whether, in the facts of this case, employees’ dues can take precedence over the claim of the secured creditor in respect of the proceeds from sale of secured assets of the Karkhana under the SARFAESI Act. Under the scheme of the SARFAESI Act, there is nothing to show that a priority is created in favour of banks, financial institutions, and other secured creditors as against a first charge specifically created under any other statute. In view of the foregoing discussion, we summarize our findings as follows: (i) Section 529A of the Companies Act, which gives workers’ dues a priority over all other debts, cannot be applied to the instant case in view of Section 167 of the Societies Act. (ii) Merely by virtue of being recoverable as arrears of land revenue, the employees’ dues, in respect of which a recovery certificate had been issued by the Industrial Court, cannot be treated as a paramount charge in terms of Section 169(1) of the Land Revenue Code. Instead, under 169(2) of the Land Revenue Code, they would take precedence only over unsecured claims. (iii) At the same time, the Appellant-Bank does not enjoy any paramount charge over the sale proceeds either. Instead, as per Section 13(7) of the SARFAESI Act, the sale letter dated 08.03.2010 and the sale certificate dated 14.09.2010 constitute a 22 contract which displaces the order of distribution stipulated under the said provision. (iv) The cumulative effect of these documents is that the Appellant-Bank must pay the employees’ dues out of the sale proceeds from the auctioned property. To this extent, the recovery certificate issued by the Industrial Court on 08.08.2011 may be executed against the Appellant herein. Further, given the significant delay in payment of the salaries to the employees, such recovery shall be made by the Collector within a period of six months from the date of this order. (v) All other dues in respect of the secured property, including any unpaid statutory dues in relation to employees (provident fund, gratuity, bonus, etc.) shall be paid by Respondent No.5 within a period of six months from the date of this order.

whether, in the facts of this case, employees’ dues can take precedence over the claim of the secured creditor in respect of the proceeds from sale of secured assets of the Karkhana under the SARFAESI Act.
Under the scheme of the SARFAESI Act, there is nothing to show that a priority is created in favour of banks, financial institutions, and other secured creditors as against a first charge specifically created under any other statute. 

In view of the foregoing discussion, we summarize our findings as follows:
(i) Section 529A of the Companies Act, which gives workers’ dues a priority over all other debts, cannot be applied to the instant case in view of Section 167 of the Societies Act.
(ii) Merely by virtue of being recoverable as arrears of land revenue, the employees’ dues, in respect of which a recovery certificate had been issued by the Industrial Court, cannot be treated as a paramount charge in terms of Section 169(1) of the Land Revenue Code. Instead, under 169(2) of the Land Revenue Code, they would take precedence only over unsecured claims.
(iii) At the same time, the Appellant-Bank does not enjoy any paramount charge over the sale proceeds either. Instead, as per Section 13(7) of the SARFAESI Act, the sale letter dated 08.03.2010 and the sale certificate dated 14.09.2010 constitute a 22 contract which displaces the order of distribution stipulated under the said provision. 
(iv) The cumulative effect of these documents is that the Appellant-Bank must pay the employees’ dues out of the sale proceeds from the auctioned property. To this extent, the recovery certificate issued by the Industrial Court on 08.08.2011 may be executed against the Appellant herein. Further, given the significant delay in payment of the salaries to the employees, such recovery shall be made by the Collector within a period of six months from the date of this order.
(v) All other dues in respect of the secured property, including any unpaid statutory dues in relation to employees (provident fund, gratuity, bonus, etc.) shall be paid by Respondent No.5 within a period of six months from the date of this order.

1
REPORTABLE

IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 232 OF 2016
The Maharashtra State Co-operative Bank Ltd. ...Appellant
Versus
Babulal Lade & Ors. …Respondents
J U D G M E N T

MOHAN M. SHANTANAGOUDAR, J.
1. This appeal arises out of judgment dated 01.12.2015 passed
by the Nagpur Bench of the High Court of Bombay in W.P. No.
3879/2012. Vide the impugned judgment, the Hon’ble High Court
has directed the issuance of a recovery certificate against the
Appellant herein, thereby modifying the order dated 08.08.2011
passed by the Bhandara Bench, Industrial Court, Maharashtra.
2. The brief facts giving rise to this appeal are as follows:
2.1 Registered under the Maharashtra Co-operative Societies
Act, 1960 (hereinafter ‘Societies Act’), Respondent No. 6 herein,
2
Vainganga Sahakari Sakhar Karkhana Ltd. (hereinafter
‘Karkhana’) had obtained credit facilities from the Appellant-Bank
and mortgaged its properties in return. When it defaulted on the
repayment of the loan, the Appellant-Bank initiated recovery
proceedings on 10.02.2005, by issuing a notice under Section
13(2) of the Securitisation and Reconstruction of Financial Assets
and Enforcement of Security Interest Act, 2002 (hereinafter
‘SARFAESI Act’). Later, on 13.06.2005, the Appellant-Bank took
physical possession of the mortgaged properties of the Karkhana
as per Section 13(4) of the SARFAESI Act.
2.2 Owing to its poor financial condition, on 24.01.2006, the
Karkhana issued a notice to its employees directing them to
proceed on leave without salary w.e.f. 24.02.2006. This was
challenged by representatives of the Karkhana employees
(Respondent Nos. 1 to 3 herein) in ULPA No. 65/2006 filed under
Section 28 read with items 9 and 10 of Schedule IV of the
Maharashtra Recognition of Trade Unions & Prevention of Unfair
Labour Practices Act, 1971 (hereinafter ‘MRTU & PULP Act’). Vide
order dated 24.08.2006, the Industrial Court quashed the notice
and held that it amounted to an unfair labour practice. Further,
noting that Karkhana had not paid salaries to its employees since
3
July 2003, the Industrial Court directed the Karkhana to pay the
unpaid salaries on top priority basis from any funds that may
become available with it.
2.3 On the basis of this order, Respondent Nos. 1 to 3 filed a
miscellaneous application, ULPA No. 5/2007, seeking the issuance
of a recovery certificate against the Karkhana, its Managing
Director (Respondent No. 4 herein), and the Appellant-Bank under
Section 50 of the MRTU & PULP Act. It is to be noted that the
Appellant was arraigned as a party in this proceeding for the first
time. Vide order dated 27.04.2007, the Industrial Court held that
a recovery certificate for unpaid salaries of the Karkhana
employees could not be issued against the Appellant-Bank. It also
refused to issue such a certificate against the Karkhana and its
Managing Director in view of the precarious financial condition of
the Karkhana. However, the Karkhana was directed to pay the
unpaid salaries to the employees on top priority basis, as and when
funds were to become available.
2.4 In the challenge against this order in W.P. No. 4746/2007,
the High Court of Bombay, vide order dated 12.07.2010, held that
recovery could only be made against the Karkhana and not the
Appellant-Bank, as there was no employer-employee relationship
4
between the Bank and the employees. It was further held that the
Industrial Court had erred in relying upon the non-availability of
funds with the Karkhana to refuse the grant of a recovery
certificate, as the relevant consideration for issuance of such a
certificate is the entitlement of the applicants and not the financial
condition of the employer. In view of this, the High Court directed
the issuance of a recovery certificate against the Karkhana and its
Managing Director. Pursuant to this direction, the Industrial
Court, vide order dated 08.08.2011, disposed of ULPA No. 5/2007
by issuing a recovery certificate of Rs.13,89,84,334 against the
Karkhana and its Managing Director. However, the prayer to issue
a recovery certificate against the Appellant-Bank was rejected.
2.5 In the interim period, on 26.08.2010, one of the attached
properties of the Karkhana was auctioned and sold by the
Appellant-Bank to one Purti Power and Sugar Ltd. (Respondent
No. 5 herein). According to the terms and conditions of this sale,
the purchaser had accepted all encumbrances on the property as
agreed upon in the sale letter. It is found that the proceeds from
this sale were appropriated by the Appellant-Bank towards the
amount due to it from the Karkhana.
5
2.6 At the same time, aggrieved by the non-issuance of a
recovery certificate against the Appellant, Respondent Nos. 1 to 3
filed W.P. No. 3879/2012. During the pendency of this petition, on
19.01.2013, an order was passed by the competent authority
under the Societies Act directing the liquidation of the Karkhana.
Finally, vide the impugned judgment dated 01.12.2015, the High
Court disposed of W.P. No. 3879/2012. It was observed that in
terms of Section 50 of the MRTU & PULP Act, the recovery
certificate should have been issued to the Collector for recovering
the amount from the Karkhana and its Managing Director. Thus,
the order of the Industrial Court dated 08.08.2011 was modified
to this extent to clarify that the certificate is to be issued to the
Collector first, who would then proceed to recover the sum as per
the recovery certificate. On the question of whether the Collector
could effectuate such recovery from sale proceeds of the attached
property of the Karkhana, it was held that after the auction sale,
the Appellant-Bank held the proceeds in trust as per Section 13(7)
of the SARFAESI Act and did not have a first charge over them.
Further, it was found that upon the liquidation of the Karkhana
on 19.01.2013, Section 529A of the Companies Act, 1956
(hereinafter ‘Companies Act’) came into operation, thereby
6
according employees’ dues priority over all other dues in respect of
the sale proceeds. In light of this, it was held that the Collector
could recover the said amount of Rs.13,89,84,334 from the sale
proceeds held in trust by the Appellant-Bank. It is against this
order that the instant appeal has been filed.
3. Heard learned Counsel for both the parties.
4. Learned Senior Counsel for the Appellant argued that the
High Court erred in applying Section 529A of the Companies Act,
as Section 167 of the Societies Act specifically bars the application
of the Companies Act to co-operative societies, as is the case with
the Karkhana here. In any case, he submitted that Section 529A
of the Companies Act was misapplied, as the proviso to Section
13(9) of the SARFAESI Act requires the company to be “in
liquidation” at the time of the sale of secured assets for Section
529A to apply. Given that the Karkhana only went into liquidation
on 19.01.2013, i.e. after the sale of its properties in 2010, he
argued that the provision was wrongly applied. In light of this, he
also submitted that there is no other provision that makes
employees’ dues a paramount charge, and the Appellant-Bank,
being a secured creditor, should be given precedence over the
proceeds from the auction sale as per Section 13(7) of the
7
SARFAESI Act. It was also his contention that a claim for unpaid
salaries cannot lie against the Appellant, as there is no employeremployee relationship between the Appellant-Bank and the said
employees.
5. On the other hand, learned Senior Counsel for Respondent
Nos. 1 to 3 drew our attention to Section 50 of the MRTU & PULP
Act, under which the recovery certificate had been issued by the
Industrial Court on 08.08.2011. Noting that this provision makes
employees’ dues recoverable in the same manner as arrears of land
revenue, learned Senior Counsel referred us to Section 169(1) of
the Maharashtra Land Revenue Code, 1966 (hereinafter ‘Land
Revenue Code’), which makes arrears of land revenue a paramount
charge on the land. Relying on this, he submitted that the
employees’ dues, recoverable as arrears of land revenue, should be
given primacy over the claim of the Appellant-Bank while dealing
with the proceeds from the auction sale.
6. In addition to this, learned Counsel for Vainganga Sahakari
Sakhar Karkhana Mazdoor Sangh (Respondent No. 8 herein) relied
on the sale letter dated 08.03.2010, which was issued by the
Appellant-Bank prior to the sale of the properties of the Karkhana.
In this letter, the Appellant-Bank had stated that it would take
8
responsibility for employees’ dues. In light of this, it was argued
that the Appellant cannot be absolved of its liability towards the
payment of employees’ dues. Learned Counsel for the subsequent
purchaser of the property (Respondent No. 5 herein) similarly
relied on this letter to submit that the liability for the payment of
employees’ dues must be placed on the Appellant.
7. In view of the arguments raised and the material on record,
the issue that arises for our consideration in this appeal is
whether, in the facts of this case, employees’ dues can take
precedence over the claim of the secured creditor in respect of the
proceeds from sale of secured assets of the Karkhana under the
SARFAESI Act.
8. At the outset, we find merit in the argument raised by learned
Senior Counsel for the Appellant that the High Court erred in
applying Section 529A of the Companies Act to this case. It would
be apposite to refer to Section 167 of the Societies Act in this
regard:
“167. Companies Act not to apply – For the removal
of doubt, it is hereby declared that the provisions of the
Companies Act, 1956 shall not apply to societies
registered or deemed to be registered; under this Act.”
It is clear that Section 167 creates an express bar on the
applicability of the Companies Act to societies registered under the
9
Societies Act. Given that the Karkhana was a co-operative society
registered under the said Act, we find that Section 167 is squarely
applicable, and the High Court committed a grave error in relying
upon Section 529A of the Companies Act. Thus, the employees
cannot make use of Section 529A of the Companies Act to claim
priority over all other debts of the Karkhana.
9. Against this backdrop, the next question to be considered is
whether the employees’ dues can take priority over other claims by
virtue of being recoverable as arrears of land revenue. Section 50
of the MRTU & PULP Act and Section 169 of the Land Revenue
Code are relevant in this regard. Section 50 of the MRTU & PULP
Act reads as follows:
“50. Recovery of money due from employer – Where
any money is due to an employee from an employer
under an order passed by the Court under Chapter VI,
the employee himself or any other person authorized by
him in writing in this behalf, or in the case of death of
the employee, his assignee or heirs may, without
prejudice to any other mode of recovery, make an
application to the Court for the recovery of money due
to him, and if the Court is satisfied that money is so
due, it shall issue a certificate for the amount to the
Collector, who shall, proceed to recover the same in the
same manner as an arrear of land revenue…”
Section 169 of the Land Revenue Code is reproduced hereunder:
10
“169. Claims of State Government to have
precedence over all others– (1) The arrears of land
revenue due on account of land shall be a paramount
charge on the land and on every part thereof and shall
have precedence over any other debt, demand or claim
whatsoever, whether in respect of mortgage,
judgement-decree, execution or attachment, or
otherwise howsoever, against any land or the holder
thereof.
(2) The claim of the State Government to any monies
other than arrears of land revenue, but recoverable as a
revenue demand under the provisions of this Chapter,
shall have priority over all unsecured claims against any
land or holder thereof.”
10. From a reading of these provisions, it is evident that dues of
employees in respect of which an order has been made by a Court
under Chapter VI of the MRTU & PULP Act are recoverable in the
same manner as arrears of land revenue. It was argued by learned
Senior Counsel for Respondent Nos. 1 to 3 that such treatment of
employees’ dues as arrears of land revenue makes it a charge
paramount to all other claims in view of Section 169(1) of the Land
Revenue Code. In response, learned Senior Counsel for the
Appellant contended that the instant case falls under Section
169(2) of the Land Revenue Code, which deals with monies other
than arrears of land revenue but which is recoverable as a revenue
demand. Since Section 169(2) only accords priority over unsecured
claims, he submitted that the Appellant’s claim, being that of a
11
secured creditor, would still have priority over employees’ dues
recoverable as arrears of land revenue.
10.1 It is important to appreciate that there is a material
difference between arrears of land revenue due on account of land,
and amounts other than arrears of land revenue but recoverable
in the same manner as arrears of land. On a close reading of subsections (1) and (2) of Section 169 of the Land Revenue Code, it
becomes clear that Section 169(1) deals with the former category
of claims and makes them a paramount charge on the land over
all other claims. On the other hand, Section 169(2) deals with the
latter category and gives them priority only over unsecured claims.
10.2 This distinction has also been noted in SICOM Ltd. v.
State of Maharashtra & Anr., (2010) 6 Bom CR 749, where a
division Bench of the High Court of Bombay was called upon to
consider whether sales tax dues of a company in liquidation, which
were recoverable as arrears of land revenue under Section 38-B of
the Bombay Sales Tax Act, 1959, created a first charge. While
discussing the scheme of Section 169 of the Land Revenue Code,
the division Bench drew upon the reasoning of the Constitution
Bench of this Court in Builders Supply Corporation v. Union of
India, AIR 1965 SC 1061 and observed as follows:
12
“10. Perusal of the above quoted provisions shows that
the Maharashtra Land Revenue Code makes a clear
distinction between the sum which is recoverable as a
land revenue and sum which is recoverable as arrears
of land revenue. What creates paramount charge is the
sum which is the amount of land revenue and not the
sum which is recoverable as land revenue. The
Constitution Bench of the Supreme Court in its
judgment in the case of Builders Supply Corporation,
referred to above, in our opinion, has made the position
absolutely clear. Following observations in the case of
Builders Supply Corporation, in our opinion, are
relevant. They read as under:-
“We have referred to this decision, because it
brings out emphatically the real character of
the provisions prescribed by s. 46(2). Section
46(2) does not deal with the doctrine of the
priority of Crown debts at all; it merely
provides for the recovery of the arrears of tax
due from an assessee as if it were an arrear
of land revenue. This provisions cannot be
said to convert arrears of tax into arrears of
land revenue either, all that it purports to do
is to indicate that after receiving the
certificate from the Income-tax Officer, the
Collector has to proceed to recover the
arrears in question as if the said arrears were
arrears of land revenue. We have already
seen that other alternative remedies for the
recovery of arrears of land revenue are
prescribed by sub-sections (3) and (5) of s.
46. In making a provision for the recovery of
arrears of tax, it cannot be said that s. 46
deals with or provides for the principle of
priority of tax dues at all; and so, it is
impossible to accede to the argument that s.
46 in terms displaces the application of the
said doctrine in the present proceedings.”
(emphasis supplied)
13
This difference in the scope of sub-sections (1) and (2) of
Section 169 of the Land Revenue Code was again noted by the High
Court of Bombay in City Co-op Credit & Capital Ltd. & Anr. v.
Official Liquidator of Satwik Electric Controls Pvt Ltd., (2019)
4 Bom CR 274.
10.3 When we look to the facts of the instant case, it is seen that
the recovery certificate issued under Section 50 of the MRTU &
PULP Act only makes employees’ dues recoverable as arrears of
land revenue. Thus, in view of the foregoing discussion, it is clear
that such employees’ dues would fall under the category of claims
captured by Section 169(2), and can only take priority over
unsecured claims.
10.4 Further, as has been held by this Court in Central Bank
of India v. State of Kerala, (2009) 4 SCC 94, only expressly
created statutory first charges under Central and State laws can
take precedence over the claims of secured creditors under the
SARFAESI Act. It is not enough to merely provide for recovery of
dues as arrears of land revenue. Given that Section 50 of the MRTU
& PULP Act falls short of expressly making the employees’ dues a
‘first charge’, it cannot be said that such dues have priority over
the claims of the Appellant-Bank, which is a secured creditor.
14
Thus, we find that under the scheme of the Land Revenue Code
and the MRTU & PULP Act, the employees’ dues cannot claim
priority over the claim of the Appellant-Bank.
11. However, this does not mean that the Appellant-Bank
automatically holds a paramount charge over the proceeds from
the sale of the secured assets. Under the scheme of the SARFAESI
Act, there is nothing to show that a priority is created in favour of
banks, financial institutions, and other secured creditors as
against a first charge specifically created under any other statute.
This has been captured succinctly by this Court in Central Bank
(supra) as follows:
“126. While enacting the DRT Act and the Securitisation
Act, Parliament was aware of the law laid down by this
Court wherein priority of the State dues was recognized.
If Parliament intended to create first charge in favour of
banks, financial institutions, or other secured creditors
on the property of the borrower, then it would have
incorporated a provision like Section 529-A of the
Companies Act or Section 11(2) of the EPF act and
ensured that notwithstanding series of judicial
pronouncements, dues of banks, financial institutions
and other secured creditors should have priority over
the State’s statutory first charge in the matter of
recovery of the dues of sales tax, etc. However, the fact
of the matter is that no such provision has been
incorporated in either of these enactments despite
conferment of extraordinary power upon the secured
creditors to take possession and dispose of the secured
assets without the intervention of the court or Tribunal.
The reason for this omission appears to be that the new
15
legal regime envisages transfer of secured assets to
private companies.”
Thus, in the absence of a paramount charge created in favour
of the employees’ dues under the MRTU & PULP Act, it cannot be
said that the Appellant-Bank automatically gets a first charge
under the SARFAESI Act.
12. In this light, what becomes relevant for the instant case is the
scheme of the SARFAESI Act in relation to the manner of
distributing the money received by the secured creditor through
the sale of secured assets. The following parts of Section 13 of the
SARFAESI Act are relevant in this regard:
13. Enforcement of security interest – (4) In case the
borrower fails to discharge his liability in full within the
period specified in sub-section (2), the secured creditor
may take recourse to one or more of the following
measures to recover his secured debt, namely:— (a) take
possession of the secured assets of the borrower
including the right to transfer by way of lease,
assignment or sale for realising the secured asset…
xxx
(7) Where any action has been taken against a borrower
under the provisions of sub-section (4), all costs,
charges and expenses which, in the opinion of the
secured creditor, have been properly incurred by him or
any expenses incidental thereto, shall be recoverable
from the borrower and the money which is received by
the secured creditor shall, in the absence of any
contract to the contrary, be held by him in trust, to be
applied, firstly, in payment of such costs, charges and
expenses and secondly, in discharge of the dues of the
16
secured creditor and the residue of the money so
received shall be paid to the person entitled thereto in
accordance with his rights and interests.
Section 13(4) of the SARFAESI Act allows a secured creditor
to take possession of the secured assets of a borrower-in-default,
including the right to transfer them by way of sale. What may be
done with the proceeds from such sale is provided under Section
13(7). In the absence of a contract to the contrary, such proceeds
are held by the secured creditor in trust and are to be applied first
towards payments of costs, charges, and expenses incurred with
respect to the sale; second, towards dues of the secured creditor;
and lastly, towards any person entitled to the residue money.
13. In the facts of the present case, in exercise of its powers under
Section 13(4)(a) of the SARFAESI Act, the Appellant-Bank had
taken possession of the property of the Karkhana on 13.06.2005.
Later, vide sale letter dated 08.03.2010, the Appellant-Bank had
offered to sell the said property to one M/s Vidarbha Realties Pvt.
Ltd. for a total consideration of Rs. 14.10 crores. Notably, this
letter stated that the Appellant-Bank would take responsibility for
employees’ dues, and all other liabilities including statutory
liabilities would rest solely on the purchaser. This letter was
followed by a sale certificate dated 14.09.2010 recording the sale
17
of the property by the Appellant-Bank in favour of M/s Wainganga
Sugar and Power Ltd. for a consideration of Rs. 14.10 crores.
13.1 Before delving into the applicability of the distribution of
the sale proceeds as per Section 13(7) of the SARFAESI Act, we
note that the sale letter dated 08.03.2010 can be relied upon by
this Court. The contention of the learned Senior Counsel for the
Appellant that the sale letter dated 08.03.2010 was addressed to
a different entity than the company mentioned in the sale
certificate dated 14.09.2010 cannot be accepted. It is found that
the addressee in the sale letter dated 08.03.2010, M/s Vidarbha
Realties Private Limited, had been renamed as M/s Wainganga
Sugar and Power Private Limited as notified on 05.04.2010.
Subsequently, on 03.06.2010, M/s Wainganga Sugar and Power
Private Limited was converted to a public limited company and its
name was changed to M/s Wainganga Sugar and Power Limited,
which is also the name of the purchaser indicated on the sale
certificate. These interim developments between March 2010 and
September 2010 explain why the sale letter dated 08.03.2010 and
the final sale certificate issued on 14.09.2010 reflect different
names. However, since it is only a case of change in name of the
company, we find that the two entities are the same and the
18
subsequent purchaser, Respondent No. 5 herein (successor of
Wainganga Sugar and Power Ltd.) would be bound by the terms of
the sale letter dated 08.03.2010.
13.2 Further, it cannot be said that the sale letter dated
08.03.2010 is an external document and cannot be relied upon to
interpret the sale certificate. This is because the sale certificate
specifically references the sale letter by providing that the
purchaser accepts “all the encumbrances presently there on the
property and may arise in future and agreed to to pay the same as
per the sale letter accepted by the purchaser”. In view of such
wording, we find that the parties intended that the sale letter dated
08.03.2010 be read harmoniously with the sale certificate
inasmuch as it appears that the same is a part of the sale
certificate. When a composite reading of the sale certificate dated
14.09.2010 and the sale letter dated 08.03.2010 is undertaken, it
is revealed that though the purchaser had accepted all
encumbrances on the property, this did not include employees’
dues in view of the specific undertaking by the Appellant-Bank
that it would pay them. Given that the certificate directly
references the prior sale letter, it is essential to give effect to its
terms. Hence, it can be concluded that the parties had agreed to
19
the Bank paying the employees’ dues and the subsequent
purchaser settling other liabilities, including statutory liabilities.
When read in this light, it becomes clear that the sale certificate
and the sale letter constitute a contract.
13.3 This brings us to the scheme of distribution of sale
proceeds under Section 13(7) of the SARFAESI Act. As mentioned
supra, this provision prescribes the manner in which money
received by the secured creditor pursuant to its action under
Section 13(4) should be distributed. However, such manner of
distribution is only applicable in the absence of a contract to the
contrary. In this case, the sale certificate and sale letter form a
contract, the cumulative effect of which is an agreement that only
the employees’ dues would be settled by the Appellant-Bank, and
all other liabilities would be settled by the subsequent purchaser.
Thus, it can be said that the contract between the parties diverges
from the order of distribution stipulated under Section 13(7) and
constitutes a contract to the contrary, which must necessarily be
given effect.
13.4 In this regard, we find that the clarification given by the
Appellant-Bank in its counter-affidavit before the High Court that
by the sale letter dated 08.03.2010 it had only accepted liability
20
towards the payment of provident fund of the employees, is
unsustainable. Upon perusing the record, it is clear that this
clarification is only a subsequent attempt by the Appellant to
escape its liability. If the Appellant genuinely intended to restrict
its liability to provident fund, it would have expressly stated so in
the sale letter, which clearly prescribes the terms and conditions
of the sale between the Appellant and the purchaser. It is
important to bear in mind that at the time of entering into this
sale, the Appellant-Bank was well aware of the unpaid salaries due
to the employees of the Karkhana in view of the orders of the
Industrial Court dated 24.08.2006 and 27.04.2007. Hence, it
cannot be said that the Appellant-Bank agreed to use the term
“employees’ dues” in the sale letter despite intending to limit it to
provident fund dues only.
13.5 Thus, on facts, we find that in terms of Section 13(7) of the
SARFAESI Act, the distribution of money received by the
Appellant-Bank should be done as per the sale contract with
Respondent No. 5. In other words, the Appellant-Bank is liable to
satisfy the employees’ dues as per its undertaking in the sale letter
dated 08.03.2010. However, in view of the fact that all other
liabilities, including statutory liabilities were agreed to be borne by
21
the subsequent purchaser, statutory liabilities in respect of
employees, such as provident fund, gratuity, bonus etc., would
have to be borne by Respondent No. 5 herein. We reiterate here
that a subsequent attempt by the Appellant-Bank to interpret the
sale contract in a manner that reduces the scope of its liability to
provident fund dues cannot be given effect.
14. In view of the foregoing discussion, we summarize our
findings as follows:
(i) Section 529A of the Companies Act, which gives
workers’ dues a priority over all other debts, cannot be applied to
the instant case in view of Section 167 of the Societies Act.
(ii) Merely by virtue of being recoverable as arrears of land
revenue, the employees’ dues, in respect of which a recovery
certificate had been issued by the Industrial Court, cannot be
treated as a paramount charge in terms of Section 169(1) of the
Land Revenue Code. Instead, under 169(2) of the Land Revenue
Code, they would take precedence only over unsecured claims.
(iii) At the same time, the Appellant-Bank does not enjoy
any paramount charge over the sale proceeds either. Instead, as
per Section 13(7) of the SARFAESI Act, the sale letter dated
08.03.2010 and the sale certificate dated 14.09.2010 constitute a
22
contract which displaces the order of distribution stipulated under
the said provision.
(iv) The cumulative effect of these documents is that the
Appellant-Bank must pay the employees’ dues out of the sale
proceeds from the auctioned property. To this extent, the recovery
certificate issued by the Industrial Court on 08.08.2011 may be
executed against the Appellant herein. Further, given the
significant delay in payment of the salaries to the employees, such
recovery shall be made by the Collector within a period of six
months from the date of this order.
(v) All other dues in respect of the secured property,
including any unpaid statutory dues in relation to employees
(provident fund, gratuity, bonus, etc.) shall be paid by Respondent
No.5 within a period of six months from the date of this order.
15. The instant appeal is disposed of accordingly.
…..…………................................J.
(MOHAN M. SHANTANAGOUDAR)
….…………………………...............J.
 (KRISHNA MURARI)
New Delhi;
December 4, 2019

whether the Court could look into the documents while considering an application for bail had arisen for consideration in the very case between the parties herein in Criminal Appeal No.130/2019 wherein through the judgment dated 05.09.2019 while considering the matter relating to the order dated 20.08.2019 whereby the High Court had rejected the bail, this Court had held that it would be open for the Court to receive the materials/documents collected during the investigation and peruse the same to satisfy its conscience that the investigation is proceeding in the right lines and for the purpose of consideration of grant of bail/anticipatory bail etc. Sealed cover While the learned Judge was empowered to look at the materials produced in a sealed cover to satisfy his judicial conscience, the learned Judge ought not to have recorded finding based on the materials produced in a sealed cover. Further while deciding the same case of the appellant in Crl. Appeal No.1340 of 2019, after holding so, this Court had consciously refrained from opening the sealed cover and perusing the documents lest some observations are made thereon after perusal of the same, which would prejudice the accused pre-trial. In that circumstance though it is held that it would be open for the Court to peruse the documents, it would be against the concept of fair trial if in every case the prosecution presents documents in sealed cover and the findings on the same are recorded as if the offence is committed and the same is treated as having a bearing for denial or grant of bail.

 whether the Court could look into the documents while considering an application for bail had arisen for consideration in the very case between the parties herein in Criminal Appeal No.130/2019 wherein through the judgment dated 05.09.2019 while considering the matter relating to the order dated 20.08.2019 whereby the High Court had rejected the bail, this Court had held that it would be open for the Court to receive the materials/documents collected during the investigation and peruse the same to satisfy its conscience that the investigation is proceeding in the right lines and for the purpose of consideration of grant of bail/anticipatory bail etc.
Sealed cover
While the learned Judge was empowered to look at the materials produced in a sealed cover to satisfy his judicial conscience, the learned Judge ought not to have recorded finding based on the materials produced in a sealed cover. Further while deciding the same case of the appellant in Crl. Appeal No.1340 of 2019, after holding so, this Court had consciously refrained from opening the sealed cover and perusing the documents lest some observations are made thereon after perusal of the same, which would prejudice the accused pre-trial. In that circumstance though it is held that it would be open for the Court to peruse the documents, it would be against the concept of fair trial if in every case the prosecution presents documents in sealed cover and the findings on the same are recorded as if the offence is committed and the same is treated as having a bearing for denial or grant of bail.

 REPORTABLE
 IN THE SUPREME COURT OF INDIA
 CRIMINAL APPELLATE JURISDICTION
(CRIMINAL APPEAL NO.1831/2019)
(Arising out of S.L.P.(Criminal) No.10493 of 2019 )
P. Chidambaram ….Appellant (s)
Versus
Directorate of Enforcement …. Respondent(s)
J U D G M E N T
 A.S. Bopanna,J.
 Leave granted.

2. The instant appeal has been filed by the appellant
assailing the final order dated 15.11.2019 passed by the
High Court of Delhi at New Delhi in Bail Application No.
2718 of 2019 whereby the High Court declined to grant
regular bail to the appellant.
3. The genesis of the case in question lies in FIR No.
RC2202017-E0011 dated 15.5.2017, registered by the CBI
under section 120-B r/w 420 IPC and sections 8 and 13
Page 1 of 36
(2) r/w 13 (1) (d) of PC Act against some known and
unknown suspects with allegations that M/s INX Media
Private Limited (accused no. 1 in the FIR) sought approval
of Foreign Investment Promotion Board (FIPB) for
permission to issue by way of preferential allotment,
certain equity and convertible, non-cumulative,
redeemable preference shares for engaging in the business
of creating, operating, managing and broadcasting of
bouquet of television channels. The company had also
sought approval to make a downstream financial
investment to the extent of 26% of the issued and
outstanding equity share capital of M/s INX News Private
Limited (accused no. 2). The FIPB Board recommended the
proposal of INX Media for consideration and approval of
the Finance Minister. However, the Board did not approve
the downstream investment by INX Media (P) Ltd. in INX
News (P) Ltd. Further, in the press release dated
30.5.2007 issued by the FIPB Unit indicating details of
proposals approved in the FIPB meeting, quantum of
FDI/NRI inflow against M/s INX media was shown as Rs.
4.62 crores. Contrary to the approval of FIPB, M/s INX
Page 2 of 36
Media Pvt. Ltd. deliberately and in violation of conditions
of approval, made a downstream investment to the extent
of 26% capital of INX News and also generated more than
Rs. 305 crores FDI in INX Media (P) Ltd. against the
approved foreign inflow of Rs. 4.62 crores is the allegation.
A complaint is stated to have been received by the
investigation wing of the Income Tax department which
sought clarifications from the FIPB Unit of Ministry of
Finance. The FIPB Unit vide letter dated 26.5.2008,
sought clarifications from M/s INX Media Limited. It was
further alleged in the FIR that upon receipt of this letter,
M/s INX Media in order to avoid punitive action entered
into criminal conspiracy with Mr. Karti Chidambaram
(accused no. 3 in the FIR who is the son of the appellant).
Mr. Karti Chidambaram is alleged to have exercised his
influence over the officials of FIPB unit which led to the
said officials showing undue favour to M/s INX News (P)
Ltd. Thereafter by deliberately concealing the investment
received in INX Media (P) Ltd., M/s INX News (P) Ltd. again
approached the FIPB Unit and sought permission for the
downstream investment. This proposal was favourably
Page 3 of 36
considered by the officials of ministry of finance and
approved by the then Finance Minister. It was also stated
in the FIR that Mr. Karti Chidambaram, in lieu of services
rendered to M/s INX Group, received consideration in the
form of payments. Information disclosed that invoices for
approximately Rs. 3.5 crores were got raised in favour of
M/s INX Group in the name of companies in which Mr.
Karti Chidambaram was having sustainable interests
either directly or indirectly. The appellant herein, who was
the then Union Finance Minister, was not however named
in the said FIR.
4. On the basis of the aforementioned FIR, the
Respondent Directorate of Enforcement registered a case
ECIR/07/HIU/2017 (hereinafter referred to as ECIR case)
under section 3 of Prevention of Money Laundering Act,
2002 (hereinafter PMLA), punishable under section 4 of
the said Act against the accused mentioned in the FIR.
The allegations in the said ECIR case were the same as
those in the aforementioned FIR. The appellant was not
named an accused in this case as well.
Page 4 of 36
5. On 23.7.2018, apprehending his arrest by the
Respondent, the appellant filed an application before the
High Court of Delhi seeking grant of anticipatory bail in
the aforementioned ECIR case. The High Court extended
interim protection to the appellant until 20.8.2019, when
the appellant’s application seeking anticipatory bail was
dismissed.
6. The appellant then approached this court by filing
Criminal Appeal No. 1340 of 2019 (arising out of SLP (Crl.)
No. 7523 of 2019) wherein while dismissing the appeal of
the appellant, the court concluded that in the instant
case, grant of anticipatory bail to the appellant will
hamper the investigation and that this is not a fit case for
exercise of discretion to grant anticipatory bail. This court
applied the following rationale for coming to the said
conclusion: there are sufficient safeguards enshrined in
the PMLA to ensure proper exercise of power of arrest;
grant of anticipatory bail is not to be done as a matter of
rule, especially in matters of economic offences which
constitute a class apart. Regard must be had to the fact
that grant of anticipatory bail at the stage of investigation
Page 5 of 36
may frustrate the investigating agency in interrogating the
accused and in collecting useful information and also
materials which might have been concealed.
7. In the meanwhile, on 21.8.2019, the appellant was
arrested in the CBI case (arising out of the
above-mentioned FIR). Since then he has been in custody.
In the ECIR case, he was arrested on 16.10.2019 on the
grounds that payment of approx. Rs. 3 crores was made at
the appellant’s instance to the companies controlled by his
son on account of FIPB work done for INX Group. Further
it was stated in the grounds of arrest that the investigation
is not fruitful due to the appellant’s non-cooperation; the
appellant has withheld relevant information which is
within his exclusive knowledge and thus his custodial
interrogation is necessary.
8. After dismissal of his application seeking
anticipatory bail by this court, the appellant moved an
application dated 5.9.2019 praying to surrender before the
Trial Court (Court of Special Judge (PC Act), CBI) in the
ECIR case. This application was rejected on 13.9.2019 in
view of the submission on behalf of the respondent
Page 6 of 36
Directorate that it was not willing to arrest the appellant
at that particular stage since it was completing
investigation pertaining to some aspect of the money
laundering and only on this background investigation was
completed, the interrogation of the appellant would be
meaningful. Thereafter, on 11.10.2019, the Respondent
Directorate moved an application u/s 267 CrPC seeking
issuance of production warrant against the appellant for
the purpose of arrest and remand. The allegations which
were levelled against the appellant in this application are
that in lieu of granting FIPB approval to INX Media Pvt.
Ltd., he and his son received a sum of approx. Rs. 3 crores
through companies controlled by the son of the
Appellant/accused Karti P. Chidambaram. Though INX
media in its application did not mention the total amount
of FDI inflow which they intended to bring, the appellant
without ascertaining their competency, granted approval.
Further the appellant became fully aware about the
violations made by INX Group when the matter was
highlighted by the Income Tax Department and a
complaint was also received by him regarding the
Page 7 of 36
investment by M/s INX Media into M/s INX News without
due approval. Despite this knowledge, the appellant again
approved the downstream proposal of INX Group treating
it as a fresh approval. Further investigation has revealed
that there were at least 17 overseas bank accounts opened
by the appellant and co-conspirators. In this regard,
summons was issued to 11 persons and statements of
some of these persons revealed that the overseas assets
were acquired in the name of various shell companies on
the instructions of appellant’s son. Thus, it was stated
that a need arises to confront the appellant with the
material gathered. This application was allowed by the
Trial Court vide order dated 11.10.2019. Thereafter on
14.10.2019, the Respondent inter alia moved an
application seeking permission to arrest the appellant. The
Trial Court treated this application as an application for
interrogation of the appellant and allowed it.
Subsequently, on 16.10.2019, the appellant was arrested
for the grounds stated supra. Vide order dated
17.10.2019, the Trial Court remanded the appellant to the
custody of the Respondent for a period of 7 days.
Page 8 of 36
9. After his arrest, on 23.10.2019, the appellant
moved a regular bail application (Bail Application No.
2718 of 2019) before the High Court u/s 439 of CrPC
averring that he is a law abiding citizen having deep roots
in the society; he is not a flight risk and is willing to abide
by all conditions as may be imposed by the court while
granting bail. It was also submitted that the instant case
is a documentary case and being a respectable citizen and
former Union Minister, he cannot and will not tamper with
the documentary record of the instant case which is
currently in the safe and secure possession of the
incumbent government or the Trial Court. On merits, it
was stated by the Appellant that he merely accorded
approval to the unanimous recommendation made by the
FIPB which was chaired by the Secretary, Economic
Affairs and included 5 other secretaries who were all
among the senior most IAS officers (one among them was
a senior IFS officer) and had a long and distinguished
record of service. Anyone familiar with the working of the
FIPB would know that no single officer can take a decision
on any proposal. Therefore, it is preposterous to allege
Page 9 of 36
that any person could have influenced any official of FIPB,
including all 6 senior secretaries to the Government of
India. Moreover, the ECIR case is a verbatim copy of the
FIR dated 15.5.2017 and allegations registered therein
and thus the Special Judge erred in granting remand of
the appellant in the ECIR case since the offences allegedly
committed in both the cases arise out of the same
occurrence and have been committed in the course of the
same transaction. Further the Special Court committed an
error in not accepting the surrender application of the
appellant which was an application limited to
surrendering before the Trial Court. The Special Court
proceeded on an erroneous basis that the desire of an
accused is contingent upon the desire of the investigating
agency to arrest the accused and that arrest is a condition
precedent for surrendering before the Court.
10. Vide the impugned order, the High Court observed
that it has not even been alleged by the Respondent
Enforcement Directorate in its counter affidavit that the
appellant is a flight risk. Regarding tampering of evidence
also the court observed that it is neither argued nor any
Page 10 of 36
material is available on record in this regard. Moreover,
there is no chance to tamper the material on record as the
same is with the investigating agencies, central
government or courts. Regarding influencing of witnesses,
the court noted that three witnesses have stated in their
statements that the appellant and his family members
have pressurised them and asked them not to appear
before the Enforcement Directorate. However, since their
statements have already been recorded, at this stage when
the complaint is almost ready to be filed, the Court held
that there is no chance to influence any witness. The High
Court also took notice of the fact that co-accused have
been granted bail. The Court was cognizant of the fact that
the appellant has been suffering from illness but the Court
opined that the Court has already issued directions to the
Jail Superintendent in this regard and therefore this
ground is no longer available to the appellant at this stage.
The Court noted that during investigation, it has been
revealed that there has been layering of proceeds of crime
by use of shell companies, most of which are only on
paper, and opined that there is cogent evidence collected
Page 11 of 36
so far that these shell companies are incorporated by
persons who can be shown to be close and connected with
the appellant. Next, the Court held that the material in the
present case is completely distinct, different and
independent from the material which was collected by the
CBI in the predicate offence. Even the witnesses in the
PMLA investigation are different from the investigation
conducted by the CBI. The High Court concluded that
prima facie, allegations are serious in nature and the
appellant has played key and active role in the present
case. On the basis of all these observations, the High
Court dismissed the bail application.
11. It is the contention of the learned senior counsel
Shri Kapil Sibal and Dr. Abhishek Manu Singhvi on behalf
of the appellant before us that the High Court ought to
have granted regular bail to the appellant after holding the
triple test of flight risk, tampering with evidence and
influencing of witnesses in favour of the appellant. The
Impugned Order deserves to be set aside only on the
ground that the allegations of a completely unrelated case
(Rohit Tandon vs. Directorate of Enforcement (2018)
Page 12 of 36
11 SCC 46) have been considered by the High Court as
allegations relating to the instant case and findings on
merits against the appellant have been rendered based on
such unrelated allegations. Next, it has been contended by
the appellant that the High Court erred in law in going
into and rendering findings on merits of the case in order
to deny bail to the appellant despite the settled position of
law that merits of a case ought not to be gone into at the
time of adjudication of a bail application. This Court in the
appellant’s own case seeking regular bail in the case
registered by CBI against him titled P. Chidambaram vs.
CBI (Crl. Appeal No. 1603/2019) has held that “at the
stage of granting bail, an elaborate examination of
evidence and detailed reasons touching upon the merit of
the case, which may prejudice the accused, should be
avoided.” It has also been contended on behalf of the
appellant that the High Court erred in accepting at face
value the allegations made on merits of the case in the
counter affidavit filed by the respondent and converting
such allegations verbatim into findings by the Court and
declining to grant bail to the appellant solely on the basis
Page 13 of 36
of said findings. On merits, the appellant has submitted
that he is neither a shareholder nor director of any
allegedly connected company nor does he have any
connection with any of these companies. No material
linking the appellant directly or indirectly with the alleged
offence of money laundering has either been put to the
appellant so far or been placed on record before the High
Court. Further, the 12 officers who signed the file
pertaining to the approval of the FDI proposal of INX
Media were not even arrested. Only the appellant, who
was the 13th signatory has been arrested and denied bail.
Moreover, all the other co-accused in the instant ECIR
case have also been granted bail or have not been
arrested. The High Court also failed to appreciate that the
appellant has already been granted regular bail by this
Court in the predicate offence FIR vide its order dated
22.10.2019. The High Court erred in denying bail to the
appellant on the specious ground that allegations are of a
serious nature. It is the submission of the learned senior
counsel for the appellant that the gravity of an offence is
to be determined from the severity of the prescribed
Page 14 of 36
punishment. In the instant case, the alleged offence of
money laundering is punishable by imprisonment for a
term which shall not exceed 7 years. Thus, the offence is
not ‘grave’ or ‘serious’ in terms of the judgment of this
Court in Sanjay Chandra vs. CBI, (2012) 1 SCC 40. The
High Court should also have considered that the appellant
is a 74 year old person whose health is fragile and while
being lodged in judicial custody of the Respondent
Enforcement Directorate between 16.10.2019 and
30.10.2019 and thereafter being lodged in judicial custody
between 30.10.2019 till date, the appellant has suffered
multiple bouts of chronic and persistent pain in his
abdomen, for which he was taken to AIIMS and Dr. Ram
Manohar Lohia Hospital on various occasions (viz. On
23.10.2019, 26.10.2019, 28.10.2019, 30.10.2019 and
1.11.2019) for consultation, diagnosis and tests. The
appellant’s health continues to deteriorate and with the
onset of the cold weather, the appellant will become more
vulnerable.
12. Between 05.09.2019 and 16.10.2019 though the
appellant was available in custody the respondent did not
Page 15 of 36
choose to interrogate but remand period was sought on
17.10.2019 and 24.10.2019, while the third remand
sought was rejected and accordingly the remand period
expired on 30.10.2019. No witness was confronted
despite seeking remand for that purpose. It is contended
that the very manner in which the whole process is being
conducted is only to see that the appellant remains in
custody. It is contended that the liberty of the appellant
cannot be denied in such manner by adopting an unfair
procedure. Though much is sought to be made out as if
the offence committed is grave there is absolutely no
material to indicate that the appellant is involved and even
otherwise it is a matter of trial wherein the charge is to be
established. The gravity can only beget the length of
sentence provided in law and by asserting that the offence
is grave, the grant of bail cannot be thwarted. The
respondent cannot contend as if the appellant should
remain in custody till the trial is over.
13. Shri Tushar Mehta, learned Solicitor General while
seeking to oppose the petition has made reference to the
counter affidavit filed on behalf of the respondent. It is
Page 16 of 36
contended that though the High Court has held that there
is no possibility of tampering the evidence and has not
influenced any witnesses and has ultimately denied the
bail, such conclusion is not justified. It is contended that
the appellant having held a very high position and also
due to his status is likely to influence the witnesses and
one of the witness had already indicated that he hails from
the same State to which the appellant belongs and is not
in a position to appear for the purpose of being
confronted. Hence even in that regard it should be held
against the appellant. It is further contended that even
otherwise despite holding the triple test in favour of the
appellant the gravity of the offence can be considered as a
stand-alone aspect as the gravity of the offence in a
particular case is also important while considering bail. In
that circumstance, the three aspects to be taken note is
the manner in which the offence has taken place, gravity
of the offence and also the contemporaneous documents
to show that the accused either in custody or otherwise,
wields influence over the witnesses. Hence, he contends
that the finding of the High Court insofar as saying that
Page 17 of 36
the appellant has not tampered is factually incorrect. The
learned Solicitor General further contends that the
economic offences are graver offences which affect the
society and the community suffers. The common man
loses confidence in the establishment. It is contended that
the Investigating Agency has collected documentary
evidence such as emails exchanged between the
co-conspirators on behalf of the appellant and documents
to indicate investment of laundered money in benami
properties whose beneficial owners can be traced to the
appellant and his family members. The respondent has
also recorded the statement of material witnesses who are
the part of process of money laundering. It is his
contention that the appellant has knowledge of all these
aspects and the material will show the share holding
pattern of the 16 companies. It is further contended that
the learned Judge of the High Court has referred to the
documents produced in a sealed cover and in that light
has arrived at the conclusion to deny bail. The High Court
has, however, not properly considered while recording that
a complaint is ready to be filed and therefore, he would
Page 18 of 36
not influence the witnesses. Even if the complaint/charge
sheet is filed in 60 days it is only to avoid default and the
investigation which is not complete would continue. In
that light it is contended that when economic offences are
premeditated it would require detailed investigation to
unearth material and, in such circumstances, if bail is
granted it would defeat the case of the prosecution. The
learned Solicitor General has also referred to the decisions
which would be taken note at the appropriate stage.
14. The learned senior counsel for the appellant in
reply to the submissions contended that not a single
document is available to indicate that the appellant is
involved in the offence. The allegation of the appellant
tampering the evidence or influencing the witnesses as
sought to be made out on behalf of the respondent cannot
be accepted for the reason that the alleged offence is of the
year 2007-08 and though the proceedings were initiated in
the year 2017, the appellant was arrested only in the year
2019. In such event when the appellant has not
influenced any person while he was at large, the allegation
of tempering while in custody is not acceptable. The
Page 19 of 36
statement of the alleged witnesses is stated to have been
recorded in the year 2018 and the case of the respondent
that they are seeking to confront the witnesses is being
put forth at this stage only to indicate as if the custody of
the appellant is still required by them. When there is no
document to indicate that the appellant is involved, the
mere allegation against the alleged co-conspirators cannot
be the basis to indicate that an economic offence has been
committed by the appellant. In that light it is contended
that the prayer made in the petition be accepted.
15. Though we have heard the matter elaborately and
also have narrated the contention of both sides in great
detail including those which were urged on the merits of
the matter we are conscious of the fact that in the instant
appeal the consideration is limited to the aspect of regular
bail sought by the appellant under Section 439 of Cr.PC.
While stating so, in order to put the matter in perspective
it would be appropriate to take note of the observation
made by us in the case of this very appellant vs. CBI, in
Criminal Appeal No. 1603/2019 which reads as
hereunder;
Page 20 of 36
“The jurisdiction to grant bail has to be exercised on the
basis of the well-settled principles having regard to the
facts and circumstances of each case. The following
factors are to be taken into consideration while
considering an application for bail:- (i) the nature of
accusation and the severity of the punishment in the
case of conviction and the nature of materials relied
upon by the prosecution; (ii) reasonable apprehension of
tampering with the witnesses or apprehension of threat
to the complainant or the witnesses; (iii) reasonable
possibility of securing the presence of the accused at the
time of trial or the likelihood of his abscondence; (iv)
character behaviour and standing of the accused and
the circumstances which are peculiar to the accused; (v)
larger interest of the public or the State and similar
other considerations (vide Prahlad Singh Bhati v. NCT,
Delhi and another (2001) 4 SCC 280. There is no hard
and fast rule regarding grant or refusal to grant bail.
Each case has to be considered on the facts and
circumstances of each case and on its own merits. The
discretion of the court has to be exercised judiciously
and not in an arbitrary manner.”
16. In the above background, perusal of the order
dated 15.11.2019 impugned herein indicates that the
learned Single Judge having taken note of the rival
contentions in so far as the triple test or the tripod test to
be applied while considering an application for grant of
regular bail under Sec. 439 Cr.PC, has answered the same
in paragraphs 50 to 53 of the order, in favour of the
appellant herein. The learned Solicitor General has
however sought to contend that though there is not much
grievance with regard to the conclusion on ‘flight risk’, the
finding on likelihood of tampering and influencing witness
Page 21 of 36
has not been considered in its correct perspective. The
finding in that regard has not been assailed and in such
event, the appellant in our opinion cannot be taken by
surprise. Even otherwise as rightly observed by the
learned Single Judge the evidence and material stated to
have been collected is already available with the
Investigating agency. Learned Solicitor General would
however contend that still further materials are to be
collected and letter rogatory has been issued and as such
tampering cannot be ruled out. In the present situation
the appellant is not in political power nor is he holding
any post in the Government of the day so as to be in a
position to interfere. In that view such allegation cannot
be accepted on its face value. With regard to the witness
having written that he is not prepared to be confronted as
he is from the same state, the appellant cannot be held
responsible for the same when there is no material to
indicate that the appellant or anyone on his behalf had
restrained or threatened the concerned witness who
refused to be confronted with the appellant in custody.
Page 22 of 36
17. The only other aspect therefore for consideration is
as to whether the further consideration made by the
learned Judge of the High Court, despite holding the triple
test in appellant’s favour was justified and if consideration
is permissible, whether the learned Judge was justified in
his conclusion.
18. While opposing the contention put forth by the
learned Senior Counsel for the appellant that the learned
Judge of the High Court ought not to have travelled
beyond the consideration on the triple test and holding it
in favour of the appellant, the learned Solicitor General
would contend that the gravity of the offence and the role
played by the accused should also be a part of
consideration in the matter of bail. It is contended by the
learned Solicitor General that the economic offences is a
class apart and the gravity is an extremely relevant factor
while considering bail. In order to contend that this
aspect has been judicially recognised, the decisions in the
case of State of Bihar & Anr. vs. Amit Kumar, (2017)
13 SCC 751; Nimmagadda Prasad vs. CBI, (2013) 7 SCC
466; CBI vs. Ramendu Chattopadhyay, Crl
Page 23 of 36
Appeal.No.1711 of 2019; Seniors Fraud Investigation
Office vs. Nittin Johari & Anr.; (2019) 9 SCC 165; Y.S.
Jagan Mohan Reddy vs. CBI, (2013) 7 SCC 439; State
of Gujarat vs. Mohanlal Jitamalji Porwal, (1987) 2 SCC
364 are relied upon. Perusal of the cited decisions would
indicate that this Court has held that economic offences
are also of grave nature, being a class apart which arises
out of deep-rooted conspiracies and effect on the
community as a whole is also to be kept in view, while
consideration for bail is made.
19. On the consideration as made in the above noted
cases and the enunciation in that regard having been
noted, the decisions relied upon by the learned senior
counsel for the appellant and the principles laid down for
consideration of application for bail will require our
consideration. The learned senior counsel for the
appellant has relied upon the decision of the Constitution
Bench of this Court in the case of Shri Gurbaksh Singh
Sibbia vs. State of Punjab, (1980) 2 SCC 565 with
reference to paragraph 27 which reads as hereunder:
 “ It is not necessary to refer to decisions which
deal with the right to ordinary bail because that
Page 24 of 36
right does not furnish an exact parallel to the right
to anticipatory bail. It is, however, interesting that
as long back as in 1924 it was held by the High
Court of Calcutta
in Nagendra v. King-Emperor [AIR 1924 Cal 476,
479, 480 : 25 Cri LJ 732] that the object of bail is
to secure the attendance of the accused at the
trial, that the proper test to be applied in the
solution of the question whether bail should be
granted or refused is whether it is probable that
the party will appear to take his trial and that it is
indisputable that bail is not to be withheld as a
punishment. In two other cases which,
significantly, are the ‘Meerut Conspiracy cases’
observations are to be found regarding the right
to bail which deserve a special mention. In K.N.
Joglekar v. Emperor [AIR 1931 All 504 : 33 Cri LJ
94] it was observed, while dealing with Section
498 which corresponds to the present Section 439
of the Code, that it conferred upon the Sessions
Judge or the High Court wide powers to grant bail
which were not handicapped by the restrictions in
the preceding Section 497 which corresponds to
the present Section 437. It was observed by the
court that there was no hard and fast rule and no
inflexible principle governing the exercise of the
discretion conferred by Section 498 and that the
only principle which was established was that the
discretion should be exercised judiciously.
In Emperor v. Hutchinson [AIR 1931 All 356, 358 :
32 Cri LJ 1271] it was said that it was very unwise
to make an attempt to lay down any particular
rules which will bind the High Court, having
regard to the fact that the legislature itself left the
discretion of the court unfettered. According to
the High Court, the variety of cases that may
arise from time to time cannot be safely classified
and it is dangerous to make an attempt to classify
the cases and to say that in particular classes a
bail may be granted but not in other classes. It
was observed that the principle to be deduced
from the various sections in the Criminal
Procedure Code was that grant of bail is the rule
and refusal is the exception. An accused person
who enjoys freedom is in a much better position
to look after his case and to properly defend
himself than if he were in custody. As a
presumably innocent person he is therefore
entitled to freedom and every opportunity look
Page 25 of 36
after his own case. A presumably innocent person
must have his freedom to enable him to establish
his innocence.”
We have taken note of the said decision since even though
the consideration therein was made in the situation where
an application for anticipatory bail under Section 438 was
considered, the entire conspectus of the matter relating to
bail has been noted by the Constitution Bench.
20. The learned senior counsel for the appellant has
also placed reliance on the decision on the decision in the
case of Sanjay Chandra vs. CBI, (2012) 1 SCC 40 with
specific reference to paragraph 39 which reads as
hereunder:
“ Coming back to the facts of the present case,
both the courts have refused the request for grant
of bail on two grounds: the primary ground is that
the offence alleged against the accused persons is
very serious involving deep-rooted planning in
which, huge financial loss is caused to the State
exchequer; the secondary ground is that of the
possibility of the accused persons tampering with
the witnesses. In the present case, the charge is
that of cheating and dishonestly inducing delivery
of property and forgery for the purpose of cheating
using as genuine a forged document. The
punishment for the offence is imprisonment for a
term which may extend to seven years. It is, no
doubt, true that the nature of the charge may be
relevant, but at the same time, the punishment to
which the party may be liable, if convicted, also
bears upon the issue. Therefore, in determining
whether to grant bail, both the seriousness of the
Page 26 of 36
charge and the severity of the punishment should
be taken into consideration.”
The said case was a case of financial irregularities and in
the said circumstance this Court in addition to taking note
of the deep-rooted planning in causing huge financial loss,
the scope of consideration relating to bail has been taken
into consideration in the background of the term of
sentence being seven years if convicted and in that regard
it has been held that in determining the grant or otherwise
of bail, the seriousness of the charge and severity of the
punishment should be taken into consideration.
21. Thus from cumulative perusal of the judgments
cited on either side including the one rendered by the
Constitution Bench of this Court, it could be deduced
that the basic jurisprudence relating to bail remains the
same inasmuch as the grant of bail is the rule and refusal
is the exception so as to ensure that the accused has the
opportunity of securing fair trial. However, while
considering the same the gravity of the offence is an
aspect which is required to be kept in view by the Court.
The gravity for the said purpose will have to be gathered
Page 27 of 36
from the facts and circumstances arising in each case.
Keeping in view the consequences that would befall on the
society in cases of financial irregularities, it has been held
that even economic offences would fall under the category
of “grave offence” and in such circumstance while
considering the application for bail in such matters, the
Court will have to deal with the same, being sensitive to
the nature of allegation made against the accused. One of
the circumstances to consider the gravity of the offence is
also the term of sentence that is prescribed for the offence
the accused is alleged to have committed. Such
consideration with regard to the gravity of offence is a
factor which is in addition to the triple test or the tripod
test that would be normally applied. In that regard what
is also to be kept in perspective is that even if the
allegation is one of grave economic offence, it is not a rule
that bail should be denied in every case since there is no
such bar created in the relevant enactment passed by the
legislature nor does the bail jurisprudence provides so.
Therefore, the underlining conclusion is that irrespective
of the nature and gravity of charge, the precedent of
Page 28 of 36
another case alone will not be the basis for either grant or
refusal of bail though it may have a bearing on principle.
But ultimately the consideration will have to be on case to
case basis on the facts involved therein and securing the
presence of the accused to stand trial.
22. In the above circumstance it would be clear that
even after concluding the triple test in favour of the
appellant the learned Judge of the High Court was
certainly justified in adverting to the issue relating to the
gravity of the offence. However, we disapprove the manner
in which the conclusions are recorded in paragraphs 57 to
62 wherein the observations are reflected to be in the
nature of finding relating to the alleged offence. The
learned senior counsel for the appellant with specific
reference to certain observations contained in the above
noted paragraphs has pointed out that the very
contentions to that effect as contained in paragraphs 17,
20 and 24 of the counter affidavit has been incorporated
as if, it is the findings of the Court. The learned Solicitor
General while seeking to controvert such contention would
however contend that in addition to the counter affidavit
Page 29 of 36
the respondent had also furnished the documents in a
sealed cover which was taken note by the learned Judge
and conclusion has been reached.
23. The question as to whether the Court could look
into the documents while considering an application for
bail had arisen for consideration in the very case between
the parties herein in Criminal Appeal No.130/2019
wherein through the judgment dated 05.09.2019 while
considering the matter relating to the order dated
20.08.2019 whereby the High Court had rejected the bail,
this Court had held that it would be open for the Court to
receive the materials/documents collected during the
investigation and peruse the same to satisfy its conscience
that the investigation is proceeding in the right lines and
for the purpose of consideration of grant of
bail/anticipatory bail etc. At the same time, this Court,
had disapproved the manner in which the learned Judge
of the High Court in the said case had verbatim quoted a
note produced by the respondent. If that be the position,
in the instant case, the learned Judge while adverting to
the materials, ought not have recorded a finding based on
Page 30 of 36
the materials produced before him. While the learned
Judge was empowered to look at the materials produced in
a sealed cover to satisfy his judicial conscience, the
learned Judge ought not to have recorded finding based on
the materials produced in a sealed cover. Further while
deciding the same case of the appellant in Crl. Appeal
No.1340 of 2019, after holding so, this Court had
consciously refrained from opening the sealed cover and
perusing the documents lest some observations are made
thereon after perusal of the same, which would prejudice
the accused pre-trial. In that circumstance though it is
held that it would be open for the Court to peruse the
documents, it would be against the concept of fair trial if
in every case the prosecution presents documents in
sealed cover and the findings on the same are recorded as
if the offence is committed and the same is treated as
having a bearing for denial or grant of bail.
24. Having said so, in present circumstance we were
not very much inclined to open the sealed cover although
the materials in sealed cover was received from the
respondent. However, since the learned Single Judge of
Page 31 of 36
the High Court had perused the documents in sealed
cover and arrived at certain conclusion and since that
order is under challenge, it had become imperative for us
to also open the sealed cover and peruse the contents so
as to satisfy ourselves to that extent. On perusal we have
taken note that the statements of persons concerned have
been recorded and the details collected have been collated.
The recording of statements and the collation of material
is in the nature of allegation against one of the co-accused
Karti Chidambaram- son of appellant of opening shell
companies and also purchasing benami properties in the
name of relatives at various places in different countries.
Except for recording the same, we do not wish to advert to
the documents any further since ultimately, these are
allegations which would have to be established in the trial
wherein the accused/co-accused would have the
opportunity of putting forth their case, if any, and an
ultimate conclusion would be reached. Hence in our
opinion, the finding recorded by the learned Judge of the
High Court based on the material in sealed cover is not
justified.
Page 32 of 36
25. Therefore, at this stage while considering the bail
application of the appellant herein what is to be taken
note is that, at a stage when the appellant was before this
Court in an application seeking for interim
protection/anticipatory bail, this Court while considering
the matter in Criminal Appeal No.1340/2019 had in that
regard held that in a matter of present nature wherein
grave economic offence is alleged, custodial interrogation
as contended would be necessary and in that
circumstance the anticipatory bail was rejected.
Subsequently the appellant has been taken into custody
and has been interrogated and for the said purpose the
appellant was available in custody in this case from
16.10.2019 onwards. It is, however, contended on behalf
of the respondent that the witnesses will have to be
confronted and as such custody is required for that
purpose. As noted, the appellant has not been named as
one of the accused in the ECIR but the allegation while
being made against the co-accused it is indicated the
appellant who was the Finance Minister at that point, has
aided the illegal transactions since one of the co-accused
Page 33 of 36
is the son of the appellant. In this context even if the
statements on record and materials gathered are taken
note, the complicity of the appellant will have to be
established in the trial and if convicted, the appellant will
undergo sentence. For the present, as taken note the
anticipatory bail had been declined earlier and the
appellant was available for custodial interrogation for
more than 45 days. In addition to the custodial
interrogation if further investigation is to be made, the
appellant would be bound to participate in such
investigation as is required by the respondent. Further it
is noticed that one of the co-accused has been granted bail
by the High Court while the other co-accused is enjoying
interim protection from arrest. The appellant is aged
about 74 years and as noted by the High Court itself in its
order, the appellant has already suffered two bouts of
illness during incarceration and was put on antibiotics
and has been advised to take steroids of maximum
strength. In that circumstance, the availability of the
appellant for further investigation, interrogation and
facing trial is not jeopardized and he is already held to be
Page 34 of 36
not a ‘flight risk’ and there is no possibility of tampering
the evidence or influencing\intimidating the witnesses.
Taking these and all other facts and circumstances
including the duration of custody into consideration the
appellant in our considered view is entitled to be granted
bail. It is made clear that the observations contained
touching upon the merits either in the order of the High
Court or in this order shall not be construed as an opinion
expressed on merits and all contentions are left open to be
considered during the course of trial.
26. For the reasons stated above, we pass the
following order:
i) The instant appeal is allowed and the judgment
dated 15.11.2019 passed by the High Court of Delhi in
Bail Application No.2718 of 2019 impugned herein is set
aside;
ii) The appellant is ordered to be released on bail if he
is not required in any other case, subject to executing bail
bonds for a sum of Rs.2 lakhs with two sureties of the like
sum produced to the satisfaction of the learned Special
Judge;
iii) The passport ordered to be deposited by this Court
in the CBI case shall remain in deposit and the appellant
Page 35 of 36
shall not leave the country without specific orders to be
passed by the learned Special Judge.
iv) The appellant shall make himself available for
interrogation in the course of further investigation as and
when required by the respondent.
v) The appellant shall not tamper with the evidence or
attempt to intimidate or influence the witnesses;
vi) The appellant shall not give any press interviews nor
make any public comment in connection with this case
qua him or other co-accused.
vii) There shall be no order as to costs.
….…………………….….J.
(R. BANUMATHI)
..….……………………….J.
 (A.S. BOPANNA)
 …..……………………….J.
 (HRISHIKESH ROY)
New Delhi,
December 04, 2019
Page 36 of 36
 REPORTABLE
 IN THE SUPREME COURT OF INDIA
 CRIMINAL APPELLATE JURISDICTION
CRIMINAL APPEAL NO.1831/2019
 (Arising out of S.L.P.(Criminal) No.10493 of 2019 )
P. Chidambaram ….Appellant (s)
Versus
Directorate of Enforcement …. Respondent(s)
O R D E R
After pronouncement of the Judgment in the above
mentioned matter, Mr. Tushar Mehta, learned Solicitor
General appearing for the respondent-Directorate of
Enforcement, has submitted that the findings in the
Judgment may not have a bearing qua the other accused.
Considering the above submission, we make it
clear that the findings in the Judgment, as above,
shall not have any bearing qua the other accused in
the case and the same shall be considered
independently on its own merits.
….…………………….….J.
 (R. BANUMATHI)
..….……………………….J.
 (A.S. BOPANNA)
 …..……………………….J.
 (HRISHIKESH ROY)
New Delhi,
December 04, 2019

right of pre-emption = in order to claim the right of pre-emption, the plaintiff should have such right as, inter alia, the co-sharer or heir of the said property. In the matter at hand, though the respondent was declared as a co-sharer by virtue of the decree dated 28.03.1984, the said decree was set aside by the First Appellate Court, the High Court as well as this Court. Thus, the respondent cannot be considered as a co-sharer, and since it is so, he cannot claim the right of pre-emption either.

1
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 9064 OF 2019
(Arising out of SLP (C) No.11268 of 2018)
SURAJ BHAN & ORS.                                 APPELLANT(S)
                                VERSUS
GORAKH RAM                                        RESPONDENT(S)
O R D E R
Heard learned counsel for the parties.
Leave granted.
The   judgment   dated   21.02.2018   in   R.S.A   No.   444   of   1995
passed   by   the   High   Court   of   Punjab   and   Haryana   at   Chandigarh
has been called in question in this appeal.
The brief facts in this appeal are as under:
The   respondent   herein   filed   a   suit   claiming   pre-emption
on  the  ground  that  he  was  a  co-owner  of  the  suit  property  and
had   been   in   possession   thereof   by   virtue   of   decree   dated
28.03.1984. The said decree had been passed by the Trial Court
in   a   prior   suit   wherein   the   respondent   was   declared   as   a   co-
sharer   in   the   suit   property.     Based   on   this,   the   respondent
filed   the   suit   for   pre-emption,   which   came   to   be   decreed   on
13.08.1993.     This   decree   was   subsequently   confirmed   by   the
First Appellate Court on 10.12.1994.
  In   the   meanwhile,   the   appellant   herein   filed   an   appeal
against the  decree dated  28.03.1984.    This appeal  was allowed
and consequently, the declaration that the respondent is a co-
sharer   in   the   suit   property   was   set   aside   vide   order   dated

2
30.04.2005.     This   order   was   confirmed   by   the   High   Court   on
11.05.2010   and   by   this   Court   vide   order   dated   25.08.2005   in
SLP   (C)   No.23144/2014.   Thus,   the   decree   passed   in   favour   of
the   respondent,   declaring   him   as   a   co-sharer,   was   set   aside
and this has been confirmed upto this Court. Consequently, the
respondent   cannot   be   said   to   be   a   co-sharer   in   the   suit
property.
Despite this, in the second appeal filed by the appellant
herein   against   the   decree   dated   13.08.1993   passed   in   the   suit
for   pre-emption,   the   High   Court   has,   vide   the   impugned
judgment, held that the respondent is entitled to exercise his
right   of   pre-emption   under   the   provisions   of   the   Punjab   Pre-
emption Act, 1913.  In doing so, the High Court relied upon the
judgment   of   this   Court   in   Shyam   Sunder   &   Ors.   v.   Ram   Kumar   &
Anr., (2001) 8 SCC 24.
In the aforementioned judgment by a Constitution Bench of
this   Court   (supra),   the   principles   of   pre-emption   have   been
succinctly stated as follows:
�In   changed   circumstances,   the   right   of   pre-emption
may   be   called   outmoded,   but   so   long   it   is
statutorily recognized, it has to be given the same
treatment   as   any   other   law   deserves.     The   right   of
pre-emption   of   a   co-sharer   is   an   incident   of
property   attached   to   the   land   itself.     It   is   some
sort of encumbrance carrying with the land which can
be enforced by or against the co-owner of the land.
The   main   object   behind   the   right   of   pre-emption,
either   based   on   custom   or   statutory   law,   is   to
prevent   intrusion   of   a   stranger   into   the   family-
holding   or   property.     A   co-sharer   under   the   law   of
pre-emption has right to substitute himself in place
of   a   stranger   in   respect   of   a   portion   of   the
property   purchased   by   him,   meaning   thereby   that
where   a   co-sharer   transfers   his   share   in   holding,
the other co-sharer has right to veto such transfer

3
and thereby prevent the stranger from acquiring the
holding   in   an   area   where   the   law   of   pre-emption
prevails.     Such   a   right   at   present   may   be
characterised   as   archaic,   feudal   and   outmoded   but
this was law for nearly two centuries, either based
on   custom   or   statutory   law.     It   is   in   this
background   the   right   of   pre-emption   under   statutory
law   has   been   held   to   be   mandatory   and   not   mere
discretionary.  The court has no option but to grant
decree   of   pre-emption   where   there   is   a   sale   of   a
property by another co-sharer.�
From   the   aforesaid   observations,   it   is   amply   clear   that
the right of pre-emption is a sort of encumbrance carrying with
the   land,   which   can   be   enforced   by   or   against   the   co-owner   of
the property only.   This is because the main object behind the
right of pre-emption is to prevent intrusion by a stranger into
the family holding of a property. Section 17 of the Punjab Pre-
emption   Act,   1913   also   indicates   this   by   stating   that   the   co-
sharers   or   the   heirs   of   a   person   can   claim   the   right   of   pre-
emption. The provision reads as follows:
�17.   Where   several   pre-emptors   are   found   by   the
Court   to   be   equally   entitled   to   the   right   of   pre-
emption, the said right shall be exercised�
a) if they claim as co-sharers, in proportion
among   themselves   to   the   shares   they   already
hold in the land or property;
b) if they claim as heirs, whether co-sharers
or   not,   in   proportion   among   themselves   to   the
shares   in   which   but   for   such   sale   they   would
inherit   the   land   or   property   in   the   event   of
the vendor�s decease without other heirs;
c)  [Omitted]
d) [Omitted]
e) in   any  other   case,  by   such  pre-emptors   in
equal shares.�
Thus,   it   is   clear   that   in   order   to   claim   the   right   of

4
pre-emption,   the   plaintiff   should   have   such   right   as,   inter
alia, the co-sharer or heir of the said property.
In the matter at hand, though the respondent was declared
as   a   co-sharer   by   virtue   of   the   decree   dated   28.03.1984,   the
said   decree   was   set   aside   by   the   First   Appellate   Court,   the
High Court as well as this Court.   Thus, the respondent cannot
be   considered   as   a   co-sharer,   and   since   it   is   so,   he   cannot
claim the right of pre-emption either.
Accordingly,   the   judgment   of   the   High   Court   dated
21.02.2018 is liable to be set aside and Civil Case No. 260 of
1990 stands dismissed.
The appeal is allowed in the above terms.
  ����������������������J.
[MOHAN M.SHANTANAGOUDAR]
��������������������.J.
[KRISHNA MURARI]
NEW DELHI;
NOVEMBER 27, 2019

5
ITEM NO.8               COURT NO.13               SECTION IV
               S U P R E M E  C O U R T  O F  I N D I A
                       RECORD OF PROCEEDINGS
Civil Appeal  No(s).  9064/2019
Arising out of SLP ( C) No. 11268 of 2018
SURAJ BHAN & ORS.                                  Appellant(s)
                                VERSUS
GORAKH RAM                                         Respondent(s)
Date : 27-11-2019 This appeal was called on for hearing today.
CORAM :
         HON'BLE MR. JUSTICE MOHAN M. SHANTANAGOUDAR
         HON'BLE MR. JUSTICE KRISHNA MURARI
For Appellant(s) Mr. P.S. Patwalia, Sr. Adv.
                    Mr. Rajat Singh, AOR
                 
For Respondent(s)  Mr. Vikas Mehta, AOR
 Mr. Mithun Shashank, Adv.   
               
          UPON hearing the counsel the Court made the following
                             O R D E R
Leave granted.
The appeal is allowed in terms of signed order.
(RAJNI MUKHI)                            (R.S. NARAYANAN)
SENIOR PERSONAL ASSISTANT              COURT MASTER (NSH)
      (Signed order is placed on the file) 

Acquital could not be distrubed unless it is a perverse order =there were 8 accused who were chargesheeted in S.C. No. 60 of 99 in the Fast Track Court, Additional Sessions Judge, Chitradurga. The appellant and the accused no. 6 faced the trial and as we have noticed that though acquitted by the Trial court appellant stood convicted by the High Court. 17. As far as the other accused are concerned, it is stated as follows: Venkatappa alias Venkataramana and accused no. 2 Narayana faced trial in S.C. No. 84 of 2002. It resulted in their acquittal. It further states that State had not preferred any appeal and acquittal is confirmed. In the order dated 16.10.2003 the chargesheet was made against the other absconding accused i.e. accused no. 3 and accused no. 8. Accused nos. 3 and 8 were also not found guilty and states that they had not preferred any appeal against the said judgment rendered in S.C. 85 of 2003. Still 18 19 further accused nos. 5 and 7 were tried in S.C. No. 57 of 2004 and they were also not found guilty by Sessions Judge and acquitted by the judgment dated 02.05.2005. Thus, against all the other accused, other than the appellant who stood charged under Section 397 have been acquitted. 18. Having regard to the circumstances, we are inclined to take the view that the High Court has erred in interfering with the acquittal of the appellant bearing in mind the principles which govern the question as to in what circumstances the Appellate Court can reverse an acquittal.

1
NON-REPORTABLE
IN THE SUPREME COURT OF INDIA
CRIMINAL APPELLATE JURISDICTION
CRIMINAL APPEAL NO.66 OF 2012
NAGARAJA ... APPELLANT
VERSUS
STATE OF KARNATAKA ... RESPONDENT
J U D G M E N T
K.M. JOSEPH, J.
1. By the impugned judgment, the High court has
allowed the appeal filed by the State and found the
appellant (Accused No.4) guilty of the offence under
Section 397 of the Indian Penal code (for short
“IPC”) and he was ordered to undergo R.I. for a
period of 7 years and to pay a fine of Rs.1000/- with
default clause. Though the State has challenged the
acquittal of the sixth accused, his acquittal was
confirmed by the High court.
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2. A complaint was submitted by PW 1 on 16.9.1996 at
about 10.15 p.m. to PW 12, the Head constable. It
was her complaint inter alia as follows:
While she was in her house with her husband, sonin-law and other relatives, they heard the barking
of dogs and came outside. It was found 6-7
unknown persons wearing lungi and shirt armed with
the club surrounded the complainant and their
family members and insisted upon them to give
their ornaments, watch and cash threatening that
in case it is not so given they will be finished.
They were pushed inside the house and PW4, PW5 and
PW6 were assaulted with clubs. A golden chain was
snatched. So also was the mangal sutra of PW1. A
silver chain, ear rings and an amount of Rs.400/-
were also snatched and they ran away from the
place.
3. It is on this complaint that finally after
investigation was carried out charge sheet was filed.
It would appear that accused No.1 to 3 though were on
bail, they did not appear for the trial. Rest of the
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accused except the appellant and accused No.6 were
absconding. The case was split up and trial
proceeded against appellant and A6 for the charge
under Section 397 IPC. During the trial, PWs 1 to PW
15 were examined. Documents were marked as Exhibits
P1 to P15 and MOs 1 to 17 were produced. The High
court found as follows:
(1) The incident took place on 16.9.1996 in the
night at about 9.00 p.m.. PW1, the wife of
PW4, PW5 and PW6 were all present besides other
members.
(2) The complaint was lodged within one hour of the
incident
(3) The names of the accused are not revealed and
it is stated to be only against the unknown
persons
(4) There is no identification parade held. The
High court found that as the incident took
place in the night, the identification parade
was essential and the evidence of the
prosecution witness could not be accepted
insofar as the identity is concerned.
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4. It is thereafter that three circumstance
described by the High Court as strong circumstances
were found against the appellant.
1.The appellant was apprehended in the neighbouring
village during night and was chased by PWs 7, 8
and 11 and was produced before the Police
immediately thereafter. Appellants conduct was
noted.
2.During interrogation by the officer, the
appellant volunteered to produce some articles
which were looted from the house of PW1. PW3,
the attesting witness was led with the police
officers to the place by the side of the national
highway and from from the ditch in the ‘naala’
appellant produced the trunk MO2 which contains
the articles, clothes MOs 8 to 17. This
recovery took place immediately on the very next
day of incident, that is, on 17.9.1996. The High
Court finds that the fact that these articles
were kept in the ditch in the‘naala’ was not
known to anybody other than the appellant. The
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evidence of PW3, witness to the recovery, was
found acceptable. It was also found corroborated
by the evidence of PW 15 (apparently PW 14).
3.The third circumstance relied upon by the
prosecution successfully before the High Court
was as follows:
PW15 is a Police Inspector and handwriting
expert. He visited the spot and checked finger
prints upon the utensils. After the arrest of
the appellant, PW 14 had obtained the finger
prints of the appellant. The fingerprints were
compared. PW15 issued Ex.P12 certificate. The
High Court relies on the Certificate and the
evidence of PW15. Chance prints on Q-1 were
found identical with the left thumb print and
Q-2 was found identical to the finger print of
the appellant. It is noted that the vessels were
not seized by the investigating officer. It was
found to be a mistake which was not to be
considered in appreciating the evidence of PW15.
PW15 was found to have visited the farmhouse of
PW-1 on the very next day and developed five
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chance prints Q1 to Q5. The High Court, further,
finds that the finger prints were lifted by
means of transparent adhesive lifting tape and
pasted them on the glass pieces for which Exh.P13 certificate was issued. It was found that P13 certificate along with P-12 letter reveals
the clinching evidence with regard to
appellant’s finger prints tallying with the
chance finger prints obtained by PW15. The
deposition of PW-11 was referred to find that he
was a police constable and was on duty on
16.9.1996 at 10:30 A.M. at Challakere fair. He
was found to have gone to the house of PW-1 at
night and came to know about the accused having
run away after the dacoity. He went towards
forest and saw a person running in the jungle
and after chasing the person running ahead
assaulted him with stones and tried to escape.
At that time some persons came to help PW-11 and
they apprehended the person who was found to be
the appellant. The High Court relied on the
circumstances revealed from the evidence of PW6
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11, namely, the conduct of the appellant running
in the jungle at night and this conduct
supported the version of the prosecution. It was
found that the PW-11 was not cross-examined and
his evidence can be accepted in toto. It is
stated only after PW-11 produced the appellant
before the Investigating Officer, interrogation
was done and appellant volunteered with a
statement resulting in the recovery being made.
The High Court, further proceeds to hold that
the only conclusion is that the appellant
participated in the incident (dacoity). The
Trial Court was found to have committed the
illegality in acquitting the appellant.
5. We heard learned counsel for the appellant and
also learned counsel appearing on behalf of the
respondent-State. As already noticed, the High Court
has found that the evidence of the prosecution
witnesses were not reliable for identifying the
appellant. Admittedly, the incident took place at
night and no identification parade was held. The
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appellant not being identified and the High Court
having not accepted the deposition of the prosecution
witnesses regarding the identity of the appellant,
the finding of guilt rendered by the High Court and
that too in an appeal against acquittal, is
questioned as impermissible.
6. It is contended that the High Court was not right
in relying upon the finger prints even when the
articles from which the chance finger prints Q1 to Q5
were found were not produced before the Court.
Reliance is placed in this regard of the judgment of
this Court in Mohd. Aman v. State of Rajasthan1.
7. It is further contended that no reliance could be
placed on the so-called recovery. It is complained
that the recovery was effected from a public place.
It is the case of the appellant also that no
negatives of the photograph were filed before the
Court and the person who took the photograph was also
not examined. Regarding the recovery the following
1 1997 (10) SCC 44
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findings of the trial Court is enlisted by the
appellant in his support.
11. PW2 is a spot panchaname PW3 is a
panch for Ex. P3. His evidence is at
the time of preparation of Ex.P3 i.e.
recovery of the articles from accused
persons, namely, as per panchaname
Ex.p3 Narayana, Mohana and Nagaraja
were present and at the instance of
Nagaraja A4 the trunk was recovered
along with the clothes. Ex.P3 is in
respect of the recovery of trunk and
clothes from accused Nagaraja is,
“…… Accused Nagaraj S/o. Bheemappa
told that clothes and trunk had come
to his share, which he had concealed
at a place, and if he was taken there
he would show the same. All the above
said articles were seized in the
presence of the Panchayatdars for
further proceedings…” (Translated from
Kannada)
Panchaname was drawn at Kengaiahna
hatti. Exp3 does not disclose that the
trunk was hidden any where and from
which place accused took out and
produced before the police and
panchas. It was mentioned that
panchaname Ex.P3 was drawn at
Kengaiahna hatti but in the evidence
PW3 Boomalingaiah states the police
seized from accused Anjaneya manihara
tali, 18 bagarada gundu and he further
states the police seized silver leg
chain Rs. 106/- and panchaname Ex.p3.
In further evidence he says “P.C. took
us the both panchas and accused person
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before the court. Harijana Kambajjara
Hola the trunk mO2 was kept in a pit
it was taken out. MO2 contains some
cloth and the same was seized under
panchaname Ex.P4.” His evidence is
that Anjaneya accused No. 6 was
present on the date of Ex. P3 and Ex.
P4 is in correct. Since PW14 has
already stated that A6 was arrested on
26.9.1996 and no property was seized
from him. In respect of the recovery
from accused No. 4 Nagaraja has not a
recovery at all at the instance of the
accused Nagaraja as per the evidence
of PW3 P.C. took them accused to
Harijana Kambajjara hola and from
there seized the articles under Ex.P4.
It is also contended that the witnesses have not
supported the recovery.
8. In regard to reliance placed on the circumstances
that the appellant ran away when PW-11 chased him,
the contention of the appellant is that the evidence
of PW-11 has been misconstrued. The evidence of PW-11
was not at all relevant in respect of the appellant
and the evidence of PW-11 actually relates to the
apprehending of another accused, namely,
Venkataramanappa. The error has led the High Court to
find the circumstance against the appellant, though
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none existed. Per contra, learned counsel for State
supported the impugned order.
9. The principles are well-settled in regard to the
approach to be adopted by this Court in an appeal
against the order reversing an acquittal. The
principles are well settled in regard to the power of
High Court in the matter of reversal of acquittal.
The presumption of innocence prior to a verdict by
the criminal court become strengthened with an
acquittal rendered by the Trial Court. The High Court
would be slow to interfere with an acquittal,
particularly, if the view taken by the Trial Court is
one of the two views possible and it is not perverse.
WHETHER THE HIGH COURT WAS CORRECT IN PLACING THE
RELIANCE ON THE DEPOSITION OF PW-11 TO FIND THAT THE
APPELLANT RAN AWAY AND THIS CONDUCT STRENGTHENED THE
PROSECUTION CASE AGAINST HIM.
The deposition of PW-11 reads as follows:-
‘I was working in year 1996 at
Challakera P.S. I was deputed on
16.9.96, at Challakere Jatre Bandobast
10:30 p.m. CW 25 and 26 took me to
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police station my self 24, 25, and 26
went to Giriminahalli Kapile as there
was a dacoit, we went to the house of
PW1 and came to that the accused
person ran towards the forest we went
in the jungle I saw one person running
the jungle I followed that person he
through the stone on me and has
sustained injury that person escaped
my clutches meanwhile CW24, 25, 26
came there in a jeep again we followed
and apprehended that person. I can
identify the person is before the
court he is A4. He discloses as
Venkatramanappa S/o Ramachandrappa
Pillhalli A4 has disclosed as name
Venkataramanappa.’
10. Next, we may also notice that in the evidence of
PW-12 who was working as Head Constable, he says that
at 2:00 A.M., PW-11 brought one person to the police
station. He secured CW-2 and CW-3 to a police station
and he seized HMT watch MO4 in the Panchanama. In the
cross-examination, he says that he seized the watch
from a person by name Venkataramanappa. He is A1. The
evidence of PW-11 would thus show that he along with
charge witnesses 24, 25 and 26 and the accused ran
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towards the forest and the person was followed. He
sustained injuries as the stones were thrown. That
thereafter, CW-24, 25 and 26 came there in a jeep and
that person was apprehended. As the officer
identified the person before the Court and he is
appellant and his name is disclosed as
Venkataramanappa s/o Ramachandrappa Pillhalli. He
states that the appellant disclosed his name as
Venkataramanappa. PW-12 also refers to
Venkataramanappa but he says that he is A1.
11. The evidence of PW-14 may be noticed. He was CPI
Traffic R.S. On receiving information, he collected
staff and proceeded to Giriyammana hally village. The
PSI, and the staff produced before him one person by
name Venkataramana. He directed his S.I. to take the
persons to the police station for further
investigation. Then, he visited the police station at
3:30 a.m.. He received information about some persons
attacking house at Kengaiahna hatty. On getting
information of three persons being apprehended, he
proceeded. Three persons were arrested, their names
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were disclosed as Narayana, Mohan and Nagaraj.
Nagaraj appears to be appellant before us. If Nagaraj
is arrested by PW-14, then reliance on evidence of
PW-11 by the Court does not appear to be justified at
all.
12. Continuing with deposition of PW-14 he states he
proves the statement of the appellant marked as
Ex.P11 and he claims to have seized the trunk and
clothes as per PW4. He also says that he recorded
voluntary statement of Venkataramanappa. He claims
to have taken the finger prints of person arrested by
him and forwarded it to PW-15 for comparison. In his
cross examination he inter alia states that has not
taken permission from the Magistrate for taking the
finger prints of the accused. The upshot of the
above discussion is that the High Court may not be
justified in relying on deposition of PW11 to
conclude that appellant, according to PW11, ran away
and this conduct constituted a circumstance against
the appellant.
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13. The second circumstance relied upon by the High
Court to convict the appellant, is the recovery of
MO2 to MO 17 clothes. It is also not a matter which
was overlooked by the Trial Court. However, the Trial
Court after referring to the recovery concluded that
so called recovery was effected from a public place.
It is true that it is reasoned by the High Court that
the fact of the articles being kept in a ditch was
not known to anybody. Also, reference is made in
this regard and support drawn from the evidences of
PW-3 and Pw-14.
14. We may also refer to the other circumstance,
namely, matching the fingerprints of the appellant
with the chance fingerprints, which were found on
certain utensils. PW-14, in his deposition admitted
that he has not obtained permission from the
Magistrate for taking the fingerprints of the
accused. The Magistrate, in fact, has referred to the
judgment of this Court reported in Mohd. Aman’s case
(supra). In the said case, it was held as follows
inter alia:-
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“Even though the specimen fingerprints of Mohd. A man had to be taken on
a number of occasions at the behest of
the Bureau, they were never taken before
or under the order of a Magistrate in
accordance with Section 5 of the
Identification of Prisoners Act. It is
true that under Section 4 thereof police
is competent to take finger-prints of
the accused but to dispel any suspicion
as to its bona fides or to eliminate the
possibility of fabrication of evidence
it was eminently desirable that they
were taken before or under the order of
a Magistrate. The other related
infirmity from which the prosecution
case suffers is that the brass, jug,
production of which would have been the
best evidence in proof of the claim of
its seizure and subsequent examination
by the Bureau, was not produced and
exhibited during trial – for reasons
best known to the prosecution and
unknown to the Court. Thus the accused
could not be convicted for murder.”
15. In this case also though seized, the utensils
were not produced and exhibited. Though another view
of the evidence of PW15 and the reasoning employed by
the High Court may be possible, we cannot overlook
that the High Court was considering an appeal against
acquittal. We may remind ourselves that the High
Court itself has found prosecution witnesses have not
been able to identify the appellant. Further, out of
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the three circumstances, quite clearly, one of the
circumstances, namely, about the conduct of the
appellant allegedly allegedly based on the evidence
of PW-11 appears to have been the product of an
error. We have also noticed the inadequacies as
observed by the Trial court in regard to the fingerprints.
 On 16.10.2019, we passed the following order: -
“Arguments concluded.
Judgment reserved.
We, however, note that the incident
pertains to the year 1996 and there were
8 accused. Out of the 8 accused, only 5
were apprehended. Three of them were
enlarged on bail and then absconded. It
appears that these accused have still
not been apprehended and put to trial.
We find the aforesaid completely
unacceptable that for these accused
could not be apprehended, if proper
measures were taken. It is not a case of
one or two accused disappearing from the
scene but six accused absconding.
We thus, call upon the respondentstate to file an affidavit under the
signatures of superintendent of police
of the District setting out as to what
steps have been taken to apprehend these
accused and as to what endeavours are
being made now.
The affidavit be filed within four
weeks.
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A copy of the order dasti be sent to
the learned counsel for the State.”
16. An affidavit has been filed on behalf of the
respondent-State. Therein, it is stated that there
were 8 accused who were chargesheeted in S.C. No. 60
of 99 in the Fast Track Court, Additional Sessions
Judge, Chitradurga. The appellant and the accused no.
6 faced the trial and as we have noticed that though
acquitted by the Trial court appellant stood
convicted by the High Court.
17. As far as the other accused are concerned, it is
stated as follows:
 Venkatappa alias Venkataramana and accused no.
2 Narayana faced trial in S.C. No. 84 of 2002. It
resulted in their acquittal. It further states that
State had not preferred any appeal and acquittal is
confirmed. In the order dated 16.10.2003 the
chargesheet was made against the other absconding
accused i.e. accused no. 3 and accused no. 8. Accused
nos. 3 and 8 were also not found guilty and states
that they had not preferred any appeal against the
said judgment rendered in S.C. 85 of 2003. Still
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further accused nos. 5 and 7 were tried in S.C. No.
57 of 2004 and they were also not found guilty by
Sessions Judge and acquitted by the judgment dated
02.05.2005. Thus, against all the other accused,
other than the appellant who stood charged under
Section 397 have been acquitted.
18. Having regard to the circumstances, we are
inclined to take the view that the High Court has
erred in interfering with the acquittal of the
appellant bearing in mind the principles which govern
the question as to in what circumstances the
Appellate Court can reverse an acquittal. The appeal
is allowed and we set aside the judgment of the High
Court convicting the appellant. We notice that the
appellant has already been enlarged on bail by order
dated 06.01.2012. The appellant’s bail bond stand
discharged and he need not surrender.
………………………………………………J.
[SANJAY KISHAN KAUL]
………………………………………………J.
[K.M. JOSEPH]
NEW DELHI
DECEMBER 06, 2019
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