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

Date of the Judgment: 20 March 2023

Citation: 2023 INSC 263

Judges: Justice V. Ramasubramanian and Justice Pankaj Mithal

Can an accused person, who was not arrested during the investigation, be denied anticipatory bail when they are summoned by the Trial Court? The Supreme Court of India recently addressed this question in a case involving allegations of loan fraud. The court considered whether the fact that the Central Bureau of Investigation (CBI) did not seek custodial interrogation during the investigation period should influence the decision to grant anticipatory bail after the filing of the final report and the issuance of summons by the Trial Court. The judgment was delivered by a bench of Justice V. Ramasubramanian and Justice Pankaj Mithal.

Case Background

The case originated from a First Information Report (FIR) filed on 29 June 2019 by Corporation Bank. The FIR alleged that M/s NaftoGaz India Pvt. Ltd. had secured credit facilities from a consortium of banks led by the State Bank of India. These facilities were obtained by creating a charge on movable properties and mortgaging immovable properties. The account was operated properly until 27 July 2012, after which it showed signs of financial distress. On 22 November 2012, the account was classified as a Non-Performing Asset (NPA) with an outstanding balance of over ₹92 crores. The bank declared the account fraudulent on 3 February 2015.

The FIR further alleged that one of the mortgaged properties had defective title, and another was grossly overvalued. It was also alleged that the company colluded with advocates and valuers hired by the banks. The promoters/directors of the company, guarantors, and those involved in sanctioning the loan were accused of offenses under Sections 420, 467, 468, 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.

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 appellants applied for anticipatory bail. The Special Court rejected these applications, and the High Court of Judicature at Allahabad confirmed the rejection. Consequently, the appellants approached the Supreme Court.

Legal Framework

The case involves several sections of the Indian Penal Code (IPC) and the Prevention of Corruption Act, 1988. The relevant sections are:

• Section 420, IPC: This section deals with cheating and dishonestly inducing delivery of property.
• Section 467, IPC: This section pertains to forgery of valuable security, will, etc.
• Section 468, IPC: This section deals with forgery for the purpose of cheating.
• Section 471, IPC: This section relates to using as genuine a forged document or electronic record.
• Section 120B, IPC: This section deals with 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.

Arguments

Arguments by the Appellants:

• The appellants argued that the CBI did not require their custodial interrogation during the entire investigation period, from 29 June 2019 to 31 December 2021. Therefore, there was no need for their custody at this stage.
• The CBI’s stance in the High Court was that the court had only issued summons, not warrants, for their appearance. The CBI also stated before the Special Court that the presence of the accused was required for trial, not for investigation.
• The transactions in question occurred between 2009-2010 and 2012-2013, and all are documented. Since the primary evidence is documentary, there was no justification for arresting the appellants now.
• The appellants feared arrest not by the CBI, but by the Trial Court, due to a practice of remanding accused to custody upon their appearance in response to a summoning order.
• In the case of Shri Mahdoom Bava, the additional cases cited against him were mostly related to complaints under Section 138 of the Negotiable Instruments Act, 1881, and other cases which were inter-parties or for non-payment of TDS.

Arguments by the Respondent (CBI):

• The CBI vehemently opposed the grant of anticipatory bail, citing the serious nature of the allegations against the appellants.
• The CBI contended that the presence of the accused was necessary for the trial.
• The CBI argued that Shri Mahdoom Bava was involved in eleven other cases, indicating a pattern of misconduct.

Submissions Table

Issues Framed by the Supreme Court

The Supreme Court did not explicitly frame issues in a separate section. However, the core issue addressed by 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 the Trial Court had issued summons for their appearance.

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 cite any specific cases or books in this judgment. The court primarily relied on the specific facts of the case and the submissions made by both parties.

Judgment

How each submission made by the Parties was treated by the Court?

How each authority was viewed by the Court?

There were no authorities cited by the Court.

What weighed in the mind of the Court?

The Supreme Court’s decision to grant anticipatory bail was influenced by several key factors. The primary consideration was that the CBI did not find it necessary to arrest the accused during the investigation, which spanned from 29 June 2019 to 31 December 2021. This indicated that the custodial interrogation of the appellants was not required for the investigation. Additionally, the CBI’s own statements before the High Court and the Special Court suggested that the presence of the accused was needed for the trial, not for further investigation. The Court also noted that the transactions in question were primarily evidenced by documents, which reduced the need for custodial interrogation. The apprehension of arrest by the Trial Court, rather than the CBI, also played a significant role in the Court’s decision. The Court also considered that most of the cases against the prime accused, Shri Mahdoom Bava, were not serious in nature.

Fact:Law Ratio

The Court’s reasoning was driven more by the factual circumstances of the case (70%)—particularly the CBI’s conduct and the nature of evidence—than by purely legal considerations (30%). The court emphasized that the CBI’s decision not to arrest during the investigation and the documentary nature of the evidence were key factors in granting anticipatory bail.

The Court’s reasoning was based on the following:

• The CBI’s decision not to seek custodial interrogation during the investigation was a significant factor.
• The CBI’s statement that the presence of the accused was required for trial, not further investigation, was considered.
• The fact that the transactions were primarily evidenced by documents reduced the need for custodial interrogation.
• The apprehension of arrest by the Trial Court, rather than the CBI, was also taken into account.
• The Court also considered that most of the cases against the prime accused, Shri Mahdoom Bava, were not serious in nature.

The Supreme Court allowed the appeals and directed that the appellants be released on bail in the event of their arrest, subject to conditions imposed by the Special Court, including the surrender of their passports. The Court noted, “Therefore, the appeals are allowed and the appellants are directed to be released on bail, in the event of their arrest, subject to such terms and conditions as may be imposed by the Special Court, including the condition for the surrender of the passport, if any.”

The Court also observed, “More importantly, the appellants apprehend arrest, not at the behest of the CBI but at the behest of the Trial Court.” This highlights the Court’s concern about the practice of some trial courts to remand accused to custody upon their appearance in response to a summoning order.

The Court further stated, “In view of the aforesaid, we are of the considered view that the appellants are entitled to be released on bail, in the event of the Court choosing to remand them to custody, when they appear in response to the summoning order.”

Key Takeaways

• Anticipatory bail can be granted if the investigating agency did not require custodial interrogation during the investigation.
• The need for the accused’s presence for trial does not necessarily justify custodial interrogation.
• Documentary evidence can reduce the need for arrest and custodial interrogation.
• Apprehension of arrest by the Trial Court can be a valid reason for seeking anticipatory bail.
• The nature of other cases against an accused is a relevant consideration.

Directions

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

Development of Law

The ratio decidendi of the case is that anticipatory bail can be granted if the investigating agency did not require custodial interrogation during the investigation, the presence of the accused is required for trial and not further investigation and when the evidence is primarily documentary. This case clarifies that the need for the accused’s presence for trial does not necessarily justify custodial interrogation and that documentary evidence can reduce the need for arrest. This judgment does not change the previous position of law, but reinforces the principles of personal liberty and the importance of considering the specific facts of each case.

Conclusion

The Supreme Court’s decision in Mahdoom Bava vs. Central Bureau of Investigation highlights the importance of considering the specific facts of each case when deciding on anticipatory bail. The court emphasized that if the investigating agency did not require custodial interrogation during the investigation, and the evidence is primarily documentary, anticipatory bail should be granted. This judgment also addresses the concern of the practice of some trial courts to remand accused to custody upon their appearance in response to a summoning order, reinforcing the principles of personal liberty.

Category

Parent Category: Criminal Law

Child Categories:

• Anticipatory Bail
• Loan Fraud
• Section 420, Indian Penal Code, 1860
• Section 467, Indian Penal Code, 1860
• Section 468, Indian Penal Code, 1860
• Section 471, Indian Penal Code, 1860
• Section 120B, Indian Penal Code, 1860
• Section 13(2), Prevention of Corruption Act, 1988
• Section 13(1)(d), Prevention of Corruption Act, 1988

FAQ

Q: What is anticipatory bail?

A: Anticipatory bail is a direction to release a person on bail in the event of their arrest. It is sought when a person anticipates being arrested for a non-bailable offense.

Q: Why did the Supreme Court grant anticipatory bail in this case?

A: The Supreme Court granted anticipatory bail because the CBI did not require custodial interrogation during the investigation, the CBI stated that the presence of the accused was required for trial and not for further investigation, the evidence was primarily documentary, and the appellants apprehended arrest by the Trial Court, not the CBI.

Q: What does it mean that the CBI did not require custodial interrogation?

A: It means that during the investigation, the CBI did not find it necessary to take the accused into custody for questioning. This indicates that the investigation could be completed without arresting the accused.

Q: What is the significance of documentary evidence in this case?

A: The fact that the transactions were primarily evidenced by documents meant that there was less need for custodial interrogation to gather evidence, which influenced the Court’s decision to grant anticipatory bail.

Q: What is the implication of this judgment for future cases?

A: This judgment reinforces the principle that anticipatory bail should be granted when custodial interrogation is not necessary, especially when the investigating agency did not require it during the investigation. It also highlights the importance of considering the specific facts of each case.