Supreme Court grants bail to Kapil and Dheeraj Wadhawan in ₹57,000-crore bank fraud case

The Supreme Court recently granted bail to Dewan Housing Finance Limited (DHFL) promoters Kapil and Dheeraj Wadhawan in a ₹57,000-crore bank fraud case [Kapil Wadhawan vs. Central Bureau of Investigation].

A Bench of Justices JK Maheshwari and Vijay Bishnoi observed that their prolonged incarceration without the trial even commencing violated the constitutional right to liberty and speedy trial.

The Court noted that brothers have spent over five years in custody, even though all other co-accused in connected cases have been released on bail.

The Court also said that the investigation against the two is complete.

The Bench further observed that the chargesheet ran into four lakh pages, listed 736 witnesses, and was accompanied by 17 trunks of documents and additional digital records exceeding two terabytes.

It said that even if the trial is held daily, it could not be completed in less than two to three years.

The case stems from loans and credit facilities worth ₹57,252 crore availed by DHFL, a non-banking financial company, from a consortium of 17 banks. The Central Bureau of Investigation (CBI) alleged that ₹34,926 crore of this was siphoned off through shell companies linked to the Wadhawans.

The CBI registered an FIR in June 2022, accusing the promoters of criminal conspiracy, cheating, criminal breach of trust, falsification of accounts and corruption under the Prevention of Corruption Act. The first chargesheet was filed in October 2022 and the accused have been in custody since April 2020.

Over time, the CBI filed supplementary chargesheets naming a total of 110 accused, including 70 companies and 40 individuals.

The Wadhawans were granted bail in ten other cases arising from the same transactions - including those under the Prevention of Money Laundering Act and the Yes Bank fraud case, but remained in jail in this one.

Before the Supreme Court, Senior Advocate Mukul Rohatgi, appearing for the Wadhawans, argued that the case was document-based and did not justify prolonged custody.

He pointed out that the loans were sanctioned after due diligence by the Reserve Bank of India and that the allegations were essentially civil in nature since DHFL had already gone through corporate insolvency proceedings before the National Company Law Tribunal (NCLT).

He also informed the Court that DHFL’s assets had been sold to Piramal Capital and Housing Finance for ₹17,700 crore under a resolution plan approved by the NCLT, which the Supreme Court itself had affirmed earlier this year.

The prosecution, led by Additional Solicitor General SV Raju, opposed the bail plea, describing the case as one of the largest financial frauds in the country’s history. He argued that the companies linked to the accused had siphoned off over ₹29,000 crore and that economic offences of such scale warranted strict scrutiny.

The Bench, however, underscored that “bail is the rule and jail is the exception,” reaffirming that the presumption of innocence cannot be denied even in grave financial offences.

The Court explained that while economic crimes are serious, they cannot justify indefinite incarceration without trial. It said pre-trial detention should not turn into punishment before conviction.

It said that when there is no likelihood of the trial concluding soon, continued custody becomes unconstitutional.

“Once it is obvious that a timely trial would not be possible and the accused has suffered incarceration for a significant period of time, the courts would ordinarily be obligated to enlarge them on bail,” the Bench said, quoting its earlier ruling in Union of India v. KA Najeeb (2021).

The Court rejected the government’s argument that delay in trial should not automatically lead to bail in economic offences, holding that constitutional rights must prevail when the prosecution is unable to ensure speedy proceedings.

“This Court therefore emphatically ruled that if the State lacks the wherewithal to ensure a speedy trial, it cannot oppose bail on the ground of seriousness of the offence,” the Bench noted.

The Court also examined Section 479 of the new Bharatiya Nagarik Suraksha Sanhita (BNSS), which allows release of undertrials who have spent half of the maximum sentence in jail. It clarified that the provision was intended to decongest prisons, not to deny bail to those facing serious charges.

The Bench held that Section 479 must be read in the light of Article 21 and cannot be interpreted in a way that defeats the guarantee of personal liberty.

Concluding that continued incarceration was unjustified, the Court ordered the release of Kapil and Dheeraj Wadhawan on strict conditions. They must each furnish a bond of ₹10 lakh with two sureties, surrender their passports, report to the local police once a month, and seek prior permission from the High Court before travelling abroad.

Any attempt to influence witnesses or violate bail conditions would lead to immediate cancellation of bail, the Court warned.

Alongside Rohatgi, the Wadhwan brothers were represented by Senior Advocates Balbir Singh and Arvind Nayar.

The prosecution team consisted of ASG Raju along with advocates Mukesh Kumar Maroria, Annam Venkatesh, Zoheb Hossain, Hitarth Raja, Kartik Sabharwal, Ayansh Shukla, Shaurya Sarin, Harsh Paul Singh, OP Gaggar and Sachindra Karn.

[Read Order]