Custodial Interrogation Significant For Investigation: Kerala High Court Denies Anticipatory Bail To Accused In ₹101 Crore Bank Misappropriation Case
The High Court has declined anticipatory bail to the prime accused in an alleged ₹101 crore co-operative bank scam, holding that economic offences of such magnitude require custodial interrogation and that pre-arrest protection would destroy the investigation.
Justice A. Badharudeen, Kerala High Court
The Kerala High Court has refused to grant anticipatory bail to a former President of a Co-operative Bank accused of misappropriating more than ₹100 crores, observing that economic offences of this nature are of “special significance” and warrant a different approach in the matter of bail.
The Court held that granting anticipatory bail to the prime accused in a huge scam would seriously impede effective investigation.
The Court was hearing an application for anticipatory bail alleging commission of offences under Sections 120B, 201, 406, 409, 420, 465 and 475 of the Indian Penal Code and Section 13(1)(a) read with Section 13(2) of the Prevention of Corruption Act, 1988.
A Single Bench of Justice A. Badharudeen examined the allegations and the necessity for custodial interrogation in the context of the scale and gravity of the alleged offence, and observed: “Economic offences of this nature are of special significance, and the specific need of the prosecution and the investigating agency to conduct custodial interrogation of the petitioner for the purposes espoused is significant, as stated in paragraph 14 of the statement filed by the Investigating Officer. Most importantly, the facts of this particular case would prima facie show misappropriation of more than a hundred crores, where the petitioner is the prime accused. If the prime accused involved in a huge scam/economic offence is granted anticipatory bail, effective investigation could not be materialised, as apprehended by the prosecution.”
Background
According to the prosecution, the petitioner, who had served as the elected President of a Co-operative Society for nearly three decades, along with other accused persons, allegedly floated deposit schemes offering exorbitant interest rates without statutory sanction.
It was alleged that funds were siphoned off through loans granted without proper collateral, diversion of funds to other societies, unauthorised appointments, and other irregularities.
The prosecution contended that the cumulative misappropriation amounted to ₹1,01,00,67,858. Enquiries conducted under Sections 65 and 68(1) of the Kerala Co-operative Societies Act, 1969, reportedly revealed widespread corruption, diversion of funds and financial irregularities.
It was further stated that surcharge proceedings had fixed liability exceeding ₹51 crores upon the petitioner.
The petitioner, aged 71 years, sought pre-arrest bail, contending that he had already been granted anticipatory bail in certain connected matters by the Supreme Court and that he was willing to cooperate with the investigation. The State strongly opposed the application, emphasising the magnitude of the alleged scam and the need for custodial interrogation.
Court’s Observations
The Court noted that the allegations pertained to misappropriation exceeding ₹100 crores and that the petitioner was the prime accused. Referring to the legal position governing anticipatory bail in economic offences, the Court relied upon recent Supreme Court precedents, including Serious Fraud Investigation Office v. Aditya Sarda, which reiterated that economic offences constitute a class apart.
Extracting the settled principles, the Court observed that anticipatory bail is an extraordinary remedy to be exercised sparingly and that in cases involving large-scale financial fraud and deep-rooted conspiracies, custodial interrogation may be imperative.
After analysing the factual matrix, the Court held: “In such a case, the grant of anticipatory bail would definitely hamper the investigation. In view of the particular facts of the case, this Court is not inclined to grant anticipatory bail to the petitioner, since the same would destroy the investigation. Therefore, this petition is liable to fail and is accordingly dismissed.”
The Court emphasised that the magnitude of the alleged fraud, the ongoing investigation, the necessity to unravel the complete chain of transactions, and the petitioner’s role as the principal accused militated against the grant of anticipatory bail.
Conclusion
Dismissing the anticipatory bail application, the Court directed the petitioner to surrender before the Investigating Officer forthwith. It further observed that in the event of failure to surrender, the Investigating Officer would proceed in accordance with the law to ensure meaningful investigation and successful prosecution.
Cause Title: N. Basurangan v. State of Kerala (Neutral Citation: 2026:KER:15130)
Appearances
Petitioner: Arun Krishna Dhan, Arjun Sreedhar, T.K. Sandeep, Swetha R., Harikrishnan P.B., Advocates
Respondents: Rajesh A., Special Public Prosecutor, Rekha S., Senior Public Prosecutor