Kiran Raj

The Gujarat High Court, in a detailed order dated December 23, 2024, rejected the anticipatory bail application of Bhupendrasinh Parbatsinh Zala, the alleged mastermind behind a massive ₹6,000 crore financial fraud. Justice M.R. Mengdey noted that the investigation revealed a “large-scale scam” involving significant misappropriation of public funds and systematic defaults.

The case pertains to an FIR lodged under multiple provisions, including Sections 316(5), 318(4), and 61(2) of the Bhartiya Nyaya Sanhita, 2023; Section 3 of the Gujarat Protection of Interest of Depositors (in Financial Establishments) Act, 2003; and Sections 21 and 23 of the Banning of Unregulated Deposit Schemes Act, 2019. Zala, the head of the BZ Group, was accused of soliciting deposits from the public through fraudulent schemes, promising exorbitant returns and incentives such as consumer goods and holiday packages.

The FIR, filed by an officer of the Economic Offences Wing, followed an anonymous tip-off received by the Home Department. The investigation uncovered that Zala had created a network of registered and unregistered firms to execute the fraud, funneling deposits into multiple accounts and diverting them for personal use.

The court noted that the investigation uncovered systematic defaults and misuse of funds. Justice Mengdey observed:

"The investigation carried out so far indicates that the present appears to be a large-scale scam committed by the present applicant, wherein the large number of people appear to have been duped by him."

The court also examined evidence showing that Zala promised returns of up to 18% annually, far exceeding market norms. Depositors were enticed with gifts such as televisions, mobile phones, and vacations for investing substantial sums. However, repayments defaulted from 2022 onwards, contrary to the applicant's claims.

Zala’s counsel contended that:

1. No depositor had lodged a complaint, and the FIR was filed by a police officer, questioning the legitimacy of the fraud allegations.
2. Agreements with investors specified a return of 7%, which was honored until the applicant’s accounts were frozen by the investigating agency.
3. Section 92 of the Indian Evidence Act precluded reliance on oral promises of higher returns.
4. The applicant had sufficient funds to repay investors if allowed access to frozen accounts and was willing to cooperate with the investigation.

The Public Prosecutor opposed the bail application, arguing that:

1. Zala orchestrated a systemic fraud affecting public trust and state finances.
2. Funds amounting to ₹360 crores were deposited into accounts linked to Zala’s firms and later withdrawn in cash or used for personal gains.
3. Defaults began in 2020, with several criminal cases pending against the applicant.
4. Evidence showed Zala diverted public funds from an educational trust he managed and loans taken under false pretenses.

The court noted several irregularities, including:

• Diversion of ₹75 lakhs from a government grant meant for an educational trust to Zala’s firm.
• Misuse of loans from Unity Small Bank, with substantial amounts transferred to personal accounts.
• Issuance of high-value cheques to associates under dubious circumstances.

The court determined that releasing Zala on anticipatory bail was unwarranted given the gravity of the allegations and the evidence of widespread fraud. Justice Mengdey remarked:

"Having regard to the same, no case is made out to release the present applicant on bail. Hence, the present application stands dismissed."

[Read/Download order]