Gujarat High Court
Central Bureau Of Investigation ... vs U.N.Pai on 27 October, 2023
Bench: Sandeep N. Bhatt
NEUTRAL CITATION
R/SCR.A/5275/2021 JUDGMENT DATED: 27/10/2023
undefined
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CRIMINAL APPLICATION (QUASHING) NO. 5275 of 2021
With
R/SPECIAL CRIMINAL APPLICATION NO. 5276 of 2021
With
R/SPECIAL CRIMINAL APPLICATION NO. 5277 of 2021
With
R/SPECIAL CRIMINAL APPLICATION NO. 5278 of 2021
With
R/SPECIAL CRIMINAL APPLICATION NO. 5279 of 2021
With
R/SPECIAL CRIMINAL APPLICATION NO. 5280 of 2021
With
R/SPECIAL CRIMINAL APPLICATION NO. 5281 of 2021
With
R/SPECIAL CRIMINAL APPLICATION NO. 5282 of 2021
With
R/SPECIAL CRIMINAL APPLICATION NO. 5283 of 2021
With
R/SPECIAL CRIMINAL APPLICATION NO. 5284 of 2021
With
R/SPECIAL CRIMINAL APPLICATION NO. 5285 of 2021
With
R/SPECIAL CRIMINAL APPLICATION NO. 5286 of 2021
With
R/SPECIAL CRIMINAL APPLICATION NO. 5287 of 2021
With
R/SPECIAL CRIMINAL APPLICATION NO. 5288 of 2021
With
R/SPECIAL CRIMINAL APPLICATION NO. 5289 of 2021
With
R/SPECIAL CRIMINAL APPLICATION NO. 5290 of 2021
With
R/SPECIAL CRIMINAL APPLICATION NO. 5292 of 2021
With
R/SPECIAL CRIMINAL APPLICATION NO. 5293 of 2021
With
R/SPECIAL CRIMINAL APPLICATION NO. 5294 of 2021
With
R/SPECIAL CRIMINAL APPLICATION NO. 5295 of 2021
With
R/SPECIAL CRIMINAL APPLICATION NO. 5296 of 2021
With
R/SPECIAL CRIMINAL APPLICATION NO. 5297 of 2021
With
Page 1 of 93
Downloaded on : Wed Nov 01 20:37:35 IST 2023
NEUTRAL CITATION
R/SCR.A/5275/2021 JUDGMENT DATED: 27/10/2023
undefined
R/SPECIAL CRIMINAL APPLICATION NO. 5298 of 2021
With
R/SPECIAL CRIMINAL APPLICATION NO. 5299 of 2021
With
R/SPECIAL CRIMINAL APPLICATION NO. 5301 of 2021
With
R/SPECIAL CRIMINAL APPLICATION NO. 5303 of 2021
With
R/SPECIAL CRIMINAL APPLICATION NO. 5305 of 2021
With
R/SPECIAL CRIMINAL APPLICATION NO. 5306 of 2021
With
R/SPECIAL CRIMINAL APPLICATION NO. 5307 of 2021
With
R/SPECIAL CRIMINAL APPLICATION NO. 5308 of 2021
With
R/SPECIAL CRIMINAL APPLICATION NO. 5309 of 2021
With
R/SPECIAL CRIMINAL APPLICATION NO. 5310 of 2021
With
R/SPECIAL CRIMINAL APPLICATION NO. 5311 of 2021
With
R/SPECIAL CRIMINAL APPLICATION NO. 5313 of 2021
With
R/SPECIAL CRIMINAL APPLICATION NO. 5342 of 2021
With
R/SPECIAL CRIMINAL APPLICATION NO. 5346 of 2021
With
R/SPECIAL CRIMINAL APPLICATION NO. 5964 of 2021
With
R/SPECIAL CRIMINAL APPLICATION NO. 5965 of 2021
With
R/SPECIAL CRIMINAL APPLICATION NO. 5966 of 2021
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR. JUSTICE SANDEEP N. BHATT
==========================================================
1 Whether Reporters of Local Papers may be allowed Yes
to see the judgment ?
2 To be referred to the Reporter or not ? Yes
3 Whether their Lordships wish to see the fair copy No
of the judgment ?
Page 2 of 93
Downloaded on : Wed Nov 01 20:37:35 IST 2023
NEUTRAL CITATION
R/SCR.A/5275/2021 JUDGMENT DATED: 27/10/2023
undefined
4 Whether this case involves a substantial question No
of law as to the interpretation of the Constitution
of India or any order made thereunder ?
==========================================================
CENTRAL BUREAU OF INVESTIGATION THRO NARENDRA KUMAR
VERMA S/O. KUSHAL SINGH
Versus
U.N.PAI
==========================================================
Appearance:
MR RC KODEKAR(1395) for the Applicant(s) No. 1
MR NANDISH Y CHUDGAR(2011) for the Respondent(s) No. 1
MS. M.H.BHATT, APP for the Respondent(s) No. 2 IN ALL THE CAPTIONED
PETITIONS
==========================================================
CORAM:HONOURABLE MR. JUSTICE SANDEEP N. BHATT
Date : 27/10/2023
COMMON ORAL JUDGMENT
1. The applicant - Central Bureau of Investigation,
under Section 482 of the Code of
Criminal Procedure, 1973 as well as under
Articles 226/227 of the Constitution of
India, has challenged in these group of Special
Criminal Applications the orders dated
06.10.2020 passed by the learned Special CBI
Court No.2, Ahmedabad in Criminal Revision
Application No.40 of 2019 and 35 allied matters as
well as the orders dated 29.03.2019 passed by the Ld.
Special CBI Court No.2, Ahmedabad in Criminal
Revision Application No. 3 of 2018 and 2 allied
matters (arising out of CBI Special Case RC No.
NEUTRAL CITATION
R/SCR.A/5275/2021 JUDGMENT DATED: 27/10/2023
undefined
12(A)-2000-GNR registered on 23.05.2000) which is
arising out of RC No.0292000A0012,
registered on 23.05.2000, for the offences punishable
under Sections 420, 467, 468, 471 and 120B of the
Indian Penal Code And Section 13(2) read with Section
13(1)(d) ofthe Prevention of Corruption Act, 1988
(for short 'P.C. Act').
2. The allegation against the officials of four
public sector oil companies viz. IOCL, HPCL,
BPCL and IBP, are that they sold the
High Speed Diesel (for short 'HSD') to various
private industries of three States viz. Gujarat,
Maharastra and Madhya Pradesh at
concessional rates of sales tax as per
applicable provisions of the State and
Central Sales Tax Acts, without complying
with the mandatory requisite permission from
the Ministry of Petroleum & Natural Gas (for
short 'MoP & NG).
2.1 The allegations are that, the private firms in
collusion with the officials of the said oil
companies sold the HSD in the open market
contrary to the Government policy, the diversion
NEUTRAL CITATION
R/SCR.A/5275/2021 JUDGMENT DATED: 27/10/2023
undefined
thereof has caused huge revenue loss to the
Government and wrongful gain to the concerned.
2.2 The Respondent Accused had preferred a discharge
application u/s 239 of Code of Criminal Procedure
before the Judicial Magistrate First Class, Ahmedabad,
which was rejected by the JMFC, Ahmedabad on
27.05.2019. The Respondent Accused had filed a
Revision application u/s 397 of CrPC, before the
Sessions and Special Judge (CBI) Court No.2 at
Ahmedabad. By order dated 06.10.2020, the said
Revision application has been allowed by the Court
and the Respondent Accused has been discharged,
which order is impugned in this Special Criminal
Application.
3. Mr. R.C. Kodekar, learned standing counsel for
the C.B.I. submitted that the impugned order
passed by the learned Special Judge is incorrect,
illegal and not as per the provisions of law. Mr.
Kodekar submitted that at the stage of framing of
charge the court was not required to
appreciate the evidence to conclude, whether the
materials produced are sufficient or not, for
convicting the accused, and only adequacy of
NEUTRAL CITATION
R/SCR.A/5275/2021 JUDGMENT DATED: 27/10/2023
undefined
material for framing of charge is expected,
and, thus stated that the order is based on
whim and fancies, as the learned trial Court
Judge was making a roving inquiry, as if,
Court was conducting a trial, and the Court
has appraised the evidence, as if, the Court was
passing order of acquittal.
3.1 Mr. Kodekar, learned standing counsel,
submitted that the trial Court has wrongly
appreciated the statement ofP.W. - R.Ramakrishnan,
while he has clearly stated in his statement given
before C.B.I. that HSD was sold by oil companies
without physical inspection or technical inspection,
the statement reveals that, the HSD was
diverted by the private companies for their own
wrongful gain. Mr. Kodekar stated that the
statement of prosecution witnesses,
ShriK.L.N. Shastri, ED, IOC, Shri
P.Sudarshnam, ED, IOC, ShriA.K. Dubey, (IAS)
of MoP & NG, clarify the guidelines of the Ministry,
which stipulates the requirement of Technical
Evaluation Committee for sale of HSD, to such
private firms for its use as raw materials.
NEUTRAL CITATION
R/SCR.A/5275/2021 JUDGMENT DATED: 27/10/2023
undefined
3.2 Standing counsel Mr. Kodekar submitted that the
Court committed error while noting about
the issue of sanction for prosecution under
section 197 Cr.P.C., submittingthat no protection
to the employees of public sector undertaking
is provided under the said provisions. Mr.
Kodekar, states that inference of commission of offence
under section 13(1)(d) of the P.C. Act, can be
drawn with prima facie material to show
recklessness or misconduct in discharge of
duty, who have acted in the manner,
unbecoming of a government servant, and
has acted negligently by not following the
prescribed conditions.
3.3 Mr. Kodekar, further stated that enough
evidence was there against the public servants for
the offence of conspiracy, cheating and abuse of
official position, as they allowed diversion of the
restricted material to open market to avail
sales tax benefits, which has caused
wrongful loss to the government exchequer.
Mr. Kodekar stated that there is use of
fake sales tax certificates, blanks C-Forms and
there were no mandatory periodical checks/inspections
NEUTRAL CITATION
R/SCR.A/5275/2021 JUDGMENT DATED: 27/10/2023
undefined
of the private firms, where the allegation is
that most of the private firms did not run
to full capacity during the entire period
and some were almost closed and some were not
in existence at the relevant point of time;
despite that HSD was sold to them
regularly by four oil companies, and, that
could not have been possible without
criminal conspiracy and connivance between the
officers of oil companies and private persons.
3.4 Referring to the statement of witnesses, Mr.
Kodekar submitted that the MoP & NG had
issued a policy for supply of HSD to the
processing units for their use as raw
material for production of specialty oil, and HSD is
only supplied to the processing firms, subject to
actual user conditions. Mr. Kodekar stated that at
any cost, firms could not sell HSD in the open
market, and as per the existing government
policy, the HSD has to be supplied to the
processing firms only on the recommendation of the
Technical Evaluation Committee (TEC) constituted
by MoP & NG, and final allocation is by the
NEUTRAL CITATION
R/SCR.A/5275/2021 JUDGMENT DATED: 27/10/2023
undefined
Ministry.
3.5 Mr. Kodekar referring to the procedure
established for supply of HSD to the private
entities by the public sector oil companies,
submitted that the processing firm is required
to make an application along with requisite
documents for allocation of HSD quota to the
MoP & NG for actual consumption. The Ministry
thereafter on processing the application, is required
to allot quota of the HSD to the processing
firm; thus, the Ministry would sent a mandatory
approval to the oil companies for allotment of
HSD quota to the processing unit, and such
supply of HSD could not be beyond the
quantum mentioned in the allotment letter by the
Ministry. Mr. Kodekar, thus, stated that the
processing firm is supposed to first approach the
officials of the oil companies for supply of HSD
as per the quota allotted by the Ministry and
it becomes a preliminary and mandatory duty
of the officials before supply of the HSD to
the processing units to check the order for
allotment of HSD quota by the Ministry; hence,
Mr. Kodekar submitted that no supply of
NEUTRAL CITATION
R/SCR.A/5275/2021 JUDGMENT DATED: 27/10/2023
undefined
HSD could be made to the processing units,
without the order of the Ministry.
3.6 Mr. Kodekar stated that Shri A.K. Dubey, IAS &
Director (Supplies), MoP & NG, was examined by
the CBI to prove the policy of the government for
supply of HSD to the processing units, and Mr.
Sharad Gupta, Mr. H.C. Khurana, Mr. Kuldip
Singh, Mr. C.S. Mishra and Mr. K.L.N.
Shastri, and other officials of MoP & NG, have also
reiterated and reaffirmed the statement of Mr. A.K.
Dubey regarding the established procedures and
policy prescribed by the MoP & NG, and
requirement of TEC for supply of HSD to
processing units.
3.7 Mr. Kodekar, thus, stated that as per established
procedure, a Field Officer of the concerned oil
company is required to visit the factory of the
processing unit for conducting physical inspection
and also to verify the quota allotted by the
government, and after inspecting theprocessing unit
and checking the mandatory approval of
quota, the Field Officer is required to
submit verification report containing information
NEUTRAL CITATION
R/SCR.A/5275/2021 JUDGMENT DATED: 27/10/2023
undefined
regarding processing unit and the genuineness
of requirement of the HSD; thereafter, the Divisional
Office would verify the report submitted by
the field officer and in case of any doubt,
the superior officials can also conduct physical
inspection of the unit for verification of the
report submitted by the field officer. Mr. Kodekar
submitted that the officers are required to
ensure and check the approval of the Ministry
for allotment of quota of HSD to the processing
unit, and complying the mandatory formalities, the
Divisional/Regional/Territorial Office, in turn, has
to submit proposal for the supply of HSD to
processing unit, to the superior officials of the
respective oil companies and the allocation of
the HSD to the processing unit is looked
after by the marketing division consisting
of officers as Manger and Dy. General
Manager (Mktg.) headed by General Manager.
Mr. Kodekar stated that the superior
officers are required to ensure the compliance of
government mandatory policy and genuineness of
requirement of HSD to the processing unit
and subsequently, approve release of supplies; and
consequently, the Divisional/Regional/territorial Office
NEUTRAL CITATION
R/SCR.A/5275/2021 JUDGMENT DATED: 27/10/2023
undefined
has to issue delivery orders/allocation letters
of the HSD to the firms for further
lifting from the supply location. Mr. Kodekar
submitted that various senior officers of oil
companies viz. The Director (Marketing),
OICL, CGM, HPCL, GM, BPCL and EDs of IBP
Co. have been examined, who all have reiterated
and affirmed the said procedure; and, those have
been cited as a relevant witnesses, along with charge-
sheet.
3.8 Mr. Kodekar further submitted that as per
policy of MoP & NG, the processing units are
entitled to avail sales tax concession prescribed
by the State and Central Government. The
processing units can purchase the HSD on inter-state
basis on payment of Central Sales Tax
(CST) at the rate of 4%, against the
applicable rate of sales tax in the
concerned State; thereby, the processing units
are exempted to pay the differential local sales
tax and Central Sales Tax at the rate of 4%,
after getting allotted quota by the Ministry
for supply of HSD to the processing units
on actual user conditions. Mr. Kodekar stated
NEUTRAL CITATION
R/SCR.A/5275/2021 JUDGMENT DATED: 27/10/2023
undefined
that for the purchase of HSD on intrastate
basis, the processing units have to submit C-
Form to the oil companies for availing the said
concession in sales tax.
3.9 Mr. Kodekar, thus, further contended that the
evidence with regard to the policy of MoP
& NG, requirement of technical evaluation by the
TEC etc., was evaluated, and there was unanimous
opinion in respect of the criminal involvement of the
officials of the oil companies of marketing division,
private firm owners and those mediators who
had purchased the Dos/allocation letters of
HSD from the firm owners and further lifting
HSD and diverted the same in the market;
and thus, concluded that the essence of the
offence is the supply of HSD to private
parties without the mandatory permission of
the MoP & NG, and the officers, at different
levels, have failed to ensure the compliance of
the policy, and have even failed to ensure the
bonafide end-use of the HSD; and the responsibility of
the oil company can be viewed only through
the acts of its officials in making supplies of
HSD to the accused firms without observing the
NEUTRAL CITATION
R/SCR.A/5275/2021 JUDGMENT DATED: 27/10/2023
undefined
compliance of the policy. Mr. Kodekar stated
that the irregularities in issuance of HSD has
spread over several years, and the Oil Coordination
Committee (OCC) has expressed the concern over the
possibility of product being uplifted on inter-state
basis, and then being dumped at the premises of
retail outlets and customers, within the state, as
brought out in the communication from OCC;
and the need for cross-checking customers availing
CST, in order to ensure avoidance of such situations
in Gujarat, was accepted by all industry members.
3.10 Mr. Kodekar further stated that there
are evidence of various private persons under
section 164 Cr.P.C. in addition to the statement
before the C.B.I., where they have stated about
the illegal gratification paid to various
officials of oil companies for HSD in the name of
defunct and non- existing private firms, and without
assessing the requirement, physical condition and
bonafide end-use, had supplied HSD at concessional
rate of sales tax, even to non-working and non-
existing private firms. Mr. Kodekar submitted
that the officials of oil companies accepted
bogus/fake sales tax Form-C and other documents,
NEUTRAL CITATION
R/SCR.A/5275/2021 JUDGMENT DATED: 27/10/2023
undefined
such as applications of the non-existent private
firms, lorry receipt of bogus transporters, where
they have a obligatory duty to verify the genuineness
of such documents.
3.11 Mr. Kodekar submitted that the trial Court has
wrongly interpreted the circulars, which speaks about
the mandatory requirements of following the policy
guidelines. Mr. Kodekar, thus, stated that because of
acts of officials of oil companies there has been
huge revenue loss to the Government exchequer,
and there has been wrongful gain to the private
parties. Mr. Kodekar stated that the conspiracy
and the complicity of every accused in the
cases are prima facie considered by way of
statement of the witnesses, and further stated
that, the officials of oil companies have made
false representations by wrongly certifying the
existence of various firms, which were only on
paper, where no activities were undertaken during
the relevant period, and evidence on record shows
that the officials of oil companies have created
bogus documents in the form of delivery
orders for HSD in the name of such non-existing
firms.
NEUTRAL CITATION
R/SCR.A/5275/2021 JUDGMENT DATED: 27/10/2023
undefined
3.12 Mr. Kodekar further submitted that in spite of
ample evidence in the initial cases sent to the
four oil companies for granting sanction for
prosecution, the same was denied by all the four
companies and a conscious decision was taken
to launch the prosecution, as the denial of
sanction would not dilute the commission of offence
on the part of officials of oil companies; and
stated that, law does not prohibit launching
prosecution against the officials under IPC offences,
where sanction has been denied and even
against the retired officials under P.C. Act;
while no protection can be granted to the officials of
government companies or public sector undertakings.
3.13 Learned standing counsel Mr. Kodekar relied
on the judgments of (i) Punjab State Warehousing
Corporation Vs. Bhushan Chander And Anr., reported in
(2016) 13 SCC 44 (ii) Mohd. Hadi Raja Vs. State of
Bihar And Anr., reported in (1998) 5 SCC 91.
4. Mr. Yogesh Lakhani, Ld. Senior Advocate with Ld.
Advocate Mr. Nandish Chudgar has submitted
that OCC was connected with the MoP &
NEUTRAL CITATION
R/SCR.A/5275/2021 JUDGMENT DATED: 27/10/2023
undefined
NG, in need of implementation of the
guidelines, and submitted, that the Circular
dated 02.01.1981 by the MoP & NG was
addressed only to IOCL for utilization of
HSD by Koyali Refinery for production of high
value specialization items. He has submitted
that after about 7 years by a Circular dated
17.03.1988 of MoP & NG, in context with the
Circular dated 02.01.1981 to IOCL, it was
informed to all the companies regarding
reconstitution of TEC on supply of feed-stock for
the production of petroleum specialties. According
to the said Circular, the TEC was to initially
look into the supply of LSHF-HSD, LDO, and
crude sludge for the manufacture of petroleum
specialties with further direction that additional
items would be assigned to the TEC as
necessary, from time to time.
4.1 Further referring to the Circular dated
09.02.1994 of the MoP & NG, he has submitted
that the constitution of the TEC was in
supersession of the Circular dated 17.03.1988,
whereby too, the committee was reconstituted,
whence TEC was entrusted to look into the
NEUTRAL CITATION
R/SCR.A/5275/2021 JUDGMENT DATED: 27/10/2023
undefined
supply of LSHF- HSD, LDO and crude sludge
for the manufacture of petroleum specialties.
Thereafter, in supersession of the said Circular dated
09.02.1994, Circular dated 23.05.1995 was
issued by the Ministry to all the companies about
the reconstitution of the TEC. He has
submitted that TEC functioning was with respect to
High Flash HSD, LDO Crude Sludge and feed-
stocks to produce solvents in small and
medium scale industries and make recommendations
to the Ministry for decision. He has stated
that this Circular too, did not include
HSD. Thereafter, the Circular dated
18.09.1996 was issued by the MoP & NG, which
was in partial modification of Para-2 of the
Circular dated 23.05.1995, and it was decided
that the applications for grant of raw
material as crude sludge, High Flash-HSD
and LDO to produce solvents in small and
medium scale industries will be received by the
oil companies and referred to TEC for inspection
of the applicant's plant to assess
technical capability and statutory compliance etc.
He has stated that this Circular too, did not
include HSD, and with further clarification, it
NEUTRAL CITATION
R/SCR.A/5275/2021 JUDGMENT DATED: 27/10/2023
undefined
was noted that TEC would send their
inspection reports to the concerned oil companies
with a copy to Adviser (R) to the Ministry
for recommendations, if any, and the
concerned oil company would await the
recommendations of Adviser (R) to the
Ministry upto two weeks from the receipt of
the recommendation of the TEC, and the
oil companies may implement the
recommendations of the TEC in case objection, if
any, by Adviser (R) is not received by TEC/oil
companies within two weeks. He has, thus,
contended that this circular had made very
clear that the inspection of TEC could not be
in connection to HSD. He has stated that
C.B.I. has not recorded the statement of
Adviser (R) of the Ministry to get the
clarification of the Circular.
4.2 He has further submitted that by letter dated
27.03.2002 by the Government of India, MoP & NG,
the TEC, which was constituted under the
Circular dated 23.05.1995 and 18.09.1996, came
to be dissolved with effect from 01.04.2002, and
on dissolution of TEC by the said letter,
NEUTRAL CITATION
R/SCR.A/5275/2021 JUDGMENT DATED: 27/10/2023
undefined
he has submitted that, all the companies were
given liberty to make their own judgments about
allocation of crude sludge, high Flash-HSD and LDO
from the said date to put conditions to the best
of their commercial prudence and business
requirements.
4.3 He has, thus, submitted that the very case
against all the accused are baseless since there
was no reference to the requirement of TEC
for the supply of HSD to processing units, nor
there was any necessity of any recommendation
of TEC for supply of HSD to the processing units.
4.4 Referring to the guidelines, Mr. Lakhani has
submitted that, for release of petroleum products
and lubricants to direct consumers submitted
that, OCC on July, 1991, had prepared a Manual
complied by the member of oil industries as
an aid to the field staff, in advising new
as well as existing customers about the
modalities for obtaining supplies of Petroleum
Products and lubricants directly from the oil
companies, and it was made to understand
that the users of the Manual were
NEUTRAL CITATION
R/SCR.A/5275/2021 JUDGMENT DATED: 27/10/2023
undefined
required to read guidelines in conjunction with
the applicable Demand Management Guidelines as
advised by the Department of P&NG from time
to time. He has submitted that the
Standing Committee was constituted to
ensure that the guidelines contained in the
Manual are constantly reviewed and updated;
thus, stated that till date no modification
has been made in the Manual. He has
further stated that the very Manual makes difference
between major products and other products, and
submits that LSHF HSD finds mention
under the heading "Other Products", while
HSD is forming part of Major Products.
4.5 He has further stated that the letter dated
02.12.2000 was issued by A.K. Dubey, Director
to Government of India, MoP & NG confirming
the understanding of the Ministry with reference
to TEC evaluation for supply of HSD to
processors, addressed to Chairman of all four
Oil Companies, and the circular dated 02.01.1981
was issued prescribing for utilization of HSD from
Koyali Refinery only, which was for production
of high value speciality items for the
NEUTRAL CITATION
R/SCR.A/5275/2021 JUDGMENT DATED: 27/10/2023
undefined
processors, and the very letter dated 02.01.1981
was confined only to HSD from Koyali Refinery,
where, as per Circular dated 02.01.1981, initial
quantity of 500 tones of HSD was given to
the processors for providing the know-how and
facilities developed by them and the TEC set-up for
the purpose, and the said circular further
stipulates about confirmation to be obtained by the
IOCL before release of HSD to the processors. He
has submitted that the circular dated 02.12.2000
clarifies that during the period of 1981 to 1988,
Low Sulphur High Flash-HSD produced at Koyali
Refinery from Ankleshwar crude was being supplied to
processors, manufacturing high value specialities for
Defence (Navy), and it was found that during that
period, as per information available, normal HSD was
not being supplied to processors from Koyali Refinery.
He has thus submitted that the Circular dated
02.01.1981 was restricted only to Koyali Refinery.
Further pursuing the said Circular, He has
submitted that Mr. A.K. Dubey, Director to
the Government of India, had referred to all the
Circulars and had concluded that the circulars
indicated, were applicable to the TEC for LSHF-HSD,
HF-HSD, LDO and Crude Sludge; and, thus submitted
NEUTRAL CITATION
R/SCR.A/5275/2021 JUDGMENT DATED: 27/10/2023
undefined
that this very circular, which reads all the earlier
circulars has concluded that the procedure to be
adopted for an approval from TEC was not in
connection with HSD, and the letter of A.K.
Dubey, Director, Government of India, clearly
proves that C.B.I. has filed the case against all
the accused on a wrong assumption, which does not
have its base on the circulars issued by the MoP
& NG.
4.6 He has submitted that after the
year 1996, there has been no other
guidelines by the Government of India, and
the allegations are pertaining to the year 1997-2000;
the TEC stood dissolved vide effect from
01.04.2002, vide letter dated 27.03.2002, of the
Ministry. He has submitted that HSD was
never a part of the guidelines and the government
guidelines changed time to time, but there
was no change in the Manual of the OCC.
4.7 He refers to the statement dated
31.10.2000 of Sales Tax Officer, Dilip Dixit
and the questionnaires put to Mr. A.K.
Dubey to state that no case has been made
NEUTRAL CITATION
R/SCR.A/5275/2021 JUDGMENT DATED: 27/10/2023
undefined
out against any of the accused, and submitted
that statement recorded by the C.B.I. of A.K. Dubey
is in contrast to the questionnaires. He is referring to
the statement of Sales Tax Officer stated that,
on question regarding the tax applicability on
HSD, he had clarified that there was no
tax liability under the provisions of Bombay Sales
Tax and HSD was tax free under the said
Act, while HSD is a taxable commodity under
the Bombay Sales of Motor Spirit
Taxation Act, 1958 & Rules. He has
stated that sales tax officer in his
statement has further clarified that private
firms purchasing HSD either within the state
or from outside state were supposed to file
Sales Tax Returns showing their total
purchase separately from within the state
and outside the state, and the oil companies
furnish the details of sale of HSD sold
from within the state. He has stated that
the Officer has also given the statement about the
process of issuance of C-Forms, and the officer
has clarified that it is the primary
responsibility of the sales tax officer to
ensure that C-Form is for genuine use and the
NEUTRAL CITATION
R/SCR.A/5275/2021 JUDGMENT DATED: 27/10/2023
undefined
product was utilized for declared purpose only,
and has also stated that there are no check-
post in the State of Maharashtra, and no
license are issued to private
firms/processors/consumers purchasing HSD, while
such license was issued to only petrol pump
and crude oil company. For non-issuance of
Motor Spirit License to the private firms, the
officer has clarified that there is no concession
facility in the sales tax under the Act, and
no liability to pay to the Government of
Maharashtra and so private firms are not issued
license.
4.8 Referring to the case, Sr. Advocate
Mr. Lakhani stated that no sanction has been
granted for prosecution, and Central Vigilance
Commission (for short 'C.V.C.') too has confirmed the
non-issuance of sanction against the officers of
the oil company, and, thus submitted that no
charge can be framed against the accused, and
the learned trial Court Judge has rightly
discharged all of them.
5. Ld. Sr. Advocate Mr. Yogesh Lakhani has stated
NEUTRAL CITATION
R/SCR.A/5275/2021 JUDGMENT DATED: 27/10/2023
undefined
that the submission of the charge-sheet is
baseless. It has been filed without even looking
to the papers, overlooking the circulars, letters and
documents of the Central Government, and the charge
is totally under misconception and non-
applicability of the mind by the C.B.I. He has
submitted that filing of charge-sheet had very
large repercussion in the business of company,
as well as in the lives of the officers of the
Company, who suffered social stigma and
arrest, and few of them were suspended and some
are still under suspension; nothing prima facie is
remotely suggested, the only circular in
connection with HSD is with Koyali Refinery.
He has submitted that C.B.I. Officers have
failed to even understand that HSD is
separate and different product, which could be
easily understood by simple reading of the circulars.
5.1 Making reference to the definition under the
Petroleum Act, 1934, Ld. Sr. Advocate Mr. Yogesh
Lakhani stated that, there is a classification of the
petroleum, and, the flash-point denigrates the class,
HSD falls under section 2(bb) of the Petroleum
Act for petroleum Class 'B', which means
NEUTRAL CITATION
R/SCR.A/5275/2021 JUDGMENT DATED: 27/10/2023
undefined
petroleum having a flash-point of twenty-three
degrees centigrade and above but below sixty-five
degrees centigrade, and, thus stated that under
the Act itself different flash- points classify
the product. , Ld. Sr. Advocate Mr. Yogesh Lakhani
stated that sections 7 of the Petroleum Act
clarifies that no license is needed for transport
and storage for limited quantity of petroleum
class B or petroleum Class C, and no license is
needed for import, transport or storage of small
quantities of petroleum Class A.
6. Ld. Sr. Advocate Mr. Yogesh Lakhani submitted
HPCL and BPCL have not been made accused while
Koyali Refinery is connected to IOCL. He stated
that as per the marketing supply, it was none of
the function of the Company to verify as to
where the private tankers goes and gives the
products to whom. Ld. Sr. Advocate Mr. Yogesh
Lakhani stated that few of the accused have
been discharged and C.B.I. has not
challenged the orders, where the charge-sheets have
been originated from single F.I.R., and after
the officer being discharged, any challenge for
subsequent order would survive under the
NEUTRAL CITATION
R/SCR.A/5275/2021 JUDGMENT DATED: 27/10/2023
undefined
principle of issue of estoppel.
6.1 Ld. Sr. Advocate Mr. Yogesh Lakhani s t a t e d that
where there are no check-posts, there was no
machinery to verify as to whether the product
was sold in other states and there are
no evidence that the tankers do not come
to Gujarat, and submits that C-Forms are given
by the sales tax authorities. There has been
inordinate delay in filing of the charge-sheet,
and partial discharge on the same F.I.R. for
few of the officers whose orders have not been
challenged by the C.B.I. , Ld. Sr. Advocate Mr.
Yogesh Lakhani stated that there is no case of
forgery of any documents, and, any decision taken
by the officers would be in the course of the
duty, which would be in accordance to the
circulars of the Ministry, and when HPCL and
BPCL are not made accused, , Ld. Sr. Advocate
Mr. Yogesh Lakhani raised an issue as to how
employees could be prosecuted under the
Essential Commodities Act.
7. Ld. Sr. Advocate Mr. Yogesh Lakhani appearing
with Advocate Mr. Nandish Chudgar r e l i e d on the
NEUTRAL CITATION
R/SCR.A/5275/2021 JUDGMENT DATED: 27/10/2023
undefined
following judgments in support of their arguments:
(i) T.P. Gopallakrishnan Vs. State of Kerala, reported
in 2022 SCC Online SC 1768;
(ii) Masud Khan Vs. State of Uttar Pradesh, reported
in (1974) 3 SCC 469;
(iii) Captain Shankarrao Mohite Vs. Burjor D.
Engineer, reported in (AIR) 1962 Bom. 198;
(iv) Sheila Sebestian Vs. R.Jawaharaj And Anr.,
reported in (2018) 7 SCC 581;
(v) Mohammed Ibrahim And Others Vs. State of Bihar
And Anr., reported in (2009) 8 SCC 751;
(vi) Maksud Saiyed Vs. State of Gujarat And ors.,
reported in (2008) 5 SCC 668;
(vii) Suryalakshmi Cotton Mills Ltd. Vs. Rajvir
Industries Ltd. And Ors., reported in (2008) 13 SCC 678;
(viii) Chittaranjan Das Vs. State of Orissa, reported in
(2011) 7 SCC 167;
NEUTRAL CITATION
R/SCR.A/5275/2021 JUDGMENT DATED: 27/10/2023
undefined
(ix) Aneeta Hada Vs. Godfather Travels And Tours
Pvt. Ltd., reported in (2012) 5 SCC 661;
(x) Sushil Sethi And Another Vs. State of Arunachal
Pradesh And Others, reported in (2020) 3 SCC 240;
(xi) D.L. Rangotha Vs. State of Madhya Pradesh,
reported in (2015) 12 SCC 733;
(xii) Judgment of Lucknow Bench of
Allahabad High Court in case of S.M. Dutta And
Ors. Vs. State of Uttar Pradesh And Anr., reported in
2012 SCC Online All 838;
(xiii) S.M. Dutta And Ors. Vs. State of Uttar Pradesh
And Anr., rendered in Special Leave to Appeal (Crl.)
No.7085/2012;
(xiv) Vakil Prasad Singh Vs. State of Bihar, reported in
(2009) 3 SCC 355;
(xv) Union of India Vs. Prafulla Kumar Samal, reported
in (1979) 3 SCC 4;
NEUTRAL CITATION
R/SCR.A/5275/2021 JUDGMENT DATED: 27/10/2023
undefined
(xvi) Century Spinning And Manufacturing C. Ltd. And
Ors. Vs. State of Maharashtra, reported in (1972) 3
SCC 282;
(xvii) Sanjaysinh Ramrao Chavan Vs. Dattatray Gulabrao
Phalke And Ors., reported in (2015) 3 SCC 123;
8. In reply to the arguments, Mr. Kodekar, learned
standing counsel for the C.B.I. submitted that
the authority is with the department of
Ministry. The OCC on 08.07.1991 had laid
down the guidelines for the release of petroleum
products and lubricants to the direct consumer and
such guidelines has remained in force. Mr. Kodekar
stated that meeting was held on 27.05.2000 of
all the secretaries to discuss about the issues,
where all the companies had raised the
grievance about the raid conducted in their
Company, and submitted that in the meeting oil
marketing companies were required to confirm
whether they had released or were releasing HSD
to processors of which the approval had not
been taken from MoP & NG, and it has been
reaffirmed that the supply would be only after
approval; and submitted that, the statement of
NEUTRAL CITATION
R/SCR.A/5275/2021 JUDGMENT DATED: 27/10/2023
undefined
R.Ramakrishnan clarifies that circulars were
for all the oil companies.
9. The C.B.I. registered the case on the basis
of source information against unknown officials of
four oil companies being IOCL, BPCL, HPCL
and IBP, unknown officials of sales tax
department and 13 private units of Gujarat.
It was alleged in the FIR that unknown
officials of the said Oil companies, unknown
officials of Sales Tax Department and the owner of
the private units of Gujarat in criminal conspiracy
with each other and by abusing their official
position caused huge revenue loss to the Government
exchequer. The officials of the oil companies sold
High Speed Diesel (HSD) to various private
industries of Gujarat as well as of Gujarat,
which were either non-existent or non- functional.
The HSD was sold to these units at
a concessional rate of sales tax as per provisions
of State and Central Sales Tax Act.
9.1 The allegation is that during the period of 1997
to 2000, the eligible private industries could lift HSD
from oil companies for their industrial use as
NEUTRAL CITATION
R/SCR.A/5275/2021 JUDGMENT DATED: 27/10/2023
undefined
raw material and for captive power generation.
The private companies were required to justify
their requirements of HSD to the oil companies
as well as sales Tax Department to avail the
concession in rate of sales tax. As per the
case of C.B.I., the HSD so sold could only be used
as raw material in the manufacture of taxable
goods under the Gujarat Sales Tax Act
and could not be used for any other
purpose like processing material, consumable
stores etc. While it was alleged that the
HSD sold in the name of private companies
were diverted in open market instead of using
it for their declared use. It was alleged
that HSD was sold in the market above
the higher rate and because of the diversion,
there has been huge revenue loss in the form
of evasion of sale tax.
9.2 The C.B.I. has placed the case stating that,
during the course of investigation commission of
similar offences by 11 more units of
Gujarat, 23 units of Madhya Pradesh and
11 units of Maharashtra came to light and searches
were conducted at the office of four oil
NEUTRAL CITATION
R/SCR.A/5275/2021 JUDGMENT DATED: 27/10/2023
undefined
companies, sales tax offices and premises of the
private industrial units. It has been contended by
the C.B.I. that investigation revealed that
HSD is an essential commodity under the
Essential Commodity Act; its supply and
distribution is controlled by the orders issued
by MoP & NG under section 3 of the Essential
Commodity Act.
9.3 The case of the C.B.I. is that, there was
a laid down policy of the MoP&NG for making
supply of petroleum products to the industrial
units; the policy was to be complied by
all the oil companies while making supplies
of HSD to private firms/processors/consumers. As per
C.B.I., the guidelines provide that the private
companies could use HSD for the purpose of
(a) Captive Power Generation or (b) using it
as a raw material and may be allotted the
required quota of HSD against concessional rates of
sales tax; if the private company was to use
HSD as raw material, necessary permission of
MoP & NG was essentially required before the
quota could be issued to the firm, and,
if the private company was to use it for Captive
NEUTRAL CITATION
R/SCR.A/5275/2021 JUDGMENT DATED: 27/10/2023
undefined
Power Generation, recommendation of TEC of oil
companies and State Electricity Board was
required. C.B.I contends that as per norms
prescribed, officials of the oil companies should
monitor supplies to ensure proper utilization
of the HSD, so issued, to prevent abuse. The
C.B.I. has put up the case that as per procedure, the
private industries was to submit its request
applications to the oil companies along with various
essential documents such as the SSI Registration
Certificate, Explosive Licence for handling and
storage of explosive commodity, Pollution Control
Board Certificate and Sales Tax Registration
Certificate etc.; the concerned oil companies viz.
HPCL and IOCL was required to conduct proper
verification of the documents submitted by the
firm and physical verification of the site of the
factory; thereafter the application was to be
forwarded along with documents to TEC for
technical assessment of the requirement of HSD in
capacity of plant.
9.4 As per the prosecution case, if the HSD
was used as a raw material, then
necessary permission of the MoP&NG was
NEUTRAL CITATION
R/SCR.A/5275/2021 JUDGMENT DATED: 27/10/2023
undefined
required before the quota could be issued
and if the same was issued for captive power
generation, recommendation of the TEC of oil
companies and State Electricity Board was required.
10. From record it appears that C.B.I. had registered
the case in the year 2000 for the offences allegedly
committed from 1997 to 2000, and after 10
years, the Charge-sheet was filed in different cases
based upon only one F.I.R. The learned Judge while
observing the prosecution case has noted that it
is against some unknown officers of the oil
companies, sales tax department and owners
of private units, alleged to have hatched conspiracy,
abusing official positions and having caused wrongful
loss to the government exchequer by selling HSD to
various private industries of various states, which
were either non-existent or non-functional. The learned
Judge referring to the charge- sheet has noted
that TEC had issued various circulars for supply
of HSD and the circular dated 2/6-1-1981 applies
only to Koyali Refinery, Vadodara, and at that
time, this refinery was manufacturing LSHF-HSD
(Low Sulphur High Flash - Diesel), which was meant
for Navy. The learned Judge observed that the
NEUTRAL CITATION
R/SCR.A/5275/2021 JUDGMENT DATED: 27/10/2023
undefined
statement given to C.B.I. by R.Ramakrishnan, who
is convener of TEC, on 09.06.2000, notes that
the evaluation by TEC was only for LSHF-
HSD; Mr. Ramakrishnan had also stated that the
specification of both items LSHF-HSD and HSD
are different and this circular does not refer to
any other State or refinery other than Koyali.
The learned Judge referring to the statement of
the convener of TEC found that the circular of 1981
will not apply to HSD. All the Circulars
thereafter were applicable only for the sale of
LSHF-HSD and High Flash-HSD, LDO and Crude
sludge. The Circular of 1981 was issued only for
Koyali Refinery, Vadodara. IOCL has five other
refineries supplying HSD, and HPCL and BPCL also
has refineries supplying HSD, and that supply
not being restricted, therefore, the Circular of 1981
had become irrelevant.
11. The Circular of Ministry of Petroleum,
Chemicals and Fertilizers, dated 01.01.1981 is
addressed to M/s. Indian Oil Corporation Ltd.,
and the subject of communication was utilization of
HSD from Koyali Refinery for production
of high value speciality items, and after a
NEUTRAL CITATION
R/SCR.A/5275/2021 JUDGMENT DATED: 27/10/2023
undefined
long consideration it was decided that the
processors should be given an initial quantity of
500 tonnes of HSD for proving the know-how and
facilities developed by them and the Technical
Evaluation Committee was set-up for that
purpose. It was communicated that before
release of HSD to the processors, the
confirmations were required to be obtained by IOCL
to their satisfaction for those processing. It was
laid down that, the unit was to be
registered with the Director of Industries of
state concerned in which their unit is
located; their plant was to be completed in
all respect and could go for production
immediately on delivery of HSD; they should
possess adequate technical know-how and facilities for
the processing of HSD; all necessary laboratory
testing formalities to be maintained for strict
quality control and it was directed that HSD
supplied to them will not be used for any
other purpose except the production of specific items
for which HSD has been released and the
speciality produced would conform to the relevant
prescribed specifications. It was also informed that
they would have no objection for the periodical
NEUTRAL CITATION
R/SCR.A/5275/2021 JUDGMENT DATED: 27/10/2023
undefined
checking conducted by IOC to see that the qualities
of HSD allocated to them are actually utilized
by them for production of specific items
mentioned in the application and as borne
out by corresponding production and sales figures. It
was also specified that they would not ask
for further quantity of HSD till such time
the evaluation and reporting of the TEC is
completed and thereafter to the satisfaction of
IOCL as to the genuine utilization of HSD
released earlier. Further condition laid in the
said circular was that, six months return
of HSD released and products produced
therefrom should be obtained from the processor and
submitted to the Ministry.
12. It has been argued by Ld. Sr. Advocate Mr.
Yogesh Lakhani that TEC was entrusted with the
task of reviewing the supply of feed-stock to the
existing and new manufacturers of petroleum
specialty and the committee was required to draw
method and procedure with the assistance of
oil companies and other agencies to ensure
that the petroleum specialities are used in
bonafide manner and the TEC was required
NEUTRAL CITATION
R/SCR.A/5275/2021 JUDGMENT DATED: 27/10/2023
undefined
to look into the supply of LSHF-HSD, LDO
and crude sludge for the manufacture of
petroleum specialties. Ld. Sr. Advocate Mr. Yogesh
Lakhani submitted that vide Circular dated
17.03.1988, which has a reference of the letter
dated 02.01.1981, which was in context of Koyali
Refinery, the circular very clearly noted that
additional items would be assigned to the TEC
as necessary from time to time, thus, he has
stated that notification under the Circular dated
17.03.1988 was addressed to all the oil companies,
while circular dated 02.01.1981 was only in
respect to M/s. Indian Oil Corporation Ltd.,
when at that time the refinery was
manufacturing Low Sulphur High Flash-Diesel
(LSHF-HSD).
12.1 The Circular dated 17.03.1988 was addressed to
all the companies with subject of constitution of
Technical Evaluation Committee on supply of
feed-stock for the production of petroleum
specialities. The TEC was reconstituted with
Director (Chemicals), Bureau of Indian Standards,
New Delhi, a representative of IIP, a
representative of IOC (R & D) and a
NEUTRAL CITATION
R/SCR.A/5275/2021 JUDGMENT DATED: 27/10/2023
undefined
representative of Department of Chemicals &
Petro-chemicals, Drug Division. The term of
the Committee was for a period of two
years and the TEC was entrusted with the
task of reviewing the supply of feed-stock to
existing and new manufacturers of petroleum
specialities, which included the technical
evaluation of the manufacturing and laboratory
facilities of the manufacturer and also the
suitability of the feed-stock for theproduction of
the said specialities. The committee was
directed to draw-up methods and procedure for
its working with appropriate help/assistance from oil
companies and other concerned agencies to ensure that
the feed-stock supplies of various manufacturers of
petroleum specialities are used in bonafide manner.
The function and duties of the Committee included
physical inspection and evaluation of the plants,
laboratory and technical competency of the
manufacturers to produce the petroleum specialities;
the quality, demand and acceptability of the
petroleum speciality produced or planned to
be produced; and the setting-up of systems and
checks to ensure that the feed-stock supplies are
actually used for the purpose intended.
NEUTRAL CITATION
R/SCR.A/5275/2021 JUDGMENT DATED: 27/10/2023
undefined
12.2 The said Circular dated 17.03.1988 specifies
that TEC would initially look into the supply of
LSHF-HSD, LDO and Crude Sludge for the
manufacture of petroleum specialities; no other
items, except referred in the Circular, were
assigned to the TEC.
12.3 Again by circular dated 09.02.1994 addressed to
all oil companies, superseding the circular dated
17.03.1988, reconstituted the committee. Clause No.6
of the said Circular reads as under:
"The Technical Evaluation Committee
would initially look into the supply of
LSHF-HSD, LDO and crude sludge for the
manufacture of petroleum specialities.
Additional items would be assigned to the
Technical Evaluation Committee as
necessary from time to time."
12.4 Again by Circular dated 23.05.1995, addressed
to all the oil companies, the Technical Evaluation
Committee was reconstituted. The said circular
reads as under:
"To
NEUTRAL CITATION
R/SCR.A/5275/2021 JUDGMENT DATED: 27/10/2023
undefined
All the Oil Companies
Subject:- Re-constitution of Technical
Evaluation Committee on supply of feed
stock for the production of petroleum
specialities.
Sir,
In supersession of this
Ministry's letter of even number dated 9.2.94
on the subject noted above, I am
directed to convey the approval of the
Government to the re-constitution of the
said Committee till further orders,
comprising of the following:-
i) A representative from Indian Oil
Corporation Convenor.
ii) A representative from CHT, New
Delhi.
iii) A representative from Bureau of
Indian Standards (BIS), New Delhi.
iv) A representative from OCC, New
Delhi.
2. The scope of Technical Evaluation
Committee would be:
(a) To examine the technological
capability of the undertaking to process the
allocated feedstock.
NEUTRAL CITATION
R/SCR.A/5275/2021 JUDGMENT DATED: 27/10/2023
undefined
(b) To inspect the testing laboratory
capabilities to exvaluate the products
quality.
(c) Products quality assurance system.
(d) Adequacy of safety & pollution
control measures available in the
factory and
(e) To evaluate the suitability of the
products intended for end use
industries/consumers.
The technical committee would look
into all the industries processing
High flash HSD, LDO, Crude Sludge
and feedstocks to produce solvents in small
& medium scale industries and make
recommendations to this Ministry for
decision."
12.5 The Circular dated 17.03.1988 referred to
LSHF- HSD, was again reiterated by Circular
dated 09.02.1994; in the Circular dated
23.05.1995, Technical Evaluation Committee was
directed to look into the industries processing
High flash HSD, and in partial modification
of the letter dated 23.05.1995, by a Circular
dated 18.09.1996 to oil companies with respect
NEUTRAL CITATION
R/SCR.A/5275/2021 JUDGMENT DATED: 27/10/2023
undefined
to the subject of reconstitution of TEC on
supply of feed-stock for the production of petroleum
specialities, it was decided that the applications
for grant of raw material as Crude Sludge, High
Flash-HSD and LDO to produce solvents in
small and medium scale industries would be
received by the oil companies and referred to
TEC for inspection of the applicant's plant
to assess technical capability and statutory
compliance etc. The said Circular further
referred that, the TEC would send their
inspection reports to the concerned oil
companies with a copy to Adviser (R) in the
Ministry for recommendations, if any, and the
concerned oil company would await the
recommendations of Adviser (R) of the Ministry
upto two weeks from the receipt of the
recommendations of the TEC; and the oil
companies may implement the recommendations of
the TEC, in case objection, if any, by Adviser (R)
is not received by TEC/oil companies within two
weeks.
12.6 By circular dated 27.03.2002, the Government of
India, Ministry of Petroleum & Natural Gas,
NEUTRAL CITATION
R/SCR.A/5275/2021 JUDGMENT DATED: 27/10/2023
undefined
as reflected in the Circular dated 18.09.1996,
the oil companies were informed about the
dissolution of Technical Evaluation Committee, and
it was communicated that the matter was
reviewed by the Ministry and after dismantling
of the APM from 01.04.2002, the price of
diesel also would be decontrolled, and, thus it
was noted that under such circumstances, the
specific objective and role of the Technical Evaluation
Committee has lost its purpose and relevance,
and the Technical Evaluation Committee therefore
stood dissolved w.e.f. 01.04.2002. The said circular,
thereafter further in the said communication
gave liberty to all the oil companies to make
their own judgments about allocation of crude
sludge, high flash-HSD and LDO from the said
date and to put conditions, to the best of
their commercial prudence and business
requirements.
13. The charge-sheet had been filed for the
period between 1997 to 2000, alleging that private
industries would lift HSD from oil companies for
the industrial use as raw material and for captive
power generation, and no necessary permission of the
NEUTRAL CITATION
R/SCR.A/5275/2021 JUDGMENT DATED: 27/10/2023
undefined
MoP & NG was obtained nor any recommendation
of TEC, oil companies and State Electricity Board
was taken.
14. The guidelines for release of
petroleum product and lubricants to direct
customers was issued on 08.07.1991 by Oil
Coordination Committee. The Manual was
complied by the members of the oil
industries as an aid to the field staff in
advising new as well as existing customers
about the modalities for obtaining supplies to
petroleum products and lubricants directly from the
oil companies. The guidelines stated in the
Manual pertained to the situation prior to the
introduction of Demand Management dated 21.06.1990;
with further clarification that the Demand
Management Guidelines had not been incorporated as
they would change from time to time
depending upon product availability, and
therefore it was clarified that users of the said
Manual would therefore ensure that these
guidelines were read in conjunction with
the then applicable Demand Management
Guidelines, as advised by the Deptt. of P & NG
NEUTRAL CITATION
R/SCR.A/5275/2021 JUDGMENT DATED: 27/10/2023
undefined
from time to time; and to ensure that the
guidelines contained in the Manual were
constantly reviewed and updated. The Manual refers
to the Standing Committee constituted with the
members as Director (MC&ES), OCC, Chief
Consumer Manager, IOC, Chief Consumer Sales
Manager, BPC, Chief Sales Manager (I&G), HPC
and Asstt. General Manager (Mktd.), IBP.
14.1 The said Committee was required to review the
validity of the guidelines once every year or
earlier, if required, and ensure that changes
were incorporated. It has been stated that since
then, there has been no change in the guidelines nor
any review was made.
14.2 The said guidelines refer to the major
products and other products, where the Major
Products are LPG, MS, Naphtha/NGL, ATF (JET A
1), SKO, HSD, LDO, FO/LSHS, Lubes, Greases,
Specialities, Bitumen. While the Other
Products are as Aviation Gasoline 100 LL,
ATF K 60, Aviation Lubricants & Greases,
Aromex, Benzene, Carbon Black Feedstock,
Calcine Petroleum Coke, Food Grade Hexane,
NEUTRAL CITATION
R/SCR.A/5275/2021 JUDGMENT DATED: 27/10/2023
undefined
Iomex, JBO, JP 5, LABFS, LSHF HSD, Mineral
Turpentine Oil, N Paraffin, Paraffin WAX, PP
Feedstock, Raw Petroleum Coke, Slack WAX,
Special Boiling Point Spirit, Toluene, Wash Oil,
Water Methanol Mixture/45/55/0.
14.3 The HSD is put under the heading of Major
Products, while LSHF HSD is under the heading of
Other Products. Here, it requires specific
mention that on 05.05.2000, Executive Directors
(Sales) of Indian Oil Corporation Limited wrote
a letter to the Additional Secretary to Govt.
of India, MoP & NG, New Delhi, under
the reference of subject, 'Release of Petroleum
Products' referring to the meeting held at Delhi
on 29.04.2000, wherein it has been written that
as required, the industry paper on the
procedure being adopted for release of various
products, was sent to the Ministry, and
accordingly for the regulated product HSD,
the procedure adopted was referred to vide
effect from 01.04.1998, the price of the
deregulated product was fixed by the oil
industries, while the price of the regulated
product was fixed by MoP & NG. HSD
NEUTRAL CITATION
R/SCR.A/5275/2021 JUDGMENT DATED: 27/10/2023
undefined
being regulated product was noted, as under:
"HSD:- HSD is primarily a transport fuel
used by Defence, Railway, State Transport
Undertakings, goods carrying vehicles,
earth moving equipment, DG sets, start-up
fuel for boilers, etc. HSD is also
processed by distillation for producing
different boiling ranges which are used for
manufacturing speciality products such as
spray oil, white oil, industrial
solvents, etc.
The customer approaches the Oil Industry
for release by placing an indent for
supplies. The Oil Industry verifies the
approval of Explosive Deptt. for storage of
product. Also if the supplies are
required on Inter State basis, the Oil
Industry checks the Central Sales Tax
Registration Certificate for assessing the
customers' eligibility to receive supplies
on Concessional Sales Tax."
14.4 In regard to the delivery of the product, the said
letter contained as under:
"Subject to satisfying the above needs and
based on Commercial understanding, a
NEUTRAL CITATION
R/SCR.A/5275/2021 JUDGMENT DATED: 27/10/2023
undefined
customer code number is allotted
in respect of the customer. Thereafter, the
Supply Point is authorized to release the
product. The authorization is issued
through a letter of a delivery order which
indicates the details of customer code,
indentor / consignee, period of
supply, price of the product, validity
of the delivery instructions, commercial
terms, etc.
Oil Industry in certain cases is providing
storage and dispensing facilities based on
the laid down norms to the customers.
These facilities are constructed by the Oil
Industry to meet the requirement of
criteria laid down by Explosives Deptt.
after obtaining No-objection certificate from
the local District Magistrate.
The large volume customers who have rail
rake unloading facilities uplift supplies
through Railway Tank wagons. The
supplies are affected from locations having
rail rake loading facilities, either
within the state or outside the
state as decided in the Supply Plan
Meeting conducted by Oil Coordination
Committee every month.
Bulk of the supplies within the
NEUTRAL CITATION
R/SCR.A/5275/2021 JUDGMENT DATED: 27/10/2023
undefined
state are on delivered basis
wherein the Oil Industry delivers
supplies at the customer's premises in
their own / hired tank lorries. Small
percentage of supplies are released ex Oil
Industry storage points in customer's own /
hired tank lorries. In case of delivered
supplies the customer give delivery
schedule based on which the Oil Industry
delivers supplies. The transporter after
delivering the product brings back the
receipted copy of the challan duly
acknowledged by the customer for
having duly received the supply. In
respect of ex storage supplies, the
customer places an indent and takes
supplies in his own / hired tank
lorry duly authorizing a representative
to receive supplies. For inter state
supplies, the concessional Sales Tax
form is collected at the time of supply.
After verification of the documents and the
Commercial terms, the Supply Point
releases the supply. The Supply Points
obtains the signature of the Authorised
representative for having received the
quantity indicated in the Delivery
Challan."
NEUTRAL CITATION
R/SCR.A/5275/2021 JUDGMENT DATED: 27/10/2023
undefined
14.5 The said letter, thus, refers to the bulk supply
within the State, which would be on delivered
basis, wherein the Oil Industries deliver supplies
at the customer's premises in their own / hired
tank lorries, while small percentage of supplies are
released ex Oil Industry storage points in
customer's own / hired tank lorries. The transporter
after delivering the product brings back the
receipted copy of the challan duly acknowledged by
the customer for having duly received the supply,
while in case of ex-storage supplies, the customer
places an indent and takes supplies in his
own / hired tank lorry. In case of inter state
supplies, the concessional Sales Tax form is
collected at the time of supply. After
verification of the documents and the
Commercial terms, the Supply Point releases the
supply, and the signature is obtained of the
Authorised representative for having received the
quantity indicated in the Delivery Challan.
This whole process, as noted in the Manual
does not insist for any report of the TEC.
The Manual itself clarifies the process of self
supply in bulk and in small percentage. In case of
inter state supplies, the process of concessional sales
NEUTRAL CITATION
R/SCR.A/5275/2021 JUDGMENT DATED: 27/10/2023
undefined
tax form is to be followed and, the oil companies
checks the central sales tax certificate for
assessing the customer's eligibility to receive supplies
on concessional sales tax.
15. Here, the F.I.R. was registered on 23.05.2000,
thereafter the letter dated 06.11.2000, signed
by directors of four oil companies viz. IOC, BPC,
HPC and IBP addressed to Additional Secretary,
MoP & NG, Government of India, New Delhi,
referred to all the earlier circulars dated 17.03.1988,
09.02.1994, 23.05.1995 and 18.09.1996, with regard
to the constitution of TEC on supply of
feed-stock specialities. It was clarified by the
companies that in all the referred communications,
the TEC was to look into the supply of LSHF-HSD/
High Flash-HSD, LDO and Crude Sludge for the
manufacture of petroleum specialities, and
further noted as being conveyed that
additional items would be assigned to the
TEC as necessary from time to time,
and that during the period from 1988 till the
date of communication, no additional items were
assigned other than the products mentioned
therein. It was clarified that in 1981 for
NEUTRAL CITATION
R/SCR.A/5275/2021 JUDGMENT DATED: 27/10/2023
undefined
the first time, the MoP & NG had
issued instructions vide letter dated
2/6.1.1981 on instituting a procedure for
utilization of HSD from Koyali Refinery for
production of High Value Speciality items by
processors. Thus, all the oil companies clarified
that letter was confined to HSD from
Koyali Refinery and all the subsequent
communications from 1988 to 1996 required TEC,
for supplying LSHF-HSD/High Flash-HSD, LDO
and Crude Sludge to processors for the manufacture
of petroleum specialities; and in supersession of the
letter dated 17.03.1988, having considered all the
previous instructions, superseded all earlier
letters, to note that TEC was not required
for supply of regular HSD. That the oil
companies were following the directions
contained in MoP & NG circulars issued
between 1988 and 1996 with clear
understanding that TEC evaluation is not
required to be carried for supply of HSD
as a feed-stock to processors for the
manufacture of petroleum specialities and was
confirmed only to LSHF-HSD, HF-HSD, LDO
and Crude Oil Sludge.
NEUTRAL CITATION
R/SCR.A/5275/2021 JUDGMENT DATED: 27/10/2023
undefined
16. The prosecution has also raised a case that
there has been loss to the government exchequer and
in criminal conspiracy with the officers of sales tax
department, Form 'C' were forged. The learned
Special Judge while dealing with the issue
has observed as under:
" It is clear from the charge sheet
papers that the Govt. exchequer has
suffered huge loss because of sales tax
evasion. But it appears that no complaint
was filed by any officer from the sales tax
department. It also appears from the
charge sheet that no complaint was lodged
for alleged forged/fake "C" form. Moreover,
even if it is presumed that the said "C"
forms were forged or fake, even then no
staff members from the sales tax
department has been arraigned as accused
in the case. It has not come on
record that any persons from the sales tax
department has alleged that the "C" forms
used for HSD were forged or fake.
There is no evidence regarding forged
document. It is true that blank "C" forms
were submitted. But there is no
allegations that the said "C" forms were
NEUTRAL CITATION
R/SCR.A/5275/2021 JUDGMENT DATED: 27/10/2023
undefined
bogus. Supposed that "C" forms were
bogus, but then it is not the case of
the prosecution that those "C" forms
were forged and produced by the
applicants accused. Generally the "C" form
were produced by the purchaser. There
is no evidence that the applicants were
aware that the "C" forms were
bogus. There is no allegation that the
accused committed forgery or produced
forged documents. The applicants accused
have not used any "C" form but
the private party has produced it at the
time of delivery. Looking to the "C" form,
no officer of oil companies can say that
"C" forms were bogus. There is no allegation
against the accused that HSD was sold at
lower price. There is no evidence to show
that oil company has suffered any
financial loss because of such transaction.
There is also no prima facie evidence to
prove that the delivery of HSD was
wrongly given. It appears that the
applicants accused have sold HSD as
per the price fixed by the Govt. It
has also not come on record that if the
purchasers had obtain any benefit, that
was not due to mistake of the
applicants accused. There is also no
prima facie evidence to show that the
NEUTRAL CITATION
R/SCR.A/5275/2021 JUDGMENT DATED: 27/10/2023
undefined
applicants have got benefit or
advantage out of loss caused to the
Govt. exchequer. There is no prima facie
evidence to show that HSD was not
sold to factories. Further more, all the
transactions were done by applicants
accused as a party of their official duties."
17. In the case of Mohd. Hadi Raja Vs.
State of Bihar And Anr. (supra) referred by
Standing Counsel Mr. Kodekar of C.B.I., a question
of law arose as to whether the provisions of sanction
under section 197 Code of Criminal Procedure, 1997
are applicable for prosecuting officers of the
public sector undertakings and government
companies when on account of deep and pervasive
control of finance and administration of such
undertakings and government companies, they
are held as State within the meaning of
Article 12 of the Constitution of India. After
careful consideration to the question of law
and submissions, made by the respective
counsels of the parties, it was observed
that the protection under section 197 of the Code of
Criminal Procedure lies in the public policy to ensure
that official acts performed by a public servant do not
NEUTRAL CITATION
R/SCR.A/5275/2021 JUDGMENT DATED: 27/10/2023
undefined
lead to needless and vexatious prosecution of
such public servant, and, it was further
observed that, it is desirable to be left to
the government to determine the question of
expediency in prosecuting a public servant.
However, it was noted that through the
contrivance or mechanism of corporate structure,
some of the public undertakings are performing the
functions which are intended to be performed
by the State, ex facie, such instrumentality
or agency being a juridical person has
or independent status and the action taken by them,
however important the same may be in the
interest of the State cannot be held to be an
action taken by or on behalf of the Government as
of the Cr.P.C.
17.1 Para 24 to 27 of Mohd. Hadi Raja Vs
State of Bihar And Anr. (supra), read as under:
"24. It is also to be indicated
here that in 1973, the concept of
instrumentality or agency of state was
quite distinct. The interest of the State
in such instrumentality or agency
NEUTRAL CITATION
R/SCR.A/5275/2021 JUDGMENT DATED: 27/10/2023
undefined
was well known. Even then, the
legislature, in its wisdom, did not think it
necessary to expressly include the officers
of such instrumentality or the
government company for affording
protection by way of sanction under
Section 197 Cr. P.C.
25. It will be appropriate to notice that
whenever there was felt need to include
other functionaries within the definition of
'public servant', they have been
declared to be 'public servants' under
several special and local acts. If the
legislature had intended to include officers
of instrumentality or agency for
bringing such officers under the
protective umbrella of Section 197 Cr. P.
C. It would have done so expressly.
26. Therefore, it will not be just and
proper to bring such persons within the
ambit of Section 197 liberally
construing the provisions of Section
197. Such exercise of liberal construction
will not be confined to the permissible limit
of interpretation of a statute by a court
of law but will amount to legislation
by Court.
NEUTRAL CITATION
R/SCR.A/5275/2021 JUDGMENT DATED: 27/10/2023
undefined
27. Therefore, in our considered opinion,
the protection by way of sanction Section
197 of the Code of Criminal procedure
is not applicable to the officers of
Government Companies or the public
undertakings even when such public
undertakings are 'State ' within the
meaning of Article 12 of the
Constitution on account of deep and
pervasive control of the government...."
17.1.1 In the case of Mohd. Hadi Raja Vs
State of Bihar And Anr. (supra), the Apex
Court observed that the importance of the public
undertaking should not be minimised. It is
observed that the government's concern for the
smooth functioning of such instrumentality or
agency can be well appreciated but on the
plain language of Section 197 of the Code of
Criminal Procedure, the protection by way of
sanction is not available to the officers of the
public undertaking because being a juridical
person and distinct legal entity such
instrumentality stands on a different footing than
the government departments.
NEUTRAL CITATION
R/SCR.A/5275/2021 JUDGMENT DATED: 27/10/2023
undefined
17.2 Advocate Mr. Kodekar also relied on the case of
Punjab State Warehousing Corporation Vs.
Bhushan Chander And Anr. (supra), para-20 of the
the same reads as under:
"20. A survey of the precedents makes it
absolutely clear that there has to be
reasonable connection between the
omission or commission and the
discharge of official duty or the act
committed was under the colour of the
office held by the official. If the acts
omission or commission is totally alien
to the discharge of the official duty,
question of invoking Section 197 CrPC
does not arise. We have already
reproduced few passages from the impugned
order from which it is discernible that to
arrive at the said conclusion the learned
Single Judge has placed reliance on the
authority in B. Saha's (supra). The
conclusion is based on the assumption
that the allegation is that while being a
public servant, the alleged criminal breach
of trust was committed while he was in
public service. Perhaps the learned
Judge has kept in his mind some kind
of concept relating to dereliction of
NEUTRAL CITATION
R/SCR.A/5275/2021 JUDGMENT DATED: 27/10/2023
undefined
duty. The issue was basically
entrustment and missing of the entrusted
items. There is no dispute that the
prosecution had to prove the
case. But the public servant cannot put
forth a plea that he was doing the
whole act as a public servant.
Therefore, it is extremely difficult to
appreciate the reasoning of the High
Court. As is noticeable he has observed
that under normal circumstances the
offences under Sections 467, 468 and 471
IPC may be of such nature that
obtaining of sanction under Section 197
CrPC is not necessary but when the said
offences are interlinked with an offence
under Section 409 IPC sanction under
Section 197 for launching the
prosecution for the offence under
Section 409 is a condition precedent. The
approach and the analysis are absolutely
fallacious. We are afraid, though the High
Court has referred to all the relevant
decisions in the field, yet, it has
erroneously applied the principle in an
absolute fallacious manner. No official can
put forth a claim that breach of trust is
connected with his official duty. Be
it noted the three-Judge Bench in B. Saha
(supra) has distinguished in Shreekantiah
NEUTRAL CITATION
R/SCR.A/5275/2021 JUDGMENT DATED: 27/10/2023
undefined
Ramayya Munipalli (supra) keeping in
view the facts of the case. It had also
treated the ratio in Amrik Singh
(supra) to be confined to its own
peculiar facts. The test to be
applied, as has been stated by
Chandrasekhara Aiyar, J. in the
Constitution Bench in Matajog Dube (supra)
which we have reproduced hereinbefore. The
three-Judge Bench in B. Saha (supra)
applied the test laid down in Gill's case
wherein Lord Simonds has reiterated that
the test may well be whether the
public servant, if challenged, can
reasonably claim, that what he does, he
does in virtue of his office."
17.3 Here, in the case on hand, the aspect of
sanction by the authority concerned would bear
not of much importance. The issue is whether
C.B.I. had any case to even lodge a
prosecution. Admittedly CVC too had not found
any case against the accused to grant sanction.
18. With reference to the letter dated 09.11.2000,
Mr. K.L.N. Shastri, Executive Director (LNG),
Indian Oil Corporation Ltd., New Delhi, submitted a
note in the form of statement, with reference to release
NEUTRAL CITATION
R/SCR.A/5275/2021 JUDGMENT DATED: 27/10/2023
undefined
of HSD to processors, as required by C.B.I., stating
that he had joined OCC on deputation in April
1996 and worked as Director (Marketing Coordination
st
& Economic Studies) uptil 31 July, 2000.
According to him, the OCC came into existence
in the year 1975 vide a resolution of the
government. He states that role and functions of
OCC have been spelt out in the Resolution
as well as in a separate note, and the basic
function of the OCC is to assist the MoP &
NG for supply and distribution of petroleum
products and is also doing the work of monitoring of
production of petroleum products, movement supply
logistics and various oil pool accounts.
According to Mr. Shastri, OCC is the apex
body of oil marketing and refining companies
coordinating, monitoring and supervising the
refining marketing and accounting
activities/functions of all the oil companies such as
IOC, HPCL, BPCL, IBP, CPCL (MRL) etc., thus,
the constitution of the OCC as being the
apex body of the oil marketing and refinery
companies, had been expressed by him, and on
being asked about the duties of the Director
NEUTRAL CITATION
R/SCR.A/5275/2021 JUDGMENT DATED: 27/10/2023
undefined
(MC&ES), OCC, Mr. Shastri stated that
he was doing the work of formulation and
circulation of policies and policy matters released
either by the OCC or by the Ministry of
P&NG in relation to marketing activities,
and those were to be followed by the oil
companies. According to Mr. Shastri necessary
clarifications with regard to the policy matters for
sale and supply of petroleum products
were issued by the OCC from time to time.
18.1 On being asked about the supply of HSD to
processors, Mr. Shastri states that there
were various guidelines issued by MoP&NG and by
the OCC, and such guidelines were issued with
a a particular objective to ensure the end use
of HSD sold to processors and consumers,
and the guidelines include in the form of
circulars, wherein Circular No.P-24013/5/80-SUP
nd
dated 2 January, 1981 of the MoP&NG and
th
guidelines dated 8 July, 1991 of OCC, too are
referred by him.
18.2 Mr. Shastri has referred to the Circular dated
NEUTRAL CITATION
R/SCR.A/5275/2021 JUDGMENT DATED: 27/10/2023
undefined
02.01.1981 addressed to IOCL with respect
to the utilization of HSD from Koyali
Refinery for the production of High Value
Specialities items and the guidelines dated
08.07.1991 of OCC. He had also been asked
regarding his clarification dated 23.08.1999 in
respect to release of HSD to processors, and he
had referred to a letter No.TEC/Circ.
dated 04.08.1999 of Shri P.Sudarsnam, ED
(Plng., P&S and BD), IOC, Ho. Mumbai to
the Executive Director, OCC, regarding the
release of HSD to processors. The said letter
reads as under:
"Executive Director,
Oil Co-ordination
Committee, Scope Complex,
2nd floor, Core-8, Lodhi
Road,
NEW DELHI - 110 003.
Dear Sir,
SUB: RELEASE OF HSD TO
PROCESSORS
NEUTRAL CITATION
R/SCR.A/5275/2021 JUDGMENT DATED: 27/10/2023
undefined
This has reference to MOP&NG's letter no.P-
21017/14/93-Dist dated 11.05.94, P-
17011/16/93-Sup dated 23.5.95 and P-
17011/15/93-Sup dated 18.9.96 on the above
subject.
So far IOC has been releasing the
supplies of HSD to the processing
units as feed stock for the production
of various speciality oils like Spray oil,
White oil, Agarbathi oil, Textile oil, Honing
oil, Antistatic oil etc. based on MOP&NG's
approval after the assessment by the
Technical Evaluation Committee (TEC).
Since effective 1.4.1998, the price
of HSD is fixed on the basis of import
parity, we are of the opinion that HSD
may be released to the processors based on
our Technical evaluation. However, the
verification of utilisation reports etc. would
continue as hitherto.
It is understood that OMCs are releasing
HSD to the processors without
allocation by MOP&NG.
NEUTRAL CITATION
R/SCR.A/5275/2021 JUDGMENT DATED: 27/10/2023
undefined
In order to protect our market share, we
also propose to meet the requirements of
Processors in the same manner as other
Marketing Companies. This is for kind
information."
18.3 In reference to the said letter, Mr. Shastri
put up a fax message dated 23.08.1999, which
reads as under:
"RELEASE OF HSD TO PROCESSORS
Reference is made to your Letter No.TEC/
Circ. Dated 4.8.99 regarding release of
HSD to Processors.
You are aware that HSD is a controlled
product and its price continues to be fixed
under administered pricing mechanism.
There is no change in the guidelines for
allocation of HSD to the processors HSD
allocation to the processors is approved by
the MOP&NG based on the certification
and recommendation of the TEC
of the Oil Companies. As such,
You are requested not to make
HSD supplies to the processors without
the Ministry's allocation / Linkage.
NEUTRAL CITATION
R/SCR.A/5275/2021 JUDGMENT DATED: 27/10/2023
undefined
Regarding supply of HSD by the OMCs
to the processors without MOP&NG's
allocation. You are requested to provide us
with specific details."
18.4 C.B.I. had asked for guidelines dated 08.07.1991 of
OCC from K.Rajeswara Rao, Joint Director
(MC&ES) of the Petroleum Planning & Analysis
Cell, who had given the Fax of Shri
Shastri and the letter of P.Sudarsnam. For
the original copy of the guidelines it had been
noted in para 3, which reads as under:
"3. As regards original copy of the
guidelines for release of petroleum
products and lubricants to direct
consumers complied and circulated by OCC
on 8.7.1991, it is stated that the Oil
Coordination Committee (OCC) has been
wound up effective 1.4.2002 and, however,
efforts have been made to locate the
original copy of the guidelines from the
available records with PPAC but in vain.
Hence the same cannot be furnished."
18.5 The compilation and circulation by OCC on
08.07.1991, of the Guidelines for Release of
NEUTRAL CITATION
R/SCR.A/5275/2021 JUDGMENT DATED: 27/10/2023
undefined
Petroleum Products and Lubricants to Direct
Consumers have not been denied, which suggests
that the same was in force and all oil companies
were following the guidelines since 1991. The charge-
sheet has been filed for period between 1997-2000.
The guidelines of OCC dated 08.07.1991 had
not found any change. Mr. Shastri had
referred in his Fax message of no change in
the guidelines for allocation of HSD to processors.
According to him, HSD allocation to the
processors is approved by the MoP&NG based on
the certification and recommendation of the TEC
of the Oil Companies. The guidelines referred and
relied upon does not reflect any certification and
recommendation of the TEC to the oil
companies, and, when a clarification was
sought by P.Sudarsnam by a letter dated
23.08.1999, Mr. Shastri states before the C.B.I.
that there was no change in the allocation
policy and requested P.Sudarsnam of IOC not to
make HSD supplies to the processors without the
Ministry's allocation / Linkage, and, since
clarification was sought by the E.D., IOC from
OCC, reply was sent by OCC, which stated
by Mr. Shastri, according to the existing
NEUTRAL CITATION
R/SCR.A/5275/2021 JUDGMENT DATED: 27/10/2023
undefined
guidelines available, the directions were to be
followed by the oil companies necessarily, and
according to him the clarification was in
accordance with the existing guidelines of
the Ministry, and, in the present case, to his
clarification on behalf of OCC, Ministry did not
issue any such amendment, which implies, concurrence
of the MoP&NG on the particular issue,
upon which the Oil Companies were required to act
accordingly.
18.6 On being asked regarding the technical
evaluation of the factories/processor units
consuming HSD for production of speciality oils,
Mr. Shastri stated that production involves processing
activities through which some finished
products were produced, which were altogether
different in nature from HSD, and, therefore,
according to him processing units were essentially
required to have the requisite plant
and machinery to process HSD of specific capacity for
specific purpose(s), and only the Technical
Officers can certify the nature and capacity of
machinery and plant installed at the factory,
and, therefore visit of Technical Officers was
NEUTRAL CITATION
R/SCR.A/5275/2021 JUDGMENT DATED: 27/10/2023
undefined
must, to see and verify the installation and working
position including capacity and requirement of
HSD for processing, and, hence, he sates
that MoP&NG for this specific purpose
constituted TEC for giving their recommendations
justifying the requirement of HSD of the
processors, and, thus Mr. Shastri notes that
HSD was/is to be released on the
recommendations of the TEC subject to approval of
MoP&NG.
18.7 At the cost of repetition, it is required to be
noted that TEC was dissolved with effect from
01.04.2002; the non- requirement of the TEC had been
noted in the letter dated 27.03.2002.
18.8 The requirement of certification of Technical Officer
and the recommendation of the TEC
justifying the requirement of HSD was only in
context of Koyali Refinery, gets specified in
the Circular dated 02.01.1981. Before release of
HSD to the processors, IOC was required to get
the confirmation as reflected in the said Circular.
th
18.9 On 29 August, 1997, the letter by the General
NEUTRAL CITATION
R/SCR.A/5275/2021 JUDGMENT DATED: 27/10/2023
undefined
Manager (S) - V.K. Nayudu to DGM
Ahmedabad, in reference to the letter dated
th
19 August, 1997, clarifies that the
guidelines from MoP&NG with regard to the
processors, who would like to uplift HSD had to
make an application to IOCL and the same
thereafter could be forwarded to TEC for
consideration. Thus, the same is also in connection
to IOCL and not for other oil companies.
Almost all the communications for the various
Private Ltd. Companies produced on the record of
the case were by the Indian Oil Corporation Ltd.
(IOCL) to the Ministry.
18.10 The letter of the OCC dated 04.12.1996 to the
under Secretary MoP&NG, New Delhi, for the
requirement of HSD/ HF HSD/LSHF and
NGL/Naphtha for M/s. Shaynoa Petrochem Ltd.
for manufacture of speciality solvent and
lubricants, reflects that the TEC was required to
evaluate the requirement, and submit the
recommendation to MoP&NG and based on the
recommendation of the TEC, it was noted that,
MoP&NG, may consider to release of
HSD/HF-HSD/LSHF for processing use ex-Koyali
NEUTRAL CITATION
R/SCR.A/5275/2021 JUDGMENT DATED: 27/10/2023
undefined
refinery, while the supply of NGL ex-Hazira
was ruled out, as the only possibility was
of supplying Naphtha ex-Koyali refinery of
IOC. It was further noted that since
December, 1992, Naphtha import had been
deccanalised and the same could be
imported after obtaining special licence/approval
from DGFT. The communication, on record, by the
Ministry of MoP&NG shows of private
companies lifting of HSD from M/s. Indian
Oil Corporation Ltd. only.
18.11 The C.B.I. while filing the F.I.R. has failed to take a
clarification from the authorized person of the
Ministry as to why the Circular dated
02.01.1981 was only addressed to IOCL for
the utilization of HSD from Koyali Refinery and not
for any other oil companies. While the
guidelines of the OCC does not refer to the
requirement of TEC recommendation for
uplifting HSD from any other oil companies.
All the letters/circulars referred earlier hereinabove
with the communication starting from 1988-1996
require TEC evaluation only for supplying
LSHF-HSD/High Flash-HSD, LDO and Crude Sludge
NEUTRAL CITATION
R/SCR.A/5275/2021 JUDGMENT DATED: 27/10/2023
undefined
to processors for the manufacture of petroleum
specialities. The communication never included the
requirement of TEC for the supply of regular HSD.
The Oil Companies viz. IOCL, HPCL, BPCL and IBP,
conveyed a understanding on 06.11.2000 to Shri
Narad, Additional Secretary, MoP & NG, after
the registration of the F.I.R., which itself
clarifies the fact that all oil companies were
functioning on the understanding that TEC
evaluation for HSD was not required. All the
companies were clear on the fact that in the
year 1991, the MoP&NG had issued the
instruction vide letter/circular dated 2/6.1.1981
for instituting a procedure for utilization of
HSD from Koyali Refinery and not from
any other refineries, and the Ministry
had addressed by Circular dated 17.03.1988 to
all the oil companies regarding the constitution of
TEC on supply of feed-stock for the production
of petroleum specialities, by making a reference
to the Ministry's letter dated 02.01.1981, for
reconstitution of the TEC; it was clarified that
it would initially look into the supply of LSHF-
HSD, LDO and Crude Sludge for the manufacture
ofpetroleum specialities. There was no
NEUTRAL CITATION
R/SCR.A/5275/2021 JUDGMENT DATED: 27/10/2023
undefined
reference with regard to the supply of regular HSD.
18.12 The Circular further clarified that the additional
items would be assigned to the TEC as
necessary from time to time. While in all
subsequent communications, HSD was never
included in the duties of TEC. While
observing the TEC by the Circular dated
27.03.2002, it was specifically noted by the
under Secretary, Government of India that the
matter was reviewed by the Ministry and
on dismantling of the APM from 01.04.2002,
in the circular, it was noted that the price
of diesel would be also decontrolled, and under such
circumstances, the specific objective and role of
the TEC had lost its purpose and relevance,
and were informed that the TEC stood
dissolved with effect from 01.04.2002. The Oil
Companies were made free to take their own
judgment about the allocation of crude sludge,
high flash-HSD and LDO from the said date and
to put conditions, to the best of their
commercial prudence and business requirements.
18.13 In view of this circular itself, there was no
NEUTRAL CITATION
R/SCR.A/5275/2021 JUDGMENT DATED: 27/10/2023
undefined
reason for the C.B.I. to file charge-sheet
against any of the accused. None of the
communications of the Ministry, except of
02.01.1981, for the utilization of HSD from Koyali
Refinery, required any TEC recommendation for
lifting of HSD from any other companies. The
C.B.I. failed to take into account that the
Ministry had never called for any
clarification from any other company during the
period between 1997 - 2000 in connection with the
alleged facts noted in the F.I.R., the officers,
who were working in the company, would go by the
understanding of the Circulars. It would have
been the functioning of the Ministry to specify the
requirement of TEC recommendation for supply of
HSD from other oil companies to the processors.
The oil companies all throughout had been following
the directions contained in the MoP&NG
circulars issued between the year 1988 to
1996, with clear understanding that TEC
evaluation was not required to be carried out
for supply of HSD as feed-stock to processors
for the manufacture of petroleum specialities.
19. The statement of Shri Dilip Dixit Dy.
NEUTRAL CITATION
R/SCR.A/5275/2021 JUDGMENT DATED: 27/10/2023
undefined
Commissioner, Sales Tax (Enforcement), noted
by the C.B.I. on 31.10.2000 would be of vital
importance. According to Shri Dixit there was no
tax liability for HSD under the provision of
Bombay Sales Tax Act, and HSD was tax
free. According to him HSD is taxable commodity
under the provisions of the Bombay Sales of Motor
Spirit Taxation Act, 1958, and for the concessional
facility provided under the Act in respect
of sales tax on purchase of HSD, it is
stated that, concession was provided to Fisherman
Cop. Societies and no other concession was provided
under the Bombay Sales of MST Act/ Rules to
any other category of purchasers, and thus,
has stated before the C.B.I. that registered
dealers/firms or purchasers of outside state are
provided the facility for purchase of HSD
against C-form under the CST Act by
paying a lesser rate of sales tax at the
rate of 4% against the prevailing rate of 30%
approximately in the State of Maharashtra, and
there is no provision for giving concession
to any purchaser as applicable in the
State of Gujarat against form-2 or form-5 or any
other form.
NEUTRAL CITATION
R/SCR.A/5275/2021 JUDGMENT DATED: 27/10/2023
undefined
19.1 Shri Dilip Dixit further affirmed the fact
that there is no provision of check post of
Sales Tax Department in the state and no
provision to check the vehicles carrying commercial
goods between the two states, nor any
records were maintained about the entries of
such vehicles carrying HSD or any other taxable
items at the borders of the state; but,
within the state, the purchasers and sellers
were supposed to file Sales Tax Returns
under the provisions of the Bombay Sales of
Motor Spirit Act, Bombay Sales Tax Act and
the Central Sales Tax Act, and, therefore the
registered private firms purchasing HSD either from
within the state or from outside state, were
supposed to file returns showing their total
purchase separately from within the sate and
outside the state, and thus, according to him,
the oil companies IBP, HPCL, BPCL & IOC
were also supposed to file sales tax returns. Mr.
Dixit stated that oil companies furnish the
details of sale of HSD sold from within
the state or outside the state against form-C, and
purchasers outside Maharashtra purchased HSD
NEUTRAL CITATION
R/SCR.A/5275/2021 JUDGMENT DATED: 27/10/2023
undefined
from oil companies in Maharashtra against form-C
on payment of CST at 4%, to be deposited with
the sales tax authorities of Maharashtra.
19.2 According to Mr. Dixit at the time of
processing of the application and scrutiny of
the documents, it was ascertained that the firm
exist at the place shown in the application, and,
the aspect of manufacturing of goods and engagement
in business activities etc. were verified later
on, but initially the firm can get
registered and start its business, and the
firms on their request for the declared
purpose were issued blank C-forms by the
Sales Tax Officer of their jurisdiction. Mr.
Dixit stated that the competent authority for
registration certificate is the Sales Tax
Officer of the registered branch, and the
issuance of 'C' forms is by the assessing
officer of their jurisdiction, and the officer in-
charge of assessment of that particular
case; the procedure for issuance of 'C' form
would be that a new registered purchaser is
issued 5 C-forms at the initial
application subject to a bank guarantee for
NEUTRAL CITATION
R/SCR.A/5275/2021 JUDGMENT DATED: 27/10/2023
undefined
37 months, and at the time of issuance of C-
forms every next time, utilisation reports of the C-
forms issued earlier is compulsorily obtained by
the issuing authority, and the utilisation of C-
forms is ensured in that form only and for
the issuance of C-forms, basic formalities are to
be observed and it is issued only to the
registered purchasers under the CST Act.
19.3 Mr. Dilip Dixit in regard to misuse of facility of
C-forms stated that only after satisfaction of
the Sales Tax Officer about the proper use of
C-forms issued earlier, the fresh C-forms are
issued to the firms. Thus, according to
him, periodic visits are made by the Sales Tax
Officer of the factories who ensures that the
product being purchased against 'C' form is
utilised for the declared purpose, thereafter
only, 'C' forms are issued. He has also
referred to the loopholes of the 'C' forms and
has raised apprehension of 'C' forms being
utilised dishonestly from outside state, which
he says could be established, if caught. Mr. Dixit
stated that primary responsibility of the Sales
Tax Officer of the particular case is to
NEUTRAL CITATION
R/SCR.A/5275/2021 JUDGMENT DATED: 27/10/2023
undefined
ensure that the C-form is issued for genuine
purpose and the product is utilised for the
declared purpose only.
20. The learned Special Judge has not found
any ground for invocation of the charge under
section 420 of IPC, to satisfy that there should
be a wrongful intention to cause some wrongful
loss, and that, wrongful intention should be
from the very inception. The learned Judge has
observed that whatever representations made by
purchaser was before the Sales Tax Department
regarding inter-state sale, and the charge-sheet
papers do not disclose that the applicants
accused had made any representation or they
were aware of any such representation. The
learned Special Judge has not found from the
record any false representation made by the
accused, in reference to the charge of
conspiracy, and, thus has concluded that there
is no prima facie evidence to show that goods
sold to any firm, were not taken by
that very firm to the place outside the
State from where they were sold; and found
that there is no prima facie case of cheating
NEUTRAL CITATION
R/SCR.A/5275/2021 JUDGMENT DATED: 27/10/2023
undefined
made out by the prosecution.
20.1 For the charge under criminal conspiracy, the
learned Special Judge has observed that the
applicants are public servants, who have acted
as per the circular issued by the Government,
and the prosecution has not established any prima
facie case or any illegal act done or any act
which is legal, but has been shown by using illegal
means; as per the prosecution case, there were large
number of persons from different parts of
country, unrelated to each other, unknown
to each other therefore the learned trial
Court concluded that there cannot be presumption
that they would have entered into any criminal
conspiracy. The learned Special Judge observed
that as per the record, four oil companies
are of Gujarat, Maharashtra and Madhya
Pradesh and there is no evidence to show
that the officers of the oil companies had
gathered, or met sales tax officers or staff or
purchasers with an intention to commit the alleged
offence.
20.2 For the offence under the P.C. Act, the
NEUTRAL CITATION
R/SCR.A/5275/2021 JUDGMENT DATED: 27/10/2023
undefined
learned Special Judge found that there is no
prima facie evidence to show that the
applicants had accepted any gratification from
any person as a motive or reward, and
the applicants accused had followed all the
instructions issued by the MoP & NG and
acted in discharge of the duties; no sanction
has been brought on record by the C.B.I.,
while sanction has been refused against the
officers of the oil companies and against refusal
C.B.I. had written to Central Vigilance
Committee, but the said committee to confirm the
order of non-issuance of sanction against the
officers of the oil companies and therefore, no
summons were issued against those accused
persons.
20.3 The learned Special Judge while discharging the
accused had observed that the offence alleged to have
been committed for the year 1997 to 2000, and
F.I.R. was filed in the year 2000, and after a
long period the charge-sheet came to be filed in the
year 2011, and before filing of the charge-
sheet no sanction had been obtained by the
prosecution under section 19 of the P.C. Act and
NEUTRAL CITATION
R/SCR.A/5275/2021 JUDGMENT DATED: 27/10/2023
undefined
section 197 of the Cr.P.C. Further observed
that there is no prima facie evidence to
show that the oil companies suffered any loss
because of act or omission of the officers; there is
neither evidence to show that HSD was sold
by the applicants - accused at lower price,
nor any evidence to show that the applicants -
accused were aware that 'C' Forms were
bogus, and it was not the case of the C.B.I
that 'C' Forms used were bogus, nor any
person from the Sales Tax Department had been
arraigned as accused; there is no evidence of taking
any bribe or monetary gains, there is no evidence
that the accused had sold HSD to any
unauthorised person or company. The learned
Special Judge observed that according to the
statement of R.Ramakrishnan, member of the
TEC, the circular of the TEC was not
applied to HSD and in the similar cases being
No.5/2006, 131/2004 and 136/2004, the accused
were discharged without any sanction, wherein
too, no sanction under section 197 of the
Cr.P.C. was obtained, and the orders of
discharge have not been challenged by the C.B.I.
NEUTRAL CITATION
R/SCR.A/5275/2021 JUDGMENT DATED: 27/10/2023
undefined
21. The statement of the various authorities
recorded by the C.B.I. cannot be read in accordance to
their own interpretation, since section 94 of the
Indian Evidence Act, 1872 clarifies that when
language used in a document is plain in
itself, and when it applies accurately to
existing facts, evidence may not be given to
show that it was not meant to apply to such
facts. The circulars and the communications by
MoP & NG and OCC guidelines, has to
be read as communicated to oil companies; and
further OCC guidelines would be of no relevance
when government guidelines are in force.
21.1 The Petroleum Act, 1934 had come into force to
consolidate and amend the law relating to the
import, transport, storage, production, refining and
blending of petroleum; that makes the provision
with regard to petroleum, classifying it into A,
B and C giving the meaning according to the flash-
point as noted in the definition. The Petroleum
and Natural Gas Regulatory Board Act, 2006
makes establishment and incorporation of the
Board by section 3, and the complaints and
disputes are to be resolved by the Board.
NEUTRAL CITATION
R/SCR.A/5275/2021 JUDGMENT DATED: 27/10/2023
undefined
21.2 The communication by the oil companies dated
06.11.2000 regarding the circulars of the
MoP&NG reflects their understanding about those
circulars of the Ministry. The officers of the Oil
Companies were required to follow the circulars
and as has been noted by the learned Special Judge,
they have been consistently followed by all the oil
companies and the circulars do not refer to,
regular HSD.
21.3 The Petroleum and Natural Gas Regulatory Board
Act, 2006 defines HSD under section 2(r) and
section 2(zd) defines oil company, which read as
under:
"2(r):- "high speed diesel" means any
hydrocarbon oil (excluding mineral colza oil
and turpentine substitute), which conforms
to such specifications for use as fuel in
compression ignition engines, as the
Central Government may, in consultation
with the Bureau of Indian
Standards, notify from time to time.
2(zd):- "oil company" means a company
registered under the Companies Act,
NEUTRAL CITATION
R/SCR.A/5275/2021 JUDGMENT DATED: 27/10/2023
undefined
1956 (1 of 1956) and includes an association
of persons, society or firm, by whatsoever
name called or referred to, for
carrying out an activity relating to
petroleum, petroleum products and natural
gas."
21.4 By the Circular, the Ministry had informed
the oil companies regarding the dissolution of
TEC and had explained under what
circumstances the specific objective and role of
the TEC has lost its purpose and relevance,
and, thus TEC stood dissolved vide effect from
01.04.2002. The communication dated 27.03.2002 of
the MoP&NG had given free hand to the oil
companies to make their own judgment about
the allocation of the crude sludge, high
Flash-HSD and LDO and to put conditions to
the best of their commercial prudence and
business requirement. Thus, in view of the
circulars, the F.I.R. dated 23.05.2000 would
have become irrelevant, since the oil companies
were given free hand to make their own judgment.
21.5 The Petroleum Rules, 2002 came into force on
13.03.2002. A technical body being Oil Industry
NEUTRAL CITATION
R/SCR.A/5275/2021 JUDGMENT DATED: 27/10/2023
undefined
Safety Directorates Standards (OISD) had been
formed for assisting the safety council
constituted under the MoP&NG. The rules deals
with restrictions of delivery and dispatch of
petroleum in all classes A, B and C, the
requirement of the licence for the import of
petroleum, and the dispute with regard to the
HSD would have to be resolved by the Board,
which is governed by the Petroleum and
Natural Gas Regulatory Board Act, 2006. The
legal provision of the Petroleum Act and
rules thereunder became relevant in this case, since
charge-sheet came to be filed on 25.03.2009.
21.6 The powers of the Special Judge under
section 227 of the Cr.P.C. has been laid down
in the judgment of Union of India Vs. Prafulla
Kumar Samal (supra). The Hon'ble Apex Court
held that in exercising the jurisdiction
under section 227, the Special Judge, which
under the present Code is a senior and
experienced court cannot act merely as a
post office or mouthpiece of the prosecution,
but has to consider the broad probabilities of
the case, the total effect of the evidence and
NEUTRAL CITATION
R/SCR.A/5275/2021 JUDGMENT DATED: 27/10/2023
undefined
the documents produced before the Court, any
basic infirmities appearing in the case and so
on, thus, observed that, this, however, does not
mean that the Judge should make a roving
enquiry into the pros and cons of the matter
and weigh the evidence as if he has
conducting a trial; while considering the question
of framing charges under this section, he has
the undoubted power to sift and weigh
the evidence for the limited purpose of
finding out whether or not a prima facie
case against the accused has been made out.
The Hon'ble Apex Court further observed
that the test to determine a prima facie
case would naturally depend upon the facts of
each case and it is difficult to lay down
a rule of universal application, and, where
the materials placed before the Court disclose
grave suspicion against the accused which has
not been properly explained, the Court
will be fully justified in framing a charge and
proceeding with the trial. Further observed that,
by and large however, if two views are
equally possible and the judge is satisfied that the
evidence produced before him while giving rise
NEUTRAL CITATION
R/SCR.A/5275/2021 JUDGMENT DATED: 27/10/2023
undefined
to some suspicion but not grave suspicion against
the accused, he will be fully within his right to
discharge the accused.
22. This Court finds that the Special Judge, CBI Court
No.2 Ahmedabad has not committed any error in
discharging the accused by allowing their Criminal
Revision Applications preferred against the orders of
rejection of their discharge applications by orders
dated 27.05.2019 below different Exhibits in 36
applications and by the orders dated 13.03.2018
below different Exhibits in 3 applications by the
Learned Additional Chief Judicial Magistrate,
Special CBI Court No.1, Ahmedabad in Special Case
arising out of FIR RC No. 12(A)-2000-GNR. No
sanction has been granted for prosecuting the
officers of the oil companies. The assessment
made by the Special Judge discharging the accused
is consistent with the record.
23. In view of the reasons given herein above,
the orders passed by the learned Special Judge,
CBI Court No.2, Ahmedabad allowing the Revision
Applications and discharging SSthe accused -
respondents herein are just and correct, the
NEUTRAL CITATION
R/SCR.A/5275/2021 JUDGMENT DATED: 27/10/2023
undefined
findings are in accordance to the documents on
record, the accused are rightly discharged, as
there are no sufficient grounds for proceedings
against them. Hence, all the present Special Criminal
Applications fail merits and are dismissed as
rejected. Notices stands discharged.
(SANDEEP N. BHATT,J)
DIWAKAR SHUKLA
