Coal scam

Landmark judgment

Print edition : June 23, 2017

A colliery in Jharia, Jharkhand. Photo: Sanjit Das/Bloomberg

H.C. Gupta, former Coal Secretary, the third accused in the Thesgoroa case. He was sentenced to rigorous imprisonment for two years and fined Rs.1 lakh. Photo: Subhav Shukla/PTI

Kuljit Singh Kropha, Joint Secretary in the MoC in 2007, the fourth accused in the Thesgoroa case. He was sentenced to rigorous imprisonment for two years and fined Rs.1 lakh.

Former Prime Minister Manmohan Singh. He was absolved of responsibility in the allocation of the Thesgora-B Rudrapuri coal block, but Judge Bharat Parashar has named him as an accused in the allocation of the Talabira coal block in Odisha. Photo: Meeta Ahlawat

On the basis of a CBI probe, a special court convicts, awards jail terms to and imposes fines on three civil servants of the Coal Ministry for criminal misconduct in the allocation of coal blocks.

THE myth that the bureaucracy enjoys immunity and impunity for its omissions and commissions has been shattered. On May 19, after concluding the trial of the case relating to corruption in the allocation of the Thesgora-B Rudrapuri coal block in Madhya Pradesh during the first term of the United Progressive Alliance government at the Centre, Bharat Parashar, special judge at the Patiala House Courts, New Delhi, held five accused guilty of criminal conspiracy, cheating and criminal misconduct by a public servant. Parashar, an Additional Sessions Judge, began the trial in the Thesgora coal blocks allocation scam last year. This is the third trial that Parashar has completed among the cases entrusted with him.

Although the then Prime Minister, Manmohan Singh, held the Coal portfolio, he was absolved of responsibility in the allocation of the Thesgora-B Rudrapuri coal block because he was bound by the advice of the screening committee. But in the allocation of the Talabira coal block in Odisha to the Kumar Mangalam Birla-owned Hindalco, Parashar has named Manmohan Singh as an accused and issued summons to him. The Supreme Court stayed the summons on a plea by the former Prime Minister.

In the Thesgora case, the judge sentenced Kamal Sponge Steel & Power Ltd (KSSPL), the Satna-based company in Madhya Pradesh that was allotted the coal block despite its ineligibility to apply for it, to pay a fine of Rs.50 lakh for criminal conspiracy and Rs.50 lakh more for cheating. He sentenced KSSPL’s director, Pawan Kumar Ahluwalia, to rigorous imprisonment for three years and fined him Rs.15 lakh. However, the court acquitted Amit Goyal, the company’s auditor, of all the charges alleged by the Central Bureau of Investigation (CBI).

The third accused, H.C. Gupta, former Secretary in the Ministry of Coal (MoC), was sentenced to rigorous imprisonment for two years and fined Rs.1 lakh. He was Secretary from December 31, 2005, to November 2008. After his retirement from the MoC, he served as Member, Competition Commission of India, and enjoyed a reputation for being a person of integrity. The fourth accused, Kuljit Singh Kropha, was the Joint Secretary in the MoC in 2007. He is now the Chief Secretary of Meghalaya. Kropha was sentenced to rigorous imprisonment for two years and fined Rs.1 lakh. The fifth accused, Kailash Chand Samria, was Director in the MoC in 2007. Samria, too, was sentenced to two years’ rigorous imprisonment and fined Rs.1 lakh. Samria is now the Joint Secretary of the Union Ministry of Minorities Affairs.

Background

In November 2006, the MoC issued an advertisement inviting applications for allocation of 38 coal blocks for captive coal mining from companies engaged in the generation of power, the production of iron and steel and the production of cement. Fifteen of the coal blocks were earmarked for the power sector and 23 for non-power sectors. The MoC received 748 applications for the coal blocks reserved for companies engaged in the power sector and 674 applications from 184 companies engaged in non-power sectors. As regards the Thesgora-B Rudrapuri coal block, the MoC received 10 applications, including that of KSSPL. Separate screening committees, comprising civil servants, considered the applications submitted for those engaged in power and non-power sectors.

The CBI’s investigation revealed that KSSPL furnished false information in its application with regard to its financial strength and the existing capacity of its end-use project. KSSPL had mentioned its net worth for the years 2004-05 and 2005-06 as Rs.40.40 crore and Rs.64.75 crore respectively. However, according to the documents the company filed with the Registrar of Companies, its actual net worth for these two financial years was found to be Rs.16.54 crore (approximately) and Rs.26.75 crore respectively. It was also found that the company had not filed its audited annual accounts/reports for the year 2005-06 along with its application even though that was a requirement in the guidelines the MoC issued while inviting applications for the allocation of coal blocks.

The guidelines clearly stated that to decide the inter se priority of various competing applicants for allocation of a captive coal block, the status (stage) level of progress and state of preparedness of the projects, beside the net worth of the applicant company and its track record and financial strength, were relevant factors. The defence argued that no wrongful gain was caused to the accused persons by the allotment of the coal block as no coal was at all extracted and thus no wrongful loss was caused to anyone. The trial court, however, answered this by stating that had the coal block been allocated to a genuine and deserving company in an objective manner, then coal would have been extracted and that would have certainly added to the infrastructural development of the country. “This in itself has resulted in wrongful loss to the country in its economic development and the said loss is difficult to be accounted for in terms of money,” the trial court reasoned. The court found that non-compliance with the guidelines governing the allocation of coal blocks was an accepted norm in the MoC and that too with the complete knowledge of the three accused MoC officers. The trial court thus concluded that Gupta, Kropha and Samria were well aware, at least on May 11, 2007, when the screening committee met, that the applications had not been checked for their completeness and eligibility.

The three officers maintained that it was the sole responsibility of the section officers in the MoC to ensure that the guidelines were being complied with. The trial court expressed its dismay that such a crucial responsibility was left to lower-level officers. However, even if it is presumed for the sake of argument that it was the sole responsibility of the CA-1 Section to check applications for compliance, when the three senior officers came to know of the action taken so far on the applications as on May 11, 2007, then at least they ought to have raised a red flag and asked why the guidelines had not been complied with in letter and spirit, the judge observed.

The trial court found that there was a complete abdication of duties by the three officers, and the allocation of the Thesgora-B Rudrapuri coal block in favour of KSSPL only fortified that conclusion. Gupta, in his cross-examination, admitted that KSSPL’s application was incomplete and ought to have been rejected. He, however, stated that he came to know this fact only during the investigation of the present case and more clearly during the course of the trial. Kropha and Samria took similar stands when they were cross-examined. Gupta took the strange stand in his deposition that irrespective of whether an applicant company was eligible or not its application was to be placed before the screening committee. Recommendation for allocation of a coal block, he agreed, however, was to be made in favour of the most eligible company. Kropha and Samria adopted similar stands.

The trial court disagreed with this proposition and held that no purpose could have been served by placing applications of any such companies before the screening committee for they could not have been recommended for allocation of any coal block. The officers wanted all the applications, including the incomplete ones, to be considered by the screening committee as that would allow them to exercise the powers of discretion vested in them in the coal block allocation process, the court inferred.

PMO kept in the dark

As Secretary, Coal, Gupta was not only the administrative head of the MOC but also the principal adviser to the Minister on all matters of policy and administration within his Ministry. Thus, as the file containing the recommendations of the screening committee was to be put up to the Prime Minister’s Office (PMO), Gupta’s responsibility was all the more onerous as he had to ensure that complete and correct facts were placed before the Prime Minister, the judge held. The MoC officers even withheld from the PMO the information that the guidelines governing allocation of coal blocks had not been complied with either by the MoC or the screening committee, the trial court found. Although the three officers were not inefficient or incompetent, it would not be wrong to describe their attitude in dealing with coal block allocation matters as one of “who cares”, the judge observed.

The minutes of the 36th screening committee meetings did not mention on what ground KSSPL was recommended for allocation of the coal block or why M/s BLA Power Pvt. Limited, the company the Madhya Pradesh government recommended, or other companies that applied for it were not chosen. The trial court also considered KSSPL a non-serious applicant as it neither made any presentation nor submitted any feedback to the screening committee despite notice having been served on it. Therefore, the court inferred that the three officers had abused their position to favour KSSPL, which only confirmed their mala fide intentions.

Sanctions not required

A key feature of bureaucratic immunity from prosecution stems from Section 197 of the Code of Criminal Procedure, which states that before public servants can be proceeded against for offences they have committed in the discharge of their official duties prior sanction is required from either the Central or the State government, whichever may have control over them. The judge, however, reasoned that this restriction would not apply in this case because the acts of omission and commission by the three public servants could not be said to have been committed by them in the discharge of their official duties. The trial court granted the accused interim bail so that they could appeal against their conviction and sentence in the High Court.

Other cases

In 2014, the Supreme Court quashed 214 of the 218 coal block allocations made between 1993 and 2010. The court held that the method of allocating the coal mines through the screening committee suffered from arbitrariness. The coal block allocation scam became a symbol of crony capitalism in the distribution of precious natural resources. In 2010, the law was amended to allow competitive bidding in the allocation of coal blocks. The Thesgora case reveals that if a company without any expertise in mining is allotted a coal block, it remains unexplored. Irregularities in allotment, however, have been found even in cases where companies have begun mining. The CBI has been entrusted with 28 cases arising out of the coal blocks allocation scam. Of these, trial has been concluded in three cases, Thesgora being the latest. The decision in this case is likely to influence the outcome in other cases, which the Supreme Court is monitoring.

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