Case: State Of Karnataka Vs. Arun Kumar Agrawal

for period of exclusivity, transference of existing permits and information, ability to induct partners and confidentiality. The next Memorandum of Understanding provided for promoters to undertake feasibility study, develop power sales structure and tariff design, all at considerable cost. The selection of Cogentrix was after examining the financial and executing capability as per the Central Electricity Authority guidelines. The techno-economic clearance was granted by the Central Electricity Authority after eight months of review. Foreign Investment Promotion Board granted permission for foreign investment on May 11, 1993 which also assessed the technical and financial capability of the promoters. The financial statement of the Cogentrix indicates that it is a US $944 million dollar company and not a fly by night company as alleged. The shifting of site from Bangalore to Managalore has been considered earlier in the decision of the High Court of Karnataka, adverted to earlier. There was a change in the set up 1000 MW at Mangalore instead of 2 x 250 MW at Bangalore and 2 x 250 at Mangalore. Utilisation of transmission lines by the Cogentrix cannot be a suspicious circumstance between it proposed 400 KV transmission line interconnecting Mangalore, Bangalore and Mysore has not been conceived exclusively for the Cogentrix but is for other projects totalling 2500 MW planned for the region. The increase in the electricity rates is subject to the Electricity Supply Act and clearance being given by different Departments of the Union and State Ministries. Therefore, that again cannot be a circumstance which could give rise to any suspicion. We have adverted in detail to the balance sheet showing incurring of expenses in India. Thus none of the thirteen circumstances noticed by the High Court can be characterised as giving rise to any suspicion, much less a basis for investigation by a criminal investigating agency.16. It is difficult to visualise that when an agreement had been entered into with a foreign company it has been done under suspicious circumstances particularly when it had stood the test of scrutiny under three different Governments headed by at least three different Chief Ministers and when the examination of the project and its approval was considered by different statutory and other agencies of the Government of India. Could it still be said that there had been kickbacks to any one of them or all of them in the matter of entering into a Memorandum of Understanding or in continuation of the same ? The law, in fact, is otherwise. The acts of persons will not be subject of criminal investigation unless a crime is reported to have been committed or reasonable suspicion thereto arises. On mere conjecture or surmise as a flight of fancy that some crime might have been committed, somewhere, by somebody but the crime is not known, the persons involved in it or the place of crime unknown, cannot be termed to be reasonable basis at all for starting a criminal investigation. However, condemnable be the nature or extent of corruption in the country, not all acts could be said to fall in that category. The attempt made by the High Court in this case appears to us to be in the nature of blind shot fired in the dark without even knowing whether there is a prey at all. That may create sound and fury but not result in hunting down the prey. The High Court has looked at different circumstances in the case with a jaundiced eye, particularly when we look at the comments made by it in relation to the amount of paper used and standing of the learned counsel appearing in the case. Naturally when stakes are high one would not like to take a risk in allowing a matter to go by default. The persons concerned will take all precautions by putting forth every point in their favour and to be represented by the best of counsel they can engage. Even that circumstance is taken to be against the parties concerned. We think, the High Court has gone too far. We would not have made this comment at all had the High Court given due weight to the rival submissions made by the parties. The High Court has not at all analysed the contentions put forth by either party. Hardly any reasons are forth coming in the order. What is stated by the writ petitioners and the respondents are summarised. When the High Court steers itself clear of expressing any opinion one way or the other even as to whether a prima facie case exists or not and whether there is reasonable suspicion of any crime having been committed, it is difficult to accept the view taken by the High Court.17. Reference has been made to certain cases including Vineet Narain v. Union of India, 1996(2) SCC 199, wherein this Court had monitored the police investigations by passing series of orders. But that was a case where the investigating agency, although had gathered evidence pursuant to a probe started long back, was not proceeding with investigation since the matter involved persons in very high positions in Government and in public life. The lethargy of CBI was inexplicable and hence this Court monitored the investigation. The principle of this decision is not at all applicable to the facts of the present case. Nor are we impressed with the arguments that this Court should not in exercise of powers conferred under Article 136 of the Constitution interfere with the order under appeal inasmuch as an order as to wrongful investigation will certainly put a person to jeopardy when there is no justification to do so.18. In the result, we think that the order made by the High Court has got to be set aside, but this order will not preclude the parties concerned on finding appropriate material to place the same before any authorised agency to register the case and investigate the matter and, in the event there is any inaction on their part, may seek relief in an appropriate Court.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]10. In this case, we are constrained to observe that the High Court has lost sight of certain broad features of the case. The necessity for establishing thermal power station which is, in detail, considered by the High Court of Karnataka in Java Jaguibi Samithi v. Union of India, 1991(2) Kar. L.J. 524. The circumstance in which the Government of Karnataka took decision to invite foreign investors, the manner in which it was done, was also subject of consideration in India Council for Enviro-Legal and another v. Union of India and others, ILR 1997 KAR 2956, and the High Court rejected objections thereto which was not interfered with in SLP by this Court and thus that order has become final. The circumstance in which the National Thermal Power Corporation which wanted to establish a power station with the collaboration of USSR was dropped on the dissolution of the Soviet Union is not in doubt. The purposal to give the appellants the contract to establish a power station near Mangalore was taken up for consideration when Mr. Bangarappa was the Chief Minister and all decisions were taken not only by him but by the Cabinet concerned after being examined at various levels by the officers of the government. Thereafter on November 19, 1992 a new government was installed in the State of Karnataka with Mr. Veerappa Moily as the Chief Minister and the matter was reviewed by a Committee headed by Mr. J.C. Lynn, Chief Secretary to the Government of Karnataka. In that review meeting the Additional Chief Secretary, Finance Commissioner, Secretary to the Ministry of Energy, Energy Secretary and Chairman, Karnataka Electricity Board had attended and those deliberations were held on January 18, 1993, January 27, 1993, February 2, 1993 and February 2, 1993. Various suggestions made by M/s Cogentrix were presented to the Foreign Investment Promotion Board formed under the auspices of the Government of India. Various aspects of the matter were examined by the Government of India and it expressed the view that in the event of cancellation of Memorandum of Understanding there are likely repercussions that may arise to which we have referred to earlier. Several clearances were given by different agencies of the Government of India from stage to stage. And, inthe meanwhile, the government was again changed in the State of Karnataka firstly with Mr. H.D. Deve Gowda as the Chief Minister, later headed by Mr. J.H. Patel and once again the project passed through the scrutiny of the new Governments.11. The genesis of the theory put forth on behalf of the writ petitioners is the balance sheet showing incurring of expenditure in India. In the balance sheet of China Light and Power Company and in Annual Report it is indicated as follows :"Investment in a power project in India : reached an agreement in July with Cogentrix Energy of US to jointly invest in a 1000 MW coal fired power station project to be built at Mangalore in the State of Karnataka"TheWaterhouse report states that 71.8 million HK Dollars out of a total of 191 million HK dollars shows as provision in the accounts for September 30, 1995 and September 30, 1996 is in respect of the Mangalore Project and they relate to (i) cost of acquisition paid to Cogentrix; (ii) reimbursement of cost incurred by Cogentrix; (iii) payment to third parties for services; and (iv) staff remuneration charged to the project. As to the allegation that money might have been paid in a foreign country, no foundation for the claim is laid in the petition. The China Light and Power Company claims that neither the company nor any group company maintained a bank account in British Virgin Island at any time and accounting have always been maintained in Hong Kong. 1359 British Virgin Island Companies, including the China Light and Power (International) Ltd. having place of business in Hong Kong are registered with the Registrar of Companies in 1997. The allegation of bribery made against Mr. Deve Gowda is based on a letter written by Mr. George Fernandes and the basis of this letter is again not clear. Thus the foundation laid for the whole case arises out of suspicion alone on the strength of dubious and amorphous material. On such material, no case can be registered, much less, an investigation can be done. We would not have hazarded to consider that material placed before us but in order to allay the facts expressed by the parties concerned, necessarily we had to undertake that exercise.12. One of the questions raised by the writ petitioner in the High Court is regarding financial and technical capability of the sponsor of the project. The Government of India while granting permission has considered this aspect at different stages as is clear from letters dated May 11, 1993, September 1, 1993, April 15, 1994, March 23, 1995, June 3, 1996 and January 3, 1997. The last of which indicated the permission of the Government of India to China Light to acquire equity holding in the project and stipulating Cogentrix as an equity holder. The original approval was to set up, own and operate pulverized coal fired power station of capacity of approximately 1000 MW to be implemented in three power blocks of approximately 330 MWs each at Mangalore which was modified by letter dated January 3, 1997. None of the approvals granted by the Government of India and the amendments made to the approvals from time to time was in challenge before us. Thus the entry, the financial capability of Cogentrix and CLP; withdrawal of General Electricity and replacement of CLP; the induction of foreign investment for the project through Mangalore Power Company; right to use imported coal; the capital cost of the project and the clearance for the implementation for 1000 MW project at Mangalore are all matters governed by specific approvals given by the Government of India. In these proceedings, therefore, such clearance cannot be attacked collaterally which have been the subject matters of examination and approval at the highest level by the Ministry of Industry (Foreign Investment Promotion Board) and the Ministry of Power of the Government of India.13. The financial structure of the project and project costs including tariff and the price of electricity have been subject to modifications and are conditional upon the approval by the Central Government, Ministry off Power as well as by the Central Electricity Authority. The final draft of the power project after review by the Ministry of Finance, Government of India was forwarded to the Government of Karnataka on September 29, 1997 for delivery and execution by the Karnataka Electricity Board. Others matters relating to power project including heat rate, capital cost, revenue expenses, fuel procurement and financial capability of the sponsor were considered at the time of examining the proposals of the scheme under Section 29 of the Electricity Supply Act and Detailed Project Report which had been submitted to the Central Electricity Authority for approval and for techno-economic clearance and detailed project report gives breakdown of the various project costs including sponsors development expenses. Detailed project reports prepared by the Cogentrix is in conformity with the guidelines of the Central Electricity Authority. General breakdown of the project costs and balance sheet were subject matters of consideration. The official guidelines require the development expenses to be shown separately and such expenses, therefore, could, by no stretch of imagination, be considered as bribes or greased money.14. The detailed project report was advertised and 838 representations had been received and the same were forwarded to the State Government for onward transmission to the Central Electricity Authority. The Central Electricity Authority has examined these objections and comments offered by the CLP or the Cogentrix before giving its approval. Thus the techno-economic clearance given to the project cannot be examined by Courts to arrive at whether they are technically feasible or not or whether in granting the same strange things have happened giving rise to suspicion that something has been done by way of undue favour.15. The reference of the High Court to the liberalisation policy, reforms approved by amendment of Electricity Supply Act to enable induction of private sector to participate in power generation, to provide for level playing field for domestic and foreign companies in terms of the Government of India is a matter of policy and, therefore, the idea of foreign collaboration by itself cannot be a suspicious circumstance. The Memorandum of Understanding arose as a result of Power Seminar held on June 16, 1992 enabling the introduction of different parties. Karnataka Cabinet met on July 15, 1995 and proposed signing of various Memorandum of Understandings with various companies and the Chief Minister visited different places. The Memorandum of Understanding with Cogentrix provides for period of exclusivity, transference of existing permits and information, ability to induct partners and confidentiality. The next Memorandum of Understanding provided for promoters to undertake feasibility study, develop power sales structure and tariff design, all at considerable cost. The selection of Cogentrix was after examining the financial and executing capability as per the Central Electricity Authority guidelines. The techno-economic clearance was granted by the Central Electricity Authority after eight months of review. Foreign Investment Promotion Board granted permission for foreign investment on May 11, 1993 which also assessed the technical and financial capability of the promoters. The financial statement of the Cogentrix indicates that it is a US $944 million dollar company and not a fly by night company as alleged. The shifting of site from Bangalore to Managalore has been considered earlier in the decision of the High Court of Karnataka, adverted to earlier. There was a change in the set up 1000 MW at Mangalore instead of 2 x 250 MW at Bangalore and 2 x 250 at Mangalore. Utilisation of transmission lines by the Cogentrix cannot be a suspicious circumstance between it proposed 400 KV transmission line interconnecting Mangalore, Bangalore and Mysore has not been conceived exclusively for the Cogentrix but is for other projects totalling 2500 MW planned for the region. The increase in the electricity rates is subject to the Electricity Supply Act and clearance being given by different Departments of the Union and State Ministries. Therefore, that again cannot be a circumstance which could give rise to any suspicion. We have adverted in detail to the balance sheet showing incurring of expenses in India. Thus none of the thirteen circumstances noticed by the High Court can be characterised as giving rise to any suspicion, much less a basis for investigation by a criminal investigating agency.16. It is difficult to visualise that when an agreement had been entered into with a foreign company it has been done under suspicious circumstances particularly when it had stood the test of scrutiny under three different Governments headed by at least three different Chief Ministers and when the examination of the project and its approval was considered by different statutory and other agencies of the Government of India. Could it still be said that there had been kickbacks to any one of them or all of them in the matter of entering into a Memorandum of Understanding or in continuation of the same ? The law, in fact, is otherwise. The acts of persons will not be subject of criminal investigation unless a crime is reported to have been committed or reasonable suspicion thereto arises. On mere conjecture or surmise as a flight of fancy that some crime might have been committed, somewhere, by somebody but the crime is not known, the persons involved in it or the place of crime unknown, cannot be termed to be reasonable basis at all for starting a criminal investigation. However, condemnable be the nature or extent of corruption in the country, not all acts could be said to fall in that category. The attempt made by the High Court in this case appears to us to be in the nature of blind shot fired in the dark without even knowing whether there is a prey at all. That may create sound and fury but not result in hunting down the prey. The High Court has looked at different circumstances in the case with a jaundiced eye, particularly when we look at the comments made by it in relation to the amount of paper used and standing of the learned counsel appearing in the case. Naturally when stakes are high one would not like to take a risk in allowing a matter to go by default. The persons concerned will take all precautions by putting forth every point in their favour and to be represented by the best of counsel they can engage. Even that circumstance is taken to be against the parties concerned. We think, the High Court has gone too far. We would not have made this comment at all had the High Court given due weight to the rival submissions made by the parties. The High Court has not at all analysed the contentions put forth by either party. Hardly any reasons are forth coming in the order. What is stated by the writ petitioners and the respondents are summarised. When the High Court steers itself clear of expressing any opinion one way or the other even as to whether a prima facie case exists or not and whether there is reasonable suspicion of any crime having been committed, it is difficult to accept the view taken by the High Court.17. Reference has been made to certain cases including Vineet Narain v. Union of India, 1996(2) SCC 199, wherein this Court had monitored the police investigations by passing series of orders. But that was a case where the investigating agency, although had gathered evidence pursuant to a probe started long back, was not proceeding with investigation since the matter involved persons in very high positions in Government and in public life. The lethargy of CBI was inexplicable and hence this Court monitored the investigation. The principle of this decision is not at all applicable to the facts of the present case. Nor are we impressed with the arguments that this Court should not in exercise of powers conferred under Article 136 of the Constitution interfere with the order under appeal inasmuch as an order as to wrongful investigation will certainly put a person to jeopardy when there is no justification to do so.18. In the result, we think that the order made by the High Court has got to be set aside, but this order will not preclude the parties concerned on finding appropriate material to place the same before any authorised agency to register the case and investigate the matter and, in the event there is any inaction on their part, may seek relief in an appropriate Court.