Holding

The Supreme Court held that the CBI’s prosecution was unsustainable because the CAG report cannot form the basis of criminal liability and the dispute was civil in nature, leading to the quashing of the charge and charge‑framing orders.

Summary

The appeals challenge the Special Judge’s order on charge (24‑12‑2021) and charge‑framing order (03‑03‑2022) against Karnataka Emta Coal Mines Ltd (KECML) and its former MD for alleged conspiracy to illegally sell coal washery rejects. The Court examined whether the CBI’s investigation was predicated solely on the 2013 CAG audit report, whether that report could create criminal liability, and the effect of earlier Karnataka High Court judgments that held the dispute to be civil. It held that the CAG report has only persuasive value, the High Court’s findings exonerated the appellants, and the CBI’s reliance on the audit report amounted to a fishing enquiry. Consequently, the prosecution was deemed unsustainable and the orders of charge and charge‑framing were set aside.

Issues considered

Did the CBI primarily rely on the CAG audit report or conduct an independent investigation?
Can the CAG audit report fasten liability on KECML under the Prevention of Corruption Act?
What is the import of the Karnataka High Court judgment dated 24‑03‑2016?
What is the sanctity of an audit report in law?
Was KECML required to account for coal rejects or dispose of them as per the mining plan?
Can KECML be blamed for not setting up a pit‑head coal washery?
Did the coal rejects have any useful calorific value making them saleable?
Does the Aryan Energy case have persuasive value in the present dispute?
Inherent jurisdiction of the High Court under Section 482 Cr.P.C.
Extraordinary powers of the Supreme Court under Article 136 of the Constitution
Application of mind at the stage of Section 227/277 Cr.P.C.

Legislation cited

Coal Mines (Nationalization) Act, 1973
Code of Criminal Procedure, 1973s. 120, s. 173, s. 227, s. 228, s. 277, s. 482
Comptroller and Auditor General (Duties, Powers and Conditions of Service) Act, 1971s. 10, s. 13, s. 26
Constitution of Indias. Article 136, s. Article 149, s. Article 151
Indian Evidence Act, 1872
Indian Penal Code, 1860s. 120-B, s. 409, s. 420
Mines and Minerals (Development & Regulation) Act, 1957
Prevention of Corruption Act, 1988s. 13(1)(d), s. 13(2)

Subjects

Joint Venture AgreementFuel Supply AgreementWashability ReportAudit ReportCoal RejectsCoal block allocationCalorific ValueAryan Energy CaseSection 482 of Code of Criminal Procedure, 1973Inherent Jurisdiction of the High CourtExtraordinary powers of the Supreme CourtSection 227 of Code of Criminal Procedure, 1973Application of mind u/s.227 of Cr.PC

Judgment

[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.

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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 respondent-
CBI 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.

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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.

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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.

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[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. Details Paras No. Page
No. 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 3.4.1-3.4.2 18-21
Understanding
7. 3.5 Washability Report of the 3.5.1 21-22
Central Institute of Mining
and Fuel Research,
Nagpur
8. 3.6 Revised Mining Plan 3.6.1-3.6.2 22-23
9. 3.7 Information submitted 3.7.1-3.7.2 23-25
by KECML to the Coal
Controller
10. 3.8 Audit Objection raised by 3.8.1-3.8.3 25-29
the CAG
11. 3.9 Preliminary Enquiry 3.9.1-3.9.2 29-31
registered by
respondent – CBI

* Ed. Note: Pagination as per the original Judgment.
1156 [2024] 8 S.C.R.

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12. 3.10 Litigation between KPCL 3.10.1- 31-33
and KECML 3.10.6
13. C. SUBMISSIONS
14. 4. Arguments by Counsel for 4.1-4.17 33-42
the Appellants
15. 5. Arguments by Counsel for 5.1-5.15 42-50
the respondent – CBI
16. 6. Rejoinder Arguments by 6.1-6.4 50-53
Counsel for the appellants
17. D. DISCUSSION AND ANALYSIS 7.1-7.3 53-54
18. Did CBI Primarily Rely on the 8.1-8.3 55-57
Audity Repot of the CAG?
19. Could the Audit Report of the 9.1-9.5 57-60
CAG fasten any liability on
KECML?
20. Import of the Judgment 10.1-10.3 60-63
dated 24th March, 2016 of the
Karnataka High Court
21. Sanctity of an Audit Report in 11.1-11.5 63-66
Law
22. Denial of Sanctions by the 12.1-12.5 66-74
Sanctioning Authorities and the
effect on the Appellants
23. Effect of the absence of any 13.1-13.2 74-75
strategy in the Mining plan to
dispose off the coal rejects
24. Was KECML required to 14.1-14.3 75-77
account for the coal rejects?
25. Can KECML be blamed for not 15.1-15.4 77-79
setting up the coal washery at
the pithead?
26. Did the coal rejects have any 16.1 79-80
useful calorific value making it a
saleable commodity?
[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 17.1-17.2 80-82
Energy Case
28. Inherent Jurisdiction of the High 18.1-18.7 82-87
Court under Section 482, Cr.P.C
29. Extraordinary powers of the 19.1-19.9 88-93
Supreme Court under Article 136
of the Constitution of India
30. Application of mind at the stage 20.1-20.4 93-95
of Section 277, CrPC
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 (2014) 9 SCC 614
Secretary and Others
3 Girish Kumar Suneja v. CBI (2017) 14 SCC 809
4 KPCL v. Aryan Energy Private COMAP No. 12, 13, 14
Limited1 and Others and 15 and 2020 decided
on 22nd July, 2021
5 Centre for Public Interest (2012) 3 SCC 1
Litigation v. Union of India
6 Arun Kumar Aggarwal v. Union (2013) 7 SCC 1
of India
7 Pathan Mohammed Suleman (2014) 4 SCC 156
Rehmat khan v. State of
Gujarat
8 Radheshyam Kejriwal v. State (2011) 3 SCC 581
of West Bengal and Another
9 Ashoo Surendranath Tewari (2020) 9 SCC 636
v. Deputy Superintendent of
Police, EOW, CBI and Another
10 J Sekar alias Sekar Reddy v. (2022) 7 SCC 370
Directorate of Enforcement
11 Prem Raj v. Poonamma 2024 SCC OnLine SC 483
Menon & Another
1158 [2024] 8 S.C.R.

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12 Neeraj Dutta v State (NCT of (2023) 4 SCC 731
Delhi)
13 B. Jayaraj v State of Andhra (2014) 13 SCC 55
Pradesh
14 P. Satyanarayana Murthy v (2015) 10 SCC 152
District Inspector of Police,
State of Andhra Pradesh and
Another
15 K. Shanthamma v State of (2022) 4 SCC 574
Telangana
16 State through Central Bureau (2017) 15 SCC 560
of Investigation v Dr Anup
Kumar Srivastava
17 Soundarajan v State Rep. (2023) SCC OnLine SC
by the Inspector of Police 424
Vigilance Anticorruption
Dindigu
18 M.S Associates and others v. (2005) SCC Online Gau
Union of India 308; (2005) 275 ITR 502
19 The King Emperor v. Khawaja AIR (1945) PC 18
Nazir Ahmand
20 Manohar Lal Sharma vs. (2014) 9 SCC 516
Principal Secretary and
Another
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.

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Hima Kohli, J.
A. PREFACE
1. The present appeals challenge the Order on Charge dated
24 th 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.
1164 [2024] 8 S.C.R.

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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
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13. T h e c o m p a n y s h a l l p r o v i d e a n
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 Max. 4500 Kcal/Kg &
variation Min. 4000 Kcal/Kg.
(c) Ash content 0 to 25 mm with
(ADB) 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
1168 [2024] 8 S.C.R.

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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. dated 8.7.2002 and relevant
clauses as agreed upon between the
parties under this agreement.
xxxxx
ARTICLE 9
OBLIGATIONS OF THE PARTIES
The parties shall at their own cost and expense
observe, undertake, comply with and perform
in addition to and not in derogation of their
obligations elsewhere set out in this Agreement,
the following:
[2024] 8 S.C.R. 1169

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

Obligation of KPCL
1. It shall apply to the Central and the relevant
state governments for the allotment of the
KPCL coal mines.
2. It shall purchase the Coal supplied to it as
per the terms agreed to in the Fuel Supply
Agreement.
Obligation of EMTA
1. It shall arrange for the identification of
mining block(s) for present and future
requirement, the acquisition of private
land and allotment of vested lands by the
State Government required for mining
operation and KPCL will render assistance,
if required.
2. It shall ensure supply of coal from KPCL
coal mines to KPCL power plants as per
the guaranteed values indicated in 3 c)
of Article 6 and specification stated in
Annexure - I attached to this agreement.
xxxx
6. It shall establish Washery at the pit
head and get all clearances required for
setting up the washery to effect washing
of coal to meet the specification.”
xxxx
[emphasis added]
3.1.3 Annexure–I appended to the aforesaid JVA specifies the
desired characteristics of the coal and contains a computed
statement relating to the expected coal quality with the
range for the maximum and minimum. The calorific value15

15 In short ‘C.V.’
1170 [2024] 8 S.C.R.

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in Gross Calorific Value16 has been mentioned in the first
column under the head ‘Description’ and in the column of
“Expected Product Coal” that states as follows:
‘DESIRED CHARACTERISTICS OF WCL COAL
EXPECTED COAL QUALITY WITH THE RANGE FOR MAXIMUM & MINIMUM
DESCRIPTION UNITS EXPECTED RANGE
PRODUCT COAL
MINUMUM MAXIMUM
Gross C.V. Kcal/K.gm 4995
xxxxxx
Size of Coal mm 0-25 mm (0-2 mm fines
not>20%

3.1.4 Annexure–II that prescribes the price schedule for
mining, washing and delivery of washed coal to BTPS,
specifies amongst others, the total price of coal at the
pit head as follows:
PRICE SCHEDULE
FOR
MINING, WASHING AND DELIVERY OF
WASHED COAL TO BTPS
Sl. Particulars Price Per
No. Metric tonne
1. xxxxx
f) Total price of coal at pit head 860.70
(Railway Siding) (a+b+c+d-e)
xxxx
7. Railway Freight from captive mines 608.90
to BTPS
xxxx
9. Landed cost per MT of washed 1650.47
coal at BTPS including Sales Tax
3.2. CORRESPONDENCE
3.2.1 Vide letter dated 10th November, 2003, the Ministry of
Coal,17 Union of India allocated three coal blocks to

16 In short ‘G.C.V.’
17 In short ‘MoC’
[2024] 8 S.C.R. 1171

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

KPCL for power generation for the proposed Thermal
Power Station at Bellary, Karnataka.18 As much emphasis
has been laid on the contents of the said letter by the
respondent-CBI, the same is reproduced hereinbelow
for ready reference :
‘No. 47011/1(1)/2002-CPAM/CA
GOVERNMENT OF INDIA
MINISTRY OF COAL
….
New Delhi, dated the 10th November, 2003
‘To,
M/s. Karnataka Power Corporation Ltd.,
Shakti Bhavan No. 82,
Race Course Road,
Bangalore - 560 00l,
KARNATAKA.
‘Subjet: Allocation of Kiloni, Manoradeep and
Baranj I-IV captive coal blocks for power
generation to M/s KPCL for their proposed 1000
MW(2x500 MW) TPS at Bellary, Karnataka.
……….
The Screening Committee has agreed to identify
Baranj l-IV. Manoradeep and Kiloni under the
command area of WCL in the State of Maharashtra
to meet the requirement of coal for the exclusive
use in the proposed TPS at Bellary. Karnataka.
The allocation of these blocks are subject to the
following conditions :-
(i) The coal mined from the blocks shall
exclusively be used by the company to
meet the requirement of coal in their
proposed TPS.

18 at Kiloni, Manoradeep and Beranj I to IV blocks
1172 [2024] 8 S.C.R.

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(ii) Synchronization/commissioning of the end use
plant should be December, 2006.
(iii) The setting up of the proposed TPS should
be completed by the Company before coal
production starts from the captive mine.
The bar chart for the coal production
should be modified suitably.
(iv) The coal mining will be done in accordance
with the provisions of Mines & Minerals
(Development & Regulation) Act, 1957 and
Mineral Concession Rules, 1960 and subject
to the provisions of other relevant statutes.
(v) Allocation of coal block may be cancelled
in case of unsatisfactory progress of
implementation of their proposed end use
plant, development of captive coal mine or
any of them.
3. The allotment of the captive blocks will also be
subject to the following conditions:
(i) The end use for which coal mined from
the captive block should be utilized and
all the conditions imposed by the Central
Government mentioned in this letter conveying
offer by the Screening Committee of captive
block to M/s. Karnataka Power Corporation
Ltd, may be clearly specified in the mining
lease.
(ii) All the conditions imposed by the Central
Government while conveying the previous
approval to the State Government under
Section 5(1) of the Mines and Minerals
(Development & Regulation) Act, 1957 for
grant of mining lease in favour of captive
mining party should clearly form part of the
lease deed to be executed between the
concerned State Government and the party.
[2024] 8 S.C.R. 1173

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

(iii) In case the captive block has been offered
for washing-cum-end use, the deed must
clearly specify that the beneficiated coal
from the washery will exclusively be used
for the end use (power generation) as
approved by the Central Government and
not for commerce or otherwise. Tailings,
middlings or rejects, as the case may be,
shall be used for captive consumption
only by the applicant as approved by the
Central Government.
(iv) The allocattee would furnish to this
Ministry detailed plan for disposal of
unusable containing carbon materials
obtained during the process of mining or
any process thereafter including washing
etc. so as to avoid any need for disposal of
the same through sale etc. at a later stage,
within 30 days of receipt of this letter or
submission of mining plan whichever is
earlier.
(v) No coal shall be sold, delivered, transferred
or disposed of except for the stated captive
mining purpose (power generation) except
with the previous approval of the Central
Government in writing.
(vi) There should be complete synchronization
between the captive coal mining operations
and the development of end-use (power
generation) plant so that no situation arises
where the company is left with coal extracted
from the captive block when the end-use plant
is yet to be operational.
(vii) Approval of mining plan shall be considered
only after financial closure for the end use
project is achieved.
(viii) Existing coal linkage from CIL/SCCL, would
not be disturbed in any way with the coal
1174 [2024] 8 S.C.R.

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mined from the allocated blocks. The coal
linkage of 2.5 mtpa provided for the TPS
from MCL shall continue.
(ix) Further, detailed exploration of the block, if
required, shall be carried out by CMPDIL or
under its direct supervision, on payment basis
by the applicant.
(x) Violation of any of the conditions will render
the allocation of the block/ grant of the lease
as the case may be liable for cancellation.
4. The progress in the end use project and the
development of the allocated blocks should
be reported to this Ministry every 3 months
from date of issuance of this letter.
5. The company may approach CIL for more
detailed information, geological report etc.
and contract the State Government authorities
concerned for completing the necessary
formalities for attaining mining lease rights and
related matters. The company will be required
to apply for mining lease within a period of
six months. The arrangement of transport of
coal, if any, etc. will have to be worked out by
the company in consultation with the Ministry
of Railways/Ministry of Surface Transport
depending on the mode of transport.
Yours faithfully,
(S. Gulati)
Director”
(emphasis added)
3.2.2. On 16 April, 2004, the Ministry of Coal and Mines issued
th

a Gazette Notification under Section 3(3)(a)(III)(4) of the
Coal Mines (Nationalization) Act, 197319 stating as below:

19 For short ‘1973 Coal Act
[2024] 8 S.C.R. 1175

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

“MINISTRY OF COAL AND MINES
(Department of Coal)
NOTIFICATION
New Delhi, the 16th July, 2004
S.O. 824(E) - In exercise of the powers conferred
by item(4) of subclause (Ill) of clause (a) of
Sub-section (3) of Section 3 of the Coal Mines
(Nationalisation) Act, 1973 (26 of 1973) the
Central Government hereby specifies as an end
use the supply of coal from the coal mines of
Kiloni, Manoradeep and Baranj I-IV blocks by the
Karnataka EMTA Coal Mines Limited on an exclusive
basis to the Karnataka Power Corporation Limited
for generation of thermal power in their proposed
1000 MW (2 x 500 MW) TPS at Ballary, Karnataka
subject to condition that the Karnataka Power
Corporation Limited holds at least 26 per cent of
voting equity share capital of the Karnataka EMTA
Coal Mines Limited at all times.
[F.No. 13016/33/2003-CA]
APVN Sarma, Jt. Secy.”
3.2.3 On 08th December, 2004, the MoC, Government of India
issued a letter to KECML approving the Mining Plan
submitted by it for the Baranj Open Pit Project under
Section 5(2)(b) of the Mines and Mineral (Development &
Regulation) Act, 195720. The appellants herein have taken
a plea that the Mining Plan did not contain any provision
contrary to the JVA with respect to the rejects and what
KECML was required to do to dispose off the rejects,
was stipulated under Clause 5(2)(b) of the JVA which
required it to dispose off the rejects in an environment
friendly manner. It was submitted that there was no clause
in the Mining Plan that ran contrary to the JVA. The said
plea has however been disputed by the respondent-CBI.

20 For short ‘MMDR Act’
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3.3 FUEL SUPPLY AGREEMENT
3.3.1 Article 6 of the JVA stipulated execution of an Agreement
between KPCL and EMTA for supply of washed coal,
described as the ‘Fuel Supply Agreement21. The FSA
was executed on 09th May, 2007 and its relevant clauses
are as below:
FUEL SUPPLY AGREEMENT
‘THIS AGREEMENT made this ninth day of May two
thousand seven between KARNATAKA EMTA COAL
MINES LIMITED, …… called the “Supplier”…….of
the First Part and
KARNATAKA POWER CORPORATION LIMITED,
…. called the “Purchaser’….of the Second Part.
WITNESSETH AS FOLLOWS
a) WHEREAS Purchaser inter alia is engaged in
the business of generating power through its
various thermal, hydel, wind power stations
and is taking up a new thermal power plant
named as Bellary Thermal Power Station
(hereinafter referred to as BTPS), with an
initial capacity of 500 MW likely date of
commissioning is July, 2007.
b) AND WHEREAS the annual requirement of
coal at BTPS will be approximately 2 million
tonnes.
c) AND WHEREAS pursuant to the policy of
Govt. of India of leasing out coal mines to
power generating agencies for use as captive
coalmine(s) for their own consumption, the
Purchaser has been allocated mining block(s)
identified as Baranj I-IV, Manoradeep & Kiloni
vide allotment Letter No.47011/1(1)12002-
CPAM/CA dated 10.11.2003 . The Purchaser
has assigned and entrusted the responsibility

21 For short ‘FSA’
[2024] 8 S.C.R. 1177

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

to develop and operate the said coal mines to
the Supplier. For this purpose, the Purchaser
has entered into a Joint Venture Agreement
dated 13.9.2002 with, M/s. Eastern Minerals &
Trading Agency (in short EMTA hereinafter),
to form a joint venture company (hereinafter’
called the “Supplier”) for development and
operation of such coal) mines. The entire
amount of coal produced from such coal
mines shall be sold, transported and
delivered by the Supplier exclusively to the
Purchaser for use at BTPS in accordance
with the provisions of this Agreement.
xxxxx
ARTICLE 1
DEFINITIONS
xxxxx
“Coal” means washed coal with guaranteed
values as per Article-6 and satisfies quality
parameter laid down in Annexure -I attached
to this agreement.
xxxxx
“GCV (ADB)” means Gross Calorific value
on air dried basis in Kcal/Kg determined
through a Bomb Calorimeter as measured
at BTPS as per IS 1350 (Part- II).
xxxxx
“Joint Venture Agreement’’ means the
agreement dated 13.09.2002 entered into
between the Purchaser and M/s. Eastern
Minerals & Trading Agency to form a joint
venture company.
xxxxx
“Specified Coal” means washed coal as
defined in the Schedule of Specification
(Annexure I) of this Agreement.
xxxxx
1178 [2024] 8 S.C.R.

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ARTICLE 4
CONDITIONS PRECEDENT
4.1 The respective obligations of the Parties
under this Agreement shall be subject to the
satisfaction in full of each of the following
conditions precedent prior to Commencement
Date:
i) The Purchaser has assigned the mining rights
in favour of the Supplier
ii) The Supplier has obtained all the necessary
clearances and approvals required from the
concerned authorities regarding operation of
the Designated Coal Mines and submitted a
copy of same to the Purchaser.
iii) The Supplier has registered this Agreement
with the relevant authority at the time and
in the manner stipulated in the Monopolies
and Restrictive Trade Practices Act, 1969 as
amended from time to time, to the extent the
provisions are required to be registered.
xxxxx
ARTICLE 5
QUANTITY AND QUALITY
5.1 QUANTITY
The Supplier shall supply and the Purchaser shall
take coal in quantities of 2 Million Tonnes (+)/(-) 10%
per annum. The quantity may increase depending
on requirement of the Purchaser.……
5.2 QUANTITY
5.2.1 The Supplier shall ensure that it shall
supply the Washed Coal with guaranteed
value as per Article – 6 and satisfies quality
parameter laid down in Annexure-I attached to
this agreement to the Delivery Points without
any interruption and shall maintain quality of
[2024] 8 S.C.R. 1179

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

supply as required. The following procedure is
indicated in respect of Joint Sampling.
a) third party agency shall be appointed
jointly by the parties of the agreement for
sampling and analysis of coal received at
BTPS end….
b) The third party agency shall be required to
undertake sampling and analysis of coal as
per the provision of ISI/ BIS or mutually agreed
procedure.
c) The payment to the third party agency shall
be borne by the supplier.
d) In the absence of certification by the
independent Inspection agency for any rake,
KPCL is not liable for payment for such rake.
5.2.2 The Supplier shall take all reasonable
steps to ensure that shalesIstones are removed
from the coal and no lumpy and/ or oversized
coal is supplied and the quality of coal shall
fall within the parameters indicated in the
Annexure - I. The methodology for verifying the
incidence of stonesIshales shall be mutually agreed
to between the Purchaser and the Supplier. The
size of coal shall be less than 25 mm (0-2 mm
fine not >20%).
xxxxx
ARTICLE 6
CONTRACT PRICE OF COAL
6.1 The Purchaser shall purchase the entire quantity
of Specified Coal supplied to it at the commercial
terms and conditions stated herein below:
6.1.1 Price
a) Purchaser shall purchase the entire quantity
of specified coal supplied to BTPS at a price
of Rs. l 650.47 per tonne, the detailed break
1180 [2024] 8 S.C.R.

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up of which is as per Annexure - II attached
to this agreement.
xxxxx
6.1.3 Basis of payment and price adjustment
xxxxx
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.&
(c) Ash content 32% maximum
(d) Size of coal 0 to 25 mm with fines
(upto-2mm) not exceeding
20%
(e) Total moisture 6% minimum; 15 maximum
Suitable price adjustment would be carried out by
Purchaser for variation in properties compared to
the guaranteed value as indicated in the following
paragraphs.
xxxxx
ii) GCV (ARB)
a) No Pro rata price adjustment is allowed for the
OCV 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 case 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
Purchaser shall not be required to pay for such
supplies including freight and other incidental
charges. The coal supplied having GCV of
below 4000 Kcal/Kg will be consumed.
[2024] 8 S.C.R. 1181

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

Adjusted rate per Mt. is calculated as per formula
defined in Annexure-III
iii) The size of coal shall not exceed 0 to 25mm
with fines (0-2 mm) not exceeding 20%.....
xxxxx
ARTICLE 8
SAMPLING OF COAL AND ANALYSIS OF
QUALITY
8.1 The quality of coal shall be determined by
drawing coal samples from railway wagons on
receipt at KPCL power plants before unloading.
8.2 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.
8.3 The third party agency shall be required to
undertake sampling and analysis of coal as per the
provision of ISIIBIS or mutually agreed procedure.
8.4 The payment to the third party agency shall
be borne by the Supplier.
xxxxx
ARTICLE 10
PENALTY
10.1 The Supplier has agreed to commence
supply of coal to BTPS on commissioning which
has been rescheduled July 2007.
10.2 The delivery period stipulated in 10.1
above for the supply of coal as envisaged in
Article 5 shall be the essence of the contract.
In the event of failure to commence the delivery
of coal within the stipulated time specified above,
Purchaser shall impose a penalty at a rate of
1182 [2024] 8 S.C.R.

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l/2% of initial contract value of Rs.330.09 crores
i.e. Rs 1.65 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.
(emphasis added)
3.3.2 In terms of Articles 2 and 5 of the FSA, a Tripartite
Agreement was executed between KECML, KPCL and
M/s SGS India Private Limited22 on 20th June, 2008.
M/s SGS was appointed as a third-party agency for
purposes of sampling and analysis of the coal to be
received at BTPS.
3.3.3 For the sake of completion of narration, it may be
noted here that although the MoC had approved the
Mining Plan submitted by KECML on 08th December,
2004 and the FSA referred to above was executed on
09th May, 2007, the actual mining and coal production
could be commenced by KECML only in September,
2008 on account of the litigation initiated by M/s Central
India Power Company23 against the MoC in relation to
the coal block allocated to KPCL. In July, 2003 CIPCO
filed a writ petition24 before the Nagpur Bench of the
Bombay High Court seeking reallocation of coal blocks
allocated to KPCL. On 21st May, 2006, a status quo
order was passed by the High Court in the said petition
and KECML and KPCL were also made parties. The
said petition was finally dismissed by the High Court on
10th August, 2006 which dismissal order was upheld by
this Court on 05th January, 2007. Due to the status quo
order operating in all this duration, the coal production
could commence at site only in September, 2008 and
washed coal was supplied by KECML to the BTPS w.e.f.
December, 2008. Due to non-supply of washed coal by
KPCL as stipulated in Article 6(4) of the JVA and Article
10 of the FSA, KPCL imposed penalties on KECML for
the delay.

22 In short ‘SGS’
23 Hereinafter referred to as ‘CIPCO’
24 Writ Petition No. 2923 of 2003
[2024] 8 S.C.R. 1183

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

3.4 MEMORANDUM OF UNDERSTANDING
3.4.1 Since Article 5(2) of the JVA required the appellants to
establish a coal washery at the pithead to supply coal of
the required specification for the consumption of BTPS
and there were several layers of clearances required from
the authorities to establish the washery at the pithead,
it is the stand of the appellants that KECML entered
into a Memorandum of Understanding25 with M/s Gupta
Coalfields and Washeries Limited26 for washing of the
mined coal, transportation of raw coal, transportation of
washed coal from the washery to Majri Railway siding of
KECML and loading into the railway wagons for onward
despatch to BTPS. For the said purpose, GCWL agreed
to dedicate its Majri washery to KECML. Following are
the relevant terms of the aforesaid MoU:
“MEMORANDUM OF UNDERSTANDING’
“This MEMORANDUM OF UNDERSTANDING
is made and executed on this 20 th May of
December, 2008
BETWEEN
KARNATKA EMTA COAL MNINES LIMITED,
……. through its Director, Shri Bikash Mukherjee
herein after referred as ‘KECML’, …… assigns of
the FIRST PART.
AND
GUPTA COALFILEDS & WASHERIES LTD., ……
through its Managing Director, Shri Padmesh Gupta
……. assigns of the SECOND PART
xxxxx
NOW BOTH THE PARTIES HAVE AGREED TO
SIGN AN MOU TO UNDERTAKE THE ABOVE
ACTIVITIES WITHNESSETH AS UNDER –

25 For short ‘MoU’
26 Hereinafter referred to as ‘GCWL’
1184 [2024] 8 S.C.R.

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1. KECML has entered into a Coal Purchase
Agreement with KPCL dated 9th May, 2007,
whereby KECML shall require to supply
coal from the above designated coal mines
with the following parameters

a) GCV (ARB) 4500 Kcal/Kg
b) Permissible Max 4500 Kcal/Kg
variation & Min 4000 Kcal/Kg
c) Size 0-50 mm with fines
(upto -2 mm) not
exceeding 20%
d) Total moisture 6% minimum,
15% maximum
Suitable price adjustment (CIFD BTPS basis)
would be earned out for variation in properties
compared to the guaranteed values as follows
xxxxx
It has been agreed by the parties hereto that
the above parameters shall be maintained by
GCWL for onward supply of coal to BTPS of
KPCL by KECML
2. KECML has agreed to provide minimum 2
mtpa (Min 8000 tonnes on daily average basis)
raw coal to Majri washery of GCWL from their
Raw Coal Dump Yard. It shall be GCWL’s
responsibility to arrange/transport Raw Coal
from the mines to MAJRI washery process
the coal to achieve agreed specifications of
the washed coal, transportation of washed
coal to Majri railway siding to load minimum
two rakes daily, supervise the loading of
washed coal, onward delivery at BTPS
power plant and co-ordination.
xxxxx
4. GCWL has agreed to deliver washed coal of
following specifications –
[2024] 8 S.C.R. 1185

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

Ash (ABD) Less than 32 %
GCV (ARB) 4500 Kcal/Kg
Size 0-5 mm

5. Yield Parameters GCWL shall ensure,
broadly, of 90% if the ash content of the
raw coal is 35% to 36% and in the event
ash content of the raw coal is found to be
40%, the yield shall be 80%. However, after
analysis of the full seam of coal available
from the mine the yield percentage will be
settled on suitable terms.
xxxxx
7. KECML shall pay Rs. 90/- Per MT (excluding
all taxes as applicable) of raw coal towards
washing charges including charges for
loading washed coal to dumpers for
transportation to railway siding. All taxes
and duties are applicable shall be reimbursed
by KECML at actual. The above charges will
remain firm for 3 years ….
8. It will be the responsibility of GCWL to
transport raw coal from mines to washery
and washed coal from washery to KECML
siding and supervise the loading onto
railway wagons. The transportation rates
shall be decided mutually by both the parties
which shall be reimbursed by KECML at actual
KECML shall place indents with railways and
make rail freight payments etc, as per RR on
actual
xxxxx
12. That the rejects shall be the joint property of
KECML and GCWL and it shall be disposed
1186 [2024] 8 S.C.R.

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off/sold jointly at mutually agreed terms,
subject to compliance of rules/ regulations/
guidelines of Ministry of Coal, Government
of India, if applicable.
xxxxx”
3.4.2 The appellants have stated that the draft MoU was sent
to KPCL for its approval by Mr. Murlidhar Rao, the then
Director (Technical) of KPCL and Director of KECML and
after deliberations between 18th December, 2008 and
12th January, 2009, the same was finally approved and
ratified by the Board of KECML on 13th January, 2009. In
the meeting of the Board of Directors of KECML held on
13th January, 2009, those who had participated included
Mr. S.M Jaamdar, the then Managing Director of KPCL
and Chairman of KECML, Mr. R. Balasubramanian, the
then Executive Director and Company Secretary of KPCL
and Director of KECML, Mr. D.C. Sreedhar, the then
Director (Finance) of KPCL and Director of KECML, Mr.
U.K. Upadhyaya, Chairman and Managing Director of
EMTA and former MD of KECML (appellant No. 2 in the
appeals). In the Meeting held on 23rd February, 2010, the
Board of Directors of KECML subsequently concluded
that washing of raw coal was necessary since a specific
grade of coal was required by the BTPS for generation
of power and therefore, washed coal should continue
to be supplied on the same basis. The appellants have
also pointed out that GCWL was known to KPCL that
had earlier entered into an agreement with GCWL along
with two other washery operators for washing of coal
mined by Western Coalfields Limited. However, the
respondent-CBI has questioned the execution of the
MoU between KECML and GCWL, in particular, Clause
12 thereof.
3.5 WASHABILITY REPORT OF THE CENTRAL INSTITUTE OF
MINING AND FUEL RESEARCH, NAGPUR
3.5.1 In the year 2009, to check the statistics of the coal mine,
the appellants approached a Government Laboratory,
[2024] 8 S.C.R. 1187

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

namely, Central Institute of Mining and Fuel Research27
for testing of the Integrated Baranj Open Cast Mines28.
The team of officers from CIMFR visited the site, collected
100 MT of coal for testing and furnished a Detailed
Washability Report. The report states that the rejects did
not contain any useful c.v. as the GCV of the rejects was
1094 Kcal/Kg and the useful heat value was negative.
3.6 REVISED MINING PLAN
3.6.1 After the mining continued for about two years in terms
of the original Mining Plan submitted in the year 2004,
KPCL decided to increase the capacity of BTPS from 2.5
Mty to 5 Mty. As a result, the appellants were required to
prepare a revised Mining Plan for supplying the increased
mining demands. On 20th December, 2010, the appellants
addressed a letter to the MoC for seeking approval of the
revised Mining Plan. At that stage, a new technology for
utilization of the rejects for its carbon value was introduced,
described as the Fluidised Bed Combustion29. The letter
issued by the appellants to the MoC mentioned that the
rejects generated could be gainfully utilized for its carbon
content by generating power through FBC/CFBC power
plants of appropriate capacity. It is not in dispute that
the new technology of FBC could have been put to use
only when a plant in respect of the same was set up for
which several approvals would be required from various
departments besides the process of acquiring land for
setting up the plant spreading over four to five years, as a
power plant could not be installed within the mining lease
area. The appellants have pleaded that KPCL could not
have started using the rejects immediately upon receiving
approval of the revised Mining Plan and that the rejects
having optimum useful heat value/GCV i.e. 2500 Kcal/
kg, could have been used only by applying the FBC
technology after such a facility was set up.

27 In short ‘CIMFR’
28 In short ‘IBOCM’
29 For short FBC.
1188 [2024] 8 S.C.R.

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3.6.2 Vide letter dated 24th August, 2011, the MoC approved
the revised Mining Plan submitted by KECML whereafter
the process of obtaining preliminary approvals including
environmental clearance from the Ministry of Environment,
Forest and Climate Change, Government of India30 for
the enhanced capacity of 5 MTPA coal from 2.5 MTPA
was initiated. While the Terms of Reference was granted
by the MoEF&CC, the mandatory public hearing required
to obtain environment clearance could not be conducted
since this Court passed an order in the year 2014
deallocating all captive coal blocks. Before that, due to
disputes that had arisen between KECML and GCWL,
washing of coal was stopped at the washery of GCWL
w.e.f. 22nd May, 2012.
3.7 INFORMATION SUBMITTED BY KECML TO THE COAL
CONTROLLER
3.7.1 On 14th December, 2012, the Office of the Coal Controller
that falls under the MoC called upon the KECML to
furnish details in terms of the prescribed formats in
respect of the production, stock, despatch of coal to
the washery etc. Vide letter dated 16th January, 2013,
KECML furnished the detailed data as per the prescribed
format. The said letter stated that from December, 2008
to December, 2012, approximately 3,61,000 MT of rejects
was generated at the washery; that the ash content of
the raw coal varied from 35 per cent to 37 per cent and
the content of the washed coal varied from 32 per cent
to 34 per cent; that the yield of the washery was about
95 per cent to 96 per cent and the residual 4 per cent
of the raw coal were rejects whose ash content was
over 90 per cent and was therefore not marketable. It
was further stated that the quality of the rejects was
so poor that no records were maintained regarding its
utilization. However, the rejects were used to fill up low
land area of siding and road between coal blocks to the
washery and for pit dumping near the washery.

30 In short ‘MoEF&CC’
[2024] 8 S.C.R. 1189

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

3.7.2 To substantiate the statement made that the yield of the
washery was 95 to 96 per cent, the appellants relied
on the Washability Report prepared by CIMFR, Nagpur
unit dated 01st August, 2009 which records that IBOCM
coal is amenable to wash with yield varying from 90 to
98 per cent at the desired ash level of 32 per cent. The
Report has recorded that the GCV of the mined coal fit
for transporting to BPTS is 4464 Kcal/kg and that of the
rejects is 1094 Kcal/kg. The data prepared in a format
and submitted in a tabulated format by KECML to the
Coal Controller for the period between the year 2008-09
and 2012-13 is extracted below:
Sl. Year Production QTY OF COAL QTY OF COAL WASHED REJECTS REJECTS
No. DIRECTYLY DESPATCHED COAL PRODUCED CONSUMED
DESPTACHED TO WASHERY PRODUCED (APPROX.)
TO SIDING
1 2 3 4 5 6 7 8
1 2008 990839 7744 90436 860367 40069 30000
09
2 2009 2252358 0 2216334 21177107 98627 70000
10
3 2010 2274995 0 2368455 2263059 105396 70000
11
4 2011 2189869 0 2205395 2108000 97395 50000
12
5 2012 1832770 1606343 225056 205200 19856 20000
13
Total 9539831 1614087 7915676 7554333 361343 240000

Ash % of Raw coal varies from 35% to 37%
Ash % of wash coal varies from 32% to 34%
% age of yield of washed coal varies from 95-96%
7915676 X (35+37)/2 = 7554333 X (32+34)/2 + 361343 X (A)
where A= Ash% of Rejects,
Hence A = (284964336 - 249292989)/ 361343 = 98.7%
The quality of rejects is as good as stone and not saleable
Pertinently, the data regarding despatch of coal for washing has
been furnished only upto May, 2012 since a dispute had arisen
between KECML and GCWL thereafter. The second last column
mentions the total rejects produced at IBOCM as 3,61,343 MT31
and the rejects consumed as 2,40,000 MT.

31 Metric Tonnes
1190 [2024] 8 S.C.R.

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3.8 AUDIT OBJECTIONS RAISED BY THE COMPTROLLER AND
AUDITOR GENERAL32
3.8.1 On 31 st October, 2013, the Office of the Principal
Accountant General (E&RSA), Karnataka raised an
audit inquiry on KPCL on the subject of non-utilization
of the washery rejects and the resultant undue benefit
of ₹ 53.37 crores to a private company. The audit inquiry
noted that KECML had engaged a third party agency
namely, GCWL through a MoU for washing of coal and
Clause 12 of the MoU stipulated that rejects should be
the joint property of KECML and GCWL which ought
to be disposed of/sold jointly at mutually agreed terms
subject to compliance of the relevant rules, regulations/
guidelines issued by the MoC, if applicable. It was
stated that KECML had executed the MoU with GCWL
to dispose off the rejects without the concurrence of
KPCL and KPCL did not demand the washery rejects
from KECML either for its captive consumption or for
its disposal. Further, it was stated that no coal could
be sold/delivered/disposed of except for captive mining
purpose, i.e., power generation and with the previous
written approval of the Central Government.
3.8.2 The observations made by the CAG in Audit Inquiry
No. 18 are extracted below:
“We observed that
¾ Depending on the type of coal being washed
and the requirement of the captive user, the
rejects and middlings are generated from
washery. A study report indicates that washing
of D-grade coal generates rejects and middling
of F and G-grade, and such low quality coal
was also being used in power generation.
¾ The purpose of allocation of coal blocks
for captive use under section 3(3) of the
Coal Mines (Nationalisation) Act, 1973 is
not to enable free trading of coal by private

32 For short “CAG”
[2024] 8 S.C.R. 1191

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

companies. The basic concept of captive
mining permitted under the aforesaid Act is that
the coal obtained from a captive block shall be
used entirely and exclusively for the specified
and approved end use by the allocatee
Company and, therefore, the production of
surplus coal should not result in any undue
advantage to the captive block allocatee as
the coal block is allotted to them for use in
their end-use plant only and any additional
production from the block should be made
available to the Government for utilization.
¾ While allocating the coal block in November
2003, the Government directed the Company to
use the rejects for its own captive consumption.
¾ In reply to the clarification sought (October
2003) by the Ministry of Coal regarding detailed
plan about the use of middling, tailings and
rejects etc, the Company informed (October
2003) that the same was proposed to be used
for power generation with fluidized-bed boilers.
Thus, the inaction on the part of the Company
resulted in the KECML/EMTA disposing the coal
rejects without transferring the revenue to KPCL.
Considering the coal rejects as G-grade based on
GCV undue benefit afforded to the KECML/EMTA
worked out to Rs. 52.37 crore, as detailed below:
Year Coal Minimum Average CIL Loss (₹)
produced at quantity of rate of G
Baranj OCP rejects as per grade coal
(in Tonnes) MOU (10%) (Rs.)
2008-09 990839.026 99083.903 590 58459502.53
2009-10 2252358.28 225235.83 620 139646213.05
2010-11 2274994.46 227499.45 650 147874639.58
2011-12 2188869 218886.9 650 142276485.00
2012-13 570869.3 57086.93 620 35393896.60
(up to June
2012)
52,36,50,736.76

Facts and Figures may be confirmed”
1192 [2024] 8 S.C.R.

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3.8.3 Vide letter dated 17th December, 2013, KPCL submitted
the following reply to Audit Inquiry No. 18:
“Sl. Question KPCL Reply
No.
1. Audit Inquiry No. 18 The Audit objection is raised as if the
Sub: Non-utilisation of washery rejects by entire rejects have been appropriated
the company and resultant undue benefit of by KECML and that the rejects have a
Rs 52.37crores to private company. market value of Rs. 52.37 crores. These
are factually incorrect in view of the
In November 2003, Government of India following : -
allocated captive coal blocks in Wardha
Valley region to the Company to develop it as a) The assessment of washery rejects
source of supply to its thermal power plant al does not have any direct co-relation with
Bellary. In accordance with the requirement the quantity of coal produced at Integrated
of the Company, the JV Company (KECML) Baranj OCP, rather, the quantity sent
engaged (December 2008) a third party agency, to washery and the quantity actually
M/s Gupta Coalfields and Washeries Limited dispatched to the thermal power stations of
(GCWL), Nagpur through a Memorandum of KPCL after the processing in the washery
Understanding for washing of coal. Clause 12 are the two important quantities giving idea
of the MOU stipulated that the rejects should of reject generation at the washery. We are
be the joint property of KECML and GCWL furnishing below the year-wise quantity of
and it should be disposed off/ sold jointly at coal sent to washery from Integrated Baranj
mutually agreed terms, subject to compliance of OCP, the quantity of rejects generation
rules/regulations/guidelines of Ministry of Coal, and the quantity of coal finally dispatched
Government of India, if applicable. to KPCL.
The washing of coal was carried out till the end
of June 2012 before it was discontinued due to
dispute between the parties to the MOU.
KECML entered into MOU with GCWL to
dispose of the rejects without the concurrence
of the Company. Despite the fact that the
Company holds the right on the captive
coal blocks, no provision was made in the
FSA made by the Company with KECML for
supply of rejects/middling. It did not demand
the washery rejects from KECML either for
its captive consumption or for its disposal by Year Coal Minimum Average Loss (Rs.)
its own means with the approval of Central produced quantity CIL rate
Government. at Baranjof rejects of G
OCP (in as per grade
The conditions of allocation inter-alia included Tonnes) MOU coal
that if the coal was being washed, tailings, (10%) (Rs.)
middling or rejects, as the case may be, 2008-09 990839.026 99083.903 590 58459502.53
from washery should be used for captive 2009-10 2252358.28 225235.83 620 139646213.05
consumption only by the Company as approved 2010-11 2274994.46 227499.45 650 147874639.58
by the Central Government. Further, no coal 2011-12 2188869 218886.9 650 142276485.00
shall be sold, delivered, transferred or disposed 2012-13 570869.3 57086.93 620 35393896.60
of except for the stated captive mining purpose (up to
(power generation) and with the previous May
approval of the Central Government in writing. 2012)
52,36,50,736.76
We observed that:
> Depending on the type of coal being b) It may be noted that the said rejects
washed and the requirement of the captive are only Stones / Boulders not consistent
user, the rejects and middling are generated with the size of coal : ( - 25 mm) for which
from washery. A study report indicates that the boiler is designed, hardly have
[2024] 8 S.C.R. 1193

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

washing of D-grade coal generates rejects any calorific value. Therefore the said
and middling of F and G-grade, and such rejects have been used for leveling,
low quality coal was also being used in piling etc. towards facilitating Integrated
power generation. Baranj OCP.
> The purpose of allocation of coal blocks for c) The Audit comment is a generalized
captive use under section 3(3) of the Coal Mines’ observation without any factual support
(Nationalization) Act, 1973 is not to enable free and as such cannot be concluded that
trading of coal by private companies. The basic the washery rejects irrespective of the
concept of captive mining permitted under the geological location of the source of coal
aforesaid Act is that the coal obtained from would have Useful Heat Value (UHV) to
a captive block shall be used entirely and cater to the generation requirement. In
exclusively for the specified and approved end fact, the rejects generated in the present
use by the allocatee Company and, therefore, case are only shale and non- coal matter.
the production, of surplus coal should not result Hence the conclusion drawn by Audit
in any undue advantage to the captive block that the rejects are G- grade is not only
allocatee as the coal block is allotted to them arbitrary but also not based on the ground
for use in their end-use plant only and any geological realties.
additional production from the block should be
Thus, the abandonment of rejects at
made available to the Government for utilization.
the collieries end has been resorted
While allocating the coal block in November to based on its utility, as otherwise its
2003, the Government directed the Company to transportation would have imposed
use the rejects for its own captive consumption. additional burden on the Company.
> In reply to the clarification sought (October The abandonment of rejects is, therefore,
2003) by the Ministry of Coal regarding detailed in order.
plan about the use of middling, tailings and
rejects, etc, the Company informed (October
2003) that the same was proposed to be used
for power generation with fluidized-bed boilers.
Thus, the inaction on the part of the Company
resulted in the KECML / EMTA disposing the
coal rejects without transferring the revenue
to KPCL Considering the coal rejects as
G-grade base on GCV undue benefit afforded
to the KECML / EMTA worked out to Rs.52.37
crore, as detailed below.
Year Quantity Quantity Quantity of
sent to of rejects coal finally
Washery from generation dispatched to
integrated KPCL
Baranj OCP
2008-09 9,31,195.026 98,940.003 8,08,871.000
2009-10 22,16,334.815 71,891.838 21,68,827.000
2010-11 23,68,121.815 1,24,137.309 22,12,460.790
2011-12 23,68,121.995 33,081.099 21,63,569.650
2012-13 2,25,035.600 34,978.967 2,11,206.350
(up to
June 2012)
79,46,082.736 3,63,023.216 75,63,934.800

Though KPCL requested the CAG to drop the audit objection in
view of its clarification, it is a matter of record that the CAG did not
accept the explanation offered by KPCL. Instead, CAG observed in
its Audit Report for the year ending March, 2013 that coal rejects
1194 [2024] 8 S.C.R.

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worth ₹52.37 crore had been misappropriated by KECML and GCWL
on account of the inaction on the part of the KPCL.
3.9 PRELIMINARY INQUIRY REGISTRED BY RESPONDENT-CBI
3.9.1 On receiving the Report from the Office of the CAG,
KPCL dashed off a letter dated 31 st July, 2014 to
KECML seeking an account of the rejects generated
by washing of coal and demanded reimbursement of
the cost of the rejects. KECML responded vide letter
dated 14th August, 2014 reiterating therein that the
percentage of rejects generated at the washery were
only 4.39 per cent of the total coal produced at the
IBOCM and the said rejects did not possess any c.v.
having no carbon and only being stones/boulders.
Therefore, the same had been used at the site for
levelling, piling etc. for facilitation of smooth mining
operations at the IBOCM.
3.9.2 In the meantime, based on a Source Information
Report33 pertaining to some irregularities committed in
the allocation of coal blocks under the ‘Government
Dispensation’ category, failure to follow the due procedure
resulting in large private companies having connived with
public servants and gaining undue benefit a Preliminary
Inquiry34 was registered by the Superintendent of Police,
CBI on 28th September, 2012. In all, three Preliminary
Inquiries were registered namely, PE 2, PE 4 and
PE 5. The FIR35 subject matter of the present appeal
was registered by the respondent-CBI on 13th March,
201336 under Section 120-B read with Sections 409 and
420, IPC and under Section 13(2) read with 13(1)(d)
of the PC Act alleging substantive offences against the
appellants and other co-accused. Following are the fourteen
persons/entities who have been arrayed as accused by
the respondent-CBI:

33 ‘SIR-03/12
34 PE 5/2012-BS&FC, Delhi Coal Block Cases
35 FIR No. RC: 220 2015 E 0002
[2024] 8 S.C.R. 1195

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

FUNCTIONARIES OF KPCL
A-1 SM Jaamdar, (Rtd IAS and the then Managing Director Karnataka
Power Corporation Limited “(KPCL”) and Chairman of Karnataka
EMTA Coal Mines Ltd (“KECML”)
A-2 Balasubramanium, then Executive Director and Company
Secretary, KPCL and Director KECML
A-3 Muralidhar Rao, Director (Technical) KPCL, Director – KECML
A-4 DC Sreedharan, Director (Technical) KPCL and Director KECML
A-5 H.N. Narayana Prasad, the then Director (Technical) KPCL, and
Former Director KECML
FUNCTIONIARIES OF KECML
A-6 Ujjal Kumar Upadhyay, Chairman and MD EMTA Coal Ltd and
Managing Director of KECML
A-7 Bikash Mukherjee, Director EMTA and Former Director of KECML
A-8 Bishwanath Dutta, Director EMTA and Director KECML
A-9 Purajit Roy, Executive Director and CFO M/s EMTA Coal Ltd
A-10 Ashok Tooley, Director KECML
FUNCTIONARIES OF GCWL
A-11 Padmesh Gupta, CMD Gupta Coal Washeries Limited
CORPORATE ENTITIES & FUNCTIONARIES
A-12 Karnataka EMTA Coal Mines Ltd. (KECML)
A-13 M/s Eastern Minerals and Trading Agency (EMTA)
A-14 Gupta Coal Washeries Limited

Though the appellants have asserted that the respondent-CBI
has registered the complaint on coming across the Report of the
CAG, the said submission has been refuted by the respondent-
CBI who has pleaded that it had conducted an independent
investigation after registering the PE which was followed by
registering of the FIR.
3.10 LITIGATION BETWEEN KPCL AND KECML
3.10.1 Aggrieved by the letter dated 31st July, 2014 addressed
by KPCL to KECML, KECML filed two writ petitions37
before the High Court of Karnataka praying inter alia
for quashing of the letters dated 31st July, 2014 and
24 th December, 2014 issued by KPCL. In the writ

37 Writ Petition 2995 to 2996 of 2016 (GM-MMS) c/w Writ Petition Nos. 2997 to 2998 of 2016 (GM-MMS)
1196 [2024] 8 S.C.R.

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petitions38 EMTA and KECML assailed a demand of
₹ 52,37,00,000/- (Rupees Fifty two crore thirty seven lakh
only) raised by KPCL towards the value of the coal rejects,
as arbitrary. Challenge was also laid to the decision taken
by KPCL to deduct ₹ 90 (Rupees Ninety) per MT towards
non-washing of coal, in terms of its communications
dated 23rd November, 2013 and 29th January, 2014. Vide
Judgment dated 24th March, 2016 the Division Bench
of the High Court allowed both the writ petitions39 and
quashed the communications issued by KPCL to KECML.
Further, KPCL was restrained from initiating any demand
against KECML on the basis of the report of the CAG and
called upon to reimburse the amounts already deducted
by KPCL towards non-washing of coal.
3.10.2 For the sake of completion of the narrative pertaining to the
aforesaid litigation, it is pertinent to note that the aforesaid
judgement dated 24th March, 2016, was challenged by
KPCL before this Court by preferring Petitions for Special
Leave to Appeal.40 Vide Judgment dated 20th May, 2022,
both the Civil Appeals41 were dismissed.
3.10.3 On 31st July 2017, the respondent-CBI submitted a
request to the Ministry of Personnel Public Grievances
and Pension,42 Government of India for grant of sanction
to prosecute Mr. Yogendra Tripathi (IAS), Managing
Director, KPCL and Mr. R. Nagaraja, Director (Finance)
of KPCL and nominee Director on the Board of KECML
under Section 19 of the PC Act. However, the Board
of KPCL, which was the Sanctioning Authority, refused
sanction for prosecution of Mr. R. Nagaraja by passing
a detailed order.
3.10.4 After examining the order passed by the Board of KPCL
refusing to grant sanction to prosecute Mr. R. Nagaraja,

38 Ibid
39 ibid
40 Petition for Special Leave to Appeal (C) No. 26367-26370/2016
41 Civil Appeal Nos. 5401-5404/2017
42 For short ‘MoPP&P’
[2024] 8 S.C.R. 1197

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

the Department of Personnel & Training,43 Government of
India addressed a letter dated 16th September, 2018 to the
respondent–CBI stating that the Competent Authority i.e.,
the Central Government had denied sanction for prosecution
of Mr. Yogendra Tripathi, the then Managing Director of
KPCL. It is a matter of record that the respondent–CBI
did not take any steps to challenge the decision taken by
the Sanctioning Authority and the Competent Authority
refusing permission to grant sanction for the prosecution
of Mr. R. Nagaraja and Mr. Yogendra Tripathi.
3.10.5 The Charge-sheet was finally filed by the respondent–CBI
against 14 persons/entities alleging that they had illegally
disposed of the coal rejects in IBOCM. A Supplementary
Chargesheet was filed on 4th November, 2019. Out of
the two charges, one charge relating to allegations of
recovery of payment for washing charges was dropped
by the respondent-CBI.
3.10.6 On 1st September, 2021, the appellants filed an application
before the learned Single Judge under Section 227 read
with Section 239 of the Criminal Procedure Code44 for
discharging them in the case. By the common impugned
order dated 24th December, 2021, the said application
was dismissed and charges were framed against them
on 3rd March, 2022, under Section 409 IPC and 120 (B)
r/w Section 13(1)(c), 13(1)(d) r/w Section 13(2) PC Act
i.e. resulting in filing of the present appeals.
C. SUBMISSIONS
4. ARGUMENTS BY COUNSEL FOR THE APPELLANTS
Following are the arguments advanced by Mr. Ranjit Kumar, learned
Senior Advocate appearing for the appellant No.1 and Mr. Abhimanyu
Bhandari, learned counsel appearing for the appellant No.2 :-
4.1 That KPCL did not have any right over the rejects produced
from the mine and therefore, cannot claim any entitlement

43 For short ‘DoPT’
44 In short ‘Cr.P.C’
1198 [2024] 8 S.C.R.

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thereto. The terms and conditions stipulated in the JVA dated
13th September, 2002, in particular Articles 5(1)(b), 5(2)(b),
5(13) and 6(3)(c) and Annexure I, when read together, would
demonstrate that the obligation cast on the KECML was limited
to providing KPCL specified quality of “washing coal” containing
a guaranteed value and having a specified heat value and
KECML was only required to dispose off the rejects to avoid
any environmental hazards.
4.2 That the original Mining Plan which was submitted by KECML
and was approved by the MoC in the year 2004, did not contain
any specific provision relating to how the rejects were to be
disposed off and nor did the allocation letter issued by the MoC
to KPCL state anything in this regard. For this, reliance has been
placed on 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 coal rejects. The
reply furnished by the Minister was in the negative along with
a clarification given that formulation of a policy of disposal of
surplus coal, by-products and middling stock rejects from coal
blocks was under the consideration of the Government.
4.3 Citing Clauses 5.2 and 5.2.2 of the FSA dated 09th May,
2007 and the definition clauses in respect of the expressions,
“Purchaser” and “specified coal”, it has been urged that none of
the clauses in the FSA have stated that KPCL would purchase
or claim rights over the rejects and that KECML was to ensure
that “shales/stones” are removed from the coal and the quality
of coal meets the parameters indicated in Annexure I.
4.4. To fortify the submission that KECML was only required to
dispose off the coal rejects in an environment friendly manner
and that KPCL would have no right over the rejects or claim
any entitlement over them, reference has been made to the
decision of the Division Bench of the Karnataka High Court
in the case of KPCL v. Aryan Energy Private Limited45 and
Others46 and the clause in the Agreement governing KPCL

45 In short ‘AEPL’
46 COMAP No. 12, 13, 14 and 15 and 2020 decided on 22nd July, 2021
[2024] 8 S.C.R. 1199

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

and AEPL to contend that it was similar to the present case
inasmuch as like KECML, AEPL was also required to dispose
off the rejects in a manner that would satisfy environmental
regulations. In the above case the Karnataka High Court has
held that the clauses of the Agreement between the parties
appearing before it showed that coal rejects were the property
of AEPL and KPCL had no claim over it and that the term
regarding disposal of coal rejects was imposed by KPCL only
to ensure compliance of the environmental regulations.
4.4.1 Notably, the aforesaid judgement of the High Court
was challenged by KPCL before this Court by way of
petition for special leave to appeal47. The said petition
was disposed of by this Court on 26th April, 2024, noting
that during the pendency of the petitions, the parties had
settled their disputes amongst themselves and part of
the decretal amount deposited by KPCL to discharge its
liability towards supply of washed coal by AEPL along
with interest etc. was directed to be released in favour
of AEPL in terms of the Compromise Deed.
4.5. That the Washability Report of CIMFR, Nagpur for the year 2009
had stated that the rejects had a GCV of 1094 Kcal/kg and
less and therefore, the same could not have been utilized in
the BTPS. For the said reason, KECML had used the rejects
for captive consumption of the mine i.e. for levelling, piling etc.
The very same Report was also referred to by KPCL in its reply
to the audit objections raised by CAG to state that no loss has
been caused to KPCL since the rejects were in the nature of
stones and boulders and did not have useful heat value.
4.6. To substantiate their submission that the rejects did not have
the requisite GCV for being utilized in the BTPS, learned
counsel have quoted a Circular issued by the NITI Aayog in the
year 2020 which states that coal rejects having GCV of 1500
Kcal/kg are to be used in back filling of mines and can be used
in construction of highways, roads etc. whereas rejects having
GCV in the range of 1500 Kcal/kg to 2200 Kcal/Kg, can be
used in FPC Boilers.

47 Petition for Special Leave to Appeal (Civil) No. 395-398 of 2022
1200 [2024] 8 S.C.R.

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4.7. That at the time of filing the chargesheet on 04th January, 2018,
the respondent-CBI completely ignored the judgement dated
24th March, 2016 passed by the Karnataka High Court in the
writ petition filed by the appellants against KPCL wherein it has
been clearly held that KPCL does not have any right over the
rejects generated during the process of mining and resultantly,
the demand letter dated 31th July, 2014, issued by KPCL was
set aside. The said judgement has also been upheld by this
Court vide judgement dated 20th May, 2022.
4.8. That KPCL has been blowing hot and cold. First, it had filed
objections to the quantification of coal rejects as recorded by
the CAG in its Report but when its objections were rejected by
the CAG, it changed its stand and proceeded to raise an illegal
demand on the appellants on the basis of the very same CAG
Report, which has been quashed by the High Court.
4.9. That both, the Karnataka High Court and this Court having
quashed the demands made by KPCL in respect of the value
of rejects to the tune of ₹ 52 Crore, no case has been made out
by the respondent-CBI to prosecute the appellants particularly
when on the advice of the Central Vigilance Commission,48 the
Central Government refused to grant sanction for the prosecution
of Mr. Yogendra Tripathi (IAS), Managing Director, KPCL and
Mr. R. Nagaraja, Director (Finance) of KPCL and nominee
Director on the Board of KECML. A different treatment cannot
be meted out to the appellants.
4.10. That the respondent-CBI has solely relied on the Report of
the CAG of 2013 to launch its prosecution in the year 2015.
However, the Report of the CAG has not been approved by
the Parliament in accordance with the procedure prescribed
under Section 19(A) and other provisions of the Comptroller and
Auditor General’s (Duties, Powers and Conditions of Service)
Act, 197149 read with Articles 148 to 151 of the Constitution
of India.

48 In short ‘CVC’
49 In short ‘CAG Act’
[2024] 8 S.C.R. 1201

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

4.11. That the analysis of the rejects and the manner in which loss
was allegedly caused to KPCL, has primarily been arrived at by
the respondent – CBI from the Report of the CAG and once this
Court has held that the Report of CAG cannot be the basis for
launching prosecution against the appellants, the entire basis
of launching the prosecution is eroded.
4.12. Stating that contrary to the prescribed procedure that
contemplates that the Report of the CAG in relation to the
accounts of a Government Company shall be submitted to the
Government and the Central Government/State Government, as
the case may be, shall place the said Report before each House
of the Parliament/State Legislature and the Public Accounts
Committee/the Joint Parliamentary Committee is required to
scrutinize the said Report. In the instant case, the Report of
the CAG has not been accepted either by the Public Accounts
Committee or by the Committee of Public Undertakings or
by the Joint Parliamentary Committee nor has it been tabled
before each House of the Parliament. It is only when the
Report is tabled in the Parliament and duly scrutinized and the
Government offers its view on the Report, can it form the basis
for initiating any action. Decisions in Centre for Public Interest
Litigation v. Union of India,50 Arun Kumar Aggarwal v. Union
of India51 and Pathan Mohammed Suleman Rehmatkhan v.
State of Gujarat52 have been cited to bring home the argument
that when the Report of the CAG is subject to scrutiny by the
Public Accounts Committee/Joint Parliamentary Committee, it
would not be proper to refer to its findings or the conclusions
drawn therein.
4.13. That the learned Special Judge, CBI has blindly accepted the
charge levelled by the respondent-CBI quantifying the loss
purportedly caused to KPCL on account of illegal sale of rejects
at ₹49,03,54,159/- (Rupees Forty nine crore three lakh fifty four
thousand one hundred and fifty nine only). The observations
made in para 104 of the impugned judgement to the effect that

50 [2012] 3 SCR 147 : (2012) 3 SCC 1
51 [2013] 3 SCR 508 : (2013) 7 SCC 1
52 [2013] 12 SCR 446 : (2014) 4 SCC 156
1202 [2024] 8 S.C.R.

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the respondent-CBI has quantified the rejects on the basis of
the documents of KECML and has calculated the loss on the
basis of the rate of the lowest grade of coal prevailing at the
relevant point of time is therefore, devoid of merits. Reliance
has been placed on the information in the Coal Directory of
India published by the MoC for the year 2010-2011 that has
categorized coal and coke and clarified that w.e.f. January, 2011,
by virtue of a notification issued by the MoC, there has been a
switchover from the existing Useful Heat Value53 based system
of grading and pricing of non-coking coal produced in India to
fully variable GCV system.
4.13.1. Under the JVA/FSA, KECML was required to supply
Grade ‘D’ coal to KPCL. As per the Coal Directory of
India, 2010-2011, Grade ‘D’ coal in terms of the old
grades of non-coking coal would be equivalent to Grade
‘G-7’ and ‘G-8’ under the new grades of non-coking
coal. The GCV range in respect of Grade ‘G-7’ coal
has been fixed between 5201 Kcal/kg and 5500 Kcal/
kg and in respect of Grade ‘G-8’ coal, between 4901
Kcal/kg and 5200 Kcal/kg. In the instant case, even as
per the Report of the CIFMR, Nagpur, the coal rejects
were found to be below either of the aforesaid grades of
non-coking coal, having been pegged at a GCV of 1094
Kcal/kg. Therefore, it is contended that the chargesheet
filed by the respondent-CBI quantifying the loss suffered
by KPCL at ₹49,03,54,159/- (Rupees Forty nine crore
three lakh fifty four thousand one hundred and fifty nine
only), is without any basis and contrary to the records.
4.14. That the Coal Controller did not raise any issue with regard to the
disposal of the rejects and the respondent-CBI has neither made
the Coal Controller a witness or an accused in the present case.
4.15. The judgements in Radheshyam Kejriwal v. State of West
Bengal and Another; 54 Ashoo Surendranath Tewari v.

53 In short UHV
54 [2011] 4 SCR 889 : (2011) 3 SCC 581
[2024] 8 S.C.R. 1203

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

Deputy Superintendent of Police, EOW, CBI and Another;55
J Sekar alias Sekar Reddy v. Directorate of Enforcement;56
and Prem Raj v. Poonamma Menon & Another 57 have been
cited to argue that it is settled law that where a party has been
exonerated on merits in civil adjudication, criminal prosecution
cannot be permitted to continue on the same set of facts and
circumstances.
4.16. That the respondent – CBI has failed to produce any document
to demonstrate that the accused Nos.1 to 5 had made any
demand for illegal gratification or there was acceptance of
any such demand made. In the absence of proof of demand
and acceptance of illegal gratification by the public servant, no
offence is made out under Section 13(1)(d) of the PC Act. For
this proposition, reliance has been placed on B. Jayaraj v State
of Andhra Pradesh;58 P. Satyanarayana Murthy v District
Inspector of Police, State of Andhra Pradesh and Another;59
State through Central Bureau of Investigation v Dr Anup
Kumar Srivastava;60 K. Shanthamma v State of Telangana;61
Neeraj Dutta v State (NCT of Delhi);62 Soundarajan v State
Rep. by the Inspector of Police Vigilance Anticorruption
Dindigul.63
4.17. Lastly, it has been strenuously argued that sanction to prosecute
Mr. Yogendra Tripathi and Mr. R. Nagaraja64 having been denied
by the Sanctioning Authority i.e. the Board of Directors of KPCL
and the CVC and the said orders having been upheld by the
DoPT and no steps having been taken by the respondent – CBI
to challenge the said decision, a different yardstick cannot be
adopted in respect of the appellants. The matter having attained
finality, the appellants deserve to be discharged.

55 (2020) 9 SCC 636
56 [2022] 3 SCR 698 : (2022) 7 SCC 370
57 [2024] 4 SCR 29 : 2024 SCC OnLine SC 483
58 [2014] 4 SCR 554 : (2014) 13 SCC 55
59 (2015) 10 SCC 152
60 [2017] 9 SCR 341 : (2017) 15 SCC 560
61 (2022) 4 SCC 574
62 [2023] 2 SCR 997: (2023) 4 SCC 731
63 [2023] 4 SCR 133 : (2023) SCC OnLine SC 424
64 (both of who were serving officers in KPCL at the relevant point of time)
1204 [2024] 8 S.C.R.

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5. ARGUMENTS BY COUNSEL FOR THE RESPONDENT-CBI
5.1 Mr. Cheema, learned Senior Advocate appearing for the
respondent – CBI has refuted each and every argument
advanced by learned counsel for the appellants. He submitted
that the appellants have unduly placed heavy reliance on the
fact that the original Mining Plan was approved by the MoC on
08th December, 2004 and the said Mining Plan did not contain
any specific clause for disposal of rejects. Similarly, unnecessary
reference has been made by the appellants to Rule 22(5) of
the Mineral Concession Rules, 1960 to demonstrate what
information is required to be disclosed in a Mining Plan. It is
submitted that the argument advanced by the appellants that
in the absence of any stipulation in the Mining Plan regarding
disposal of the rejects, there could be no inference of commission
of any offence or a shadow cast on the conduct of the appellants,
is flawed.
5.2 Learned counsel for the respondent-CBI has canvassed that
there was a latent error in the assumption of the appellants that
it was for the MoC to incorporate a clause regarding disposal of
the rejects in the Mining Plan and in the absence of any such
clause, KPCL or KECML could not be held responsible for the
disposal of the rejects, which was done in an illegal manner or
that when the Mining Plan was silent regarding the manner in
which the rejects were to be disposed of, it was for KPCL and
KECML to deal with the rejects in an appropriate manner. The
aforesaid presumptions are stated to be without any basis and
opposed to the letter dated 10th November, 2003, addressed
by the MoC to KPCL that lays down the conditions of allotment
of the captive coal blocks in para 3 that specifically states in
sub-para (iv) as follows:
“3 The allotment of the captive blocks will also be subject
to the following conditions:·
xxxxx
(iv) The allocattee would furnish to this Ministry detailed
plan for disposal of unusable containing carbon material
obtained during the process of a mining or any process
thereafter including washing etc. so as to avoid any need
[2024] 8 S.C.R. 1205

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

for disposal of the same through sale etc. at a later stage,
within 30 days of receipt of this letter or submission of
mining plan whichever is earlier.”
5.3 As per the respondent-CBI, it was the duty of KPCL to furnish the
detailed plan for the disposal of the rejects to the Ministry within
30 days of the receipt of the letter dated 10th November, 2003
or submission of the Mining Plan, whichever is earlier and this
requirement was independent of the Mining Plan. Therefore,
absence of any plans mentioned in the Mining Plan to deal
with the rejects would not exonerate the appellants who
remained under an obligation to furnish a detailed plan for the
disposal of the rejects in terms of the Allocation letter dated
10th November, 2003 issued by the MoC.
5.4 Referring to the letter dated 31st January, 2006 addressed
by the MoC to the Secretary, Industries, Energy and Labour
Department, State of Maharashtra, learned counsel for the
respondent-CBI submitted that the appellants were aware of
the fact that the rejects could not have been disposed of by
KECML since the said letter had conveyed the approval of the
Central Government to grant mining lease for coal in three
coal blocks in favour of KECML with certain stipulations, one
of which was as follows:
“ii) No coal mined from the allocated blocs shall be
sold, delivered, transferred of disposed of except for
the aforestated captive mining purposes except with the
previous approval of the Central Government”
5.5 To reinforce the above plea, reliance has also been placed on
the statement of Dr. Manmohan Seam, cited as witness No. 12
who had prepared the Mining Plan in question and stated that
in case of washing of coal the allocatees are required to obtain
an approval from the MoC in terms of the letter of allotment and
since the MoC has not allocated any coal block for washing
of coal alone, the expression used in para 3 (iii) of the letter
dated 10th November, 2003 written by the MoC has to be read
and understood to mean ‘washing-cum-end use’. Therefore,
emphasis on non-incorporation of a detailed plan for the disposal
of the rejects in the original Mining Plan has no relevance and
cannot offer any defence to the appellants.
1206 [2024] 8 S.C.R.

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5.6 It has next been submitted that the order refusing grant of
sanction to prosecute Mr. Yogendra Tripathi (IAS), Managing
Director, KPCL and Mr. R. Nagaraja, Director (Finance) of
KPCL and nominee Director on the Board of KECML by the
Sanctioning Authority and the Competent Authority is not a
relevant circumstance at the stage of consideration and framing
of charge and no benefit can be given to the appellants on
that basis. The orders passed by the Competent Authority
refusing to grant sanction are sought to be described as mere
administrative orders. Learned counsel argued that in any
event, the two officers mentioned above were public servants
and the factum of the Competent Authority having refused to
grant sanction to prosecute them cannot enure to the benefit of
the appellants herein who are not public servants and cannot
seek any parity with public servants.
5.7 Learned counsel for the respondent-CBI points out that the
Order on Charge impugned by the appellants herein was also
challenged by the accused No. 1 to 5 (functionaries of KPCL
who had since retired), by filing a Petition for Special Leave to
Appeal65 in this Court which was dismissed as withdrawn vide
order dated 09th February, 2024.
5.8 It is submitted that at the stage of framing of charges, the trial
Court must confine itself to the material brought on record by way
of the chargesheet filed under Section 173 Cr.P.C and merely
because some other Authority has taken a different view with
regard to the complicity of some co-accused who are public
servants and denied the request made by the respondent-CBI
for sanctioning their prosecution, is irrelevant.
5.9 As for case law cited by learned counsel for the appellants to
substantiate their submission that sanction under Section 197
Cr.P.C is mandatory for prosecuting public servants (A-1 to
A-5 in the instant case), the submission made is that for the
said purpose, facts and circumstances of each case have to
be examined and there cannot be any universal findings in
this regard.

65 SLP (Crl.) Dy No. 20094/2023 titled S.M. Jaamdar & Others v. CBI
[2024] 8 S.C.R. 1207

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

5.10 Learned counsel for the respondent – CBI has strenuously
disputed as incorrect, the argument advanced on behalf of the
appellants that the respondent – CBI has filed the Chargesheet
solely on the basis of the CAG Report and submitted that a
reading of the FIR dated 31st March, 2015 would demonstrate
that this case was not triggered by the Report of the CAG. In
fact, PE 5/2012 was registered on 28th September, 2012 in
connection with the irregularities noticed in the allocation of
coal blocks under the Government Dispensation route for the
period between 1993 and 2006. Asserting that PE 5 did not
emanate from the CAG Report and originated independently
thereof, learned counsel submitted that during the course of
the preliminary enquiry, several documents including the CAG
Report were examined by the respondent – CBI. In fact, the
respondent – CBI had conducted its own independent enquiry
into the allegations for arriving at a conclusion relating to the
commission of the offence or quantification of the extent of
misappropriation. In view of the aforesaid submission, the
contentions of the appellants based on a reading of the provisions
of the CAG Act and the Constitution of India are stated to be
extraneous to the controversy raised before this Court just as
the case law cited by them regarding the nature of the CAG
Report. Learned counsel has cited the judgment of the Gauhati
High Court in M.S Associates and others v. Union of India66
to urge that even if the CAG Report has not been placed before
the Parliament/State Legislature, contents thereof can serve as
information for starting an investigation into a criminal offence.
5.11 Coming next to the judgement passed by the Karnataka High
Court in the case of Aryan Energy (supra) and cited by the other
side, it is submitted on behalf of the respondent-CBI that the said
judgment was passed on 22nd July, 2021, much after institution
of the chargesheet by the respondent–CBI in the present case.
Learned counsel submits that the said judgement addresses a
situation where no criminal case has been registered against
any of the parties appearing before the High Court. The main
dispute in that matter was relating to the entitlement of KPCL
to the value of the coal rejects. The Commercial Court had

66 (2005) SCC Online Gau 308; (2005) 275 ITR 502
1208 [2024] 8 S.C.R.

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decreed the suits in favour of AEPL by holding that as per the
contractual stipulations between the parties, AEPL was only
required to dispose off the coal rejects in a manner that would
satisfy environmental regulations and KPCL was not entitled
to the value of the coal rejects. Learned counsel submits that
the terminology used in the contract governing the parties was
different and therefore the said judgement does not have any
relevance to the facts of the instant case.
5.12 Learned counsel for the respondent-CBI goes on to argue that
even the judgement dated 24th March, 2016, passed by the
Karnataka High Court in a writ petition filed by KECML against
KPCL cannot be of any assistance to the appellants for the
reason that the respondent – CBI had not been impleaded as
a party in the said proceedings and the said judgement has
confined itself to the demands made by KPCL for recovery of
amounts from KECML towards the value of the coal rejects.
Further, the FIR in the present case was registered on
13th March, 2015 whereas the judgement was delivered by the
Karnataka High Court one year later, on 24th March, 2016. By
the time the appeal preferred by KPCL against the judgment of
the High Court was dismissed by this Court on 20th May, 2022,
Charges had already been framed by the learned Special Judge,
CBI against the appellants on 24th December, 2021.
5.13 Learned counsel for the respondent–CBI has emphatically
argued that Clause 12 of the MoU dated 20th December, 2008
executed between KECML and GCWL states that the rejects
shall be the joint property of KECML and GCWL and it shall be
disposed of/sold jointly at mutually agreed terms. It is contended
that the above clause clearly demonstrates the underlying intent
of the appellants to conspire with GCWL to sell the rejects in
the market and cause monetary loss to KPCL by depriving it
of the value of the rejects.
5.14 The attention of this Court has also been drawn to the letter dated
10th September, 2009, issued by KECML to GCWL enclosing
therewith a Debit Note of even date for a sum of ₹ 4,30,38,500/-
(Rupees Four crore thirty lakh thirty eight thousand five hundred
only) towards “disposal of foreign material during washing” and
it has been argued that the said Debit Note was raised on the
[2024] 8 S.C.R. 1209

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

instructions of Mr. Purujit Roy (accused No. 9), as stated by
Mr. N.K. Ganorkar (PW 26) who was one of the two signatories
of the said Debit Note and Mr. S.K. Gupta, an employee of
GCWL (PW 16).
5.15 Learned counsel for the respondent–CBI also referred to a
Certificate dated 12th July, 2010 issued by Mr. Avijit Sarkar
who was working in the Finance and Accounts Department
of KECML. The said Certificate refers to the MoU dated
20th December, 2008 and states that the rejects generated in
the process of washing of coal undertaken by GCWL at their
washery at Majiri during 2009-10, is owned by GCWL.
5.16 Lastly, learned counsel for the respondent-CBI has canvassed
that the findings returned in a civil proceeding are not binding
in a prosecution founded on similar allegations and it is for the
criminal Court to arrive at any decision on its own and not to
reach any conclusion by reference to any previous decisions
relating to the parties which cannot be treated as binding upon
it. In support of the said submission, he has cited The King
Emperor v. Khawaja Nazir Ahmed.67 It has thus been argued
by the respondent-CBI that the present appeals are devoid of
merits and deserve to be dismissed.
5.17 On the scope of Section 227, Cr.P.C. and the power of the
Special Judge to pass an order of discharge, learned counsel
for the respondent-CBI has cited the decisions in Union of
India v. Prafulla Kumar Samal and Another 68 and Niranjan
Singh Karam Singh v. Jitendra Bhimraj Bijjaya And Others.69
The decisions in State of Maharashtra v. Som Nath Thapa,70
State of Tamil Nadu v. N. Suresh Rajan and Others71 have
been relied on to make a point that at the stage of framing of
charges, the Court cannot appraise the evidence as is done at
the time of trial and the Court must proceed on an assumption
that the materials brought on record by the prosecution are

67 AIR (1945) PC 18
68 [1979] 2 SCR 229 : (1979) 3 SCC 4
69 [1990] 3 SCR 633 : (1990) 4 SCC 76
70 [1996] Supp. 1 SCR 189 : (1996) 4 SCC 659
71 [2014] 1 SCR 135 : (2014) 11 SCC 709
1210 [2024] 8 S.C.R.

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true. Alluding to the judgment in State of Bihar v. Ramesh
Singh,72 learned counsel submitted that at the initial stage of
the trial, if there is a strong suspicion that gives an impression
to the Court for drawing a presumption that the accused has
committed an offence, it is not open for the Court to state that
there is insufficient ground for proceeding against the accused.
5.18 Both sides have also relied on K.G. Premshanker v. Inspector
of Police and Another 73 which discusses the effect of a decision
of a civil Court on criminal proceedings against the same person
pertaining to the same cause in the context of Sections 40 to
43 of the Indian Evidence Act, 1872 as to which judgments of
the courts are relevant and the extent of the relevance.
6. REJOINDER ARGUMENTS BY COUNSEL FOR THE APPELLANTS
In their rejoinder arguments, learned counsel for the appellants have
disputed the submissions made on behalf of the respondent-CBI and
reiterated the pleas taken by them. We do not propose to repeat
the said submissions except for touching on the aspects which were
not addressed earlier.
6.1 It has been stated that the MoU dated 20th December, 2008
was executed to meet the urgent requirement of coal for BTPS.
The purpose of incorporating Clause 12 was to keep a check
on the rejects generated by GCWL during the washing of coal.
The said clause specifically mentions that any disposal/sale
of the rejects would be subject to compliances of the relevant
rules and regulations. Learned counsel submitted that it is the
case of the respondent-CBI itself that GCWL sold the rejects by
mixing it with good coal at their washery. There is no document
produced by the respondent-CBI to connect the rejects sold
by GCWL to the appellants. The appellants cannot be roped
in on the bald statements made by the functionaries of GCWL
connecting them with the coal purchased in e-auction from
WCL and sold off.
6.2 As for the Debit Note dated 21st March, 2009, it is submitted
that the same was recovered from GCWL and not KECML.

72 [1978] 1 SCR 257 : (1977) 4 SCC 39
73 [2002] Supp. 2 SCR 350 : (2002) 8 SCC 87
[2024] 8 S.C.R. 1211

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

The said Debit Note was neither acted upon nor approved by
the Board of Directors of KECML and there is no supporting
correspondence relating to the Debit Note to demonstrate any
complicity on the part of the appellants.
6.3 The appellants have disputed the Certificate dated 12th July, 2010,
purportedly issued by Mr. Avijit Sarkar to GCWL stating that the
email was despatched by the said employee from his personal
email id and not from the official email id of KECML and he was
not authorized by the Board of Directors of KECML to issue
any such email. Even otherwise, the Certificate runs contrary to
Clause 12 of the MoU, as it purports to give 100% entitlement
of the rejects to GCWL.
6.4 During the course of rejoining, arguments have also been
advanced on the quantum of the rejects which as per the
appellants, has been wrongly quantified by the respondent–CBI
at 8,03,859.277 MT. Learned counsel contended that the said
figure has been pulled out by the respondent-CBI from the CAG
Report though it claims it has not relied on it to register the PE,
followed by registration of the FIR. The attention of this Court
has been drawn to the mismatch between the quantity of rejects
for a period of two months (April and May of the year, 2012-13)
claimed to be 207,837.117 MT by referring to a Certificate dated
07th June, 2016 issued by Mr. S.N. Roy, Statutory Auditor of
KECML vis-à-vis the quantity of rejects generated for a period
of twelve months for the previous year (2011-2012) that came
to only 74,511.709 MT. Learned counsel submitted that in reply
to the Audit query raised by the CAG, KECML had specifically
stated that the total production of coal upto May, 2012 was
79,46,082.736 MT which included coal and rejects. This figure
has not been disputed by the respondent – CBI. The quantity
of the rejects upto May, 2012 was 75,63,934.800 MT of the
washed coal which figure has also not been disputed by the
respondent-CBI. An inference would therefore have to be drawn
that, at best, the difference between both the aforesaid figures
would be the extent of the rejects of coal. It has been urged that
once the extent of production and the quantum of coal sent to
KPCL has not been disputed, there is no question of inflating
the quantum of rejects, as alleged. The respondent–CBI has
therefore blindly accepted the version put forth by GCWL that it
1212 [2024] 8 S.C.R.

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had supplied good coal to KPCL from its own pocket, which suits
its purpose because when the washing activity was stopped at
Majri on 22nd May, 2012, disputes had arisen between KECML
and GCWL, that are pending adjudication before the Arbitration
Tribunal and GCWL has inflated its claims to raise exorbitant
demands on KECML.
D. DISCUSSION AND ANALYSIS
7.1 We have given our anxious consideration to the arguments
advanced by learned counsel for the parties, gone through the
records and perused the impugned orders. The grievance of the
appellants arises from the decision taken by the learned Special
Judge, CBI to reject the application moved by them for seeking
discharge in the matter and proceeding to frame charges against
them alongwith the other co-accused for having entered into
a criminal conspiracy with an object to facilitate illegal sale of
coal rejects by GCWL that were generated during washing of
coal and to have gained undue pecuniary advantage therefrom.
7.2 The genesis of the investigation conducted by the respondent–
CBI in respect of the coal block allocation lies in the judgement
of this Court dated 25th August 2014 rendered in Manohar Lal
Sharma vs. Principal Secretary and Another.74 The petitioner
therein filed a petition under Article 32 of the Constitution of
India and challenged the allocation of coal blocks to Private
Companies for the period between 1993 and 2011 on the
ground that they violated the principles of trusteeship of natural
resources by giving away precious resources as largesse without
complying with the mandatory provisions of the MMDR Act and
1973 Coal Act. After a detailed scrutiny, this Court declared that
the entire allocation of coal blocks as per the recommendations
made by the Screening Committee from the year 1993 onwards
through the Government dispensation route suffered from
arbitrariness, and that no fair and transparent procedure had
been adopted.
7.3 In the course of the proceedings in the aforesaid matter, the
respondent–CBI registered a Preliminary inquiry to investigate

74 [2014] 8 SCR 446 : (2014) 9 SCC 516
[2024] 8 S.C.R. 1213

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

the irregularities in allocation of coal blocks under the
Government Dispensation Route and to State PSUs, who were
allowed to form JVA by joining hands with Private Companies
for purposes of development and operation of coal mines. PE 5
was registered on 28th September, 2012. It related to all the
coal block allocations made during the year 1993 to 2006. It
is not in dispute that the coal allocation in favour of KPCL was
also a subject matter of investigation, but nothing untoward
was noticed in that. The JVA between KPCL and KECML also
withstood the test of scrutiny. As a result, allocation of coal
blocks made in favour of KPCL were not interfered with.
8. DID CBI PRIMARILY RELY ON THE AUDIT REPORT OF THE CAG?
8.1 We shall first examine the submission made by the appellants
that the respondent–CBI solely relied on the Audit report of the
CAG of 2013 to launch its prosecution in the year 2015. This
contention has been strongly refuted by the respondent–CBI
that has asserted that the Department had on its own initiative,
come across several documents including the CAG Report
which exposed commission of the offence and the extent of
misappropriation of money by the appellants and the other
co-accused and it had not solely relied on the CAG Report to
commence the investigation.
8.2 In the course of hearing, this Court had directed learned counsel
for the respondent–CBI to produce the files of the Department on
the basis whereof, three Preliminary Inquiries were registered –
PE-2/2012/EO-I,75 PE-4/2012/EO-I76 and PE-5/2012/EO-I.77 It
transpires from the said records that PE-2 was registered on
02nd June, 2012 on the directions issued by the CVC that had
forwarded a complaint received by it alleging irregularities in the
allotment of coal blocks to Private Companies during the period
2006 to 2009 and in awarding a contract by State owned PSUs
for the development of coal blocks allocated to them under the
Government dispensation. Subsequently, two more references
were received by the respondent–CBI from the CVC and vide OM

75 In short PE-2
76 In short PE-3
77 In short PE-4
1214 [2024] 8 S.C.R.

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dated 19th September, 2012, the CVC forwarded a third complaint
received from seven Members of Parliament (Lok Sabha) and
directed the respondent – CBI to conduct a preliminary inquiry.
8.3 The file produced by the respondent–CBI reveals that premised
on the Source Information Report78 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 JVA executed
between 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 28th September, 2012,
was entirely different and had no relationship with the JVA
and other agreements executed by KPCL and KECML. No
other documents have been filed by the respondent – CBI to
demonstrate that it had initiated an independent inquiry into
the mining operations of KPCL or that it was during the course
of its inquiry into the affairs of KPCL and KECML that it had
stumbled upon some irregularities in the MoU executed between
KECML with GCWL. Quite clearly, the respondent–CBI made
the Audit Report of the CAG submitted in 2013, a launching pad
for initiating the prosecution of the appellants in respect of the
allegations levelled in the present case and subsequently sought
to substantiate them by delving into the records maintained by
KPCL, KECML and GCWL. In other words, there was no move
within the Department to investigate KPCL or KECML before
2015. The PE’s registered in the year 2012 did not inculpate
the appellants in any manner. The entire focus of the said
PE’s was on the larger issue of irregularities in the allocation
of coal blocks through the Government dispensation route. In
this background, the respondent–CBI cannot be heard to state

78 For short ‘SIR’
[2024] 8 S.C.R. 1215

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

that CBI was independently investigating the matter at hand
well before 2015 or the Audit Report of the CAG of 2013 was
not the trigger point for commencing the investigation.
9. COULD THE AUDIT REPORT OF THE CAG FASTEN ANY LIABILITY
ON KECML?
9.1 Coming next to the CAG Report, as much hinges on the said
Report, we may note that the same was considered by the
Division Bench of the High Court of Karnataka in its judgement
dated 24th March, 2016, wherein, it was noticed that there was
no dispute between KPCL and KECML regarding the obligations
cast on them under the contracts for the development of
captive coal blocks and for supply of coal for consumption
at the Thermal Power Station (BPCL) located in the State of
Karnataka until the CAG submitted an Audit Report for the year
ending March, 2013. The High Court took note of the Report
of the CAG which stated that the total production of coal from
one of the open cast mines between 2008-09 and June 2012
was 80.78 lacs MT and a minimum quantity of coal rejects
ought to be 10% of the total production which would come to
8.28 lacs MT which financially translated into ₹52,37,00,000/-
(Rupees Fifty Two Crores Thirty Seven Lacs only). Based
on the above analysis, the CAG raised an audit objection
and called upon KPCL to explain the loss of ₹52,37,00,000/-
(Rupees Fifty Two Crores Thirty Seven Lacs only) allegedly
caused to the public exchequer, on account of the rejects being
disposed of in terms of a MoU executed between KECML and
GCWL. The stand taken by KPCL was also noted by the court.
KPCL submitted its Audit Objections to the said Report stating
inter alia that the valuation of the rejects was erroneous; that
assessment of washery rejects did not have any co-relation
with the quantity of coal produced at the open coal mines;
that the rejects generated in the mining operation were only
stones and boulders and could not be used for generation of
electricity at BPCL and lastly, that all the rejects were used
for levelling and piling work within the mines for better mining
operations. However, all the said objections were rejected by
the CAG that maintained its stand in the final Report.
9.2 The High Court observed that at that stage, KPCL did a
sudden summersault. Faced with the Audit Report of the CAG,
1216 [2024] 8 S.C.R.

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KPCL proceeded to raise a demand on the appellants seeking
reimbursement to the tune of ₹52,37,00,000/- (Rupees Fifty
two crores thirty seven lacs only) as cost of the rejects and
threatened KECML that in case of default of payment, recovery
would commence from their running bills. This made KECML
file two writ petitions, which were allowed by the High Court
with the following observations:
xxxxxxx
“36. We find that the report of CAG cannot be the sole basis
for any liability being caused or for that matter the sole
basis for the prosecution to be launched. However, mere
drawing up of FIR by the CBI against unknown officials
of KPCL, EMTA and KEMTA cannot provide legal basis
or impetus for unilateral demand by KPCL for recovery of
₹52,37,00,000/- (Rupees Fifty Two Crores Thirty Seven
Lakh) only. We hold that such action is arbitrary and
unsustainable in law.”
9.3. The aforesaid judgement was assailed by KPCL by approaching
this Court. The said appeals were dismissed by a three Judges
Bench of this Court of which one of us (Hon’ble Ms. Hima Kohli, J)
was a member with the observations that the Audit Report
of the CAG appeared to have been the starting point for the
entire dispute between the parties. When the CAG Report
was first submitted, KPCL had itself raised objections to the
quantification of the coal rejects by the CAG but on its objections
being turned down, KPCL raised a demand on KECML seeking
reimbursement on the basis of very same CAG Report to which
it had not so long ago, filed objections.
9.4. The observations made by this Court in the captioned decision
are germane and are extracted below:
“13. The present matter pertains to a tender that was
awarded by the appellant to EMTA nearly twenty years
ago, in the year 2002. The CAG report that appears
to have been the starting point for the entire dispute
between the parties is dated March, 2013, close to a
decade back. In such circumstances, to even advert to
arguments on the maintainability of the writ petitions
would be unjust to the parties involved.
[2024] 8 S.C.R. 1217

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

14. Coming to the merits of the appeal, from the facts,
it appears that in the first instance, when the CAG
report was first submitted, the appellant itself had raised
objections to the quantification of coal rejects arrived at
by the CAG. However, when the audit objections were
rejected by the CAG, and the final report was made
available, the appellant demanded reimbursement from
KEMTA based on the same CAG report to which it had
filed objections. Such a change of stand by the appellant
has not been sufficiently explained.
15. Additionally, a bare perusal of the clauses contained
in the various agreements entered into between the
parties does not indicate that such deductions could
be made for the purposes of washing charges. There
does not appear to be any specification laid down as to
the method required to be adopted for washing of coal.
16. No material has been placed on record by the
appellant to suggest that there was ever any problem
with respect to the quality of coal being supplied by
KEMTA to the appellant. Rather, the impugned order
suggests that coal supplied by KEMTA was utilized by
the appellant in its thermal power plants in order to
generate electricity.
17. Taking into consideration the above facts and
circumstances, we are of the opinion that no material
has been brought to the notice of this Court that would
compel us to interfere with the impugned common
judgment passed by the High Court in exercise of our
jurisdiction under Article 136 of the Constitution.
18. Accordingly, the Civil Appeals filed by the appellant
are dismissed.”
9.5. We are therefore of the opinion that this 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
1218 [2024] 8 S.C.R.

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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
respondent–CBI was not a party in the aforesaid proceedings.
The chronology of the events speak for themselves and need
no further elaboration.
10. IMPORT OF THE JUDGMENT DATED 24TH MARCH, 2016 OF THE
KARNATAKA HIGH COURT
10.1. Coming next to the submission made by learned counsel for
the respondent that the judgement dated 24th March, 2016
passed by the Karnataka High Court in a writ petition filed
by KECML against KPCL is of no consequence, as the said
judgment was confined to examining the demands made by
KPCL on KECML for reimbursement towards the value of the
coal rejects, the same is found to be erroneous. It is well-settled
that in a case of exoneration on merits in relation to adjudication
proceedings in a civil matter where the allegations are found
to be unsustainable and the party is held as innocent, criminal
prosecution on the same set of facts and circumstances cannot
be permitted to continue. In Radheshyam Kejriwal (supra),
a three judges Bench of this Court reconciled the conflict
between the view taken in Standard Chartered Bank(1) v.
Directorate of Enforcement79 and Collector of Customs
v. L.R. Melwani 80 on the one hand where it was held that
adjudication proceedings and criminal proceedings are two
independent proceedings and both can go on simultaneously
and findings in the adjudication proceedings is not binding on
the criminal proceedings and the judgments in Uttam Chand
v. ITO,81 G.L. Didwania v. ITO,82 K.C. Builders v. CIT 83 where
the view taken was that when there is a categorical finding in
the adjudication proceedings exonerating a person which is
binding and conclusive, the prosecution cannot be allowed to

79 [2006] 2 SCR 709 : (2006) 4 SCC 278
80 AIR 1970 SC 962
81 (1982) 2 SCC 543
82 (1995) Supp(2) 724
83 [2004] 1 SCR 1134 : (2004) 2 SCC 731
[2024] 8 S.C.R. 1219

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

stand, this Court summarized the ratio of the decisions in the
following words:
“38. The ratio which can be culled out from these
decisions can broadly be stated as follows:
(i) Adjudication proceedings and criminal prosecution
can be launched simultaneously;
(ii) Decision in adjudication proceedings is not necessary
before initiating criminal prosecution;
(iii) Adjudication proceedings and criminal proceedings
are independent in nature to each other;
(iv) The finding against the person facing prosecution
in the adjudication proceedings is not binding on the
proceeding for criminal prosecution;
(v) Adjudication proceedings by the Enforcement
Directorate is not prosecution by a competent court
of law to attract the provisions of Article 20(2) of the
Constitution or Section 300 of the Code of Criminal
Procedure;
(vi) The finding in the adjudication proceedings in favour
of the person facing trial for identical violation will
depend upon the nature of finding. If the exoneration
in adjudication proceedings is on technical ground and
not on merit, prosecution may continue; and
(vii) In case of exoneration, however, on merits where
the allegation is found to be not sustainable at all and
the person held innocent, criminal prosecution on the
same set of facts and circumstances cannot be allowed
to continue, the underlying principle being the higher
standard of proof in criminal cases.
39. In our opinion, therefore, the yardstick would
be to judge as to whether the allegation in the
adjudication proceedings as well as the proceeding
for prosecution is identical and the exoneration
of the person concerned in the adjudication
proceedings is on merits. In case it is found on merit
1220 [2024] 8 S.C.R.

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that there is no contravention of the provisions of
the Act in the adjudication proceedings, the trial
of the person concerned shall be an abuse of the
process of the court.”
[emphasis added]
The aforesaid view also finds resonance in Ashoo Surendranath
Tewari (supra) and J Sekar alias Sekar Reddy(supra).
10.2. We are of the view that if there was any breach of contract or
default on the part of KECML, KPCL was well empowered to
determine the lease. However, KPCL did not do so. Instead,
on being confronted with the Audit Objections taken by CAG,
it raised a demand on KECML for the value of the coal rejects.
This demand was quashed and set aside by the Karnataka
High Court and this Court.
10.3. On applying the decisions cited above to the facts of the instant
case, this Court cannot turn a blind eye to the view taken in
the judgement dated 24th March, 2016 passed by the Division
Bench of the High Court of Karnataka in a dispute directly arising
between KPCL and KECML pertaining to the very same cause
of action based on the obligations cast on both the parties under
various agreements executed for the development of captive
coal blocks and for supply of coal, which was finally upheld
by this Court vide judgement dated 20th May, 2022. The said
judgments have cleared KECML of any blame. On the same
set of facts and logic, we are of the opinion that no criminality
can be attributed to the appellants.
11. SANCTITY OF AN AUDIT REPORT IN LAW
11.1. As the sanctity of the Audit Report of the CAG of 2013 has
been questioned by the appellants, we propose to examine
this aspect. Before the year 1971, the CAG used to function
under the Government of India (Audit and Accounts Order),
1936 as adopted by the Government of India (Provisional
Constitution) Order, 1947. This was followed by the promulgation
of the Comptroller and Auditor General’s (Duties, Powers and
Conditions of Service) Act, 197184. By virtue of Section 26 of the

84 For short ‘the CAG Act’
[2024] 8 S.C.R. 1221

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

CAG Act, the earlier Order of 1936 was repealed. Section 10 of
the CAG Act requires the CAG to compile the accounts of the
Union and the States and on the basis of the said accounts, to
prepare an annual account for being submitted to the President
of India or the Governor of the State/Administrator of the Union
Territory, as the case may be. The scope of the audit of the
Union and the States has been stated in Section 13 of the
CAG Act.
11.2. Article 149 of the Constitution of India defines the duties and
powers of the CAG and provides thus:
“149. Duties and powers of the Comptroller and
Auditor-General
The Comptroller and Auditor-General shall perform
such duties and exercise such powers in relation to
the “accounts of the Union and of the States and of
any other authority or body as may be prescribed by or
under any law made by Parliament and, until provision
in that behalf is so made, shall perform such duties
and exercise such powers in relation to the accounts
of the Union and of the States as were conferred on or
exercisable by the Auditor-General of India immediately
before the commencement of this Constitution in relation
to the accounts of the Dominion of India and of the
Provinces respectively.”
11.3 The duties of the CAG have been described and discussed
at some length in the Arun Kumar Aggarwal (supra) in the
following words:
“60. The audit of the Union and the States is under
Section 13 of the Act. The scope of the audit extends to
the audit of all expenditure so as to ascertain whether
the monies shown in the accounts as having been
disbursed were legally available for such disbursement
and whether the expenditure conforms to the authority
which governs it. The CAG has to satisfy himself
that the rules and procedures designed to secure an
effective check on the assessment, collection and proper
allocation of revenue are being duly observed under
1222 [2024] 8 S.C.R.

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Section 16. The CAG also has to examine decisions
which have financial implications including the propriety
of the decision making.
61. The reports of the CAG are required to be submitted
to the President, who shall cause them to be laid
before each House of Parliament, as provided under
Article 151(1). In relation to the States, reports are
submitted to the Governor, who shall cause them to be
laid before the legislature of the State, as per Article
151(2) of the Constitution. When reports are received in
Parliament, they are scrutinised by the Public Accounts
Committee (PAC).
62. The PAC is established in accordance with Rule 308
of the Rules of Procedure and Conduct of Business in
Lok Sabha. The function of the PAC is to examine the
accounts of the Union and the report of the CAG. The
PAC shall be principally concerned whether the policy
is carried out efficiently, effectively and economically,
rather than with the merits of government policy. Its
main functions are to see that public monies are
applied for the purposes prescribed by Parliament, that
extravagance and waste are minimised and that sound
financial practices are encouraged in estimating and
contracting, and in administration generally. The PAC
also has the power to receive evidence, the power to
send for persons, papers and record and can receive
oral evidence on solemn affirmation. Once the report
is prepared, the report of the PAC is presented to the
House.
xxxxx
68. We may, however, point out that since the report
is from a constitutional functionary, it commands
respect and cannot be brushed aside as such, but
it is equally important to examine the comments
what respective Ministries have to offer on the
CAG’s Report. The Ministry can always point out,
if there is any mistake in the CAG’s report or the
CAG has inappropriately appreciated the various
[2024] 8 S.C.R. 1223

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

issues. For instance, we cannot as such accept
the CAG report in the instant case.”
[emphasis added]
A similar view has been expressed in Pathan Mohammed
Suleman Rehmatkhan (supra) and Centre for Public Interest
Litigation (supra).
11.4. It is, therefore, evident that the recommendations of the PAC are
premised on the response that is received from the concerned
Ministries and the Action Taken Reports which includes the
replies furnished by the Government and the comments of
the PAC to the said replies. Finally, it is for the Parliament to
comment on the CAG’s Report after it receives the report of
the PAC.
11.5. In the instant case, admittedly the aforesaid procedure has not
been followed. As noticed above, 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. 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.
12. DENIAL OF SANCTIONS BY THE SANCTIONING AUTHORITIES
AND THE EFFECT ON THE APPELLANTS
12.1.It is relevant to note that the very same Audit objections taken
by the CAG and relied upon by the respondent–CBI to allege
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conspiracy and loss to the public exchequer were thoroughly
examined and found to be meritless by two separate set of
Sanctioning Authorities. When it came to Mr. R. Nagaraja, the
then Director (Finance) of KPCL and the nominee Director
on the Board of KECML, the Sanctioning Authority, i.e., the
Board of KPCL went through several documents during its
deliberations including the MoU between the KECML and
GCWL forwarded by the respondent–CBI for seeking sanction
to prosecute him. The reasons for holding that the CAG Report
was without any factual basis, were elaborately dealt with as
below:
“DETAILED REPORT OF THE BOARD OF KPCL IN
RELATION TO THE CBI REPORT DATED 28.07.2017
AS REGARDS SHRI R. NAGARAJA
xxxxx
1.8 There is an Memorandum of Understanding dated
20.12.2008 between Gupta Coal Fields and Washeries
Ltd (‘GCWL’) and KECML under which GCWL was
required to wash and supply the coal of required
specification to the Power Plant of KPCL in respect
of coal mined by KECML. Clause 12 of the said MoU
stipulates that “the rejects generated shall be the joint
property of KECML and GCWL and can be disposed off
/ sold at mutually agreed terms subject to compliance
of rules / regulations / guidelines of Ministry of Coal,
Government of India, if applicable”. KPCL allowed
KECML to sign an MoU with Gupta under which rejects
belonging to KPCL was put under the joint ownership of
Gupta and KECML by virtue of Clause 12. Gupta has
sold those rejects resulting in an illegal gain of Rs.52.37
crores to Gupta (as per CAG) and loss to KPCL. The
Board of KECML which conspired to insert Clause 12
of the MoU did not take any protective / mitigative
measures to prevent the loss despite it being raised at
a lower level. The facts in relation to the above offence
are elaborated in detail herein below.
xxxxx
[2024] 8 S.C.R. 1225

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

B. Consideration of the report of CBI dated
27.07.2017 (along with annexures) by the Board
of KPCL and their Report thereon
2. The entire matter including the 344 documents
produced along with the Report and the witness
statements of 67 witnesses have been perused by
the members of the Board. The Board has also
considered the applicable law on the point.
3. The offence is complained of by Shri R. Nagaraja
in his capacity as a nominee of KPCL in the Board
of KECML. It is the matter of fact that the nominees
of KPCL who have been appointed to the Board
of KECML are not persons well versed in mining
matters. As KPCL was not capable of handling
mining operations, a joint Venture Company was
formed. The Board of KECML and the nominees
of KPCL on the Board entirely depended on
the inputs provided by the Managing Director,
Statutory Auditor and other personnel for making
their decisions.
4. The Mining Plan for the operationalization of
the mine was prepared by Dr. Seam who was
a Ministry of Coal official and not an employee
of KECML or KPCL. The Mining Plan was
approved by the Ministry of Coal when it did
not contain any provisions for disposal of
the rejects. In such a situation, the Board of
Directors of KECML and especially the KPCL
nominees (A-1 to A-7) could not be blamed for
the non-compliance of the Allotment Letter and
there is no act of omission or commission on
the part of KPCL’s employees including Shri
R. Nagaraja.
5. A perusal of the KPCL Office Notes (Document
No.199 to 202) for the period indicates that by way
of letter dated 12.01.2009, the Managing Director of
KPCL had specifically raised the issue of whether
washing of coal is required or not. If washing was
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not necessary, then the question of generation
of rejects would not arise at all. Therefore, after
taking into account the office note generated by
Shri Purushottam, Shri R. Nagaraja had sought to
examine whether washing is required at all. Hence,
Shri R. Nagaraja has acted with great prudence
to ensure that no loss is caused to KPCL under
the directions of Dr. S.M. Jaamdar, MD, KPCL.
6. If washing of coal was not required, then the
MoU with Gupta was not required to be approved
inasmuch as the main purpose of the agreement
was to start the washing process. Although the
MoU was ratified, it could not be operationalized
specifically Clause 12 of the MoU was not ratified
by the Board of KECML. Conditional ratification of
MoU does not mean that the Board has dishonestly
refrained from protecting the interest of KPCL.
(See Board minutes of KECML at Document
No.232)
7. From the reading of the Clause 12, it appears
that the fact that there was no concluded
contract vis-à-vis of rejects inasmuch it was
understood that it was to be sold on ‘mutually
agreed terms’ and ‘subject to legal clearances’.
This implies that GCWL and KECML had to
mutually agree for the terms of the sale and
same had to be approved by Ministry of Coal.
Given the fact that the MoU was only conditionally
ratified, it was incumbent upon the officials of
KECML that before they agree to any terms for
the sale of the rejects that they had to bring the
matter up to the Board of KECML. The subsequent
events indicate that even the officials of KECML
were of the same understanding.
8. Even assuming that the Clause 12 of the MoU
was approved, another aspect of the matter
which has to be noted is that Clause 12 of
the MoU does not violate the terms of the
[2024] 8 S.C.R. 1227

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

Allotment Letter inasmuch as it specifically
required that the approval of the Ministry of
Coal be obtained before such a disposal. A
bare reading of the Clause 12 does not indicate
any illegality a sought to be alleged by the
CBI. Therefore, the approval of the MoU in the
Board Meeting on 13.01.2009 cannot be said to
be an act of negligence or error in judgment and
no imputation of any wrongdoing can be imposed
any KPCL nominee present in the Board Meeting
on 13.01.2009.
xxxxx
10. Additionally, KECML wrote a letter wherein
it sought for a waiver from meeting the
specification if raw coal was supplied. The
difficulty for the Management of KPCL was that
if the raw coal did not match the specification,
it would not be utilization for the generation
of power. This would result in stoppage of
generation resulting in power crisis in the
State of Karnataka. The better alternative would
have been to wait for the certificate of the Coal
Controller regarding whether the raw coal met
the requirements of KPCL of not. Hence, no
confirmation was given. This was a managerial
decision taken in the best interest of the State of
Karnataka as the power generation could not be
compromised to save washing cost. The cost of
procurement of power would be tremendous
and outweighed any temporary disadvantage
caused by not abiding by the Board Minutes
of 13.06.2009. This decision was vindicated
by the letter issued by the Coal Controller’s
Office on 09.12.2009 wherein it concluded that
to obtain the agreed parameter of coal quality,
washing would be required. Therefore, it cannot
be said that there was an act of omission or
negligence or error in judgment on part of the
KPCL nominees on the Board of KECML. The
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decision was taken keeping the best interests
of KPCL in mind and cannot be faulted.
xxxxx
16. The contention of CBI that there is a violation of
the allotment order that tailings and rejects are
the property of KPCL and should be utilized only
for its end use of power generation appears to be
based on a strict interpretation of the allotment
conditions. Technically, Bellary Thermal Plant of
500 MW capacity is designed to use pulverized
coal for firing and coal of reasonable quality. As
such the condition that middlings, tailings &
rejects should be used for power generation
by KPCL is neither feasible nor appropriate. On
the other hand, since disposal of rejects is an
environmental issue, KPCL has insisted that
the same should be subject to compliance of
environmental norms. When KPCL was not in a
position to use the reject for power generation,
the onus is on the mining operator to dispose
of the same as permitted under law. Given the
facts as stated above, there cannot be any act of
negligence on part of the nominees of KPCL in
this regard as well.
17. The CAG report is without factual basis for the
following reasons:
i) The quantum of rejects is assumed as 10% of
the coal based on MoU whereas as per actuals it
was 4.39% as evident from the Coal Controller’s
certificate, Statements of inward and outward
movements of Coal as submitted by GCWL.
ii) Without even knowing the calorific value of the
rejects, it has been assumed to be G Grade
coal. Even going by the statement of Shri
Padmesh Gupta of GCWL, the rejects were
of such a low calorific value that it could not
be sold without blending. Hence, it could not
[2024] 8 S.C.R. 1229

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

have been of G grade. Hence, the basis of the
calculation is wrong.
xxxxx
20. The assumption of the CBI that the exact
quantity of rejects that have been sold off
cannot be ascertained is a self-serving
statement inasmuch as for the purpose of
blending of coal, Gupta has to purchase the
raw coal / washed coal and pay royalty / sales
tax on the same whereas there is no sales tax
/ royalty paid on the rejects. With this number,
it is easily possible to arrive at the exact quantity
of reject coal. As the quantity of reject coal
generated / available at Majri Washery as per
the Stock statement far exceeds the reject
coal quantity claimed to be generated by the
washing of KECML’s coal, in order to divert
other rejects as KECML’s rejects, the absurdly
high amount has been claimed. Hence, there is
absolutely no evidence to show that any reject has
been sold and if so, what is the quantity of rejects
sold. In such a situation, there is no basis for
assuming that KPCL has suffered any unlawful
loss or that GCWL has gained unlawfully during
this process.
21. CBI has produced a Debit Note No.KECML/DN/08-
09/09 dated 31.03.2009 for Rs.4,30,38,500/- which
was recovered at GCWL (and not at KECML) and
there is a statement from GCWL that this Debit Note
was not honoured. An examination of the Debit
Note, Annual Accounts of KECML for 2008-09
and other documents produced along with the
Report would indicate that this Debit Note is a
fabricated document for the following reasons:
a. The Note is generated as on the last date of the
financial year 2008-2009 but is forwarded only in
the next financial year in September 2009 indicating
that it is an afterthought.
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b. This Debit Note does not find a mention in the
Annual Accounts of 2008-2009 i.e. it should have
created an income stream for KECML.
c. If the Debit Note was a genuine document, then
KECML had to classify the sales of washer rejects
of 86,077 MT as “other income” in the Annual
Accounts. However, it is shown as washing loss.
d. There are no corresponding Debit Notes of this
nature (viz. For foreign material) amongst the
several admitted Debit Notes and no mention
of this Debit Note or such an arrangement for
subsequent years.
e. KECML officials have written emails asking for
accounts of the stock and Gupta has stated that
the rejects are still lying with them.
22. There are two types of rejects as reflected in the
Annual accounts. One is the rejects lost due to
stones, boulders etc. for which no royalty was
paid. These rejects were not even transported
to Gupta and are not classified as ‘washery
loss’. The washery loss is evident from the
Coal Controller’s certificates.
xxxxx
38. To say the least, there is no evidence whatsoever
that is collected by the investigator that would
indicate that there was either any request or a
demand by the public servant concerned for a
valuable thing or a pecuniary advantage at any
point of time upon the beneficiary for any reason
whatsoever. A mere omission on the part of the
public servant or a negligent act on his part which
has enured to the beneficiary cannot be said to act
of misconduct on the part of the public servant to
bring him within the ambit of Section 13(1) (d) of
the Prevention of Corruption Act, 1988.
xxxxxx
[2024] 8 S.C.R. 1231

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

48. Shri R. Nagaraja has an impeccable and
unblemished service record in his 27 years
of service as an officer and he has held many
important and sensitive posts during his
service span in KPCL. Any action against him
on the basis of a charge devoid of any merit and
substance would not only tarnish his otherwise
impeccable reputation but will also have a
bearing on the morale of the public services.
49. For the reasons enumerated in para 3 to
48 above, we, the Board of KPCL, hereby
exercising our powers under Section 19 of the
Prevention of Corruption Act, 1988 refuse to
grant sanction to prosecute Shri R. Nagaraja for
the offences alleged to have been committed
under Sections 120B r/w 409 and 420 of the
Indian Penal Code, 1860 and Sections 13(2) read
with 13(1)(d) of the Prevention of Corruption
Act, 1988.”
12.2. It is apparent from the above that after Sanctioning Authority
had scrutinized all the relevant documents and the depositions
as many as of 67 witnesses submitted by the respondent-CBI,
it observed that there was no evidence to show that any rejects
generated by washing of coal had been sold or that KPCL had
suffered an unlawful loss during the process. As a result, the
Board of KPCL refused to grant sanction to the respondent-
CBI to prosecute Mr. R. Nagaraja for offences alleged to have
been committed by him. It is noteworthy that no appeal has
been filed by the respondent – CBI against denial of sanction.
12.3. Similarly, the request made by the respondent-CBI for seeking
sanction to prosecute Mr. Yogendra Tripathi, the then Managing
Director, KPCL was denied by the Competent Authority in the
Central Government in terms of the letter dated 16th April, 2018,
issued by the DoPT. The order passed by the DoPT shows that
it took note of the Report of the respondent-CBI, the records
submitted by it along with the Report, the advice received from
the CVC and then summarized the allegations levelled by the
respondent-CBI that formed the basis of its proposal to seek
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sanction for prosecution of the aforesaid officer. The said request
was finally rejected by the Competent Authority in the Central
Government with the following observations:
“xxxxx
12. AND WHEREAS the debit note recovered at GCWL
and the certificate are contradictory to each other in
as much as debit note imposes a realizable value
on the rejects and the certificate claims that it has
been written off. Neither document is supported by
the annual accounts. Hence, they are extraneous
and fabricated as an afterthought.
13. AND WHEREAS washery loss and loss due to
stone bounders etc. are different. The certificate
combines the two losses and claims them as
washing loss. The rejects quantified as 8.03. MT
only reproduces what is disclosed in the accounts
as processed wastage.
14. AND WHEREAS on examination of records,
statement of witnesses etc, it was seen that there is
no evidence of any purported conspiracy between
the accused officer and GCWL or any quid pro
quo in this regard. The reason for deferring the
agenda in 41st Board Meeting have been explained
in the detailed note of M/s KPCL and appear to
be reasonable. It has been mentioned that the
revised mining plan was approved in the Board
Meeting of the Joint Venture KECML by which
a new technology was to be implemented which
could have been issued of rejection irrelevant.
15. AND WHEREAS the comments of the Govt.
of Karnataka have been obtained. They have
stated that there is no material to support
the allegation that he conspired to illegally
dispose off the rejects and therefore deferred
the agenda. Hence, no criminal intent can
be attributed to Shri Yogendra Tripathi and
have recommended declining of sanction for
[2024] 8 S.C.R. 1233

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

prosecution U/s 120B r/w 409 and 420 of IPC
and Section 13 of the Prevention of Corruption
Act, 1988.
16. AND WHEREAS the proposal was sent to
the CVC for their advice. The CVC advised
declining of sanction for prosecution against
Shri Yogendra Tripathi, IAS(KN:1985), the then
Managing Director Karnataka Power Corporation
Ltd. (KPCL), Bangalore, in case RC:2202015
E0002 dated 13.03.2015.
17. AND WHEREAS all case records sent by the
investigating agency were sent to the Hon’ble
Prime Minister, who is the Competent Authority
in the Central Government, to decide sanction
for prosecution in respect of the IAS officers.
18. AND THEREFORE The Competent Authority, in
view of the above position and after carefully
considering the facts and circumstances of the
case and considering all other relevant material/
documents, including evidence submitted by
the Investigating Agency with the proposal,
has approved the proposal to decline sanction
for prosecution against Shri Yogendra Tripathi,
IAS (KN:85) in the instant case, under Section
19 of the Prevention of Corruption Act, 1988.”
12.4. The aforesaid order reveals that before applying its mind, the
Competent Authority in the Central Government had sought
comments from the Government of Karnataka who had stated
that there was no material produced by the respondent-CBI in
support of the allegation that Mr. Yogendra Tripathi had conspired
to illegally dispose off the coal rejects or with malafide intention
deferred the agenda in the 41st Board Meeting of the KPCL.
The Competent Authority separately sent the said proposal
submitted by the respondent-CBI to the CVC for seeking
advice. After examining all the records sent by the investigation
agency including the evidence submitted by it, the Office of the
Prime Minister who is the Competent Authority in the Central
Government, approved the proposal to decline the sanction for
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prosecuting Mr. Yogendra Tripathi. Yet again, no appeal has
been filed by the respondent – CBI before the court questioning
the said decision.
12.5. The respondent-CBI having accepted the decision taken
by the Sanctioning Authority in respect of Mr. R. Nagaraja
and the decision of the Competent Authority in the Central
Government in respect of Mr. Yogendra Tripathi, both senior
most serving officers of KPCL and were also on the Board of
KECML, cannot be permitted to argue that these were merely
administrative decisions and even if permission to prosecute
the aforesaid officers has been denied, the Department can
still proceed against the appellants based on the very same set
of material/documents/evidence etc. that have been minutely
scrutinized by different authorities at the highest level and
they have independently arrived at an identical conclusion of
refusing to grant sanction to prosecute senior functionaries of
KPCL. Simply because the said senior functionaries of KPCL
were public servants, does not detract from the fact that
the respondent-CBI has described them as co-accused in a
criminal conspiracy and attributed similar motives to them as
the appellants herein. If they have been let off the hook and
the respondent-CBI has not challenged the said decisions,
there is no reason to proceed against the appellants herein on
the basis of the very same set of facts and material gathered
during the course of investigation.
13. EFFECT OF THE ABSENCE OF ANY STRATEGY IN THE MINING
PLAN TO DISPOSE OFF THE COAL REJECTS
13.1. Coming next to the stand taken by the respondent-CBI that
absence of any plan mentioned in the Mining Plan to deal with
the rejects could not exonerate the appellants who werebound by
the terms and conditions of the letter dated 10th November, 2003
issued by the MoC, we may note the assertion of the respondent-
CBI that the Mining Plan of the coal blocks in question did
not contain any plan for disposal of rejects, usable, tailings,
middlings, etc., that would be generated on account of mining/
washing of coal, is contrary to the records. Article 5(2)(b) of
the JVA required EMTA to take all clearances for setting up
the coal washery from the concerned authorities and properly
[2024] 8 S.C.R. 1235

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

dispose off the coal rejects to the satisfaction of environmental
regulations.
13.2. 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. We do not find any
irregularity in the route adopted to dispose off the coal rejects.
14. WAS KECML REQUIRED TO ACCOUNT FOR THE COAL REJECTS?
14.1. Much emphasis has been laid by the respondent-CBI on the
contents of the allocation letter dated 10th November, 2003 issued
by the MoC, Government of India to KPCL to canvass that the
coal mined from the allocated blocks was to be exclusively
used to meet the requirements of coal in the proposed thermal
power station namely, BTPS and on the condition that no coal
was to be sold /delivered/transferred/disposed of except for the
purpose of power generation and with the previous approval of
the Central Government. We are afraid, the said letter cannot be
read in isolation and out of context for the very same reasons
as have been noted above.
14.2.When the Central Government did not formulate any National
Policy for exploitation of coal rejects, it is fallacious on the part
of the respondent-CBI to argue that the conditions imposed
by the Central Government while conveying its approval to
the State Government for grant of mining lease in favour of
KPCL ought to have formed a part of the lease deed to be
executed. Fact of the matter is that there was no such condition
imposed in the Notification dated 16th July, 2004, issued by
the MoC. The said notification simply specified the end use of
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the coal from the allocated coal blocks for supply to KPCL to
generate thermal power in the proposed BPCL. The original
Mining Plan of September, 2004 submitted by KECML to the
MoC for its approval also did not elucidate the manner in which
the coal rejects were to be disposed of. The said Mining Plan
had the approval of the MoC which did not raise any objection
relating to the absence of any condition for dealing with the
coal rejects. The inevitable conclusion is that disposal of the
coal rejects was to be undertaken by KECML strictly in terms
of Article 5(2)(b) of the JVA and no more.
14.3. Moreover, a closer look at 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.85 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 FSA86 and further, KECML
was required to ensure that all “shales/stones” are removed
from the coal before making the supply,87 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.88 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. KPCL itself understood the clauses
in the JVA and the FSA to mean the same and it was satisfied
with the manner in which KECML was discharging its obligations
under the agreements till Audit Objections were raised by the
CAG in October, 2013. That’s when KPCL did a complete flip
flop and for the first time, raised a demand on KECML seeking
reimbursement towards the value of the coal rejects, a decision
that was successfully assailed by the appellants in the High

85 ‘Grade D Coal’ as defined under ‘Definition and Interpretation’ clause of the JVA dt 13th September, 2002.
86 ‘Coal’ as defined under ‘Definition and Interpretation’ clause of the JVA dt. 13th September, 2002 and
Article 1 of FSA dt. 09th May, 2007
87 Article 5.2.2 of the FSA
88 Annexure-II of the JVA and Article 6.1.1 of the FSA
[2024] 8 S.C.R. 1237

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

Court and the challenge laid by KPCL to the said judgement
was repelled by this Court.
15. CAN KECML BE BLAMED FOR NOT SETTING UP THE COAL
WASHERY AT THE PITHEAD?
15.1. As for the allegation levelled by the respondent–CBI that
KECML violated the terms of Articles 2(4)(g) and 5(2)(b) of the
JVA having failed to setup the coal washery at the pithead, the
sequence of events narrated above, shows that the fault does
not lie at the door of the appellants. It was on account of some
litigation between CIPCO and MoC in relation to the coal blocks
allocated to KPCL wherein interim orders were granted by the
High Court in favour of CIPCO, that the project got delayed.
Production of coal could commence only in September, 2008
after the aforesaid litigation came to an end. By then, much time
was lost. The conditions stipulated in the agreements governing
KPCL and KECML placed an obligation on KECML to supply
washed coal with a definite GCV and specified parameters
for the consumption of the Thermal Power Station at Bellary
and failure to deliver coal within the stipulated time, attracted
penalties.
15.2. It was in this background that KECML executed the MoU with
GCWL for washing of the mined coal at its washery at Majri,
transportation of the raw coal from the mines and washed
coal to the Railway Siding for delivery to BTPS. Records
reveal that the draft of MoU was duly deliberated upon by the
Board of Directors of KECML and finally approved and ratified
on 13th January, 2009. Subsequently, in the meeting held on
23rd February, 2010, the Board of Directors of KECML concluded
that washing of raw coal was a prerequisite to meet the specified
grade of coal with a defined GCV for generation of power at
BTPS. The necessity of supplying washed coal to obtain the
agreed parameter of coal quality was also recognized by the
office of the Coal Controller in its letter dated 9th December, 2009.
This fact finds mention in the detailed Report of the Board
of KPCL that refused permission to the respondent-CBI to
prosecute Mr. R. Nagaraja.
15.3. It is clear from the above that the decision of KECML to enter
into a MoU with GCWL for washing of coal was actuated by
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compelling circumstance faced by it and KPCL had taken a
calibrated decision in its commercial wisdom to duly concur
with the said decision knowing very well that non-supply of a
specified grade of washed coal by KECML would have serious
consequences of stoppage of generation of power at BTPS and
a cascading effect of resulting in a power crisis in the State of
Karnataka.
15.4. We do not propose to Labour much on the contention of the
respondent-CBI that allocation of the coal block was in favour
of KPCL and not in favour of KECML as stands adequately
explained on a perusal of the Notification dated 16th July, 2024
which shows that the Central Government did recognize the
fact that it was KECML who was required to supply coal from
the coal mines allocated to KPCL and end use of the said
coal was specified for generation of Thermal Power Station at
Bellary, Karnataka. In our view, having regard to the aforesaid
notification, nothing much turns on the submission made by
the respondent-CBI that the coal block allocation was only in
favour of KPCL and it ought to have a right over the rejects to
the exclusion of KECML and others.
16. DID THE COAL REJECTS HAVE ANY USEFLUL CALORIFIC
VALUE MAKING IT A SALEABLE COMMODITY?
16.1. We find that the Detailed Washability Report of the Government
Laboratory namely, CIMFR, Nagpur has been ignored by the
respondent-CBI. It was the said Report that formed the basis of
the information furnished by KECML with respect to production,
stock, despatch of coal to the washery etc., as was demanded
by the office of the Coal Controller, a department that falls under
the MoC. The said Report stated in so many words that the
rejects did not contain any useful c.v. 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. The plant could not be established by
[2024] 8 S.C.R. 1239

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

KECML for the reason that the revised Mining Plan submitted
by it was approved by the MoC only on 24th August, 2011.
Consequent steps that were required to be taken by KECML
for obtaining necessary approvals from the MoEF&CC and
other govt. agencies came to a grinding halt when an order was
passed by this Court in the year 2014, deallocating all captive
coal blocks, including those allocated to KPCL. Therefore, any
reference by the respondent-CBI to the revised Mining Plan is
of no consequence.
17. PERSUASIVE VALUE OF THE ARYAN ENERGY CASE
17.1 KPCL’s entitlement over the coal rejects has been separately
tested by the High Court of Karnataka in the case of Aryan
Energy (supra). Pertinently, in that case the clauses forming
a part of the Agreement between KPCL and Aryan Energy
particularly with respect to the disposal of the coal rejects is the
same as in the instant case. Aryan Energy was also required
to dispose off the coal rejects by making compliance of the
environmental regulations. In the said case, the High Court of
Karnataka returned a finding that KPCL did not have any claim
over the coal rejects generated during washing of coal. The view
taken was that as long as disposal of the coal rejects was in
line with the environmental regulations, KPCL did not have any
role to play in the disposal of the coal rejects. It was specifically
observed by the High Court that the agreement between KPCL
and Aryan Energy included a condition that KPCL would only
buy washed coal at a predetermined price and that it was not
entitled to lay a claim on the coal rejects generated during the
processing of raw coal. In view of the terms and conditions of
the agreement between the parties, the High Court concluded
that KPCL could not have raised any demand on Aryan Energy
claiming reimbursement for the value of the coal rejects. It is
a matter of record that although KPCL had challenged the
judgement and order dated 22nd July, 2021 passed by the
High Court of Karnataka44 before this court, the said petitions
were disposed of on 26th April, 2014 noting that the parties had
settled their inter se disputes amongst themselves in terms of a
Compromise Deed and as a result, part of the decretal amount
deposited by KPCL before the Commercial Court was agreed
to be released in favour of Aryan Energy.
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17.2 We do not see why the aforesaid decision would not have any
persuasive value when the clauses in the agreement between
KPCL and KECML for disposing off the coal rejects are identical.
On going through the agreements executed between KPCL and
Aryan Energy, the High Court had shot down the plea of KPCL
that it was entitled to the coal rejects. Though KPCL assailed
the said decision before this Court, it settled its dispute with
Aryan Energy and the appeals preferred by it were disposed
of as compromised. The contention of the respondent-CBI that
the order of the High Court of Karnataka is not relevant for
the present case since there was no criminal case registered
therein, cannot be a distinguishing feature when the terms and
conditions of the contract between KPCL and Aryan Energy on
the aspect of disposal of the coal rejects is pari materia. We are
of the opinion that the judgment in the case of Aryan Energy
does have persuasive value.
18. INHERENT JURISDICTION OF THE HIGH COURT UNDER
SECTION 482, Cr.P.C
18.1. For seeking quashing of the chargesheet and the order framing
charges, learned counsel for the appellants has cited decisions
of this court that lay down the proposition of law relating
to quashing of criminal proceedings by a High Court under
Section 482, Cr.P.C. In Rajiv Thapar and Others v. Madan
Lal Kapoor,89 this court held as under:
“29. The issue being examined in the instant case is the
jurisdiction of the High Court under Section 482 CrPC,
if it chooses to quash the initiation of the prosecution
against an accused at the stage of issuing process,
or at the stage of committal, or even at the stage of
framing of charges. These are all stages before the
commencement of the actual trial. The same parameters
would naturally be available for later stages as well. The
power vested in the High Court under Section 482 CrPC,
at the stages referred to hereinabove, would have far-
reaching consequences inasmuch as it would negate
the prosecution’s/complainant’s case without allowing

89 [2013] 3 SCR 52 : (2013) 3 SCC 330
[2024] 8 S.C.R. 1241

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

the prosecution/complainant to lead evidence. Such a
determination must always be rendered with caution,
care and circumspection. To invoke its inherent
jurisdiction under Section 482 CrPC the High Court
has to be fully satisfied that the material produced
by the accused is such that would lead to the
conclusion that his/their defence is based on sound,
reasonable, and indubitable facts; the material
produced is such as would rule out and displace the
assertions contained in the charges levelled against
the accused; and the material produced is such as
would clearly reject and overrule the veracity of the
allegations contained in the accusations levelled by
the prosecution/complainant. It should be sufficient
to rule out, reject and discard the accusations
levelled by the prosecution/complainant, without
the necessity of recording any evidence. For this
the material relied upon by the defence should not
have been refuted, or alternatively, cannot be justifiably
refuted, being material of sterling and impeccable quality.
The material relied upon by the accused should
be such as would persuade a reasonable person
to dismiss and condemn the actual basis of the
accusations as false. In such a situation, the judicial
conscience of the High Court would persuade it
to exercise its power under Section 482 CrPC to
quash such criminal proceedings, for that would
prevent abuse of process of the court, and secure
the ends of justice.”
[emphasis added]
18.2 In the captioned case, this court had further observed that the
discretion vested in the High Court under Section 482 Cr.P.C
can be exercised suo moto to prevent abuse of the process of
a Court, and/or to secure the ends of justice. After listing the
factors that ought to weigh with the High Court to make a just
and rightful choice, it was observed thus:
“30. Based on the factors canvassed in the foregoing
paragraphs, we would delineate the following steps to
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determine the veracity of a prayer for quashment raised
by an accused by invoking the power vested in the High
Court under Section 482 CrPC:
30.1. Step one: whether the material relied upon by the
accused is sound, reasonable, and indubitable i.e. the
material is of sterling and impeccable quality?
30.2. Step two: whether the material relied upon by the
accused would rule out the assertions contained in the
charges levelled against the accused i.e. the material
is sufficient to reject and overrule the factual assertions
contained in the complaint i.e. the material is such as
would persuade a reasonable person to dismiss and
condemn the factual basis of the accusations as false?
30.3. Step three: whether the material relied upon by
the accused has not been refuted by the prosecution/
complainant; and/or the material is such that it cannot
be justifiably refuted by the prosecution/complainant?
30.4. Step four: whether proceeding with the trial would
result in an abuse of process of the court, and would
not serve the ends of justice?
30.5. If the answer to all the steps is in the affirmative,
the judicial conscience of the High Court should
persuade it to quash such criminal proceedings in
exercise of power vested in it under Section 482
CrPC. Such exercise of power, besides doing justice
to the accused, would save precious court time,
which would otherwise be wasted in holding such
a trial (as well as proceedings arising therefrom)
specially when it is clear that the same would not
conclude in the conviction of the accused.”
[emphasis added]
18.3 In State of Orissa v. Debendra Nath Padhi,90 the powers of
the High Court under Section 482, Cr.P.C and Article 226 of the
Constitution of India were highlighted and the court observed that:

90 [2004] Supp. 6 SCR 460 : (2005) 1 SCC 568
[2024] 8 S.C.R. 1243

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

“29. Regarding the argument of the accused having
to face the trial despite being in a position to produce
material of unimpeachable character of sterling quality,
the width of the powers of the High Court under
Section 482 of the Code and Article 226 of the
Constitution is unlimited whereunder in the interests
of justice the High Court can make such orders as
may be necessary to prevent abuse of the process
of any court or otherwise to secure the ends of
justice within the parameters laid down in Bhajan
Lal case91 [1992 Supp (1) SCC 335 : 1992 SCC (Cri)
426].”
[emphasis added]
18.4 In Rukmini Narvekar v. Vijaya Satardekar and Others,92 this
Court has observed that the width of the powers of the High
Court under Section 482, Cr.P.C and under Article 226 of the
Constitution of India are unlimited, that the High Court could
make such orders as may be necessary to prevent abuse of
the process of any Court or otherwise to secure the ends of
justice. In a concurring order passed in the very same case, it
was observed in addition that in exercising jurisdiction under
Section 482, Cr.P.C, the High Court is free to consider even
material that may be produced on behalf of the accused to arrive
at a decision whether charge as framed could be maintained.
18.5 In Anand Kumar Mohatta and Another v. State (NCT of
Delhi), Department of Home and Another,93 referring to the
provisions of Section 482, Cr.P.C, this Court held as follows:
16. There is nothing in the words of this section which
restricts the exercise of the power of the Court to prevent
the abuse of process of court or miscarriage of justice
only to the stage of the FIR. It is settled principle of
law that the High Court can exercise jurisdiction under
Section 482 CrPC even when the discharge application

91 (1992) Supp (1) SCC 335
92 [2008] 14 SCR 271 : (2008) 14 SCC 1
93 [2018] 13 SCR 1028 : (2019) 11 SCC 706
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is pending with the trial court [G. Sagar Suri v. State
of U.P., (2000) 2 SCC 636, para 7 : 2000 SCC (Cri)
513. Umesh Kumar v. State of A.P., (2013) 10 SCC
591, para 20 : (2014) 1 SCC (Cri) 338 : (2014) 2 SCC
(L&S) 237] . Indeed, it would be a travesty to hold
that proceedings initiated against a person can be
interfered with at the stage of FIR but not if it has
advanced and the allegations have materialised into
a charge-sheet. On the contrary it could be said
that the abuse of process caused by FIR stands
aggravated if the FIR has taken the form of a charge-
sheet after investigation. The power is undoubtedly
conferred to prevent abuse of process of power of
any court.
xxxxx
28. In State of Haryana v. Bhajan Lal [State of Haryana
v. Bhajan Lal, 1992 Supp (1) SCC 335 : 1992 SCC (Cri)
426], this Court has set out the categories of cases
in which the inherent power under Section 482 CrPC
can be exercised. Para 102 of the judgment reads as
follows : (SCC pp. 378-79)
“102. In the backdrop of the interpretation of the
various relevant provisions of the Code under
Chapter XIV and of the principles of law enunciated
by this Court in a series of decisions relating to the
exercise of the extraordinary power under Article
226 or the inherent powers under Section 482 of
the Code which we have extracted and reproduced
above, we give the following categories of cases
by way of illustration wherein such power could
be exercised either to prevent abuse of the
process of any court or otherwise to secure the
ends of justice, though it may not be possible
to lay down any precise, clearly defined and
sufficiently channelised and inflexible guidelines
or rigid formulae and to give an exhaustive list of
myriad kinds of cases wherein such power should
be exercised.
[2024] 8 S.C.R. 1245

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

(1) Where the allegations made in the first
information report or the complaint, even if they
are taken at their face value and accepted in their
entirety do not prima facie constitute any offence
or make out a case against the accused.
(2) Where the allegations in the first information
report and other materials, if any, accompanying
the FIR do not disclose a cognizable offence,
justifying an investigation by police officers under
Section 156(1) of the Code except under an order
of a Magistrate within the purview of Section 155(2)
of the Code.
(3) Where the uncontroverted allegations made in
the FIR or complaint and the evidence collected in
support of the same do not disclose the commission
of any offence and make out a case against the
accused.
(4) Where, the allegations in the FIR do not
constitute a cognizable offence but constitute only a
non-cognizable offence, no investigation is permitted
by a police officer without an order of a Magistrate
as contemplated under Section 155(2) of the Code.
(5) Where the allegations made in the FIR or
complaint are so absurd and inherently improbable
on the basis of which no prudent person can ever
reach a just conclusion that there is sufficient
ground for proceeding against the accused.
(6) Where there is an express legal bar engrafted
in any of the provisions of the Code or the Act
concerned (under which a criminal proceeding
is instituted) to the institution and continuance of
the proceedings and/or where there is a specific
provision in the Code or the Act concerned,
providing efficacious redress for the grievance of
the aggrieved party.
(7) Where a criminal proceeding is manifestly
attended with mala fide and/or where the proceeding
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is maliciously instituted with an ulterior motive for
wreaking vengeance on the accused and with
a view to spite him due to private and personal
grudge.”
18.6. In State of Karnataka vs. L. Munniswamy,94 Y.V. Chandrachud, J.
as he then was (speaking for a three Judge Bench) observed
thus:
“7. … In the exercise of this wholesome power, the High
Court is entitled to quash a proceeding if it comes to
the conclusion that allowing the proceeding to continue
would be an abuse of the process of the Court or
that the ends of justice require that the proceeding
ought to be quashed. The saving of the High
Court’s inherent powers, both in civil and criminal
matters, is designed to achieve a salutary public
purpose which is that a court proceeding ought
not to be permitted to degenerate into a weapon
of harassment or persecution. In a criminal case,
the veiled object behind a lame prosecution, the
very nature of the material on which the structure
of the prosecution rests and the like would justify
the High Court in quashing the proceeding in the
interest of justice.”
[ emphasis added]
18.7 As can be gathered from the above, 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.

94 [1977] 3 SCR 113 : (1977) 2 SCC 699
[2024] 8 S.C.R. 1247

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

18.8 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.
19. EXTRAORDINARY POWERS OF THIS COURT UNDER ARTICLE
13 OF THE CONSTITUTION OF INDIA
19.1. When it comes to invocation of the powers vested in this Court
under Article 136 of the Constitution of India, unlike Section 482
Cr.P.C that has a statutory flavour, Article 136 confers
plenary powers on this Court to interfere in suitable cases. In
Arunachalam v. P.S.R. Sadhanantham and Another,95 this
court has expounded on the amplitude of its powers under
Article 136 in the following words:
“4. ……Article 136 of the Constitution of India invests
the Supreme Court with a plentitude of plenary,
appellate power over all Courts and Tribunals in
India. The power is plenary in the sense that there
are no words in Article 136 itself qualifying that
power. But, the very nature of the power has led the
Court to set limits to itself within which to exercise
such power. It is now the well established practice of
this Court to permit the invocation of the power under
Article 136 only in very exceptional circumstances, as
when a question of law of general public importance
arises or a decision shocks the conscience of the Court.
But, within the restrictions imposed by itself, this
Court has the undoubted power to interfere even
with findings of fact, making no distinction between
judgments of acquittal and conviction, if the High
Court, in arriving at those findings, has acted

95 [1979] 3 SCR 482 : (1979) 2 SCC 297
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“perversely or otherwise improperly”. (See State of
Madras v. A. Vaidyanatha Iyer [AIR 1958 SC 61 : [1958]
SCR 580 : 1958 Cri LJ 232] and Himachal Pradesh
Administration v. Om Prakash [(1972) 1 SCC 249 :
[1972] 2 SCR 765])…….”
5. A doubt has been raised about the competence
of a private party, as distinguished from the State, to
invoke the jurisdiction of this Court under Article 136
of the Constitution against a judgment of acquittal by
the High Court. We do not see any substance in the
doubt. Appellate power vested in the Supreme Court
under Article 136 of the Constitution is not to be
confused with ordinary appellate power exercised
by appellate courts and Appellate Tribunals under
specific statutes.As we said earlier, it is a plenary
power, ‘exercisable outside the purview of ordinary
law’ to meet the pressing demands of justice (vide
Durga Shankar Mehta v. Thakur Raghuraj Singh [AIR
1954 SC 520 : [1955] 1 SCR 267 : 1954 SCJ 723]).
Article 136 of the Constitution neither confers on
anyone the right to invoke the jurisdiction of the
Supreme Court nor inhibits anyone from invoking
the Court’s jurisdiction. The power is vested in the
Supreme Court but the right to invoke the Court’s
jurisdiction is vested in no one. The exercise of the
power of the Supreme Court is not circumscribed by
any limitation as to who may invoke it. …….. Appeals
under Article 136 of the Constitution are entertained by
special leave granted by this Court, whether it is the
State or a private party that invokes the jurisdiction of
this Court, special leave is not granted as a matter of
course but only for good and sufficient reasons, as well
established by the practice of this Court.”
[emphasis added]
19.2. In P.S.R. Sadhanantham v. Arunachalam,96 a Constitution
Bench of five judges elaborated the content and character

96 [1980] 2 SCR 873 : (1980) 3 SCC 141
[2024] 8 S.C.R. 1249

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

of Article 136 vis-à-vis Article 21 and made the following
observations:
“7. Specificity being essential to legality, let us see if
the broad spectrum spread out of Article 136 fills the
bill from the point of view of “procedure established by
law”. In express terms, Article 136 does not confer
a right of appeal on a party as such but it confers
a wide discretionary power on the Supreme Court
to interfere in suitable cases. The discretionary
dimension is considerable but that relates to the power of
the court. The question is whether it spells by implication,
fair a procedure as contemplated by Article 21. In our
view, it does. Article 136 is a special jurisdiction. It is
residuary power; it is extraordinary in its amplitude,
its limit, when it chases injustice, is the sky itself.
This Court functionally fulfils itself by reaching out
to injustice wherever it is and this power is largely
derived in the common run of cases from Article
136. Is if merely a power in the court to be exercised
in any manner it fancies? Is there no procedural
limitation in the manner of exercise and the occasion
for exercise? Is there no duty to act fairly while hearing
a case under Article 136, either in the matter of grant
of leave or, after such grant, in the final disposal of the
appeal? We have hardly any doubt that here is a
procedure necessarily implicit in the power vested
in the summit court. It must be remembered that
Article 136 confers jurisdiction on the highest court.
The founding fathers unarguably intended in the
very terms of Article 136 that it shall be exercised
by the highest judges of the land with scrupulous
adherence to judicial principles well established by
precedents in our jurisprudence. Judicial discretion
is canalised authority, not arbitrary eccentricity….
xxxxx
10. Once we hold that Article 136 is a composite
provision which vests a wide jurisdiction and, by the
very fact of entrusting this unique jurisdiction in the
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Supreme Court, postulates, inarticulately though, the
methodology of exercising that power, nothing more
remains in the objection of the petitioner. It is open
to the court to grant special leave and the subsequent
process of hearing are (sic is) well-established. Thus,
there is an integral provision of power-cum-procedure
which answers with the desideratum of Article 21
justifying deprivation of life and liberty.
[emphasis added]
In a concurring judgement in the captioned case, it was further
observed that:
21. Plainly, the jurisdiction conferred by Article 136
seeks to confer on this Court the widest conceivable
range of judicial power, making it perhaps among
the most powerful courts in the world. The judicial
power reaches out to every judgment, decree,
determination, sentence or order affecting the rights
and obligations of persons in civil matters, of life
and liberty in criminal matters as well as matters
touching the Revenues of the State. It is an attempt
to ensure that the foundations of the Indian Republic,
which have been laid on the bedrock of justice, are not
undermined by injustice anywhere in the land, Bharat
Bank Ltd. v. Employees of these Bharat Bank Ltd
[1950 SCC 470 : AIR 1950 SC 188 : [1950] SCR 459,
474 : 1950 LLJ 21 : (1950-51) 2 FJR 1] . As the court
observed in Durga Shankar Mehta v. Thakur Raghuraj
Singh [AIR 1954 SC 520 : [1955] 1 SCR 267, 272 :
9 ELR 494] Article 136 “vests in the Supreme Court
a plenary jurisdiction in the matter of entertaining and
hearing appeals by grant of special leave”.
22. Nonetheless, there is a limitation which, in our
opinion, is of immediate relevance. It is a limitation
in-built in to the jurisdiction of the court and flows from
the nature and character of the case intended to be
brought before the court. It is a limitation which requires
compliance despite the apparent plenitude of power
vested in the court. When a petition is presented to the
[2024] 8 S.C.R. 1251

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

court under Article 136, the court will have due regard
to the nature and character of the case sought to be
brought before it when entertaining and disposing of
the petition.
[ emphasis added]
19.3 In Khoday Distilleries Limited and Others v. Mahadeshwara
S.S.K. Limited,97 this Court observed that Article 136 commences
with a non-obstante clause, the words are of overriding effect and
clearly indicate the intention of the framers of the Constitution
that it is a special jurisdiction and a repository of residuary
powers unfettered by any Statute or any provisions of Chapter
IV of Part V of the Constitution of India. It was also observed
that the jurisdiction under Article 136 of the Constitution cannot
be barred by the Statute since it is an extraordinary power.
19.4 In State of Punjab and others v. Rafiq Masih (White Washer)
others,98 in the same strain, this Court has held that Article 136
is a special jurisdiction and can be described as a ‘residuary
power, extraordinary in its amplitude, its limits when it chases
injustice, is the sky itself’. It is a corrective jurisdiction that vests
a discretion in this Court to settle the law clearly and makes
the law operational thereby making it a binding precedent for
the future instead of keeping it vague.
19.5 In Mekala Sivaiah v. State of Andhra Pradesh,99 this Court
commented on the circumstances in which the power under
Article 136 is exercised and held thus:
“14. Before adverting to the merits of the contention
raised, it is important to reiterate that Article 136 of the
Constitution of India is an extraordinary jurisdiction
which this Court exercises when it entertains an
appeal by special leave and this jurisdiction, by its
very nature, is exercisable only when this Court is
satisfied that it is necessary to interfere in order
to prevent grave or serious miscarriage of justice.

97 [2019] 3 SCR 411 : (2012) 12 SCC 291
98 [2014] 13 SCR 1343 : AIR (2015) 1267
99 [2022] 6 SCR 989 : (2022) 8 SCC 253
1252 [2024] 8 S.C.R.

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15. It is well settled by judicial pronouncement that
Article 136 is worded in wide terms and powers
conferred under the said Article are not hedged by
any technical hurdles. This overriding and exceptional
power is, however, to be exercised sparingly and
only in furtherance of cause of justice. Thus, when
the judgment under appeal has resulted in grave
miscarriage of justice by some misapprehension
or misreading of evidence or by ignoring material
evidence then this Court is not only empowered but
is well expected to interfere to promote the cause
of justice.”
[emphasis added]
19.6 From the aforesaid discussion, it is apparent that 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.
19.7 Coming back to the case in hand, ordinarily, a party aggrieved
by the filing of a chargesheet or framing of charges ought to
first approach the High Court in a petition under Section 482,
Cr.P.C. Though such a route would have been available to
the appellants herein as well, but in view of the categorical
directions issued by this court in M.L. Sharma (supra) that
this Court alone shall have the jurisdiction to entertain cases
relating to allocation of coal blocks including cases for staying
[2024] 8 S.C.R. 1253

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

the investigation or trial in a matter relating to coal, one rung of
an appeal before the High Court for quashing the chargesheet
or interfering in the order on charge by invoking the inherent
jurisdiction under Section 482 Cr.P.C. stands fore closed. The
appellants were left with only one chance of directly invoking
Article 136 of the Constitution of India and filing a petition
for special leave before this court to challenge the impugned
orders passed by the learned Special Judge, CBI framing
charges against them and dismissing their application for
seeking discharge.
19.9 Given the broad amplitude of the extraordinary powers of
this Court under Article 136 of the Constitution of India,
the respondent-CBI cannot be heard to urge that since a
Chargesheet has already been filed against the appellants
and charges framed, the appellants should be left to take all
the pleas available to them before the learned Special Judge,
CBI during the course of the trial and that no interference is
called for by this Court at this stage. Such an approach does
not commend itself to this Court in the facts and circumstances
of this case.
20. APPLICATION OF MIND AT THE STAGE OF SECTION 227, Cr.P.C
20.1 We may note that there is no quarrel with the broad proposition
canvassed by learned counsel for the respondent- CBI that at
the stage of Section 227, Cr.P.C., the Special Judge, CBI had
to sift the evidence to find out whether there was sufficient
ground for proceedings against the appellants. That exercise
would include taking a prima facie view on the nature of the
evidence recorded by the CBI and the documents placed before
the court so as to frame any charge. At the same time, one
must be mindful of the language used in Section 227 of the
Cr.P.C, which is extracted below:
“227. Discharge.—If, upon consideration of the record
of the case and the documents submitted therewith,
and after hearing the submissions of the accused and
the prosecution in this behalf, the Judge considers that
there is not sufficient ground for proceeding against the
accused, he shall discharge the accused and record his
reasons for so doing.”
1254 [2024] 8 S.C.R.

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20.2. As observed in Prafulla Kumar Samal (supra) the expression
“not sufficient ground for proceeding against the accused”
clearly shows that the Judge is not a mere post office to frame
the charge at the behest of the prosecution. The Judge must
exercise the judicial mind to the facts of the case in order to
determine whether a case for trial has been made out by the
prosecution. The principles governing the scope of Section 227,
Cr.P.C. have been succinctly summarized in the caption case
as below:
“10. Thus, on a consideration of the authorities
mentioned above, the following principles emerge:
(1) That the Judge while considering the question of
framing the charges under Section 227 of the Code has
the undoubted power to sift and weigh the evidence for
the limited purpose of finding out whether or not a prima
facie case against the accused has been made out.
(2) Where the materials placed before the Court disclose
grave suspicion against the accused which has not
been properly explained the Court will be fully justified
in framing a charge and proceeding with the trial.
(3) The test to determine a prima facie case would
naturally depend upon the facts of each case and it is
difficult to lay down a rule of universal application. By
and large however if two views are equally possible
and the Judge is satisfied that the evidence produced
before him while giving rise to some suspicion but not
grave suspicion against the accused, he will be fully
within his right to discharge the accused.
(4 ) That in exercising his jurisdiction under Section
227 of the Code the Judge which under the present
Code is a senior and experienced court cannot
act merely as a Post Office or a mouthpiece of
the prosecution, but has to consider the broad
probabilities of the case, the total effect of the
evidence and the documents produced before the
Court, any basic infirmities appearing in the case
and so on. This however does not mean that the
Judge should make a roving enquiry into the pros
[2024] 8 S.C.R. 1255

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

and cons of the matter and weigh the evidence as
if he was conducting a trial.”
[emphasis added]
20.3. To the same effect is the view expressed in Niranjan Singh
KS Punjabi (supra) where this court has observed as follows:
“5. Section 227, introduced for the first time in the new
Code, confers a special power on the Judge to discharge
an accused at the threshold if ‘upon consideration’ of the
record and documents he considers ‘that there is not
sufficient ground’ for proceeding against the accused.
In other words his consideration of the record and
document at that stage is for the limited purpose of
ascertaining whether or not there exists sufficient grounds
for proceeding with the trial against the accused. If he
comes to the conclusion that there is sufficient ground to
proceed, he will frame a charge under Section 228, if not
he will discharge the accused. It must be remembered
that this section was introduced in the Code to
avoid waste of public time over cases which did not
disclose a prima facie case and to save the accused
from avoidable harassment and expenditure.
6. The next question is what is the scope and
ambit of the ‘consideration’ by the trial court at
that stage.………..It is obvious that since he is at
the stage of deciding whether or not there exists
sufficient grounds for framing the charge, his
enquiry must necessarily be limited to deciding if
the facts emerging from the record and documents
constitute the offence with which the accused is
charged. At that stage he may sift the evidence
for that limited purpose but he is not required to
marshal the evidence with a view to separating the
grain from the chaff. All that he is called upon to
consider is whether there is sufficient ground to
frame the charge and for this limited purpose he
must weigh the material on record as well as the
documents relied on by the prosecution.”
[emphasis Added]
1256 [2024] 8 S.C.R.

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20.4. In N. Suresh Rajan (supra), the following view was expressed
as to the role of the trial Court at the time of considering an
application for discharge.
“29. We have bestowed our consideration to the rival
submissions and the submissions made by Mr Ranjit
Kumar commend us. True it is that at the time of
consideration of the applications for discharge,
the court cannot act as a mouthpiece of the
prosecution or act as a post office and may sift
evidence in order to find out whether or not the
allegations made are groundless so as to pass
an order of discharge. It is trite that at the stage of
consideration of an application for discharge, the court
has to proceed with an assumption that the materials
brought on record by the prosecution are true and
evaluate the said materials and documents with a
view to find out whether the facts emerging therefrom
taken at their face value disclose the existence of all
the ingredients constituting the alleged offence. At this
stage, probative value of the materials has not to be
gone into and the court is not expected to go deep
into the matter and hold that the materials would not
warrant a conviction. In our opinion, what needs
to be considered is whether there is a ground for
presuming that the offence has been committed
and not whether a ground for convicting the
accused has been made out.To put it differently,
if the court thinks that the accused might have
committed the offence on the basis of the materials
on record on its probative value, it can frame
the charge; though for conviction, the court has
to come to the conclusion that the accused has
committed the offence. The law does not permit
a mini trial at this stage.”
[emphasis added]
20.5 The aforesaid parameters had to be kept in mind by the learned
Special Judge, CBI at the time of considering the records/
documents submitted by the respondent-CBI and the material
[2024] 8 S.C.R. 1257

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

produced by the appellants. In our view, the said consideration
is lacking in the impugned orders for the reasons noticed above.
21. CONCLUSION
21.1 Though multiple arguments have been advanced by learned
counsel for the appellants to assail the impugned orders
passed by the learned Special Judge, CBI, including a plea
that no offence is made out under Section 13(1)(d) of the P.C.
Act for various reasons, this Court has consciously elected to
confine itself only to those aspects that in our opinion, would
be sufficient to arrive at a prima facie view that the allegations
levelled against the appellants have pre-dominant contours
of a dispute of a civil nature, does not have the makings of a
criminal offence and on an overall conspectus of the case, would
persuade any reasonable person to dismiss the accusations
levelled. Therefore, this court declines to go into the nitty gritties
of the documents/evidence, or the contrasting data produced
by the parties to test their probative value.
21.2 The prima facie findings of this Court, based on the documents
and material placed before us are as follows:
(a) 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 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.
(b) 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.
(c) The Sanctioning Authority namely, the Board of Directors
of KPCL in respect of Mr. R Nagarajan, the then Finance
Director of KPCL and nominee Director of the Board of
KECML had the occasion to thoroughly scrutinize all
the relevant documents including the MoU dated 20th
December, 2008 executed between KECML and GCWL
as also the depositions of 67 witnesses submitted by
1258 [2024] 8 S.C.R.

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the respondent-CBI. Only thereafter, did it arrive at a
conclusion that there was nothing to demonstrate that any
rejects generated by washing of the coal had been sold
by the appellants or that KPCL had suffered an unlawful
loss due to the same.
(d) The Competent Authority in the Central Government who
was approached by the respondent-CBI for sanction to
prosecute Mr. Yogendra Tripathi, the then Managing
Director of KPCL sought comments from two separate
sources. The Government of Karnataka opined that no
criminal intent could be attributed to the said officer. A
proposal was also sent to the CVC for their advice. The
CVC too recommended that the sanction for prosecuting
the officer ought to be declined. The Competent Authority
in the Central Government after going through the
entire documents and material including the evidence
submitted by the respondent-CBI and the opinions
solicited, declined sanction for the prosecution of the
aforesaid officer.
(e) The respondent-CBI did not approach the Court to
challenge the aforesaid decisions. 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.
(f) The decision dated 24th March, 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
respondent–CBI 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
20th May, 2022 which was just a few days after Charges
were framed by the learned Special Judge, CBI on 3rd
March, 2022.
[2024] 8 S.C.R. 1259

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

(g) Yet again, 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 22nd July, 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
learned 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.
(h) Perusal of the relevant clauses of the JVA read in
conjunction with the terms and conditions stipulated in
the FSA leave no manner of doubt that all that KPCL
required KECML to do was to provide it a specified grade
of washed coal having a specific GCV to be purchased
at a predetermined price for being supplied to BPCL for
generation of power. The agreement between the parties
did not contemplate that KPCL would be entitled to claim
the ‘shales/stones’ that were required to be removed
from the coal before supplies were made by KECML.
Under the agreements governing the parties KECML was
required to dispose off the coal rejects properly, to the
satisfaction of environmental regulation, as prescribed
in Article 5(2)(b) of the JVA.
(i) The MoC did not impose any condition in the Notification
dated 16th July, 2004 which required KECML to hand
over the coal rejects to KPCL; nor did the MoC issue
any Guidelines as to the manner in which the coal
rejects were to be disposed of. Once the Mining Plan of
1260 [2024] 8 S.C.R.

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September, 2004 submitted by KECML was approved
by the MoC, nothing further was required to be done by
KECML except for following the conditions imposed on it.
(j) The Central Government had not come up with any specific
plan to dispose off the coal rejects, as is apparent from
a perusal of the reply submitted by the Minister of State,
MoC in the Lok Sabha, stating that the Government had
not framed any National Policy for exploitation of coal
rejects and the same was still under consideration. In
the absence of a policy to dispose off the coal rejects,
the appellants cannot be blamed for complying with the
terms and conditions stipulated in the JVA.
(k) 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.
(l) There was no getting around the process of washing
of raw coal which was the predominant prerequisite to
meet the specified grade of coal with the defined GCV for
generation of power at BTPS. Failure to supply washed
coal to KPCL not only invited heavy penalties on KECML in
terms of the JVA, it would have had serious consequences
of stoppage of generation of power at BTPS, resulting in
power outages in the State of Karnataka.
(m) The Washability Report submitted by CIMFR, Nagpur,
a Government Laboratory stated in so many words that
[2024] 8 S.C.R. 1261

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

the coal rejects did not contain any useful c.v. Therefore,
the entire edifice of criminality and conspiracy built by the
respondent-CBI on the premise that the coal rejects had
a commercial c.v. 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 of the
Washability Report.
(n) The Revised Mining Plan submitted by the appellants to
the MoC in the year 2010 and approved in 2011, could not
have been relied on by the respondent-CBI for pressing
charges against the appellants on a plea that had the new
technology for utilizing the coal rejects been put to use,
the losses could have been mitigated. It is not in dispute
that the new technology namely, FBC was not even in
vogue when the MoC had approved the original Mining
Plan submitted by KECML in the year 2004. Besides that,
before putting the new technology to use, there were
several steps required to be undertaken, which included
obtaining approvals from different government agencies
and establishment of a plant. None of that could take place
as an order was passed by this court in the year 2014,
deallocating all captive coal mines.
21.3 In the light of the aforesaid discussion, we are of the opinion
that the respondent–CBI embarked on a roving and fishing
inquiry on the strength of the Audit Report of the CAG and
then started working backwards to sniff out criminal intent
against the appellants. The underpinnings of what was a civil
dispute premised on a contract between the parties, breach
whereof could at best lead to determination of the contract or
even the underlying lease deed, has been painted with the
brush of criminality without any justification. This criminal intent
has been threaded into the dispute by the respondent-CBI by
misinterpreting the clauses of the agreements governing the
parties and by heavily banking on the observations made in
the Audit Report of the CAG that has not attained finality till
date. In view of the glaring infirmities mentioned hereinabove,
the impugned orders deserve interference in exercise of the
powers vested in this court under Article 136 of the Constitution
of India.
1262 [2024] 8 S.C.R.

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21.4 For all the reasons enumerated above, the present appeals
succeed. The order on charge dated 24th December, 2021 and
the order framing charges dated 3rd March, 2022 passed by
the learned Special Judge, CBI qua the appellants before this
Court are unsustainable and accordingly quashed and set aside.

Result of the case: Appeals allowed.

†
Headnotes prepared by: Ankit Gyan