Introduction:
In the case of Pawan Kumar v. Inspector (Preventive), Central Goods and Services Tax [2025 LiveLaw (PH) 110], the Punjab & Haryana High Court strongly criticized the imposition of excessive bail conditions that led to the prolonged incarceration of an accused in a tax fraud case. Justice Harpreet Singh Brar, while deciding on a plea under Section 482 CrPC, set aside the requirement of furnishing a bail bond worth ₹1.10 crore for default bail. The petitioner, Pawan Kumar, had been in custody for over four years despite the maximum punishment for his alleged offence being five years. The Court observed that this case exemplified the failure of the criminal justice system in safeguarding the rights of undertrial prisoners. The High Court’s ruling not only underscored the petitioner’s right to default bail under Section 167(2) CrPC but also his entitlement to release under Section 479 of the Bharatiya Nyaya Sanhita, 2023 (BNSS). Expressing grave concern over the inaction of the District Legal Services Authority (DLSA), the Court called for intervention by the Chief Justice to ensure compliance with the Supreme Court’s directives in In Re Policy Strategy for Grant of Bail. This decision marks a significant reaffirmation of fundamental rights, particularly the right to a fair trial and the principle that an accused is presumed innocent until proven guilty.
Arguments of Both Sides:
The petitioner, Pawan Kumar, was accused under Section 132(1)(b) & (c) punishable under Section 132(1)(i) of the Central Goods and Services Tax Act, 2017, read with the corresponding provisions of the Punjab Goods and Services Tax Act, 2007, and the Integrated Goods and Services Tax Act, 2017. The complaint alleged that a co-accused orchestrated a fraudulent scheme involving fake transactions, creating 14 firms in the names of family members and associates. These firms were allegedly used to unlawfully avail and pass on ineligible input tax credit amounting to ₹17.65 crores through fabricated invoices. The petitioner was arrested in 2021, but the prosecution failed to complete the investigation and file the final report under Section 173 CrPC within the statutory period of 60 days. Consequently, he moved an application under Section 167(2) CrPC, seeking default bail, which was granted on 15.03.2021. However, he was required to furnish bail bonds worth ₹1.10 crore, along with surety bonds and a bank guarantee of ₹55 lakhs. Given his inability to meet these stringent conditions, he remained in custody for over four years without the trial even commencing.
The petitioner’s counsel, Mr. Anoop Verma, argued that the bail conditions were disproportionately severe and in violation of constitutional principles. He highlighted that under Section 479 BNSS, the petitioner was entitled to release as he had already served more than one-third of the maximum prescribed sentence. Further, he contended that the failure of the prosecution to complete the investigation within the statutory period automatically granted him the right to default bail, which could not be frustrated by imposing unreasonable conditions. Additionally, the defense pointed out the Supreme Court’s ruling in In Re Policy Strategy for Grant of Bail, which mandated that undertrial prisoners should not be kept in custody solely due to their inability to fulfill bail conditions.
On the other hand, the respondent, represented by Mr. Sourabh Goel, Senior Standing Counsel, CBIC, along with Mr. Samridhi Jain and Mr. Akash Khurana, defended the bail conditions. The prosecution maintained that the economic nature of the offence necessitated stringent bail requirements to ensure the accused’s availability for trial. They argued that the petitioner’s involvement in a fraudulent scheme causing a loss of ₹17.65 crores to the exchequer justified the imposition of substantial financial guarantees. Moreover, they asserted that since the petitioner had access to significant financial resources as alleged in the complaint, the bail conditions were reasonable. The prosecution further argued that modifying the bail conditions would set a precedent that might be exploited by economic offenders to secure bail without adequate safeguards.
Court’s Judgment:
After a thorough examination of the submissions, Justice Harpreet Singh Brar delivered a scathing indictment of the justice system’s failure in this case. The Court observed that the petitioner had been incarcerated for four years, one month, and twenty days, despite the fact that the maximum punishment for the alleged offences was five years. It lamented that such prolonged pre-trial detention amounted to a punitive sentence, violating the fundamental principle that an accused is presumed innocent until proven guilty.
The Court strongly criticized the imposition of excessive bail conditions, noting that they effectively nullified the petitioner’s right to default bail. It emphasized that bail conditions should not be so onerous that they defeat the very purpose of granting bail. Citing the Supreme Court’s ruling in In Re Policy Strategy for Grant of Bail, the Court highlighted that it was the duty of the District Legal Services Authority (DLSA) to assist undertrial prisoners who are unable to meet bail conditions. The Court expressed dismay over the fact that no efforts were made by the DLSA to help the petitioner secure his release, nor was any socio-economic report prepared to justify the stringent bail conditions.
Furthermore, the Court noted that the authorities had failed to release the petitioner under Section 479 BNSS, despite the provision’s clear mandate that undertrials who have served more than one-third of their maximum sentence must be released. It held that the Superintendent of Jail had neglected his duty under Section 479(3) BNSS to inform the Court of the petitioner’s eligibility for bail, leading to an unjust extension of his incarceration.
In unequivocal terms, the Court described the situation as a “distressing picture of the criminal justice system’s failure” to uphold the rights of undertrial prisoners. It remarked that the petitioner had been condemned unheard and that his continued detention without trial was a blatant miscarriage of justice. The judgment underscored that while economic offences must be dealt with stringently, an accused’s fundamental rights cannot be sacrificed in the name of deterrence.
Accordingly, the Court set aside the bail conditions imposed by the Chief Judicial Magistrate and affirmed by the Additional Sessions Judge, Ludhiana. It directed the immediate release of Pawan Kumar on default bail upon furnishing bail bonds of ₹50,000. Additionally, the matter was referred to the Chief Justice for appropriate action to ensure that courts across the state comply with the Supreme Court’s directives on undertrial prisoners.