# M/s Karnataka Emta Coal Mines Limited and Another v. Central Bureau of Investigation

- **Citation:** 2024 INSC 623
- **Court:** Supreme Court of India
- **Decided:** 2024-08-23
- **Case number:** Criminal Appeal Nos. 1659-1660 of 2024
- **Bench:** Hima Kohli, Ahsanuddin Amanullah
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/m-s-karnataka-emta-coal-mines-limited-and-another-v-central-bureau-of-38019
- **Pages:** 117

## Headnote

The present appeals challenge the Order on Charge dated
24.12.2021 and Order framing Charges dated 03.03.2022 passed
by the Special Judge (Prevention of Corruption Act) Central Bureau
of Investigation registered u/s.120-B r/w. ss.409/420 of the IPC and
ss.13(1)(d)/ 13(2) of the Prevention of Corruption Act, 1988. The
appellants before this Court are M/s Karnataka Emta Coal Mines
Limited (KECML) arrayed as accused No. 12 in the chargesheet
and Chairman and Managing Director of Emta Coal Limited and
former Managing Director of accused No. 12, arrayed as accused
No. 6 in the chargesheet.
The issues which arose for consideration are: Did CBI Primarily
Rely on the Audit Report of the Comptroller and Auditor General
(CAG) or independently investigated the matter; Could the Audit
Report of the CAG fasten any liability on KECML; What is the
import of the Judgment dated 24.03.2016 of the Karnataka High
Court; What is the sanctity of an Audit Report in Law; What is the
effect of the absence of any strategy in the Mining plan to dispose
off the coal rejects; Was KECML required to account for the coal
rejects; Can KECML be blamed for not setting up the coal washery
at the pithead; Did the coal rejects have any useful calorific value
making it a saleable commodity; Does the Aryan Energy case has
a persuasive value; Inherent Jurisdiction of the High Court under
Section 482, Cr.PC; Extraordinary powers of the Supreme Court
under Article 136 of the Constitution of India; Application of mind
at the stage of Section 277, Cr.PC.
Headnotes†
Prevention of Corruption Act, 1988 - ss.13(1)(d)/13(2) - Penal
Code, 1860 - s.120-B r/w. ss.409/420 - Mines and Minerals
(Development & Regulation) Act, 1957 - Did CBI Primarily Rely
* Author
[2024] 8 S.C.R.
1147
M/s Karnataka Emta Coal Mines Limited and Another v.
Central Bureau of Investigation
on the Audit Report of the Comptroller and Auditor General
(CAG) or independently investigated the matter:
Held: The file produced by the respondent-CBI reveals that
premised on the Source Information Report (SIR) submitted by an
Inspector from the Department pertaining to some irregularities in
the allocation of coal blocks under the Government Dispensation
Category allegedly in connivance with public servants, the matter
was taken up by CBI for verification - The notings in the file
states that it was not possible to verify the allegations discretely -
Therefore, the SIR was directed to be registered as a PE - These
records falsifies the suggestion made by the respondent-CBI that
there was a SIR that disclosed irregularities in the Joint Venture
Agreement (JVA) executed between M/s. Karnataka Power
Corporation Limited (KPCL) and KECML - The stand of the
respondent-CBI that PE-5 was registered well before the Audit
Report of the CAG and originated independently thereof, is also
factually misleading because CBI's own record shows that the
scope of enquiry in respect of PE-5 registered on 28.09.2012,
was entirely different and had no relationship with the JVA and
other agreements executed by KPCL and KECML - Thus, 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 Source
Information Report (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. [Paras 8.3, 21.2(a)]
Prevention of Corruption Act, 1988 - ss.13(1)(d)/ 13(2) - Penal
Code, 1860 - s.120-B r/w. ss.409/420 - Mines and Minerals
(Development & Regulation) Act, 1957 - Could the Audit Report
of the CAG fasten any liability on KECML:
Held: The Supreme Court having already dismissed the appeal
filed by KPCL against the judgment of the Karnataka High Court,
having held in clear terms that the CAG Report could not form the
basis for launching proceedings against the appellants and further,
ha

## Text

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[2024] 8 S.C.R. 1146 : 2024 INSC 623
M/s Karnataka Emta Coal Mines Limited and Another
v.
Central Bureau of Investigation
(Criminal Appeal Nos. 1659-1660 of 2024)
23 August 2024
[Hima Kohli* and Ahsanuddin Amanullah, JJ.]
Issue for Consideration
The present appeals challenge the Order on Charge dated
24.12.2021 and Order framing Charges dated 03.03.2022 passed
by the Special Judge (Prevention of Corruption Act) Central Bureau
of Investigation registered u/s.120-B r/w. ss.409/420 of the IPC and
ss.13(1)(d)/ 13(2) of the Prevention of Corruption Act, 1988. The
appellants before this Court are M/s Karnataka Emta Coal Mines
Limited (KECML) arrayed as accused No. 12 in the chargesheet
and Chairman and Managing Director of Emta Coal Limited and
former Managing Director of accused No. 12, arrayed as accused
No. 6 in the chargesheet.
The issues which arose for consideration are: Did CBI Primarily
Rely on the Audit Report of the Comptroller and Auditor General
(CAG) or independently investigated the matter; Could the Audit
Report of the CAG fasten any liability on KECML; What is the
import of the Judgment dated 24.03.2016 of the Karnataka High
Court; What is the sanctity of an Audit Report in Law; What is the
effect of the absence of any strategy in the Mining plan to dispose
off the coal rejects; Was KECML required to account for the coal
rejects; Can KECML be blamed for not setting up the coal washery
at the pithead; Did the coal rejects have any useful calorific value
making it a saleable commodity; Does the Aryan Energy case has
a persuasive value; Inherent Jurisdiction of the High Court under
Section 482, Cr.PC; Extraordinary powers of the Supreme Court
under Article 136 of the Constitution of India; Application of mind
at the stage of Section 277, Cr.PC.
Headnotes†
Prevention of Corruption Act, 1988 - ss.13(1)(d)/13(2) - Penal
Code, 1860 - s.120-B r/w. ss.409/420 - Mines and Minerals
(Development & Regulation) Act, 1957 - Did CBI Primarily Rely
* Author
[2024] 8 S.C.R.
1147
M/s Karnataka Emta Coal Mines Limited and Another v.
Central Bureau of Investigation
on the Audit Report of the Comptroller and Auditor General
(CAG) or independently investigated the matter:
Held: The file produced by the respondent-CBI reveals that
premised on the Source Information Report (SIR) submitted by an
Inspector from the Department pertaining to some irregularities in
the allocation of coal blocks under the Government Dispensation
Category allegedly in connivance with public servants, the matter
was taken up by CBI for verification - The notings in the file
states that it was not possible to verify the allegations discretely -
Therefore, the SIR was directed to be registered as a PE - These
records falsifies the suggestion made by the respondent-CBI that
there was a SIR that disclosed irregularities in the Joint Venture
Agreement (JVA) executed between M/s. Karnataka Power
Corporation Limited (KPCL) and KECML - The stand of the
respondent-CBI that PE-5 was registered well before the Audit
Report of the CAG and originated independently thereof, is also
factually misleading because CBI's own record shows that the
scope of enquiry in respect of PE-5 registered on 28.09.2012,
was entirely different and had no relationship with the JVA and
other agreements executed by KPCL and KECML - Thus, 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 Source
Information Report (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. [Paras 8.3, 21.2(a)]
Prevention of Corruption Act, 1988 - ss.13(1)(d)/ 13(2) - Penal
Code, 1860 - s.120-B r/w. ss.409/420 - Mines and Minerals
(Development & Regulation) Act, 1957 - Could the Audit Report
of the CAG fasten any liability on KECML:
Held: The Supreme Court having already dismissed the appeal
filed by KPCL against the judgment of the Karnataka High Court,
having held in clear terms that the CAG Report could not form the
basis for launching proceedings against the appellants and further,
having upheld the findings returned by the Karnataka High Court
that the CAG Report appears to have been the starting point for
the entire disputes between the parties who till then, were smoothly
discharging their obligations under various agreements, there is
no reason to take a different view only on the ground that the
1148
[2024] 8 S.C.R.
Digital Supreme Court Reports
respondent-CBI was not a party in the aforesaid proceedings -
Further, 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. [Paras 9.5, 21.2(b)]
Prevention of Corruption Act, 1988 - ss.13(1)(d)/13(2) - Penal
Code, 1860 - s.120-B r/w. ss.409/420 - Mines and Minerals
(Development & Regulation) Act, 1957 - What is the import of
the Judgment dated 24.03.2016 of the Karnataka High Court:
Held: The decision dated 24.03.2016 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 respondentCBI 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 20.05.2022 which was just
a few days after Charges were framed by the Special Judge, CBI
on 03.03.2022. [Para 21.2(f)]
Mines and Minerals (Development & Regulation) Act, 1957 -
What is the sanctity of an Audit Report in Law:
Held: 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 - In the instant case, 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 KPCL and KECML
remains 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. [Para 11.5]
[2024] 8 S.C.R.
1149
M/s Karnataka Emta Coal Mines Limited and Another v.
Central Bureau of Investigation
Prevention of Corruption Act, 1988 - ss.13(1)(d)/13(2) - Penal
Code, 1860 - s.120-B r/w. ss.409/420 - Mines and Minerals
(Development & Regulation) Act, 1957 - What is the effect of
the absence of any strategy in the Mining plan to dispose off
the coal rejects:
Held: 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 - This Court does
not find any irregularity in the route adopted to dispose off the
coal rejects. [Para 13.2]
Prevention of Corruption Act, 1988 - ss.13(1)(d)/13(2) - Penal
Code, 1860 - s.120-B r/w. ss.409/420 - Mines and Minerals
(Development & Regulation) Act, 1957 - Was KECML required
to account for the coal rejects:
Held: 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/kg - 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 FSA
and further, KECML was required to ensure that all "shales/stones"
are removed from the coal before making the supply, 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 price - 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. [Para 14.3]
1150
[2024] 8 S.C.R.
Digital Supreme Court Reports
Prevention of Corruption Act, 1988 - ss.13(1)(d)/13(2) - Penal
Code, 1860 - s.120-B r/w. ss.409/420 - Mines and Minerals
(Development & Regulation) Act, 1957 - Can KECML be blamed
for not setting up the coal washery at the pithead:
Held: 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. [Para 21.2 (k)]
Prevention of Corruption Act, 1988 - ss.13(1)(d)/13(2) - Penal
Code, 1860 - s.120-B r/w. ss.409/420 - Mines and Minerals
(Development & Regulation) Act, 1957 - Did the coal rejects
have any useful calorific value making it a saleable commodity:
Held: The Detailed Washability Report of the Government
Laboratory namely, CIMFR, Nagpur - The said Report stated in
so many words that the rejects did not contain any useful calorific
value 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. [Para 16.1]
Prevention of Corruption Act, 1988 - ss.13(1)(d)/13(2) - Penal
Code, 1860 - s.120-B r/w. ss.409/420 - Mines and Minerals
(Development & Regulation) Act, 1957 - Does the Aryan Energy
case has a persuasive value:
[2024] 8 S.C.R.
1151
M/s Karnataka Emta Coal Mines Limited and Another v.
Central Bureau of Investigation
Held: 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 22.07.2021, 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 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. [Para 21.2(g)]
Code of Criminal Procedure, 1973 - s.482 - Inherent Jurisdiction
of the High Court:
Held: 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 - 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. [Paras 18.7, 18.8]
Constitution of India - Art.136 - Extraordinary powers of the
Supreme Court under Article 136:
1152
[2024] 8 S.C.R.
Digital Supreme Court Reports
Held: 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 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. [Para 19.6]
Code of Criminal Procedure, 1973 - s.277 - Application of
mind at the stage of s.227 of Cr.PC - discussed.
Constitution of India - Art. 136 - Prevention of Corruption
Act, 1988 - ss.13(1)(d)/13(2) - Penal Code, 1860 - s.120-B r/w.
ss.409/420 - Mines and Minerals (Development & Regulation)
Act, 1957 - The Special Judge, CBI passed an order on
charge dated 24.12.2021 and the order framing charges dated
03.03.2022 qua appellants - Sustainability:
Held: This Court is 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, the impugned orders deserve interference in
exercise of the powers vested in this court under Article 136 of the
Constitution of India - The order on charge dated 24.12.2021 and
the order framing charges dated 03.03.2022 passed by the Special
Judge, CBI qua the appellants before this Court are unsustainable
and accordingly quashed and set aside. [Paras 21.3, 21.4]
[2024] 8 S.C.R.
1153
M/s Karnataka Emta Coal Mines Limited and Another v.
Central Bureau of Investigation
Case Law Cited
P.S.R. Sadhanantham v. Arunachalam [1980] 2 SCR 873 : (1980)
3 SCC 141 - followed.
Uttam Chand v. ITO (1982) 2 SCC 543; G.L. Didwania v. ITO
(1995) Supp(2) 724; Arun Kumar Aggarwal v. Union of India [2013]
3 SCR 508 : (2013) 7 SCC 1; Rajiv Thapar and Others v. Madan
Lal Kapoor [2013] 3 SCR 52 : (2013) 3 SCC 330; State of Orissa
v. Debendra Nath Padhi [2004] Supp. 6 SCR 460 : (2005) 1 SCC
568; Anand Kumar Mohatta and Another v. State (NCT of Delhi),
Department of Home and Another [2018] 13 SCR 1028 : (2019)
11 SCC 706; State of Karnataka v. L. Munniswamy [1977] 3 SCR
113 : (1977) 2 SCC 699; Arunachalam v. P.S.R. Sadhanantham
and Another [1979] 3 SCR 482 : (1979) 2 SCC 297; Khoday
Distilleries Limited and Others v. Mahadeshwara S.S.K. Limited
[2019] 3 SCR 411 : (2012) 12 SCC 291; Mekala Sivaiah v. State
of Andhra Pradesh [2022] 6 SCR 989 : (2022) 8 SCC 253; Union
of India v. Prafulla Kumar Samal and Another [1979] 2 SCR 229 :
(1979) 3 SCC 4; State of Tamil Nadu v. N. Suresh Rajan and Others
[2014] 1 SCR 135 : (2014) 11 SCC 709 - relied on.
CBI v. S.M. Jaamdar & Others; M.L. Sharma v. The Principal
Secretary and Others [2014] 12 SCR 110 : (2014) 9 SCC 614;
Girish Kumar Suneja v. CBI [2017] 9 SCR 544 : (2017) 14 SCC
809; KPCL v. Aryan Energy Private Limited and Others, COMAP
No. 12, 13, 14 and 15 and 2020 decided on 22nd July, 2021;
Centre for Public Interest Litigation v. Union of India [2012] 3 SCR
147 : (2012) 3 SCC 1; Pathan Mohammed Suleman Rehmatkhan
v. State of Gujarat [2013] 12 SCR 446 : (2014) 4 SCC 156;
Radheshyam Kejriwal v. State of West Bengal and Another [2011]
4 SCR 889 : (2011) 3 SCC 581; Ashoo Surendranath Tewari v.
Deputy Superintendent of Police, EOW, CBI and Another (2020) 9
SCC 636; J Sekar alias Sekar Reddy v. Directorate of Enforcement
[2022] 3 SCR 698 : (2022) 7 SCC 370; Prem Raj v. Poonamma
Menon & Another [2024] 4 SCR 29 : (2024) SCC OnLine SC 483;
B. Jayaraj v. State of Andhra Pradesh [2014] 4 SCR 554 : (2014)
13 SCC 55; P. Satyanarayana Murthy v. District Inspector of Police,
State of Andhra Pradesh and Another (2015) 10 SCC 152; State
through Central Bureau of Investigation v. Dr Anup Kumar Srivastava
[2017] 9 SCR 341 : (2017) 15 SCC 560; K. Shanthamma v. State
of Telangana (2022) 4 SCC 574; Neeraj Dutta v. State (NCT of
Delhi) [2023] 2 SCR 997 : (2023) 4 SCC 731; Soundarajan v. State
Rep. by the Inspector of Police Vigilance Anticorruption Dindigul
1154
[2024] 8 S.C.R.
Digital Supreme Court Reports
[2023] 4 SCR 133 : (2023) SCC OnLine SC 424; M.S Associates
and Others v. Union of India (2005) SCC Online Gau 308; (2005)
275 ITR 502; The King Emperor v. Khawaja Nazir Ahmed, AIR
(1945) PC 18; Niranjan Singh Karam Singh v. Jitendra Bhimraj
Bijjaya And Others [1990] 3 SCR 633 : (1990) 4 SCC 76; State of
Maharashtra v. Som Nath Thapa [1996] Supp. 1 SCR 189 : (1996)
4 SCC 659; State of Bihar v. Ramesh Singh [1978] 1 SCR 257 :
(1977) 4 SCC 39; K.G. Premshanker v. Inspector of Police and
Another [2002] Supp. 2 SCR 350 : (2002) 8 SCC 87; Manohar
Lal Sharma v. Principal Secretary and Another [2014] 8 SCR 446 :
(2014) 9 SCC 516; Standard Chartered Bank(1) v. Directorate of
Enforcement [2006] 2 SCR 709 : (2006) 4 SCC 278; Collector
of Customs v. L.R. Melwani, AIR 1970 SC 962; K.C. Builders v.
CIT [2004] 1 SCR 1134 : (2004) 2 SCC 731; Rukmini Narvekar
v. Vijaya Satardekar and Others [2008] 14 SCR 271: (2008) 14
SCC 1; State of Punjab and Others v. Rafiq Masih (White Washer)
Others [2014] 13 SCR 1343 : AIR (2015) 1267 - referred to.
List of Acts
Coal Mines (Nationalization) Act, 1973; Mines and Minerals
(Development & Regulation) Act, 1957; Prevention of Corruption
Act, 1988; (Duties, Powers and Conditions of Service) Act, 1971;
Evidence Act, 1872; Comptroller and Auditor General (Duties,
Powers and Conditions of Service) Act, 1971; Penal Code, 1860;
Code of Criminal Procedure, 1973.
List of Keywords
Joint Venture Agreement; Fuel Supply Agreement; Washability
Report; Audit Report; Coal Rejects; Coal block allocation;
Calorific Value; Aryan Energy Case; Section 482 of Code of
Criminal Procedure, 1973; Inherent Jurisdiction of the High Court;
Extraordinary powers of the Supreme Court; Section 227 of Code
of Criminal Procedure, 1973; Application of mind u/s.227 of Cr.PC.
Case Arising From
CRIMINAL APPELLATE JURISDICTION: Criminal Appeal Nos.
1659-1660 of 2024
From the Judgment and Order dated 24-12-2021 in CN No.
CBI/317/2019 and Order dated 03-03-2022 in CN No. CBI/317/2019
passed by the Special Judge (PC Act), CBI, Rouse Avenue District
Court
[2024] 8 S.C.R.
1155
M/s Karnataka Emta Coal Mines Limited and Another v.
Central Bureau of Investigation
Appearances for Parties
Ranjit Kumar, Sr. Adv., Abhimanyu Bhandari, Ms. Rooh-e-hina Dua,
Ayush Aggarwal, Sangram S. Saron, Arav Pandit, Advs. for the
Appellants.
R.S. Cheema, Sr. Adv., Ms. Tarannum Cheema, Akshay Nagrajan,
Akash Singh, Mukesh Kumar Maroria, Advs. for the Respondent.
Judgment / Order of the Supreme Court
Judgment
Hima Kohli, J.
INDEX*
S.
No.
Details
Paras No.
Page
No.
1.
A.
PREFACE
1-2
1
2.
B.
FACTUAL BACKDROP
3-3.10.5
2
3.
3.1
Joint Venture Agreement
3.1.1-3.1.4 3-9
4.
3.2
Correspondence
3.2.1-3.2.3
9-13
5.
3.3
Fuel Supply Agreement
3.3.1-3.3.3
13-18
6.
3.4
Memorandum of
Understanding
3.4.1-3.4.2
18-21
7.
3.5
Washability Report of the
Central Institute of Mining
and Fuel Research,
Nagpur
3.5.1
21-22
8.
3.6
Revised Mining Plan
3.6.1-3.6.2
22-23
9.
3.7
Information submitted
by KECML to the Coal
Controller
3.7.1-3.7.2
23-25
10.
3.8
Audit Objection raised by
the CAG
3.8.1-3.8.3
25-29
11.
3.9
Preliminary Enquiry
registered by
respondent - CBI
3.9.1-3.9.2
29-31
* Ed. Note: Pagination as per the original Judgment.
1156
[2024] 8 S.C.R.
Digital Supreme Court Reports
12.
3.10
Litigation between KPCL
and KECML
3.10.13.10.6
31-33
13.
C.
SUBMISSIONS
14.
4.
Arguments by Counsel for
the Appellants
4.1-4.17
33-42
15.
5.
Arguments by Counsel for
the respondent - CBI
5.1-5.15
42-50
16.
6.
Rejoinder Arguments by
Counsel for the appellants
6.1-6.4
50-53
17.
D.
DISCUSSION AND ANALYSIS
7.1-7.3
53-54
18.
Did CBI Primarily Rely on the
Audity Repot of the CAG?
8.1-8.3
55-57
19.
Could the Audit Report of the
CAG fasten any liability on
KECML?
9.1-9.5
57-60
20.
Import of the Judgment
dated 24th March, 2016 of the
Karnataka High Court
10.1-10.3
60-63
21.
Sanctity of an Audit Report in
Law
11.1-11.5
63-66
22.
Denial of Sanctions by the
Sanctioning Authorities and the
effect on the Appellants
12.1-12.5
66-74
23.
Effect of the absence of any
strategy in the Mining plan to
dispose off the coal rejects
13.1-13.2
74-75
24.
Was KECML 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
[2024] 8 S.C.R.
1157
M/s Karnataka Emta Coal Mines Limited and Another v.
Central Bureau of Investigation
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
CITATIONS
S. No.
Title
Citation
1
'CBI vs. S.M. Jaamdar &
Others'
2
M.L. Sharma v. The Principal
Secretary and Others
(2014) 9 SCC 614
3
Girish Kumar Suneja v. CBI
(2017) 14 SCC 809
4
KPCL v. Aryan Energy Private
Limited1 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
(2012) 3 SCC 1
6
Arun Kumar Aggarwal v. Union
of India
(2013) 7 SCC 1
7
Pathan Mohammed Suleman
Rehmat khan v. State of
Gujarat
(2014) 4 SCC 156
8
Radheshyam Kejriwal v. State
of West Bengal and Another
(2011) 3 SCC 581
9
Ashoo Surendranath Tewari
v. Deputy Superintendent of
Police, EOW, CBI and Another
(2020) 9 SCC 636
10
J Sekar alias Sekar Reddy v.
Directorate of Enforcement
(2022) 7 SCC 370
11
Prem Raj v. Poonamma
Menon & Another
2024 SCC OnLine SC 483
1158
[2024] 8 S.C.R.
Digital Supreme Court Reports
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
(2015) 10 SCC 152
15
K. Shanthamma v State of
Telangana
(2022) 4 SCC 574
16
State through Central Bureau
of Investigation v Dr Anup
Kumar Srivastava
(2017) 15 SCC 560
17
Soundarajan v State Rep.
by the Inspector of Police
Vigilance Anticorruption
Dindigu
(2023) SCC OnLine SC
424
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
(2014) 9 SCC 516
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
[2024] 8 S.C.R.
1159
M/s Karnataka Emta Coal Mines Limited and Another v.
Central Bureau of Investigation
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
1160
[2024] 8 S.C.R.
Digital Supreme Court Reports
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 Act1) Central Bureau of Investigation,2 Coal Block Case
No.-01, Rouse Avenue District Court, Delhi3 in a case4 registered
under Section 120-B read with Sections 409/420 of the Indian Penal
Code5 and Sections 13(1)(d)/ 13(2) of the P.C. Act, 1988 titled 'CBI
vs. S.M. Jaamdar & Others'. The appellants before this Court are
M/s Karnataka Emta Coal Mines Limited6 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 Others7 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
1
In short 'P.C. Act'
2
In short CBI
3
Hereinafter referred to as 'learned Special Judge, CBI'
4
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
5
In short 'IPC'
6
In short "KECML"
7
[2014] 12 SCR 110 : (2014) 9 SCC 614
8
[2017] 9 SCR 544 : (2017) 14 SCC 809
9
In short 'MoU'
[2024] 8 S.C.R.
1161
M/s Karnataka Emta Coal Mines Limited and Another v.
Central Bureau of Investigation
must be delineated chronologically at some length to appreciate the
context of the case.
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:
"AGREEMENT 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
10
In short 'JVA'
11
In short 'KPCL'
12
In short 'EMTA'
13
In short 'BTPS'
14
In short 'JVC'
1162
[2024] 8 S.C.R.
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"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,
[2024] 8 S.C.R.
1163
M/s Karnataka Emta Coal Mines Limited and Another v.
Central Bureau of Investigation
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.
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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
[2024] 8 S.C.R.
1165
M/s Karnataka Emta Coal Mines Limited and Another v.
Central Bureau of Investigation
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
1166
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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:
[2024] 8 S.C.R.
1167
M/s Karnataka Emta Coal Mines Limited and Another v.
Central Bureau of Investigation
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
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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.