2009 (8) TMI 1210 - SC - Indian Laws

Interpretation and application of arbitration clause - Commission of offences u/s 13(1)(d)(2)(ii-iii) r/w Section 13(2) of the Prevention of Corruption Act 1988 ( the Act ) and Section 120B of the IPC - controversy regarding the use of those stones as rubble in masonry dam - allocation of the parts of the quarries - contractors invoked the arbitration agreement - ad hoc settlement was proposed - Whether sanction for prosecution in terms of Section 197 of the CrPC was required - HELD THAT - At the outset however we must place on record that construction of the dam over river Hasdeo Bango became necessary for the purpose of supply of water to the National Thermal Power Corporation. It was a World Bank project. The project was required to be completed within a time frame. Stones required to be used for the construction of the dam as of necessity were required to be of sufficient strength. The opinion of the Indian Institute of Technology referred to by Mr. Tulsi is not on record. Correspondences as also the opinion of the Central Water Commission Government of India however point out that stones of requisite strength were not available at Therma Pahar Quarry. The quantum of stone required was eight lakh cubic meters and only one lakh cubic metres was available thereat. The balance seven lakh cubic meters of stone was thus required to be obtained from the quarries situated at villages villages Katghora Hunkra and Maheshpur. Stone is a minor mineral within the meaning of the provisions of the Mines and Minerals (Regulation and Development) Act 1957 and the Minor Mineral Concession Rules framed by the State. Lease and/ or licence for extraction thereof is to be granted by the Collector. Although the Mines Department of the State intended to grant Quarry lease in favour of others having regard to the requirements of the State the said quarries were reserved subject to certain conditions. The respondent Nos. 8 to 10 in view of the provisions of the Mines and Mineral (Regulation and Development) Act 1957 and the Madhya Pradesh Minor Mineral Concession Rules could not have on their own undertaken mining operation for the purpose of extracting the said minor mineral. They could have done so only on a licence granted in their favour by the Collector/State. However as the hillocks of the villages in question were reserved for departmental use only by reason thereof the contractors could carry on mining operation thereat and not otherwise. It was therefore a conscious decision on the part of the competent authorities of the State. The intra-departmental and inter-departmental correspondences and notesheets to which we have adverted to heretobefore clearly go to show that the authorities incharge of construction of the dam were aware of the difficulties which were being faced by the contractors. Their apprehension was that in the event the contractors were not permitted to mine stones from Katghora Quarry and other Quarries they may leave the job as a result whereof the entire project might come to a stand-still. We would proceed on the basis that two divergent opinions on the construction of the contract in the light of the stand taken by the World Bank as also the earlier decision taken by the State was possible. That however would not mean that a fresh decision could not have been taken keeping in view the exigencies of the situation. A decision to that effect was not taken only by one officer or one authority. Each one of the authorities was ad idem in their view in the decision making process. Even the Financial Adviser who was an independent person and who had nothing to do with the implementation of the project made recommendations in favour of the contractors stating that if not in law but in equity they were entitled to the additional amount. From the materials available on record it is crystal clear that the decision taken was a collective one. The decision was required to be taken in the exigency of the situation. It may be an error of judgment but then no material has been brought on record to show that they did so for causing any wrongful gain to themselves or to a third party or for causing wrongful loss to the State. Ex facie there is no material to show that a conspiracy had been hatched by the respondents. Even under the Act an offence cannot be said to have been committed only because the public servant has obtained either for himself or for any other person any pecuniary advantage. He must do so by abusing his position as public servant or holding office as a public servant. In the latter category of cases absence of any public interest is a sine qua non. The materials brought on record do not suggest in any manner whatsoever that the respondent Nos. 1 to 7 either had abused their position or had obtained pecuniary advantage for the respondent Nos. 8 9 and 10 which was without any public interest. It is also interesting to notice that the prosecution had proceeded against the officials in a pick and choose manner. We may notice the following statements made in the counter-affidavit which had not been denied or disputed to show that not only those accused who were in office for a very short time but also those who had retired long back before the file was moved for the purpose of obtaining clearance for payment of additional amount from the government viz. M.N. Nadkarni who worked as Chief Engineer till 24.03.1987 and S.W. Mohogaonkar Superintending Engineer who worked till 19.06.1989 have been made accused but on the other hand those who were one way or the other connected with the decision viz. Shri J.R. Malhotra and Mr. R.D. Nanhoria have not been proceeded at all. We fail to understand on what basis such a discrimination was made. In this case the probative value of the materials on record has not been gone into. The materials brought on record have been accepted as true at this stage. It is true that at this stage even a defence of an accused cannot be considered. But we are unable to persuade ourselves to agree with the submission of Mr. Tulsi that where the entire materials collected during investigation have been placed before the court as part of the chargesheet the court at the time of framing of the charge could only look to those materials whereupon the prosecution intended to rely upon and ignore the others which are in favour of the accused. Indisputably they were required to do so. Be he an Executive Engineer Superintending Engineer Chief Engineer Engineer-in-Chief Secretary or Deputy Secretary matters were placed before them by their subordinate officers. They were required to take action thereupon. They were required to apply their own mind. A decision on their part was required to be taken so as to enable them to oversee supervision and completion of a government project. The Minister having regard to the provisions of the Rules of Executive Business was required to take a decision for and on behalf of the State. Some of the respondents were required to render their individual opinion required by their superiors. They were members of the Committee constituted by the authorities viz. the Minister or the Secretary. At that stage it was not possible for them to refuse to be a Member of the Committee and/ or not to render any opinion at all when they were asked to perform their duties. They were required to do the same and thus there cannot be any doubt whatsoever that each one of the respondent Nos. 1 to 7 was performing his official duties. Whether an order of sanction was required to be obtained - There exists a distinction between a sanction for prosecution u/s 19 of the Act and Section 197 of the Code of Criminal Procedure. Whereas in terms of Section 19 it would not be necessary to obtain sanction in respect of those who had ceased to be a public servant Section 197 of the CrPC requires sanction both for those who were or are public servants. For the purpose of attracting the provisions of Section 197 of the CrPC it is not necessary that they must act in their official capacity but even where a public servant purports to act in their official capacity the same would attract the provisions of Section 197 of the CrPC. It was so held by this Court in Sankaran Moitra v. Sadhna Das and Another 2006 (3) TMI 748 - SUPREME COURT . In State of Karantaka v. Ameerjan 2007 (9) TMI 628 - SUPREME COURT it was held that an order of sanction is required to be passed on due application of mind. Thus in this case sanction for prosecution in terms of Section 197 of the CrPC was required to be obtained. For the reasons aforementioned there is no merit in this appeal which is dismissed accordingly.

Summary

Issues Involved:
1. Requirement of sanction under Section 197 of the Code of Criminal Procedure.
2. Interpretation and application of contract terms.
3. Allegations of criminal misconduct under the Prevention of Corruption Act, 1988.
4. Allegations of criminal conspiracy under Section 120B of the Indian Penal Code.
5. Evaluation of evidence and materials on record for framing charges.

Detailed Analysis:

1. Requirement of Sanction under Section 197 of the Code of Criminal Procedure:
The court examined whether sanction under Section 197 of the Code of Criminal Procedure was necessary for prosecuting the respondents. The court opined that the respondents, being public servants, were performing their official duties, and thus, sanction was required. The court emphasized that the protection under Section 197 is to ensure that public servants are not prosecuted for actions taken in the discharge of their official duties without reasonable cause. The court referenced various precedents, including *Centre for Public Interest Litigation v. Union of India* and *Matajog Dobey v. H.C. Bhari*, to elucidate the necessity of sanction when the act is reasonably connected with the discharge of official duty.

2. Interpretation and Application of Contract Terms:
The court delved into the terms of the contract between the state and the contractors, particularly focusing on the clause that no claims would be entertained if the quarry was changed. The court acknowledged that the contract contained an arbitration clause and noted that the contractors had invoked arbitration, leading to an award in their favor based on a settlement. The court recognized that the contract's interpretation was disputed, especially regarding the additional payment for extra lead due to the change in quarry. The court concluded that the decision to pay the contractors was a collective one taken by various authorities, including the Financial Adviser, who recommended payment on equitable grounds.

3. Allegations of Criminal Misconduct under the Prevention of Corruption Act, 1988:
The prosecution alleged that the respondents committed criminal misconduct by sanctioning extra payments to the contractors, causing a loss to the state. The court examined whether the respondents abused their positions to obtain pecuniary advantages for the contractors without public interest. The court found that the decision to change the quarry and make additional payments was taken due to technical reasons and the necessity to complete the dam project within the stipulated time frame. The court held that the materials on record did not suggest any abuse of position or lack of public interest, thus not constituting criminal misconduct under Section 13(1)(d)(ii-iii) of the Act.

4. Allegations of Criminal Conspiracy under Section 120B of the Indian Penal Code:
The court analyzed the allegations of criminal conspiracy, which required proving an agreement between two or more persons to commit an illegal act. The court noted that conspiracy is often hatched in secrecy and can be proved by circumstantial evidence. However, the court found no material evidence to show that a conspiracy was hatched by the respondents. The court emphasized that the decision to make additional payments was a collective one, taken after considering various opinions and recommendations, including those from independent authorities.

5. Evaluation of Evidence and Materials on Record for Framing Charges:
The court considered whether the materials on record formed a sufficient basis for framing charges against the respondents. The court reiterated that at the stage of framing charges, the materials must be taken at face value. The court found that the intra-departmental and inter-departmental correspondences and notesheets indicated a genuine necessity to change the quarry and make additional payments. The court concluded that the materials did not disclose any prima facie case of criminal misconduct or conspiracy. The court also highlighted the principle that if only one view is possible based on the materials, the court should not subject the accused to trial.

Conclusion:
The court dismissed the appeal, holding that the materials on record did not justify framing charges against the respondents for criminal misconduct or conspiracy. The court emphasized the necessity of obtaining sanction under Section 197 of the Code of Criminal Procedure and found that the respondents acted within their official capacities. The decision to make additional payments was deemed a collective one, taken in the public interest to complete the dam project within the required timeframe.