Bombay High Court
Priyank Nagraj Mehta vs Senior Police Inspector And Anr on 8 August, 2025
Author: Milind N. Jadhav
Bench: Milind N. Jadhav
2025:BHC-AS:34058
ABA.2669.22 + Group.docx
Ajay
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CRIMINAL APPELLATE JURISDICTION
ANTICIPATORY BAIL APPLICATION NO. 2677 OF 2022
Sunil Rikabchand Jain .. Applicant
Versus
Senior Police Inspector and Anr. .. Respondents
WITH
ANTICIPATORY BAIL APPLICATION NO. 2754 OF 2022
Jairaj Vinod Bafna .. Applicant
Versus
The State Of Maharashtra .. Respondent
WITH
ANTICIPATORY BAIL APPLICATION NO. 2857 OF 2022
Priyank Nagraj Mehta .. Applicant
Versus
Senior Police Inspector and Anr. .. Respondents
WITH
ANTICIPATORY BAIL APPLICATION NO. 3537 OF 2023
Rohit Rajendra Parmar .. Applicant
Versus
State Of Maharashtra .. Respondent
WITH
ANTICIPATORY BAIL APPLICATION NO. 2723 OF 2022
Ritesh Bharat Jain .. Applicant
Versus
The State Of Maharashtra .. Respondent
AND
ANTICIPATORY BAIL APPLICATION NO. 2669 OF 2022
Urvi Milan Shah .. Applicant
Versus
The State Of Maharashtra .. Respondent
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....................
Mr. Sanjog Parab, Senior Advocate i/by Mr. Mohan Rao a/w. Ms.
Sulbha Rane, Ms. Sakshi Baadkar, Mr. Sangram Parab, Mr. Pranjal
Pandey for Applicant in Anticipatory Bail Application Nos. 2677 of
22 and 2682 of 2022.
Mr. Vishwajeet Mohite a/w. Mr. Vishalkumar Kothari and Ms.
Pranjali Jadhav, Advocates for Applicant in Anticipatory Bail
Application No.2723 of 2022.
Mr. Afsar Ansari, Advocate i/by Mr. Pramod Pandey for Applicant in
Anticipatory Bail Application No.2669 of 2022.
Mr. Vrushabh Savla, Advocate for Applicant in Anticipatory Bail
Application No.3537 of 2023.
Mr. Hrishikesh Ambre, Advocate for Applicant in Anticipatory Bail
Application No.2857 of 2022.
Mr. Niranjan Mundargi a/w. Ms. Keral Mehta, Mr. Rajiv Hingu and
Mr. Deepraj Shetye, Advocates i/by L. H. Hingu & co. For Applicant
in Anticipatory Bail Application No.2754 of 2022.
Ms. Akanksha Khedekar i/by Mr. Ganesh Singh, Advocate for
Respondent No.3 in Anticipatory Bail Application No.2677 of 2022.
Ms. Sangita E. Phad APP for Respondent - State.
PSI - Palve, Vile Parle Police Station present.
...................
CORAM : MILIND N. JADHAV, J.
DATE : AUGUST 8, 2025 P. C.:
1. Heard learned Advocates appearing for the parties.
2. This is a group of 6 Anticipatory Bail Applications. These
Applications for anticipatory bail are filed under Section 438 of the
Code of Criminal Procedure, 1973 (for short, “Cr.P.C.”). Applicants are
apprehending arrest in F.I.R. No.850 of 2022 registered with Vile Parle
Police Station for the offences punishable under Sections 409, 411,
413, 420, 465, 467, 468, 479, 120B read with Section 34 of the Indian
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Penal Code, 1860 (for short “IPC“) and Sections 66(d) and 66(e) of the
Information Technology Act, 2000 (for short “IT Act“) by First
Informant – Complainant – Anurag Shukla against 6 Accused persons
namely Sunil Jain, Jairaj Bafna, Priyank Mehta, Rohit Parmar, Ritesh
B. Jain and Urvi Milan Shah.
3. Briefly stated, facts germane to the present Applications
are as follows:-
3.1. Artha Vriddhi Securities Limited (for short ‘AVSL’) was
incorporated in the year 2005 by one Mr. Dhirendra Shukla and his
family under the name ‘Transparent Shares and Securities’. However
in the year 2013 the name was changed to ‘Artha Vriddhi Securities
Limited’. The Company is a Registered Share Broker.
3.2. First Informant – Anurag Dhirendra Shukla was appointed
as Director in March, 2021, prior to him, his father Dhirendra Shukla
served as the Director since the inception.
3.3. On 25.06.2013, Applicant No.1 – Sunil Jain (Accused
No.1) was appointed as the Director of AVSL. Trading accounts of
clients including Blue Sea International and Manish Shah were
managed by AVSL for the purpose of trading shares.
3.4. It is alleged that since the year 2015, present Applicants
in connivance with each other, engaged in illegal acts of circular
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and its clients.
3.5. In October 2021, clients – Blue Sea International and
Manish Shah raised complaints before the Grievance Redressal
Committee (for short ‘GRC’) of NSE qua the irregularities in their
trading accounts. On 10.11.2021 and 11.11.2021, the GRC passed
orders directing AVSL to pay compensation of Rs.1,54,24,446/- and
Rs.60,38,280/- respectively. On 11.11.2021, intimation for Arbitration
proceedings was sent by AVSL against the GRC orders.
3.6. On 18.02.2022, an order was passed by the Member and
Core Settlement Guarantee Fund Committee (MCSGFC) of NSE
wherein Anurag Shukla represented AVSL qua the complaints against
AVSL. He submitted that there was no misutilization of clients’ funds
and recorded that the two complaints were settled by AVSL and it
wanted to withdraw from Arbitration.
3.7. In the interregnum, in October – November 2021, Mr.
Sunil Giri – Director of Blue Sea International filed a complaint against
four accused persons i.e. Anurag Shukla, Dhirendra Shukla, Jairaj
Bafna and Sunil Jain. On 21.07.2022, first FIR No.755 of 2022 was
registered.
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ABA.2669.22 + Group.docx3.8. On 08.08.2022, co-accused No.2 – Jairaj Bafna was
granted Anticipatory Bail. On 24.07.2022, other Directors alongwith
First Informant – Anurag Shukla were arrested. By order dated
18.08.2022, the learned Sessions Court granted bail to all Directors
including First Informant – Anurag Shukla.
3.9. On 29.08.2022, First Informant – Anurag Shukla obtained
permission from the Magistrate under Section 156(3) of Cr.P.C. and
pursuant thereto on 11.09.2022, the present (second) FIR No.850 of
2022 was registered against six accused persons.
3.10. It is prosecution case that Applicants were engaged in
unauthorized trading activities in stock accounts managed by AVSL
which came to light upon complaints made by clients of AVSL. It is
alleged that Applicants were involved in a systematic and clandestine
scheme of circular trading, through which they embezzled an amount
of Rs.9.35 crores from AVSL and its clients. It is prosecution case that
Applicants siphoned off these funds and misappropriated them for
their personal gain. As a consequence, the stocks / shares of clients
depleted due to reversal trade, thereby losing their quantum value.
3.11. Allegation against Accused No.1 – Sunil Jain, Head of
Sales at AVSL is that he was the mastermind of the offence. It is
alleged that internal email exchanges with co-accused clearly reflected
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committed the offense with the assistance of Accused Nos.2 to 4,
facilitated embezzlement of Rs.9.35 crores into the accounts of
Accused Nos.5 and 6 which is substantiated through their bank
accounts and ledger accounts of AVSL. It is alleged that to conceal
circular trading accused persons altered clients’ contact numbers and
email IDs and sent forged documents involving valuable securities to
defraud clients. Being the custodian of AVSL’s shares and properties,
Accused No.1 is alleged to have committed criminal breach of trust by
misappropriating client funds and shares.
3.12. Allegation against Accused No.2 – Jairaj Bafna, Business
Consultant on retainer basis with AVSL is that he forged the signatures
of Mr. Sunil Giri and his wife on account opening forms and assisted in
altering client details to cover up fraudulent trades thereby facilitating
the misappropriation.
3.13. Allegation against Accused No.3 – Priyank Mehta,
Relationship Manager with AVSL is that he participated in
unauthorized circular trading with co-accused persons, fabricated
documents, and aided in causing wrongful loss to clients thereby
contributing to the embezzlement.
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ABA.2669.22 + Group.docx3.14. Allegation against Accused No.4 – Rohit Parmar, Head of
IT Department is that he downloaded APPs which prevented clients
from receiving updates on the status of their shares and thereby
supported execution of the fraudulent scheme.
3.15. Allegation against Accused Nos.5 and 6 – Ritesh Bharat
Jain and Urvi Milan Shah, investors in AVSL is that they not only
received the embezzled funds but also played an active role by
fabricating holding statements and aiding in unauthorized sale of First
– Informant’s shares without his knowledge or consent to meet third-
party liabilities and thereby contributed to the alleged
misappropriation of Rs.9.35 crores belonging to AVSL and its clients.
4. Submissions made by learned Advocates appearing for
Applicants – Accused Nos.1 to 6 are as follows:
4.1. Anticipatory Bail Application No.2677 of 2022:
(i) Mr. Parab, learned Senior Advocate appearing for
Applicant – Accused No.1 would submit that Applicant –
Accused No.1 is falsely implicated and made a scapegoat
in the present crime. He would submit that First
Informant in present FIR – Anurag Shukla, Director of
AVSL, suppressed the fact that he is an accused in FIR
No.755 of 2022 filed against a few Directors of AVSL. He
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would submit that First Informant obtained order under
Section 156(3) Cr.P.C. to register FIR No.850 of 2022
alleging embezzlement of Rs.9.35 crores with the sole
intention to avoid his liability in FIR No.755 of 2022 due
to counter pressure from the Complainant – Sunil Giri in
that case.
(ii) He would submit that First Informant represented AVSL
before MCSGFC, which recorded in its order dated
18.02.2022 that the shortfall of Rs.1.48 crores was due to
pending investor claim of Rs.1.60 crores and not due to
misappropriation. He would submit that no allegation of
unauthorized trading or embezzlement was made against
Applicant in those proceedings. He would submit that
primary allegation of misappropriation of Rs.9.35 crores is
unsubstantiated and without any relevant documentary
evidence showing diversion of funds to Applicant’s
account or for personal gain. He would submit that the
dispute raised is civil in nature as AVSL has filed Writ
Petition No.2271 of 2022 in this Court and the Statutory
Appeal before SAT challenging MCSGFC’s findings and
Arbitration Notice, which itself highlights that a civil
matter is given a criminal colour.
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(iii) He would submit that all alleged share transactions were
routed through NSE/BSE platforms linked to the Demat
accounts of clients and consideration amounts were duly
transferred to clients’ accounts. Hence, no illegal funds
were transferred to Applicant’s account. He would submit
that there is no complaint or enquiry initiated either by
NSE or BSE against Applicant – Accused No.1 thereby
disproving any claim of adverse findings or illegal trading
practices against Applicant. He would submit that three
FIRs for the same cause of action have been filed with
three separate investigations undertaken. He would
submit that in FIR No.755 of 2022, investigation is
complete and all relevant documents and bank statements
are provided by Applicant.
(iv) He would submit that no money trail has been traced or
discovered linking Applicant to the alleged offense. He
would submit that Applicant’s and his relatives’ bank
accounts have been de-frozen after disclosure and
investigation thereby indicating no incriminating material
having been found against him.
(v) In support of his submissions, Mr. Parab, learned Senior
Advocate appearing for Applicant – Accused No.1 has
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referred to and relied upon the decision of this Court in
the case of Prashant Vasant Chavan Vs. The State of
Maharashtra.1. Hence, he would submit that custodial
interrogation of Applicant is not necessary and therefore
Application for Anticipatory Bail deserves to be allowed.
4.2. Anticipatory Bail Application No. 2754 of 2022:
(i) Mr. Mundargi, learned Advocate appearing for Applicant –
Accused No.2 would submit that Applicant – Accused
No.2 is falsely implicated. He would submit that Applicant
worked as Business Consultant on retainer-ship basis with
AVSL. He would submit that Applicant was not an
employee of AVSL and not involved in its day-to-day
affairs. He would submit that his role was limited to
providing customer relationship coordination and
operational support. He would submit that the
Trading/Demat account of Blue Sea International was
opened by Relationship Managers Mr. Nilesh More and
Mr. Umesh Malaye after due verification. He would submit
that group chat records show Sunil Giri confirming receipt
of account opening forms on 02.11.2019, thereby refuting
the allegation of his forged signatures. He would submit
1
Criminal Anticipatory Bail Application No.31 of 2025, decided on 08.01.2025.
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that transactions were carried out in the said account,
with regular confirmations sent by NSE to Sunil Giri.
(ii) He would submit that the allegation regarding his sister
being a beneficiary is baseless as she was a client of AVSL,
she traded in minimal amounts and also incurred losses.
He would submit that the assurance to repay losses was
made by Accused No.1 and not this Applicant. He would
submit that Applicant has been granted anticipatory bail
in FIR No.755 of 2022, which incidentally arises from the
same cause of action. He would submit that no money
trail has been discovered linking Applicant to the alleged
offense of embezzlement.
(iii) In support of his submissions Mr. Mundargi, learned
Advocate appearing for Applicant – Accused No.2 has
referred to and relied upon the decision of the Supreme
Court in the case of Musheer Alam Vs. State of Uttar
Pradesh and Another2. Hence, he would submit that
custodial interrogation is not necessary, and Application
for Anticipatory Bail deserves to be allowed.
2
2025 SCC OnLine SC 116.
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4.3. Anticipatory Bail Application No. 2857 of 2022:
(i) Mr. Ambre, learned Advocate appearing for Applicant –
Accused No.3 would submit that he is falsely implicated in
the present crime. He would submit that he worked as
Relationship Manager who looked after the clients and
guided them. He would submit that Applicant never
handled any finance or banking portfolio at AVSL. He
would submit that all signing authority and control was
with Dhirendra Shukla and his family members.
(ii) He would submit that Applicant was never entrusted with
any share of funds to make him liable for the alleged
offense under Section 409 of the IPC. He would submit
that there is no transfer of funds or shares to the account
of Applicant except for his salary. He would submit that
Applicant was an employee of AVSL, but he resigned on
07.01.2022 and the FIR No.850 of 2022 is lodged on
11.09.2022. He would submit that First Informant –
Complainant has made a vague, general, unsubstantiated
and omnibus statement with regard to Applicant’s role in
the present offence. He would submit that there is no
averment in the FIR with regard to Applicant’s specific
role in the alleged offense. He would submit that no
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money trail either has been discovered linking Applicant
to the alleged offense. Hence, he would submit that
custodial interrogation is not necessary, and the
Application for Anticipatory Bail deserves to be allowed.
4.4. Anticipatory Bail Application No. 3537 of 2023:
(i) Mr. Salva, learned Advocate appearing for Applicant –
Accused No.4 would submit that FIR No.850 of 2022 was
registered on 11.09.2022, whereas the alleged offence is
stated to have occurred from 01.01.2015 onwards
resulting in an unexplained delay of nearly seven years in
lodging the FIR. He would submit that such delay casts
serious doubt on the credibility of the allegations. He
would submit that Applicant merely worked as an
employee of AVSL in its IT Department on a salary.
(ii) He would submit that no specific role is attributed to
Applicant in the FIR. He would further submit that no
cogent or documentary evidence is placed on record to
substantiate Applicant’s involvement in the alleged
offence. Hence, he would submit that custodial
interrogation is not necessary and the Application for
Anticipatory Bail deserves to be allowed.
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4.5. Anticipatory Bail Application No. 2723 of 2022:
(i) Mr. Pandey, learned Advocate appearing for Applicant –
Accused No.5 would submit that he is falsely implicated in
the present crime. He would submit that Applicant was
merely an investor in AVSL and had no direct or indirect
control over its business operations. He would submit that
FIR did not prima facie attribute any specific role to
Applicant in the alleged offence. He would submit that
Accused No.1 had advanced loan to Applicant which was
invested for stock trading with AVSL and the said amount
was infact returned to Accused No.1 more than one year
prior to registration of this FIR.
(ii) He would submit that any profit or loss in the Applicant’s
personal trading account pertained to a different set of
shares, unrelated to those of other clients or the present
offence. He would further submit that Applicant’s name
did not appear in the initial proceedings before the GRC
of NSE. He would submit that the prosecution relied
solely on bank statements already in the custody of the
Investigating Officer, and there existed no direct, indirect,
or circumstantial evidence connecting Applicant to the
alleged offence. Hence, he would submit that custodial
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interrogation is not necessary and the Application for
Anticipatory Bail deserves to be allowed.
4.6. Anticipatory Bail Application No. 2669 of 2022:
(i) Mr. Pandey, learned Advocate appearing for Applicant –
Accused No.6 would submit that she is falsely implicated
in the present crime. He would submit that Applicant was
merely an investor in AVSL and had no direct or indirect
control over its business operations. He would submit that
FIR did not prima facie attribute any specific role to
Applicant in the alleged offence. He would submit that
there is nothing placed on record either to show that any
misappropriated funds were received by Applicant in her
account. He would submit that in the year 2018,
Applicant invested Rs.8,00,000/- with AVSL however
Directors of AVSL without her knowledge used her
Trading Id for two years and incurred loss. However no
message or email was received by her from AVSL
regarding the said transactions. He would submit that in
the year 2022 when Applicant enquired with Accused
No.1, he from his personal account transferred the loss
amount to Applicant. He would submit that Applicant had
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given Rs.45,00,000/- to Dhirendra Shukla, however the
said amount was never returned back to her till today.
(ii) He would submit that any profit or loss in the Applicant’s
personal trading account pertained to a different set of
shares, unrelated to those of other clients. He would
further submit that Applicant’s name did not appear in
the initial proceedings before the GRC of NSE. He would
submit that the prosecution relied solely on bank
statements already in the custody of the Investigating
Officer, and there existed no direct, indirect, or
circumstantial evidence connecting Applicant to the
alleged offence. Hence, he would submit that custodial
interrogation is not necessary and the Application for
Anticipatory Bail deserves to be allowed.
5. PER CONTRA, Ms. Phad, learned APP for Respondent –
State has vehemently opposed the 6 Applications. She would submit
that Applicants are involved in a well-planned and systematic
conspiracy resulting in misappropriation of approximately Rs.9.35
crores from AVSL and its clients. She would submit that allegations are
grave and supported by prima facie material, including internal email
correspondence, manipulated client data, forged documents, and
banking records reflecting unauthorized diversion of funds. She would
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submit that each Applicant played a distinct and active role in
facilitating circular trading and fraudulent transactions to cause
wrongful loss to Investors of AVSL. She would submit that delay in
lodging FIR No.850 of 2022 was duly explained as it was registered
pursuant to directions issued under Section 156(3) Cr.P.C. and hence
does not weaken the prosecution case. She would submit that
custodial interrogation of Applicants is essential for further
investigation in the present crime.
5.1. In support of her submissions, Ms. Phad learned APP for
Respondent – State has referred to and relied upon the decision of the
Supreme Court in the case of Satender Kumar Antil Vs. Central Bureau
of Investigation and Anr.3. Hence considering the nature and
seriousness of the offence, quantum of public loss involved and for
thorough investigation she would urge the Court to reject the
Applications.
6. Ms. Khedekar, learned Advocate appearing for
Respondent No.3 in Anticipatory Bail Application No.2677 of 2022 has
placed on record a compilation of documents and would adopt the
submissions made by Ms. Phad. She would submit that the present
Application deserves to be rejected in view of the active and
corroborated involvement of Accused No.1 in connivance with other
3
AIR Online 2021 SC 1017.
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Applicants in commission of serious economic offences thereby
resulting in loss to AVSL to the tune of Rs.9.35 crores. She would
submit that one such fraudulent transaction is evident from the trade
dated 25.02.2019 wherein Accused No.5 – Ritesh Jain received
Rs.48,02,225/- through reverse trading causing a corresponding loss
to AVSL, as reflected in the Summary of Reverse Trade.
6.1. She would further submit that the said transaction and
the role of the Accused came to light only on 17.11.2021, when First
Informant received and reviewed the bank statements of Accused
Nos.5 and 6. On perusal, it was revealed that the funds used for the
impugned trades by Accused Nos.5 and 6 were sourced from Accused
No.1 which is corroborated by the bank entries at Flag 6 of the
Convenience Compilation of Accused No.5 which clearly show that
Accused No.1 transferred funds to Accused No.5, who thereafter
transferred them to AVSL for the purpose of trading. She would submit
that this fund flow is not incidental but demonstrates Accused No.1’s
direct involvement in the execution of the fraudulent trades and points
to his active role in the offence.
7. She would submit that Accused No.6 – Urvi Milan Shah
also received funds from both Accused Nos.1 and 5 which is
corroborated by the bank statements placed at Flag 7 of the
Convenience Compilation thereby reflecting structured and
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coordinated financial movement between the accused persons. She
would submit that such transactions formed part of a deliberate
scheme to defraud AVSL by misusing client and proprietary accounts
for personal gain. She would submit that the findings of forensic audit
conducted by the NSE and report of the GRC support the First
Informant’s case, both recording unauthorised trading, deletion of
complaint-related data, misuse of client information, and collusion
among the Accused. She would further submit that Accused No.1 has
previously been summoned in another complaint in April 2020,
showing a pattern of repeated misconduct. Hence she would urge the
Court to consider the seriousness of the economic offence and
corroborative material placed on record and would submit that
Accused No.1’s custodial interrogation is necessary. She would
therefore urge the Court to reject the Anticipatory Bail Application
filed by Accused No.1
8. I have heard the learned Advocates appearing for the
respective parties and with their able assistance perused the record of
the case.
9. Prima facie on perusal of record, it is seen that the
present FIR in question has been registered at the instance of Mr.
Anurag Shukla, who is the Director of AVSL, a registered brokerage
firm regulated under SEBI. The primary allegations are that
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Applicants, being employees of AVSL, in collusion with two Investors
unauthorizedly traded in client accounts, forged internal records, and
misappropriated funds between 2015 and 2022, causing financial loss
to AVSL and its clients.
10. At the outset, it is pertinent to note that the allegations
pertain to transactions and conduct within the internal working of
AVSL, involving no third-party deception at inception. The timeline
and tenure of the transactions is over a period of 7 years, which on the
face of record itself is humongous. First – Informant – Complainant
being Director of AVSL and his family members were in full control of
their client interface, back-end operations and trading platform. It is
seen that the client accounts in question were opened in the regular
course of business and the trades were executed over a sustained
period of time. There is no allegation or prima facie material to
suggest that any of the Applicants induced the company to act under a
false pretence at the inception of their business relationship. It is seen
that FIR is filed in 2022 despite the alleged misconduct claimed to
have begun several years earlier and First Informant having access to
all necessary records and surveillance systems. This unexplained delay
significantly weakens the credibility of the prosecution’s case.
11. It is seen that FIR No.850 of 2022 has been registered
pursuant to an order under Section 156(3) Cr.P.C. obtained at the
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instance of the First Informant – Anurag Shukla who himself is arrayed
as accused in FIR No.755 of 2022 arising out of the same set of
transactions and significantly over the same period of time. Present
FIR therefore clearly and prima facie appears to be a counterblast to
FIR No.755 of 2022 and registered nearly a year after the alleged
incident which raises doubt on the prosecution case considering First
Informant’s conflicting roles in AVSL and transactions.
12. It needs to be noted that AVSL being a registered
brokerage company is subject to statutory audits, compliance checks,
and internal verifications, but however nothing was flagged
contemporaneously either by external auditors, SEBI, NSE or clients
for a substantial period of seven years including Mr. Giri whose
trading account forms the basis of the allegations. The said client had
been trading through AVSL over a long period of time and continued
to receive trade confirmations and account statements with no
immediate objections raised during the relevant period either.
Therefore the allegations in the FIR will have to undergo the test of
trial.
13. With regard to Applicant – Accused No.1 it is alleged that
he was head of the sales team and issued internal emails that allegedly
facilitated unauthorised trade. However, the emails relied upon do
not, on the face of it, reflect any criminal conspiracy or fraudulent
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design. There is no prima facie direct incriminating material to show
that he personally committed, directed or benefited from any
unauthorised or illegal activity.
14. With regard to Applicant – Accused Nos.2, 3, and 4 they
are employees involved with the account servicing, client onboarding,
or execution of instructions. However, investigation does not disclose
any falsification of records or forged documents traceable to these
individuals. The lack of forensic analysis, document examination or
specific attribution of role so as to enrich themselves with the crime
proceeds makes the allegations against these Applicants highly
generalized.
15. Applicant – Accused Nos.5 and 6 are alleged to have
placed trades in the client account in question. However it is seen that
the trading system employed by AVSL required multi-layered
authorisation and trades were backed by recorded terminal access and
transaction logs. There is no report indicating tampering with the
back-end or illegal access. Moreover, the regular audit trail,
unchallenged by the First Informant – Complainant until 2022 prima
facie dilutes the assertion of fraud against these clients / investors.
16. It is seen that the core allegations pertain to trading losses
and share transactions between clients and AVSL which are inherently
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civil in nature. The fact of Arbitration proceedings under the GRC of
NSE and Appeal before SAT initiated and pending reinforces that a
civil dispute is being given a criminal colour. Insofar as the offence
under Section 420 of IPC is concerned the essential element of
dishonest inducement with an intention to deceive at the inception is
not evident from the record. It is seen that clients of AVSL have had a
longstanding business relationship with the company and continued to
trade even after the alleged transactions thereby negating the
existence of dishonest inducement from the very beginning. The
transactions were executed in the company’s ordinary course of
business and First – Informant and his family members had complete
supervisory access. No act of inducement resulting in wrongful gain to
the accused or wrongful loss to First Informant – Complainant at the
threshold is prima facie demonstrated. However only when losses
were incurred by First – Informant the said FIR came to be registered.
17. With regard to charge under Section 409 of IPC, it is seen
that there must be clear entrustment and dishonest misappropriation
by a public servant, banker, or agent. Applicants Nos.2 to 6 were not in
fiduciary positions to warrant invocation of Section 409 of IPC.
However, no prima facie incriminating material has been brought on
record to show that any property or funds were entrusted to these
Applicants in their personal capacity or they misappropriated any
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funds. Rather their actions were in the ordinary cause of their
employment unless disproved on evidence.
18. There is no material on record to substantiate the
allegations of forgery under Sections 465, 467, 468 or 471 of IPC. No
specific document is identified as having been fabricated or signed
falsely by any of the Applicants. There is also no expert opinion,
handwriting analysis, or digital forensic evidence indicating
falsification or unauthorised alteration of any records or instruments
at this stage. In absence of such concrete evidence, the allegations
under the aforesaid provisions appear unsubstantiated at this stage.
19. Despite the gravity of allegations, during investigation no
direct money trail linking embezzled funds to the personal accounts of
Applicants is seen. However it is pertinent to note that Bank accounts
of Applicants have been de-frozen and no incriminating material has
surfaced. Hence allegations regarding circular trading and reverse
transactions prima facie remain unsubstantiated by conclusive
documentary or forensic evidence.
20. It is further relevant to note that Applicants are first-time
offenders with no prior criminal antecedents. The investigation has
continued over a considerable period, chargesheet has been filed and
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material documents are already in custody of the Investigating Officer.
Hence, no recovery as such is pending at the instance of Applicants.
21. While relying on the decision of the Supreme Court in the
case of Ramesh Kumar Vs. State (NCT of Delhi)4 it is held that criminal
proceedings are not for realisation of disputed dues and thus a
criminal Court exercising jurisdiction to grant bail / anticipatory bail is
not expected to act as a recovery agent to realise the dues of the First –
Informant, and that too, without any trial (emphasis supplied).
Supreme Court has however held that in exceptional cases where
allegation of misappropriation of public money by Accused is levelled,
it would be open to the concerned Court to consider whether in the
larger public interest the money which is misappropriated be allowed
to be deposited before application for Anticipatory Bail or Bail is taken
up for consideration.
22. It is trite law that offence of cheating and criminal breach
of trust cannot co-exist simultaneously. In this context reference is
made to a decision of the Supreme Court in the case of Delhi Race
Club (1940) Ltd. and Ors. Vs. State of Uttar Pradesh and Anr. 5 wherein
in paragraph Nos.24 to 30 the Court has laid down the distinction
between offence of cheating and criminal breach of trust. Paragraph
Nos. 24 to 30 read thus:-
4
(2023) 7 Supreme Court Cases 461.
5
Criminal Appeal No. 3114 of 2024 decided on 23.08.2024
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“DIFFERENCE BETWEEN CRIMINAL BREACH OF TRUST AND
CHEATING
24. This Court in its decision in S.W. Palanitkar & Ors. v.
State of Bihar & Anr. reported in (2002) 1 SCC 241 expounded
the difference in the ingredients required for constituting an of
offence of criminal breach of trust (Section 406 IPC) viz-a-viz
the offence of cheating (Section 420). The relevant observations
read as under: –
“9. The ingredients in order to constitute a criminal breach
of trust are: (i) entrusting a person with property or with
any dominion over property,(ii) that person entrusted (a)
dishonestly misappropriating or converting that property
to his own use; or (b) dishonestly using or disposing of
that property or wilfully suffering any other person so to
do in violation (i) of any direction of law prescribing the
mode in which such trust is to be discharged, (ii) of any
legal contract made, touching the discharge of such trust.
10. The ingredients of an offence of cheating are: (i) there
should be fraudulent or dishonest inducement of a person
by deceiving him, (ii)(a) the person so deceived should be
induced to deliver any property to any person, or to
consent that any person shall retain any property; or (b)
the person so deceived should be intentionally induced to
do or omit to do anything which he would not do or omit
if he were not so deceived; and (iii) in cases covered by
(ii)(b), the act of omission should be one which causes or
is likely to cause damage or harm to the person induced in
body, mind, reputation or property.”
25. What can be discerned from the above is that the
offences of criminal breach of trust (Section 406 IPC) and
cheating (Section 420 IPC) have specific ingredients.
In order to constitute a criminal breach of trust (Section 406
IPC): –
1) There must be entrustment with person for property or
dominion over the property, and
2) The person entrusted: –
a) dishonestly misappropriated or converted property to
his own use, or
b) dishonestly used or disposed of the property or willfully
suffers any other person so to do in violation of:
i. any direction of law prescribing the method in which the
trust is discharged; or
ii. legal contract touching the discharge of trust (see:
S.W.P. Palanitkar (supra).
Similarly, in respect of an offence under Section 420 IPC, the
essential ingredients are: –
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1) deception of any person, either by making a false or
misleading representation or by other action or by omission;
2) fraudulently or dishonestly inducing any person to deliver
any property, or
3) the consent that any persons shall retain any property and
finally intentionally inducing that person to do or omit to do
anything which he would not do or omit (see: Harmanpreet
Singh Ahluwalia v. State of Punjab, (2009) 7 SCC 712 : (2009)
Cr.L.J. 3462 (SC))
26. Further, in both the aforesaid sections, mens rea i.e.
intention to defraud or the dishonest intention must be present,
and in the case of cheating it must be there from the very
beginning or inception.
27. In our view, the plain reading of the complaint fails to
spell out any of the aforesaid ingredients noted above. We may
only say, with a view to clear a serious misconception of law in
the mind of the police as well as the courts below, that if it is a
case of the complainant that offence of criminal breach of trust
as defined under Section 405 of IPC, punishable under Section
406 of IPC, is committed by the accused, then in the same
breath it cannot be said that the accused has also committed the
offence of cheating as defined and explained in Section 415 of
the IPC, punishable under Section 420 of the IPC.
28. Every act of breach of trust may not result in a penal
offence of criminal breach of trust unless there is evidence of
manipulating act of fraudulent misappropriation. An act of
breach of trust involves a civil wrong in respect of which the
person may seek his remedy for damages in civil courts but, any
breach of trust with a mens rea, gives rise to a criminal
prosecution as well. It has been held in Hari Prasad Chamaria v.
Bishun Kumar Surekha & Ors., reported in (1973) 2 SCC 823 as
under:
“4. We have heard Mr. Maheshwari on behalf of the
appellant and are of the opinion that no case has been
made out against the respondents under Section 420 Penal
Code, 1860. For the purpose of the present appeal, we
would assume that the various allegations of fact which
have been made in the complaint by the appellant are
correct. Even after making that allowance, we find that the
complaint does not disclose the commission of any offence
on the part of the respondents under Section 420 Penal
Code, 1860. There is nothing in the complaint to show
that the respondents had dishonest or fraudulent intention
at the time the appellant parted with Rs. 35.000/- There is
also nothing to indicate that the respondents induced the
appellant to pay them Rs. 35,000/- by deceiving him. It is
further not the case of the appellant that a representation
was made, the respondents knew the same to be false. The
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be the proprietor of Drang Transport Corporation and
would also render accounts to him in the month of
December might create civil liability on the respondents
for the offence of cheating.”
29. To put it in other words, the case of cheating and
dishonest intention starts with the very inception of the
transaction. But in the case of criminal breach of trust, a person
who comes into possession of the movable property and receives
it legally, but illegally retains it or converts it to his own use
against the terms of the contract, then the question is, in a case
like this, whether the retention is with dishonest intention or
not, whether the retention involves criminal breach of trust or
only a civil liability would depend upon the facts of each case.
30. The distinction between mere breach of contract and
the offence of criminal breach of trust and cheating is a fine one.
In case of cheating, the intention of the accused at the time of
inducement should be looked into which may be judged by a
subsequent conduct, but for this, the subsequent conduct is not
the sole test. Mere breach of contract cannot give rise to a
criminal prosecution for cheating unless fraudulent or dishonest
intention is shown right from the beginning of the transaction
i.e. the time when the offence is said to have been committed.
Therefore, it is this intention, which is the gist of the offence.
Whereas, for the criminal breach of trust, the property must
have been entrusted to the accused or he must have dominion
over it. The property in respect of which the offence of breach of
trust has been committed must be either the property of some
person other than the accused or the beneficial interest in or
ownership’ of it must be of some other person. The accused
must hold that property on trust of such other person. Although
the offence, i.e. the offence of breach of trust and cheating
involve dishonest intention, yet they are mutually exclusive and
different in basic concept. There is a distinction between
criminal breach of trust and cheating. For cheating, criminal
intention is necessary at the time of making a false or
misleading representation i.e., since inception. In criminal
breach of trust, mere proof of entrustment is sufficient. Thus, in
case of criminal breach of trust, the offender is lawfully
entrusted with the property, and he dishonestly misappropriated
the same. Whereas, in case of cheating, the offender
fraudulently or dishonestly induces a person by deceiving him to
deliver any property. In such a situation, both the offences
cannot co-exist simultaneously.
23. The Supreme Court, while dealing with offence, involving
conspiracy to commit economic offences of huge magnitude, in the
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case of Y.S. Jagan Mohan Reddy Vs. C.B.I.6 laid down following
parameters:-
” i) economic offences constitute a class apart and need to be
visited with a different approach in the matter of bail. The
economic offence having deep rooted conspiracies and involving
huge loss of public funds needs to be viewed seriously and
considered as grave offences affecting the economy of the
country as a whole and thereby posing serious threat to the
financial health of the country, and
ii) while granting 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 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 interest of the
public/State and other similar considerations.”
24. Attention is drawn to the decision of the Supreme Court
in the case of Sanjay Chandra Vs. Central Bureau of Investigation 7
wherein the Court has held that in economic offences while
considering an application for bail, the nature of charge may be
relevant but at the same the punishment to which the party may be
liable, if convicted is also a significant aspect and therefore both, the
seriousness of the charge and the severity of the punishment should be
taken into consideration for arriving at decision of grant of bail. It
further observed that deprivation of liberty must be considered a
punishment unless it is absolutely necessary in the interest of justice
6
(2013) 7 SCC 439
7
(2012) 1 SCC 40
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and that object of bail is merely to secure appearance of accused at the
trial.
25. Next, in the context of the present case the decision of the
Supreme Court in the case of P. Chidambaram Vs. Directorate of
Enforcement 8 is also relevant. The Supreme Court observed that
economic offences would fall under the category of ‘grave offences’
and in such circumstances while considering application for bail, the
Court will have to deal with the same being sensitive to the nature of
allegations made against the accused, however the term of sentence
that is prescribed for the offence which is in addition to the triple test
or the tripod test that would be normally applied. In that regard the
Supreme Court has further held that even if the allegation is one of
grave economic offence, it is not a rule that bail should be denied in
every case and ultimately the consideration will have to be on case-to-
case basis on the facts involved therein and securing the presence of
the accused to stand trial.
26. In the present case, it is seen that First – Informant did not
institute any civil suit for recovery of his money allegedly
misappropriated by Applicants. Considering the facts in the present
case and having regard to the nature of dispute between the parties
herein which is predominantly civil in nature as it underwent the
8
(2020) 13 SCC 791
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statutory process of arbitration, mechanism, challenge being pending
to the Award before the statutory Appellate Authority, process of
criminal law cannot be pressed into service for settling a civil dispute
in this fashion.
27. In the light of the above prima facie observations and
findings, this Court is of the opinion that custodial interrogation of
Applicants is neither warranted nor necessary in the facts of the
present case. Prima facie the dispute between parties is of a civil
nature coupled with absence of essential ingredients of the alleged
Sections. Hence, I am of the opinion that the liberty of Applicants be
protected. Investigation is completed and all disclosures have been
made. In view of the above and looking at the nature of the issue
involved in the present case, apprehension of First – Informant and
prosecution can be well addressed by this Court by laying down
appropriate conditions. In my opinion custodial investigation of
Applicants is not required. Appropriate conditions shall be imposed on
Applicants regarding participation in investigation, disclosure and to
ensure that there is no impediment caused to First – Informant in the
interregnum until the completion of trial.
28. In view of the above, all six Anticipatory Bail Applications
are allowed, subject to the following terms and conditions:-
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(i) In the event of arrest, all six Applicants be enlarged
on bail on executing P.R. Bond in the sum of
Rs.50,000/- each with one or two sureties in the
like amount;
(ii) Applicants shall report to the Investigating Officer
at the concerned Police Station as and when called
for by the Investigating Officer for investigation;
(iii) Applicants shall disclose and produce before the
Investigating Officer all such relevant material with
respect to documents which are finding place in the
Complaint by First – Informant as also appended to
Application as called for by the Investigating
Officer;
(iv) Investigating Officer shall allow First - Informant to
participate in the investigation and seek
information from First – Informant with respect to
any impediment that may be caused due to actions
of Applicants;
(v) All Applicants shall furnish detailed particulars of
their current residential and office address and
mobile number to the Investigating Officer within
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one week from today as also any change in the
same in future;
(vi) All Applicants shall deposit their passports with the
Trial Court within one week of this order;
(vii) Applicants shall not misuse their liberty in any
manner or influence the informant, witnesses or
any person concerned with the case and they shall
not tamper with the evidence or create any
impediment or trouble in respect of investigation;
(viii) It is directed that Applicants shall extend complete
cooperation in the investigation of the instant case
and shall attend the Trial Court unless exempted on
all dates of hearing;
(ix) Any infraction of the above conditions shall entail
revocation of this order.
29. All contentions of the parties are left open to be
adjudicated at the time of trial. The observations made herein are only
for the purpose of adjudication of the present Anticipatory Bail
Applications and shall not influence the trial in any manner.
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30. Anticipatory Bail Application Nos.2677 of 2022, 2754 of
2022, 2857 of 2022, 3537 of 2023, 2723 of 2022 and 2669 of 2022
stand allowed and disposed in the above terms.
Ajay [ MILIND N. JADHAV, J. ]
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