Supreme Court declares all coal allocations since 1993 as ‘illegal’

The bench added that the principles of common good and public purpose were brazenly overlooked.

Written by Utkarsh Anand | New Delhi | Updated: August 26, 2014 11:31 am
The bench said illegality crippled allocation done both under the government dispensation scheme and those by the screening committee for various reasons. The bench said illegality crippled allocation done both under the government dispensation scheme and those by the screening committee for various reasons.

The Supreme Court on Monday declared allocation of all the 218 coal blocks made since 1993 as “illegal and arbitrary” while also holding that the central government had no power of allocation under the relevant laws.

However, the consequences of this declaration, particularly whether such allocations will be scrapped or not, will be considered on September 1 after further hearing by the court.

In what is bound to overhaul the entire process of mining of the mineral, which the court described as “black diamond” and “extremely important element in the industrial life of developing India”, a three-judge bench ruled that the whimsical and non-transparent procedure of allocation had resulted in “unfair distribution of the national wealth in the hands of few private companies”.

It also said the prevailing practice of the Centre issuing allocation letters after selecting the private companies reversed the legal procedure stipulating that the states should take such decisions.

The bench, led by Chief Justice R M Lodha, said the entire allocation of coal blocks, on recommendations made by the screening committee in 36 meetings and through the government dispensation route, suffered from the “vice of arbitrariness and legal flaws”.

The allocations relate to the period from 1993 to 2011, during the regimes of both the NDA and UPA governments. However, over 190 of these allocations were done during the tenure of the UPA government, which had defended these allocations in January, when the court reserved its order.

The allocations were done on the recommendations of the screening committee, set up in 1992, for scrutinising applications from private power generating companies for ownership and operation of captive coal mines. The second route was through the government dispensation quota, wherein the allocations were made by the Coal Ministry to the government companies.

The bench clarified that it was not for the court to evaluate the advantages of competitive bidding over other methods of disposal of natural resources, but it was surely the court’s duty to examine whether such disbursal did not trample upon constitutional mandates.

While maintaining that the “common good and public interest have suffered heavily”, the bench said the screening committee was not consistent or transparent, and whatever guidelines were framed were not followed. “There was no objective criteria, nay, no criteria for evaluation of comparative merits. The approach had been ad hoc and casual,” it said.

Indicting the authorities for a policy of “pick and choose”, the bench, also comprising Justices Kurian Joseph and Madan B Lokur, said: “No applications were invited through advertisement and thus the exercise of allocation denied a level playing field, healthy competition and equitable treatment. There were no steps or measures taken to prevent possible misuse of end-use project of private companies.”

It also noted that several companies which have been allocated coal blocks were not engaged in the production of steel, power or cement at the time of allocation — a necessary condition to be fulfilled for allocation — but they were still given the blocks. Similarly, though allocation could be done only to individual entities and not to a consortium of companies, coal blocks were allocated to such consortium by tweaking the norms.

The bench termed the allocations through the government dispensation route as “illegal” since it was not permissible as per the Coal Mines (Nationalisation) Act, 1973, according to which no state government or public sector undertakings of the state governments are eligible for mining coal for commercial uses. Yet, such entities were allocated coal blocks.

The court, adjudicating on PILs filed by advocate M L Sharma and NGO Common Cause, also junked the Centre’s argument that it was the appropriate authority empowered to allocate blocks by issuing letters of allocation and that the states could subsequently execute the leases with the selected companies.

It underlined that such a practice was violative of the CMN Act as well as the Mines and Minerals (Development and Regulation) (MMDR) Act and it also rendered the role of the state governments “only mechanical.”

“Though the legal regime under the MMDR Act imposes responsibility and statutory obligation upon the state government to recommend or not to recommend to the central government grant of prospecting licence or mining lease for the coal mines, but once the letter allocating a coal block is issued by the central government,

the statutory role of the state government is reduced to completion of procedural formalities only,” said the bench, adding that the Centre reversed the scheme as stipulated under the law.

It also restrained diversion of coal meant for Ultra Mega Power Projects (UMPPs) for any other purposes of commercial exploitation.

ALSO READ: CBI to drop coal scam case against Kumar Mangalam Birla

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  1. I
    Aug 26, 2014 at 12:13 am
    Funny and Very original Manish Bimari!!!
    1. A
      Aug 26, 2014 at 2:30 am
      Its a three judge bench borrowing time for further hearing knowing the fact that delay will cause heavy financial losses and more. Ethically they should work nonstop like 24/7 until a final judgement.
      1. S
        Sarvopagunavarjita Raghav
        Aug 25, 2014 at 10:22 am
        Bhakts dont get too excited it includes decisions made by Bajpayee govt. as well.. #BJPCongBhaiBhai
        1. B
          Banda Gangaraju
          Aug 26, 2014 at 3:59 am
          Is it not like bolting the stable after the horse has fled?
          1. I
            Aug 25, 2014 at 4:41 pm
            NO it was not. The legislation was changed in 2004 to bring transparency by auction method while private players are allowed,Government had the authority to allocate coal blocks by a process of compeive bidding from 2004 , but it did not instead chose to Use the current method to loot and give Coal at throw away prices. In 2005 the Expert Committee on Coal Sector Reforms provided recommendations on improving the allocation process this was also not followed. It can be guessed by the presumed losses calculated while allocation of coal, it is calculated to be around $ 2 billion in NDA period but the loss calculated is $ 180 billion in UPA allocation. Get the picture?
            1. N
              Aug 26, 2014 at 7:10 am
              Besides identifying each allocation done to non-steel, non-power and non-cement producing and other non-deserving companies and cancelling them, the culprits responsible for these allocations should also be punished severely.
              1. N
                Aug 25, 2014 at 10:09 am
                1. S
                  Sanjay Kumar
                  Aug 25, 2014 at 9:31 am
                  There will be no smoke in Sonia hi's 10-Janpath Kitchen from now on.
                  1. R
                    Rajdatt Manjrekar
                    Aug 25, 2014 at 10:25 am
                    UPA: Usurping Poacher's Alliance. Thank God they were defeated and kicked out, otherwise they would have devastated the Country. Jai Hind
                    1. R
                      Ramesh Negi
                      Aug 26, 2014 at 6:29 am
                      Govt must start new auction process now so that mining should not effect due to cancellation.
                      1. S
                        S K
                        Aug 25, 2014 at 11:35 am
                        Manish Bimari---where are you ? Any self righteous comments, pl?
                        1. S
                          Sanjay Verma
                          Aug 25, 2014 at 4:39 pm
                          Did you not read the article??? It clearly says out of 218 cases 190 belongs to UPA Government. Balance 28 will need analysis as there will be some to Government undertakings and also allocated by Congress (pre1997) and 3 Front governments (supported by Congress)
                          1. S
                            Aug 26, 2014 at 9:32 am
                            I think Supreme Court should know the distinction between "work to rule" & work as per rules. Very fact that people did not object to the procedure earlier is clear indication that they thought it was legal. Who is aggrieved by allocation in 1993? It is the defence of UPA that they followed the policy of NDA. So obviously they are also not aggrieved party.Can Supreme Court at this stage say that removal of Governors by Congress Gov in 2004 was illegal? I think review by S.C judge is not the remedy. Will Supreme Court agree for review of their Collegium system by Law Secretary or by Cabinet Secretary?
                            1. V
                              viswa shastry
                              Aug 25, 2014 at 3:28 pm
                              The observation of Supreme Court proves that it is the custodian of corruption.What the the court was doing all these years.
                              1. S
                                Subramanian Venkatraman
                                Aug 26, 2014 at 5:06 am
                                It is sad that comments are made without any deep thinkingas to (1) why it was done and (2) then why it was continued and (3) what weshould do for such things not to happen. For (1) & (2) the answer is solelybecause of coalition compulsions. PVR's govt was literally a minority govt andhe somehow managed by making opposition parties fight with each other andtaking the support of one party or the other. Coalgate was the price he paid.Vajpayee also paid the same price for the same reason. The UPA1 & UPA2 hadto continue with the polity because they had introduced it originally. Aboutquestion (3) We have already taken necessary steps as is evident. We now have agovt which has a clear majority in Lok Sabha and will have majority in RajyaSabha by the time next ebly elections are over. The second requirement is weshould have a PM who is old for the young and young for the old and alsototally untainted and well experienced both in politics and in administration our PM Modiji we have everything. We have already come across some instanceswhere he had stood against the corrupt. God bless him and let's all supporthim.A couple of more thing to say. If the licences issued 20years before are cancelled now, who will be the loser? Not the companies who gotthe licences. It will be the shareholders who had no part in its management.Even if the Supreme Court sets of a SIT and fast track court, it will be yearsbefore the culprits could be punished. There will be no evidence whatsoeverleft now after 20 years to punish them beyond doubt. The original perpetrator,i.e. PVT is no more and even The Family came into the picture almost after adecade. Let's not waste our time, money and energy on this.Secondly, the role of the Supreme Court in this matter.Right or wrong, the original leases were awarded on the basis of certain'policy'. Is it right that the Supreme Court umes the right to set up an SITand then declare all the leases void? I consider it a gross interference withthe authority of government. The judiciary had the previous government by itsballs or whatever. It had the audacity to do what it pleased with almost muteopposition. The corrupt government, Parliament and politicians could not dareto raise this issue forcefully. In the process SC has established a number ofwrong precedents and I wonder if any of the succeeding CJ will have the guts totell his colleagues that their job is to define and interpret the Consutionand not play for the galleries and media by lording over both Government andthe Parliament.Thirdly, the office of CAG did not raise this issue on theseyears. Why? Lack of backbone? Or as our PM points out: "Mera Kya?"and/or "Mujhe Kya?" atude? Why our Government should followstrictly the 'Seniority' qualification to over ride all other qualificationincluding overall suitability, which is the main reason for such fiascos andbecause of which the nation is set back by decades?Lastly, the Supreme Court brings to the fore again the setback foreign direct investment dried up after Vodaphone fiasco in which law wasretrospectively amended by the Government. Now the SC is doing it. The judgeswho felt the responsibility to take up the investigation by themselves of theCAG report, might try to justify what they did by contending that it was in thelarger national interest. Did not the same 'national interest' tell them not todeclare the leases defunct which is unlikely to make any difference to thelessees?There is still time to correct itself for the Supreme Court.I hope wiser counsel will prevail.
                                1. T
                                  Thomas George
                                  Aug 26, 2014 at 3:56 am
                                  All political parties have been in power since 1993 for significant periods. No one including the Congress or the BJP did anything to correct it. Now, if the SC did not rule on this, how can you be so sure that BJP under Modi would have changed the regime when Vajpayee did not? So, this is more than political; it is about all political parties conspiring to disregard the law as it is written. In a democracy, laws ped by the Parliament are supreme. If a government wants to do something not conforming to the law, why not change it before implementing the new policy? Then, there would be a discussion in the public domain and in the Parliament. Executive disregarding the Legislature, and held accountable by the Judiciary after two decades is a sorry state of affairs.
                                  1. S
                                    Aug 25, 2014 at 9:49 am
                                    So now Supreme court will decide on cancellation of these mines one by one 'ARBITRARILY'.SC will take another 20 years in this process, so by that time the mines will be empty.
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