Balancing liberty and economic justice: Supreme Court clarifies approach to bail in financial crimes

The case stems from a complaint filed by Rakesh Mittal (complainant) in 2023.² The complainant alleged that he had supplied foodgrains worth INR 11,52,38,156 to the accused persons but received only INR 5,02,57,000, leaving a significant amount unpaid. The cheques issued to clear the outstanding amount were also dishonoured, and it was claimed that the accused had conspired to cheat the complainant by using forged documents, false addresses, and fabricated Aadhaar Cards.

After the First Information Report (FIR) was registered, one of the accused, Ajay Pal Gupta, went absconding for over 20 months. He was finally arrested in August 2025 after a reward was declared for his arrest. The Sessions Judge, Bahraich, rejected his initial bail application and noted that he had deliberately suppressed the fact that three other FIRs were also registered against him. However, the High Court subsequently granted him bail, considering parity with the co-accused, who had already been granted bail, the period of his incarceration, and the fact that the chargesheet had been filed in an offence triable by a Magistrate.

This bail order was appealed before the Supreme Court. The counter-affidavit filed by the State of Uttar Pradesh detailed the extensive criminal history of the accused. It revealed that he operated under multiple aliases and possessed fake Aadhaar and PAN cards with altered names for himself and his father. It was also argued that the accused had previously been granted bail in another case³ but had failed to cooperate with the trial, leading to a non-bailable warrant against him. Even the surety furnished by him was found to be fictitious.

The appeal directly challenged the High Court’s order granting bail and was not an application seeking cancellation of bail on the grounds of any subsequent misconduct by the accused. In fact, the Supreme Court stayed the operation of the impugned bail order at the first hearing, ensuring that the accused remained in custody pending the final decision.

Typically, when a court grants bail to an accused, the remedy available to the complainant or the prosecution is to seek cancellation of bail under Section 439(2) of the Code of Criminal Procedure, 1973 (CrPC). This cancellation is sought when an accused misuses their liberty, for instance, by tampering with evidence, threatening witnesses, or committing another offence while on bail. These are often referred to as “supervening circumstances.”

However, in this case, the Supreme Court highlighted a crucial distinction. The present appeal was not an application for cancellation of bail on the basis of supervening circumstances, but a challenge to the legality and justifiability of the bail order itself. The Court affirmed that it possesses the inherent power to set aside a bail order that is perverse, illegal, or has been passed without considering relevant factors, even if there are no supervening circumstances.

The Supreme Court relied on its previous decision in Dolat Ram v State of Haryana,⁴ in which it was held that the power to cancel bail is not confined to the occurrence of supervening events. One of the grounds for exercising this power is where the past criminal record and the conduct of the accused are completely ignored while granting bail. Further, relying upon its judgment in Neeru Yadav v State of U.P.,⁵ the Supreme Court distinguished between examining an order granting bail which was “unjustified, illegal or perverse” and cancelling bail due to subsequent misconduct. An order falls in the first category if relevant factors were not considered or if it was founded on irrelevant considerations. In such instances, a superior court has the authority to set aside the order.

A significant aspect of this Judgment is its extension of the principles of bail, which are typically applied to heinous offences, to cases of serious economic fraud.

The Supreme Court acknowledged that some of the precedents it was relying upon, such as Neeru Yadav and Sudha Singh v State of U.P.,⁶ involved grave offences like murder and contract killing. Despite this, the Court opined that the “value of life and liberty of members of society is not limited only to their ‘person’ but would also extend to the quality of their life, including their economic well-being.” The Supreme Court held that in offences of a pecuniary nature, where conmen systematically cheat innocent people of their hard-earned money, the courts must weigh the same factors as they would in cases of heinous crimes.

The Supreme Court classified the accused as a “career criminal and a menace to society” whose nefarious intentions were evident from his use of diverse aliases and fake identities. The Court also observed that while the immediate victim may be an individual, “in the ultimate eventuate, it is the society which is the victim,” as financial crimes create a “dent in the law-and-order situation.” Therefore, the Court concluded that granting bail to habitual offenders, whose conduct reflects a pattern of exploiting others, poses a risk not only to individuals but also to the economic well-being and stability of society.

One of the primary grounds on which the High Court granted bail was parity, as two co-accused had already been granted bail. The Supreme Court strongly disapproved of this mechanical approach. It held that the High Court “ought not to have blindly extended the parity principle to him without considering the particular and distinctive features of his individual case.”

The Supreme Court emphasised that the doctrine of parity is not a binding rule of law but a guideline based on the principle of fairness. Its application requires a thorough comparison of the individual roles, criminal antecedents, and overall conduct of the accused seeking bail with that of the co-accused who has been granted bail. In the present case, the “distinctive features” of the accused’s case were manifold and significant:

• He was identified by the investigation as the “principal offender and the mastermind.”
• He had multiple FIRs registered against him, demonstrating his criminal history and that he was a habitual offender.
• His past conduct included absconding from trial and furnishing a fake surety in a previous case.
• He was a fugitive for over 20 months in the present case.

Given these facts, his case was clearly distinguishable from that of the co-accused. The Supreme Court concluded that granting bail solely on parity, while ignoring such overwhelming negative factors, was an improper exercise of discretion.

The Judgment reinforces some basic rules of criminal law and reminds courts that bail is a matter of judicial discretion to be exercised carefully and not mechanically.

Notably, the Judgment reiterates the legal remedy available against perverse bail orders, clarifying that one need not wait for an accused to violate bail conditions to challenge an order that was flawed from inception. Further, by equating the societal harm of large-scale economic fraud with that of heinous crimes, the Judgment recognises the gravity of such offences, which erode public trust and cause widespread financial damage. It also cautions against the indiscriminate use of the parity principle, rightly holding that the individual role and criminal history of an accused cannot be overlooked.

The Judgment is a positive step towards preventing career criminals and masterminds of organised financial crime from being released on bail through mechanical bail orders.