1997 JTR(SC) 1067
1997 3 AICLR 650 ; 1997 AIR(SC) 3868 ; 1997 AIR(SCW) 3792 ; 1997 2 ALD(Cri)(SC) 325 ; 1997 35 AllCriC 366 ; 1997 2 ALT(Cri)(SC) 317 ; 1997 CriLR 649 ; 1997 3 Crimes(SC) 125 ; 1997 CrLJ 4634 ; 1997 2 CTC 614 ; 1998 1 EastCrC(SC) 276 ; 1997 7 JT 212 ; 1997 4 RCR(Cri) 3 ; 1997 5 Scale 332 ; 1997 6 SCC 647 ; 1997 SCC(Cri) 978 ; 1997 SCR 247 ; 1997 KHC 998 ; 1997 7 Supreme 1
1997(7) Supreme 1
SUPREME COURT OF INDIA
M.K. Mukherjee, S.P. Kurdukar & K.T. Thomas, JJ.
Director of Enforcement & Anr. -Appellants
versus
P.V. Prabhakar Rao -Respondent
Criminal Appeal No 697 of 1997
(Arising out of SLP (C) 1691 of 1997)
Decided on 5-8-1997
Counsel for the Parties :
For the Appellants : Mr. S.B. Wad, Sr. Advocate, Mr. T.C. Sharma, Mr. P. Parmeswaran and Mr. Y.P. Mahajan, Advocates.
For the Respondent : Mr. D.D. Thakur, Sr. Advocate, Mr. T.N. Rao, Mr. Y. Rama Rao and Mr. Sunil Kumar, Advocates
IMPORTANT POINT
Order contemplated u/s 438 Cr.P.C. is to be granted or refused by the High Court or a Court of Sessions after exercising its Judicial discretion wisely.
Act Referred :CRIMINAL PROCEDURE CODE : S.167, S.438
(A) The impugned order of the High Court deals with the grant of anticipatory bail under Section 438 of the Code of Criminal Procedure, 1973, read in conjunction with the stringent provisions of the Prevention of Corruption Act framework and the Foreign Exchange Regulation Act, 1973, arising out of a massive foreign exchange fraud involving siphoning of public funds. The petition challenges the legality of the anticipatory bail granted to a respondent who was apprehended of involvement in a criminal conspiracy, scrutinizing the correctness of the judicial discretion exercised by the learned Single Judge in light of the seriousness of the offence and the accused's attempts to evade interrogation. The Enforcement Directorate's special leave petition underscores the necessity of aligning bail grants with the procedural safeguards under Section 167 of the Code, particularly where investigations are being staved off by the accused.
(B) The exercise of discretion under Section 438 is not a mechanical right but a judicial function requiring caution and awareness of foreseeable consequences; an accused cannot exploit the delay in investigation caused by their own conduct; the material on record must disclose an accusing finger before bail can be entertained; and the physical condition of the accused is a relevant factor but cannot overshadow the gravity of the economic offence and the need for timely investigation.
Facts of the case:
A fraud involving a staggering sum was perpetrated through a criminal conspiracy where a domestic entity entered into a deal for urea worth millions of US Dollars, leading to a complete siphoning of foreign exchange reserves without delivery of goods, while kickbacks were paid to intermediaries both in India and abroad. The Enforcement Directorate initiated investigation into offences under the Foreign Exchange Regulation Act, 1973, and the Central Bureau of Investigation was also authorised to probe the matter. While some accused were arrested and released on bail due to procedural delays by the investigating agency, the respondent avoided interrogation on more than one occasion and subsequently moved the High Court for anticipatory bail, which was granted despite the material indicating a grave economic offence. The record indicated an accusing finger against the respondent, who had not been subjected to the test of a fair investigation.
Findings of Court:
The learned Single Judge erred in exercising discretion by making the interim bail absolute, placing undue emphasis on physical ailment and the release of other accused, while disregarding the magnitude of the conspiracy and the fact that the respondent had deliberately avoided interrogation. The material on record was sufficient to attract suspicion but did not meet the threshold for an anticipatory bail grant under Section 438, as the stage did not warrant interference at that juncture.
Issues:
Whether anticipatory bail can be granted where the accused has deliberately avoided investigative interrogation and the material on record discloses an accusing finger but does not constitute a sufficient ground to prima facie accuse the accused? Whether the physical condition of the accused and the release of other accused on technical grounds of investigation delay are valid considerations for granting anticipatory bail in a grave economic offence involving foreign exchange siphoning?
Ratio Decidendi:
The court must exercise judicial discretion with caution under Section 438, ensuring that the gravity of the offence, the need for timely investigation, and the attempt by the accused to evade questioning are not overshadowed by peripheral factors; anticipatory bail is not maintainable merely because an accused has not been arrested or because other accused have been released, if the material on record reveals a credible suspicion of involvement in a serious economic conspiracy.
Result:
The appeal is allowed, the impugned order is set aside, and the application for anticipatory bail under Section 438 of the Code is dismissed.
(A) The impugned order of the High Court deals with the grant of anticipatory bail under Section 438 of the Code of Criminal Procedure, 1973, read in conjunction with the stringent provisions of the Prevention of Corruption Act framework and the Foreign Exchange Regulation Act, 1973, arising out of a massive foreign exchange fraud involving siphoning of public funds. The petition challenges the legality of the anticipatory bail granted to a respondent who was apprehended of involvement in a criminal conspiracy, scrutinizing the correctness of the judicial discretion exercised by the learned Single Judge in light of the seriousness of the offence and the accused's attempts to evade interrogation. The Enforcement Directorate's special leave petition underscores the necessity of aligning bail grants with the procedural safeguards under Section 167 of the Code, particularly where investigations are being staved off by the accused.
(B) The exercise of discretion under Section 438 is not a mechanical right but a judicial function requiring caution and awareness of foreseeable consequences; an accused cannot exploit the delay in investigation caused by their own conduct; the material on record must disclose an accusing finger before bail can be entertained; and the physical condition of the accused is a relevant factor but cannot overshadow the gravity of the economic offence and the need for timely investigation.
Facts of the case:
A fraud involving a staggering sum was perpetrated through a criminal conspiracy where a domestic entity entered into a deal for urea worth millions of US Dollars, leading to a complete siphoning of foreign exchange reserves without delivery of goods, while kickbacks were paid to intermediaries both in India and abroad. The Enforcement Directorate initiated investigation into offences under the Foreign Exchange Regulation Act, 1973, and the Central Bureau of Investigation was also authorised to probe the matter. While some accused were arrested and released on bail due to procedural delays by the investigating agency, the respondent avoided interrogation on more than one occasion and subsequently moved the High Court for anticipatory bail, which was granted despite the material indicating a grave economic offence. The record indicated an accusing finger against the respondent, who had not been subjected to the test of a fair investigation.
Findings of Court:
The learned Single Judge erred in exercising discretion by making the interim bail absolute, placing undue emphasis on physical ailment and the release of other accused, while disregarding the magnitude of the conspiracy and the fact that the respondent had deliberately avoided interrogation. The material on record was sufficient to attract suspicion but did not meet the threshold for an anticipatory bail grant under Section 438, as the stage did not warrant interference at that juncture.
Issues:
Whether anticipatory bail can be granted where the accused has deliberately avoided investigative interrogation and the material on record discloses an accusing finger but does not constitute a sufficient ground to prima facie accuse the accused? Whether the physical condition of the accused and the release of other accused on technical grounds of investigation delay are valid considerations for granting anticipatory bail in a grave economic offence involving foreign exchange siphoning?
Ratio Decidendi:
The court must exercise judicial discretion with caution under Section 438, ensuring that the gravity of the offence, the need for timely investigation, and the attempt by the accused to evade questioning are not overshadowed by peripheral factors; anticipatory bail is not maintainable merely because an accused has not been arrested or because other accused have been released, if the material on record reveals a credible suspicion of involvement in a serious economic conspiracy.
Result:
The appeal is allowed, the impugned order is set aside, and the application for anticipatory bail under Section 438 of the Code is dismissed.
ORDER
Leave granted.
2. The respondent apprehended that he would be arrested in connection with "Urea Scan". He approached the High Court of Andhra Pradesh for an order under Section 438 of the Code of Criminal Procedure (for short "the Code"). A Single Judge of the High Court initially granted an interim order in his favour and finally passed the impugned order making the interim order absolute. The Chief Enforcement Officer, Directorate of Enforcement: "Enforcement Director" for short) has filed this special leave petition.
3. It is not necessary to set out details of the case, yet we give a brief sketch of it. A fraud costing a whopping sum of Rs. 133 crores was perpetrated by some individuals after hatching a criminal conspiracy. A company by name M/s. National Fertilizers Ltd. entered into a deal with a Turkish company known as M/s. Karsans Inc. for the supply of urea worth 38 million US Dollars. The entire amount was paid to the Turkish company through the country s foreign exchange reserve without getting even an ounce of urea in return. It was later discovered that the siphoning of such a huge foreign exchange was the result of a well orchestrated conspiracy hatched by some individuals in and out of India. The Turkish company in return paid a substantial amount to "middlemen" as "kickbacks". The recipients of such kickbacks included those in India and abroad.
4. When the print media highlighted the large dimension of the fraud Central Bureau of Investigation was authorised to investigate into it. It was revealed that kickbacks were received by some middlemen in India in violation of the provisions of the Foreign Exchange Regulation Act, 1973, (for short "FERA"). It was then that the Enforcement Directorate also came into the picture are started investigation into offences involving FERA.
5. Some persons were already arrested including one Sambasiva Rao, who was Director of M/s. Sai Krishna Impex Ltd., Hyderabad. During investigation it appeared to the Enforcement Directorate that the respondent is also involved in this fraud and hence efforts were made to question him but the respondent avoided such interrogation by the officials of the Directorate, on more than one occasion. In the meanwhile the respondent, on his own, approached the High Court with a petition for an order under Section 438 of the Code.
6. Learned Single Judge, who granted the order to the respondent, pointed out that interim order was passed on 16-3-1996 on medical grounds. In the final order also learned Single Judge gave much leverage to the physical condition of the respondent. We may mention here that the physical impairment of the respondent which was pointed out was "sponoylitis". Learned counsel for the respondent has fairly admitted that, by now, lapse of time and medical care have helped the respondent to get rid of the ailment considerably. So we need not vex our mind whether that was a germane ground to be considered for granting anticipatory bail.
7. Learned counsel for the Enforcement Director forcefully attacked the reasoning of the learned Single Judge of the High Court and contended that the discretion under Section 438 of the Code was very improperly exercised in this case. Learned counsel for the respondent on the contrary defended the impugned order. Excerpts from Gurbaksh Singh v. State of Punjab1 have been doubted in support of it.
8. Legal position concerning the grant of anticipatory bail requires no repetition particularly in view of the decision of the Constitution Bench of this Court in Gurbaksh Singh (supra) which has settled the position well heigh. Nonetheless we remind ourselves that the order contemplated under Section 438 of the Code is to be granted or refused by the High Court or a Court of Sessions, after exercising its judicial discretion wisely. The Constitution Bench in Gurbaksh Singh said thus:
"A wise exercise of judicial power inevitably takes care of the evil consequences which are likely to flow out of its intemperate use. Every kind of judicial discretion, whatever may be the nature of the matter in regard to which it is required to be exercised, has to be used with due care and caution. In fact, an awareness of the context in which the discretion is required to be exercised and of the reasonably foreseeable consequences of its use, is the hallmark of a prudent exercise of judicial discretion. One ought not to make a buggear of the power to grant anticipatory bail.
9. After hearing both sides and after perusing the case records (which was submitted to us in a sealed cover by the Enforcement Director, on our request) we have no doubt that the learned Single Judge of the High Court went wrong in exercising his discretion by granting anticipatory bail to the respondent in this case. Learned Single Judge has observed :
"I have examined the material in order to satisfy myself whether the apprehension of the petitioner is well founded or not. Suffice it say that the files which are made available by the Enforcement Directorate would disclose an accusing finger against the petitioner. Be it noted that this is not the stage when this court can apply any test for its acceptability and hence a superficial examination is done. It is also not necessary to see whether this material is sufficient to file a complaint against the petitioner or not.
When we perused the records we felt that learned Single Judge has euchemistrically stated that the files disclosed "an accusing finger" against the respondent. We, however, refrain from saying anything more at this stage.
10. Learn Single Judge has taken into account the fact that all other accused arrested in connection with this case have been released on bail. But they were released on bail only on the failure of the investigating agency to complete the investigation within the time prescribed in the proviso to Section 167(2) of the Code. How could this respondent take advantage of that fact? We cannot overlook that the respondent too has contributed to the non-completion of the investigation. Completion of investigation could be achieved only by interrogating all the persons involved as well as acquainted with the matter and after collecting all material evidence procurable. So learned Single Judge should never have counted this point in favour of granting anticipatory bail to the respondent.
11. The most glaring feature which even the respondent did not repudiate is the magnitude of the criminal conspiracy hatched, the ingenuity with which the cabal was orchestrated and the meticulousness with which it was implemented and the colossal amount of foreign exchange siphoned off from the country. It is not disputed that whomsoever perpetrated this grave economic offence deserves to be dealt with sternly under law.
12. When the learned Single Judge himself felt, after going through the records in this case, that the materials already collected were capable of stretching accusing finger towards the respondent. It was not at all a proper or anticipatory bail under Section 438 of the Code.
13. For the aforesaid reason we allow this appeal, upset the impugned order and dismiss the application of the respondent filed under Section 438 of the Code.
Appeal allowed.
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