No automatic rejection of bail due to twin conditions in Section 212 Companies Act; prosecutor must furnish valid reasons: Delhi High Court

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The Delhi High Court Wednesday held that there is no statutory mandate for the court to depart from the presumption of innocence while dealing with bail pleas related to Section 212 of the Companies Act of 2013 [Ashish Mittal v Serious Fraud Investigation Office].

Section 212 deals with investigation of fraud by the Serious Fraud Investigation Office (SFIO).

Like the twin conditions under the Prevention of Money Laundering Act (PMLA), Section 212 of the Companies Act also provides that while dealing with bail, the public prosecutor must be given opportunity to oppose the application.

It further says that if the court is inclined to grant bail, there must be reasonable grounds for believing that the person is not guilty of such offence and is not likely to commit any offence while on bail.

Single-judge Justice Anup Jairam Bhambhani held that the twin-conditions contained in section 212(6) of the 2013 Act do not imply that as soon as section 212(6) is triggered, bail must reflexively, immediately or automatically be rejected.

“Giving to the public prosecutor the opportunity to oppose bail however, does not mean rejection of bail on opposition simpliciter. The public prosecutor cannot simply say that bail must not be granted, without giving any reasons for the opposition,” the court said.

Justice Bhambhani further said that the opposition by the public prosecutor must be reasoned opposition, supported by valid and relevant reasons.

“When the public prosecutor opposes a bail plea, he would have to establish foundational facts sufficiently to dislodge the presumption of innocence, and it is only then that the onus of satisfying the stringent twin-conditions would shift onto the accused. To be clear, there is no statutory mandate for the court to depart from the presumption of innocence.”

Referring to the various court judgements in cases of PMLA, Narcotic Drugs and Psychotropic Substances (NDPS) Act as well as Maharashtra Control of Organised Crime Act (MCOCA), the bench said that where additional conditions are stipulated in a statute for grant of bail relating to specified offences, it cannot be that the prosecution need only recite from its complaint, or simply say that it has material against the accused in respect of such offences.

“The prosecution must show how the material collected during investigation supports the allegations in the complaint, and most importantly, how the allegations apply against the accused.”

The Court further said that to assess whether the State has been able to prima-facie make-out a case against an accused and for the additional twin-conditions to apply, there must be a specific allegation against the accused, this allegation must find place in the complaint, there must be material in support of such allegation and the combined reading of the material in support of the allegation must point towards the guilt of the accused as regards the relevant offence.

“It would be necessary to note that the bulky nature of material annexed to the complaint is not a sufficient criteria, there must be something, as regards each specific allegation against the accused in the complaint, which point towards the guilt of the accused of the offence which attracts the additional twin-conditions.”

After all, bail, not jail is the rule, the Court underscored.

“It is also important to articulate here, that though the general principle is that parity with co-accused alone is not a ground to claim bail as a matter of right; however, that principle is nuanced. The nature of an offence may be such, that the fact that other accused have been granted bail, may persuade the court to exercise its discretion in favour of another co-accused in granting bail,” the single-judge said.

Justice Bhambhani was dealing with the bail application filed by one Ashishi Mittal in a case registered by the SFIO.

He was booked under Sections 420/120B of the Indian Penal Code (IPC) as well as Sections 211/628/227/233 of the Companies Act, 1956 and Sections 129/447/448 of the Companies Act, 2013.

Mittal is the former Chief Financial Officer (CFO) of Educomp Solutions Limited. The company came under the scanner of the authorities for allegedly diverting funds of nearly ₹240 crores and committing fraud. The company’s Managing Director, Shantanu Prakash, is alleged to be kingpin of the whole fraud.

After considering the case, the Court held that there are reasonable grounds for believing that the petitioner is not guilty of the offence charged under the Companies Act.

“Furthermore, considering that the investigation is complete and the prosecution complaint has been filed before the learned Special Judge, this court is also satisfied that the petitioner is not likely to commit any offence while on bail,” the judgment said.

The bench, therefore, released Mittal on bail.

Senior Advocate N Hariharan along with advocates Tanveer Ahmed Mir, Shikhar Sharma, Kartik Venu, Punya Rekha Angara, Prateek Bhalla and Mohammed Qasim appeared for the petitioner, Ashish Mittal.

SFIO was represented through Central Government Standing Counsel Ajay Digpaul and Advocate Arib Ansari.

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