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TMI Blog2024 (12) TMI 292X X X X Extracts X X X X X X X X Extracts X X X X ..... earing no. RC 2019 2015 E007 dated 22.04.2005 against the Appellant and others. The allegation that the Appellant had misrepresented before the Ministry of Coal and Ministry of Steel so as to get allocation of North Dhadu Coal Block along with three other companies was investigated. The CBI had filed the chargesheet no. 18 of 2016 dated 31.08.2016 for the offences punishable under Sections 120B and 420 of IPC. Resultantly, the Enforcement Directorate filed the ECIR KLZO/10/2015 on 06.07.2015. As part of the investigations under PMLA, certain statements were recorded of various persons under Section 50 of PMLA. Shri Gyanchand Prasad Agarwal, Managing Director of the Appellant Company confirmed that the Ministry of Coal had allotted Coal Block to the company at North Dhadu on 13.01.2006. That the Company had no existing unit at Lohardaga at the time of his application for Coal Block allocation. They had yet to start coal mining at North Dhadu. His Company had 50 % share with Shri Ram Swarup Rungta and his family members. They had invested Rs. 1.62 Crores in North Dhadu Mining Company Ltd. for the development of Coal Block. They had also purchased land of around Rs. 70 Lakhs. The Comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Chand Agarwal and S.K. Kanungo for the offence of criminal conspiracy that is 120B IPC and for the offences u/s 120- B/420 IPC, beyond shadows of all reasonable doubts. 7. In this regard, certain findings of the Ld. Special Judge (PC Act) (CBI) Rouse Avenue, New Delhi are being quoted: "126. A bare perusal of the aforesaid guidelines clearly show that documents relating to status and stage of the proposed end use project qua which the coal block was sought in terms of land, finance, equipments, other required inputs and technical know-how etc. were to be filed alongwith the application form. The applicants were also required to submit a project report beside submitting detailed schedule of implementation of the proposed end use project and the proposed coal mining development project. Similarly, the interse priority guidelines also stated that the status/stage/level of progress and state of preparedness of the project were relevant factors to be considered. Various other factors such as suitability of the coal grade in the block, tehcno economic viability/feasibility report of the project and track record of the applicant were some other relevant factors to be considered by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... strength or as regard the status of placing orders for procuring equipments as was mentioned in the agenda form Ex. PW 7/J (D-21) were false. The accused persons knowing fully well that the said facts were false represented them to be true or as existing facts and thus misled firstly Ministry of Steel in believing the said claim to be true and thereby inducing it to make a recommendation in favour of M/s PSPL for allocation of a captive coal block. Secondly, they misled 27th Screening Committee, Ministry of Coal, Government of India by deceiving it to believe in the existence of such claims as true and thereby inducing it to make a recommendation for allotment of a captive coal block in favour of M/s PSPL." 8. Ld. Counsel for the Appellant during the course of final arguments pressed on the contention that the investment made by Shri R.S. Rungta cannot be held as proceeds of crime. He argued that the application for the allocation of Coal Block was made in 2004. It was on 13.01.2006 that the letter for allocation of Coal Block was issued to the Appellant Company. However, the investment which was made in the Appellant Company by Shri R.S. Rungta and family members was in 2008-09 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot indicated any reason, which could lead one to believe that HEPL had derived any other benefit from the allocation of the coal block in question." 10. Ld. Counsel for the Appellant cited the following paragraphs of the judgment dated 19.07.2022 of the Hon'ble High Court of Delhi in the matter of Prakash Industries Ltd. and Anr. v. Directorate of Enforcement [2022 SCC OnLine Del 2087] "95. The allocation letter was thus recognised to be a grant of largesse by the Government entitling the holder thereof to obtain a mining lease and consequently a right to win minerals falling in a particular block. The holder of the allocation letter thus became entitled to the grant of a lease or a permission to win minerals which always did and continued to vest in the State. The mining lease embodied the conferment of a right by the State which owned the land and the mineral deposits to enjoy that property, to extract minerals on terms and conditions specified in the lease. The position of the lessee under the provisions of the Coal Mines (Special Provisions) Act, 2015 essentially remains the same with the ownership of the land and the mineral deposit vesting in the appropriate government an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of crime having been obtained or generated is laid against the petitioners. 99. In order to uphold the invocation of the Act resting on events leading upto the allocation of the coal block on 04 September 2003 and going no further, it was incumbent upon the respondents to establish that proceeds of crime came to be acquired or obtained on that date. This they have woefully failed to do. As noted hereinabove, the gamut of allegations with respect to the generation of proceeds of crime relate to activities and events which ensued after 04 September 2003. That for reasons which stand recorded cannot be taken cognizance of for the purposes of evaluating the validity of proceedings under the Act. within the ambit of Section 2(1)(u). 100. That leads the Court to the irrefutable conclusion that once it is found that the allocation of coal would not fall within the scope of the definition of proceeds of crime, proceedings initiated based on a contrary assumption under the Act would also necessarily crumble and disintegrate. The aforesaid conclusion flows as a necessary sequitur to the Court finding that the allocation would not constitute "proceeds of crime". ........... 106. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that can form the subject matter of the offense under the Act. The allocation of a coal block in itself did not give rise to any monetary gains. It was only when the same was utilized that the question of illegal gains would have arisen." 11. Ld. Counsel for the Appellant lastly cited the following paragraphs of the judgment dated 24.01.2023 of the Hon'ble High Court of Delhi in the matter of Prakash Industries Ltd. v. Union of India and Anr. [2023 SCC OnLine Del 336]: "97. Even if the Court were to proceed on the assumption that the aforesaid submission was correct, it would have to necessarily view the PAO as resting on two fundamental pillars: (a) the allocation of the coal block and (b) the allurement of investors to subscribe to preferential shares. Insofar as the first facet is concerned, undoubtedly it would have to be answered against the respondent in light of the conclusions recorded by the Court in Prakash Industries-I. As would be evident from the extracts of the aforesaid decision noticed hereinabove, this Court had come to the definitive conclusion that an allocation of a coal block on its own would not constitute proceeds of crime. The question which thus surv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... into the Appellant Company, which was given letter of allocation of the Coal Block, as proceeds of crime. The coal was yet to be mined, when on the order dated 25.08.2014 of the Hon'ble Supreme Court, the letter of allocation was cancelled with effect from 22.11.2012. Hence, no coal could be extracted and since there was no revenue generated there could not have been any proceeds of crime. Ld. Counsel also contended that the judgments cited afore squarely apply to the present matter and therefore, the appeal may be allowed. 13. Ld. Counsel for the Respondent cited the observations in the following paragraphs of the judgment dated 25.08.2014 of the Hon'ble Supreme Court in the matter of Manohar Lal Sharma v. Principal Secretary and Anr. [(2014) 9 Supreme Court Cases 516]: "73. Assuming that the Central Government has competence to make allocation of coal blocks, the next question is, whether such allocation confers any valuable right amounting to grant of largesse? 74. The learned Attorney General argues that allocation of coal blocks does not amount to grant of largesse since it is only the first statutory step. According to him, the question whether the allocation amounts to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allottee. Obviously, therefore, such allocation has to meet the twin constitutional tests, one, the distribution of natural resources that vest in the State is to subserve the common good and, two, the allocation is not violative of Article 14." 14. Ld. Counsel for the Respondent stated that the three judgments cited by the Ld. Counsel for the Appellant have been further challenged. Ld. Counsel for the Appellant stated that there is no stay in any of the matters from high judicial fora. Ld. Counsel for the Respondent contended that the Hon'ble Supreme Court in the Judgement (supra) of Manohar Lal Sharma has held that the letter of allocation of coal block entailed valuable right to the allottee. He, therefore, argued that once it is found in the investigation and trial forthe predicate offence, that such allotment was on the basis of misrepresentation with dishonest and fraudulent intention, the generation of any proceeds, not necessarily from that of mining of coal, will be tainted and subject to the provisions of PMLA. Ld. Counsel therefore, pleaded that the Appeal may be dismissed. 15. We have considered the rival submissions made by the two parties and the material on record ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e absence of such finding in the course of investigation of the predicate offence, the Respondent Directorate could not have either assumed existence of such link or even undertake to investigate such link, being only empowered to conduct investigations of the offence of money laundering and not that of the scheduled offence. 17. We note that in the absence of any predicate offence having been registered and investigated with respect to the flow of investment from outsider investors into the Appellant Company, the attempt by the Respondent Directorate to make such flow of funds as proceeds of crime fails. The Hon'ble Supreme Court in the judgment dated 27.07.2022 in SPECIAL LEAVE PETITION (CRIMINAL) NO. 4634 OF 2014 in the matter of Vijay Madanlal Choudhary vs Union of India has observed that: "The authorities under the 2002 Act cannot resort to action against any person for money laundering on an assumption that the property recovered by them must be proceeds of crime and that a schedule offence has been committed, unless the same is registered with jurisdictional police or pending inquiry by way of complaint before the competent forum." 18. In view of the aforementioned anal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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