Summary
Exercising its Article 136 jurisdiction in a coal block case, the Supreme Court set aside the Special Judge's orders refusing discharge and framing charges against KECML and its former Managing Director. The charges were under Section 120-B with Section 409 IPC and the Prevention of Corruption Act, over the disposal of coal washery rejects. The Court held that the case was in substance a civil contractual dispute. The CBI built it on an un-tabled CAG audit report, and it was contradicted by civil judgments clearing KECML, by refusals of sanction for co-accused KPCL officers, and by the contracts themselves, which gave KPCL no claim to the rejects.
Issues
- Whether the prosecution was triggered by and rested mainly on the CAG audit report of 2013, and what evidentiary weight a CAG report has before it is tabled in and scrutinised by Parliament.
- Whether the Karnataka High Court's judgment of 24.03.2016, affirmed by the Supreme Court on 20.05.2022, quashing KPCL's civil demand for the value of the coal rejects, bars a criminal prosecution on the same facts.
- What effect the refusal of sanction to prosecute senior KPCL officers alleged to be co-conspirators has on prosecuting the private appellants on the same material.
- Whether, under the JVA, FSA, allocation letter and notification, KECML had to account to KPCL for the coal rejects, and whether disposing of them through the washery operator raised any inference of criminality.
- The scope of discharge under Section 227 CrPC, and whether the Supreme Court should interfere under Article 136 at the stage of charge where the High Court's Section 482 jurisdiction was unavailable in coal block cases.
Provisions considered
- Section 227, Code of Criminal Procedure, 1973The section was quoted. Following Prafulla Kumar Samal, Niranjan Singh Karam Singh and N. Suresh Rajan, the Court held that the judge considering discharge is not a post office for the prosecution. The judge must sift the material for a prima facie case and consider the broad probabilities and basic infirmities, and may discharge where the evidence raises only suspicion and not grave suspicion. The Special Judge's orders lacked this consideration. (¶¶ 20.1, 20.2, 20.3, 20.4, 20.5)
- Section 482, Code of Criminal Procedure, 1973The Court set out the tests in Rajiv Thapar, Bhajan Lal and related cases for quashing before trial: material of sterling quality that the prosecution cannot justifiably refute and that would lead a reasonable person to reject the accusations. It noted that M.L. Sharma confined coal block cases to the Supreme Court, which closed this route to the appellants. (¶¶ 18.1, 18.2, 18.7, 18.8, 19.7)
- Article 136, Constitution of IndiaThe Court described this as a plenary, residuary jurisdiction, wider than Section 482 and limited only by self-imposed restraint. Because the High Court route was foreclosed, the appellants could only come to this Court, and the CBI's plea that they should raise their defences at trial was rejected. The Court exercised the power to quash the charges. (¶¶ 19.1, 19.6, 19.7, 19.9, 21.3)
- Articles 149 and 151, Constitution of IndiaRelying on Arun Kumar Aggarwal, the Court explained that CAG reports go to Parliament or the State Legislature, are examined by the Public Accounts Committee with the Ministries' responses, and may be accepted or rejected in whole or part. Since the 2013 report was never tabled or examined, its finding of loss was only a viewpoint and not decisive. (¶¶ 11.2, 11.3, 11.4, 11.5)
- Sections 10 and 13, Comptroller and Auditor General's (Duties, Powers and Conditions of Service) Act, 1971Referred to as the statutory basis of the CAG's duties to compile accounts and audit the Union and the States, as background to the Court's view that an audit report that has not gone through parliamentary scrutiny has not attained finality. (¶¶ 11.1, 11.3)
- Section 19, Prevention of Corruption Act, 1988The KPCL Board refused sanction to prosecute its Director (Finance), and the Central Government, after obtaining the Karnataka Government's comments and the CVC's advice, refused sanction to prosecute KPCL's Managing Director. Both found no evidence of sale of rejects or unlawful loss. The CBI did not challenge either refusal. The Court held that the CBI could not proceed against private co-accused with a similar role on the same material. (¶¶ 12.1, 12.2, 12.3, 12.4, 12.5, 21.2)
- Sections 120-B and 409 IPC; Sections 13(1)(c), 13(1)(d) and 13(2) PC Act, Indian Penal Code, 1860 and Prevention of Corruption Act, 1988These were the charges framed against the appellants for conspiring to enable the washery operator's illegal sale of coal rejects. The Court found that the allegations were predominantly civil and lacked the elements of a criminal offence. It chose not to decide the separate argument on Section 13(1)(d). (¶¶ 1, 7.1, 21.1)
Held
- The CBI's own files showed that the 2012 preliminary enquiries were about the wider allocation of coal blocks through the government dispensation route and did not implicate the appellants. The CBI acted only after the CAG audit report of 2013 and used it as a launching pad, so its claim of an earlier independent investigation was factually misleading. (¶¶ 8.2, 8.3, 21.2)
- A CAG report is entitled to respect but is subject to parliamentary scrutiny through the Public Accounts Committee, and Parliament may accept or reject it. Because the 2013 report was never tabled or examined, its conclusion of loss from disposal of the rejects was not decisive. At most it had persuasive value, and the CBI could not treat it as final. (¶¶ 11.4, 11.5, 21.2)
- Following Radheshyam Kejriwal, where a person is exonerated on merits in civil adjudication on identical allegations, criminal prosecution on the same facts cannot continue. The Karnataka High Court's 2016 judgment, affirmed by this Court in 2022, quashed KPCL's demand for the value of the rejects and cleared KECML on the very agreements and CAG report on which the CBI relied. The CBI not being a party to that case made no difference, and no criminality could be attributed to the appellants on the same facts. (¶¶ 9.5, 10.1, 10.2, 10.3)
- Two separate sanctioning authorities examined the same material, including the statements of 67 witnesses, and refused sanction to prosecute KPCL's senior officers, whom the CBI described as co-conspirators with similar motives. The CBI accepted those refusals. It could not call them mere administrative orders and still press charges against the appellants on the same evidence. (¶¶ 12.2, 12.4, 12.5)
- Read together, the JVA and FSA required KECML only to supply washed coal of a specified grade and GCV at a fixed price, removing shales and stones, and to dispose of rejects safely under Article 5(2)(b) of the JVA. Neither the allocation conditions, nor the end-use notification under the Coal Mines (Nationalisation) Act, nor the approved Mining Plan required the rejects to be handed over or accounted for to KPCL. There was also no national policy on coal rejects. KECML therefore had no obligation to account for the rejects. (¶¶ 13.1, 13.2, 14.1, 14.2, 14.3)
- KECML could not be blamed for not setting up a pithead washery. Litigation over the coal blocks delayed production until September 2008, and late supply attracted penalties. KPCL agreed in its commercial judgment to washing at the Majri washery under the MoU, and the Coal Controller also recognised that washing was necessary. A commercial decision of this kind cannot be selectively given a criminal colour. (¶¶ 15.1, 15.2, 15.3, 21.2)
- The CIMFR washability report of a government laboratory found the rejects had no useful calorific value, which undercut the premise that they were a saleable commodity. The revised Mining Plan's reference to FBC technology did not help the CBI, because that technology needed a plant and approvals that were overtaken by the 2014 deallocation of coal blocks. The Aryan Energy judgment on identical clauses had persuasive value, and the Special Judge should have considered it. (¶¶ 16.1, 17.1, 17.2, 21.2)
- At the discharge stage the judge must apply judicial mind to the broad probabilities and basic infirmities and must not merely adopt the prosecution's case. That consideration was missing. The CBI had conducted a roving inquiry based on the CAG report and turned a contractual dispute, which at most could lead to termination of the contract or lease, into a criminal case by misreading the agreements. The Court deliberately did not assess the probative value of disputed data. (¶¶ 20.2, 20.5, 21.1, 21.3)
Result
Appeals allowed. The order on charge dated 24.12.2021 and the order framing charges dated 03.03.2022 passed by the Special Judge (PC Act), CBI, Rouse Avenue Court, Delhi, were quashed and set aside as against the appellants.