M/s Karnataka Emta Coal Mines Limited and Another vs Central Bureau of Investigation

Held: The Supreme Court having already dismissed the appeal filed by KPCL against the judgment of the Karnataka High Court, having held in clear terms that the CAG Report could not form the basis for launching proceedings against the appellants and further, having upheld the findings returned by the Karnataka High Court that the CAG Report appears to have been the starting point for the entire disputes between the parties who till then, were smoothly discharging their obligations under various agreements, there is no reason to take a different view only on the ground that the respondent-CBI was not a party in the aforesaid proceedings – Further, the CAG Report had not attained finality inasmuch as its recommendations have not been tabled before the Parliament or accepted so far – The said report at best, has a persuasive value but no more. [Paras 9.5, 21.2(b)]

Prevention of Corruption Act, 1988 – ss.13(1)(d)/13(2) – Penal Code, 1860 – s.120-B r/w. ss.409/420 – Mines and Minerals (Development & Regulation) Act, 1957 – What is the import of the Judgment dated 24.03.2016 of the Karnataka High Court: Held: The decision dated 24.03.2016 of the Karnataka High Court in a writ petition filed by KECML against KPCL has been wrongly overlooked – The High Court had an occasion to scrutinize the very same agreements and the CAG report that formed the basis of the investigation conducted by the respondentCBI to return positive findings in favour of the appellants – The view taken by the Karnataka High Court has been upheld by this Court in a judgment rendered on 20.05.2022 which was just a few days after Charges were framed by the Special Judge, CBI on 03.03.2022. [Para 21.2(f)]

Mines and Minerals (Development & Regulation) Act, 1957 – What is the sanctity of an Audit Report in Law: Held: The CAG Report is subject to scrutiny by the Parliament and the Government can always offer its views on the said report – Merely because the CAG is an independent constitutional functionary does not mean that after receiving a report from it and on the PAC scrutinizing the same and submitting its report, the Parliament will automatically accept the said report – The Parliament may agree or disagree with the Report – It may accept it as it is or in part – In the instant case, it is not in dispute that the Audit Report of the CAG has not been tabled before the Parliament for soliciting any comments from the PAC or the respective Ministries – Therefore, the views taken by the CAG to the effect that tremendous loss had been caused to the public exchequer on account of the coal rejects being disposed of by the KPCL and KECML remains a view point but cannot be accepted as decisive – The respondent-CBI has largely relied on the findings and the conclusions drawn in the Audit Report of the CAG to launch the prosecution against the appellants on an assumption that the said Report has the seal of approval of the Parliament and has attained finality, which is not the case. [Para 11.5]

Prevention of Corruption Act, 1988 – ss.13(1)(d)/13(2) – Penal Code, 1860 – s.120-B r/w. ss.409/420 – Mines and Minerals (Development & Regulation) Act, 1957 – What is the effect of the absence of any strategy in the Mining plan to dispose off the coal rejects:

Held: The explanation offered by the appellants that at that point in time, the Central Government had not come out with any specific plan to dispose off the coal rejects is validated by the reply furnished by the Minister of State, MoC, in the Lok Sabha in response to an unstarred question seeking an answer from the Government of India as to whether it had framed any National Policy for exploitation of the coal rejects – The reply given was that the Government had not framed any National Policy for exploitation of coal rejects and the same was still under consideration – That being the position, it was left to KPCL and KECML to devise a satisfactory and safe method to dispose off the coal rejects – This was done in terms of Article 5(2)(b) of the JVA that required KECML to dispose off the rejects in a manner that would ensure that there was no threat to the environment – This Court does not find any irregularity in the route adopted to dispose off the coal rejects. [Para 13.2]

Prevention of Corruption Act, 1988 – ss.13(1)(d)/13(2) – Penal Code, 1860 – s.120-B r/w. ss.409/420 – Mines and Minerals (Development & Regulation) Act, 1957 – Was KECML required to account for the coal rejects:

Held: The clauses of the JVA and FSA clearly indicate that KECML was only obliged to provide a specified grade of washed coal (Grade – D) having a specific GCV in the range of 4200-4940 Kcal/kg – When coal has been defined in the JVA and FSA as “washed coal with guaranteed value” and one that satisfied the parameters laid down in Annex-1 attached to the JVA and FSA and further, KECML was required to ensure that all “shales/stones” are removed from the coal before making the supply, there was no occasion for KECML to account for the rejects – All that KPCL was required to do was to buy from KECML, the washed coal with a particular guaranteed value and one that would satisfy the specified quality parameters, at a predetermined price – The agreement governing the parties required KECML to dispose off the rejects safely – KECML was not required to account for the coal rejects to KPCL. [Para 14.3]

Prevention of Corruption Act, 1988 – ss.13(1)(d)/13(2) – Penal Code, 1860 – s.120-B r/w. ss.409/420 – Mines and Minerals (Development & Regulation) Act, 1957 – Can KECML be blamed for not setting up the coal washery at the pithead: Held: KECML could not be faulted for failing to set up the coal washery at the pithead, in terms of the JVA as that was for reasons beyond its control which included a prolonged litigation between the MoC and CIPCO in relation to the very same coal blocks allocated to KPCL which in turn delayed the project considerably – Production of coal could only commence in September, 2008 when the curtains were drawn on the aforesaid litigation – The Board of KPCL consciously acceded to the proposal made by KECML that a MoU be executed with GCWL for washing of mined coal at its washery – Pertinently, GCWL was not an unknown entity to KPCL as the latter had prior dealings with the said Company for washing of mined coal in another project – This decision taken by the parties in their commercial wisdom has been sought to be selectively tainted with criminal intention attributed to the appellants, without any basis. [Para 21.2 (k)]

Prevention of Corruption Act, 1988 – ss.13(1)(d)/13(2) – Penal Code, 1860 – s.120-B r/w. ss.409/420 – Mines and Minerals (Development & Regulation) Act, 1957 – Did the coal rejects have any useful calorific value making it a saleable commodity: Held: The Detailed Washability Report of the Government Laboratory namely, CIMFR, Nagpur – The said Report stated in so many words that the rejects did not contain any useful calorific value Reliance placed by the respondent-CBI on the revised Mining Plan submitted by the appellants to the MoC in 2010, that mentions a new technology for utilization of rejects for its carbon value, namely FBC is of no consequence as the said technology had not even been introduced when MoC approved the original Mining Plan, submitted by KECML in the year 2004 – Even otherwise, it is not in dispute that for applying the said technology, a plant was required to be established after obtaining necessary approvals from several agencies. [Para 16.1]

Prevention of Corruption Act, 1988 – ss.13(1)(d)/13(2) – Penal Code, 1860 – s.120-B r/w. ss.409/420 – Mines and Minerals (Development & Regulation) Act, 1957 – Does the Aryan Energy case has a persuasive value:

Held: An interpretation of the very same clauses in the agreement relating to the manner of disposal off the coal rejects came up for consideration before the Karnataka High Court in a writ petition filed by Aryan Energy against KPCL – Having scrutinized the clauses forming a part of the agreement executed between the parties vide judgment dated 22.07.2021, the Karnataka High Court clearly observed that KPCL did not have any claim over the coal rejects generated during washing of the coal – The submissions made by the respondent-CBI that the aforesaid judgment came much after institution of the chargesheet by the, respondent-CBI is of no consequence – Even if that was so, nothing prevented the Special Judge, CBI from taking into consideration the view expressed in the said judgement at the time of framing charges, particularly, when the clause relating to disposal of the coal rejects in an environment friendly manner incorporated in the agreement between KPCL and Aryan Energy was identical to the one contained in the agreement between KPCL and KECML. [Para 21.2(g)]

Code of Criminal Procedure, 1973 – s.482 – Inherent Jurisdiction of the High Court:

Held: Section 482 Cr.P.C recognizes the inherent powers of the High Court to quash initiation of prosecution against the accused to pass such orders as may be considered necessary to give effect to any order under the Cr.P.C or to prevent abuse of the process of any court or otherwise to secure the ends of justice – It is a statutory power vested in the High Court to quash such criminal proceedings that would dislodge the charges levelled against the accused and based on the material produced, lead to a firm opinion that the assertions contained in the charges levelled by the prosecution deserve to be overruled – While exercising the powers vested in the High Court under Section 482, Cr.P.C, whether at the stage of issuing process or at the stage of committal or even at the stage of framing of charges, which are all stages that are prior to commencement of the actual trial, the test to be applied is that the Court must be fully satisfied that the material produced by the accused would lead to a conclusion that their defence is based on sound, reasonable and indubitable facts – The material relied on by the accused should also be such that would persuade a reasonable person to dismiss the accusations levelled against them as false. [Paras 18.7, 18.8]

Constitution of India – Art.136 – Extraordinary powers of the Supreme Court under Article 136:

Held: Article 136 can be invoked by a party in a petition for special leave to appeal from any judgement, decree, determination, sentence or order in any cause or matter passed or made by a Court or Tribunal within the territory of India – The reach of the extraordinary powers vested in this Court under Article 136 of the Constitution of India is boundless – Such unbridled powers have been vested in Court, not just to prevent the abuse of the process of any court or to secure the ends of justice as contemplated in Section 482, Cr.P.C, but to ensure dispensation of justice, correct errors of law, safeguard fundamental rights, exercise judicial review, resolve conflicting decisions, inject consistency in the legal system by settling precedents and for myriad other to undo injustice, wherever noticed and promote the cause of justice at every level – The fetters on this power are self imposed and carefully tampered with sound judicial discretion. [Para 19.6]

Code of Criminal Procedure, 1973 – s.277 – Application of mind at the stage of s.227 of Cr.PC – discussed. Constitution of India – Art. 136 – Prevention of Corruption Act, 1988 – ss.13(1)(d)/13(2) – Penal Code, 1860 – s.120-B r/w. ss.409/420 – Mines and Minerals (Development & Regulation) Act, 1957 – The Special Judge, CBI passed an order on charge dated 24.12.2021 and the order framing charges dated 03.03.2022 qua appellants – Sustainability:

Held: This Court is of the opinion that the respondent-CBI embarked on a roving and fishing inquiry on the strength of the Audit Report of the CAG and then started working backwards to sniff out criminal intent against the appellants – The underpinnings of what was a civil dispute premised on a contract between the parties, breach whereof could at best lead to determination of the contract or even the underlying lease deed, has been painted with the brush of criminality without any justification – This criminal intent has been threaded into the dispute by the respondent-CBI by misinterpreting the clauses of the agreements governing the parties and by heavily banking on the observations made in the Audit Report of the CAG that has not attained finality till date – In view of the glaring infirmities, the impugned orders deserve interference in exercise of the powers vested in this court under Article 136 of the Constitution of India – The order on charge dated 24.12.2021 and the order framing charges dated 03.03.2022 passed by the Special Judge, CBI qua the appellants before this Court are unsustainable and accordingly quashed and set aside. [Paras 21.3, 21.4]