IN THE SUPREME COURT OF INDIA
CRIMINAL APPELLATE JURISDICTION
SERIOUS FRAUD INVESTIGATION OFFICE …. APPELLANT(S)
VERSUS
ADITYA SARDA .…RESPONDENT(S)
A bench of Justices Bela M. Trivedi and Satish Chandra Sharma
CRIMINAL APPEAL NO. OF 2025
(@ SPECIAL LEAVE PETITION (CRIMINAL) NO. 13956
of 2023)
Introduction
The Supreme Court held that bail, including anticipatory bail, cannot be granted for an offence under Section 447 (punishment for fraud) of the Companies Act 2013 unless twin conditions are satisfied.
In a landmark decision, the Supreme Court of India, in Serious Fraud Investigation Office vs. Aditya Sarda & Others (2025 INSC 477), delivered a significant ruling clarifying the stringent requirements for granting bail, including anticipatory bail, under Section 447 of the Companies Act, 2013. The judgment emphasized the mandatory compliance with the “twin conditions” prescribed under Section 212(6) of the Act, aligning with the judicial standards established under the Prevention of Money Laundering Act, 2002 (PMLA).
This decision holds far-reaching implications for the legal treatment of white-collar crimes and economic offences, underscoring the judiciary’s resolve in tackling complex corporate frauds with rigor and procedural caution.
Background
The case stems from a massive financial scandal involving the Adarsh Credit Cooperative Society Limited (ACCSL) and its associated companies. The Serious Fraud Investigation Office (SFIO), following directions from the Ministry of Corporate Affairs (MCA), investigated 125 companies of the Adarsh Group. The investigation revealed that ACCSL, a Multi-State Credit Cooperative Society, had disbursed illegal loans worth approximately Rs. 1700 crores to its own controlled entities using forged documentation.
The fraudulent transactions not only violated established financial norms but also exposed systemic exploitation and siphoning of funds collected from over 20 lakh small depositors. Subsequently, the SFIO filed a comprehensive criminal complaint under multiple sections of the Companies Act, 2013, Companies Act, 1956, Limited Liability Partnership Act, 2008, and the Indian Penal Code.
Legal Framework: Section 447 and Section 212(6)
Section 447 of the Companies Act prescribes severe punishment for fraud, including imprisonment for a term not less than six months (which may extend up to ten years), and a fine that could amount to three times the amount involved in the fraud.
Section 212(6) provides that:
“Notwithstanding anything contained in the Code of Criminal Procedure, 1973, an offence covered under section 447 shall be cognizable and no person accused of such offence shall be released on bail unless:
(i) the Public Prosecutor has been given an opportunity to oppose the application for such release; and
(ii) where the Public Prosecutor opposes the application, the Court is satisfied that there are reasonable grounds for believing that he is not guilty and is not likely to commit any offence while on bail.”
These stringent bail conditions mirror those under Section 45 of the PMLA, which have been upheld as constitutionally valid in the landmark judgment of Vijay Madanlal Choudhary vs. Union of India, 2022.
Facts of the Case
- The Special Court took cognizance of offences and issued bailable warrants, which were repeatedly evaded by the accused.
- Non-bailable warrants and proclamation orders under Section 82 CrPC were later issued against several accused for non-compliance and absconding behavior.
- The High Court granted anticipatory bail to many of the respondents, without adequately considering the mandatory twin conditions.
- The SFIO challenged these High Court orders in the Supreme Court.
Supreme Court’s Analysis and Judgment
The apex court, led by Justices Bela M. Trivedi and Satish Chandra Sharma, meticulously examined the case, focusing on three central issues:
- Applicability of Section 212(6): The Court held that Section 212(6) applies not only to regular bail but also to anticipatory bail, citing precedents like Vijay Madanlal Choudhary and Union of India vs. Kanhaiya Prasad. It categorically stated that the twin conditions are mandatory and cannot be bypassed.
- Conduct of the Accused: The Court was critical of the respondents’ conduct, noting repeated evasion of warrants and non-cooperation with judicial processes. It termed such behavior a clear obstruction of justice.
- High Court Orders: The Supreme Court found the High Court’s reasoning flawed, particularly in differentiating between the PMLA and the Companies Act. The Court emphasized that both statutes incorporate similarly restrictive bail provisions due to the grave nature of economic offences.
Consequently, the Supreme Court set aside the anticipatory bail granted to several accused and upheld the requirement of strict compliance with Section 212(6).
Section 212(6) of the Companies Act says that crimes under Section 447 (which deals with fraud) are serious and treated as cognizable offences—this means the police can arrest without a warrant and start an investigation without the court’s permission.
For anyone accused of such crimes to get bail, they must meet two strict conditions:
- The Public Prosecutor must be given a chance to object to the bail request.
- If the Prosecutor does object, the court must be convinced that:
- The person is probably not guilty, and
- The person is unlikely to commit another offence if released on bail.
A Supreme Court bench of Justices Bela M. Trivedi and Satish Chandra Sharma said these bail conditions are mandatory—they must be followed in every case.
They referred to an earlier case, Vijay Madanlal Choudhary vs. Union of India, where the Supreme Court had upheld similar bail conditions under the Prevention of Money Laundering Act (PMLA), 2002. In that case too, it was made clear that such strict rules for bail must be followed, even when someone is applying for anticipatory bail (bail before arrest).
Comparative Jurisprudence
The judgment aligns with the Court’s earlier approach in economic offence cases, such as:
- P. Chidambaram vs. Directorate of Enforcement: Anticipatory bail not a matter of right in grave economic offences.
- Y.S. Jagan Mohan Reddy vs. CBI: Economic offences are serious and require a cautious bail approach.
- Nimmagadda Prasad vs. CBI: Emphasized societal damage caused by white-collar crimes.
Implications
This judgment significantly alters the judicial approach to bail under the Companies Act:
- It affirms that anticipatory bail is subject to stringent scrutiny in economic offence cases.
- High Courts must now explicitly address the twin conditions before granting bail under Section 447.
- The ruling serves as a deterrent against attempts to evade legal processes and undermines the misuse of anticipatory bail as a shield in corporate frauds.
Critique and Future Outlook
While the judgment fortifies the legal architecture against corporate fraud, it also raises concerns about potential misuse of stringent bail provisions to stifle legitimate business activity or harass accused individuals. The pendency of constitutional challenges to Section 212(6) suggests ongoing judicial engagement with balancing individual liberties and economic integrity.
The case underscores the judiciary’s acknowledgment of the gravity of economic offences and its intent to ensure accountability through procedural stringency. It also sends a strong message about respecting the sanctity of judicial summons and cooperation with investigative agencies.
Conclusion
The Supreme Court’s decision in SFIO vs. Aditya Sarda marks a watershed moment in India’s corporate criminal jurisprudence. It reinforces the principle that bail in serious economic offences cannot be routine and must conform to rigorous statutory safeguards. As corporate frauds grow in scale and complexity, this ruling ensures that legal frameworks remain robust and responsive to evolving economic realities.
This judgment, together with the Court’s previous rulings, cements a jurisprudential shift toward stricter compliance and accountability in corporate governance and financial integrity.
