No Bail in Corporate Fraud u/s 447 of Companies Act Without Satisfying Two Key Conditions: Supreme Court [Read Judgement]
The Supreme Court held that bail under Section 447 of the Companies Act cannot be granted without fulfilling the mandatory twin conditions laid down in Section 212(6).
![No Bail in Corporate Fraud u/s 447 of Companies Act Without Satisfying Two Key Conditions: Supreme Court [Read Judgement] No Bail in Corporate Fraud u/s 447 of Companies Act Without Satisfying Two Key Conditions: Supreme Court [Read Judgement]](https://www.taxscan.in/wp-content/uploads/2025/04/corporate-fraud.jpg)
The Supreme Court of India ruled that bail under Section 447 of the Companies Act, 2013, which deals with corporate fraud, cannot be granted unless the twin conditions prescribed under Section 212(6) are strictly satisfied.
In this case, the Serious Fraud Investigation Office (SFIO) had filed a criminal complaint before the Special Court, Gurugram, against the Adarsh Group and its associates for allegedly orchestrating a massive corporate fraud through Adarsh Credit Cooperative Society Ltd.. The society was accused of issuing illegal loans worth over Rs. 4,100 crores to shell companies controlled by its own promoters using forged documents and false financial statements.
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Following the complaint, the Special Court took cognizance of the offences and issued bailable and subsequently non-bailable warrants against the accused. Several accused persons avoided arrest and failed to appear before the court, prompting the initiation of proclamation proceedings under Section 82 of the CrPC. Despite this, the Punjab and Haryana High Court granted anticipatory bail to some of the accused in 2023.
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The SFIO appealed these bail orders before the Supreme Court, arguing that the High Court had not considered the mandatory conditions under Section 212(6) of the Companies Act. According to this provision, two conditions must be met before bail can be granted in offences involving fraud under Section 447:
- The Public Prosecutor must be given an opportunity to oppose the bail application.
- If opposed, the court must be satisfied that the accused is not guilty of the offence and is not likely to commit any offence while on bail.
The SFIO argued that these twin conditions are binding and must be observed even in anticipatory bail cases. They also emphasized that corporate fraud is a serious economic offence with far-reaching consequences.
Section 447 of the Companies Act, 2013, addresses punishment for fraud, prescribing imprisonment ranging from six months to ten years, with a minimum of three years where the fraud involves public interest. It includes fines not less than the amount involved in the fraud, which may extend to three times the amount involved. The section is aimed at deterring fraudulent activities in corporate and financial affairs.
Section 212(6), linked with Section 447, makes such fraud-related offences non-bailable and subjects bail to stricter conditions, similar to the provisions under the Prevention of Money Laundering Act (PMLA).
The bench comprising Justices Bela M. Trivedi and Prasanna B. Varale held that the High Court had erred in granting anticipatory bail without properly applying the statutory twin conditions. The court explained that economic offences must be viewed with seriousness due to their impact on the financial system and public trust.
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The court observed that many of the accused deliberately avoided court summons and warrants, concealed themselves, and obstructed the investigation. The court held that such conduct disentitled them from claiming the extraordinary relief of anticipatory bail.
The Supreme Court set aside the High Court’s bail orders and directed the accused to surrender before the Special Court within one week. The court dismissed appeals against anticipatory bail granted by the Special Court itself in a few cases where no non-bailable warrants or proclamation proceedings were involved.
To Read the full text of the Order CLICK HERE
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