By Trishala Kulkarni
The allocation of coal blocks for the period 1993 to 2010 is the subject matter of this group of writ petitions filed in the nature of Public Interest Litigation, principally one by Manohar Lal Sharma and the other by the Common Cause.
Grounds raised against the allocation
- Non-compliance of the mandatory legal procedure under the Mines and Minerals (Development and Regulation) Act, 1957.
- Breach of Section 3(3)(a)(iii) of the Coal Mines (Nationalisation) Act, 1973.
- Violation of the principle of Trusteeship of natural resources by gifting away precious resources as largesse.
- Arbitrariness, lack of transparency, lack of objectivity and non-application of mind.
- Allotment tainted with mala fides and corruption and made in favour of ineligible companies tainted with mala fides and corruption.
The first of these writ petitions was filed by Manohar Lal Sharma. When that writ petition was listed for preliminary hearing on 14.09.2012, the Hon’ble Court issued notice to Union of India and directed it to file counter affidavit through Secretary, Ministry of Coal dealing with the following aspects:
- The details of guidelines framed by the Central Government for allocation of subject coal blocks.
- The process adopted for allocation of subject coal blocks.
- Whether the guidelines contain inbuilt mechanism to ensure that allocation does not lead to distribution of largesse unfairly in the hands of few private companies.
- Whether the guidelines were strictly followed and whether by allocation of the subject coal blocks, the objectives of the policy have been realized.
- What were the reasons for not following the policy of competitive bidding adopted by the Government of India way back in 2004 for allocation of coal blocks.
- What steps have been taken or are proposed to be taken against the allottees who have not adhered to the terms of allotment or breached the terms thereof.
The PIL filed by Common Cause was heard on 19.11.2012 wherein certain additional issues were also raised along with additional reliefs. The Hon’ble Supreme Court issued notice on the PIL filed by Common Cause on 19.11.2012.
Prayers of the petitioners
- For quashing the entire allocation of coal blocks made to private companies by the Central Government between 1993 and 2012.
- A court monitored investigation by the Central Bureau of Investigation (CBI) and Enforcement Directorate (ED) or by a Special Investigation Team (SIT) into the entire allocation of coal blocks by the Central Government.
“The present consideration of the matter is confined to the first prayer, i.e., for quashing the allocation of coal blocks to private companies made by the Central Government between the above period. At the outset, therefore, it is clarified that consideration of the present matter shall not be construed, in any manner, as touching directly or indirectly upon the investigation being conducted by CBI and ED into the allocation of coal blocks.”
The first counter affidavit was filed by the Union of India on 22.01.2013 running into 11 volumes and 2607 pages. The Union of India clarified that their counter affidavit focuses on the queries raised by the Court on 14.09.2012 in the petition filed by Manohar Lal Sharma.
On 26.09.2013, Attorney General, as he then was Mr. G.E. Vahanvati, in the course of his arguments submitted that allocation letter by the Central Government was only a first step towards obtaining mining lease and that, by itself, did not confer any right on the allottee to work mines. He submitted that at the best, letter of allocation was a letter of intent and issuance of such allocation letter in no way impinges the rights of the State Governments under the 1957 Act.
In light of the submissions of the learned Attorney General on 26.09.2013, the Hon’ble Court after consultation with the Petitioners (Mr. Prashant Bhushan and Mr. Manohar Lal Sharma) issued notice to the State Governments of Jharkhand, Chhattisgarh, Odisha, Maharashtra, Andhra Pradesh, Madhya Pradesh and West Bengal as the subject coal blocks, for which the allocation is in issue, were located in these States.
Issues for consideration
- Whether the allocation of coal blocks ought to have been done only by public auction.
- Whether the allocation of coal blocks made on the basis of recommendations of the Screening Committee suffer from any constitutional vice and legal infirmity.
- Whether the allocation of coal blocks made by way of Government dispensation route (Ministry of Coal) is consistent with the constitutional principles and the fundamentals of the equality clause enshrined in the Constitution.
“On 25.08.2014, the Supreme Court held that the allotment of coal blocks made by the Screening Committee of the Government of India, and also the allotments made through the Government dispensation route are arbitrary and illegal.”
The Court analyzed the scheme of the Mines and Minerals Development and Regulation Act and the Coal Mine Nationalization Act (CMN Act) and the relevant provisions respectively to come to the conclusion that “exercise undertaken by the Central Govt. in allocating the coal blocks/selection of beneficiaries is not traceable either to the MMDR Act or the CMN Act.” The practice and procedure for allocation of coal blocks by the Central Govt. through administrative route is clearly inconsistent with the law already enacted or the rules framed.
It is not the domain of court to evaluate the methods of distribution/disposal of natural resources. However, if the allocation of coal blocks is inconsistent with Article 14 and the procedure has been found to be unfair, unreasonable, discriminatory, the consequences of such illegal allocation must follow.
Further the Court analyzed in detail the minutes of the various Screening Committee meetings. The guidelines of the Screening Committee were silent about inter se priority between applicants for the same block, or any objective criterion for determining the merits of the applicants. The Screening Committee did not assess the capacities and coal requirements of the companies. It simply relied upon the information provided by the applicants without verification. No applications were invited through advertisement.
The Court observed that most of the companies which have been allocated coal blocks were not engaged in production of steel, power or cement at the time of allocation, nor had they proposed to set-up. The recommendation for allocation by the Screening Committee to the State PSUs and also the allocation made to the State PSUs through Government dispensation route are, therefore, in violation of the provisions of the CMN Act. On 25.08.2014 the Court in Paragraph 157 stated, “what should be the consequences, is the issue which remains to be tackled. We are of the view that, to this limited extent, the matter requires further hearing.”
Thereafter, after hearing the parties on the issue of de-allocation, the Hon’ble Supreme Court of India passed an Order on 24.09.2014. The Union of India filed its affidavit on 08.09.2014 stating that coal is actually being mined from 40 coal blocks listed in Annexure I to the affidavit. This list includes two coal blocks allotted to an Ultra Mega Power Project (Sasan Power Ltd. [UMPP] allotted the coal blocks Moher and Moher Amroli Extension). Further the affidavit in addition to the above 40 coal blocks also mentions that 6 more coal blocks are ready for extraction of coal in 2014-15.
The Court observed that the judgment did not deal with any individual case. It dealt only with the process of allotment of coal blocks and found it to be illegal and arbitrary. The process of allotment cannot be reopened collaterally through the appointment of a committee. This would virtually amount to nullifying the judgment. The process is a continuous thread that runs through all the allotments. Since it was fatally flawed, the beneficiaries of the flawed process must suffer the consequences thereof and the appointment of a committee would really amount to permitting a body to examine the correctness of the judgment.
Consequences and cancellation
The Court further observed that the judgment highlighted the illegality and arbitrariness in the allotment of coal blocks and these “consequence proceedings” are intended to correct the wrong done by the Union of India; these proceedings look to the future in that by highlighting the wrong, it is expected that the Government will not deal with the natural resources that belong to the country as if they belong to a few individuals who can fritter them away at their sweet will; these proceedings may also compensate the exchequer for the loss caused to it.
There are two categories of coal block allotments: the first category being allotments other than those mentioned in Annexure 1 and Annexure 2; the second category being the 46 coal blocks mentioned in Annexure 1 and Annexure 2 that could possibly be “saved” from cancellation on certain terms and conditions. As far as the first category of coal block allotments is concerned, they must be cancelled (except those mentioned in the judgment). There is no reason to “save” them from cancellation. The allocations are illegal and arbitrary; the allottees have not yet entered into any mining lease and they have not yet commenced production.
The allocation of three coal blocks in Annexure 1 is not disturbed and they are Moher and Moher Amroli Extension allocated to Sasan Power Ltd. (UMPP) and Tasra (allotted to Steel Authority of India Ltd. (SAIL), a Central Government public sector undertaking not having any joint venture). As far the 6 coal blocks mentioned in Annexure 2 are concerned, the allocatees have not yet commenced production. They do not stand on a different or better footing as far as the consequences are concerned. These allotments are also liable to be cancelled. The allocation of the Pakri Barwadih coal block (allotted to National Thermal Power Corporation (NTPC), being a Central Government public sector undertaking not having any joint venture) is not liable to be cancelled.
The cancellation will take effect only after six months, i.e. from 31st March, 2015. This period of six months is being given since the Central Government and CIL would need some time to adjust to the changed situation and move forward and to also give adequate time to the coal block allottees to adjust and manage their affairs.
Additional levy and CBI scrutiny
The allottees of the coal blocks other than those covered by the judgment and the four coal blocks covered by this order must pay an amount of Rs. 295/- per metric ton of coal extracted as an additional levy within a period of three months and in any case on or before 31st December, 2014. The coal extracted hereafter till 31st March, 2015 will also attract the additional levy of Rs. 295/- per metric ton. (Note: This compensatory amount is based on the assessment made by the CAG. It may well be that the cost of extraction of coal from an underground mine has not been taken into consideration by the CAG, but in matters of this nature it is difficult to arrive at any mathematically acceptable figure quantifying the loss sustained. The estimated loss of Rs. 295/- per metric ton of coal is, therefore, accepted for the purposes of these cases.)
The scrutiny by the CBI in respect of the allotment of 12 coal blocks out of 46 will continue and be taken to its logical conclusion and also that, the observations and findings in this order shall have no bearing on the pending investigations.