Former CFO of Bhushan Steel to remain in jail, SC sets aside bail order passed by Delhi High Court

Shruti Mahajan

The Supreme Court today set aside the order of the Delhi High Court that had granted bail to the former CFO of Bhushan Steels, Nittin Johari.

The Bench of Justices NV Ramana, Mohan M Shantanagoudar, and Ajay Rastogi, thus canceled the bail granted to Johari, who is a co-accused in the Bhushan Steel case and remanded the bail application to the High Court to decide on the matter afresh.

The Supreme Court had earlier stayed the bail order of the Delhi High Court till the final disposal of the petition. Johari had thus been in judicial custody since May this year after he was arrested by the SFIO. In light of today’s judgment, Johari will now remain in jail.

The judgment came in a petition assailing the order of the Delhi High Court which had, in August this year, granting regular bail to Johari. The Supreme Court said that the High Court did not apply the principles and the twin conditions necessary for the grant of bail in economic offences. Relying on the judgment of the Supreme Court in the YS Jagan Mohan reddy case where it was held that “Economic Offences constitute a class apart” and need to be approached differently in matters of bail, the Court remarked that while the Special Court took note of the special conditions requisite for bail, the High Court had failed to apply the general principles.

“The Court referred to the principles governing the grant of bail as laid down by this Court in Ranjitsing Brahmajeetsingh Sharma v. State of Maharashtra, (2005) 5 SCC 294, which discusses the effect of the twin mandatory conditions pertaining to the grant of bail for offences under the Maharashtra Control of Organised Crime Act, 1999 as laid down in Section 21(4) thereof, similar to the conditions embodied in Section 212(6)(ii) of the Companies Act. However, the High Court went on to grant bail to Respondent No. 1 by observing that bail was justified on the “broad probabilities” of the case.”

The former Chief Financial Officer (CFO) of Bhushan Steel was arrested by the Serious Fraud Investigation Office (SFIO) in May this year for indulging in fraudulent activities. Johari was one of the signatories to the company’s financial statements until the year 2016-17. One of the allegations against Johari pertains to filing false documents with various banks.

While the Delhi High Court found Johri’s to be a fit case for granting bail, opining that the mind and will of Bhushan Steel, Brij Bhushan and Neeraj Singal, appear to be the main accused, the SFIO had assailed the bail order in Supreme Court claiming that Johari had played a crucial role as the CFO “to the fountainhead of the scam”.

It was submitted by the SFIO, that the High Court passed the bail order without recording any satisfaction as regards economic offences. The mandatory requisites while granting bail in such offences were ignored by the High Court, according to the SFIO.

SFIO’s case was rebutted by Counsel for Johari on the ground that Johari’s co-accused Neeraj Singal was granted bail and Brij Bhushan Singal was not even arrested. In this regard, the Supreme Court, in its judgment, has said,

” The fate of the co­accused promoters alleged to be the “mind and will” of the accused companies seems to have played heavily on the Court’s mind. The High Court observed that while co­accused Brij Bhushan Singal had not been arrested due to his old age, co­accused Neeraj Singal had already been granted bail, vide order dated 29.08.2018. 

…we find it necessary to note that in light of the peculiar circumstances of the case, the High Court ought not to have been influenced by the non­arrest of Brij Bhushan Singal and the grant of bail to Neeraj Singal.”

Johari’s co-accused Neeraj Singal’s bail plea had reached the Supreme Court in September last year when the Court had stayed the bail order passed by the Delhi High Court. While the interim bail granted to Singal continued to be in operation, the Supreme Court had come down heavily on the Delhi High Court for passing interim directions for Singal’s release despite the fact that the Supreme Court was seized of the matter.

The Court was also critical of the High Court as regards the observations made in the bail order and noted that the observations made may have far-reaching consequences and may deprive the Competent Authority or the Statutory Authority to proceed in the matter in accordance with the provisions of the Companies Act, 2013 in respect of investigations and including filing of complaint/police report concerning the offences involving serious financial frauds or economic misdemeanor.

The SFIO was then granted liberty to file an application for recalling of interim protection granted to Singal and the SFIO had exercised this liberty and the relevant application was filed.

The SFIO was represented by the Solicitor General Tushar Mehta assisted by Advocate Kanu Agrawal while Johari was represented by Senior Counsel Kapil Sibal assisted by Advocate Arshdeep Singh.

[Read Judgment]

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