When bail be granted in commission of fraud punishable under Section 447 of the Companies Act, 2013 = from FY 2009­10 to FY 2016­17, Brij Bhushan Singal and Neeraj Singal, promoters of Bhushan Steel Ltd. (for short “BSL”), assisted by employees and close associates, used a complex web of 157 companies to siphon off funds from BSL for various purposes, and also fraudulently availed of credit from various lender banks and manipulated the books of accounts and financial statements of BSL, causing wrongful loss to banks and financial institutions amounting to Rs. 20,879 crores and causing wrongful gain to the promoters and their family members, amounting to around Rs. 3500 crores. Respondent No. 1 herein, Nittin Johari, who was the Chief Financial Officer and Whole Time Director (Finance) of BSL, as well as a member of the Committee of the Board of Directors on Borrowing, Investment and Loans during the relevant period, was alleged to have been a close associate of the promoters and to have played a central role in perpetrating these frauds. = in Y.S. Jagan Mohan Reddy (supra): “34. Economic offences constitute a class apart and need to be visited with a different approach in the matter of bail. The economic offences having deeprooted conspiracies and involving huge loss of public funds need to be viewed seriously and considered as grave offences affecting the economy of the country as a whole and thereby posing serious threat to the financial health of the country. 35. While granting bail, the court has to keep in mind the nature of accusations, the nature of evidence in support thereof, the severity of the punishment which conviction will entail, the character of the accused, circumstances which are peculiar to the accused, reasonable possibility of securing the presence of the accused at the trial, reasonable apprehension of the witnesses being tampered with, the larger interests of the public/State and other similar considerations.”=. In our considered opinion, the High Court in the impugned order has failed to apply even these general principles. The High Court, after referring to certain portions of the complaint to ascertain the alleged role of Respondent No. 1, came to the conclusion that the role attributed to him was merely that of colluding with the co­accused promoters in the commission of the offence in question. The Court referred to the principles governing the grant of bail as laid down by this Court in Ranjitsing Brahmajeetsingh Sharma v. State of Maharashtra, (2005) 5 SCC 294, which discusses the effect of the twin mandatory conditions pertaining to the grant of bail for offences under the Maharashtra Control of Organised Crime Act, 1999 as laid down in Section 21(4) thereof, similar to the conditions embodied in Section 212(6)(ii) of the Companies Act. However, the High Court went on to grant bail to Respondent No.1 by observing that bail was justified on the “broad probabilities” of the case. In our considered opinion, this vague observation demonstrates non­application of mind on the part of the Court even under Section 439 of the Cr.P.C., even if we keep aside the question of satisfaction of the mandatory requirements under Section 212(6)(ii) of the Companies Act. We refrain from making any observations with respect to the proceedings pertaining to Neeraj Singal, particularly since the proceedings pertaining to the vires of Section 212(6)(ii) of the Companies Act that have arisen therefrom are pending before this Court, as already noted supra. However, we find it necessary to note that in light of the peculiar circumstances of the case, the High Court ought not to have been influenced by the non­arrest of Brij Bhushan Singal and the grant of bail to Neeraj Singal. 15. In light of the foregoing discussion, we are of the view that the High Court has failed to apply its mind to all the circumstances that were required to be considered while granting bail, particularly in relation to economic offences. Accordingly, the impugned order is hereby set aside. In the interest of justice, we deem it fit to remand the matter to the High Court to reconsider Bail Application No. 1971/2019 filed by Respondent No.1 in light of the principles governing the grant of bail under Section 439 of the Cr.P.C, while also keeping in mind the scope and effect of the twin mandatory conditions for grant of bail laid down in Section 212(6)(ii) of the Companies Act.

IN THE SUPREME COURT OF INDIA
CRIMINAL APPELLATE JURISDICTION
CRIMINAL APPEAL NO. 1381 OF 2019
(@ S.L.P. (CRL.) NO. 7437 OF 2019
Serious Fraud Investigation Office …Appellant(s)
Versus
Nittin Johari & Anr. …Respondent(s)
J U D G M E N T
MOHAN M. SHANTANAGOUDAR, J.
Leave granted.

  1. The instant appeal challenges the grant of bail to
    Respondent No. 1 by the High Court of Delhi in Bail Application
    No. 1971/2019 in C.C. No. 770/2019, vide the order dated
    14.08.2019.
  2. The case of the prosecution primarily hinges on the
    commission of fraud punishable under Section 447 of the
    Companies Act, 2013 (for short “the Companies Act”), though
    several other offences under the Companies Act and the Indian
    NON­REPORTABLE
    1
    Penal Code, 1860 have also been alleged. Briefly put, it is alleged
    that from FY 2009­10 to FY 2016­17, Brij Bhushan Singal and
    Neeraj Singal, promoters of Bhushan Steel Ltd. (for short “BSL”),
    assisted by employees and close associates, used a complex web
    of 157 companies to siphon off funds from BSL for various
    purposes, and also fraudulently availed of credit from various
    lender banks and manipulated the books of accounts and
    financial statements of BSL, causing wrongful loss to banks and
    financial institutions amounting to Rs. 20,879 crores and
    causing wrongful gain to the promoters and their family
    members, amounting to around Rs. 3500 crores.
    Respondent No. 1 herein, Nittin Johari, who was the Chief
    Financial Officer and Whole Time Director (Finance) of BSL, as
    well as a member of the Committee of the Board of Directors on
    Borrowing, Investment and Loans during the relevant period, was
    alleged to have been a close associate of the promoters and to
    have played a central role in perpetrating these frauds. In
    particular, it is alleged that Respondent No. 1 played an active
    role in using fraudulent letters of credit to avail of credit from
    lender banks, in inflating Stock­in­Transit figures to avail of
    greater Drawing Power from banks, and in manipulating
    2
    statements of accounts and other financial statements of BSL in
    the garb of adopting the Indian Accounting Standards.
    Investigation into the affairs of BSL and certain associated
    companies had been initiated by the Serious Fraud Investigation
    Office (for short “the SFIO”), the Appellant herein, pursuant to
    the order dated 03.05.2016 issued by the Ministry of Corporate
    Affairs (for short “the MCA”) under Section 212(1)(c) of the
    Companies Act. Gradually, the scope of investigation expanded to
    157 companies and 130 individuals.
  3. Respondent No. 1 came to be arrested on 02.05.2019, and
    was remanded to the Appellant’s custody on 03.05.2019. He has
    been in judicial custody since 08.05.2019. It is also pertinent to
    note that previously, co­accused Neeraj Singal had been granted
    certain interim reliefs (including interim bail) by the High Court
    of Delhi vide order dated 29.08.2018 in W.P. (Crl.) No.
    2453/2018, in which he had challenged the constitutionality of
    Section 212(6)(ii), (7) and (8) of the Companies Act. The operation
    and effect of this order (save for his interim release) had been
    stayed by this Court in appeal, vide order dated 04.09.2018.
  4. Respondent No. 1 applied for regular bail under Section 439
    of the Code of Criminal Procedure, 1973 (for short “the Cr.P.C.”),
    3
    which was dismissed by the Special Judge (Companies Act),
    Dwarka District Courts, Delhi, vide order dated 06.06.2019. The
    Investigation Report was submitted by the Appellant to the MCA
    on 27.06.2019, and after obtaining sanction from the MCA, the
    Petitioner filed the Complaint before the Special Court on
    01.07.2019. It may be pertinent to note that as per Section
    212(15) of the Companies Act, the Investigation Report filed
    under Section 212(12) of the Companies Act is deemed to be a
    report filed by a police officer under Section 173 of the Cr.P.C.
    (i.e. the chargesheet).
    Respondent No. 1 filed another application under Section
    439 of the Cr.P.C. before the Special Judge, which was dismissed
    vide order dated 02.08.2019. It is pertinent to note that both
    these orders take note of the mandatory nature of Section 212(6)
    (ii) of the Companies Act pertaining to the grant of bail for
    offences, as well as of the gravity of the economic offence
    committed, the deep­rooted nature of the conspiracy, and the
    huge loss of public funds involved.
  5. Bail Application No. 1791/2019 was subsequently filed
    before the High Court of Delhi, which came to be allowed vide the
    impugned order, giving rise to the instant appeal. The impugned
    4
    order was stayed by this Court on 16.08.2019. Respondent No. 1
    therefore continues to be in custody.
  6. At the outset, learned Solicitor General Shri Tushar Mehta,
    appearing on behalf of the Appellant, requested that as the
    proceedings in SFIO v. Neeraj Singal (Crl. Appeal No. 1114 of
    2018) might be referred to by Respondent No. 1 to buttress his
    claim for bail on the ground of parity, it may be appropriate for
    this bench to also take up the proceedings related to the grant of
    interim bail to Neeraj Singal, currently pending before a
    coordinate bench of this Court, alongside the present petition. As
    of now, we do not find any ground to accept this request, and are
    therefore constrained to turn it down for the present.
    Learned Solicitor General also submitted that the relief of
    interim bail had been wrongly granted to co­accused Neeraj
    Singal by the High Court of Delhi when he mounted a challenge
    to the constitutionality of Section 212(6)(ii), (7) and (8) of the
    Companies Act, and not on merits. This order had thereafter
    been criticized by this Court in Criminal Appeal No. 1114 of 2018
    in its order dated 04.09.2018, inter alia on the ground that the
    High Court should have at least considered the case for interim
    relief by applying the broad contours of Section 439 of the Cr.P.C.
    5
    In this respect, he referred to the following observations made in
    the order dated 04.09.2018:
    “9. In the nature of the interim order that we propose
    to pass, we refrain from elaborating on the contentions
    and the reasons recorded by the High Court at this
    stage. However, we may observe that prima facie we
    find that the reasons being on the constitutional
    validity of provisions apart from Sections 212(6)(ii) and
    212(7) of the Act ought not to have weighed with the
    High Court for grant of interim relief. Moreover, in
    any case, the High Court ought to have applied the
    broad contours required to be kept in mind for grant of
    bail under Section 439 Cr.P.C., which aspect, we find,
    has not been adverted to at all in the impugned order.
    There is prima facie substance in the grievance of the
    appellants that the High Court has failed to consider
    matter such as the nature of gravity of the
    alleged offence. Moreover, we find that in the course of
    the impugned order, the High Court even proceeded to
    recall certain observations made by it in another case
    (Poonam Malik v. Union of India [W.P.(Crl.) No.2384
    of 2018] order dated 10th August 2018).”
    It was submitted that in light of these peculiar
    circumstances, there exists no reason to grant bail to Respondent
    No. 1 on the ground of parity with Neeraj Singal. It was further
    submitted that the non­arrest of various other co­accused was
    not pertinent to deciding whether Respondent No. 1 should be
    released on bail.
    Learned Solicitor General also sought to impress upon us
    the magnitude of the offence, arguing that economic offences
    6
    form a class apart, particularly cases such as the instant one,
    which have resulted in not only a substantial loss to banks but
    also a huge blow to the national economy. In such cases, the
    Court must account for several factors while granting bail,
    especially the gravity of the offence involved. In pursuance of this
    contention, he referred to certain observations made by this
    Court in Y.S. Jagan Mohan Reddy v. Central Bureau of
    Investigation, (2013) 7 SCC 439 to this effect. It was argued that
    the above factors had not been considered adequately by the
    High Court in the impugned order, which granted bail merely on
    the basis of “broad probabilities” and without adverting to the
    gravity of the offence and its impact on society.
    In this respect, he took us through the contents of the
    complaint, arguing that the High Court had erred in selectively
    referring to certain portions thereof, and had not appreciated that
    the extent of the role of Respondent No. 1 in the alleged offences
    had been made out extensively throughout the complaint.
    Additionally, reference was made to the mandatory
    conditions under Section 212(6)(ii) of the Companies Act, which
    require the Court to record its satisfaction that there exist
    reasonable grounds for believing that the accused is not guilty of
    7
    the alleged offence and is not likely to commit any offence while
    on bail. It was argued that these conditions do not imply that an
    applicant would be kept in custody indefinitely. In this respect,
    our attention was drawn to the decision in Collector of
    Customs, New Delhi v. Ahmadalieva Nodira, (2004) 3 SCC
    549, pertaining to an analogous provision (i.e. Section 37(1)(b)(ii)
    of the Narcotic Drugs and Psychotropic Substances Act, 1985), in
    which it was held that the term “reasonable grounds” refers to
    something more than prima facie grounds, and contemplates
    substantial probable causes for believing that the accused is not
    guilty of the offence concerned.
    Learned Solicitor General also referred to Nikesh
    Tarachand Shah v. Union of India, (2018) 11 SCC 1, wherein
    this Court had struck down Section 45 of the Prevention of
    Money Laundering Act, 2002 (for short “the PMLA”), another
    provision analogous to Section 212(6) of the Companies Act. It
    was contended that this decision was irrelevant to the present
    case, since the classification because of which the provision was
    held to be unconstitutional had been done away with. This was
    because when the said judgment was passed, Section 45 of the
    8
    PMLA imposed the twin conditions for bail only for offences found
    in Schedule A of the PMLA (i.e., ‘predicate offences’ found in other
    penal statutes) which were punishable with imprisonment for
    three years or more, and this Court had struck down this
    provision as unconstitutional mainly on the ground that the
    aforesaid classification did not seem to have a rational nexus to
    the object of that legislation. However, the Parliament had
    subsequently amended Section 45 of the PMLA, imposing the
    twin conditions for bail for offences under the PMLA itself, and
    not for offences found in Schedule A. It was further submitted
    that after the said amendment, Section 45 of the PMLA had
    become in pari materia with Section 212(6) of the Companies Act,
    as the latter section also imposed the twin conditions for offences
    under Section 447 of the Companies Act itself.
  7. On the other hand, learned Senior Counsel Shri Kapil Sibal,
    appearing on behalf of Respondent No. 1, submitted that once
    investigation is over and a chargesheet has been filed, as has
    been done in the present case, the nature of allegations may not
    be a factor to decide if bail is to be granted. Instead, in such
    cases, the Court must consider whether the applicant has been
    cooperating in the investigation, and whether there is a
    9
    possibility that the applicant may abscond or tamper with
    evidence. At the same time, learned Senior Counsel was quick to
    caution that mere apprehension of tampering or absconding is
    not enough to deny bail, and that there should be an attempt at
    tampering with evidence or certainty that the petitioner would
    abscond if he is granted bail. Reliance was placed on State of
    Maharashtra v. Nainmal Punjaji Shah, (1969) 3 SCC 904 to
    buttress this proposition. It was stressed that in the instant case,
    there had been no allegation of tampering with evidence or
    influencing witnesses against Respondent No. 1.
    Learned Senior Counsel also referred to Y.S. Jagan Mohan
    Reddy (supra), where the Court had given the accused therein
    liberty to renew his prayer for bail once the chargesheet had been
    filed. He also highlighted that bail had been granted within five
    days after the chargesheet had been filed. The decision of this
    Court in Sanjay Chandra v. Central Bureau of Investigation,
    (2012) 1 SCC 40, was also referred to, wherein bail had been
    granted since custody was felt to be unnecessary after the
    chargesheet had been filed.
    10
    It was also contended that since BSL has been taken over
    by the Tata Group, there was no possibility of tampering with any
    evidence, as all relevant documents were either in the possession
    of the new owners of BSL or of the Court.
    Learned Senior Counsel further submitted that the
    Appellant had unfairly targeted Respondent No. 1 by arresting
    only him, although 287 parties, including 157 companies and
    130 individuals, were named in the complaint. Further, he drew
    our attention to the order dated 16.08.2019 vide which the
    Special Judge has directed the parties to be summoned in
    batches until December 2019. It was further contended that the
    documents sought to be submitted by the Appellant ran into
    more than 70,000 pages, the perusal of which at the stage of
    framing of charges before the Special Judge would take a
    considerable amount of time. It was thus argued that if the
    present appeal before this Court were allowed, Respondent No.1,
    who has already spent 124 days in custody, would have to spend
    well over a year or more in custody even before the
    commencement of the trial.
    With respect to the twin mandatory conditions under
    Section 212(6)(ii) of the Companies Act, learned Senior Counsel
    11
    highlighted that in Nikesh Tarachand Shah (supra), Section 45
    of the PMLA had been held unconstitutional not only under
    Article 14, but also under Article 21 of the Constitution, as the
    said section made drastic inroads into the fundamental right of
    liberty without there being a compelling state interest. However,
    without going into the question of the constitutionality of Section
    212(6) of the Companies Act itself, it was stressed that since the
    provision, as it exists, requires the Court to practically record a
    finding of acquittal in order to grant bail, it is well nigh
    impossible for an applicant to obtain bail under the provision.
    Overall, it was contended that the High Court had used its
    discretion in granting bail in Respondent No.1 after applying its
    mind to the contents of the complaint and relevant legal
    propositions, and did not suffer from any perversity so as to
    warrant the intervention of this Court.
  8. Having heard the learned Counsel on either side, we have
    perused the record.
  9. It is pertinent to begin our discussion by referring to the
    mandatory conditions imposed under Section 212(6)(ii) for the
    grant of bail in connection with offences under Section 447 of the
    Companies Act. Sub­clause (ii) of Section 212(6) reads as follows:
    12
    “(6) Notwithstanding anything contained in the Code of
    Criminal Procedure, 1973 (2 of 1974), offence covered
    under section 447 of this Act shall be cognizable and
    no person accused of any offence under those sections
    shall be released on bail or on his own bond unless—
    (ii) where the Public Prosecutor opposes the
    application, the court is satisfied that there are
    reasonable grounds for believing that he is not guilty of
    such offence and that he is not likely to commit any
    offence while on bail”
    Although arguments have been advanced touching upon the
    scope and validity of the above provision, particularly in the
    aftermath of the decision of this Court in Nikesh Tarachand
    Shah (supra) pertaining to a similar provision in the PMLA, we
    do not find it appropriate to make any observations in this regard
    in light of the pendency of the challenge to the constitutionality of
    the said provision of the Companies Act before this Court.
  10. At this juncture, it must be noted that even as per Section
    212(7) of the Companies Act, the limitation under Section 212(6)
    with respect to grant of bail is in addition to those already
    provided in the Cr.P.C. Thus, it is necessary to advert to the
    principles governing the grant of bail under Section 439 of the
    Cr.P.C. Specifically, heed must be paid to the stringent view
    taken by this Court towards grant of bail with respect of
    economic offences. In this regard, it is pertinent to refer to the
    13
    following observations of this Court in Y.S. Jagan Mohan Reddy
    (supra):
    “34. Economic offences constitute a class apart and
    need to be visited with a different approach in the
    matter of bail. The economic offences having deeprooted conspiracies and involving huge loss of public
    funds need to be viewed seriously and considered as
    grave offences affecting the economy of the country as
    a whole and thereby posing serious threat to the
    financial health of the country.
  11. While granting bail, the court has to keep in mind
    the nature of accusations, the nature of evidence in
    support thereof, the severity of the punishment which
    conviction will entail, the character of the accused,
    circumstances which are peculiar to the accused,
    reasonable possibility of securing the presence of the
    accused at the trial, reasonable apprehension of the
    witnesses being tampered with, the larger interests of
    the public/State and other similar considerations.”
    This Court has adopted this position in several decisions,
    including Gautam Kundu v. Directorate of Enforcement
    (Prevention of Money Laundering Act), Government of India,
    (2015) 16 SCC 1, and State of Bihar v. Amit Kumar, (2017) 13
    SCC 751. Thus, it is evident that the above factors must be taken
    into account while determining whether bail should be granted in
    cases involving grave economic offences.
  12. As already discussed supra, it is apparent that the Special
    Court, while considering the bail applications filed by Respondent
    14
    No. 1 both prior and subsequent to the filing of the Investigation
    Report and complaint, has attempted to account not only for the
    conditions laid down in Section 212(6) of the Companies Act, but
    also of the general principles governing the grant of bail.
  13. In our considered opinion, the High Court in the impugned
    order has failed to apply even these general principles. The High
    Court, after referring to certain portions of the complaint to
    ascertain the alleged role of Respondent No. 1, came to the
    conclusion that the role attributed to him was merely that of
    colluding with the co­accused promoters in the commission of
    the offence in question. The Court referred to the principles
    governing the grant of bail as laid down by this Court in
    Ranjitsing Brahmajeetsingh Sharma v. State of
    Maharashtra, (2005) 5 SCC 294, which discusses the effect of
    the twin mandatory conditions pertaining to the grant of bail for
    offences under the Maharashtra Control of Organised Crime Act,
    1999 as laid down in Section 21(4) thereof, similar to the
    conditions embodied in Section 212(6)(ii) of the Companies Act.
    However, the High Court went on to grant bail to Respondent No.
    15
    1 by observing that bail was justified on the “broad probabilities”
    of the case.
    In our considered opinion, this vague observation
    demonstrates non­application of mind on the part of the Court
    even under Section 439 of the Cr.P.C., even if we keep aside the
    question of satisfaction of the mandatory requirements under
    Section 212(6)(ii) of the Companies Act.
  14. Moreover, the fate of the co­accused promoters alleged to be
    the “mind and will” of the accused companies seems to have
    played heavily on the Court’s mind. The High Court observed that
    while co­accused Brij Bhushan Singal had not been arrested due
    to his old age, co­accused Neeraj Singal had already been granted
    bail, vide order dated 29.08.2018. The Court noted that the order
    dated 29.08.2018 primarily dealt with the challenge mounted to
    the constitutional validity of various sub­sections of Section 212
    of the Companies Act, and that though the operation of that
    order had been stayed by the Supreme Court, this was only
    because the observations made by the High Court in its order
    dated 29.08.2018 were of far­reaching consequences, and the
    release of such co­accused on bail had not been reversed.
    16
    We refrain from making any observations with respect to the
    proceedings pertaining to Neeraj Singal, particularly since the
    proceedings pertaining to the vires of Section 212(6)(ii) of the
    Companies Act that have arisen therefrom are pending before
    this Court, as already noted supra. However, we find it necessary
    to note that in light of the peculiar circumstances of the case, the
    High Court ought not to have been influenced by the non­arrest
    of Brij Bhushan Singal and the grant of bail to Neeraj Singal.
  15. In light of the foregoing discussion, we are of the view that
    the High Court has failed to apply its mind to all the
    circumstances that were required to be considered while granting
    bail, particularly in relation to economic offences. Accordingly,
    the impugned order is hereby set aside.
  16. In the interest of justice, we deem it fit to remand the matter
    to the High Court to reconsider Bail Application No. 1971/2019
    filed by Respondent No.1 in light of the principles governing the
    grant of bail under Section 439 of the Cr.P.C, while also keeping
    in mind the scope and effect of the twin mandatory conditions for
    grant of bail laid down in Section 212(6)(ii) of the Companies Act.
    Needless to say, Respondent No. 1 shall continue to remain in
    17
    custody subject to the order of the High Court in the said bail
    application.
  17. The impugned order of the High Court is set aside. This
    appeal is disposed of accordingly, with a request to the High
    Court to decide the bail application afresh at an early date, in
    accordance with law, and in the light of the aforesaid
    observations.
    ……………………………………J.
    (N.V. Ramana)
    …………………………………….J.
    (Mohan M. Shantanagoudar)
    ……………………………………..J.
    (Ajay Rastogi)
    New Delhi;
    September 12, 2019.
    18