Adarsh SFIO Bailable Warrant

Podcast on Adarsh SFIO Bailable Warrant

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(i) Introduction

This briefing article concerns a batch of sixteen criminal appeals before the Hon’ble Hon’ble Supreme Court of India in the year 2025, specifically Criminal Appeal No. of 2025 (@ Special Leave Petition (Criminal) No. 13956 of 2023), with the Serious Fraud Investigation Office (SFIO) as the Appellant and Aditya Sarda as the Respondent, along with several other connected appeals. All these appeals are interconnected and arise from proceedings in CIS No. COMA/5/2019 pending before the Special Judge, Gurugram.

The core issue revolves around a "brazen attempt" by the respondents-accused to stall criminal proceedings initiated against them for serious economic offenses. This was done by not respecting summons/warrants issued by the Learned Special Court and thereby obstructing the administration of justice.

The Appellant, Serious Fraud Investigation Office (SFIO), is a statutory body established under Section 211 of the Companies Act of 2013. The Ministry of Corporate Affairs (MCA) directed the SFIO to investigate the affairs of 125 Companies of Adarsh Group in June 2018, and later expanded the investigation to include 20 other companies and two persons in February 2019.

Upon completion of its investigation on May 9^th, 2019, the SFIO submitted a report to the MCA recommending prosecution. Subsequently, on May 18, 2019, the SFIO filed a Criminal Complaint (COMA/5/2019) in the Learned Special Court at Gurugram, impleading 181 accused, including the respondents in these appeals. The complaint alleged various offenses under the Companies Act (1956 and 2013) and the Indian Penal Code.

The allegations primarily centre on the Adarsh Credit Cooperative Society Limited (ACCSL), a Multi-State Credit Cooperative Society allegedly founded and controlled by Mukesh Modi, his family, and associates. This society accepted deposits from largely low to middle-income individuals, accumulating Rs. 9253 crores in outstanding deposits as of May 31, 2018. The controllers of ACCSL, including Mukesh Modi and Rahul Modi, allegedly incorporated around 125 Adarsh Group of Companies, controlling them through their directorships or those of their associates. The investigation revealed that funds to the tune of Rs. 1700 crores were given by ACCSL as illegal loans to 70 of its own controlled Adarsh Group of Companies and other groups, contrary to the legal position that a company cannot be a member of a multi-state credit cooperative society, and thus loans could not be legally given to them. The total outstanding balance for these illegal loans was Rs. 4120 crores as of March 31, 2018. 

(ii) Cognizance by the Learned Special Court

The Learned Special Court took cognizance of all alleged offenses under the Companies Act and IPC on June 3^rd . 2019, and initially issued bailable warrants for Rs. 10,000 against all accused, directing their appearance on July 30^th, 2019. Due to alleged clerical errors, the order was corrected on July 11^th, 2019. When the respondents-accused allegedly did not allow the bailable warrants to be executed by hiding themselves or not being available at their given addresses, and possibly colluding with process servers, the Learned Special Court had to issue non-bailable warrants and, in some cases, initiate proclamation proceedings against them.

(iii) Arguments by Both the Parties

Arguments by the Appellant (Serious Fraud Investigation Office - SFIO):

• Obstruction of Justice: The SFIO argued that the Respondents-Accused made a "brazen attempt" to stall criminal proceedings for serious economic offenses by disrespecting summons and warrants issued by the Learned Special Court, thereby obstructing the administration of justice.

• Avoidance of Process: The SFIO highlighted that the bailable and non-bailable warrants could not be executed because the Respondents were not available at their last known addresses, hiding themselves, or their houses were locked, and in some instances, they allegedly colluded with process servers.

• Awareness of Proceedings: The SFIO contended that the Respondents’ claim of not being aware of the proceedings was falsified by the fact that they filed anticipatory bail applications before the Learned Special Court.

• No Justification for Non-Appearance: There was no justification provided by the Respondents for not appearing before the Learned Special Court after their anticipatory bail applications were rejected by that Ld. Court.

• Mandatory Twin Conditions for Bail: The SFIO emphasized that offenses under Section 447 of the Companies Act are cognizable, and Section 212(6) of the Companies Act, 2013, imposes mandatory "twin conditions" for bail. These conditions require that the Public Prosecutor must be given an opportunity to oppose bail, and if opposed, the court must be satisfied that there are reasonable grounds to believe the accused is not guilty and is not likely to commit any offense while on bail. These conditions are applicable even in anticipatory bail proceedings. The SFIO asserted that the High Court's orders granting bail were in utter disregard of these mandatory conditions and the respondents' conduct.

• Perversity of High Court Orders: The SFIO argued that the High Court's orders were perverse and liable to be set aside because they were cryptic, did not advert to the facts, or consider the restrictive bail conditions.

• Exception for Specific Respondents: The SFIO fairly conceded that in the cases of Mahesh Dutt Sharma (SLP Crl. No.15326/2023), Akshat Singh (SLP Crl. No.13973/2023), and Naveen Kumar (SLP Crl. No.13974/2023), no non-bailable warrants or proclamation proceedings were initiated (Mahesh Dutt Sharma), or the Learned Special Court itself had granted anticipatory bail which the High Court upheld (Akshat Singh and Naveen Kumar).

Arguments by the Respondents (Accused):

• Lack of Awareness: The Respondents contended that they were not aware about the criminal proceedings. (This argument was rejected by the Hon’ble Court).

• Summons vs. Warrants: The respondents attempted to argue, relying on Tarsem Lal vs. Directorate of Enforcement Jalandhar Zonal Office, that if they were not arrested by the SFIO during the investigation, the Learned Special Court should have issued summons only, not warrants, when taking cognizance of the offenses. (This argument was rejected by the Ld. Court).

(iii) Legal Issues/Questions the Hon’ble Court Answered

The Hon’ble Hon’ble Supreme Court addressed several critical legal questions regarding criminal procedure and the grant of anticipatory bail, particularly in the context of serious economic offenses:

• Discretion of Court in Issuing Process (Summons vs. Warrants):

    ◦ The Hon’ble Court clarified that under Section 204 of the Code of Criminal Procedure (Cr.P.C.), when a Magistrate takes cognizance of an offense and finds sufficient ground for proceeding in a warrant case, the Court has the discretion to issue either a warrant or a summons for the accused to appear.

    ◦ It rejected the argument that a Court must first issue a summons, even in a warrant case, regardless of the offense's gravity.

    ◦ The Court reiterated that a non-bailable warrant can be issued if it is reasonable to believe that the person will not voluntarily appear, or if police authorities are unable to find the person, or if the person could harm someone if not immediately taken into custody.

    ◦ The exercise of this discretion must be judicial, considering factors such as the nature and seriousness of the offense, the character of the evidence, circumstances peculiar to the accused, the possibility of absconding, and the larger interest of the public and the State.

• Principles for Granting Anticipatory Bail, especially in Economic Offenses:

    ◦ Extraordinary Power: The Court emphasized that the power to grant anticipatory bail under Section 438 Cr.P.C. is an extraordinary power and should be exercised sparingly and only in exceptional cases, not as a matter of routine.

    ◦ Not a Fundamental Right: The right to anticipatory bail is a statutory right, not an essential ingredient of Article 21 of the Constitution.

    ◦ Balance of Rights: Courts must maintain a delicate balance between safeguarding an individual's personal liberty and the larger societal interest in maintaining law and order.

    ◦ Economic Offenses as a Separate Class: The Court reiterated that economic offenses constitute a "class apart" and require a different approach to bail. They involve deep-rooted conspiracies, huge losses of public funds, and seriously affect the country's economic fabric, posing a significant threat to its financial health. Such offenses are considered grave, committed with "cool calculation and deliberate design".

    ◦ Impact of Abscondence/Proclamation: The Court strongly held that if an accused person absconds, creates hindrances in the execution of warrants, or conceals themselves, they should not be granted the privilege of anticipatory bail, especially when prima facie involved in serious economic or heinous offenses.

    ◦ Seriousness of Warrants/Proclamation: High Courts should seriously consider the fact that non-bailable warrants have been issued and proclamation proceedings initiated when evaluating anticipatory bail applications for such accused.

    ◦ Mandatory Conditions for Section 447 Offenses: For offenses covered under Section 447 of the Companies Act, 2013, which are cognizable, Section 212(6) mandates "twin conditions" for bail. These conditions are: (i) the Public Prosecutor must be given an opportunity to oppose the bail application; and (ii) if opposed, the court must be satisfied that there are reasonable grounds to believe the accused is not guilty and is not likely to commit any offense while on bail. The Court emphasized that these restrictive conditions are mandatory and apply even to anticipatory bail proceedings.

    ◦ Perverse Orders: The Court noted that cryptic orders granting bail without addressing the facts or considering these restrictive conditions are perverse and liable to be set aside.

    ◦ Duty to Abide by Law: The principle that "law aids only the abiding and certainly not its resistants" was underscored, stating that anyone subject to a chargesheet or summons is bound to submit to the authority of law and cooperate with the courts.

(iv) Final Observations of the Court

The Hon’ble Hon’ble Supreme Court made the following key observations and conclusions:

• The High Court's impugned orders granting anticipatory bail were deemed "perverse and untenable at law". This was primarily because the High Court had "utter disregard" for the mandatory conditions contained in Section 212(6) of the Companies Act and also ignored the "conduct of the respondents-accused".

• The High Court failed to consider the detailed proceedings and orders passed by the Special Court to secure the presence of the accused respondents.

• The Hon’ble Hon’ble Supreme Court affirmed that judicial time is valuable, and accused persons are "duty bound to cooperate the trial courts" and appear when required. Avoiding execution of summons or warrants, disobeying court orders, and attempting to delay proceedings were categorized as "interfering with and causing obstruction in the administration of justice".

• Reiterating its stance from Srikant Upadhyay's case, the Court stated that when a warrant of arrest is issued or proclamation proceedings are initiated, the accused "would not be entitled to invoke, except in exceptional cases, the extraordinary power of the court to grant anticipatory bail". It firmly stated that "Granting anticipatory bail is certainly not the rule".

• The Respondents-Accused, who had "continuously avoided to follow the due process of law, by avoiding attendance in the Court, by concealing themselves and thereby attempting to derail the proceedings," were found "not entitled to the anticipatory bail".

• The Hon’ble Supreme Court set aside the High Court's orders dated March 29^th, 2023, and April 20^th , 2023, that had granted anticipatory bail to the concerned accused in most of the appeals.

• The Respondents-Accused were directed to surrender themselves before the Ld. Special Court within one week from the date of the Hon’ble Supreme Court's judgment (April 9^th, 2025).

• The Hon’ble Court clarified that if the respondents file bail applications upon surrender, the Special Court should decide them "in accordance with law," and the Hon’ble Hon’ble Supreme Court had not expressed any opinion on the merits of the case.

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FAQ'S

What is the primary issue addressed in this Hon’ble Hon’ble Supreme Court case?

The primary issue in this Hon’ble Supreme Court case is the "brazen attempt" by respondents (accused individuals) to obstruct criminal proceedings related to serious economic offenses. This obstruction was achieved by consistently disrespecting summons and warrants issued by the Special Court, thereby delaying the administration of justice. The case specifically deals with the High Court's granting of anticipatory bail to these absconding accused, despite the Special Court having initiated proclamation proceedings against them.

Who is the Serious Fraud Investigation Office (SFIO) and what was their role in this case?

The Serious Fraud Investigation Office (SFIO) is a statutory body established under Section 211 of the Companies Act of 2013. In this case, the Ministry of Corporate Affairs directed the SFIO to investigate the affairs of 125 companies of the Adarsh Group and subsequently 20 other companies and two individuals. Upon completing its investigation, the SFIO submitted a report recommending prosecution and filed a criminal complaint in the Special Court at Gurugram against 181 accused, including the respondents in these appeals, for various offenses under the Companies Act (1956 and 2013) and the Indian Penal Code (IPC).

What are the core allegations against the Adarsh Group of Companies and the accused individuals?

The core allegations center around the Adarsh Credit Cooperative Society Limited (ACCSL), founded and controlled by Mukesh Modi and his associates. ACCSL, which had over 20 lakh members and Rs. 9253 crores in outstanding deposits, allegedly gave illegal loans totaling Rs. 1700 crores to its own controlled 70 Adarsh Group companies and other entities. This was done despite companies not being permitted to be members of a multi-state credit cooperative society, making the loans contrary to regulations. The total outstanding balance for these illegal loans was Rs. 4120 crores as of March 31, 2018. Furthermore, it's alleged that these illegal loans were obtained through forged financial/loan documents, and the funds were siphoned off by the directors in connivance with other accused parties, showing these funds on balance sheets as "loans taken from a financial institution."

How did the accused individuals initially respond to the legal proceedings?

Initially, after the SFIO filed the criminal complaint, the Special Court took cognizance of the alleged offenses and issued bailable warrants for the accused to appear. However, the respondents-accused allegedly did not allow these bailable warrants to be executed, reportedly by hiding themselves and not being available at their given residential addresses, potentially in collusion with process servers. This led the Special Court to repeatedly issue non-bailable warrants and, in some cases, initiate proclamation proceedings against the absconding accused.

What is "anticipatory bail" and why is its granting controversial in this case?

Anticipatory bail is a pre-arrest bail, a direction issued by a High Court or Court of Session to release a person on bail in the event of their arrest for a non-bailable offense. In this case, its granting is controversial because most of the accused had previously had their anticipatory bail applications rejected by the Special Court and had consistently absconded, avoiding the execution of warrants and the initiation of proclamation proceedings. The Hon’ble Supreme Court emphasizes that anticipatory bail should be granted sparingly, especially in serious economic offenses, and notes that the High Court granted it "in utter disregard" of mandatory conditions, the accused's conduct, and settled legal positions.

What are the "twin conditions" for bail under Section 212(6) of the Companies Act, and how do they relate to this case?

Section 212(6) of the Companies Act, 2013, states that offenses covered under Section 447 (Punishment for fraud) are cognizable, and an accused person shall not be released on bail unless two mandatory conditions are met:

1. The Public Prosecutor must be given an opportunity to oppose the bail application.

2. If the Public Prosecutor opposes, the court must be satisfied that there are reasonable grounds for believing the accused is not guilty of the offense and is not likely to commit any other offense while on bail.

These "twin conditions" are mandatory and apply even to anticipatory bail proceedings. The Hon’ble Supreme Court found that the High Court's orders granting anticipatory bail in this case were in "utter disregard" of these mandatory conditions, making them "perverse and untenable at law."

Why did the Hon’ble Hon’ble Supreme Court dismiss some of the SFIO's appeals regarding specific respondents?

The Hon’ble Supreme Court dismissed appeals against three respondents: Mahesh Dutt Sharma, Akshat Singh, and Naveen Kumar. In the case of Mahesh Dutt Sharma, the SFIO conceded that no non-bailable warrant had been issued against him, nor had any proclamation proceedings been initiated. For Akshat Singh and Naveen Kumar, the Special Court itself had granted them anticipatory bail, and the High Court had subsequently dismissed the SFIO's petitions to cancel their bail. Given these specific circumstances where the lower courts had already granted bail and certain procedural steps for absconding individuals were not taken (for Sharma), the Hon’ble Supreme Court did not find grounds to overturn those decisions.

What is the Hon’ble Supreme Court's final directive to the accused respondents whose anticipatory bail was set aside?

The Hon’ble Supreme Court's final directive is that the concerned accused respondents, whose anticipatory bail orders were set aside, are directed to surrender themselves before the Special Court within one week from the date of the judgment (April 9, 2025). The Court clarified that any bail applications they subsequently file will be decided by the Special Court in accordance with the law, without expressing any opinion on the merits of the case itself.