State Of Bihar Petitioner(S) v. Divesh Kumar Chaudhary & Anr. (S), Supreme Court Of India, Judgment, Law, casemine.com

Factual and Procedural Background

The State of Bihar and the Bihar State Food Civil Supplies Corporation filed special leave petitions challenging orders of the High Court that had granted anticipatory bail or bail to several accused persons. According to the State, the accused—operators of various rice mills—had entered into agreements for milling paddy but failed to return the resultant rice, allegedly misappropriating approximately ₹1,500 crore. Over 600 FIRs were registered. More than a year after the High Court’s orders, the Supreme Court heard the petitions seeking cancellation or modification of those bail orders.

Legal Issues Presented

Whether the anticipatory bail/bail earlier granted by the High Court should be cancelled in light of the alleged large-scale misappropriation and the ongoing investigation.

If cancellation is unwarranted, what conditions, if any, should be imposed to secure the State’s financial interests and ensure cooperation with investigation and trial?

Arguments of the Parties

Petitioners (State of Bihar/Bihar State Food Civil Supplies Corporation)

Senior counsel Mr. Siddharth Luthra asserted that roughly ₹1,500 crore had been misappropriated, supported by 600 FIRs.

He contended that granting anticipatory bail/bail would seriously hamper investigation and trial, causing further loss to the State.

The State relied on the milling agreements, highlighting Clause 3 (requirement to furnish a bank guarantee or pledge immovable property) and Clause 12 (forfeiture of the guarantee and initiation of recovery proceedings upon default) to show available means of securing the State’s financial interest.

Court's Reasoning and Analysis

The Supreme Court noted that the impugned bail orders had been in force for over a year. Acknowledging the substantial financial stake of the State, the Court determined that the State’s interests could be adequately safeguarded through stringent conditions rather than cancellation of bail. Key considerations included:

The existence of contractual mechanisms—bank guarantees and pledges of immovable property—capable of securing recovery.

The need to balance the liberty granted by the High Court with effective investigation and expeditious trial.

Consequently, the Court declined to revoke the previously granted anticipatory bail/bail but imposed additional conditions, including:

Mandatory furnishing or renewal of bank guarantees within one month, with automatic cancellation of bail upon non-compliance.

Obligations on the accused to cooperate with investigation and appear when required, subject to cancellation for non-compliance.

Completion of investigation within three months.

Consolidation of trials at five specified venues (Patna, Gaya, Chhapra, Darbhanga and Purnia) before specially designated officers, with authority granted to the High Court to delineate jurisdiction and seek additional resources.

Provisions for encashment or continuation of bank guarantees, adjustment of any deposits, and surrender of passports.

Holding and Implications

The special leave petitions were DISPOSED OF with modification of the bail/anticipatory bail conditions rather than cancellation.

Direct consequences include:

The accused retain bail/anticipatory bail, contingent upon strict compliance with the newly imposed conditions.

Failure to furnish or renew bank guarantees, or to cooperate with investigation, will lead to automatic or court-ordered cancellation of bail.

Investigations must conclude within three months and trials will proceed before five specially designated courts, aiding judicial efficiency.

The decision secures the State’s financial interests while preserving the personal liberty already granted; it does not set new precedent on bail cancellation but exemplifies the Court’s discretionary power to tailor conditions to protect public funds.

State Of Bihar Petitioner(S) v. Divesh Kumar Chaudhary & Anr. (S)

1. Heard.

2. Permission granted.

3. Delay condoned.

4. These petitions have been preferred by the State of Bihar/Bihar State Food Civil Supplies Corporation against orders granting anticipatory bail/bail, in connection with cases, the facts of which are identical.

5. It has been stated by Mr. Siddharth Luthra, learned senior counsel appearing for the State/Corporation, that a sum of Rupees fifteen hundred crores in all has been allegedly misappropriated by the accused for which 600 FIRs have been filed. According to the case of the State, agreements for milling of paddy were entered into with different rice mills in pursuance of which paddy was handed over for milling but the rice from the milled paddy was not returned or was returned partly. Thus, there is misappropriation to a huge extent. In such circumstances, grant of anticipatory bail/bail will seriously hamper the investigation/trial resulting in huge loss to the State.

6. Our attention has been drawn to the Deed of Agreement. Clause 3 thereof provides for furnishing of bank guarantee for the value of paddy, which is taken for milling, or for pledging of the immovable property of the value of the paddy. There is also provision in clause 12 that in case of default of terms of agreement the bank guarantee can be forfeited and legal action initiated for recovery of the amount from the mortgaged immovable property.

7. The High Court has passed an order for deposit of 10 to 20% of the amount, alleged to be involved in different cases for grant of bail/anticipatory bail.

8. Since the anticipatory bail/bail was granted more than one year back and financial interest of the State is or can be secured, we are not inclined to cancel the anticipatory bail/bail but modify the order of granting of anticipatory bail/bail conditional adding conditions as follows:

(1) The accused in all the FIR(s), will ensure that bank guarantee, if not furnished, is furnished and if lapsed, is renewed within a period of one month from today failing which the anticipatory bail/bail granted will stand cancelled.

(2) The accused will cooperate with investigation/trial and their failure to appear, when required, will be a ground for cancellation of anticipatory bail/bail. An order of cancellation will be passed by the trial court on being satisfied about such failure.

(3) The investigation will be completed within a period of three months.

(4) All the accused will be tried only at five places viz. Patna, Gaya, Chhapra, Darbhanga and Purnia by officers of the appropriate rank determined by the High Court within one week from today. The High Court may specify the area of jurisdiction of the said five courts by a public order. If required by the High Court, the State Government may sanction extra strength of officers with requisite infrastructure so that normal work of courts is not disturbed on account of the special arrangement for these cases.

(5) The officers posted will deal with these cases exclusively. If free from their work, any other work may be assigned to the said officers.

(6) The concerned authorities will be at liberty to encash the bank guarantee(s) after holding that there is a breach of terms of the agreement which decision will be subject to appropriate remedies of the parties.

(7) If not otherwise encashed, the bank guarantee will be kept alive till the trial is over. However, deposits/furnishing of bank guarantees will be abide by further orders of the trial court, interim or final.

(8) If any amount is deposited by the accused, the said amount will be adjusted in the amount of the bank guarantee, which is to be furnished by the accused.

(9) The accused will surrender their passports to the respective courts within a period of four weeks from today and will not leave the country without prior permission from the concerned court.

9. On compliance of the above order, if any accused is in custody, he will be granted bail in accordance with law.

10. Any other proceedings between the parties will remain unaffected by this order and the same can proceed in accordance with law.

11. The trial court/High Court will be at liberty to pass any further order which it considers appropriate, having regard to the individual fact situation or modify the above directions in exigencies of the situation.

12. The special leave petitions are disposed of accordingly.

13. Pending applications, if any, shall also stand disposed of.

State Of Bihar Petitioner(S) v. Divesh Kumar Chaudhary & Anr. (S)

Factual and Procedural Background

Legal Issues Presented

Arguments of the Parties

Petitioners (State of Bihar/Bihar State Food Civil Supplies Corporation)

Table of Precedents Cited

Court's Reasoning and Analysis

Holding and Implications

State Of Bihar Petitioner(S) v. Divesh Kumar Chaudhary & Anr. (S)

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