Raja Sheikh vs. The State Of Madhya Pradesh

Held

The Court allowed the application for regular bail. The Court noted that various High Courts and the Apex Court have considered similar matters in favour of applicants. Specifically referencing Section 132 of the GST Act, the Court observed that for wrongful utilization of input tax credit, if the total sum involved is about Rs 10 Crores (as alleged in the FIR, though the total loss stated is Rs 33.80 Crores), and if the amount exceeds Rs 5 Crores, the maximum sentence is five years. The Court also pointed out the provision for compounding of offences under Section 138 of the Act, suggesting that compounding is a possibility. The Court further noted that anticipatory bail had been granted to a co-accused, Dheeraj Gupta, in a related matter. Considering the applicant's custody period since July 1, 2025, and the potential adverse effect on his business, the Court found it inclined to grant bail. The applicant was directed to be released on furnishing a personal bond of Rs 5,00,000/- with two solvent sureties, subject to several conditions including not inducing witnesses, keeping his mobile operational, sharing his location, committing no further offences, and surrendering his passport.

Facts

The applicant, Raja Sheikh, sought regular bail in a case registered for offences including cheating, forgery, and criminal conspiracy under the IPC, and Section 66-D of the IT Act. The prosecution alleged that a complainant was induced to form a proprietorship firm, "Maa Narmada Traders," and obtain GST registration. Co-accused allegedly misused the complainant's documents and OTPs to file fraudulent GST returns, showing fictitious transactions of crores of rupees. Several other bogus firms were also floated. The total wrongful loss to the State exchequer was approximately Rs 33.80 Crores. The applicant had been in custody since July 1, 2025. The applicant's counsel argued that if the amount involved exceeds Rs 5 Crores, the maximum punishment is five years, and there is no embargo on granting bail under the GST Act. The respondent opposed, citing the seriousness of the offences and ongoing investigation.

Key Issues

1. Whether the applicant is entitled to regular bail considering the alleged fraudulent transactions and the quantum of loss to the State exchequer under the GST Act and IPC? Petitioner's Arguments: - The applicant's counsel argued that for offences involving amounts exceeding Rs 5 Crores under Section 132 of the GST Act, the maximum punishment is five years, and the GST Act does not prohibit consideration for bail. - Reliance was placed on various High Court decisions, including Akram Pasha v. Senior Intelligence Officer, which had similar facts, and Sharat Babu Digumarti v. Government of NCT of Delhi, Deepak Singhal v. Union of India, Sushil Kumar Singla v. State of UT Chandigarh, and Shalini Singhal v. State of MP, to contend that the applicant should be released on bail given the custody period, as GST is a self-contained code. Respondent's Arguments: - The respondent's counsel opposed the bail application, referring to Section 131 of the GST Act, and argued that the offences are serious in nature. - It was contended that the investigation is ongoing, and further interrogation might reveal more scams and frauds committed by the applicant and co-accused, potentially increasing the fraudulent amount. - The respondent emphasized that GST revenue is vital for the nation and such activities jeopardize national interest, thus urging the Court to take a serious view and not exercise discretion in favour of the applicant, as a prima facie case is made out.