M-S KARNATAKA EMTA COAL MINES LIMITED AND ANOTHER v. CENTRAL BUREAU OF INVESTIGATION

Citation: Criminal Appeal Nos.

Court: Allahabad High Court (Lucknow Bench)

Bench: Central Bureau of Investigation

Case summary

The present appeals challenge the Order on Charge dated 24. qua the appellants before this Court are unsustainable and accordingly quashed and set aside.

Judgment text

SUPREME COURT OF INDIA M/s Karnataka Emta Coal Mines Limited and Another v. Central Bureau of Investigation Criminal Appeal Nos. 1659-1660 of 2024 [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 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 respondent-CBI was not a party in the aforesaid proceedings - Further, the CAG Report had not attained finality inasmuch as its recommendations have not been tabled before the Parliament or accepted so far - The said report at best, has a persuasive value but no more. [Paras 9.

5, 21. 2(b)] Prevention of Corruption Act, 1988 - ss. 13(1)(d)/13(2) - Penal Code, 1860 - s. 120-B r/w. ss. 409/420 - Mines and Minerals (Development & Regulation) Act, 1957 - What is the import of the Judgment dated 24. 03. 2016 of the Karnataka High Court: Held: The decision dated 24. 03. 2016 of the Karnataka High Court in a writ petition filed by KECML against KPCL has been wrongly overlooked - The High Court had an occasion to scrutinize the very same agreements and the CAG report that formed the basis of the investigation conducted by the respondentCBI to return positive findings in favour of the appellants - The view taken by the Karnataka High Court has been upheld by this Court in a judgment rendered on 20. 05. 2022 which was just a few days after Charges were framed by the Special Judge, CBI on 03. 03. 2022. [Para 21.

2(f)] Mines and Minerals (Development & Regulation) Act, 1957 - What is the sanctity of an Audit Report in Law: Held: The CAG Report is subject to scrutiny by the Parliament and the Government can always offer its views on the said report - Merely because the CAG is an independent constitutional functionary does not mean that after receiving a report from it and on the PAC scrutinizing the same and submitting its report, the Parliament will automatically accept the said report - The Parliament may agree or disagree with the Report - It may accept it as it is or in part - In the instant case, it is not in dispute that the Audit Report of the CAG has not been tabled before the Parliament for soliciting any comments from the PAC or the respective Ministries - Therefore, the views taken by the CAG to the effect that tremendous loss had been caused to the public exchequer on account of the coal rejects being disposed of by the KPCL and KECML remains a view point but cannot be accepted as decisive - The respondent-CBI has largely relied on the findings and the conclusions drawn in the Audit Report of the CAG to launch the prosecution against the appellants on an assumption that the said Report has the seal of approval of the Parliament and has attained finality, which is not the case.

[Para 11. 5] 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 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: 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 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] 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 [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 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. 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? 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 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 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 Hima Kohli, J. A. PREFACE 1. The present appeals challenge the Order on Charge dated 24th December, 2021 and Order framing Charges dated 03rd March, 2022 passed by the learned Special Judge (Prevention of Corruption Act1) Central Bureau of Investigation,2 Coal Block Case No.

-01, Rouse Avenue District Court, Delhi3 in a case4 registered under Section 120-B read with Sections 409/420 of the Indian Penal Code5 and Sections 13(1)(d)/ 13(2) of the P. C. Act, 1988 titled 'CBI vs. S. M. Jaamdar & Others'. The appellants before this Court are M/s Karnataka Emta Coal Mines Limited6 arrayed as accused No. 12 in the chargesheet and Shri Ujjal Kumar Upadhaya, Chairman and Managing Director of Emta Coal Limited and former Managing Director of accused No. 12, arrayed as accused No. 6 in the chargesheet. 2. It may be noted at the outset that a challenge has been laid to the impugned orders passed by the learned Special Judge directly before this Court in the light of the directions issued inM. 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' 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 "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, 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 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 M/s Karnataka Emta Coal Mines Limited and Another v. Central Bureau of Investigation 6. Quantity a. The total quantity of coal required to be supplied to BTPS is approximately 2 Million Tonnes (+)/(-) 10% per annum. 7.

Quality a) The quality of coal shall be determined by drawing coal samples from railway wagons on receipt at KPCL power plants before unloading. b) A third party agency shall be appointed jointly by the parties of the agreement for sampling and analysis of coal received at BTPS end. The third party agency shall carry out the sampling and analysis of coal in the presence of the representative of the parties........ xxxxx d) An independent inspection agency shall supervise and certify the quality of coal received at BTPS and the result of analysis certified by the independent inspection agency as per the procedure stated above shall be binding to all concerned for all commercial purposes. xxxxx 9. Delivery Period a. The delivery of coal to BTPS shall commence one month prior to the scheduled date of synchronisation of first unit with coal at BTPS. The tentative date of commissioning maybe taken as Dec. 2005. xxxxx 1166 13.

The company shall provide an undertaking to the Ministry of Coal, Government of India that the coal produced from the KPCL Coal Mines shall be wholly and exclusively supplied, transported and delivered to KPCL. ARTICLE - 6 COMMERCIAL TERMS Fuel supply agreement shall be executed between KPCL and Company to record the terms and conditions of coal supply from KPCL coal mines to KPCL which shall be governed by the following commercial terms : 1. Price a) KPCL shall purchase the entire quantity of specified coal supplied to BTPS at a price of Rs. 1650. 47 per tonne, the detailed break up of which is as per Annexure - II attached to this agreement xxxxx c) The price shall be firm at the agreed price i. e. Rs. 1650. 47 per MT for a quantity of one million tonnes in the first year of BTPS - operation subject to price variation as per clause 3. D(b)- l(a) but limited to 50% increase in base price only. And 100% variation in statuary charges as per clause 3. D(a). xxxxx 2.

Basis of payment and price adjustment KPCL shall pay the price of coal for the quantity and quality of coal on receipt at BTPS on rake to rake basis as detailed herein below: 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 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: 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 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' 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 (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.

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 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 16th April, 2004, the Ministry of Coal and Mines issued 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 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' 1176 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' 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 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 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 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. 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 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 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 20th 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 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 - 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 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, 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 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' 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 3. 8 AUDIT OBJECTIONS RAISED BY THE COMPTROLLER AND AUDITOR GENERAL32 3. 8. 1 On 31st 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 Rs. 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" 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 (Rs. ) 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 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 its own means with the approval of Central Year Coal Minimum Average Loss (Rs. ) produced quantity CIL rate Government. at Baranj of rejects of G The conditions of allocation inter-alia included OCP (in as per grade 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 consumption only by the Company as approved 2009-10 2252358.

28 225235. 83 620 139646213. 05 by the Central Government. Further, no coal 2010-11 2274994. 46 227499. 45 650 147874639. 58 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 (power generation) and with the previous (up to 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 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. 09