Featured image for Supreme Court Judgment dated 12-09-2019 in case of petitioner name Serious Fraud Investigation Of vs Nittin Johari & Anr.
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Bail Revoked in Corporate Fraud Case: Supreme Court Orders Fresh Hearing

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The case of Serious Fraud Investigation Office vs. Nittin Johari & Anr. revolves around the grant of bail to a corporate executive accused of financial fraud under the Companies Act, 2013. The Supreme Court, in its judgment on September 12, 2019, set aside the Delhi High Court’s order granting bail and remanded the matter for fresh consideration.

Background of the Case

The case concerns Bhushan Steel Ltd. (BSL), whose promoters and senior executives allegedly engaged in fraudulent financial activities between 2009 and 2017. According to the prosecution, the promoters, along with company officials, siphoned off funds from BSL using a network of 157 shell companies, manipulated financial records, and fraudulently obtained bank credit.

The Serious Fraud Investigation Office (SFIO) accused the company’s management of causing a loss of Rs. 20,879 crores to banks and financial institutions while fraudulently benefiting to the tune of Rs. 3,500 crores.

The respondent, Nittin Johari, was the Chief Financial Officer (CFO) and Whole-Time Director of Finance at BSL during the period of the alleged fraud. SFIO alleged that he played a crucial role in:

  • Using fraudulent letters of credit to obtain bank loans.
  • Inflating Stock-in-Transit figures to secure greater drawing power from banks.
  • Manipulating BSL’s financial statements under the guise of implementing Indian Accounting Standards.

Johari was arrested on May 2, 2019, and was in judicial custody until his bail application was granted by the Delhi High Court on August 14, 2019. SFIO challenged this bail order before the Supreme Court.

Legal Issues and Arguments

Arguments by the Appellant (SFIO):

  • The High Court failed to consider the stringent bail conditions under Section 212(6) of the Companies Act, which requires courts to be satisfied that the accused is not guilty before granting bail.
  • The gravity of economic offenses must be considered, as they impact the financial stability of the nation.
  • The accused played a pivotal role in financial manipulations that caused enormous losses to public banks.
  • Other co-accused, including key promoters of BSL, were either denied bail or remained under investigation.
  • The High Court granted bail based on “broad probabilities” without fully assessing the serious nature of the charges.

Arguments by the Respondent (Nittin Johari):

  • The chargesheet had already been filed, and further custody was unnecessary.
  • There was no direct evidence of personal financial gain by Johari.
  • Other key accused individuals had been granted bail, ensuring parity.
  • There was no risk of tampering with evidence since all financial records were already in possession of Tata Steel, which took over BSL.

Supreme Court’s Observations

The Supreme Court noted that economic offenses require a different approach to bail due to their impact on public funds. The Court cited Y.S. Jagan Mohan Reddy vs. CBI (2013), which states:

“Economic offenses constitute a class apart and need to be visited with a different approach in the matter of bail.”

Regarding the High Court’s reasoning, the Supreme Court observed:

“The High Court granted bail based on broad probabilities without considering the stringent requirements under Section 212(6) of the Companies Act.”

The Court also pointed out that the grant of bail should be assessed in light of:

  • The severity of the allegations against the accused.
  • The quantum of financial loss involved in the fraud.
  • The potential risk of influencing witnesses or tampering with evidence.

Key Rulings and Conclusion

The Supreme Court set aside the High Court’s bail order and remanded the matter for fresh consideration. The ruling included the following directives:

  • The High Court must reconsider the bail application while keeping in mind the gravity of the offense.
  • The accused must remain in custody until the High Court delivers a fresh decision.
  • Stringent conditions under Section 212(6) of the Companies Act must be strictly followed.

This judgment highlights the principle that economic offenses involving large-scale financial fraud must be scrutinized rigorously, and bail cannot be granted without satisfying statutory requirements.


Petitioner Name: Serious Fraud Investigation Office.
Respondent Name: Nittin Johari & Anr..
Judgment By: Justice N.V. Ramana, Justice Mohan M. Shantanagoudar, Justice Ajay Rastogi.
Place Of Incident: Delhi.
Judgment Date: 12-09-2019.

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