Tenny Jose Chiramel and Elsa Tenny and Kiran C Tenny and Arun Tenny Jose v. State of Kerala

# **`IN THE HIGH COURT OF KERALA AT ERNAKULAM`** # **`PRESENT`** ``` THE HONOURABLE MR.JUSTICE C.S.DIAS ``` ``` THURSDAY, THE 8[TH] DAY OF FEBRUARY 2024 / 19TH MAGHA, 1945 BAIL APPL. NO. 10337 OF 2023 CRIME NO.224/2023 OF CRIME BRANCH, ERNAKULAM, Ernakulam ``` ## **`PETITIONERS:`** ``` 1 TENNY JOSE CHIRAMEL, AGED 61 YEARS S/O C.S. JOSE, VILLA NO.29, NOEL FRAGRANCE, SHIHAB THANGAL ROAD, VIDYA NAGAR COLONY, THRIKAKKARA, EDAPPALLY, ERNAKULAM, PIN - 682021 2 ELSA TENNY, AGED 60 YEARS W/O. TENNY JOSE CHIRAMEL, VILLA NO.29,NOEL FRAGRANCE, SHIHAB THANGAL ROAD, VIDYA NAGAR COLONY, THRIKAKKARA,EDAPPALLY, ERNAKULAM, PIN - 682021 3 KIRAN C TENNY, AGED 25 YEARS S/O TENNY JOSE, VILLA NO.29, NOEL FRAGRANCE, SHIHAB THANGAL ROAD, VIDYA NAGAR COLONY, THRIKAKKARA, EDAPPALLY, ERNAKULAM, PIN - 682021 4 ARUN TENNY JOSE, AGED 29 YEARS S/O TENNY JOSE,VILLA NO.29, NOEL FRAGRANCE, SHIHABTHANGAL ROAD, VIDYA NAGAR COLONY, THRIKAKKARA, EDAPPALLY, ERNAKULAM, PIN - 682021 ``` ``` BY ADVS. K.K.DHEERENDRAKRISHNAN N.P.ASHA ``` B.A.No.10337 of 2023 -:2:- ## **`RESPONDENTS/STATE:`** ``` 1 STATE OF KERALA, REPRESENTED BY PUBLIC PROSECUTOR, HIGH COURT OF KERALA, PIN - 682031 2 JILU HANNAH EAPEN, CHIEF MANAGER, DRT CELL, SIB BUILDING, MARKET ROAD, ERNAKULAM-682035, IS IMPLEADED AS ADDL.R2 AS PER ORDER DATED 14/12/2023 IN CRL.MA.1/2023. BY ADVS. THOMAS J.ANAKKALLUNKAL ANUPA ANNA JOSE KANDOTH JAYARAMAN S. MELBA MARY SANTHOSH P.VIJAYA BHANU (SR.)(K/421/1984) ``` ## **`OTHER PRESENT:`** ``` SR VIJAYABHANU ``` ``` SR PP SMT NEEMA T V ``` ``` THIS BAIL APPLICATION HAVING COME UP FOR ADMISSION ON 08.02.2024, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: ``` B.A.No.10337 of 2023 ## -:3:- ## **O R D E R** Dated this the 8[th] day of February, 2024 The application is filed under Section 438 of the Code of Criminal Procedure, 1973, for an order of prearrest bail. 2. The petitioners are the accused 2 to 5 in Crime No.224/2023 of the Crime Branch Police Station, Ernakulam, registered against the accused (six in number) for allegedly committing the offences punishable under Sections 408, 420, 465, 468 and 471 r/w Section 34 of the Indian Penal Code, 1860 (‘IPC’, for short). 3. The prosecution case, in brief, is that: the first accused Company had availed a business loan from the second respondent/de facto complainant on 26.09.2014, for an amount of Rs. 20/- Crore by forging the stock statement and, thereafter, sold the stock given as security without the knowledge of the second B.A.No.10337 of 2023 -:4:- respondent. The accused 2 to 6 are the directors of the first accused Company and the guarantors of the loan. The accused misappropriated the loan amount and have failed to repay the loan amount. Accordingly, they have caused the second accused a loss of Rs.32.52/- Crore. Thus, the accused have committed the above offences. 4. Heard; Sri. K.K. Dheerendrakrishnan, the learned counsel appearing for the petitioners, Smt. Neema. T.V, the learned Senior Public Prosecutor appearing for the State and Sri. P. Vijayabhanu, the learned Senior Counsel for the second respondent. 5. The learned counsel for the petitioners submitted that the petitioners are totally innocent of the accusations levelled against them. The petitioners had availed of the loan as early as on 26.09.2014 based on the stock and the guarantees offered by the first accused Company and the petitioners/the accused 2 to 6. The petitioners were diligent in repaying the loan till the Covid-19 pandemic. After the Covid-19 pandemic, the B.A.No.10337 of 2023 ## -:5:- business ran into troubled waters and due to reasons beyond the petitioners’ control, they were unable to repay the loan. It is then that the second respondent filed Annexure A1 FIR, and Crime No.267/2022 was registered by the Thrissur East Police Station for the very same set of offences. The police, after investigation, by Annexure A2 refer report, found that the transaction between the accused and the de facto complainant was civil in nature. Accordingly, the case was referred. Then, the second respondent approached the State Police Chief, and sought for further investigation. Accordingly, Annexure A3 FIR was registered by the Crime Branch. The first accused Company is under liquidation. By Annexure A4 order dated 16.12.2022, passed by the National Company Law Tribunal, Kochi Bench (‘NCLT’ in short) the entire assets of the Company have been taken over by a liquidator. The second respondent has filed PIRP No.3214177/00660/2023 before the NCLT to recover their money and the petitioners have filed B.A.No.10337 of 2023 ## -:6:- similar applications to declare them insolvents. In the first crime that was registered by the local police, the petitioners had cooperated with the Investigating Officer and the entire documents of the first accused Company were recovered by the Investigating Officer. It is after a threadbare investigation of the entire materials, that Annexure A2 refer report was filed finding the transaction to be civil in nature. By no stretch of imagination can the petitioners be attributed of committing the offences alleged against them. Even if the allegations are taken on their face value they do not constitute the offences. The petitioners are law-abiding citizens. The petitioners 1 and 2 are the Senior citizens. The second petitioner is a lady. The petitioners 3 and 4/ the accused 4 and 5 were minors at the time the loan was availed. The learned counsel for the petitioners relied on the decision of the Hon’ble Supreme Court in **Satishchandra Ratanlal Shah V. State of Gujarat and Another ((2019) KHC 6300)** to drive out the point B.A.No.10337 of 2023 ## -:7:- that the mere inability of an accused to return the loan amount will not attract the offence of cheating, unless there was a fraudulent or dishonest intention right at the inception of taking the loan. Hence, the petitioners may be granted an order of pre-arrest bail. 6. The learned Public Prosecutor opposed the application. She contended that the investigation in the case is in progress. She relied on Annexure A3 FIR and submitted that since the case has been re-registered, the petitioners’ custodial interrogation is necessary and the recovery is to be effected. Hence, the application may be dismissed. 7. The learned Senior Counsel appearing for the second respondent also vehemently opposed the application. He drew the attention of this Court to the objections filed by the second respondent in the bail application and contended that the petitioners have diverted the loan amount for starting subsidiaries in India and abroad. The accused have also transferred the B.A.No.10337 of 2023 ## -:8:- funds to the accounts of the directors. The fraudulent removal of hypothecated stocks, without the knowledge of the second respondent, establish that the petitioners have committed the above offences. He contended that since the earlier investigation was a farce, due to the influence of the petitioners, the present crime has been registered. The custodial interrogation of the petitioners is absolutely necessary to unveil the truth and for the proper and full investigation of the crime. He prayed that the application may be dismissed. 8. On an analysis of the materials placed on record, it is apparent that the first accused company had availed a business loan from the second respondent bank as early as on 26.09.2014. The accused 2 to 6, who are the directors of the first accused, were the guarantors. The loan was granted principally on strength of the stock of the first accused and its landed properties. From 26.09.2014 till 11.02.2022, the second respondent had absolutely no complaint as against the accused. It was ## B.A.No.10337 of 2023 ## -:9:- only on 11.02.2022, the Manager of the second respondent lodged the First Information Statement before the Thrissur East Police and Annexure A1 FIR was registered. Even in the FIS, it is alleged that the cash credit loan was sanctioned on the basis of the stock and collateral security offered by the first accused company and the accused 2 to 6 stood as guarantors. The main allegation is that the accused had fabricated the stock statements and inflated the stock value and cheated the bank. It was only when the forensic audit report was received on 16.08.2021, the bank became enlightened of the fraud. Then they have reported the matter to the Reserve Bank of India as loan fraud. 9. Indisputably, pursuant to Annexure A1 FIR, the Thrissur East Police investigated the crime and filed Annexure A2 refer report, inter alia, stating that the transaction between the accused and the second respondent was civil in nature. Annexure A2 shows that the second respondent was given notice on 09.09.2022. B.A.No.10337 of 2023 -:10:- 10. The petitioners’ contention is that it was after Annexure A2 refer report was filed, the second respondent approached the State Police Chief. On the contrary, the second respondent asserts that as the investigation was shabby and a farce, the second respondent approached the State Police Chief, and the matter was directed to be investigated by the Crime Branch. Annexure A3 FIR was re- Consequently, registered. 11. Be that as it may, the facts remain that the loan was sanctioned on 26.09.2014 and Annexure A1 FIR was registered on 11.02.2022, alleging that the accused have committed the offences punishable under Sections 406, 420, 465, 468 and 471 r/w Section 34 of the IPC. Thereafter, Annexure A2 refer report was filed on 09.09.2022 and the second respondent was given notice on the same day. But, Annexure A3 FIR is seen registered on 19.11.2022 on very same set of allegations as in Annexure 1 FIR. B.A.No.10337 of 2023 ## -:11:- 12. The second respondent has stated in the bail objection report that the first accused Company was maintaining an inflated stock value, which was noticed between the period from 31.03.2020 to 30.11.2020. Accordingly, a forensic audit was conducted, and the second respondent decided to register Annexure A1 FIR. 13. Admittedly, the materials placed on record also establish that by Annexure A4 order of the NCLT, the first accused has been ordered to be liquidated and a liquidator has been appointed. The second respondent has also approached the NCLT and filed PIRP filing No.3214177/00660/2023, staking their claim in the assets of the Company. ## 14. **Satishchandra Ratanlal Shah’s** case (Supra) the Hon’ble Supreme Court has held as follows: “14. Now coming to the charge under Section 415punishable under Section 420 of IPC. In the context of contracts, the distinction between mere breach of contract and cheating would depend upon the fraudulent inducement and mens rea. (SeeHaridaya Ranjan Prasad Verma V. State of Bihar, (2000 KHC 1121 : 2000 (4) SCC 168 : AIR B.A.No.10337 of 2023 ## -:12:- 2000 SCC Cri) 786 : 2000 CriLJ 2983). In the case before us, admittedly the appellant was trapped in economic crisis and therefore, he had approached the respondent no. 2 to ameliorate the situation of crisis. Further, in order to recover the aforesaid amount, the respondent no. 2 had instituted a summary civil suit seeking recovery of the loan amount which is still pending adjudication. The mere inability of the appellant to return the loan amount cannot give rise to a criminal prosecution for cheating unless fraudulent or dishonest intention is shown right at the beginning of the transaction, as it is this mens rea which is the crux of the offence. Even if all the facts in the complaint and material are taken on their face value, no such dishonest representation or inducement could be found or inferred. 15. Moreover, this Court in a number of cases has usually cautioned against criminalizing civil disputes, such as breach of contractual obligations [refer to Gian Singh v. State of Punjab, (2012 (10) SCC 303 : 2012 (4) KHC SN 11 : 2012 KLD 688 : 2012 (4) KLJ 141 : 2012 (4) KLT 108 : 2012 (9) SCALE 257 : 212 CriLJ 4934). The legislature intended to criminalize only those breaches which are accompanied by fraudulent, dishonest or deceptive inducements, which resulted in involuntary and inefficient transfers, under Section 415 of IPC.” ## 15. Recently, in **Sachin Garg V. State of U.P** **[(2024) KHC Online 6046],** the Honourable Supreme Court has held that the mere breach of contract will not B.A.No.10337 of 2023 ## -:13:- constitute the offence of cheating. The above legal position has been reiterated by the Hon’ble Supreme Court in a plethora of judgments. 16. The parameters to grant an order of pre-arrest bail have been succinctly laid down by the Hon’ble Supreme Court in **Siddharam Satlingappa Mhetre v. State of Maharashtra** [(2011) 1 SCC 694] in the following lines: **111.** No inflexible guidelines or straitjacket formula can be provided for grant or refusal of anticipatory bail. We are clearly of the view that no attempt should be made to provide rigid and inflexible guidelines in this respect because all circumstances and situations of future cannot be clearly visualised for the grant or refusal of anticipatory bail. In consonance with the legislative intention the grant or refusal of anticipatory bail should necessarily depend on the facts and circumstances of each case. As aptly observed in Satishchandra Ratanlal the Constitution Bench decision in Sibbia case [(1980) 2 SCC 565 : 1980 SCC (Cri) 465] that the High Court or the Court of Session has to exercise their jurisdiction under Section 438 CrPC by a wise and careful use of their discretion which by their long training and experience they are ideally suited to do. In any event, this is the legislative mandate which we are bound to respect and honour. **112** . The following factors and parameters can be B.A.No.10337 of 2023 ## -:14:- taken into consideration while dealing with the anticipatory bail: (i) The nature and gravity of the accusation and the exact role of the accused must be properly comprehended before arrest is made; (ii) The antecedents of the applicant including the fact as to whether the accused has previously undergone imprisonment on conviction by a court in respect of any cognizable offence; (iii) The possibility of the applicant to flee from justice; (iv) The possibility of the accused's likelihood to repeat similar or other offences; (v) Where the accusations have been made only with the object of injuring or humiliating the applicant by arresting him or her; (vi) Impact of grant of anticipatory bail particularly in cases of large magnitude affecting a very large number of people; (vii) The courts must evaluate the entire available material against the accused very carefully. The court must also clearly comprehend the exact role of the accused in the case. The cases in which the accused is implicated with the help of Sections 34 and 149 of the Penal Code, 1860 the court should consider with even greater care and caution because overimplication in the cases is a matter of common knowledge and concern; (viii) While considering the prayer for grant of anticipatory bail, a balance has to be struck between two factors, namely, no prejudice should be caused to the free, fair and full investigation and there should be prevention of harassment, humiliation and unjustified detention of the accused; (ix) The court to consider reasonable apprehension of tampering of the witness or apprehension of threat to the complainant; B.A.No.10337 of 2023 ## -:15:- (x) Frivolity in prosecution should always be considered and it is only the element of genuineness that shall have to be considered in the matter of grant of bail and in the event of there being some doubt as to the genuineness of the prosecution, in the normal course of events, the accused is entitled to an order of bail. **126** . We deem it appropriate to reiterate and assert that discretion vested in the court in all matters should be exercised with care and circumspection depending upon the facts and circumstances justifying its exercise. Similarly, the discretion vested with the court under Section 438 CrPC should also be exercised with caution and prudence. It is unnecessary to travel beyond it and subject the wide power and discretion conferred by the legislature to a rigorous code of self-imposed limitations. 17. On an overall consideration of the facts, the materials placed on record, the rival submissions made across the bar, especially on comprehending the facts that the loan was sanctioned by the second respondent as early as on 26.09.2014 and the second respondent had no demur or complaint till 11.02.2022, that the Thrissur East Police had investigated the case and filed Annexure A2 refer report after analysing the entire B.A.No.10337 of 2023 ## -:16:- materials, that the petitioners have co-operated with the investigation, that the petitioners do not have any criminal antecedents, that the claims for recovery of money is pending before the NCLT and the Debt Recovery Tribunal, that the prosecution has no case the petitioners would flee from justice and that no recovery is found necessary, I am of the definite view that the petitioners’ custodial interrogation is not necessary. Therefore, I am inclined to allow the application, but subject to stringent conditions. In the result, the application is allowed subject to the following conditions: i) The petitioners are directed to surrender before the Investigating Officer within one week from today. ii) In the event of the petitioners’ arrest, the Investigating Officer shall produce them before the jurisdictional court on the date of surrender itself. iii) On such production, the jurisdictional court shall release the petitioners on bail on them executing a bond B.A.No.10337 of 2023 ## -:17:- for Rs.1,00,000/- (Rupees One Lakh only) each with two solvent sureties for the like amount each, to the satisfaction of the jurisdictional court; iv) The petitioners shall co-operate with the investigation and make themselves available for interrogation and for the purpose of investigation as and when the Investigating Officer directs; v). The petitioners shall not intimidate witnesses or interfere with the investigation in any manner; vi). The petitioners shall not get involved in any other offence while on bail. vii). In case of violation of any of the conditions mentioned above, the jurisdictional court shall be empowered to consider the application for cancellation of bail, if any filed, and pass orders on the same, in accordance with law. viii). Applications for deletion/modification of the bail conditions shall also be filed before the court below. (ix) Needless to mention, it would be well within the B.A.No.10337 of 2023 ## -:18:- powers of the Investigating Officer to investigate the matter and, if necessary, to effect recoveries on the information, if any, given by the petitioners even while the petitioners are on bail as laid down by the Hon'ble Supreme Court in **Sushila Aggarwal v. State (NCT of Delhi) and another [2020 (1) KHC 663].** (x) Needless to say, any observations made in this order is only for the purpse of deciding the application and the same shall not be construed as an expression on the merits of the case to be decided by the Courts. **Sd/C.S.DIAS, JUDGE** mtk/08.02.24