court failed to appreciate the demand for Rs. 30 lakhs and the acceptance of the bribe money through Dhara Angadia Firm.

Arguments by Mr. Santosh Karnani (Accused)

• The allegations are false and concocted, and he never demanded gratification.

• There is no evidence of demand or acceptance of the bribe, which are essential for establishing the offense.

• The voice recording was done without police involvement and has no evidentiary value.

• The deposit in the Angadia firm is not acceptance of bribe as he has no connection with the firm.

• The complainant has animosity due to the past survey action against his company.

• There is a delay in registering the FIR, with no record of the complainant meeting police officials before the FIR.

• Only Mr. Karnani is being targeted, while the owners of Dhara Angadia firm have not been arrested.

• The CBI misused Section 41A of the CrPC, which is meant for cases where custody is not required.

• He cannot be termed an absconder as he was availing legal remedies, yet the investigating agency published “Wanted” posters.

• He has cooperated with the investigation after the grant of anticipatory bail.

• He has an impeccable service record and there are no cases of disproportionate assets against him.

• The investigation was initiated without the prior approval mandated by Section 17A of the Prevention of Corruption Act, 1988.

• The High Court rightly granted anticipatory bail and provided adequate reasoning.

• Cancellation of bail requires ‘cogent and overwhelming’ reasons, as per Dolat Ram v. State of Haryana [(1995) 1 SCC 349], and no such reasons exist.

Issues Framed by the Supreme Court

The Supreme Court considered the following issues:

1. Whether the High Court was justified in granting anticipatory bail to Respondent No. 1, considering the gravity of the offense and the material collected against him?
2. Whether the High Court correctly appreciated the evidence of demand and acceptance of bribe by Respondent No. 1?
3. Whether the High Court’s observation regarding delay in registration of FIR was factually correct?
4. Whether the High Court was correct in its observation regarding the acceptance of the bribe amount?
5. Whether the High Court’s order directing that the investigating agency would be at liberty to apply to the competent Magistrate for police remand of Respondent No. 1, despite granting anticipatory bail, was justified?

Treatment of the Issue by the Court

Authorities

The Supreme Court considered the following authorities:

Cases

• State Rep. By The CBI v. Anil Sharma [(1997) 7 SCC 187] – Supreme Court of India. This case was cited to emphasize that custodial interrogation is more effective than questioning a suspect protected by anticipatory bail.
• Prem Shankar Prasad v. State of Bihar [2021 SCC OnLine SC 955] – Supreme Court of India. This case was cited to argue that anticipatory bail should not be granted to an absconder.
• State of Madhya Pradesh v. Pradeep Sharma [(2014) 2 SCC 171] – Supreme Court of India. This case was cited to argue that anticipatory bail should not be granted to an absconder.
• Lavesh v. State (NCT of Delhi) [(2012) 8 SCC 730] – Supreme Court of India. This case was cited to argue that anticipatory bail should not be granted to an absconder.
• Siddharam Satlingappa Mhetre v. State of Maharashtra [(2011) 1 SCC 694] – Supreme Court of India. This case was referred to for the factors and parameters to be considered while dealing with anticipatory bail.
• Gurbaksh Singh Sibbia v. State of Punjab [(1980) 2 SCC 565] – Supreme Court of India. This case was referred to for the parameters evolved by the Constitution Bench for anticipatory bail.
• Sushila Aggarwal v. State (NCT of Delhi) [(2020) 5 SCC 1] – Supreme Court of India. This case was referred to for the principles to be considered while deciding anticipatory bail applications.
• Dolat Ram v. State of Haryana [(1995) 1 SCC 349] – Supreme Court of India. This case was cited to argue that cancellation of bail requires ‘cogent and overwhelming’ reasons.

Legal Provisions

• Section 7 of the Prevention of Corruption Act, 1988 – This section deals with offences related to public servants taking gratification other than legal remuneration.
• Section 17A of the Prevention of Corruption Act, 1988 – This section mandates prior approval for investigating offences related to decisions taken by public servants in their official capacity, with a proviso for cases involving arrest on the spot for accepting undue advantage.
• Section 133A of the Income Tax Act, 1961 – This section deals with the power of survey by Income Tax authorities.
• Section 41A of the Code of Criminal Procedure – This section deals with the procedure for issuing notices to persons to appear before police officers.

Judgment

The Supreme Court allowed the appeals, set aside the High Court’s order granting anticipatory bail, and dismissed Mr. Karnani’s anticipatory bail application. The Court also set aside the Special Judge’s order that had partly allowed CBI’s application for remand.

The Supreme Court considered the following authorities:

• State Rep. By The CBI v. Anil Sharma [(1997) 7 SCC 187]* – The Court relied on this case to emphasize that custodial interrogation is more effective than questioning a suspect protected by anticipatory bail.
• Prem Shankar Prasad v. State of Bihar [2021 SCC OnLine SC 955]* – The Court cited this case to support the argument that anticipatory bail should not be granted to an absconder.
• State of Madhya Pradesh v. Pradeep Sharma [(2014) 2 SCC 171]* – The Court cited this case to support the argument that anticipatory bail should not be granted to an absconder.
• Lavesh v. State (NCT of Delhi) [(2012) 8 SCC 730]* – The Court cited this case to support the argument that anticipatory bail should not be granted to an absconder.

What weighed in the mind of the Court?

The Supreme Court’s decision was influenced by several factors, primarily focusing on the need for a thorough investigation in corruption cases and the conduct of the accused. The Court emphasized that corruption poses a serious threat to society and must be dealt with firmly.

The Court noted the following points:

• The gravity of the offense and the position held by Mr. Karnani as a public servant.
• The evidence of demand and acceptance of the bribe, including voice recordings and the deposit of money in the Angadia firm.
• Mr. Karnani’s evasion of arrest, use of criminal force against the ACB team, and attempts to destroy evidence.
• The need to unearth the larger conspiracy involving other Income Tax officials and individuals.
• The importance of custodial interrogation for effective investigation.

The Court’s reasoning for rejecting the anticipatory bail application for each issue is as follows:

Conclusion

The Supreme Court’s decision in CBI vs. Santosh Karnani is a significant judgment that underscores the importance of maintaining public trust and ensuring accountability of public servants. The Court’s decision to cancel the anticipatory bail granted by the High Court emphasizes the need for a thorough investigation in corruption cases, especially when there is evidence of demand and acceptance of bribes.

The judgment also highlights that anticipatory bail should not be granted to individuals who evade arrest, attempt to tamper with evidence, or fail to cooperate with the investigation. The Court’s emphasis on custodial interrogation in such cases reinforces the idea that it is crucial for uncovering the full extent of the conspiracy and ensuring that justice is served.

Furthermore, the Supreme Court’s rejection of the High Court’s unusual order allowing police remand after granting anticipatory bail sends a clear message that such practices are not conducive to fair investigation. The judgment serves as a reminder that the judiciary must act decisively to uphold the rule of law and ensure that those who engage in corrupt practices are held accountable.

In summary, this case reinforces the principle that in cases involving allegations of corruption against public servants, the focus should be on ensuring a thorough and impartial investigation, and anticipatory bail should not be granted if it hinders this process.