Reportable

IN THE SUPREME COURT OF INDIA

CRIMINAL APPELLATE JURISDICTION

CRIMINAL APPEAL NO. 1356 OF 2004

Union of India & Ors. …….. Appellants

Versus

Ramesh Gandhi ……… Respondent

J U D G E M E N T

Chelameswar, J.

1. This  appeal  arises out of  a  judgment of  the High Court  of  

Calcutta dated 23rd November, 2001 in Writ Petition No. 352/2001.  

The appellants herein were the respondents in the above-mentioned  

Writ Petition.

2. An FIR came to be registered on 15th November, 2000 in the  

Delhi Special Police Establishment, Ranchi Branch in Crime No. RC  

13(A)/2000 (R) under Section 120B read with Section 420 IPC and  

Section  13(2)  read  with  Section  13(1)(d)  of  the  Prevention  of  

Corruption  Act,  1988  against  nine  accused  of  whom  the  first  

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accused was the Coal Controller at the relevant point of time.  The  

next  five  accused  were  the  officers  of  Central  Coalfields  Limited  

(hereinafter  ‘CCL’.  for  short),  which is  a subsidiary of Coal  India  

Limited (hereinafter  ‘CIL’,  for  short).   Accused No.9 is  a  Private  

Limited  Company  (hereinafter  ‘private  company’,  for  short)  and  

accused Nos. 7 and 8 are the members of the said private company.

3. The  sole  respondent,  Mr.  Ramesh  Gandhi,  is  one  of  the  

members of the above-mentioned private company and shown to be  

the  seventh accused  in  the above-mentioned FIR.   He filed  writ  

petition No. 352/2001 on the file of the Calcutta High Court praying  

that the above-mentioned FIR be quashed.  By the judgment under  

appeal, the Calcutta High Court allowed the writ petition quashing  

the FIR.   

4. The  substance of  the  accusation  in  the  FIR  is  that  all  the  

accused entered into a criminal conspiracy to confer an illegal and  

unjust  benefit  on  the  above-mentioned  private  company.  In  the  

process,  the  accused,  “intentionally  and  dishonestly”  suppressed  

certain relevant and crucial facts (in the various cases filed before  

the Calcutta High Court and also this Court to which the accused  

were parties), which resulted in orders being passed both by this  

Court  as  well  as  by  the  High  Court  favourable  to  the  private  

company.

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5. FIR reads as follows:

“DELHI  SPECIAL  POLICE  ESTABLISHMENT,  RANCHI  BRANCH

FIRST INFORMATION REPORT

Crime  No.RC  13(A)/2000(R),  Date  and  time  of  Report  :  15.11.2000 at 1700 Hrs.

Place of occurrence with State : Calcutta (West Bengal), Ranchi  (Jharkhand)

Date and time of occurrence : 1990-91 to 2000

Name of complainant or informant with address : Through Source

Offence : U/s. 120B r/w 420 IPC and Sec. 13(2) r/w 13(1)(d) of PC  Act, 1988.

Name and address of the accused : (1)  Shri P.N. Tiwary, the then  Coal Controller, Calcutta (retd.)

(2)  Shri R.P. Srivastava, the then G.M.  Sales, CCL, Ranchi (retd.)

(3)  Shri S.K. Srivastava, G.M. (Sales), CCL, Ranchi

(4)  Shri B. Akla, CMD, CCL, Ranchi

(5)  Shri K.M. Singh, the then G.M., Argada Area, CCL

(6)   Shri  Sudarshan Singh,  the  then  Area  Sales  Officer  Argada  Area, CCL, presently Superintending Engineer (E&M), N.K. Area,  CCL

(7) Shri  Ramesh Gandhi,  Prop.  M/s.  Continental  Transport  Constn. Corpn., (CTCC), Dhanbad (Pvt).

(8)  Shri Mahesh Gandhi of M/s. CTCC, Dhanbad (Pvt.)

(9)   M/s.  Continental  Transport  Construction  Corpn.  (CTCC),  Dhanbad (Pvt.)

Action taken :  Regular case registered and investigation taken up.  

Investigation Officer: Shri A. Prasad, DSP, CBI, SPE, Ranchi

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INFORMATION

A reliable  information  has  been received to  the  effect  that  Shri  P.N. Tiwary, the then Coal Controller (since retd.), Calcutta, Shri  R.P. Srivastava, the then G.M.(Sales), CCL, Ranchi (since retd.),  Shri S.K. Srivastava, the then GM.(Sales), CCL, Ranchi, Shri B.  Akla, the then Chief of Marketing, Coal India Limited, Calcutta,  Director  (Technical)  and  (Projects  and  Planning),  CCL  and  presently  Chairman-cum-Managing  Director,  Central  Coalfields  Ltd. (CCL), Ranchi, Shri K.M. Singh, the then G.M., Argada Area,  CCL, Shri Sudarshan Singh, the then Area Sales Officer, Argada  Area, CCL (presently Superintending Engineer (E&M), N.K. Area,  CCL,  Shri  Ramesh  Gandhi  of  M/s.  Continental  Transport  Construction Corpn., Dhanbad and Shri  Mahesh Gandhi of M/s.  Continental Transport Construction Corpn., Dhanbad entered into  a criminal conspiracy among themselves and in furtherance of the  said conspiracy the accused public servants abused their respective  official positions, in as much as that they helped the private firm  namely  M/s.  CTCC  by  way  of  illegally  and  unauthorisedly  transferring  different  grades  of  coal/slurry  to  the  private  firm  (CTCC)  and  also  by  way  of  intentionally  and  dishonestly  suppressing relevant facts before the Hon’ble Courts and thereby  helped M/s.CTCC in getting favourable orders for release of steam  coal which was meant to be supplied only to the actual users and  not to the traders like M/s. CTCC.  As a result  of the aforesaid  overt acts of the accused public servants as mentioned above, M/s.  CTCC, illegally obtained the supply of the Steam Coal at a cheaper  rate applicable to the actual users, even after the lapse of the period  stipulated by the Hon’ble Supreme Court, causing wrongful loss to  the tune of Rs.90,00,000/- approximately to the CCL.

It has been alleged that Coal India Limited (CIL), Calcutta vide  NIT  (Notice  Inviting  Tender)  dated  9/15-1-91  offered  sale  of  existing stock of following categories of coal under “BULK SALE  SCHEME” on as is where is basis.

(i) Slurry

(ii) Dirty Slurry

(iii) Middlings

(iv) Rejects

It was also stipulated vide item no.23 of the terms and  conditions of the NIT that in case of failure on the part of the buyer  to lift 90% of the quantity within 90 days of allocation, security  deposit and the Bank Guarantee would be liable to be forfeited by  the Company.

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In response to the aforesaid NIT, M/s. CTCC, offered to  buy following quantity/quality of coal at the prescribed rate. M/s.  CTCC was allotted the entire quantity w.e.f. 25.7.91 which was to  be lifted within 90 days after depositing the cost in advance.

Name of Product Quantity  offered  by M/s. CTCC

Price

Slurry Grade ‘D’ 179000 MT Rs.37756/- per MT Dirty Slurry Grade ‘F’ 45000 MT Rs.238.50 per MT Middlings Grade ‘F’ 90000 M T Rs.238.50 per MT Rejects 50000 MT Rs. 178.00 per MT

It  is further alleged that M/s. CTCC deposited the cost  only  for  1500 MTs of  Middlings  Grade  ‘F’  and 13276  MT of  Slurry Grade ‘D’ against the offered quantity as mentioned in the  foregoing para.  M/s. CTCC had lifted this quantity of 1500 MT  only  and  was  thus  to  be  penalised  by  way  of  forfeiture  of  security/invoking of Bank Guarantee as per terms and conditions  of the NIT.  However, the concerned accused public servants in  pursuance  to  a  criminal  conspiracy,  had  shown favours  to  M/s.  CTCC by not taking action subsequently as above.

In furtherance of the conspiracy,  M/s. CTCC requested  the CIL in April 1993 to transfer the remaining quantity of 88500  MT of Middlings Grade ‘F’ to Dirty Slurry Grade ‘F’ and the same  was  approved  on  28.5.93  in  complete  violation  of  terms  and  conditions of the NIT.

Accused Ramesh Gandhi  of M/s.  CTCC in accordance  with Shri P.N. Tiwary, the then Coal Controller, Calcutta and the  accused  officials  of  the  CCL/CIL submitted  a  representation  to  accused  Shri  P.N.  Tiwary  requesting  transfer  of  the  left  over  quantity of 165724 MT of Slurry Grade ‘D’ to Dirty Slurry Grade  ‘F’.   Shri  P.N.  Tiwari,  in  his  capacity  as  Coal  Controller,  was  supposed to allow the transfer of grade of coal after following due  procedure, but he, in utter violation of the terms and condition of  the  NIT,  approved  the  same  and  intimated  to  the  CMD,  CCL,  Ranchi, accordingly.

It is further alleged that the Coal India Limited, Calcutta  floated another NIT under “LIBERALISED SALES SCHEME II  (LSS-II)”,  with  same  terms  and  conditions  as  of  Bulk  Sale  Scheme, and M/s. CTCC offered to purchase, under this scheme,  following quantities of coal from the collieries mentioned against  each.

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Grade of Coal Quantity lifted Colliery

(i) Steam Coal Grade ‘B’ 1.35 Lakhs MT Urimari

(ii) Steam Coal  Washery  Grade  ‘D’

1.75 Lakhs MT Jarangdih

It is further alleged that M/s. CTCC was allotted 32,000  MT of Steam Coal Grade ‘B’ from URIMARI Colliery and 5750  MT of Washery Grade ‘D’ Coal from Jarangdih Colliery vide letter  dated  7.4.93  and  21.4.93  respectively  of  Coal  India  Limited,  Calcutta.   As  against  the  aforesaid  allotted  quantity  M/s.CTCC  deposited the amount equal only to the value of 3000 MT each and  lifted the same from the respective sources.

In pursuance of criminal conspiracy M/s. CTCC further  requested  the  then  General  Manager,  Argada  Area,  CCL,  Shri  K.M.  Singh,  vide  letter  dated  7.4.94  to  allot  Steam Coal  from  Sirka,  Religara  and  Giddi  ‘C’  Collieries  (All  high  demand  collieries), in lieu of left over quantity of Slurry Grade ‘D’ (165724  MT), Middlings Grade ‘F’ (88500 MT) and Dirty Slurry Grade’F’  (45000 MT) of the previous scheme, i.e. Bulk Sale Scheme.

Steam Coal of the aforesaid three sources namely Sirka,  Religara and Giddi ‘C’ was to be allotted, as per the policy of the  CIL/CCL, exclusively to the industrial  consumers (Actual users)  and not to the traders like M/s. CTCC at all, during the relevant  period.  Also, the rate of Steam Coal applicable to the industrial  Consumers (Actual users) was approximately Rs.200/- per MT less  than the rate fixed for the traders and M/s. CTCC being the traders,  was not authorised to get the Steam Coal at the rate which was  applicable to the industrial consumers (actual users).

Following  the  receipt  of  letter  dated  7.4.94  of  M/s.  CTCC,  accused  Shri  K.M.  Singh,  the  then  General  Manager,  Argada Area, CCL, in pursuance to the criminal conspiracy falsely  intimated the Sales and Marketing Divisions of CCL, Ranchi, on  8.4.94 to the effect that Argada Area was having a huge stock of  Steam Coal  and that  he  was  ready to  supply  the  same  to  M/s.  CTCC.

It  is  further  alleged that  accused Shri  K.M. Singh,  the  then General Manager, Argada Area, CCL also was not competent  to entertain such a matter as it was the concern of General Manager  (Sales and Marketing), CCL, Ranchi.

Simultaneously, accused Ramesh Gandhi of M/s. CTCC  approached accused P.N. Tiwary, the then Coal Controller, as well,  on the same issue,  who in turn,  in criminal  conspiracy with M/s.  

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CTCC and accused public servants  wrote a letter dated 12.4.94 to  the CMD, CCL, Ranchi, inter alia,  directing him to accede to the  request of M/s. CTCC, without ascertaining from the CCL, Ranchi,  the  stock  position  and  the  past  conduct  of  M/s.  CTCC  of  not  remitting  the  cost  of  entire  offered  quantity  of  coal  in  question  against both the aforesaid schemes namely ‘Bulk Sale’ and ‘LSS-II’  within the stipulated period as prescribed and also the fact that M/s.  CTCC was not authorised to get the Steam Coal which was meant  for Industrial Units (Actual Users).

Even before the aforesaid letter dated 12.4.94 of accused  P.N. Tiwary, was received in the office of the CMD, CCL, Ranchi,  accused Ramesh Gandhi of M/s. CTCC moved to the Hon’ble High  Court, Calcutta by suppressing the relevant facts of the matter and  secured an order dated 18.4.94 vide which CMD, CCL, Ranchi was  directed to comply with the directions of the Coal Controller issued  vide letter dated 12.4.94.  The accused public servants of CIL/CCL  also did not place the correct facts before the Hon’ble High Court,  Calcutta in the matter.

It is further alleged that it was obligatory on the part of  accused R.P. Shrivastava, the then General Manager (Sales), CCL,  Ranchi, and Shri Akla, the then Chief of Marketing, CIL, Calcutta to  safeguard the interest  of the company by way of approaching the  Coal Controller to modify his order issued vide letter dated 12.4.94  according to the terms and conditions of the NITs in question and  also to recommend to move the Division Bench of Hon’ble High  Court  Calcutta  for  modification  of  the  order  dated  18.4.94  on  following points.

(i) M/s.  CTCC did  not  fulfil  the  terms  and  conditions  of  NITs in question and thus the penalty was to be imposed on them;

(ii) Steam Coal of the aforesaid collieries was not meant for  traders like M/s. CTCC.

(iii) Traders,  if  allotted  Steam Coal,  were  to  pay @  Rs.200/- approximately  (per MT) more than the rate allowed to the  Industrial Consumers (Actual users).

However, they, in pursuance to the criminal conspiracy,  simply  recommended  challenging  the  authority  of  the  Coal  Controller  for  issuing  direction  vide  letter  dated  12.4.94,  in  the  Hon’ble  High  Court,  Calcutta  since  the  Coal  Controller  was  authorised to issue such letters,  the Hon’ble High Court,  Calcutta  vide  order dated 6.4.95 dismissed the Revision Petition filed by the  CIL with direction to implement the order dated 12.4.94 of the Coal  Controller.

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M/s. CTCC, however,  did not  deposit  the value  of  the  Coal to be lifted again, on some pretext or the other as they were not  in a position to sale such a huge quantity of coal at monopolistic  price, those days, since the buyers were getting coal  directly  from  the Coal India Limited and other sources. Also neither the accused  Shri  B.  Akla,  the  then  Chief  of  Marketing  CIL  nor  Shri  R.P.  Shrivastava, the then General Manager (Sales and Marketing), CCL,  Ranchi asked M/s. CTCC to deposit the coal value and to lift  the  coal.

Two  SLPs  vide  no.  2004  and  2005  of  1997  were,  however, filed in the Hon’ble Supreme Court after a lapse of more  than two years by the CIL./CCL challenging the order dated 6.4.95  of the Division Bench of the Hon’ble High Court, Calcutta.

At this stage also, the actual facts relating to the failure  on the part of M/s. CTCC in lifting the coal after depositing the coal  value  in  advance  within  the  stipulated  period  as  per  terms  and  conditions of the NITs, were not brought to the notice of the Hon’ble  Supreme Court and simply the authority of the Coal Controller was  challenged.

The  Hon’ble  Supreme  Court  after  hearing  both  the  accused  parties,  dismissed  both  the  SLPs  on  18.3.97  with  an  observation that the Coal Controller had got the jurisdiction to pass  such orders.

On receipt of the orders of the Hon’ble Supreme Court, it  was rightly commented upon by an officer of Sales and Marketing  Department of the CCL, Ranchi on 5.4.97 to the effect that merely  challenging  authority  of  the  Coal  Controller  had  not  served  any  purpose. He opined that all the relevant points regarding failure on  the  part  of  M/s.  CTCC should  be  raised  by preferring  an  appeal  against the impugned order. Accused Shri B. Akla by that time had  joined  as  Director  (Projects  and Planning)  CCL,  Ranchi  and had  perused the aforesaid noting on 5.4.97 itself, but he had returned the  file on 16.4.97 without any comment with an advice to discuss the  matter with the Panel Advocate of CCL/CIL.

On  22.4.98,  a  modification  petition  was  filed  in  the  Hon’ble Supreme Court on behalf of CCL/CIL, mentioning therein  the difficulties in implementing the orders dated 12.4.94 fo the Coal  Controller,  Calcutta.   In  this  petition  also,  there  was  no  mention  about the facts that M/s. CTCC had not deposited the value of the  entire  quantity  of  coal  and  had  not  lifted  the  same  within  the  stipulated  period.  The  fact  that  Steam  Coal  of  the  collieries  in  question was meant specially for the industrial units/Actual users and  if  sold  to  the  traders  was  to  be  costlier  by  Rs.200/-  per  MT  approximately  was  also  not  mentioned  in  the  said  modification  petition.

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M/s. CTCC also filed a contempt petition simultaneously  in the Hon’ble Supreme Court against the then CMD, CCL, Ranchi  and others in the matter.  Hearing of both the petitions was fixed on  9.5.97 and the Hon’ble Supreme Court issued a show cause notice to  the concerned officers of CCL.  Hearing on the modification petition  as mentioned above could not be taken up.

As per the commitment of the CCL, the Hon’ble Supreme  Court vide its order dated 14.7.97, directed the CCL to complete the  supply of the entire quantity of coal allotted to M/s. CTCC within 20  months  positively at  the rate of 10,000 MT per month and at  the  modified price fixed by the CIL w.e.f. 1.4.97.

On receipt of the aforesaid order, the Dealing Officer of  the  Sales  and  Marketing  Division  of  CCL,  Ranchi,  initiated  a  proposal suggesting that penalty as per terms and conditions of NIT  of  “Bulk Sale”  and “LSS-II”  Schemes  should  be  decided in  case  M/s.  CTCC to  notify  truck  wise  allotment  on  a  weekly  basis,  to  ensure timely placement of trucks by the party and to maintain  a  record to assess the quantity lifted by them within a particular period  of time.

It was also decided/recommended during a meeting held  jointly  by  the  Director  (Finance),  CCL,  Ranchi,  C.G.M.,  Argada  Area,  CCL,  Sales  Officer,  Argada  Area,  CCL,  CGM  (Sales  and  Marketing Division), CCL, Ranchi etc. to impose a penalty on M/s.  CTCC in case failed to lift 10,000 MT of coal per month as per the  orders  of  the  Hon’ble  Supreme  Court.  When  this  note,  duly  recommended by the Committee was put up to the accused Shri B.  Akla,  the  then  director  (Technical)  and  (Projects  and  Planning),  CCL, Ranchi, he observed in favour of the party to the effect that the  party shall have to be made to forego the unlifted quantity after “the  stipulated  period,  and  it  will  in  itself,  be  sufficient  and  recovery/penalising for unlifted quantity may not be required”.

This observation of accused Shri B. Akla, which was not  in accordance with the recommendation of General Manager (Sales)  and the Committee members, including the Director (Finance) shows  that he was promoting the interests of M/s. CTCC rather than that of  CCL, Ranchi.

Thereafter,  on 20.9.97,  a  meeting  was held  which  was  attended to by Shri B. Akla, Director (Technical) and (P&P), Shri  A.K.  Mitra,  Director  (Finance),  R.R.  Menon,  G.M.(Sales  and  Marketing),  CCL and Ramesh Gandhi  of  M/s.  CTCC and it  was  mutually  agreed  upon  that  M/s.  CTCC  would  submit  a  Bank  Guarantee at the rate of Rs.30/- per MT for the unlifted quantity of  coal, which could not be lifted due to the failure on the part of M/s.  CTCC and to allow twenty months time for lifting the entire quantity  

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as per the direction of the Hon’ble Supreme Court. This period was  to be calculated from the actual date of commencement of lifting or  1st November,  1997, whichever  was earlier.   It was also specified  that M/s. CTCC would pay @ Rs.896/- per MT for the Steam Coal  Grade ‘B’ at the notified rate w.e.f. 1.4.97.

As per the aforesaid decision M/s. CTCC was to lift the  entire  quantity  of coal  by June 1999, but  against  2.8 lakh MT of  Steam Coal, M/s. CTCC lifted only about 30000 MT of coal from  the aforesaid three collieries upto June 1999 and thus the remaininig  quantity of 2.5 lakhs MT of coal was not to be allowed to be lifted  by M/s. CTCC. However, in violation of the Supreme Court’s order  M/s. CTCC was allowed by Shri R.P. Shrivastava, the then General  Manager (Sales), CCL, Ranchi to lift another 15000 MT of Steam  Coal between June 1999 to October 1999. As per the direction of  Hon’ble Supreme Court, the lifting of Coal was to commence from  November 1997 but it  was delayed by M/s.  CTCC in connivance  with the officers of CCL, on one pretext or the other upto March  1998, till the peak season started.  This was obviously with a view to  avoid the lean season.

It is also alleged that Shri Sudarshan Singh the then Area  Sales  Officer,  Argada  Area,  CCL,  was  made  the  nodal  officer  responsible  for  regulating  supplies  of  coal  to  M/s.  CTCC and its  reconciliation but he intentionally did not make any reconciliation  and did not  adhere to  the norms of  NIT/direction  of  the Hon’ble  Supreme  Cort.  Shri  Sudarshan  Singh  also  went  to  the  extent  of  issuing a letter/certificate favouring the party mentioning therein that  due to the non-availability of Coal in the Area, the supplies could not  be made to M/s. CTCC. This was done with a view to helping the  party  in  the  matter  of  lifting  coal  even  after  the  expiry  of  the  stipulated period of 20 months.

After  the  expiry  of  20  months,  accused  Shri  S.K.  Shrivastava the then General Manager (Sales), CCL, Ranchi and Shri  Mahesh  Gandhi  of  M/s.  CTCC  entered  into  an  unwarranted  agreement (MOU) on 23.3.2000, vide which M./s. CTCC would be  allowed to lift coal according to its own will as no time frame was  fixed for lifting the same. M/s. CTCC was also given a chance for  lifting  coal  from  Bokaro,  Barkakana,  Sayal  and  Dhuri  Area,  in  addition to the aforesaid areas was in high demand and was fetching  the  highest  premium.   In  the  MOU,  no  provision  was  kept  for  imposing any penalty for failure on the part of M/s. CTCC in lifting  of Coal.  This was done with a view of allow M/s. CTCC to lift coal  during premium months.

The rate at which M/s. CTCC allowed to lift the coal was  applicable  to  the  industrial  consumers/actual  users  and not  to  the  traders  like  M/s.  CTCC.   The  rate  applicable  to  the  trader  was  Rs.200/- (approximately per MT) more.

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After the expiry of stipulated period of 20 months, M/s.  CTCC was allowed by the accused public servants of CCL to lift  extra quantity of 45000 MT of steam coal, at the rate applicable to  the actual users and thereby CCL Ranchi was put to a wrongful loss  to the tune of Rs.90 lakhs (Rs. Ninty Lakhs) approximately.

The aforesaid acts of commissions and omissions on the  part  of  S/Shri  P.N.  Tiwary,  the  then  Coal  Controller,  Calcutta  (retired), R.P. Shrivastava, the then General Manager (Sales), CCL,  Ranchi (retd.), S.K. Srivastava, G.M. (Sales) CCL, Ranchi, B. Akla,  CMD, CCL, Ranchi, K.M. Singh, the then G.M. Argada Area, CCL,  Sudarshan  Singh,  the  then  Area  Sales  Officer,  Argada  Area,  presently superintending engineer (E&M), NK Area, CCL, Ramesh  Gandhi  of  M/s.  Continental  Transport  Construction  Corporation  (CTCC)  Dhanbad  (Pvt.)  reveal  that  the  public  servants  and  the  private persons alongwith their firm, as mentioned above,  entered  into a criminal conspiracy and in pursuance of the same violated the  terms and conditions of the NITs issued in respect of sale of coal  under  “Bulk  Sale”  and  “LSS-II”  Schemes,  wilfully  suppressed  relevant facts before the Hon’ble High Court, Calcutta and Hon’ble  Supreme Court of India and subsequently in violation of Hon’ble  Supreme Court’s order allowed the private party namely M/s. CTCC  to  lift  an  additional  quantity  of  45000  MT  of  coal  at  the  rate  applicable  to  the  industrial  consumers/actual  users  and  thereby  caused huge wrongful loss to the tune of Rs.90 lakhs approximately  to the CCL, Ranchi and corresponding wrongful gain to the private  party and themselves.  Shri P.N. Tiwary, the then Coal Controller,  Calcutta  also  connived  with  the  private  party  and accused  public  servants  by  fraudulently  and  dishonestly  issuing  directions  to  the  CMD, CCL, Ranchi in favour of the private party.

This prima facie disclose the commission of offences u/s.  120(B) r/w 420 IPC and Sec. 13(2) r/w sec. 13(1)(d) of P.C. Act,  1988.

This  R.C.  is  therefore  registered  and  investigation  is  taken up.

Sd/- 15.11.2000

[A. PRASAD] Dy. Supt. Of Police,

CBI/SPE/Ranchi, Investigating Officer

Dated 15.11.2000”

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6. According to the FIR, the various acts and omissions narrated  

therein  of  the  accused  caused  a  huge  wrongful  loss  of  

approximately rupees ninety lakhs to the CCL and a corresponding  

wrongful gain to the private company.

7. This case has a long and chequered history.  It all started with  

two advertisements issued by CIL in January, 1991 and September,  

1991  published  in  the  ‘Statesman’  newspaper  inviting  offers  for  

purchase of various grades of coal under two schemes propounded  

by it named as ‘Bulk Sale Scheme’ and ‘Liberalised Sale Scheme-II’.  

[It is unfortunate that copies of the above advertisements are not  

placed on record]

8. What transpired subsequently  is  described in detail  by this  

Court in judgment dated 18th March, 1997 in Civil Appeal Nos.2004-

2005/1997 reported in (1997) 9 SCC 258.  Both Coal India Ltd. and  

the private company were parties to the above-mentioned appeals.  

In paras 5 to 7, this Court recorded as follows:

“5. In Civil Appeal arising out of Special Leave Petition No.  25983 of 1995 we are concerned with the sale of coal under the  Liberalised Sales Scheme-II (for short 'LSS-II) framed by CIL in  August 1992 in pursuance of Notifications dated July 24, 1967 and  June 4, 1992. In September 1992 CIL published an advertisement  in the 'Statesmen'  inviting offers for purchase in respect  of coal  offered  for  sale  under  LSS-II.  In  the  said  advertisement  the  quantity and quality of coal that was being offered in the various  collieries  belonging  to  the  subsidiaries  of  CIL  were  specified.  

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Among the collieries mentioned in the advertisement were Urimari  and Jarangdih collieries  of  CCL. In respect  of  Urimari  Colliery  1.35 lac tonnes of Grade-B Steam Coal was offered and in respect  of Jarangdih Colliery 1.75 lac tonnes of Grade W-III Steam Coal  was offered. In response to the said advertisement M/s. Continental  Transport and Construction Corporation, respondent No. 1 in both  the appeals (hereinafter referred to as 'the petitioners'), sent a letter  dated September 16, 1992 to the General Manager (Sales), CCL,  offering to purchase 1.35 lac tonnes of Grade-B Steam Coal from  Urimari Colliery and 1.75 lac tonnes of Grade W-III Steam Coal  from Jarangdih Colliery. By allotment letter dated April 7, 1993,  CCL allotted to the petitioners 32,400 MT Grade-B Steam Coal  from Urimari Colliery in Sayal area in response to the offer made  by the petitioners  on September 16, 1992. By another allotment  letter  dated  April  20/21,  1993,  CCL  allotted  to  the  petitioners  50,750 MT Grade W-III Steam Coal from Jarangdih Colliery. The  validity of the said allotments was up to March 31, 1994, but the  period  of  the  said  allotments  was  extended.  The  case  of  the  petitioners is that Steam Coal at Urimari and Jarangdih Collieries  was not matching to the declared Grade-B and W-III respectively  and was of lower grades. Sirka Colliery falling in Argada area also  belongs  to  CCL.  The  petitioners,  having  come  to  know  that  sufficient stocks of Grade-B Steam Coal was available for disposal  at Sirka Colliery, wrote a letter dated April 7, 1994 to the General  Manager  (Argada area)  of  CCL, wherein  it  was  mentioned that  32,400 MT of  Grade-B Steam Coal  from Urimari  Colliery  and  50,750 MT of Grade W-III Steam Coal from Jarangdih Colliery  was allotted to them vide allotment letters dated April 7, 1993 and  April  20/21,  1993  respectively  and  that  on  account  of  non- availability of Grade-B Steam Coal at Urimari Colliery and Grade  W-III  grade  steam  coal  at  Jarangdih  Colliery  it  would  not  be  possible for them to lift the required quantity of coal. In the said  letter  it  was also stated that the petitioners had learnt  that Sirka  Colliery had huge stocks of Grade-B Steam Coal to the tune of  4.16 lakh MT and that he (General Manger) was willing to accept  the diversion of orders of other areas booked under LSS-II to the  tune of 2.00 lakhs MT in addition to other pending commitments  and orders/proposed deliveries to others including the petitioners.  By the  said  letter  the  petitioners  expressed  their  willingness  to  accept  equivalent  quantities  of  Grade-B Steam Coal  from Sirka  Colliery in case the General  Manager was willing to accept  the  transfer  of  allotment  for  Steam Coal  of  Urimari  and  Jarangdih  Collieries.  The  General  Manager  was  requested  to  accept  the  proposal of the petitioners at his level and intimate to the General  Manager  (Sales)/CCL  Headquarters  for  obtaining  the  formal  approval in this regard. After receiving the said letter the General  Manager (A), Sirka, sent a communication dated April 8, 1994 to  the General Manager (S&M), CCL, wherein he enclosed a copy of  the  aforementioned  letter  of  the  petitioners  dated  April  7,  1994  and, after referring to his wireless message dated April 1, 1994, he  

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stated that in view of the stock position of 4.16 lakhs MT of coal at  Sirka  Colliery  it  has  been  confirmed  that  in  order  to  liquidate  stocks  such  orders  of  steam coal,  if  diverted  from other  areas,  could be accepted.  On April  9, 1994 the petitioners submitted a  representation to the Coal Controller for transfer of allotments of  steam  coal  from  Urimari  and  Jarangdih  Collieries  allotted  by  CCL/Headquarters  under  LSS-II  from  these  collieries  to  Sirka  Colliery of Argada area. In the said representation the petitioners  mentioned that quality of coal being produced at Urimari Colliery  was equivalent to Grade-D coal and at Jarangdih Colliery also the  quality of coal being produced was equivalent to Grade W-IV. It  was stated that at Sirka Colliery of Argada area there were huge  stocks of Grade-B Steam Coal to the tune of 4.10 lakhs MT and it  was pointed out that the General Manager (Argada area) of CCL,  in his letter dated April 8, 1994, had recommended the request of  the  petitioners  for  diversion  of  allotments  to  Sirka  Colliery  for  favourable  consideration  and  approval  of  the  General  Manager  (Sales)/CCL. A copy of the said letter  of the General  Manager,  Argada Area, Sirka dated April 8, 1994 was also submitted along  with the representation. By the said representation the petitioners  requested  the  Coal  Controller  to  issue  a  direction  to  the  coal  company for transfer of allotments of Steam Coal from Urimari  and Jarangdih Collieries to Sirka Colliery for release of equivalent  quantity  of  Steam  Coal  from  Sirka  Colliery.  On  the  said  representation  the  Coal  Controller,  on  April  12,  1994,  sent  a  communication  to  the  Chairman-cum-Managing  Director,  CCL,  Ranchi referring to the letter dated April 7, 1994 submitted by the  petitioners  to  the  General  Manager,  Argada area  as  well  as  the  letter  dated  April  8,  1994  from  the  General  Manager,  Argada  addressed  to  the  General  Manager  (Sales)/CCL wherein  he  had  recommended for acceptance of the transfer in order to liquidate  huge stocks of coal at Sirka Colliery.  In the said letter  the Coal  Controller has stated :  

Having noted the entire circumstances and facts of the case and the  availability of steam coal at Sirka you are advised to forthwith give  effect  to  the  transfer  of  these  allotments  of  steam  coal  from  Urimari/Jarangdih  collieries  to  Sirka  Colliery  for  delivery  of  equivalent quantity of steam coal Grade B to the party as requested  for  by  them  and  recommended  by  the  concerned  area,  at  the  earliest.

6. Civil  Appeal arising out of S.L.P.  (Civil)  No. 26366 of 1995  relates to sale of washery products on the basis of the Notification  dated  July  24,  1967,  before  amendment  introduced  therein  by  Notification  dated  June  4,  1992.  On  January  17,  1991  and  advertisement was published in the 'Statesman' inviting offers for  bulk  purchase  of  rejects,  Middlings,  Slurry  and Dirty  Slurry  in  various washeries of CCL including the Gidi Washery. In response  to  the  said  advertisement,  the  petitioners,  on  March  2,  1991,  

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submitted offers for purchase of 1,79,000 MT Slurry, 90,000 MT  Middlings  and  90,000  MT  Dirty  Slurry.  By  letters  dated  May  11/14, 1991 CIL accepted the offer of the petitioners and agreed to  supply to the petitioners 1,79,000 MT Slurry Grade-D, 90,000 MT  Middlings  Grade-F  and  45,000  MT Dirty  Slurry  Grade-F  from  Gidi Washery.  Subsequently by letter  dated May 28, 1992 CCL  approved the transfer of 88,500 MT of Grade-F Middlings allotted  to the petitioners to equivalent quantity of Grade-F Dirty Slurry to  be delivered from Gidi  Washery.  By letter  dated September  18,  1993,  the  General  Manager  (Argada  area)  of  CCL  refused  to  accede to the request of the petitioners to allow delivery of Grade- D also with Grade-F Dirty Slurry and reiterated that in order to  avoid possible malpractices of lifting of Slurry against orders of  Dirty  Slurry,  lifting  of  both  the  products  concurrently  was  not  possible.  On  September  20,  1993,  the  petitioners  submitted  a  representation to the Coal Controller requesting him to direct CCL  to transfer their  allotment of 1,65,724 MT of Slurry Grade-D to  equivalent quantity of Dirty slurry Grade-F which was abundantly  available  at  the  Gidi  Washery.  On  January  31,  1994  the  Coal  Controller  gave  a  direction  to  the  Chairman-cum-Managing  Director, CCL, Ranchi, to transfer 1,65,724 MT of Grade-D Slurry  to equivalent quantity of Grade-F Slurry in Gidi Washery.  Since  the direction of the Coal Controller was not implemented by CCL,  the  petitioners  moved  the  Calcutta  High Court  by filing  a  Writ  Petition and the High Court,  by order dated February 10, 1994,  directed the appellants to act in terms of Coal Controller's letter  dated January 31, 1994. Thereupon by letter  dated February 28,  1994,  CCL confirmed  the  transfer  of  1,65,724 MT of  Grade-D  Slurry  to  Grade-F  Slurry  of  Gidi  Washery.  The  case  of  the  petitioners is that with effect from April 1, 1994, CCL changed the  grade of Dirty Slurry of Gidi Washery from Grade-F to Grade-E  for the year 1994-95 and increased its price by about Rs. 85 per  MT.  The  petitioners  submitted  a  representation  to  the  Coal  Controller on April 2, 1994 in that regard. On April 7, 1994, the  petitioners wrote a letter to the General Manager (Argada area) of  CCL, wherein they stated that in view of the difficulties mentioned  in the said letter, it would not be possible for them to lift the Dirty  Slurry allotted to them from Gidi Washery and they sought transfer  of their allotments of Dirty Slurry to Steam Coal from Sirka/Gidi- C/Religara collieries. By his letter dated April 8, 1994 addressed to  the General Manager (S&M), CCL, the General Manager (Argada  area),  forwarded the said letter  of  the petitioners  for favourable  consideration.  On  April  9,  1994  the  petitioners  submitted  a  representation to the Coal Controller requesting him to transfer of  then-allotted quantity of Dirty Slurry remaining to be booked and  lifted against allotment and the entire quantity of recent allotment  of 1,65,724 MT of Dirty Slurry for release of equivalent quantity  of Steam Coal by road from Sirka/Gidi-C/Religara collieries. The  Coal Controller, sent a communication dated April 12, 1994 to the  Chairman-cum-Managing  Director,  CCL,  wherein,  after  taking  

15

note of the representation dated April  7,  1994 submitted  by the  petitioners  to  the  General  Manager  (Argada area)  and the  letter  from the General Manager, Argada area to the General Manager  (Sales)/CCL dated April 8, 1994, he stated :

Having  noted  the  entire  circumstances  and  facts  and  the  availability of the coal at Sirka/Religara/Gidi-C desired to be lifted  by the party, you are advised to forthwith effect to the transfer of  allotments of Dirty Slurry and in the party letter dated 2.4.94 and  9.4.94  for  release  of  equivalent  quantity  of  steam  coal  from  Sirka/Religara/Gidi-C  collieries  as  requested  for  by  them  and  recommended by the concerned area, at the earliest.

7. Since the directions contained in both the communications of the  Coal Controller dated April 12, 1994 addressed to the Chairman- cum-Managing Director of CCL were not being implemented by  CCL, the petitioners on April  18, 1994, filed two Writ Petitions  (Matters Nos. 940-941 of 1994) in the Calcutta High Court. Both  the  Writ  Petitions  were  disposed  of  by  a  learned  single  Judge  (Mitra J.) by order dated April 18, 1994 whereby the Chairman- cum-Managing Director of CCL was directed to act in terms of the  communications dated April 12, 1994 sent by the Coal Controller  within  a  fortnight  from the  date.  This  order  was  passed  by the  learned single Judge without issuing notice to the appellants and by  directing that a copy of the Writ Petition be served upon Mrs. A.  Quraishi,  Advocate  as  she  generally  appears  on  behalf  of  the  Chairman-cum-Managing Director of CCL and the Chairman-cum- Managing  Director  of  CCL  'was  directed  to  regularise  her  appointment  in  the  matter.  The said order  of  the learned single  Judge was, however, set aside in appeal by the Division Bench of  the High Court by order June 6, 1994 and the matter was remitted  for  reconsideration  on  merits.  Thereafter,  the  matter  was  considered by Samaresh Banerjee J. who, after issuing notice to the  parties, by his judgment dated April 6, 1995, allowed both the Writ  Petitions filed by the petitioners and directed the appellants herein,  who  were  respondents  in  the  Writ  Petitions,  to  implement  the  orders  of  the  Coal  Controller  dated  April  12,  1994  forthwith.  Letters  Patent  Appeals  filed  by  the  appellants  against  the  said  judgment of the learned single Judge have been dismissed by the  Division Bench of the High Court (K.C. Agarwal CJ. and Tarun  Chatterjee J.) by the impugned judgment dated October 31, 1995.  Hence these appeals. “

It can be seen from the above-extract that the private company  

entered into two contracts with CIL pursuant to two Notice Inviting  

Tenders  (NITs).   Subsequently,  the  private  company  sought  

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variation of the original  terms of the contracts in so far as they  

relate to the quality of coal and also the collieries from which the  

coal could be secured. The same was directed to be given by  the  

Coal Controller (one of the accused) by his communications dated  

12.04.1994.   Complaining that  the CIL  and its  officers  were  not  

honouring the directions given by the Coal Controller, the private  

company  approached  the  Calcutta  High  Court  by  filing  two  writ  

petitions, i.e. W.P. Nos. 940 and 941 of 1994.  The brief history of  

the said writ petitions is taken note of by this Court in para 7 of the  

judgment  dated  18th March,  1997,  extracted  above.   Eventually,  

both the writ petitions were allowed by the judgment of the Calcutta  

High Court dated 6th April, 1995 and the same was confirmed by the  

Division Bench in Letters Patent Appeals by a judgment dated 31st  

October, 1995. Aggrieved by the same, CIL approached this Court  

by  the  above-mentioned  Civil  Appeal  Nos.  2004-2005  of  1997.  

Both the appeals were dismissed.

9. The matter  did  not  end there.   Complaining that  the  Coal  

India Ltd. and its officers failed to comply with the judgment of this  

Court dated 18th March, 1997 in the above-mentioned Civil Appeal  

Nos.  2004-2005  of  1997,  the  private  company  filed  contempt  

petitions Nos. 261-262 of 1997.  The said contempt petitions were  

disposed of by an order dated 14th July, 1997 by this Court. The  

operative portion of the said order is as follows:-

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“We, however, find that in the contempt petitions the prayer of  the applicants is that they may be supplied coal at the notified price  fixed by the Coal India Ltd. and made effective for sale of coal with  effect from April 1, 1997.  Having regard to the said prayer made by  the applicants themselves in the contempt petitions, we consider it  just  and  appropriate  in  the  interest  of  justice  to  direct  that  the  supplies of the coal that are to be made by the respondents as per the  directions of the Coal Controller during the period of next 20 months  shall be made at Rs.896/- per metric tonne, the notified price fixed  by the Coal India Ltd. with effect from April 1, 1977.  It is made  clear that the respondents are not restricted to supply coal at the rate  of 10000 metric tonne per month and that if there is availability of  larger quantity of coal the respondents can supply quantity in excess  of 10000 metric tonne per month so as to reduce the period of 20  months  for  the  supply  but  in  no  event  the  said  period  shall  be  extended.  Since the supplies are to be made at the rate of 10000  metric tonne per month, it will be permissible for the applicants to  furnish rotating bank guarantee for 10000 metric tonne of coal per  month.  It is also made clear that the price at which the supply of  coal is to be made as directed above, shall be for the entire quantity  of  coal  to  be  supplied  by  the  respondents  and  there  shall  be  no  variation in the said price.   The contempt petitions as well  as the  interlocutory applications Nos.5-6 are disposed of accordingly.”

10. Subsequently, it appears that CIL did, in fact, supply coal to  

the  private  company  allegedly  not  only  in  compliance  with  the  

directions of this Court  in its  order dated 14th March but also in  

excess of the legal obligations imposed by the orders of this Court.

11. It is in the above-mentioned background, the FIR, which is  

the subject matter of the dispute in the instant appeal, came to be  

registered on 15th November 2000.  

12. The crux of the FIR is that though the supplies by the Coal  

India Ltd. are pursuant to the directions issued by the Calcutta High  

Court confirmed and reinforced by the judgment dated 18.3.97 and  

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order dated 14.7.97 of this Court referred to above, such directions  

from the courts are consequences of the failure on the part of the  

various accused (mentioned in the FIR) to bring the relevant and  

crucial  facts  which  in  law  disentitle  the  private  company  from  

getting any relief either from this Court or from the Calcutta High  

Court.  According to the FIR, the private company failed to comply  

with the twin obligations arising under the two contracts referred to  

earlier, i.e. lifting of the coal contracted to be purchased by it in  

accordance with the schedule agreed upon and making the payment  

of money towards the sale price of the coal in terms of the schedule  

of the payment agreed upon.  The substance of the FIR is that the  

failure to bring the above mentioned crucial facts to the notice of  

the  Courts  (both  the  Calcutta  High  Court  and  this  Court),  is  

deliberate  and  due  to  a   conspiracy  between  all  the  accused  of  

which the respondent is one.

13. By the judgment under  appeal,  the said FIR was quashed.  

The  only  reason given  is  that  the  supply  of  coal  to  the  private  

company  had  been  made  in  terms  of  a  decision  given  by  the  

Calcutta High Court as approved by this Court at a price fixed by  

this Court. Therefore, no Magistrate can examine the allegation that  

such a supply of coal resulted in an unjust pecuniary advantage to  

the private company.  The operative portion of the judgment reads  

as under:

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“It was contended that the object of the First Information Report  and the  investigation  thereon was to  unearth  criminal  misconduct  conducted  by  the  accused  public  servants  to  obtain  for  CTCC  wrongful  pecuniary  advantage  by  corrupt  or  illegal  means  or  by  abusing their position as public servants or while holding office as  public  servants  and  accordingly  offences  said  to  have  been  committed  includes  those  mentioned  in  Section  13(2)  read  with  Section 13(1)(d) of the Prevention of Corruption Act,  1988.  The  alleged wrongful pecuniary advantage is obtaining of supply of coal  at a less price.  As aforesaid supply of coal had been obtained in  terms of a decision given by this Court and approved by the Supreme  Court and at the price fixed by the Supreme Corut, no magistrate,  therefore, in the circumstances can decide that any unjust pecuniary  advantage was made available to CTCC by any of the accused public  servants.

For the reasons aforesaid I quash the First  Information Report  impugned in this writ petition,  all investigations made pursuant to  the  said  First  Information  Report  and  restrain  Central  Bureau  of  Investigation from carrying on any further investigation on the basis  of the said First Information Report.”

14.   Hence, this appeal.

15. Learned  Additional  Solicitor  General,  Shri  P.P.  Malhotra,  

appearing for  the appellant very vehemently  submitted that: the  

only issue considered and decided by the Calcutta High Court and  

confirmed by this Court was whether the Coal Controller had the  

necessary  legal  authority  to  direct   (by  his  two  letters  dated  

12.4.1994) the variation of the terms of the two contracts entered  

into by the private company and this Court did find that the Coal  

Controller had the requisite legal authority to direct such variation.  

The  mere  existence  of  authority  in  the  Coal  Controller  to  order  

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variation in the terms of the contracts does not by itself mean that  

the authority had been exercised  legally  and validly.   The Coal  

Controller failed to take note of the fact that the private company  

had already committed a breach of  its  contractual  obligations  to  

CIL.  Having regard to the breach of the contract committed by the  

private company, the Coal Controller should not have exercised his  

authority in favour of such a defaulting purchaser. In other words,  

the  Coal  Controller  did  not  take  all  the  relevant  factors  before  

exercising  his  authority  to  grant  variation  in  the  terms  of  the  

contracts  between  the  private  company  and  the  Coal  India  Ltd.  

Shri Malhotra further submitted that even in the legal proceedings  

before the Calcutta High Court and this Court, these factors were  

not brought to the notice of the Courts by any one of the accused.  

It  is  argued that  if  only  the  fact  that  the  private  company had  

already defaulted in its obligations arising out of the two contracts  

entered into by it with the CIL had been brought to the notice of the  

Courts, Courts would not have intervened in favour of the private  

company.  The gravamen of the charge in the FIR in issue is that  

the failure to bring such crucial facts, which were most crucial for  

adjudicating the rights and obligations of the private company and  

CIL, to the notice of the Courts is the consequence of a criminal  

conspiracy by  all  the  accused  to  enable  the  private  company to  

derive  an  unjust  and  illegal  benefit  at  the  cost  of  CIL.   Shri  

Malhotra,  therefore,  submitted  that  the  judgment  under  appeal  

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clearly failed to consider this aspect and, therefore, unsustainable in  

law.

16. On the other hand, Shri Gopal Subramanium, learned senior  

counsel appearing for the respondent submitted that the judgment  

under appeal does not call for any interference as the conclusion  

arrived at by the judgment under appeal is a logical corollary to the  

earlier judgment  in Civil Appeal Nos. 2004-2005 of 1997  and order  

in Contempt Petitions Nos. 261-262 of 1997 of this Court.

17. From  the  tenor  of  the  impugned  FIR,  we  understand  the  

charge against the accused to be as follows:

(a) The  private  company  committed  breach  of  contractual  

obligations arising under the two contracts entered into by it with  

CIL.

(b) The officers of the CIL and CCL(shown accused in the FIR) are  

obliged  in  law (as  per  the  terms  of  the  contract)  to  take  penal  

action  against  the  private  company  for  such  breach  of  the  

contractual obligations.

(c) The above-mentioned officers/accused failed to take any such  

penal action.

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(d) On the other hand, when the private company approached the  

courts seeking the enforcement of the directions of Coal Controller,  

all  the  accused  deliberately  suppressed  the  fact  that  private  

company  had  committed  a  breach  of  its  contractual  obligations,  

thereby enabling the private company to obtain favourable order.

(e) The suppression of the crucial fact that the private company  

committed breach of its contractual obligations was deliberate and  

intentional on the part of all the accused.

(f) Such suppression is a consequence of a criminal conspiracy  

between all the accused to enable the private company to secure an  

illegal monetary gain by manipulating the judicial process.

18. We have meticulously examined the judgment of this Court  

dated  18.3.1997.   The  entire  controversy  in  the  said  judgment  

revolved  only around the authority of the Coal Controller to issue  

the various directions such as were given by him on 12.04.1994. On  

an  examination  of  the  relevant  provisions  of  law,  this  Court  no  

doubt held that the Coal Controller was legally competent to issue  

the  said  directions.  That  the  private  company  had  already  

committed breach of contractual obligations arising under the two  

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contracts was not at issue. There is no discussion in that regard in  

the said judgment.

19. Whether the private company failed to comply with the legal  

obligations arising out of the contracts entered into by it with the  

Coal  India  or  its  subsidiaries,  depends on the proof  of  the facts  

allegedly constituting the acts or omissions amounting to the breach  

of the contracts on the part of the private company. To arrive at  

any  conclusion  on  the  above  question,  it  requires  a  detailed  

examination of the relevant material. The fact that the supplies of  

coal were made to the private company pursuant to the orders of  

the Calcutta High Court and confirmed by this Court by itself does  

not rule out the possibility of a crime having been committed.  It is  

well known that decisions are rendered by courts on the basis of the  

facts  pleaded  before  them  and  the  issues  arising  out  of  those  

pleaded  facts.   As  we  have  already  pointed  out,  the  only  issue  

projected on the basis of the facts placed before Calcutta High Court  

and  this  Court  is  the  competence  of  the  Coal  Controller  to  give  

directions which in substance amounted to variation of the terms of  

the contracts to which the private company and Coal India Ltd. are  

parties.  This court in Civil Appeal Nos.2004-2005 of 1997 declared  

that  the Coal  Controller  had the requisite legal  authority to  give  

such directions but did not examine any other issue.

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20. The  exact  terms  and  conditions  subject  to  which  the  CIL  

accepted the offer of private company are not available on record in  

the instant case.  But it appears from the FIR (which is the subject  

matter of dispute) that the private company is required to lift the  

entire quantity of coal it agreed to purchase within a period of 90  

days from the date of allotment. It also appears from the FIR, that  

the private company is obliged to make the payments of the price in  

a specified manner and schedule and also make a security deposit,  

the exact nature of which is not mentioned either in FIR or in the  

petition  or  in  the  judgment  under  appeal.  We are,  therefore,  to  

make  a  conjuncture  that  deposit  of  money  is  some  kind  of  a  

guarantee for the performance of the contract on the part of the  

private company.

21. Coming to the judgment under appeal, as it is already noticed  

that the High Court quashed the FIR only on the ground that the  

supply of coal had been obtained in terms of a decision given by the  

Calcutta High Court and approved by this Court and for the said  

reason  no  magistrate  can,  therefore,  decide  whether  any  unjust  

pecuniary advantage was made available to the private company.  

For  coming  to  such  a  conclusion,  the  learned  Judge  made  an  

‘elaborate  examination’  of  the  Indian  legal  system.   But,  in  our  

opinion, the entire enquiry proceeded on a wrong premise that no  

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examination, as to how a judgment of a superior Court came into  

existence, is permissible in the system of law which we follow.   

22. This Court on more than one occasion held that fraud vitiates  

everything including judicial  acts.  In  S.P. Chengal Varaya Naidu  

(Dead) By Lrs. Vs. Jagannath (Dead) By Lrs. & Ors., (1994) 1 SCC  

1, this Court observed as follows in para 1:-

1.  "Fraud-avoids  all  judicial  acts,  ecclesiastical  or  temporal"  observed  Chief  Justice  Edward  Coke  of  England  about  three  centuries ago. It is the settled proposition of law that a judgment or  decree obtained by playing fraud on the court is a nullity and honest  in the eyes of law. Such a judgment/decree - by the first court or by  the  highest  court  -  has  to  be  treated  as  a  nullity  by every  court,  whether superior or inferior. It can be challenged in any court even  in collateral proceedings.”

23. Again  in  A.V.  Papayya  Sastry  and  Ors.

Vs.  Government of A.P. and Ors.,  AIR 2007 SC 1546, this Court  

reviewed the law on this position and reiterated the principle. In  

paras 38 and 39 it was held as follows:

38.   The  matter  can  be  looked  at  from  a  different  angle  as  well.  Suppose, a case is decided by a competent Court of Law after hearing  the parties and an order is passed in favour of the applicant/plaintiff  which is upheld by all the courts including the final Court. Let us also  think  of  a  case  where  this  Court  does  not  dismiss  Special  Leave  Petition but after granting leave decides the appeal finally by recording  reasons. Such order can truly be said to be a judgment to which Article  141 of the Constitution applies. Likewise, the doctrine of merger also  gets  attracted.  All  orders  passed by the  courts/authorities  below,  therefore,  merge  in  the  judgment  of  this  Court  and after  such  judgment, it is not open to any party to the judgment to approach  any court or authority to review, recall or reconsider the order.  

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39. The  above  principle,  however,  is  subject  to  exception  of  fraud.  Once  it  is  established  that  the  order  was  obtained  by  a  successful  party  by  practising  or  playing  fraud,  it  is  vitiated.  Such  order cannot be held legal, valid or in consonance with law. It is non- existent  and  non  est  and  cannot  be  allowed  to  stand.  This  is  the  fundamental  principle  of  law  and  needs  no  further  elaboration.  Therefore, it has been said that a judgment, decree or order obtained  by fraud has  to  be  treated  as  nullity,  whether  by the  court  of  first  instance or by the final court. And it has to be treated as nonest by  every Court, superior or inferior.

[emphasis supplied]

If a judgment obtained by playing fraud on the Court is a nullity and  

is to be treated as non est by every Court  superior or inferior, it  

would be strange logic to hear that an enquiry  into the question  

whether a judgment was secured  by playing fraud on the Court by  

not disclosing the necessary  facts relevant for the  adjudication  of  

the controversy before  the Court is impermissible. From the above  

judgments, it is clear that such an examination is permissible. Such  

a principle is required to be applied with greater emphasis in the  

realm of public law jurisdiction as the mischief resulting from such  

fraud has larger dimension affecting the larger public interest.  

Therefore, the conclusion reached by the judgment under appeal  

that no Court can examine the correctness of the contents of the  

impugned FIR, is unsustainable and without any basis in law. The  

very complaint in the FIR is that the judgment of the Calcutta High  

Court, as affirmed by this Court, is a consequence of a deliberate  

and  dishonest  suppression  of  the  relevant  facts  necessary  for  

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adjudicating the rights  and obligations of  the parties  to the said  

litigation

24. Coming to the question as to what amounts for securing a  

judgment by playing fraud in the Court- In  Chengal  Varaya  Naidu  

(supra), this Court categorically held that the non-disclosure of all  

the necessary facts tantamounts to playing fraud on the Courts.  At  

para 6 of the said judgment, it was held as follows:

“…………..If  he  withholds  a  vital  document  in  order  to  gain  advantage on the other side then he would he guilty of playing fraud  on the court as well as on the opposite party.”

25. The  allegation  in  the  FIR  is  that  the  various  accused  

deliberately withheld/suppressed the fact that the private company,  

by the time it approached the Calcutta High Court in writ petition  

Nos.940  and 941  of  1994,  had  already committed  breach  of  its  

obligations  arising of  the  contracts  from out  of  which the  entire  

litigation arose.   A fact  which is  greatly  relevant  in deciding the  

entitlement of the private company to seek various reliefs such as  

the ones sought by it before the Calcutta High Court.  It is further  

specific allegation in the FIR such a non-disclosure/suppression of  

the crucial fact was wilful and deliberate pursuant to a conspiracy  

between all the accused to secure an illegal and wrongful monetary  

gain  to  the  private  company.  Therefore,  in  our  opinion  the  

Judgment under appeal cannot be sustained.  

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26. Coming  to  the  question  of  the  scope of  the  jurisdiction  to  

quash an FIR, either in the exercise of statutory jurisdiction under  

Section 482 of Cr.P.C. or under Article 226 of the Constitution of  

India, the law is well settled and this Court in a catena of decisions  

laid down clear principles and indicated parameters which justify the  

quashing of an FIR.  We do not propose to catalogue all the cases  

where the issue was examined but notice only two of  them and  

indicate  the consistent  principles  laid  down by this  Court  in  this  

regard.

27. In  R.P.  Kapur Vs.  State  of  Punjab,  AIR 1960 SC 866,  this  

Court at para 6 held:

“……………..It is well-established that the inherent jurisdiction  of the High Court can be exercised to quash proceedings in a  proper  case either  to  prevent  the  abuse  of  the  process  of  any  court  or  otherwise  to  secure  the  ends  of  justice.  Ordinarily  criminal proceedings instituted against an accused person must  be tried under the provisions of the Code, and the High Court  would be reluctant to interfere with the said proceedings at an  interlocutory stage. It is not possible, desirable or expedient to  lay down any inflexible rule which would govern the exercise of  this  inherent  jurisdiction.  However,  we  may  indicate  some  categories of cases where the inherent jurisdiction can and should  be exercised for quashing the proceedings. There may be cases  where it may be possible for the High Court to take the view that  the institution or continuance of criminal proceedings against an  accused person may amount to the abuse of the process of the  court or that the quashing of the impugned proceedings would  secure the ends of justice. If the criminal proceeding in question  is in respect of an offence alleged to have been committed by an  accused person and it manifestly appears that there is a legal bar  against the institution or continuance of the said proceeding the  High Court would be justified in quashing the proceeding on that  ground.  Absence  of  the  requisite  sanction  may,  for  instance,  furnish cases under this category. Cases may also arise where the  allegations in the First Information Report or the complaint, even  if they are taken at their face value and accepted in their entirety,   

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29. Tested from the point  of  view of  the law laid down in the  

above  mentioned  judgments,  the  impugned  FIR  does  not  merit  

interference,  as  it  is  not  a  case  of  even  the  respondent  (writ  

petitioners) that the FIR is required to be quashed on any one of  

the grounds legally recognised by this Court to be sufficient ground  

for quashing an FIR.

30. For  all  the  above reasons,  we are  of  the  opinion  that  the  

judgment  under  appeal  cannot  be  sustained  and  the  same  is  

required to be set aside and we, accordingly, set aside the same.  

The appeal stands allowed.

…………………………………J. ( P. Sathasivam )

……………………………………J. ( J. Chelameswar )

New Delhi; Dated: 14th November, 2011.

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