Source: Allahabad High Court 

Why in News?

Recently, the Allahabad High Court in the matter of Kanika Dhingra v. State of U.P. and connected matters has held that the court may deny bail if the offence is an economic offence affecting public at large and a woman holding an influential position cannot be given benefit of Section 437 of the Code of Criminal Procedure, 1973 (CrPC) 

• Section 437 of CrPC is now covered under Section 480 of Bharatiya Nagarik Suraksha Sanhita, 2023 (BNSS) 

What was the Background of Kanika Dhingra vs. State of U.P. and connected matters Case?  

• Three First Information Reports (FIRs) were filed related to alleged fraudulent Goods and Service Tax (GST) registrations and input tax credit claims. 
• The accused are alleged to have created a syndicate that collected SIM cards and personal data to create fake firms by uploading information to the GST portal. 
• Approximately 2,600 fake firms were allegedly registered, involving input tax credit claims of over 4,000 crore rupees. 
• The main accused include Sanjay Dhingra, his wife Kanika Dhingra, and their son Mayank Dhingra. 
• Sanjay Dhingra is alleged to be the chief controller of M/s Good Health Pvt. Ltd., which was allegedly involved in the scam. 
• It was alleged that the two firms, AKS Traders and YOYO Traders, were found to be non-existent and allegedly connected to M/s Good Health Industries Private Limited. 
• Mobile phones used in registering these fake firms were traced back to one of the accused, Deepak Murjani. 
• The applicants, Kanika Dhingra and Mayank Dhingra, are accused of being involved in the conspiracy and benefiting from the fraudulent transactions. 
• Investigations revealed multiple transactions in the accounts of Kanika Dhingra and Mayank Dhingra, totaling approximately 300 crore rupees.  
• The accused are charged under sections 420 (cheating), 467, 468, 471 of Indian Penal Code, 1860 (IPC) and 120B (criminal conspiracy) of the IPC. 
• The prosecution argues that the applicants were part of a larger conspiracy to defraud the government through fake GST registrations and fraudulent input tax credit claims.  
• The defense contends that the applicants have been falsely implicated without credible evidence and that mere money transactions do not prove their involvement in the alleged crimes. 
• Three Bail application based on the above-mentioned allegations were filed by the applicants before the Allahabad High Court.  

What were the Court’s Observations? 

• The Allahabad High Court observed that: 
  • Bail can be denied in cases of economic offences that significantly impact society's economic fabric, especially if the accused holds a position of influence or power. 
  • The benefit of Section 437 of CrPC, which typically allows for bail to be granted to women in non-bailable offences, cannot be extended to women who are powerful or connected to powerful individuals, particularly when the offence affects the public at large. 
  • The case involved a money trail of crores of rupees, which has a large-scale impact on society. This began with the registration of fake firms using Aadhaar and PAN cards of citizens who had not applied for such registrations. 
  • If relatives (in this case, mother and son) knowingly benefit from money or transactions, even without directly participating in the crime, they can be implicated in legal proceedings as an offence against them is made out.  
• The Court also found evidence in the case diary suggesting that the mother and son personally gained from the illegal funds. Thus, it concluded that it couldn't be said they were not guilty simply because they weren't directly involved in registering fake firms. 
• The Court highlighted that money laundering has become a frequent occurrence. If there's evidence that the recipient attempted to conceal the source of funds or participated in transferring money in ways suggesting intentional wrongdoing, it creates circumstantial evidence of involvement in criminal activity.  
• The Court found that the involvement, knowledge, and actions of the applicants following the deposits indicated they were well-connected with Sanjay Dhingra regarding transactions with GST firms registered using fraudulent means. 
• The Court noted that the intention of all the accused in having transactions with fake GST firms was to claim input tax credit fraudulently. 
• The Court observed that the offences under the relevant sections were prima facie made out against the accused and had been adequately investigated by the Investigating Officer after the lodging of FIRs.  
• In light of these observations, the Court denied bail to the applicants, considering the seriousness of the economic offences alleged and the evidence suggesting their involvement in the conspiracy. 

What are the Legal Provisions in relation to Bail? 

Concept of Bail: 

• Bail, a legal provision within CrPC and now BNSS facilitates release from prison pending trial or appeal upon depositing security.  
• Bailable offences guarantee the right to bail, as per Section 436 of the CrPC (this section is now covered under Section 478 of BNSS), while non-bailable offences grant discretion to courts or designated police officers, as outlined in Section 437.  
• Justice V R Krishna Iyer in the case of State of Rajasthan v. Balchand (1977) held that the basic rule is bail, not jail. It referred to a concept which is ‘Bail is a Right and Jail is an exception”.

Section 480(1) of BNSS:

• This section states the provisions related as to when bail may be taken in case of non-bailable offence. 
• Subsection (1) states that if any person is accused of any non-bailable offence is arrested or detained without warrant may be released on bail except: 
  • Clause (1) states that such person shall not be so released if there appear reasonable grounds for Maximum period for which undertrial prisoner can be detained. When bail may be taken in case of non-bailable offence. Believing that he has been guilty of an offence punishable with death or imprisonment for life. 
  • Clause (2) states that such person shall not be so released if such offence is a cognizable offence and he had been previously convicted of an offence punishable with death, imprisonment for life or imprisonment for seven years or more, or he had been previously convicted on two or more occasions of a cognizable offence punishable with imprisonment for three years or more but less than seven years. 
  • It is provided that the person detained under the above clauses can be released on bail if such person is a child, women or is sick or infirm. 
  • It is further if person in Clause(ii) may be released on bail if the court finds it just and proper to do so. 
  • Provided also that the mere fact that an accused person may be required for being identified by witnesses during investigation or for police custody beyond the first fifteen days shall not be sufficient ground for refusing to grant bail if he is otherwise entitled to be released on bail and gives an undertaking that he shall comply with such directions as may be given by the Court. 
  • Provided also that no person shall, if the offence alleged to have been committed by him is punishable with death, imprisonment for life, or imprisonment for seven years or more, be released on bail by the Court under this sub-section without giving an opportunity of hearing to the Public Prosecutor.