Punishment Must Follow Conviction, Severity Of Allegations Cannot Justify Pre-Trial Incarceration: Delhi HC In Fraud Case

The Delhi High Court while granting bail to the director of a company in a fraud case has held that a punishment must follow the conviction and the severity of allegations cannot be justification for pre-trial incarceration.

A Single Bench of Justice Anup Jairam Bhambhani observed, “Needless to add, that nothing in this judgment should be taken to detract from the position that economic offences are serious in nature, and the allegations against the petitioner and other co-accused, if proved at the trial, must be met with requisite punishment. However, that punishment must follow conviction, and the severity of the allegations by themselves cannot be justification for pre-trial incarceration.”

The Bench said that the trial in such a matter is about to take considerable time and there was no reason to wait for further time to elapse before lamenting that the petitioner suffered pre-trial detention for an unduly long period.

Advocate Neeraj Kumar appeared on behalf of the petitioner while CGSC Harish Vaidhyanathan Shankar appeared on behalf of the respondent.

Brief Facts -

The petitioner who was arraigned as an accused in the Trial Court’s proceedings among the 12 other accused sought a regular bail. The petitioner being the director of M/s. Parul Polymers Pvt. Ltd. (company) was summonsed in a matter relating to Section 447 of the Companies Act, 2013, and was in custody for more than 6 months. The said company was engaged principally in the trade of plastic granules.

It was alleged that the company indulged in cash sales, in the fictitious sale of food grain, and in the creation of accommodation/adjustment accounting entries, apart from misuse of cheque discounting facilities. It was also alleged that the said company manipulated financial statements in order to project substantial growth in its revenues to mislead banks and to induce them to extend and enhance credit limits, which monies were however diverted and siphoned off to other entities, with no genuine underlying business transactions.

The High Court in view of the above facts of the case noted, “… what is important to note is that arrest is permissible if the investigating officer has reason to believe that the accused is guilty of the offence based on available material. In the present case, the record shows that the investigating officer never arrested the petitioner throughout the investigation, further investigation and other pre-cognizance stages, all of which took more than 06 years.”

The Court said that the Special Judge misdirected himself in applying Section 212(6) of the Companies Act, on the flawed premise that that was the stage for grant of bail, whereas, it was the stage of considering whether there was any need to remand the petitioner to judicial custody at all.

“… this court is at pains to explain, that when the petitioner appeared before the learned Special Judge in compliance of the summons issued to him, he was not under arrest. It must also be re-emphasised that on taking cognizance of the offence, the learned Special Judge issued only summons for the petitioner to appear and did not deem it necessary to issue warrants for his arrest”, also noted the Court.

The Court further directed the investigating officer to issue a request to the Bureau of Immigration, Ministry of Home Affairs of the Government of India, or other appropriate authority, to forthwith open a ‘Look-out-Circular’ in the petitioner’s name, to prevent the petitioner from leaving the country, without the permission of the Special Judge.

Accordingly, the Court granted bail to the petitioner on furnishing a personal bond of Rs. 5 lakhs and disposed of the plea.

Cause Title- Suman Chadha v. Serious Fraud Investigation Office (Neutral Citation: 2023:DHC:4961)

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