Court’s Decision
The Bombay High Court rejected the bail application filed under Section 439 of the Code of Criminal Procedure by a businessman accused of duping over 127 investors through fraudulent investment schemes. The Court held that:
“Economic offences involving deep-rooted conspiracies and massive diversion of public money stand on a different footing, since they seriously affect the economy of the nation and corrode the trust of the common man in financial systems.”
Given the gravity of allegations, antecedents of the accused in similar offences, and the magnitude of fraud, the Court refused to enlarge him on bail.
Facts
The case arose out of a large-scale financial fraud linked to Mars Finance (also referred to as Mars Finnmart). The complainant, a BMC employee, was introduced by a friend to the scheme, which promised 5% monthly returns.
When the complainant visited the office in November 2020, he was persuaded by the accused and his associates to invest by either direct payment or by availing loans arranged in his name. Subsequently, five different banks sanctioned loans amounting to ₹38.19 lakhs in the complainant’s name, out of which ₹34.3 lakhs were transferred to the accused’s account.
In return, the complainant received an agreement and a cheque promising fixed monthly returns of ₹1.7 lakhs for five years. Only ₹50,000 was ever paid. The office later shut down, and the accused absconded.
Further investigation revealed similar cheating of at least 127 investors, involving siphoning of more than ₹7.29 crores. Another earlier FIR (2021) disclosed cheating of 25 investors to the tune of ₹82.70 lakhs.
Issues
- Whether the Designated Court under the MPID Act has jurisdiction to try IPC offences alongside MPID offences.
- Whether the amounts invested qualify as “deposits” under Section 3 of the MPID Act.
- Whether antecedents and gravity of allegations justify denial of bail under Section 439 CrPC.
- Whether partial repayments or earlier bail orders in similar FIRs entitle the accused to parity.
Petitioner’s Arguments
The accused argued that the MPID Designated Court lacked jurisdiction to try IPC offences like Sections 406, 409, and 420 IPC since, unlike the Prevention of Corruption Act, the MPID Act does not expressly confer such powers. He claimed this deprived him of an appellate forum, violating Articles 14 and 21.
He also contended that Mars Finnmart was a company, not a natural person, hence Section 120-B IPC (criminal conspiracy) could not apply. He emphasized that part repayments had been made, some investors’ statements were missing, and some complaints were not part of the charge-sheet.
Further, he relied on Arnesh Kumar v. State of Bihar (2014) to argue that procedural safeguards against unnecessary arrests were ignored, and on Satender Kumar Antil v. CBI (2022) to highlight low conviction rates and caution against pre-trial incarceration. He also invoked parity, citing an earlier bail order in a similar FIR of 2021.
Respondent’s Arguments
The prosecution argued that the MPID Court, being a Sessions Court, retains full jurisdiction to try IPC offences in addition to MPID offences. Section 6 of the MPID Act enlarges jurisdiction; it does not restrict it.
On merits, it was contended that the accused siphoned investors’ funds into his personal account, showing fraudulent intent from inception. The promise of 5–10% monthly returns was unrealistic. Evidence showed cheating of at least 127 investors involving ₹7.29 crores.
The prosecution emphasized antecedents: another FIR of 2021 involving cheating of 25 investors worth ₹82.70 lakhs. It argued that the accused was a repeat offender, likely to continue similar offences if released.
Analysis of the Law
The Court clarified that designation of a Sessions Court under the MPID Act does not curtail its original powers under the CrPC; instead, it enlarges jurisdiction. Thus, IPC offences interwoven with MPID offences can be tried together to avoid multiplicity of proceedings.
On “deposit,” the Court held that any money received under a scheme promising returns constitutes a deposit under Section 3 of the MPID Act, unless specifically exempt. Investors’ funds here clearly fell within that definition.
On Section 409 IPC, the Court found that investors had entrusted money in a fiduciary capacity, treating the accused as an agent. Misappropriation of these funds into his personal account established a prima facie case of criminal breach of trust.
Precedent Analysis
- Arnesh Kumar v. State of Bihar (2014) AIR SC 2756 – Cited by petitioner. Distinguished: safeguards apply to minor offences, not grave economic offences.
- Satender Kumar Antil v. CBI (2022) 10 SCC 51 – Cited by petitioner. Distinguished: while low conviction rates matter, gravity of serious economic offences outweighs liberty concerns.
- Nimmagadda Prasad v. CBI (2013) 7 SCC 466 and Y.S. Jagan Mohan Reddy v. CBI (2013) 7 SCC 439 – Relied upon by Court. Held that economic offences involving deep-rooted conspiracies seriously affect the economy and justify strict bail considerations.
Court’s Reasoning
The Court held that accepting the petitioner’s jurisdictional argument would result in multiplicity of trials, duplication of evidence, and conflicting judgments, which was never the Legislature’s intent. The MPID Act creates an additional jurisdiction, not a restricted one.
On merits, the Court found prima facie evidence of a systematic scheme to cheat investors through false promises of high returns, siphoning funds into personal accounts, and closing offices to abscond. The magnitude of fraud (₹7.29 crores, 127 investors) and antecedents showed a continuing pattern.
Partial repayments and earlier bail orders did not absolve liability. Parity was rejected, as the present case was graver in scale and scope.
The Court concluded that releasing the accused on bail would undermine public confidence in justice and risk repetition of frauds.
Conclusion
The Bombay High Court dismissed the bail application, holding that the allegations disclosed a deep-rooted conspiracy involving systematic cheating of investors and large-scale misappropriation of funds. It emphasized that liberty under Article 21 must be balanced with the interests of society and protection of investors in economic offences of such gravity.
Implications
This ruling strengthens the deterrence framework against financial frauds under the MPID Act. It clarifies that MPID Courts, being Sessions Courts, can try IPC offences alongside MPID offences, ensuring efficiency and avoiding duplication. It underscores that economic offences with wide social impact warrant stricter bail considerations, especially for repeat offenders, to protect investor confidence.
FAQs
1. Can MPID Designated Courts try IPC offences along with MPID offences?
Yes. The Court clarified that MPID Courts remain Sessions Courts with full powers to try IPC offences linked to financial frauds.
2. Why was bail denied despite partial repayments by the accused?
Because repayments do not erase the fraudulent inducement and misappropriation at inception. The scale of fraud and antecedents weighed heavily.
3. What principle guides bail decisions in economic offences?
Courts emphasize that while bail is the rule, economic offences involving deep-rooted conspiracies and massive diversion of public money justify stricter standards to protect society.
