Bombay High Court
Sunil Jain vs Senior Police Inspector And Anr on 8 August, 2025
Author: Milind N. Jadhav
Bench: Milind N. Jadhav
2025:BHC-AS:34081
ABA.2682.22 & 2751.22.doc
Ajay
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CRIMINAL APPELLATE JURISDICTION
ANTICIPATORY BAIL APPLICATION NO. 2682 OF 2022
Sunil Jain .. Applicant
Versus
Senior Police Inspector and Anr. .. Respondents
WITH
ANTICIPATORY BAIL APPLICATION NO. 2751 OF 2022
Jairaj Vinod Bafna .. Applicant
Versus
The State Of Maharashtra .. Respondent
....................
Mr. Sanjog Parab, Senior Advocate i/b Mr. Mohan Rao a/w Ms.
Sulbha Rane, Ms. Sakshi Baadkar, Mr. Sangram Parab, Mr. Pranjal
Pandey, Advocates for Applicant in Anticipatory Bail Application
No.2682 of 2022.
Mr. Niranjan Mundargi a/w. Ms. Keral Mehta, Mr. Rajiv Hingu &
Mr. Deepraj Shetye, Advocates i/b L. H. Hingu & Co. for Applicant
in Anticipatory Bail Application No.2751 of 2022.
Mr. Karansingh Rajput a/w. Mr. Ibrahim Shaikh and Mr. Dhananjay
Kadam, Advocates i/by Mr. Mayur Sanap for Respondent No.3 in
Anticipatory Bail Application No.2682 of 2022 and Respondent
No.2 in Anticipatory Bail Application No.2751 of 2022.
Ms. Sangita E. Phad, APP for Respondent - State.
PSI - Palve, Vile Parle Police Station present.
...................
CORAM : MILIND N. JADHAV, J.
DATE : AUGUST 08, 2025
P. C.:
1. Heard Mr. Parab, learned Senior Advocate for Applicant in
Anticipatory Bail Application No.2682 of 2022; Mr. Mundargi, learned
Advocate for Applicant in Anticipatory Bail Application No.2751 of
1 of 27
::: Uploaded on – 08/08/2025 ::: Downloaded on – 09/08/2025 00:14:00 :::
ABA.2682.22 & 2751.22.doc
2022; Mr. Rajput, learned Advocate for Respondent No.3 in
Anticipatory Bail Application No.2682 of 2022 and Respondent No.2
in Anticipatory Bail Application No.2751 of 2022 and Ms. Phad,
learned APP for Respondent – State.
2. This is a group of two 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.859 of 2022 registered with Vile
Parle Police Station for the offences punishable under Sections 409,
411, 413, 420, 465, 467, 468, 479, 120-B read with Section 34 of the
Indian 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 – Manish Indukumar Shah against two
Accused persons namely Sunil Jain and Jairaj Bafna. Both Anticipatory
Bail Applications are disposed of by this common order.
3. Briefly stated, facts germane to the present Applications
are as follows:-
3.1. Artha Vriddhi Securities Ltd. (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.
2 of 27
::: Uploaded on – 08/08/2025 ::: Downloaded on – 09/08/2025 00:14:00 :::
ABA.2682.22 & 2751.22.doc3.2. 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
trading and embezzlement thereby misappropriating funds from AVSL
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
3 of 27
::: Uploaded on – 08/08/2025 ::: Downloaded on – 09/08/2025 00:14:00 :::
ABA.2682.22 & 2751.22.docAVSL. He submitted that there was no misutilization of clients’ funds
and it is further recorded that the two complaints were settled by
AVSL and 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.
3.8. 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 other
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 i.e. other Directors,
employees and investors of AVSL.
3.10. Thereafter, on 13.09.2022 (third) FIR No.859 of 2022 was
filed by First Informant – Complainant – Manish Indukumar Shah who
4 of 27
::: Uploaded on – 08/08/2025 ::: Downloaded on – 09/08/2025 00:14:00 :::
ABA.2682.22 & 2751.22.docis an Investor in AVSL against two accused persons viz namely Sunil
Jain and Jairaj Bafna.
3.11. It is prosecution case that, in September 2019, First
Informant got acquainted with one Nilesh More – Relationship
Manager who introduced him to Accused Nos.1 and 2 who asked him
to invest in AVSL. First Informant opened a Share Trading Account and
amounts were transferred by First Informant from time to time in
AVSL account for the purpose of trading. First Informant invested a
total amount of Rs.1,55,00,000/- from 30.09.2019 to 18.05.2021.
However it is alleged that both Accused persons made unauthorized
transactions in contravention of SEBI Rules and Regulations, sold his
shares to gain profit without his knowledge or consent and gave
incorrect information about the said transactions by sending incorrect
emails and caused loss to him. Hence the present FIR No.859 of 2022.
3.12. It is alleged that Applicant – Sunil Jain (Accused No.1)
Head of Sales at AVSL was the mastermind of the offence. It is alleged
that internal email exchanges with co-accused clearly reflected that
offence was committed on his instructions. He is alleged to have
committed the offense with the assistance of Applicant – Accused
No.2. It is alleged that both accused persons in collusion executed
multiple trade transactions without consent of First Informant and
caused wrongful losses to him. It is alleged that Accused Nos.1 and 2
5 of 27
::: Uploaded on – 08/08/2025 ::: Downloaded on – 09/08/2025 00:14:00 :::
ABA.2682.22 & 2751.22.doc
transferred profit amounts into the accounts of other Investors namely
Ritesh Jain and Urvi Milan Shah. It is alleged that both accused
persons sent multiple emails consisting false and fabricated details of
trades and stock holding report to First Informant. Being the custodian
of AVSL’s shares and properties, Accused No.1 with the aid of Accused
No.2 have allegedly committed criminal breach of trust by
misappropriating client’s funds and shares.
4. Anticipatory Bail Application No.2682 of 2022:
(i) Mr. Parab, learned Senior Advocate appearing for
Applicant – Accused No.1 would submit that Applicant
has been falsely implicated and made a scapegoat in the
present FIR, selectively states names of Accused Nos.1 and
2 despite the fact that funds were transferred to AVSL’s
corporate accounts and not to the personal accounts of
the accused. He would submit that Accused No.1 was
solely heading the sales team and had no role in finance
or banking operations. He would submit that day-to-day
affairs of AVSL including financial decisions were handled
by Dhirendra Shukla and his family members who were
authorised signatories. He would submit that First
Informant had earlier filed a complaint before the NSE,
GRC only against AVSL and not against Applicant for
6 of 27
::: Uploaded on – 08/08/2025 ::: Downloaded on – 09/08/2025 00:14:00 :::
ABA.2682.22 & 2751.22.docalleged unauthorised trading. He would submit that FIR is
belated and appears to be a counterblast to the arbitration
notice issued by AVSL. He would submit that GRC, by its
order dated 28.10.2021 in its findings recorded that First
Informant failed to substantiate his claims and that his
own negligence contributed to the alleged loss.
(ii) He would submit that allegation of misappropriation of
funds through other investors’ accounts is baseless as
those investors had been independently trading through
their own accounts even prior to First Informant. He
would submit that Applicant has not been issued any
notice or faced action from NSE, BSE, or SEBI till date
and all transactions were routed through recognised
exchanges with due credit to clients’ accounts and no
illegality is attributed to Applicant. He would submit that
there is no financial trail linking Applicant to any alleged
offence. He would submit that three FIRs on the same
cause of action have led to parallel investigations in FIR
No.755 of 2022, investigation is completed and relevant
documents and bank statements have been provided. He
would submit that custodial interrogation is not necessary
7 of 27
::: Uploaded on – 08/08/2025 ::: Downloaded on – 09/08/2025 00:14:00 :::
ABA.2682.22 & 2751.22.doc
and the Anticipatory Bail Application deserves to be
allowed.
(iii) In support of his submissions, Mr. Parab, learned Senior
Advocate appearing for Applicant – Accused No.1 has
referred to and relied upon the decision of this Court in
the case of Prashant Vasant Chavan Vs. The State of
Maharashtra. 1
5. Anticipatory Bail Application No. 2751 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
1
Criminal Anticipatory Bail Application No.31 of 2025, decided on 08.01.2025.
8 of 27
::: Uploaded on – 08/08/2025 ::: Downloaded on – 09/08/2025 00:14:00 :::
ABA.2682.22 & 2751.22.doc
of account opening forms on 02.11.2019 thereby refuting
the allegation of his forged signatures. He would submit
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 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 the Anticipatory Bail
Application of the Applicant deserves to be allowed.
2
2025 SCC OnLine SC 116.
9 of 27
::: Uploaded on – 08/08/2025 ::: Downloaded on – 09/08/2025 00:14:00 :::
ABA.2682.22 & 2751.22.doc
6. PER CONTRA, Ms. Phad, learned APP for Respondent –
State has vehemently opposed both the Applications. She would
submit that both Applicants are actively involved in the commission of
offences which involved unauthorised trading, misappropriation of
funds and fabrication of documents. She would submit that Accused
No.1 though designated as Head of Sales is the masterminded as on
his instructions and in collusion with Accused No.2 – Jairaj Bafna,
despite claiming to be a mere consultant actively coordinated trading
activity and communicated with clients and misled them by sending
false and fabricated stock trading report. She would submit that the
claim of Applicant that the funds were routed through AVSL’s official
accounts does not absolve Applicants of their individual roles in the
illegal scheme. She would submit that serious allegations of wrongful
gains transferred to related parties including co-accused’s relatives,
require custodial interrogation to unearth the financial trail and digital
evidence. Hence, she would submit that considering the nature and
seriousness of the offence, quantum of loss involved and for thorough
investigation she would urge the Court to reject the Applications
6.1. In support of her submissions, Ms. Phad learned APP for
Respondent – State has referred to and relied upon the decision of the
10 of 27
::: Uploaded on – 08/08/2025 ::: Downloaded on – 09/08/2025 00:14:00 :::
ABA.2682.22 & 2751.22.doc
Supreme Court in the case of Satender Kumar Antil Vs. Central Bureau
of Investigation and Anr. 3.
7. Mr. Rajput, learned Advocate appearing for Respondent
No.3 in Anticipatory Bail Application No.2682 of 2022 and
Respondent No.2 in Anticipatory Bail Application No.2751 of 2022.
would adopt the submissions made by Ms. Phad. He would submit
that the present case involves a systematic and premeditated financial
fraud committed by Accused No.1 wherein investors were lured into
opening Demat accounts with promise of consent-based trading. He
would submit that Accused No.1 forged documents, manipulated
trades without consent, and issued over 300 fake emails
misrepresenting shareholding positions.
7.1. He would submit that role of Accused No.1 has been
independently corroborated by orders of statutory bodies such as the
GRC of NSE and the MCSGFC’s order dated 26.11.2024 appended at
page No.62 of the compilation which record serious violations
including misuse of client funds, non-maintenance of ledgers, running
a guaranteed returns scheme, circular trading and uploading fake
contact details on the exchange.
7.2. He would submit that Accused No.1 diverted investor
funds for personal use and acquisition of immovable properties which
3
AIR Online 2021 SC 1017.
11 of 27
::: Uploaded on – 08/08/2025 ::: Downloaded on – 09/08/2025 00:14:00 :::
ABA.2682.22 & 2751.22.doc
is evident from detailed bank statements on record appended at page
Nos.24 to 84 of compilation, which demonstrate substantial money
transfers from investor accounts to those of family members and
entities such as Zeus Shelters showing clear financial gain from the
fraudulent trades.
7.3. He would submit that fraudulent scheme was carried out
in collusion with close associates of Accused No.1. He would submit
that data analysis conducted by the NSE revealed 831 pairs of trades
between related clients, including other investors like Ritesh Jain and
Amit Lalwani who shared personal ties and residential proximity with
Accused No.1. This establishes the deliberate and repetitive nature of
the fraud.
7.4. He would submit that accused persons are habitual
offenders. He would submit that apart from the present FIR, there are
two more FIRs pending against them for similar offences. He would
submit that there are a total of 22 complaints been lodged against
them on the NSE portal pointing out a widespread and recurring
pattern of market abuse and public deception.
7.5. He would submit that there is clear evidence of
suppression and tampering by both the accused persons. He would
submit that audio recordings and whatsApp chats show Accused No.1
12 of 27
::: Uploaded on – 08/08/2025 ::: Downloaded on – 09/08/2025 00:14:00 :::
ABA.2682.22 & 2751.22.doc
admitting his guilt and making false assurances to repay investors. He
would submit that internal emails obtained from the Grant Thornton
Report reveal instructions like “stop sending SMS,” exposing their
intention to conceal actual trades and mislead investors.
7.6. He would submit that the fraudulent conduct goes far
beyond a civil dispute or isolated grievance. It is a serious economic
offence that erodes investors’ confidence and disturbs the capital
market thereby impacting broader economic stability and public
interest.
7.7. He would submit that Accused No.1 have made
misleading representations to the Court. He would submit that
Accused No.1 in his Anticipatory Bail Application No.2682 of 2022
claimed to be a 0.1% shareholder Director drawing a salary of 25
lakhs, however his bank accounts reflect multi-crore transactions
involving closely linked parties, thereby undermining the claims of his
non-involvement and minimal role.
7.8. He would submit that even other Directors of AVSL have
initiated criminal proceedings against Accused Nos.1 and 2 by filing a
separate FIR. He would submit that their legal notice states the
defrauded amount over Rs.9.35 crores thereby confirming internal
acknowledgment of the fraud.
13 of 27
::: Uploaded on – 08/08/2025 ::: Downloaded on – 09/08/2025 00:14:00 :::
ABA.2682.22 & 2751.22.doc
7.9. He would submit that the findings of the NSE, GRC which
upheld the investor complaints totalling of Rs.2.17 crores attained
finality as the accused withdrew their challenge to the said orders. He
would submit that AVSL’s decision to forego arbitration further
confirms their liability and the validity of the claims.
7.10. He would submit that the inspection report relied upon by
the NSE clearly demonstrates that AVSL misused clients’ funds to the
tune of Rs.1.49 crores as of 17.12.2021 by diverting credit balance
clients’ monies to cover the settlement obligations of debit balance
clients or for its own internal purposes, in violation of principle 1 of
Enhanced Supervision of Stockbrokers.
7.11. He would submit that such misuse of client funds reflects
a systemic and deliberate breach of regulatory obligations, pointing
towards willful diversion and misappropriation which squarely falls
within the ambit of Section 409 IPC. He would submit that quantum
involved is not nominal but substantial and the same reflects a pattern
of dishonest conduct.
7.12. He would further draw my attention to the Exchange’s
findings regarding the artificial inflation of net worth. He would
submit that despite filing certificates reflecting net worth in excess of
Rs.1 crore, AVSL failed to deduct non-allowable assets such as
14 of 27
::: Uploaded on – 08/08/2025 ::: Downloaded on – 09/08/2025 00:14:00 :::
ABA.2682.22 & 2751.22.doc
doubtful debts and advances which resulted in the actual net worth
standing at a negative Rs.1.67 crores and Rs.1.48 crores for the period
of March 2021 to September 2021. He would submit that this
concealment establishes suppression of material facts and
misrepresentation of finances thereby indicative of dishonest intent.
7.13. He would submit that NSE also found that AVSL failed to
maintain any evidence of client instructions or orders in all 8 instances
of 3 clients selected for sample scrutiny. He would submit that absence
of basic client-authorisation records reveals a complete breakdown of
compliance and accountability mechanisms thereby reinforcing the
allegations of unauthorised trades which further substantiate that
trades were executed without consent.
7.14. He would therefore submit that these statutory and
regulatory violations recorded by the NSE after due process are
admissible and relevant material that go to the root of the matter. He
would submit that Applicants cannot wash their hands off such
misconduct while having played key roles in sales and client relations.
7.15. He would submit that in the light of the above facts,
custodial interrogation of Accused No.1 is essential in the present case.
Hence he would urge the Court to dismiss the Anticipatory Bail
Application filed by Applicant – Accused No.1.
15 of 27
::: Uploaded on – 08/08/2025 ::: Downloaded on – 09/08/2025 00:14:00 :::
ABA.2682.22 & 2751.22.doc
7.16. In support of his submissions, Mr. Rajput has referred to
and relied upon the following decisions of the Supreme Court and
various High Courts:-
(ii) Chirag M. Pathak and Ors. Vs. Dollyben Kantilal Patel and
Ors.5;
(iii) Ashok Kumar Vs. State of Union Territory Chandigarh6;
(iv) Pratibha Manchanda and Anr. Vs. State of Haryana and
Anr.7;
(v) Sushila Aggarwal and Ors. Vs. State (NCT of Delhi) and
Anr.8;
(viii)Virupakshappa Gouda and Anr. Vs. State of Karnataka and
Anr.11;
(ix) Bharat Chaudhary and Anr. Vs. State of Bihar and Anr.12;
(x) Krishna Lal Chawla and Ors. Vs. State of Uttar Pradesh
and Anr.13;
(xi) Shri Gurbaksh Singh Sibbia and Ors. Vs. State of Punjab14;
4
Cri. Appln. No.2816 of 2004 Decided on 15.07.2004.
5
(2018) 1 SCC 330
6
2024 SCC OnLine SC 274
7
Cri. Appeal No.1793 of 2023 – Decided on 07.07.2023.
8
(2020) 5 SCC 1
9
(2001) 6 SCC 181
10
(2013) 6 SCC 384
11
(2017) 5 SCC 406
12
(2003) 8 SCC 77
13
(2021) 5 SCC 435
14
(1980) 2 SCC 565
16 of 27
::: Uploaded on – 08/08/2025 ::: Downloaded on – 09/08/2025 00:14:00 :::
ABA.2682.22 & 2751.22.doc
(xii) Ravindra Saxena Vs. State of Rajasthan15;
(xiii) Sumitha Pradeep Vs. Arun Kumar C.K. and Anr.16.
8. I have heard learned Advocates appearing of the parties
and learned APP for the State and with their able assistance perused
the record of the case.
9. On perusal of the material placed on record, it is evident
that both Applicants – Accused persons were admittedly not authorised
signatories or fund handlers of AVSL. Accused No.1 headed the sales
division and Accused No.2 functioned in a limited marketing
consultancy capacity. Hence there is nothing to indicate that First –
Informant entrusted funds to Accused Nos.1 and 2 in their personal
capacity or that they had dominion or control over such funds. The
funds in question were deposited in the official account of AVSL, a
SEBI registered intermediary and there is no material to demonstrate
that any such funds were misappropriated or received by Accused
persons individually. Therefore the offence under Section 409 IPC
therefore prima facie cannot be made out against the Applicants.
10. With regard to cheating under Section 420 of IPC, there is
no material to suggest that there was fraudulent or dishonest
inducement at the inception of client-broker relationship. The
15
(2010) 1 SCC 684
16
(2022) 17 SCC 391
17 of 27
::: Uploaded on – 08/08/2025 ::: Downloaded on – 09/08/2025 00:14:00 :::
ABA.2682.22 & 2751.22.doc
onboarding and KYC procedures were duly followed and First –
Informant had availed services of AVSL in a formal capacity. Even if
trades were carried out in excess of limits or without authority it
cannot be said that the initial transaction was vitiated by deception.
Subsequent mishandling or over-trading, if any, would at best give rise
to civil or regulatory consequences and not a criminal prosecution
under Section 420 of IPC, Hence in absence of material showing
inducement with intent to deceive at the stage of inception dilutes the
prosecution case.
11. With respect to the allegations under Sections 467, 468
and 471 of IPC, the investigation has not discovered any forged or
fabricated document allegedly created or used by either of the Accused
Nos.1 and 2. It is seen that the allegations of falsified reports and
manipulated holdings remain broad and unspecific as no document
has been shown to bear the authorship or electronic trail linking it
directly to the Applicants – Accused. In absence of such prima facie
material the applicability of the offences relating to forgery remains
doubtful. It is seen that the investigation is documentary in nature
and no recovery or custodial interrogation has been shown to be
necessary.
12. It is further relevant to note that Applicants are first-time
offenders with no prior criminal antecedents. The investigation has
18 of 27
::: Uploaded on – 08/08/2025 ::: Downloaded on – 09/08/2025 00:14:00 :::
ABA.2682.22 & 2751.22.doc
continued over a considerable period, charge-sheet has been filed and
material documents are already in custody of the Investigating Officer.
Hence, no recovery as such is pending at the instance of Applicants.
13. While relying on the decision of the Supreme Court in the
case of Ramesh Kumar Vs. State (NCT of Delhi) 17 considering Bail
Applications, the said Court 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.
14. 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. 18
wherein in paragraph Nos.24 to 30 the Court has laid down the
17
(2023) 7 Supreme Court Cases 461.
18
Criminal Appeal No. 3114 of 2024 decided on 23.08.2024
19 of 27
::: Uploaded on – 08/08/2025 ::: Downloaded on – 09/08/2025 00:14:00 :::
ABA.2682.22 & 2751.22.doc
distinction between offence of cheating and criminal breach of trust.
Paragraph Nos. 24 to 30 read thus:-
“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; or20 of 27
::: Uploaded on – 08/08/2025 ::: Downloaded on – 09/08/2025 00:14:00 :::
ABA.2682.22 & 2751.22.docii. 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: –
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 the21 of 27
::: Uploaded on – 08/08/2025 ::: Downloaded on – 09/08/2025 00:14:00 :::
ABA.2682.22 & 2751.22.docappellant 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
fact that the respondents subsequently did not abide by
their commitment that they would show the appellant to
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.
22 of 27
::: Uploaded on – 08/08/2025 ::: Downloaded on – 09/08/2025 00:14:00 :::
ABA.2682.22 & 2751.22.doc
15. The Supreme Court, while dealing with offence, involving
conspiracy to commit economic offences of huge magnitude, in the
case of Y.S. Jagan Mohan Reddy Vs. C.B.I. 19 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.”
16. Attention is drawn to the decision of the Supreme Court
in the case of Sanjay Chandra Vs. Central Bureau of Investigation 20
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
19
(2013) 7 SCC 439
20
(2012) 1 SCC 40
23 of 27
::: Uploaded on – 08/08/2025 ::: Downloaded on – 09/08/2025 00:14:00 :::
ABA.2682.22 & 2751.22.doc
punishment unless it is absolutely necessary in the interest of justice
and that object of bail is merely to secure appearance of accused at the
trial.
17. Next, in the context of the present case the decision of the
Supreme Court in the case of P. Chidambaram Vs. Directorate of
Enforcement 21 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.
18. In the present case, it is seen that the 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
21
(2020) 13 SCC 791
24 of 27
::: Uploaded on – 08/08/2025 ::: Downloaded on – 09/08/2025 00:14:00 :::
ABA.2682.22 & 2751.22.doc
herein which is predominantly civil in nature, process of criminal law
cannot be pressed into service for settling a civil dispute in this
fashion.
19. 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.
20. In view of the above, both Anticipatory Bail Applications
are allowed, subject to the following terms and conditions:-
25 of 27
::: Uploaded on – 08/08/2025 ::: Downloaded on – 09/08/2025 00:14:00 :::
ABA.2682.22 & 2751.22.doc
(i) In the event of arrest, both 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) Both Applicants shall furnish detailed particulars of
their current residential and office address and
mobile number to the Investigating Officer within
26 of 27
::: Uploaded on – 08/08/2025 ::: Downloaded on – 09/08/2025 00:14:00 :::
ABA.2682.22 & 2751.22.doc
one week from today as also any change in the
same in future;
(vi) Both 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.
21. 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.
22. Anticipatory Bail Application Nos.2682 of 2022 and 2751
of 2022 stand allowed and disposed in the above terms.
Ajay [ MILIND N. JADHAV, J. ]
27 of 27
::: Uploaded on - 08/08/2025 ::: Downloaded on - 09/08/2025 00:14:00 :::