Karnataka Emta Coal Mines Limited and Another v. Central Bureau of Investigation

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 required to account for the coal rejects? 14.1-14.[3] 75-77

25. Can KECML be blamed for not setting up the coal washery at the pithead? 15.1-15.[4] 77-79

26. Did the coal rejects have any useful calorific value making it a saleable commodity? 16.[1] 79-80

27. Persuasive Value of the Aryan Energy Case 17.1-17.[2] 80-82

28. Inherent Jurisdiction of the High Court under Section 482, Cr.P.C 18.1-18.[7] 82-87

29. Extraordinary powers of the Supreme Court under Article 136 of the Constitution of India 19.1-19.[9] 88-93

30. Application of mind at the stage of Section 277, CrPC 20.1-20.[4] 93-95

31. E CONCLUSION 21.1-21.[4] 95-102 iii CITATIONS

3 Girish Kumar Suneja v. CBI (2017) 14 SCC 809 4 KPCL v. Aryan Energy Private Limited[1] and Others COMAP No. 12, 13, 14 and 15 and 2020 decided on 22nd July, 2021

5 Centre for Public Interest Litigation v. Union of India

6 Arun Kumar Aggarwal v. Union of India (2013) 7 SCC 1 7 Pathan Mohammed Suleman Rehmat khan v. State of Gujarat

8 Radheshyam Kejriwal v. State of West Bengal and Another

9 Ashoo Surendranath Tewari v. Deputy Superintendent of Police, EOW, CBI and Another

10 J Sekar alias Sekar Reddy v. Directorate of Enforcement

11 Prem Raj v. Poonamma Menon & Another 2024 SCC OnLine SC 483

12 Neeraj Dutta v State (NCT of Delhi) (2023) 4 SCC 731 13 B. Jayaraj v State of Andhra Pradesh (2014) 13 SCC 55 14 P. Satyanarayana Murthy v District Inspector of Police, State of Andhra Pradesh and Another

15 K. Shanthamma v State of Telangana (2022) 4 SCC 574 16 State through Central Bureau of Investigation v Dr Anup Kumar Srivastava

17 Soundarajan v State Rep. by the Inspector of Police Vigilance Anticorruption Dindigu

18 M.S Associates and others v. Union of India (2005) SCC Online Gau 308; (2005) 275 ITR 502

19 The King Emperor v. Khawaja Nazir Ahmand AIR (1945) PC 18 20 Manohar Lal Sharma vs. Principal Secretary and Another iv GLOSSARY Abbreviations of Acts Act of 1973 Coal Mines (Nationalization) Act, 1973 CAG Act Comptroller and Auditor General (Duties, Powers and Conditions of Service) Act, 1971 Cr.P.C Code Criminal Procedure, 1973 CVC Central Vigilance Commission IPC Indian Penal 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 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 Calorific Value IBOCM Integrated Baranj Open Cast Mines JVA Joint Venture Agreement JVC Joint Venture Company MoU Memorandum of Understanding MT Metric Tones PE Preliminary Enquiry SIR Source Information Report IN THE SUPREME COURT OF INDIA CRIMINAL APPELLATE JURISDICTION CRIMINAL APPEALS NO. 1659-1660 OF 2024 M/S. KARNATAKA EMTA COAL MINES LIMITED AND ANOTHER..…APPELLANTS

VERSUS

CENTRAL BUREAU OF INVESTIGATION …..RESPONDENT

JUDGMENT

HIMA KOHLI, J.

A. PREFACE

1. The present appeals challenge the Order on Charge dated 24th December, 2021 and Order framing Charges dated 03rd March, 2022 passed by the learned Special Judge (Prevention of Corruption Act[1]) Central Bureau of Investigation[2], Coal Block Case No. - 01, Rouse Avenue District Court, Delhi[3] in a case[4] registered under Section 120- B read with Sections 409/420 of the Indian Penal Code[5] and Sections 13(1)(d)/ 13(2) of In short ‘P.C. Act’ In short CBI Hereinafter referred to as ‘learned Special Judge, CBI’ Case No. CBI/317 /2019; CNR No. DLCT11-001312-2019 in RC No. 220-2015- E-0002; Branch: CBI/EOU-IV, EO-II/New Delhi In short ‘IPC’ Criminal Appeal No. 1659-1660 of 2024 the P.C. Act, 1988 titled ‘CBI vs. S.M. Jaamdar & Others’. The appellants before this Court are M/s Karnataka Emta Coal Mines Limited[6] arrayed as accused No. 12 in the chargesheet and Shri Ujjal Kumar Upadhaya, Chairman and Managing Director of Emta Coal Limited and former Managing Director of accused No. 12, arrayed as accused NO. 6 in the chargesheet.

2. It may be noted at the outset that a challenge has been laid to the impugned orders passed by the learned Special Judge directly before this Court in the light of the directions issued in M.L. Sharma v. The Principal Secretary and Others[7] vide order dated 25th July, 2014 and upheld in Girish Kumar Suneja v. CBI[8] vide Judgement dated 13th July, 2017 wherein directions have been issued that this Court alone shall have the jurisdiction to entertain cases relating to coal block allocation across the country, in particular, cases where the parties seek a stay of the investigation/trial in a matter relating to coal.

B. FACTUAL BACKDROP

3. The contours of the case being intricately intertwined with several documents including Agreements, Memorandum of Understandings[9], correspondence etc. referred to by both sides, the factual narrative must be delineated chronologically at some length to appreciate the context of the case. In short “KECML”

3.1. JOINT VENTURE AGREEMENT 3.1.[1] A Joint Venture Agreement10 was executed between Karnataka Power Corporation Limited11 and M/s Eastern Mineral and Trading Agency12 for a period of 25 years for the development of captive coal mines and supply of coal to the Thermal Power Plant operated by KPCL namely, Bellary Thermal Power Station13 with the tentative date of commissioning scheduled in December, 2005. KPCL was allocated three coal blocks by the Government 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: In short ‘JVA’ In short ‘KPCL’ In short ‘EMTA’ In short ‘BTPS’ In short ‘JVC’ “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 Calorific value on ‘Air dried basis’ in kcal/kg determined through a Bomb Calorimeter as measured at BTPS as per IS 1350(part -I) xxxxx “D Grade Coal” means “Non-long flame coal” having Useful Heat Value(UHV) in the range of 4200 to 4940 Kcal/Kg as per GOI notification. xxxxx ARTICLE 2 THE COMPANY AND ITS OBJECTIVES

1. The Parties of this agreement shall form and incorporate the Company as a Public Limited Company under the Companies Act, 1956 having its registered office at Bangalore.

2. The Company shall be named KARNATAKA EMTA COAL MINES LIMITED; or in case such name is not available, any other name which may be mutually acceptable to the Parties.

3. The main object of the Company shall be to develop the captive coal mines of KPCL and produce coal from KPCL coal mines and to supply, transport and deliver such coal wholly and exclusively to KPCL.

4. For achieving the above main object, EMTA on behalf of the Company shall, inter-alia, take up the following activities with regard to the KPCL Coal Mines: (a) survey and preparation of plans for mining; (b) drilling and prospecting;

(c) mining either in open cast process or underground or both; xxxxx (e) raising coal and stacking the same on surface; xxxxx (g) Establishing coal washery of adequate capacity at the pit head and supply of coal of the required specification to the power plant of KPCL by Rail mode; xxxxx

(m) preparation of plans, obtention of approval of Site Clearance from

Ministry of Environment & Forest Govt. of India; (n) preparation of Mining Plan and its approval from Ministry of Coal, Govt. of India; xxxxx (r) arrangement of approval for coal linkage from KPCL Coal Mines to the power stations of KPCL; (s) arrangement of railway siding nearest to the KPCL Coal Mines, and xxxxx {u) undertake all other allied jobs for coal mining & washery operations.

ARTICLE 5 BUSINESS OF THE COMPANY To achieve the main objects of the Company as mentioned in clause 3 of Article 2, EMTA shall be responsible for development, operation of KPCL coal mines and delivery of coal to BTPS or any other thermal power station under KPCL, the terms and conditions of which shall be governed by an agreement to be executed by and between Company and EMTA. EMTA’s Scope of work shall comprise as follows:

1. Development and Operation of KPCL coal mines

2. Establishing coal washery at Pit head a) EMTA shall ensure establishment of coal washery 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 inspection agency shall supervise and certify the quality of coal received at BTPS and the result of analysis certified by the independent inspection agency as per the procedure stated above shall be binding to all concerned for all commercial purposes. xxxxx

9. Delivery Period a. The delivery of coal to BTPS shall commence one month prior to the scheduled date of synchronisation of first unit with coal at BTPS. The tentative date of commissioning maybe taken as Dec. 2005. xxxxx

13. The company shall provide an undertaking to the Ministry of Coal, Government of India that the coal produced from the KPCL Coal Mines shall be wholly and exclusively supplied, transported and delivered to KPCL.

ARTICLE – 6 COMMERCIAL TERMS Fuel supply agreement shall be executed between KPCL and Company to record the terms and conditions of coal supply from KPCL coal mines to KPCL which shall be governed by the following commercial terms:

1. Price a) KPCL shall purchase the entire quantity of specified coal supplied to BTPS at a price of Rs. 1650.47 per tonne, the detailed break up of which is as per Annexure - II attached to this agreement xxxxx c) The price shall be firm at the agreed price i.e. Rs.1650.47 per MT for a quantity of one million tonnes in the first year of BTPS operation subject to price variation as per clause 3.D(b)-l(a) but limited to 50% increase in base price only. And 100% variation in statuary charges as per clause 3.D(a). xxxxx

2. Basis of payment and price adjustment KPCL shall pay the price of coal for the quantity and quality of coal on receipt at BTPS on rake to rake basis as detailed herein below: A) QUANTITY … B) QUALITY … C) PRICE ADJUSTMENT The size of coal, ash content, and GCV of coal would be checked and compared with the guaranteed values as indicated below: (a) GCV (ARB) 4500 in Kcal/KG (b) Permissible variation Max. 4500 Kcal/Kg & Min. 4000 Kcal/Kg.

(c) Ash content (ADB) 0 to 25 mm with fines (upto-2 mm) not exceeding 20% Suitable price adjustment would be carried out be KPCL for variation in properties compared to the guaranteed value as indicated in the following paragraphs. i) ASH CONTENT(ADB)… ii) GCV (ARB) a) No Pro rata price adjustment is allowed for the GCV over and above 4500 Kcal/Kg. b) In case the GCV is between 4200 to 4500 Kcal/Kg the price adjustment will be on the Base Price on Pro rata basis. c) In ease the GCV of the coal supplied falls 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 under this agreement. xxxxx ARTICLE 9 OBLIGATIONS OF THE PARTIES The parties shall at their own cost and expense observe, undertake, comply with and perform in addition to and not in derogation of their obligations elsewhere set out in this Agreement, the following: Obligation of KPCL

1. It shall apply to the Central and the relevant state governments for the allotment of the KPCL coal mines.

2. It shall purchase the Coal supplied to it as per the terms agreed to in the Fuel Supply Agreement. Obligation of EMTA

1. It shall arrange for the identification of mining block(s) for present and future requirement, the acquisition of private land and allotment of vested lands by the State Government required for mining operation and KPCL will render assistance, if required.

2. It shall ensure supply of coal from KPCL coal mines to KPCL power plants as per the guaranteed values indicated in 3 c) of Article 6 and specification stated in Annexure - I attached to this agreement. xxxx

6. It shall establish Washery at the pit head and get all clearances required for setting up the washery to effect washing of coal to meet the specification.” xxxx [ emphasis added ] 3.1.[3] Annexure–I appended to the aforesaid JVA specifies the desired characteristics of the coal and contains a computed statement relating to the expected coal quality with the range for the maximum and minimum. The calorific value15 in Gross Calorific Value16 has been mentioned in the first column under the head ‘Description’ and in the column of “Expected Product Coal” that states as follows: ‘DESIRED CHARACTERISTICS OF WCL COAL EXPECTED COAL QUALITY WITH THE RANGE FOR MAXIMUM & MINIMUM DESCRIPTION UNITS EXPECTED PRODUCT COAL RANGE MINUMUM MAXIMUM Gross C.V. Kcal/K.gm 4995 xxxxxx Size of Coal mm 0-25 mm (0-2 mm fines not>20% In short ‘C.V.’ In short ‘G.C.V.’ 3.1.[4] Annexure–II that prescribes the price schedule for mining, washing and delivery of washed coal to BTPS, specifies amongst others, the total price of coal at the pit head as follows: PRICE SCHEDULE FOR MINING, WASHING AND DELIVERY OF WASHED COAL TO BTPS

┌────────────────────────────────────────────────────────────────────────────────────────────────────────────┐
│

┌───────────────────────────────────────────────────────────────────────────────────────────────────────────┐
│    Sl.                                   DIRECTYLY                                  REJECTS               │
│             Year        Production                     DESPATCHED        COAL                 CONSUMED    │
│    No.                                  DESPTACHED                                 PRODUCED               │
│                                                        TO WASHERY      PRODUCED               (APPROX.)   │
│                                          TO SIDING                                                        │
├───────────────────────────────────────────────────────────────────────────────────────────────────────────┤
│     1        2                3              4               5                6        7          8       │
│          2008                                                                                             │
│     1                     990839           7744            90436         860367      40069      30000     │
│          2009                                                                                             │
│     2                    2252358             0            2216334       21177107     98627      70000     │
│          2010                                                                                             │
│     3                    2274995             0            2368455        2263059    105396      70000     │
│          2011                                                                                             │
│     4                    2189869             0            2205395        2108000     97395      50000     │
│          2012                                                                                             │
│     5                    1832770          1606343          225056        205200      19856      20000     │
│       Total              9539831          1614087         7915676        7554333    361343     240000     │
│                    Ash % of Raw coal varies from 35% to 37%                                               │
│                    Ash % of wash coal varies from 32% to 34%                                              │
│                    % age of yield of washed coal varies from 95-96%                                       │
│                    7915676 X (35+37)/2 = 7554333 X (32+34)/2 + 361343 X (A)                               │
└───────────────────────────────────────────────────────────────────────────────────────────────────────────┘

3.2. CORRESPONDENCE

│
└────────────────────────────────────────────────────────────────────────────────────────────────────────────�

��

39. In our opinion, therefore, the yardstick would be to judge as to whether the allegation in the adjudication proceedings as well as the proceeding for prosecution is identical and the exoneration of the person concerned in the adjudication proceedings is on merits. In case it is found on merit that there is no contravention of the provisions of the Act in the adjudication proceedings, the trial of the person concerned shall be an abuse of the process of the court.”

(1995) Supp(2) 724

[emphasis added] The aforesaid view also finds resonance in Ashoo Surendranath Tewari (supra) and J Sekar alias Sekar Reddy(supra).

10.2. We are of the view that if there was any breach of contract or default on the part of KECML, KPCL was well empowered to determine the lease. However, KPCL did not do so. Instead, on being 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), 1936 as adopted by the Government of India (Provisional Constitution) Order, 1947. This was followed by the promulgation of the Comptroller and Auditor General’s (Duties, Powers and Conditions of Service) Act, 197184. By virtue of Section 26 of the CAG Act, the earlier Order of 1936 was repealed. Section 10 of the CAG Act requires the CAG to compile the accounts of the Union and the States and on the basis of the said accounts, to prepare an annual account for being submitted to the President of India or the Governor of the State/Administrator of the Union Territory, as the case may be. The scope of the audit of the Union and the States has been stated in Section 13 of the CAG Act.

11.2. Article 149 of the Constitution of India defines the duties and powers of the CAG and provides thus: “149. Duties and powers of the Comptroller and Auditor-General The Comptroller and Auditor-General shall perform such duties and exercise such powers in relation to the “accounts of the Union and of the States and of any other authority or body as may be prescribed by or under any law made by Parliament and, until provision in that behalf is so made, shall perform such duties and exercise such powers in relation to the accounts of the Union and of the States as were conferred on or exercisable by the Auditor-General of India immediately before the commencement of this Constitution in relation to the accounts of the Dominion of India and of the Provinces respectively.” 11.[3] The duties of the CAG have been described and discussed at some length in the Arun Kumar Aggarwal(supra) in the following words:

For short ‘the CAG Act’ disbursed were legally available for such disbursement and whether the expenditure conforms to the authority which governs it. The CAG has to satisfy himself that the rules and procedures designed to secure an effective check on the assessment, collection and proper allocation of revenue are being duly observed under Section 16. The CAG also has to examine decisions which have financial implications including the propriety of the decision making.

61. The reports of the CAG are required to be submitted to the President, who shall cause them to be laid before each House of Parliament, 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 may, however, point out that since the report is from a constitutional functionary, it commands respect and cannot be brushed aside as such, but it is equally important to examine the comments what respective Ministries have to offer on the CAG’s Report. The Ministry can always point out, if there is any mistake in the CAG’s report or the CAG has inappropriately appreciated the various issues. For instance, we cannot as such accept the CAG report in the instant case.” A similar view has been expressed in Pathan Mohammed Suleman Rehmatkhan(supra) and Centre for Public Interest Litigation(supra).

11.4. It is, therefore, evident that the recommendations of the PAC are premised on the response that is received from the concerned Ministries and the Action Taken Reports which includes the replies furnished by the Government and the comments of the PAC to the said replies. Finally, it is for the Parliament to comment on the CAG’s Report after it receives the report of the PAC.

11.5. In the instant case, admittedly the aforesaid procedure has not been followed. As noticed above, the CAG Report is subject to scrutiny by the Parliament and the Government can always offer its views on the said report. Merely because the CAG is an independent constitutional functionary does not mean that after receiving a report from it and on the PAC scrutinizing the same and submitting its report, the Parliament will automatically accept the said report. The Parliament may agree or disagree with the Report. It may accept it as it is or in part. It is not in dispute that the Audit Report of the CAG has not been tabled before the Parliament for soliciting any comments from the PAC or the respective Ministries. Therefore, the views taken by the CAG to the effect that tremendous loss had been caused to the public exchequer on account of the coal rejects being disposed of by the KPCLand KECMLremains a view point but cannot be accepted as decisive. The respondent–CBI has largely relied on the findings and the conclusions drawn in the Audit Report of the CAG to launch the prosecution against the appellants on an assumption that the said Report has the seal of approval of the Parliament and has attained finality, which is not the case.

12.

DENIAL OF SANCTIONS BY THE SANCTIONING AUTHORITIES AND THE EFFECT ON THE APPELLANTS

12.1. It is relevant to note that the very same Audit 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 / sold at mutually agreed terms subject to compliance of rules / regulations / guidelines of Ministry of Coal, Government of India, if applicable”. KPCL allowed KECML to sign an MoU with Gupta under which rejects belonging to KPCL was put under the joint ownership of Gupta and KECML by virtue of Clause 12. Gupta has sold those rejects resulting in an illegal gain of Rs.52.37 crores to Gupta (as per CAG) and loss to KPCL. The Board of KECML which conspired to insert Clause 12 of the MoU did not take any protective / mitigative measures to prevent the loss despite it being raised at a lower level. The facts in relation to the above offence are elaborated in detail herein below. xxxxx

2. The entire matter including the 344 documents produced along with the Report and the witness statements of 67 witnesses have been perused by the members of the Board. The Board has also considered the applicable law on the point.

3. The offence is complained of by Shri R. Nagaraja in his capacity as a nominee of KPCL in the Board of KECML. It is the matter of fact that the nominees of KPCL who have been appointed to the Board of KECML are not persons well versed in mining matters. As KPCL was not capable of handling mining operations, a joint Venture Company was formed. The Board of KECML and the nominees of KPCL on the Board entirely depended on the inputs provided by the Managing Director, Statutory Auditor and other personnel for making their decisions.

4. The Mining Plan for the operationalization of the mine was prepared by Dr. Seam who was a Ministry of Coal official and not an employee of KECML or KPCL. The Mining Plan was approved by the Ministry of Coal when it did not contain any provisions for disposal of the rejects. In such a situation, the Board of Directors of KECML and especially the KPCL nominees (A-1 to A-7) could not be blamed for the non-compliance of the Allotment Letter and there is no act of omission or commission on the part of KPCL’s employees including Shri R. Nagaraja.

5. A perusal of the KPCL Office Notes (Document No.199 to 202) for the period indicates that by way of letter dated 12.01.2009, the Managing Director of KPCL had specifically raised the issue of whether washing of coal is required or not. If washing was not necessary, 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-à-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 by Ministry of Coal. Given the fact that the MoU was only conditionally ratified, it was incumbent upon the officials of KECML that before they agree to any terms for the sale of the rejects that they had to bring the matter up to the Board of KECML. The subsequent events indicate that even the officials of KECML were of the same understanding.

8. Even assuming that the Clause 12 of the MoU was approved, another aspect of the matter which has to be noted is that Clause 12 of the MoU does not violate the terms of the Allotment Letter inasmuch as it specifically required that the approval of the Ministry of Coal be obtained before such a disposal. A bare reading of the Clause 12 does not indicate any illegality a sought to be alleged by the CBI. Therefore, the approval of the MoU in the Board Meeting on 13.01.2009 cannot be said to be an act of negligence or error in judgment and no imputation of any wrongdoing can be imposed any KPCL nominee present in the Board Meeting on 13.01.2009. xxxxx

10. Additionally, KECML wrote a letter wherein it sought for a waiver from meeting the specification if raw coal was supplied. The difficulty for the Management of KPCL was that if the raw coal did not match the specification, it would not be utilization for the generation of power. This would result in stoppage of generation resulting in power crisis in the State of Karnataka. The better alternative would have been to wait for the certificate of the Coal Controller regarding whether the raw coal met the requirements of KPCL of not. Hence, no confirmation was given. This was a managerial decision taken in the best interest of the State of Karnataka as the power generation could not be compromised to save washing cost. The cost of procurement of power would be tremendous and outweighed any temporary disadvantage caused by not abiding by the Board Minutes of 13.06.2009. This decision was vindicated by the letter issued by the Coal Controller’s Office on 09.12.2009 wherein it concluded that to obtain the agreed parameter of coal quality, washing would be required. Therefore, it cannot be said that there was an act of omission or negligence or error in judgment on part of the KPCL nominees on the Board of KECML. The decision was taken keeping the best interests of KPCL in mind and cannot be faulted. xxxxx

16. The contention of CBI that there is a violation of the allotment order 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 GCWL. ii) Without even knowing the calorific value of the rejects, it has been assumed to be G Grade coal. Even going by the statement of Shri Padmesh Gupta of GCWL, the rejects were of such a low calorific value that it could not be sold without blending. Hence, it could not have been of G grade. Hence, the basis of the calculation is wrong. xxxxx

20. The assumption of the CBI that the exact quantity of rejects that have been sold off cannot be ascertained is a self-serving statement inasmuch as for the purpose of blending of coal, Gupta has to purchase the raw coal / washed coal and pay royalty / sales tax on the same whereas there is no sales tax / royalty paid on the rejects. With this number, it is easily possible to arrive at the exact quantity of reject coal. As the quantity of reject coal generated / available at Majri Washery as per the Stock statement far exceeds the reject coal quantity claimed to be generated by the washing of KECML’s coal, in order to divert other rejects as KECML’s rejects, the absurdly high amount has been claimed. Hence, there is absolutely no evidence to show that any reject has been sold and if so, what is the quantity of rejects sold. In such a situation, there is no basis for assuming that KPCL has suffered any unlawful loss or that GCWL has gained unlawfully during this process.

21. CBI has produced a Debit Note No.KECML/DN/08-09/09 dated 31.03.2009 for Rs.4,30,38,500/- which was recovered at GCWL (and not at KECML) and there is a statement from GCWL that this Debit Note was not honoured. An examination of the Debit Note, Annual Accounts of KECML for 2008-09 and other documents produced along with the Report would indicate that this Debit Note is a fabricated document for the following reasons: a. The Note is generated as on the last date of the financial year 2008-2009 but is forwarded only in the next financial year in September 2009 indicating that it is an afterthought. b. This Debit Note does not find a mention in the Annual Accounts of 2008- 2009 i.e. it should have created an income stream for KECML. c. If the Debit Note was a genuine document, then KECML had to classify the sales of washer rejects of 86,077 MT as “other income” in the Annual Accounts. However, it is shown as washing loss. d. There are no corresponding Debit Notes of this nature (viz. For foreign material) amongst the several admitted Debit Notes and 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 his 27 years of service as an officer and he has held many important and sensitive posts during his service span in KPCL. Any action against him on the basis of a charge devoid of any merit and substance would not only tarnish his otherwise impeccable reputation but will also have a bearing on the morale of the public services.

49. For the reasons enumerated in para 3 to 48 above, we, the Board of KPCL, hereby exercising our powers under Section 19 of the Prevention of Corruption Act, 1988 refuse to grant sanction to prosecute Shri R. Nagaraja for the offences alleged to have been committed under Sections 120B r/w 409 and 420 of the Indian Penal Code, 1860 and Sections 13(2) read with 13(1)(d) of the Prevention of Corruption Act, 1988.”

12.2. It is apparent from the above 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.

12.3. Similarly, the request made by the respondent-CBI for seeking sanction to prosecute Mr. Yogendra Tripathi, the then Managing Director, KPCL was denied by the Competent Authority in the Central Government in terms of the letter dated 16th April, 2018, issued by the DoPT. The order passed by the DoPT shows that it took note of the Report of the respondent-CBI, the records submitted by it along with the Report, the advice received from the CVC and then summarized the allegations levelled by the respondent-CBI that formed the basis of its proposal to seek sanction for prosecution of the aforesaid officer. The said request was finally rejected by the Competent Authority in the Central Government with the following observations: “xxxxx

12.

AND WHEREAS the debit note recovered at GCWL and the certificate are contradictory to each other in as much as debit note imposes a realizable value on the rejects and the certificate claims that it has been written off. Neither document is supported by the annual accounts. Hence, they 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 declining of sanction for prosecution U/s 120B r/w 409 and 420 of IPC and Section 13 of the Prevention of Corruption Act, 1988.

16.

AND WHEREAS the proposal was sent to the CVC for their advice. The CVC advised declining of sanction for prosecution against Shri Yogendra Tripathi, IAS(KN:1985), the then Managing Director Karnataka Power Corporation Ltd. (KPCL), Bangalore, in case RC:2202015 E0002 dated 13.03.2015.

17.

AND WHEREAS all case records sent by the investigating agency were sent to the Hon’ble Prime Minister, who is the Competent Authority in the Central Government, to decide sanction for prosecution in respect of the IAS officers.

18.

AND THEREFORE The Competent Authority, in view of the above position and after carefully considering the facts and circumstances of the case and considering all other relevant material/documents, including evidence submitted by the Investigating Agency with the proposal, has approved the proposal to decline sanction for prosecution against Shri Yogendra Tripathi, IAS (KN:85) in the instant case, under Section 19 of the Prevention of Corruption Act, 1988.”

12.4. The aforesaid order reveals that before applying its mind, the Competent Authority in the Central Government had sought comments from the Government of Karnataka who had stated that there was no material produced by the respondent-CBI in support of the allegation that Mr. Yogendra Tripathi had conspired to illegally dispose off the coal rejects or with malafide intention deferred the agenda in the 41st Board Meeting of the KPCL. The Competent Authority separately sent the said proposal submitted by the respondent-CBI to the CVC for seeking advice. After examining all the records sent by the investigation agency including the evidence submitted by it, the Office of the Prime Minister who is the Competent Authority in the Central Government, approved the proposal to decline the sanction for prosecuting Mr. Yogendra Tripathi. Yet again, no appeal has been filed by the respondent – CBI before the court questioning the said decision.

12.5. 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 Mr. Yogendra Tripathi, both senior most serving officers of KPCL and were also on the Board of KECML, cannot be permitted to argue that these 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 could not exonerate the appellants who were bound by the terms and conditions of the letter dated 10th November, 2003 issued by the MoC, we may note the assertion of the respondent-CBI that the Mining Plan of the coal blocks in question did not contain any plan for disposal of rejects, usable, tailings, middlings, etc., that would be generated on account of mining/ washing of coal, is contrary to the records. Article 5(2)(b) of the JVA required EMTA to take all clearances for setting up the coal washery from the concerned authorities and properly dispose off the coal rejects to the satisfaction of environmental regulations.

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

14.

WAS KECML REQUIRED TO ACCOUNT FOR THE COAL REJECTS ?

14.1. Much emphasis has been laid by the respondent-CBI on the contents of the allocation letter dated 10th November, 2003 issued by the MoC, Government of India to KPCL to canvass that the coal mined from the allocated blocks was to be exclusively used to meet the requirements of coal in the proposed thermal power station namely, BTPS and on the condition that no coal was to be sold /delivered/transferred/disposed of except for the purpose of power generation and with the previous approval of the Central Government. We are afraid, the said letter cannot be read in isolation and out of context for the very same reasons as have been noted above. 14.[2] When the Central Government did not formulate any National Policy for exploitation of coal 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 washed coal (Grade – D) having a specific GCV in the range of 4200-4940 Kcal/kg85. When coal has been defined in the JVA and FSA as “washed coal with guaranteed value” and one that satisfied the parameters laid down in Annex-1 attached to the JVA and FSA86 and further, KECML was required to ensure that all “shales/stones” are removed from the coal before making the supply87, there was no occasion for KECML to account for the rejects. All that KPCL was required to do was to buy from KECML, the washed coal with a particular guaranteed value and one that would satisfy the specified quality parameters, at a predetermined price88. The agreement governing the parties required KECML to dispose off the rejects safely.

KECML was not required to account for the coal rejects to KPCL. KPCL itself understood the clauses in the JVA and the FSA to mean the same and it was 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 ‘Grade D Coal’ as defined under ‘Definition and Interpretation’ clause of the JVA dt 13th September, 2002. ‘Coal’ as defined under ‘Definition and Interpretation’ clause of the JVA dt. 13th September, 2002 and Article 1 of FSA dt. 09th May, 2007 Article 5.2.[2] of the FSA Annexure-II of the JVA and Article 6.1.[1] of the FSA 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.

15.

CAN KECML BE BLAMED FOR NOT SETTING UP THE COAL WASHERY AT THE PITHEAD ?

15.1. As for the allegation levelled by the respondent–CBI that KECML violated the terms of Articles 2(4)(g) and 5(2)(b) of the JVA having failed to setup the coal washery at the pithead, the sequence of events narrated above, shows that the fault does not lie at the door of the appellants. It was on account of some litigation between CIPCO and MoC in relation to the coal blocks allocated to KPCL wherein interim orders were granted by the High Court in favour of CIPCO, that the project got delayed. Production of coal could commence only in September, 2008 after the aforesaid litigation came to an end. By then, much time was lost. The conditions stipulated in the agreements governing KPCL and KECML placed an obligation on KECML to supply washed coal with a definite GCV and specified parameters for the consumption of the Thermal Power Station at Bellary and failure to deliver coal within the stipulated time, attracted penalties.

15.2. It was in this background that KECMLexecuted the MoU with GCWLfor 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 specified grade of washed coal by KECMLwould 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.

15.4. We do not propose 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 explained on a perusal of the Notification dated 16th July, 2024 which shows that the Central Government did recognize the fact that it was KECML who was required to supply coal from the coal mines allocated to KPCL and end use of the said coal was specified for generation of Thermal Power Station at Bellary, Karnataka. In our view, having regard to the aforesaid notification, nothing much turns on the submission made by the respondent-CBI that the coal block allocation was only in favour of KPCL and it ought to have a right over the rejects to the exclusion of KECML and others.

16.

DID THE COAL REJECTS HAVE ANY USEFLUL CALORIFIC VALUE MAKING IT A SALEABLE COMMODITY ?

16.1. We find that the Detailed Washability Report of the Government Laboratory namely, CIMFR, Nagpur has been ignored by the respondent-CBI. It was the said Report that formed the basis of the information furnished by KECML with respect to production, stock, despatch of coal to the washery etc., as was demanded by the office of the Coal Controller, a department that falls under the MoC. The said Report stated in so many words that the rejects did not contain any useful c.v. Reliance placed by the respondent-CBI on the revised Mining Plan submitted by the appellants to the MoC in 2010, that mentions a new technology for utilization of rejects for its carbon value, namely FBC is of no consequence as the said technology had not even been introduced when MoC approved the original Mining Plan, submitted by KECML in the year 2004. Even otherwise, it is not in dispute that for applying the said technology, a plant was required to be established after obtaining necessary approvals from several agencies. The plant could not be established by KECML for the reason that the revised Mining Plan submitted by it was approved by the MoC only on 24th August, 2011. Consequent steps that were required to be taken by KECML for obtaining necessary approvals from the MoEF&CC and other govt. agencies came to a grinding halt when an order was passed 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 KPCLdid 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 predetermined price and that it was not entitled to lay a claim on the coal rejects generated during the processing of raw coal. In view of the terms and conditions of the agreement between the parties, the High Court concluded that KPCL could not have raised any demand on Aryan Energy claiming reimbursement for the value of the coal rejects. It is a matter of record that although KPCL had challenged the judgement and order dated 22nd July, 2021 passed by the High Court of Karnataka44 before this court, the said petitions were disposed of on 26th April, 2014 noting that the parties had settled their inter se disputes amongst themselves in terms of a Compromise Deed and as a result, part of the decretal amount deposited by KPCL before the Commercial Court was agreed to be released in favour of Aryan Energy. 17.[2] We do not see why the aforesaid decision would not have any persuasive value when the clauses in the agreement between KPCL and KECML for disposing off the coal rejects are identical. On going through the agreements executed 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. We are of the opinion that the judgment in the case of Aryan Energy does have persuasive value.

18.

INHERENT JURISDICTION OF THE HIGH COURT UNDER SECTION 482, Cr.P.C

18.1. For seeking quashing of the chargesheet and the order framing charges, learned counsel for the appellants has cited decisions of this court that lay down the proposition of law relating to quashing of criminal proceedings by a High Court under Section 482, Cr.P.C. In Rajiv Thapar and Others v. Madan Lal Kapoor89, this court held as under: “29. The issue being examined in the instant case is the jurisdiction of the High Court under Section 482 CrPC, if it chooses to quash the initiation of the prosecution against an accused at the stage of issuing 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 discard the accusations levelled by the prosecution/complainant, without the necessity of recording any evidence. For this the material relied upon by the defence should not have been refuted, or alternatively, cannot be justifiably refuted, being material of sterling and impeccable quality. The material relied upon by the accused should be such as would persuade a reasonable person to dismiss and condemn the actual basis of the accusations as false. In such a situation, the judicial conscience of the High Court would persuade it to exercise its power under Section 482 CrPC to quash such criminal proceedings, for that would prevent abuse of process of the court, and secure the ends of justice.” 18.[2] In the captioned case, this court had further observed that the discretion vested in the High Court under Section 482 Cr.P.C can be exercised suo moto to prevent abuse of the process of a Court, and/or to secure the ends of justice. After listing the factors that ought to weigh with the High Court to make a just and rightful choice, it was observed thus: “30. Based on the factors canvassed in the foregoing paragraphs, we would delineate the following steps to determine the veracity of a prayer for quashment raised by an accused by invoking the power vested in the High Court under Section 482 CrPC:

30.1. Step one: whether the material relied upon by the accused is sound, reasonable, and indubitable i.e. the material is of sterling and impeccable quality?

30.2. Step two: whether the material relied upon by the accused would rule out the assertions contained in the charges levelled against the accused i.e. the material is sufficient to reject and overrule the factual assertions contained in the complaint i.e. the material is such as would persuade a reasonable person to dismiss and condemn the factual basis of the accusations as false?

30.3. Step three: whether the material relied upon by the accused has not been refuted by the prosecution/complainant; and/or the material is such that it cannot be justifiably refuted by the prosecution/complainant?

30.4. Step four: whether proceeding with the trial would result in an abuse of process of the court, and would not serve the ends of justice?

30.5. If the answer to all the steps is in the affirmative, the judicial conscience of the High Court should persuade it to quash such criminal proceedings in exercise of 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.” 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:

secure the ends of justice within the parameters laid down in Bhajan Lal case91 [1992 Supp (1) SCC 335: 1992 SCC (Cri) 426].” 18.[4] In Rukmini Narvekar v. Vijaya Satardekar and Others92, this Court has observed that the width of the powers of the High Court under Section 482, Cr.P.C and under Article 226 of the Constitution of India are unlimited, that the High Court could make such orders as may be necessary to prevent abuse of the process of any Court or otherwise to secure the ends of justice. In a concurring order passed in the very same case, it was observed in addition that in exercising jurisdiction under Section 482, Cr.P.C, the High Court is free to consider even material that may be produced on behalf of the accused to arrive at a decision whether charge as framed could be maintained. 18.[5] In Anand Kumar Mohatta and Another v. State (NCT of Delhi), Department of Home and Another93, referring to the provisions of Section 482, Cr.P.C, this Court held as follows:

16. There is nothing in the words of this section which restricts the exercise of the power of the Court to prevent the abuse of process of court or miscarriage of justice only to the stage of the FIR. It is settled principle of law that the High Court can exercise jurisdiction under Section 482 CrPC even when the discharge application is pending with the trial court [G. Sagar Suri v. State of U.P., (2000) 2 SCC 636, para 7: 2000 SCC (Cri) 513. Umesh Kumar v. State of A.P., (2013) 10 SCC 591, para 20: (2014) 1 SCC (Cri) 338: (2014) 2 SCC (L&S) 237]. Indeed, it would be a travesty to hold that proceedings initiated against a person can be interfered with at the stage of FIR but not if it has advanced and the allegations have materialised into a charge-sheet. On the contrary it could be said that the abuse of process caused by FIR stands aggravated if the FIR has taken the form of a charge-sheet after investigation. The power is undoubtedly conferred to prevent abuse of process of power of any court. xxxxx

28. In State of Haryana v. Bhajan Lal [State of Haryana v. Bhajan Lal, 1992 Supp (1) SCC 335: 1992 SCC (Cri) 426], this Court has set out the categories of cases in which the inherent power under Section 482 CrPC can be exercised. Para 102 of the judgment reads as follows: (SCC pp. 378-79) “102. In the backdrop of the interpretation of the various relevant provisions of the Code under Chapter XIV and of the principles of law enunciated by this Court in a series of decisions relating to the exercise of the extraordinary power under Article 226 or the inherent powers under Section 482 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 commission of any offence and make out a case against the accused. (4) Where, the allegations in the FIR do not constitute a cognizable offence but constitute only a non-cognizable offence, no investigation is permitted by a police officer without an order of a Magistrate as contemplated under Section 155(2) of the Code. (5) Where the allegations made in the FIR or complaint are so absurd and inherently improbable on the basis of which no prudent person can ever reach a just conclusion that there is sufficient ground for proceeding against the accused. (6) Where there is an express legal bar engrafted in any of the provisions of the Code or the Act concerned (under which a criminal proceeding is instituted) to the institution and continuance of the proceedings and/or where there is a specific provision in the Code or the Act concerned, providing efficacious redress for the grievance of the aggrieved party. (7) Where a criminal proceeding is manifestly attended with mala fide and/or where the proceeding is maliciously instituted with an ulterior motive for wreaking vengeance on the accused and with a view to spite him due to private and personal grudge.”

18.6. In State of Karnataka vs. L. Munniswamy94, Y.V. Chandrachud, J. as he then was (speaking for a three Judge Bench) observed thus: “7. … In the exercise of this wholesome power, the High Court is entitled to quash a proceeding if it comes to the conclusion that allowing the proceeding to continue would be an abuse of the process of the Court or that the ends of justice require that the proceeding ought to be quashed. The saving of the High Court's inherent powers, both in civil and criminal matters, is designed to achieve a salutary public purpose which is that a court proceeding ought not to be permitted to degenerate into a weapon of harassment or persecution. In a criminal case, the veiled object behind a lame prosecution, the very nature of the material on which the structure of the prosecution rests and the like would justify the High Court in quashing the proceeding in the interest of justice.” 18.[7] As can be gathered from the above, Section 482 Cr.P.C recognizes the inherent powers of the High Court to quash initiation of prosecution against the accused to pass such orders as may be considered necessary to give effect to any order under the Cr.P.C or to prevent abuse of the process of any court or otherwise to secure the ends of justice. It is a statutory power vested in the High Court to quash such criminal proceedings that would dislodge the charges levelled against the accused and based on the material produced, lead to a firm opinion that the assertions contained in the charges levelled by the prosecution deserve to be overruled. 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 Section 482 Cr.P.C that has a statutory flavour, Article 136 confers plenary powers on this Court to interfere in suitable cases. In Arunachalam v. P.S.R. Sadhanantham and Another95, this court has expounded on the amplitude of its powers under Article 136 in the following words:

not see any substance in the doubt. Appellate power vested in the Supreme Court under Article 136 of the Constitution is not to be confused with ordinary appellate power exercised by appellate courts and Appellate Tribunals under specific statutes. As we said earlier, it is a plenary power, ‘exercisable outside the purview of ordinary law’ to meet the pressing demands of justice (vide Durga Shankar Mehta v. Thakur Raghuraj Singh [AIR 1954 SC 520: (1955) 1 SCR 267: 1954 SCJ 723] ). Article 136 of the Constitution neither confers on anyone the right to invoke the jurisdiction of the Supreme Court nor inhibits anyone from invoking the Court's jurisdiction. The power is vested in the Supreme Court but the right to invoke the Court's jurisdiction is vested in no one. 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.”

19.2. In P.S.R. Sadhanantham v. Arunachalam96, a Constitution Bench of five judges elaborated the content and character of Article 136 vis-à-vis Article 21 and made the following observations:

10. Once we hold that Article 136 is a composite provision which vests a wide jurisdiction and, by the very fact of entrusting this unique jurisdiction in the Supreme Court, postulates, inarticulately though, the methodology of exercising that power, nothing more remains in the objection of the petitioner. It is open to the court to grant special leave and the subsequent process of hearing are (sic is) wellestablished. Thus, there is an integral provision of power-cum-procedure which answers with the desideratum of Article 21 justifying deprivation of life and liberty. In a concurring judgement in the captioned case, it was further observed that:

21. Plainly, the jurisdiction conferred by Article 136 seeks to confer on this Court the widest conceivable range of judicial power, making it perhaps among the most powerful courts in the world. The judicial power reaches out to every judgment, decree, determination, sentence or order affecting the rights and obligations of persons in civil matters, of life and liberty in criminal matters as well as matters touching the Revenues of the State. It is an attempt to ensure that the foundations of the Indian Republic, which have been laid 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. 19.[3] In Khoday Distilleries Limited and Others v. Mahadeshwara S.S.K. Limited97, this Court observed that Article 136 commences with a non-obstante clause, the words are of overriding effect and clearly indicate the intention of the framers of the Constitution that it is a special jurisdiction and a repository of residuary powers unfettered by any Statute or any provisions of Chapter IV of Part V of the Constitution of India. It was also observed that the jurisdiction under Article 136 of the Constitution cannot be barred by the Statute since it is an extraordinary power. 19.[4] In State of Punjab and others v. Rafiq Masih (White Washer) others98, in the same strain, this Court has held that Article 136 is a special jurisdiction and can be described as a ‘residuary power, extraordinary in its amplitude, its limits when it chases injustice, is the sky itself’. It is a corrective jurisdiction that vests a discretion in this Court to settle the law clearly and makes the law operational thereby making it a binding precedent for the future instead of keeping it vague. 19.[5] In Mekala Sivaiah v. State of Andhra Pradesh99, this Court commented on the circumstances in which the power under Article 136 is exercised and held thus: “14. Before adverting to the merits of the contention raised, it is important to reiterate that Article 136 of the Constitution of India is an extraordinary jurisdiction which this Court exercises when it entertains an appeal by special leave and this jurisdiction, by its very nature, is exercisable only when this Court is satisfied that it is necessary to interfere in order to prevent grave or serious miscarriage of justice.

15. It is well settled by judicial pronouncement that Article 136 is worded in wide terms and powers conferred under the said Article are not hedged by any technical hurdles. This overriding and exceptional power is, however, to be exercised sparingly and only in furtherance of cause of justice. Thus, when the judgment under appeal has resulted in grave miscarriage of justice by some misapprehension or misreading of evidence or by ignoring material evidence then this Court is not only empowered but is well expected to interfere to promote the cause of justice.” 19.[6] From the aforesaid discussion, it is apparent that Article 136 can be invoked by a party in a petition for special leave to appeal from any judgement, decree, determination, sentence or order in any cause or matter passed or made by a Court or AIR (2015) 1267

Tribunal within the territory of India. The reach of the extraordinary powers vested in this Court under Article 136 of the Constitution of India is boundless. Such unbridled powers have been vested in Court, not just to prevent the abuse of the process of any court or to secure the ends of justice as contemplated in Section 482, Cr.P.C, but to ensure dispensation of justice, correct errors of law, safeguard fundamental rights, exercise judicial review, resolve conflicting decisions, inject consistency in the legal system by settling precedents and for myriad other to undo injustice, wherever noticed and promote the cause of justice at every level. The fetters on this power are self imposed and carefully tampered with sound judicial discretion. 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 blocks including cases for staying the investigation or trial in a matter relating to coal, one rung of an appeal before the High Court for quashing the chargesheet or interfering in the order on charge by invoking the inherent jurisdiction under Section 482 Cr.P.C. stands fore closed. The appellants were left with only one chance of directly invoking Article 136 of the Constitution of India and filing a petition for special leave before this court to challenge the impugned orders passed by the learned Special Judge, CBI framing charges against them and dismissing their application for seeking discharge. 19.[9] Given the broad amplitude of the extraordinary powers of this Court under Article 136 of the Constitution of India, the respondent-CBI cannot be heard to urge that since a Chargesheet has already been filed against the appellants and charges framed, the appellants should be left to take all the pleas available to them before the learned Special Judge, CBI during the course of the trial and that no interference is called for by this Court at this stage. Such an approach does not commend itself to this Court in the facts and circumstances of this case.

20.

APPLICATION OF MIND AT THE STAGE OF SECTION 227, Cr.P.C 20.[1] We may note 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, which is extracted below:

20.2. As observed in Prafulla Kumar Samal (supra) 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 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 against the accused, he will be fully within his right to discharge the accused. (4) That in exercising his jurisdiction under Section 227 of the Code the Judge which under the present Code is a senior and experienced court cannot act merely as a Post Office or a mouthpiece of the prosecution, but has to consider the broad probabilities of the case, the total effect of the evidence and the documents produced before the Court, any basic infirmities appearing in the case and so on. This however does not mean that the Judge should make a roving enquiry into the pros and cons of the matter and weigh the evidence as if he was conducting a trial.”

20.3. To the same effect is the view expressed in Niranjan Singh KS Punjabi (supra) where this court has observed as follows:

exists sufficient grounds for proceeding with the trial against the accused. If he comes to the conclusion that there is sufficient ground to proceed, he will frame a charge under Section 228, if not he will discharge the accused. It must be remembered that this section was introduced in the Code to avoid waste of public time over cases which did not disclose a prima facie case and to save the accused from avoidable harassment and expenditure.

6. The next question is what is the scope and ambit of the ‘consideration’ by the trial court at that stage. ……….. It is obvious that since he is at the stage of deciding whether or not there exists sufficient grounds for framing the charge, his enquiry must necessarily be limited to deciding if the facts emerging from the record and documents constitute the offence with which the accused is charged. At that stage he may sift the evidence for that limited purpose but he is not required to marshal the evidence with a view to separating the grain from the chaff. All that he is called upon to consider is whether there is sufficient ground to frame the charge and for this limited purpose he must weigh the material on record as well as the documents 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 a conviction. In our opinion, what needs to be considered is whether there is a ground for presuming that the offence has been committed and not whether a ground for convicting the accused has been made out. To put it differently, if the court thinks that the accused might have committed the offence on the basis of the materials on record on its probative value, it can frame the charge; though for conviction, the court has to come to the conclusion that the accused has committed the offence. The law does not permit a mini trial at this stage.” 20.[5] The aforesaid parameters had to be kept in mind by the learned Special Judge, CBI at the time of considering the records/documents submitted by the respondent-CBI and the material produced by the appellants. In our view, the said consideration is lacking in the impugned orders for the reasons noticed above.

21.

CONCLUSION 21.[1] Though multiple arguments have been advanced by learned counsel for the appellants to assail the impugned orders passed by the learned Special Judge, CBI, including a plea that no offence is made out under Section 13(1)(d) of the P.C. Act for various reasons, this Court has consciously elected to confine itself only to those aspects that in our opinion, would be sufficient to arrive at a prima facie view that the allegations levelled against the appellants have pre-dominant contours of a dispute of a civil nature, does not have the makings of a criminal offence and on an overall conspectus of the case, would persuade any reasonable person to dismiss the accusations levelled. Therefore, this court declines to go into the nitty gritties of the documents/evidence, or the contrasting data produced by the parties to test their probative value. 21.[2] The prima facie findings of this Court, based on the documents and material placed before us are as follows: (a) The plea of the respondent-CBI that it conducted an investigation in the present case during the course of the inquiry in respect of PE-5 registered by it in the year 2012 is belied as the SIR was on a completely different aspect. CBI only got activated only on stumbling upon the Audit Report of the CAG submitted in 2013. There is nothing brought on record to show to the contrary. (b) The CAG Report had not attained finality inasmuch as its recommendations have not been tabled before the Parliament or accepted so far. The said report at best, has a persuasive value but no more.

(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 after going through the entire documents and material including the evidence submitted by the respondent-CBI and the opinions solicited, declined sanction for the prosecution of the aforesaid officer. (e) The respondent-CBI did not approach the Court to challenge the aforesaid decisions. Having accepted the decision taken by the Sanctioning Authority/Competent Authority in the Central Government and dropping the charges against the seniormost functionaries in KPCL, who were also holding positions in the Board of KECML, there is no justification to press charges against the appellants herein whose role is similar to them. (f) The decision dated 24th March, 2016 of the Karnataka High Court in a writ petition filed by KECML against KPCL has been wrongly overlooked. The High Court had an occasion to scrutinize the very same agreements and the CAG report that formed the basis of the investigation conducted by the respondent–CBI to return positive findings in favour of the appellants. The view taken by the Karnataka High Court has been upheld by this Court in a judgment rendered on 20th May, 2022 which was just a few days after Charges were framed by the learned Special Judge, CBI on 3rd March, 2022. (g) Yet again, an interpretation of the very same clauses in the agreement relating to the manner of disposal off the coal rejects came up for consideration before the Karnataka High Court in a writ petition filed by Aryan Energy against KPCL. Having scrutinized the clauses forming a part of the agreement executed between the parties vide judgment dated 22nd July, 2021, the Karnataka High Court clearly observed that KPCL did not have any claim over the coal rejects generated during washing of the coal. The submissions made by the respondent – CBI that the aforesaid judgment came much after institution of the chargesheet by the, respondent-CBI is of no consequence. Even if that was so, nothing prevented the learned Special Judge, CBI from taking into consideration the view expressed in the said judgement at the time of framing charges, particularly, when the clause relating to disposal of the coal rejects in an environment friendly manner incorporated in the agreement between KPCL and Aryan Energy was identical to the one contained in the agreement between KPCL and KECML. (h) Perusal of the relevant clauses of the JVA read in conjunction with the terms and conditions stipulated 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 the reply submitted by the Minister of State, MoC in the Lok Sabha, stating that the Government had not framed any National Policy for exploitation of coal rejects and the same was still under consideration. In the absence of a policy to dispose off the coal rejects, the appellants cannot be blamed for complying with the terms and conditions stipulated in the JVA. (k) KECML could not be faulted for failing to set up the coal washery at the pithead, in terms of the JVA as that was for reasons beyond its control which included a prolonged litigation between the MoC and CIPCO in relation to the very same coal blocks allocated to KPCL which in turn delayed the project considerably. Production of coal could only commence in September, 2008 when the curtains were drawn on the aforesaid litigation. The Board of KPCL consciously acceded to the proposal made by KECML that a MoU be executed with GCWL for washing of mined coal at its washery. Pertinently, GCWL was not an unknown entity to KPCL as the latter had prior dealings with the said Company for washing of mined coal in another project. This decision taken by the parties in their commercial wisdom has been sought to be selectively tainted with criminal intention attributed to the appellants, without any basis.

(l) There was no getting around the process of washing of raw coal which was the predominant prerequisite to meet the specified grade of coal with the defined GCV for generation of power at BTPS. Failure to supply washed coal to KPCL not only invited heavy penalties on KECML in terms of the JVA, it would have had serious consequences of stoppage of generation of power at BTPS, resulting in power outages in the State of Karnataka.

(m) The Washability Report submitted by CIMFR, Nagpur, a Government Laboratory stated in so many words that the coal rejects did not contain any useful c.v. Therefore, the entire edifice of criminality and conspiracy built by the respondent-CBI on the premise that the coal rejects had a commercial c.v. with an assertion that the appellants had profited from the sale thereof in the open market and pocketed the sale proceeds, flies in the face of the Washability Report. (n) The Revised Mining Plan submitted by the appellants to the MoC in the year 2010 and approved in 2011, could not have been relied on by the respondent-CBI for pressing charges against the appellants on a plea that 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 the respondent-CBI by misinterpreting the clauses of the agreements governing the parties and by heavily banking on the observations made in the Audit Report of the CAG that has not attained finality till date. In view of the glaring infirmities mentioned hereinabove, the impugned orders deserve interference in exercise of the powers vested in this court under Article 136 of the Constitution of India. 21.[4] For all the reasons enumerated above, the present appeals succeed. The order on charge dated 24th December, 2021 and the order framing charges dated 3rd March, 2022 passed by the learned Special Judge, CBI qua the appellants before this Court are unsustainable and accordingly quashed and set aside. ……………………………………..J. [HIMA KOHLI] ….……………………………………..J. [AHSANUDDIN AMANULLAH] NEW DELHI AUGUST 23, 2024