The Bombay High Court, expressing concerns over the prolonged incarceration of the applicant for nearly six years without the trial commencing, has granted bail to Gokulnath Raghu Shetty, prime accused in the Punjab National Bank (PNB) fraud case involving over Rs 7,000 crore. Justice M.S. Karnik passed the order on Thursday.

“The reason why I am inclined to enlarge the applicant on bail is only on the ground of long incarceration

The case involves the fraudulent activities of diamond merchants Mehul Choksi and his nephew Nirav Modi, along with others, who obtained fraudulent Letters of Undertaking (LoUs) from PNB in collusion with certain bank officials. Gokulnath Raghu Shetty, formerly employed as a Deputy Manager in PNB's Forex Department, is accused of conspiring with the main perpetrators and misusing his official position to issue LoUs/Foreign Letters of Credit, thereby violating established banking protocols.

Acknowledging the gravity of the allegations and their potential ramifications on the nation's economy, Justice Karnik recognized that the prolonged detention of Shetty was unwarranted due to the slow progress of the trial proceedings. The court pointed out that with approximately 100 witnesses yet to be examined, the trial is unlikely to reach a conclusion in the near future.

Taking into account the recent Supreme Court order granting bail to a co-accused, Hemant Bhatt, the judge commented that Shetty's age of 65 years and prolonged detention justified his release on bail. Nevertheless, stringent conditions were imposed to address the prosecution's concerns regarding potential tampering with the investigation.

Shetty has been instructed to provide a personal bond of Rs 1 lakh along with a surety of the same amount. Additionally, he is required to report to the CBI office on a weekly basis, refrain from contacting co-accused or influencing witnesses, and is prohibited from leaving the Mumbai metropolitan area without court permission. Notably, he has been barred from applying for a passport until the conclusion of the trial. The court emphasized that its observations were preliminary and cautioned Shetty about severe consequences, including bail cancellation, if he attempted to interfere with the investigation. The order will be enforced after six weeks, as per the prosecution's request, considering the seriousness of the offense.

The PNB fraud case, which came to light in 2018, sent shockwaves through India's banking sector and triggered a concerted effort to strengthen regulatory oversight and internal controls within financial institutions.

Appearances - Adv. Sandeep Karnik for the applicant. SPP Hiten Venegavkar for the CBI

BAIL APPLICATION NO.2489 OF 2023