Central Bureau Of Investigation vs M/S Aes Chhattisgarh Energy Pvt Ltd on 19 December, 2023
IN THE COURT OF SH. ARUN BHARDWAJ
SPECIAL JUDGE (PC ACT)(CBI)(COAL BLOCK CASES 01)
ROUSE AVENUE DISTRICT COURTS, NEW DELHI.
CNR NO. DLCT-11-000959-2019.
CBI Case No. 251/2019 (Old CC Nos. 15/17).
RC No. 219-2015-(E)-0008.
Branch: CBI, EO-I Branch, New Delhi.
U/s: 120-B/420 IPC.
In the matter of: -
CBI
Through: Sh. R.S. Cheema, Senior Advocate/Special PP
(through VC) with Sh. A.P. Singh, Sh. Sanjay Kumar,
DLAs, Sh. N.P. Srivastava, Sh. VK Pathak, Senior PPs
with Ms. Tarannum Cheema and Sh. Akshay Nagrajan,
Advocates for CBI along with HIO M.R. Atrey.
Versus
1. AES Chhattisgarh Energy Private Limited (A-1)
Through its Director,
At Unit No. 1117, 11th Floor,
Tower-B, Vatika Towers,
Sector-54, Gurgaon.
2. Sanjeev Kumar Aggarwal (A-2)
S/o Late J.P. Aggarwal,
The then Promoter/Director of
M/s AES Chhattisgarh Energy Private Limited
R/o 130, Aspen Green Nirvana Country,
Sector-50, Gurgaon.
Through: Sh. Vikas Pahwa, Senior Advocate with
Sh. Tanvir Ahmed Mir, Sh. Rajeev Goyal, Sh. Bishwajit
Dubey, Sh. Gaurav Gupta, Ms. Surabhi Khattar, Sh.
Ashutosh Singh, Ms. Dakshita Chopra, Mr. Prabhav Ralli,
Ms. Nancy Shamim, Mr. Saud Khan and Mr. Shaurea
Tyagi, Advocates.
CBI vs M/s AES Chhattisgarh Energy Private Ltd. & Another Judgment dated 19.12.2023 Page 1 of 111
S.No. Description Page No.
1. Introduction. 3-5
2. Points for determination. 5-6
3. Brief facts. 6-11
4. Charge against the Accused. 12-13
5. Prosecution Evidence. 13-16
6. Statement of the accused u/s 313 Cr.P.C., 16-17
written statement u/s 315(5) Cr.P.C. and defence
evidence.
7. Arguments of CBI. 17-38
8. Arguments of accused persons. 38-66
9. Rebuttal by CBI. 67-71
10. Response of the accused to the rebuttal 71-73
arguments.
11. Discussion on first point for determination: 73-104
Whether as on 10.01.2007 the composition of
the Board of directors of AES Chhattisgarh
Energy Private Ltd. was under the control of
AES Corporation, USA?
12. Discussion on second point for determination: 104-110
Whether as on 10.01.2007 AES Chhattisgarh
Energy Private Ltd was a subsidiary of AES
Corporation, USA according to the laws of
USA?
13. Answer to the charge framed against accused 110-111
persons.
14. Conclusion 111
15 Note: PDF numbers mentioned in this judgment are from the
softcopy of chargesheet provided by CBI while filing
chargesheet in this case.
Judgment Reserved On : 12.12.2023.
Judgment Delivered On : 19.12.2023.
CBI vs M/s AES Chhattisgarh Energy Private Ltd. & Another Judgment dated 19.12.2023 Page 2 of 111
JUDGMENT
1. Introduction: The only bone of contention in this case is whether AES Chhattisgarh Energy Private Ltd through its Director Sanjeev Kumar Aggarwal had procured allocation of Sayang coal block in the State of Chhattisgarh from the Screening Committee, Ministry of Coal by misrepresenting in its application dated 10.01.2007 that it is 100% subsidiary of AES Corporation, USA?
2. The accused persons have taken the defence that AES Corporation, USA was controlling the composition of Board of Directors of AES Chhattisgarh Energy Private Ltd as on 10.01.2007 which makes AES Chhattisgarh Energy Private Ltd subsidiary of AES Corporation, USA under Section 4 (1) (a) of the Companies Act, 1956.
3. The other defence of the accused persons is that according to Section 4 (6) of the Companies Act, 1956 since under the laws of USA, AES Chhattisgarh Energy Private Ltd is a subsidiary of AES Corporation, USA, therefore, for the purposes of Companies Act, 1956, AES Chhattisgarh Energy Private Ltd will be treated as a subsidiary of AES Corporation, USA irrespective of the fact whether the requirements of Section 4 of the Companies Act, 1956 are fulfilled or not.
4. The entire case revolves around Section 4 of the Indian Companies Act, 1956 which is reproduced as under:
"4. Meaning of "holding company" and "subsidiary".
(1) For the purposes of this Act, a company shall, subject to the provisions of sub-section (3), be deemed to be a subsidiary of another if, but only if, -
(a) that other controls the composition of its Board of directors; or
(b) that other-
(i) where the first-mentioned company is an existing company in respect of which the holders of preference shares issued before the commencement of this Act have the same voting rights in all respects as the holders of equity shares, exercises or controls more than half of the total voting power of such company;
(ii) where the first-mentioned company is any other company, holds more than half in nominal value of its equity share capital; or
(c) the first - mentioned company is a subsidiary of any company which is that other' s subsidiary.
Illustration Company B is a subsidiary of Company A, and Company C is a subsidiary of Company B. Company C is a subsidiary of Company A, by virtue of clause (c) above. If Company D is a subsidiary of Company C, Company D will be a subsidiary of Company B and consequently also of Company A, by virtue of clause (c) above; and so on.
(2) For the purposes of sub-section (1), the composition of a company's Board of directors shall be deemed to be controlled by another company if, but only if, that other company by the exercise of some power exercisable by it at its discretion without the consent or concurrence of any other person, can appoint or remove the holders of all or a majority of the directorships; but for the purposes of this provision that other company shall be deemed to have power to appoint to a directorship with respect to which any of the following conditions is satisfied, that is to say-
(a) that a person cannot be appointed thereto without the exercise in his favour by that other company of such a power as aforesaid;
(b) that a person's appointment thereto follows necessarily from his appointment as director or manager of, or to any other office or employment in, that other company; or
(c) that the directorship is held by an individual nominated by that other company or a subsidiary thereof;
(3) In determining whether one company is a subsidiary of another-
(a) any shares held or power exercisable by that other company in a fiduciary capacity shall be treated as not held or exercisable by it;
(b) subject to the provisions of clauses (c) and (d), any shares held or power exercisable-
(i) by any person as a nominee for that other company (except where that other is concerned only in a fiduciary capacity); or
(ii) by, or by a nominee for, a subsidiary of that other company, not being a subsidiary, which is concerned only in a fiduciary capacity, shall be treated as held or exercisable by that other company;
(c) any shares held or power exercisable by any person by virtue of the provisions of any debentures of the first-mentioned company or of a trust deed for securing any issue of such debentures shall be disregarded;
(d) any shares held or power exercisable by, or by a nominee for, that other or its subsidiary [not being held or exercisable as mentioned in clause (c)] shall be treated as not held, or exercisable by that other, if the ordinary business of that other or its subsidiary, as the case may be, includes the lending of money and the shares are held or the power is exercisable as aforesaid by way of security only for the purposes of a transaction entered into in the ordinary course of that business.
(4) For the purposes of this Act, a company shall be deemed to be the holding company of another if, but only if, that other is its subsidiary.
(5) In this section, the expression "company" includes any body corporate, and the expression "equity share capital" has the same meaning as in sub-section (2) of section 85.
(6) In the case of a body corporate which is incorporated in a country outside India, a subsidiary or holding company of the body corporate under the law of such country shall be deemed to be a subsidiary or holding company of the body corporate within the meaning and for the purposes of this Act also, whether the requirements of this section are fulfilled or not. (7) A private company, being a subsidiary of a body corporate incorporated outside India, which, if incorporated in India, would be a public company within the meaning of this Act, shall be deemed for the purposes of this Act to be a subsidiary of a public company if the entire share capital in that private company is not held by that body corporate whether alone or together with one or more other bodies corporate incorporated outside India.]"
5. Therefore, in this case, two points for determination would be: -
(a) Whether as on 10.01.2007 the composition of the Board of directors of AES Chhattisgarh Energy Private Ltd. was under
the control of AES Corporation, USA?
(b) Whether as on 10.01.2007 AES Chhattisgarh Energy Private Ltd was a subsidiary of AES Corporation, USA according to the laws of USA?
6. If answer to one of these two questions is yes, the accused will be acquitted, otherwise they will be convicted for the offence of cheating the Ministry of Coal.
7. Brief Facts: - On 06.11.2006, the Ministry of Coal had invited applications from the companies registered under Indian Companies Act, 1956 for allocation of 38 coal blocks for captive mining, D-24, Page 73-94, PDF 4003-4024.
8. Besides several other documents, applicant companies had to provide with their applications (i) certified copy of their Memorandum and Articles of Association and (ii) their Audited Annual Accounts/reports of last three years, D-24, Page 82, PDF 4011.
9. As per the guidelines of Ministry of Coal, D-24, Page 90, PDF 4019, inter-se-priority for allocation of a coal block among competing applicants was to be decided, besides other things, on the basis of (i) net worth of the applicant company (or in the case of a new SP/JV, the net worth of the principals) and (ii) track record and financial strength of the company.
10. The proposals of the private companies for captive mining were to be screened by the Screening Committee following the guidelines laid down in that regard and based on the recommendations of the Screening Committee, the Ministry of Coal had to make the final allocations.
11. AES Chhattisgarh Energy Private Ltd vide letter dated 10.01.2007 submitted its application for allocation of Sayang coal block in Chhattisgarh State along with some other coal blocks for their proposed 1000 MW power project at Raigarh District of Chhattisgarh State, D-5, Page-1-391, PDF-325-985. It was mentioned by Sh. Sanjeev Aggarwal in the covering letter that AES Chhattisgarh Energy Private Limited was 100% subsidiary of AES Corporation, USA.
12. In the application, an additional note was appended mentioning that AES Chhattisgarh Energy and Power Limited is a subsidiary of AES Corporation and is Special-Purpose Vehicle (SPV) constituted to implement the project and accordingly it will draw its financial and technical strength from AES Corporation.
13. In the footnote below the financial figures, it was mentioned that AES Corporation follows calendar year for accounting, hence they have submitted for latest 03 years financial numbers i.e., year ending 31.12.2003, 2004, 2005, respectively. As required in the guidelines, AES Chhattisgarh Energy Private Ltd had enclosed various documents including its Memorandum and Articles of Association and Annual Reports of AES Corporation for the last three years.
14. The meetings of the 35th Screening Committee were held during the month of June-September, 2007. Presentations by the applicant companies were scheduled from 20-23 June, 2007. During presentations, the companies were required to submit feedback forms and in case any company had made any progress towards establishment of the end use project or in respect of the company itself, the same had to be reflected through the feedback form.
15. Sanjeev Aggarwal, director of AES Chhattisgarh Energy Private Ltd made presentations on 21.06.2007 before the 35 th Screening Committee on 21.06.2007 and submitted feedback form signed by him as authorised signatory of AES Chhattisgarh Energy Private Ltd, D-19, Page-5-7, PDF-3478.
16. In the feedback form, he mentioned that AES Chhattisgarh Energy Private Ltd was 100% subsidiary of AES Corporation, USA. He also mentioned that the net worth of the company as on 31.12.2006 is Rs.12,448 Crores. He also mentioned that AES Corporation, USA follows calendar year for accounting hence they are submitting the net worth as on 31st December, 2006.
17. The applications of the applicant companies sent to the Ministry of Power were assessed by Central Electricity Authority (CEA) on the basis of pre-qualification criteria which was that the net worth of the company should be Rs.0.50 Crores per MW of the maximum capacity as per the guidelines laid for Ultra Mega Power Projects (UMPPs) and project capacity should be minimum of 500 MW and maximum 1000 MW. For further shortlisting, CEA had adopted the criteria of a) identification of site and status of acquisition of land and b) allocation of water, D-30, Page-80-85, PDF-5067.
18. Ministry of Power, vide its letter dated 30.07.2007 recommended to the Ministry of Coal allocation of Sayang coal block in favour of AES Chhattisgarh Energy Private Ltd, D-11, Page-215- 218, PDF-1547.
19. The 35th Screening Committee meeting held on 13.09.2007 recommended allocation of Sayang coal block in the State of Chhattisgarh in favour of AES Chhattisgarh Energy Private Ltd, D-13, Page-1-41, PDF-1809.
20. Thereafter, approval of the Prime Minister who was the Minister for Coal was obtained and on 06.11.2007, the Ministry of Coal issued allocation letter along with milestones chart regarding allocation of Sayang coal block in favour of AES Chhattisgarh Energy Private Ltd, D-14, Page-85-89, PDF-2240.
21. The allegations in the chargesheet are that AES Chhattisgarh Energy Private Ltd was not a subsidiary company of AES Corporation, USA on the date of application as well as on the date of making presentations before the 35th Screening Committee and it was not a subsidiary company of AES Corporation, USA even the date of allocation of Sayang coal block i.e., on 06.11.2007. Thus, AES Chhattisgarh Energy Private Ltd was not legally entitled to claim itself as one of the subsidiary companies of AES Corporation, USA in terms of Indian Companies Act, 1956 and could not have used the financial figures of AES Corporation, USA at the time of submitting application to the Ministry of Coal as well as at the time of making presentations before the 35th Screening Committee. The claim of Sanjeev Kumar Aggarwal in this regard was wrong and misleading.
22. The chargesheet alleges that Sanjeev Kumar Aggarwal, the then director of AES Chhattisgarh Energy Private Ltd got Sayang coal block in Chhattisgarh State in favour of AES Chhattisgarh Energy Private Ltd, by way of misrepresentation and concealment of facts before the Ministry of Coal, Ministry of Power, Government of Chhattisgarh as well as before the 35th Screening Committee.
23. The chargesheet alleges that Sanjeev Kumar Aggarwal intentionally and deceitfully concealed material facts and misrepresented before the Ministry of Coal and before the 35 th Screening Committee by using the financial figures of AES Corporation, USA for its advantage and got Sayang coal block allocated in his favour without having any legal support regarding his claim that AES Chhattisgarh Energy Private Ltd was a 100 % subsidiary of AES Corporation, USA at the time of submission of application dated 10.01.2007 and during the presentation made by the company before 35th Screening Committee.
24. Mainly, there are two reasons assigned for alleging that M/s AES Chhattisgarh Energy Private Limited was not a subsidiary of M/s AES Corporation USA.
25. The first reason is that 'AES Chhatisgarh Energy Private Ltd' was incorporated on 16.11.2006 at the office of Registrar of Companies, NCT of Delhi and Haryana, D-92, Page-305, PDF-9903. Authorised share capital of the company at the time of its incorporation was Rs.1,00,000/-. The company was incorporated with two initial promoters/directors, namely (1) Sanjeev Kumar Aggarwal S/o late Jagdish Prasad Aggarwal R/o 130 Aspen Greens, Nirvana, South City-II, Gurgaon and (2) Soumendra Chandra Rout S/0 late Suresh Chandra Rout R/o N3/124, VIP Colony, Jayadev Vihar, Bhubaneshwar, Orissa, D-5, Page-116, PDF-446. Both the directors were having equity share capital of Rs.50,000/- each. According to the Memorandum of Articles and Association of the Company, at the time of its incorporation, AES Chhattisgarh Energy Private Ltd belonged to Sanjeev Kumar Aggarwal and Soumendra Chandra Rout. On 15.11.2007, the equity shares of AES Chhattisgarh Energy Private Ltd amounting to Rs.1,00,000 equally held by Sanjeev Kumar Aggarwal and Soumendra Chandra Rout were transferred to AES India Holdings (Mauritius) and AES OPGC Holdings (Mauritius). Soumendra Chandra Rout transferred his 5000 equity shares of Rs.10/- each to AES OPGC Holding, Mauritius and Sanjeev Kumar Aggarwal transferred his 5000 equity shares of Rs.10/- each to AES India Holding, Mauritius on 15.11.2007, D-43, Page-2-3, PDF-6746. Therefore, AES Chhattisgarh Energy Power Limited had become the subsidiary of AES Corporation on 15.11.2207 only and was not its subsidiary before that.
26. The second reason for alleging that AES Chhattisgarh Energy Private Limited was not a subsidiary of AES Corporation USA is that as on 31.12.2006 AES Chhattisgarh Energy Private Ltd was not in the list of subsidiary companies of AES Corporation, USA, D-59, Page-302, PDF-8149. The name of AES Chhattisgarh Energy Private Ltd appeared in the list of subsidiary companies of AES Corporation, USA on 31.12.2007 i.e., subsequent to transfer of shares by Sanjeev Kumar Aggarwal and Soumendra Chandra Rout of AES Chhattisgarh Energy Private Ltd to AES OPGC Holding and AES India Holding (Mauritius) which were already subsidiary companies of AES Corporation, USA, D-60, Page-450, PDF-8643.
27. The chargesheet was filed alleging the offence of cheating punishable under section 420 of IPC against AES Chhattisgarh Energy Private Ltd and its Director Sanjeev Kumar Aggarwal.
28. Charge against the Accused: Following charges were framed against accused persons:
"That you i.e., AES Chhattisgarh Energy Private Ltd and Sanjeev Kumar Aggarwal during the year 2006-2008 at, Chhattisgarh, New Delhi and other places entered into a criminal conspiracy so as to procure allocation of Sayang coal block situated in the state of Chhattisgarh in favour of M/s AES Chhattisgarh Energy Private Ltd by adopting various illegal means viz making false claims about the status of company, i.e., M/s AES Chhattisgarh Energy Private Ltd as being a subsidiary company of AES Corporation, USA and also using the figures of financial strength of M/s AES Corporation, USA with respect to the net worth, track record and financial strength, etc., and also as regard the techno-economic status of the applicant company as on 10.01.2007, i.e., when application seeking allocation of coal block for captive use was submitted by the company A-1 AES Chhattisgarh Energy Private Ltd under the signatures of A- 2 Sanjeev Kumar Aggarwal, Director of the company and subsequently also in the feedback form as was submitted before 35th Screening Committee, on behalf of the company and again under the signatures of A-2 Sanjeev Kumar Aggarwal and while knowing the said claims to be false, and thereby obtained recommendation in favour of A-1 AES Chhattisgarh Energy Private Ltd from 35th Screening Committee followed by allocation of Sayang coal block and subsequently obtained allocation of the said coal block from MoC, Government of India on the basis of said recommendation and thus, by way of various acts of omission and commission amounting to cheating, you, both thereby committed offence of criminal conspiracy punishable u/s 120 B IPC and within my cognizance. Secondly, during the aforesaid period and, in furtherance of the common object of the criminal conspiracy as described above, you both did various acts of cheating, as described above, and also in the substantive charge framed separately and you both thereby committed offences punishable under section 120 B r/w 420 IPC and within my cognizance."
29. Further, both the accused were also charged as under:
"That you i.e., M/s AES Chhattisgarh Energy Private Ltd and Sanjeev Kumar Aggarwal during the year 2006-2008 at Chhattisgarh, New Delhi and other places in furtherance of common object of the criminal conspiracy hatched by you both cheated Ministry of Coal, Government of India, dishonestly or fraudulently by procuring allocation of coal block "Sayang"
situated in the state of Chhattisgarh in favour of M/s Chhattisgarh Energy Private Ltd by adopting various illegal means viz, by making false claims about the status of the company i.e., AES Chhattisgarh Energy Private Ltd as being a subsidiary company of AES Corporation, USA, and also used the figures of financial strength of AES Corporation, USA with respect to the net worth, track record and financial strength etc., and also as regard the techno-economic status of the applicant company as on 10.01.2007 i.e., when application seeking allocation of coal block for captive use was submitted by the company A-1 AES Chhattisgarh Energy Private Ltd under the signatures of A-2 Sanjeev Kumar Aggarwal, Director of the company and subsequently also in the feedback form as was submitted before, 35th Screening Committee, on behalf of the company and again under the signatures of A-2 Sanjeev Kumar Aggarwal and while knowing the said claims to be false, and you both thereby induced 35th Screening Committee, MoC, Government of India to make a recommendation for allocation of Sayang coal block in favour of A-1 AES Chhattisgarh Energy Private Ltd believing the said claims made in the application and feedback form to be true and thereby inducing MoC, Government of India to allocate Sayang coal block in favour of company A-1 AES Chhattisgarh Energy Private Ltd and you both thereby committed an offence u/s 420 IPC and within my cognizance."
30. Prosecution Evidence: Prosecution examined 18 witnesses to prove its case.
31. PW 1 Sh. S.P. Rana, Dy. S.P., CBI and PW 2 Sh. Suresh Kumar, Dy. S.P., CBI have deposed about enquiry proceedings conducted by them in PE 219-2012-E-0002-EO-I.
32. PW 3 Sh. Sampath Narayanan, the Under Secretary, Ministry of Power and PW 4 Sh. Ved Prakash Sharma, Section Officer, CA-I Section in Ministry of Coal had provided various documents during investigation of this case.
33. PW 5 Sh. Ram Avtar Asiwal, Senior Manager, Bank of Baroda, Delhi had proved specimen signatures/handwriting of Sanjeev Aggarwal.
34. PW 6 Sh. V.S. Rana was the Under Secretary in Ministry of Coal from August 2005 December 2013. He deposed about the procedure followed in Ministry of Coal for allocation of coal blocks and proved various documents starting from guidelines of Ministry of Coal to allocation of Sayang coal block in favour of AES Chhattisgarh Energy Pvt. Ltd.
35. PW 7 Deepak Roy, Chartered Accountant by profession was a partner in Deloitte Huskins and Sells from the year 1992 till 31.03.2021. They were the auditors of AES Chhattisgarh and the witness had prepared the audit reports of AES Group in India for the year ended on 31.03.2008. He deposed about Auditors Reports, Balance Sheets and Forms 23ACs of AES India Pvt. Ltd. and AES Chhattisgarh Energy Pvt. Ltd. for the years ending on 31.03.2007 and 31.03.2008.
36. PW 8 Dr Raj Singh was the Regional Director, Northern Region, Delhi, in the Ministry of Corporate Affairs during the period 2014 to 2016. This witness was examined by prosecution to show that as per Indian Companies Act, 1956 AES Chhattisgarh Energy Pvt. Ltd. was not a subsidiary of AES Corporation, USA.
37. PW 9 Sh. Rajneesh Kumar Singh was posted as Assistant Registrar of Companies in the office of Registrar of Companies in the NCT of Delhi and Haryana during 2014-15. He was examined as he had provided certain documents to CBI pertaining to AES Chhattisgarh Energy Private Ltd and AES India Private Ltd.
38. PW 10 Sh. Manjit Singh Puri and PW 11 Sh. Rohtash Dahiya had deposed about the proceedings which took place in Central Electricity Authority (CEA) regarding recommendations of Ministry of Power for allocation of coal blocks.
39. PW 12 Sh. Nesar Ahmad, Company Secretary was examined as his office had provided various professional services to M/s AES Chhattisgarh Energy Pvt. Ltd.
40. PW 13 Sh. Aditya Jain was the Director (Engineering and Construction) in AES India Private Ltd from May 2007 to 30.11.2008. He had attended the Screening Committee Meeting in June 2007.
41. PW 14 Sh. Debasish Das was the Special Secretary for the Government of Chhattisgarh in the Department of Energy during 2006-08. He had proved letter dated 18.06.2007 written by him to the Ministry of Coal recommending the name of AES Chhattisgarh Energy Private Ltd for allocation of a coal block in the State of Chhattisgarh. He also proved another letter dated 05.09.2007 written by him to the Ministry of Coal after verification of claims of applicant companies regarding land, quantity of water, status of civil construction and status of environment clearance etc.
42. PW 15 Sh. Sanjay Chadha was the Director of Investment Promotion Cell in Ministry of Power during the relevant time and deposed about various decisions of Ministry of Power for recommending allocation of coal block to different companies dealing with power sector.
43. PW 16 Sh. Bhola Nath Shukla was Director (Technical) in CMPDIL and deposed about correspondence with CBI regarding allocation of coal block in favour of AES Chhattisgarh Energy Pvt. Ltd.
44. PW 17 is Sh. Manoj Kumar, DSP, CBI who had also conducted some investigation in this case.
45. PW 18 is Sh. Vidhi Kumar Birdi who as SP, EO-I Branch had remained associated with coal allocation matters in supervisory capacity. Investigation in present case was conducted under his supervision by Sh. J.B. Lakra, Inspector who passed away before his statement could be recorded in this case.
46. Statement of the Accused u/s 313 of Cr.P.C., written statement u/s 315 (5) Cr.P.C. and Defence Evidence: On completion of prosecution evidence, statements of the accused u/s 313 Cr.P.C. were recorded. They also filed their written statements u/s 315 (5) of Cr.P.C. The accused examined five witnesses in their defence. DW-1 is Sh. Allena Srinivasa Rao, who had worked in various capacities in AES Corporation from 1999 till 2016. DW-2 Sh. Sharad Pungalia had worked as Assistant General Manager (Business Development) at AES India till October, 2010. DW-3 is Sh. Robert David Mill who was part of Independent Review Team (IRT) of AES Corporation, USA which was having two responsibilities, i) providing independent review of new investment opportunities seeking approval and allocation of AES Corporation capital and ii) tracking projects, assisting teams prepare materials, collating materials and distributing the same to the members of the Development Council. DW-4 Sh. S. Balasubramanian, Ex- Chairman of Company Law Board was examined as an expert witness on Corporate Law. DW-5 Prof. Jonathan Macey, Sam Harris Professor of Corporate Law, Corporate Finance and Securities Law at Yale Law School and Professor at the Yale School of Management was examined as an expert on Company Law applicable in USA because as per Section 4(6) of Indian Companies Act, 1956 if two companies in USA had holding company and subsidiary company relationship, they are to be treated as having Holding-Subsidiary company relationship in India also.
47. Arguments were addressed by Sh. A.P. Singh, Ld. DLA for CBI and Sh. Vikas Pahwa, Ld. Senior Advocate and Sh. Tanvir Ahmad Mir, Ld. Counsel for the accused.
48. Arguments of CBI: It was submitted on behalf of CBI that FIR in this case was recorded on 06.05.2015, chargesheet was filed on 09.01.2017, cognizance was taken on 31.05.2017 and charges were framed on 06.01.2020 under section 420 B IPC and 120 B IPC, 120 B IPC read with 420 IPC.
49. The learned DLA of CBI read from para-16.35 and 16.36 of the chargesheet to argue that Sanjeev Kumar Aggarwal intentionally and deceitfully concealed the material facts and misrepresented before the Ministry of Coal as well as before the 35th Screening Committee by using the financial figures of AES Corporation, USA for its advantage and got Sayang Coal Block allocated in favour of AES Chhattisgarh Energy Pvt. Ltd. without any legal support regarding their claim that AES Chhattisgarh Energy Private Ltd was a 100% subsidiary of AES Corporation, USA at the time of submission of application dated 10.01.2007, at the time of submission of the feedback form on 21.06.2007 when the presentations were made before the 35th screening committee and at the time of issuance of final allocation letter in favour of AES Chhattisgarh Energy Pvt. Ltd. on 06.11.2007.
50. Learned DLA of CBI read in detail from the order on charge dated 06.01.2020 and also submitted that the order on charge was challenged by the accused before the Hon'ble Supreme Court by filing SLP Crl. No. 1919-1920/2020 but vide orders dated 06.03.2020 the said SLP was dismissed as withdrawn. However, the Hon'ble Supreme Court had recorded that all the differences are left open.
51. It was further submitted that during admission/denial of documents under section 294 of Cr.P.C., the accused have admitted most of the documents but have not admitted D-56 which is the record of Registrar of Companies submitted by AES Chhattisgarh Energy Private Ltd as in those records the company had unequivocally indicated that it is not subsidiary of any other company.
52. It was also submitted that in their statement under Section 313 of Cr.P.C especially in response to question No. 383, the accused have stated that the prosecution witnesses are interested witnesses. It is submitted that this is only an evasive stand in as much as the witnesses had no interest in prosecution of the accused persons.
53. It was submitted that pursuant to advertisement issued by Ministry of Coal for inviting applications for allocation of coal blocks, Ex. P-42/PW-6 (Colly), D-24, Page 73, PDF 4002 application was submitted by the accused persons also for allocation of a coal block.
54. It is submitted that M/s AES Chhattisgarh Energy Private Ltd. was not engaged in production of power at the time of giving the application as it was incorporated on 16.11.2006 and was not eligible to apply for allocation of a coal block.
55. In their covering letter dated 10.01.2007 Ex. P-25/PW-1, D- 5, Page 6, PDF 331, it was claimed by the accused company that it is 100% subsidiary of AES Corporation, USA.
56. He pointed out that at Ex. P-1 (Colly)/Ex. P-25/PW-1 (Colly), D-5, Page 109, PDF 434 are the Minutes of Meeting of the Board of directors of AES Chhattisgarh Energy Private Ltd dated 10.01.2007 authorising Sanjeev Aggarwal to give an application for allocation of coal block with Ministry of Coal. It is submitted that the minutes are totally silent about association of AES Chhattisgarh Energy Private Ltd either with AES Corporation, USA or AES India Pvt. Limited.
57. Reference was made to Memorandum of Articles of AES Chhattisgarh Energy Pvt. Limited, Ex. P-1 (Colly)/P-25/PW-1 (Colly), D-5, Page 110 @ 116, PDF 446 where there is no mention of AES Corporation, USA or AES OPGC Holdings or AES India Holdings (Mauritius) or AES India Pvt. Limited being the holding company of AES Chhattisgarh Energy Pvt. Limited.
58. Attention of the court was also drawn to Ex. P-1 (Colly)/P- 25/PW-1 (Colly), D-5, Page 117@120, PDF 454 which are Articles of Association of AES Chhattisgarh Energy Private Ltd where only the names of two directors namely Sanjeev Aggarwal and Soumendra Chandra Rout are mentioned. Attention of the court was also drawn to Ex. P-1(Colly)/Ex. P-25/PW-1, D-5, Page 124, PDF 461 to show that in the description of subscribers, only the names of aforesaid two persons are recorded. He submitted that from the Memorandum of Association and Articles of Association, it is not evident that the control of this company was with any other company. Nothing is there to show that AES Corporation USA is the holding company and AES Chhattisgarh Energy Private Ltd is the subsidiary company.
59. It was submitted that as per Annexure II - Project Status Note, PDF 335 which was enclosed by Accused No. 1 company with its application for allocation of coal block, AES India had signed a Memorandum of Understanding (MOU) with the Government of Chhattisgarh and Chhattisgarh State Electricity Board dated March 03, 2006 for setting up of integrated coal mine and 1000 to 1200 MW thermal power project (Project) in the Chhattisgarh State.
60. It was submitted that in the Annexure III-Details of permits and clearances applied, PDF 337 it was mentioned that Cabinet Committee on Economic Affairs on 02.11.2006 has accorded approval to AES for bringing in foreign investment for setting up a 1000-1200 MW Greenfield Power Project with integrated captive coal mine in the state of Chhattisgarh and SPV in the name of AES Chhattisgarh Energy Private Ltd is incorporated on 16.11.2006.
61. In Annexure-IV-Other relevant information, PDF 338, it is mentioned that AES is one of the world's largest global power companies with 2005 revenues of more than US $ 11 billion.
62. At Annexure-V-Experience with reference to end use project, PDF 339, it was mentioned that AES Chhattisgarh Energy Private Ltd is a special purpose vehicle incorporated under the Companies Act 1956, which is a subsidiary of AES Corporation, USA to carry out the proposed end use Project in the state of Chhattisgarh.
63. In the Annexure-VI-Experience with reference to mining, PDF 349, the experience of AES in coal mining was provided at Maikuben Coal Mine at Chhattisgarh. At Page 125-382, PDF 462, Annual Report of AES Corporation for the year 2003 was enclosed.
64. At Page 387, PDF 981, the accused company had enclosed letter dated 03.07.2006 written by Special Secretary (Energy), Government of Chhattisgarh to the Director, Business Development, AES India Pvt. Limited vide which no objection of Government of Chhattisgarh was conveyed to the feasibility report for the 1200 MW coal based Thermal Power Project. The company was advised to submit application to State Investment Promotion Board for allotment of land, allocation of water, application for allotment of coal linkage, allotment of captive coal blocks and to obtain clearance from Chhattisgarh Environmental Conservation Board and other necessary clearances.
65. At Page 388, PDF 982, the accused company had enclosed letter dated 03.01.2007 from Water Resource Department addressed to AES India Pvt. Limited.
66. The company had also enclosed letter dated 10.01.2007, PDF 984, from Infrastructure Development Finance Company Limited addressed to AES India Pvt. Limited conveying its in- principle confirmation to consider providing debt for proposed power project subject to allocation of captive coal mines.
67. The Ld. DLA referred to Ex. P-84/PW-8, D-56, Page 120, PDF 7563 which is Form 23AC pursuant to Section 220 of the Companies Act, 1956 for filing Balance Sheet and other documents with the Registrar of Companies pertaining to AES Chhattisgarh Energy Pvt. Limited for the year ending 31.03.2007 where in paragraph 3 (a) the company had mentioned that it is not a subsidiary company under Section 4 of the Companies Act. He pointed out that this information was provided by Soumendra Chandra Rout on 22.09.2007 under his digital signatures.
68. Attention of the court was drawn to cross examination of DW-2 Sh. Sharad Pungalia recorded on 19.08.2023 where he had denied that Form 23AC was ever shared by M/s Nesar and Associates either prior to or post filing with Accused No. 1 company.
69. However, the attention of the court was drawn to Ex.P-35 (Colly), D-67, Page 43, PDF 9316 which are the Minutes of Meeting of AES Chhattisgarh Energy Pvt. Ltd. held on 21.09.2007 where it is recorded that the Balance Sheet as at March 31, 2007 was approved by the directors Sh. Sanjeev Aggarwal and Sh. Soumendra Chandra Rout.
70. At Ex. P-35 (Colly), D-67, Page 47, PDF 9320, which are the minutes dated 22.09.2007, it was resolved that Shri Sanjeev Kumar Aggarwal and Shri Soumendra Chandra Rout were authorised to digitally sign the Forms 23 AC and any other relevant forms for the financial year 2007 to be filed with the Registrar of Companies, NCT of Delhi and Haryana, New Delhi.
71. It was submitted that this is an important piece of document which shows that the accused Sanjeev Kumar Aggarwal had the knowledge that in Form 23 AC, the company has not claimed itself to be subsidiary of any other company.
72. It was further submitted that the Balance Sheet as at 31.03.2007 was signed by both the directors namely Sanjeev Kumar Aggarwal and Soumendra Chandra Rout on 21.09.2007, Ex. P- 80/PW-7, D-56, Page 130, PDF 7573. At Page 134, PDF 7577 of the balance sheet is the 'BACKGROUND' which is as under:
"AES Chhattisgarh Energy Private Limited ('the Company') was incorporated in India on November 16, 2006 to carry on, promote, collaborate in and assist in India and elsewhere the business of development of power projects of (not legible) the company is a closely held company with 5000 shares each being held by Mr. Sanjeev Aggarwal and Mr. Soumendra Chandra Rout."
73. It was submitted that the 'Background' is silent about any relationship between AES Chhattisgarh Energy Private Limited and AES India or AES Corporation, USA.
74. On the other hand, in the Balance Sheet of AES India for the year ending on 31.03.2007, the 'BACKGROUND' at Ex. P-85/PW-9, D-55, Page 264, PDF 7380 clearly mentions that AES India Private Ltd is a closely held company with 1122440 shares being held by AES Corporation, USA and hundred shares being held by AES India LLC, USA. It reads as under:
"AES (India) Private Limited ('the Company') was incorporated in India on November 13, 1998 to provide consultancy services to various power projects in India and elsewhere. The company is a closely held company with 1,122,440 shares being held by AES Corporation, USA and 100 shares being held by AES India LLC USA."
75. To show that the initial funds of Rs.1,00,000 for incorporating AES Chhattisgarh Energy Private Ltd were not given by AES India, reference is made to Ex. P-80/PW-7, D-56, Page 137, PDF 7580 of the Balance Sheet of AES Chhattisgarh Energy Private Limited for the year ending at 31.03.2007 where "Secured Loans" and "Unsecured Loans" are shown as "Nil".
76. Further, Additional Attachments to Form 23 AC, Ex. P- 81/PW-7, D-56, Page 141, PDF 7584 pertaining to Balance Sheet of AES Chhattisgarh Energy Private Limited as at 31.03.2008 the Change in Ownership is described as under:
"During the year there had been a change in the ownership of the company. There had been transfer of shares; the shareholding pattern of the company as on date is as follows:
Name of Shareholder No. of shares Amount % of
Shareholding
AES INDIA HOLDINGS 5914299 59142990 99.99
(Mauritius)
AES OPGC HOLDING 591 5910 0.01
Total 5914890 59148900 100.00
Allotment of Shares
During the financial year 08, there had been allotment of 59,04,890 equity shares of Rs.10/- each against the share application pending allotment.
77. To make the allegations clear, reliance is placed on Form 23 AC submitted by AES Chhattisgarh Energy Private Ltd with the Registrar of Companies for the year ending at 31.03.2008, Ex. P- 81/PW-7, D-56, Page 145, PDF 7588. In this form, at para-8 (a), the response to the question "Whether the Company is a subsidiary company as defined under section 4" is given as "Yes".
78. The submission of CBI is that AES Chhattisgarh Energy Private Limited became subsidiary of AES Corporation USA on 15.11.2007 when its shares were transferred to AES India Holdings (Mauritius) (99.99%) and AES OPGC Holdings (0.01%) and that is why in the balance sheet of the year ending at 31.03.2008, AES Chhattisgarh Energy Private Limited claimed itself to be a subsidiary company for the first time in the Form 23 AC submitted with Registrar of Companies.
79. To further show that even AES India Private Ltd was not a subsidiary of any other company including AES Corporation, USA, reference is made to Ex. P-81/PW-9 (Colly), D-55, Page 240, PDF 7355 which is the Form 23 AC submitted by AES India Private Ltd with the Registrar of Companies for the year ending on 31.03.2007 where in para 3(a), the response to the question "Whether the company is a subsidiary company as defined under section 4" is "No".
80. To show that AES Chhattisgarh Energy Private Ltd had become a subsidiary of AES OPGC Holding and AES India Holdings (Mauritius) only on 15.11.2007, reliance is placed on Ex. P-13 (Colly), D-43, Page 2 and 3, PDF 6746 which are the share certificates showing transfer of shares from Soumendra Chandra Rout and Sanjeev Kumar Aggarwal in favour of AES OPGC Holding and AES India Holdings (Mauritius) respectively.
81. To further show that there was no Holding Company- Subsidiary Company Relationship between AES Corporation, USA and AES Chhattisgarh Energy Private Ltd, reference is made to Ex. P- 14 (Colly), D-44, Page 3, PDF 6769 and its back page where the particulars with regard to details regarding shares to be transferred in para 7 is mentioned as under:
7 Details regarding shares to be transferred Date of the Number Face Value Negotiated Amount of transaction of shares Price for the consideration transfer 25.07.2007 5,000 10 10 50,000
82. This transaction is for transfer of 5000 shares of Sanjeev Aggarwal in favour of AES India Holdings (Mauritius) and similar transaction between Soumendra Chandra Rout and AES OPGC Holdings (Mauritius) is available at of Ex. P-14 (Colly), D-44, Page 6 and 7, PDF 6773.
83. The submission is that in case there was Holding Company-
Subsidiary Company Relationship, Sanjeev Aggarwal and Soumendra Chandra Rout would not have received Rs.50,000/- each for the transfer of these shares.
84. Reliance is also placed on Minutes of the Meeting of the Board of Directors of AES Chhattisgarh Energy Private Ltd held on 15.11.2007 to approve the transfer of shares, Ex. P-35 (colly), D-67, Page 48, PDF 9321 Para-3 of the minutes is as under:
"3. To approve the Transfer of Shares The Chairman informed the Board that the Company had received transfer deeds together with share certificates and also Form FC-TRS duly certified by ICICI Bank, New Delhi, confirming compliance of the provisions of FEMA in respect of transfer of shares by way of sale from resident shareholders i.e. Mr. Soumendra Chandra Rout and Mr. Sanjeev Aggarwal, the subscribers to the Memorandum of Association in favour of AES OPGC Holdings, Mauritius (5000 equity shares) and AES India Holdings (Mauritius), Mauritius (5000 equity shares) for cash at par value of Rs. 10/- each share.
85. The Board after deliberations, passed the following resolution unanimously-
"RESOLVED THAT approval of the Board be and is hereby accorded to transfer 10,000 (Ten Thousand) Equity Shares of Rs. 10/- each for cash at par as per the details given here under:
T. No. of Distinctive Name of Folio Name of Folio No. Shares Nos. Transferor No. Transferee No. Chandra Rout Holdings 2 5,000 5000- Sanjeev Kumar 02 AES India 04 10000 Aggarwal Holdings (Mauritius) RESOLVED FURTHER THAT Mr. Sanjeev Agarwal and/or Mr. Soumendra Chandra Rout, Directors of the Company be and is (are) hereby authorized severally to make necessary endorsement in the share certificate(s) and send the same to the Transferee and to do all such acts, deeds and things as may be required or considered necessary or incidental thereto."
86. Reliance is also placed on Section 187 C of the Companies act, 1956, which is as under:
187 C. DECLARATION BY PERSONS NOT HOLDING BENEFICIAL INTEREST IN ANY SHARE (1) Notwithstanding anything contained in section 150, section 153 B or section 187 B, a person, whose name is entered, at the commencement of the Companies (Amendment) Act, 1974 (41 of 1974), or at any time thereafter, in the register of members of a company as the holder of a share in that company but who does not hold the beneficial interest in such share, shall, within such time and in such form as may be prescribed, make a declaration to the company specifying the name and other particulars of the person who holds the beneficial interest in such share.
(2) Notwithstanding anything contained elsewhere in this Act, a person who holds a beneficial interest in a share or a class of shares of a company shall, within thirty days from the commencement of the Companies (Amendment) Act, 1974, or within thirty days after his becoming such beneficial owner, whichever is later, make a declaration to the company specifying the nature of his interest, particulars of the person in whose name the shares stand registered in the books of the company and such other particulars as may be prescribed. (3) Whenever there is a change in the beneficial interest in such shares the beneficial owner shall, within thirty days from the date of such change, make a declaration to the company in such form and containing such particulars as may be prescribed. (4) Notwithstanding anything contained in section 153 where any declaration referred to in sub-section (1), sub-section (2) or sub-section (3) is made to a company, the company shall make a note of such declaration, in its register of members and shall file, within thirty days from the date of receipt of the declaration by it, a return in the prescribed form with the Registrar with regard to such declaration.
(5)(a) If any person, being required by the provisions of sub- section (1), sub-section (2) or sub-section (3), to make a declaration, fails, without any reasonable excuse, to do so, he shall be punishable with fine which may extend to one thousand rupees for every day during which the failure continues. (b) If a company fails to comply with the provisions of this section, the company, and every officer of the company who is in default, shall be punishable with fine which may extend to one hundred rupees for every day during which the default continues. (6) Any charge, promissory note or any other collateral agreement, created, executed or entered into in relation to any share, by the ostensible owner thereof, or any hypothecation by the ostensible owner of any share, in respect of which a declaration is required to be made under the foregoing provisions of this section, but not so declared, shall not be enforceable by the beneficial owner or any person claiming through him.
(7) Nothing in this section shall be deemed to prejudice the obligation of a company to pay dividend in accordance with the provisions of section 206, and the obligation shall, on such payment, stand discharged.
[(8) The provisions of this section shall not apply to the trustee referred to in section 187B and after the commencement of Companies (Amendment) Act, 2000.]
87. In view of aforementioned provisions of Companies Act, 1956 it is submitted on behalf of CBI that in case Sanjeev Kumar Aggarwal and Soumendra Chandra Rout were not holding the beneficial interest in shares of AES Chhattisgarh Energy Private Ltd and the beneficial interest in the shares of this company was held by AES Corporation, USA, in that event, they should have made a declaration to the company specifying the name and other particulars of the person who was holding the beneficial interest in such shares and the company should have also filed a declaration with the Registrar of Companies. However, in this case, neither any declaration was made by Sanjeev Kumar Aggarwal/Soumendra Chandra Rout nor by AES Corporation, USA with the company AES Chhattisgarh Energy Private Ltd nor any such declaration was made by AES Chhattisgarh Energy Private Ltd with the Registrar of Companies.
88. Reference was made to the response of DW-4 Shri S. Balasubramanian recorded during cross examination of the said witness on 06.10.2023, Page 7 of 10 where he stated that as far as Section 187 C of the Companies Act, 1956 is concerned, the law is very clear that if someone holds shares for the benefit of somebody else then both the parties have to make declaration as specified in that section.
89. At this stage, reference was made to Exhibit P-27, D-59, PDF 7844 which is Form 10-K (Annual Report) of AES Corporation filed on 23.05.2007 for the period ending 31.12.2006. At Page 302, PDF 8149 of this report is the list of subsidiaries of AES Corporation. It is pointed out that the name of AES Chhattisgarh Energy Private Ltd is not mentioned in the long list of subsidiaries of AES Corporation, USA. However, in the Form 10-K (Annual Report) of AES Corporation filed on 17.03.2008 for the period ending 31.12.2007 which is Exhibit P-28, D-60, Page 450, PDF 8643 the name of AES Chhattisgarh Energy Private Ltd is duly mentioned as one of the subsidiaries of AES Corporation.
90. Thus, it is the submission of prosecution that AES Chhattisgarh Energy Private Ltd had become a subsidiary of AES Corporation only after all of its shares were transferred from Sanjeev Aggarwal and Soumendra Chandra Rout to AES OPGC (Mauritius) and AES OPGC Holdings (Mauritius) on 15.11.2007 but before that the coal block allocation was already procured in favour of AES Chhattisgarh Energy Private Ltd on 06.11.2007 by cheating Ministry of Coal.
91. It is submitted that in the Feedback Form which was given by AES Chhattisgarh Energy Private Ltd to the Screening Committee during presentations made on 21.06.2007, it was mentioned that the said company is a wholly-owned subsidiary of AES Corporation, USA. However, it is submitted that AES Chhattisgarh Energy Private Ltd had become subsidiary of AES Corporation, USA on 15.11.2007. It is submitted that on 06.11.2007 when the allocation letter was issued in favour of AES Chhattisgarh Energy Private Ltd, the said company was not a subsidiary of AES Corporation, USA.
92. Next, reference is made to the attendance sheet of the representatives of the applicant companies who had attended the Screening Committee meeting on 21.06.2007 which is available as Exhibit P-3/PW 1, D-11, Page 67, PDF 1396. It is submitted that six persons appeared before the Screening Committee. They were Sh.
Venu Nambiar, VP, Sanjeev Aggarwal, Director (BD), Sharad Pangulia, G. M. (BD), Sh. Aditya Jain, Director (E & C), K.P. Singh and R.B. Mathur. They all mentioned the name of their Office/Organisation as "AES Chhattisgarh." It is submitted that none of them named their Office/Organisation as "AES Corporation, USA."
93. It is submitted that the final Screening Committee meeting took place on 13.09.2007 when the decision was taken to allocate Sayang coal block in favour of AES Chhattisgarh Energy Private Ltd. This recommendation finally resulted in issuance of allocation letter dated 06.11.2007 in favour of AES Chhattisgarh Energy Private Ltd, Exhibit P-5 (colly), D-14, Page 85-89, PDF 2240.
94. It is submitted that in case AES India Limited had given the initial corpus of Rs. 1 lakh for subscribing to the shares of AES Chhattisgarh Energy Private Ltd, then the same should have been shown in the Balance Sheet of the said company.
95. It is submitted that the Form 23AC of AES India Private Ltd, available at Exhibit P-85/PW-9, D-55, Page 243, PDF 7358 should have reflected the same. It is submitted that Part-B 1. Particulars of mobilisation and deployment of funds under the heading of secured loans shows the figure 0.00 and under the head of unsecured loans shows the figure 456.69 Rs. in thousands. At Page 252, PDF 7367 it is mentioned that the company has not granted any loans, secured or unsecured to companies, firms or other parties listed in the register maintained under Section 301 of the Companies Act 1956.
96. Similarly, AES Chhattisgarh Energy Private Ltd in the Balance Sheet as at 31.03.2007, Exhibit P-80/PW-7, D-56, Page 130, PDF 7573 mentioned "Loans and Advances" as Rs.23,380 and at Page 149, the secured loans as well as unsecured loans are mentioned as 0.00.
97. In order to rebut the submission of the accused that initial sum of Rs. 1 lakh for subscribing to the shares of AES Chhattisgarh Energy Private Ltd was given by AES India Private Ltd, reliance is placed on Ex. P-20 (Colly), D-50, PDF 7000 which are the minutes of the first meeting of the Board of Directors of AES Chhattisgarh Energy Private Ltd held on 21.11.2006, where in paragraph 8, it is recorded as under:
8. To prove the preliminary expenses The chairman informed the Board that the preliminary expenses for incorporation of the company was incurred by M/s AES India Private Ltd and placed a statement thereof initialed by him. It was proposed to prove the said statement of expenses and to credit the same to AES India Private Limited. The board considered in the matter and passed the following resolution unanimously:
"RESOLVED THAT preliminary expenses amounting to INR 41,877 (Indian Rupees Forty One Thousand Eighth Hundred Seventy Seven) incurred in connection with the incorporation of the company as per the statement submitted to the board and duly initialed by the Chairman for the purpose of identification, be and are hereby approved."
98. It is therefore submitted that in case a sum of Rs. 1 lakh was also given by AES India Private Ltd, the same would also have been reflected in the Minutes of the Meeting referred above.
99. Reliance is placed on para 68 and 72 of the judgement of the Hon'ble Supreme Court in the case of Iridium India Telecom Ltd versus Motorola Incorporated and others (2011) 1 Supreme Court Cases 74, which are as under:
"68. A bare perusal of the aforesaid section would show that it can be conveniently divided into two parts. The first part makes it necessary that the deception by the accused of the person deceived, must be fraudulent or dishonest. Such deception must induce the person deceived to: either (a) deliver property to any person; or (b) consent that any person shall retain any property. The second part also requires that the accused must by deception intentionally induce the person deceived either to do or omit to do anything which he would not do or omit, if he was not so deceived. Furthermore, such act or omission must cause or must be likely to cause damage or harm to that person in body, mind, reputation or property. Thus, it is evident that deception is a necessary ingredient for the offences of cheating under both parts of this section. The complainant, therefore, necessarily needs to prove that the inducement had been caused by the deception exercised by the accused. Such deception must necessarily produce the inducement to part with or deliver property, which the complainant would not have parted with or delivered, but for the inducement resulting from deception. The explanation to the section would clearly indicate that there must be no dishonest concealment of facts. In other words, non-disclosure of relevant information would 44 also be treated as a mis-representation of facts leading to deception.
72. According to the High Court, the respondent no. 1 did not keep the investors in dark about the Iridium System and gave them all necessary information in respect of various aspects of the system. In coming to the aforesaid conclusion, the High Court observed that "a bare perusal of the complaint shows that there is no reference to the Stock Purchase Agreements of 1993 and 1994. In fact, these two important documents contain acknowledgments of the investors about their capability of evaluating the merits and 46 risks of the purchase of the shares and their relying upon their own advisors." The High Court, therefore, negated the submission that there has not been a complete and candid disclosure of the entire material which has resulted in the deception/inducement of the appellant to make huge investment in the Iridium. This conclusion reached by the High Court did not take notice of the explanation to Section 415. The aforesaid explanation gives a statutory recognition to the legal principles established through various judicial pronouncements that misleading statements which withhold the vital facts for intentionally inducing a person to do or to omit to do something would amount to deception. Further, in case it is found that misleading statement has wrongfully caused damage to the person deceived it would amount to cheating."
100. In this case, the Investigating Officer is no more and therefore, the prosecution could not have the benefit of his statement. Reliance is also placed on Rajesh Yadav vs. State of U.P., 2022 Criminal Law Journal 2986 to submit that non-examination of the Investigating Officer will not result in acquittal of the accused when there is other incriminating evidence available on record.
101. It is submitted that PW-7 Deepak Roy, the Chartered Accountant from Deloitte Haskins & Sells who was the Auditor of AES Group of Companies in India since 2000, PW-8 Sh. Raj Singh, Regional Director, Ministry of Corporate Affairs and PW-12 Sh. Nesar Ahmad, Company Secretary who had provided secretarial services to AES Chhattisgarh Energy Private Ltd for complying with the requirements of Companies Act, 1956 have deposed clearly that before 15.11.2007, AES Chhattisgarh Energy Private Ltd. was not a subsidiary of AES Corporation, USA.
102. Reliance is also placed on State of Rajasthan & Ors. Vs. Chetan Jeff, 2022 LiveLaw (SC) 483, K. Sitaram and another versus CFL Capital Finance Service Ltd and another, criminal appeal No. 2285 of 2011, decided by the Hon'ble Supreme Court on March 21, 2017, Kanumukkala Krishnamurty vs. State of Andhra Pradesh, AIR 1965 Supreme Court 333, Abhayanand Mishra vs. The State of Bihar, AIR 1961 Supreme Court 1968, Religare Finvest Limited vs. State of NCT of Delhi & Anr., 2023 SCC Online SC 1148, Technip SA vs. SMS Holding (P) Ltd., (2005) 5 SCC 465, State of U.P. vs. Renusagar Power Co., (1998) 4 SCC 59 and Sunil Bharti Mittal vs. Central Bureau of Investigation, Crl. Appeal No. 34 of 2015 (arising out of Special Leave Petition (Crl.) No. 2961 of 2013.
103. The arguments of CBI can be summarized as under:
(i) M/s AES Chhattisgarh Energy Private Limited was incorporated on 16.11.2006, PDF 433. According to the Memorandum of Association of the Company, there were only two subscribers in as much as Soumendra Chandra Rout and Sanjeev Aggarwal had subscribed 5000 shares each, PDF 454.
According to the Articles of Association of the Company, the Board of Directors comprised of two persons namely Sanjeev Aggarwal and Soumendra Chandra Rout, PDF 461. Therefore, from Memorandum of Association and Articles of Association of the Company, it is not discernible that it was subsidiary company of any other holding company. It is also not discernible that composition of the Board of Directors of AES Chhattisgarh Energy Private Limited was under control of any other company.
(ii) The minutes of the first meeting of the Board of Directors of AES Chhattisgarh Energy Private Limited held on 21.11.2006, PDF 7000 do not show that the company was incorporated as Special Purpose Vehicle (SPV) by AES India Private Limited or AES Corporation USA. The minutes do not show that the composition of Board of Directors of the company was controlled by AES India Private Limited or AES Corporation USA. The minutes only speaks about a sum of Rs. 41,877 incurred by AES India Private Limited towards preliminary expenses for incorporation of the company and it was resolved to credit this amount to AES India Private Limited. However, the minutes do not record that a sum of Rs. 1,00,000/- was also given by AES India Private Limited for subscribing 5000 shares each by Soumendra Chandra Rout and Sanjeev Aggarwal. It shows that AES Chhattisgarh Energy Private Limited was a company which was got incorporated Soumendra Chandra Rout and Sanjeev Aggarwal independent of any connection with AES India Private Limited or AES Corporation USA.
(iii) Even the balance sheet of AES Chhattisgarh Energy Private Limited as at March, 31, 2007 shows that the secured and unsecured loans are NIL, PDF 7580. It rules out that a sum of Rs. 1,00,000/- for subscribing 5000 shares each by Sanjeev Aggarwal and Soumendra Chandra Rout was given by AES India Private Limited. Similarly, the balance sheet of AES India Private Limited as at March, 31, 2007 shows that the company has not granted any loans, secured or unsecured to companies, firms or other parties listed in the register-maintained u/s 301 of the Companies Act, 1956, PDF 7637. Therefore, the balance sheets of both the companies do not show that a sum of Rs.1,00,000/- was given by AES India Pvt. Ltd. to Sanjeev Aggarwal and Soumendra Chandra Rout for subscribing 5000 shares each in AES Chhattisgarh Energy Pvt. Ltd. As per Minutes of Meeting of AES Chhattisgarh Energy Private Ltd held on 21.09.2007 that the balance sheet of the company as at 31.03.2007 was approved by the directors of the company namely Sanjeev Aggarwal and Soumendra Chandra Rout. Therefore, Sanjeev Aggarwal knew that it is being mentioned in the balance sheet that there is no secured or unsecured loan from any quarter including AES India Private Ltd., PDF 9316.
(iv) In the Minutes of Meeting of AES Chhattisgarh Energy Private Ltd held on 22.09.2007, it was resolved that Sanjeev Aggarwal and Soumendra Chandra Rout were authorised to digitally sign the Form 23 AC or any other relevant form for the financial year 2007 to be filed with the Registrar of Companies, NCT of Delhi and Haryana, New Delhi, PDF 9320. Pursuant to such authorisation, Form 23 AC was got filed with the Registrar of Companies on 22.09.2007 under digital signatures of Soumendra Chandra Rout and the company had provided the information in para 3 (a) that it is not a subsidiary company under Section 4 of the Companies Act. Had AES Chhattisgarh Energy Private Ltd been a subsidiary of AES India Private Ltd or AES Corporation, USA, the response would have been Yes and not No.
(v) AES Chhattisgarh Energy Private Ltd cannot claim itself to be the subsidiary of AES Corporation, USA being the subsidiary of AES India Private Ltd because AES India Private Ltd itself mentioned in its Form 23 AC that it is not a subsidiary company under section 4 of the Companies Act, PDF 7355.
(vi) Whereas AES India Private Ltd in its balance sheet for the year ending on 31.03.2007 mentioned under the heading 'BACKGROUND' that it is a closely held company with 1122440 shares held by AES Corporation, USA and 100 shares held by AES (not legible) LLC USA, PDF 7380 but the balance sheet of AES Chhattisgarh Energy Private Ltd, while dealing with the 'BACKGROUND' of the company did not mention its relationship with either AES India Private Ltd or AES Corporation, USA, PDF 7573. It also rules out any subsidiary- holding company relationship between AES Chhattisgarh Energy Private Ltd and AES India Private Ltd or AES Corporation, USA.
(vii) When presentations were made before the screening committee meeting on 21.06.2007, the representationists did not mention the name of AES India Private Ltd or AES Corporation, USA as their Office/Organisation, PDF 1396.
(viii) During the Minutes of Meeting of Board of Directors of AES Chhattisgarh Energy Private Ltd held on 15.11.2007, it is duly recorded that the resident shareholders of AES Chhattisgarh Energy Private Ltd i.e., Soumendra Chandra Rout and Sanjeev Aggarwal, the subscribers to the Memorandum of Association are transferring their shares by way of sale in favour of AES OPGC Holdings, Mauritius and AES India Holdings (Mauritius) for cash at par value of Rs. 10 each share, PDF 9321. In case AES Chhattisgarh Energy Private Ltd was a subsidiary of AES India Private Ltd or AES Corporation, USA, it would not have transferred its shares by way of a sale.
(ix) Pursuant to the resolution noted above, the shares of Soumendra Chandra Rout and Sanjeev Aggarwal were transferred in favour of AES OPGC Holding and AES India Holdings (Mauritius) on 15.11.2007, PDF 6746.
(x) After the shares of Soumendra Chandra Rout and Sanjeev Aggarwal were transferred in favour of AES OPGC Holdings and AES India Holdings (Mauritius) on 15.11.2007, in the balance sheet of AES Chhattisgarh Energy Private Ltd for the period ending on 31.03.2008, the company mentioned for the first time in its Form 23 AC that it is a subsidiary company, PDF 7588. It shows that neither on the date of application for allocation of a coal block i.e., 10.01.2007 nor on the date of presentations made before the screening committee meeting i.e., 21.06.2007 and nor on the date of allocation of Sayang coal block i.e., on 06.11.2007, AES Chhattisgarh Energy Private Ltd was a subsidiary of AES India Private Ltd or AES Corporation, USA.
(xi) In the Form 10-K (Annual Report) of AES Corporation, USA filed on 23.05.2007 for the period ending 31.12.2006, AES Chhattisgarh Energy Private Ltd was not mentioned as one of the subsidiary companies of AES Corporation, USA, PDF 8149. However, in Form 10-K (Annual Report) of AES Corporation, USA filed on 17.03.2008 for the period ending on 31.12.2007, AES Chhattisgarh Energy Private Ltd was shown as one of the subsidiary companies of AES Corporation, USA, because on 15.11.2007 all the shares of Soumendra Chandra Rout and Sanjeev Aggarwal were transferred in favour of AES OPGC (Mauritius) and AES OPGC Holdings (Mauritius), PDF 8643. It shows that AES Chhattisgarh Energy Private Ltd had become a subsidiary of AES Corporation, USA only after 15.11.2007 and not before that.
(xii) Lastly, since neither Soumendra Chandra Rout nor Sanjeev Aggarwal, nor AES Corporation, USA, nor AES Chhattisgarh Energy Private Ltd complied with provisions of section 187 C of the Companies Act, 1956, same is indicative of the fact that AES Chhattisgarh Energy Private Ltd was not a subsidiary of AES India Private Ltd or AES Corporation, USA.
104. Arguments of the Accused Persons: It was argued on behalf of the accused persons that Preliminary Enquiry was initiated in this case on 13.04.2012 and the Column No. 9 of the chargesheet mentions against the name of the complainant/informant that PE-219 2012 (E) 0002 was converted into the regular case on 06.05.2015. It was submitted that during this period of three years nothing was enquired from the accused persons about the allegations which were subject matter of the enquiry. It was submitted that PW-1 and PW-2 who had conducted the Preliminary Enquiry never called the accused persons during enquiry. Reliance was placed on Chapter 7 of the CBI (Crime) Manual 2020 dealing with Preliminary Enquiries. It was submitted that during investigation, the Investigating Officer was given all the exculpatory information available with the accused persons but the same was ignored and chargesheet was filed on 09.01.2017. It was submitted that the Investigating Officer had a tunneled view and did not examine the version of the accused. It was submitted that in case the Investigating Officer had appropriately considered the material provided to him by the accused persons, he would not have filed the chargesheet in this case.
105. It was submitted that in this case there is no aggrieved party in as much as neither the Screening Committee nor Ministry of Coal filed any complaint against the accused persons accusing them of having cheated the Screening Committee or the Ministry of Coal by misrepresentations about the Holding-Subsidiary company relationship between AES Corporation, USA/AES India Private Ltd and AES Chhattisgarh Energy Private Ltd.
106. It was submitted that Section 2 (wa) of CrPC defines "victim" as a person who has suffered any loss or injury caused by reason of the act or omission for which the accused person has been charged and the expression "victim" includes his or her guardian or legal heir. It was submitted that in this case there was no "victim". It was submitted that the case was initiated on the complaint of Central Vigilance Commission who is not the aggrieved party being the person who was allegedly cheated by the accused persons.
107. It was submitted that chargesheet is only opinion of the Investigating Officer and now after conclusion of trial, it is vividly clear from the material on record that the accused persons had not made any misrepresentations before the Screening Committee that AES Chhattisgarh Energy Private Ltd was 100% subsidiary of AES Corporation, USA.
108. It is submitted that Guideline No. 2 of the Ministry of Coal makes it clear that in the case of a new Special Purpose (SP)/Joint Venture (JV) applicant company, the net worth would be the net worth of their principals.
109. It was submitted that as per para 16.15 of the chargesheet, the Ministry of Power had mentioned that the authenticity of data/comments submitted by applicant companies need to be separately verified but the allegations in the FIR were that the officials of Ministry of Coal did not verify the claims of the company. It was submitted that in para 16.21 of the chargesheet, it is mentioned that the financial strength of the applicant companies was got verified by calling officers from Coal India Ltd. It was submitted that once the financial strength of applicant companies was got verified by the Screening Committee, there was no justification for chargesheeting the accused persons.
110. It was submitted that the entire case revolves around different provisions of Section 4 of the Companies Act, 1956 but the chargesheet does not even mention once about the said section which shows that the Investigating Officer wanted to avoid to deal with provisions of Section 4 (1) (a) and Section 4 (6) of the Companies Act, 1956 according to which a company can be subsidiary of another company if the other company has control over the composition of its Board of Directors or in the case of a holding company incorporated in a country outside India under the law of such country has Holding- Subsidiary relationship with a company, the said company would be subsidiary of the company incorporated outside India irrespective of the fact whether the requirements of Section 4 of the Companies Act, 1956 are fulfilled or not.
111. It was submitted that AES Group was targeted deliberately which compelled the said company to leave all its business in India including the plant earlier set up in the State of Orissa.
112. Reliance is placed on Jamuna Chaudhary v. State of Bihar, (1974) 3 SCC 774 where it is held that the duty of the Investigating Officers is not merely to bolster up a prosecution case with such evidence as may enable the Court to record a conviction but to bring out the real unvarnished truth. Reliance is also placed on Babu Bhai and Anr. vs. State of Gujarat, Crl. Appeal No. 1599/2010 dated 26.08.2010 where the afore-stated views of the Hon'ble Supreme Court on the role of the Investigating Officer in the judgment in the case of Jamuna Chaudhary (supra) were reaffirmed and reiterated.
113. It was submitted that although the accused were not successful in challenging the order on charge before the Hon'ble Supreme Court, but the Hon'ble Supreme Court had made it clear that all the questions are left open and now the accused are re-agitating their submissions for their innocence.
114. Coming to the merits of the case, it was argued that the use of "semicolon" in Section 4 (2) in the Companies Act, 1956 shows that it divides the section in two parts and the earlier part of the said sub-section ends at "semicolon" and the subsequent part of the said sub-section after "semicolon" makes a fresh beginning and is to be read separately. Reliance is placed on Commissioner, Customs Central Excise and Service Tax, Patna versus Shapoorji Pallonji and Co Private Ltd and Others, 2023 SCC Online 1330 to submit that the contents of a provision of law after introduction of semicolon make them an independent category. Reliance is also placed on Vincen Mathew vs. Life Insurance Corporation of India, 2016 SCC Online Ker 20451 where it is held that semicolon is a punctuation mark indicating a greater degree of separation than the "comma" and it is being used to separate parts of a sentence. It was submitted that Section 4 (2) of the Companies Act, 1956 is to be read in two parts. The first part provides that the composition of a Company's Board of Directors shall be deemed to be controlled by another company, if the other company by the exercise of some power exercisable by it at its discretion, without the consent or concurrence of any other person, can appoint or remove the holders of all or a majority of the directorships. It was submitted that the second part of Section 4 (2) of the Companies Act provides three conditions which are to be satisfied before coming to a conclusion that the company has power to appoint a director in a company. It was submitted that these three conditions are not applicable for exercising power to remove the holders of all or a majority of the directorships in a company.
115. For showing control of AES Corporation, USA over AES Chhattisgarh Energy Private Ltd, reliance is placed on email dated 17.07.2005, Exhibit D-5/DW-1 (Colly) sent by Accused No. 2 Sanjeev Aggarwal to Ms. Maureen Lim, who was Regional CFO Asia Transpower, Singapore (Subsidiary of AES Corporation, USA). In this email, it was mentioned that as per advice received from tax experts, it would be a better way to incorporate a SPV under the Indian Companies Act for applying for a coal linkage. It was mentioned in the email that two individuals will be the shareholders of this company. So far as expenses for incorporating this company were concerned, it was mentioned that AES India will continue to incur expenses and after receiving investment approval from AES Board, the funding from AES Corporation will flow into the SPV and SPV will pay back to AES India and clear the books. It was mentioned that the expenses to be incurred and formulation of this company would be around INR150,000. It was also mentioned that in case for some reason, the board approval is not granted for this project, the company can be used for some other project. This email was followed by various emails from Ms. Maureen Lim to Sanjeev Aggarwal, who responded to her queries over various issues raised by her for incorporating SPV. These emails are relied on to submit that from the very beginning, Sanjeev Aggarwal was taking the approval of AES Corporation, USA and even before for incurring expenses of Rs.1,50,000 for incorporating SPV, approval was taken from AES Corporation, USA.
116. Reliance is also made on Exhibit P-51/DW-3, which is a one-page note providing description of Chhattisgarh project, a summary of investment from AES, project rationale and capital requirements. As on 16.07.2005, when the same was placed before the Development Council of AES Corporation, USA the status was "Assess". At that time, A. Srinivas Rao was shown as the Project Leader and Sanjeev Aggarwal was shown as Project Staff. Both of them were Full-Time Employees-FTE and considering the current low activity phase of the project, the current resource allocation was 0.2 for A. Srinivas Rao and 0.5 for Sanjeev Aggarwal.
117. It is submitted that on 04.08.2005, Sanjeev Aggarwal, Director-Business Development, AES India Private Ltd had addressed a letter to the Principal Secretary (Industries and Mines), Government of Chhattisgarh, Chhattisgarh, India, proposing signing a Memorandum of Understanding with the State Government, Exhibit 58 (Colly), D-92, Page 116-117, PDF 10017-10029. Along with this letter, Common Application Form was also given where so far as name of investor/company is concerned, it was mentioned that the investment in the project will be carried out through a Special Purpose Vehicle (SPV) in which AES India Private Ltd (through its shareholders, subsidiaries and associates) would hold majority of the equity. It was also made clear that the exact name of the SPV will be decided at a later stage. So far as directors in the SPV are concerned, it was mentioned that A. Srinivas Rao and Sanjeev Aggarwal were proposed as directors on the Board. The declaration in support of the application was furnished under the signatures of Sanjeev Aggarwal, Director-Business Development, AES India Private Ltd.
118. The accused have relied on email dated 22.02.2006 from Sanjeev Aggarwal to Jamie R Gebbia of AES Corporation USA seeking her help in expediting the approval for setting up of an SPV. The confirmation for incorporating the SPV was conveyed to Sanjeev Aggarwal by Jamie R Gebbia on the same date i.e., 22.02.2006, Ex. D-6/DW-1.
119. The accused have submitted that a Memorandum of Understanding was executed between Government of Chhattisgarh, Chhattisgarh State Electricity Board and AES India Private Ltd on 03.03.2006 for setting up of 1000 MW to 1200 MW Thermal Power Project Ex. P-37 (colly), D-69, Page 36-43, PDF 9367-9374. Prior thereto, Allena Srinivasa Rao was authorized to sign the same and Sanjeev Kumar Agarwal was made director in AES India Private Limited vide Board Resolution dated 02.03.2006 of AES India Private Limited D-69, Page 36-43, PDF 9367-9374 Ex. P-37 (colly).
120. The accused have submitted that on 20.03.2006, AES OPGC Holdings Mauritius (a wholly owned subsidiary of AES Corporation USA), referring to Press Note 1 (2005 series) applied for approval of FIPB for making investments to the tune of USD 370 Million for setting up the Project through a subsidiary wholly owned by AES OPGC Holdings Mauritius / any other group/affiliate entity of AES Corporation, USA in terms of the MoU signed with Government of Chhattisgarh, D-45, Page 1-7, PDF 6777-6783 Ex. P-15 (colly). In the Application, complete background of AES Corporation, USA along with copy of MoU, was furnished. The approvals sought in the application were:
a)Waiver of applicability of Press Note 1 read with Press Note 3.
b)Permit AES OPG Holding Mauritius or any other group affiliate entity of AES Corporation, USA to set up a wholly owned subsidiary in India to undertake a green field coal-based power generation plant in the state of Chhattisgarh and to undertake coal mining for captive consumption.
121. It was submitted by the accused that pending approval from FIPB, AES India authorized Sanjeev Kumar Aggarwal and Soumendra Rout, to incorporate the SPV and also granted permission to use "AES" as a part of the name of the SPV. Sanjeev Kumar Aggarwal was Director Business Development and also whole-time director of AES India and Soumendra Rout was Chief Financial Officer of AES India, D-69, Page 2, PDF 9333 Ex. P-37 (colly). The Resolution dated 30.05.2006 being important is reproduced here which is as under:
"RESOLVED THAT, Mr Sanjeev Aggarwal and/or Mr Soumendra Chandra Rout be and are hereby authorised to incorporate a company within the meaning of the Companies Act, 1956 (the Act) in the name and style of M/s. AES Chhattisgarh Power and Mining Company Private Ltd or such other name with the word "AES" as may be approved by the Registrar of Companies, NCT of Delhi and Haryana, New Delhi (the ROC) and that the Company has no objection to the use of the words "AES" by Mr Sanjeev Aggarwal and Mr Soumendra Chandra Rout.
RESOLVED FURTHER THAT Mr Sanjeev Aggarwal and Mr Soumendra Chandra Rout be and are hereby authorised jointly and/or severally to use the words "AES" in the corporate name of the proposed company under incorporation.
RESOLVED FURTHER THAT, Mr Allena Srinivas Rao be and is hereby authorised to issue a no objection certificate, if required, to the ROC to that effect, and to do all such acts, deeds and things as may be required or considered necessary or incidental thereto."
122. The accused have submitted that the Board of AES India Holding Mauritius (AES India Mauritius) in its meeting noted about the appointment of Allena Srinivas Rao and Sanjeev Kumar Aggarwal as additional directors effective from 11th May 2006. In para 20 of the minutes, it is mentioned that a company in the name of AES Chhattisgarh Energy Private Limited was being incorporated and that its shares would be held by Sanjeev Aggarwal and Soumendra Rout. It was further recorded that the shares held by Sanjeev Aggarwal and Soumendra Rout would be transferred to the company and AES OPGC Holdings Mauritius (AES OPGC) after obtaining FIPB approval D-47, Page 1-8, PDF 6810-6817, Ex. P-17 (colly). Para 20 of the Resolution dated 06.07.2006 noted as under:
"20. INVESTMENT IN NEW INDIAN COMPANY IT WAS NOTED that the Company was set up with the objective to act as an investment holding vehicle for companies in India and Asia Pacific region. In that respect, IT WAS NOTED that the Company had the intention to set up a new company in India, subject to obtaining regulatory approval from the Government of India, with an investment of approximately INRs 50,000,000,000 and which would be owned 99% by the Company and 1% by AES OPGC Holding, a sister company. IT WAS FURTHER NOTED that the activities of the proposed Indian company would include:
to establish a green field coal fired power generation plant in the Indian State of Chhattisgarh;
to undertake coal mining for captive consumption, to be used as a raw material for generation of electricity in the proposed power plant; and to undertake such other activities/actions as may be required for the purposes of above objectives.
Upon a proposal from the Chairman, Messrs. Aggarwal and Allena advised the Board on the following: - The Indian Company under the name of AES Chhattisgarh Energy Private Limited was in the process of being incorporated and its shares would be held by Messrs. Sanjeev Aggarwal and Somendra Rout;
Approval for the project Feasibility Study Report (hereafter "FSR") was being sought from the Government of Chhattisgarh in the name of one of the subsidiaries of AES Corporation USA. A copy of the FSR and approval obtained would be provided to IMM, the Company Secretary;
Pursuant to the FSR, the Foreign Investment Promotion Board (hereafter "FIPB") approval which would be required for this investment, due to the existence of other investments in India, was in the process of being finalized;
Upon the incorporation of AES Chhattisgarh, approval received from the Government of Chhattisgarh and FIPB would be transferred to AES Chhattisgarh;
The shares held by Messrs. Sanjeev Aggarwal and Somendra Rout would be transferred to the Company and AES OPGC Holding, once all the applications have been cleared; Financial forecasts, expected cash flows and expected returns from this investment would be provided in due course; Upon query from Mr. Aggarwal, the Chairman advised the Board that any additional investments, including Joint Ventures, may be routed through the Company, with prior Approval from the Board of Directors."
123. Reliance is placed by accused on Section 254 of the Companies Act, 1956, which provides as under:
254. Subscribers of memorandum deemed to be directors-In default of and subject to any regulations in the articles of a company, subscribers of the memorandum, who are individuals, shall be deemed to be the directors of the company, until the directors are duly appointed in accordance with Section 255.
124. It is the submission of the accused that by being the subscribers of the memorandum they were deemed to be the directors of the company.
125. The accused have submitted that on 15.09.2006 the Board of AES India Private Limited accorded its approval for formation of a new company as the SPV for setting up of 1000 MW coal based thermal power project as per the MOU signed with Government of Chhattisgarh and the State Electricity Board. It also authorized Sanjeev Kumar Aggarwal and Soumendra Chandra Rout to carry out all necessary acts/steps for the formation of SPV, Ex. P-58 (colly) D- 92, Page 2, PDF 9902. The resolution is as under:
Formation of SPV for execution of MOU signed by the company with Government of Chhattisgarh The chairman informed the board that the company has signed an MOU with the Government of Chhattisgarh and Chhattisgarh state electricity board for setting up of 1000 to 1200 MW coal- based thermal power project. The copy of signed MOU was laid before the board for the purpose of identification. Since the project is to be set up in conformity with the various constitutional and statutory provisions and policy of the Government of India and Government of Chhattisgarh in this regard, the Chairman further informed the board that for the purpose of execution of MOU, one SPV has to be set up for the purpose.
The board considered the matter and passed the following resolutions unanimously.
"RESOLVED that the consent of the Board be and is hereby accorded for the formation of a new company which would be for a special purpose (execution of MOU, hereinafter referred to as Special Purpose Vehicle).
RESOLVED FURTHER that Mr Sanjeev Aggarwal and Soumendra Chandra Rout be and is hereby authorised to carry out all necessary action steps required for the formation of "Special Purpose Vehicle."
126. The accused have submitted that first meeting of the Board of Directors of AES Chhattisgarh Energy Private Ltd was held on 21.11.2006, which recorded that AES India incurred all incorporation expenses of AES Chhattisgarh [amounting to Rs. 41,877/-]. It further records that Allena Srinivasa Rao (an employee & Director, AES India) and Sanjeev Kumar Aggarwal would be the jointly authorized signatories for bank accounts operation of AES Chhattisgarh, Ex. P- 20 (colly), D-50, Page 1-3, PDF 7000-7004.
127. The accused have submitted that AES India had paid the incorporation money of Rs. 1 lakh on behalf of Sanjeev Aggarwal and Soumendra Chandra Rout to AES Chhattisgarh by way of cheque No. 721458 dated November 23, 2006, Exhibit P-65, D-102, Page 44, PDF 11037.
128. The accused have submitted that on 19.12.2006 FIPB approval was accorded in favour of AES OPGC and/or any other group affiliate entity of AES Corporation, USA to set up a wholly- owned subsidiary in India to undertake a greenfield coal-based power generation plant in Chhattisgarh and to undertake coal mining for captive consumption, Exhibit P-46, D-78, page 30-33, PDF 9656- 9658.
129. The accused have referred to another one pager of 05.01.2007 mentioning the details of the MOU and the equity required from AES. It was submitted that now the status of the project had progressed from "Assess" to "Pursue" and Sanjeev Aggarwal was now shown as the Project Leader because A. Srinivas Rao had resigned from AES by then and was therefore no more available to be the Project Leader. This one pager was placed before the Development Council of AES Corporation, USA mentioning therein that the equity required from AES would be $277M, Exhibit P-11/DW-1.
130. The accused have submitted that Sanjeev Aggarwal vide letter dated 08.01.2007 had acknowledged the receipt of approval of Government of India for Foreign Direct Investment in the proposed 1200 MW thermal power project with integrated captive coal mine in Chhattisgarh, Exhibit P-63, D-97, page 13, PDF 10308.
131. The accused have referred to Section 309 (6) of the Companies Act which provides that:
"No director of a company who is in receipt of any commission from the company and who is either in the full-time employment of the company or a managing director shall be entitled to receive any commission or other remuneration from any subsidiary of such company."
132. To show that Sanjeev Aggarwal being in full-time employment of AES India Private Ltd could not have taken any salary from AES Chhattisgarh Energy Private Ltd the accused have referred to the Balance Sheet of AES Chhattisgarh Energy Private Limited as at 31.03.2007, Ex. P-19, D-49 Page 1-7, PDF 6846-6852 where it is mentioned with regard to 'Managerial Remuneration' that the directors have voluntarily waived their right to receive commission and remuneration during the year ended March 31, 2007.
133. Reference was also made upon audited balance sheet of AES India where it was recorded that AES Corporation is the holding company of AES India and AES Chhattisgarh Energy Private Ltd is a fellow subsidiary of AES India in terms of Accounting Standard-18 to submit that AES India and AES Chhattisgarh Energy Private Ltd, both were the subsidiaries of AES Corporation, Exhibit P-25 (Colly), D- 55, Page 251-274, PDF 7366-7390.
134. Reliance is also placed on evidence of PW 7 Deepak Roy who also stated during his cross-examination that AES India Private Ltd and AES Chhattisgarh Energy Private Ltd were subsidiaries of the same holding company i.e., AES Corporation, USA.
135. Reliance is also placed on D-56, PDF 7444 which is record of Ministry of Corporate Affairs, Government of India, Register of Directors, Managing Directors, Managers and Secretaries etc pertaining to AES Chhattisgarh Energy Private Ltd. As per this record, Sanjeev Aggarwal was appointed as the Director in this company on 16.11.2006. He had ceased to be a director of this company on 15.04.2010. So far as, AES India Private Ltd is concerned, the records show that Sanjeev Aggarwal had become one of the directors in this company on 11.03.2006 and had ceased to be the director on 15.04.2010, Exhibit P-85, D-55, PDF 7114.
136. Reference is also made to Section 283 (l) of the Companies Act, 1956, which provides that the office of a director shall become vacant if having been appointed a director, by virtue of his holding any office or other employment in the company, he ceases to hold such office or other employment in the company.
137. Reliance is placed on evidence of DW 1 A. Allena Srinivas Rao dated 25.07.2023 where he stated that the relationship of the SPV AES Chhattisgarh Energy Private Ltd with AES Corporation was as a subsidiary of AES Corporation and all its actions, including providing resources like employees, budgets were decided by AES Corporation. He stated that as per his understanding and knowledge the induction of directors, shareholders and the day-to-day affairs and submissions of the application for allocation of the coal block were all done at the directions and advice of AES Corporation.
138. In response to the query of the court whether all the material was provided by the accused persons to the investigating officer during investigation to show that AES Chhattisgarh Energy Private Ltd was 100% subsidiary of AES Corporation, USA as on 10.01.2007 and 21.06.2007 in terms of Companies Act, 1956, the attention of the court was drawn to Exhibit P-30, D-62, Page 22, PDF 8690 where the accused had informed the investigating officer of this case, vide letter dated 28.03.2016 as under:
"8. Supporting documents establishing M/s AES Chhattisgarh Energy Private Ltd as 100% subsidiary of AES Corporation, USA as on 10.01.2007 and 21.06.2007 in terms of Companies Act, 1956".
Section 4 (1) of the Indian Companies Act 1956, amongst others suggests that a company (AES Chhattisgarh Energy Private Ltd-
"ACE") would be a subsidiary of the another holding company (AES Corporation), if the holding company controls the composition of the board of directors of the subsidiary. In this regard, it has already been stated in our previous representations before your good self, that ACE was incorporated under the guidance of AES Corporation and the process of formation had started in 2005, i.e., much prior to date of coal block application of Jan 10, 2007. The same is evident from the fact that in August 4, 2005, AES showed its interest in setting up a power project in the State of Chhattisgarh by way of proposing a MOU to be entered upon with the State of Chhattisgarh citing credentials of AES Corp. It was also stated in the application that AES proposes investment in the project through an SPV in which AES through its parent, subsidiaries, affiliates and/or associates would hold a majority of the equity, and the exact corporate structure of the investing company will be worked out in due course. Further, at and prior to the date of coal block application, several representations both at state and central level were made, clearly indicating the intent of AES Corporation to implement the proposed project, by way of an SPV, held through its shareholders, subsidiaries and/or associates, who would hold a majority of the equity. The SPV shall depend on the technical and financial expertise of its parent company to implement the project. Further, a review of the coal block application Dt. Jan 10, 2007 in isolation, would clearly establish the relationship between ACE and AES Corporation, as there is mention of AES Corporation financials, just below tab of net worth, and later in note 1, it has been clearly stated that AES Corporation or its affiliates/subsidiary will subscribe to ACE equity.
In addition, the following facts would also suggest that AES, Chhattisgarh, energy Private Ltd on the said dates was subsidiary of AES Corporation:
(a) That the promoters of ACE, Sanjeev Aggarwal and Soumendra Rout became promoters, and subsequently directors of ACE, by virtue of being employees of AES India. They ceased to remain directors of ACE, when they resigned as employees of AES India in the year 2010. All through the employment they were under control and superintendence of AES Corporation, through its subsidiaries, and could not act in their independent capacity.
(b) That AES India incurred pre-incorporation expense on behalf of ACE, which implies that the then promoters did not act independently and were under superintendence and control of AES India [which was at the relevant date and also at present is a wholly owned subsidiary of AES Corporation].
(c) That on July 6, 2006, AES India Holding (Mauritius) by its Board Resolution ratified the process of incorporation of ACE by Sanjeev Aggarwal and Soumendra Rout, and its eventual transfer to AES India Holding Mauritius and AES OPGC Holdings.
(d) That AES India vide its application of August 4, 2005, for an MOU with Government of Chhattisgarh and follow-up letter dated November 22, 2005, provided credentials of AES Corp/Project Details stating that AES India proposes investment in the project through a SPV in which AES India through its parent, subsidiaries, affiliates and/or associates would hold majority of the equity. AES India is a wholly owned subsidiary of AES Corp. The exact corporate structure of the investing company will be worked out in due course."
139. To show that AES India Holding (Mauritius) was a subsidiary of AES Corporation, reference was made to Form 10 K Annual Report submitted by the AES Corporation with the United States Securities and Exchange Commission for the fiscal year ended December 31, 2006, Exhibit P-27, D-59, Pages 1 to 325, PDF 7844- 8175. At PDF 8149 is the list of subsidiaries of the AES Corporation and at PDF 8156 AES Mount Vernom B.V. is mentioned as one of the subsidiaries of AES Corporation USA. Further, reference is made to the first minutes of the Directors of AES India Holdings (Mauritius) dated 06.07.2006, Ex. P-17, D-47, Page 1-8, PDF 6810-6817, where in para 16, 17 and 18, it was noted that Conqueror limited was holding one share which was transferred on 06.07.2006 in favour of AES Mount Vernom B.V. and that is how AES India Holdings (Mauritius) became subsidiary of AES Corporation USA.
140. It is also explained on behalf of the accused persons why the name of AES Chhattisgarh Energy Private Ltd was not mentioned in the list of subsidiaries of AES Corporation, USA in the Annual Report Form 10-K for the year ending 31.12.2006. The explanation given is that at the end of the list, Exhibit P-27, D-59, Pages 319, PDF 8166 a note is appended which mentions that:
"This list omits certain subsidiaries which, considered in the aggregate as a single subsidiary, would not constitute a significant subsidiary."
141. However, in the Form 10-K Annual Report for the period ending 31.12.2007, Ex. P-28, D-60, PDF 8643 the name of AES Chhattisgarh Energy Private Limited is mentioned as one of the subsidiaries of AES Corporation USA. It is submitted that this is for the reason because the status of this company in the eyes of AES Corporation as on 16.07.2005 was "Assess" in the one pager Ex. D- 51/DW-3 which had changed to "Pursue" by 05.01.2007, Ex. D-
11DW-1. Reliance is also placed on Exhibit D-56/DW-5, which is the report of Prof Jonathan Macey. In this report, in para 9 and 10, it is mentioned as under:
"9. The Corporation was not listed by AES as one of its subsidiaries on its SEC Form 10-K as of December 31, 2006, but it was listed among AES's subsidiaries as the AES Form 10- K as of December 31, 2007. Form 10-K, sometimes referred to as an annual report, provides a comprehensive overview of the company's financial condition and includes audited financial statements. Among other things, the Form 10k describes the company's business operations, summarises the share price performance and financial results, provides information about corporate officers and directors, and the beneficial stock ownership interests of such officers and directors. In their 10-Q filings, companies are required to provide an Exhibit, known as Exhibit 21, which lists the name and jurisdiction of incorporation of each "Significant subsidiary." Consistent with standard corporate practice, AES permitted from its Exhibit 21.1 disclosures, subsidiaries that would not constitute significant subsidiaries.
10.The process of determining whether a subsidiary is a "Significant Subsidiary" is governed by the Code of Federal Regulations and requires the application of three tests, an investment test, and assets test, and an income test. The investment test measures the amount of money that the parent company has invested in or advanced to the subsidiary as compared to the parent company's total assets. The asset test measures the size of the subsidiary's assets compared to the total assets of the parent company. The income test compares the parent company's equity in a subsidiary's income from its continuing operations to the income of the registrant for the most recently completed fiscal year."
142. Reference is also made to question No. 35 put to DW 5 Prof Jonathan Macey on 11.10.2023. The question was "Is it correct that every holding company has to mention about its subsidiaries on SEC Form 10-K on the end of every year, i.e., 31 st December of each year?" and the response of the witness was "Companies are only required to list the names of their significant subsidiaries at the end of their fiscal year. The fiscal year for different companies may end differently. For AES Corporation, USA it was ending on 31st December every year." Reference is made to cross examination of DW-5 Prof Jonathan Macey on 11.10.2023, when in response to the question "Please see D-59, Exhibit P-27 (Colly), PDF 7844, which is Form 10-K (Annual Report) submitted by AES Corporation for the period ending on 31.12.2006. In this Form in the list of subsidiaries AES CEPL is not mentioned as one of the subsidiaries of AES Corporation, USA. I suggest to you that this Form shows that according to AES Corporation, USA, AES CEPL was not one of its subsidiaries?" and the answer of the witness was "At the footnote of the Form 10-K, it is mentioned that this list omits certain subsidiaries, which considered in the aggregate as a single subsidiary would not constitute a significant subsidiary and I know that in 2006 AES Corporation USA had only contributed about 1500 US Dollars to the subsidiary while in the subsequent year, a substantially greater amount that is more than 1 million US Dollars were transferred to the subsidiary company and as I noted in paragraph 10 of my report the amount of investment by the parent is a relevant part of the determination of whether a subsidiary is a significant subsidiary."
143. Reference is also made to the cross examination of DW 1 A. Srinivas Rao who stated on 26.07.2023 in response to the question "Please see D-59, Exhibit P-27, Page 302, where in the list of subsidiaries of AES Corporation, the name of AES Chhattisgarh Energy Private Ltd is not mentioned for the period ending 31.12.2006 and this name is coming in D-60, Page 448, Exhibit P-28 for the period ending 31.12.2007. This is my suggestion that as on 31.12.2006, according to AES Corporation, AES Chhattisgarh Energy Private Ltd was not it's subsidiary and it became a subsidiary in the next year, as is evident from, Exhibit P-28?" and the witness had answered that "My answer to this question is that at D-59, Page 319, there is a footnote that 'This list omits certain subsidiaries which, considered in the aggregate as a single subsidiary, would not constitute a significant subsidiary'." Reliance is also placed on evidence of DW 3 Robert David Mill recorded on 28.08.2023, who stated that the project had advanced to Status "Pursue" in Q-1 (January to March) 2006. The submission of the accused is that since the status of the project had advanced from "Assess" to "Pursue", therefore, AES Chhattisgarh Energy Private Ltd had become a substantial subsidiary of AES Corporation, USA and was so named in the annual report for the year ending 31.12.2007.
144. The accused have sought to explain the circumstances in which in Form 23 AC of AES Chhattisgarh Energy Private Ltd for the year ending on 31.03.2007, Ex. P-84, D-56, Page 120-125, PDF 7563-7568, it came to be mentioned that it is not a subsidiary of any other company under Section 4 of the Companies Act, 1956.
145. First of all, it is submitted that this form was submitted under digital signatures of Soumendra Chandra Rout and not Sanjeev Aggarwal, PDF 7568. Reference is made to email dated 20.12.2006 written by Soumendra Chandra Rout to Sanjeev Aggarwal as well as Raja Gopal inquiring therein how to do the correction in the records of Registrar of Companies in the name of AES Chhattisgarh Energy Private Ltd., Ex. D-21/DW-2. Reference is made to Ex. D-22/DW-2, which is email dated 20.12.2006, as per which Raja Gopal of Ernst and Young, the Auditors of the company had given the details of the Company Secretary Nesar Ahmad to Sharad Pungalia. Next, attention of the court was drawn to Exhibit P-23/DW-2, which is letter dated 19.01.2007 written by Nesar Ahmad, Company Secretary to AES Chhattisgarh Energy Private Ltd on the topic of Retainership Arrangement. The scope of work agreed to be done by the Company Secretary was defined as under:
Scope of Work We shall advise you on all matters pertaining to formalities, procedures, maintenance of records required under the Companies Act, 1956 and related laws as mutually decided from time to time. The main objective is to ensure that expert guidance is available to you on above matters at all the times. However, scope of work, inter alia, would include the following issues:
Inspection/Verification of company's records/documents maintained under the Companies Act, 1956, or related laws from the effective date of agreement.
Maintaining records/registers and filing of returns with the statutory authorities on regular basis. Pre certification of the eforms and filing thereof on regular basis, including certification of any documents pertaining to the company viz. Memorandum of Association, Articles of Associations, Certificate of Incorporation.
Advising on company law on regular basis.
Advising on Foreign Exchange Management Act
(FEMA) on regular basis.
Advising on all kinds of permissions, approvals,
registrations that may be required by you under Companies' laws.
Obtaining Director Identification No. (DIN) for all the Directors and also compliance with DIN 1, 2, 3, etc or changes in law, as and when affected.
Obtaining Digital Signature for Directors/Company Secretary, etc. Certification as and when required under the Companies Act 1956."
146. To show that Nesar Ahmad had filed Form 23 AC for the year ending 31.03.2007 in which it was mentioned that AES Chhattisgarh Energy Private Ltd is not a subsidiary of any holding company without instructions of directors or any responsible person of AES Chhattisgarh Energy Private Ltd, reliance is placed on evidence of DW-2 Sharad Pungalia. In para 39 to 42 of the evidence of DW-2 recorded on 08.08.2023, the witness has stated as under:
"39. After we entered into the engagement with Mr Nesar Ahmad, I was dealing with Mr Ahmad and his office with reference to miscellaneous secretarial compliance and other matters like transfer of shares etc. After we signed the engagement with Mr Nesar, the first important activity was with reference to the transfer of shares. In this context, I went to Mr Nesar's office and had a detailed approximately two hours discussion with them wherein I briefed them about the company which they were already aware of and I asked him to send us his proposal along with complete steps to undertake such transfer.
Subsequently, M/s. Nesar and Associates have been carrying out the various secretarial filings like preparation of minutes, filing of various forms like Form 18, Form 32, Form 23 AC etc. on behalf of the company. Since the digital signatures were in custody of Mr Nesar Ahmad's office, all these filings, including the pre-certifications, if any required were done by their office. For these purposes, if any specific document or information was required, their office used to communicate me via email and our team used to provide the necessary documents. After filing of these forms and documents with the respective authorities, their office used to send a copy via email to us for our records.
40. The witness is now shown D-56, Page 120-125, PDF 7563, Ex. P-84/PW-8 (Colly). This Form 23 AC of AES CEPL for the year ending 31.03.2007, Serial No. 5 (a). This Form 23 AC is digitally signed by Soumendra Chandra Rout. Along with this form, the annual report of 2006-07 of AES CEPL was uploaded on the website of Registrar of Companies. Neither this Form was sent to me by M/s. Nesar and Associates before the same was uploaded on the website of Registrar of Companies on 22.09.2007 nor it was sent to me after the same was uploaded on the said website. As per the terms of engagement between M/s Nesar and Associates and AES, digital signatures of the Director of AES CEPL were to be obtained by M/s. Nesar and Associates and also the digital signatures of the Directors were in their custody which they have used to file other forms and documents including this Form 23 AC also.
41. M/s. Nesar and Associates was introduced to me by E&Y. After the introduction, I met them individually in their office and had detailed discussions about their engagement with the company. Post the engagement, the Interaction with M/s. Nesar and Associates used to happen between me and my colleagues from Finance Department.
42. I do not recollect, Mr Sanjeev Aggarwal having met Nesar Ahmad and his office at any stage of our discussion with them."
147. Attention of the court was also drawn to the cross examination of DW-2 Sharad Pungalia recorded on 19.08.2023 where the response of the witness to Question No. 1, 2, 3, was as under:
"1. Que. At this stage witness is shown D-56, Page 120, i.e., Form 23 AC submitted by AES Chhattisgarh Energy Private Ltd on 22.09.2007 with ROC, Ex. P-84/PW-8 (Colly) where Clause 3 (a) "Whether the company is a subsidiary company as defined u/s 4" and the response given is NO. Can you explain that when in this form, company itself stated that it is not a subsidiary company of any company then how you have stated in your statement u/s 161 Cr.P.C. recorded on 11.09.2015 Ex. D-48/DW- 2 that AES Chhattisgarh Energy Private Ltd was a subsidiary of AES Corporation, USA as on 10.01.2007?
Ans. We had engaged M/s. Nesar and Associates to carry out various secretarial compliances and services like filing of forms, preparation of minutes, certifications, obtaining Digital signatures, filing of minutes, etc as a Company Secretery Firm for AES CEPL. M/s. Nesar and Associates were reputed Company Secretary Firm introduced to us by Mr Raja Gopal of Ernst & Young. All the secretarial matters related to the company post incorporation were carried out by M/s Nesar and Associates. I believe this form was also filed by M/s. Nesar and Associates and I am not aware why it has been stated in that this company is not a subsidiary of any other company. Since this Form 23 AC was never shared by M/s. Nesar and Associates to me, so that is why, I had no reason to doubt or verify my statement.
2. Que. Is it correct that M/s. Nesar and Associates carried out various secretarial compliances like filing of forms, preparation of minutes, certifications, obtaining Digital signatures, filing of minutes, etc as a Company Secretary company for AES CEPL, as per information furnished by the representatives of AES CEPL?
Ans. Yes. M/s. Nesar and Associates whenever required used to communicate with us seeking necessary inputs which were not available with them and we used to provide such inputs. After filing such document, they used to send a copy to us for records.
3. Que. Is it correct that Form 23 AC Ex. P-84/PW-8 (Colly), (D-56) was shared by M/s. Nesar and Associates with the company M/s. AES CEPL?
Ans. I used to interact with M/s. Nesar and Associates during the year 2007. Generally, I was marked in all the communications by M/s. Nesar and Associates pertaining to the secretarial/compliances and other tasks done by them on behalf of M/s. AES CEPL. I do not have any remembrance or records to confirm if this Form was shared with us. Hence, I state that as per my knowledge, this Form was shared with us. Hence, I state that as per my knowledge, this Form was never shared by M/s. Nesar and Associates either prior or post, filing."
148. The submission of the accused is that it should have been brought on record by the prosecution during evidence of Nesar Ahmad that he had sent Form 23 AC to AES Chhattisgarh Energy Private Ltd after the same was uploaded on the website of Registrar of Companies.
149. Attention of the court was drawn to the cross examination of PW 12 Nesar Ahmad recorded on 24.09.2022, page 8 of 8 where he stated that "At that time, Form 1, Form 1-A, Form 18, form 32, Memorandum and Articles of Association were required for incorporation of a company. All these documents on behalf of M/s AES Chhattisgarh Energy Pvt Ltd were submitted in the office of RoC by my firm. I had told the IO that my office had got the incorporation of M/s AES Chhattisgarh Energy Private Limited facilitated". PW 12 Nesar Ahmad further admitted during his cross-examination recorded on 24.09.2022, Page 2 of 4 that Form 23 AC is to file balance sheet with the Registrar of Companies. He also admitted during his cross- examination dated 24.09.2022, at page 2 of 4 that filing of Form 23 AC was facilitated by his office. The submissions of the accused are that Nesar Ahmad in order to cover his mistake where he mentioned in the Form 23 AC that AES Chhattisgarh Energy Private Ltd was not a subsidiary company of any other holding company kept on making false statements, one after another during his cross-examination. It is pointed out that on 24.09.2022 during his examination in chief, page 1 of 8, he stated that he had helped in the incorporation of AES Chhattisgarh Energy Private Ltd whereas the company was got incorporated on 16.11.2006 and Nesar Ahmad was approached for the first time on 20.12.2006. It is submitted that Nesar Ahmad in para 2, page 2 of 8 confined his job responsibilities only to providing secretarial support like filing of forms with the office of RoC whereas the Retainership Agreement Exhibit P-23/DW-2 shows he had exhaustive responsibilities to perform with regard to various compliances and requirements on behalf of AES Chhattisgarh Energy Private Ltd. Nesar Ahmad also stated that he had met once or twice Sanjeev Aggarwal whereas DW-2 Sharad Pungalia has stated that he and other persons of finance department of AES Chhattisgarh Energy Private Ltd used to interact with Nesar Ahmad and Sanjeev Aggarwal had never met Nesar Ahmad. It is further submitted that Nesar Ahmad denied any connection between AES India Private Ltd and AES Chhattisgarh Energy Private Ltd but Form 32, D-56, Page 7, PDF 7450 of AES Chhattisgarh Energy Private Ltd had mentioned that Sanjeev Aggarwal was one of the directors of AES India Private Ltd. It was further pointed out that during his cross examination recorded on 24.09.2022, at page 7 of 8, Nesar Ahmad stated that he does not recollect whether my professional charges for incorporation of M/s AES Chhattisgarh Energy Private Limited were paid by AES India Private Ltd. Further, Nesar Ahmad stated that he does not know who paid for the preliminary expenses for the incorporation of AES Chhattisgarh Energy Private Ltd whereas the first minutes of meeting of the board of directors of the said company which took place on 21.11.2006, Ex. P-20 (colly), D-50, Page 1-3, PDF 7000-7004, recorded that the expenses were born by AES India Private Ltd and these minutes were in the knowledge of Nesar Ahmad. It is also submitted that he denied that he knew any person by the name Amit Kaushal who had certified the particulars in Form 32 but at 8 of 8 of his evidence dated 24.09.2022, he admitted that Form 32, D-56, Page 14 was submitted with Registrar of Companies by his office.
150. To show that it was a mistake in Form 23 AC to say that AES Chhattisgarh Energy Private Ltd was not a subsidiary reference was made to Form 23 AC of AES India Private Ltd where also it is mentioned that the said company was not a subsidiary company whereas it is absolutely clear on record that the said company was a subsidiary of AES Corporation India, P-25 (Colly) D-55, Page 240- 245, PDF 7355-7360.
151. With regard to PW 8 Raj Singh, it was submitted at page 3 of 7 of his evidence dated 03.08.2022, he stated that if the control over Board of Directors of the company was with another company it should have been mentioned in the Articles of Association of the subsidiary company. When he was asked what is the basis of this statement, the witness could not point out any provision of law and stated that this is his understanding, page 6 of 10 of his evidence dated 28.10.2022. It was further submitted that the witness was not willing to see the internal documents of the companies involved and only on examination of internal records, it could have been stated whether the Board of Directors of AES Chhattisgarh Energy Private Ltd were controlled by some other company or not, evidence of Raj Singh at page 4 of 10.
152. With regard to the offence of cheating under section 420 of IPC it was argued that the company had made complete disclosure in the application given to the Ministry of Coal and there was no fraudulent misrepresentation. It was submitted that the coal block was deallocated even before the decision of the Hon'ble Supreme Court in the case of Manohar Lal Sharma. Rather, it was submitted that in the entire process, the victim was AES Chhattisgarh Energy Private Ltd because Sayang coal block was in a reserved area and should not have been advertised in the first instance by Ministry of Coal. The applicant companies including AES Chhattisgarh Energy Private Ltd were persuaded to believe, without any rider that the allocation will be subject to environmental clearance, that Sayang coal block is available for captive mining. It was submitted that the advertisement of Ministry of Coal permitted applicant companies which were Special- Purpose vehicles or Joint Ventures to take benefit of net worth of their principals.
153. Reliance is also placed on the judgement of the Hon'ble Supreme Court in the case of New Horizon, para-26, 1995 (1) SCC 478 to submit that the Accused No. 1 company being the subsidiary of AES Corporation, USA could rely on the financial net-worth of its holding company.
154. The accused have relied on the following case law in support of their arguments: -
S.No. Case Law Relevant Relevant
Para Page No.
The investigation should be fair and impartial
1. Jamuna Chaudhary v. State of Bihar, (1974) 3 SCC 11 1-10 Babubhai v. State of Gujarat, (2010) 12 SCC 254 32 11-30 Ingredients of cheating under Section 420
2. Tulsi Ram v. State of U.P., AIR 1963 SC 666 16-17 31-47 Representation should be false to the knowledge of the Accused
3. Ellerman & Bucknall Steamship Co. Ltd. v. Sha 13 48-59 Misrimal Bherajee, AIR 1966 SC 1892
4. ARCI v. Nimra Cerglass Technics (P) Ltd., (2016) 1 15 60-74 SCC 348 Intention at the time of commission of the offence
5. Mobarik Ali v State of Bombay AIR 1957 SC 857 23 75-98
6. Hira Lal Hari Lal Bhagwati v. C.B.I, AIR 2003 SC 34 99-125
7. Indermohan Goswami v. State of Uttaranchal and Ors 42 126-143 (2007) 12 SCC 1 Ingredients of conspiracy
8. Topandas v. State of Bombay 1955 SCC OnLine SC 33 6 144-148
9. Manoj Kumar Soni v State of MP, 2023 SCC OnLine 39 149-170 SC 1009
10. CBI v. Suresh Kumar Sharma & Anr., CC No. 72 171-214 Misrepresentation on concealment of material facts
11. Iridium India Telecom Ltd. v. Motorola Incorporated 68 215-246 and Ors., AIR 2011 SC 20 Subsequent conduct may be considered under the offence of cheating
12. Hriday Ranjan Verma v. State of Bihar and Anr., AIR 13-15 247-256 2000 SC 2341
13. Vir Prakash Sharma v. Anil Kumar Aggarwal, 2007 13 257-261 CriLJ 3735
14. K. Shanmugasundara Nadar v. V. Sadasivam, (1969) 1 7 262-267 Mad LJ 610 A statute/guideline has to be read as a whole and holistically
15. Commissioner of Income Tax v. Hindustan Bulk 18-22 268-297 Carriers, AIR 2003 SC 3942
16. New Horizons Limited and Anr. V. Union of India and 26, 43 298-319 Ors., (1995) 1 SCC 478 Allocation letter cannot be construed to be property for the purposes of Section 415/ 420
17. Prakash Industries v. Directorate of Enforcement, 2022 95 320-397 SCC Online Del 2087
18. Mukarrab etc. v. State of U.P., MANU/SC/1150/2015 12-15 398-409 Person cannot be held guilty on hyper technicalities; statue has to be given meaningful interpretation
19. Khurshid Ahmed v. State of Jammu and Kashmir, 40 410-423 (2018) 7 SCC 429
20. Ramanand @ Nandlal Bharti v. State of U.P., AIR 16 424-474 2022 SC 5273
21. Ashish Batham v. State of Madhya Pradesh, AIR 2002 11 475-492 SC 3206 There is no offence of cheating if the offence is a result of bonfide belief of the accused
22. M. Cheluviah v. Smt. Amruthamma, 2004 CriLJ 4564 4 493-494
23. Nathulal v. State of Madhya Pradesh, AIR 1966 SC 43 4 495-501
24. Motilal Chakrawarty v. the King, AIR 1949 Cal 586 12 502-508
25. CBI v. JLD Yavatmal Energy Ltd. and Ors. 735 509-913 Corporate veil can be lifted to determine whether a company is a subsidiary or an independent company
26. State of UP & Ors vs Renusagar Power & Ors 66-69 914-963 (1988) 4 SCC 59 Adverse inference may be drawn u/s. 114(g) of the Evidence Act if witness is withheld
27. Govindraju v. State 66 964-992 (2012) 4 SCC 722 Difference in interpretation of company law provisions and penal statues
28. Lalita Jalan v. Bombay Gas Co. Ltd. 16-17 993-1008 (2003) 6 SCC 107 Interpretation of semicolon
29. CCE v. Shapoorji Pallonji & Co. (P) Ltd. 27 1009-1024 2023 SCC OnLine SC 1330
30. Vincen Mathew v Life Insurance Corp 6 1025-1035 2016 SCC OnLine Ker 20451 Suo moto complaint could not have been registered for an offence under Section 420 IPC
31. Abdul Razak Pane Mangalore vs State of Karnataka 3,4,8 1036-1037 2020 SCC OnLine Kar 3715 Exclusion of oral evidence by documentary evidence
32. V. Anantha Raju v. TM Narasimhan 35-38 1038-1053 2021 SCC OnLine SC 969
33. Roop Kumar v. Mohan Thedani 13 1054-1070 (2003) 6 SCC 595
34. Bai Hira Devi & Ors v. Official Assignee of Bombay 4-5 1071-1075 1958 SCR 1384
155. Rebuttal by CBI: - Sh. A.P. Singh, Ld. DLA for CBI submitted that Ex. P-38, D-70, PDF 9397 is the notice u/s 91 of Cr.P.C. directing Aditya Trivedi, Director, AES Chhattisgarh Energy Pvt. Ltd. to produce confirmation of remittance in the accounts of Soumendra Chandra Rout and Sanjeev Aggarwal for transfer of shares from resident to non-resident entities. It is submitted that Exhibit P- 39/Exhibit P-36/PW-75, D-71 is the Production Cum Seizure Memo dated 10.12.2015 as per which besides other documents, bank statements of Sanjeev Kumar Aggarwal and Soumendra Chandra Rout confirming the foreign remittances were provided to the Investigating Officer. It was submitted that at Page 6, PDF 9406 is the Certificate of Foreign Inward Remittance dated 21.08.2007 of Barclays Bank PLC confirming remittance of a sum of Rs.51,500/- in the account of Sanjeev Aggarwal. At Page 15, PDF 9415 is the deposit of Rs.51,500/- in the bank account of Sanjeev Kumar Aggarwal on 30.07.2007. Similar transaction is also shown with regard to Soumendra Chandra Rout. It is the submission of prosecution that the fact that both the Directors received a sum of Rs.51,500/- each from AES India Holdings (Mauritius) in their personal accounts shows that there was no relationship of holding company and subsidiary company between AES Corporation USA and AES Chhattisgarh Energy Pvt. Ltd.
156. It is further submitted that Sanjeev Kumar Aggarwal and Soumendra Chandra Rout were the beneficial owner of the shares of AES Chhattisgarh Energy Private Ltd because they had signed the subscription clause of Memorandum and Articles of Association in their individual capacity, without any reference to AES Corporation, USA or AES India Private Ltd. It is submitted that the fact that AES Chhattisgarh Energy Private Ltd had to pass a board resolution for transfer of shares in favour of AES India Holdings (Mauritius) and AES OPGC Holdings shows that Sanjeev Kumar Aggarwal and Soumendra Chandra Rout were the beneficial owner of shares of AES Chhattisgarh Energy Private Ltd.
157. Reliance is also placed on Section 307 of the Companies Act, 1956 which provides:
"307. Register of directors' shareholders etc.-(1) Every company shall keep a register showing, as respects each director of the company, the number, description and amount of any shares in, or debentures of, the company or any other body corporate, being the companies' subsidiary or holding company, or a subsidiary of the company's holding company, which are held by him or interest for him, or of which he has any right to become the holder whether on payment or not".
158. It is submitted that in this case, AES Chhattisgarh Energy Private Ltd was not maintaining any such register which shows that Sanjeev Kumar Aggarwal and Soumendra Chandra Rout were not holding the shares in trust for AES Corporation, USA.
159. So far as CBI Crime Manual is concerned, it was argued that the same is not a statute and has not been enacted by the legislature. It is a set of administrative orders issued for internal guidance of the CBI officers.
160. To the argument of the accused that there is no victim, reliance is placed on Kanumukkala Krishna Murthy (supra). In this case, it was held by the Hon'ble Supreme Court that there are cases in which servants or agents of an authority have been deceived while the loss has been suffered by the authority concerned. In such cases, the person deceiving the servants or agents has been held to have deceived the authority concerned, though no direct question was raised about the deception being made not to the authority, but to its servant.
161. Reliance is also placed on the definition of 'person' under Section 11 of IPC, according to which person includes any company or association or body of persons, whether incorporated or not.
162. To show that misrepresentations of the accused persons had cheated the screening committee reliance is placed on minutes of the 35th meeting of the screening committee held on 13.09.2007 where it is held as under:
"10. Based on the data furnished by the applicants, and the feedback received from the State Governments and the Ministry of Power, the Committee assessed the applications, having regard to matters such as, techno-economic feasibility of end use project, status of preparedness to set up the end use project, past track record in execution of projects, financial and technical capabilities of applicant companies, recommendations of the State Governments and the Administrative Ministry concerned etc. ...
11...
12...
13. The Screening Committee, thereafter, deliberated at length over the information furnished by the applicant companies in the application forms, during the presentations and subsequently. The committee also took into consideration the views/comments of the Ministry of Power, State Governments concerned, guidelines laid down for allocation of coal blocks, and other factors as mentioned in paragraph 10 above. The Screening Committee, accordingly, decided to recommend for allocation of coal blocks in the manner as follows:"
163. To show that the investigating officer had given opportunity to the accused persons during investigation to produce supporting documents to establish that M/s AES Chhattisgarh Energy Pvt. Limited was a 100% subsidiary of AES Corporation, USA as on 10.01.2007 and 21.06.2007 in terms of Companies Act, 1956 reliance is placed on Exhibit P-29, D-61, PDF 8668 which is notice under Section 91 Cr.P.C. to Shri Aditya Trivedi, director of AES Chhattisgarh Energy Private Ltd. in which he was called upon to produce documents to show that AES Chhattisgarh Energy Private Ltd was 100% subsidiary of AES Corporation, USA as on 10.01.2007 and 21.06.2007. It is submitted that the documents/emails produced by the defence witnesses were never produced before the Investigating Officer and, therefore, as these documents were not in possession of CBI at any point of time, the accused cannot blame the investigating officer for not investigating the case fairly.
164. So far as challenge to the evidence of Nesar Ahmad is concerned, it was submitted that the accused had not given any suggestion to him during his cross-examination that he had never met Sanjeev Kumar Aggarwal.
165. To rebut the argument of the accused persons that AES Corporation, USA did not name AES Chhattisgarh Energy Private Ltd as one of its subsidiaries as it was an insignificant subsidiary, it is submitted that in column no. 25 of the application PDF 328, the company had mentioned that it has invested Rs. 1.5 Crores and it was mentioned in column no. 10 of the feedback form furnished on 21.06.2007, PDF 3479 that the company has invested Rs. 3 crores. It was submitted that with such an investment, the subsidiary cannot be called insignificant subsidiary. The summary of rebuttal arguments would be (i) the fact that Sanjeev Aggarwal and Soumendra Chandra Rout had received Rs.51,500 each in their bank accounts as a sale consideration for sale of shares of AES Chhattisgarh Energy Private Ltd shows that AES Corporation, USA was not the holding company and AES Corporation, Chhattisgarh Energy Private Ltd was not its subsidiary company, (ii) since the company was not maintaining any register under Section 307 of the Companies Act, 1956 for recording whether the directors of this company were having shares in the company or of any other body corporate, being the company's subsidiary or holding company or a subsidiary of the company's holding company held by him or in trust for him shows that AES Corporation USA was not the holding company of AES Chhattisgarh Energy Private Ltd., (iii) CBI manual is not a statute but is for internal guidance of its officers, (iv) under Section 11 of IPC dealing with "person", the government can be the victim of cheating, (v) the investigating officer, had called upon the accused to produce material to show that AES Chhattisgarh Energy Private Ltd was 100% subsidiary of AES Corporation, USA, but the material in the form of email and other documents now produced on record during defence evidence were never given to the Investigating Officer during investigation, and (vi) AES Corporation, USA had invested a sum of Rs. 1.5 Crores in AES Chhattisgarh Energy Private Ltd but in spite of such a huge investment, this company was not shown as significant subsidiary by AES Corporation USA in its annual return for the year ending 31.03.2007.
166. Response of the accused to the rebuttal arguments: - So far as credit of Rs. 51,500 in the account of Sanjeev Kumar Aggarwal is concerned, attention of the court was drawn to Exhibit P-40, D-72, Page 15, PDF 9415, which is the statement of account of Sanjeev Kumar Aggarwal. It was pointed out that the account was credited with Rs.3,04,454/- towards salary, but the next credit of salary was Rs.2,49,454 which takes into account credit of Rs.51,500/- in his account.
167. So far as register of directors' shareholdings is concerned, reference is made to sub section 8 of Section 307 of the Companies Act, 1956, which is as under:
"If default is made in complying with subsection (1) or (2), or if any inspection required under this section is refused, or if any copy required thereunder is not sent within a reasonable time, the company, and every officer of the company who is in default, shall be punishable with fine which may extend to fifty thousand rupees and also with a further fine which may extend to two hundred rupees for every day during which the default continues".
168. It is therefore submitted that in case the Company AES Chhattisgarh Energy Private Ltd had not maintained the register of directors' shareholding, as required under Section 307 of the Companies Act, 1956 at most, the prosecution could have been initiated under section 628 of the Companies Act 1956.
169. So far as mentioning in the application that investment of Rs. 1.5 Crores was made, reference is made to the balance sheet of AES India Private Ltd for the year ending on 31.03.2008, PDF 7418 which shows that in the previous financial years, a sum of Rs.1,08,63,104 was advanced to AES Chhattisgarh Energy Private Ltd which is a fellow subsidiary company. It was submitted that as against investment of USD 300 million, the investment of Rs. 1.5 Crores was insignificant investment for AES Corporation, USA. So far as investment of Rs. 3 crores is concerned, it was submitted that in the annual report ending 31.12.2007, AES Corporation, USA had shown AES Chhattisgarh Energy Private Limited as one of its subsidiary companies. It was also submitted that investment was just one of the three factors for determining whether the subsidiary was insignificant or significant.
170. After the arguments were over in this matter, a request was made by accused persons for permission to file written arguments as well. The permission was given and the accused also filed their written arguments, a copy of the same was also provided to the prosecution.
171. Discussion on first point for determination: The first point for determination in this case is:
"Whether as on 10.01.2007 the composition of the Board of directors of AES Chhattisgarh Energy Private Ltd. was under the control of AES Corporation, USA?"
172. Before discussing the material on record for deciding the points for determination, it is noted in the very beginning that the threshold which the accused is required to meet is of preponderance of probability. In the case of Ramanand @ Nandlal Bharti vs. State of U.P., 2022 AIR SC 5273, the Hon'ble Supreme Court has held as under:
"It is sufficient if the accused person succeeds in proving a preponderance of probability in favour of his case. It is not necessary for the accused person to prove his case beyond a reasonable doubt or in default to incur a verdict of guilty. The onus of proof lying upon the accused person is to prove his case by a preponderance of probability. In the American Jurisprudence, 2nd Edition, Vol. 30, the expression "preponderance of evidence" has been defined in Article 1164.
In America the term means "the weight, credit and value of the aggregate evidence on either side, and is usually considered to be synonymous with the term greater weight of the evidence", or "greater weight of the credible evidence". It is a phrase which, in the last analysis, means probability of the truth. To be satisfied, certain, or convinced is a much higher test than the test of "preponderance of evidence". The phrase "preponderance of probability" appears to have been taken from Charles R. Cooper v. F. W. Slade, (1857-59) 6 HLC 746. The observations made therein make it clear that what "preponderance of probability"
means "more probable and rational view of the case", not necessarily as certain as the pleading should be."
173. Therefore, the points for determination in this case will be decided on the principle that the prosecution has to prove its case beyond all reasonable doubts and accused has to show his defence by preponderance of probability.
174. It is evident from Exhibit P-15, D-45, PDF 6777 which is the application given by AES OPGC Holding to FIPB that AES was in business in India since 1998 in the form of foreign collaboration with Orrisa Power Generation Corporation Ltd ("OPGCL") and was holding 49% equity in OPGCL through its group companies AES (India) Private Limited ("AES India") and AES Mauritius, both companies being subsidiaries of AES Corporation, USA. The shareholding pattern of OPGCL was as under:
Serial No. Name of shareholder % of shareholding
1) AES Mauritius 32.75%
2) AES India 16.25%
3) Government of Orissa 51%
175. OPGCL was engaged in the business of power generation having a power plant of 2x210 MW power from which 100 % power generated was sold to GRIDCO, a government-owned company, at prices fixed under a 30-year agreement valid till 2026. Therefore, before venturing into Chhattisgarh power project, AES Corporation USA was not new to India.
176. During 2005, Sanjeev Kumar Aggarwal, accused No. 2 was an employee of AES India Private Ltd. On 04.08.2005, he had signed an application given by AES India Private Ltd to the Government of Chhattisgarh for clearances for execution of MOU, Exhibit 58 (Colly), D-92, Page 116-117, PDF 10017-10029, as 'Director- Business Development' of AES India Private Ltd. However, he had become director of AES India Private Ltd much later on 02.03.2006 which is evident from minutes of meeting of Board of Directors of AES India Private Ltd held on 02.03.2006, Exhibit P-12, D-42, Page 1-2, PDF 6743-6744. Before that, he was only an employee of AES India Private Ltd with the designation of 'Director-Business Development'.
177. The first document showing interest shown by AES Corporation, USA in the power project in the state of Chhattisgarh is One Pager, Exhibit D-51/DW-3, mentioning therein the Chhattisgarh project description, summary of investment from AES, project rationale and capital requirements mentioning the probability of success of the project as 'low'.
178. What is a 'one pager' is explained by DW-3, Robert David Mill, Chartered Accountant working for AES Corporation since 1997. He was a member of Independent Review Group in AES Corporation, USA in the year 2005. This Group provides independent review of new investment opportunities seeking approval and allocation of AES Corporation capital. The group is also responsible for the organization of development oversight function for AES Corporation, USA. This is primarily referred to as the Development Council. He explained that the Development Council comprises of the senior leadership of AES Corporation, including CEO Paul Hanrahan, CFO Victoria Harker, CLO Brian Miller, senior leaders of development teams from three business units spread across 45 countries as well as functional heads of specialist groups in Arlington. This group met frequently between every month to every three months to review and provide decisions or guidance across entire pipeline of development projects of AES Corporation, USA. The Development Council also considered matters of strategy, either market or technology and was responsible for both upgrading projects and making investment decisions and also on occasion to cancel further development of projects. At each meeting, it provided a physical binder containing a one-page report for each project. At the meeting, the process used to be to go through the binder, page by page looking at updates on each project. There were around 200 separate projects in the development pipeline categorized by the state of their advancement and were categorized at the stage of 'idea', 'assess', 'pursue' and 'execute'.
179. DW-3 Robert David Mill also deposed that the Chhattisgarh Project was reviewed by the Development Council at each meeting from June 2005 onwards. At each meeting, the project was unanimously supported and seen as an exciting opportunity. The project consistently achieved progress on its key milestones and saw upgrade in status. Over time, additional financial and people resources were allocated to the project and there was an expectation that AES would commence land acquisition.
180. The one pager Exhibit D-51/DW-3 in the year 2005, dealing with the Chhattisgarh Thermal project recorded that the project will cost US $ 450MM. The equity of AES was proposed as 150 US $ MM and Debt was proposed to be 300 US $ MM. So far as availability of coal mine is concerned, it was mentioned that at this stage, the plan is to obtain a confirmation for coal availability from state owned mining companies. In parallel, efforts are underway to procure a captive mine. A captive mine will help in securing the pricing and availability of fuel for the planned open market IPP. The status of the project was noted as 'Assess'. Srinivas Rao was named as the Project Leader and Sanjeev Aggarwal was named as Project Staff and their current resource allocation was mentioned as 0.2 and 0.5 respectively.
181. This one pager shows that all the facts for Chhattisgarh power project were placed before the Development Council of AES Corporation, USA for its decision and Sanjeev Aggarwal was merely shown as project staff who had to devote 50% of his time on this project. All the decisions were to be taken by Development Council of AES Corporation, USA and Sanjiv Aggarwal had to follow all the directions of his employer i.e., AES Corporation, USA given him either directly or through its subsidiary company AES (India) Pvt. Ltd.
182. Since this one pager throws light on discussions in AES Corporation, USA regarding Chhattisgarh thermal project much before Sanjeev Kumar Aggarwal gave application dated 10.01.2007 for allocation of coal block to Ministry of Coal, the same is extracted in entirety as under:
183. On 17.07.2005, Sanjeev Aggarwal of AES India had sent an Email to Maureen Lim, Chief Finance Officer of AES Transpower, Singapore, Exhibit D-5/DW-1. In this email, Sanjeev Aggarwal mentioned that there are plans to develop new projects in India and work has already been initiated for Chhattisgarh thermal and wind power. He mentioned that presently expenses are incurred by AES India and for tax purposes, it is advisable that new investments through Mauritius be made into a new company. He stated that on the advice of E & Y i.e., auditors of the company, it is safe and better to incorporate a SPV for applying for a coal linkage. He clarified that two individuals will be the shareholders of this company and the expenses to be incurred for incorporation of this company would be around INR 150000 (close to US $ 35K). He also mentioned that in case for some reason, the board approval is not granted for this project, this company can be used for another project. He requested for 'advice'. This email was followed by several emails between Sanjeev Aggarwal and Maureen Lim seeking further clarifications regarding working of the proposed SPV. These emails show that Sanjeev Aggarwal could not have taken any decision as an individual but as an employee of AES India Private Ltd he had to obtain orders from AES Corporation, USA before taking any step with regard to Chhattisgarh power project.
184. In the application given by Sanjeev Aggarwal, Director (Business Development) AES India to Government of Chhattisgarh under Section 4(2) of Chhattisgarh Audyogik Nivesh Protsahan Niyam, 2004 on 04.08.2005, it was mentioned that AES India is proposing signing a memorandum of understanding with the State government indicating the commitment of each of the parties in facilitating the development of this project in an expeditious manner. It was also mentioned that the investment in the project will be carried out through a Special Purpose Vehicle (SPV) in which AES (India) Private Limited (through its shareholders, subsidiaries and associates) would hold majority of the equity. It was also mentioned that the SPV is yet to be incorporated and till such time, the address of registered office of AES (India) Private Limited was mentioned in the application. It was also mentioned that the exact name of the SPV will be decided at a later stage. It was also mentioned that in the SPV to be incorporated, A.Srinivas Rao and Sanjeev Aggarwal were proposed to be the Directors on the Board. The declaration in support of this application was signed by Sanjeev Aggarwal, Exhibit 58 (Colly), D- 92, Page 116-117, PDF 10017-10029. From this letter it was made clear to the state of Chhattisgarh that the project will be carried out through a SPV in which majority shareholding would be of AES (India) Private Ltd through its shareholders, subsidiaries and associates. It shows that it was made clear by the company that the project will be carried out through a subsidiary of AES (India) Private Ltd. Since AES (India) Private Ltd is admittedly a subsidiary of AES Corporation, USA, its proposed SPV would also be subsidiary of AES Corporation, USA. It was also informed to the state of Chhattisgarh that the proposed directors in the said SPV will be A. Srinivas Rao and Sanjeev Aggarwal. It shows that Sanjeev Aggarwal had no independent volition in the proposed SPV and the directorship in the SPV was in the control of AES India Private Ltd. Since SPV was yet to be incorporated, therefore, in the 'Investor's Information', the address of AES India Private Limited was mentioned.
185. Finally, on 22.02.2006, Sanjeev Aggarwal was given the go- ahead by AES Corporation, USA to proceed immediately with the incorporation of SPV, Exhibit P-6/DW-1. It shows that for incorporation of SPV and for incurring expenses of Rs. 1,50,000 for its incorporation, Sanjeev Aggarwal did not act as an individual but acted as an employee of AES Corporation, USA and took prior permission from AES Corporation, USA before venturing to incorporate SPV.
186. The overarching presence of AES Corporation, USA in the Chhattisgarh power project is also evident from the fact that Paul Hanrahan, CEO of AES Corporation, USA was also present on 03.03.2006 at the time of signing of memorandum of understanding with the Chhattisgarh government, Exhibit D-6/DW-1. The presence of Paul Hanrahan, CEO of AES Corporation for the signing of MOU shows that the entire project was of AES Corporation, USA and none else. Otherwise, why the CEO of one of the Fortune 500 companies would have taken the trouble to fly from USA to Chhattisgarh in India.
187. Further, just a day before signing of memorandum of understanding between AES India and State government of Chhattisgarh, Sanjeev Aggarwal, who was up till now, an employee of AES India was made a director in AES India, Exhibit P-12, D-42, Page 1-2, PDF 6743-6744.
188. As permission of FIPB is required for foreign direct investment, application was given to FIPB by AES OPGC Holding, Mauritius to set up a wholly owned subsidiary in India to undertake a greenfield coal-based power generation plant in the state of Chhattisgarh and to undertake coal mining for captive consumption by AES OPGC holding, Mauritius and/or any other group affiliate entity of AES Corporation, USA, Exhibit P-15, D-45, Page 1-7, PDF 6777- 6783. The fact that AES Corporation, USA sought permission for direct investment of upto US $ 370 million to undertake a greenfield coal-based power generation plant in the state of Chhattisgarh and to undertake coal mining for captive consumption reveals the true picture and shows that it was AES Corporation, USA, which had to enter into power project in the state of Chhattisgarh through AES India Private Ltd or any of its subsidiary companies.
189. The Board of directors of AES India in the meeting held on 30.05.2006, Exhibit P-37, D-69, Page 2, PDF 9333, 'authorised' Sanjeev Aggarwal and Soumendra Chandra Rout to incorporate a company within the meaning of the Companies act, 1956 in the name and style of M/s. AES Chhattisgarh Power and Mining Co Private Ltd or such other name with the word "AES" as may be approved by the Registrar of Companies, NCT of Delhi and Haryana, New Delhi. It shows that Sanjeev Aggarwal and Soumendra Chandra Rout had the authority of AES India to incorporate AES Chhattisgarh Energy Private Ltd. The fact that two individual employees of the company required the authority of their employer company for incorporating the SPV shows that the control over board of directors of the SPV was of the employer company. Moreover, it is to be noted that AES India Private Ltd had authorised them to use the words AES in the company to be incorporated by them. Brand name carries value. More so, when it is the brand name of one of the fortune 500 companies in the world. Why AES India Private Ltd would have gladly allowed its two employees to incorporate a company using the prefix of 'AES' unless the company which was being incorporated was its subsidiary.
190. AES India holding Mauritius had to invest INRs 50,000,000,000 in the new company to be incorporated in India and had to own 99% of its shares and 1% of the shares were to be held by AES OPGC Holding, a sister company. The board of this company in its meeting held on 06.07.2006 had noted that the proposed Indian company by the proposed name of Chhattisgarh Energy Private Ltd would establish a greenfield coal fired power generation plant in the Indian state of Chhattisgarh and its shares will be held by Sanjeev Aggarwal and Soumendra Chandra Rout, Exhibit P-17 (Colly), D-47, Page 1-8, PDF 6810-6817. It was also noted that these shares of Sanjeev Aggarwal and Soumendra Chandra Rout would be transferred to the company, i.e., AES India Holding Mauritius and AES OPGC Holding, once all the applications have been cleared. It also shows that how the shareholding in the new SPV will be held was not in the hands of Sanjeev Aggarwal and Soumendra Chandra Rout, but that was controlled by its employer company which also shows that the board of directors of AES Chhattisgarh Energy Private Ltd were controlled by AES Corporation, USA.
191. During the minutes of the meeting of the board of directors of AES (India) Private Ltd held on 07.07.2006, Exhibit P-37 (Colly), D-69, Page 33, PDF 9364, Sanjeev Aggarwal was appointed as authorised representative of the company to deal with the various government departments and authorities in the matter of upcoming thermal power project in the state of Chhattisgarh and take all necessary action for the purpose of obtaining required permits and clearances for the upcoming Chhattisgarh power project on behalf of the said company. These minutes also show that Sanjeev Aggarwal was working as an employee of AES India Private Ltd for furthering the cause of the company in the upcoming thermal power project in the state of Chhattisgarh. Individually, he had nothing to do with the said project and everything which he was doing was with the directions and authority of his employer company AES India Private Limited. That is why he was appointed as attorney of AES India Private Ltd to do in its name and on its behalf, all such acts, deeds and things necessary in connection with or incidental to the development of 1000 to 1200 MW power project in the state of Chhattisgarh including signing and submission of all documents and providing information/responses to government of Chhattisgarh and other departments for various clearances and permits required in the project and generally dealing in all matters, in connection with the proposed project, Exhibit P-37 (Colly), D-69, Page 32, PDF 9363.
192. To make things clearer, the board resolution passed by board of directors of AES India Private Ltd on 15.09.2006, at item No. 8, had resolved to accord consent of the board to Sanjeev Aggarwal and Soumendra Chandra Rout for the formation of a new company for a special purpose of execution of memorandum of understanding with the state of Chhattisgarh. The two named individuals were also authorised to carry out all necessary action steps required for the formation of Special Purpose Vehicle, Exhibit P-58 (Colly), D-92, Page 2, PDF 9902. When Sanjeev Aggarwal was authorised to carry out all necessary action steps required for the formation of Special Purpose Vehicle by AES India Private Ltd, it would show that the SPV and its board of directors were under the control of AES India Private Ltd.
193. Since Sanjeev Aggarwal and Soumendra Chandra Rout were not the driving force behind incorporation of AES Chhattisgarh Energy Private Ltd and they had got incorporated this company on the directions of AES India Private Ltd, the initial expenses for its incorporation, i.e., Rs.41,877 were also incurred by AES India Private Ltd, Exhibit P-20 (Colly), D-50, Page 1-3, PDF 7000-7004. It is also the submission of the accused persons that AES India had paid a sum of Rs. 1 lakh for the incorporation of this company, Exhibit P-65 (Colly), D-102, Page 44, PDF 11037. However, since Sanjeev Kumar Aggarwal and Soumendra Chandra Rout both had received Rs.51,500/- each in their bank accounts when their shares were transferred in favour of two Mauritius-based companies, the argument on behalf of prosecution is that initial payment of Rs. 1 lakh by AES India cannot be taken into consideration for deciding this point for determination in favour of the accused persons. The accused have tried to show from their bank statement that this sum was deducted from their salary. However, this court is not satisfied with this explanation because a sum of Rs.3,04,454/- were credited as salary in the account of Sanjeev Kumar Aggarwal on 31.05.2007. However, on 30.06.2007, the credit from AES was Rs.2,51,454/- (though the figure is not very clearly legible). On 30.07.2007, Rs.51,500/-were credited in the account of Sh. Sanjeev Kumar Aggarwal and on the same date the salary credited was Rs.2,49,454/-. Therefore, it cannot be said that a sum of Rs.51,500/- were debited from the salary of Sh. Sanjeev Kumar Aggarwal because the salary was Rs.2,51,454/- as on 30.06.2007 and Rs.2,49,454/- as on 30.07.2007. Had the salary been Rs.3,04,454.00 as on 30.06.2007 only then it could have been inferred that the salary credited on 30.07.2007 was less probably due to debit of Rs.51,500/- from the salary. Be that as it may, there is material on record to show that independent of this transaction of Rs.51,500/-, AES Chhattisgarh Energy Pvt. Ltd. was subsidiary of AES Corporation, USA.
194. Queries were being raised to Sanjeev Aggarwal on behalf of AES Corporation, USA, to explain how chances of getting a coal mine allocation is being increased, Exhibit D-10/DW-1. In case allocation of coal mine was concerning AES Chhattisgarh Energy Private Ltd, only without anything to do with AES Corporation, USA, nobody would have asked Sanjeev Aggarwal, how the chances of the company getting the coal mine allocation are going to be increased by him.
195. It is important to note that few days before Sanjeev Aggarwal applied for allocation of a coal block to the Ministry of coal on 10.01.2007, the status of Chhattisgarh thermal project had changed from 'Assess' to 'Pursue' in the one pager that was put up before the Development Council of AES Corporation, USA on 05.01.2007, Exhibit D-11/DW-1. Now, Sanjeev Aggarwal was shown as Project Leader. Since the project was in low activity phase, Sanjeev Aggarwal had to devote 0.6 resource allocation on this project. This one pager as on 05.01.2007 under consideration of Development Council of AES Corporation, USA before application was given for allocation of coal block by Sanjeev Aggarwal is an important document showing keen involvement and control of AES Corporation USA over the project, the same is reproduced in its entirety as under:
196. After FIPB approval was received in favour of AES OPGC and/or any other group affiliate entity of AES Corporation, USA to set up a wholly-owned subsidiary in India to undertake a greenfield coal- based power generation plant, Exhibit P-46 (Colly), D-78, Page 30- 33, PDF 9656-9658, Soumendra Chandra Rout requested for transfer of shareholding in his name and shareholding of Sanjeev Aggarwal in AES Chhattisgarh Energy Private Ltd in favour of the two Mauritius companies, Exhibit D-24/DW-2. In case, AES Chhattisgarh Energy Private Ltd was an independent entity and was not subsidiary of AES Corporation, USA, then it would have got no effect of FIPB clearance in favour of AES Corporation, USA and would have felt no need to transfer its shareholding in favour of AES India Holdings Private Ltd and AES OPGC Holding, Mauritius. This request to transfer shareholding by these two individuals in AES Chhattisgarh Energy Private Ltd shows that both of them, the directors of the said company, were working under the control of AES Corporation, USA. Otherwise, why they would have desired to transfer their shareholdings after AES Corporation USA got FIPB approval. This request for transfer of shareholding was pursuant to the plans as per which on approval of FIPB, huge foreign investment had to be made by the two Mauritius companies, subsidiaries of AES Corporation, USA. The request for transfer of shareholdings is evidence of control of AES Corporation USA over board of directors of AES Chhattisgarh Energy Private Ltd.
197. Within 10 days of expressing their request for transfer of their shareholding in AES Chhattisgarh Energy Private Ltd, both Soumendra Chandra Rout and Sanjeev Aggarwal gave consent letters on 12.0.2007 for transfer of their shares in favour of the two Mauritius-based companies, Exhibit P-43, D-75, Page 46, PDF 9497 (Soumendra Chandra Rout) and Exhibit P-43, D-75, Page 65, PDF 9516 (Sanjeev Aggarwal). This request was given within one month of applying for allocation of coal block to Ministry of coal by Sanjeev Aggarwal and much before allocation of coal block by Ministry of coal. The consent to transfer shares was at par and not at any premium.
198. The next day, on 13.02.2007, AES Chhattisgarh Energy Private Ltd informed the Principal Secretary, Energy Department, Government of Chhattisgarh, Raipur that AES India Private Ltd has incorporated a special purpose vehicle in the name of AES Chhattisgarh Energy Private Ltd for development of the proposed project requesting that all future correspondences/communication be facilitated in the name of the said SPV, Exhibit P-58 (Colly), D-92, Page 2, PDF 9901. Why a company which is having a memorandum of understanding with State of Chhattisgarh for setting up a power plant of 1000 to 1200 MW capacity will write to the State government that it will not carry forward the memorandum of understanding, but the MOU will be carried forward by another company and why such a company will say that the other company is its SPV if they were not having holding company-subsidiary company relationship between them?
199. The director's report of AES India for the year ending on 31.03.2007 mentions that a MOU with the Chhattisgarh government has been signed to set up 1000-1200 MW plant and a SPV, AES Chhattisgarh Energy Private Ltd. has been set up for executing the said MOU, Exhibit P-25 (Colly), D-55, Page 246-250, PDF 7361- 7366. At this stage, the coal block was yet to be allocated in favour of AES Chhattisgarh Energy Private Ltd. It cannot be anybody's case that in anticipation of allocation of a coal block in favour of AES Chhattisgarh Energy Private Ltd (which took place in November 2007), AES India Private Ltd falsely mentioned in its director's report that SPV by the name of AES Chhattisgarh Energy Private Ltd has been incorporated for executing MOU signed between state of Chhattisgarh and AES India Private Ltd. Rather, the Director's report correctly mentioned AES Chhattisgarh Energy Private Ltd as SPV of AES India Private Ltd to carry out MOU referred above. At the time of submitting audited balance sheet for the year ending on 31.03.2007 with the office of Registrar of Companies, AES India had also mentioned that AES Corporation, USA is the holding company of AES India and AES Chhattisgarh Energy Private Ltd is a fellow subsidiary of AES India, Exhibit P-25, D-55, Page 251-274, PDF 7366-7390. This will make both AES India as well as AES Chhattisgarh Energy Private Ltd subsidiaries of AES Corporation, USA. To make things further clear, it was mentioned in the director's report of AES Chhattisgarh Energy Private Ltd that AES India has signed a MOU with Chhattisgarh government to set up 1000-1200 MW plant and AES Chhattisgarh Energy Private Ltd will be implementing this project as an affiliate of AES India Private Ltd, D- 56, Page 126, PDF 7569. Therefore, contemporaneously and unequivocally, it was mentioned in the director's report of both the companies and audited balance sheet of AES India Private Ltd that the MOU that was executed between AES India Private Ltd and state of Chhattisgarh will be implemented by SPV/affiliate AES Chhattisgarh Energy Pvt. Ltd. It is nobody's case that AES Chhattisgarh Energy Private Ltd and AES India Private Limited had conspired together to falsely mention in their respective director's reports that former is SPV/affiliate of later. In the spirit of section 309 (6) of the Companies act, 1956, Sanjeev Kumar Aggarwal was not receiving any commission or remuneration from AES Chhattisgarh Energy Private Ltd because he was a director in AES India and was receiving salary from the said company, Exhibit P-19, D-49, Page 1-7, PDF 6846- 6852. In the balance sheet of AES Chhattisgarh Energy Private Ltd for the year ending on 31.03.2007, under the heading Managerial Remuneration, it was mentioned that the Directors have voluntarily waived their right to receive commission and remuneration during the year ended March 31, 2007. As was decided in the first meeting of the directors of AES India Holdings (Mauritius) held on 06.07.2006, D- 47, Page 1-8, PDF 6810-6817, Ex. P-17 (colly) that after receiving all the clearances, the shares of Sanjeev Kumar Aggarwal and Soumendra Chandra Rout will be transferred in favour of the two Mauritius-based companies, it was decided in the meeting of the board of directors of AES OPGC Holding held on 13.04.2007 that that now approval of Government of India, Ministry of Finance has been received so the shares of these two individuals shall be acquired by AES OPGC Holding and AES India Holdings (Mauritius), Ex. P-43, D-75, Page 51-52, PDF 9502-9503. Similar minutes were also recorded by the board of directors of AES India Holdings (Mauritius) in its meeting held on 13.04.2007, Exhibit P-43 (Colly), D-75, Page 71-72, PDF 9522-9523. Pursuant to the minutes of the board of directors, both the companies gave their consent letters for transfer of 5000 equity shares of AES Chhattisgarh Energy Private Ltd from Sanjeev Kumar Aggarwal and Soumendra Chandra Rout on 20.04.2007, Exhibit P-43 (Colly), D-75, Page 66 and Page 47, PDF 9517 and PDF 9498. Since Sanjeev Kumar Aggarwal was only acting as employee of AES India Private Ltd, he, vide Email dated 06.06.2007 had shown his concern to Soumendra Chandra Rout for the delay in the process of transfer of shares of AES Chhattisgarh Energy Private Ltd from him and Soumendra Chandra Rout to AES India Holdings (Mauritius) and AES OPGC Holding, Exhibit P-43/DW-2. On 21.06.2007, presentations were made before the screening committee by the applicant companies. For making presentations on behalf of AES Chhattisgarh Energy Private Ltd Venu Nambiar who was in charge of AES USA's Asia and Middle East operations as well as an officer/Vice President of AES Corporation, USA had also attended the screening committee meeting. Why the Vice President AES Corporation, USA would have taken the pains to appear before the screening committee in case AES Corporation, USA, had to gain nothing by allocation of coal block in favour of AES Chhattisgarh Energy Private Ltd. Much before transfer of shares of Sanjeev Kumar Aggarwal and Soumendra Chandra Rout in Chhattisgarh energy Private Ltd in favour of AES India Holdings (Mauritius) and AES OPGC Holding, AES India Holding (Mauritius) had remitted USD 290000 INR equivalent 11776900 towards equity contribution on 28.06.2007, Exhibit P-43 (Colly), D-75, Page 6, PDF 9457. The transferor company transferred this amount before the shares of Sanjeev Kumar Aggarwal and Soumendra Chandra Rout were transferred in its favour because it had full control over both these individuals being employees of AES India Private Ltd. In case they were not under control of AES India Private Ltd, no prudent person would have transferred this amount in the company unless they had control over board of directors of the transferee company. Whereas the screening committee recommended allocation of a coal block in favour of AES Chhattisgarh Energy Private Ltd on 13.09.2007, Exhibit P-5/PW-1, D-13, Page 1-8, PDF 1809-1816, letter from MoC to AES Chhattisgarh Energy Private Ltd conveying allocation of Sayang coal block with the approval of Prime Minister was issued on 06.11.2007, Exhibit P 27/PW-1, D-7, Page 13, PDF 1009, but the shares of Sanjeev Kumar Aggarwal and Soumendra Chandra Rout were transferred in the favour of AES India Holdings Mauritius and AES OPGC Holdings Mauritius on 15.11.2007 as completion of formalities took time, whereas the process to transfer the shares was initiated as back as 20.04.2007. It is already observed that even before the shares of Sanjeev Kumar Aggarwal and Soumendra Chandra Rout were transferred in favour of the two Mauritius-based companies, an investment of Rs.1,17,76,900/- was already made in AES Chhattisgarh Energy Private Ltd, which shows that the transfer of shares in favour of the two Mauritius-based companies on 15.11.2007 was left to be only in the nature of a formality to be completed because the process for transfer was initiated much in advance.
200. On examination of the material on record, this court is of the view that AES Corporation, USA through its subsidiary AES India Private Ltd was controlling the composition of board of directors of AES Chhattisgarh Energy Private Ltd. Sanjeev Kumar Aggarwal and Soumendra Chandra Rout could not have been appointed as directors of AES Chhattisgarh Energy Private Ltd without the authority of AES Corporation USA/AES India Private Ltd. The directorship of AES Chhattisgarh Energy Private Ltd was held by Sanjeev Kumar Aggarwal and Soumendra Chandra Rout who were nominated by AES India Private Ltd, a subsidiary of AES Corporation, USA.
201. Discussion of this point for determination will be complete only after discussing arguments of CBI also. Since admission is the best proof against a party, the most emphatic piece of evidence relied on by prosecution against the accused persons to submit that AES Chhattisgarh Energy Pvt. is not subsidiary of AES Corporation, USA is that in the Form 23AC of AES Chhattisgarh Energy Pvt. Ltd. for the year ending on 31.03.2007, Ex. P-84/PW-8, D-56, Page 120, PDF 7563, the company had itself informed the Registrar of Companies that it is not a subsidiary company of any other holding company. The submission on behalf of prosecution is that there can be no better proof than own admission by accused no. 1 company that it is not a subsidiary of any other holding company.
202. However, the admissions can also be explained.
203. The Director's Report attached with the audited balance sheet and filed with Form 23AC of AES Chhattisgarh Energy Pvt. Ltd., PDF 7569, shows that the said company is affiliate of AES India Pvt. Ltd. and will be implementing the project in terms of Memorandum of Understanding with Government of Chhattisgarh signed by AES India Pvt. Ltd.
204. While examining the documents submitted by Accused No. 1 company with Registrar of Companies, this Director's Report cannot be ignored. Whereas in the Form 23AC submitted on behalf of Accused No. 1 company, it mentioned that it is not a subsidiary of any other holding company, but in the Directors Report, it was made clear that accused No. 1 company is affiliate of AES India Private Ltd and will be implementing the project in terms of memorandum of understanding with Government of Chhattisgarh. It shows that while submitting the documents by accused No. 1 company with registrar of Companies, it was made known and clear that AES Chhattisgarh Energy Private Ltd is the affiliate and therefore subsidiary of AES India Private Ltd. and it will be implementing the memorandum of understanding with government of Chhattisgarh signed by AES India Private Ltd.
205. It is obvious that it was a blatant mistake on the part of AES Chhattisgarh Energy Private Ltd to mention in its Form 23 AC that it is not a subsidiary of any holding company whereas it was subsidiary of AES Corporation, USA. This mistake was committed not only while submitting Form 23 AC of Accused No. 1 company but was also committed while submitting Form 23 AC for AES India Pvt. Ltd. for the year ending on 31.03.2007 as well. In the Form 23 AC of AES India Private Ltd also, it was mentioned that the said company is not a subsidiary of any other company. However, it is amply clear from the records that AES India Private Ltd was a subsidiary of AES Corporation, USA, but still in the Form 23 AC of AES India Private Ltd, it was mentioned that it is not a subsidiary of any other company. The way mistake was made while furnishing Form 23 AC of AES India Private Ltd same mistake was made while furnishing Form 23 AC of AES Chhattisgarh Energy Private Ltd.
206. There is a dispute as to who is answerable for furnishing Form 23 AC where inadvertent mistake was made in mentioning that AES Chhattisgarh Energy Private Ltd is not a subsidiary of any other company. According to prosecution, since this Form 23AC is digitally signed by Soumendra Chandra Rout, the argument is that the same was filed by the company through its Director. The argument of the accused is that the company Secretary Nesar Ahmad was having the digital signatures of Soumendra Chandra Rout and he had submitted this Form with the registrar of companies without any intimation to the company or any of its directors. In the opinion of this court, since this Form 23 AC is digitally signed by Soumendra Chandra Rout there is a presumption that the same was filed with the specific authority of Soumendra Chandra Rout. The presumption was rebuttable. The argument of the accused persons is that the digital signatures were available with their Company Secretary Nesar Ahmad and he had filed this form, without any information to the company. However, when Nesar Ahmad was in witness box, he was not given a suggestion that the digital signatures of Soumendra Chandra Rout were in his possession and he used them for filing Form 23 AC without information of the company or without information of the directors Soumendra Chandra Rout. Therefore, this court is of the opinion that information in the Form 23 AC that AES Chhattisgarh energy Private Ltd is not a subsidiary company was under the authority of Soumendra Chandra Rout. However, nothing turns out on that because this is merely a mistake and the material on record has shown that AES Chhattisgarh Energy Private Ltd was a subsidiary company of AES India Private Ltd and through that the subsidiary company of AES Corporation, USA. Even if the arguments of the accused persons are accepted that the Form 23 AC was submitted by the office of Nesar Ahmad, still they cannot be absolved of their responsibility in furnishing this wrong Form 23 AC because the directors had the knowledge that they have to submit Form 23 AC with the office of Registrar of Companies. Being the directors and shareholders of the company, they should have checked with the office of Nesar Ahmad, the documents that were submitted with the office of Registrar of Companies on behalf of AES Chhattisgarh Energy Private Ltd.
However, this court has found from the evidence, documentary and oral, brought on record by the accused persons during their defence evidence that it can be satisfactorily concluded that AES Chhattisgarh Energy Private Ltd that was a subsidiary of AES Corporation, USA because the composition of board of directors of AES Chhattisgarh Energy Private Ltd was under the control of AES Corporation, USA.
207. Another emphatic argument on behalf of prosecution is that since the provisions of section 187C of the Companies Act, 1956 were neither complied with by Sanjeev Kumar Aggarwal/Soumendra Chandra Rout nor by AES Corporation, USA nor By AES Chhattisgarh Energy Private Ltd shows that AES Corporation, USA was not the beneficial owner of shares held in the name of Sanjeev Kumar Aggarwal and Soumendra Chandra Rout.
208. In the opinion of this court, the non-compliance of Section 187 C of the Companies Act, 1956 by all the three concerned parties referred above can be dealt with in two ways. One, the mere presence of this provision in the statute shows that there would be many instances where a person not holding beneficial interest in shares may not have made a declaration to the company specifying the name and other particulars of the person who was holding the beneficial interest in the shares of the company. There would be many instances where a person holding beneficial interest in shares may not have made a declaration to the company specifying the nature of his interest, particulars of the person in whose name the shares stand registered in the books of the company. There would be many instances where a company may have failed to make a declaration in its register of members and may have failed to file a return in the prescribed form with the registrar with regard to such declaration. That is why the legislatures deemed it appropriate to incorporate Section 187 C in the Companies Act, 1956. It shows that the mere fact that the provisions of Section 187 C of the Companies Act, 1956 were not complied with, does not mean nobody could be holding beneficial interest in shares of a company for some other person. The purpose of this provision is to ensure the compliance by reporting by concerned parties to the Registrar of Companies who is the beneficial owner of shares of a company. This provision does not say that in case the same is not complied with the beneficial owner will lose the benefit of ownership of those shares and the person who was holding the shares for the benefit of some other person will become the owner of those shares. It does not result the transaction into a void transaction.
209. The second view can be that Section 187 C would be relevant and applicable in the prosecutions for violation of Section 187 C of the Companies Act, 1956 and not in prosecution under Section 420 IPC of the accused as in the case in hand.
210. Another strongly relied upon evidence by the prosecution is Form 10-K (Annual Reports) of AES Corporation, USA for the year ending on 31.12.2006. In this Annual Report, the holding company i.e., AES Corporation, USA itself did not name AES Chhattisgarh Energy Private Ltd as one of its subsidiaries. It was only in the Form 10-K for the year ending on 31.12.2007, AES Chhattisgarh Energy Private Ltd was named as one of the subsidiaries of AES Corporation, USA. According to prosecution, it shows that on 10.01.2007, when application was given by Sanjeev Kumar Aggarwal for allocation of coal block in favour of AES Chhattisgarh Energy Private Ltd, the said company was not a subsidiary of AES Corporation, USA. The Holding-Subsidiary relationship between these two companies came into existence only on 15.11.2007 when the shares of Sanjeev Kumar Aggarwal and Soumendra Chandra Rout were transferred in favour of the two Mauritius-based companies. The argument is further supplemented with the allegation that as per the application of AES Chhattisgarh Energy Private Ltd, Rs. 1.5 Crores were already invested in the said company and in the feedback form, it is mentioned that the investment is Rs. 3 crores. The case of prosecution is that despite of such huge investment, AES Corporation, USA had chosen not to claim AES Chhattisgarh Energy Private Ltd as one of its subsidiary companies.
211. The two explanations of the accused in this regard are that the Annual Report itself mentions that the list of subsidiaries omits certain subsidiaries which are not significant subsidiaries. It is the submission of the accused that AES Chhattisgarh Energy Private Ltd was not a significant subsidiary for AES Corporation, USA till the ending of financial year on 31.12.2006 and that is why it was not mentioned as one of its subsidiaries. The accused have relied on definition of "significant subsidiary" provided in the Code of Federal Regulations, Part 270 (k) which is as under:
"(k) Significant subsidiary. The term "significant subsidiary"
means a subsidiary including its subsidiaries, which meets any of the following conditions, using amounts determined under U.S. Generally Accepted Accounting Principles and, if applicable, Section 2 (a)(41) of the Act:
(1) Investment test: The value of the registrant's and its other subsidiaries' investments in and advances to the tested subsidiary exceed 10% of the value of the total investments of the registrant and its subsidiaries consolidated as of the end of the most recently completed fiscal year; or (2) Income test: The absolute value of the sum of combined investment income from dividends, interest and other income, the net unrealised gains and losses on investments and the net change in unrealised gains and losses on investments from the tested subsidiary for the most recently completed fiscal year exceeds:
(i) 80 percent of the absolute value of the change in the net assets resulting from operations of the registrant and its subsidiaries consolidated for the most recently completed fiscal year; or
(ii) 10 percent of the absolute value of the change in net assets resulting from operations of the registrant and its subsidiaries consolidated for the most recently completed fiscal year and the investment test [paragraph (k)(1) of this section] condition exceeds 5 percent. However, if the absolute value of the change in net assets resulting from operations of the registrant and its subsidiaries consolidated is at least 10 percent lower than the average of the absolute value of such amounts for each of its last five fiscal years, then the registrant may compute both conditions of the income test using the average of the absolute value of such amounts for the registrant and its subsidiaries consolidated for each of its last five fiscal years."
212. It is therefore submitted that the investment of Rs. 1.5 Crores was not meeting the investment test referred above and therefore AES Chhattisgarh Energy Private Ltd was not named as a subsidiary of AES Corporation, USA in the annual report for the year ending on 31.12.2006. As against proposed investment of US $ 300 million, investment of Rs. 1.5 Crores was insignificant investment for AES Corporation, USA.
213. The reasons given by the accused persons for not including the name of AES Chhattisgarh Energy Private Ltd as one of the subsidiary companies of AES Corporation USA in the annual report ending as on 31.12.2007 are acceptable.
214. There is another equally serious incriminating evidence against the accused persons. In the Additional Attachments to Form 23 AC, PDF 7584, pertaining to Balance Sheet of AES Chhattisgarh Energy Private Ltd as at 31.03.2008, it is recorded that there is change in ownership of the company. These minutes are signed by Sanjeev Kumar Aggarwal as Managing Director and Soumendra Chandra Rout as director of AES Chhattisgarh Energy Private Ltd on 25.08.2008. If the beneficial owner of the shares of AES Chhattisgarh Energy Private Ltd was AES Corporation, USA and not Sanjeev Kumar Aggarwal and Soumendra Chandra Rout, it should not have been mentioned that there is a change in the ownership. However, considering the evidence dating from the year 2005 onwards which is noted in earlier paragraphs in detail and applying the test of preponderance of probability, this court is of the opinion that there was gross negligence in the way financial documents of the company AES Chhattisgarh Energy Private Ltd were prepared and submitted before Registrar of Companies. The glaring example of careless manner with which these documents were furnished with the Registrar of Companies is Form 23 AC of AES India Private Ltd for the year ending on 31.03.2007 where it was mentioned that the said company is not a subsidiary of any other company. This is in spite of the fact that 1122440 shares of the said company were held by AES Corporation, USA and 100 shares were held by AES India, LLC USA. Sanjeev Kumar Aggarwal has blamed Nesar Ahmad for mentioning in Form 23 AC that AES Chhattisgarh Energy Private Ltd was not a subsidiary of any other company. How can he explain signing of the Director's Report for the year ending on 31.03.2008 where under his signatures (and not under his digital signatures), he mentioned that during the year there had been a change in the ownership of the company. Although these financial documents are prepared with the assistance of Company Secretary and Chartered Accountants, but the signatory to these documents should have shown some attention before signing these documents. On the one hand, AES Chhattisgarh Energy Private Ltd had its own financial documents denying that it is a subsidiary company of any other company and denying that it has any holding company and on the other hand when the prosecution during investigation sought the information to justify that AES, Chhattisgarh Energy Private Ltd was a 100% subsidiary of AES Corporation, USA documents were provided half-heartedly. The approach of the accused was of utter complacency. Shri AP Singh, learned DLA for CBI has rightly pointed out that when they were given an opportunity during investigation, the accused did not share with CBI the emails and the supporting documents that were exchanged through those emails. When any fact is especially within the knowledge of any person, the burden of proving that fact is upon him. These emails which are brought on record now during defence evidence have shown that Sanjeev Kumar Aggarwal was following persons in senior positions in AES Corporation, USA for seeking their permission to incorporate SPV for carrying out MOU between AES India Private Ltd and State of Chhattisgarh. He was seeking their permission to spend a sum of Rs.1,50,000/- for incorporating the said company. He initiated steps for incorporating the company only receiving green signal from AES Corporation, USA. Important documents like One Pagers that were deliberated upon by the Development Council of AES Corporation, USA since 2005 were never shared with CBI. It was never explained during investigation to the CBI the procedure that was being followed by the Development Council of AES Corporation, USA and the stages a project undergoes during discussions in the Development Council i.e., 'idea', 'assess', 'pursue' and 'execute'. The examination of all the material available on record, including the material brought on record by the accused during defence evidence, now, any prudent person would be of the opinion that the composition of Board of Directors of AES Chhattisgarh Energy Private Ltd was under the control of AES Corporation, USA, through its subsidiary, AES India Private Ltd. However, it is also right that but for the defence evidence now brought on record and considering the self-damaging documents of AES Chhattisgarh Energy Private Ltd submitted with the Registrar of Companies any prudent person would have come to a conclusion that AES Chhattisgarh Energy Private Ltd was not a subsidiary of AES Corporation, USA. Be that as it may. The accused have suffered this trial for their own mistakes in furnishing incorrect information with the Registrar of Companies. However, during the trial, fortunately they have produced all the evidence available with them to show that AES Chhattisgarh Energy Private Ltd was a subsidiary of AES Corporation, USA. They have shown that Sanjeev Kumar Aggarwal and Soumendra Chandra Rout could not have been appointed directors of AES Chhattisgarh Energy Private Ltd, without the exercise of power in their favour by AES Corporation USA through its subsidiary, AES India Private Ltd. They have shown that they were nominated as directors of AES Chhattisgarh Energy Private Ltd as they were authorised by AES India Private Ltd to incorporate the company in question and they were also directed that they i.e., Sanjeev Kumar Aggarwal and Soumendra Chandra Rout shall own all the shareholding of the said company till FIPB clearance. Thereafter, they transferred their shareholding, as per earlier decisions, in favour of two Mauritius based companies.
215. Having answered this point for determination in favour of the accused persons, the discussion on second point of determination i.e., whether AES Chhattisgarh Energy Private Ltd was a subsidiary of AES Corporation, USA according to laws of USA is only of academic value now. However, the same is equally important and shall be decided in the following paragraphs in this judgment.
216. The second point for determination in this case is:
"Whether as on 10.01.2007 AES Chhattisgarh Energy Private Ltd was a subsidiary of AES Corporation, USA according to the laws of USA?"
217. The accused persons have relied on definition of "subsidiary" given in section 220 (2) of the Delaware General Corporation Law in their support of their arguments. The definition is:
"Subsidiary" means any entity directly or indirectly owned, in whole or in part, by the Corporation of which the stockholder is a stockholder and over the affairs of which the Corporation directly or indirectly exercises control and includes, without limitation, corporations, partnerships, limited partnerships, limited liability partnerships, limited liability companies, statutory trusts and/or joint ventures."
218. For "Control" reliance is placed on Section 203(c)(4) of the Delaware General Corporation Law which defines "Control" as under:
"Control," including the terms "controlling", "controlled by"
and "under common control with," means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting stock, by contract or otherwise. A person who is the owner of 20% or more of the outstanding voting stock of any corporation, partnership, unincorporated association or other entity shall be presumed to have control of such entity, in the absence of proof by a preponderance of the evidence to the contrary; Notwithstanding the foregoing, a presumption of control shall not apply where such person holds voting stock, in good faith and not for the purpose of circumventing this section, as an agent, bank, broker, nominee, custodian or a trustee for 1 or more owners who do not individually or as a group have control of such entity."
219. The accused have also relied on Code of Federal Regulations, Section 270, which defines "subsidiary" as "an affiliated person who is controlled by the specific person, directly or indirectly, through one or more intermediaries."
220. Reliance is also placed on definition of "parent" in section 270.8(b)-2(h) which is "A parent of a specified person is an affiliated person who controls the specified person directly or indirectly through one or more intermediaries."
221. Reliance is also placed on definition of "Affiliate" given in Section 230.501, which is defined as "An affiliate of, or person affiliated with, a specified person shall mean a person that directly, or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with, the person specified."
222. The submissions of the accused are that Sanjeev Kumar Aggarwal was an employee of AES India, a wholly owned subsidiary of AES USA. He was appointed a Director of AES Chhattisgarh Energy Private Ltd on November 16, 2006, at the time of its incorporation at the behest of AES India. AES Chhattisgarh Energy Private Ltd was formed and operated for the sole purpose of furthering the interests of AES USA. Any and all economic gains generated by the company were for the benefit of AES USA. The registered shareholders, Sanjeev Kumar Aggarwal and Soumendra Chandra Rout did not stand to benefit personally in any way from their positions as registered owners of the company's stock. Their status as registered owners of shares were a result of their positions as employees of AES. Any and all actions taken by them on behalf of AES Chhattisgarh Energy Private Ltd were for the benefit of its ultimate shareholder, AES Corporation USA. The incorporation expenses for AES Chhattisgarh Energy Private Ltd were paid by AES India. The transfer of shares of AES Chhattisgarh Energy Private Ltd registered in the name of Sanjeev Kumar Aggarwal and Soumendra Chandra Rout to AES India Mauritius and AES OPGC Holdings (Mauritius) (two wholly owned subsidiaries of AES Corporation) was done at the behest of AES Corporation, USA, and for its benefit. AES Chhattisgarh Energy Private Ltd was formed by AES and operated by agents of AES. These agents were subject to the control of AES, and acted under its direction at all times. The agents were drawing salary from AES India Private Limited. Since AES Chhattisgarh Energy Private Ltd was controlled by AES India and AES USA, it was subsidiary of both of these companies.
223. It is the submission of the accused persons that all the shares of AES Chhattisgarh Energy Private Ltd were beneficially owned by AES Corporation, USA, and therefore, AES Chhattisgarh Energy Private Ltd was a subsidiary of AES Corporation, USA. The accused have relied on Delaware General Corporation Law, Section 203 (c) (9), which defines the term "owner" "when used with respect to any stock" as a person or corporation who "beneficially owns such a stock, directly or indirectly." Reliance is also placed on section 262 (a) of the Delaware General Corporation Law which defines a beneficial owner is a person or corporation "who is the beneficial owner of shares of stock held either in voting trust or by a nominee on behalf of such person." It is the submission of the accused that Sanjeev Kumar Aggarwal and Soumendra Chandra Rout were nominees on behalf of AES. They were holding the shares of AES Chhattisgarh Energy Private Ltd for the benefit of AES Corporation, USA, which was the beneficial owner of the shares. It is their submission that Sanjeev Kumar Aggarwal and Soumendra Chandra Rout were merely the "Record Holder" and AES Corporation USA was the "actual owner of the shares".
224. Reliance is also placed on U.S. Securities and Exchange Commission in Securities Act Rule 13d-3 (a) which defines a beneficial owner as any person or corporation who "directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise has all shares: (1) voting power (including the power to vote, or to direct the voting of, such security) and/or, (2) investment power (including the power to dispose, or to direct the disposition of, such security)."
225. The accused have submitted that during 16.11.2006 to 15.11.2007, Sanjeev Kumar Aggarwal and Soumendra Chandra Rout were the registered owners of the shares of AES Chhattisgarh Energy Private Ltd. This registered ownership was directly for the benefit of AES group of companies. Therefore, AES Corporation USA was the beneficial owner of the shares of AES Chhattisgarh Energy Private Ltd during the period when Sanjeev Kumar Aggarwal and Soumendra Chandra Rout were the registered owners of those shares and AES Corporation USA was the true ultimate owner of the shares.
226. Reliance is also placed on Section 220 of the Delaware General Corporation Law which defines "Shareholder" as being either "a holder of record of stock in a stock Corporation, or a person who is the beneficial owner of shares of such a stock held either in a voting trust or by a nominee on behalf of such person." It is the submission of the accused that according to this provision of Delaware General Corporation Law, AES Corporation USA owned 100% of the shares of AES Chhattisgarh Energy Private Ltd by virtue of its beneficial ownership of such shares. The submission of the accused is that AES Corporation, USA was the beneficial owner of the shares, AES Chhattisgarh Energy Private Ltd was a subsidiary of AES Corporation USA from 16.11.2006 to 15.11.2007, despite the fact that AES Corporation USA was not the registered owner during that period. As the beneficial owner, AES Corporation, USA was the true owner of the AES Chhattisgarh Energy Private Ltd shares and AES Corporation, USA and AES India Private Ltd were the parent companies of AES Chhattisgarh Energy Private Ltd. The accused have submitted that AES Chhattisgarh Energy Private Ltd was a subsidiary of AES Corporation USA because it was directly controlled by it and it was indirectly owned by AES Corporation, USA.
227. The accused have relied on evidence of Prof Jonathan Macey, DW-5, who has stated that under USA Corporate Practice the name of beneficial owner is never mentioned in the registry of shares in the initial incorporation documents and there was no requirement under the Delaware law or US law that the name of beneficial owner be mentioned in any filing or disclosure. He stated that there is a significant difference in the laws in USA and India in as much as unlike section 187 C of the Companies Act, 1956, in USA, no such declaration is required to be filed in the company or any such return with the Registrar of Companies Act. At the relevant time, it was perfectly legal for the beneficial owner to remain anonymous under the US law.
228. The accused have mainly relied on Delaware General Corporation Law, Code of Federal Regulations and the evidence of Prof. Jonathan Macey, DW-5 as an expert on corporate law applicable in USA.
229. This evidence was led by the accused persons because if they are able to show that in USA, AES Corporation, USA and AES Chhattisgarh Energy Private Ltd were having the relationship of holding-subsidiary companies, they would be treated in the same relationship in India also whether they are holding-subsidiary companies as per Companies Act, 1956 or not.
230. This court finds provisions of Section 4 (6) of the Companies Act, 1956 are clearly made out in favour of the accused persons. The reason for the same is that whereas in India there is requirement in the form of section 187 C of the Companies Act, 1956 to report to the registrar of companies who is the beneficial owner of the companies but in USA, the beneficial owner can maintain his anonymity and can hold the shares through record holder of shares. There is no provision for informing any authority who is the real/beneficial owner of the shares. This court has noted in detail while deciding the first point for determination in this case, the evidence which shows that the composition of the Board of Directors of AES Chhattisgarh Energy Private Ltd was under the control of AES Corporation, USA, through its subsidiary company AES India Private Ltd. That discussion is not required to be repeated again. So far as Section 4(6) of the Companies Act, 1956 is concerned, this court is of the opinion that the accused have shown that AES Chhattisgarh Energy Private Ltd was being controlled by AES Corporation, USA and AES Corporation, USA was the beneficial owner of the shares of AES Chhattisgarh Energy Private Ltd as they were held by Sanjeev Kumar Aggarwal and Soumendra Chandra Rout who were record owner of the shares for the benefit of AES Corporation, USA. Therefore, according to laws of USA, AES Corporation, USA was the holding company and AES Chhattisgarh Energy Private Ltd was its subsidiary company and they would have the same relationship in India also in view of Section 4 (6) of the Companies Act, 1956.
231. Therefore, the second point for determination is also answered in favour of the accused persons holding that AES Corporation, USA was a holding company of AES Chhattisgarh Energy Private Ltd according to laws of USA and by virtue of Section 4 (6) of the Companies Act, 1956 AES Chhattisgarh Energy Private Ltd will be treated as the subsidiary company of AES Corporation, USA.
232. Answer to the charge framed against the accused persons: Since this court has held that AES Chhattisgarh Energy Private Ltd was the hundred percent subsidiary of AES Corporation, USA the charges framed against the accused persons are not proved. It is not proved that the accused had cheated Ministry of Coal for allocation of Sayang Coal Block in favour of AES Chhattisgarh Energy Pvt. Ltd. There was no misrepresentation when AES Chhattisgarh Energy Pvt. Ltd. mentioned in its application that it was 100% subsidiary of AES Corporation, USA. Both the accused are therefore acquitted of all the charges framed against them i.e., under section 420 of IPC and under section 120 B IPC and 120 B IPC read with 420 IPC.
233. Conclusion: The accused are acquitted.
ARUN ARUN BHARDWAJ
BHARDWAJ Date: 2023.12.19
17:15:24 +0530
Announced in the open Court (ARUN BHARDWAJ)
on 19.12.2023 SPECIAL JUDGE (PC ACT),
CBI, COAL BLOCK CASES-01
RADC, NEW DELHI
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