Photo used for indicative purpose only
Shimla, May 16
In a major setback to the Sukhu government, the High Court of Himachal Pradesh has once again refused to permit the arrest of businessman Yudh Chand Bains and his son in the alleged Kangra Central Cooperative Bank (KCCB) loan fraud case, holding that the State Vigilance and Anti-Corruption Bureau failed to justify their custodial interrogation in accordance with law.
The State had approached the High Court afresh after the Supreme Court of India set aside an earlier order and directed fresh consideration of the anticipatory bail petitions on merits. However, Justice Rakesh Kainthla, in a detailed 47-page verdict delivered on May 13, rejected the State’s plea seeking cancellation of protection granted to Yudh Chand Bains, his son Harish Chand and two former bank officials.
The Vigilance Bureau had registered an FIR alleging that Bains secured huge loans for hotel projects in Manali and Dharamshala by submitting forged and misleading documents and in violation of RBI and NABARD norms. According to the prosecution, utilisation certificates connected with the projects were allegedly issued by Future Craft, Palampur.
However, the firm later clarified before investigators that it was merely an architectural consultancy authorised to issue structural stability certificates and building drawings and had never issued utilisation certificates.
The agency further alleged that the bank approved loans despite multiple irregularities, including non-verification of borrower contribution, repeated use of family members as guarantors, absence of monitoring of utilisation of funds and disbursal of money despite several loan accounts already being in default. The prosecution claimed that more than ₹20 crore was transferred to various accounts after disbursal and that conditions imposed by NABARD and internal committees were relaxed illegally.
However, while examining the status reports and investigation records, the High Court found that the prosecution itself admitted that the Board of Directors had relaxed loan conditions and violated banking norms while sanctioning the loans. Justice Kainthla observed that several directors who approved the loans were either not interrogated at all or merely served notices under law, whereas the investigating agency was repeatedly insisting upon arrest of the borrower and his son.
The court noted that names of directors involved in sanctioning and relaxing the loan conditions had surfaced during investigation, yet the police failed to explain why no custodial interrogation was considered necessary for them. The judgment observed that this conduct of the police weakened the prosecution’s claim that the matter involved a grave economic offence requiring immediate arrest.
In one of the sharpest observations in the verdict, the court stated: “This conduct of the police shows the gravity of the so-called economic offence involving large-scale financial fraud.” The court further remarked that “there is something more in this case than meets the eye, and the police are only bent upon arresting the petitioner, Yudh Chand Bains and his son.”
Justice Kainthla also rejected the State’s argument that custodial interrogation was necessary for tracing diversion of loan money and recovery of dues. The court observed that investigators had already collected bank statements and examined persons to whom money was transferred. It held that police custody could not be justified merely for recovery purposes when legal mechanisms under banking laws and the SARFAESI Act were already available to the bank.
Also Read
HP High Court to hear bail plea of Yudh Chand Bains in ₹20 Cr loan fraud case today
Quoting settled legal principles, the court observed that “a criminal court exercising jurisdiction to grant bail is not expected to act as a recovery agent to realise the dues of the complainant.”
The judgment further emphasised that merely labelling a case as an “economic offence” was not sufficient to deny anticipatory bail. The court held that personal liberty cannot be curtailed mechanically and custodial interrogation cannot become a “magic phrase” to justify arrest without proper legal grounds.
The High Court also observed that refusal by an accused to make self-incriminating statements cannot be treated as non-cooperation with investigation and reiterated that the right against self-incrimination remains protected during investigation.
About the Author
