Telangana HC Grants Anticipatory Bail to CA in Share Fraud Case, Cites Precedent on Custodial Interrogation [Read Order]

The High Court of Telangana at Hyderabad has granted anticipatory bail to a practising Chartered Accountant (CA), in connection with a case involving the alleged fraudulent transfer of shares. The Court held that custodial interrogation was not required, citing a previous judgment regarding the limited role of auditors in such matters.

The Petitioner,. Annam Leela Sundaram, arrayed as A-4, filed the petition under Section 482 of the Bharatiya Nagarik Suraksha Sanhita (BNSS), 2023, seeking anticipatory bail in connection with case registered by the Central Crime Station Police Station, Hyderabad. The offences alleged included cheating, criminal breach of trust, forgery, and criminal conspiracy under the Bharatiya Nyaya Sanhita (BNS), 2023.

The case arose from a complaint by the Managing Director of M/s Vannsh Life Sciences Private Limited. It was alleged that the Managing Director's shareholding had been fraudulently reduced from 70% to 51% without his knowledge, with shares transferred to the Finance Officer (A-1) and another individual. The Petitioner, serving as the Statutory Auditor, was accused of being instrumental in this alteration.

Sultana Basha, counsel for the Petitioner, submitted that the CA was not involved in the day-to-day affairs of the company and did not handle the complainant’s funds or assets. It was argued that Section 316(5) of BNS (criminal breach of trust) was not applicable, as the Petitioner functioned according to the norms of the Income Tax authorities and ICAI. The counsel highlighted the Petitioner's health issues and the apprehension of arrest.

The Additional Public Prosecutor opposed the bail, citing the serious nature of the allegations.

The bench of Justice K. Sujana perused the records and relied on the precedent set by the Court in M. Nagraj vs. State of Telangana. The Court observed that the nature of the allegations against the Petitioner, a professional auditor, did not warrant custodial interrogation. It was noted that in similar cases, auditors cannot be questioned for improper payments or share transactions solely based on their statutory role.

The Court observed:

“Taking into consideration the nature of the allegations, the status of the Chartered Accountant, his duties and responsibilities towards the Company and the surrounding facts and circumstances of the case, I am of the opinion that it is not a fit case where the custodial interrogation of the petitioner... will be required.”

The Criminal Petition was allowed and granted anticipatory bail subject to conditions, including the execution of a personal bond for Rs. 25,000/- with two sureties and a directive to appear before the concerned SHO every Monday for eight weeks to cooperate with the investigation.

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