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Synopsis

The Supreme Court has quashed an order for framing of charges against M/s Karnataka Emta Coal Mines Limited in connection with coal block scam, in view of glaring infirmities, including reliance upon CAG report which has not been finally accepted.

A bench of Justices Hima Kohli and Ahsanuddin Amanullah said the criminal intent has been threaded into the dispute by the 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.

The court noted it was not in dispute 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 viewpoint but cannot be accepted as decisive," the court said.

In the case, the bench noted CBI 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. 

"We are of the opinion that the respondent–CBI embarked on a roving and fishing inquiry on the strength of the Audit Report of the CAG and then started working backwards to sniff out criminal intent against the appellants. The underpinnings of what was a civil dispute premised on a contract between the parties, breach whereof could at best lead to determination of the contract or even the underlying lease deed, has been painted with the brush of criminality without any justification," the bench said.

The private firm was alleged to have facilitated illegal sale of coal rejects through another firm. Going by the Washability Report submitted by CIMFR, Nagpur, the bench found the entire edifice of criminality and conspiracy built by the respondent-CBI on the premise that the coal rejects had a commercial values with an assertion that the appellants had profited from the sale thereof in the open market and pocketed the sale proceeds, flies in the face.

A joint-venture agreement was executed between the Karnataka Power Corporation Limited (KPCL) and M/s Eastern Mineral and Trading Agency (EMTA) for a period of 25 years for the development of captive coal mines and supply of coal to a thermal power plant of the KPCL -- the Bellary Thermal Power Station (BTPS).

The Union government had allocated three coal blocks to KPCL in Maharashtra for the development and operation of coal mines dedicated to feeding the BTPS. It was alleged that EMTA entered into a criminal conspiracy with an objective to facilitate illegal sale of coal rejects by GCWL (M/s Gupta Coalfields and Washeries Limited) that were generated during washing of coal and gained undue pecuniary advantage to the tune of Rs 53.37 crore.

A special court in Delhi had in March, 2022 framed charges of criminal conspiracy, breach of trust and other offences under the Prevention of Corruption Act against the accused company and others.

As per the Top Court, central government had not come up with any specific plan to dispose of the coal rejects, as is apparent from a perusal of the reply submitted by the Minister of State, MoC in the Lok Sabha, stating that the government had not framed any National Policy for exploitation of coal rejects and the same was still under consideration. 

The bench said therefore in the absence of a policy to dispose of the coal rejects, the appellants cannot be blamed for complying with the terms and conditions stipulated in the JVA.

The bench said the plea by the 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. 

“The 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,” the bench said.

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, it pointed out.

"Having accepted the decision taken by the Sanctioning Authority/Competent Authority in the Central Government and dropping the charges against the seniormost functionaries in KPCL, who were also holding positions in the Board of KECML, there is no justification to press charges against the appellants herein whose role is similar to them," the bench said.