CENTRUM FINANCIAL SERVICES LIMITED versus STATE OF NCT OF DELHI AND ANR.

CENTRUM FINANCIAL SERVICES LIMITED

STATE OF NCT OF DELHI AND ANR.

(Criminal Appeal No. 94 of 2022)

JANUARY 28, 2022

[M. R. SHAH AND SANJIV KHANNA, JJ.]

Bail –Non-consideration of relevant factors– Penal Code,1860 – ss.409, 420, 467, 468, 471 and 120B –Commercialtransaction – Respondent no.2-accused granted bail by High Court–Correctness of – On appeal, held:While releasing Respondent no.2on bail, the High Court has not at all considered the relevant factorsincluding the nature and gravity of accusation;serious allegationsof siphoning off the huge amount, the modus operandi and themanner in which the offences were committed through shellcompanies and creating false/forged documents and/or misusingdocuments of the employees and showing them as Directors of thefake and shell companies –High Court has also not taken intoconsideration the status report filed by the I.O. detailing howsystematically the accused have committed the offence andmisappropriated the huge sum through shell companies – High Courtdid not exercise the jurisdiction judiciously and granted the bailmechanically by observing that the case arises out of commercialtransaction – Impugned order set aside – Respondent no.2 tosurrender.

Bail – Cancellation of – Duty of appellate court – Plea ofaccused that after being released on bail there are no allegationsof misusing the liberty and thus the bail may not be cancelled –Held: There is no absolute proposition of law that once the bail isgranted by the High Court, in absence of any allegation of misuseof liberty and/or breach of any of the conditions of the bail, thebail cannot be set aside when grant of bail is itself subject matter ofchallenge in appeal/revision – Rejection of bail in non-bailablecase at an initial stage and cancellation of bail so granted has tobe dealt with and considered on different basis and that very cogentand overwhelming circumstances are necessary for an orderdirecting the cancellation of the bail already granted – Thus, onvery cogent and overwhelming circumstances the bail can be

Acancelled –Where Court while considering an application for bailfails to consider the relevant factors, an Appellate Court mayjustifiably set aside the order granting bail – Appellate Court isthus required to consider whether the order granting bail suffersfrom non-application of mind or prima facie view from theevidence available on record.BBail – Grant of – Relevant factors to be considered –Discussed.

Prabhakar Tewari vs. State of U.P. (2020) 11 SCC 648;Gurcharan Singh vs. State (Delhi Administration) (1978)C1 SCC 118 : [1978] 2 SCR 358; Prasanta Kumar Sarkarvs. Ashis Chatterjee and Anr. (2010) 14 SCC 496 :[2010] 12 SCR 1165; Neeru Yadav vs. State of UP &Anr. (2016) 15 SCC 422 : [2015] 10 SCR 802; AnilKumar vs. State (NCT of Delhi) (2018) 12 SCC 129 :[2017] 11 SCR 195; Prahlad Singh Bhati vs. NCT ofDDelhi & Ors. (2001) 4 SCC 280 : [2001] 2 SCR 684;Mahipal vs. Rajesh Kumar alias Polia and Another(2020) 2 SCC 118 : [2019] 14 SCR 529 – relied on.

Dolat Ram vs. State of Haryana (1995) 1 SCC 349 :[1994] 6 Suppl. SCR 69; X vs. State of Telangana (2018)E16 SCC 511 : [2018] 4 SCR 466 – referred to.

CRIMINAL APPELLATE JURISDICTION: Criminal Appeal No.94 of 2022.

From the Judgment and Order dated 14.09.2020 of the High Courtof Delhi at New Delhi in Bail Application No.2442 of 2020.

Siddharth Dave, Ashutosh Kumar, Ms. Namita Choudhary, Ms.Srishti Khurana, Ms. Kritika Khurana, Advs. for the Appellant.

Mukul Rohatgi, Vikas Pahwa, Sr. Advs., Chirag M. Shroff, RoshanSanthalia, Vikas Sethi, Ms. Puja Jakhar, Advs. for the Respondents.

The Judgment of the Court was delivered by

M. R. SHAH, J.

1. Feeling aggrieved and dissatisfied with the impugned judgmentand order dated 14.09.2020 passed by the High Court of Delhi at NewDelhi in Bail Application No.2442 of 2020 by which the High Court hasallowed the said application preferred by the Respondent No.2 hereinand has directed that he be released on bail in connection with FIRNo.128 of 2019 PS Economic Offences Wing in New Delhi for theoffences under Sections 409, 420, 467, 468, 471 and 120B IPC, theoriginal complainant has preferred the present appeal.

2. That the appellant herein non-banking financial company(NBFC) lodged an FIR/complaint with the Economic Offences Branch,New Delhi against the company M/s Sri Aranath Logistics Limited(formerly known as M/s LMJ Logistics Limited), Respondent No.2 hereinJayant Kumar Jain – Managing Director and others for the offencesunder Sections 409, 420, 467, 468, 471 and 120B IPC. It was allegedagainst the accused – Respondent No.2 herein that he is the ManagingDirector of M/s Aranath Logistics Limited engaged in the business ofmulti-commodity trading of agricultural and non-commodities agricultural.That by way of written agreement accused availed loan credit facilitiesto the tune of Rs.25 crores for term of 180 days from the complainantcompany. It was alleged that the said amount of Rs.25 crores wasdisbursed in the year 2017. It was alleged that the said amount of Rs.25crores was required to be used by the company for its own purpose. Itwas further alleged that for the purpose of repayment of loan, no stockstatement was submitted and mortgage was also not created as agreedbetween the parties. It was further alleged that instead of using theamount for the purpose mentioned in the agreement the same was

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Atransferred to several fake/shell companies. It was further alleged thatat the time of availing the loan the accused misrepresented to thecomplainant about the financial health of the company of the accused. Itwas further alleged that the amount of around Rs.8 crores stated tohave been diverted into such shell companies which were created bythe accused in the name of his employees and bank account was openedBfor transaction of those companies by using forged and fabricateddocuments of identities of those employees and the said amount wasfurther siphoned off to other companies which were connected to theaccused. It was further alleged that Directors of those shell entitieshave stated that they have not opened the bank account in the said nameCor said firm and their KYC form was misused by the accused. It wasfurther alleged that sum of Rs.15 crores was transferred to anothercompany – LMJ International Ltd. and the said amount was used forthe purpose of setting off against the previous liability of the said companywith the Corporation Bank, Calcutta. That after the preliminaryinvestigation on the complaint of the appellant herein – originalDcomplainant, the Economic Offences Wing having found prima faciecase against Respondent No.2 and others, FIR being FIR No.128 wasregistered. The Respondent No.2 came to be arrested on 03.07.2020.The Respondent No.2 filed an application before the learned MetropolitanMagistrate seeking bail under Section 437 Cr.P.C. One another bailEapplication for regular bail being Bail Application No.903 of 2020 wasmoved on behalf of the Respondent No.2 – Accused before the Courtof Sessions Judge, Patiala House Courts, New Delhi. The said bailapplication was opposed by the I.O. status report was filed pointingout how the amount of 25 crores was siphoned off and transferred toother shell companies and how the said amount was used by theFRespondent No.2 for other companies. Vide order dated 04.08.2020 bya detailed speaking order, the learned Sessions Judge dismissed the bailapplication. That thereafter, respondent no.2 – accused filed the presentbail application before the High Court. The detailed status report wasfiled on behalf of the I.O. It was also submitted that the charge-sheetGhas been filed against Respondent No.2 and other co-accused. Thedetailed status report was filed pointing out how sum of Rs.25 croresto be used by M/s LMJ Logistic Limited was transferred to shell andother companies such as M/s LMJ Logistic Limited and how systematicfraud was committed. Despite the above, by the impugned judgmentand order, the High Court has directed to release Respondent No.2 onH

bail merely on the ground that the case arises out of commercialtransaction and is based on documents already seized.

3. Feeling aggrieved and dissatisfied with the impugned judgmentand order passed by the High Court directing to release RespondentNo.2 – accused on bail, the original complainant has preferred the presentappeal.

3.1 At the outset, it is required to be noted that after this Courtdirected to issue notice to the respondents vide order dated 17.12.2020and thereafter the matter was adjourned from time to time, on 08.01.2022the petitioner (appellant) moved an application being CriminalMiscellaneous Application No.4818 of 2022 seeking permission towithdraw the present Special Leave Petition submitting that during thependency of the present Special Leave Petition, settlement agreementhas been entered into between the petitioner (appellant) and RespondentNo.2 on 08.01.2022 and therefore, the Petitioner (appellant) is no longerinterested in pursuing the present Special Leave Petition in view of thesettlement. The said application was heard by this Court on 10.01.2022.This Court shown its disinclination to permit the petitioner (appellant) towithdraw the Special Leave Petition by observing that the petitioner(appellant) cannot be permitted to withdraw the Special Leave Petitionin view of the serious allegations against Respondent No.2 and others.That thereafter the learned counsel appearing on behalf of the petitioner(appellant) withdrew the said application. That thereafter the presentSpecial Leave Petition was adjourned to 17.01.2022, at the request ofthe learned counsel for the respective parties to consider the presentSpecial Leave Petition on merits.

4. Shri Mukul Rohatgi, learned Senior Advocate appearing onbehalf of Respondent No.2 has made the following submissions in supportof his prayer and requested not to cancel the bail granted by the HighCourt.

4.1 It is vehemently submitted by Shri Rohatgi, learned SeniorAdvocate appearing on behalf of Respondent No.2 that in the facts andcircumstances of the case and considering the fact that the dispute is ofa civil nature arising out of commercial transactions and the investigationis concluded and the case rests on documentary evidence alreadycollected by the Investigating Officer during the investigation which havebeen seized and that the impugned order passed by the High Courtreleasing Respondent No.2 on bail is as far as back on 14.09.2020 and

Athereafter there are no allegations that Respondent No.2 has misusedthe liberty in between and that during the investigation Respondent No.2has cooperated and neither the complainant nor the State are opposingthe bail application seriously, this Court may not cancel the bail.

4.2 It is further submitted by Shri Rohatgi, learned Senior AdvocateBfor Respondent No.2 that in the present case out of Rs.25 crores, Rs.15crores were transferred to the sister concern LNJ International Limitedand the sister concern paid off its loan which cannot be said to be anoffence.

4.3 Shri Rohatgi, learned Senior Advocate on behalf of RespondentNo.2 – accused has heavily relied upon the decisions of this Court in theCcase of Dolat Ram vs. State of Haryana, (1995) 1 SCC 349; X vs.State of Telangana, (2018) 16 SCC 511; Prabhakar Tewari vs.State of U.P., (2020) 11 SCC 648 as well as the decision of this Courtin the case of Gurcharan Singh vs. State (Delhi Administration)(1978) 1 SCC 118 in support of his submissions that once the bail hasDbeen granted by the High Court and/or the Court below the same maynot be cancelled unless it is found that the accused has violated any ofthe terms and conditions of the bail order and/or has misused any libertyshown to him while releasing him on bail and/or there are any otherpeculiar circumstances.

E4.4. Making the above submissions it is prayed to dismiss thepresent appeal.

5. Present appeal is opposed by learned Counsel on behalf ofRespondent – State. status report on behalf of the State has been filedin which it is stated that the State had filed status report on 09.09.2020before the High Court and before the High Court, the State vehementlyFopposed the bail of Respondent No.2. However, at that stage, furtherinvestigation was underway and supplementary charge-sheet was yetto be filed. The same has now been filed. The State shall abide by thedirections/order passed by this Hon’ble Court.

6. In the status report it has been pointed out how systematicGfraud has been committed by Respondent No.2 and others siphoning offhuge amount of Rs.25 crores through other Shell Companies who arefound to be fake and non-existent. supplementary charge-sheet is alsofiled on further investigation. detailed status report has been filedpointing out how shell entities were used as conduit entities to transferHmoney to the main company of the accused i.e., LMJ Logistics Limited.

7. We have heard learned counsel appearing on behalf of therespective parties at length.

8. Having gone through the impugned judgment and order passedby the High Court directing to release the Respondent No.2 on bail itappears that the High Court has directed to release the RespondentNo.2 on bail mainly on the ground that the case arises out of commercialtransaction and is based on documents already seized. Para 16 containsthe only reasoning while releasing Respondent No.2 on bail, which readsas under:

“16. Coming to the facts of the present case, it is an admitted factthat the co-accused namely Navin Kumar Jain and Hulash ChandJain were the other Directors and shareholders of SALL as wellas LMJIL. They also signed/undertook personal guarantee to thecomplainant company in their capacity as Directors of the SALLagainst the “Working Capital Demand Loan”. Navin Jain had alsosigned the Tripartite Off-take Agreement in the capacity ofDirector of LMJIL. Both of them were not even arrested and thechargesheet against them was filed without arrest. During twoyears of enquiry/investigation, the petitioner joined investigationon multiple occasions. After his arrest, the EOW sought only oneday PC remand. Neither in the Status Report nor during the courseof arguments, any apprehension was shown that the petitioner isa “flight risk”. The case arises out of commercial transactionand is based on documents that already stand seized. The petitionerhas already approached the NCLT where moratorium on theassets/properties has been declared and an IRP has beenappointed. The complainant has already approached NCLT.”

9. From the aforesaid it can be seen that while releasing theRespondent No.2 on bail the High Court has not at all adverted to and/orconsidered the nature of accusation and the material found/collectedduring the course of investigation and the serious allegations of siphoningoff the huge amount through various shell companies. The High Courthas not at all dealt with and/or considered any of the allegations and/ormaterial collected during the course of the investigation which werespecifically pointed out and mentioned in the status report filed by theI.O. From the status report and even the charge-sheet/supplementarycharge-sheet papers it has been found during the course of theinvestigation that sum of Rs.25 crores was disbursed by the complainant

Ato Respondent No.2 and its company M/s LMJ Logistics Limited. Thesaid amount was disbursed for its own use. During the course of theinvestigation, it has been found that the said amount was debited to thevarious companies/entities as under:

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9.1 During the course of the investigation, it has been found thatFRs.15 crores was transferred to another company/LMJ InternationalLimited through some of the fake companies and the said anothercompany – M/s LMJ International Limited used that amount to clear itsdues of Corporation Bank, Kolkata. During the investigation it has beenfound that sum of Rs.2,49,25,720/- was transferred to one SairamAgrocorp Pvt. Ltd. and it was further transferred to LMJ InternationalGLimited on the same day. Similarly, the amount of Rs.2,51,30,176/- wastransferred in the account of Vasudev Agro Foods Pvt. Ltd. out of whichRs.1.82 crores approximately was transferred into account of AlderaTraders Pvt. Limited and it was further transferred to LMJ InternationalLimited on the same day. During the course of the investigation, it hasHbeen found that an amount of Rs.99,98,874/- and Rs.98,74,563/- were

transferred in the account of Sairam Agrocorp Pvt. Ltd. and consolidatedamount of Rs.1,98,72,914/- was further transferred to LMJ InternationalLimited on the same day. It has been further found that an amount ofRs.99,96,387/- was transferred to Vasudev Agro Foods Pvt. Limitedand it was further transferred to LMJ International Limited on the sameday. Thus, it has been found that the credit facility to the tune of Rs.25crores availed by M/s LMJ Logistics Limited were not used for anybusiness purposes i.e., sale purchase of agri or non-agri products but ithas been rotated through shell entities and immediately transferred toother company M/s LMJ International Limited to square off the liabilitiesthrough the shell companies. During the course of the investigation/furtherinvestigation it has been revealed that Sairam Agrocorp Pvt. Ltd. andVasudev Agro Foods Pvt. Ltd. are fake and shell companies and they donot exist at the registered address. During the course of the investigation,it has been found that some of the employees were made directorswithout their knowledge and their KYC and other documents weremisused without their knowledge. As per the charge-sheet/supplementarycharge-sheet it appears that the investigation revealed that the accountsin question were created to inflate the turnover of the company so thatthey could avail the credit facility from various banks. It further revealsthat the shell companies were created to misappropriate/siphoned offthe money entrusted to them as loan to the tune of Rs.25 crores. It hasbeen revealed that there was no genuine transaction of sale and purchasebut it was simply routing and re-routing of the amount received from thecomplainant to different entities which were in actual being operated byRespondent No.2. All these aforesaid allegations and the materialcollected during the course of the investigation which are being part ofthe charge-sheet and supplementary charge-sheet are not taken note ofby the High Court and the High Court has just simply ignored the sameand has released Respondent No.2 on bail by simply observing that casearises out of commercial transaction and the dispute is of civil nature.Therefore, the High Court has not at all taken into consideration therelevant considerations while grant of bail. Even the High Court has notat all taken note of the reasoning given by the learned Sessions Courtwhile rejecting the bail application of Respondent No.2.

9.2 In the light of the above facts, it is required to be consideredwhether the High Court is at all justified in releasing Respondent No.2on bail.

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A10. At this stage few decisions of this Court on the relevantconsiderations to be considered by the High Court while grant of bail arerequired to be referred to. In the case of Prasanta Kumar Sarkar vs.Ashis Chatterjee and Anr., (2010) 14 SCC 496, while cancellingthe bail and quashing and setting aside the order passed by the HighCourt granting the bail to the accused it is observed in para 9 to 12 asBunder:

“9. We are of the opinion that the impugned order is clearlyunsustainable. It is trite that this Court does not, normally, interferewith an order passed by the High Court granting or rejecting bailto the accused. However, it is equally incumbent upon the HighCCourt to exercise its discretion judiciously, cautiously and strictlyin compliance with the basic principles laid down in plethora ofdecisions of this Court on the point. It is well settled that, amongother circumstances, the factors to be borne in mind whileconsidering an application for bail are:

(i) whether there is any prima facie or reasonable groundto believe that the accused had committed the offence;

(ii) nature and gravity of the accusation;

(iii) severity of the punishment in the event of conviction;

(iv) danger of the accused absconding or fleeing, if releasedon bail;

(v) character, behaviour, means, position and standing ofthe accused;

(vi) likelihood of the offence being repeated;

(vii) reasonable apprehension of the witnesses beinginfluenced; and

(viii) danger, of course, of justice being thwarted by grantof bail.

[See State of U.P. v. Amarmani Tripathi [(2005) 8 SCC 21](SCC p. 31, para 18), Prahlad Singh Bhati v. NCT of Delhi [(2001)4 SCC 280], and Ram Govind Upadhyay v. Sudarshan Singh[(2002) 3 SCC 598].

10. It is manifest that if the High Court does not advert tothese relevant considerations and mechanically grants bail, the

said order would suffer from the vice of non-application of mind,rendering it to be illegal. In Masroor [(2009) 14 SCC 286], aDivision Bench of this Court, of which one of us (D.K. Jain, J.)was member, observed as follows: (SCC p. 290, para 13)

“13. … Though at the stage of granting bail an elaborateexamination of evidence and detailed reasons touching themerit of the case, which may prejudice the accused, shouldbe avoided, but there is need to indicate in such orderreasons for prima facie concluding why bail was beinggranted particularly where the accused is charged of havingcommitted serious offence.”

11. We are constrained to observe that in the instant case,while dealing with the application of the accused for grant of bail,the High Court completely lost sight of the basic principlesenumerated above. The accused, in the present case, is alleged tohave committed heinous crime of killing an old helpless lady bystrangulation. He was seen coming out of the victim’s house by aneighbour around the time of the alleged occurrence, giving riseto reasonable belief that he had committed the murder. We feelthat under the given circumstances, it was not the stage at whichbail under Section 439 of the Code should have been granted tothe accused, more so, when even charges have not yet beenframed.

12. It is also pertinent to note that, as stated above, theAdditional Chief Judicial Magistrate had rejected three bailapplications of the accused but the High Court did not find itworthwhile to even make reference to these orders. In thisregard, it would be useful to refer to the following observationsechoed in Kalyan Chandra Sarkar v. Rajesh Ranjan [(2004)7 SCC 528]: (SCC p. 536, para 12)

“12. In regard to cases where earlier bail applicationshave been rejected there is further onus on the court toconsider the subsequent application for grant of bail bynoticing the grounds on which earlier bail applications havebeen rejected and after such consideration if the court is ofthe opinion that bail has to be granted then the said courtwill have to give specific reasons why in spite of such earlier

Arejection the subsequent application for bail should begranted.”

10.1 In the case of Neeru Yadav vs. State of UP & Anr., (2016)15 SCC 422, it is held by this Court in para 11 as under:

“11. It is well-settled principle of law that while dealing with anBapplication for grant of bail, it is the duty of the Court to take intoconsideration certain factors and they basically are: (i) the natureof accusation and the severity of punishment in cases of convictionand the nature of supporting evidence, (ii) reasonable apprehensionof tampering with the witnesses for apprehension of threat to theCcomplainant, and (iii) prima facie satisfaction of the Court insupport of the charge. (See Chaman Lal v. State of U.P., (2004)7 SCC 525)”

10.2 In Anil Kumar vs. State (NCT of Delhi), (2018) 12 SCC129, it is observed and held by this Court that while granting bail, theDrelevant considerations are, (i) nature of seriousness of the offence; (ii)character of the evidence and circumstances which are peculiar to theaccused; and (iii) likelihood of the accused fleeing from justice; (iv) theimpact that his release may make on the prosecution witnesses, its impacton the society; and (v) likelihood of his tampering.

E10.3 In the case of Prahlad Singh Bhati vs. NCT of Delhi &Ors., (2001) 4 SCC 280, it is observed and held by this Court that thejurisdiction to grant bail has to be exercised on the basis of well settledprinciples having regard to the circumstances of each case and not in anarbitrary manner. It is observed and held as under:

F“The jurisdiction to grant bail has to be exercised on the basis ofwell settled principles having regard to the circumstances of eachcase and not in an arbitrary manner. While granting the bail, thecourt has to keep in mind the nature of accusations, the nature ofevidence in support thereof, the severity of the punishment whichconviction will entail, the character, behaviour, means and standingGof the accused, circumstances which are peculiar to the accused,reasonable possibility of securing the presence of the accused atthe trial, reasonable apprehension of the witnesses being tamperedwith, the larger interests of the public or State and similar otherconsiderations. It has also to be kept in mind that for the purposesof granting the bail the Legislature has used the words ‘reasonableH

grounds for believing’ instead of “the evidence” which means thecourt dealing with the grant of bail can only satisfy it as to whetherthere is genuine case against the accused and that the prosecutionwill be able to produce prima facie evidence in support of thecharge.”

11. Applying the law laid down by this Court in the aforesaiddecisions to the facts of the case on hand and the grounds on which theHigh Court has released the Respondent No.2 on bail, we are constraintto observe that in the instant case while dealing with the application ofthe accused for grant of bail, the High Court has completely lost sight ofthe basic principles enumerated above. The High Court has not at allconsidered the modus operandi adopted by the accused in commissionof serious offence of siphoning and/or transferring the huge sum to anothercompany through shell companies. The High Court has also not takeninto consideration the status report filed by the I.O. in which in detail ithas been pointed out how systematically the accused have committedthe offence and misappropriated/siphoned off the huge sum through shellcompanies. Thus, it appears that the High Court has not adverted to therelevant considerations and has granted the bail mechanically by observingthat the case arises out of commercial transaction.

12. Now so far as the submission on behalf of the accused that asthe accused has been released on bail as far as back on 14.09.2020 andthat thereafter there are no allegations of misusing the liberty and thereforethe bail may not be cancelled and reliance placed upon the decisionsof this Court referred to hereinabove more particularly in the case ofX (Supra) are concerned at the outset it is required to be noted that thisis case where it is found that the order passed by the High Courtreleasing the accused – Respondent No.2 on bail has been passedmechanically and without adverting to the relevant facts and withoutconsidering the nature of accusation and allegations and the nature ofthe gravity of the accusation. Even in the decisions which are reliedupon by Shri Rohatgi, learned Senior Advocate appearing on behalf ofRespondent No.2, there is no absolute proposition of law laid down bythis Court in the aforesaid decisions that once the bail is granted by theHigh Court, though the High Court could not have granted the bail, inabsence of any allegation of misuse of liberty and/or breach of any ofthe conditions of the bail, the bail cannot be set aside when grant of bailis itself subject matter of challenge in appeal/revision.

A12.1 What is observed and held is that the rejection of bail in anon-bailable case at an initial stage and cancellation of bail so grantedhas to be dealt with and considered on different basis and that verycogent and overwhelming circumstances are necessary for an orderdirecting the cancellation of the bail already granted. Therefore, on verycogent and overwhelming circumstances the bail can be cancelled. AtBthis stage the decision of this Court in the case of Mahipal vs. RajeshKumar alias Polia and Another, (2020) 2 SCC 118 is required to bereferred to. In the said decision, it is observed and held by this Court thatthough this Court does not ordinarily interfere with the order of the HighCourt granting bail, however, where the discretion of the High Court toCgrant bail has been exercised without due application of mind and incontravention of the directions of this Court, such an order of grantingbail is liable to be set aside. Thereafter after drawing the distinctionbetween the power of an appellate court in assessing the correctness ofan order granting bail and an application for the cancellation of the bail,Din paragraph 16 it is observed and held as under:“16. The considerations that guide the power of an appellate courtin assessing the correctness of an order granting bail stand on adifferent footing from an assessment of an application for thecancellation of bail. The correctness of an order granting bail isEtested on the anvil of whether there was an improper or arbitraryexercise of the discretion in the grant of bail. The test is whetherthe order granting bail is perverse, illegal or unjustified. On theother hand, an application for cancellation of bail is generallyexamined on the anvil of the existence of superveningcircumstances or violations of the conditions of bail by person toFwhom bail has been granted.

In Neeru Yadav v. State of U.P., (2014) 16 SCC 508], the accusedwas granted bail by the High Court [Mitthan Yadav v. State ofU.P., 2014 SCC OnLine All 16031]. In an appeal against the order[Mitthan Yadav v. State of U.P., 2014 SCC OnLine All 16031]of the High Court, two-Judge Bench of this Court surveyed theprecedent on the principles that guide the grant of bail. DipakMisra, J. (as the learned Chief Justice then was) held: (NeeruYadav case [Neeru Yadav v. State of U.P., (2014) 16 SCC 508],SCC p. 513, para 12)

“12. … It is well settled in law that cancellation of bail after itis granted because the accused has misconducted himself orof some supervening circumstances warranting suchcancellation have occurred is in different compartmentaltogether than an order granting bail which is unjustified, illegaland perverse. If in case, the relevant factors which shouldhave been taken into consideration while dealing with theapplication for bail have not been taken note of, or bail isfounded on irrelevant considerations, indisputably the superiorcourt can set aside the order of such grant of bail. Such acase belongs to different category and is in separate realm.While dealing with case of second nature, the Court does notdwell upon the violation of conditions by the accused or thesupervening circumstances that have happened subsequently.It, on the contrary, delves into the justifiability and the soundnessof the order passed by the Court.”

12.2 Thus, as per the law laid down by this Court where Courtwhile considering an application for bail fails to consider the relevantfactors, an Appellate Court may justifiably set aside the order grantingbail. Appellate Court is thus required to consider whether the ordergranting bail suffers from non-application of mind or prima facieview from the evidence available on record.

13. From the aforesaid it emerges that while releasing Respondentno.2 on bail, the High Court has not at all considered the relevant factorsincluding the nature and gravity of accusation; the modus operandi andthe manner in which the offences have been committed through shellcompanies and creating the false/forged documents and/or misusing thePAN Cards, Aadhar Cards and KYCs of the employees and showingthem as Directors of the fake and shell companies. As observedhereinabove, the High Court has not at all considered and taken intoconsideration the status report and the evidence collected during thecourse of the investigation. Therefore, the impugned judgment and orderpassed by the High Court releasing Respondent No.2 on bail isunsustainable as the High Court while releasing Respondent No.2 onbail has not exercised the jurisdiction judiciously and has not consideredthe relevant factors which are required to be considered while grant ofbail.

A14. In view of the above and for the reasons stated above, theimpugned judgment and order passed by the High Court releasingRespondent No.2 on bail deserves to be quashed and set aside and isaccordingly quashed and set aside. Now on quashing and setting asidethe impugned judgment and order passed by the High Court releasingRespondent No.2 on bail and consequently the bail being set aside, theBRespondent no.2 – accused to surrender before the concerned Court/Jail Authority forthwith. Present Appeal is accordingly allowed.

However, it is made clear that any observations by this Court inthe present order shall not affect the trial and the observations made inthe present order be treated to be confined to the impugned judgmentCgranting bail. It is further observed that after surrender it will be openfor Respondent No.2 to move an appropriate application for bail beforethe High Court afresh after period of three months, which shall beconsidered by the High Court in accordance with law and on its ownmerits and after taking into consideration the relevant material collected

Dduring the course of the investigation which is part of the charge-sheet/further charge-sheet and taking into consideration the relevant factorsto be considered while grant of bail.

Divya Pandey(Assisted by : Deepak Panwar, LCRA)

Appeal allowed.