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TMI Blog2024 (9) TMI 57X X X X Extracts X X X X X X X X Extracts X X X X ..... ned by KPCL, KECML and GCWL. In other words, there was no move within the Department to investigate KPCL or KECML before 2015. The PE s registered in the year 2012 did not inculpate the appellants in any manner. The entire focus of the said PE s was on the larger issue of irregularities in the allocation of coal blocks through the Government dispensation route. In this background, the respondent CBI cannot be heard to state that CBI was independently investigating the matter at hand well before 2015 or the Audit Report of the CAG of 2013 was not the trigger point for commencing the investigation. Could the Audit Report of the CAG fasten any liability on KECML? - HELD THAT:- This 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. Denial of Sanctions by the Sanctioning Authorities and the effect on the Appellants - HELD THAT:- After Sanctioning Authority had scrutinized all the relevant documents and the depositions as many as of 67 witnesses submitted by the respondent-CBI, it observed that there was no evidence to show that any rejects generated by washing of coal had been sold or that KPCL had suffered an unlawful loss during the process. As a result, the Board of KPCL refused to grant sanction to the respondent-CBI to prosecute Mr. R. Nagaraja for offences alleged to have been committed by him. It is noteworthy that no appeal has been filed by the respondent CBI against denial of sanction. The respondent-CBI having accepted the decision taken by the Sanctioning Authority in respect of Mr. R. Nagaraja and the decision of the Competent Authority in the Central Government in respect of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... satisfied with the manner in which KECML was discharging its obligations under the agreements till Audit Objections were raised by the CAG in October, 2013. That s when KPCL did a complete flip flop and for the first time, raised a demand on KECML seeking reimbursement towards the value of the coal rejects, a decision that was successfully assailed by the appellants in the High Court and the challenge laid by KPCL to the said judgement was repelled by this Court. Can KECML be blamed for not setting up the coal washery at the pithead? - HELD THAT:- The decision of KECML to enter into a MoU with GCWL for washing of coal was actuated by compelling circumstance faced by it and KPCL had taken a calibrated decision in its commercial wisdom to duly concur with the said decision knowing very well that non-supply of a specified grade of washed coal by KECML would have serious consequences of stoppage of generation of power at BTPS and a cascading effect of resulting in a power crisis in the State of Karnataka - It is not proposed to Labour much on the contention of the respondent-CBI that allocation of the coal block was in favour of KPCL and not in favour of KECML as stands adequately expl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xecuted between KPCL and Aryan Energy, the High Court had shot down the plea of KPCL that it was entitled to the coal rejects. Though KPCL assailed the said decision before this Court, it settled its dispute with Aryan Energy and the appeals preferred by it were disposed of as compromised. The contention of the respondent-CBI that the order of the High Court of Karnataka is not relevant for the present case since there was no criminal case registered therein, cannot be a distinguishing feature when the terms and conditions of the contract between KPCL and Aryan Energy on the aspect of disposal of the coal rejects is pari materia. It is opined that the judgment in the case of Aryan Energy does have persuasive value. Inherent Jurisdiction of the High Court under Section 482, Cr.P.C - HELD THAT:- 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his Court in the facts and circumstances of this case. Application of mind at the stage of Section 227, CrPC - HELD THAT:- There is no quarrel with the broad proposition canvassed by learned counsel for the respondent- CBI that at the stage of Section 227, Cr.P.C., the Special Judge, CBI had to sift the evidence to find out whether there was sufficient ground for proceedings against the appellants. That exercise would include taking a prima facie view on the nature of the evidence recorded by the CBI and the documents placed before the court so as to frame any charge. At the same time, one must be mindful of the language used in Section 227 of the Cr.P.C - As observed in Prafulla Kumar Samal [ 1978 (11) TMI 151 - SUPREME COURT ] the expression not sufficient ground for proceeding against the accused clearly shows that the Judge is not a mere post office to frame the charge at the behest of the prosecution. The Judge must exercise the judicial mind to the facts of the case in order to determine whether a case for trial has been made out by the prosecution - the CBI at the time of considering the records/documents submitted by the respondent-CBI and the material produced by the appel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Report of the Central Institute of Mining and Fuel Research, Nagpur 3.5.1 21-22 8. 3.6 Revised Mining Plan 3.6.1 3.6.2 22-23 9. 3.7 Information submitted by KECML to the Coal Controller 3.7.1 3.7.2 23-25 10. 3.8 Audit Objection raised by the CAG 3.8.1 3.8.3 25-29 11. 3.9 Preliminary Enquiry registered by respondent CBI 3.9.1 3.9.2 29-31 12. 3.10 Litigation between KPCL and KECML 3.10.1 -3.10.6 31-33 13 C. SUBMISSIONS 14. 4. Arguments by Counsel for the Appellants 4.1 4.17 33-42 15. 5. Arguments by Counsel for the respondent CBI 5.1 5.15 42-50 16. 6. Rejoinder Arguments by Counsel for the appellants 6.1 6.4 50 53 17. D DISCUSSION AND ANALYSIS 7.1-7.3 53-54 18. Did CBI Primarily Rely on the Audity Repot of the CAG? 8.1-8.3 55-57 19. Could the Audit Report of the CAG fasten any liability on KECML? 9.1-9.5 57-60 20. Import of the Judgment dated 24th March, 2016 of the Karnataka High Court 10.1-10.3 60-63 21. Sanctity of an Audit Report in Law 11.1-11.5 63-66 22. Denial of Sanctions by the Sanctioning Authorities and the effect on the Appellants 12.1-12.5 66-74 23. Effect of the absence of any strategy in the Mining plan to dispose off the coal rejects 13.1-13.2 74-75 24. Was KECML req ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Code MMDR Act, Mines and Minerals (Development Regulation) Act, 1957 P.C. Act Prevention of Corruption Act Abbreviations of Companies AEPL M/s Aryan Energy Private Limited EMTA M/s Eastern Mineral and Trading Agency GCWL M/s Gupta Coalfields and Washeries Limited KECML M/s Karnataka Emta Coal Mines Limited KPCL M/s Karnataka Power Corporation Limited SAS M/s. SAS India Private Limited Abbreviations of Companies AEPL M/s Aryan Energy Private Limited EMTA M/s Eastern Mineral and Trading Agency GCWL M/s Gupta Coalfields and Washeries Limited KECML M/s Karnataka Emta Coal Mines Limited KPCL M/s Karnataka Power Corporation Limited SAS M/s. SAS India Private Limited Abbreviations of Government Organizations CAG Comptroller and Auditor General CBI Central Bureau of Investigation CIMFR Central Institute of Mining and Fuel Research CIPCO M/s. Central India Power Company DoPT Department of Personnel and Training MoC Ministry of Coal MoEF CC Ministry of Environment, Forest and Climate Change MoPPP Ministry of Personnel, Public Grievances and Punishment Abbreviations of terms BTPS Bellary Thermal Power Station CV Calorific Value FBC Fluidized Bed Combustion FSA Fuel Supply Agreement GCV Gross ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of India under the Western Coalfield Limited command area situated in the State of Maharashtra for the development/operation of coal mines dedicated to feeding BTPS. 3.1.2 The JVA was executed between KPCL and EMTA on 13th September, 2002 which gave birth to the Joint Venture Company14 namely, M/s KECML. The shareholding of EMTA in the JVC was to the extent of 76 per cent and that of KPCL was 24 per cent. In the JVA, it was agreed that there would be five directors from each of the two companies and the nominee of KPCL would be the Chairman of KECML who would have the right to cast vote. The relevant clauses of the JVA referred to and relied upon by the parties are extracted hereinbelow: AGREEMENET ON CAPTIVE COAL MINING PROJECT THROUGH A JOINT VENTURE xxxxx COAL means washed coal with guaranteed values as per article-6 clause 3 C and satisfies quality parameter laid down in Annexure-1 attached to this agreement. xxxxx KPCL Coal Mines means the coal mine(s) to be allotted to KPCL by Ministry of Coal, Government of India in which mining rights shall be given to the Company and which shall be developed/operated through the Company for captive use of KPCL. Xxxxx GCV (ADB) Gross C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ery at the pit head so that the coal to be supplied by the company should meet the required specification of KPCL and KPCL is not liable to pay any additional charges towards washing of coal. b) EMTA shall take all the clearances required for the setting up the coal washery from the concerned authorities and to properly dispose off the coal rejects to the satisfaction of environmental regulation. c) EMTA shall keep liaison with the concerned railway authorities and organise railway siding at nearest distance from mines/washery area for movement of coal to BTPS by rail. 3. Arranging transportation of coal to BTPS xxxxx 6. Quantity a. The total quantity of coal required to be supplied to BTPS is approximately 2 Million Tonnes (+)/(-) 10% per annum. 7. Quality a) The quality of coal shall be determined by drawing coal samples from railway wagons on receipt at KPCL power plants before unloading. b) A third party agency shall be appointed jointly by the parties of the agreement for sampling and analysis of coal received at BTPS end. The third party agency shall carry out the sampling and analysis of coal in the presence of the representative of the parties. . xxxxx d) An independent ins ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ls between 4000- 4200 Kcal/Kg, the price payable is restricted to 50% of the Base Price. d) In case the GCV is below 4000 Kcal/Kg KPCL shall not require to pay for such supplies including freight and other incidental charges. xxxx D) Price Variation . 4. Penalty a) The delivery period stipulated in Clause No 9 of Article 5 for the supply of coal shall be the essences of the contract. In the event of failure to commence the delivery of coal within the stipulated time specified in Clause 9 of Article 5 KPCL shall impose a penalty at a rate of l/2% of initial contract value of Rs.330.09 Crores i.e. Rs.l.65 crores for every week's delay subject to a maximum of 10% of the contract value of Rs.330.09 crores i.e. Rs.33.00 crores b) In the event of delay in commencement of mining operation or washery or due to non-availability o(railway siding or for any other reason, Company shall arrange coal supply from any other source with the same specification as indicated under 3 c) of above . xxxxx 5. Fuel Supply Agreement shall be executed between KPCL and the company on the terms and conditions stipulated in the L.O.A. dated 8.7.2002 and relevant clauses as agreed upon between the parties un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7, Union of India allocated three coal blocks to KPCL for power generation for the proposed Thermal Power Station at Bellary, Karnataka18. As much emphasis has been laid on the contents of the said letter by the respondent-CBI, the same is reproduced hereinbelow for ready reference : No. 47011/1(1)/2002-CPAM/CA GOVERNMENT OF INDIA MINISTRY OF COAL . New Delhi, dated the 10th November, 2003 To, M/s. Karnataka Power Corporation Ltd., Shakti Bhavan No. 82, Race Course Road, Bangalore - 560 00l, KARNATAKA. 'Subjet: Allocation of Kiloni, Manoradeep and Baranj I-IV captive coal blocks for power generation to M/s KPCL for their proposed 1000 MW(2x500 MW) TPS at Bellary, Karnataka. .. The Screening Committee has agreed to identify Baranj l-IV. Manoradeep and Kiloni under the command area of WCL in the State of Maharashtra to meet the requirement of coal for the exclusive use in the proposed TPS at Bellary. Karnataka. The allocation of these blocks are subject to the following conditions :- (i) The coal mined from the blocks shall exclusively be used by the company to meet the requirement of coal in their proposed TPS. (ii) Synchronization/commissioning of the end use plant should be De ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... should be complete synchronization between the captive coal mining operations and the development of end-use (power generation) plant so that no situation arises where the company is left with coal extracted from the captive block when the end-use plant is yet to be operational. (vii) Approval of mining plan shall be considered only after financial closure for the end use project is achieved. (viii) Existing coal linkage from CIL/SCCL, would not be disturbed in any way with the coal mined from the allocated blocks. The coal linkage of 2.5 mtpa provided for the TPS from MCL shall continue. (ix) Further, detailed exploration of the block, if required, shall be carried out by CMPDIL or under its direct supervision, on payment basis by the applicant. (x) Violation of any of the conditions will render the allocation of the block/ grant of the lease as the case may be liable for cancellation. 4. The progress in the end use project and the development of the allocated blocks should be reported to this Ministry every 3 months from date of issuance of this letter. 5. The company may approach CIL for more detailed information, geological report etc. and contract the State Government authorit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was executed on 09th May, 2007 and its relevant clauses are as below: FUEL SUPPLY AGREEMENT 'THIS AGREEMENT made this ninth day of May two thousand seven between KARNATAKA EMTA COAL MINES LIMITED, called the Supplier .of the First Part and KARNATAKA POWER CORPORATION LIMITED, .. called the Purchaser' .of the Second Part. WITNESSETH AS FOLLOWS a) WHEREAS Purchaser inter alia is engaged in the business of generating power through its various thermal, hydel, wind power stations and is taking up a new thermal power plant named as Bellary Thermal Power Station (hereinafter referred to as BTPS), with an initial capacity of 500 MW likely date of commissioning is July, 2007. b) AND WHEREAS the annual requirement of coal at BTPS will be approximately 2 million tonnes. c) AND WHEREAS pursuant to the policy of Govt. of India of leasing out coal mines to power generating agencies for use as captive coalmine(s) for their own consumption, the Purchaser has been allocated mining block(s) identified as Baranj I-IV, Manoradeep Kiloni vide allotment Letter No.47011/1(1)12002-CPAM/CA dated 10.11.2003 . The Purchaser has assigned and entrusted the responsibility to develop and operate the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts without any interruption and shall maintain quality of supply as required. The following procedure is indicated in respect of Joint Sampling. a) third party agency shall be appointed jointly by the parties of the agreement for sampling and analysis of coal received at BTPS end .. b) The third party agency shall be required to undertake sampling and analysis of coal as per the provision of ISI/ BIS or mutually agreed procedure. c) The payment to the third party agency shall be borne by the supplier. d) In the absence of certification by the independent Inspection agency for any rake, KPCL is not liable for payment for such rake. 5.2.2 The Supplier shall take all reasonable steps to ensure that shalesIstones are removed from the coal and no lumpy and/ or oversized coal is supplied and the quality of coal shall fall within the parameters indicated in the Annexure - I. The methodology for verifying the incidence of stonesIshales shall be mutually agreed to between the Purchaser and the Supplier. The size of coal shall be less than 25 mm (0-2 mm fine not 20%). xxxxx ARTICLE 6 CONTRACT PRICE OF COAL 6.1 The Purchaser shall purchase the entire quantity of Specified Coal supplied to it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... escheduled July 2007. 10.2 The delivery period stipulated in 10.1 above for the supply of coal as envisaged in Article 5 shall be the essence of the contract. In the event of failure to commence the delivery of coal within the stipulated time specified above, Purchaser shall impose a penalty at a rate of l/2% of initial contract value of Rs.330.09 crores i.e. Rs 1.65 crores for every week's delay subject to a maximum of 10% of the contract value of Rs.330.09 crores i.e. Rs.33.00 crores. ( emphasis added ) 3.3.2 In terms of Articles 2 and 5 of the FSA, a Tripartite Agreement was executed between KECML, KPCL and M/s SGS India Private Limited22 on 20th June, 2008. M/s SGS was appointed as a third-party agency for purposes of sampling and analysis of the coal to be received at BTPS. 3.3.3 For the sake of completion of narration, it may be noted here that although the MoC had approved the Mining Plan submitted by KECML on 08th December, 2004 and the FSA referred to above was executed on 09th May, 2007, the actual mining and coal production could be commenced by KECML only in September, 2008 on account of the litigation initiated by M/s Central India Power Company23 against the MoC i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ize 0-50 mm with fines (upto -2 mm) not exceeding 20% d) Total moisture 6% minimum, 15% maximum Suitable price adjustment (CIFD BTPS basis) would be earned out for variation in properties compared to the guaranteed values as follows xxxxx It has been agreed by the parties hereto that the above parameters shall be maintained by GCWL for onward supply of coal to BTPS of KPCL by KECML 2. KECML has agreed to provide minimum 2 mtpa (Min 8000 tonnes on daily average basis) raw coal to Majri washery of GCWL from their Raw Coal Dump Yard. It shall be GCWL s responsibility to arrange/transport Raw Coal from the mines to MAJRI washery process the coal to achieve agreed specifications of the washed coal, transportation of washed coal to Majri railway siding to load minimum two rakes daily, supervise the loading of washed coal, onward delivery at BTPS power plant and co-ordination. xxxxx 4. GCWL has agreed to deliver washed coal of following specifications Ash (ABD) Less than 32 % GCV (ARB) 4500 Kcal/Kg Size 0-5 mm 5. Yield Parameters GCWL shall ensure, broadly, of 90% if the ash content of the raw coal is 35% to 36% and in the event ash content of the raw coal is found to be 40%, the yield sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g of coal mined by Western Coalfields Limited. However, the respondent-CBI has questioned the execution of the MoU between KECML and GCWL, in particular, Clause 12 thereof. 3.5 WASHABILITY REPORT OF THE CENTRAL INSTITUTE OF MINING AND FUEL RESEARCH, NAGPUR 3.5.1 In the year 2009, to check the statistics of the coal mine, the appellants approached a Government Laboratory, namely, Central Institute of Mining and Fuel Research27 for testing of the Integrated Baranj Open Cast Mines28. The team of officers from CIMFR visited the site, collected 100 MT of coal for testing and furnished a Detailed Washability Report. The report states that the rejects did not contain any useful c.v. as the GCV of the rejects was 1094 Kcal/Kg and the useful heat value was negative. 3.6 REVISED MINING PLAN 3.6.1 After the mining continued for about two years in terms of the original Mining Plan submitted in the year 2004, KPCL decided to increase the capacity of BTPS from 2.5 Mty to 5 Mty. As a result, the appellants were required to prepare a revised Mining Plan for supplying the increased mining demands. On 20th December, 2010, the appellants addressed a letter to the MoC for seeking approval of the revis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tent of the washed coal varied from 32 per cent to 34 per cent; that the yield of the washery was about 95 per cent to 96 per cent and the residual 4 per cent of the raw coal were rejects whose ash content was over 90 per cent and was therefore not marketable. It was further stated that the quality of the rejects was so poor that no records were maintained regarding its utilization. However, the rejects were used to fill up low land area of siding and road between coal blocks to the washery and for pit dumping near the washery. 3.7.2 To substantiate the statement made that the yield of the washery was 95 to 96 per cent, the appellants relied on the Washability Report prepared by CIMFR, Nagpur unit dated 01st August, 2009 which records that IBOCM coal is amenable to wash with yield varying from 90 to 98 per cent at the desired ash level of 32 per cent. The Report has recorded that the GCV of the mined coal fit for transporting to BPTS is 4464 Kcal/kg and that of the rejects is 1094 Kcal/kg. The data prepared in a format and submitted in a tabulated format by KECML to the Coal Controller for the period between the year 2008-09 and 2012-13 is extracted below: Sl. No. Year Production Q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ejects and middlings are generated from washery. A study report indicates that washing of D-grade coal generates rejects and middling of F and G-grade, and such low quality coal was also being used in power generation. ➢ The purpose of allocation of coal blocks for captive use under section 3(3) of the Coal Mines (Nationalisation) Act, 1973 is not to enable free trading of coal by private companies. The basic concept of captive mining permitted under the aforesaid Act is that the coal obtained from a captive block shall be used entirely and exclusively for the specified and approved end use by the allocatee Company and, therefore, the production of surplus coal should not result in any undue advantage to the captive block allocatee as the coal block is allotted to them for use in their end-use plant only and any additional production from the block should be made available to the Government for utilization. ➢ While allocating the coal block in November 2003, the Government directed the Company to use the rejects for its own captive consumption. ➢ In reply to the clarification sought (October 2003) by the Ministry of Coal regarding detailed plan about the use of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Central Government. The conditions of allocation inter-alia included that if the coal was being washed, tailings, middling or rejects, as the case may be, from washery should be used for captive consumption only by the Company as approved by the Central Government. Further, no coal shall be sold, delivered, transferred or disposed of except for the stated captive mining purpose (power generation) and with the previous approval of the Central Government in writing. We observed that: Depending on the type of coal being washed and the requirement of the captive user, the rejects and middling are generated from washery. A study report indicates that washing of D-grade coal generates rejects and middling of F and G-grade, and such low quality coal was also being used in power generation. The purpose of allocation of coal blocks for captive use under section 3(3) of the Coal Mines' (Nationalization) Act, 1973 is not to enable free trading of coal by private companies. The basic concept of captive mining permitted under the aforesaid Act is that the coal obtained from a captive block shall be used entirely and exclusively for the specified and approved end use by the allocatee Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .83 620 139646213.05 2010-11 2274994.46 227499.45 650 147874639.58 2011-12 2188869 218886.9 650 142276485.00 2012-13 (up to May 2012) 570869.3 57086.93 620 35393896.60 52,36,50,736.76 b) It may be noted that the said rejects are only Stones / Boulders not consistent with the size of coal :( - 25 mm) for which the boiler is designed hardly have any calorific value. Therefore the said rejects have been used for leveling, piling etc. towards facilitating Integrated Baranj OCP. c) The Audit comment is a generalized observation without any factual support and as such cannot be concluded that the washery rejects irrespective of the geological location of the source of coal would have Useful Heat Value (UHV) to cater to the generation requirement. In fact, the rejects generated in the present case are only shale and non- coal matter. Hence the conclusion drawn by Audit that the rejects are G- grade is not only arbitrary but also not based on the ground geological realties. Thus, the abandonment of rejects at the collieries end has been resorted to based on its utility, as otherwise its transportation would have imposed additional burden on the Company. The abandonment of rejects is, there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5 H.N. Narayana Prasad, the then Director (Technical) KPCL, and Former Director KECML FUNCTIONIARIES OF KECML A-6 Ujjal Kumar Upadhyay, Chairman and MD EMTA Coal Ltd and Managing Director of KECML A-7 Bikash Mukherjee, Director EMTA and Former Director of KECML A-8 Bishwanath Dutta, Director EMTA and Director KECML A-9 Purajit Roy, Executive Director and CFO M/s EMTA Coal Ltd A-10 Ashok Tooley, Director KECML FUNCTIONARIES OF GCWL A-11 Padmesh Gupta , CMD Gupta Coal Washeries Limited CORPORATE ENTITIES FUNCTIONARIES A-12 Karnataka EMTA Coal Mines Ltd. (KECML) A-13 M/s Eastern Minerals and Trading Agency (EMTA) A-14 Gupta Coal Washeries Limited Though the appellants have asserted that the respondent-CBI has registered the complaint on coming across the Report of the CAG, the said submission has been refuted by the respondent-CBI who has pleaded that it had conducted an independent investigation after registering the PE which was followed by registering of the FIR. 3.10 LITIGATION BETWEEN KPCL AND KECML 3.10.1 Aggrieved by the letter dated 31st July, 2014 addressed by KPCL to KECML, KECML filed two writ petitions37 before the High Court of Karnataka praying inter alia for quashing of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ally filed by the respondent CBI against 14 persons/entities alleging that they had illegally disposed of the coal rejects in IBOCM. A Supplementary Chargesheet was filed on 4th November, 2019. Out of the two charges, one charge relating to allegations of recovery of payment for washing charges was dropped by the respondent-CBI. 3.10.6 On 1st September, 2021, the appellants filed an application before the learned Single Judge under Section 227 read with Section 239 of the Criminal Procedure Code44 for discharging them in the case. By the common impugned order dated 24th December, 2021, the said application was dismissed and charges were framed against them on 3rd March, 2022, under Section 409 IPC and 120 (B) r/w Section 13(1)(c), 13(1)(d) r/w Section 13(2) PC Act i.e. resulting in filing of the present appeals. C. SUBMISSIONS 4. ARGUMENTS BY COUNSEL FOR THE APPELLANTS Following are the arguments advanced by Mr. Ranjit Kumar, learned Senior Advocate appearing for the appellant No.1 and Mr. Abhimanyu Bhandari, learned counsel appearing for the appellant No.2 :- 4.1 That KPCL did not have any right over the rejects produced from the mine and therefore, cannot claim any entitlement th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s appearing before it showed that coal rejects were the property of AEPL and KPCL had no claim over it and that the term regarding disposal of coal rejects was imposed by KPCL only to ensure compliance of the environmental regulations. 4.4.1. Notably, the aforesaid judgement of the High Court was challenged by KPCL before this Court by way of petition for special leave to appeal47. The said petition was disposed of by this Court on 26th April, 2024, noting that during the pendency of the petitions, the parties had settled their disputes amongst themselves and part of the decretal amount deposited by KPCL to discharge its liability towards supply of washed coal by AEPL along with interest etc. was directed to be released in favour of AEPL in terms of the Compromise Deed. 4.5 That the Washability Report of CIMFR, Nagpur for the year 2009 had stated that the rejects had a GCV of 1094 Kcal/kg and less and therefore, the same could not have been utilized in the BTPS. For the said reason, KECML had used the rejects for captive consumption of the mine i.e. for levelling, piling etc. The very same Report was also referred to by KPCL in its reply to the audit objections raised by CAG to sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ral's (Duties, Powers and Conditions of Service) Act, 197149 read with Articles 148 to 151 of the Constitution of India. 4.11. That the analysis of the rejects and the manner in which loss was allegedly caused to KPCL, has primarily been arrived at by the respondent CBI from the Report of the CAG and once this Court has held that the Report of CAG cannot be the basis for launching prosecution against the appellants, the entire basis of launching the prosecution is eroded. 4.12. Stating that contrary to the prescribed procedure that contemplates that the Report of the CAG in relation to the accounts of a Government Company shall be submitted to the Government and the Central Government/State Government, as the case may be, shall place the said Report before each House of the Parliament/State Legislature and the Public Accounts Committee/the Joint Parliamentary Committee is required to scrutinize the said Report. In the instant case, the Report of the CAG has not been accepted either by the Public Accounts Committee or by the Committee of Public Undertakings or by the Joint Parliamentary Committee nor has it been tabled before each House of the Parliament. It is only when the Rep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rore three lakh fifty four thousand one hundred and fifty nine only), is without any basis and contrary to the records. 4.14. That the Coal Controller did not raise any issue with regard to the disposal of the rejects and the respondent-CBI has neither made the Coal Controller a witness or an accused in the present case. 4.15. The judgements in Radheshyam Kejriwal v. State of West Bengal and Another54; Ashoo Surendranath Tewari v. Deputy Superintendent of Police, EOW, CBI and Another55; J Sekar alias Sekar Reddy v. Directorate of Enforcement56; and Prem Raj v. Poonamma Menon Another57 have been cited to argue that it is settled law that where a party has been exonerated on merits in civil adjudication, criminal prosecution cannot be permitted to continue on the same set of facts and circumstances. 4.16. That the respondent CBI has failed to produce any document to demonstrate that the accused Nos.1 to 5 had made any demand for illegal gratification or there was acceptance of any such demand made. In the absence of proof of demand and acceptance of illegal gratification by the public servant, no offence is made out under Section 13(1)(d) of the PC Act. For this proposition, reliance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted to be without any basis and opposed to the letter dated 10th November, 2003, addressed by the MoC to KPCL that lays down the conditions of allotment of the captive coal blocks in para 3 that specifically states in sub-para (iv) as follows: 3 The allotment of the captive blocks will also be subject to the following conditions: xxxxx (iv) The allocattee would furnish to this Ministry detailed plan for disposal of unusable containing carbon material obtained during the process of a mining or any process thereafter including washing etc. so as to avoid any need for disposal of the same through sale etc. at a later stage, within 30 days of receipt of this letter or submission of mining plan whichever is earlier. 5.3 As per the respondent-CBI, it was the duty of KPCL to furnish the detailed plan for the disposal of the rejects to the Ministry within 30 days of the receipt of the letter dated 10th November, 2003 or submission of the Mining Plan, whichever is earlier and this requirement was independent of the Mining Plan. Therefore, absence of any plans mentioned in the Mining Plan to deal with the rejects would not exonerate the appellants who remained under an obligation to furnish ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts and cannot seek any parity with public servants. 5.7 Learned counsel for the respondent-CBI points out that the Order on Charge impugned by the appellants herein was also challenged by the accused No. 1 to 5 (functionaries of KPCL who had since retired), by filing a Petition for Special Leave to Appeal65 in this Court which was dismissed as withdrawn vide order dated 09th February, 2024. 5.8 It is submitted that at the stage of framing of charges, the trial Court must confine itself to the material brought on record by way of the chargesheet filed under Section 173 Cr.P.C and merely because some other Authority has taken a different view with regard to the complicity of some co-accused who are public servants and denied the request made by the respondent-CBI for sanctioning their prosecution, is irrelevant. 5.9 As for case law cited by learned counsel for the appellants to substantiate their submission that sanction under Section 197 Cr.P.C is mandatory for prosecuting public servants (A-1 to A-5 in the instant case), the submission made is that for the said purpose, facts and circumstances of each case have to be examined and there cannot be any universal findings in this regar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... required to dispose off the coal rejects in a manner that would satisfy environmental regulations and KPCL was not entitled to the value of the coal rejects. Learned counsel submits that the terminology used in the contract governing the parties was different and therefore the said judgement does not have any relevance to the facts of the instant case. 5.12 Learned counsel for the respondent-CBI goes on to argue that even the judgement dated 24th March, 2016, passed by the Karnataka High Court in a writ petition filed by KECML against KPCL cannot be of any assistance to the appellants for the reason that the respondent CBI had not been impleaded as a party in the said proceedings and the said judgement has confined itself to the demands made by KPCL for recovery of amounts from KECML towards the value of the coal rejects. Further, the FIR in the present case was registered on 13th March, 2015 whereas the judgement was delivered by the Karnataka High Court one year later, on 24th March, 2016. By the time the appeal preferred by KPCL against the judgment of the High Court was dismissed by this Court on 20th May, 2022, Charges had already been framed by the learned Special Judge, CBI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Singh Karam Singh v. Jitendra Bhimraj Bijjaya And Others69. The decisions in State of Maharashtra v. Som Nath Thapa70, State of Tamil Nadu v. N. Suresh Rajan and Others71 have been relied on to make a point that at the stage of framing of charges, the Court cannot appraise the evidence as is done at the time of trial and the Court must proceed on an assumption that the materials brought on record by the prosecution are true. Alluding to the judgment in State of Bihar v. Ramesh Singh72, learned counsel submitted that at the initial stage of the trial, if there is a strong suspicion that gives an impression to the Court for drawing a presumption that the accused has committed an offence, it is not open for the Court to state that there is insufficient ground for proceeding against the accused. 5.18 Both sides have also relied on K.G. Premshanker v. Inspector of Police and Another73 which discusses the effect of a decision of a civil Court on criminal proceedings against the same person pertaining to the same cause in the context of Sections 40 to 43 of the Indian Evidence Act, 1872 as to which judgments of the courts are relevant and the extent of the relevance. 6. REJOINDER ARGUME ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the mismatch between the quantity of rejects for a period of two months (April and May of the year, 2012-13) claimed to be 207,837.117 MT by referring to a Certificate dated 07th June, 2016 issued by Mr. S.N. Roy, Statutory Auditor of KECML vis- -vis the quantity of rejects generated for a period of twelve months for the previous year (2011-2012) that came to only 74,511.709 MT. Learned counsel submitted that in reply to the Audit query raised by the CAG, KECML had specifically stated that the total production of coal upto May, 2012 was 79,46,082.736 MT which included coal and rejects. This figure has not been disputed by the respondent CBI. The quantity of the rejects upto May, 2012 was 75,63,934.800 MT of the washed coal which figure has also not been disputed by the respondent-CBI. An inference would therefore have to be drawn that, at best, the difference between both the aforesaid figures would be the extent of the rejects of coal. It has been urged that once the extent of production and the quantum of coal sent to KPCL has not been disputed, there is no question of inflating the quantum of rejects, as alleged. The respondent CBI has therefore blindly accepted the version put ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade during the year 1993 to 2006. It is not in dispute that the coal allocation in favour of KPCL was also a subject matter of investigation, but nothing untoward was noticed in that. The JVA between KPCL and KECML also withstood the test of scrutiny. As a result, allocation of coal blocks made in favour of KPCL were not interfered with. 8. DID CBI PRIMARILY RELY ON THE AUDIT REPORT OF THE CAG ? 8.1 We shall first examine the submission made by the appellants that the respondent CBI solely relied on the Audit report of the CAG of 2013 to launch its prosecution in the year 2015. This contention has been strongly refuted by the respondent CBI that has asserted that the Department had on its own initiative, come across several documents including the CAG Report which exposed commission of the offence and the extent of misappropriation of money by the appellants and the other coaccused and it had not solely relied on the CAG Report to commence the investigation. 8.2 In the course of hearing, this Court had directed learned counsel for the respondent CBI to produce the files of the Department on the basis whereof, three Preliminary Inquiries were registered PE-2/2012/EO-I75, PE-4/2012/E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d GCWL. In other words, there was no move within the Department to investigate KPCL or KECML before 2015. The PE s registered in the year 2012 did not inculpate the appellants in any manner. The entire focus of the said PE s was on the larger issue of irregularities in the allocation of coal blocks through the Government dispensation route. In this background, the respondent CBI cannot be heard to state that CBI was independently investigating the matter at hand well before 2015 or the Audit Report of the CAG of 2013 was not the trigger point for commencing the investigation. 9. COULD THE AUDIT REPORT OF THE CAG FASTEN ANY LIABILITY ON KECML? 9.1 Coming next to the CAG Report, as much hinges on the said Report, we may note that the same was considered by the Division Bench of the High Court of Karnataka in its judgement dated 24th March, 2016, wherein, it was noticed that there was no dispute between KPCL and KECML regarding the obligations cast on them under the contracts for the development of captive coal blocks and for supply of coal for consumption at the Thermal Power Station (BPCL) located in the State of Karnataka until the CAG submitted an Audit Report for the year ending ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oresaid judgement was assailed by KPCL by approaching this Court. The said appeals were dismissed by a three Judges Bench of this Court of which one of us (Hon ble Ms. Hima Kohli, J) was a member with the observations that the Audit Report of the CAG appeared to have been the starting point for the entire dispute between the parties. When the CAG Report was first submitted, KPCL had itself raised objections to the quantification of the coal rejects by the CAG but on its objections being turned down, KPCL raised a demand on KECML seeking reimbursement on the basis of very same CAG Report to which it had not so long ago, filed objections. 9.4. The observations made by this Court in the captioned decision are germane and are extracted below: 13. The present matter pertains to a tender that was awarded by the appellant to EMTA nearly twenty years ago, in the year 2002. The CAG report that appears to have been the starting point for the entire dispute between the parties is dated March, 2013, close to a decade back. In such circumstances, to even advert to arguments on the maintainability of the writ petitions would be unjust to the parties involved. 14 Coming to the merits of the appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion made by learned counsel for the respondent that the judgement dated 24th March, 2016 passed by the Karnataka High Court in a writ petition filed by KECML against KPCL is of no consequence, as the said judgment was confined to examining the demands made by KPCL on KECML for reimbursement towards the value of the coal rejects, the same is found to be erroneous. It is wellsettled that in a case of exoneration on merits in relation to adjudication proceedings in a civil matter where the allegations are found to be unsustainable and the party is held as innocent, criminal prosecution on the same set of facts and circumstances cannot be permitted to continue. In Radheshyam Kejriwal(supra), a three judges Bench of this Court reconciled the conflict between the view taken in Standard Chartered Bank(1) v. Directorate of Enforcement79 and Collector of Customs v. L.R. Melwani80 on the one hand where it was held that adjudication proceedings and criminal proceedings are two independent proceedings and both can go on simultaneously and findings in the adjudication proceedings is not binding on the criminal proceedings and the judgments in Uttam Chand v. ITO81, G.L. Didwania v. ITO82, K.C. B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eing confronted with the Audit Objections taken by CAG, it raised a demand on KECML for the value of the coal rejects. This demand was quashed and set aside by the Karnataka High Court and this Court. 10.3. On applying the decisions cited above to the facts of the instant case, this Court cannot turn a blind eye to the view taken in the judgement dated 24th March, 2016 passed by the Division Bench of the High Court of Karnataka in a dispute directly arising between KPCL and KECML pertaining to the very same cause of action based on the obligations cast on both the parties under various agreements executed for the development of captive coal blocks and for supply of coal, which was finally upheld by this Court vide judgement dated 20th May, 2022. The said judgments have cleared KECML of any blame. On the same set of facts and logic, we are of the opinion that no criminality can be attributed to the appellants. 11. SANCTITY OF AN AUDIT REPORT IN LAW 11.1. As the sanctity of the Audit Report of the CAG of 2013 has been questioned by the appellants, we propose to examine this aspect. Before the year 1971, the CAG used to function under the Government of India (Audit and Accounts Order) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rliament, as provided under Article 151(1). In relation to the States, reports are submitted to the Governor, who shall cause them to be laid before the legislature of the State, as per Article 151(2) of the Constitution. When reports are received in Parliament, they are scrutinised by the Public Accounts Committee (PAC). 62. The PAC is established in accordance with Rule 308 of the Rules of Procedure and Conduct of Business in Lok Sabha. The function of the PAC is to examine the accounts of the Union and the report of the CAG. The PAC shall be principally concerned whether the policy is carried out efficiently, effectively and economically, rather than with the merits of government policy. Its main functions are to see that public monies are applied for the purposes prescribed by Parliament, that extravagance and waste are minimised and that sound financial practices are encouraged in estimating and contracting, and in administration generally. The PAC also has the power to receive evidence, the power to send for persons, papers and record and can receive oral evidence on solemn affirmation. Once the report is prepared, the report of the PAC is presented to the House. xxxxx 68. We ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dit objections taken by the CAG and relied upon by the respondent CBI to allege conspiracy and loss to the public exchequer were thoroughly examined and found to be meritless by two separate set of Sanctioning Authorities. When it came to Mr. R. Nagaraja, the then Director (Finance) of KPCL and the nominee Director on the Board of KECML, the Sanctioning Authority, i.e., the Board of KPCL went through several documents during its deliberations including the MoU between the KECML and GCWL forwarded by the respondent CBI for seeking sanction to prosecute him. The reasons for holding that the CAG Report was without any factual basis, were elaborately dealt with as below : DETAILED REPORT OF THE BOARD OF KPCL IN RELATION TO THE CBI REPORT DATED 28.07.2017 AS REGARDS SHRI R. NAGARAJA xxxxx 1.8 There is an Memorandum of Understanding dated 20.12.2008 between Gupta Coal Fields and Washeries Ltd ( GCWL ) and KECML under which GCWL was required to wash and supply the coal of required specification to the Power Plant of KPCL in respect of coal mined by KECML. Clause 12 of the said MoU stipulates that the rejects generated shall be the joint property of KECML and GCWL and can be disposed off / ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, then the question of generation of rejects would not arise at all. Therefore, after taking into account the office note generated by Shri Purushottam, Shri R. Nagaraja had sought to examine whether washing is required at all. Hence, Shri R. Nagaraja has acted with great prudence to ensure that no loss is caused to KPCL under the directions of Dr. S.M. Jaamdar, MD, KPCL. 6. If washing of coal was not required, then the MoU with Gupta was not required to be approved inasmuch as the main purpose of the agreement was to start the washing process. Although the MoU was ratified, it could not be operationalized specifically Clause 12 of the MoU was not ratified by the Board of KECML. Conditional ratification of MoU does not mean that the Board has dishonestly refrained from protecting the interest of KPCL. (See Board minutes of KECML at Document No.232) 7. From the reading of the Clause 12, it appears that the fact that there was no concluded contract vis- -vis of rejects inasmuch it was understood that it was to be sold on mutually agreed terms and subject to legal clearances . This implies that GCWL and KECML had to mutually agree for the terms of the sale and same had to be approved ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der that tailings and rejects are the property of KPCL and should be utilized only for its end use of power generation appears to be based on a strict interpretation of the allotment conditions. Technically, Bellary Thermal Plant of 500 MW capacity is designed to use pulverized coal for firing and coal of reasonable quality. As such the condition that middlings, tailings rejects should be used for power generation by KPCL is neither feasible nor appropriate. On the other hand, since disposal of rejects is an environmental issue, KPCL has insisted that the same should be subject to compliance of environmental norms. When KPCL was not in a position to use the reject for power generation, the onus is on the mining operator to dispose of the same as permitted under law. Given the facts as stated above, there cannot be any act of negligence on part of the nominees of KPCL in this regard as well. 17. The CAG report is without factual basis for the following reasons: i) The quantum of rejects is assumed as 10% of the coal based on MoU whereas as per actuals it was 4.39% as evident from the Coal Controller s certificate, Statements of inward and outward movements of Coal as submitted by GC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no mention of this Debit Note or such an arrangement for subsequent years. e. KECML officials have written emails asking for accounts of the stock and Gupta has stated that the rejects are still lying with them. 22. There are two types of rejects as reflected in the Annual accounts. One is the rejects lost due to stones, boulders etc. for which no royalty was paid. These rejects were not even transported to Gupta and are not classified as washery loss . The washery loss is evident from the Coal Controller s certificates. xxxxx 38. To say the least, there is no evidence whatsoever that is collected by the investigator that would indicate that there was either any request or a demand by the public servant concerned for a valuable thing or a pecuniary advantage at any point of time upon the beneficiary for any reason whatsoever. A mere omission on the part of the public servant or a negligent act on his part which has enured to the beneficiary cannot be said to act of misconduct on the part of the public servant to bring him within the ambit of Section 13(1) (d) of the Prevention of Corruption Act, 1988. xxxxxx 48. Shri R. Nagaraja has an impeccable and unblemished service record in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are extraneous and fabricated as an afterthought. 13. AND WHEREAS washery loss and loss due to stone bounders etc. are different. The certificate combines the two losses and claims them as washing loss. The rejects quantified as 8.03. MT only reproduces what is disclosed in the accounts as processed wastage. 14. AND WHEREAS on examination of records, statement of witnesses etc, it was seen that there is no evidence of any purported conspiracy between the accused officer and GCWL or any quid pro quo in this regard. The reason for deferring the agenda in 41st Board Meeting have been explained in the detailed note of M/s KPCL and appear to be reasonable. It has been mentioned that the revised mining plan was approved in the Board Meeting of the Joint Venture KECML by which a new technology was to be implemented which could have been issued of rejection irrelevant. 15. AND WHEREAS the comments of the Govt. of Karnataka have been obtained. They have stated that there is no material to support the allegation that he conspired to illegally dispose off the rejects and therefore deferred the agenda. Hence, no criminal intent can be attributed to Shri Yogendra Tripathi and have recommended ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ese were merely administrative decisions and even if permission to prosecute the aforesaid officers has been denied, the Department can still proceed against the appellants based on the very same set of material/documents/evidence etc. that have been minutely scrutinized by different authorities at the highest level and they have independently arrived at an identical conclusion of refusing to grant sanction to prosecute senior functionaries of KPCL. Simply because the said senior functionaries of KPCL were public servants, does not detract from the fact that the respondent-CBI has described them as co-accused in a criminal conspiracy and attributed similar motives to them as the appellants herein. If they have been let off the hook and the respondent-CBI has not challenged the said decisions, there is no reason to proceed against the appellants herein on the basis of the very same set of facts and material gathered during the course of investigation. 13. EFFECT OF THE ABSENCE OF ANY STRATEGY IN THE MINING PLAN TO DISPOSE OFF THE COAL REJECTS 13.1. Coming next to the stand taken by the respondent-CBI that absence of any plan mentioned in the Mining Plan to deal with the rejects coul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rejects, it is fallacious on the part of the respondent-CBI to argue that the conditions imposed by the Central Government while conveying its approval to the State Government for grant of mining lease in favour of KPCL ought to have formed a part of the lease deed to be executed. Fact of the matter is that there was no such condition imposed in the Notification dated 16th July, 2004, issued by the MoC. The said notification simply specified the end use of the coal from the allocated coal blocks for supply to KPCL to generate thermal power in the proposed BPCL. The original Mining Plan of September, 2004 submitted by KECML to the MoC for its approval also did not elucidate the manner in which the coal rejects were to be disposed of. The said Mining Plan had the approval of the MoC which did not raise any objection relating to the absence of any condition for dealing with the coal rejects. The inevitable conclusion is that disposal of the coal rejects was to be undertaken by KECML strictly in terms of Article 5(2)(b) of the JVA and no more. 14.3 Moreover, a closer look at the clauses of the JVA and FSA clearly indicate that KECML was only obliged to provide a specified grade of was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he MoU with GCWL for washing of the mined coal at its washery at Majri, transportation of the raw coal from the mines and washed coal to the Railway Siding for delivery to BTPS. Records reveal that the draft of MoU was duly deliberated upon by the Board of Directors of KECML and finally approved and ratified on 13th January, 2009. Subsequently, in the meeting held on 23rd February, 2010, the Board of Directors of KECML concluded that washing of raw coal was a prerequisite to meet the specified grade of coal with a defined GCV for generation of power at BTPS. The necessity of supplying washed coal to obtain the agreed parameter of coal quality was also recognized by the office of the Coal Controller in its letter dated 9th December, 2009. This fact finds mention in the detailed Report of the Board of KPCL that refused permission to the respondent-CBI to prosecute Mr. R. Nagaraja. 15.3 It is clear from the above that the decision of KECML to enter into a MoU with GCWL for washing of coal was actuated by compelling circumstance faced by it and KPCL had taken a calibrated decision in its commercial wisdom to duly concur with the said decision knowing very well that non-supply of a spec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by this Court in the year 2014, deallocating all captive coal blocks, including those allocated to KPCL. Therefore, any reference by the respondent-CBI to the revised Mining Plan is of no consequence. 17. PERSUASIVE VALUE OF THE ARYAN ENERGY CASE 17.1 KPCL s entitlement over the coal rejects has been separately tested by the High Court of Karnataka in the case of Aryan Energy(supra). Pertinently, in that case the clauses forming a part of the Agreement between KPCL and Aryan Energy particularly with respect to the disposal of the coal rejects is the same as in the instant case. Aryan Energy was also required to dispose off the coal rejects by making compliance of the environmental regulations. In the said case, the High Court of Karnataka returned a finding that KPCL did not have any claim over the coal rejects generated during washing of coal. The view taken was that as long as disposal of the coal rejects was in line with the environmental regulations, KPCL did not have any role to play in the disposal of the coal rejects. It was specifically observed by the High Court that the agreement between KPCL and Aryan Energy included a condition that KPCL would only buy washed coal at a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng process, or at the stage of committal, or even at the stage of framing of charges. These are all stages before the commencement of the actual trial. The same parameters would naturally be available for later stages as well. The power vested in the High Court under Section 482 CrPC, at the stages referred to hereinabove, would have far-reaching consequences inasmuch as it would negate the prosecution's/complainant's case without allowing the prosecution/complainant to lead evidence. Such a determination must always be rendered with caution, care and circumspection. To invoke its inherent jurisdiction under Section 482 CrPC the High Court has to be fully satisfied that the material produced by the accused is such that would lead to the conclusion that his/their defence is based on sound, reasonable, and indubitable facts; the material produced is such as would rule out and displace the assertions contained in the charges levelled against the accused; and the material produced is such as would clearly reject and overrule the veracity of the allegations contained in the accusations levelled by the prosecution/complainant. It should be sufficient to rule out, reject and disca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f power vested in it under Section 482 CrPC. Such exercise of power, besides doing justice to the accused, would save precious court time, which would otherwise be wasted in holding such a trial (as well as proceedings arising therefrom) specially when it is clear that the same would not conclude in the conviction of the accused. [emphasis added] 18.3 In State of Orissa v. Debendra Nath Padhi90, the powers of the High Court under Section 482, Cr.P.C and Article 226 of the Constitution of India were highlighted and the court observed that: 29. Regarding the argument of the accused having to face the trial despite being in a position to produce material of unimpeachable character of sterling quality, the width of the powers of the High Court under Section 482 of the Code and Article 226 of the Constitution is unlimited whereunder in the interests of justice the High Court can make such orders as may be necessary to prevent abuse of the process of any court or otherwise to secure the ends of justice within the parameters laid down in Bhajan Lal case91 [1992 Supp (1) SCC 335 : 1992 SCC (Cri) 426] . [emphasis added] 18.4 In Rukmini Narvekar v. Vijaya Satardekar and Others92, this Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 82 of the Code which we have extracted and reproduced above, we give the following categories of cases by way of illustration wherein such power could be exercised either to prevent abuse of the process of any court or otherwise to secure the ends of justice, though it may not be possible to lay down any precise, clearly defined and sufficiently channelised and inflexible guidelines or rigid formulae and to give an exhaustive list of myriad kinds of cases wherein such power should be exercised. (1) Where the allegations made in the first information report or the complaint, even if they are taken at their face value and accepted in their entirety do not prima facie constitute any offence or make out a case against the accused. (2) Where the allegations in the first information report and other materials, if any, accompanying the FIR do not disclose a cognizable offence, justifying an investigation by police officers under Section 156(1) of the Code except under an order of a Magistrate within the purview of Section 155(2) of the Code. (3) Where the uncontroverted allegations made in the FIR or complaint and the evidence collected in support of the same do not disclose the commissio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 18.8 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. 19. EXTRAORDINARY POWERS OF THIS COURT UNDER ARTICLE 13 OF THE CONSTITUTION OF INDIA 19.1. When it comes to invocation of the powers vested in this Court under Article 136 of the Constitution of India, unlike Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne. The exercise of the power of the Supreme Court is not circumscribed by any limitation as to who may invoke it. ... Appeals under Article 136 of the Constitution are entertained by special leave granted by this Court, whether it is the State or a private party that invokes the jurisdiction of this Court, special leave is not granted as a matter of course but only for good and sufficient reasons, as well established by the practice of this Court. [emphasis added] 19.2. In P.S.R. Sadhanantham v. Arunachalam96, a Constitution Bench of five judges elaborated the content and character of Article 136 vis- -vis Article 21 and made the following observations: 7. Specificity being essential to legality, let us see if the broad spectrum spread out of Article 136 fills the bill from the point of view of procedure established by law . In express terms, Article 136 does not confer a right of appeal on a party as such but it confers a wide discretionary power on the Supreme Court to interfere in suitable cases. The discretionary dimension is considerable but that relates to the power of the court. The question is whether it spells by implication, fair a procedure as contemplated by Article 21 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid on the bedrock of justice, are not undermined by injustice anywhere in the land, Bharat Bank Ltd.v. Employees of these Bharat Bank Ltd [1950 SCC 470 : AIR 1950 SC 188 : (1950) SCR 459, 474 : 1950 LLJ 21 : (1950-51) 2 FJR 1] . As the court observed in Durga Shankar Mehta v. Thakur Raghuraj Singh [AIR 1954 SC 520 : (1955) 1 SCR 267, 272 : 9 ELR 494] Article 136 vests in the Supreme Court a plenary jurisdiction in the matter of entertaining and hearing appeals by grant of special leave . 22. Nonetheless, there is a limitation which, in our opinion, is of immediate relevance. It is a limitation in-built in to the jurisdiction of the court and flows from the nature and character of the case intended to be brought before the court. It is a limitation which requires compliance despite the apparent plenitude of power vested in the court. When a petition is presented to the court under Article 136, the court will have due regard to the nature and character of the case sought to be brought before it when entertaining and disposing of the petition. [ emphasis added ] 19.3 In Khoday Distilleries Limited and Others v. Mahadeshwara S.S.K. Limited97, this Court observed that Article 136 comme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rritory 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. 19.7 Coming back to the case in hand, ordinarily, a party aggrieved by the filing of a chargesheet or framing of charges ought to first approach the High Court in a petition under Section 482, Cr.P.C. Though such a route would have been available to the appellants herein as well, but in view of the categorical directions issued by this court in M.L. Sharma (supra) that this Court alone shall have the jurisdiction to entertain cases relating to allocation of coal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n. The Judge must exercise the judicial mind to the facts of the case in order to determine whether a case for trial has been made out by the prosecution. The principles governing the scope of Section 227, Cr.P.C. have been succinctly summarized in the caption case as below: 10. Thus, on a consideration of the authorities mentioned above, the following principles emerge: (1) That the Judge while considering the question of framing the charges under Section 227 of the Code has the undoubted power to sift and weigh the evidence for the limited purpose of finding out whether or not a prima facie case against the accused has been made out. (2) Where the materials placed before the Court disclose grave suspicion against the accused which has not been properly explained the Court will be fully justified in framing a charge and proceeding with the trial. (3) The test to determine a prima facie case would naturally depend upon the facts of each case and it is difficult to lay down a rule of universal application. By and large however if two views are equally possible and the Judge is satisfied that the evidence produced before him while giving rise to some suspicion but not grave suspicion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uments relied on by the prosecution. [ emphasis Added ] 20.4. In N. Suresh Rajan(supra), the following view was expressed as to the role of the trial Court at the time of considering an application for discharge. 29. We have bestowed our consideration to the rival submissions and the submissions made by Mr Ranjit Kumar commend us. True it is that at the time of consideration of the applications for discharge, the court cannot act as a mouthpiece of the prosecution or act as a post office and may sift evidence in order to find out whether or not the allegations made are groundless so as to pass an order of discharge. It is trite that at the stage of consideration of an application for discharge, the court has to proceed with an assumption that the materials brought on record by the prosecution are true and evaluate the said materials and documents with a view to find out whether the facts emerging therefrom taken at their face value disclose the existence of all the ingredients constituting the alleged offence. At this stage, probative value of the materials has not to be gone into and the court is not expected to go deep into the matter and hold that the materials would not warrant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said report at best, has a persuasive value but no more. (c) The Sanctioning Authority namely, the Board of Directors of KPCL in respect of Mr. R Nagarajan, the then Finance Director of KPCL and nominee Director of the Board of KECML had the occasion to thoroughly scrutinize all the relevant documents including the MoU dated 20th December, 2008 executed between KECML and GCWL as also the depositions of 67 witnesses submitted by the respondent-CBI. Only thereafter, did it arrive at a conclusion that there was nothing to demonstrate that any rejects generated by washing of the coal had been sold by the appellants or that KPCL had suffered an unlawful loss due to the same. (d) The Competent Authority in the Central Government who was approached by the respondent-CBI for sanction to prosecute Mr. Yogendra Tripathi, the then Managing Director of KPCL sought comments from two separate sources. The Government of Karnataka opined that no criminal intent could be attributed to the said officer. A proposal was also sent to the CVC for their advice. The CVC too recommended that the sanction for prosecuting the officer ought to be declined. The Competent Authority in the Central Government af ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lated in the FSA leave no manner of doubt that all that KPCL required KECML to do was to provide it a specified grade of washed coal having a specific GCV to be purchased at a predetermined price for being supplied to BPCL for generation of power. The agreement between the parties did not contemplate that KPCL would be entitled to claim the shales/stones that were required to be removed from the coal before supplies were made by KECML. Under the agreements governing the parties KECML was required to dispose off the coal rejects properly, to the satisfaction of environmental regulation, as prescribed in Article 5(2)(b) of the JVA. (i) The MoC did not impose any condition in the Notification dated 16th July, 2004 which required KECML to hand over the coal rejects to KPCL; nor did the MoC issue any Guidelines as to the manner in which the coal rejects were to be disposed of. Once the Mining Plan of September, 2004 submitted by KECML was approved by the MoC, nothing further was required to be done by KECML except for following the conditions imposed on it. (j) The Central Government had not come up with any specific plan to dispose off the coal rejects, as is apparent from a perusal of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had the new technology for utilizing the coal rejects been put to use, the losses could have been mitigated. It is not in dispute that the new technology namely, FBC was not even in vogue when the MoC had approved the original Mining Plan submitted by KECML in the year 2004. Besides that, before putting the new technology to use, there were several steps required to be undertaken, which included obtaining approvals from different government agencies and establishment of a plant. None of that could take place as an order was passed by this court in the year 2014, deallocating all captive coal mines. 21.3 In the light of the aforesaid discussion, we are 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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