Supreme Court Grants Anticipatory Bail in Bank Fraud Case: Mahdoom Bava vs. CBI (20 March 2023)

Date of the Judgment: 20 March 2023

Citation: (2023) INSC 253

Judges: V. Ramasubramanian, J., Pankaj Mithal, J.

Can an individual be denied anticipatory bail when the investigating agency did not deem custodial interrogation necessary during the investigation? The Supreme Court of India addressed this critical question in a recent case involving allegations of bank fraud. The court’s decision highlights the importance of personal liberty and the circumstances under which anticipatory bail should be granted. This judgment involved an appeal against the High Court of Judicature at Allahabad’s decision to reject the anticipatory bail applications of individuals accused in a bank fraud case. The bench was composed of Justices V. Ramasubramanian and Pankaj Mithal, with the judgment authored by Justice V. Ramasubramanian.

Case Background

The case originated from a First Information Report (FIR) filed on 29 June 2019 by Corporation Bank. The FIR alleged offences under Sections 420 (cheating), 467 (forgery of valuable security), 468 (forgery for purpose of cheating), 471 (using as genuine a forged document) read with Section 120B (criminal conspiracy) of the Indian Penal Code (IPC) and Section 13(2) read with Section 13(1)(d) of the Prevention of Corruption Act, 1988. The core allegation was that M/s NaftoGaz India Pvt. Ltd. obtained credit facilities from a consortium of banks, led by State Bank of India, by creating charges on movable and immovable properties. The account was operated properly until 27 July 2012, after which it showed signs of financial distress and was classified as a Non-Performing Asset (NPA) on 22 November 2012, with an outstanding balance of over Rs. 92 crores. The account was later declared fraudulent on 3 February 2015. It was alleged that the company colluded with advocates and valuers hired by the banks, and the properties mortgaged were either litigated or overvalued. The promoters/directors, guarantors, and those involved in loan sanction were accused of the offenses.

Timeline

Course of Proceedings

After the CBI filed its final report on 31 December 2021, the Special Court issued summons for the accused to appear on 7 March 2022. Apprehending arrest, the accused filed anticipatory bail applications. The Special Court rejected these applications, and the High Court of Judicature at Allahabad upheld the rejection. Consequently, the accused appealed to the Supreme Court.

Legal Framework

The case involves the following legal provisions:

• Section 420 of the Indian Penal Code (IPC): This section deals with cheating and dishonestly inducing delivery of property.
• Section 467 of the Indian Penal Code (IPC): This section addresses forgery of valuable security, will, etc.
• Section 468 of the Indian Penal Code (IPC): This section pertains to forgery for the purpose of cheating.
• Section 471 of the Indian Penal Code (IPC): This section covers using as genuine a forged document or electronic record.
• Section 120B of the Indian Penal Code (IPC): This section defines the punishment for criminal conspiracy.
• Section 13(2) read with Section 13(1)(d) of the Prevention of Corruption Act, 1988: These sections deal with criminal misconduct by a public servant.
• Section 138 of the Negotiable Instruments Act, 1881: This section deals with dishonour of cheque for insufficiency, etc., of funds in the account.

These provisions are invoked to address the alleged fraudulent activities and conspiracy in obtaining credit facilities from the banks.

Arguments

The arguments presented by both sides are as follows:

Arguments by the Appellants (Accused)

• The CBI did not require custodial interrogation of the appellants during the investigation period from 29 June 2019 to 31 December 2021.
• The CBI’s stand before the High Court was that the court had only issued summons and not warrants.
• For one of the accused, Shri Deepak Gupta, the CBI stated before the Special Court that his presence was required for trial, not for investigation.
• All the transactions in question occurred between 2009-2010 and 2012-2013 and are supported by documentary evidence.
• The appellants’ apprehension of arrest stems from the practice of Trial Courts remanding accused to custody upon appearance in response to a summons.

Arguments by the Respondent (CBI)

• The allegations against the appellants are serious in nature.
• Shri Mahdoom Bava, one of the accused, was involved in eleven other cases.

The appellants argued that since the CBI did not require their custody during the investigation and the transactions were supported by documents, there was no need for their arrest at this stage. The CBI, however, highlighted the seriousness of the allegations and the involvement of one of the accused in other cases.

Issues Framed by the Supreme Court

The Supreme Court did not explicitly frame specific issues in a dedicated section. However, the central issue before the Court was:

1. Whether the appellants are entitled to anticipatory bail, considering that the CBI did not require their custodial interrogation during the investigation and that their apprehension of arrest stems from the practice of Trial Courts remanding accused to custody upon appearance in response to a summons.

Treatment of the Issue by the Court

The following table demonstrates as to how the Court decided the issues:

Authorities

The Supreme Court did not explicitly cite any specific cases or books in this judgment. The court’s reasoning was primarily based on the facts of the case and the specific circumstances presented by the CBI’s actions and statements.

The court considered the following legal provisions:

• Section 420 of the Indian Penal Code (IPC): This section deals with cheating and dishonestly inducing delivery of property.
• Section 467 of the Indian Penal Code (IPC): This section addresses forgery of valuable security, will, etc.
• Section 468 of the Indian Penal Code (IPC): This section pertains to forgery for the purpose of cheating.
• Section 471 of the Indian Penal Code (IPC): This section covers using as genuine a forged document or electronic record.
• Section 120B of the Indian Penal Code (IPC): This section defines the punishment for criminal conspiracy.
• Section 13(2) read with Section 13(1)(d) of the Prevention of Corruption Act, 1988: These sections deal with criminal misconduct by a public servant.
• Section 138 of the Negotiable Instruments Act, 1881: This section deals with dishonour of cheque for insufficiency, etc., of funds in the account.

Judgment

How each authority was viewed by the Court?

• The Court noted that the alleged offences under Section 420, Section 467, Section 468, Section 471 read with Section 120B of the Indian Penal Code (IPC) and Section 13(2) read with Section 13(1)(d) of the Prevention of Corruption Act, 1988 were the basis of the FIR.
• The Court used Section 138 of the Negotiable Instruments Act, 1881 to show that many of the cases against one of the accused were not serious criminal cases, thus weakening CBI’s argument against grant of anticipatory bail.

What weighed in the mind of the Court?

The Supreme Court’s decision to grant anticipatory bail was primarily influenced by the following factors:

• The CBI did not find it necessary to have custodial interrogation of the accused during the investigation period.
• The CBI’s own statements indicated that the presence of the accused was required for the trial, not for further investigation.
• The transactions in question were backed by documentary evidence.
• The apprehension of arrest stemmed from the practice of Trial Courts to remand the accused to custody upon their appearance in response to a summons.

The Court emphasized that the CBI’s own actions and statements undermined their opposition to the anticipatory bail. The Court also considered the fact that the transactions were supported by documentary evidence and the accused’s apprehension of arrest was due to the practice of Trial Courts.

The Court’s reasoning was based on the specific facts of the case, particularly the CBI’s conduct and statements. The Court noted that “Admittedly, the CBI did not require the custodial interrogation of the appellants during the period of investigation from 29.06.2019 (date of filing of FIR) till 31.12.2021 (date of filing of the final report). Therefore, it is difficult to accept the contention that at this stage the custody of the appellants may be required.” The Court also observed that “In the reply/counter filed before the High Court, the CBI had taken a categorical stand that the Court had merely issued summons and not warrant for the appearance of the accused…all that the CBI wanted was the presence of the accused before the Trial Court to face trial. In such circumstances, to oppose the anticipatory bail request at this stage may not be proper.” Furthermore, the Court stated that “All transactions out of which the complaint had arisen, seem to have taken place during the period 2009-2010 to 2012-2013 and all are borne out by records. When the primary focus is on documentary evidence, we fail to understand as to why the appellants should now be arrested.”

Key Takeaways

• Anticipatory bail can be granted if the investigating agency did not require custodial interrogation during the investigation.
• Statements made by the investigating agency during the proceedings can be used against them.
• The existence of documentary evidence supporting the transactions is a factor in favor of granting anticipatory bail.
• The practice of Trial Courts to remand accused to custody upon appearance in response to a summons is a factor to be considered in anticipatory bail applications.
• The Court emphasized that personal liberty is paramount and should not be curtailed without sufficient cause.

Directions

The Supreme Court directed that the appellants be released on bail in the event of their arrest, subject to terms and conditions imposed by the Special Court, including the surrender of their passports, if any.

Development of Law

The ratio decidendi of this case is that anticipatory bail can be granted if the investigating agency did not require custodial interrogation during the investigation and the transactions are supported by documentary evidence. This judgment reinforces the principle that personal liberty is paramount and should not be curtailed without sufficient cause. The ruling also highlights that the statements of the investigating agency can be used against them, and the practice of Trial Courts to remand accused to custody upon appearance in response to a summons is a factor to be considered in anticipatory bail applications.

Conclusion

In conclusion, the Supreme Court allowed the appeals and granted anticipatory bail to the accused, emphasizing that the CBI did not require their custody during the investigation, the transactions were backed by documentary evidence, and the accused’s apprehension of arrest was due to the practice of Trial Courts to remand the accused to custody upon appearance in response to a summons. The Court underscored the importance of personal liberty and the need for a balanced approach in criminal proceedings.