M.E. SHIVALINGAMURTHY versus CENTRAL BUREAU OF INVESTIGATION, BENGALURU

[2020] 1 S.C.R.

M.E. SHIVALINGAMURTHY

CENTRAL BUREAU OF INVESTIGATION, BENGALURU

(Criminal Appeal No. 957 of 2017)

BJANUARY 07, 2020

[SANJAY KISHAN KAUL AND K. M. JOSEPH, JJ.]

Code of Criminal Procedure, 1973 – s. 227 – Discharge –There was Partnership firm “AMC”, first accused and secondaccused became partners of the firm in 2009 – The appellant wasCarrayed as the third accused – There was reference in the charge-sheet to conspiracy between the first accused and the secondaccused – The appellant was director of Mines and Geology in theState at the relevant time – It was alleged that appellant had actedin pursuance to the criminal conspiracy and abused his officialDposition with dishonest and fraudulent intention to cheat theGovernment and knowingly made false note in the file that hehad discussed the matter, relating to issuance of the Mineral DispatchPermit (MDP) to the new partners of the firm, viz., the first accusedand the second accused, with the Deputy Director (legal) anddirected Deputy Director to issue MDP – It was alleged in theEcharge-sheet that the acts of the accused including the third accused(appellant) constituted criminal offences u/ss. 120B, 420, 379, 409,447, 468, 471, 477A of IPC and ss. 13 (2), 13 (1) (c) and 13 (1) (d)of the Prevention of Corruption Act, 1988 – Applications were filedu/s. 227 of the Cr.P.C. seeking discharge – The Trial Court dischargedFthe second accused and the appellant – This order was set aside bythe High Court – On appeal, held: The prosecution case largelydepended upon the statement of the Deputy Director legal who tooka definite stand that no opinion was sought from him by the appellant– matter, u/r. 37 of the Rules, therefore, according to the prosecutioncase, which ought to have gone to the State Government for priorGsanction, came to be dealt with by the appellant as Director of Mines– This led to the issue of MDP – If the defence of the appellant isnot to be looked into, which included the practice of obtaining inthe past whenever the firm was reconstituted and also the versionof the appellant that he did in fact speak with the Deputy DirectorH(legal) and acted on his advice and further that this fact would be

established if the Deputy Director legal was questioned in hispresence, they would appear to be matter which may not be availableto the appellant to press before the Court considering the applicationu/s. 227 of the Cr.P.C. – Consequently, the appeal is dismissed –Mines and Minerals (Development and Regulation) Act, 1957 –Mineral Concession Rules, 1960 – r. 37.

Code of Criminal Procedure, 1973 – s. 227 – Contours ofjurisdiction under – Held: The principle established is to take thematerials produced by the prosecution, both in the form of oralstatements and also documentary material, and act upon it withoutit been subjected to questioning through cross-examination andeverything assumed in favour of the prosecution, if scenarioemerges where no offence, as alleged, is made out against theaccused, it, undoubtedly, would enure to the benefit of the accusedwarranting the Trial Court to discharge the accused – It is not opento the accused to rely on material by way of defence and persuadethe court to discharge him.

Code of Criminal Procedure, 1973 – s. 227 – Discharge –Defence of accused seeking discharge – Held: The defence of theaccused is not to be looked into at the stage when the accusedseeks to be discharged u/s. 227 of the Cr.PC (State of J & K v.Sudershan Chakkar and another) – The expression, “the record ofthe case”, used in Section 227 of the Cr.PC, is to be understood asthe documents and the articles, if any, produced by the prosecution– The Code does not give any right to the accused to produce anydocument at the stage of framing of the charge – At the stage offraming of the charge, the submission of the accused is to beconfined to the material produced by the Police (State of Orissa v.Debendra Nath Padhi).Dismissing the appeal, the Court

HELD: 1. The defence of the accused is not to be lookedinto at the stage when the accused seeks to be discharged underSection 227 of the Cr.PC (State of J & Kv. Sudershan Chakkarand another). The expression, “the record of the case”, used inSection 227 of the Cr.PC, is to be understood as the documentsand the articles, if any, produced by the prosecution. The Codedoes not give any right to the accused to produce any documentat the stage of framing of the charge. At the stage of framing of

Athe charge, the submission of the accused is to be confined tothe material produced by the Police (State of Orissav. DebendraNath Padhi). [Para 15][805-D-E]

2. It is here that again it becomes necessary to remind thecontours of the jurisdiction under Section 227 of the Cr.PC. TheBprinciple established is to take the materials produced by theprosecution, both in the form of oral statements and alsodocumentary material, and act upon it without it been subjectedto questioning through cross-examination and everythingassumed in favour of the prosecution, if scenario emerges whereno offence, as alleged, is made out against the accused, it,Cundoubtedly, would enure to the benefit of the accused warrantingthe Trial Court to discharge the accused. [Para 25][810-A-B]

3. It is not open to the accused to rely on material by way ofdefence and persuade the court to discharge him. [Para 26][810-

4. In this case, as already noticed, going by the statementsmade by the subordinates working in the Office of the appellant,on receipt of the letter from the erstwhile partners of AMC dated26.12.2009, two of his subordinates, including the AdditionalDirector, did recommend that the matter requires legal opinion.EThe noting, which is undisputed in this case, made by theappellant, would appear to suggest that he had spoken to theDeputy Director (Legal). The prosecution case largely dependsupon the statement of the Deputy Director (Legal) who takes adefinite stand that no opinion was sought from him. matter,Funder Rule 37 of the Rules, therefore, according to theprosecution case, which ought to have gone to the StateGovernment for prior sanction, came to be dealt with by theappellant as Director of Mines. This led to the issue of MDPs. Itis, no doubt, true that there may not be any other material to linkthe appellant with various other acts and omissions which haveGbeen alleged against the first accused in particular along with thefifth accused and other accused. However, the fact remains, ifthe defence of the appellant is not to be looked into, whichincluded the practice obtaining in the past whenever the firmwas reconstituted, and also the version of the appellant that he

M.E. SHIVALINGAMURTHY v. CENTRAL BUREAU OFINVESTIGATION, BENGALURU

did in fact speak with the Deputy Director (Legal) and acted onhis advice and further that this fact would be established if theDeputy Director (Legal) was questioned in his presence, theywould appear to be matter which may not be available to theappellant to press before the court considering the applicationunder Section 227 of the Cr.PC. [Para 29][810-F-H; 811-A-B]

Sree Ramakrishna Mining Company v. Commissionerof Income-Tax, Mysore (1966) SCC Online Kar 73;State of J & K v. Sudershan Chakkar and another AIR1995 SC 1954; State of Orissa v. Debendra Nath PadhiAIR 2005 SC 359 – referred to.

P. Vijayan v. State of Kerala and another (2010) 2 SCC398 – relied on.

Case Law Reference

CRIMINAL APPELLATE JURISDICTION: Criminal Appeal No.957 of 2017.

From the Judgment and Order dated 07.11.2016 of the High Courtof Karnataka at Bengaluru in Criminal Revision Petition No. 838 of2016.

Kapil Sibal, Sr. Adv., S. Udaya Kumar Sagar, Ms. Bina Madhavan,L. M. Chidanandayya, Ms. Akanksha Mehra, Ms. Vasudha Singh, M/s.Lawyer S Knit & Co, Akshay Amritanshu, Shekhar Vyas, Arvind KumarSharma, Ms. Nithya Rao, Mukesh Kumar Maroria, Parmatma Singh,Mayank Jain, Madhur Jain, Ms. Aakriti Dhawan, Ms. Nishtha Singh,Advs. for the appearing parties.

The Judgment of the Court was delivered by

K. M. JOSEPH, J.

1. The appeal is directed against the Order of the High Courtsetting aside the Order passed by the Magistrate allowing the applicationfiled by the appellant to discharge him.

A2. The charge-sheet came to be filed on the basis of FIR dated01.10.2011. The appellant was Director of Mines and Geology in theState of Karnataka at the relevant time. There was partnership firmby the name M/s Associated Mineral Company (‘AMC’, for short). Theoffences are alleged to revolve around the affairs of the said firm. Firstaccused is the husband of the second accused. They became partnersBof the firm (AMC) in 2009. Appellant was arrayed as the third accused.There was reference in the charge-sheet to conspiracy between thefirst accused and the second accused. It is alleged, inter alia, that theyobtained an undated letter from one Shri K.M. Vishwanath, the Ex-Partner, which is after his retirement with effect from 01.08.2009 fromCthe firm, which was addressed to the appellant, seeking directions to theDeputy Director of Mines and Geology, Hospet in Karnataka to issuethe Mineral Dispatch Permit (‘MDP’ for short) to the new partners,viz., the first accused and the second accused. It is further averred thatthe investigation revealed that the appellant marked the said letter to theCase Worker who put up the note seeking orders for referring the matterDfor legal opinion which was also approved and recommended by theAdditional Director and put up to the appellant for orders. Appellant isalleged to have acted in pursuance to the criminal conspiracy and abusedhis official position with dishonest and fraudulent intention to cheat theGovernment of Karnataka and knowingly made false note in the fileEthat he had discussed this matter with the Deputy Director (Legal) anddirected Deputy Director, Mines and Geology, Hospet for issue of MDPsto the new partners, viz., the first accused and the second accused byviolating Mines and Minerals (Development and Regulation) Act, 1957(hereinafter referred to as ‘the Act’, for short) and Mineral ConcessionRules, 1960 (hereinafter referred to as ‘the Rules’, for short). There areFvarious allegations regarding other accused. As far as appellant isconcerned, it is alleged further in the charge-sheet that the acts of theaccused, 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 (hereinafterGreferred to as ‘the IPC’, for short) and Sections 13(2) and 13(1)(c) and13(1)(d) of the Prevention of Corruption Act, 1988. No doubt, the originof this investigation is to be traced to an Order passed by this Courtdated 29.03.2011 in Special Leave Petition (Criminal) No. 7366-7367 of2010 and connected matters ordering investigation into the illegalitiesinto the matter of Mining Lease No. 2434 of AMC. The allegationsHinclude the allegation that the accused conspired to commit theft ofGovernment property, i.e., mineral ore. They allegedly trespassed intothe forest area and other areas of Bellary District: carried out illegalmining and transported it. Though, second accused (A2) to seventhaccused(A7) filed applications under Section 227 of the Code of CriminalProcedure, 1973 (hereinafter referred to as ‘Cr.PC’, for short) seekingdischarge, by Order dated 08.10.2015, the Trial Court discharged thesecond accused and the appellant. It is this Order which has been setaside by the High Court by the impugned Order.

APPLICATION BY THE APPELLANT SEEKINGDISCHARGE

3. It is, inter alia, stated as follows:

Appellant is known for his honesty and dignity as public servant.He earned his name as an excellent and honest Officer in all the placeswhere he was posted. He was not issued single article of chargeswhile discharging his duties. Though, he started as Member of theKarnataka State Civil Service, he was promoted to the Cadre of IndianAdministrative Service (IAS) as he had an impeccable service record.He was posted as Director of Mines in Geology, having regard to hisservice record. By virtue of the delegation under Section 26(2) of theAct, the execution of the lease deed lies with the Director of Mines andGeology. AMC was granted the Mining Lease by the State way back in1966. The firm was reconstituted several times by inducting new partnersand retiring old partners. As and when there is the reconstitution of thefirm, the firm intimated to the Department of Geology of the reconstitutionand conducted the mining operation in the name of AMC by the newlyinducted partners. Though, several reconstitutions have taken place, noapplication has been filed under Rule 37 of the Rules for transfer of thelease on the ground that the assets, viz., the Mining Lease belongs to thefirm and not to any individual partners. Therefore, there was norequirement of making an application under Rule 37 of the Rules seekingtransfer of the Mining Lease. Records produced by the official beforethe Court reveal that the Department has understood that reconstitutiondid not amount to transfer as the partnership is the owner of the asset,viz., the Mining Lease. On inducting first and second accused, thereconstituted firm made application to Deputy Director seeking MDPby intimating that two new partners were inducted. The application wassent to the Director for issuance of MDP. In addition to the application

Afiled to the Deputy Director seeking MDPs, Shri K.M. Vishwanath, Ex-Partner, representing the firm, made application to the Director, placingon record that firm had been reconstituted by inducting the first and thesecond 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 isBan elaborate procedure followed while considering applications inDepartment of Mines and Geology. The Section Officer initially examinesthe file. detailed note on the application is prepared. The file, alongwith note sheet, is sent to the Superintendent of the Mining Leases Sectionwho is senior Officer who examines the note sheet and puts up theCsame before the Additional Director. The Additional Director, who is thesenior-most departmental Officer in the Department, examines the entirefile and puts up the file before the Director. He passes an order consideringthe 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 delegationDunder Section 26(2) of the Act.

4. Appellant found that the firm was constituted by Shri JaliMahadevappa an Shri Jali Mallikarjun in the year 1966 and the leasewas obtained in the name of AMC as firm registered under thePartnership Act. The lease, as per the records, is the asset of the firm.EThe firm, viz., AMC, was reconstituted on 30.06.1983 by inducting ShriL. Lingaraju as one of the partners on account of retirement of ShriJ. Mallikarjun. On 13.02.1984, the firm was reconstituted again whereinShri B. Ananda joined as partner and Shri J. Lingaraju retired. On13.02.1982, Smt. B. Vasanthi joined in place of Shri J. VamadevappaFwho retired from the firm. On 13.06.1986, Shri B. Vasudev entered thefirm as partner and Smt. B. Vasanthi retired from the firm. By Deedof Partnership dated 10.06.1990, Shri Mohammed Kasim joined the firmand Shri B. Ananda retired from the firm. Again, Smt. Asha MohammadHaroon joined as partner in place of Shri B. Vasudev who retired. Again,

AMC was reconstituted by inducting Shri K.M. Prabhu and Smt.GParvathamma. There was further reconstitution by inducting Smt. SujataPrabhu and Shri K.M. Sujan, as partners. Lastly, on 01.09.2009, the firstaccused and the second accused were inducted as partners. From 1981,on several occasions, the firm was, thus, reconstituted and the applicationunder Rule 37 of the Rules was not filed before the State Government.HPartners filed Form V before the Registrar of Firms intimating

reconstitution. Never was an application made under Rule 37 as andwhen reconstitution was done on the ground that the firm was the ownerof the mining lease. Only intimation under Rule 62 of the Rules wasgiven. The Case Worker-CW24 has suggested to take legal opinion whichwas put up along with the note sheet. There was no note put up suggestingthe applicability of Rule 37 of the Rules. If there was suggestion aboutthe applicability of such Rule, the appellant would have taken appropriatedecision. The precedent available also was relied upon. The decisiontaken was bonafide decision. The suggestion to take legal opinionwas endorsed by the Additional Director which is produced before theCourt as Exhibit D-765, the note sheet. During the course of theexamination of the file, it was brought to the notice of the appellant thatRule 37 was not applicable. communication was sent to the DeputyDirector, Hospet that the permits will have to be issued to the AMC butnot in the names of the partners. The appellant further submitted thatafter receipt of the file, he contacted the Deputy Director (Legal)telephonically who informed that the reconstitution of the firm had takenplace by inducting new partners and permits may be issued in the nameof the Company and not in the name of the partners which was deniedby the said Deputy Director (Legal) at later stage. He sought supportof Section 27 of the Act which protected acts done in good faith underthe Act. He pointed out that during the investigation, he gave details ofvarious firms who have leases with the Government which have notobtained permission under Rule 37. The procedure which was consistentlyfollowed for obtaining MDPs by intimating reconstitution under Rule 62was brought to the notice. It was contended that taking bonafideadministrative decision on the understanding of Rule 37 and based onprevious precedents, should not be considered as cheating. Reading ofthe charge-sheet and allegations, according to the appellant, basicallysurrounded around Section 420 of the IPC.

5. The statements of CW7, CW21, CW24, CW26, CW202 andCW109 were enlisted by the prosecution in support of the charge. Theappellant pointed out the statements of the witnesses and the documentsproduced clearly reveal there is no material much less prima faciematerial to frame the charges.

ORDER PASSED BY THE MAGISTRATE

6. The Court noted the submission of the appellant that AMC hadbeen reconstituted on number of occasions. No fault was found in

DEF

Aaccepting reconstitution. Only when the first and second accused becamepartners in the year 2009, the appellant was faulted. Reliance is seenplaced on the judgment of the judgment of the Division Bench of theHigh Court in Sree Ramakrishna Mining Companyv. Commissioner ofIncome-Tax, Mysore1. Thereafter, reliance is placed on decisions whichwere rendered under the Indian Stamp Act, 1899 for the proposition thatBan instrument evidencing the distribution of assets of firm, on dissolutionor retirement of partner, would not amount to conveyance. Theprinciples relating to discharge under Sections 227 and 228 werediscussed, and finally, it was held as follows:

“41. In view of the above said citations, it is evident that act ofCA-3 in directing his subordinates to issue MOP to M/s. AssociatedMining Company belonging to accused Nos.1 and 2 does notamount to fastening criminal liability of him. In the statement ofCWs 7, 21, 24, 26, 109 and 202, absolutely there is no material toshow that A-3 has committed criminal conspiracy to help accusedDNos.1 and 2 in directing his officials to issue Mineral DispatchPermit and as such there is considerable force in the argument oflearned Counsel for accused No.3 and I am unable to accept theargument addressed by learned Special Public Prosecutor. Hence,I answer IA. No.30 deserves to be allowed. I answer.”EFINDINGS OF THE HIGH COURT

7. After noting the rival contentions, the court notes that forpunishing under Section 120B of the IPC, the prosecution is required toprove the conspiracy. The agreement, which is illegal, can be proved bynecessary implication. It is to be largely proved from the inference ofFthe illegal acts or omissions by the conspirators. The incriminatingevidence collected by the prosecution, it is noted, is that the appellantrecommended issuance of MDPs in gross violation of the Act despitethe office noting to the effect that the matter required legal opinion. Thestand of the appellant that he had discussed the matter with the LegalDepartment is seen negatived by CW21. As to his contention that manyGa time AMC was reconstituted and he had really discussed the matterwith CW21 before directing the issue of MDPs, was found to be amatter of defence which could not be pressed at the threshold.

8. We notice the following findings:

“12. Applying the formulae of (some/mere suspicion – gravesuspicion: as enunciated in Dilawar Balu Kurane’s case (supra)and Union of India -vs- Prafulla Kumar Samai and another reportedin AIR 1979 SC 366, to the evidentiary material placed before thecourt against respondent, then also the needle tilts more towardsgrove suspicion. The subject matter involved in this case is thenatural resource of the country and the alleged offence is said tohave caused loss to the State exchequer substantially. Therespondent is responsible officer of the State. Consciously hepassed the order in violation of the statutory provisions.

13. The learned Trial Judge in the order impugned has made anomnibus observation that his action does not fasten criminal liabilityon him and the statement of the witnesses does not show that hecommitted criminal conspiracy. Though there was no directevidence, the learned Trial Judge has lost sight of incriminatingmaterial appearing in the circumstantial evidence placed by theprosecution. Limited power vested with the Trial Court to sift andweigh the evidence is transgressed by the learned Trial Judge inthe impugned order, hence requires intervention in this revisionjurisdiction.”9. Accordingly, the petition was allowed setting aside the order ofthe Sessions Judge discharging the appellant.

10. We heard Shri Kapil Sibal, learned Senior Counsel appearingfor the appellant. We also heard learned Counsel appearing for therespondent.

11. Shri Kapil Sibal, learned Senior Counsel for the appellant,submits as follows:

The lease was originally in favour of AMC in the year 1966.Thereafter, the firm was reconstituted on large number of occasions.The procedure followed was intimation being given to the Departmentunder Rule 62 of the Rules about the reconstitution. Rule 37 of the Ruleswas not invoked. This is case where the action of the appellant wasbonafide. Proceeding on the basis that Rule 37 applies, he further submits,this is not case where the appellant could be prosecuted for the criminaloffences. The appellant acted on the basis of the practice. He contactedthe Deputy Director (Legal).

A12. There is also case of the appellant that he had directed MDPto be issued in the name of the firm. He had also made it clear thatpermit be also not issued to the partners. There was no other materialproduced on record by the prosecution. This is not case where there ismaterial to establish any criminal conspiracy.B13. Per contra, the learned Counsel for the respondent-CentralBureau of Investigation, Bengaluru, supported the order. In particular,reliance is placed on the specific stand of the Charge Witness-CW21 tothe effect that the appellant had not sought his legal opinion contrary tothe stand of the appellant.

CLEGAL PRINCIPLES APPLICABLE IN REGARD TO ANAPPLICATION SEEKING DISCHARGE

14. This is an area covered by large body of case law. We referto recent judgment which has referred to the earlier decisions, viz., P.Vijayanv. State of Kerala and another2 and discern the followingDprinciples:

i.If two views are possible and one of them gives rise tosuspicion only as distinguished from grave suspicion, the TrialJudge would be empowered to discharge the accused.

ii.The Trial Judge is not mere Post Office to frame the chargeEat the instance of the prosecution.

iii.The Judge has merely to sift the evidence in order to find outwhether or not there is sufficient ground for proceeding.Evidence would consist of the statements recorded by thePolice or the documents produced before the Court.F

iv.If the evidence, which the Prosecutor proposes to adduce toprove the guilt of the accused, even if fully accepted before itis challenged in cross-examination or rebutted by the defenceevidence, if any, “cannot show that the accused committedoffence, then, there will be no sufficient ground for proceedingGwith the trial”.

v.It is open to the accused to explain away the materials givingrise to the grave suspicion.

vi.The court has to consider the broad probabilities, the totaleffect of the evidence and the documents produced beforethe court, any basic infirmities appearing in the case and soon. This, however, would not entitle the court to make rovinginquiry into the pros and cons.

vii. At the time of framing of the charges, the probative value ofthe material on record cannot be gone into, and the materialbrought on record by the prosecution, has to be accepted astrue.

viii. There must exist some materials for entertaining the strongsuspicion which can form the basis for drawing up chargeand refusing to discharge the accused.

15. The defence of the accused is not to be looked into at thestage when the accused seeks to be discharged under Section 227 ofthe Cr.PC (See State of J & Kv. Sudershan Chakkar and another3).The expression, “the record of the case”, used in Section 227 of theCr.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 theaccused to produce any document at the stage of framing of the charge.At the stage of framing of the charge, the submission of the accused isto be confined to the material produced by the Police (See State ofOrissav. Debendra Nath Padhi4).ANALYSIS OF THE CASE

16. Having set out the legal principles, as aforesaid, let us considerthe facts:

Undoubtedly, the appellant came to be appointed as the Directorof Mines and Geology of the State of Karnataka by virtue of Notificationdated 09.06.2008. He continued in the said post till 25.10.2010. MiningLease No.625 was executed on 02.03.1966 between the Governor andAMC, registered firm. The Managing Partner was one Shri JaliMahadevappa. The partners of the AMC, viz., Shri K.M. Parvatammaand Shri K.M. Vishwanath sent letter dated 26.12.2009. It reads asfollows:

3 AIR 1995 SC 19544 AIR 2005 SC 359

[2020] 1 S.C.R.

The Director

Mines & Geology Mineral

Khanija Bhavan

BRace Course Road

Bangalore.

Sub: Change in Constitution of Associated Mining Company MLNo.2434- Reg.

Sir,

We undersigned are lease owner of Associated Mining Companyof Guru Iron Ore Mines at Venkatagiri Village, Sandur Taluk,Bellary Dist, bearing ML No.2434 (Old 625).

For better management we admitted as Partners Mr. G. JanardhanDReddy and Mrs. G. Lakshmi Aruna of 123/350 VeerabagoudaColony, Opp Kumaraswamy Temple Club Road, Bellary on 31[st]July, 2009. Subsequently on 1[st ]August, 2009 Smt. K.M.Parvatamma and Mr. K.M. Vishwanath retired.

Mr. G. Janardhana Reddy and Mrs. G. Lakshmi Aruna are soleEPartners of the Mine. The admission and Retirement deed areenclosed herewith for your perusal. This is for your kindinformation.

Kindly issue permission to transport the ore from Mines to variousdestinations.

Thanking you,

Yours sincerely,

Smt. K. Parvatamma

Mr. K.M. Vishwanath”

17. The role, which is attributed to the appellant, begins essentiallywith this letter. It is the case of the prosecution that having regard toH

Rule 37 of the Rules, it was incumbent upon the appellant, before actingupon the reconstitution of the firm, to obtain the previous sanction of theState Government. The Charge Witnesse-CW24-D. Hanumantha,undoubtedly, has given statement indicating that the letter aforesaid wasmarked to him to process the same. He further stated that he proposedthat legal opinion may be obtained. Finally, it was submitted to theAdditional Director. The Additional Director also recommended theneed to obtain legal opinion. The matter came up before the appellant on04.01.2010. On 04.01.2010, it appears that appellant has ordered:

“… “spoken to Dy. Director (Legal), the company remainsthe same, whereas the partners might have been included orremoved, and this they are supposed to approach the law board.In the present case, the partners are not asking for MDP (MineralDispatch Permits) in their names, but in the name of the company.Permits may be issued only in the name of the company viz.,AMC where lease is also sanctioned to the same company only.The partners are changed, but you are not going to issue MDPsto the partners. Hence inform DD Hospet that MDPs may beissued only in the name of the Company.”…”

18. The Additional Director has also spoken on similar lines.

19. The case of the prosecution, which has appealed to the HighCourt, is essentially based on the fact that on the one hand, the appellantin his Order dated 04.01.2010 (Draft) which was finalised on 05.01.2010,spoke about having obtained legal opinion by speaking to Deputy Director(Legal), the Deputy Director (Legal) has taken the stand that he has notgiven any such opinion. The statement of the Deputy Director (Legal)has been produced by the appellant along with Criminal MiscellaneousPetition No. 122009 of 2009. He has stated, inter alia, as follows:“However, no opinion was sought from me in this regard”.He has further stated that since the contents of the letter dated26.12.2009 disclosed that the entire lease holding rights weretransferred in favour of the first and second accused, it is contraryto Rule 37 of the Rules. However, ignoring the provisions of Rule37, the direction was issued to Deputy Director to issue the MDPsin the name of the Company. However, he further states thatAMC is firm not company. He further stated that if there is nochange in the rights of the lessee, then, someone else gets rights

808SUPREME COURT REPORTS

Aover the leasehold rights. The said act will attract provisions ofRule 37 of the Rules. He has also stated that though an applicationwas filed on 29.07.1994 in view of the fact that the Mining Leasewas due to expire on 01.03.1996, the lease is renewed from theyear 2000 to 2010 by the Minister since the Forest Departmentgave permission. He goes on to state that the lease ought to haveBbeen renewed with effect from 02.03.1996 for period of tenyears. 20. It is necessary to notice Rule 37 of the Rules which weremade in 1960. Rule 37 reads as follows, inter alia:

C“37. Transfer of lease :- (1) The lessee shall not, without theprevious consent in writing of the State Governmentand in thecase of mining lease in respect of any mineral specified in Part‘A’ and Part ‘B’ of the First Schedule to the Act, withoutthe previous approval of the Central Government :-

D(a) assign, sublet, mortgage, or in any other manner, transferthe mining lease, or any right, title or interest therein, or

(b) enter into or make any bonafide arrangement, contract,or understanding whereby the lessee will or may be directlyor indirectly financed to substantial extent by, or underEwhich the lessee’s operations or undertakings will or maybe substantially controlled by, any person or body ofpersons other than the lessee:”

(Emphasis supplied)

21. The Trial Court has placed reliance on judgment of the DivisionFBench of the Mysore High Court in Sree Ramakrishna Mining Company(supra). In fact, the Court in the said case, considered Rule 37 of theMineral Concession Rules of 1949, which read as follows:

“37. Transfer of lease:- The lessee may with the previoussanction of the State Governmentand subject to conditionsGspecified in the first proviso to rule 35 and in rule 38, transfer hislease or any right, title, or interest therein, to person holding acertificate of approval on payment of fee of Rs.100 to the StateGovernment.”

(Emphasis supplied)

22. It is clear that the provision, as obtained prior to 1960, whenthe Rules were made, was different.

23. In the aforesaid case, the question came to be decided in aReference under Section 66 of the Income Tax Act, 1922. One of thequestions which fell for decision was the effect of there being no previoussanction of the Government under Rule 37 for the transfer of lease. Wemay notice that the Court in Sree Ramakrishna Mining Company(supra),inter alia, held as follows:

“The 37th Rule, as can be seen from its language does not concernitself with the formation of partnership such as the one beforeus, and, its principal purpose is to provide for the transfer of alease granted under the provisions of the Rules. It is in the natureof an enabling provision which authorises transfer by the lesseeto person who has certificate of approval, and, directs thatsuch transfer could be made with the previous sanction of theGovernment subject to the other conditions with which we arenot concerned. There is distinction between statutory provisionwhich contains an express prohibition against the performance ofa certain act and one which enables its performance subject toprescribed conditions. While in the former case, there will be nodifficulty in coming to the conclusion if nothing else could be saidabout it that the absolute prohibition against the performance ofthe act is what is forbidden by law, the same could not be said ifthe matter falls within the second category. Now the 37th ruledoes not, in express terms, forbid transfer but authorises atransfer with the previous sanction of the Government and subjectto other conditions.”

24. The provisions of Rule 37, which would control destiny ofthis case, is, as it was obtained in the year 2009. Also could it not becontended that decisions rendered under the Stamp Act may not berelevant to understood the scope of Rule (37) of the Rules. No doubt,there is case for the appellant that on number of reconstitutions tookplace in regard to the firm-AMC, and on no occasion, was an issuerelating to infraction of Rule 37, raised. All that the appellant did was, heacted in accordance with the practice obtaining in the Department. Thereis the case for the appellant that in this regard, Rule 37, as such, was notpointedly invoked by either the Additional Director or the SDA.

A25. It is here that again it becomes necessary that we remindourselves of the contours of the jurisdiction under Section 227 of theCr.PC. The principle established is to take the materials produced by theprosecution, both in the form of oral statements and also documentarymaterial, and act upon it without it been subjected to questioning throughcross-examination and everything assumed in favour of the prosecution,Bif scenario emerges where no offence, as alleged, is made out againstthe accused, it, undoubtedly, would enure to the benefit of the accusedwarranting the Trial Court to discharge the accused.

26. It is not open to the accused to rely on material by way ofdefence and persuade the court to discharge him.C

27. However, what is the meaning of the expression “materialson the basis of which grave suspicion is aroused in the mind of thecourt’s”, which is not explained away? Can the accused explain awaythe material only with reference to the materials produced by theprosecution? Can the accused rely upon material which he chooses toDproduce at the stage?

28. In view of the decisions of this Court that the accused canonly rely on the materials which are produced by the prosecution, it mustbe understood that the grave suspicion, if it is established on the materials,should be explained away only in terms of the materials made availableEby the prosecution. No doubt, the accused may appeal to the broadprobabilities to the case to persuade the court to discharge him.

29. In this case, as already noticed, going by the statements madeby the subordinates working in the Office of the appellant, on receipt ofthe letter from the erstwhile partners of AMC dated 26.12.2009, two ofFhis subordinates, including the Additional Director, did recommend thatthe matter requires legal opinion. The noting, which is undisputed inthis case, made by the appellant, would appear to suggest that he hadspoken to the Deputy Director (Legal). The prosecution case largelydepends upon the statement of the Deputy Director (Legal) who takes aGdefinite stand that no opinion was sought from him. matter, under Rule37 of the Rules, therefore, according to the prosecution case, whichought to have gone to the State Government for prior sanction, came tobe dealt with by the appellant as Director of Mines. This led to the issueof MDPs. It is, no doubt, true that there may not be any other material tolink the appellant with various other acts and omissions which have been

alleged against the first accused in particular along with the fifth accusedand other accused. However, the fact remains, if the defence of theappellant is not to be looked into, which included the practice obtaining inthe past whenever the firm was reconstituted, and also the version ofthe 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 ifthe Deputy Director (Legal) was questioned in his presence, they wouldappear to be matter which may not be available to the appellant to pressbefore the court considering the application under Section 227 of theCr.PC.

30. This being the outcome of our discussion, the inevitableconsequence is that we are not persuaded to hold that the High Courtwas in error in the view it has taken. Consequently, the appeal fails andit stands dismissed. We, however, make it clear that the observationsmade by us are for the purpose of deciding the application under Section227 of the Cr.PC. and they are not to trammel the Court.

Ankit Gyan

Appeal dismissed.