Court finds prima facie evidence of criminal breach of trust and conspiracy; directs immediate FIR registration and investigation amid allegations of a cover-up
In a significant judgment delivered on October 8, 2026, the Jharkhand High Court (Division Bench of Chief Justice M.S. Sonak and Justice Manoj Prasad) directed the Central Bureau of Investigation (CBI) to register a First Information Report (FIR) and investigate the loss of Rs. 727.67 crores suffered by the Coal Mines Provident Fund Organisation (CMPFO) due to investments made in Dewan Housing Finance Corporation Limited (DHFL).
The case arose from a Public Interest Litigation (W.P. (PIL) No. 4486 of 2022) filed by the Coal Employees Welfare Association and another petitioner, who alleged gross mismanagement and possible criminal conduct in the handling of CMPFO funds. The fund had invested approximately Rs. 1,300 crores in DHFL despite repeated warnings from financial experts advising withdrawal to prevent losses. This failure to act resulted in a massive financial loss.
The Court noted that the CMPFO officials had not conducted any meaningful inquiry into the matter. Instead, a premature affidavit was filed by Mr. Pankaj Kumar, Regional Commissioner-II, CMPFO, giving a clean chit to the officials involved, even before the conclusion of departmental proceedings. This raised serious concerns about a potential attempt to hush up the matter.
The Court observed that departmental proceedings cannot substitute a criminal investigation as they are limited to service or civil liability and cannot extend to persons outside the organization. Given the scale of the loss and the seriousness of allegations-criminal breach of trust, criminal conspiracy, and collusion-the Court found that an independent CBI investigation was necessary to ensure a fair, impartial inquiry and to instil public confidence.
The CBI, which was already investigating various aspects of the DHFL scam, expressed its willingness to take up this matter if directed by the Court. Respondent authorities failed to file affidavits or explain their inaction, further strengthening the petitioners' apprehension of a cover-up.
The Court reiterated the principles laid down by the Supreme Court that directions for CBI investigations under Article 226 of the Constitution should be exercised sparingly but emphasized that such intervention is justified where prima facie material discloses the commission of offences and independent investigation is essential.
Consequently, the Jharkhand High Court ordered the CBI to expeditiously register an FIR and investigate the role of all persons responsible, including CMPFO officials. The Court also directed that departmental proceedings against the ex-Commissioner, Mr. Animesh Bharti, shall continue independently and must not be influenced by the premature clean chit given earlier.
Regarding the petitioners' prayers for compensation, the Court held that it was premature to decide this issue before the investigation's outcome, but allowed the petitioners liberty to renew the request at a suitable stage.
This landmark judgment underscores the judiciary's proactive role in protecting public funds and ensuring accountability in cases involving large-scale financial irregularities and alleged criminal conduct.
Bottom Line:
Article 226 - Direction for CBI investigation - Where prima facie material disclosed possible criminal breach of trust and criminal conspiracy in investment of CMPFO public funds of about Rs. 1,300 crores in DHFL, despite repeated expert warnings, resulting in loss of Rs. 727.67 crores, and authorities failed to conduct meaningful inquiry and attempted to treat matter as mere commercial loss, High Court held case to be exceptional and directed CBI to register FIR and investigate.
Statutory provision(s): Article 226 of the Constitution of India, Insolvency and Bankruptcy Code (IBC)
Coal Employees Welfare Association v. Union of India, (Jharkhand)(DB) : Law Finder Doc Id # 2998054
