/2022 INSC 0089/
[REPORTABLE]
IN THE SUPREME COURT OF INDIA
CRIMINAL APPELLATE JURISDICTION
CRIMINAL APPEAL NO.94 OF 2022
Centrum Financial Services Limited …Appellant
                                                                                       
Versus
State of NCT of Delhi and Anr.            …Respondents
J U D G M E N T
M. R. Shah, J.
1. Feeling   aggrieved   and   dissatisfied   with   the   impugned
judgment   and   order   dated   14.09.2020   passed   by   the   High
Court   of   Delhi   at   New   Delhi   in   Bail   Application   No.2442   of
2020   by   which   the   High   Court   has   allowed   the   said
application   preferred   by   the   Respondent   No.2   herein   and
has  directed that he be released on bail in connection  with
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FIR   No.128   of   2019   PS   Economic   Offences   Wing   in   New
Delhi   for   the   offences   under   Sections   409,   420,   467,   468,
471   and   120B   IPC,   the   original   complainant   has   preferred
the present appeal.
2. That   the   appellant   herein   a   non­banking   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   herein   Jayant
Kumar Jain – Managing Director and others for the offences
under   Sections   409,   420,   467,   468,   471   and   120B   IPC.     It
was   alleged   against   the   accused   –   Respondent   No.2   herein
that   he   is   the   Managing   Director   of   M/s   Aranath   Logistics
Limited engaged in the business of multi­commodity trading
of   agricultural   and   non­commodities   agricultural.     That   by
way   of   written   agreement   accused   availed   loan   credit
facilities to the tune of Rs.25 crores for  a term  of 180 days
from the complainant company.  It was alleged that the said
amount of Rs.25 crores was disbursed in the year 2017.   It
was   alleged   that   the   said   amount   of   Rs.25   crores   was
required to be used by the company for its own purpose.  It
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was   further   alleged   that   for   the   purpose   of   repayment   of
loan,  no   stock  statement   was  submitted   and   mortgage   was
also   not   created   as   agreed   between   the   parties.     It   was
further   alleged   that   instead   of   using   the   amount   for   the
purpose   mentioned   in   the   agreement   the   same   was
transferred to several fake/shell companies.   It was further
alleged   that   at   the   time   of   availing   the   loan   the   accused
misrepresented   to   the   complainant   about   the   financial
health of the company of the accused.  It was further alleged
that the amount of around Rs.8 crores stated to have been
diverted   into   such   shell   companies   which   were   created   by
the accused in the name of his employees and bank account
was   opened   for   transaction   of   those   companies   by   using
forged   and   fabricated   documents   of   identities   of   those
employees and the said amount was further siphoned off to
other   companies   which   were   connected   to   the   accused.     It
was   further   alleged   that   Directors   of   those   shell   entities
have stated that they have not opened the bank account in
the said name or said firm and their KYC form was misused
by   the   accused.   It   was   further   alleged   that   a   sum   of   Rs.15
crores   was   transferred   to   another   company   –   LMJ
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International   Ltd.   and   the   said   amount   was   used   for   the
purpose   of   setting   off   against   the   previous   liability   of   the
said   company   with   the   Corporation   Bank,   Calcutta.     That
after   the   preliminary   investigation   on   the   complaint   of   the
appellant   herein   –   original   complainant,   the   Economic
Offences   Wing   having   found   a   prima   facie   case   against
Respondent   No.2   and   others,   FIR   being   FIR   No.128   was
registered.     The   Respondent   No.2   came   to   be   arrested   on
03.07.2020.     The   Respondent   No.2   filed   an   application
before   the   learned   Metropolitan   Magistrate   seeking   bail
under Section 437 Cr.P.C.     One another bail application for
regular   bail   being   Bail   Application   No.903   of   2020   was
moved   on   behalf   of   the   Respondent   No.2   –   Accused   before
the   Court   of   Sessions   Judge,   Patiala   House   Courts,   New
Delhi.   The said bail application was opposed by the I.O.   A
status   report   was   filed   pointing   out   how   the   amount   of   25
crores   was   siphoned   off   and   transferred   to   other   shell
companies   and   how   the   said   amount   was   used   by   the
Respondent   No.2   for   other   companies.     Vide   order   dated
04.08.2020   by   a   detailed   speaking   order,   the   learned
Sessions   Judge   dismissed   the   bail   application.   That
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thereafter, respondent  no.2 – accused filed the  present  bail
application before the High Court. The detailed status report
was filed on behalf of the I.O.  It was also submitted that the
charge­sheet   has   been   filed   against   Respondent   No.2   and
other   co­accused.     The   detailed   status   report   was   filed
pointing  out how a sum of Rs.25 crores to be used by  M/s
LMJ   Logistic   Limited   was   transferred   to   shell   and   other
companies   such   as   M/s   LMJ   Logistic   Limited   and   how   a
systematic fraud was committed.   Despite the above, by the
impugned judgment and order, the High Court has directed
to   release   Respondent   No.2   on   bail   merely   on   the   ground
that the case arises out of a commercial transaction and is
based on documents already seized.
3. Feeling   aggrieved   and   dissatisfied   with   the   impugned
judgment   and   order   passed   by   the   High   Court   directing   to
release   Respondent   No.2   –   accused   on   bail,   the   original
complainant has preferred the present appeal.
3.1 At the outset, it is required to be noted that after  this
Court directed to issue notice to the respondents vide order
dated   17.12.2020   and   thereafter   the   matter   was   adjourned
from   time   to   time,   on   08.01.2022   the   petitioner(appellant)
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moved   an   application   being   Criminal   Miscellaneous
Application   No.4818   of   2022   seeking   permission   to
withdraw the present Special Leave Petition submitting that
during the pendency of the present Special Leave Petition, a
settlement   agreement   has   been   entered   into   between   the
petitioner(appellant)   and   Respondent   No.2   on   08.01.2022
and   therefore,   the   Petitioner(appellant)   is   no   longer
interested in pursuing the present Special Leave Petition in
view   of   the   settlement.     The   said   application   was   heard   by
this   Court   on   10.01.2022.     This   Court   shown   its
disinclination to permit the petitioner(appellant) to withdraw
the   Special   Leave   Petition   by   observing   that   the
petitioner(appellant)   cannot   be   permitted   to   withdraw   the
Special   Leave   Petition   in   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 present Special Leave Petition was adjourned
to 17.01.2022,   at the request of the learned counsel for the
respective   parties   to   consider   the   present   Special   Leave
Petition on merits.
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4. Shri   Mukul   Rohatgi,   learned   Senior   Advocate
appearing   on   behalf   of   Respondent   No.2   has   made   the
following   submissions   in   support   of   his   prayer   and
requested not to cancel the bail granted by the High Court.
4.1 It   is   vehemently   submitted   by   Shri   Rohatgi,   learned
Senior   Advocate   appearing   on   behalf   of   Respondent   No.2
that   in   the   facts   and   circumstances   of   the   case   and
considering   the   fact   that   the   dispute   is   of   a   civil   nature
arising out of commercial transactions and the investigation
is   concluded   and   the   case   rests   on   documentary   evidence
already   collected   by   the   Investigating   Officer   during   the
investigation which have been seized and that the impugned
order  passed   by   the   High   Court   releasing   Respondent   No.2
on bail is as far as back on 14.09.2020 and thereafter there
are   no   allegations   that   Respondent   No.2   has   misused   the
liberty   in   between   and   that   during   the   investigation
Respondent   No.2   has   cooperated   and   neither   the
complainant nor the State are opposing the bail application
seriously, this Court may not cancel the bail.
4.2 It is further submitted by Shri Rohatgi, learned Senior
Advocate   for   Respondent   No.2   that   in   the   present   case   out
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of   Rs.25   crores,   Rs.15   crores   were   transferred   to   the   sister
concern   LNJ   International   Limited   and   the   sister   concern
paid off its loan which cannot be said to be an offence.
4.3     Shri   Rohatgi,   learned   Senior   Advocate   on   behalf   of
Respondent   No.2   –   accused   has   heavily   relied   upon   the
decisions  of this  Court in  the  case  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 Court in
the   case   of   Gurcharan   Singh   vs.   State   (Delhi
Administration)   (1978)   1   SCC   118   in   support   of   his
submissions   that   once   the   bail   has   been   granted   by   the
High   Court   and/or   the   Court   below   the   same   may   not   be
cancelled   unless   it   is   found   that   the   accused   has   violated
any of the terms and conditions of the bail order and/or has
misused   any   liberty   shown   to   him   while   releasing   him   on
bail and/or there are any other peculiar   circumstances. 
4.4. Making   the   above   submissions   it   is  prayed   to  dismiss
the present appeal.
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5. Present   appeal   is   opposed   by   learned   Counsel   on
behalf   of   Respondent   –   State.     A   status   report   on   behalf   of
the State has been filed in which it is stated that the State
had   filed   a   status   report   on   09.09.2020   before   the   High
Court   and   before   the   High   Court,   the   State   vehemently
opposed   the   bail   of   Respondent   No.2.     However,   at   that
stage,   further   investigation   was   underway   and   a
supplementary   charge­sheet   was   yet   to   be   filed.     The   same
has   now   been   filed.     The   State   shall   abide   by   the
directions/order passed by this Hon’ble Court.
6. In   the   status   report   it   has   been   pointed   out   how
systematic   fraud   has   been   committed   by   Respondent   No.2
and   others   siphoning   off   huge   amount   of   Rs.25   crores
through   other   Shell   Companies   who   are   found   to   be   fake
and   non­existent.     A   supplementary   charge­sheet   is   also
filed   on   further   investigation.     A   detailed   status   report   has
been   filed   pointing   out   how   shell   entities   were   used   as
conduit   entities   to   transfer   money   to   the   main   company   of
the accused i.e., LMJ Logistics Limited.
7. We have heard learned counsel appearing on behalf of
the respective parties at length.
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8. Having   gone   through   the   impugned   judgment   and
order   passed   by   the   High   Court   directing   to   release   the
Respondent No.2 on bail it appears that the High Court has
directed   to   release   the   Respondent   No.2   on   bail   mainly   on
the   ground   that   the   case   arises   out   of   a   commercial
transaction   and   is   based   on   documents   already   seized.
Para   16   contains   the   only   reasoning   while   releasing
Respondent No.2 on bail, which reads as under:
“16.     Coming   to   the   facts   of   the   present   case,   it   is   an
admitted   fact   that   the   co­accused   namely   Navin
Kumar   Jain   and   Hulash   Chand   Jain   were   the   other
Directors  and   shareholders  of  SALL  as   well  as   LMJIL.
They also signed/undertook personal guarantee to the
complainant company in their capacity as Directors of
the SALL against the “Working Capital Demand Loan”.
Navin   Jain   had   also   signed   the   Tripartite   Off­take
Agreement in the  capacity  of Director  of  LMJIL.    Both
of   them   were   not   even   arrested   and   the   charge   sheet
against   them   was   filed   without   arrest.     During   two
years   of   enquiry/investigation,   the   petitioner   joined
investigation   on   multiple   occasions.     After   his   arrest,
the EOW sought only one day PC remand.   Neither in
the Status Report nor during the course of arguments,
any   apprehension   was   shown   that   the   petitioner   is   a
“flight   risk”.     The   case   arises   out   of   a   commercial
transaction   and   is   based   on   documents   that   already
stand   seized.     The   petitioner   has   already   approached
the   NCLT   where   a   moratorium   on   the
assets/properties   has   been   declared   and   an   IRP   has
been   appointed.     The   complainant   has   already
approached NCLT.”
9. From the aforesaid it can be seen that while releasing
the   Respondent   No.2   on   bail   the   High   Court   has   not   at   all
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adverted to and/or considered the nature of accusation and
the   material   found/collected   during   the   course   of
investigation and the serious allegations of siphoning off the
huge   amount   through   various   shell   companies.     The   High
Court has not at all dealt with and/or considered any of the
allegations   and/or   material   collected   during   the   course   of
the   investigation   which   were   specifically   pointed   out   and
mentioned   in   the   status   report   filed   by   the   I.O.     From   the
status   report   and   even   the   charge­sheet/supplementary
charge­sheet papers it has been found during the course of
the investigation that a sum of Rs.25 crores was disbursed
by   the   complainant   to   Respondent   No.2   and   its   company
M/s   LMJ   Logistics   Limited.     The   said   amount   was
disbursed   for   its   own   use.     During   the   course   of   the
investigation,   it   has   been   found   that   the   said   amount   was
debited to the various companies/entities as under:
Sr.
No. Date Beneficiary
Firm Voucher
No. Amount (In
Rs.)
1. 03.11.17 LMJ
International
Ltd.
Corporation
Bank Kolkata 860388 1500,00,000/
­
2. 06.11.17 Sairam
Agrocorp   Pvt. 860391 2,49,25,720/­
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Ltd.   Bandhan
Bank,
Connaught
Place, Delhi
3. 30.11.17 LMJ   Logistics
Ltd.   RBL
Bank   Ltd.,
Connaught
Place,   New
Delhi 860407 2,00,00,000/­
4. 30.11.17 Vasudev   Agro
Foods   Pvt.
Ltd.
ICICI   Bank,
Parliament
Street,   New
Delhi 860410 2,51,30,176/­
5. 30.11.17 Sairam
Agrocorp   Pvt.
Ltd.   Bandhan
Bank,
Connaught
Place, Delhi 860405 99,98,874/­
6. 30.11.17 Vasudev   Agro
Foods   Pvt.
Ltd.,
Bandhan
Bank,
Connaught
Place, Delhi 860406 99,96,387/­
7. 30.11.17 Sairam
Agrocorp   Pvt.
Ltd.   Bandhan
Bank,
Connaught
Place, Delhi 860409 98,74,563/­
9.1 During   the   course   of   the   investigation,   it   has   been
found   that   Rs.15   crores   was   transferred   to   another
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company/LMJ   International   Limited   through   some   of   the
fake   companies   and   the   said   another   company   –   M/s   LMJ
International Limited used that amount to clear its dues of
Corporation Bank, Kolkata.   During the investigation it has
been found that a sum of Rs.2,49,25,720/­ was transferred
to   one   Sairam   Agrocorp   Pvt.   Ltd.   and   it   was   further
transferred   to   LMJ   International   Limited   on   the   same   day.
Similarly,   the   amount   of   Rs.2,51,30,176/­   was   transferred
in the account of Vasudev Agro Foods Pvt. Ltd. out of which
Rs.1.82   crores   approximately   was   transferred   into   account
of Aldera Traders Pvt. Limited and it was further transferred
to LMJ International Limited on the same day.   During the
course   of   the   investigation,   it   has   been   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
consolidated   amount   of   Rs.1,98,72,914/­   was   further
transferred   to   LMJ   International   Limited   on   the   same   day.
It has been further found that an amount of Rs.99,96,387/­
was   transferred   to   Vasudev   Agro   Foods   Pvt.   Limited   and   it
was further transferred to LMJ International Limited on the
same day.  Thus, it has been found that the credit facility to
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the   tune   of   Rs.25   crores   availed   by   M/s   LMJ   Logistics
Limited   were   not   used   for   any   business   purposes   i.e.,   sale
purchase   of   agri   or   non­agri   products   but   it   has   been
rotated   through   shell   entities   and   immediately   transferred
to other company M/s LMJ International Limited to square
off   the   liabilities   through   the   shell   companies.   During   the
course of the investigation/further investigation it has been
revealed   that   Sairam   Agrocorp   Pvt.   Ltd.   and   Vasudev   Agro
Foods   Pvt.   Ltd.   are   fake   and   shell   companies   and   they   do
not exist at the registered address.  During the course of the
investigation, it has been found that some of the employees
were made directors without their knowledge and their KYC
and   other   documents   were   misused   without   their
knowledge. As per the charge­sheet/supplementary charge­
sheet   it   appears   that   the   investigation   revealed   that   the
accounts in question were created to inflate the turnover of
the company so that they could avail the credit facility from
various   banks.     It   further   reveals   that   the   shell   companies
were   created   to   misappropriate/siphoned   off   the   money
entrusted to them as a loan to the tune of Rs.25 crores.   It
has been revealed that there was no genuine transaction of
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sale and purchase but it was simply routing and re­routing
of   the   amount   received   from   the   complainant   to   different
entities which were in actual being operated by Respondent
No.2.     All   these   aforesaid   allegations   and   the   material
collected   during   the   course   of   the   investigation   which   are
being   part   of   the   charge­sheet   and   supplementary   charge­
sheet are not taken note of by the High Court and the High
Court   has   just   simply   ignored   the   same   and   has   released
Respondent   No.2   on   bail   by   simply   observing   that   case
arises out of a commercial transaction and the dispute is of
a   civil   nature.     Therefore,   the   High   Court   has   not   at   all
taken   into   consideration   the   relevant   considerations   while
grant of bail.  Even the High Court has not at all taken note
of  the  reasoning  given  by  the  learned  Sessions  Court  while
rejecting the bail application of Respondent No.2.
9.2 In   the   light   of   the   above   facts,   it   is   required   to   be
considered   whether   the   High   Court   is   at   all   justified   in
releasing Respondent No.2 on bail.  
10. At   this   stage   few   decisions   of   this   Court   on   the
relevant considerations to be considered by the High Court
while grant of bail are required to be referred to.  In the case
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of   Prasanta Kumar Sarkar vs. Ashis Chatterjee and Anr.,
(2010) 14 SCC 496,  while cancelling the bail and quashing
and   setting   aside   the   order   passed   by   the   High   Court
granting   the bail  to  the accused it  is  observed in  para  9 to
12 as under:
“9.   We   are   of   the   opinion   that   the   impugned   order
is clearly unsustainable. It is trite that this Court does
not,   normally,   interfere   with   an   order   passed   by   the
High   Court   granting   or   rejecting   bail   to   the   accused.
However, it is equally incumbent upon the High Court
to   exercise   its   discretion   judiciously,   cautiously   and
strictly   in   compliance   with   the   basic   principles   laid
down   in   a   plethora   of   decisions   of   this   Court   on   the
point.   It   is   well   settled   that,   among   other
circumstances,   the   factors   to   be   borne   in   mind   while
considering 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 accusation;
( 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 influenced; and
( viii )   danger,   of   course,   of   justice   being
thwarted by grant of 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].
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10.   It   is   manifest   that   if   the   High   Court   does   not
advert   to   these   relevant   considerations   and
mechanically   grants   bail,   the   said   order   would   suffer
from the vice of non­application of mind, rendering it to
be   illegal.   In   Masroor   [(2009)   14   SCC   286],   a   Division
Bench  of  this Court, of which  one  of  us (D.K. Jain,  J.)
was a member, observed as follows: (SCC p. 290, para
13)
“ 13 . … Though at the stage of granting bail
an   elaborate   examination   of   evidence   and
detailed   reasons   touching   the   merit   of   the
case,   which   may   prejudice   the   accused,
should   be   avoided,   but   there   is   a   need   to
indicate in such order reasons for prima facie
concluding   why   bail   was   being   granted
particularly   where   the   accused   is   charged   of
having committed a 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   principles   enumerated   above.   The
accused,   in   the   present   case,   is   alleged   to   have
committed   a   heinous   crime   of   killing   an   old   helpless
lady   by   strangulation.   He   was   seen   coming   out   of   the
victim's   house   by   a   neighbour   around   the   time   of   the
alleged   occurrence,   giving   rise   to   a   reasonable   belief
that he had committed the murder. We feel that under
the given circumstances, it was not the stage at which
bail   under   Section   439   of   the   Code   should   have   been
granted   to   the   accused,   more   so,   when   even   charges
have not yet been framed.
12.   It is also pertinent to note that, as stated above,
the   Additional   Chief   Judicial   Magistrate   had   rejected
three   bail   applications   of   the   accused   but   the   High
Court   did   not   find   it   worthwhile   to   even   make   a
reference   to   these   orders.   In   this   regard,   it   would   be
useful   to   refer   to   the   following   observations   echoed
in   Kalyan   Chandra   Sarkar   v.   Rajesh   Ranjan   [(2004)   7
SCC 528]: (SCC p. 536, para 12)
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“ 12 .   In   regard   to   cases   where   earlier   bail
applications   have   been   rejected   there   is   a
further   onus   on   the   court   to   consider   the
subsequent   application   for   grant   of   bail   by
noticing   the   grounds   on   which   earlier   bail
applications   have   been   rejected   and   after
such   consideration   if   the   court   is   of   the
opinion   that   bail   has   to   be   granted   then   the
said   court   will   have   to   give   specific   reasons
why   in   spite   of   such   earlier   rejection   the
subsequent   application   for   bail   should   be
granted.”
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   a   well­settled   principle   of   law   that   while
dealing   with   an   application   for   grant   of   bail,   it   is   the
duty   of   the   Court   to   take   into   consideration   certain
factors   and   they   basically   are:   ( i )   the   nature   of
accusation and the severity of punishment in cases of
conviction   and   the   nature   of   supporting   evidence,   ( ii )
reasonable   apprehension   of   tampering   with   the
witnesses   for   apprehension   of   threat   to   the
complainant,   and   ( iii )   prima   facie   satisfaction   of   the
Court   in   support   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
SCC   129 ,   it   is   observed   and   held   by   this   Court   that   while
granting   bail,   the   relevant   considerations   are,   (i)   nature   of
seriousness of the offence; (ii) character of the evidence and
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circumstances   which   are   peculiar   to   the   accused;   and   (iii)
likelihood of the accused fleeing from justice; (iv) the impact
that his release may make on the prosecution witnesses, its
impact on the society; and (v) likelihood of his tampering.
10.3 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 the jurisdiction to grant bail has to be exercised
on   the   basis   of   well   settled   principles   having   regard   to   the
circumstances of each case and not in an arbitrary manner.
It is observed and held as under:
“The   jurisdiction   to   grant   bail   has   to   be   exercised   on
the basis of well settled principles having regard to the
circumstances   of   each   case   and   not   in   an   arbitrary
manner.  While granting the bail, the court has to keep
in   mind   the   nature   of   accusations,   the   nature   of
evidence   in   support   thereof,   the   severity   of   the
punishment   which   conviction   will   entail,   the
character,   behaviour,   means   and   standing   of   the
accused,   circumstances   which   are   peculiar   to   the
accused,   reasonable   possibility   of   securing   the
presence   of   the   accused   at   the   trial,   reasonable
apprehension   of   the   witnesses   being   tampered   with,
the   larger   interests   of   the   public   or   State   and   similar
other   considerations.     It   has   also   to   be   kept   in   mind
that   for   the   purposes   of   granting   the   bail   the
Legislature   has   used   the   words   ‘reasonable   grounds
for   believing’   instead   of   “the   evidence”   which   means
the court dealing with the grant of bail can only satisfy
it   as   to   whether   there   is   a   genuine   case   against   the
accused   and   that   the   prosecution   will   be   able   to
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produce   prima   facie   evidence   in   support   of   the
charge.”
11. Applying   the   law   laid   down   by   this   Court   in   the
aforesaid decisions to the facts of the case on hand and the
grounds   on   which   the   High   Court   has   released   the
Respondent No.2 on bail, we are constraint to observe that
in the instant case while dealing with the application of the
accused for grant of bail, the High Court has completely lost
sight   of   the   basic   principles   enumerated   above.     The   High
Court has not at all considered the modus operandi adopted
by   the   accused   in   commission   of   serious   offence   of
siphoning   and/or   transferring   the   huge   sum   to   another
company   through   shell   companies.     The   High   Court   has
also   not  taken   into  consideration   the  status   report   filed   by
the   I.O.   in   which   in   detail   it   has   been   pointed   out   how
systematically the accused have committed the offence and
misappropriated/siphoned   off   the   huge   sum   through   shell
companies.     Thus,   it   appears   that   the   High   Court   has   not
adverted to the relevant considerations and has granted the
bail mechanically by observing that the case arises out of a
commercial transaction.  
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12. Now so far as the submission on behalf of the accused
that as the accused has been released on bail as far as back
on   14.09.2020   and   that   thereafter   there   are   no   allegations
of   misusing   the   liberty   and   therefore   the   bail   may   not   be
cancelled   and   reliance   placed   upon   the   decisions   of   this
Court referred to hereinabove more particularly in the case
of  X (Supra)  are concerned at the outset it is required to be
noted   that   this   is   a   case   where   it   is   found   that   the   order
passed   by   the   High   Court   releasing   the   accused   –
Respondent No.2 on bail has been passed mechanically and
without   adverting   to   the   relevant   facts   and   without
considering   the   nature   of   accusation   and   allegations   and
the   nature   of   the   gravity   of   the   accusation.     Even   in   the
decisions   which   are   relied   upon   by   Shri   Rohatgi,   learned
Senior   Advocate   appearing   on   behalf   of   Respondent   No.2,
there   is   no   absolute   proposition   of   law   laid   down   by   this
Court   in   the   aforesaid   decisions   that   once   the   bail   is
granted by the High Court, though the High Court could not
have granted the bail, in absence of any allegation of misuse
of liberty and/or breach of any of the conditions of the bail,
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the   bail   cannot   be   set   aside   when   grant   of   bail   is   itself
subject matter of challenge in appeal/revision.
12.1 What is observed and held is that the rejection of bail
in a non­bailable case at an initial stage and cancellation of
bail   so   granted   has   to   be   dealt   with   and   considered   on
different   basis   and   that   very   cogent   and   overwhelming
circumstances   are   necessary   for   an   order   directing   the
cancellation   of   the   bail   already   granted.   Therefore,   on   very
cogent   and   overwhelming   circumstances   the   bail   can   be
cancelled.     At   this   stage   the   decision   of   this   Court   in   the
case   of   Mahipal   vs.   Rajesh   Kumar   alias   Polia   and
Another,   (2020)   2   SCC   118   is   required   to   be   referred   to.
In   the   said   decision,   it   is   observed   and   held   by   this   Court
that though this Court does not ordinarily interfere with the
order   of   the   High   Court   granting   bail,   however,   where   the
discretion of the High Court to grant bail has been exercised
without due application of mind and in contravention of the
directions   of   this   Court,   such   an   order   of   granting   bail   is
liable   to   be   set   aside.     Thereafter   after   drawing   the
distinction   between   the   power   of   an   appellate   court   in
assessing   the   correctness   of   an   order   granting   bail   and   an
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application for the cancellation of the bail, in paragraph 16
it is observed and held as under: 
“16.   The   considerations   that   guide   the   power   of   an
appellate   court   in   assessing   the   correctness   of   an
order granting bail stand on a different footing from an
assessment   of   an   application   for   the   cancellation   of
bail. The correctness of an order granting bail is tested
on   the   anvil   of   whether   there   was   an   improper   or
arbitrary exercise of the discretion in the grant of bail.
The test is whether the order granting bail is perverse,
illegal   or   unjustified.   On   the   other   hand,   an
application   for   cancellation   of   bail   is   generally
examined  on the  anvil  of  the existence  of  supervening
circumstances or violations of the conditions of bail by
a person to whom bail has been granted. 
In   Neeru   Yadav   v.   State   of   U.P.,   (2014)   16   SCC   508],
the   accused   was   granted   bail   by   the   High   Court
[ Mitthan   Yadav   v.   State   of   U.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,   a   two­Judge   Bench   of   this   Court
surveyed   the   precedent   on   the   principles   that   guide
the grant of bail. Dipak Misra, J. (as the learned Chief
Justice   then   was)   held:   ( Neeru   Yadav   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 it is granted because
the   accused   has   misconducted   himself   or   of
some   supervening   circumstances   warranting
such   cancellation   have   occurred   is   in   a
different   compartment   altogether   than   an
order granting bail which is unjustified, illegal
and perverse. If in a case, the relevant factors
which   should   have   been   taken   into
consideration   while   dealing   with   the
application   for   bail   have   not   been   taken   note
of,   or   bail   is   founded   on   irrelevant
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considerations,   indisputably   the   superior
court   can   set   aside   the   order   of   such   a   grant
of   bail.   Such   a   case   belongs   to   a   different
category   and   is   in   a   separate   realm.   While
dealing   with   a   case   of   second   nature,   the
Court   does   not   dwell   upon   the   violation   of
conditions  by  the  accused  or   the  supervening
circumstances   that   have   happened
subsequently.   It,   on   the   contrary,   delves   into
the   justifiability   and   the   soundness   of   the
order passed by the Court.”
12.2 Thus, as per  the  law  laid down by this  Court where a
Court   while   considering   an   application   for   bail   fails   to
consider   the   relevant   factors,   an   Appellate   Court   may
justifiably set aside the order granting bail.  Appellate Court
is thus required to consider whether the order granting bail
suffers from a non­application of mind or a prima facie view
from the evidence available on record.
13. From   the   aforesaid   it   emerges   that   while   releasing
Respondent   no.2   on   bail,   the   High   Court   has   not   at   all
considered   the   relevant   factors   including   the   nature   and
gravity   of  accusation;  the   modus  operandi   and  the   manner
in   which   the   offences   have   been   committed   through   shell
companies and creating the false/forged documents and/or
misusing   the   PAN   Cards,   Aadhar   Cards   and   KYCs   of   the
employees   and   showing   them   as   Directors   of   the   fake   and
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shell  companies.    As observed  hereinabove,  the  High  Court
has   not   at   all   considered   and   taken   into   consideration   the
status   report   and   the   evidence   collected   during   the   course
of the investigation.  Therefore, the impugned judgment and
order  passed   by   the   High   Court   releasing   Respondent   No.2
on   bail   is   unsustainable   as   the   High   Court   while   releasing
Respondent   No.2   on   bail   has   not   exercised   the   jurisdiction
judiciously   and   has   not   considered   the   relevant   factors
which are required to be considered while grant of bail.  
14. In view of the above and for the reasons stated above,
the impugned judgment and order passed by the High Court
releasing   Respondent   No.2   on   bail   deserves   to   be   quashed
and   set   aside   and   is   accordingly   quashed   and   set   aside.
Now on quashing and setting aside the impugned judgment
and   order   passed   by   the   High   Court   releasing   Respondent
No.2 on bail  and  consequently   the bail  being   set  aside,  the
Respondent   no.2   –   accused   to   surrender   before   the
concerned Court/Jail Authority forthwith. Present Appeal is
accordingly allowed.  
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However, it is made clear that any observations by this
Court in the present order shall not affect the trial and the
observations   made   in   the   present   order   be   treated   to   be
confined   to   the   impugned   judgment   granting   bail.     It   is
further   observed   that   after   surrender   it   will   be   open   for
Respondent No.2 to move an appropriate application for bail
before the High Court afresh after a period of three months,
which shall be considered by the High Court in accordance
with   law   and   on   its   own   merits   and   after   taking   into
consideration   the   relevant   material   collected   during   the
course   of   the   investigation   which   is   part   of   the   charge­
sheet/further   charge­sheet   and   taking   into   consideration
the relevant factors to be considered while grant of bail.
……………………………….J.
               [M.R. SHAH]
NEW DELHI;            ……………………………….J.
JANUARY 28, 2022.          [SANJIV KHANNA]
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