Gujarat HC Refuses To Discharge Auditor In ₹51.62-Crore Bank-Fraud Case: “No mini-trial at discharge; if the court thinks the accused might have committed the offence, charge can be framed.”

“At the stage of considering an application for discharge, the court has to proceed on an assumption that the materials brought on record by the prosecution are true….Revisional jurisdiction under Sections 397/401 CrPC sets right patent defects — it is not a licence to re-appreciate evidence at the threshold.” – Gujrat High Court

Gujarat High Court (Justice L. S. Pirzada) dismissed R/Criminal Revision Application, affirming the CBI Court’s order dated December 30, 2024 that refused to discharge a chartered accountant accused of helping Sai Infosystem (India) Ltd. secure and sustain bank credit by filing deceptive audit reports. Invoking first principles on Section 227 CrPC and the narrow compass of revisional scrutiny under Sections 397/401, the Court held that the case materials disclose grounds to proceed; the plea for discharge therefore fails.
According to the CBI, Sai Infosystem (India) Ltd. borrowed around ₹1,000 crore from a consortium led by SBI (2008–2012), anchored by an Internet Data Centre project with BSNL at Bengaluru, Hyderabad, Ernakulam and Ranchi. By 2013 the company allegedly defaulted and “manipulated” drawing power in its Allahabad Bank cash-credit account using “inflated/false debtors,” causing a wrongful loss of ₹51.62 crore. The applicant—shown as Accused No. 10—audited SIS for FY 2010-11, 2011-12 and 2012-13 as a partner of Dharmesh Parikh & Co. The CBI charges that he “affirmed” a false debtors picture and submitted misleading audit reports, inducing the bank to continue disbursements. He sought discharge under Section 227 CrPC (Exh. 19) in CBI Special Case No. 22/2022 before the ACJM, CBI Court No.1, Ahmedabad (Rural). The trial court rejected discharge on 30.12.2024; the High Court reserved judgment on 08.07.2025 and pronounced on 07.08.2025.

The applicant insisted he was an independent auditor with no role in company or bank decisions; that audits relied on management representations/TEV reports; that there is “no direct evidence” beyond one banker’s statement; and that professional standards were followed. The CBI countered that his audit sign-offs and notes on inventories/receivables, read with a senior banker’s statement, show he “affirmed” inflated receivables, enabling higher drawing power and continued withdrawals, in conspiracy with the promoter.

The Court answered with the doctrinal yardsticks for discharge and revision. It quoted the Supreme Court to emphasise that at Section 227, the judge “has to proceed on an assumption that the material brought on record by the prosecution is true” and assess whether the facts on their face disclose the ingredients of the offence; “the law does not permit a mini-trial at this stage.” It further reminded that revisional power under Section 397 is to correct “a patent defect or error of jurisdiction or law,” not to re-weigh evidence or conduct a premature merits review.

Justice Pirzada walked through the charge-sheet: SIS’s consortium facilities; alleged siphoning and DP manipulation using inflated debtors; the applicant’s role as statutory auditor for three successive years; and a senior manager’s statement attributing continued disbursements to audit affirmations of receivables/outstandings. Noting passages where the audit reported inventory checks and receivables reasonableness, and references to direct confirmations on a “random basis,” the Court concluded that, taken at face value, the prosecution materials supply a prima facie case of conspiracy, cheating and related offences.

Two pivots emerge from the reasoning. First, discharge: “What needs to be considered is whether there is a ground for presuming that the offence has been committed and not whether a ground for convicting the accused has been made out.” Second, revision: The High Court cannot sit as an appellate court to “sift” and “test” probative value; the trial court’s refusal to discharge disclosed no jurisdictional error or perversity. Result: revision dismissed, trial to proceed.
The ruling underscores a familiar but critical divide: threshold sufficiency vs. final guilt. At discharge, the prosecution’s story is assumed true to see if it discloses the legal ingredients; defences about professional judgment, management reliance, or causation are for trial. And in revision, the High Court steps in only to correct manifest legal error — not to try the case in miniature. With those guardrails, the auditor’s bid to exit at the threshold was rejected.

Date of Decision: August 7, 2025