Simply because an accused is not cooperating with the investigation, this Court cannot deny bail” — Kerala High Court in Rs. 24 Crore Cooperative Society Fraud Case

Bail is the Rule, Jail is the Exception - Kerala High Court granted bail to two elected Panchayat members, accused in a multi-crore cooperative society embezzlement case. Justice P.V. Kunhikrishnan observed that mere non-cooperation with investigation cannot be a sole ground to deny bail, reiterating the settled principle that “bail is the rule and jail is the exception”. The Court, while allowing bail on stringent conditions, drew support from landmark judgments like P. Chidambaram v. Directorate of Enforcement and Siddharth v. State of U.P. emphasizing the importance of personal liberty. 
 
The case arose from Crime No.150/2025 registered at the Aruvikkara Police Station, Thiruvananthapuram, based on allegations of massive misappropriation within the Rajiv Gandhi Residence Welfare Co-operative Society, Nedumangad. 

The petitioners, Shaffi M.M (President of the Grama Panchayat) and S. Anilkumar (District Panchayat Member), were arrayed as Accused Nos.13 and 15 among several others. 
 
According to the prosecution: “The petitioners, with the intention to cheat and defraud the investors of the said group, misappropriated an amount of Rs.24,74,21,480/- (Rupees Twenty-Four Crores Seventy-Four Lakhs Twenty-One Thousand Four Hundred and Eighty only).” 
  
The alleged fraud occurred between 01.04.2021 and 31.05.2024, involving the diversion and misappropriation of public funds collected from innocent investors. The accused were charged under Sections 409 and 420 read with Section 34 IPC. 

Bail Application Before the High Court: The petitioners approached the High Court after the Investigating Officer reported that while they did appear for interrogation as directed earlier, they were allegedly not cooperating fully with the investigation.  

Justice Kunhikrishnan, however, remarked: “Simply because an accused in a criminal case is not cooperating with the investigation, this Court cannot deny bail to the petitioners.” 
 
 
The Court acknowledged the seriousness of the allegations but emphasized that mere allegations, without custodial interrogation being shown as indispensable, do not automatically disqualify an accused from bail. 

Relying on established principles, the Court observed: “It is a well accepted principle that the bail is the rule and the jail is the exception.” 
 
The judgment referred to the Supreme Court’s decision in P. Chidambaram v. Directorate of Enforcement where it was reiterated that: “The basic jurisprudence relating to bail remains the same inasmuch as the grant of bail is the rule and refusal is the exception so as to ensure that the accused has the opportunity of securing fair trial.” 
 
The Court also cited Siddharth v. State of U.P.: “Merely because an arrest can be made because it is lawful does not mandate that arrest must be made. A distinction must be made between the existence of the power to arrest and the justification for exercise of it.” 
 
Furthermore, referring to Manish Sisodia v. CBI, the Court clarified: “Even if the allegation is one of grave economic offence, it is not a rule that bail should be denied in every case.” 
Bail Granted with Stringent Conditions: Considering the circumstances, the Court granted bail subject to strict conditions: “The petitioners shall appear before the Investigating Officer within two weeks and shall undergo interrogation.” 
 
The Court ordered that: “After interrogation, if the Investigating Officer proposes to arrest the petitioners, they shall be released on bail on executing a bond for a sum of Rs.50,000/- each with two solvent sureties.” 

Further conditions included mandatory cooperation with the investigation, non-interference with witnesses, and restrictions on foreign travel without court permission. 
 
Justice Kunhikrishnan also clarified: “Needless to mention, it would be well within the powers of the investigating officer to investigate the matter and, if necessary, to effect recoveries on the information, if any, given by the petitioners even while the petitioners are on bail.” 
 
The Court warned that any violation of the conditions could lead to cancellation of bail. 

The judgment reinforces the evolving stance of Indian courts to balance individual liberty and investigative needs in financial fraud cases. By holding that non-cooperation alone cannot justify denial of bail and emphasizing established constitutional principles, the Kerala High Court underlined that “bail is the rule and jail is the exception” even in complex economic offences. 

Date of Decision: 28th March 2025