CBI Embarked On Roving Inquiry On Strength Of CAG’s Audit Report: Supreme Court Quashes Criminal Case Against Coal Company
The Supreme Court has quashed a criminal case against M/s. Karnataka Emta Coal Mines Limited (KECML) registered under Section 120-B read with Sections 409 and 420 of the Indian Penal Code (IPC) and Sections 13(1)(d) and 13(2) of the Prevention of Corruption Act, 1988 (PC Act).
The Court said that CBI heavily relied on the observations made in the Audit Report of the CAG that has not attained finality till date.
The said company had filed appeals challenging the order of the Special Judge (PC Act) Central Bureau of Investigation (CBI), Coal Block Case.
The two-Judge Bench comprising Justice Hima Kohli and Justice Ahsanuddin Amanullah remarked, “… 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.”
The Bench said that KECML could not be faulted for failing to set up the coal washery at the pithead, in terms of the Joint Venture Agreement (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.
Senior Advocates Ranjit Kumar and Abhimanyu Bhandari represented the appellants while Senior Advocate R.S. Cheema represented the respondent.
Factual Background -
The Karnataka Power Corporation Limited (KPCL) and Eastern Mineral and Trading Agency (EMTA) formed a joint venture, Karnataka EMTA Coal Mines Limited (KECML), to develop and operate coal mines allocated to KPCL for captive use in its Bellary Thermal Power Station (BTPS). The JVA outlined that all mined coal would be washed and supplied to KPCL. A Fuel Supply Agreement (FSA) was signed between KECML and KPCL in the year 2007, with provisions for the quality and pricing of coal. The coal produced was to be washed, and any rejects were to be disposed of as per the agreement and environmental regulations.
The Comptroller and Auditor General (CAG) raised objections regarding the non-utilization of washery rejects, leading to an alleged undue benefit of Rs. 53.37 crores to KECML. The CAG argued that KECML disposed of coal rejects without proper revenue transfer to KPCL. Based on the CAG report, the CBI initiated a Preliminary Enquiry (PE) into the case. The investigation focused on whether KECML violated provisions of the IPC and PC Act by allegedly misappropriating coal rejects. KECML i.e., the appellant challenged the findings and orders of the Special Judge, CBI, which framed charges against the company and its directors before the Apex Court.
The Supreme Court in the above regard observed, “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.”
The Court said that the 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 Special Judge, CBI during the course of the trial and that no interference is called for by the Court at this stage.
“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”, it noted.
Furthermore, the Court said 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. It, therefore, declined to go into the nitty gritties of the documents/evidence, or the contrasting data produced by the parties to test their probative value.
“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”, it also noted.
The Court observed that the failure to supply washed coal to KPCL not only invited heavy penalties on KECML in terms of the JVA, but would have had serious consequences of stoppage of generation of power at BTPS, resulting in power outages in the Karnataka State.
“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”, it remarked.
The Court added 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 and none of that could take place as an order was passed by the Court in the year 2014, deallocating all captive coal mines.
Accordingly, the Apex Court allowed the appeals and quashed the impugned order of the Special Judge, CBI.
Cause Title- M/s. Karnataka Emta Coal Mines Limited and Another v. Central Bureau of Investigation (Neutral Citation: 2024 INSC 623)
Appearance:
Appellants: Senior Advocates Ranjit Kumar, Abhimanyu Bhandari, AOR Rooh-e-hina Dua, Advocates Ayush Aggarwal, Sangram S. Saron, and Arav Pandit.
Respondent: Senior Advocate R.S. Cheema, AOR Mukesh Kumar Maroria, Advocates Tarunnum Cheema, Akshay Nagarajan, and Akash Singh.
