Today, 23rd August, The Supreme Court quashed charges against a Karnataka coal company, criticizing the CBI for conducting a “fishing and roving inquiry.” The Court noted that the CBI relied heavily on a CAG report that was not finalized, leading to unjustified criminal charges.
New Delhi: The Supreme Court, On Friday, expressed concern over the Central Bureau of Investigation (CBI) perceiving criminal intent in contractual agreements that based on an audit report yet to be finalized.
A Bench comprising Justices Hima Kohli and Ahsanuddin Amanullah dismissed the corruption charges against Karnataka EMTA Coal Mines, ruling that the CBI had misconstrued the clauses in the company’s agreements to suggest criminal behaviour.
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The court observed,
“The CBI embarked on a fishing and roving inquiry, relying on the CAG’s Audit Report, and then retrospectively sought to establish criminal intent against the appellants. What was essentially a civil dispute rooted in a contractual agreement, which could have led at most to the contract’s termination or the underlying lease deed, was unjustifiably portrayed as criminal. This conclusion was heavily based on the CAG’s Audit Report, which has not yet reached finality.”
The company directly approached the Supreme Court to challenge a special court’s decision to frame charges against it under the Prevention of Corruption Act. The lower court had denied the company’s and its Chairperson’s request for discharge from the case.
The case originated from allegations of irregularities in the handling of a coal block.
An agreement established between Karnataka Power Corporation Limited (KPCL) and the appellant company for the development of captive coal mines to supply coal to the Bellary Thermal Power Station.
A fuel supply agreement was signed between the two entities, detailing coal supply specifications, including quality and quantity, price adjustments, and penalties for delays. The appellant company and its Managing Director later accused of corruption concerning this agreement.
They claimed that the CBI’s actions were based on an inquiry report from the Comptroller and Auditor General (CAG). The report alleged that the appellants failed to transfer Rs. 52.37 crore to the government entity, which argued that the amount referred to the value of rejected coal due to low calorific value.
The Supreme Court observed that the CBI used the audit report as a “launching pad” to initiate prosecution and then sought to substantiate the allegations made.
The Court noted that the central agency should not have acted against an earlier order prohibiting prosecution based on the report, especially since the agency was not a party to those proceedings.
The Court further explained that a CAG report is subject to parliamentary scrutiny, allowing the government to present its views on the report. Since the report in this case had not been tabled, its findings could not be considered conclusive.
The court stated,
“Simply because the CAG is an independent constitutional functionary does not imply that once a report is received from it, and after the Public Accounts Committee (PAC) reviews and submits its findings, Parliament will automatically accept the report. Parliament may agree or disagree with the report, either in full or in part.”
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The Bench also found no fault in the appellant company’s method of disposing of coal rejects, noting that the Union government had not provided a specific plan for their disposal.
As a result, the appeal was upheld, and the order framing charges against the appellants was overturned.
Senior Advocates Ranjit Kumar and Abhimanyu Bhandari represented Karnataka EMTA Coal Mines and its former Managing Director, while Senior Advocate RS Cheema represented the CBI.