1. Court’s decision
The Delhi High Court has rejected an anticipatory bail plea in a large-scale economic offences investigation concerning a stalled housing project in Noida. The Court held that the allegations involved systematic inducement of homebuyers, diversion of crores of rupees, and misuse of funds even after the applicant’s claimed resignation from the real-estate company. Relying on settled principles that anticipatory bail is an extraordinary remedy to be granted sparingly—particularly in economic offence cases—the Court concluded that custodial interrogation was indispensable. The application was dismissed, and the order clarified that observations were limited to bail adjudication.
2. Facts
The case arises from an FIR registered by the Economic Offences Wing concerning a Noida housing project marketed as “The Aranya.” Homebuyers alleged that they were induced to pay 80–90% of the sale consideration based on representations that Phase-III towers were nearing completion. Between 2013 and 2014, several buyers executed agreements and deposited substantial amounts. However, construction allegedly stalled after the basement and a partial first floor, with no meaningful progress thereafter. Buyers also alleged that funds were siphoned off by the company’s directors and statutory dues owed to Noida Authority remained unpaid, leading to multiple complaints. The FIR later expanded to include twelve additional complainants with identical allegations.
3. Issues
The central question before the Court was whether anticipatory bail could be granted in a case involving allegations of fraud, criminal breach of trust, and conspiracy in a large real-estate investment scheme. Ancillary issues included whether the applicant’s claimed resignation in 2014 absolved him of liability; whether subsequent resolution proceedings under insolvency law extinguished earlier conduct; whether purported settlements with complainants were genuine; and whether custodial interrogation was necessary to investigate fund flow, bank withdrawals, and unexplained transfers. The Court also examined the applicant’s non-compliance with notices and whether his influence and financial capacity created risks of witness tampering.
4. Petitioner’s arguments
The applicant argued that he resigned from the company’s board in February 2014 and therefore bore no responsibility for bookings made thereafter. He contended that all decisions concerning the project post-2019 were taken by the resolution professional, making him irrelevant to subsequent developments. Counsel submitted that under the resolution plan, complainants accepted settlement proposals and had either taken possession of units or disposed of them. The applicant relied on earlier bail orders in related FIRs and cited Supreme Court judgments to contend that bail cannot be denied for declining to make self-incriminatory statements. He insisted that pending Noida dues were obligations of the resolution professional. He argued that custodial interrogation would serve no purpose and sought protection from arrest.
5. Respondent’s arguments
The State opposed bail, emphasising the gravity of allegations and pointing to three similar FIRs pending against the applicant. Investigators asserted that settlements relied upon by the applicant were riddled with inconsistencies and unsupported by registered transfers. The prosecution highlighted that the applicant had collected up to 90% of sale amounts but failed to complete construction, had not deposited mandatory dues, and continued withdrawing funds even after his alleged resignation. It was argued that the applicant remained the authorised signatory and principal decision-maker, and massive fund transfers to related entities required detailed custodial questioning. The State also cited the applicant’s financial influence and his custody in an enforcement case as grounds to fear witness intimidation.
6. Analysis of the law
The Court reiterated that anticipatory bail is an extraordinary statutory remedy, distinct from regular bail, and not meant to shield an accused from legitimate investigation. For economic offences—especially those involving diversion of public or investor funds—courts adopt stricter scrutiny. The Court relied on the principles that custodial interrogation may be essential in cases where financial trails, document authenticity, and fund diversion patterns require examination beyond voluntary questioning. The Court also noted that insolvency resolution proceedings do not erase earlier criminal liability. Nor does partial settlement with complainants prevent prosecution when allegations indicate systemic misconduct affecting numerous investors. The Court placed weight on statutory notices ignored by the applicant, which indicated non-cooperation.
7. Precedent analysis
The Court discussed several key Supreme Court authorities on anticipatory bail. It cited State of Andhra Pradesh v. Bimal Krishna Kundu and Pokar Ram v. State of Rajasthan, which held that considerations for anticipatory bail differ from those applicable to post-arrest bail. The judgment also referred to State v. Anil Sharma, emphasising that custodial interrogation is materially more effective than questioning someone protected by anticipatory bail. Further reliance was placed on Nimmagadda Prasad v. CBI and Y.S. Jagan Mohan Reddy v. CBI, which clarify that economic offences constitute a separate class and bail in such cases requires heightened caution. These precedents collectively guided the Court to conclude that granting pre-arrest bail would jeopardise investigation in a complex financial fraud case.
8. Court’s reasoning
The Court found that although the applicant asserted resignation in 2014, records showed he retained 89% shareholding and remained an authorised signatory. The status report indicated cash withdrawals of ₹7 crore and transfers of ₹2.24 crore into his personal account between 2015–2016, contradicting his claim of non-involvement. It further revealed diversion of ₹46.26 crore to other affiliated companies, undermining the applicant’s narrative. The Court also noted contradictions in the applicant’s explanation regarding settlements—on one hand attributing responsibility to the resolution professional, and on the other claiming personal involvement. The Court held that these inconsistencies required custodial investigation. The applicant had not joined the investigation despite notices, reinforcing the necessity of custodial interrogation.
9. Conclusion
The Court concluded that large-scale economic wrongdoing was alleged, involving diversion of investors’ funds, false representations, and non-completion of a real-estate project. The applicant’s continued financial involvement in the company, despite formal resignation, was a critical factor. Further, the applicant’s failure to assist the investigation and the need to trace fund movements made custodial interrogation essential. Given the seriousness of allegations, the scale of financial loss, and relevant Supreme Court principles on economic offences, the Court held that anticipatory bail was unwarranted. The application was dismissed, with all observations confined to the bail stage.
10. Implications
This ruling reinforces the judiciary’s consistent position that anticipatory bail must be exercised sparingly, particularly in economic offences involving investors, homebuyers, or public funds. The judgment emphasises that resignation from a company does not absolve liability where financial signatures, shareholding, or fund flows indicate continuing control. It also clarifies that insolvency proceedings do not shield individuals from earlier criminal acts. The decision sends a strong signal to the real-estate sector that systemic diversion of buyer funds will be treated as a serious criminal offence requiring robust investigation. It also underscores that non-cooperation with investigative agencies significantly weakens anticipatory bail claims.
CASE LAW REFERENCES
1. State of Andhra Pradesh v. Bimal Krishna Kundu (1997) 8 SCC 104
Holding: Anticipatory bail must be granted sparingly; custodial interrogation may be essential.
Use in this case: Court relied on this to deny protection where allegations involve deep-rooted conspiracy.
2. Pokar Ram v. State of Rajasthan (1985) 2 SCC 597
Holding: Factors in anticipatory bail differ materially from regular bail considerations.
Applied: Cited to highlight the higher threshold for pre-arrest protection.
3. State v. Anil Sharma (1997) 7 SCC 187
Holding: Custodial interrogation is more effective and sometimes indispensable.
Applied: Used to justify the need to interrogate the applicant in custody.
4. Nimmagadda Prasad v. CBI (2013) 7 SCC 466
Holding: Economic offences have severe societal impact; bail requires special caution.
Applied: Reinforced seriousness of real-estate investor fraud.
5. Y.S. Jagan Mohan Reddy v. CBI (2013) 7 SCC 439
Holding: Economic offences are distinct and bail cannot be granted lightly.
Applied: Used to emphasise societal harm and justify denial of anticipatory bail.
FAQs
1. Why did the Delhi High Court deny anticipatory bail in this economic offences case?
Because the allegations involved large-scale diversion of funds, continuing financial control by the applicant, inconsistencies in settlement claims, and the need for custodial interrogation, making anticipatory bail inappropriate.
2. Does resignation from a company protect a director from liability in financial fraud cases?
No. The Court held that where bank records show continuing control, withdrawals, or fund transfers, formal resignation does not extinguish liability.
3. What role does custodial interrogation play in economic offences?
It enables investigators to trace fund flow, examine documents, and confront the accused with financial evidence—tasks often impossible when the accused is protected by anticipatory bail.
