Case: M.E. SHIVALINGAMURTHY Vs. CENTRAL BUREAU OF INVESTIGATION, BENGALURU

2. The charge-sheet came to be filed on the basis of a FIR dated 01.10.2011. The appellant was Director of Mines and Geology in the State of Karnataka at the relevant time. There was a partnership firm by the name M/s Associated Mineral Company, for short). The offences are alleged to revolve around the affairs of the said firm. First accused is the husband of the second accused. They became partners of the firm (AMC) in 2009. Appellant was arrayed as the third accused. There was reference in the charge-sheet to a conspiracy between the first accused and the second accused. It is alleged, inter alia, that they obtained an undated letter from one Shri K.M. Vishwanath, the Ex-Partner, which is after his retirement with effect from 01.08.2009 from the firm, which was addressed to the appellant, seeking directions to the Deputy Director of Mines and Geology, Hospet in Karnataka to issue the Mineral Dispatch Permitfor short) to the new partners, viz., the first accused and the second accused. It is further averred that the investigation revealed that the appellant marked the said letter to the Case Worker who put up the note seeking orders for referring the matter for legal opinion which was also approved and recommended by the Additional Director and put up to the appellant for orders. Appellant is alleged to have acted in pursuance to the criminal conspiracy and abused his official position with a dishonest and fraudulent intention to cheat the Government of Karnataka and knowingly made a false note in the file that he had discussed this matter with the Deputy Director (Legal) and directed Deputy Director, Mines and Geology, Hospet for issue of MDPs to the new partners, viz., the first accused and the second accused by violating Mines and Minerals (Development and Regulation) Act, 1957 (hereinafter referred to as ‘the, for short) and Mineral Concession Rules, 1960 (hereinafter referred to as ‘the, for short). There are various allegations regarding other accused. As far as appellant is concerned, it is alleged further in the charge-sheet that the acts of the accused, seven in number, including the third accused (appellant), constitutes criminal offences punishable under Sections 120B, 420, 379, 409, 447, 468, 471, 477A of the Indian Penal Code, 1860 (hereinafter referred to as ‘the, for short) and Sections 13(2) and 13(1)(c) and 13(1)(d) of the Prevention of Corruption Act, 1988. No doubt, the origin of this investigation is to be traced to an Order passed by this Court dated 29.03.2011 in Special Leave Petition (Criminal) No. 7366-7367 of 2010 and connected matters ordering investigation into the illegalities into the matter of Mining Lease No. 2434 of AMC. The allegations include the allegation that the accused conspired to commit theft of Government property, i.e., mineral ore. They allegedly trespassed into the forest area and other areas of Bellary District: carried out illegal mining and transported it. Though, second accused (A2) to seventh accused(A7) filed applications under Section 227 of the Code of Criminal Procedure, 1973 (hereinafter referred to as, for short) seeking discharge, by Order dated 08.10.2015, the Trial Court discharged the second accused and the appellant. It is this Order which has been set aside by the High Court by the impugned OrderAPPLICATION BY THE APPELLANT SEEKING DISCHARGE3. It is, inter alia, stated as follows:Appellant is known for his honesty and dignity as a public servant. He earned his name as an excellent and honest Officer in all the places where he was posted. He was not issued a single article of charges while discharging his duties. Though, he started as a Member of the Karnataka State Civil Service, he was promoted to the Cadre of Indian Administrative Service (IAS) as he had an impeccable service record. He was posted as Director of Mines in Geology, having regard to his service record. By virtue of the delegation under Section 26(2) of the Act, the execution of the lease deed lies with the Director of Mines and Geology. AMC was granted the Mining Lease by the State way back in 1966. The firm was reconstituted several times by inducting new partners and retiring old partners. As and when there is the reconstitution of the firm, the firm intimated to the Department of Geology of the reconstitution and conducted the mining operation in the name of AMC by the newly inducted partners. Though, several reconstitutions have taken place, no application has been filed under Rule 37 of the Rules for transfer of the lease on the ground that the assets, viz., the Mining Lease belongs to the firm and not to any individual partners. Therefore, there was no requirement of making an application under Rule 37 of the Rules seeking transfer of the Mining Lease. Records produced by the official before the Court reveal that the Department has understood that reconstitution did not amount to transfer as the partnership is the owner of the asset, viz., the Mining Lease. On inducting first and second accused, the reconstituted firm made application to Deputy Director seeking MDP by intimating that two new partners were inducted. The application was sent to the Director for issuance of MDP. In addition to the application filed to the Deputy Director seeking MDPs, Shri K.M. Vishwanath, Ex-Partner, representing the firm, made application to the Director, placing on record that firm had been reconstituted by inducting the first and the second accused and, accordingly, intimated under Rule 62 of the Rules. It is stated further that after receiving the application by the Department, the file will have to be processed in the Mining Lease Section. There is an elaborate procedure followed while considering applications in Department of Mines and Geology. The Section Officer initially examines the file. A detailed note on the application is prepared. The file, along with note sheet, is sent to the Superintendent of the Mining Leases Section who is a senior Officer who examines the note sheet and puts up the same before the Additional Director. The Additional Director, who is the senior-most departmental Officer in the Department, examines the entire file and puts up the file before the Director. He passes an order considering the law applicable. If it is within the jurisdiction, he disposes the application. If an order from the State Government is required, it is so referred with comments. The Director signs the lease deed by virtue of delegation under Section 26(2) of the Act4. Appellant found that the firm was constituted by Shri Jali Mahadevappa an Shri Jali Mallikarjun in the year 1966 and the lease was obtained in the name of AMC as a firm registered under the Partnership Act. The lease, as per the records, is the asset of the firm. The firm, viz., AMC, was reconstituted on 30.06.1983 by inducting Shri L. Lingaraju as one of the partners on account of retirement of Shri J. Mallikarjun. On 13.02.1984, the firm was reconstituted again wherein Shri B. Ananda joined as a partner and Shri J. Lingaraju retired. On 13.02.1982, Smt. B. Vasanthi joined in place of Shri J. Vamadevappa who retired from the firm. On 13.06.1986, Shri B. Vasudev entered the firm as a partner and Smt. B. Vasanthi retired from the firm. By Deed of Partnership dated 10.06.1990, Shri Mohammed Kasim joined the firm and Shri B. Ananda retired from the firm. Again, Smt. Asha Mohammad Haroon joined as partner in place of Shri B. Vasudev who retired. Again, AMC was reconstituted by inducting Shri K.M. Prabhu and Smt. Parvathamma. There was further reconstitution by inducting Smt. Sujata Prabhu and Shri K.M. Sujan, as partners. Lastly, on 01.09.2009, the first accused and the second accused were inducted as partners. From 1981, on several occasions, the firm was, thus, reconstituted and the application under Rule 37 of the Rules was not filed before the State Government. Partners filed Form V before the Registrar of Firms intimating reconstitution. Never was an application made under Rule 37 as and when reconstitution was done on the ground that the firm was the owner of the mining lease. Only intimation under Rule 62 of the Rules was given. The Case Worker-CW24 has suggested to take legal opinion which was put up along with the note sheet. There was no note put up suggesting the applicability of Rule 37 of the Rules. If there was a suggestion about the applicability of such Rule, the appellant would have taken appropriate decision. The precedent available also was relied upon. The decision taken was a bonafide decision. The suggestion to take legal opinion was endorsed by the Additional Director which is produced before the Court as Exhibit D-765, the note sheet. During the course of the examination of the file, it was brought to the notice of the appellant that Rule 37 was not applicable. A communication was sent to the Deputy Director, Hospet that the permits will have to be issued to the AMC but not in the names of the partners. The appellant further submitted that after receipt of the file, he contacted the Deputy Director (Legal) telephonically who informed that the reconstitution of the firm had taken place by inducting new partners and permits may be issued in the name of the Company and not in the name of the partners which was denied by the said Deputy Director (Legal) at a later stage. He sought support of Section 27 of the Act which protected acts done in good faith under the Act. He pointed out that during the investigation, he gave details of various firms who have leases with the Government which have not obtained permission under Rule 37. The procedure which was consistently followed for obtaining MDPs by intimating reconstitution under Rule 62 was brought to the notice. It was contended that taking a bonafide administrative decision on the understanding of Rule 37 and based on previous precedents, should not be considered as cheating. Reading of the charge-sheet and allegations, according to the appellant, basically surrounded around Section 420 of the IPC5. The statements of CW7, CW21, CW24, CW26, CW202 and CW109 were enlisted by the prosecution in support of the charge. The appellant pointed out the statements of the witnesses and the documents produced clearly reveal there is no material much less prima facie material to frame the chargesORDER PASSED BY THE MAGISTRATE6. The Court noted the submission of the appellant that AMC had been reconstituted on a number of occasions. No fault was found in accepting reconstitution. Only when the first and second accused became partners in the year 2009, the appellant was faulted. Reliance is seen placed on the judgment of the judgment of the Division Bench of the High Court in Sree Ramakrishna Mining Company v. Commissioner of Income-Tax, Mysore 1966 SCC Online Kar 73 / ILR 1966 Mys. 1945 . Thereafter, reliance is placed on decisions which were rendered under the Indian Stamp Act, 1899 for the proposition that an instrument evidencing the distribution of assets of a firm, on dissolution or retirement of a partner, would not amount to a conveyance. The principles relating to discharge under Sections 227 and 228 were discussed, and finally, it was held as follows:

Court's reasoning:
24. The provisions of Rule 37, which would control destiny of this case, is, as it was obtained in the year 2009. Also could it not be contended that decisions rendered under the Stamp Act may not be relevant to understood the scope of Rule (37) of the Rules. No doubt, there is a case for the appellant that on a number of reconstitutions took place in regard to the firm-AMC, and on no occasion, was an issue relating to infraction of Rule 37, raised. All that the appellant did was, he acted in accordance with the practice obtaining in the Department. There is the case for the appellant that in this regard, Rule 37, as such, was not pointedly invoked by either the Additional Director or the SDA25. It is here that again it becomes necessary that we remind ourselves of the contours of the jurisdiction under Section 227 of the Cr.PC. The principle established is to take the materials produced by the prosecution, both in the form of oral statements and also documentary material, and act upon it without it been subjected to questioning through cross-examination and everything assumed in favour of the prosecution, if a scenario emerges where no offence, as alleged, is made out against the accused, it, undoubtedly, would enure to the benefit of the accused warranting the Trial Court to discharge the accused28. In view of the decisions of this Court that the accused can only rely on the materials which are produced by the prosecution, it must be understood that the grave suspicion, if it is established on the materials, should be explained away only in terms of the materials made available by the prosecution. No doubt, the accused may appeal to the broad probabilities to the case to persuade the court to discharge him29. In this case, as already noticed, going by the statements made by the subordinates working in the Office of the appellant, on receipt of the letter from the erstwhile partners of AMC dated 26.12.2009, two of his subordinates, including the Additional Director, did recommend that the matter requires a legal opinion. The noting, which is undisputed in this case, made by the appellant, would appear to suggest that he had spoken to the Deputy Director (Legal). The prosecution case largely depends upon the statement of the Deputy Director (Legal) who takes a definite stand that no opinion was sought from him. A matter, under Rule 37 of the Rules, therefore, according to the prosecution case, which ought to have gone to the State Government for prior sanction, came to be dealt with by the appellant as Director of Mines. This led to the issue of MDPs. It is, no doubt, true that there may not be any other material to link the appellant with various other acts and omissions which have been alleged against the first accused in particular along with the fifth accused and other accused. However, the fact remains, if the defence of the appellant is not to be looked into, which included the practice obtaining in the past whenever the firm was reconstituted, and also the version of the appellant that he did in fact speak with the Deputy Director (Legal) and acted on his advice and further that this fact would be established if the Deputy Director (Legal) was questioned in his presence, they would appear to be matter which may not be available to the appellant to press before the court considering the application under Section 227 of the Cr.PC30. This being the outcome of our discussion, the inevitable consequence is that we are not persuaded to hold that the High Court was in error in the view it has takenLEGAL PRINCIPLES APPLICABLE IN REGARD TO AN APPLICATION SEEKING DISCHARGE14. This is an area covered by a large body of case law. We refer to a recent judgment which has referred to the earlier decisions, viz., P. Vijayan v. State of Kerala and another (2010) 2 SCC 398 and discern the followingi. If two views are possible and one of them gives rise to suspicion only as distinguished from grave suspicion, the Trial Judge would be empowered to discharge the accusedii. The Trial Judge is not a mere Post Office to frame the charge at the instance of the prosecutioniii. The Judge has merely to sift the evidence in order to find out whether or not there is sufficient ground for proceeding. Evidence would consist of the statements recorded by the Police or the documents produced before the Courtiv. If the evidence, which the Prosecutor proposes to adduce to prove the guilt of the accused, even if fully accepted before it is challenged in cross-examination or rebutted by the defence evidence, if any,t show that the accused committed offence, then, there will be no sufficient ground for proceeding with thev. It is open to the accused to explain away the materials giving rise to the grave suspicionvi. The court has to consider the broad probabilities, the total effect of the evidence and the documents produced before the court, any basic infirmities appearing in the case and so on. This, however, would not entitle the court to make a roving inquiry into the pros and consvii. At the time of framing of the charges, the probative value of the material on record cannot be gone into, and the material brought on record by the prosecution, has to be accepted as trueviii. There must exist some materials for entertaining the strong suspicion which can form the basis for drawing up a charge and refusing to discharge the accusedThe defence of the accused is not to be looked into at the stage when the accused seeks to be discharged under Section 227 of the Cr.PC (See State of J & K v. Sudershan Chakkar and another AIR 1995 SC 1954 ). The expression,e record of the, used in Section 227 of the Cr.PC, is to be understood as the documents and the articles, if any, produced by the prosecution. The Code does not give any right to the accused to produce any document at the stage of framing of thecharge. At the stage of framing of the charge, the submission of the accused is to be confined to the material produced by the Police (See State of Orissa v. Debendra Nath PadhiAIR 2005 SC 359