Court’s Decision
The Delhi High Court granted anticipatory bail to the petitioners accused of cheating, forgery, and conspiracy in relation to partnership funds of M/s Sanrachna Infra Projects. The Court observed that although allegations of forgery and siphoning of money were made, the dispute primarily stemmed from partnership account issues—a civil dispute already subject to arbitration. The Court held that custodial interrogation was unwarranted, emphasizing that the documentary nature of evidence and the petitioners’ cooperation during investigation weighed in favour of bail. The applications were allowed subject to strict conditions of cooperation, non-tampering with evidence, and non-flight risk.
Facts
The FIR was registered on 03.07.2024 against the petitioners, who were partners in M/s Sanrachna Infra Projects. The complainant alleged that the petitioners, as authorized signatories of the firm’s bank accounts, fabricated deeds, issued forged cheques, and siphoned off funds. The partnership firm was initially formed in 2017; subsequently reconstitutions and changes inducted petitioner Ayush Bhedda (son of petitioner Pinki) as a 10% partner in 2019.
The complainant accused the petitioners of mismanaging funds and forging documents. The petitioners, however, claimed that the complainant himself embezzled over ₹7 crores, formed a parallel firm (M/s Sanrachna Construction Company), and diverted money. Arbitration was invoked in 2022, and an arbitrator was appointed by the Court. The present FIR was filed only after disputes escalated. Interim protection was earlier granted but bail was rejected by the Sessions Court, leading to this petition.
Issues
- Whether the allegations of cheating, forgery, and conspiracy constitute a criminal offence or are rooted in civil partnership disputes.
- Whether custodial interrogation of the petitioners was necessary despite their cooperation in investigation and existence of documentary evidence.
- Whether anticipatory bail should be granted considering the seriousness of the offences invoked (Sections 420, 467, 468, 471, 120B IPC) vis-à-vis the constitutional right to liberty.
Petitioner’s Arguments
The petitioners contended that the FIR was motivated by internal partnership disputes over accounts and was an attempt to criminalize a civil matter already under arbitration. They emphasized that Pinki had contributed substantial capital, while Ayush had only a minor 10% share with no managerial role. They alleged that the complainant siphoned funds into a parallel firm and fraudulently withdrew over ₹1.6 crores.
They argued that no recovery was pending, all documents were already on record, and they had cooperated with investigation while enjoying interim protection without misuse. Custodial interrogation was unnecessary as the evidence was documentary in nature. They relied on Amit Kathuria v. State (NCT of Delhi) and Manminder Singh v. Govt. of NCT of Delhi (Delhi High Court, 2024) to stress that civil disputes should not be criminalized. They further cited Dilip Singh v. State of Madhya Pradesh (2021) 2 SCC 779 and Jay Shri v. State of Rajasthan (2024 INSC 48) to argue that criminal courts cannot act as recovery agents for dues and must avoid converting civil disputes into criminal cases. Article 20(3) of the Constitution was also invoked to argue against custodial interrogation as a means of coercion.
Respondent’s Arguments
The State and complainant opposed bail, asserting that the allegations were serious and not mere civil issues. They claimed the petitioners siphoned about ₹3 crores through forged withdrawals, manipulated records, and cracked accounting systems. It was argued that Ayush and Pinki were signatories to accounts and actively participated in the conspiracy.
They stressed that arbitration proceedings do not shield from criminal liability where forgery and cheating are evident. Custodial interrogation was necessary to trace siphoned funds, recover documents, laptops, and other assets. They also highlighted non-cooperation, missing tax filings, and suppression of material documents. Given the gravity of the offences under Sections 467 and 468 IPC (serious forgery), anticipatory bail was argued to be inappropriate.
Analysis of the Law
The Court recognized that although allegations of cheating and forgery were present, the dispute was deeply embedded in the financial dealings of a partnership firm—a matter primarily of civil nature. Arbitration was already pending, reinforcing this perspective.
However, criminal allegations cannot be completely brushed aside. But given that the evidence was primarily documentary and already in possession of the parties or accessible to the police, custodial interrogation was unnecessary. The Court highlighted the constitutional mandate of liberty under Article 21, requiring a balance between fair investigation and protection from unnecessary arrest.
Precedent Analysis
- Arnesh Kumar v. State of Bihar (2014) 8 SCC 273: Arrest must be the exception and not the rule, especially where custodial recovery is not required.
- State of Haryana v. Bhajan Lal (1992 Supp (1) SCC 335): Criminal law should not be misused as a weapon of harassment in civil disputes.
- Dilip Singh v. State of Madhya Pradesh (2021) 2 SCC 779: Anticipatory bail cannot be denied merely to pressure repayment in commercial disputes.
- Jay Shri v. State of Rajasthan (2024 INSC 48): Cautioned courts against converting purely civil disputes into criminal prosecutions.
These precedents guided the Court in granting protection to the petitioners despite the seriousness of allegations.
Court’s Reasoning
The Court reasoned that:
- The partnership nature of the dispute and ongoing arbitration pointed towards a civil-commercial substratum.
- Allegations of forgery and cheating, while serious, required trial scrutiny and did not justify pre-trial custodial detention.
- Petitioners had cooperated with the investigation under interim protection, and there was no evidence of misuse of liberty.
- The evidence was documentary and already available, making custodial interrogation redundant.
- Liberty under Article 21 must be safeguarded with conditions ensuring cooperation and non-tampering.
Thus, anticipatory bail was warranted with strict safeguards.
Conclusion
The Court allowed the bail applications, granting anticipatory bail to the petitioners on personal bond of ₹50,000 each with one surety. Conditions included: continued cooperation with investigation, non-influence of witnesses, prohibition on foreign travel without court permission, and furnishing of current contact details. The Court clarified that observations were confined to bail proceedings and would not prejudice trial.
Implications
This judgment reinforces the principle that civil disputes cloaked as criminal allegations should not lead to custodial harassment. It emphasizes judicial caution in balancing investigation needs with personal liberty. The ruling strengthens the protection of partners embroiled in commercial disagreements from unnecessary arrest, while ensuring investigation continues unhindered under conditions of bail. It will serve as a significant precedent in partnership and commercial disputes where criminal allegations overlap.
FAQs
Q1: Can a partnership dispute lead to criminal prosecution for cheating and forgery?
Yes, but courts closely examine whether allegations are genuinely criminal or merely civil disputes over accounts. In this case, the substratum was civil, reducing the justification for custodial detention.
Q2: Does arbitration bar criminal proceedings?
No, arbitration does not bar criminal prosecution. However, when disputes are predominantly civil, courts are cautious to prevent misuse of criminal law.
Q3: What did the Court stress in granting anticipatory bail?
The Court stressed that “arrest must be an exception and not the rule”, particularly where documentary evidence exists and the accused have cooperated in investigation.