SC Upholds CBI Investigation in Coal Scam, Orders Trial to Continue

The Supreme Court of India ruled on a crucial case concerning alleged corruption in coal supply agreements, rejecting petitions seeking the quashing of criminal proceedings against private companies and government officials. The case arose from an investigation conducted by the Central Bureau of Investigation (CBI) into allegations that coal, which was supposed to be used for industrial purposes, was fraudulently sold on the black market, causing a loss of Rs. 36.28 crore to the government.

Background of the Case

On October 18, 2007, Coal India Limited introduced a new policy requiring purchasers to enter into a Fuel Supply Agreement (FSA). The appellants, including Fertico Marketing and Investment Pvt. Ltd., signed an FSA with Northern Coalfields Limited (NCL) on April 30, 2008. However, on March 25, 2011, the CBI conducted a surprise raid at Fertico’s factory premises and found that the coal supplied under the FSA had been illegally diverted to the black market.

Following the raid, an FIR was registered on April 13, 2011, against Anil Kumar Agarwal, the Director of Fertico, and unknown officials from the District Industries Centre (DIC), Chandauli, and NCL, Singrauli, Madhya Pradesh. The investigation revealed that two government officers, Ram Ji Singh (General Manager, DIC, Chandauli) and Yogendra Nath Pandey (Assistant Manager, DIC, Chandauli), were involved in the conspiracy. They allegedly falsified reports about the company’s operations, allowing it to receive subsidized coal illegally.

Arguments by the Petitioners

The petitioners, including private individuals and government officials, filed petitions under Section 482 Cr.P.C. before the Allahabad High Court, seeking to quash the charge sheet and criminal proceedings. Their main arguments were:

The investigation conducted by the CBI was illegal due to the lack of prior consent from the Uttar Pradesh government under Section 6 of the Delhi Special Police Establishment (DSPE) Act.
The case was of a civil nature, arising from a breach of contract under the FSA, and should not have been turned into a criminal prosecution.
The CBI did not follow the principle of parity in prosecuting only some of the parties involved.
Without the involvement of NCL officials, there could be no conspiracy under Section 120B IPC.

Arguments by the Respondents

The CBI and the State of Uttar Pradesh countered the petitions with the following arguments:

The Uttar Pradesh government had granted general consent for CBI investigations under the Prevention of Corruption Act, 1988, vide a notification dated June 15, 1989.
The issue was not a mere contractual dispute but involved deliberate fraud, criminal conspiracy, and corruption by government officials.
The involvement of public servants was confirmed, and the sanction for their prosecution had been granted before the charge sheet was filed.
The procedural irregularity, if any, did not cause prejudice or a miscarriage of justice, making the trial valid.

Supreme Court’s Observations

The Supreme Court analyzed the case and made the following key observations:

1. CBI Had Jurisdiction to Investigate

The Court noted that the Uttar Pradesh government had given general consent to the CBI to investigate offenses under the Prevention of Corruption Act, 1988, subject to prior permission for cases involving state government officials.

“The notification dated June 15, 1989, enables the CBI to investigate corruption cases within Uttar Pradesh, with prior consent required only when state government officials are involved.”

2. Post-Facto Consent Validated the Investigation

The Court held that the lack of prior consent under Section 6 of the DSPE Act was rectified when the Uttar Pradesh government granted post-facto approval on September 7, 2018.

“Since the state government has retrospectively granted permission, the investigation cannot be deemed invalid.”

3. Criminal Nature of the Offense

The Court rejected the argument that the case was a civil dispute, emphasizing that the fraudulent diversion of subsidized coal constituted a criminal offense.

“A breach of contract simpliciter does not amount to a crime, but when fraud, misrepresentation, and conspiracy are involved, criminal prosecution is warranted.”

4. No Miscarriage of Justice

The Court relied on past precedents to hold that minor procedural irregularities in investigations do not vitiate trials unless they cause substantial injustice.

“An illegality in investigation does not affect the competence and jurisdiction of the trial court unless it leads to a miscarriage of justice.”

Final Judgment

The Supreme Court ruled:

The criminal proceedings against the accused, including government officials and private company directors, would continue.
The investigation was valid despite the procedural objections regarding Section 6 of the DSPE Act.
The CBI’s charge sheet and the trial before the Special Judge (CBI) were upheld.
The petitions challenging the criminal proceedings were dismissed.

Conclusion

This judgment reinforces the principle that economic offenses involving fraud and corruption warrant strict scrutiny and cannot be dismissed as mere contractual breaches. By allowing the CBI investigation and trial to proceed, the Supreme Court has affirmed that procedural lapses do not necessarily render an investigation invalid unless they lead to a miscarriage of justice. The ruling serves as an important precedent in cases involving economic fraud and public sector corruption.

Petitioner Name: M/S Fertico Marketing and Investment Pvt. Ltd. & Others.
Respondent Name: Central Bureau of Investigation & Another.
Judgment By: Justice A.M. Khanwilkar, Justice B.R. Gavai.
Place Of Incident: Chandauli, Uttar Pradesh, India.
Judgment Date: 17-11-2020.

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