# M/S Fertico Marketing & Investment Pvt. Ltd. & Ors v. C.B.I., Anti Corruption Branch, Lucknow & Anr

- **Citation:** (2021) 3 ILRA 105
- **Court:** High Court of Judicature at Allahabad
- **Decided:** 2021-03-17
- **Case number:** Application U/S 482/378/407 No. 4253 of 2012
- **Bench:** Dinesh Kumar Singh
- **Source:** https://unisonlegal.in/judgment/allahabad-high-court/m-s-fertico-marketing-investment-pvt-ltd-ors-v-c-b-i-anti-corruption-branch-46874
- **Pages:** 34

## Headnote

(A) Criminal Law - Indian Penal Code,
1860 - Sections 120 -B, 415,418,420, 467,
468 and 471 - Prevention of Corruption
Act, 1988 - Sections 13(2) read with
13(1)(d) - remitted back by supreme
court - Mere failure in complying with the
promise would not amount to cheating -
criminal proceedings are based on public
policy,
while
civil
proceedings
are
intended to determine the rights between
the parties - The allegations and the
findings of the CBI in the charge-sheet
would indicate commission of economic
offences
against
the
financial
and
economic well-being of the State as well
as the public in general.(Para - 42, 63 )

Petitioners had taken coal on the basis of FSAs
(Fuel Supply Agreements) on notified price for
manufacturing special smokeless fuel to be
supplied for domestic use - but instead of using
the coal taken on notified price, they had
unauthorizedly diverted the same in the
open/black market - had obtained pecuniary
gains and, corresponding caused loss to the coal
company/public in general - CBI had carried out
intensive investigation and, filed a detailed
charge-sheet against the petitioners.(Para - 60)

HELD: - The offences committed by the
accused cannot be said to be overwhelmingly
and predominantly of civil nature. The conduct
of the accused has both civil and criminal
consequences. The NCL is entitled to proceed
against the accused under the FSA, but for the
criminal offences committed by them, the
competent Court has to proceed against the
accused for their crimes. There is no parity in a
closure report filed by the CBI in the case
against the petitioners herein, the CBI has
collected sufficient evidence, which would
clearly disclose that prima facie, offences have
been committed by the accused-petitioners in
the
present
case.
CBI
has
not
found
involvement of the officials of the NCL in
commission of the offence with the petitioners.
The offence of criminal conspiracy under Section
120-B IPC is against the petitioners and DIC
officials, who issued forged and fabricated
certificates regarding status of the factory
requirement of coal by the petitioners. (Para -
63,73)

Application u/s 482 Cr.P.C. dismissed. (E-6)

List of Cases cited: -

## Text

_Characters 0–39,943 of 118,969. This is a partial read: ask again with offset=39943 for what follows._

3 All. M/S Fertico Marketing & Investment Pvt. Ltd. & Ors. Vs. C.B.I., Anti Corruption Branch, Lucknow & Anr.
105

28. We request the learned Single
Judge to dispose of the proceedings at the
earliest, if possible, within one month of its
listing as aforesaid.
----------
(2021)03ILR A105
ORIGINAL JURISDICTION
CRIMINAL SIDE
DATED: LUCKNOW 17.03.2021

BEFORE

THE HON'BLE DINESH KUMAR SINGH, J.

Application U/S 482/378/407 No. 4253 of 2012
& other related cases

M/S Fertico Marketing & Investment Pvt.
Ltd. & Ors. ...Applicants
Versus
C.B.I., Anti Corruption Branch, Lucknow &
Anr. ...Opposite Parties

Counsel for the Applicants:
Gaurav Gupta, Himanshu Hemant Gupta,
Nandit K Srivastava, Yasovardhan Swaroop

Counsel for the Opposite Parties:
Birshwar Nath, Anurag Kumar Singh, S.B.
Pandey

(A) Criminal Law - Indian Penal Code,
1860 - Sections 120 -B, 415,418,420, 467,
468 and 471 - Prevention of Corruption
Act, 1988 - Sections 13(2) read with
13(1)(d) - remitted back by supreme
court - Mere failure in complying with the
promise would not amount to cheating -
criminal proceedings are based on public
policy,
while
civil
proceedings
are
intended to determine the rights between
the parties - The allegations and the
findings of the CBI in the charge-sheet
would indicate commission of economic
offences
against
the
financial
and
economic well-being of the State as well
as the public in general.(Para - 42, 63 )

Petitioners had taken coal on the basis of FSAs
(Fuel Supply Agreements) on notified price for
manufacturing special smokeless fuel to be
supplied for domestic use - but instead of using
the coal taken on notified price, they had
unauthorizedly diverted the same in the
open/black market - had obtained pecuniary
gains and, corresponding caused loss to the coal
company/public in general - CBI had carried out
intensive investigation and, filed a detailed
charge-sheet against the petitioners.(Para - 60)

HELD: - The offences committed by the
accused cannot be said to be overwhelmingly
and predominantly of civil nature. The conduct
of the accused has both civil and criminal
consequences. The NCL is entitled to proceed
against the accused under the FSA, but for the
criminal offences committed by them, the
competent Court has to proceed against the
accused for their crimes. There is no parity in a
closure report filed by the CBI in the case
against the petitioners herein, the CBI has
collected sufficient evidence, which would
clearly disclose that prima facie, offences have
been committed by the accused-petitioners in
the
present
case.
CBI
has
not
found
involvement of the officials of the NCL in
commission of the offence with the petitioners.
The offence of criminal conspiracy under Section
120-B IPC is against the petitioners and DIC
officials, who issued forged and fabricated
certificates regarding status of the factory
requirement of coal by the petitioners. (Para -
63,73)

Application u/s 482 Cr.P.C. dismissed. (E-6)

List of Cases cited: -

1. Ashoka Smokeless Coal India (P) Ltd. & ors.
Vs U.O.I. & ors., (2007) 2 SCC 640

2. Anil Mahajan Vs Bhor Industries Ltd. & anr. ,
(2005) 10 SCC 228

3. Gorige Pentaiah Vs St. of Andh. P. & ors.,
(2008) 12 SCC 53

4. V.Y. Jose & anr. Vs St. of Guj. & anr. , (2009)
3 SCC 78

5. V.P. Shrivastava Vs Indian Explosives Ltd. &
ors., (2010) 10 SCC 361
106 INDIAN LAW REPORTS ALLAHABAD SERIES
6. Sushil Sethi & anr. Vs The St. Of Arun.P. &
anr. , (2020) 3 SCC 240

7. Babloo Kumar Vs St. of Jharkhand & ors.,
2006 (3) JCR 144

8. Ajmer Singh Vs St. of Har., (2010) 3 SCC 746,
paras 23 to 29

9. Yogesh @ Sachin Jagdish Joshi Vs St. of
Mah., (2008) 10 SCC 394

10. St. of M.P. Vs Sheetla Sahai & ors., (2009) 8
SCC 617

11. Rajesh Bajaj Vs State of NCTE Delhi & ors.,
(1999) 3 SCC 259

12. Tulsi Ram Vs St. of U.P., 1963 Supp. (1)
SCR 382

13. Hridaya Ranjan Prasad Verma & ors. Vs St.
Bihar & anr., (2000) 4 SCC 168

14. Tulsi Ram Vs St. of U.P., 1963 Supp. (1)
SCR 382

15. Pratibha Rani Vs Suraj Kumar & anr., (1985)
2 SCC 370

16. Medchl Chemicals & Pharma (P) Ltd. Vs
Biological E. Ltd. & anr., (2000) 3 SCC 269

17. Rajiv Thapar & ors. Vs Madan Lal Kapoor,
(2013) 3 SCC 330

(Delivered by Hon'ble Dinesh Kumar Singh, J.)

1. This is second round before this
Court after theses cases have been remitted
back by the Supreme Court vide judgment
and order dated 17th November, 2020
passed in Criminal Appeal Nos. 760-764 of
2020
and,
other
connected
criminal
appeals, for decision by this Court on three
questions, which were framed vide order
dated 24.02.2015, but not dealt with by this
Court in its final judgment and order dated
14th August, 2019 passed in these cases,
which was challenged before the Supreme
Court in the afore-mentioned criminal
appeals.

2. This Court did not deal with the
three questions in its judgment dated
14.08.2019
as
the
learned
counsels,
appearing for the petitioners herein, at the
time of final arguments pressed only first
question. Be that as it may, since the
Supreme Court has remitted back the
matters to this Court for decision on
Question Nos. 2, 3 and 4, this Court has
proceeded to hear the arguments of the
learned
counsels,
representing
the
petitioners as well as the learned counsel,
representing
the
Central
Bureau
of
Investigation.

3. Vide order dated 24th February,
2015 Hon'ble Vishnu Chandra Gupta (since
retired) had framed the following four
questions for determination:-

"Q.No.1.
Whether
the
investigation conducted by the CBI in these
bunch of cases are illegal and without
jurisdiction for non-compliance of section 6
of DSPE Act? If so, its effect?

Q.No. 2. Whether the cases are
overwhelmingly and predominantingly of
civil nature as purely based on breach of
contract
(FSA)
and
the
criminal
prosecutions are liable to be quashed?

Q. No. 3. Whether CBI did not
follow doctrine of parity in filing the
criminal
prosecutions
against
the
petitioners? If so, its effect?

Q. No. 4. Whether in absence of
Officer/official of NCL, charge of Criminal
conspiracy under section 120-B IPC could
be made out?"

4. Hon'ble Judge was not in
agreement with the view taken by another
Single Bench in its judgment in the case of
3 All. M/S Fertico Marketing & Investment Pvt. Ltd. & Ors. Vs. C.B.I., Anti Corruption Branch, Lucknow & Anr.
107
Sriniwas Dwivedi Versus The State of U.P.
through S.P., CBI/ACB, Lucknow in a
petition under Section 482 CrPC, being
Petition No.3830 of 2013, decided on 9th
September, 2013 on the issue of consent by
the State Government, permitting the
investigation under the Delhi Special Police
Establishment
Act,
1946
(for
short
'DSPEA') and, therefore, referred the
following two questions for decision by the
Division Bench:-

"1. Whether investigation of such
cases having involvement of Public servant
under control of State Government of U.P.
as well as private individuals for offences
punishable
under
the
Prevention
of
Corruption Act, 1988 (49 of 1988), and
attempts, abetments and conspiracies in
relation to all or any of the offence or
offences mentioned above and any other
offence or offences committed in the course
of the transaction and arising out of the
same facts under the G.O. of State
Government Dated 15.6.1989 can be
investigated by CBI assuming suo moto
jurisdiction under section 6 of DSPE Act
without the previous permission or consent
of State Government?

2. Whether total non compliance /
absence of previous consent of State
Government under section 6 of DSPE Act
could be cured by grant of prosecution
sanction under section 197 Cr.P.C. of
under section 19 of P.C. Act by State
Government or competent authority?"

5. The Division Bench vide its
judgment and order dated 6th July, 2015
answered
the
reference
in
following
manner:-

"Our
answer
therefore
to
question no.1 is that since the question as
framed proceeds on an erroneous premise
of facts available in the case, the same is
answered by holding that the Government
Order
dated
15.6.l989
permits
investigation and it was not a case of
assuming suo motu jurisdiction by the CBI
to investigate on the facts of the present
case.

The second question framed by
the learned Single Judge is returned
unanswered in view of the fact that the
affidavit of the State Government had not
been invited by the learned Single Judge
before proceeding to raise a doubt and
frame the second question to be answered
in this reference as observed above.

With the aforesaid answers to the
two questions framed, let the papers be
placed before the concerned court for
proceeding in the matter in accordance
with law."

6. After the case was remitted back by
the Division Bench, this Court vide its final
judgment and order dated 14th August,
2019 concluded the issue of sanction by the
State Government as under:-

"36. From perusal of the affidavit
of the Principal Secretary, Department of
Home, Government of Uttar Pradesh, it is
evident that the Government has granted
the post facto consent vide notification
dated 7.9.2018 against the two public
servants of the State Government whose
names have figured during the course of
investigation. The consent given by the
State
Government
vide
order
dated
7.9.2018 would deem to be sufficient for
investigation by the C.B.I. of offences
against the two public servants of the State
Government whose names find place in the
charge sheet, but were not named in the
F.I.R. In cases where the name of a public
servant is not in the F.I.R., but his name
comes to light during the course of
108 INDIAN LAW REPORTS ALLAHABAD SERIES
investigation and, charge sheet is filed
against such a public servant of the State
Government, the consent given after
completion of investigation would be a
valid consent under Section 6 of the DSPE
Act. It is also relevant to mention here that
cognizance
has
been
taken
by
the
competent court of law. The question of
valid consent can be raised by the public
servants, who have been named in the First
Information Report, and not by the private
individuals who have come before this
Curt."

This Court dismissed the petitions
with following observations:

"41. This Court has failed to
appreciate that how the petitioners are
prejudiced even if there is no consent in
respect of the public servants whose names
have
figured
during
the
course
of
investigation and against whom charge
sheets have been filed and, after sanction
under Section 19 of the Prevention of
Corruption Act, the cognizance has been
taken against them along with private
entities/individuals. The public servants who
have been named in the charge sheet, have
not come forward to this Court challenging
the investigation or charge sheets, but the
private individuals have come before this
Court on the ground that the substance of
charge is only under Section 120-B read with
Section 13(2)/13(1)(c) of the Prevention of
Corruption Act and, if the prosecution fails in
case of the public servants, the prosecution
will also fail against them. However, the
aforesaid contention has been rejected in the
previous paragraphs. There is no prejudice
caused to the petitioners even if it is assumed
that there was no proper consent of the State
Government under Section 6 of the DPSE
Act."

7. The aforesaid judgment and order
dated 14th August, 2019 came to be
challenged before the Supreme Court. The
Supreme Court vide final judgment and
order dated 17th November, 2020 had
upheld the judgment and order dated 14th
August, 2019 passed by this Court and,
remitted back the matter for decision on
Question Nos. 2, 3 and 4 by observing as
under:-

"21. In the result, we find no
reason to interfere with the finding of the
High Court with regard to not obtaining
prior consent of the State Government
under Section 6 of the DSPE Act.

22. However, it could be noticed
that the learned Single Judge while
referring two questions to the Division
Bench, had observed that the question Nos.
2, 3 and 4 can be decided only after the
question No. 1 was answered. After the
matter was returned to the learned Single
Judge by the Division Bench, the learned
Single Judge was bound to answer question
Nos. 2, 3 and 4. The learned Single Judge,
in the impugned order, has not at all dealt
with question Nos. 2, 3 and 4.

23. We, therefore, remit the
matter to the learned Single Judge for
deciding the question Nos. 2, 3 and 4 on its
own merits. We clarify, that we have not
considered the merits of the matter and all
questions available to both the parties are
kept open."

8. Some of the facts, though they may
appear to be repetitive, but are imporatnt to
be narrated for decision on Question Nos.
2, 3 and 4, referred to above. In 'Ashoka
Smokeless Coal India (P) Ltd. and others
VERSUS Union of India and others
(2007) 2 SCC 640, the validity/legality of
the Scheme framed by the Coal India
Limited for sale of coal by e-Auction to the
non-core sectors and traders came to be
challenged. The Supreme Court set-aside
3 All. M/S Fertico Marketing & Investment Pvt. Ltd. & Ors. Vs. C.B.I., Anti Corruption Branch, Lucknow & Anr.
109
the policy of e-Auction of coal and, issued
directions
to
frame
a
New
Coal
Distribution Policy (for short 'NCDP'). The
Supreme Court concluded the judgment in
Ashoka Smokeless Coal India (P) Ltd. and
others VERSUS Union of India and others
(supra) as under:-

"188.
Coal
being a
scarce
commodity, its utility for the purpose for
which it is needed is essential. Although,
technically, in view of the fact that no price
is fixed for coal, there may not be any black
marketing in the technical sense of the
terms;
but
this
Court
cannot
also
encourage black marketing in general
sense. Nobody should be allowed to take
undue advantage while dealing with a
scarce commodity. The very fact that
despite
best
efforts
of
the
Central
Government, the coal companies failed to
curb the menace of a section of people and
to deal in coal excluding other general
people therefrom or the linked consumers
misusing
their
position
of
obtaining
allotment of coal either wholly or in part, it
is
absolutely
necessary
that
some
mechanism should be found out for
plugging the loopholes. The Union of India
or the coal companies appear to have lost
confidence in the State Governments. They
had carried out joint inspection and in that
process they must have arrived at a
satisfaction about the genuineness of the
claims of industrial units for which the
linkage system was meant for.

189. Before us most of the
consumers, with a view to obtain supply of
coal had filed documents to prove their
genuineness. The said documents must be
scrutinised by the authorities of the coal
companies. In the event, they have any
suspicion, inspection should be carried out
by officers appointed by the Chairmancum-Managing Director of the company
concerned within whose jurisdiction the
unit is situated.

190. With a view to evolve a
viable policy, a committee should be
constituted by the Union of India with the
Secretary of Coal being the Chairman. In
such a committee, a technical expert in
coal should also be associated as most of
the projects involve consumers of coal,
particularly manufacturers of hard coke
and smokeless fuel. In our opinion, it may
not be difficult to find out, having regard to
the technologies used therein as regards
the ratio of the input vis-à-vis the output,
with a balance and 10% margin. On the
basis of such finding alone, apart from the
requirements of five years, supply should
form the basis of MPQ. We may, however,
hasten to add that the Central Government
in collaboration with the coal companies
would be at liberty to evolve a policy which
would meet the requirements of public
interest vis-à-vis the interest of consumers
of coal. They would be entitled to lay down
such norms as may be found fit and proper.
They would be entitled to fix appropriate
norms therefor. In the event, any industrial
unit is found to violate the norms, it should
be stringently dealt with.

191. Hard coke plants are also
coal mines within the meaning of the
Colliery Control Order, 2000. Hard coke is
coal within the meaning of the provisions
thereof.
The
Central
Government,
therefore, may think it fit to widen the
definition of coal so as to include the
smokeless coal in exercise of its power
under the Essential Commodities Act. We
may notice in ONGC [1990 Supp SCC 397]
that this Court has held that slurries are a
part of coal and is governed by the
provisions of the Mines and Minerals
(Regulation and Development) Act. Such
being the wider definition of coal, we fail to
see any reason as to why proper measure
110 INDIAN LAW REPORTS ALLAHABAD SERIES
cannot be taken by the Union of India to
have a complete control thereover. Any
strict mechanism to find out the genuine
consumers would go a long way in taking
preventive measures and dealing with coal
by unscrupulous persons for unauthorised
purposes. Those who do so, should be dealt
with stringently but the same would not
mean that the genuine consumers should
suffer for want of coal.

192. We, in the peculiar facts and
circumstances of this case, are of the
opinion that it may not be difficult to find
out as to who the genuine consumers are.
So far as owners of the hard coke ovens are
concerned, they are members of the
association and their identity can easily be
verified.

193. However, discussions made
hereinbefore should not be taken to lay down
a law that the Central Government and for
that matter the coal companies cannot
change their policy decision. They evidently
can; but therefor there should be a public
interest as contradistinguished from a mere
profit motive. Any change in the policy
decision for cogent and valid reasons is
acceptable in law; but such a change must
take place only when it is necessary, and
upon
undertaking
of
an
exercise
of
separating the genuine consumers of coal
from the rest. If the coal companies intend to
take any measure they may be free to do so.
But the same must satisfy the requirements of
constitutional as also the statutory schemes;
even in relation to an existing scheme e.g.
Open Sales Schemes, indisputably the coal
companies would be at liberty to formulate
the new policy which would meet the changed
situation. E-advertisement or e-tender would
be welcome but then therefor a greater
transparency should be maintained."

9. The Coal India Limited framed a
new policy, which was introduced with
effect from 18th October, 2007. According
to the new policy, Fuel Supply Agreements
(for short 'FSA') were to be entered into
between the Coal Companies and, the
purchasers of the coal. The price of the coal
was fixed and, notified by the Coal India
Limited. Before entering into the FSA, the
verification, whether the unit was in
operation/working
condition,
its
requirement of raw-material etc. were to be
ascertained by the Coal Companies. Once
the FSA was entered into, the coal was to
be supplied on fixed price, in terms of the
NCDP.

10. In respect of the leading case,
which is of M/s Fertico, the FSA was
entered into between the petitioners and the
coal company (NCL) on 30th April, 2008.
The FSA was a commercial arrangement
for supply of coal on a fixed price. When
the FSA was in existence, the Central
Bureau of Investigation (for short 'CBI')
conducted made a joint surprise check of
the factory premises of the petitioners and,
noticed large-scale diversion of coal
allotted under the NCDP on notified rates
in pursuance of the FSA in the blackmarket in active connivance with the
government officials. By diverting the coal
in the black-market, these companies made
exorbitant profits by wrongful gains, which
caused a substantial loss to the Central
Government/Coal Company to the tune of
Rs.36.28 Crores.

11. Similar raids were conducted in
the factory premises of other petitioners
and FIRs were registered against them by
the CBI.

12. The petitioners-M/s Fertico
Marketing & Investment Pvt. Ltd. situated
at B-20, Industrial Area, Ram Nagar,
District Chandauli (for short 'petitioner-
3 All. M/S Fertico Marketing & Investment Pvt. Ltd. & Ors. Vs. C.B.I., Anti Corruption Branch, Lucknow & Anr.
111
Fertico Investment') is registered with U.P.
State Industries Department as SmallScale- Industry (for short 'SSI') for
manufacturing Special Smokeless Fuel
(SSF) from the raw-material i.e. coal
obtained from the coal mine projects of
Northern Coal Fields Limited (NCL) to be
supplied
under
the
NCDP
on
notified/subsidized rates. However, the CBI
unearthed
that
the
petitioner-Fertico
Investment in active connivance with
unknown
officers/officials
of
District
Industries
Center
(DIC),
Chandauli;
unknown
officers/officials
of
NCL,
Singrauli and others did not actually
process the coal; instead the coal, so
received, was sold in black market at a high
premium.

13. The petitioner-Fertico Investment
during the year 2010-11 lifted 30,569.86
metric-tonnes coal from NCL at an average
price
of
Rs.1700/-
per
metric-tonne
(notified/subsidized rate) and, sold the
same at the rate of Rs.4,200/- per metrictonne
in
black
market.
This
notified/subsidized rate is the rate on which
coal was supplied to Thermal Power Units
of the Government of India.

14. The CBI, in the joint surprise check
conducted on 25th March, 2011, noticed that
the
factory
of
the
petitioner-Fertico
Investment was in non-operational condition.
An electric generator of 125 KVA was found
installed in the factory. No power connection
for the purpose of manufacturing SSF was
found in the factory. The quality of coal,
found available in the factory premises of the
petitioner-Fertico Investment, did not match
with the quality of coal being received by the
petitioner-Fertico Investment from NCL.
Samples of the coal from the factory premises
of the petitioner-Fertico Investment were sent
for testing the grade/quality. The Mechanical
Examiner of coal, in his report, had stated
that the quality of coal available in the factory
premises of the petitioner-Fertico Investment
was Grade-D, while the coal supplied to the
petitioner-Fertico Investment by NCL was of
Grade-B and Grade-C only. It was clear that
coal available in the factory premises was
kept for the namesake and, just to display the
functional status of the factory to any
inspection team.

15. Against the declaration of 18
labourers in the factory, only 04 were
available. The conveyor system, bunker and
retort of the coal handling plant were found in
a dusty, non-lubricated and rusted condition
and, it seemed that the plant was not in a
functional condition for the last several
months. The SSF, available in the factory
premises of the petitioner-Fertico Investment,
was tallied with their quantities shown in the
books of the firm and, huge shortage was
noticed.

16. The concept of SSF was
developed by Central Mine Planning &
Design Institute Limited (CMPDI) for
large-scale production of domestic coke for
meeting the progressive rise in demand of
that type of fuel and, to minimize air
pollution. As per technical specification,
for a 100 tonnes per day SSF plant, the
steam coal requirement would be 167
tonnes. The power supply to the plant
should be 440 watt. The connected load
was expected to be about 135 KW
(including
the
power
for
standby
equipment), the daily consumption of
power would be about 1560 KW and, for a
plant of 100 tonnes per day SSF, about 99
persons were required to be employed.

17. From the physical and technical
inspection of the factory premises of the
petitioner-Fertico Investment, it became
112 INDIAN LAW REPORTS ALLAHABAD SERIES
very clear that the factory was not in
operation for the last couple of years.
However, the petitioner-Fertico Investment
continued to take supply under the
notified/subsidized rate from NCL and,
would sell the same in the black-market at
a high premium. During the period 201011, the petitioner-Fertico Investment lifted
quantity of steam coal Grade-B (LF)
22618.67 metric-tonnes and Grade-C (LF)
8690.20 metric-tonnes, total steam coal
31303.94 metric-tonnes from NCL at
notified/ subsidized rates through road by
trucks. The total load for faring the coal
would be 1899 trucks. However, the coal
was lifted by 284 trucks in several trips.

18. The CBI examined most of the
owners of the trucks, which brought the coal
form NCL and, allegedly unloaded in the
factory premises of the petitioner-Fertico
Investment. Three truck owners, covering 49
trucks' load and 748.66 metric-tonnes of coal
confirmed in their statements that the coal
loaded in their trucks from the projects of
NCL was unloaded in the Chandasi Coal
Market, Chandauli, instead of the factory
premises of the petitioner-Fertico Investment.
The distance between Chandasi Coal Market
and Chandauli Industrial Area is around 15
kilometers.

19. The CBI also concluded that the
diversion of coal taken from NCL on
notified/subsidized rates in pursuance of
the
FSA
in
the
black-market
got
corroborated from the fact that the
Mobile Squad of the Commercial Tax,
Varanasi, intercepted 4 trucks loaded
with the coal from NCL for the factory
premises
of
the
petitioner-Fertico
Investment going to Chandasi Coal
Market. The instances of 4 trucks with
their registration numbers have been
given in the charge-sheet.

20. It is further recorded in the
charge-sheet that on the notified/subsidized
rates of B-Grade and C-Grade coal, the
petitioner-Fertico
Investment
had
purchased coal from NCL under the FSA
and, the e-Auction rate of B-Grade and CGrade of coal during 2010-11 was fixed to
1368/- per metric-tonn in case of B-Grade
coal and Rs.2,421/- per metric-tonne in
case of C-Grade coal. This e-Auction
would be at-least at the market rate of BGrade and C-Grade coal. It is also alleged
that to camouflage the diversion of coal in
the black-market, bogus sale of SSF was
shown by the petitioner-Fertico Investment
in its books. As per the record of the
petitioner-Fertico Investment, the company
had shown a sale of 18633.05 metrictonnes of SSF and 7940.60 metric-tonnes
undersized coal to different private parties
through 880 trucks in the year 2010-11.
Out of said 880 trucks, 181 vehicles were
found other than trucks (motorcycle, tractor
and bus etc.) and/or having unallocated
registration numbers by the ARTOs of
different districts. The owners/drivers of 47
vehicles, on their examination, stated that
their trucks never loaded any coal or coal
product from the factory premises of the
petitioner-Fertico Investment. However,
invoice of each sale had been prepared by
the
petitioner-Fertico
Investment,
mentioning
therein
date,
type
of
commodity, weight, vehicle number and
amount etc. In addition, sale of 4094.03
metric-tonnes SSF and 1461.74 metric
tonnes undersized coal made through 227
vehicles had been established to be false
and fabricated.

21. The CBI, in its investigation, has
found that during the year 2010-11, to
show the bogus sale of SSF/undersized
coal, the petitioner-Fertico Investment
forged the purchase and sale documents
3 All. M/S Fertico Marketing & Investment Pvt. Ltd. & Ors. Vs. C.B.I., Anti Corruption Branch, Lucknow & Anr.
113
and, used them as genuine to NCL and
Department of Commercial Tax. These
sales
have
been
fraudulently
and
dishonestly shown by accused, Anil Kumar
Agrawal
and
Arun Kumar
Agrawal,
Directors
of
the
petitioner-Fertico
Investment and/or their close relatives. One
of the Directors, accused Anil Kumar
Agrawal was also the proprietor of firm
M/s Anil Traders, Chandasi, Chandauli.
Accused, Anil Kumar Tiwari, an employee
of Munna Industries (Proprietor accused,
Anil Kumar Agrawal) was the Proprietor of
M/s
Baba
Enterprises,
Chandauli.
Similarly, accused Chandrama Yadav,
working as labourer in the petitionerFertico Investment was Proprietor of M/s
Yadav Traders, Chandauli and Mritunjay
Kumar, a domestic help of accused Anil
Kumar Agrawal was the proprietor of M/s
Om Enterprises, Chandauli. Accused Anil
Kumar Agrawal, with fraudulent and malafide intention constituted these firms viz.
M/s Baba Enterprises, M/s Yadav Traders
and M/s Om Enterprise and, got them
registered
with
Commercial
Tax
Department,
Varanasi
for
doing
the
business of coal in the name of his
employees for re-routing coal as SSF. All
the said four firms have been found
indulging
in
bogus
purchase
of
SSF/undersized coal by the petitionerFertico Investment.

22. The CBI further found that
accused Jay Narayan Agrawal is brother-inlaw of accused, Anil Kumar Agrawal,
Director
of
the
petitioner-Fertico
Investment. He was the Director of M/s
Ananda Coal Movers and, proprietors of
two firms; M/s Shivam Coal Movers,
Chandasi, Chandauli and M/s Trishul
Industries, Chandauli. All these firms were
found indulging in bogus purchase of
SSF/undersized coal by the petitionerFertico Investment. Accused, Arun Kumar
Agrawal, one of the Directors of the
petitioner-Fertico
Investment
and,
his
brother, accused, Anil Kumar Agrawal
were also Proprietors of M/s Surya
Industries, Chandauli. This firm had been
found indulging in bogus purchase of
SSF/undersized coal by the petitionerFertico Investment.

23. According to the CBI, the
petitioner-Fertico Investment criminally
conspired with 11 different firms i.e. M/s
Ananda Coal Movers, Pvt. Ltd. (owned by
accused Jay Narayan Agrawal), M/s Om
Enterprises (owned by accused Anil Kumar
Agrawal), M/s Purnagiri Holding Pvt. Ltd.,
(owned
by
accused
Subhash
Chand
Tulsyan
and
accused
Muksh
Kumar
Tulsyan), M/s Anil Traders (owned by
accused
Anil
Agrawal),
M/s
Baba
Enterprises (owned by accused Anil
Agarwal), M/s Shivam Coal Movers
(owned by accused Jay Narayan Agarwal)
M/s Shubhangi Traders (owned by accused
Anand Shukla) M/s Surya Industries
(owned by accused Arun Kumar Agrawal),
M/s Trishul Industries (owned by accused
Jay Narayan Agrawal), M/s Yadav Traders
(owned by accused Anil Agrawal) and M/s
Tulsyan Coal Syndicate (owned by accused
Subhash
Chand
Tulsiyan)
and
in
furtherance of the said criminal conspiracy,
M/s Shree Ram Fuel Pvt. Ltd fraudulently
and dishonestly prepared bogus sale
invoices in favour of the said firms and the
said
firms
dishonestly/fraudulently
reflected the said fake/bogus purchases as
genuine in their records.

24. The CBI, in its charge-sheet, has
detailed that how-much coal received from
the NCL under FSA on notified/subsidized
rate was diverted through these firms which
was shown to have been purchased by these
114 INDIAN LAW REPORTS ALLAHABAD SERIES
firms as SSF/undersized coal from the
petitioner-Fertico Investment and, the CBI
concluded that in the year 2010-11 itself a
substantial amount of wrongful gain of
seven crores rupees was made by the
petitioner-Fertico
Investment
from
diverting the coal received under the
notified/subsidized rate in the black market.

25. The investigation by the CBI has
also revealed that the coal supply to the
petitioner/Fertico Investment was made
after taking certification of the operational
status from the State Industries Department
i.e. District Industries Center (DIC). After
allotment of coal by the concerned coal
companies, the coal companies used to
write to the units directly for verification
and, send a copy of the letter to the DICs
and the Directorate of Industries. On
receipt of such letters from the coal
companies, the DICs used to verify and
send their report directly to the concerned
coal companies. Sometimes, the coal
companies used to write to the Directorate
of Industries also for the same. It was
further disclosed that on request of CIL in
December,
2010,
the
Directorate
of
Industries, Kanpur forwarded formats I and
II to all DICs for compliance.

26. The CBI, in its investigation, had
further found that accused, Anil Kumar
Agrawal had entered into a criminal
conspiracy with accused Ramji Singh,
General Manager, DIC, Chandauli and, in
furtherance of the said criminal conspiracy,
fraudulently and dishonestly sent false
status
reports
regarding the working
condition
of
the
petitioner-Fertico
Investment during the period June, 2010 to
November, 2010 under his signature.
Accused Ramji Singh, General Manager,
DIC,
Chandauli
deliberately
and,
dishonestly concealed the real fact that the
factory of the petitioners was not in
operation. During this period, he sent
month-wise false status reports to the
Directorate of Industries, Kanpur for
onward transmission to the NCL, Singrauli.
On the basis of the month-wise status
report duly signed by accused, Ramji
Singh, the NCL supplied coal at a notified
price to the petitioner-Fertico Investment.
Further, from December, 2010 to February,
2011, the information regarding the end use
and operational status of the petitionerFertico Investment was fraudulently and
dishonestly submitted in Format No. I & II
by accused, Anil Kumar Agrawal, Director
of the petitioner-Fertico Investment along
with affidavit and, in furtherance of the
said criminal conspiracy, the same was
fraudulently and dishonestly certified by
accused, Ramji Singh, the then General
Manager and accused, Yogendra Nath
Pandey,
Assistant
Manager,
DIC,
Chandauli. These reports were sent by
accused, Ramji Singh to the Directorate of
Industries, Kanpur, who further sent the
same to the General Manager, Sales, NCL,
Singrauli. On the basis of the said false
certificate regarding existence of the unit,
its operational status and, end use of the
coal, further supplies of coal were made to
the petitioner-Fertico Investment by NCL
and,
thereby
the
accused
obtained
pecuniary advantage for themselves and,
for other co-accused by corrupt and illegal
means.

27. It has been further said that during
the course of investigation role of the
officers/officials of NCL and Coal India
Limited was examined. As per the
provisions of NCDP, CIL was to undertake
verification of such consumers of erstwhile
non-core sector in a time-bound manner,
either directly or through an agency, so as
to check the veracity of their claim of being
3 All. M/S Fertico Marketing & Investment Pvt. Ltd. & Ors. Vs. C.B.I., Anti Corruption Branch, Lucknow & Anr.
115
bona fide consumers of coal for allocating
coal to such consumers on notified rates.
However,
there
were
no
clear-cut
guidelines/methods
regarding
the
verification of non-core sector and, Small
Scale
Industrial
Units.
As
per
the
provisions of the FSA, the NCL was bound
to supply the coal to the petitioner-Fertico
Investment on the notified price. In absence
of any clear-cut guidelines, no physical
verification of the factory premises of the
petitioner-Fertico Investment could take
place. However, on the basis of the
bogus/false verification certificate issued
by DIC, NCL kept on supplying coal to the
petitioner-Fertico Investment.

28. It is important to note here that the
CBI could not find any incriminating evidence
against the officers/officials of the NCL/CIL.

29. Heard Mr. Sri Ajit Kumar Sinha,
learned Senior Advocate assisted by Mr.
Himanshu
H.
Gupta, Mr.
Yasovardhan
Swaroop, Mr. Alok Kumar Singh and Mr.
Aishwarya Sinha for the petitioners and Mr.
Anurag Kumar Singh for the CBI and Mr. Rao
Narednra Singh, learned AGA for the State.

30. After setting out the facts and findings
of the CBI in its charge-sheet dated 13.04.2011
in brief, I would now deal with three questions,
on which the Supreme Court, has remitted the
matter back for decision by this Court .

"Q.No. 2. Whether the cases are
overwhelmingly and predominantly of civil
nature as purely based on breach of contract
(FSA) and the criminal prosecutions are liable
to be quashed?"

31. After the judgment of the Supreme
Court in Ashoka Smokeless Coal India (P) Ltd.
and others VERSUS Union of India and others
(supra), the Government of India, Ministry of
Coal, formulated 'New Coal Distribution Policy'
and, published the same on 18th October, 2007
in supersession of existing coal distribution
policy for core and non-core sectors and, other
instructions issued in this regard from time to
time.

32. Classification of consumers into
core and non-core sectors was reviewed on
the basis of new policy and, it was decided
to dispense with the same. Instead, each
sector/consumers was treated on merit,
keeping in view, inter alia, the regulatory
provisions applicable thereto and other
relevant factors. Requirement of Defence
Sector and Railways was to be met in full
at notified price. For power utilities,
including
independent
power
producers/captive
power
plants
and,
fertilizer sector, under the new policy, 100
per cent quantity as per the normative
requirement of the consumers was to be
made through 'Fuel Supply Agreement' (for
short 'the FSA') by CIL at fixed prices to be
declared/notified by CIL. In respect of
other consumers, it was provided that under
the NCDP, 75% of the quantity as per the
normative
requirement
of
the
consumers/actual
users
should
be
considered for supply of coal through FSA
by CIL at notified prices to be fixed and
declared by CIL and, balance 25% of coal
requirement of the units was to be sourced
by them through e-auction/import of coal
etc, as per their preference.

33. All the existing linkage holders of
erstwhile core and non-core sectors and,
not having FSAs were required to be
entered into FSAs with coal companies. It
was further provided that distribution of
coal to units where requirement was upto
4200 tonnes per annum, the distribution
was to be done through agencies nominated
by the State Government; in units, where
116 INDIAN LAW REPORTS ALLAHABAD SERIES
requirement was more than 4200 tonnes per
annum, coal was to be supplied directly
from CIL/Subsidiary companies through
FSAs. So far as the linked consumers of
erstwhile non-core sector, whose annual
requirement was less than 4200 tonnes,
were concerned, they were given option to
either enter into FSA with the coal
company or they could opt out FSA regime
and access their coal requirement through
agencies nominated by State Governments.
In respect of supply of coal to steal plants,
it was provided that the same would be
based on FSA. In respect of supply of coal
to consumers in small and medium sector,
it was provided that the State Governments
would be requested to work out genuine
requirement of such units in small and
medium sector like smokeless fuel, brick
kiln, coke oven units etc in a transparent
and scientific basis and distribute coal to
them accordingly. It was further provided
that all the existing valid linked consumers,
whose linkage/MPQ, during the year 20062007, was 4200 tonnes or more were to
enter into FSAs with coal companies within
six months from the date to be notified by
CIL. The other valid linked consumers
were given option to opt out of FSA regime
or enter into FSA within six months. On
opting out, such consumers could access
their coal requirement through various
channels
i.e.,
e-caution,
distribution
network of State nominated agencies etc.
Failure, to enter into FSA would result in
discontinuation of supplies at fixed prices.

34. It was further provided that around
10% of the estimated annual production of
CIL would be initially offered through eauction and, the quantity to be offered under
e-auction would be reviewed from time to
time by the Ministry of Coal. It was for the
CIL to undertake verification of erstwhile
consumers/non-core sector consumer in a
time bound manner, either directly or through
an agency, so as to check the veracity of their
claim of being banafide consumers of coal
and, thereafter, act accordingly.

35. The NCL on 19th March, 2008,
intimated to the petitioners herein that under
the New Coal Distribution Policy (for short
'NCDP') all the existing valid linked
consumers, whose linkage/MPQ was 4200
tonnes or more, they were required to enter
into FSAs with coal companies. Other valid
linked consumers were having option to opt
out of FSA regime or enter into FSA.