SRINAGAR: The High Court of Jammu and Kashmir and Ladakh has granted bail to a Class-IV employee accused in a Rs 1.38 crore alleged treasury fraud in Reasi, holding that the circumstances of the case did not justify his continued detention pending trial.
Justice Mohd Yousuf Wani, hearing the matter at the Jammu wing of the High Court, allowed the bail petition filed by Ali Hussain Shah, an MTS employee of the Sub-Treasury Office, Dharmari, Reasi, in FIR No. 19/2024 registered at Police Station Arnas under Sections 409, 420, 467, 468, 471, 477-A and 120-B of the IPC. The judgment was pronounced on September 25, 2026.
The court directed Shah to furnish a personal bond and surety of Rs 1 lakh each to the satisfaction of the Registrar Judicial (Jammu Wing) and the concerned jail authorities. It barred him from directly or indirectly inducing, threatening or promising anything to prosecution witnesses, directed him to appear before the investigating officer if required during further investigation, remain punctual at the trial and not leave Jammu and Kashmir without prior permission of the trial court.
The court made it clear that the bail order would not amount to any finding on the merits of the criminal case. “Nothing in this order shall be construed as any prejudging of or interference with the merits of the case,” Justice Wani said.
The case arose after financial irregularities were detected at the Sub-Treasury Office, Dharmari. According to the judgment, the Treasury Officer informed the District Treasury Officer, Reasi, on March 3, 2024, about suspected irregularities. An inspection and scrutiny of records allegedly revealed fraudulent payments of government money into different accounts.
A written complaint was submitted to Police Station Arnas on March 5, 2024, and FIR No. 19/2024 was registered on March 6 under Section 409 IPC. The investigation was subsequently transferred from District Police, Reasi, to the Economic Offences Wing of the Crime Branch, Jammu, through an order issued by the Police Headquarters on March 11, 2024. A Special Investigation Team was constituted on March 13.
The prosecution case, as recorded by the court, was that Shah, then working as an MTS at the treasury, allegedly conspired with co-accused Balbir Singh, an Accounts Assistant, and Ajeet Kumar, then Assistant Treasury Officer, and used treasury credentials to process forged bills and vouchers relating to pension and National Pension System heads.
The investigating agency alleged that between May 4, 2023 and March 1, 2024, fake and forged bills were repeatedly prepared and liabilities created, resulting in alleged misappropriation of Rs 1,38,17,971. The prosecution further alleged that the amount was credited into accounts associated with Shah and subsequently transferred to various accounts, besides cash withdrawals.
The court noted that a search of Shah’s house during the investigation did not result in the recovery of incriminating documents, cash, cheque books, electronic gadgets or documents relating to movable or immovable properties. The preliminary charge sheet against Shah and the co-accused remains pending before the trial court, while further investigation has been kept open under Section 173(8) of the Code.
Appearing for Shah, Senior Advocate K.S. Johal, assisted by Advocate Supreet R.S. Johal, argued that the petitioner had been falsely implicated and had no authority or access to transfer the alleged funds. The defence maintained that Shah was a Class-IV employee and that the actual authority to process and transfer the payments rested with the co-accused officials.
The defence also pointed out that Ajeet Kumar, the then Assistant Treasury Officer and a co-accused, had already been granted bail by the High Court on November 25, 2024. Johal argued that Shah had remained in custody since March 2024, that the investigation had substantially progressed, and that his continued detention would violate his right to personal liberty under Article 21 of the Constitution.
The defence further relied on Supreme Court precedents, including Sanjay Chandra v. Central Bureau of Investigation, arguing that the seriousness of an economic offence by itself could not be the sole consideration for denying bail once the investigation had been completed and the charge sheet presented.
The prosecution opposed the bail application through Senior Additional Advocate General Monika Kohli, arguing that Shah was involved in serious non-bailable economic offences affecting the government exchequer. The prosecution alleged that he was an active and main conspirator in the alleged siphoning of Rs 1.38 crore and that the whereabouts of the allegedly diverted money had not yet been fully established.
Kohli also argued that the trial was at an initial stage, with prosecution evidence yet to be recorded, and that Shah could potentially influence witnesses or otherwise affect the proceedings if released. The prosecution relied on an earlier High Court order in Mohd Ishaq Bhat v. CBI, where bail had been denied in a bribery case, to contend that economic and corruption-related offences required a stricter approach.
Justice Wani, however, held that the principles governing bail did not justify continued detention in the circumstances of the case. The court observed that in non-bailable offences which do not carry death or life imprisonment as an alternative, “bail is a rule and its denial an exception,” particularly where custodial questioning is not necessary for completion of the investigation and there is no material showing that the accused is likely to tamper with evidence, evade the investigation or abscond from trial.
The court also relied on the Supreme Court’s observations in Sanjay Chandra, noting that the object of bail is to secure the accused’s appearance at trial and that bail is “neither punitive nor preventive.” It further observed that deprivation of liberty before conviction must be justified by necessity rather than used as punishment for an unconvicted person.
While acknowledging the seriousness of the allegations and noting that some of the offences invoked against Shah carry a maximum sentence of life imprisonment, the High Court held that the relevant statutory bar under Section 480 of the BNSS did not operate in the circumstances of the case because the life imprisonment provision was an alternative maximum punishment rather than an alternative to death.
The court also considered the defence submission that other accused persons had already been released on bail and that the investigation had culminated in the filing of the charge sheet. It ultimately concluded that the principles governing bail, considered against the facts and circumstances of the case, did not warrant denial of bail to Shah.
At the same time, the court cautioned that its observations were confined to the question of bail and should not be understood as an adjudication on Shah’s guilt or innocence. The trial proceedings and further investigation will continue in accordance with law.
