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When the FIR can be quashed ? =1. Where the allegations made in the First Information Report or the complaint, even if they are taken at their face value and accepted in their entirety do not prima-facie constitute any offence or make out a case against the accused. 2. Where the allegations in the First Information Report and other materials, if any, accompanying the F.I.R. do not disclose a cognizable offence, justifying an investigation by police officers Under Section 156(1) of the Code except under an order of a Magistrate within the purview of Section 155(2) of the Code. 3. Where the uncontroverted allegations made in the FIR or complaint and the evidence collected in support of the same do not disclose the commission of any offence and make out a case against the accused. 4. Where, the allegations in the F.I.R. do not constitute a cognizable offence but constitute only a non-cognizable offence, no investigation is permitted by a police officer without an order of a Magistrate as contemplated Under Section 155(2) of the Code. 5. Where the allegations made in the FIR or complaint are so absurd and inherently improbable on the basis of which no prudent person can ever reach a just conclusion that there is sufficient ground for proceeding against the accused. 6. Where there is an express legal bar engrafted in any of the provisions of the Code or the concerned Act (under which a criminal proceeding is instituted) to the institution and continuance of the proceedings and/or where there is a specific provision in the Code or the concerned Act, providing efficacious redress for the grievance of the aggrieved party. 7. Where a criminal proceeding is manifestly attended with mala fide and/or where the proceeding is maliciously instituted with an ulterior motive for wreaking vengeance on the accused and with a view to spite him due to private and personal grudge. 109. We also give a note of caution to the effect that the power of quashing a criminal proceeding should be exercised very sparingly and with circumspection and that too in the rarest of rare cases; that the Court will not be justified in embarking upon an enquiry as to the reliability or genuineness or otherwise of the allegations made in the F.I.R. or the complaint and that the extraordinary or inherent powers do not confer an arbitrary jurisdiction on the Court to act according to its whim or caprice.”

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1


 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 

 2

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.

 3

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

 4

 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.

 5

 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 Price

 by M/s. CTCC

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.

 6

 Grade of Coal Quantity lifted Colliery

 (i) Steam Coal Grade `B' 1.35 Lakhs MT Urimari

 (ii) Steam Coal Washery Grade 1.75 Lakhs MT Jarangdih

 `D'

 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. 

 7

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.

 8

 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.

 9

 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 

 10

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.

 11

 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"

 12

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. 

 13

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 

 14

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, 

 15

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 

 16

 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 

 17

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:-

 18

 "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 

 19

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:

 20

 "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 

 21

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 

 22

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.

 23

(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 

 24

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.

 25

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 

 26

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. 

 27

 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 

 28

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. 

 29

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, 

 30

 do not constitute the offence alleged; in such cases no question of 

 appreciating evidence arises; it is a matter merely of looking at 

 the complaint or the First Information Report to decide whether 

 the offence alleged is disclosed or not. In such cases it would be 

 legitimate for the High Court to hold that it would be manifestly 

 unjust to allow the process of the criminal court to be issued 

 against the accused person. A third category of cases in which 

 the inherent jurisdiction of the High Court can be successfully 

 invoked may also arise. In cases falling under this category the 

 allegations made against the accused person do constitute an 

 offence alleged but there is either no legal evidence adduced in 

 support of the case or evidence adduced clearly or manifestly 

 fails to prove the charge. In dealing with this class of cases it is 

 important to bear in mind the distinction between a case where 

 there is no legal evidence or where there is evidence which is 

 manifestly and clearly inconsistent with the accusation made and 

 cases where there is legal evidence which on its appreciation 

 may or may not support the accusation in question. In exercising 

 its jurisdiction under s. 561-A the High Court would not embark 

 upon an enquiry as to whether the evidence in question is reliable 

 or not. That is the function of the trial magistrate, and ordinarily 

 it would not be open to any party to invoke the High Court's 

 inherent jurisdiction and contend that on a reasonable 

 appreciation of the evidence the accusation made against the 

 accused would not be sustained. Broadly stated that is the nature 

 and scope of the inherent jurisdiction of the High Court under s. 

 561-A in the matter of quashing criminal proceedings, 

 ...................."

28. In State of Haryana and others Vs. Ch. Bhajan Lal and others 

AIR 1992 SC 604, this Court after reviewing large number of cases 

on the question of the quashing the FIR held at paras 108 and 109 

as follows:

 "108.In the backdrop of the interpretation of the various relevant 

 provisions of the Code under Chapter XIV and of the principles of 

 law enunciated by this Court in a series of decisions relating to the 

 exercise of the extra-ordinary power under Article 226 or the 

 inherent powers Under Section 482 of the Code which we have 

 extracted and reproduced above, we give the following categories of 

 cases by way of illustration wherein such power could be exercised 

 either to prevent abuse of the process of any Court or otherwise to 

 secure the ends of justice, though it may not be possible to lay down 

 any precise, clearly defined and sufficiently channelised and 

 31

inflexible guidelines or rigid formulae and to give an exhaustive list 

of myriad kinds of cases wherein such power should be exercised.

1. Where the allegations made in the First Information Report or the 

complaint, even if they are taken at their face value and accepted in 

their entirety do not prima-facie constitute any offence or make out a 

case against the accused.

2. Where the allegations in the First Information Report and other 

materials, if any, accompanying the F.I.R. do not disclose a 

cognizable offence, justifying an investigation by police officers 

Under Section 156(1) of the Code except under an order of a 

Magistrate within the purview of Section 155(2) of the Code.

3. Where the uncontroverted allegations made in the FIR or 

complaint and the evidence collected in support of the same do not 

disclose the commission of any offence and make out a case against 

the accused.

4. Where, the allegations in the F.I.R. do not constitute a cognizable 

offence but constitute only a non-cognizable offence, no 

investigation is permitted by a police officer without an order of a 

Magistrate as contemplated Under Section 155(2) of the Code.

5. Where the allegations made in the FIR or complaint are so absurd 

and inherently improbable on the basis of which no prudent person 

can ever reach a just conclusion that there is sufficient ground for 

proceeding against the accused.

6. Where there is an express legal bar engrafted in any of the 

provisions of the Code or the concerned Act (under which a criminal 

proceeding is instituted) to the institution and continuance of the 

proceedings and/or where there is a specific provision in the Code or 

the concerned Act, providing efficacious redress for the grievance of 

the aggrieved party.

7. Where a criminal proceeding is manifestly attended with mala fide 

and/or where the proceeding is maliciously instituted with an ulterior 

motive for wreaking vengeance on the accused and with a view to 

spite him due to private and personal grudge.

109. We also give a note of caution to the effect that the power of 

quashing a criminal proceeding should be exercised very sparingly 

and with circumspection and that too in the rarest of rare cases; that 

the Court will not be justified in embarking upon an enquiry as to the 

reliability or genuineness or otherwise of the allegations made in the 

F.I.R. or the complaint and that the extraordinary or inherent powers 

do not confer an arbitrary jurisdiction on the Court to act according 

to its whim or caprice."

 32

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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