‘ED can’t usurp jurisdiction’: Delhi court declines cognisance of prosecution complaint in Chhattisgarh coal scam case

The court declined to take cognisance of the prosecution complaint, noting that the existence of “proceeds of crime” in itself could not be established.

“Since the foundational ingredient of the offence of money laundering under Section 3 of PMLA, namely the existence of ‘proceeds of crime’ has not been established in this case, no ground exists for proceeding further or to take cognisance of the alleged offence,” Judge Mor said.

The ED’s money laundering case followed a corruption case filed by the Central Bureau of Investigation (CBI), in which all the accused were convicted in July 2016. The CBI case is that the accused had highly inflated land-related claims to “dishonestly induce” the 36th Screening Committee to recommend the allocation of the coal block to RSPL.

‘Allocation letter can’t be construed as proceeds of crime’

ED, on the other hand, submitted that the August 5, 2008, allocation letter for the “fraudulently secured” coal block fell within the ambit of “proceeds of crime” in the case. It also said the company and its officials generated proceeds of crime by raising their share capital under the guise of the letter.
“… allocation is merely a preliminary step, conferring at best a valuable right i.e. a preferential entitlement to be considered for grant of a mining lease subject to compliance with statutory requirements and the discretion of the competent authorities. It does not even, to the slightest extent, create any present right, title or interest in the coal block itself,” said Judge Mor, noting that an allocation letter wouldn’t fall within the ambit of “proceeds of crime”.

“… coal block allocation letter, unless it leads to or results in financial gains, direct or indirect but relatable, cannot be construed as ‘proceeds of crime’ within the meaning of Section 2(1)(u) of the PMLA,” he added.

‘Unfounded assumptions, illusions and conjectures’
According to ED, 14 lakh shares were issued in favour of non-promoters and through this, RSPL allegedly gained Rs. 3.08 crore “by projecting the coal mine development as a major determinative factor”.

The court junked this claim as well. It stated that ED couldn’t link the shares and the coal block allocation.
“…the coal block allocation to A-1 RSPL on 05.08.2008 had no positive impact on the value of its shares, which continued to decline after the said allocation. Thus, it is apparent that the value of the shares of A-1 RSPL was governed by the market forces unrelated to and independent of coal block allocation letter,” the judge said.

“In view of the above discussion, there is not even an iota of evidence on record to suggest that the said 14 lakh preferential equity shares were subscribed by the non-promoters on being influenced by the allocation of coal block allegedly secured by A-1 RSPL by misrepresentation,” he added, stating that the entire ED case was based on “unfounded assumptions, illusions and conjectures”.