Chandravadan Desai & Ors Vs. State of Gujarat  Insc 643 (16 November 2005)
S. B. Sinha & R. V. Raveendran [Arising out of SLP (Crl.) No.1818 of 2004] RAVEENDRAN J., Leave granted.
The appellants have challenged the order dated 15.12.2003 passed by the High
Court of Gujarat at Ahmedabad, rejecting their application for bail filed under
Section 439 of the Code of Criminal Procedure.
2. First appellant was one of the Directors of M/s Charotar Nagarik Sahakari
Bank Limited [for short 'the Bank']. He became a shareholder of the bank on
18.10.99 and was appointed as a Director on the same day. It is alleged that
one Chiman Sathi, Managing Director of the said bank, first appellant and other
Directors of the bank siphoned off the funds of the bank by bogus loans and
fictitious letters of credit in the name of their friends, relatives,
associates and name-lender companies either without any security or with wholly
3. The wives of appellant Nos. 1 and 2 along with appellant No.3 are the
Directors of M/s Bhavika Creations which is one of the beneficiaries of the
illegal and collusive loans/credit facilities given by the Bank. It is alleged
that appellant nos. 2 & 3 actively assisted and supported appellant no. 1
in several fraudulent transactions in the name of Bhavika Creations, Jayraj
Multimedia, Hindustan Earthmovers Pvt. Ltd., Rahul Industries, Innovative
Hydraulics (P) Ltd., Satya Sulpher (P) Ltd., Raheja Textile Industries, Bhanu
Sulpher Industries Ltd., Trigon Jinco Co. etc.
The State alleges that the following fraudulent transactions involving
appellant nos. 1, 2 & 3 and Chiman Sathi, which aggregate to more than
Rs.50 crores, took place in the year 2000- 01 :- S.
Transaction Amount Name of Beneficiary 1.
4 letter of credit 10.95 crores Appellants Nos. 1 to 3 and Chiman Sathi 2.
Term loan to Jayraj Multimedia, Vadodara (12.6.2000) 6.47 crores Appellant
No. 1 3.
Term loan to Hindustan Earthmovers Pvt. Ltd.
(27.6.2000) 3 crores Appellant No. 1 4.
Letter of credit in the name of Trigon Jinco Co. in Baroda Peoples
Cooperative Bank Limited.
(6.11.2000) 4.956 crores Appellants Nos. 1 to 3 5.
Discounted letter of credit in the name of Rahul Industries.
(8.11.2000) 4.67 crores Appellants Nos. 1 to 3 6.
Loan given to Bhavika Creations (9.11.2000) 0.50 crores Appellant No. 1 and
Discounted Letter of Credit of Innovative Hydraulics Pvt. Ltd., Waghodia
(14.11.2000) 4.98 crores Appellants Nos. 1 to 3 8.
Discounted Letter of Credit (12.12.2000) 2.67 crores Appellants Nos. 1 to 3
Letter of credit in discounted by Himanshu Desai and his associates in the
name of bogus company, Satya Sulpher Pvt. Ltd., (27.12.2000) 3.128 crores
Appellants Nos. 1 to 3 10.
Bogus letter of credit discounted by Himanshu Desai in the name of bogus
company, Raheja Textile Industry (27.12.2000) 2.486 crores Appellants Nos. 1 to
In the name of Bhanu Sulpher Industries Pvt. Ltd.
(27.12.2000) 2.486 crores Appellants Nos. 1 to 3 12.
Bogus Letter of Credit in NRI account of Shri Subhash Mehta 7 crores
Appellants Nos. 1 to 3 and Chiman Sathi 13.
Vehicle loan to Himanshu Desai
1.4 lakhs Appellant No. 1 14.
Vehicle loan to Bhavika Creations.
4 lakhs Appellants Nos. 1 to 3 It is also alleged that Chiman Sathi
(Managing Director) and other Directors were involved in other fraudulent
transactions relating to the Bank, which are not relevant for the purpose of
4. In regard to the said bank scam, the bank lodged a complaint with the
Police Station, Anand Town vide Criminal No.6 of 2002 for offences punishable
under sections 409, 468 and 114 of Indian Penal Code. It is stated that the
Appellants voluntarily surrendered on 24.10.2002 and are in custody even since
On completion of investigation, a charge-sheet was filed on 22.1.2003 under
sections 409, 465,466, 467, 468,470, 471, 406, 420 and 120-B of IPC against the
Directors of the Bank.
5. It is alleged that Appellants filed Criminal Misc. Appeal Nos.
747/2000, 6/2003 and 479/2003 seeking regular bail which were rejected by
the Sessions Judge, Anand on 5.4.2003, 16.5.2003 and 21.11.2003 respectively.
The Appellants filed Criminal Misc.
Appeal Nos. 6523/2003 and 6520/2003 before the High Court of Gujarat which
were withdrawn. After rejection of Criminal Misc.
Appeal No. 479/2003 by the Sessions Judge, the appellants moved a regular
bail application (Criminal Misc. Application No.
10003 of 2003) in the High Court of Gujarat. The High Court after referring
to the clandestine and fraudulent nature of the transactions rejected the
application. The said order is challenged in this appeal, urging the following
contentions :- a) The Chairman, Vice-Chairman and other Directors of the Bank
who were also allegedly involved in the said offence have been released on
regular bail. [Reliance is placed on order of this Court dated 14.7.2003 in
Criminal Appeal No. 802 of 2003 granting bail to one Rajendra Kumar Dhanraj
Banthia, a share broker who according to appellants was the real beneficiary
and took the siphoned money from the bank] b) Even though the charge-sheet has
been filed as long back as on 22.1.2003, charges have not been framed.
The investigation is completed. The prosecution has cited as many as 150
witness. The trial is likely to be protracted and therefore, appellants should
be released on bail. It is contended that failure to do so would amount to
detention by way of punishment.
c) Even if a prima facie case is established, where presence of the accused
would readily be available for trial and there was no likelihood of the accused
tampering with the evidence in view of completion of the investigation, the
accused should not be detained, particularly when the accused has been long
incarcerated and the trial is likely to consume long time vide Bhagirath Singh
vs. State of Gujarat [1984 (1) SCC 284].
6. The cases of appellants cannot be compared with the others who have been
released on bail. The cases of Appellants are more serious than the case of
other Directors (except the case of Chiman Sathi). Further, the State has
pointed out that one or two Directors of the Bank were released on the ground
of old age and medical problems; and other Directors were released on bail
after they repaid their entire dues. It is also submitted that in regard to
three sons of Chiman Sathi (the then Managing Director of the Bank), the High
Court cancelled the bail for not honouring the undertaking and repaying the
dues. The case of Rajendra Banthia (share-broker) is different and he
apparently was not directly involved in defrauding the Bank.
7. A Constitution Bench of this Court in Bihar Legal Support Society v.
Chief Justice of India & Anr. [1986 (4) SCC 767] has held that this Court
should not ordinarily, save in exceptional cases, interfere with orders
granting or refusing bail by the High Court because the High Court should
normally be the final arbiter in such matters. The crime in which the
petitioners are involved is very serious involving a conspiracy to cheat and
defraud public institutions in a systematic manner and the punishment is likely
to be severe in the event of conviction. The High Court has recorded a finding
that the material shows that the petitioners are prima facie involved in the
offence. Large portion of the amount advanced to Bhavika Creations (about Rs.
7.5 crores) has allegedly been diverted by appellant No.1 for acquiring shares
in Nedungadi Bank Ltd. As a result of the scam, the Bank is under liquidation
from 31.7.2003. On account of the fraudulent activities of the then Managing
Director and Appellant No.1 (the then Director) and Appellants Nos. 2 and 3,
nearly Rs.23 crores is due from Bhavika Creations alone. Having regard to huge
amounts involved in the systematic fraud, there is a danger of the appellants
absconding, if released on bail, or attempting to tamper with the evidence by
pressurizing witnesses. In the circumstances, we do not find any reason to
interfere with the order refusing bail as grant of the relief sought may result
in thwarting the course of justice. The appeal is, therefore, dismissed.