Court’s Decision
The Bombay High Court, through Justice Amit Borkar, dismissed the anticipatory bail plea filed by two businesspersons accused of involvement in the large-scale adulteration and illegal sale of petroleum products under the guise of “process oil.” The applicants were being investigated for offences under the Bharatiya Nyaya Sanhita, 2023, Essential Commodities Act, Petroleum Act, and Inflammable Substances Act.
The Court held that serious economic offences impacting public safety and national revenue cannot be treated as private disputes. Emphasizing the potential dangers of adulterated fuel, the Court observed:
“The circulation of adulterated fuel endangers public safety, undermines the economy, and shakes citizens’ faith in regulatory systems. Such offences must be dealt with sternly.”
The Court refused anticipatory bail, noting that custodial interrogation was essential to unearth the conspiracy, trace the supply chain, and identify the ultimate beneficiaries.
Facts
The applicants were accused of diverting imported petroleum-based “process oil” and adulterating it with diesel for unauthorized sale. An Assistant Police Inspector (API) visited a customs-bonded warehouse in Uran, Raigad on 12 July 2024 and found eight tankers containing the suspected substance.
Subsequent inspection revealed that two tankers contained adulterated diesel fuel, while six others held process oil. The tankers and goods were seized, and Crime No. 346 of 2024 was registered for offences under multiple laws including the Essential Commodities Act and the Petroleum Act.
The investigation uncovered that three companies—Sole Bloom Pvt. Ltd., Siddhidhata Trading Company, and Naksh Trading Company—were involved in a chain of transactions. All three were linked through a common email ID belonging to one of the accused, suggesting coordinated financial control. The prosecution alleged that these entities were fronts used to disguise the illegal diversion of petroleum products.
Issues
- Whether the Assistant Police Inspector (API) had legal authority to register the FIR and conduct the investigation.
- Whether the laboratory report indicating adulteration was valid evidence, given the alleged procedural defects.
- Whether the applicants were entitled to anticipatory bail despite allegations of economic and public safety offences.
Petitioners’ Arguments
Counsel for the applicants contended that the FIR and investigation were illegal as the API and customs officers were not authorized under Petroleum Orders or the Essential Commodities Act. They cited a Government Circular dated 12 November 2021, which limited the powers of such officers to detain or test petroleum products.
The applicants argued that the laboratory report was invalid, as it was not from an NABL-accredited lab and did not conduct all 21 mandatory tests prescribed under IS 1460:2017 for automotive diesel fuel. A subsequent forensic report allegedly confirmed the presence of “petroleum hydrocarbon” but not adulterated fuel.
They further submitted that “Process Oil” is not a notified commodity under the Essential Commodities Act and hence no offence was made out. The accused maintained that the import, storage, and transfer were legitimate business transactions and that the police had exceeded their jurisdiction.
Reliance was placed on Abhay Anup Rathi v. State of Maharashtra (2023), Avtar Singh v. State of Punjab (2023), and Criminal Writ Petition No.1839 of 2013 to argue that procedural lapses in seizure and testing vitiate the criminal case.
Respondent’s Arguments
The State, represented by the APP, opposed the bail plea, highlighting that three separate bank accounts belonging to different entities were linked to the same email ID of one of the accused. This established a common control and indicated a camouflaged chain of sale.
The prosecution contended that the transfer of goods among Sole Bloom, Siddhidhata, and Naksh Trading was merely a paper transaction used to mask the diversion of petroleum products. The so-called independent companies were effectively controlled by the same individuals.
The APP emphasized that laboratory reports showed adulteration, and two tankers were found containing illegally blended diesel. The role of each accused—especially the brothers who headed the firms—was intertwined in a coordinated scheme. Given the magnitude and implications of the offence, custodial interrogation was necessary to uncover the full conspiracy.
Analysis of the Law
The Court examined the applicability of various laws governing petroleum and essential commodities. It held that the Essential Commodities Act and Petroleum Act are designed to protect public interest and prevent hazards caused by adulterated or unsafe products.
Justice Borkar observed that at the anticipatory bail stage, the Court must assess whether there exists prima facie evidence and whether custodial interrogation is essential for a fair investigation. Detailed examination of evidence or legality of seizure cannot be undertaken at this stage.
The Court clarified that issues relating to the authenticity of laboratory tests, authority of the investigating officer, and admissibility of reports are matters for trial. The principle of lifting the corporate veil was deemed applicable, given the evidence that the companies were created as fronts to disguise the actual perpetrators.
Precedent Analysis
- Avtar Singh v. State of Punjab (2023 SCC Online 319) – Reiterated that offences involving manipulation of essential commodities are grave and custodial interrogation may be necessary.
- Abhay Anup Rathi v. State of Maharashtra (2023 Bom CR (Cri) 218) – Discussed procedural compliance under the Essential Commodities Act but was distinguished here, as the allegations involved large-scale diversion and adulteration.
- State of Gujarat v. Mohanlal Jitamalji Porwal (1987) – Relied upon by the Court to stress that economic offences affect society at large and cannot be viewed as ordinary crimes.
The Court held that these precedents collectively underscore the seriousness of economic and public safety offences and justify refusal of anticipatory bail when there is prima facie evidence of organized illegality.
Court’s Reasoning
The Court noted that all three companies claimed to be separate legal entities but were linked through a single email ID, enabling one accused to control financial transactions of all. This was “not a coincidence” but a deliberate design to create a façade of independent business transactions while diverting petroleum products.
Justice Borkar held that such interlinking and concealment pointed to a layered conspiracy aimed at evading regulation and manipulating petroleum imports.
The Court emphasized that adulteration of petroleum products is not a victimless offence — it affects the economy, public safety, and environment, and damages consumer trust. It stated:
“When adulterated fuel is circulated, it harms vehicles, endangers human life, and undermines the faith of citizens in law enforcement. Such acts cannot be trivialized.”
Given the ongoing investigation, the gravity of allegations, and the need to identify the wider network, the Court held that custodial interrogation was indispensable.
Conclusion
The High Court dismissed the anticipatory bail application, holding that:
- There exists prima facie material linking the applicants to the offence.
- The allegations concern serious economic offences involving adulteration and diversion of petroleum.
- Custodial interrogation is necessary to unearth the broader conspiracy.
- Issues regarding procedural irregularities or admissibility of evidence are matters for trial.
Justice Borkar concluded:
“Anticipatory bail is an extraordinary remedy, not a refuge for those engaged in economic offences that endanger public welfare. Courts must balance individual liberty with societal interest.”
Implications
This judgment reinforces that economic crimes affecting public health and safety will be treated as grave offences. It sets a precedent that:
- Courts will deny pre-arrest bail in cases involving adulteration or diversion of essential commodities.
- The corporate veil can be lifted when companies are misused to perpetrate fraud.
- Investigating agencies retain broad authority to pursue such cases in the larger public interest.
The ruling strengthens the principle that economic offences are not private wrongs but crimes against the economy and society, demanding a firm judicial response.