M/S KARNATAKA EMTA COAL MINES LIMITED AND ANOTHER versus CENTRAL BUREAU OF INVESTIGATION

Citation: [2024] 8 S.C.R. 1146 · Decided: 23-08-2024 · Supreme Court of India · Bench: HIMA KOHLI · Disposal: Appeal(s) allowed

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Judgment (excerpt)

[2024] 8 S.C.R. 1146 : 2024 INSC 623
M/s Karnataka Emta Coal Mines Limited and Another 
v. 
Central Bureau of Investigation
(Criminal Appeal Nos. 1659-1660 of 2024)
23 August 2024
[Hima Kohli* and Ahsanuddin Amanullah, JJ.]
Issue for Consideration
The present appeals challenge the Order on Charge dated 
24.12.2021 and Order framing Charges dated 03.03.2022 passed 
by the Special Judge (Prevention of Corruption Act) Central Bureau 
of Investigation registered u/s.120-B r/w. ss.409/420 of the IPC and 
ss.13(1)(d)/ 13(2) of the Prevention of Corruption Act, 1988. The 
appellants before this Court are M/s Karnataka Emta Coal Mines 
Limited (KECML) arrayed as accused No. 12 in the chargesheet 
and Chairman and Managing Director of Emta Coal Limited and 
former Managing Director of accused No. 12, arrayed as accused 
No. 6 in the chargesheet.
The issues which arose for consideration are: Did CBI Primarily 
Rely on the Audit Report of the Comptroller and Auditor General 
(CAG) or independently investigated the matter; Could the Audit 
Report of the CAG fasten any liability on KECML; What is the 
import of the Judgment dated 24.03.2016 of the Karnataka High 
Court; What is the sanctity of an Audit Report in Law; What is the 
effect of the absence of any strategy in the Mining plan to dispose 
off the coal rejects; Was KECML required to account for the coal 
rejects; Can KECML be blamed for not setting up the coal washery 
at the pithead; Did the coal rejects have any useful calorific value 
making it a saleable commodity; Does the Aryan Energy case has 
a persuasive value; Inherent Jurisdiction of the High Court under 
Section 482, Cr.PC; Extraordinary powers of the Supreme Court 
under Article 136 of the Constitution of India; Application of mind 
at the stage of Section 277, Cr.PC.
Headnotes†
Prevention of Corruption Act, 1988 – ss.13(1)(d)/13(2) – Penal 
Code, 1860 – s.120-B r/w. ss.409/420 – Mines and Minerals 
(Development & Regulation) Act, 1957 – Did CBI Primarily Rely 
* Author
[2024] 8 S.C.R. 
1147
M/s Karnataka Emta Coal Mines Limited and Another v.  
Central Bureau of Investigation
on the Audit Report of the Comptroller and Auditor General 
(CAG) or independently investigated the matter:
Held: The file produced by the respondent-CBI reveals that 
premised on the Source Information Report (SIR) submitted by an 
Inspector from the Department pertaining to some irregularities in 
the allocation of coal blocks under the Government Dispensation 
Category allegedly in connivance with public servants, the matter 
was taken up by CBI for verification – The notings in the file 
states that it was not possible to verify the allegations discretely – 
Therefore, the SIR was directed to be registered as a PE – These 
records falsifies the suggestion made by the respondent-CBI that 
there was a SIR that disclosed irregularities in the Joint Venture 
Agreement (JVA) executed between M/s. Karnataka Power 
Corporation Limited (KPCL) and KECML – The stand of the 
respondent-CBI that PE-5 was registered well before the Audit 
Report of the CAG and originated independently thereof, is also 
factually misleading because CBI’s own record shows that the 
scope of enquiry in respect of PE-5 registered on 28.09.2012, 
was entirely different and had no relationship with the JVA and 
other agreements executed by KPCL and KECML – Thus, the 
plea of the respondent-CBI that it conducted an investigation in 
the present case during the course of the inquiry in respect of 
PE-5 registered by it in the year 2012 is belied as the Source 
Information Report (SIR) was on a completely different aspect –  
CBI only got activated only on stumbling upon the Audit Report of 
the CAG submitted in 2013 – There is nothing brought on record 
to show to the contrary. [Paras 8.3, 21.2(a)]
Prevention of Corruption Act, 1988 – ss.13(1)(d)/ 13(2) – Penal 
Code, 1860 – s.120-B r/w. ss.409/420 – Mines and Minerals 
(Development & Regulation) Act, 1957 – Could the Audit Report 
of the CAG fasten any liability on KECML:
Held: The Supreme Court having already dismissed the appeal 
filed by KPCL against the judgment of the Karnataka High Court, 
having held in clear terms that the CAG Report could not form the 
basis for launching proceedings against the appellants and further, 
having upheld the findings returned by the Karnataka High Court 
that the CAG Report appears to have been the starting point for 
the entire disputes between the parties who till then, were sm

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