Discharge Application - trial court allowed - High Court set aside - Apex court confirmed the order of high court.
High Court set aside the Order passed by the Magistrate allowing the application filed by the appellant to discharge him. - The appellant was Director of Mines and Geology in the State of Karnataka at the relevant time - Appellant is alleged to have acted in pursuance to the criminal conspiracy and abused his official position with a dishonest and fraudulent intention to cheat the
Government of Karnataka and knowingly made a false note in the file that he had discussed this matter with the Deputy Director (Legal) and directed Deputy Director, Mines and Geology, Hospet for issue of MDPs to the new partners, viz., the first accused and the second accused by violating Mines and Minerals (Development and Regulation) Act, 1957 (hereinafter referred to as ‘the Act’, for short) and Mineral Concession Rules, 1960 (hereinafter referred to as ‘the Rules’, for short). There are various allegations regarding other accused under Sections 120B, 420, 379, 409, 447, 468, 471, 477A of the Indian Penal Code, 1860 (hereinafter referred to as ‘the IPC’, for short) and Sections 13(2) and 13(1)(c) and 13(1)(d) of the Prevention of Corruption Act, 1988.- Apex court held that It is, no doubt, true that there may not be any other material to link the appellant with various other
acts and omissions which have been alleged against the first accused in particular along with the fifth accused and other accused. However, the fact remains, if the defence of the appellant is not to be looked into, which included the practice obtaining in the past whenever the firm was
reconstituted, and also the version of the appellant that he did in fact speak with the Deputy Director (Legal) and acted on his advice and further that this fact would be established if the Deputy Director (Legal) was questioned in his presence, they would appear to be matter which may not be available to the appellant to press before the court considering the application under Section 227 of the Cr.PC.
This being the outcome of our discussion, the inevitable consequence is that we are not persuaded to hold that the High Court was in error in the view it has taken.
1
REPORTABLE
IN THE SUPREME COURT OF INDIA
CRIMINAL APPELLATE JURISDICTION
CRIMINAL APPEAL NO. 957 OF 2017
M.E. SHIVALINGAMURTHY ... APPELLANT(S)
VERSUS
CENTRAL BUREAU OF INVESTIGATION,
BENGALURU ... RESPONDENT(S)
J U D G M E N T
K.M. JOSEPH, J.
1. The appeal is directed against the Order of the High
Court setting aside the Order passed by the Magistrate
allowing the application filed by the appellant to
discharge him.
2. The charge-sheet came to be filed on the basis of a FIR
dated 01.10.2011. The appellant was Director of Mines and
Geology in the State of Karnataka at the relevant time.
There was a partnership firm by the name M/s Associated
2
Mineral Company (‘AMC’, for short). The offences are
alleged to revolve around the affairs of the said firm.
First accused is the husband of the second accused. They
became partners of the firm (AMC) in 2009. Appellant was
arrayed as the third accused. There was reference in the
charge-sheet to a conspiracy between the first accused and
the second accused. It is alleged, inter alia, that they
obtained an undated letter from one Shri K.M. Vishwanath,
the Ex-Partner, which is after his retirement with effect
from 01.08.2009 from the firm, which was addressed to the
appellant, seeking directions to the Deputy Director of
Mines and Geology, Hospet in Karnataka to issue the Mineral
Dispatch Permit (‘MDP’ for short) to the new partners, viz.,
the first accused and the second accused. It is further
averred that the investigation revealed that the appellant
marked the said letter to the Case Worker who put up the
note seeking orders for referring the matter for legal
opinion which was also approved and recommended by the
Additional Director and put up to the appellant for orders.
Appellant is alleged to have acted in pursuance to the
3
criminal conspiracy and abused his official position with
a dishonest and fraudulent intention to cheat the
Government of Karnataka and knowingly made a false note in
the file that he had discussed this matter with the Deputy
Director (Legal) and directed Deputy Director, Mines and
Geology, Hospet for issue of MDPs to the new partners, viz.,
the first accused and the second accused by violating Mines
and Minerals (Development and Regulation) Act, 1957
(hereinafter referred to as ‘the Act’, for short) and
Mineral Concession Rules, 1960 (hereinafter referred to as
‘the Rules’, for short). There are various allegations
regarding other accused. As far as appellant is concerned,
it is alleged further in the charge-sheet that the acts of
the accused, seven in number, including the third accused
(appellant), constitutes criminal offences punishable
under Sections 120B, 420, 379, 409, 447, 468, 471, 477A of
the Indian Penal Code, 1860 (hereinafter referred to as ‘the
IPC’, for short) and Sections 13(2) and 13(1)(c) and
13(1)(d) of the Prevention of Corruption Act, 1988. No
doubt, the origin of this investigation is to be traced to
4
an Order passed by this Court dated 29.03.2011 in Special
Leave Petition (Criminal) No. 7366-7367 of 2010 and
connected matters ordering investigation into the
illegalities into the matter of Mining Lease No. 2434 of
AMC. The allegations include the allegation that the
accused conspired to commit theft of Government property,
i.e., mineral ore. They allegedly trespassed into the
forest area and other areas of Bellary District: carried
out illegal mining and transported it. Though, second
accused (A2) to seventh accused(A7) filed applications
under Section 227 of the Code of Criminal Procedure, 1973
(hereinafter referred to as ‘Cr.PC’, for short) seeking
discharge, by Order dated 08.10.2015, the Trial Court
discharged the second accused and the appellant. It is this
Order which has been set aside by the High Court by the
impugned Order.
APPLICATION BY THE APPELLANT SEEKING DISCHARGE
3. It is, inter alia, stated as follows:
Appellant is known for his honesty and dignity as
a public servant. He earned his name as an excellent
5
and honest Officer in all the places where he was
posted. He was not issued a single article of charges
while discharging his duties. Though, he started as a
Member of the Karnataka State Civil Service, he
was promoted to the Cadre of Indian Administrative
Service (IAS) as he had an impeccable service record.
He was posted as Director of Mines in Geology, having
regard to his service record. By virtue of the
delegation under Section 26(2) of the Act, the
execution of the lease deed lies with the Director of
Mines and Geology. AMC was granted the Mining Lease by
the State way back in 1966. The firm was reconstituted
several times by inducting new partners and retiring
old partners. As and when there is the reconstitution
of the firm, the firm intimated to the Department of
Geology of the reconstitution and conducted the mining
operation in the name of AMC by the newly inducted
partners. Though, several reconstitutions have taken
place, no application has been filed under Rule 37 of
the Rules for transfer of the lease on the ground that
6
the assets, viz., the Mining Lease belongs to the firm
and not to any individual partners. Therefore, there
was no requirement of making an application under Rule
37 of the Rules seeking transfer of the Mining Lease.
Records produced by the official before the Court
reveal that the Department has understood that
reconstitution did not amount to transfer as the
partnership is the owner of the asset, viz., the Mining
Lease. On inducting first and second accused, the
reconstituted firm made application to Deputy Director
seeking MDP by intimating that two new partners were
inducted. The application was sent to the Director for
issuance of MDP. In addition to the application filed
to the Deputy Director seeking MDPs, Shri K.M.
Vishwanath, Ex-Partner, representing the firm, made
application to the Director, placing on record that
firm had been reconstituted by inducting the first and
the second accused and, accordingly, intimated under
Rule 62 of the Rules. It is stated further that after
receiving the application by the Department, the file
7
will have to be processed in the Mining Lease Section.
There is an elaborate procedure followed while
considering applications in Department of Mines and
Geology. The Section Officer initially examines the
file. A detailed note on the application is prepared.
The file, along with note sheet, is sent to the
Superintendent of the Mining Leases Section who is a
senior Officer who examines the note sheet and puts up
the same before the Additional Director. The
Additional Director, who is the senior-most
departmental Officer in the Department, examines the
entire file and puts up the file before the Director.
He passes an order considering the law applicable. If
it is within the jurisdiction, he disposes the
application. If an order from the State Government is
required, it is so referred with comments. The Director
signs the lease deed by virtue of delegation under
Section 26(2) of the Act.
8
4. Appellant found that the firm was constituted by Shri
Jali Mahadevappa an Shri Jali Mallikarjun in the year 1966
and the lease was obtained in the name of AMC as a firm
registered under the Partnership Act. The lease, as per the
records, is the asset of the firm. The firm, viz., AMC, was
reconstituted on 30.06.1983 by inducting Shri L. Lingaraju
as one of the partners on account of retirement of Shri J.
Mallikarjun. On 13.02.1984, the firm was reconstituted
again wherein Shri B. Ananda joined as a partner and Shri
J. Lingaraju retired. On 13.02.1982, Smt. B. Vasanthi
joined in place of Shri J. Vamadevappa who retired from the
firm. On 13.06.1986, Shri B. Vasudev entered the firm as
a partner and Smt. B. Vasanthi retired from the firm. By
Deed of Partnership dated 10.06.1990, Shri Mohammed Kasim
joined the firm and Shri B. Ananda retired from the firm.
Again, Smt. Asha Mohammad Haroon joined as partner in place
of Shri B. Vasudev who retired. Again, AMC was reconstituted
by inducting Shri K.M. Prabhu and Smt. Parvathamma. There
was further reconstitution by inducting Smt. Sujata Prabhu
and Shri K.M. Sujan, as partners. Lastly, on 01.09.2009,
9
the first accused and the second accused were inducted as
partners. From 1981, on several occasions, the firm was,
thus, reconstituted and the application under Rule 37 of
the Rules was not filed before the State Government.
Partners filed Form V before the Registrar of Firms
intimating reconstitution. Never was an application made
under Rule 37 as and when reconstitution was done on the
ground that the firm was the owner of the mining lease. Only
intimation under Rule 62 of the Rules was given. The Case
Worker-CW24 has suggested to take legal opinion which was
put up along with the note sheet. There was no note put up
suggesting the applicability of Rule 37 of the Rules. If
there was a suggestion about the applicability of such Rule,
the appellant would have taken appropriate decision. The
precedent available also was relied upon. The decision
taken was a bonafide decision. The suggestion to take legal
opinion was endorsed by the Additional Director which is
produced before the Court as Exhibit D-765, the note sheet.
During the course of the examination of the file, it was
brought to the notice of the appellant that Rule 37 was not
10
applicable. A communication was sent to the Deputy
Director, Hospet that the permits will have to be issued
to the AMC but not in the names of the partners. The
appellant further submitted that after receipt of the file,
he contacted the Deputy Director (Legal) telephonically who
informed that the reconstitution of the firm had taken place
by inducting new partners and permits may be issued in the
name of the Company and not in the name of the partners which
was denied by the said Deputy Director (Legal) at a later
stage. He sought support of Section 27 of the Act which
protected acts done in good faith under the Act. He pointed
out that during the investigation, he gave details of
various firms who have leases with the Government which have
not obtained permission under Rule 37. The procedure which
was consistently followed for obtaining MDPs by intimating
reconstitution under Rule 62 was brought to the notice. It
was contended that taking a bonafide administrative
decision on the understanding of Rule 37 and based on
previous precedents, should not be considered as cheating.
Reading of the charge-sheet and allegations, according to
11
the appellant, basically surrounded around Section 420 of
the IPC.
5. The statements of CW7, CW21, CW24, CW26, CW202 and
CW109 were enlisted by the prosecution in support of the
charge. The appellant pointed out the statements of the
witnesses and the documents produced clearly reveal there
is no material much less prima facie material to frame the
charges.
ORDER PASSED BY THE MAGISTRATE
6. The Court noted the submission of the appellant that
AMC had been reconstituted on a number of occasions. No
fault was found in accepting reconstitution. Only when the
first and second accused became partners in the year 2009,
the appellant was faulted. Reliance is seen placed on the
judgment of the judgment of the Division Bench of the High
Court in Sree Ramakrishna Mining Company v. Commissioner
of Income-Tax, Mysore1. Thereafter, reliance is placed on
decisions which were rendered under the Indian Stamp Act,
1 1966 SCC Online Kar 73 / ILR 1966 Mys. 1945
12
1899 for the proposition that an instrument evidencing the
distribution of assets of a firm, on dissolution or
retirement of a partner, would not amount to a conveyance.
The principles relating to discharge under Sections 227 and
228 were discussed, and finally, it was held as follows:
“41.In view of the above said citations,
it is evident that act of A-3 in directing his
subordinates to issue MOP to M/s. Associated
Mining Company belonging to accused Nos.1 and
2 does not amount to fastening criminal
liability of him. In the statement of CWs
7,21,24,26,109 and 202, absolutely there is
no material to show that A-3 has committed
criminal conspiracy to help accused Nos.1 and
2 in directing his officials to issue Mineral
Dispatch Permit and as such there is
considerable force in the argument of learned
Counsel for accused No.3 and I am unable to
accept the argument addressed by learned
Special Public Prosecutor. Hence, I answer
IA. No.30 deserves to be allowed. I answer.”
FINDINGS OF THE HIGH COURT
7. After noting the rival contentions, the court notes
that for punishing under Section 120B of the IPC, the
prosecution is required to prove the conspiracy. The
13
agreement, which is illegal, can be proved by necessary
implication. It is to be largely proved from the inference
of the illegal acts or omissions by the conspirators. The
incriminating evidence collected by the prosecution, it is
noted, is that the appellant recommended issuance of MDPs
in gross violation of the Act despite the office noting to
the effect that the matter required legal opinion. The stand
of the appellant that he had discussed the matter with the
Legal Department is seen negatived by CW21. As to his
contention that many a time AMC was reconstituted and he
had really discussed the matter with CW21 before directing
the issue of MDPs, was found to be a matter of defence which
could not be pressed at the threshold.
8. We notice the following findings:
“12. Applying the formulae of (some/mere
suspicion – grave suspicion: as
enunciated in Dilawar Balu Kurane’s
case (supra) and Union of India -vsPrafulla Kumar Samai and another
reported in AIR 1979 SC 366, to the
evidentiary material placed before
the court against respondent, then
also the needle tilts more towards
grove suspicion. The subject matter
involved in this case is the natural
14
resource of the country and the
alleged offence is said to have
caused loss to the State exchequer
substantially. The respondent is a
responsible officer of the State.
Consciously he passed the order in
violation of the statutory
provisions.
13. The learned Trial Judge in the order
impugned has made an omnibus
observation that his action does
not fasten criminal liability on
him and the statement of the
witnesses does not show that he
committed criminal conspiracy.
Though there was no direct
evidence, the learned Trial Judge
has lost sight of incriminating
material appearing in the
circumstantial evidence placed by
the prosecution. Limited power
vested with the Trial Court to sift
and weigh the evidence is
transgressed by the learned Trial
Judge in the impugned order, hence
requires intervention in this
revision jurisdiction.”
9. Accordingly, the petition was allowed setting aside
the order of the Sessions Judge discharging the appellant.
10. We heard Shri Kapil Sibal, learned Senior Counsel
appearing for the appellant. We also heard learned Counsel
appearing for the respondent.
15
11. Shri Kapil Sibal, learned Senior Counsel for the
appellant, submits as follows:
The lease was originally in favour of AMC in
the year 1966. Thereafter, the firm was
reconstituted on a large number of occasions. The
procedure followed was intimation being given to
the Department under Rule 62 of the Rules about the
reconstitution. Rule 37 of the Rules was not
invoked. This is a case where the action of the
appellant was bonafide. Proceeding on the basis
that Rule 37 applies, he further submits, this is
not a case where the appellant could be prosecuted
for the criminal offences. The appellant acted on
the basis of the practice. He contacted the Deputy
Director (Legal).
12. There is also case of the appellant that he had directed
MDP to be issued in the name of the firm. He had also made
it clear that permit be also not issued to the partners.
There was no other material produced on record by the
16
prosecution. This is not a case where there is material to
establish any criminal conspiracy.
13. Per contra, the learned Counsel for the
respondent-Central Bureau of Investigation, Bengaluru,
supported the order. In particular, reliance is placed on
the specific stand of the Charge Witness-CW21 to the effect
that the appellant had not sought his legal opinion contrary
to the stand of the appellant.
LEGAL PRINCIPLES APPLICABLE IN REGARD TO AN APPLICATION
SEEKING DISCHARGE
14. This is an area covered by a large body of case law.
We refer to a recent judgment which has referred to the
earlier decisions, viz., P. Vijayan v. State of Kerala and
another2 and discern the following principles:
i.If two views are possible and one of them gives rise
to suspicion only as distinguished from grave
suspicion, the Trial Judge would be empowered to
discharge the accused.
2 (2010) 2 SCC 398
17
ii. The Trial Judge is not a mere Post Office to frame
the charge at the instance of the prosecution.
iii. The Judge has merely to sift the evidence in order
to find out whether or not there is sufficient ground
for proceeding. Evidence would consist of the
statements recorded by the Police or the documents
produced before the Court.
iv. If the evidence, which the Prosecutor proposes to
adduce to prove the guilt of the accused, even if
fully accepted before it is challenged in
cross-examination or rebutted by the defence
evidence, if any, “cannot show that the accused
committed offence, then, there will be no sufficient
ground for proceeding with the trial”.
v.It is open to the accused to explain away the materials
giving rise to the grave suspicion.
vi. The court has to consider the broad probabilities,
the total effect of the evidence and the documents
produced before the court, any basic infirmities
appearing in the case and so on. This, however, would
18
not entitle the court to make a roving inquiry into
the pros and cons.
vii. At the time of framing of the charges, the probative
value of the material on record cannot be gone into,
and the material brought on record by the
prosecution, has to be accepted as true.
viii. There must exist some materials for entertaining
the strong suspicion which can form the basis for
drawing up a charge and refusing to discharge the
accused.
15. The defence of the accused is not to be looked into at
the stage when the accused seeks to be discharged under
Section 227 of the Cr.PC (See State of J & K v. Sudershan
Chakkar and another3). The expression, “the record of the
case”, used in Section 227 of the Cr.PC, is to be understood
as the documents and the articles, if any, produced by the
prosecution. The Code does not give any right to the accused
to produce any document at the stage of framing of the
3 AIR 1995 SC 1954
19
charge. At the stage of framing of the charge, the
submission of the accused is to be confined to the material
produced by the Police (See State of Orissa v. Debendra Nath
Padhi4).
ANALYSIS OF THE CASE
16. Having set out the legal principles, as aforesaid, let
us consider the facts:
Undoubtedly, the appellant came to be
appointed as the Director of Mines and Geology of
the State of Karnataka by virtue of Notification
dated 09.06.2008. He continued in the said post
till 25.10.2010. Mining Lease No.625 was executed
on 02.03.1966 between the Governor and AMC, a
registered firm. The Managing Partner was one Shri
Jali Mahadevappa. The partners of the AMC, viz.,
Shri K.M. Parvatamma and Shri K.M. Vishwanath sent
a letter dated 26.12.2009. It reads as follows:
“To:
The Director
4 AIR 2005 SC 359
20
Mines & Geology Mineral
Khanija Bhavan
Race Course Road
Bangalore.
Sub: Change in Constitution of
Associated Mining Company ML
No.2434- Reg.
Sir,
We undersigned are lease owner of
Associated Mining Company of Guru Iron
Ore Mines at Venkatagiri Village, Sandur
Taluk, Bellary Dist, bearing ML No.2434
(Old 625).
For better management we admitted
as Partners Mr. G. Janardhan Reddy and
Mrs. G. Lakshmi Aruna of 123/350
Veerabagouda Colony, Opp Kumaraswamy
Temple Club Road, Bellary on 31st July,
2009. Subsequently on 1st August, 2009
Smt. K.M. Parvatamma and Mr. K.M.
Vishwanath retired.
Mr. G. Janardhana Reddy and Mrs. G.
Lakshmi Aruna are sole Partners of the
Mine. The admission and Retirement deed
are enclosed herewith for your perusal.
This is for your kind information.
Kindly issue permission to
transport the ore from Mines to various
destinations.
Thanking you,
Yours sincerely,
sd/-
Smt. K. Parvatamma
sd/-
Mr.K.M. Vishwanath”
21
17. The role, which is attributed to the appellant, begins
essentially with this letter. It is the case of the
prosecution that having regard to Rule 37 of the Rules, it
was incumbent upon the appellant, before acting upon the
reconstitution of the firm, to obtain the previous sanction
of the State Government. The Charge Witnesse-CW24-
D. Hanumantha, undoubtedly, has given statement indicating
that the letter aforesaid was marked to him to process the
same. He further stated that he proposed that legal opinion
may be obtained. Finally, it was submitted to the Additional
Director. The Additional Director also recommended the
need to obtain legal opinion. The matter came up before the
appellant on 04.01.2010. On 04.01.2010, it appears that
appellant has ordered:
“… “spoken to Dy. Director (Legal), the
company remains the same, whereas the
partners might have been included or removed,
and this they are supposed to approach the law
board. In the present case, the partners are
not asking for MDP (Mineral Dispatch Permits)
in their names, but in the name of the
company. Permits may be issued only in the
22
name of the company viz., AMC where lease is
also sanctioned to the same company only. The
partners are changed, but you are not going
to issue MDPs to the partners. Hence inform
DD Hospet that MDPs may be issued only in the
name of the Company.”…”
18. The Additional Director has also spoken on similar
lines.
19. The case of the prosecution, which has appealed to the
High Court, is essentially based on the fact that on the
one hand, the appellant in his Order dated 04.01.2010
(Draft) which was finalised on 05.01.2010, spoke about
having obtained legal opinion by speaking to Deputy
Director (Legal), the Deputy Director (Legal) has taken the
stand that he has not given any such opinion. The statement
of the Deputy Director (Legal) has been produced by the
appellant along with Criminal Miscellaneous Petition No.
122009 of 2009. He has stated, inter alia, as follows:
“However, no opinion was sought from me in
this regard”. He has further stated that since the
contents of the letter dated 26.12.2009 disclosed
23
that the entire lease holding rights were
transferred in favour of the first and second
accused, it is contrary to Rule 37 of the Rules.
However, ignoring the provisions of Rule 37, the
direction was issued to Deputy Director to issue
the MDPs in the name of the Company. However, he
further states that AMC is a firm not a company.
He further stated that if there is no change in the
rights of the lessee, then, someone else gets
rights over the leasehold rights. The said act will
attract provisions of Rule 37 of the Rules. He has
also stated that though an application was filed
on 29.07.1994 in view of the fact that the Mining
Lease was due to expire on 01.03.1996, the lease
is renewed from the year 2000 to 2010 by the
Minister since the Forest Department gave
permission. He goes on to state that the lease
ought to have been renewed with effect from
02.03.1996 for a period of ten years.
24
20. It is necessary to notice Rule 37 of the Rules which
were made in 1960. Rule 37 reads as follows, inter alia:
“37. Transfer of lease :- (1) The lessee shall
not, without the previous consent in writing
of the State Government and in the case of
mining lease in respect of any mineral
specified in Part ‘A’ and Part ‘B’ of the
First Schedule to the Act, without
the previous approval of the Central
Government :-
(a) assign, sublet, mortgage, or in any
other manner, transfer the mining
lease, or any right, title or
interest therein, or
(b) enter into or make any bonafide
arrangement, contract, or
understanding whereby the lessee
will or may be directly or
indirectly financed to a
substantial extent by, or under
which the lessee's operations or
undertakings will or may be
substantially controlled by, any
person or body of persons other than
the lessee:”
(Emphasis supplied)
21. The Trial Court has placed reliance on judgment of the
Division Bench of the Mysore High Court in Sree Ramakrishna
Mining Company (supra). In fact, the Court in the said case,
25
considered Rule 37 of the Mineral Concession Rules of 1949,
which read as follows:
“37. Transfer of lease:- The lessee may
with the previous sanction of the State
Government and subject to conditions
specified in the first proviso to rule 35 and
in rule 38, transfer his lease or any right,
title, or interest therein, to a person
holding a certificate of approval on payment
of a fee of Rs.100 to the State Government.”
(Emphasis supplied)
22. It is clear that the provision, as obtained prior to
1960, when the Rules were made, was different.
23. In the aforesaid case, the question came to be decided
in a Reference under Section 66 of the Income Tax Act, 1922.
One of the questions which fell for decision was the effect
of there being no previous sanction of the Government under
Rule 37 for the transfer of lease. We may notice that the
Court in Sree Ramakrishna Mining Company (supra), inter
alia, held as follows:
“The 37th Rule, as can be seen from its
language does not concern itself with the
formation of a partnership such as the one
before us, and, its principal purpose is to
provide for the transfer of a lease granted
under the provisions of the Rules. It is in
26
the nature of an enabling provision which
authorises a transfer by the lessee to a
person who has a certificate of approval,
and, directs that such transfer could be made
with the previous sanction of the Government
subject to the other conditions with which we
are not concerned. There is a distinction
between a statutory provision which contains
an express prohibition against the
performance of a certain act and one which
enables its performance subject to
prescribed conditions. While in the former
case, there will be no difficulty in coming
to the conclusion if nothing else could be
said about it that the absolute prohibition
against the performance of the act is what is
forbidden by law, the same could not be said
if the matter falls within the second
category. Now the 37th rule does not, in
express terms, forbid a transfer but
authorises a transfer with the previous
sanction of the Government and subject to
other conditions.”
24. The provisions of Rule 37, which would control destiny
of this case, is, as it was obtained in the year 2009. Also
could it not be contended that decisions rendered under the
Stamp Act may not be relevant to understood the scope of
Rule (37) of the Rules. No doubt, there is a case for the
appellant that on a number of reconstitutions took place
in regard to the firm-AMC, and on no occasion, was an issue
relating to infraction of Rule 37, raised. All that the
27
appellant did was, he acted in accordance with the practice
obtaining in the Department. There is the case for the
appellant that in this regard, Rule 37, as such, was not
pointedly invoked by either the Additional Director or the
SDA.
25. It is here that again it becomes necessary that we
remind ourselves of the contours of the jurisdiction under
Section 227 of the Cr.PC. The principle established is to
take the materials produced by the prosecution, both in the
form of oral statements and also documentary material, and
act upon it without it been subjected to questioning through
cross-examination and everything assumed in favour of the
prosecution, if a scenario emerges where no offence, as
alleged, is made out against the accused, it, undoubtedly,
would enure to the benefit of the accused warranting the
Trial Court to discharge the accused.
26. It is not open to the accused to rely on material by
way of defence and persuade the court to discharge him.
27. However, what is the meaning of the expression
“materials on the basis of which grave suspicion is aroused
28
in the mind of the court’s”, which is not explained away?
Can the accused explain away the material only with
reference to the materials produced by the prosecution? Can
the accused rely upon material which he chooses to produce
at the stage?
28. In view of the decisions of this Court that the accused
can only rely on the materials which are produced by the
prosecution, it must be understood that the grave
suspicion, if it is established on the materials, should
be explained away only in terms of the materials made
available by the prosecution. No doubt, the accused may
appeal to the broad probabilities to the case to persuade
the court to discharge him.
29. In this case, as already noticed, going by the
statements made by the subordinates working in the Office
of the appellant, on receipt of the letter from the
erstwhile partners of AMC dated 26.12.2009, two of his
subordinates, including the Additional Director, did
recommend that the matter requires a legal opinion. The
noting, which is undisputed in this case, made by the
29
appellant, would appear to suggest that he had spoken to
the Deputy Director (Legal). The prosecution case largely
depends upon the statement of the Deputy Director (Legal)
who takes a definite stand that no opinion was sought from
him. A matter, under Rule 37 of the Rules, therefore,
according to the prosecution case, which ought to have gone
to the State Government for prior sanction, came to be dealt
with by the appellant as Director of Mines. This led to the
issue of MDPs. It is, no doubt, true that there may not be
any other material to link the appellant with various other
acts and omissions which have been alleged against the first
accused in particular along with the fifth accused and other
accused. However, the fact remains, if the defence of the
appellant is not to be looked into, which included the
practice obtaining in the past whenever the firm was
reconstituted, and also the version of the appellant that
he did in fact speak with the Deputy Director (Legal) and
acted on his advice and further that this fact would be
established if the Deputy Director (Legal) was questioned
in his presence, they would appear to be matter which may
30
not be available to the appellant to press before the court
considering the application under Section 227 of the Cr.PC.
30. This being the outcome of our discussion, the
inevitable consequence is that we are not persuaded to hold
that the High Court was in error in the view it has taken.
Consequently, the appeal fails and it stands dismissed. We,
however, make it clear that the observations made by us are
for the purpose of deciding the application under Section
227 of the Cr.PC. and they are not to trammel the Court.
…………………………………………………J.
[SANJAY KISHAN KAUL]
…………………………………………………J.
[K.M. JOSEPH]
NEW DELHI;
JANUARY 07, 2020.
High Court set aside the Order passed by the Magistrate allowing the application filed by the appellant to discharge him. - The appellant was Director of Mines and Geology in the State of Karnataka at the relevant time - Appellant is alleged to have acted in pursuance to the criminal conspiracy and abused his official position with a dishonest and fraudulent intention to cheat the
Government of Karnataka and knowingly made a false note in the file that he had discussed this matter with the Deputy Director (Legal) and directed Deputy Director, Mines and Geology, Hospet for issue of MDPs to the new partners, viz., the first accused and the second accused by violating Mines and Minerals (Development and Regulation) Act, 1957 (hereinafter referred to as ‘the Act’, for short) and Mineral Concession Rules, 1960 (hereinafter referred to as ‘the Rules’, for short). There are various allegations regarding other accused under Sections 120B, 420, 379, 409, 447, 468, 471, 477A of the Indian Penal Code, 1860 (hereinafter referred to as ‘the IPC’, for short) and Sections 13(2) and 13(1)(c) and 13(1)(d) of the Prevention of Corruption Act, 1988.- Apex court held that It is, no doubt, true that there may not be any other material to link the appellant with various other
acts and omissions which have been alleged against the first accused in particular along with the fifth accused and other accused. However, the fact remains, if the defence of the appellant is not to be looked into, which included the practice obtaining in the past whenever the firm was
reconstituted, and also the version of the appellant that he did in fact speak with the Deputy Director (Legal) and acted on his advice and further that this fact would be established if the Deputy Director (Legal) was questioned in his presence, they would appear to be matter which may not be available to the appellant to press before the court considering the application under Section 227 of the Cr.PC.
This being the outcome of our discussion, the inevitable consequence is that we are not persuaded to hold that the High Court was in error in the view it has taken.
1
REPORTABLE
IN THE SUPREME COURT OF INDIA
CRIMINAL APPELLATE JURISDICTION
CRIMINAL APPEAL NO. 957 OF 2017
M.E. SHIVALINGAMURTHY ... APPELLANT(S)
VERSUS
CENTRAL BUREAU OF INVESTIGATION,
BENGALURU ... RESPONDENT(S)
J U D G M E N T
K.M. JOSEPH, J.
1. The appeal is directed against the Order of the High
Court setting aside the Order passed by the Magistrate
allowing the application filed by the appellant to
discharge him.
2. The charge-sheet came to be filed on the basis of a FIR
dated 01.10.2011. The appellant was Director of Mines and
Geology in the State of Karnataka at the relevant time.
There was a partnership firm by the name M/s Associated
2
Mineral Company (‘AMC’, for short). The offences are
alleged to revolve around the affairs of the said firm.
First accused is the husband of the second accused. They
became partners of the firm (AMC) in 2009. Appellant was
arrayed as the third accused. There was reference in the
charge-sheet to a conspiracy between the first accused and
the second accused. It is alleged, inter alia, that they
obtained an undated letter from one Shri K.M. Vishwanath,
the Ex-Partner, which is after his retirement with effect
from 01.08.2009 from the firm, which was addressed to the
appellant, seeking directions to the Deputy Director of
Mines and Geology, Hospet in Karnataka to issue the Mineral
Dispatch Permit (‘MDP’ for short) to the new partners, viz.,
the first accused and the second accused. It is further
averred that the investigation revealed that the appellant
marked the said letter to the Case Worker who put up the
note seeking orders for referring the matter for legal
opinion which was also approved and recommended by the
Additional Director and put up to the appellant for orders.
Appellant is alleged to have acted in pursuance to the
3
criminal conspiracy and abused his official position with
a dishonest and fraudulent intention to cheat the
Government of Karnataka and knowingly made a false note in
the file that he had discussed this matter with the Deputy
Director (Legal) and directed Deputy Director, Mines and
Geology, Hospet for issue of MDPs to the new partners, viz.,
the first accused and the second accused by violating Mines
and Minerals (Development and Regulation) Act, 1957
(hereinafter referred to as ‘the Act’, for short) and
Mineral Concession Rules, 1960 (hereinafter referred to as
‘the Rules’, for short). There are various allegations
regarding other accused. As far as appellant is concerned,
it is alleged further in the charge-sheet that the acts of
the accused, seven in number, including the third accused
(appellant), constitutes criminal offences punishable
under Sections 120B, 420, 379, 409, 447, 468, 471, 477A of
the Indian Penal Code, 1860 (hereinafter referred to as ‘the
IPC’, for short) and Sections 13(2) and 13(1)(c) and
13(1)(d) of the Prevention of Corruption Act, 1988. No
doubt, the origin of this investigation is to be traced to
4
an Order passed by this Court dated 29.03.2011 in Special
Leave Petition (Criminal) No. 7366-7367 of 2010 and
connected matters ordering investigation into the
illegalities into the matter of Mining Lease No. 2434 of
AMC. The allegations include the allegation that the
accused conspired to commit theft of Government property,
i.e., mineral ore. They allegedly trespassed into the
forest area and other areas of Bellary District: carried
out illegal mining and transported it. Though, second
accused (A2) to seventh accused(A7) filed applications
under Section 227 of the Code of Criminal Procedure, 1973
(hereinafter referred to as ‘Cr.PC’, for short) seeking
discharge, by Order dated 08.10.2015, the Trial Court
discharged the second accused and the appellant. It is this
Order which has been set aside by the High Court by the
impugned Order.
APPLICATION BY THE APPELLANT SEEKING DISCHARGE
3. It is, inter alia, stated as follows:
Appellant is known for his honesty and dignity as
a public servant. He earned his name as an excellent
5
and honest Officer in all the places where he was
posted. He was not issued a single article of charges
while discharging his duties. Though, he started as a
Member of the Karnataka State Civil Service, he
was promoted to the Cadre of Indian Administrative
Service (IAS) as he had an impeccable service record.
He was posted as Director of Mines in Geology, having
regard to his service record. By virtue of the
delegation under Section 26(2) of the Act, the
execution of the lease deed lies with the Director of
Mines and Geology. AMC was granted the Mining Lease by
the State way back in 1966. The firm was reconstituted
several times by inducting new partners and retiring
old partners. As and when there is the reconstitution
of the firm, the firm intimated to the Department of
Geology of the reconstitution and conducted the mining
operation in the name of AMC by the newly inducted
partners. Though, several reconstitutions have taken
place, no application has been filed under Rule 37 of
the Rules for transfer of the lease on the ground that
6
the assets, viz., the Mining Lease belongs to the firm
and not to any individual partners. Therefore, there
was no requirement of making an application under Rule
37 of the Rules seeking transfer of the Mining Lease.
Records produced by the official before the Court
reveal that the Department has understood that
reconstitution did not amount to transfer as the
partnership is the owner of the asset, viz., the Mining
Lease. On inducting first and second accused, the
reconstituted firm made application to Deputy Director
seeking MDP by intimating that two new partners were
inducted. The application was sent to the Director for
issuance of MDP. In addition to the application filed
to the Deputy Director seeking MDPs, Shri K.M.
Vishwanath, Ex-Partner, representing the firm, made
application to the Director, placing on record that
firm had been reconstituted by inducting the first and
the second accused and, accordingly, intimated under
Rule 62 of the Rules. It is stated further that after
receiving the application by the Department, the file
7
will have to be processed in the Mining Lease Section.
There is an elaborate procedure followed while
considering applications in Department of Mines and
Geology. The Section Officer initially examines the
file. A detailed note on the application is prepared.
The file, along with note sheet, is sent to the
Superintendent of the Mining Leases Section who is a
senior Officer who examines the note sheet and puts up
the same before the Additional Director. The
Additional Director, who is the senior-most
departmental Officer in the Department, examines the
entire file and puts up the file before the Director.
He passes an order considering the law applicable. If
it is within the jurisdiction, he disposes the
application. If an order from the State Government is
required, it is so referred with comments. The Director
signs the lease deed by virtue of delegation under
Section 26(2) of the Act.
8
4. Appellant found that the firm was constituted by Shri
Jali Mahadevappa an Shri Jali Mallikarjun in the year 1966
and the lease was obtained in the name of AMC as a firm
registered under the Partnership Act. The lease, as per the
records, is the asset of the firm. The firm, viz., AMC, was
reconstituted on 30.06.1983 by inducting Shri L. Lingaraju
as one of the partners on account of retirement of Shri J.
Mallikarjun. On 13.02.1984, the firm was reconstituted
again wherein Shri B. Ananda joined as a partner and Shri
J. Lingaraju retired. On 13.02.1982, Smt. B. Vasanthi
joined in place of Shri J. Vamadevappa who retired from the
firm. On 13.06.1986, Shri B. Vasudev entered the firm as
a partner and Smt. B. Vasanthi retired from the firm. By
Deed of Partnership dated 10.06.1990, Shri Mohammed Kasim
joined the firm and Shri B. Ananda retired from the firm.
Again, Smt. Asha Mohammad Haroon joined as partner in place
of Shri B. Vasudev who retired. Again, AMC was reconstituted
by inducting Shri K.M. Prabhu and Smt. Parvathamma. There
was further reconstitution by inducting Smt. Sujata Prabhu
and Shri K.M. Sujan, as partners. Lastly, on 01.09.2009,
9
the first accused and the second accused were inducted as
partners. From 1981, on several occasions, the firm was,
thus, reconstituted and the application under Rule 37 of
the Rules was not filed before the State Government.
Partners filed Form V before the Registrar of Firms
intimating reconstitution. Never was an application made
under Rule 37 as and when reconstitution was done on the
ground that the firm was the owner of the mining lease. Only
intimation under Rule 62 of the Rules was given. The Case
Worker-CW24 has suggested to take legal opinion which was
put up along with the note sheet. There was no note put up
suggesting the applicability of Rule 37 of the Rules. If
there was a suggestion about the applicability of such Rule,
the appellant would have taken appropriate decision. The
precedent available also was relied upon. The decision
taken was a bonafide decision. The suggestion to take legal
opinion was endorsed by the Additional Director which is
produced before the Court as Exhibit D-765, the note sheet.
During the course of the examination of the file, it was
brought to the notice of the appellant that Rule 37 was not
10
applicable. A communication was sent to the Deputy
Director, Hospet that the permits will have to be issued
to the AMC but not in the names of the partners. The
appellant further submitted that after receipt of the file,
he contacted the Deputy Director (Legal) telephonically who
informed that the reconstitution of the firm had taken place
by inducting new partners and permits may be issued in the
name of the Company and not in the name of the partners which
was denied by the said Deputy Director (Legal) at a later
stage. He sought support of Section 27 of the Act which
protected acts done in good faith under the Act. He pointed
out that during the investigation, he gave details of
various firms who have leases with the Government which have
not obtained permission under Rule 37. The procedure which
was consistently followed for obtaining MDPs by intimating
reconstitution under Rule 62 was brought to the notice. It
was contended that taking a bonafide administrative
decision on the understanding of Rule 37 and based on
previous precedents, should not be considered as cheating.
Reading of the charge-sheet and allegations, according to
11
the appellant, basically surrounded around Section 420 of
the IPC.
5. The statements of CW7, CW21, CW24, CW26, CW202 and
CW109 were enlisted by the prosecution in support of the
charge. The appellant pointed out the statements of the
witnesses and the documents produced clearly reveal there
is no material much less prima facie material to frame the
charges.
ORDER PASSED BY THE MAGISTRATE
6. The Court noted the submission of the appellant that
AMC had been reconstituted on a number of occasions. No
fault was found in accepting reconstitution. Only when the
first and second accused became partners in the year 2009,
the appellant was faulted. Reliance is seen placed on the
judgment of the judgment of the Division Bench of the High
Court in Sree Ramakrishna Mining Company v. Commissioner
of Income-Tax, Mysore1. Thereafter, reliance is placed on
decisions which were rendered under the Indian Stamp Act,
1 1966 SCC Online Kar 73 / ILR 1966 Mys. 1945
12
1899 for the proposition that an instrument evidencing the
distribution of assets of a firm, on dissolution or
retirement of a partner, would not amount to a conveyance.
The principles relating to discharge under Sections 227 and
228 were discussed, and finally, it was held as follows:
“41.In view of the above said citations,
it is evident that act of A-3 in directing his
subordinates to issue MOP to M/s. Associated
Mining Company belonging to accused Nos.1 and
2 does not amount to fastening criminal
liability of him. In the statement of CWs
7,21,24,26,109 and 202, absolutely there is
no material to show that A-3 has committed
criminal conspiracy to help accused Nos.1 and
2 in directing his officials to issue Mineral
Dispatch Permit and as such there is
considerable force in the argument of learned
Counsel for accused No.3 and I am unable to
accept the argument addressed by learned
Special Public Prosecutor. Hence, I answer
IA. No.30 deserves to be allowed. I answer.”
FINDINGS OF THE HIGH COURT
7. After noting the rival contentions, the court notes
that for punishing under Section 120B of the IPC, the
prosecution is required to prove the conspiracy. The
13
agreement, which is illegal, can be proved by necessary
implication. It is to be largely proved from the inference
of the illegal acts or omissions by the conspirators. The
incriminating evidence collected by the prosecution, it is
noted, is that the appellant recommended issuance of MDPs
in gross violation of the Act despite the office noting to
the effect that the matter required legal opinion. The stand
of the appellant that he had discussed the matter with the
Legal Department is seen negatived by CW21. As to his
contention that many a time AMC was reconstituted and he
had really discussed the matter with CW21 before directing
the issue of MDPs, was found to be a matter of defence which
could not be pressed at the threshold.
8. We notice the following findings:
“12. Applying the formulae of (some/mere
suspicion – grave suspicion: as
enunciated in Dilawar Balu Kurane’s
case (supra) and Union of India -vsPrafulla Kumar Samai and another
reported in AIR 1979 SC 366, to the
evidentiary material placed before
the court against respondent, then
also the needle tilts more towards
grove suspicion. The subject matter
involved in this case is the natural
14
resource of the country and the
alleged offence is said to have
caused loss to the State exchequer
substantially. The respondent is a
responsible officer of the State.
Consciously he passed the order in
violation of the statutory
provisions.
13. The learned Trial Judge in the order
impugned has made an omnibus
observation that his action does
not fasten criminal liability on
him and the statement of the
witnesses does not show that he
committed criminal conspiracy.
Though there was no direct
evidence, the learned Trial Judge
has lost sight of incriminating
material appearing in the
circumstantial evidence placed by
the prosecution. Limited power
vested with the Trial Court to sift
and weigh the evidence is
transgressed by the learned Trial
Judge in the impugned order, hence
requires intervention in this
revision jurisdiction.”
9. Accordingly, the petition was allowed setting aside
the order of the Sessions Judge discharging the appellant.
10. We heard Shri Kapil Sibal, learned Senior Counsel
appearing for the appellant. We also heard learned Counsel
appearing for the respondent.
15
11. Shri Kapil Sibal, learned Senior Counsel for the
appellant, submits as follows:
The lease was originally in favour of AMC in
the year 1966. Thereafter, the firm was
reconstituted on a large number of occasions. The
procedure followed was intimation being given to
the Department under Rule 62 of the Rules about the
reconstitution. Rule 37 of the Rules was not
invoked. This is a case where the action of the
appellant was bonafide. Proceeding on the basis
that Rule 37 applies, he further submits, this is
not a case where the appellant could be prosecuted
for the criminal offences. The appellant acted on
the basis of the practice. He contacted the Deputy
Director (Legal).
12. There is also case of the appellant that he had directed
MDP to be issued in the name of the firm. He had also made
it clear that permit be also not issued to the partners.
There was no other material produced on record by the
16
prosecution. This is not a case where there is material to
establish any criminal conspiracy.
13. Per contra, the learned Counsel for the
respondent-Central Bureau of Investigation, Bengaluru,
supported the order. In particular, reliance is placed on
the specific stand of the Charge Witness-CW21 to the effect
that the appellant had not sought his legal opinion contrary
to the stand of the appellant.
LEGAL PRINCIPLES APPLICABLE IN REGARD TO AN APPLICATION
SEEKING DISCHARGE
14. This is an area covered by a large body of case law.
We refer to a recent judgment which has referred to the
earlier decisions, viz., P. Vijayan v. State of Kerala and
another2 and discern the following principles:
i.If two views are possible and one of them gives rise
to suspicion only as distinguished from grave
suspicion, the Trial Judge would be empowered to
discharge the accused.
2 (2010) 2 SCC 398
17
ii. The Trial Judge is not a mere Post Office to frame
the charge at the instance of the prosecution.
iii. The Judge has merely to sift the evidence in order
to find out whether or not there is sufficient ground
for proceeding. Evidence would consist of the
statements recorded by the Police or the documents
produced before the Court.
iv. If the evidence, which the Prosecutor proposes to
adduce to prove the guilt of the accused, even if
fully accepted before it is challenged in
cross-examination or rebutted by the defence
evidence, if any, “cannot show that the accused
committed offence, then, there will be no sufficient
ground for proceeding with the trial”.
v.It is open to the accused to explain away the materials
giving rise to the grave suspicion.
vi. The court has to consider the broad probabilities,
the total effect of the evidence and the documents
produced before the court, any basic infirmities
appearing in the case and so on. This, however, would
18
not entitle the court to make a roving inquiry into
the pros and cons.
vii. At the time of framing of the charges, the probative
value of the material on record cannot be gone into,
and the material brought on record by the
prosecution, has to be accepted as true.
viii. There must exist some materials for entertaining
the strong suspicion which can form the basis for
drawing up a charge and refusing to discharge the
accused.
15. The defence of the accused is not to be looked into at
the stage when the accused seeks to be discharged under
Section 227 of the Cr.PC (See State of J & K v. Sudershan
Chakkar and another3). The expression, “the record of the
case”, used in Section 227 of the Cr.PC, is to be understood
as the documents and the articles, if any, produced by the
prosecution. The Code does not give any right to the accused
to produce any document at the stage of framing of the
3 AIR 1995 SC 1954
19
charge. At the stage of framing of the charge, the
submission of the accused is to be confined to the material
produced by the Police (See State of Orissa v. Debendra Nath
Padhi4).
ANALYSIS OF THE CASE
16. Having set out the legal principles, as aforesaid, let
us consider the facts:
Undoubtedly, the appellant came to be
appointed as the Director of Mines and Geology of
the State of Karnataka by virtue of Notification
dated 09.06.2008. He continued in the said post
till 25.10.2010. Mining Lease No.625 was executed
on 02.03.1966 between the Governor and AMC, a
registered firm. The Managing Partner was one Shri
Jali Mahadevappa. The partners of the AMC, viz.,
Shri K.M. Parvatamma and Shri K.M. Vishwanath sent
a letter dated 26.12.2009. It reads as follows:
“To:
The Director
4 AIR 2005 SC 359
20
Mines & Geology Mineral
Khanija Bhavan
Race Course Road
Bangalore.
Sub: Change in Constitution of
Associated Mining Company ML
No.2434- Reg.
Sir,
We undersigned are lease owner of
Associated Mining Company of Guru Iron
Ore Mines at Venkatagiri Village, Sandur
Taluk, Bellary Dist, bearing ML No.2434
(Old 625).
For better management we admitted
as Partners Mr. G. Janardhan Reddy and
Mrs. G. Lakshmi Aruna of 123/350
Veerabagouda Colony, Opp Kumaraswamy
Temple Club Road, Bellary on 31st July,
2009. Subsequently on 1st August, 2009
Smt. K.M. Parvatamma and Mr. K.M.
Vishwanath retired.
Mr. G. Janardhana Reddy and Mrs. G.
Lakshmi Aruna are sole Partners of the
Mine. The admission and Retirement deed
are enclosed herewith for your perusal.
This is for your kind information.
Kindly issue permission to
transport the ore from Mines to various
destinations.
Thanking you,
Yours sincerely,
sd/-
Smt. K. Parvatamma
sd/-
Mr.K.M. Vishwanath”
21
17. The role, which is attributed to the appellant, begins
essentially with this letter. It is the case of the
prosecution that having regard to Rule 37 of the Rules, it
was incumbent upon the appellant, before acting upon the
reconstitution of the firm, to obtain the previous sanction
of the State Government. The Charge Witnesse-CW24-
D. Hanumantha, undoubtedly, has given statement indicating
that the letter aforesaid was marked to him to process the
same. He further stated that he proposed that legal opinion
may be obtained. Finally, it was submitted to the Additional
Director. The Additional Director also recommended the
need to obtain legal opinion. The matter came up before the
appellant on 04.01.2010. On 04.01.2010, it appears that
appellant has ordered:
“… “spoken to Dy. Director (Legal), the
company remains the same, whereas the
partners might have been included or removed,
and this they are supposed to approach the law
board. In the present case, the partners are
not asking for MDP (Mineral Dispatch Permits)
in their names, but in the name of the
company. Permits may be issued only in the
22
name of the company viz., AMC where lease is
also sanctioned to the same company only. The
partners are changed, but you are not going
to issue MDPs to the partners. Hence inform
DD Hospet that MDPs may be issued only in the
name of the Company.”…”
18. The Additional Director has also spoken on similar
lines.
19. The case of the prosecution, which has appealed to the
High Court, is essentially based on the fact that on the
one hand, the appellant in his Order dated 04.01.2010
(Draft) which was finalised on 05.01.2010, spoke about
having obtained legal opinion by speaking to Deputy
Director (Legal), the Deputy Director (Legal) has taken the
stand that he has not given any such opinion. The statement
of the Deputy Director (Legal) has been produced by the
appellant along with Criminal Miscellaneous Petition No.
122009 of 2009. He has stated, inter alia, as follows:
“However, no opinion was sought from me in
this regard”. He has further stated that since the
contents of the letter dated 26.12.2009 disclosed
23
that the entire lease holding rights were
transferred in favour of the first and second
accused, it is contrary to Rule 37 of the Rules.
However, ignoring the provisions of Rule 37, the
direction was issued to Deputy Director to issue
the MDPs in the name of the Company. However, he
further states that AMC is a firm not a company.
He further stated that if there is no change in the
rights of the lessee, then, someone else gets
rights over the leasehold rights. The said act will
attract provisions of Rule 37 of the Rules. He has
also stated that though an application was filed
on 29.07.1994 in view of the fact that the Mining
Lease was due to expire on 01.03.1996, the lease
is renewed from the year 2000 to 2010 by the
Minister since the Forest Department gave
permission. He goes on to state that the lease
ought to have been renewed with effect from
02.03.1996 for a period of ten years.
24
20. It is necessary to notice Rule 37 of the Rules which
were made in 1960. Rule 37 reads as follows, inter alia:
“37. Transfer of lease :- (1) The lessee shall
not, without the previous consent in writing
of the State Government and in the case of
mining lease in respect of any mineral
specified in Part ‘A’ and Part ‘B’ of the
First Schedule to the Act, without
the previous approval of the Central
Government :-
(a) assign, sublet, mortgage, or in any
other manner, transfer the mining
lease, or any right, title or
interest therein, or
(b) enter into or make any bonafide
arrangement, contract, or
understanding whereby the lessee
will or may be directly or
indirectly financed to a
substantial extent by, or under
which the lessee's operations or
undertakings will or may be
substantially controlled by, any
person or body of persons other than
the lessee:”
(Emphasis supplied)
21. The Trial Court has placed reliance on judgment of the
Division Bench of the Mysore High Court in Sree Ramakrishna
Mining Company (supra). In fact, the Court in the said case,
25
considered Rule 37 of the Mineral Concession Rules of 1949,
which read as follows:
“37. Transfer of lease:- The lessee may
with the previous sanction of the State
Government and subject to conditions
specified in the first proviso to rule 35 and
in rule 38, transfer his lease or any right,
title, or interest therein, to a person
holding a certificate of approval on payment
of a fee of Rs.100 to the State Government.”
(Emphasis supplied)
22. It is clear that the provision, as obtained prior to
1960, when the Rules were made, was different.
23. In the aforesaid case, the question came to be decided
in a Reference under Section 66 of the Income Tax Act, 1922.
One of the questions which fell for decision was the effect
of there being no previous sanction of the Government under
Rule 37 for the transfer of lease. We may notice that the
Court in Sree Ramakrishna Mining Company (supra), inter
alia, held as follows:
“The 37th Rule, as can be seen from its
language does not concern itself with the
formation of a partnership such as the one
before us, and, its principal purpose is to
provide for the transfer of a lease granted
under the provisions of the Rules. It is in
26
the nature of an enabling provision which
authorises a transfer by the lessee to a
person who has a certificate of approval,
and, directs that such transfer could be made
with the previous sanction of the Government
subject to the other conditions with which we
are not concerned. There is a distinction
between a statutory provision which contains
an express prohibition against the
performance of a certain act and one which
enables its performance subject to
prescribed conditions. While in the former
case, there will be no difficulty in coming
to the conclusion if nothing else could be
said about it that the absolute prohibition
against the performance of the act is what is
forbidden by law, the same could not be said
if the matter falls within the second
category. Now the 37th rule does not, in
express terms, forbid a transfer but
authorises a transfer with the previous
sanction of the Government and subject to
other conditions.”
24. The provisions of Rule 37, which would control destiny
of this case, is, as it was obtained in the year 2009. Also
could it not be contended that decisions rendered under the
Stamp Act may not be relevant to understood the scope of
Rule (37) of the Rules. No doubt, there is a case for the
appellant that on a number of reconstitutions took place
in regard to the firm-AMC, and on no occasion, was an issue
relating to infraction of Rule 37, raised. All that the
27
appellant did was, he acted in accordance with the practice
obtaining in the Department. There is the case for the
appellant that in this regard, Rule 37, as such, was not
pointedly invoked by either the Additional Director or the
SDA.
25. It is here that again it becomes necessary that we
remind ourselves of the contours of the jurisdiction under
Section 227 of the Cr.PC. The principle established is to
take the materials produced by the prosecution, both in the
form of oral statements and also documentary material, and
act upon it without it been subjected to questioning through
cross-examination and everything assumed in favour of the
prosecution, if a scenario emerges where no offence, as
alleged, is made out against the accused, it, undoubtedly,
would enure to the benefit of the accused warranting the
Trial Court to discharge the accused.
26. It is not open to the accused to rely on material by
way of defence and persuade the court to discharge him.
27. However, what is the meaning of the expression
“materials on the basis of which grave suspicion is aroused
28
in the mind of the court’s”, which is not explained away?
Can the accused explain away the material only with
reference to the materials produced by the prosecution? Can
the accused rely upon material which he chooses to produce
at the stage?
28. In view of the decisions of this Court that the accused
can only rely on the materials which are produced by the
prosecution, it must be understood that the grave
suspicion, if it is established on the materials, should
be explained away only in terms of the materials made
available by the prosecution. No doubt, the accused may
appeal to the broad probabilities to the case to persuade
the court to discharge him.
29. In this case, as already noticed, going by the
statements made by the subordinates working in the Office
of the appellant, on receipt of the letter from the
erstwhile partners of AMC dated 26.12.2009, two of his
subordinates, including the Additional Director, did
recommend that the matter requires a legal opinion. The
noting, which is undisputed in this case, made by the
29
appellant, would appear to suggest that he had spoken to
the Deputy Director (Legal). The prosecution case largely
depends upon the statement of the Deputy Director (Legal)
who takes a definite stand that no opinion was sought from
him. A matter, under Rule 37 of the Rules, therefore,
according to the prosecution case, which ought to have gone
to the State Government for prior sanction, came to be dealt
with by the appellant as Director of Mines. This led to the
issue of MDPs. It is, no doubt, true that there may not be
any other material to link the appellant with various other
acts and omissions which have been alleged against the first
accused in particular along with the fifth accused and other
accused. However, the fact remains, if the defence of the
appellant is not to be looked into, which included the
practice obtaining in the past whenever the firm was
reconstituted, and also the version of the appellant that
he did in fact speak with the Deputy Director (Legal) and
acted on his advice and further that this fact would be
established if the Deputy Director (Legal) was questioned
in his presence, they would appear to be matter which may
30
not be available to the appellant to press before the court
considering the application under Section 227 of the Cr.PC.
30. This being the outcome of our discussion, the
inevitable consequence is that we are not persuaded to hold
that the High Court was in error in the view it has taken.
Consequently, the appeal fails and it stands dismissed. We,
however, make it clear that the observations made by us are
for the purpose of deciding the application under Section
227 of the Cr.PC. and they are not to trammel the Court.
…………………………………………………J.
[SANJAY KISHAN KAUL]
…………………………………………………J.
[K.M. JOSEPH]
NEW DELHI;
JANUARY 07, 2020.
