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Citation Codes
Equivalent Citations
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Case Number
Attorney(S)
  • For the Appellant: A. Saravanan, Govt. Advocate (Crl. Side).
  • For the Respondent: R1, Habibullah Basha, Senior Counsel, Arun, R2, B. Kumar, Senior Counsel, Madhavan, Advocates.
Judges
  • Mr. Justice M. Jeyapaul
Acts
  • sections 403, 406, 420, 466, 468, 471, 474, 477-A 506(1) and 120B of the Indian Penal Code
  • section 439(2) of the Code of Criminal Procedure
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Cites
Cited by
Citation Codes
Equivalent Citations
citation codes
Case Number
Attorney(S)
  • For the Appellant: A. Saravanan, Govt. Advocate (Crl. Side).
  • For the Respondent: R1, Habibullah Basha, Senior Counsel, Arun, R2, B. Kumar, Senior Counsel, Madhavan, Advocates.
Judges
  • Mr. Justice M. Jeyapaul
Acts
  • sections 403, 406, 420, 466, 468, 471, 474, 477-A 506(1) and 120B of the Indian Penal Code
  • section 439(2) of the Code of Criminal Procedure
See more information ...
Smart Summary

Structured Summary of the Opinion — Bail Cancellation under Section 439(2) CrPC

Factual and Procedural Background

The petition was filed by the investigating officer under section 439(2) of the Code of Criminal Procedure seeking cancellation of bail granted to the first accused in C.C.B. X.Crime No.87/2008. The case registered by the Central Crime Branch, Egmore, Chennai is based on allegations against the first accused and others for offences punishable under sections 403, 406, 420, 466, 468, 471, 474, 477-A, 506(1) and 120B of the Indian Penal Code.

According to the complaint, Cheran Enterprises Private Limited had Rs.78 crores in its ABN Amro Bank account which the first accused allegedly siphoned off by diverting funds to accounts of other accused, contrary to the terms of a joint venture agreement dated 30.1.2004 that restricted withdrawals over Rs.40,00,000 without a director's consent. The complaint alleges fabrication of documents, forgery and misappropriation, resulting in wrongful loss to the company and wrongful enrichment of the first accused.

Procedurally, the first accused obtained bail from the Additional Chief Metropolitan Magistrate, Egmore, Chennai. The investigating officer challenged that bail order before the High Court under section 439(2) CrPC, seeking cancellation. The High Court heard submissions from the State (Government Advocate), the de facto complainant's Senior Counsel, and Senior Counsel for the accused.

Legal Issues Presented

  1. Whether the bail granted by the Additional Chief Metropolitan Magistrate to the first accused should be cancelled under section 439(2) of the Code of Criminal Procedure.
  2. Whether, in the circumstances of this case (seriousness of allegations, alleged misappropriation of Rs.78 crores, alleged fabrication/forgery, failure to cooperate in investigation, antecedents of the accused and the stage of investigation), the factors applicable to bail justify cancellation of the previously granted bail.

Arguments of the Parties

Learned Government Advocate (Criminal Side) — State / Investigating Agency

  • Emphasized the gravity of the allegation: misappropriation of Rs.78 crores and alleged fabrication of records and forgery.
  • Contended the first accused did not cooperate during police custody; other accused remain at large; investigating agency is "groping in the dark."
  • Asserted risk that the first accused, given his status as Ex-M.P. and Ex-M.L.A., could tamper with evidence or influence witnesses and could hide the diverted funds or abscond if released on bail.

Senior Counsel for the de facto complainant (Company)

  • Argued the Trial Court failed to consider relevant points and that custody duration alone cannot justify bail when facing serious charges.
  • Noted the first accused's criminal antecedents were not considered and stressed that bail after only about 22 days' custody was inappropriate during ongoing material investigation.
  • Maintained that release of the core accused would hinder detection and recovery of the Rs.78 crores and urged cancellation of bail to enable thorough investigation.

Senior Counsel for the Accused (Person granted bail)

  • Argued the Additional Chief Metropolitan Magistrate properly considered material aspects, including duration of custody and that the case involved diversion of funds within contractual terms rather than simple siphoning.
  • Pointed to some cooperative acts (e.g., a fixed deposit in the complainant company's name) and indicated that under section 439(2) this Court should not itself decide fitness for bail but may set aside the lower court's order only if there is a supervening event.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
NIRANJAN SINGH v. PRABHAKAR, AIR 1980 SC 785 Courts should avoid detailed examination of evidence or elaborate documentation of merits while deciding bail applications so that no party feels prejudiced. The court noted this caution but proceeded to apply established bail principles without conducting an exhaustive merits inquiry; it balanced the admonition against over-detailed merit evaluation with the need to consider relevant factors showing why bail should be cancelled.
STATE OF U.P. v. AMARMANI TRIPATHI, (2005) 8 SCC 21 Enumerated matters to be considered in bail applications: (i) prima facie or reasonable grounds, (ii) nature and gravity of charge, (iii) severity of punishment, (iv) danger of absconding, (v) character/standing of accused, (vi) likelihood of repeating offence, (vii) reasonable apprehension of tampering with witnesses, and (viii) danger of justice being thwarted. The court expressly applied these factors to the present case, considering gravity of the alleged offences, the large amount involved (Rs.78 crores), antecedents of the accused, risk of tampering and absconding, and the stage of investigation to justify cancellation of bail.
RAJESH RANJAN YADAV v. CBI, AIR 2007 SC 451 There is no absolute rule that long incarceration alone mandates grant of bail. The court relied on this authority to reject the argument that the first accused's period in custody (about 22 days at the time of bail) required release; the court emphasized that incarceration length is not a determinative ground for bail in serious cases.
PURAN v. RAMBILAS, 2001 SCC (Cri) 1124 High Court has the power under section 439(2) CrPC to examine merits and demerits of bail orders passed by courts below. The court invoked this precedent to justify a merits-based review of the Additional Chief Metropolitan Magistrate's bail order and proceeded to examine whether the lower court had considered the relevant factors.

Court's Reasoning and Analysis

The court's analysis proceeded by applying established Supreme Court principles on bail (as cited) to the facts of the case and the record of the lower court's order. Key steps in the court's reasoning:

  1. Identification of the seriousness of allegations: The court recorded the complaint's case of "rank cheating, misappropriation of Rs.78 crores, breach of trust, forgery and fabrication of records" and observed that punishments for the alleged offences are "really severe." The joint venture agreement was considered to show restrictions on withdrawals.
  2. Application of Amarmani Tripathi factors: The court considered the enumerated bail factors—nature and gravity of charge, severity of punishment, danger of absconding, antecedents and standing of the accused, risk of repetition, and risk of tampering with witnesses—against the factual matrix.
  3. Evaluation of investigative stage and cooperation: The court noted the investigating agency's statements that only specimen signatures and statements had been obtained, that the accused failed to cooperate in police custody and was not taken to various places for further investigation, and that material documents and the bulk of the funds had not been traced. The court regarded the investigation as at a crucial stage requiring more time.
  4. Consideration of accused's status and antecedents: The court observed that the first accused is an Ex-M.P. and Ex-M.L.A. and that the investigating agency alleged involvement in other criminal cases; the court criticized the Additional Chief Metropolitan Magistrate for not taking these antecedents into account when granting bail.
  5. Assessment of risk to evidence and investigation: Given that other core accused were at large and closely connected to the business transactions, the court accepted the investigating agency's apprehension that release might facilitate tampering with witnesses, concealment of diverted funds, or absconding, thereby thwarting justice.
  6. Reconciling caution on merit examination: While mindful of the Supreme Court's instruction to avoid detailed merit adjudication in bail matters (Niranjan Singh), the court concluded that the High Court nonetheless has jurisdiction to re-examine the merits under section 439(2) (Puran) and that the cumulative facts amounted to a supervening justification to cancel bail.
  7. Conclusion from the above application: The court found that the Additional Chief Metropolitan Magistrate relied unduly on duration of custody and documentary nature of the case without adequately weighing the gravity of charges, criminal antecedents, incomplete recovery of funds, the pendency and crucial stage of the investigation, and the risk posed by release.

Holding and Implications

HOLDING: The High Court set aside and cancelled the bail previously granted by the Additional Chief Metropolitan Magistrate. Specifically, the order passed in Crl.M.P.No.611 of 2008 granting bail to the first accused stands cancelled, and the connected miscellaneous petition is closed.

Implications:

  • Direct effect: The first accused's bail is cancelled; the accused must return to custody in accordance with the appropriate procedures and the ongoing investigation may proceed without the accused being at large.
  • Investigation: The cancellation supports the investigating agency's ability to pursue further investigative steps, attempt to trace the allegedly diverted Rs.78 crores, and arrest or secure cooperation from other accused who remain at large.
  • Precedential impact: The opinion applies and follows established Supreme Court authorities on the principles to be considered in bail applications and on the High Court's power under section 439(2). The court did not purport to create any new legal precedent beyond applying those authorities to the facts before it.

Order addressed to: The Additional Chief Metropolitan Magistrate, Egmore, Chennai (per the concluding direction in the opinion).

Show full summary ...

    The Inspector Of Police v. Cheran Enterprises (P) Ltd

    The petition is filed by the investigating officer invoking the provision under section 439(2) of the Code of Criminal Procedure seeking to cancel the bail granted to the first accused in a case in C.C.B. X.Crime No.87/2008 registered for offences punishable under sections 403, 406, 420, 466, 468, 471, 474, 477-A 506(1) and 120B of the Indian Penal Code on the file of the Inspector of Police, Central Crime Branch Team I, Egmore, Chennai.

    2. The allegation in the complaint is that the Company by name Cheran Enterprises Private Limited kept in its account a sum of Rs.78 crores in its bank account in ABN Amro Bank, Chennai. The first accused siphoned off the entire money by diverting the same to the accounts of the other accused. The first accused is supposed to utilise the funds of Cheran Enterprises Private Limited only as per the terms of the agreement dated 30.1.2004. The said agreement postulates that the first accused cannot withdraw more than a sum of Rs.40,00,000/= from the said account without the consent of Mr.Chandran Rathnasami, one of its Directors. The first accused also fabricated documents and records and fraudulently misappropriated the funds of the complainant. The de facto complainant company had been stripped off its entire capital in the form of liquid cash. He had caused wrongful loss to the Company and wrongful enrichment to himself. Therefore, the first accused is guilty of misappropriation of property, criminal breach of trust, forgery, falsification of accounts and other related offences.

    3. The first accused moved an application seeking bail before the Additional Chief Metropolitan Magistrate, Egmore, Chennai. He has granted bail to the first accused with the following observations:-

    The first accused had already been taken police custody for about three days for interrogation. During interrogation, his specimen signatures and statements were also obtained. Though the first accused was taken into police custody for the purpose of taking him to Coimbatore, Erode and other places to unearth the details of transaction the first accused had with various banks, for reasons best known, the investigating officer had not taken the first accused either to Coimbatore or to Erode or to other places. The amount had been allegedly diverted from the de facto complainant company and deposited in a company by name SPIL. Even in connection with two other cases, the petitioner was subjected to police custody and his specimen signature and statement were already obtained in connection therewith. The first accused had been in custody in connection with yet another case from 31.1.2008 and in connection with the present case from 25.2.2008. The first accused is an Ex.M.P and Ex.M.L.A. He is a respectable person in the Society. After all, the case is based on the documentary evidence. Hence, the question of tampering the evidence would not arise.

    4. Learned Government Advocate (Criminal Side) appearing for the State would submit that a serious allegation of misappropriation of a whopping sum of Rs.78 crores has been alleged in this case. The complainant also has come out with fabrication of records and forgery of documents. The first accused never co-operated even during interrogation under police custody. The other accused are at large. The investigating agency is groping in the dark without any co-operation from any of the accused. There is every possibility for the first accused misusing his status he has acquired as Ex.M.P and Ex.M.L.A not only to tamper with the evidence but also to prevail upon the material witnesses in this case. A sum of Rs.78 crores which was diverted from the complainant company could not be traced by the investigating agency. If the first accused is released on bail, there is every possibility for him to completely hide the said amount. He may also abscond from justice as a case of this magnitude has been booked as against him.

    5. Learned Senior Counsel appearing for the de facto complainant would vehemently submit that the Trial Court had not chosen to consider the relevant points for grant of bail. The duration of custody cannot at all be a criterion for releasing an accused on bail more especially when the accused is facing such a serious charge. The criminal antecedents of the first accused had not been taken into consideration by the Trial Court. The accused had been in custody just for about 22 days. But, quite unfortunately, even during the pendency of the material part of the investigation, the learned Additional Chief Metropolitan Magistrate, Egmore, Chennai was pleased to enlarge the first accused on bail. If the core accused in this case is released on bail, the investigating agency may not be in a position to detect the whopping amount of Rs.78 crores diverted against the agreement entered into between the parties. Therefore, he would submit that the bail granted to the first accused will have to be cancelled to enable the investigating agency to thoroughly investigate the case and track down the sum of Rs.78 crores siphoned off by the first accused.

    6. Learned Senior Counsel appearing for the accused who was granted bail by the Additional Chief Metropolitan Magistrate, Egmore, Chennai would contend that the material aspects necessary for granting bail have been thoroughly discussed by the learned Additional Chief Metropolitan Magistrate. This is not a case of siphoning off the amount, but, it is a case of diversion of funds to some other company against the terms of the agreement. The Additional Chief Metropolitan Magistrate has rightly considered the duration of custody of the first accused and the investigation embarked upon by the investigating officer by taking the first accused into police custody. The accused had also made a fixed deposit in the name of the complainant company. At any rate, this court, under section 439(2) of the Code of Criminal Procedure cannot decide whether it is a fit case for grant of bail. At the most, this court can set aside the order of the Additional Chief Metropolitan Magistrate if there is any supervening event which goes against the accused.

    7. The Supreme Court in NIRANJAN SINGH v. PRABHAKAR (AIR 1980 SC 785) has held as follows:-

    "Detailed examination of the evidence and elaborate documentation of the merits of the case should be avoided while passing orders on bail applications. No party should have the impression that his case has been prejudiced."

    8. The ratio laid down by the Supreme Court in STATE OF U.P. v. AMARMANI TRIPATHI ((2005) 8 SCC 21) reads as follows:-

    "It is well settled that the matters to be considered in an application for bail are (i)whether there is any prima facie or reasonable ground to believe that the accused had committed the offence; (ii)nature and gravity of the charge; (iii)severity of the punishment in the event of conviction; (iv)danger of the accused absconding or fleeing, if released on bail; (v)character, behaviour, means, position and standing of the accused; (vi)likelihood of the offence being repeated; (vii)reasonable apprehension of the witnesses being tampered with; and (viii)danger, of course, of justice being thwarted by grant of bail."

    In a graver nature of charge alleged against the accused, the court, which takes up an application for bail, shall consider the application in the aforesaid angles stipulated by the Supreme Court.

    9. The Supreme Court in RAJESH RANJAN YADAV v. CBI (AIR 2007 SC 451) has observed that there is no absolute rule that bail must be granted on account of the long incarceration of the accused.

    10. The Supreme Court in PURAN v. RAMBILAS (2001 SCC (Cri) 1124) has authoritatively rejected the plea of the accused that the High Court could not sit in appeal or revision over a Sessions Court's order under section 439(2) of the Code of Criminal Procedure. The High Court has got powers to go into the merits and demerits of the plea for bail in the light of the order passed by the court below.

    10. Coming to the gravity of the offence alleged as against the first accused, it is found that the de facto complainant has come out with a case of rank cheating, misappropriation of Rs.78 crores, breach of trust, forgery and fabrication of records. The court finds that the punishments contemplated for these offences are really severe. The joint venture agreement produced before this court would contemplate development of two properties of 6th accused Cheran Properties Limited and 7th accused Vasantha Mills Limited. The said agreement further reads that any expenditure more than Rs.40,00,000/= can be incurred only by way of Board Resolution and also with the approval of ORE representative. The de facto complainant has established that the de facto complainant company had a deposit of Rs.78 crores. The bank account would disclose that the entire amount had been withdrawn or taken away by the first accused. There is a serious charge of fabrication of the documents for the purpose of misappropriating the said funds by the first accused.

    11. It is found that the first accused is an Ex.M.P and Ex.M.L.A. The investigating agency has come out with a revelation that the first accused, though acquired some status, was involved in many a criminal case. In fact, the petitioner was remanded to judicial custody with regard to this is a case when he was in judicial custody relating to some other case.

    12. Except another accused, who was recently arrested and taken to police custody for the ongoing investigation, no other core accused was arrested by the investigating agency. All of them are at large. All those accused are, in one way or other, closely connected with the business transactions of the first accused. If the first accused is enlarged on bail at the stage where the investigation is at a crucial stage, there is every possibility, as apprehended by the investigating officer, for tampering with those witnesses. The investigating agency has come out with a case that the first accused never co-operated during the course of interrogation in police custody. Therefore, there had been no occasion for the investigating agency to take the accused either to Coimbatore or to Erode or to any other place where the amount misappropriated had been deposited. The investigating agency has to zero in on the destination of the whopping amount of Rs.78 cores allegedly siphoned off by the first accused.

    13. The obtention of specimen signature and the specimen writing of the first accused do not complete the process of investigation, more especially when the first accused has failed to co-operate for the purpose of investigation. It has been demonstrated before the court that only a small portion of the amount was diverted and deposited in a company by name SPIL and in fixed deposit for a short while. The Supreme Court has laid down that the duration of custody of an accused cannot be a material ground for releasing an accused when he has been alleged of graver offence. It is found that the antecedents of the first accused was not taken note of by the Additional Chief Metropolitan Magistrate, Egmore, Chennai. The major part of the case would hinge on documentary proof. But, it is seen that material documents could not be retrieved from the first accused while he was in police custody during the course of investigation.

    14. The investigating agency is virtually groping in the dark in the absence of co-operation from any of the accused. In a case of such magnitude, if the accused is released on bail, as rightly contended by the investigating agency, there is also every possibility for the first accused to flee from justice. The criminal antecedents projected by the investigating agency and the de facto complainant cannot be ignored by this court. The first accused had been in judicial custody only for about 22 days at the time when the bail was granted by the Additional Chief Metropolitan Magistrate. Considering the amount involved in this case, a lot of materials to be collected by the investigating agency and the abscondence of other accused in this case, the court finds that the investigating agency will definitely take some more time for completion of the investigation. The release of the first accused at this crucial stage will definitely deal a deathblow to the investigation embarked upon by the investigating agency. The Additional Chief Metropolitan Magistrate has not considered the gravity of charge, criminal antecedents of the first accused, the fact that the amount alleged to have been misappropriated is yet zeroed in on and the pendency of the investigation beforeever considering positively the plea for bail emanated from the first accused. In view of the above, the court finds that it is a fit case where the order of bail granted by the Additional Chief Metropolitan Magistrate, will have to be cancelled.

    16. Therefore, the order passed by the Additional Chief Metropolitan Magistrate in Crl.M.P.No.611 of 2008 granting bail to the first accused stands cancelled. The connected Miscellaneous Petition stands closed.

    ssk.

    To The Additional Chief Metropolitan Magistrate, Egmore, Chennai.

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    Comments

    The Inspector Of Police v. Cheran Enterprises (P) Ltd
    (Mar 24, 2008)