Holding

The Supreme Court held that the High Court's bail order was valid, the accused had substantially complied with its conditions, and the appeal under Article 136 was not maintainable.

Summary

The Madhavpura Mercantile Cooperative Bank uncovered a large‑scale fraud involving crores of rupees and filed a criminal complaint under several IPC sections against its chairman, managing director, other officers and businessmen, including J.P. Bhimani. The accused was denied bail by the Sessions Court but the Gujarat High Court granted bail on 9 March 2004 subject to stringent conditions, including payment of sums and surrender of passport. The bank appealed to the Supreme Court under Article 136, contending that the High Court erred by not ordering the accused to pay at least Rs 41 crore and that the bail conditions were insufficient given the magnitude of the scam. The Supreme Court observed that the High Court had imposed strict conditions which the accused had substantially complied with, that the FIR concerned only Rs 8 crore and other matters were pending in separate suits, and that there was no material showing breach of bail conditions. Consequently, the Court held that the appeal was not maintainable under Article 136 and dismissed it.

Issues considered

The propriety of the High Court's grant of bail to the accused despite the alleged large‑scale fraud.
Whether the accused complied with the bail conditions imposed by the High Court.
Whether the Supreme Court can entertain a petition under Article 136 of the Constitution in this circumstance.
Whether the bail order could validly require the accused to pay a specified large sum.

Legislation cited

Constitution of Indias. Article 136
Indian Penal Code, 1860s. 120-B, s. 406, s. 409, s. 420, s. 467, s. 471
Maharashtra Co-operative Societies Act

Subjects

bailbank fraudcooperative bankArticle 136IPC offencescompliance with bail conditionscriminal procedurecooperative societies Act

Judgment

[2009) 11 S.C.R. 748

~
A M.M. COOPERATIVE BANK LTD.
V.
J.P. BHIMANI & ANR.
(Criminal Appeal No. 1374 of 2009)
JULY 31, 2009
B
[S.B. SINHA AND CYRIAC JOSEPH, JJ.]

BAIL:

c Bank-scam - Order of High Court granting bail to one of
the accused challenged - HELD: High Court while enlarging
the accused on bail imposed stringent conditions which were
not contravened by accused - Directions of the High Court
as regards payment of the amount have been substantially
D complied with by the accused - In the absence of any material
brought on record to show that accused has not complied with
conditions imposed on him by High Court and, further, the
order releasing him on bail having been passed in 2004, it
is not a fit case for exercise of jurisdiction under Article 136
of the Constitution - Constitution of India, 1950 - Article 136.
E
A large scale scam and defalcation of public money
amounting to crores of rupees deposited in the appellant
bank was uearthed. The Bank Chairman, Managing
Director, some other officers of the bank, some investors
F and businessmen including respondent no. 1 were stated
to have committed the fraud on the bank. An FIR for
commission of offences punishable ulss 406, 409, 420,
467, 471 and 120-B was filed against respondent no. 1
and others. The application for bail of respondent no. 1
G was rejected by the Sessions Judge, but was allowed by
the High Court imposing certain conditions and directing
respondent no. 1 to pay certain amounts.

In the instant appeal filed by the Bank, it was
H 748
M.M. COOPERATIVE BANK LTD. v. J.P. BHIMANI & 749
ANR.
,..
)
contended for the appellant that the High Court erred in A
releasing respondent no. 1 on bail as it failed to take into
consideration that the total amount involved in the scam
was Rs.1701- crores and even keeping in view the offer
made by respondent no. 1, he should be directed to pay
. at least Rs.41 crores. B

Dismissing the appeal, the Court

HELD: 1.1. The power of the superior courts to
' enlarge an accused on bail is not in dispute. The High
Court while enlarging respondent no. 1 on bail, taking c
into consideration the materials on record, had issued
stringent conditions. It is not the case of the appellant
that such conditions have been contravened by
respondent no.1; instead he has substantively complied
with the directions of the High Court is also not in D
dispute. [Para 10] [759-C-E]

1.2. The plea of the appellant-Bank that respondent
no. 1 should be directed to pay at least a sum of Rs.41
crores cannot be accepted. Subject matter of the first
E
information report was only Rs.8 crores. Other complaint
petitions as also civil litigation are pending. Indisputably,
respondent no. 1 substantively complied with the
directions issued by the High Court. In the absence of
any material brought on record to show that respondent
no. 1 has not complied with the conditions imposed on
F
him by the High Court, impugned order cannot be
interfered with. Furthermore, the impugned order having
been passed in the year 2004, it is not a fit case where
this Court should exercise its jurisdiction under Article
136 of the Constitution of India. [Para 8, 11 and 12] [758- G
G-H; 759-E-G]

Fida Hussain Bohra vs. The State of Maharashtra
2009(3) SCALE 419; Ramathal & Ors. Vs. Inspector of Police
& Anr. 2009(3) SCALE 550 and Glaskasden Grace & Ors. H
750 SUPREME COURT REPORTS (2009] 11 S.C.R.

A Vs. Inspector of Police & Anr. 2009(3) SCALE 554, referred •
to.

Case Law Reference:
2009(3) SCALE 419 referred to para 11
B
2009(3) SCALE 550 referred to ·para 11
2009(3) SCALE 554 referred to para 11

CRIMINAL APP ELLATE JURISDICTION : Criminal Appeal
c No. 1374 of 2009.

From the Judgment & Order dated 9.3.2004 of the High
Court of Gujarat at Ahmedabad in Criminal Misc. Application
No. 9584 of 2003.

D R.F. Nariman, Gaurav Goel, Mahesh Agarwal, Rishi
Agrawala and E.C. Agrawala for the Appellant.

l.H. Syed, Huzefa Ahmadi, Varinder Kumar Sharma,
Priduman, Pinky, Jesal, K. Enatoli Serna (for Hemantika Wahi)
for the Respondents.
E
The Judgment of the Court was delivered by

S.8. SINHA, J. 1. Leave granted.

2. Appellant-Madhavpura Mercantile Cooperative Bank
F •
Ltd. (the bank) is a banking organisation incorporated and
registered under the Maharashtra Co-operative Societies Act.
It is now under a reconstruction scheme as contemplated by
Section 15(b) of the Multi State Cooperative Societies Act,
1984 (for short, the '1984 Act') since repealed and replaced
G by the Multi State Cooperative Societies Act, 2002. The said
reconstruction scheme was framed as directed by the Ministry
of Agriculture, Department of Agriculture and Cooperation of •
the Government of India.

H 3. The bank at present is managed by a Board of
M.M. COOPERATIVE BANK LTD. v. J.P. BHIMANI & 751
._ ANR. [S.B. SINHA, J.]
..
" )
A
Management constituted in terms of the said scheme.
Indisputably, the Board of Directors of the bank was superseded
and an Administrator was appointed by an order dated
15.3.2001 in terms of Sub-section (7) of Section 58 of the 1984
Act. Allegedly, the Administrator, after his appointment
unearthed a large scale scam and defalcation of money made B
by several persons including the respondents herein by
committing fraud of an unprecedented scale to the tune of
crores of rupees.

A criminal complaint registered as C.R.8 of 2003 was filed,
inter alia, against the respondents alleging siphoning of the
c
funds by the accused in conspiracy with each other and, thus,
they are said to have committed offences punishable under
Sections 406, 409, 420, 467, 471 and 1208 of the Indian Penal
Code. The amount involved in the aforementioned complaint
is said to be Rs.8 crores. D

Respondent was arrested on 22.7.2003. He filed an
application for grant of bail before the learned Sessions Judge.
An affidavit was affirmed on behalf of the appellant opposing
the said application wherein it was alleged that the amount E
involved was Rs.60 crores and not 8 crores. It was alleged that
several other complaints have also been filed against the first
respondent. Before the learned Sessions Judge, an offer was
made on behalf of the first respondent to make payment of
_.., some dues. F
The learned. Sessions Judge, however, rejected the said
prayer for grant of bail, inter alia, opining that as the first
respondent in association with the other accused cheated the
bank and committed misappropriation, they cannot be directed
to be released on bail, stating : G

.. "Due to this reason the academic future of several
students was endangered, and many marriages were held-
back, auspicious functions were held-up, the treatment of
several persons was held-up, there were difficulties in H
752 SUPREME COURT REPORTS [2009] 11 S.C.R.

A several families. The senior citizens and widowed women
were dependant on the interest from the Bank and were
maintaining their families, their plain bread got snatched
from them. Several families came under grave difficulties.
Even at very old age several persons were compelled-to
B start work afresh with new energies, they were subjected
to such qifficult times, or that those persons who could not
work they become helpless and dependant. The sole
cause behind all this was that the Bank Chairman,
Manager, Managing Director, a handful of Officers and a
c hanqful of investors of the Madhavpura Bank for satisfying
their I Qwn financial interests, conspired and
miscyppropriated the bank funds. Due to their financial
greed, and because of their acts so many people have
become paupers. In these circumstances, the cheating of
large a.mount is done and are involved in the conspiracy
D
of misappropriation of the bank funds, if such persons
involved in such acts are released on bail then if on release
on bail there would definitely be adverse on the Society."

4. The first respondent thereafter filed an application for
E grant of bail before the High Court. A learned Single Judge of
the said Court upon taking into consideration the readiness and
willingness on his part to make payment of Rs.2384 lacs
allowed the said application stating that at that stage, it was
difficult tO positively infer any conspiracy with the Management
F considering the past transactions. It was, however, noticed :

"However, it would be appropriate to note at this stage that
learned advocate Mr. Lakhani, after obtaining the
instructions from his client, has made a statement at the
Bar that the applicant shall within a week from the date of
G
his release deposit an amount of Rs.50 lakhs with MMCB.
He also states that an amount of Rs.150 lakhs will be paid
in monthly installments of Rs.30 lakhs each. The first •
installment is to be payable on 15th April, 2004 with a
grace period of 5 days. The last such installment would be
H
M.M. COOPERATIVE BANK LTD. v. J.P. BHIMANI & 753
ANR. [S.B. SINHA, J.]

~ payable on 15th August, 2004 with a grace period of 5 A
days, that is by 20th August, 2004. Mr. Lakhani also states
that the mortgaged property worth Rs .150 lakhs would be
sold out by the applicant with the consent of the bank and
the sale proceeds would be deposited with MMCB directly
within four months from today. He also states that the B
applicant shall, within eight weeks from the date of his
release, tender a list of freehold properties held by third
parties (not being the borrowers of the bank) along with
• their consent and title clearance report and the bank would
be free to deal with such properties in the manner bank c
likes for the recovery of the dues and the .applicant shall
extend cooperation in dealing with such properties. Mr.
Lakhani stated that so far as rest of the amount nearing
Rs.805 lakhs approximately would be repaid by the
applicant in minimum monthly installments of Rs.10 fakhs 0
after initial period of six months is over, which would
commence from September, 2004. He, however, states
that the applicant will also make all his endeavour to repay
the banks dues as early as possible. Mr. Lakhani has
stated that he has made· this statement on the basis of the
instructions which he has received from his client and the E
applicant shall file his undertaking on this line within one
week from the date of his release."

A large number of conditions,\however, were attached by
the High Court for grant of bail in fa~our of the first respondent F
which are as under :

"(a) The applicant shall file an undertaking on the lines
of the statement made by the learned advocate Mr.
Lakhani before this court within one week from the G
date of his release and shall abide by the said
undertaking;

(b) The ·applicant shall surrender his passport, if he is
holding it, to the Court;
H
754 SUPREME COURT REPORTS [2009) 11 S.C.R.

A (c) The applicant shall not influence the witnesses or
tamper with any documents;
•
(d) The applicant shall remain present and mark his
presence at the Prevention of Economic Offences
Cell, CID (Crime), Gandhinagar Zone Police
B
Station, on every 2nd Sunday of even number
English Calendar month between 9 am to 2 pm;

(e) At the time of execution of the bonds, the applicant
shall furnish his address to the investigating officer
c and the court concerned and shall not change his
residence till the final disposal of the case or till
further orders in that regards;

(f) The applicant shall not leave the limits of India
D without the prior permission of this Court;

(g) The applicant shall not directly or indirectly make
any inducement, threat or promise to any person
acquainted with the fact of the case so as to
dissuade him from disclosing such facts to the court
E or to any police officer;

(h) The applicant shall not do any act prejudicial to the
interest of the Prosecution.

(i) The applicant shall deposit an amount of Rs.50
F
lakhs with MMGB within a period of one week from
the date of his release, as already stated by him.

(j) The aforesaid amounts are ordered to be deposited
without prejudice to the rights of the parties and the
G same shall be subject to the final outcome in the
Lavad Suit(s).

(k) The applicant shall abide by the above conditions
scrupulously and in case of violation of any other
H conditions, the complainant bank would be at liberty
M.M. COOPERATIVE BANK LTD. v. J.P. BHIMANI & 755
ANR. [S.B. SINHA, J.]
......l
to move this court for cancellation of bail." A

5. Mr. R.F. Nariman, learned senior counsel appearing on
behalf of the appellant, would contend that the High Court
committed a serious error in releasing the first respondent on
bail in so far as it failed to take into consideration that as the
8
total amount involved in the scam is huge viz. to the tune of 107
crores of rupees. It was urged that in any event, keeping in view
the offer made by the appellant, he should at least be directed
• to pay a sum of Rs.41 crores. Our attention, in this behalf, has
been d~wn to Annexure-A/1 appended to the affidavit in reply C
filed by the appellant bank which reads as under :

"(Rs. in crores)
Amount of principal dues
Amount of principal dues 45.78
claimed by MMCB as per D
l affidavit
Less : (I) A/cs not pertaining to 0.40
Jayesh Bhimani Group 0. 70 1.10
(a) Sahyog Chemicals E
(b) Kishanlail Verma
(II) Excess amount shown in one of
Group Ale.Mis Doshi Chemical
Industries (13 reported instead of
10) 3.00 4.10 F
Correct position of Principal Dues 41.68
Total amount of principal dues 41.68
Less : Interest paid out of increased
limit in various Group concerns of G
Bhimani Group 15.84

Amount paid after suspension
of MMCB 2.00 17.84
Amount actually parted with by MMCB 23.84" H
L

756 SUPREME COURT REPORTS [2009) 11 S.C.R.

A 6. Mr. l.H. Syed, learned counsel appearing on behalf of
respondent No.1, on the other hand, would contend that the
respondent had been granted bail after remaining behind the
bar for about eight months. The present complaint, it was urged,
merely involving 8 crores of rupees and in any event, even if
B the advances to the. other concerns of the respondents are
taken into consider9tion, the same would come to Rs.23.84
crores, this Court, thus, should not exercise its discretionary
jurisdiction in interfering with the impugned judgment,
particularly, when the respondent No.1 had made payments in
c terms of the directions of the High Court.

We may at the outset notice that the High Court issued the
directions on the basis of the offer made 011 behalf of the
respondent No.1 which reads as under :

D 'The learned advocate Mr. Lakhani appearing for the
applicant submttt\;!d that a picture is sought to be drawn l
by the prosecution that the applicant has been transacting
the bank since 1977 and has indulged in irregular
transactions from the beginning throughout the period but
E the fact is otherwise and he tried to demonstrate the same
from the papers of the prosecution itself. Mr. Lakhani
submitted that the applicant is a businessman and a
regular loanee of the Bank. He has been regulating
repaying the dues to the bank. Mr. Lakhani, of course, in
F all fairness, conceded that there appear to be come ...
procedural lapses but, there are no intentional violations
of the banking rules at the hands of the applicant. He
submitted that the charge sheet does not indicate any
forgery to have beeri committed by the applicant. Mr.
Lakhani submitted that the applicant has no criminal
G
antecedents. The trial is likely to take time. The bank would
not be benefited and consequently the depositors of the
~
bank would not be benefited by keeping the applicant
behind the bars. The interest would go on mounting.
· Recovery would be delayed and probably may become
H
M.M. COOPERATIVE BANK LTD. v. J.P. BHIMANI & 757
'(
ANR. [S.B. SINHA, J.]
·- .)
imp_9~ible. Mr. Lakhani submitted that the applicant is a A
businessman who had a reasonably large business of
l roughly Rs.100 crores of rupees turn over in a year and if
he is permitted to be out of jail pending the trial, he will be
able to recover his dues from his debtors and in turn, pass
them over to the bank. The applicant is also prepared to 8
make repayment of reasonable amount up front and some
amount by way of installments. The applicant is also
prepared to sell the property mortgaged to the bank and
submit the sale proceeds to the bank. He submitted that

- .. c
the applicant would also tender details of freehold property
of third parties with their consent letters and title clearance
I
report to the bank and put those properties at the disposal
'
of the bank, which can be dealt with by the bank and the
applicant mutually cooperates for recovery of the money.
Mr. Lakhani submits that the applicant will undertake to
D
recover the money from his debtors and repay it to the
bank in a minimum of monthly deposit of Rs.10 lakhs, after
initial period of six months, as has been indicated in the
affidavit, sworn by the applicant before notary and
produced before the notary and produced before the trial
E
,.., court, which is forming part of this application as Annexure-
D. Mr. Lakhani submitted that the applicant is not in any
way hardened criminal. Mr. Lakhani submitted that the
charge sheet relates to only one firm, namely M/s.
Prabhudas Mohanlal Bhimani for an amount of Rs.800
lakhs. The offer is being made by the applicant to take F
care of the firms or companies with which the applicant is
concerned. As indicated in the affidavit of Deepakrai
Parekh in the table in Annexure-C except item No.9 and
10 and part of item No.4"
G
A further affidavit was affirmed by the respondent to the .
:. .,. said effect.

7. We may furthermore notice that a large number of civil
litigations are also pending including the ones forming the
H
758 SUPREME COURT REPORTS [2009] 11 S.C.R.

A subject matter of awards passed by the Arbitrators in different ~
arbitrations proceedings, the details whereof are as under :

3r Company Lavad Status Arbitra- Status Civil Status
name Suits ti on Appl!-
Disputes cation
B 567106 Pending
1. Shah 2568/02 With- 79/03 Award
Bhimani drawn Declared with
Chemical by (18.08.06) comp-
Pvt. Ltd. bank etent
court
-
c 2. Doshi -- -- 208/03 Award 434/06 Pending
Chemical Declared with
Industries (25.07.06) comp-
etent
court
3. Prabhudas -- -- Award 568/06 Pending
D Mohan la I Declared with
Bhimani (18.08.06) comp-
etent
court
4. Jin al 2566/02 With- 96/2005 Award 40/07 Pending
Chem Pvt. drawn Declared (9.10.06) with by
E Ltd. bank comp-
tent
court
5. Parin 695/02 Matter -- -- -- --
Chemi- pending
F cals for cross
examin-
ation
6. Shah 639102 Matter -- -- -- --
Bhimani 640/02 pending
Petro for cross
G Terminals exami-
Pvt. Ltd. nation

8. The impugned judgment of the High Court was passed
on 9.3.20Q4. Respondent No.1, indisputably, substantively
H complied with the directions issued by the High Court. He had
-
M.M. COOPERATIVE BANK LTD. v. J.P. BHIMANI & 759
.- ANR. [S.B. SINHA, J.]
j
deposited a sum of Rs.SO lal<hs. He had also deposited A
installments of Rs.30 lakhs each per month. The respondent
No.1 was to tender a list of properties held by third parties not
being the borrowers of the bank along with their consent and
support and the bank was free to deal with such properties in
the manner it likes for recovery of the amount. It furthermore B
apprears that the first respondent sold his residential house with
his brother as well as his officer whereafter a deposit of Rs.150
lakhs in addition of the amounts mentioned in para 2 and 3 of
J
the further affidavit was made.
.,
9. The bank, as noticed hereinbefore, had also instituted
c
civil proceedings by filing arbitration suits for recovery of total
dues against the first respondent.

10. The power of the superior courts to enlarge an accused
on bail is not in dispute. The High Court while enlarging the first D
j. respondent on bail, taking into consideration the materials on
record, had issued stringent conditions. It is not the case of the
appellant that such conditions have been contravened by the
first respondent. Even if some contraventions have been made,
the same could be brought to the notice of the High Court. The E
fact that the first respondent has substantively complied with the
directions of the High Court is also not in dispute.

11. Submissions of Mr. Nariman that the first respondent
.. should be directed to pay at least a sum of Rs.41 crores cannot
F
be accepted. Subject matter of the first information report was
only Rs.8 crores. Other complaint petitions as also civil litigation
are pending. In absence of any material brought on record
before us to show that respondent No.1 has not complied with
the conditions imposed on him by the High Court, it is difficult
to interfere with the impugned judgment. The Court, while G
granting bail cannot impose unreasonable conditions. {See
~
Fida Hussain Bohra v. The State of Maharashtra [2009 (3)
SCALE 419]; Ramathal & Ors. v. Inspector of Police & Anr.
[2009 (3) SCALE 550]; and I. Glaskasden Grace & Ors. v.
H
760 SUPREME COURT REPORTS [2009] 11 S.C.R.

A Inspector of Police & Anr. (2009 (3) SCALE 554]}. • -
12. Furthermore, the impugned judgment having been
passed in the year 2004, in our opinion, it is not a fit case where
this Court should exercise its jurisdiction under Article 136 of
the Constitution of India.
B
13 For the reasons aforementioned, there is no merit in
the appeal. It is dismissed accordingly. However, in the facts
and circumstances of this case, there shall be no order as to \
costs.
c ,.
R.P. Appeal dismissed.