Court’s decision
The Delhi High Court dismissed a petition seeking cancellation of bail granted to an accused in a ₹2 crore cheating and criminal breach of trust case, holding that failure to honour a settlement or dishonour of post-dated cheques cannot, by itself, justify cancellation of bail. The Court clarified that once bail is granted on valid judicial considerations such as completion of investigation and filing of chargesheet, courts cannot be converted into recovery forums to enforce private settlements. Finding no misuse of liberty or violation of bail conditions, the Court upheld both the original bail order and the subsequent order refusing cancellation .
Facts
The FIR was registered on the complaint of a finance company engaged in providing loan facilities. It was alleged that the accused, who was working on a freelance basis for sourcing loan clients, along with associates, cheated the complainant company by arranging fake loans using forged documents and by misappropriating instalments collected from customers into his personal account. The alleged loss was stated to be approximately ₹2 crores.
The accused was arrested in April 2024. After completion of investigation and filing of the chargesheet, the Additional Sessions Judge granted him regular bail in October 2024. At that stage, the Court noted that the complainant had entered into a settlement with the accused, received ₹5 lakhs, and had expressly given no objection to the grant of bail.
Subsequently, the complainant moved an application seeking cancellation of bail, contending that the total settlement amount was ₹55 lakhs, that post-dated cheques issued for the balance amount had been dishonoured, and therefore the bail deserved to be cancelled. This application was dismissed by the trial court in August 2025, leading to the present petition before the High Court .
Issues
The core issue before the High Court was whether bail granted to an accused can be cancelled solely on the ground that the accused failed to comply with the financial terms of a private settlement entered into with the complainant. The Court was also required to examine whether dishonour of settlement cheques constitutes a supervening circumstance or misuse of liberty sufficient to justify cancellation of bail.
Petitioner’s arguments
The complainant argued that his consent and no objection to the grant of bail were premised entirely on the settlement between the parties. It was submitted that the accused had undertaken to pay ₹55 lakhs, out of which only ₹5 lakhs was paid upfront, while the remaining amount was covered by post-dated cheques. Since those cheques were dishonoured and the accused failed to honour the settlement, it was contended that the very foundation of the bail order had collapsed. On this basis, the complainant urged that the bail order was liable to be set aside.
Respondents’ arguments
The State and the accused opposed the petition, submitting that bail had been granted primarily on judicial considerations independent of the settlement, namely that the accused had undergone custodial interrogation, the investigation was complete, and the chargesheet had already been filed. It was argued that there was no allegation of the accused violating any condition of bail, tampering with evidence, influencing witnesses, or absconding. The respondents contended that breach of a private settlement may give rise to civil or separate criminal remedies but cannot automatically lead to cancellation of bail.
Analysis of the law
The High Court examined the settled principles governing cancellation of bail. It reiterated that cancellation of bail stands on a different footing from rejection of bail at the initial stage. Once bail is granted, it can be cancelled only if the order is shown to be perverse or illegal, or if there are supervening circumstances such as misuse of liberty, violation of bail conditions, or obstruction of the trial process.
The Court emphasised that liberty granted by a judicial order cannot be curtailed on extraneous considerations, and that bail jurisdiction cannot be expanded to enforce contractual or settlement obligations between private parties.
Precedent analysis
The Court relied on the Supreme Court’s decision in Mahipal v. Rajesh Kumar, which draws a clear distinction between setting aside a bail order for perversity and cancelling bail on the basis of subsequent misconduct. The precedent underscores that appellate courts must be slow to interfere with bail orders unless compelling reasons exist. Applying these principles, the High Court held that dishonour of settlement cheques does not constitute a ground recognised in law for cancellation of bail .
Court’s reasoning
The Court found that the trial court, while granting bail, had relied primarily on the fact that the accused was arrested in April 2024, had already undergone custodial interrogation, and that investigation stood completed with filing of the chargesheet. Although the existence of a settlement and the complainant’s no objection were noted, they were not the sole or decisive basis for grant of bail.
The High Court categorically observed that courts cannot act as recovery agents or instruments to compel performance of private settlements through the threat of incarceration. It noted that the complainant had not alleged any breach of bail conditions or misuse of liberty by the accused. In such circumstances, cancellation of bail would amount to punishing the accused for a civil or contractual dispute, which is impermissible in law.
Conclusion
The Delhi High Court dismissed the petition and upheld both the original bail order dated 25.10.2024 and the subsequent order refusing cancellation of bail. The Court clarified that breach of settlement terms provides an independent cause of action to the complainant but cannot be used as a lever to seek cancellation of bail. All pending applications were disposed of accordingly .
Implications
This judgment reinforces a critical principle in bail jurisprudence: criminal courts are not enforcement mechanisms for private financial settlements. The ruling draws a firm boundary between liberty jurisprudence and private recovery disputes, ensuring that bail orders remain anchored to criminal law considerations such as investigation, trial integrity, and misuse of liberty. It serves as an important caution for complainants seeking to use bail proceedings as leverage in settlement enforcement.
Case law references
- Mahipal v. Rajesh Kumar
Held that cancellation of bail requires strong and compelling reasons such as perversity in the bail order or supervening circumstances involving misuse of liberty. - Prasanta Kumar Sarkar v. Ashis Chatterjee
Laid down parameters governing grant and interference with bail orders.
FAQs
1. Can bail be cancelled if an accused fails to honour a settlement?
No. Failure to comply with a private settlement, by itself, is not a legally recognised ground for cancellation of bail.
2. What are valid grounds for cancellation of bail?
Misuse of liberty, violation of bail conditions, tampering with evidence, influencing witnesses, absconding, or a perverse bail order.
3. What remedy is available if settlement cheques are dishonoured?
The aggrieved party may pursue appropriate civil remedies or proceedings under cheque dishonour laws, but cannot seek cancellation of bail on that basis.