Arvind Kumar Munka vs The Union Of India on 24 December, 2019

1. Outcome

The application for bail filed by the petitioner under Section 439 of the Cr.P.C. was dismissed. The Court, however, granted the petitioner the liberty to approach the authorities for compounding the offence under Section 138 of the CGST Act, 2017.

2. Core Issue

The core issue before the High Court was whether the petitioner, a Chartered Accountant accused of masterminding a large-scale fake invoice racket causing a revenue loss of over ₹141 crores, was entitled to be released on bail. The determination of this issue involved examining several sub-issues, including:
* The applicability of the right to default bail under Section 167(2) Cr.P.C.
* Compliance with arrest procedures laid down in Arnesh Kumar vs State of Bihar.
* The nature of offences under Section 132 of the CGST Act (bailable vs. non-bailable).
* The necessity of prior sanction for prosecution under the CGST Act.

3. Key Facts

• Petitioner: Arvind Kumar Munka, a Chartered Accountant.
• Allegation: The petitioner, in connivance with other accused, orchestrated a scheme of issuing fake GST invoices without any actual supply of goods or services. This was done on a commission basis, facilitating fraudulent claims of Input Tax Credit (ITC).
• Revenue Loss: The alleged fraudulent activity resulted in a loss to the Government Exchequer amounting to approximately ₹141.76 crores.
• Procedural History:
  • The petitioner was arrested on June 6, 2019.
  • His initial bail application was rejected by the Chief Judicial Magistrate (CJM), Alipore, on the same day.
  • A subsequent bail application was rejected by the Sessions Judge, Alipore, on August 20, 2019.
  • A bail application was moved before the CJM on August 6, 2019 (the 61st day of custody), claiming default bail. On the very same day, the prosecution filed the charge sheet (Final Report). The CJM rejected the plea for default bail.
• Evidence: Searches at the petitioner's premises led to the recovery of incriminating documents, including PAN cards, bank cheque books, digital signature keys, stamps, seals, and mobile SIM cards of various firms. The petitioner and co-accused allegedly gave statements admitting to the modus operandi.

4. Arguments

Petitioner's Arguments (Mr. Sekhar Basu):
1. Default Bail (Sec 167(2) Cr.P.C.): The petitioner had an indefeasible right to be released on "default bail" as the charge sheet was not filed within the stipulated 60-day period, and the trial court erred by not granting bail on the 61st day.
2. Non-compliance with Arrest Guidelines: The arrest was illegal as the authorities failed to comply with the mandatory directions of the Supreme Court in Arnesh Kumar vs. State of Bihar, which require specific reasons for arrest and satisfaction by the Magistrate for offences punishable with less than seven years. No notice under Section 41A Cr.P.C. was served.
3. Nature of Offence: The offences under Section 132 of the CGST Act are bailable in nature.
4. Lack of Sanction: The prosecution is invalid as it was initiated without the previous sanction of the Commissioner, which is a mandatory pre-requisite under Section 132(6) and Section 134 of the CGST Act.

Respondent's Arguments (Union of India - Mr. K.K. Maiti):
1. Default Bail Inapplicable: The right to default bail was extinguished as the charge sheet was filed on the 61st day, the same day the application for default bail was moved. The right is enforceable only before the filing of the challan.
2. Compliance with Law: The guidelines in Arnesh Kumar are not absolute. Relying on P.V. Ramana Reddy, it was argued that the power to summon under Section 70 of the CGST Act serves a similar purpose to Section 41A of the Cr.P.C. The Commissioner had "reason to believe" that the petitioner committed a cognizable and non-bailable offence, justifying the arrest under Section 69.
3. Gravity of Offence: The case involves a massive economic offence of over ₹141 crores, which is a serious crime against the nation's economy. Given the magnitude, the offence is cognizable and non-bailable, and the petitioner should not be granted bail.

5. Court’s Reasoning

The Court rejected the petitioner's contentions and dismissed the bail application based on the following reasoning:
* On Default Bail: The Court held that the petitioner’s indefeasible right to default bail did not arise. It relied on the established principle that this right is enforceable only prior to the filing of the charge sheet. Since the charge sheet was filed on the very same day the default bail application was moved (the 61st day), the right was no longer available to be exercised.
* On Arnesh Kumar Guidelines: The Court found merit in the respondent's argument, referencing the Supreme Court's decision in P.V. Ramana Reddy. It concluded that the provisions of Section 41 and 41A of the Cr.P.C. do not provide an absolute guarantee against arrest in such matters. The "reason to believe" recorded by the Commissioner was deemed sufficient for the purpose of arrest under Section 69 of the CGST Act.
* On Gravity of Economic Offence: The paramount consideration for the Court was the seriousness and magnitude of the economic offence. The loss of over ₹141 crores to the public exchequer was a significant factor weighing against the grant of bail.
* Distinction from Precedent (Sanjay Kumar Bhuwalka): The Court, presided over by the same judge who decided Sanjay Kumar Bhuwalka, distinguished the present case. In Bhuwalka, bail was granted primarily because the investigating agency had failed to file a charge sheet within the prescribed period, triggering the right to default bail. In this case, the charge sheet was filed in time, making the facts materially different.

6. Statutory References

• Central Goods and Services Tax (CGST) Act, 2017:
  • Section 69: Power to arrest.
  • Section 70: Power to summon persons to give evidence and produce documents.
  • Section 132(1): Punishment for certain offences (clauses a, b, c).
  • Section 132(6): Requirement of previous sanction of the Commissioner for prosecution.
  • Section 134: Cognizance of offences.
  • Section 138: Compounding of offences.
• Code of Criminal Procedure (Cr.P.C.), 1973:
  • Section 41 & 41A: When police may arrest without warrant and procedure for appearance.
  • Section 167(2): Procedure when investigation cannot be completed in twenty-four hours (proviso regarding default bail).
  • Section 439: Special powers of High Court or Court of Session regarding bail.
• Constitution of India:
  • Article 21: Protection of life and personal liberty.

7. Precedents Cited

1. Arnesh Kumar vs. State of Bihar (2014) 8 SCC 273
2. Rini Johar vs. State of Madhya Pradesh (2016) 11 SCC 703
3. P.V. Ramana Reddy vs. Union of India 2019 (26) GSTL J(175) SC
4. Uday Mohanlal Acharya vs. State of Maharashtra (2001) 5 SCC 453
5. Hussainara Khatoon and Ors. (1980) 1 SCC 108
6. U.O.I. through C.B.I. vs Nirala Yadav @ Raja Ram AIR 2014 SC 3036
7. Rajnikant Jivanlal Patel & Anr. vs Intelligence Officer Narcotic Control Bureau New Delhi (1989) 3 SCC 532
8. Sidhharam Satlingappa Mhetre Vs. State Of Maharashtra (2011) 1 SCC 694
9. Vikas Goel vs. Deputy Director, Directorate General of GST Intelligence 2019 (28) GSTL (590)
10. Sanjay Kumar Bhuwalka vs. Union of India 2018(362) ELT 568(Cal)