THE CLEAN ENERGY FIASCO

1. Shalini Mukherjee graduated with honours from Sloan Business School in 1999, to return

to India and join her fathers ailing energy business. Her class album earmarked her for

success (and her ability to hold a drink), but nobody could have foreseen what an upturn in

fortunes her return would herald for M/s Gladiator Pvt Ltd [Gladiator]. All of it stemmed

from her prescient decision to shift the focus of the company from coal based energy to

green fuels hydel and wind based power generation. She oversaw a remarkable

downsizing of the family business in West Bengal and focused on showcasing the prospects

of clean energy with one village. Her demonstration, and her fathers old network of friends

from his anti-Bhadralok days helped curry favour with the communist government of the

day in Calcutta (as it then was).

2. Gladiator became the first private player in the field of hydel and air production upon being

awarded the necessary license by the Government of West Bengal. Along with this, the

State Government also provided prime real-estate for two separate projects at a pittance.

All of this was justified as being part of a Looking Forward policy of the State

Government which was widely publicised at the time but till then had lacked suitable

players. The other projects backed in the Looking Forward policy included biotechnolo gy

and pharmaceutical research. To cap an incredible few years for Shalini, Forbes Magazine

ran a feature on her in early 2004, highlighting how a woman had shown how to run what

was predominantly understood as a mans business.

3. The meteoric rise of Gladiator did not go unnoticed. Soon after the Forbes Magazine

interview, Gladiator received a formal communication from the management of M/s

Energize India Ltd. [Energize India], the Indian wholly-owned subsidiary of M/s Energize

Inc. [Energize USA], a company operating out of Delaware in the United States. Energize

USA was a global giant in the field of green energy. It was desperate to make inroads into

India but had been unable to master the unique business strategy required to succeed in this

environment. The company had known about Shalini due to her being a Sloan alumnus and

considered this a useful opportunity to make its presence felt.

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 4. Energize USA offered a simple deal: sell all assets and shareholding of Gladiator to

Energize India without selling the company itself. Energize India would install its

management within Gladiator, while retaining Shalini in an executive position for her to

help continue steering the transition. At this point, Gladiator had yet to begin operations at

the new sites that were allocated by the Government. In fact, as a company its assets were

little more than its shareholding, a skeletal framework for a plant at one site, and the

fourteen licenses and permissions required for running a hydel and wind based energy

production business in West Bengal. Energize USA offered Shalini and her father (the only

shareholders in Gladiator) Rs.30,00,00,000/- for their shares.

5. By 31.12.2004, all the necessary paperwork was complete, and Energize India had

officially become the 100% shareholder in Gladiator. Meetings were held with members

of the State Government, the managements of Gladiator and Energize USA. Shalini and

her family left West Bengal and bought a bungalow in New Friends Colony, which was

registered in her name on 01.02.2005. Over the next ten years she continued be

remunerated by Gladiator for her services as an advisor.

6. People were right to wonder what was she getting this money for, as Gladiator had

managed barely any production in this time. This was all par for the course when it came

to energy projects in the state of West Bengal. A sting operation conducted by the Daily

Telegram exposed how most of the land had been lying unused, or had in fact been wrongly

allocated having already been earmarked for previous government projects. The Gladiator

project had hit one snag after another, and after having spent the first five years living under

the shelter of a communist government afraid to acknowledge its failure, it spent the next

five years backed by the support of Energize USA, which was now looking to exit the

business altogether.

7. The time from 2004 to 2014 was tumultuous, to say the least, for the state of West Bengal.

The communist regime was overthrown. A new, more populist government took charge,

and as is every new governments wont it decided that the best way to move forward was

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 to undo the past. The cloud of corruption cast by the previous Government will be cleared

under these skies of Blue exhorted their new popular leader, Pushpa Didi. A horde of

government policies came under the scanner for potential political brownie-points. The

construction tenders awarded in the city of Kolkata became a favourite, with several

prosecutions under the Prevention of Corruption Act, 1988 [PC Act] being launched by the

Central Bureau of Investigation in West Bengal.

8. For the past few years, though, the government desperately wanted to find something to

stick against Dibyojyoti Basu an old communist sympathiser working as the Secretary,

Ministry of Tourism, Government of West Bengal. That Dibyojyoti held solid links with

the ailing party was a well-known fact. But so did most of the senior bureaucracy, so that

could not be helped. What had specifically irked the ruling regime was his bold decision

to stop an entourage close to the Minister of Tourism from running amok in the Sunderbans.

The entourage included Pushpa Didis brother and his family and the issue became a

personal affront to the great leader.

9. The subsequent flurry of activity in 2014 unearthed the Looking Forward policy of 2004

and the story of Gladiator. Dibyojyoti was joint-secretary in the Ministry of Power,

Government of West Bengal at the time. The file-notings showed that he was involved in

all the decisions (made through a committee) regarding the policy that the government had

pushed through, including getting the necessary licenses issued in favour of Gladiator. He

was also present in meetings held between Gladiator and Energize. This was considered

enough material to call up the Director of the Central Bureau of Investigation (an old friend

of the Chief Minister), and ask him to have his inspectors look into the matter.

10. Within days the CBI had descended upon the offices of the Ministry of Power to seize all

the relevant files pertaining to the Looking Forward policy and the subsequent grant of

licenses and permissions to Gladiator. A Regular Case (RC) was registered on 01.04.2015

under Sections 120-B, 420, 467, and 471 Indian Penal Code [IPC], and Sections 13(2) read

with 13(1)(d) of the PC Act. The Regular Case named Gladiator and Unknown Persons

in the Ministry of Power as accused persons. The CBI also summoned Dibyojyoti Basu

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 and other bureaucrats for questioning on 02.04.2015. Notices under Section 160, Crimina l

Procedure Code 1973 [Cr.P.C.] were also sent to Shalini Mukherjee in New Delhi (her

father had died in 2014).

11. Shalini came to the CBI offices in Kolkata on 15.07.2015, and was asked to subsequently

provide all available documents and materials pertaining to her association with Gladiator.

Separate notices under Section 160, Cr.P.C. were also sent to Gladiator, asking for the

Managing Director to appear in person or depute someone to assist the ongoing

investigation.

12. In this fashion, the CBI got access to all the paperwork surrounding the deals between

Shalini, Gladiator, Energize India and Energize USA. Soon after, on 01.10.2015 it filed a

Final Report under Section 173(2) Cr.P.C. before the Court of the Ld. Metropolitan

Magistrate, Kolkata Sessions Court, against Shalini Mukherjee, Gladiator, Energize India,

and Energize USA, under Sections 406, 420 read with Section 120-B IPC. While the CBI

named Dibyojyoti Basu as the concerned public servant from the Ministry of Power, it filed

a Closure Report in his regard as the investigation yielded no incriminating material to

suggest corruption. It concluded that the acts and omissions of the public servant may

merit suitable disciplinary action.

13. The Ld. Metropolitan Magistrate refused to take piecemeal cognizance of offences on the

Final Report, and sent the CBI back to conduct further investigation in respect of the

allegations against the public servants. The next date was fixed for 01.12.2015.

14. In the meanwhile, on 01.11.2015 Mr. Rajan Kapoor, Deputy Director in the Enforceme nt

Directorate, passed a Provisional Attachment Order [PAO] under Section 5 of the

Prevention of Money Laundering Act 2002 [PMLA] in respect of the bungalow located at

C-4, New Friends Colony, New Delhi owned by Shalini Mukherjee. The Provisio na l

Attachment stated that the Officer had reasons to believe that the said properties were

proceeds of crime that may be concealed, transferred or dealt with in a manner that may

result in frustrating any proceedings relating to confiscation of the proceeds. A copy of

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 the PAO and reasons to believe was forwarded to the Adjudicating Authority, and served

upon Shalini at her residence on 04.11.2015. Shalini was then served a summons under

Section 50 of the PMLA, asking her to appear at the offices in Lok Nayak Bhavan on

07.11.2015 and give her statement.

15. Shalini appeared but no statement was recorded on that date, with the Deputy Director

asking her to appear again on 10.11.2015. On this date, Shalini was asked to explain the

source of funds behind the house in New Friends Colony, her relations with Dibyojyoti

Basu, the management at Energize India and Energize USA. Shalini declined to make any

statement, citing her fundamental right to remain silent under Article 20(3) of the

Constitution of India. Rajan Kapoor informed her of the provisions of Section 50, which

made her bound to state the truth and accordingly she made her statement under

objection.

16. On 01.12.2015, Rajan Kapoor filed Original Complaint [O.C.] 240/2015 titled Rajan

Kapoor. Dy. Director, Directorate of Enforcement vs. Shalini Mukherjee & Ors. before

the Ld. Adjudicating Authority, and sought confirmation of the PAO as it was proceeds

of crime obtained via commission of scheduled offences under the PMLA. On the same

day, the matter was listed before the Court of the Ld. Metropolitan Magistrate in Kolkata,

where the CBI sought additional time to complete further investigation into the allegatio ns

against the public servants. Accordingly, the case was adjourned for 01.03.2016 and no

cognizance of offences was taken on that date.

17. During this time, the PMLA proceedings against Shalini took place before the Ld.

Adjudicating Authority. It was argued that there were no reasons to believe that the

provisionally attached property was proceeds of crime, and further that in any event there

was no reason to believe that the same would be transferred or alienated, as it was her

residence. Shalinis counsel also argued that the attachment proceedings were contrary to

Article 20(1) of the Constitution of India, and that her statements had been obtained in

violation of Article 20(3).

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 18. The Ld. Adjudicating Authority confirmed the attachment on 01.02.2016, specifica lly

directing the Enforcement Directorate against taking possession within three months to

enable Shalini to prefer an appeal, which she duly did. In Appeal No. 14 of 2016 titled

Shalini Mukherjee vs. Rajan Kapoor, Dy. Director, Directorate of Enforcement, Shalini

reiterated her contentions and pressed for a stay of operation against the order passed by

the Ld. Adjudicating Authority. On the side, she also preferred Writ Petition (Civil) No. 15

of 2016 titled Shalini Mukherjee vs. Union of India before the Delhi High Court.

19. It was argued that the proceedings of attachment and confiscation instituted against her

under the PMLA were contrary to Article 20(1) of the Constitution of India. Moreover, it

was specifically argued that Section 50 of the PMLA was contrary to Article 20(3) of the

Constitution of India. She relied upon the decision passed by a Ld. Single Judge of the

Delhi High Court in M/s Mahanivesh Oils & Foods Pvt. Ltd. vs. Directorate of

Enforcement [Writ Petition (Civil) 1925/2014]. After a brief set of initial hearings in

February, the Single Judge kept her case pending owing to the decision in Mahanivesh

being challenged in appeal before a Division Bench.

20. On 28.02.2016, Rajan Kapoor filed a Complaint before the Ld. Special Court in Delhi

against Shalini Mukherjee, Gladiator, Energize India, and Energize USA for offences

punishable under Sections 3 and 4 of the PMLA. When the Ld. Special Court asked about

the status of the case under IPC offences against Shalini Mukherjee, the Enforceme nt

Directorate informed him of their pendency and the Ld. Special Court thus declined to take

cognizance of offences on that date. He adjourned proceedings for 01.05.2016, in the hope

that proceedings in Kolkata would have come to a head by then.

21. His hopes were not unreasonable. On 01.03.2016 the CBI filed a Supplementary Report

under Section 173(8) Cr.P.C. against Dibyojyoti Basu and two other public servants. The

evidence collected during further investigation showed that the decision taken by

Dibyojyoti Basu, by which Gladiator obtained important licenses was without any public

interest. The CBI now alleged that all accused persons were part of an overarchin g

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 conspiracy to commit corruption and cheat the government, i.e. offences punishable under

Sections 120-B read with Sections 420 IPC and 13(1)(d) PC Act.

22. In addition to this, the CBI also added a separate allegation under Sections 120-B read with

406 IPC against Shalini Mukherjee, Saransh Asthana (CEO of Energize India) and Brian

Weston (CEO of Energize USA) for causing criminal breach of trust in conspiracy with

each other. It was alleged that the Government of West Bengal had entrusted Gladiator

was the licenses and permissions, and the sale of these licenses with huge profit was

nothing but a dishonest breach of trust committed by the accused persons. Such profiteering

could not be permitted in respect of natural resources.

23. The Court of the Ld. Metropolitan Magistrate immediately transferred proceedings before

the Court of the Ld. Special Judge, as offences under the PC Act had been added to the

mix, and fixed the next date for 01.04.2016. The Court of the Ld. Special Judge took

cognizance of all the offences on that date. The lack of sanction to prosecute Dibyojyoti

Basu, a public servant, was considered immaterial to the present proceedings. Owing to the

presence of foreign parties and the difficulty involved in summoning them, the next date

was fixed for 01.10.2016. The CBI was directed to ensure process was issued to all accused

persons well in advance.

24. When the Ld. Special Court in Delhi took up the PMLA proceedings on 01.05.2016, Rajan

Kapoor informed him of the developments in Kolkata. He also informed the Court that the

Enforcement Directorate was in the process of collecting material against Dibyojyoti Basu

and other persons, and sought an adjournment to file a Supplementary Complaint in this

regard.

25. The Ld. Special Court agreed to fix the matter for 01.07.2016, by which time the

Enforcement Directorate filed a Supplementary Complaint naming Dibyojyoti Basu as a

co-accused. Cognizance of offences under Sections 3 and 4 of the PMLA was taken, and

Court directed that the proceedings in Kolkata were to be transferred to Delhi as per law.

The case was fixed for 01.12.2016, to ensure no procedural hiccups delay proceedings.

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 26. 2016 had not been a great year for the world, and Shalini Mukherjee was no exception. Not

only did she receive all these summonses, informing her of the various cases soon to begin

against her, she also saw the Division Bench of the Delhi High Court reverse Mahanivesh

in appeal, by way of a decision handed down on 10.11.2016. On the advice of her counsel,

she immediately withdrew her writ petition, and filed a Special Leave Petition under

Article 136 of the Constitution of India, along with a separate Writ Petition under Article

32, before the Supreme Court.

27. She was joined in this by the other private persons named as accused (except Energize

USA), while Dibyojyoti Basu preferred separate challenges to the proceedings instituted

against him. Due to the common questions of law and fact, the Supreme Court granted

leave to appeal in the Special Leave Petitions, and clubbed these petitions together with

the Writ Petition preferred by Shalini Mukherjee. Criminal Appeal No. 200 of 2017

(Shalini Mukherjee & Ors. v. CBI & Ors.), Criminal Appeal No. 201 of 2017 (Dibyojyoti

Basu v. CBI & Ors.), and Writ Petition (Civil) No. 130 of 2017 (Shalini Mukherjee v.

Directorate of Enforcement & Ors.), were all posted before an unprecedented 15 judges

bench of the Supreme Court, due to the various constitutional questions of importance

involved in the cases.

28. The private persons (Shalini Mukherjee, Gladiator, and Energize India) raised the

following issues of law in their petitions before the Supreme Court (in no order of

precedence):

1. All the proceedings arising out of O.C. 240/2015 are contrary to Article 20(1) of

the Constitution of India;

2. Section 50 of the PMLA is contrary to Article 20(3) of the Constitution of India;

3. The Supplementary Report filed by the CBI, making allegations under Sections 406

IPC, and those of Section 120-B read with 13(1)(d) PC Act against the private

persons, must be set aside as bad in law.

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 29. DIbyojyoti Basu, in his petition under Article 136, raised the following issues of law:

1. Supplementary Report filed by the CBI, making allegations under Section

13(1)(d)(iii) PC Act in absence of any mens rea, must be set aside as bad in law;

2. Cognizance of offences could not be taken be taken in the absence of sanction under

Section 19 PC Act and Section 197 Cr.P.C.;

3. The Supplementary Complaint filed before the Ld. Special Court, Delhi, was ille ga l

and must be set aside as bad in law.

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