Kerala High Court
Shefin M.B vs The State Of Kerala on 27 August, 2025
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR. JUSTICE A. BADHARUDEEN
WEDNESDAY, THE 27TH DAY OF AUGUST 2025 / 5TH BHADRA,
1947
BAIL APPL. NO. 9976 OF 2025
CRIME NO.6/2025 OF VACB, THIRUVANANTHAPURAM,
Thiruvananthapuram
ENQUIRY COMMISSIONER AND SPECIAL JUDGE,
THIRUVANANTHAPURAM
PETITIONER/ACCUSED NO.1:
SHEFIN M.B.,
AGED 37 YEARS
S/O. BASHEER, RESIDING AT M C STREET,
MULLIYIL, BALARAMAPURAM, THIRUVANANTHAPURAM
DISTRICT, PIN - 695501.
BY ADVS.
SRI.R.T.PRADEEP
SMT.M.BINDUDAS
SHRI.NIRANJAN T. PRADEEP
RESPONDENT/STATE:
THE STATE OF KERALA,
REPRESENTED BY THE PUBLIC PROSECUTOR, HIGH
COURT OF KERALA, ERNAKULAM, PIN - 682031.
ADV.RAJESH.A SPL .PP FOR VACB,
SR. PP FOR VACB, ADV.REKHA.S
THIS BAIL APPLICATION HAVING COME UP FOR
ADMISSION ON 14.08.2025, THE COURT ON 27.08.2025
DELIVERED THE FOLLOWING:
2025:KER:65919
B.A.No.9976/2025 :2:
A. BADHARUDEEN, J.
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B.A. No.9976 of 2025
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Dated this the 27th day of August, 2025
ORDER
The 1st accused in Crime No.VC/06/2025SIU-1 of 2025 of VACB, Thiruvananthapuram, has filed this petition seeking pre-arrest bail.
2. Heard the learned counsel for the petitioner and the learned Special Public Prosecutor representing the VACB.
3. Perused the records placed by the learned counsel for the petitioner and the records placed by the learned public prosecutor.
4. The prosecution case as per the FIR runs as under; The 1st and 2nd accused while working as Industries Extension Officers (IEO) in the Industries Department who were responsible for implementing development schemes and are entrusted with the authority to grant loan subsidies to women under the BPL category (General) and the implementing officers of the project No. SO, 760/22 of 2025:KER:65919 B.A.No.9976/2025 :3: Thiruvananthapuram Corporation, entered into a criminal conspiracy among themselves and others for implementing the self employment beneficiary group scheme and with the intention to cheat and cause wrongful loss to the government, fraudulently prepared forged documents and misappropriated funds by creating false records, manipulated the list of eligible beneficiaries for the subsidy under the scheme, and created fake bills and other documents, disbursed subsidies to these fake beneficiaries, who were not entitled to receive any benefits, during the financial year 2021-2022. They were alleged to have misappropriated a total amount of Rs 1.14 Crores during the period of 1st accused from September 2021 to March 2022 and during the period of the 2 nd accused from March 2021 to September 2021. Loans were granted to ineligible women who were not enlisted in the beneficiaries list approved by the Corporation Council and without verifying the authenticity of the documents submitted by them, violating the procedures and the guidelines of the scheme, by abusing their official position, dishonestly and fraudulently committed criminal misappropriation, breach of trust and by forging the documents, used such documents as genuine and granted subsidy to those illegal beneficiaries.
2025:KER:65919 B.A.No.9976/2025 :4: Subsequently, the officials caused disappearance of documents by willfully misplacing the original records from the said file which caused the issuance of the loan subsidy and thereby government had sustained a wrongful loss of Rs 1.14 Crore and corresponding gain to accused and thus thereby the accused are alleged to have committed the offences punishable U/s 13 (2) r/w 13 (1) (a) of PC (Amendment) Act 2018 and 409, 420, 468, 471, 120(B) & 34 IPC.
5. The following grounds have been urged by the learned counsel for the petitioner while seeking anticipatory bail to the petitioner. The same are as under:
"A. The prosecution version is unsustainable in law or on facts.
B. The petitioner is falsely implicated in the crime. He has absolutely no role in the preparation of beneficiary list. Therefore he cannot be mulcted with any liability for the percolation of bogus groups.
C. Pressure was mounted upon him to expedite the disbursement of subsidy amount to avert lapse of amount during the financial year by Annexure-VI notice by the secretary of corporation. There is no supporting staff to the petitioner.
D. The petitioner has no rational connection or 2025:KER:65919 B.A.No.9976/2025 :5: nexus with accused (A3) and (A4). The transactions fastened upon the petitioner for the cumulative amount of Rs.1.14 crores, there is not even a single transaction to Aswathy Suppliers of 3rd accused. The transactions levelled against Aswathy Suppliers has absolutely no connection of whatsoever with the petitioner.
E. The transactions to the 38 groups to a tune of Rs.1.14 crores of which 17 groups are genuine ones. The transactions to the 17 genuine groups come to Rs.51 lakhs. He intercepted the release of Rs.30 lakhs to bogus 10 groups. Therefore the subsidy swindled in this regard is Rs.33 lakhs for which the petitioner is not at all liable. The financial institutions in collusion with bogus groups misappropriated that amount. There was clear direction from the petitioner to the financial institutions to adjust the subsidy amount in the loan account of the group. The financial institutions are legally precluded to credit the amount in the account of the group rather than crediting in the loan account of the group. Matter being so, the petitioner cannot be incarcerated for no offence committed.
F. No application seeking similar relief is earlier filed before this Hon'ble Court or before any other Court. It is undertaken that no such application shall be filed before this Hon'ble Court or any other Coun during the pendency of this bail application."
6. It is submitted by the learned counsel for the petitioner that since the prosecution materials would not show the involvement of the 2025:KER:65919 B.A.No.9976/2025 :6: petitioner and, according to him, prima facie, the petitioner intercepted the release of Rs.30 lakh to bogus 10 groups, he conceded that the same was after disbursement of the said amount. He also would submit that since the petitioner is ready to co-operate with the investigation and he is ready to abide by any conditions to be imposed by this Court while releasing him on anticipatory bail, he may be released on anticipatory bail.
7. While opposing anticipatory bail to the petitioner, the learned Public Prosecutor would submit that the grounds urged for granting bail could not be appreciated because the prosecution records would justify that the petitioner has involvement in this crime involving misappropriation of Rs.1.14 Crore. It is submitted further that upon assuming the charge as the implementing officer following the transfer of the 2nd accused, the 1st accused was duty bound to personally verify and ascertain whether the Joint Liability Groups (JLGs) were functioning properly, whether the previously implemented portion of the scheme was progressing on the right track and whether the projects were ongoing. On satisfying the said ingredients alone, the amount should be transferred to the respective bank accounts after due verification. However, the 1st accused in collision with the 2 nd accused, illegally transferred the subsidy amount without conducting the required verification even though it was her duty to ensure that the projects are active and progressing before 2025:KER:65919 B.A.No.9976/2025 :7: releasing any subsidy. It is specifically alleged that the 1 st accused failed to fulfil her obligation and sanctioned subsidies to 38 JLGs without confirming the operational status of their ventures, thereby causing financial loss to the Government. It was also revealed through investigation that these 38 groups had not availed any loan from any banks. It is also submitted that in the above circumstances, in this matter, the arrest and custodial interrogation of the petitioner are necessary to effectuate meaningful investigation and successful prosecution. Therefore, anticipatory bail could not be granted as the same would impede the investigation.
8. In the statement filed by the Inspector of Police, VACB, SIU-1, Thiruvananthapuram, in paragraphs 14 to 19 it has been stated as under:
"14. The Preliminary Enquiry reveals that A1, the Implementing Officer (IEO), transferred an amount of Rs.30 lakhs as subsidy to 10 Joint Liability Groups (JLGs) from the account of Thiruvananthapuram Corporation to the Vattiyoorkavu Service Co-operative Bank Ltd. Since the beneficiary groups had not commenced any ventures and the bank had not disbursed any loans, the bank withheld the amount and duly informed Thiruvananthapuram Corporation.It was further confirmed that the bank had not issued any documentation to the Corporation regarding the disbursal of loans to any of these groups. This clearly indicates that Al failed to verify the authenticity of the letters submitted to the Corporation in the name of the bank before 2025:KER:65919 B.A.No.9976/2025 :8: releasing the funds. During the investigation, it was confirmed by the bank authorities that the loan sanction letters, allegedly issued by the bank, were in fact not issued by them, thereby establishing that the documents were fraudulently created. Hence, a detailed investigation into this aspect is essential.
15. A1 and A2 who are government officials and were entrusted with the implementation of the government projects are duty bound to act in accordance with the government guidelines, issued from time to time. The other accused were private persons who colluded with the Al and A2 with their common intention to misappropriate the government fund.
16. It is submitted that Al Sheffin M.B was arrested on 30.07.2025 and was produced before the Enquiry Commissioner and Special Judge (Vigilance) Court and was enlarged on interim bail on the said day which was made absolute on the next day stating that the procedures of arrest were not properly complied with. It is submitted that during the time of arrest itself, grounds of arrest were communicated to Al and he had acknowledged the same. The learned Special Judge has observed that the copy of remand report was not served on the accused and the arrested persons were granted with interim bail on the said day. It is submitted that the remand report was not served on to all accused except three only due to some technical reasons. Three copies were kept for the reference of the defence counsel, but they insisted copies for all the accused which could not be issued on the date of arrest since the accused persons were produced before the Court during night hours. It is also submitted that the Special Judge on a finding that since the arrest of the 2025:KER:65919 B.A.No.9976/2025 :9: accused is by not following the procedures/guidelines of arrest, there is no necessity to enlarge the accused on bail and they were set free. The Special Judge has given liberty to the Investigating agency to arrest the accused persons following the mandatory guidelines.
17. It is submitted that aggrieved by the said order, the petitioner/1st accused herein approached this Hon'ble Court with a prayer to release him on anticipatory bail. He is also one of the Suspect Officer in the Vigilance Enquiry (VE 02/2025/SIU-1) regarding the implementation of project No. 613/22 of Thiruvananthapuram Corporation which is pending enquiry with this unit.
18. It is submitted that the investigation is in the preliminary stage and it is highly essential to collect all the evidences relating to the crime. Custodial interrogation of the accused person is necessary to unearth the involvement of other accused in the case, to recover the records and to find out the proceeds of crime and to recover the lost government money. In the financial fraud case, a total of Rs 2.40 Crores is involved in the 2 vigilance cases and in the ongoing Vigilance Enquiry No. 02/2025/SIU-1 a total of 4.32 Crores is involved. The petitioner/1 st accused Shefin and others were involved in the VC 06/2025/SIU-1 for a loss of Rs 1.14. Crores and in the above Vigilance Enquiry of Rs 4.32 Crores. There are materials which would, prima facie, show or would suggest economic abuse by way of misappropriation by the accused 1 and 2 and others. The investigation conducted so far has revealed that Al and A2 played 2025:KER:65919 B.A.No.9976/2025 :10: specific roles in the misappropriation, resulting in the non- implementation of the project and the defalcation of a substantial amount of Government funds. There are specific allegations against the 1st accused/petitioner in the matter where crores of rupees alleged to have been misappropriated and hence the investigation in this matter may be permitted to proceed further and granting pre-arrest bail at the preliminary stage will hamper the investigation. Granting pre-arrest bail to accused persons who were involved in huge financial fraud cases will give a wrong message to the society. The allegation against the 1 st accused/petitioner would require effective investigation and hence pre arrest bail may not be granted to the accused.
19. It has been held by the Hon'ble Supreme Court in Devinder Kumar Bansal v. State of Punjab [2025 KHC 6219] as follows:-
The parameters for grant of anticipatory bail in a serious offence like corruption are required to be satisfied Anticipatory bail can be granted only in exceptional circumstances where the Court is prima facie of the view that the applicant has been falsely enroped in the crime or the allegations are politically motivated or are frivolous. So far as the case at hand is concerned, it cannot be said that any exceptional circumstances have been made out by the petitioner accused for grant of anticipatory bail and there is no frivolity in the prosecution. It is most humbly submitted that no exceptional circumstances have been made out in this case and the above dictum is squarely applicable."
9. Thus the sum and substance of the argument tendered by 2025:KER:65919 B.A.No.9976/2025 :11: the learned Special Public Prosecutor is that in this case, misappropriation of a total amount of Rs.1.14 crores was done by the petitioner/2 nd accused and the 1st accused together. Therefore, the arrest and custodial interrogation of the petitioner/1st accused are necessary to investigate the case properly. According to the learned Special Public Prosecutor, even though the petitioner was arrested earlier and produced before the Special Court, the Special Court found fault with the procedure of arrest and thereby the accused was not remanded to judicial custody. Accordingly, earlier interim bail granted to the petitioner was made absolute with liberty to the investigating officer to arrest the petitioner following the ratio in [2025 (2) KLT 817 : 2025 (3) KHC 221], Babu M v. State of Kerala & Anr.
10. While addressing the question as to whether the petitioner would deserve anticipatory bail, it could be gathered that the petitioner, who is the implementing officer, who succeeded the 2 nd accused, transferred the amount of Rs.30 lakh as subsidy to 10 JLGs from the account of Thiruvananthapuram Corporation to the Vattiyoorkkavu Service Co-operative Bank even though the beneficiary groups had not 2025:KER:65919 B.A.No.9976/2025 :12: commenced any ventures and no bank had disbursed any loans. It was further revealed during investigation that the petitioner had not issued any documentation to the Corporation regarding disbursal of loans to any of these groups. This would show that the 1 st accused failed to verify the authenticity of the letters submitted to the Corporation in the name of the bank before releasing the fund. During investigation, it was revealed further that the bank authorities not issued any letter sanctioning loans and those documents were fraudulently created. The investigation in this crime, involving huge amount, is at the preliminary stage.
11. On scrutiny of the prosecution materials on par with the decision of the Apex Court referred to in the report of the investigating officer, viz., [2025 KHC 6219], Devinder Kumar Bansal v. State of Punjab, the parameters for grant of anticipatory bail in a serious offence like corruption are required to be satisfied. Anticipatory bail can be granted only in exceptional circumstances where the Court is, prima facie, of the view that the applicant has been falsely enroped in the crime or the allegations are politically motivated or are frivolous. So far as the case at hand is concerned, it cannot be said that any exceptional circumstances 2025:KER:65919 B.A.No.9976/2025 :13: have been made out by the petitioner accused for grant of anticipatory bail and there is no frivolity in the prosecution, this is not a fit case to grant anticipatory bail. Therefore, the plea of anticipatory bail would definitely fail.
12. Before parting, it is necessary to address the patent illegalities in the order in Crl.M.P.No.1092 of 2025, 1093 of 2025 and 1097 of 2025 passed by the learned Special Judge, Vigilance on 31.07.2025. In order to address the same, paragraph 32 of the order required to be extracted and the same reads as under:
"32. Point. No.2:- Given the findings on point No.1, this court passed the following order.
1. The arrest of accused Nos. 1 to 4 is not in accordance with the procedure established by law, and so they cannot be remanded to judicial custody.
2. The order passed yesterday releasing the accused Nos. 1 to 4 to interim bail is made absolute, and they are set free. They are released from custody.
3. However, it is made clear that in view of the principles referred to in Babu M's case, this order would not prevent the Investigating agency from arresting the accused following the law.
2025:KER:65919 B.A.No.9976/2025 :14:
4. Since the arrest is found to be illegal, and they are set free, there is no necessity to grant bail to them. The bail applications are disposed of accordingly."
13. On perusal of the above order, it could be gathered that the Special Judge found that arrest of accused 1 to 4 (including the petitioner) was not in accordance with the procedure established by law. So they could not be remanded to judicial custody. After holding so, the learned Special Judge made the interim bail granted to accused 1 to 4 absolute and they were set at free. Thereafter the learned Special Judge ordered that following the principles referred to in Babu M's case (supra), the order would not prevent the investigating agency from arresting the accused following the procedure of law. Going through the order, once the learned Special Judge found that the arrest was not in accordance with law, automatically the arrest and custody of the accused by the police came to an end and thereby the accused would be relegated to the stage before his arrest. In view of the finding, the arrest was illegal. To be more explicit, when it is found that the arrest was illegal, the accused is free from custody of the police as well as the Court, and the question of execution of bail bond doesn't arise. In such a case, there is no necessity 2025:KER:65919 B.A.No.9976/2025 :15: for the Special Judge to make the interim bail absolute. By making the interim bail absolute, thus the learned Special Judge stated that the accused were set at free. It is noticed that the Special Judge went wrong in making the interim bail absolute instead of holding that the accused were set free to the stage before their arrest. Then comes anther illegality. If the bail order made absolute and continues in view of the order passed by the learned Special Judge, because he made the order absolute, it is not possible for the investigating agency to arrest the petitioner, who is on bail, deemed to be in judicial custody at the hands of the sureties. Resultantly, arrest of an accused, whose interim bail made absolute, without cancellation of bail, doesn't arise. If so, the same is another illegality. Thus the illegality has to be addressed holding that the order passed by the learned Special Judge, making the interim bail absolute, is wrong and has no legal effect and the accused are free before the stage of arrest.
14. In the result, this petition is found to be meritless and is accordingly dismissed.
The petitioner is directed to surrender before the investigating officer forthwith and to co-operate with the investigation, failing which the 2025:KER:65919 B.A.No.9976/2025 :16: Investigating Officer is at liberty to proceed as per law, without fail.
Sd/-
A.BADHARUDEEN, JUDGE rtr/ 2025:KER:65919 B.A.No.9976/2025 :17: APPENDIX OF BAIL APPL. 9976/2025 PETITIONER's ANNEXURES Annexure I TRUE COPY OF F.I.R. DATED 14.5.2025 IN CRIME NO.06/2025/SIU-1 OF V&ACB, SIU-1 BEFORE THE COURT OF ENQUIRY COMMISSIONER AND SPECIAL JUDGE, THIRUVANANTHAPURAM Annexure II TRUE COPY OF REMAND APPLICATION DATED 30.7.2025 IN CRIME NO.06/2025/SIU-1 OF V&ACB, SIU-1 BEFORE THE COURT OF ENQUIRY COMMISSIONER AND SPECIAL JUDGE, THIRUVANANTHAPURAM Annexure III TRUE COPY OF COMMON ORDER DATED 31.7.2025 IN CRL.M.P. NO.1093/2025 WITH RESPECT TO PETITIONER BY THE COURT OF ENQUIRY COMMISSIONER AND SPECIAL JUDGE, THIRUVANANTHAPURAM.
Annexure IV TRUE COPY OF CLAUSE 11.3 OF THE GUIDELINES OF PEOPLES DEVELOPMENT PROGRAMME BROUGHT OUT BY G.O. (MS) NO.17/2018/L.S.G.D. DATED 2.2.2018. Annexure V TRUE COPY OF ORDER NO.DIC/12084/2018-EC 1 DATED 20.9.2021 BY THE DIRECTOR OF INDUSTRIES & COMMERCE, THIRUVANANTHAPURAM BY WHICH THE PETITIONER IS TRANSFERRED TO THE CORPORATION OF THIRUVANANTHAPURAM.
Annexure VI TRUE COPY OF LETTER NO.J1/7624/21 DATED 18.10.2021 FROM SECRETARY OF CORPORATION OF THIRUVANANTHAPURAM TO PETITIONER.
Annexure VII TRUE COPY OF LETTER NO.IEO/TVMC/2021-22/BL/3 DATED 3.2.2022 FROM PETITIONER TO THE BRANCH MANAGER, MUTTATHARA SERVICE CO-OPERATIVE BANK, MAIN BRANCH.
Annexure VIII TRUE COPY OF LETTER NO.IEO/TVMC/2021-22/760/7 DATED 24.3.2022 FROM PETITIONER TO THE SECRETARY, KOVALAM SERVICE CO-OPERATIVE BANK LTD., VAZHAMUTTAM, PACHALLOOR.
2025:KER:65919 B.A.No.9976/2025 :18: Annexure IX TRUE COPY OF LETTER NO.IEO/TVMC/2021-22/BL/11 DATED 27.4.2022 FROM PETITIONER TO THE BRANCH MANAGER, KERALA STATE COOPERATIVE BANK LTD., KULATHOOR BRANCH.
Annexure X TRUE COPY OF LETTER NO.IEO/TVMC/2021-22/613/3 DATED 11.4.2022 FROM PETITIONER TO THE SECRETARY, KOVALAM SERVICE COOPERATIVE BANK LTD., VAZHAMUTTAM, PACHALLOOR.
Annexure XI TRUE COPY OF LETTER NO.IEO/TVMC/2021-22/BL/8 DATED 31.3.2022 FROM PETITIONER TO THE BRANCH MANAGER, KERALA STATE COOPERATIVE BANK LTD., KULATHOOR BRANCH.
Annexure XII TRUE COPY OF LETTER NO.IEO/TVMC/2021-22/760/8 DATED 5.4.2022 FROM PETITIONER TO THE SECRETARY, VATTIYOORKAVU SERVICE CO-OPERATIVE BANK LTD.
Annexure XIII TRUE COPY OF LETTER NO.IEO/TVMC/2021-22/760/6 DATED 17.3.2022 FROM PETITIONER TO THE SECRETARY, VATTIYOORKAVU SERVICE CO-OPERATIVE BANK LTD.
Annexure XIV TRUE COPY OF LETTER NO.IEO/TVMC/2021-22/BL/4 DATED 3.2.2022 FROM PETITIONER TO THE BRANCH MANAGER, KERALA STATE COOPERATIVE BANK LTD., PEROORKADA BRANCH.
Annexure XV TRUE COPY OF LETTER NO.IEO/TVMC/2021-22/760/9 DATED 8.6.2022 FROM PETITIONER TO THE SECRETARY, VATTIYOORKAVU SERVICE CO-OPERATIVE BANK LTD. TO RETURN BACK RS.30 LAKHS AS LOAN WAS NOT SANCTIONED FOR 10 GROUPS.