Coal mines - allotment of blocks through screening committee but not by public auction - challenged - quashed except some - Apex court held that The allocation of coal blocks through Government dispensation route, however laudable the object may be, also is illegal since it is
impermissible as per the scheme of the CMN Act. No State Government or public sector undertakings of the State Governments are eligible for mining coal for commercial use. Since allocation of coal is permissible only to those categories under Section 3(3) and (4), the joint venture arrangement with ineligible firms is also impermissible. Equally, there is also no
question of any consortium / leader / association in allocation. Only an undertaking satisfying the eligibility criteria referred to in Section 3(3) of the CMN Act, viz., which has a unit engaged in the production of iron and steel and generation of power, washing of coal obtained from mine or production of cement, is entitled to the allocation in addition to Central Government, a Central Government company or a Central Government corporation. In this context, it is worthwhile to note that the 1957 Act has been amended introducing Section 11-A w.e.f. 13.02.2012. As per the said amendment, the grant of reconnaissance permit or prospecting licence or mining lease in respect of an area containing coal or lignite can be made
only through selection through auction by competitive bidding even among the eligible entities under Section 3(3)(a)(iii), referred to above. However, Government companies, Government corporations or companies or corporations, which have been awarded power projects on the basis of competitive bids for tariff (including Ultra Mega Power Projects) have been exempted of allocation in favour of them is not meant to be through the competitive bidding process. As we have already found that the allocations made, both under the Screening Committee route and the Government dispensation route, are arbitrary and illegal, 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. By way of footnote, it may be clarified and we do, that no
challenge was laid before us in respect of blocks where competitive bidding was held for the lowest tariff for power for Ultra Mega Power Projects (UMPPs). =
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.
The allocation of coal blocks made during the
above period by the Central Government, according to petitioners,
is
illegal and unconstitutional inter alia on the following grounds:
(a) Non-compliance of the mandatory legal procedure under the Mines and
Minerals (Development and Regulation) Act, 1957 (for short, ‘1957 Act’).
(b) Breach of Section 3(3)(a)(iii) of the Coal Mines (Nationalisation)
Act, 1973 (for short, ‘CMN Act’).
(c) Violation of the principle of Trusteeship of natural resources by
gifting away precious resources as largesse.
(d) Arbitrariness, lack of transparency, lack of objectivity and non-
application of mind; and
(e) Allotment tainted with mala fides and corruption and made in favour
of ineligible companies tainted with mala fides and corruption.=
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.=
In Natural Resources Allocation Reference20 the Constitution
Bench, in the main judgment, thus, concluded that auction despite being a
more preferable method of alienation / allotment of natural resources
cannot be held to be constitutional requirement or limitation for
alienation of all natural resources and, therefore, every method other than
auction cannot be struck down as ultra vires the constitutional mandate.
The Court also opined that auction as a mode cannot be conferred the status
of a constitutional principle.
While holding so, the Court held that
alienation of natural resources is a policy decision and the means adopted
for the same are, thus, executive prerogatives.
The Court summarized the
legal position as under:
“146. To summarise in the context of the present Reference, it needs to be
emphasised that this Court cannot conduct a comparative study of the
various methods of distribution of natural resources and suggest the most
efficacious mode, if there is one universal efficacious method in the first
place.
It respects the mandate and wisdom of the executive for such
matters.
The methodology pertaining to disposal of natural resources is
clearly an economic policy. It entails intricate economic choices and the
Court lacks the necessary expertise to make them. As has been repeatedly
said, it cannot, and shall not, be the endeavour of this Court to evaluate
the efficacy of auction vis-à-vis other methods of disposal of natural
resources.
The Court cannot mandate one method to be followed in all facts
and circumstances.
Therefore, auction, an economic choice of disposal of
natural resources, is not a constitutional mandate. We may, however, hasten
to add that the Court can test the legality and constitutionality of these
methods.
When questioned, the courts are entitled to analyse the legal
validity of different means of distribution and give a constitutional
answer as to which methods are ultra vires and intra vires the provisions
of the Constitution.
Nevertheless, it cannot and will not compare which
policy is fairer than the other, but, if a policy or law is patently unfair
to the extent that it falls foul of the fairness requirement of Article 14
of the Constitution, the Court would not hesitate in striking it down.
147. Finally, market price, in economics, is an index of the value that a
market prescribes to a good.
However, this valuation is a function of
several dynamic variables: it is a science and not a law. Auction is just
one of the several price discovery mechanisms.
Since multiple variables are
involved in such valuations, auction or any other form of competitive
bidding, cannot constitute even an economic mandate, much less a
constitutional mandate.
148. In our opinion, auction despite being a more preferable method of
alienation/allotment of natural resources, cannot be held to be a
constitutional requirement or limitation for alienation of all natural
resources and therefore, every method other than auction cannot be struck
down as ultra vires the constitutional mandate.
149. Regard being had to the aforesaid precepts, we have opined that
auction as a mode cannot be conferred the status of a constitutional
principle.
Alienation of natural resources is a policy decision, and the
means adopted for the same are thus, executive prerogatives. However, when
such a policy decision is not backed by a social or welfare purpose, and
precious and scarce natural resources are alienated for commercial pursuits
of profit maximising private entrepreneurs, adoption of means other than
those that are competitive and maximise revenue may be arbitrary and face
the wrath of Article 14 of the Constitution.
Hence, rather than prescribing
or proscribing a method, we believe, a judicial scrutiny of methods of
disposal of natural resources should depend on the facts and circumstances
of each case, in consonance with the principles which we have culled out
above.
Failing which, the Court, in exercise of power of judicial review,
shall term the executive action as arbitrary, unfair, unreasonable and
capricious due to its antimony with Article 14 of the Constitution.”=
The entire exercise of allocation through Screening Committee
route thus appears to suffer from the vice of arbitrariness and not
following any objective criteria in determining as to who is to be selected
or who is not to be selected. There is no evaluation of merit and no inter
se comparison of the applicants. No chart of evaluation was prepared. The
determination of the Screening Committee is apparently subjective as the
minutes of the Screening Committee meetings do not show that selection was
made after proper assessment. The project preparedness, track record etc.,
of the applicant company were not objectively kept in view. Until the
amendment was brought in Section 3(3) of the CMN Act w.e.f. 09.06.1993, the
Central Government alone was permitted to mine coal through its companies
with the limited exception of private companies engaged in the production
of iron and steel. By virtue of the bar contained in Section 3(3) of the
CMN Act, between 1976 and 1993, no private company (other than the company
engaged in the production of iron and steel) could have carried out coal
mining operations in India. Section 3(3) of the CMN Act, which was amended
on 09.06.1993 permitted private sector entry in coal mining operations for
captive use. The power for grant of captive coal block is governed by
Section 3(3)(a) of the CMN Act, according to which, only two kind of
entities, namely, (a) Central Government or undertakings/corporations owned
by the Central Government; or (b) companies having end-use plants in iron
and steel, power, washing of coal or cement can carry out coal mining
operations. The expression “engaged in” in Section 3(3)(a)(iii) means that
the company that was applying for the coal block must have set up an iron
and steel plant, power plant or cement plant and be engaged in the
production of steel, power or cement. The prospective engagement by a
private company in the production of steel, power or cement would not
entitle such private company to carry out coal mining operation. Most of
the companies, which have been allocated coal blocks, were not engaged in
the production of steel, power or cement at the time of allocation nor in
the applications made by them any disclosure was made whether or not the
power, steel or cement plant was operational. They only stated that they
proposed to set up such plants. Thus, the requirement of end-use project
was not met at the time of allocation.=
To sum up, the entire allocation of coal block as per
recommendations made by the Screening Committee from 14.07.1993 in 36
meetings and the allocation through the Government dispensation route
suffers from the vice of arbitrariness and legal flaws. The Screening
Committee has never been consistent, it has not been transparent, there is
no proper application of mind, it has acted on no material in many cases,
relevant factors have seldom been its guiding factors, there was no
transparency and guidelines have seldom guided it. On many occasions,
guidelines have been honoured more in their breach. There was no objective
criteria, nay, no criteria for evaluation of comparative merits. The
approach had been ad-hoc and casual. There was no fair and transparent
procedure, all resulting in unfair distribution of the national wealth.
Common good and public interest have, thus, suffered heavily. Hence, the
allocation of coal blocks based on the recommendations made in all the 36
meetings of the Screening Committee is illegal.
155. The allocation of coal blocks through Government dispensation
route, however laudable the object may be, also is illegal since it is
impermissible as per the scheme of the CMN Act. No State Government or
public sector undertakings of the State Governments are eligible for mining
coal for commercial use. Since allocation of coal is permissible only to
those categories under Section 3(3) and (4), the joint venture arrangement
with ineligible firms is also impermissible. Equally, there is also no
question of any consortium / leader / association in allocation. Only an
undertaking satisfying the eligibility criteria referred to in Section 3(3)
of the CMN Act, viz., which has a unit engaged in the production of iron
and steel and generation of power, washing of coal obtained from mine or
production of cement, is entitled to the allocation in addition to Central
Government, a Central Government company or a Central Government
corporation.
156. In this context, it is worthwhile to note that the 1957 Act has
been amended introducing Section 11-A w.e.f. 13.02.2012. As per the said
amendment, the grant of reconnaissance permit or prospecting licence or
mining lease in respect of an area containing coal or lignite can be made
only through selection through auction by competitive bidding even among
the eligible entities under Section 3(3)(a)(iii), referred to above.
However, Government companies, Government corporations or companies or
corporations, which have been awarded power projects on the basis of
competitive bids for tariff (including Ultra Mega Power Projects) have been
exempted of allocation in favour of them is not meant to be through the
competitive bidding process.
157. As we have already found that the allocations made, both under
the Screening Committee route and the Government dispensation route, are
arbitrary and illegal, 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.
158. By way of footnote, it may be clarified and we do, that no
challenge was laid before us in respect of blocks where competitive bidding
was held for the lowest tariff for power for Ultra Mega Power Projects
(UMPPs). As a matter of fact, Mr. Prashant Bhushan, learned counsel for
Common Cause submitted that since allocation for UMPPs is in accord with
the opinion given in Natural Resources Allocation Reference20 and the
benefit of the coal block is passed on to the public, the said allocations
may not be cancelled. However, he submitted that in some cases the
Government has allowed diversion of coal from UMPP to other end uses i.e.
for commercial exploitation. Having regard to this, it is directed that
the coal blocks allocated for UMPP would only be used for UMPP and no
diversion of coal for commercial exploitation would be permitted.
2014 - Aug.Part - http://judis.nic.in/supremecourt/filename=41841
REPORTABLE
IN THE SUPREME COURT OF INDIA
ORIGINAL JURISDICTION
WRIT PETITION (CRL.) NO. 120 OF 2012
Manohar Lal Sharma …… Petitioner
Vs.
The Principal Secretary & Ors. ……
Respondents
WITH
WRIT PETITION [C] NO. 463 OF 2012
WRIT PETITION [C] NO. 515 OF 2012
WRIT PETITION [C] NO. 283 OF 2013
JUDGMENT
R.M. LODHA, CJI.
Coal is king and paramount Lord of industry is an old saying in
the industrial world. Industrial greatness has been built up on coal by
many countries. In India, coal is the most important indigenous energy
resource and remains the dominant fuel for power generation and many
industrial applications. A number of major industrial sectors including
iron and steel production depend on coal as a source of energy. The cement
industry is also a major coal user. Coal’s potential as a feedstock for
producing liquid transport fuels is huge in India. Coal can help
significant economic growth. India’s energy future and prosperity are
integrally dependant upon mining and using its most abundant, affordable
and dependant energy supply – which is coal. Coal is extremely important
element in the industrial life of developing India. In power, iron and
steel, coal is used as an input and in cement, coal is used both as fuel
and an input. It is no exaggeration that coal is regarded by many as the
black diamond.
2. Being such a significant, valuable and important natural
resource, 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. The allocation of coal blocks made during the
above period by the Central Government, according to petitioners, is
illegal and unconstitutional inter alia on the following grounds:
(a) Non-compliance of the mandatory legal procedure under the Mines and
Minerals (Development and Regulation) Act, 1957 (for short, ‘1957 Act’).
(b) Breach of Section 3(3)(a)(iii) of the Coal Mines (Nationalisation)
Act, 1973 (for short, ‘CMN Act’).
(c) Violation of the principle of Trusteeship of natural resources by
gifting away precious resources as largesse.
(d) Arbitrariness, lack of transparency, lack of objectivity and non-
application of mind; and
(e) Allotment tainted with mala fides and corruption and made in favour
of ineligible companies tainted with mala fides and corruption.
3. 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 Court issued notice to Union of India and directed it to
file counter affidavit through Secretary, Ministry of Coal dealing with the
following aspects:
(i) The details of guidelines framed by the Central Government for
allocation of subject coal blocks.
(ii) The process adopted for allocation of subject coal blocks.
(iii) 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?
(iv) Whether the guidelines were strictly followed and whether by
allocation of the subject coal blocks, the objectives of the policy have
been realised?
(v) 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?
(vi) 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?
4. Another PIL came to be filed by Common Cause after the above
order was passed. PIL by Common Cause came up for preliminary hearing on
19.11.2012. Since, certain additional issues were raised and additional
reliefs were also made in the PIL by Common Cause, this Court issued notice
in that matter as well on 19.11.2012.
5. Principally, two prayers have been made in these matters,
first, for quashing the entire allocation of coal blocks made to private
companies by the Central Government between 1993 and 2012 and second, 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 made
between the above period covering all aspects.
6. 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.
7. The first counter affidavit was filed by the Central Government
on 22.01.2013 running into eleven volumes and 2607 pages. Thereafter,
further/additional counter affidavit was filed by the Central Government.
However, when the matters were listed on 10.07.2013, learned Attorney
General submitted that in the counter affidavits filed so far, the Union of
India had focused on the six queries raised by the Court on 14.09.2012 in
the writ petition filed by Manohar Lal Sharma. He sought some time to
enable the Central Government to file appropriate counter affidavit
justifying allocation of coal blocks. Thereafter, further/additional
counter affidavits have also been filed by the Central Government.
8. On 10.09.2013, the arguments with regard to challenge to
allocation of coal blocks commenced which continued on 11.09.2013,
12.09.2013, 17.09.2013, 18.09.2013, 24.09.2013, 25.09.2013 and 26.09.2013.
On 26.09.2013, Attorney General 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,
we wanted to know from the counsel for the petitioners whether concerned
State Governments should be asked to explain their position in the matter
to which Mr. Manohar Lal Sharma, petitioner-in-person and Mr. Prashant
Bhushan agreed and, accordingly, the Court issued notice to the States 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. The Court sought the
views of the above States on the following:
(i) How did the State Government understand the allocation of coal
blocks by the Central Government?
(ii) What was the role of the State Government in the
allocation of coal blocks ?
(iii) What was the role of the State Government in the subsequent steps
having regard to the provisions of the 1957 Act?
(iv) The details of the agreements entered into by the State Public Sector
Undertakings, which were allotted coal blocks, with private parties for the
coal blocks located in the State.
9. In pursuance of the above, 7 States have filed their responses.
10. The arguments re-commenced on 05.12.2013. On that day,
arguments of the States of Jharkhand, Chhattisgarh and Odisha were
concluded and matters were fixed for 08.01.2014. On 08.01.2014, the
arguments on behalf of the States of Maharashtra, Andhra Pradesh, Madhya
Pradesh and West Bengal were concluded and the matters were fixed for
09.01.2014. On that day, arguments of learned Attorney General were
concluded.
11. Three Associations, viz., Coal Producers Association, Sponge
Iron Manufacturers Association and Independent Power Producers Association
of India have made applications for their intervention stating that these
associations represented large number of allottees who have been allocated
subject coal blocks. Accordingly, Mr. K.K. Venugopal, learned senior
counsel was heard for Coal Producers Association and Mr. Harish N. Salve,
learned senior counsel was heard on behalf of the Sponge Iron Manufacturers
Association and Independent Power Producers Association of India. They
commenced their arguments on 09.01.2014, which continued on 15.01.2014 and
concluded on 16.01.2014. The arguments in rejoinder by Mr. Manohar Lal
Sharma, petitioner-in-person and Mr. Prashant Bhushan, learned counsel for
Common Cause were also concluded on that day. The arguments of Mr. Sanjay
Parikh, who had made an application for intervention on behalf of Mr.
Sudeep Shrivastav were also heard and concluded. The judgment was reserved
on that day.
12. It is appropriate that we first notice the statutory framework
relevant for the issues under consideration. The Mines and Minerals
(Development and Regulation) Act, 1948 (for short, ‘1948 Act’) was enacted
to provide for the regulation of mines and oil fields and for the
development of the minerals under entry 36 of the Government of India Act,
1935. It received the assent of the Governor General on 08.09.1948 and
came into effect from that date.
13. 1948 Act was repealed by the 1957 Act. The introduction of the
1957 Act reads:
“In the Seventh Schedule of the Constitution in Union List entry 54
provides for regulation of mines and minerals development to the extent to
which such regulation and development under the control of the Union is
declared by Parliament by law to be expedient in the public interest. On
account of this provision it became imperative to have a separate
legislation. In order to provide for the regulation of mines and the
development of minerals, the Mines and Minerals (Regulation and
Development) Bill was introduced in the Parliament.”
14. 1957 Act has undergone amendments from time to time. Section 2
of the 1957 Act reads:
“Declaration as to the expediency of Union Control - it is hereby declared
that it is expedient in the public interest that the Union should take
under its control the regulation of mines and the development of minerals
to the extent hereinafter provided.”
15. Sections 3(a), (c), (d), (e), (f), (g) and (h) define:
“minerals”, “mining lease”, “mining operations”, “minor minerals”,
“prescribed”, “prospecting licence”, and “prospecting operations”[1],
respectively.
16. Section 4 mandates that prospecting or mining operations shall
be under licence or lease. Sub-section (2) provides that no reconnaissance
permit, prospecting licence or mining lease shall be granted otherwise than
in accordance with the provisions of the Act and the rules made thereunder.
17. Section 5 is a restrictive provision. The provision mandates
that in respect of any mineral specified in the First Schedule, no
reconnaissance permit, prospecting licence or mining lease shall be granted
except with the previous approval of the Central Government. Coal and
Lignite are at item no.1 in Part A under the title “Hydro Carbons/Energy
Minerals” in the First Schedule appended to the 1957 Act.
18. Section 6 provides for maximum area for which a prospecting
licence or mining lease may be granted. Section 7 makes provisions for the
periods for which prospecting licence may be granted or renewed and Section
8 provides for periods for which mining leases may be granted or renewed.
Section 10 provides that application for reconnaissance permit, prospecting
licence or mining lease in respect of any land in which the minerals vest
in the Government shall be made to the State Government concerned, inter
alia, it empowers the State Government concerned to grant or refuse to
grant permit, licence or lease having regard to the provisions of the 1957
Act or the Mineral Concession Rules, 1960 (for short ‘1960 Rules’).
19. Section 11 provides for preferential right of certain persons.
Sub-section (1) of Section 11 makes a provision that where a reconnaissance
permit or prospecting licence has been granted in respect of any land, the
permit holder or the licensee shall have a preferential right for obtaining
a prospecting licence or mining lease, as the case may be, in respect of
that land over any other person. This is, however, subject to State
Government’s satisfaction and certain conditions as provided therein. Sub-
section (2) of Section 11 says that where the State Government does not
notify in the Official Gazette the area for grant of reconnaissance permit
or prospecting licence or mining lease and two or more persons have applied
for a reconnaissance permit, prospecting licence or a mining lease in
respect of any land in such area, the applicant whose application was
received earlier, shall have a preferential right to be considered for such
grant over the applicant whose application was received later. This is,
however, subject to provisions of sub-section (1). The first proviso
appended thereto enacts that where an area is available for grant of
reconnaissance permit, prospecting licence or mining lease and the State
Government has invited applications by notification in the Official Gazette
for grant of such permit, licence or lease, the applications received
during the period specified in such notification and the applications which
had been received prior to the publication of such notification in respect
of the lands within such area or had not been disposed of, shall be deemed
to have been received on the same day for the purpose of assigning priority
under sub-section (2). The second proviso indicates that where such
applications are received on the same day, the State Government, after
taking into consideration the matter specified in sub-section (3), may
grant the reconnaissance permit, prospecting licence or mining lease to one
of the applicants as it may deem fit. Sub-section (3) elaborates the matter
referred to in sub-section (2), namely, (a) any special knowledge of,
experience in reconnaissance operations, prospecting operations or mining
operations, possessed by the applicant; (b) the financial resources of the
applicant; (c) the nature and quality of the technical staff employed or to
be employed by the applicant; (d) the investment which the applicant
proposes to make in the mines and in the industry based on the minerals;
and (e) such other matters as may be prescribed.
20. Section 13 empowers the Central Government to make rules in
respect of minerals. By virtue of the power conferred upon the Central
Government under Section 13(2), the 1960 Rules have been framed for
regulating the grant of, inter alia, mining leases in respect of minerals
and for purposes connected therewith.
21. By virtue of Section 17, the Central Government has been given
special powers to undertake prospecting or mining operations in certain
lands. Section 17-A authorises the Central Government to reserve any area
not already held under any prospecting licence or mining lease with a view
to conserve any mineral and after consultation with the State Government by
notification in the Official Gazette.
22. Section 18 indicates that it shall be the duty of the Central
Government to take all such steps as will be necessary for the conservation
and systematic development of minerals in India and for the protection of
the environment by preventing or controlling any pollution which may be
caused by prospecting or mining operations and for such purposes the
Central Government may, by notification in the Official Gazette, make such
rules as it thinks necessary.
23. Section 18A empowers the Central Government to authorise the
Geological Survey of India to carry out necessary investigation for the
purpose of information with regard to the availability of any mineral in or
under any land in relation to which any prospecting licence or mining lease
has been granted by a State Government or by any other person. The proviso
that follows sub-section (1) of Section 18A provides that in cases of
prospecting licences or mining leases granted by a State Government, no
such authorisation shall be made except after consultation with the State
Government.
24. Section 19 provides that any prospecting licences and mining
leases granted, renewed or acquired in contravention of the 1957 Act or any
rules or orders made thereunder shall be void and of no effect.
25. The 1960 Rules were framed by the Central Government, as noted
above, in exercise of the powers conferred by Section 13.
26. Chapter IV of 1960 Rules deals with grant of mining leases in
respect of land in which the minerals vest in the Government. Sub-rule (1)
of Rule 22 provides that an application for the grant of a mining lease in
respect of land in which the minerals vest in the Government shall be made
to the State Government in Form I through such officer or authority as the
State Government may specify in this behalf. Sub-rule (3) provides for the
documents to be annexed with the application and so also that such
application must be accompanied by a non-refundable fee as prescribed
therein. Sub-rule (4) of Rule 22 provides that on receipt of the
application for the grant of mining lease, the State Government shall take
decision to grant precise area and communicate such decision to the
applicant. The applicant, on receipt of communication from the State
Government of the precise areas to be granted, is required to submit a
mining plan within a period of six months or such other period as may be
allowed by the State Government to the Central Government for its approval.
The applicant is required to submit the mining plan duly approved by the
Central Government or by an officer duly authorized by the Central
Government to the State Government to grant mining lease over that area.
Sub-rule (5) of Rule 22 provides the details to be incorporated in the
mining plan.
27. Rule 26 empowers the State Government to refuse to grant or
renew mining lease over the whole or part of the area applied for. But
that has to be done after giving an opportunity of being heard and for
reasons to be recorded in writing and communicated to the applicant.
28. Rule 31 provides for time within which lease is to be executed
where an order has been made for grant of such lease on an application.
Rule 34 provides for manner of exercise of preferential rights for mining
lease.
29. Rule 35 provides that where two or more persons have applied
for a reconnaissance permit or a prospecting licence or a mining lease in
respect of the same land, the State Government shall, for the purpose of
sub-section (2) of Section 11, consider besides the matters mentioned in
clauses (a) to (d) of sub-section (3) of Section 11, the end use of the
mineral by the applicant.
30. In short, the 1957 Act provides for general restrictions on
undertaking prospecting and mining operations, the procedure for obtaining
prospecting licences or mining leases in respect of lands in which the
minerals vest in the government, the rule-making power for regulating the
grant of prospecting licences and mining leases, special powers of Central
Government to undertake prospecting or mining operations in certain cases,
and for development of minerals.
31. The Coal Mines (Taking Over of Management) Act, 15 of 1973,
(for short, ‘Coal Mines Management Act’) was passed,
“to provide for the taking over, in the public interest, of the management
of coal mines, pending nationalisation of such mines, with a view to
ensuring rational and coordinated development of coal production and for
promoting optimum utilisation of the coal resources consistent with the
growing requirements of the country, and for matters connected therewith or
incidental thereto.”
32. The Coal Mines Management Act received the assent of the
President on 31.03.1973 but it was made effective from 30.01.1973 except
Section 8(2) which came into force at once. Section 3(1) provides that on
and from the appointed day (that is, 31.01.1973) the management of all coal
mines shall vest in the Central Government. By Section 3(2), the coal mines
specified in the Schedule shall be deemed to be the coal mines the
management of which shall vest in the Central Government under sub-section
(1). Under the proviso to Section 3(2), if, after the appointed day, the
existence of any other coal mine comes to the knowledge of the Central
Government, it shall by a notified order make a declaration about the
existence of such mine, upon which the management of such coal mine also
vests in the Central Government and the provisions of the Act become
applicable thereto.
33. Immediately after the Coal Mines Management Act, the Parliament
enacted the CMN Act. CMN Act was passed,
“to provide for the acquisition and transfer of the right, title and
interest of the owners in respect of coal mines specified in the Schedule
with a view to reorganising and reconstructing any such coal mines so as to
ensure the rational, coordinated and scientific development and utilisation
of coal resources consistent with the growing requirements of the country,
in order that the ownership and control of such resources are vested in the
State and thereby so distributed as best to subserve the common good, and
for matters connected therewith or incidental thereto.”
34. Section 2(b) of the CMN Act defines a coal mine in the same
manner as the corresponding provision of the Coal Mines Management Act,
namely, a mine “in which there exists one or more seams of coal”. Section
3(1) provides that on the appointed day (i.e., 01.05.1973) the right, title
and interest of the owners in relation to the coal mines specified in the
Schedule shall stand transferred to, and shall vest absolutely in the
Central Government free from all encumbrances. Section 4(1) provides that
where the rights of an owner under any mining lease granted, or deemed to
have been granted, in relation to a coal mine, by a State Government or any
other person, vest in the Central Government under Section 3, the Central
Government shall, on and from the date of such vesting, be deemed to have
become the lessee of the State Government or such other person, as the case
may be, in relation to such coal mine as if a mining lease in relation to
such coal mine had been granted to the Central Government. The period of
such lease is to be the entire period for which the lease could have been
granted by the Central Government or such other person under the 1960 Rules
and thereupon all the rights under the mining lease granted to the lessee
are to be deemed to have been transferred to, and vested in, the Central
Government. By Section 4(2) on the expiry of the term of any lease referred
to in sub-section (1), the lease, at the option of the Central Government,
is liable to be renewed on the same terms and conditions on which it was
held by the lessor for the maximum period for which it could be renewed
under the 1960 Rules. Section 5(1) empowers the Central Government under
certain conditions to direct by an order in writing that the right, title
and interest of an owner in relation to a coal mine shall, instead of
continuing to vest in the Central Government, vest in the Government
company. Such company, under Section 5(2), is to be deemed to have become
the lessee of the coal mine as if the mining lease had been granted to it.
By Section 6(1), the property which vests in the Central Government or in a
government company is freed and discharged from all obligations and
encumbrances affecting it. Section 8 requires that the owner of every coal
mine or group of coal mines specified in the second column of the Schedule
shall be given by the Central Government in cash and in the manner
specified in Chapter VI, for the vesting in it under Section 3 of the
right, title and interest of the owner, an amount equal to the amount
specified against it in the corresponding entry in the fifth column of the
Schedule. By Section 11(1), the general superintendence, direction, control
and management of the affairs and business of a coal mine, the right, title
and interest of an owner in relation to which have vested in the Central
Government under Section 3 shall vest in the Government company or in the
Custodian, as the case may be.
35. The CMN Act came to be amended by the Coal Mines
(Nationalisation) Amendment Ordinance which was promulgated on 29.04.1976.
The Ordinance was replaced by the Coal Mines (Nationalisation) Amendment
Act, 1976 (for short, ‘1976 Nationalisation Amendment Act’). A new
section, Section 1-A was inserted by which it was declared that it was
expedient in the public interest that the Union should take under its
control the regulation and development of coal mines to the extent provided
in sub-sections (3) and (4) of Section 3 and sub-section (2) of Section 30
of the CMN Act. By sub-section (2) of Section 1-A, the declaration
contained in sub-section (1) was to be in addition to and not in derogation
of the declaration contained in Section 2 of the 1957 Act. By Section 3 of
the 1976 Nationalisation Amendment Act, a new sub-section (3) was
introduced in Section 3 of the principal Act. Under clause (a) of the newly
introduced sub-section (3) of Section 3, on and from the commencement of
Section 3 of the 1976 Nationalisation Amendment Act, no person other than
(i) Central Government or a Government company or a corporation owned,
managed or controlled by the Central Government or (ii) a person to whom a
sub-lease, referred to in the proviso to clause (c) has been granted by any
such Government, company or corporation or (iii) a company engaged in the
production of iron and steel, shall carry on coal mining operation, in
India in any form. Under clause (b) of sub-section (3), excepting the
mining leases granted before the 1976 Nationalisation Amendment Act in
favour of the Government company or corporation referred to in clause (a),
and any sub-lease granted by any such Government, Government company or
corporation, all other mining leases and sub-leases in force immediately
before such commencement shall insofar as they relate to the winning or
mining of coal, stand terminated. Clause (c) of the newly introduced sub-
section (3) of Section 3 provides that no lease for winning or mining coal
shall be granted in favour of any person other than the Government,
Government company or corporation referred to in clause (a). Under the
proviso to clause (c), the Government, Government company or the
corporation to whom a lease for winning or mining coal has been granted may
grant a sub-lease to any person in any area if, (i) the reserves of coal in
the area are in isolated small pockets or are not sufficient for scientific
and economical development in a coordinated and integrated manner, and (ii)
the coal produced by the sub-lessee will not be required to be transported
by rail. By sub-section (4) of Section 3, where a mining lease stands
terminated under sub-section (3), it shall be lawful for the Central
Government or a Government company or corporation owned or controlled by
the Central Government to obtain a prospecting licence or mining lease in
respect of the whole or part of the land covered by the mining lease which
stands terminated. Section 4 of the 1976 Nationalisation Amendment Act
introduces an additional provision in Section 30 of the principal Act by
providing that any person who engages, or causes any other person to be
engaged, in winning or mining coal from the whole or part of any land in
respect of which no valid prospecting licence or mining lease or sub-lease
is in force, shall be punishable with imprisonment for a term which may
extend to two years and also with fine which may extend to Rs.10,000/-.
36. By the Coal Mines (Nationalisation) Amendment Act, 1993 (for
short, ‘1993 Nationalisation Amendment Act’), the CMN Act was further
amended. The Statement of Objects and Reasons of the 1993 Nationalisation
Amendment Act reads thus:
“Considering the need to augment power generation and to create additional
capacity during the eighth plan, the Government have taken decision to
allow private sector participation in the power sector. Consequently, it
has become necessary to provide for coal linkages to power generating units
coming up in the private sector. Coal India Limited and Neyveli Lignite
Corporation Limited, the major producers of coal and lignite in the public
sector, are experiencing resource constraints. A number of projects cannot
be taken up in a short span of time. As an alternative, it is proposed to
offer new coal and lignite mines to the proposed power stations in the
private sector for the purpose of captive end use. The same arrangement is
also considered necessary for other industries who would be handed over
coal mines for captive end use. Washeries have to be encouraged in the
private sector also to augment the availability of washed coal for supply
to steel plants, power houses, etc.
Under the Coal Mines (Nationalisation) Act, 1973, coal mining is
exclusively reserved for the public sector, except in case of companies
engaged in the production of iron and steel, and mining in isolated small
pockets not amenable to economical development and not requiring rail
transport. In order to allow private sector participation in coal mining
for captive use for purpose of power generation as well as for other
captive end uses to be notified from time to time and to allow the private
sector to set up coal washeries, it is considered necessary to amend the
Coal and Coal Mines (Nationalisation) Act, 1973.
The Coal Mines (Nationalization) Amendment Bill, 1992 seeks to achieve the
aforesaid objectives.”
37. Section 3 of the CMN Act was amended and thereby in clause (a)
of sub-section (3) for item (iii), the following was substituted, namely,
(iii) a company engaged in –
(1) the production of iron and steel,
(2) generation of power,
(3) washing of coal obtained from a mine, or
(4) such other end use as the Central Government may, by notification,
specify.
38. By further Notification dated 15.03.1996, the Central
Government specified production of cement to be an end-use for the purposes
of the CMN Act.
39. By another Notification dated 12.07.2007, the Central
Government specified production of syn-gas obtained through coal
gasification (underground and surface) and coal liquefaction as end uses
for the purposes of the CMN Act.
40. The background in which Section 3(3) of the CMN Act was amended
to permit private sector entry in coal mining operation for captive use has
been sought to be explained by the Central Government. It is stated that
nationalization of coal through the CMN Act was done with the objective of
ensuring “rational, coordinated and scientific development and utilization
of coal resources consistent with the growing requirements of the country”
and as a first step in 1973, 711 coal mines specified in the Schedule
appended to CMN Act were nationalized and vested in the Central Government.
By 1976 Nationalisation Amendment Act, the Central Government alone was
permitted to mine coal with the limited exception of private companies
engaged in the production of iron and steel. In 1991, the country was
facing huge crisis due to (a) the situation regarding balance of payments;
(b) the economy being in doldrums; (c) dismal power situation; (d) shortage
in coal production; and (e) inability of Coal India Limited (CIL) to
produce coal because of lack of necessary resources to maximize coal
production amongst other reasons. There was a huge shortage of power in the
country. The State Electricity Boards were unable to meet power
requirements. Post liberalization, in the 8th Five Year Plan (1992-1997) a
renewed focus was placed on developing energy and infrastructure in the
country. CIL was not in a position to generate the resources required. It
was in this background that in a meeting taken by the Deputy Chairman of
the Planning Commission on 31.10.1991, it was decided that “private
enterprises may be permitted to develop coal and lignite mines as captive
units of power projects”. The approval of Cabinet was consequently sought
vide a Cabinet note dated 30.01.1992 for “allowing private sector
participation in coal mining operations for captive consumption towards
generation of power and other end use, which may be notified by Government
from time to time”. The Cabinet in the meeting held on 19.02.1992
considered the above Cabinet note and it was decided that the proposal may
be brought up only when specific projects of private sector participation
in coal mining come to the Government for consideration. Subsequently,
another Cabinet note dated 23.04.1992 was placed before the Cabinet
containing references to certain private projects like the two 250 MW
thermal power plants of RPG Enterprises, which had been recommended by the
Government of West Bengal. The proposal contained in the Cabinet note dated
23.04.1992 was approved by the Cabinet on 05.05.1992. On 15.07.1992, the
Bill for amendment of Section 3(3) of CMN Act was introduced in Rajya Sabha
and the same was passed on 21.07.1992. The Bill was passed in Lok Sabha on
19.04.1993 and got assent of the President on 09.06.1993.
41. The Central Government has highlighted that once Section 3(3)
of the CMN Act was amended to permit private sector entry in coal mining
operations for captive use, it became necessary to select the coal blocks
that could be offered to the private sector for captive use. The coal
blocks to be offered for captive mining were duly identified and a booklet
containing particulars of 40 blocks was prepared which was revised from
time to time.
42. Mr. Goolam E. Vahanvati, learned Attorney General with all
persuasive skill and eloquence at his command has sought to justify the
allocation of coal blocks by the Central Government. He submits that the
Central Government is not only empowered but is duty bound to take the lead
in allocation of coal blocks and that is what it did. He traces this power
to Sections 1A and 3(3) of the CMN Act. It is argued by the learned
Attorney General that in addition to the declaration contained in Section 2
of the 1957 Act, Parliament has made a further declaration in terms of
Entry 54 of List I (Union List) of the Seventh Schedule in Section 1A of
the CMN Act which makes specific reference to Section 3(3) of the CMN Act
and both have to be read in conjunction with each other. By virtue of
Parliament having placed the regulation and development of coal mines under
the control of the Union, Section 1A of the CMN Act regulates coal mining
operations under Sections 3(3) and 3(4). He argues that coal reserves are
primarily concentrated in seven States, viz., Maharashtra, Madhya Pradesh,
Chhattisgarh, Odisha, Jharkhand, Andhra Pradesh and West Bengal and all
these seven States have accepted and acknowledged the source of power of
Government of India with respect to allocation of coal blocks.
43. It is argued by the learned Attorney General that by virtue of
the bar contained in Section 3(3) of the CMN Act between 1976 and 1993, no
private company (other than the company engaged in the production of iron
and steel) could have carried out coal mining operations in India.
Therefore, if no other company could have carried on coal mining
operations, it follows that it could also not have applied to the State
Government for grant of lease for mining of coal. Even if they did (post
1993) make an application for grant of prospective licence/mining lease
directly to the State Government, the State Government could not process
the same until it received the letter of allocation from the Central
Government.
44. Learned Attorney General argues that the consideration of
proposals by the Central Government for allocation of coal blocks does not
contravene the provisions of the 1957 Act in any manner, firstly, because
Section 1A of CMN Act is in addition to and not in derogation of the 1957
Act; secondly, an application for allocation of a coal block is not dealt
with by the provisions of the 1957 Act; and thirdly, after allocation, the
allocatee has to make an application for grant of mining lease or
prospecting licence to the State Government in accordance with the 1957 Act
and the 1960 Rules. It is for these reasons, he submits, that none of the
States nor any private person ever challenged the grant of allocation by
the Central Government on the ground that the Central Government was not
empowered to allocate the coal blocks.
45. The above arguments of the learned Attorney General are
vehemently contested by Mr. Prashant Bhushan, learned counsel for Common
Cause. He submits that under the provisions of CMN Act only two kinds of
entities (a) Central Government and undertakings/corporations owned by the
Central Government; and (b) companies having end-use plants in iron and
steel, power, cement, etc., could work the coal mines. He submits that the
CMN Act does not, in any way, give the power of calling applications,
selection and allocation of coal blocks to the Central Government and
Section 3 of the CMN Act only provides eligibility criteria for allocation
of coal mines. The procedure for allocation continues to be governed by
the 1957 Act and it is for this reason that ultimately Section 11A
concerning allocation of coal mines was introduced in the 1957 Act only.
46. Mr. Harish N. Salve, learned senior counsel, who appeared for
interveners, Sponge Iron Manufacturers Association and Independent Power
Producers Association of India, argues that Section 1A(2) of the CMN Act
makes the declaration in addition to the existing declaration in Section 2
of the 1957 Act. The additional declaration has done away with any vestige
of power in the State in the matter of selection of beneficiaries of the
mineral and if Section 1A had not been inserted vide 1976 Nationalisation
Amendment Act, it may have been possible to argue that the State, as the
owner of the mineral, would nonetheless be required to grant the lease
under Section 10 of the 1957 Act by exercising its discretion under Section
10(3) albeit subject to further “conditionalities” imposed by Section 3(2)
of the CMN Act. The additional declaration, learned senior counsel for the
interveners submits, is intended to denude the State of power under Entry
23 of List II of the Seventh Schedule and corresponding executive power
under Article 162 of the Constitution of India. According to Mr. Harish N.
Salve, the grant or refusal of the lease by State insofar as coal is
concerned, is no longer governed by Section 11 of the 1957 Act and that it
is governed by Sections 3(3) and 3(4) of the CMN Act and, thus, it is
obvious that there has to be first a recommendation by the Central
Government before the State can exercise its discretion under Section 10(3)
of the 1957 Act and that the converse would lead to conferring upon the
State, in Section 10(3) of the 1957 Act, an unguided and un-canalised power
to grant or refuse a lease. He submits that if Section 3(3) of the CMN Act
is read as prescribing qualifications in addition to those in Section 5(1)
of the 1957 Act, such position would make the scheme of both the enactments
– 1957 Act and CMN Act – unworkable.
47. Mr. Harish N. Salve argues that the allocation letter issued by
the Central Government is the procedure which regulates the exercise under
Rule 22 of the 1960 Rules (and Section 10(3) of the 1957 Act) by the State
Government and that procedure is to ensure that a lease is granted to a
company engaged in stipulated permissible activities by making it a two
step process, viz., the issue of letter of allotment conditional upon the
end-use plant, followed by grant of a lease once end usage is achieved. He
submits that Section 3(3) of the CMN Act is fully satisfied where a lease
is granted to a company which engages in the permissible activity. Learned
senior counsel for the interveners fully supports the arguments of the
learned Attorney General that the Central Government has the power to
identify the beneficiary of an allotment and once the Central Government
has identified the beneficiary of allotment, the State will be obliged to
grant a lease if other conditions are satisfied.
48. Mr. K.K. Venugopal, learned senior counsel appearing for Coal
Producers Association argues that having regard to the declaration made
under Section 2 of the 1957 Act and the declaration under Section 1A of the
CMN Act and so also Section 3(3) thereof, it is perfectly legitimate for
the Central Government to exercise its power and jurisdiction in the manner
it has done for the purpose of selecting the allottees for coal blocks. He
contends that under Article 73 of the Constitution, the executive power of
the Union extends to matters in regard to which the Parliament has
legislative competence and this power it undoubtedly possesses by reason of
the declarations contained in the 1957 Act and the CMN Act enacted
specifically for the regulation and development of coal and coal mines.
49. It shall have been noticed that the thrust of the arguments of
the learned Attorney General and so also Mr. Harish N. Salve and Mr. K. K.
Venugopal hinges around the premise that Sections 1A and 3(3) of the CMN
Act clothe the Central Government with power to allocate the coal blocks
or, in other words, select the allottees for coal blocks. Is it so? The
constitutional philosophy about law making in relation to mines and
minerals and List I Entry 36 (Federal Legislative List) and List II Entry
23 (Provincial Legislative List) in Schedule VII of the Government of India
Act, 1935 which correspond to List I Entry 54 (Union List) and List II
Entry 23 (State List) in our Constitution has been noticed by this Court in
Monnet[2]. Speaking through one of us (R.M. Lodha, J., as he then was) in
Monnet2, this Court has noted the statement of the learned Solicitor
General in the House of Commons made in the course of debate in respect of
the above entries in the Government of India Bill that the rationale of
including only the “regulation of mines” and “development of minerals” and
that, too, only to the extent it was considered expedient in the public
interest by a federal law was to ensure that the provinces were not
completely cut out from the law relating to mines and minerals and if there
was inaction at the Centre, then the provinces could make their own laws.
Thus, power in relation to the mines and minerals was accorded to both, the
Centre and the States. The Court in Monnet2 said:
“130. …………... The management of the mineral resources has been left with
both the Central Government and the State Governments in terms of List I
Entry 54 and List II Entry 23. In the scheme of our Constitution, the State
Legislatures enjoy the power to enact legislation on the topics of “mines
and minerals development”. The only fetter imposed on the State
Legislatures under Entry 23 is by the latter part of the said entry which
says, “subject to the provisions of List I with respect to regulation and
development under the control of the Union”. In other words, the State
Legislature loses its jurisdiction to the extent to which the Union
Government had taken over control, the regulation of mines and development
of minerals as manifested by legislation incorporating the declaration and
no more. If Parliament by its law has declared that regulation of mines and
development of minerals should in the public interest be under the control
of the Union, which it did by making declaration in Section 2 of the 1957
Act, to the extent of such legislation incorporating the declaration, the
power of the State Legislature is excluded. The requisite declaration has
the effect of taking out regulation of mines and development of minerals
from List II Entry 23 to that extent. It needs no elaboration that to the
extent to which the Central Government had taken under “its control” “the
regulation of mines and development of minerals” under the 1957 Act, the
States had lost their legislative competence. By the presence of the
expression “to the extent hereinafter provided” in Section 2, the Union has
assumed control to the extent provided in the 1957 Act. The 1957 Act
prescribes the extent of control and specifies it. We must bear in mind
that as the declaration made in Section 2 trenches upon the State
legislative power, it has to be construed strictly. Any legislation by the
State after such declaration, trespassing the field occupied in the
declaration cannot constitutionally stand. …...”
50. The declaration made by Parliament in Section 2 of the 1957 Act
states that it is expedient in the public interest that the Union should
take under its control the regulation of mines and the development of
minerals to the extent provided in the Act. Legal regime relating to
regulation of mines and development of minerals is, thus, guided by the
1957 Act and the 1960 Rules. In addition to the above declaration in 1957
Act, a further declaration has been inserted by Section 1A of the CMN Act,
insofar as coal mines are concerned. By this provision, it is declared that
it is expedient in the public interest that the Union should take under its
control regulation and development of coal mines to the extent provided in
sub-sections (3) and (4) of Section 3 and sub-section (2) of Section 30 of
the CMN Act.
51. The two declarations – Section 2 of the 1957 Act and Section 1A
of the CMN Act – have to be conjointly read insofar as the control and
regulation of coal mines is concerned. As a consequence, the States have
lost their jurisdiction to legislate to the extent to which the Union had
taken over control, regulation and development of coal mines as manifested
by the two enactments. When the Parliament by its law contained in 1957 Act
has declared that regulation of mines and development of minerals should,
in the public interest, be under the control of the Union and by an
additional declaration in the CMN Act declared that regulation and
development of mines to the extent provided in sub-sections (3) and (4) of
Section 3 and sub-section (2) of Section 30 of the CMN Act should, in the
public interest, be under the control of the Union, the power of the State
legislature to legislate on the subject covered by these two enactments is
excluded. In other words, the field disclosed in the declarations under the
1957 Act and the CMN Act is abstracted from the legislative competence of
the State Legislature. The requisite declarations have the effect of taking
out regulation and development of coal mines from List II Entry 23. To
that extent, the States have lost their legislative competence.
52. In Baijnath Kadio[3] the Constitution Bench referred to two
earlier decisions of this Court in Hingir-Rampur Coal Co. Ltd.[4] and M.A.
Tulloch and Co.[5]. While dealing with declaration contained in Section 2
of the 1957 Act, the Court stated in para 14, page 847 of the Report, as
follows:
“14. The declaration is contained in Section 2 of Act 67 of 1957 and speaks
of the taking under the control of the Central Government the regulation of
mines and development of minerals to the extent provided in the Act itself.
We have thus not to look outside Act 67 of 1957 to determine what is left
within the competence of the State Legislature but have to work it out from
the terms of that Act……….”
53. In Sandur Manganese and Iron Ores Ltd.[6], this Court held that
the declaration made in Section 2 of the 1957 Act had denuded the State of
its legislative power to make any law with respect to the regulation of
mines and mineral development to the extent provided in the 1957 Act. As a
sequitur, it is also held that the State is also denuded of its executive
power in regard to matters covered by the 1957 Act and the 1960 Rules and
there is no question of the State having any power to frame a policy de-
hors the 1957 Act and the 1960 Rules.
54. Om Prakash Mehta[7] highlights that the 1957 Act and the 1960
Rules are a complete code in respect of the grant and renewal of
prospecting licences as well as mining leases in lands belonging to the
Government as well as lands belonging to private persons.
55. In Monnet2, the scope and extent of the word ‘regulation’
occurring in Section 2 has been examined and it is stated that ‘regulation’
must receive wide interpretation but the extent of control by the Union as
specified in the 1957 Act has to be construed strictly. The same meaning
must apply to the word ‘regulation’ occurring in Section 1A of the CMN Act.
In other words, the extent of control by the Union as specified in the CMN
Act has to be construed strictly.
56. In Orissa Cement Ltd.[8] a three Judge Bench of this Court
explained that in the case of a declaration under Entry 54, the legislative
power of the State Legislature is eroded only to the extent control is
assumed by the Union pursuant to such declaration as spelt out by the
legislative enactment which makes the declaration.
57. 1957 Act provides for general restrictions on undertaking
prospecting and mining operations, the procedure for obtaining
reconnaissance permits, prospecting licences and mining leases and the rule
making power of regulating the grant of reconnaissance permits, prospecting
licences and mining leases. Clause (a) of sub-section (3) of Section 3 of
the CMN Act enables persons specified therein only to carry on coal mining
operation. In clause (c), it is provided that no lease for winning or
mining coal should be granted in favour of any person other than the
Government, Government company or corporation referred to in clause (a).
Under clause (b) of sub-section (3), excepting the mining leases granted
before 1976 in favour of the Government, Government company or corporation
referred to in clause (a) and any sub-lease(s) granted by any such
Government, Government company or corporation, all other mining leases and
sub-leases in force immediately before such commencement insofar as they
relate to the winning or mining of coal stand terminated. When a sub-lease
stands terminated under sub-section (3), sub-section (4) of Section 3
provides that it shall be lawful for the Central Government or the
Government company or corporation owned or controlled by the Central
Government to obtain a prospecting licence or a mining lease in respect of
whole or part of the land covered by mining lease which stands so
terminated. The above provisions in the CMN Act, as inserted in 1976,
clearly show that the target of these provisions in the CMN Act is coal
mines, pure and simple. CMN Act effectively places embargo on granting the
leases for winning or mining of coal to persons other than those mentioned
in Section 3(3)(a). Does CMN Act for the purposes of regulation and
development of mines to the extent provided therein alter the legal regime
incorporated in the 1957 Act? We do not think so. What CMN Act does is
that in regard to the matters falling under the Act, the legal regime in
the 1957 Act is made subject to the prescription under Section 3(3)(a) and
(c) of the CMN Act. 1957 Act continues to apply in full rigour for
effecting prescription of Section 3(3)(a) and (c) of the CMN Act. For
grant of reconnaissance permit, prospecting licence or mining lease in
respect of coal mines, the MMDR regime has to be mandatorily followed.
1957 Act and so also the 1960 Rules do not provide for allocation of coal
blocks nor they provide any mechanism, mode or manner of such allocation.
58. Learned Attorney General submits that an application for allocation
of a coal block is not dealt with by the 1957 Act and, therefore,
consideration of proposals for allocation of coal blocks does not
contravene the provisions of the 1957 Act. The submission of the learned
Attorney General does not merit acceptance for more than one reason.
First, although the Central Government has pre-eminent role under the 1957
Act inasmuch as no reconnaissance permit, prospecting licence or mining
lease of coal mines can be granted by the State Government without prior
approval of the Central Government but that pre-eminent role does not
clothe the Central Government with the power to act in a manner in
derogation to or inconsistent with the provisions contained in the 1957
Act. Second, the CMN Act, as amended from time to time, does not have any
provision, direct or indirect, for allocation of coal blocks. Third, there
are no rules framed by the Central Government nor is there any notification
issued by it under the CMN Act providing for allocation of coal blocks by
it first and then consideration of an application of such allottee for
grant of prospecting licence or mining lease by the State Government.
Fourth, except providing for the persons who could carry out coal mining
operations and total embargo on all other persons undertaking such
activity, no procedure or mode or manner for winning or mining of coal
mines is provided in the CMN Act or the 1960 Rules or by way of any
notification. Fifth, even in regard to the matters falling under CMN Act,
such as prescriptive direction that no person other than those provided in
Sections 3(3) and 3(4) shall carry on mining operations in the coal mines,
the legal regime under the 1957 Act, subject to the prescription under
Sections 3(3) and 3(4), continues to apply in full rigour. Mr. Harish N.
Salve, learned senior counsel for the interveners, is not right in his
submission that allocation letter issued by the Central Government is the
procedure which regulates the exercise under Rule 22 of the 1960 Rules. Had
that been so, some provisions to that effect would have been made in the
CMN Act or the 1960 Rules framed thereunder but there is none.
59. The submission of the learned Attorney General that the 7
States - Maharashtra, Madhya Pradesh, Chhattisgarh, Odisha, Jharkhand,
Andhra Pradesh and West Bengal – which have coal deposits, have accepted
and acknowledged the source of power of the Central Government with regard
to allocation of coal blocks is not fully correct. Odisha has strongly
disputed that position. Odisha’s stand is that the system of allocation of
coal blocks by the Central Government is alien to the legal regime under
the CMN Act and the 1957 Act. It is true that many of these States have
taken the position that allocation letter confers a right on such allottee
to get mining lease and the only role left with the State Government is to
carry out the formality of processing the application and for execution of
lease deed, but, in our view, the source of power of the Central
Government in allocation of coal blocks is not dependant on the
understanding of the State Governments but it is dependant upon whether
such power exists in law or not. Indisputably, power to regulate assumes
the continued existence of that which is to be regulated and it includes
the authority to do all things which are necessary for the doing of that
which is authorized including whatever is necessarily incidental to and
consequential upon it but the question is, can this incidental power be
read to empower the Central Government to allocate the coal blocks which is
neither contemplated by the CMN Act nor by the 1957 Act? In our opinion,
the answer has to be in the negative. It is so because where a statute
requires to do a certain thing in a certain way, the thing must be done in
that way or not at all. Other methods of performance are necessarily
forbidden[9]. This is uncontroverted legal principle.
60. It is argued by the learned Attorney General that the
allocation letter does not by itself confer the right to work mines and the
identification of the coal block does not impinge upon the rights of the
State Government under the 1957 Act. Learned Attorney General argues that
allocation of coal block is essentially an identification exercise where
coal blocks selected by the CIL for captive mining were identified by the
Screening Committee for development by an allocatee, after considering the
suitability of the coal block (in terms of exercise and quality of reserve)
vis-à-vis the requirements of the end-use plan of the applicant. It is
submitted by the Attorney General that a letter of allocation is the first
step. It entitles the allocatee to apply to the State Government for grant
of prospecting licence/mining lease in accordance with the provisions of
the 1957 Act. The right to apply for grant of prospecting licence/mining
lease does not imply that with the issuance of allocation letter the
allocatee automatically gets the clearances and approval required under the
1957 Act, the 1960 Rules, the Forest (Conservation) Act, 1980 and the
Environment (Protection) Act, 1986, etc. According to the learned Attorney
General, after allocation, the following steps are required to be complied
with:
The allocatee is required to apply to the State Government for grant of
Prospecting Licence in case of an unexplored block, or a Mining Lease in
case of an explored block.
On receipt of the application for grant of Prospecting License or Mining
Lease, as the case may be, the State Government, in the case of Prospecting
Licence can process the application for Prospecting Licence in accordance
with Chapter III of the 1960 Rules.
In the case of application for Mining Lease (in Form I), the State
Government has to take a decision to grant precise area for the purpose of
the lease and communicate such decision to the applicant.
On receipt of the communication from the State Government of the precise
area to be granted, the applicant is required to submit a mining plan to
the Central Government for its approval. [Rule 22(4)]
After the mining plan has been duly approved by the Central Government, the
applicant submits the same to the State Government for grant of mining
lease over the area.
After receipt of the duly approved mining plan, the State Government makes
a proposal for grant of prior consent by the Central Government in terms of
the proviso to Section 5(1) of the 1957 Act.
In addition to the approved mining plan, the allocatee is required to
obtain permission under Section 2 of the Forest (Conservation) Act, 1980 if
the coal block is located in a scheduled forest. Further, the allocatee is
required to submit to the State Government, prior environmental clearance
from the Ministry of Environment and Forests, Government of India for the
project. Forest Clearance and EIA clearance operate separately.
Mining Lease is thereafter granted by the State Government, after verifying
that all statutory requirements have been duly complied with by the
allocatee.
61. There seems to be no doubt to us that allocation letter is not
merely an identification exercise as is sought to be made out by the
learned Attorney General. From the position explained by the concerned
State Governments, it is clear that the allocation letter by the Central
Government creates and confers a very valuable right upon the allottee. We
are unable to accept the submission of the learned Attorney General that
allocation letter is not bankable. As a matter of fact, the allocation
letter by the Central Government leaves practically or apparently nothing
for the State Government to decide save and except to carry out the
formality of processing the application and for execution of the lease deed
with the beneficiary selected by the Central Government. Though, the legal
regime under the 1957 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 processual formalities only. As noticed earlier, the
declaration under Section 1A of the CMN Act does not take away the power of
the State under Section 10(3) of the 1957 Act. It is so because the
declaration under Section 1A of the CMN Act is in addition to the
declaration made under Section 2 of the 1957 Act and not in its derogation.
1957 Act continues to apply with the same rigour in the matter of grant of
prospecting licence or mining lease of coal mines but the eligibility of
persons who can carry out coal mining operations is restricted to the
persons specified in Section 3(3)(a) of the CMN Act.
62. In Tara Prasad Singh[10], a seven Judge Constitution Bench
while dealing with the purposiveness of the CMN Act, as amended in 1976,
vis-à-vis the 1957 Act, stated that nothing in this Act (CMN) could be
construed as a derogation of the principle enunciated in Section 18 of the
1957 Act. The Court said:
“Therefore, even in regard to matters falling under the Nationalisation
Amendment Act which terminates existing leases and makes it lawful for the
Central Government to obtain fresh leases, the obligation of Section 18 of
the Act of 1957 will continue to apply in its full rigour. As contended by
the learned Solicitor General, Section 18 contains a statutory behest and
projects a purposive legislative policy. The later Acts on the subject of
regulation of mines and mineral development are linked up with the policy
enunciated in Section 18.”
(emphasis supplied by us)
63. The observations made by this Court in Tara Prasad Singh10
about interplay between the CMN Act and the 1957 Act with reference to the
policy enunciated in Section 18, in our view, apply equally to the entire
legal regime articulated in the 1957 Act. We are of the opinion that
nothing should be read in the two Acts, namely, CMN Act and the 1957 Act,
which results in destruction of the policy, purpose and scheme of the two
Acts. It is not right to suggest that by virtue of declaration under
Section 1A of the CMN Act, the power of the State under Section 10(3) of
the 1957 Act has become unavailable. The submission of Mr. Harish N.
Salve, learned senior counsel for the interveners that additional
declaration under Section 1A of the CMN Act seeks to do away with any
vestige of power in the State in the matter of selection of beneficiaries
of the mineral is not meritorious. Had that been so, Rule 35 of the 1960
Rules would not have been amended to provide that where two or more persons
have applied for reconnaissance permit or prospecting licence or a mining
lease in respect of the same land, the State Government shall, inter alia,
consider the end-use of the mineral by the applicant. The declaration under
Section 1A has not denuded the States of any power in relation to grant of
mining leases and determining of those permitted to carry on coal mining
operation.
64. The allocation of coal block is not simply identification of the
coal block or the allocatee as contended by the learned Attorney General
but it is in fact selection of beneficiary. As a matter of fact, Mr.
Harish N. Salve, learned senior counsel for the interveners, has taken a
definite position that allocation letter may not by itself confer purported
rights in the minerals but such allocation has legal consequences and
confers private rights to the allocatees for obtaining the coal mining
leases for their end-use plants.
65. In view of the foregoing discussion, we hold, as it must be,
that the exercise undertaken by the Central Government in allocating the
coal blocks or, in other words, the selection of beneficiaries, is not
traceable either to the 1957 Act or the CMN Act. No such legislative
policy (allocation of coal blocks by the Central Government) is discernible
from these two enactments. Insofar as Article 73 of the Constitution is
concerned, there is no doubt that the executive power of the Union extends
to the matters with respect to which the Parliament has power to make laws
and the executive instructions can fill up the gaps not covered by
statutory provisions but it is equally well settled that the executive
instructions cannot be in derogation of the statutory provisions. The
practice and procedure for allocation of coal blocks by the Central
Government through administrative route is clearly inconsistent with the
law already enacted or the rules framed.
66. The principle of Contemporanea Expositio was pressed into
service by the learned Attorney General and the learned senior counsel for
interveners. It is argued that the Ministries of Central Government, the
State Governments and all concerned have understood the declaration under
Section 1A read with Section 3 of the CMN Act recognizing that the
selection of beneficiaries through allocation letter is the task of the
Union. The exposition of the legal position by them must be accepted as
there is nothing to show that the exposition in respect of allocation of
coal blocks received by the Central Government, State Governments and all
concerned was clearly wrong. In this regard, reliance has been placed on
the decision of this Court in Desh Bandhu Gupta[11].
67. In Desh Bandhu Gupta11, this Court has dealt with the principle
of Contemporanea Expositio. While doing so, this Court referred to
Crawford on Statutory Construction (1940 ed.) and the two decisions of the
Calcutta High Court in Baleshwar Bagarti[12] and Mathura Mohan Saha[13]
and culled out the legal position in para 9 (page 572 of the Report) as
under:
“9. It may be stated that it was not disputed before us that these two
documents which came into existence almost simultaneously with the issuance
of the notification could be looked at for finding out the true intention
of the Government in issuing the notification in question, particularly in
regard to the manner in which outstanding transactions were to be closed or
liquidated. The principle of contemporanea expositio (interpreting a
statute or any other document by reference to the exposition it has
received from contemporary authority) can be invoked though the same will
not always be decisive of the question of construction (Maxwell 12th ed.p.
268). In Crawford on Statutory Construction (1940 ed.) in para 219 (at pp.
393-395) it has been stated that administrative construction (i.e.
contemporaneous construction placed by administrative or executive officers
charged with executing a statute) generally should be clearly wrong before
it is overturned; such a construction, commonly referred to as practical
construction, although not controlling, is nevertheless entitled to
considerable weight; it is highly persuasive. In Baleshwar Bagarti v.
Bhagirathi Dass [ILR 35 Cal 701 at 713] the principle, which was reiterated
in Mathura Mohan Saha v. Ram Kumar Saha [ILR 43 Cal 790 : AIR 1916 Cal 136]
has been stated by Mookerjee, J., thus:
‘It is a well settled principle of interpretation that courts in construing
a statute will give much weight to the interpretation put upon it, at the
time of its enactment and since, by those whose duty it has been to
construe, execute and apply it….. I do not suggest for a moment that such
interpretation has by any means a controlling effect upon the courts; such
interpretation may, if occasion arises, have to be disregarded for cogent
and persuasive reasons, and in a clear case of error, a court would without
hesitation refuse to follow such construction.
Of course, even without the aid of these two documents which contain a
contemporaneous exposition of the Government’s intention, we have come to
the conclusion that on a plain construction of the notification the proviso
permitted the closing out or liquidation of all outstanding transactions by
entering into a forward contract in accordance with the rules, bye-laws and
regulations of the respondent.”
68. The above is consistent view. In our view, an interpretation
to the statute received from contemporary authority is not binding upon the
courts and may have to be disregarded if such interpretation by the
contemporary authority is clearly wrong. The process evolved by the Central
Government for allocation of coal blocks for captive use has significantly
and effectively reversed the scheme provided in the 1957 Act inasmuch as in
most of the cases the applications have been made directly to the Central
Government. West Bengal has stated that in some cases, they had knowledge
of such applications and in some cases the State Government had no such
knowledge. Then once allocation letter has been issued by the Central
Government, virtually no power remains with the State Government in
objectively considering the application for reconnaissance permit,
prospecting licence or mining lease. Maharashtra says, “…the role of the
State Government is limited in the case of coal mines as the discretion to
reject once the Central Government has issued an allocation letter is
virtually non-existent………”. Odisha says, “……Once the beneficiary has been
identified by the Central Government by making the allocation of coal
block, there was nothing left out for the State Government to decide…………”.
It must be noted without an iota of hesitation that the process for
allocation of coal blocks for captive use has rendered the role of the
State Government only mechanical and the concept of ‘previous approval’ in
Section 5 of the 1957 Act meaningless after recommendation has been made
by the State Government. It is not without any reason that confronted with
this difficulty, the 1957 Act has been amended and Section 11A inserted in
2010 providing for allocation of coal blocks and also the mode and manner
of such allocation.
69. Assuming that the Central Government has competence to make
allocation of coal blocks, the next question is, whether such allocation
confers any valuable right amounting to grant of largesse? Learned
Attorney General argues that allocation of coal blocks does not amount to
grant of largesse since it is only the first statutory step. According to
him, the question whether the allocation amounts to grant of largesse must
be appreciated not from the perspective whether allocation confers any
rights upon the allocatee but whether allocation amounts to conferment of
largesse upon the allocatee. An allocatee, learned Attorney General
submits, does not get right to win or mine the coal on allocation and,
therefore, an allocation letter does not result in windfall gain for the
allocatee. He submits that diverse steps, as provided in Rules 22A, 22B,
and 22(5) of the 1960 Rules and the other statutory requirements, have to
be followed and ultimately the grant of prospecting licence in relation to
unexplored coal blocks or grant of mining lease with regard to explored
blocks entitles the allocatee/licensee/lessee to win or mine the coal.
70. We are unable to accept the submission of the learned Attorney
General that allocation of coal block does not amount to grant of largesse.
It is true that allocation letter by itself does not authorize the
allottee to win or mine the coal but nevertheless the allocation letter
does confer a very important right upon the allottee to apply for grant of
prospecting licence or mining lease. As a matter of fact, it is admitted
by the interveners that allocation letter issued by the Central Government
provides rights to the allottees for obtaining the coal mines leases for
their end-use plants. The banks, financial institutions, land acquisition
authorities, revenue authorities and various other entities and so also the
State Governments, who ultimately grant prospecting licence or mining
lease, as the case may be, act on the basis of the letter of allocation
issued by the Central Government. As noticed earlier, the allocation of
coal block by the Central Government results in the selection of
beneficiary which entitles the beneficiary to get the prospecting licence
and/or mining lease from the State Government. Obviously, allocation of a
coal block amounts to grant of largesse.
71. Learned Attorney General accepted the position that in the
absence of allocation letter, even the eligible person under Section 3(3)
of the CMN Act cannot apply to the State Government for grant of
prospecting licence or mining lease. The right to obtain prospecting
licence or mining lease of the coal mine admittedly is dependant upon the
allocation letter. The allocation letter, therefore, confers a valuable
right in favour of the allottee. Obviously, therefore, such allocation has
to meet the twin constitutional tests, one, the distribution of natural
resources that vest in the State is to sub-serve the common good and, two,
the allocation is not violative of Article 14.
72. The PIL petitioners have seriously criticized the entire
allocation process by the Central Government. They submit that allocations
made on the recommendations of the Screening Committee and through the
government dispensation route after 1993 are in violation of statutory
provisions contained in the 1957 Act. Moreover, the Central Government
while making the allocations failed to even follow the basic statutory
eligibility for grant of captive coal blocks. The power for grant of
captive coal block is governed by Section 3(3)(a) of the CMN Act.
According to which, only two kinds of entities, viz., (a) Central
Government, or undertakings/corporations owned by the Central Government or
(b) a company having end-use plants in iron, steel, power, washing of coal
or cement, can carry out coal mining operations. The State Government
undertakings are not included in the above provision and any allocation to
them can only be made if they are engaged in any of the end-uses specified
under that provision. Commercial mining by the State Public Sector
Undertakings/companies is not permitted, yet as many as 38 coal blocks were
allocated to State Public Sector Undertakings for commercial mining though
these undertakings were not engaged in any specified end-use activity. They
submit that allocation of coal blocks made by the Central Government,
whether by way of Screening Committee route or dispensation route, is ipso
facto illegal and it is in total violation of the CMN Act. Moreover, it is
submitted that almost all these State PSUs then signed agreements with
private companies wherein the right to mine coal was given to them which
later sold the coal to the State PSUs either at the market price or at CIL
price.
73. According to Mr. Prashant Bhushan, learned counsel for the
petitioner-Common Cause and Mr. Manohar Lal Sharma, petitioner-in-person,
the expression “engaged in” in Section 3(3)(a)(iii) means that the company
that was applying for the coal block must have set up an iron and steel
plant, power plant or cement plant and be engaged in the production of
steel, power or cement. Most companies were silent in their applications
as to whether or not the power, steel or cement plant was operational.
They only stated that they proposed to set up such plants. Moreover, from
2006 even the requirement of end-use project was done away with and the
Central Government allowed companies to apply and obtain coal blocks, and
it was stated that the coal mined from these blocks would be transferred to
an end-user company. Thus, the basic minimum statutory requirements were
not adhered to and followed in making allocation of coal blocks.
74. It is submitted on behalf of the PIL petitioners that the
allocation of those blocks which had reserves far in excess of requirement
for the end-use project was made which demonstrates the total non-
application of mind and arbitrariness in the decision making process.
Mr. Prashant Bhushan, learned counsel for Common Cause and Mr. Manohar Lal
Sharma, petitioner-in-person submit that the allocation of coal blocks
constitutes a largesse as it confers very valuable benefit on the applicant
to get mining lease. It is argued that the arbitrary and non-transparent
allocation process has resulted in windfall gain to the allottees and the
State has been deprived of the full value of its resources. Besides that
the process of allocation was arbitrary and non-transparent, it is
submitted by the PIL petitioners that the process also suffers from mala
fides inasmuch as though a comprehensive note on competitive bidding on
allocation of coal blocks was placed by the then Coal Secretary on
16.07.2004, the allocation process through the Screening Committee
continued leading to windfall gain to the private companies and thereby
corresponding loss to the public exchequer. In this regard, Mr. Prashant
Bhushan, learned counsel for Common Cause and Mr. Manohar Lal Sharma,
petitioner-in-person referred to Parliamentary Standing Committee Report
submitted on 24.03.2013, Central Empowered Committee Report made in I.A.
No.2167 to the Forest Bench regarding the loss from the allocation of coal
mines in the State of Madhya Pradesh, the additional affidavit of the
Government of Maharashtra filed on 09.01.2014 and the CAG Report.
75. It is argued on behalf of the PIL petitioners that the
Screening Committee did not follow any objective criteria in determining as
to who is to be selected or who is to be rejected. The minutes of the
Screening Committee meetings do not show that selection was made after
proper assessment. There is no evaluation of merit and no inter se
comparison of the applicants. No chart of evaluation was prepared. The
determination of the Screening Committee is apparently subjective. It is
no co-incidence that a large number of allottees are either powerful
corporate groups or shady companies linked with politicians and ministers
or those who came with high profile recommendations. Most of these
allottees were in fact ineligible for allocation; they had misrepresented
the facts and were not more meritorious than others whose claims have been
rejected, but by serious manipulations and abuse, they were able to get the
coal blocks.
76. With regard to Government dispensation route whereby public
sector corporations and undertakings were allocated coal blocks, it is
submitted by Mr. Prashant Bhushan, learned counsel for the Common Cause and
Mr. Manohar Lal Sharma, petitioner-in-person that such allocations were
violative of Section 3 of the CMN Act. The State Government undertakings
are not included in Section 3 and in any case allocation to them could have
been made only if they were engaged in any of the end-uses specified under
Section 3(3)(a)(iii) of the CMN Act. The State PSUs have signed agreements
with private companies under which substantial benefits or interest from
the coal blocks had accrued to the private companies thereby causing huge
loss to the public exchequer and windfall gain to the private companies.
The PIL petitioners, therefore, vehemently argued that the allocation of
coal blocks deserves to be quashed being non-transparent, arbitrary,
illegal and unconstitutional.
77. According to Central Government, the need for a Screening
Committee was felt because development of coal mines for captive end-uses
required consideration of inputs from a variety of stakeholders such as
the Ministry of Coal, Ministry of Railways, the concerned State Government
(owner of the coal block), the concerned Administrative Ministry like
Ministry of Power (for inputs pertaining to the end use plant) and Coal
India Limited (to protect CIL’s interest in coal blocks being developed by
its subsidiaries). Initially, by Office Memorandum dated 14.07.1992[14],
the Screening Committee was constituted by the Ministry of Coal for
scrutinizing applications/proposals received from private power generating
companies requesting for ownership and operation of captive coal mines.
The Screening Committee was reconstituted on more than one occasion by
Office Memorandum dated 05.08.1993[15], Office Memorandum dated
10.01.2000[16], Office Memorandum dated 17.04.2003[17] and Office
Memorandum dated 26.09.2005[18].
78. Learned Attorney General argues that the Screening Committee
provided opportunity to stakeholders to express their views about
permitting a particular company to develop a particular coal block for its
end-use plant. The State Governments as the owners of coal blocks within
their territories participated in the Screening Committee meetings. At no
stage, anybody objected to the allocation of coal blocks by the Central
Government through the Screening Committee route. Learned Attorney General
in this regard referred to the affidavits filed on behalf of Maharashtra,
Madhya Pradesh, Odisha, Chhattisgarh, West Bengal, Jharkhand and Andhra
Pradesh. The process of allocation was participatory. The coal blocks
were allocated to private companies only from the approved list of blocks
to be offered for captive mining and the interests of CIL, being paramount,
were duly protected and preserved. Only in such cases of subsisting lease,
where CIL had no plans to work these blocks in near future and consented to
these blocks being offered for captive mining, few of such blocks were
allocated but CIL’s interest was kept into consideration. He, thus,
submitted that allocation of coal blocks during the subject period was
transparent and it does not suffer from any constitutional vice or legal
infirmity.
79. Moreover, it is the submission of the learned Attorney General
that allocation of coal blocks by the Central Government has brought
significant benefits and investment to the States in which these coal
blocks and the associated end-use plants are located. Due to substantial
investment and employment opportunities generated in various States, the
State Governments have accepted, participated and made recommendations in
the meetings of the Screening Committee. A number of blocks have been
allocated in accordance with the recommendations of the State Governments.
Besides the benefits and investment to the State in which coal blocks and
the associated end-use plants are located, learned Attorney General also
submits that there are number of States where coal blocks are not located,
which have got benefits due to the substantial investment in associated end
use plants. For instance, it is submitted that blocks in Maharashtra,
namely, Baranj – I to IV, Kiloni and Manoradeep were allocated to Karnataka
Power Corporation for captive use in its power generation plants. The end-
use is the supply of coal to Bellary Thermal Power Station (in Karnataka)
which is supplying 1000 MW power to the State grid.
80. Learned Attorney General for the sake of convenience divided
the allocations recommended by the Screening Committee for the period
between 14.07.1993 and 03.07.2008 in 36 meetings into four periods: first
period between 14.07.1993 to 19.08.2003 (1st meeting till the 21st
meeting); second period from 04.11.2003 to 18.10.2005 (22nd meeting to 30th
meeting); third period from 29/30.06.2006 to 07/08.09.2006 (32nd meeting
till the 34th meeting) and the fourth period from 20.06.2007 to 03.07.2008
(35th and 36th meeting). Learned Attorney General argues that in the first
period, 21 coal blocks were recommended for allocation after full
consideration of each case. During the second period, 26 blocks were
recommended. These recommendations were also made by the Screening
Committee after consideration of each applicant. The third period relates
to recommendations made pursuant to the advertisement issued by Ministry of
Coal in September, 2005. The decision to advertise was taken as there was
growing demand for coal blocks which had substantially matured in the
economy by this time. In the third period, the Screening committee
recommended 20 blocks for allocation. In the fourth period, recommendations
were made by the Screening Committee pursuant to the advertisement issued
in 2006 whereby 38 coal blocks were advertised for allocation, out of which
15 blocks were reserved for the power sector. Learned Attorney General
clarified that a coal block that was approved as one block in the
advertisement has been subsequently considered as two blocks in the 36th
meeting of the Screening Committee. Learned Attorney General has fairly
admitted that the minutes of the Screening Committee meetings in the third
and fourth periods do not contain the particulars showing consideration of
each application. He, however, justifies the manner in which the exercise
was undertaken by the Screening Committee in the third and fourth periods
as, according to him, the huge number of applications had been received by
the Ministry of Coal in response to its advertisement and recording of
particulars of each application in the minutes was not possible. Moreover,
he submits that each application was duly considered and evaluated with
reference to other applications by the Administrative Ministry concerned
and the recommendations of the Screening Committee were primarily based on
the exercise conducted by the concerned Administrative Ministry. Thus,
learned Attorney General submits that the entire exercise by the Screening
Committee was done properly and in a non-arbitrary manner.
81. Learned Attorney General vehemently contends that allocation of
coal blocks without auction is not unlawful. He submits that lack of
public auction does not render the allocation process arbitrary. Moreover,
according to him, when coal mining sectors were first opened up to private
participants, the idea of the Central Government was to encourage the
private sector so that they could come forward and invest. Allocation of
coal blocks by public auction in such a scenario would have been
impractical and unrealistic. As a matter of fact, he would submit that
when the proposal for introduction of competitive bidding was first mooted
in June, 2004, the State Governments expressed their reservations and
concerns. In this regard, learned Attorney General referred to the letters
sent by the Governments of Chhattisgarh, West Bengal, Rajasthan and Odisha.
Learned Attorney General submits that the concerns of the State
Governments could not have been brushed aside by introducing competitive
bidding by an administrative fiat. Moreover, according to the learned
Attorney General, competitive bidding could have resulted in increase in
the input price which would have a cascading effect.
82. From the above submissions, the following questions fall for
determination:
(i) Whether the allocation of coal blocks ought to have been done only by
public auction?
(ii) Whether the allocation of coal blocks made on the basis of
recommendations of the Screening Committee suffer from any constitutional
vice and legal infirmity?
(iii) 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?
83. Two recent decisions viz., (1) Centre for Public Interest
Litigation (2G case)[19] and (2) Natural Resources Allocation
Reference[20] directly deal with the question of auction as mode for the
disposal or allocation of natural resources. But before we consider these
two decisions, reference to some of the decisions of this Court, which had
an occasion to deal with disposal of natural resources, may be of some help
in appreciating this aspect in correct perspective.
84. P.N. Bhagwati, J. in Kasturi Lal Lakshmi Reddy[21] had said
that where the State was allocating resources such as water, power, raw
materials, etc., for the purpose of encouraging setting up of industries
within the State, the State was not bound to advertise and tell the people
that it wanted a particular industry to be set up within the State and
invite those interested to come up with proposals for the purpose. It was
also observed that if any private party comes before the State and offers
to set up an industry, the State would not be committing breach of any
constitutional or legal obligation if it negotiates with such party and
agrees to provide resources and other facilities for the purpose.
85. In Sachidanand Pandey[22] this Court had observed that
ordinary rule for disposal of State-owned or public-owned property, was by
way of public auction or by inviting tenders but there could be situations
where departure from the said rule may be necessitated but then the reasons
for the departure must be rational and should not be suggestive of
discrimination and that nothing should be done which gives an appearance of
bias, jobbery or nepotism.
86. The statement of law in Sachidanand Pandey22 was echoed again
in Haji T.M. Hassan Rawther[23], wherein this Court reiterated that the
public property owned by the State or by an instrumentality of State should
be generally sold by public auction or by inviting tenders. It was
emphasized that this rule has been insisted upon not only to get the
highest price for the property but also to ensure fairness in the
activities of the State and public authorities and to obviate the factors
like bias, favoritism or nepotism. Clarifying that this is not an
invariable rule, the Court reiterated that departure from the rule of
auction could be made but then it must be justified.
87. The above principle is again stated by this Court in M.P. Oil
Extraction[24], in which this Court said that distribution of largesse by
inviting open tenders or by public auction is desirable but it cannot be
held that in no case distribution of such largesse by negotiation is
permissible.
88. In Netai Bag[25] this Court said that when any State land is
intended to be transferred or the State largesse is decided to be
conferred, resort should be had to public auction or transfer by way of
inviting tenders from the people as that would be a sure method of
guaranteeing compliance with mandate of Article 14 of Constitution but non-
floating of tenders or not holding public auction would not in all cases be
deemed to be the result of the exercise of the executive power in an
arbitrary manner.
89. In Villianur Iyarkkai Padukappu Maiyam[26] the matter before
this Court related to the selection of contractor for development of the
port of Pondicherry without floating a tender or holding public auction.
The Court said that where the State was allocating resources such as water,
power, raw materials, etc., for the purpose of encouraging development of
the port, the State was not bound to advertise and tell the people that it
wanted development of the port in a particular manner and invite those
interested to come up with proposals for the purpose.
90. There are numerous decisions of this Court dealing with the
mode and manner of disposal of natural resources but we think it is not
necessary to refer to all of them. Having indicated the view taken by this
Court in some of the cases, now we may turn to 2G case19. In that case,
the two-Judge Bench of this Court stated that a duly publicised auction
conducted fairly and impartially was perhaps the best method for alienation
of natural resources lest there was likelihood of misuse by unscrupulous
people who were only interested in garnering maximum financial benefit and
have no respect for the constitutional ethos and values. Court laid
emphasis that while transferring or alienating the natural resources, the
State is duty bound to adopt the method of auction by giving wide publicity
so that all eligible persons can participate in the process.
91. The above view in 2G case19 necessitated the reference by the
President of India to this Court under Article 143(1) of the Constitution.
The first two questions – Question 1 and Question 2 – referred to this
Court for consideration and report read as under:
“Question 1 - Whether the only permissible method for disposal of all
natural resources across all sectors and in all circumstances is by the
conduct of auctions?
Question 2 - Whether a broad proposition of law that only the
route of auctions can be resorted to for disposal of natural resources does
not run contrary to several judgments of the Supreme Court including those
of the larger Benches?”
92. The Constitution Bench which dealt with the above reference
observed that the answer to the following three questions would provide
comprehensive answer to the parent question, viz., Question 1:
(i) Are some methods ultra vires and others intra vires the Constitution
of India, especially Article 14?
(ii) Can disposal through the method of auction be elevated to a
constitutional principle?
(iii) Is this Court entitled to direct the executive to adopt a certain
method because it is the “best” method? If not, to what extent can the
executive deviate from such “best” method?
93. The Constitution Bench clarified that the statement of law in
2G case19 that while transferring or alienating the natural resources, the
State is duty bound to adopt the method of auction was confined to the
specific case of spectrum and not for dispensation of all natural
resources. The Constitution Bench said that findings of this Court in 2G
case19 were limited to the case of spectrum and not beyond that and that it
did not deal with the modes of allocation for natural resources other than
spectrum.
94. The Constitution Bench while dealing with the aspect of
disposal of natural resources other than auction, divided the consideration
of this aspect under two heads, viz., “Legitimate deviations from auction”
and “Potential of abuse”. Under the head “Legitimate deviations from
auction” the Court considered the earlier decisions of this Court in
Kasturi Lal Lakshmi Reddy21, Sachidanand Pandey22, Haji T.M. Hassan
Rawther23, M.P. Oil Extraction24, Netai Bag25 and Villianur Iyarkkai
Padukappu Maiyam26, which we have briefly noted above, and it was held that
there is no constitutional mandate in favour of auction under Article 14.
In the main judgment (paras 129 to 131, pg. 92), the Constitution Bench
stated as under:
“129. Hence, it is manifest that there is no constitutional mandate in
favour of auction under Article 14. The Government has repeatedly deviated
from the course of auction and this Court has repeatedly upheld such
actions. The judiciary tests such deviations on the limited scope of
arbitrariness and fairness under Article 14 and its role is limited to that
extent. Essentially whenever the object of policy is anything but revenue
maximization, the Executive is seen to adopt methods other than auction.
130. A fortiori, besides legal logic, mandatory auction may be contrary to
economic logic as well. Different resources may require different
treatment. Very often, exploration and exploitation contracts are bundled
together due to the requirement of heavy capital in the discovery of
natural resources. A concern would risk undertaking such exploration and
incur heavy costs only if it was assured utilization of the resource
discovered; a prudent business venture, would not like to incur the high
costs involved in exploration activities and then compete for that resource
in an open auction. The logic is similar to that applied in patents. Firms
are given incentives to invest in research and development with the promise
of exclusive access to the market for the sale of that invention. Such an
approach is economically and legally sound and sometimes necessary to spur
research and development. Similarly, bundling exploration and exploitation
contracts may be necessary to spur growth in a specific industry.
131. Similar deviation from auction cannot be ruled out when the object of
a State policy is to promote domestic development of an industry, like in
Kasturi Lal’s case, discussed above. However, these examples are purely
illustrative in order to demonstrate that auction cannot be the sole
criteria for alienation of all natural resources.”
95. While dealing with the argument that even if the method of
auction was not a mandate under Article 14, it must be the only permissible
method due to the susceptibility of other methods to abuse, the Court under
the head “Potential of abuse” held that a potential for abuse cannot be the
basis for striking down the method as ultra vires the Constitution. The
Court noted two decisions of this Court in R.K. Garg[27] and D.K.
Trivedi[28] and held that neither auction nor any other method of disposal
can be held ultra vires the Constitution merely because of a potential
abuse. The Constitution Bench (para 135, pgs. 93-94) stated as under:
“135. Therefore, a potential for abuse cannot be the basis for striking
down a method as ultra vires the Constitution. It is the actual abuse
itself that must be brought before the Court for being tested on the anvil
of constitutional provisions. In fact, it may be said that even auction has
a potential of abuse, like any other method of allocation, but that cannot
be the basis of declaring it as an unconstitutional methodology either.
These drawbacks include cartelization, “winners curse” (the phenomenon by
which a bidder bids a higher, unrealistic and unexecutable price just to
surpass the competition; or where a bidder, in case of multiple auctions,
bids for all the resources and ends up winning licenses for exploitation of
more resources than he can pragmatically execute), etc. However, all the
same, auction cannot be called ultra vires for the said reasons and
continues to be an attractive and preferred means of disposal of natural
resources especially when revenue maximization is a priority. Therefore,
neither auction, nor any other method of disposal can be held ultra vires
the Constitution, merely because of a potential abuse.”
96. In Natural Resources Allocation Reference20 the Constitution
Bench, in the main judgment, thus, concluded that auction despite being a
more preferable method of alienation / allotment of natural resources
cannot be held to be constitutional requirement or limitation for
alienation of all natural resources and, therefore, every method other than
auction cannot be struck down as ultra vires the constitutional mandate.
The Court also opined that auction as a mode cannot be conferred the status
of a constitutional principle. While holding so, the Court held that
alienation of natural resources is a policy decision and the means adopted
for the same are, thus, executive prerogatives. The Court summarized the
legal position as under:
“146. To summarise in the context of the present Reference, it needs to be
emphasised that this Court cannot conduct a comparative study of the
various methods of distribution of natural resources and suggest the most
efficacious mode, if there is one universal efficacious method in the first
place. It respects the mandate and wisdom of the executive for such
matters. The methodology pertaining to disposal of natural resources is
clearly an economic policy. It entails intricate economic choices and the
Court lacks the necessary expertise to make them. As has been repeatedly
said, it cannot, and shall not, be the endeavour of this Court to evaluate
the efficacy of auction vis-à-vis other methods of disposal of natural
resources. The Court cannot mandate one method to be followed in all facts
and circumstances. Therefore, auction, an economic choice of disposal of
natural resources, is not a constitutional mandate. We may, however, hasten
to add that the Court can test the legality and constitutionality of these
methods. When questioned, the courts are entitled to analyse the legal
validity of different means of distribution and give a constitutional
answer as to which methods are ultra vires and intra vires the provisions
of the Constitution. Nevertheless, it cannot and will not compare which
policy is fairer than the other, but, if a policy or law is patently unfair
to the extent that it falls foul of the fairness requirement of Article 14
of the Constitution, the Court would not hesitate in striking it down.
147. Finally, market price, in economics, is an index of the value that a
market prescribes to a good. However, this valuation is a function of
several dynamic variables: it is a science and not a law. Auction is just
one of the several price discovery mechanisms. Since multiple variables are
involved in such valuations, auction or any other form of competitive
bidding, cannot constitute even an economic mandate, much less a
constitutional mandate.
148. In our opinion, auction despite being a more preferable method of
alienation/allotment of natural resources, cannot be held to be a
constitutional requirement or limitation for alienation of all natural
resources and therefore, every method other than auction cannot be struck
down as ultra vires the constitutional mandate.
149. Regard being had to the aforesaid precepts, we have opined that
auction as a mode cannot be conferred the status of a constitutional
principle. Alienation of natural resources is a policy decision, and the
means adopted for the same are thus, executive prerogatives. However, when
such a policy decision is not backed by a social or welfare purpose, and
precious and scarce natural resources are alienated for commercial pursuits
of profit maximising private entrepreneurs, adoption of means other than
those that are competitive and maximise revenue may be arbitrary and face
the wrath of Article 14 of the Constitution. Hence, rather than prescribing
or proscribing a method, we believe, a judicial scrutiny of methods of
disposal of natural resources should depend on the facts and circumstances
of each case, in consonance with the principles which we have culled out
above. Failing which, the Court, in exercise of power of judicial review,
shall term the executive action as arbitrary, unfair, unreasonable and
capricious due to its antimony with Article 14 of the Constitution.”
97. J.S. Khehar, J., while concurring with the main opinion has
stated that auction is certainly not a constitutional mandate in the manner
expressed, but it can be applied in some situations to maximise revenue
returns, to satisfy legal and constitutional requirements. In his view, if
the State arrives at a conclusion, in a given situation, that maximum
revenue would be earned by auction of the particular natural resource, then
that alone would be the process which it would have to adopt. In the
penultimate para of his opinion, J.S. Khehar, J., observed, “………there can
be no doubt about the conclusion recorded in the “main opinion” that
auction which is just one of the several price recovery mechanisms, cannot
be held to be the only constitutionally recognised method for alienation of
natural resources. That should not be understood to mean, that it can
never be a valid method for disposal of natural resources…………..”.
98. In Natural Resources Allocation Reference20, the Constitution
Bench said that reading auction as a constitutional mandate would be
impermissible because such an approach may distort another constitutional
principle embodied in Article 39(b). In the main judgment, with reference
to Article 39(b), the Court stated as follows:
“113…The disposal of natural resources is a facet of the use and
distribution of such resources. Article 39(b) mandates that the ownership
and control of natural resources should be so distributed so as to best
subserve the common good. Article 37 provides that the provisions of Part
IV shall not be enforceable by [pic]any court, but the principles laid down
therein are nevertheless fundamental in the governance of the country and
it shall be the duty of the State to apply these principles in making laws.
Therefore, this Article, in a sense, is a restriction on “distribution”
built into the Constitution. But the restriction is imposed on the object
and not the means. The overarching and underlying principle governing
“distribution” is furtherance of common good. But for the achievement of
that objective, the Constitution uses the generic word “distribution”.
Distribution has broad contours and cannot be limited to meaning only one
method i.e. auction. It envisages all such methods available for
distribution/allocation of natural resources which ultimately subserve the
“common good”.
*** *** ***
115. It can thus, be seen from the aforequoted paragraphs that the term
“distribute” undoubtedly, has wide amplitude and encompasses all manners
and methods of distribution, which would include classes, industries,
regions, private and public sections, etc. Having regard to the basic
nature of Article 39(b), a narrower concept of equality under Article 14
than that discussed above, may frustrate the broader concept of
distribution, as conceived in Article 39(b). There cannot, therefore, be a
cavil that “common good” and “larger public interests” have to be regarded
as constitutional reality deserving actualisation.
116. The learned counsel for CPIL argued that revenue maximisation during
the sale or alienation of a natural resource for commercial exploitation is
the only way of achieving public good since the revenue collected can be
channelised to welfare policies and controlling the burgeoning deficit.
According to the learned counsel, since the best way to maximise revenue is
through the route of auction, it becomes a constitutional principle even
under Article 39(b). However, we are not persuaded to hold so. Auctions may
be [pic]the best way of maximising revenue but revenue maximisation may not
always be the best way to subserve public good. “Common good” is the sole
guiding factor under Article 39(b) for distribution of natural resources.
It is the touchstone of testing whether any policy subserves the “common
good” and if it does, irrespective of the means adopted, it is clearly in
accordance with the principle enshrined in Article 39(b).
*** *** ***
119. The norm of “common good” has to be understood and appreciated in a
holistic manner. It is obvious that the manner in which the common good is
best subserved is not a matter that can be measured by any constitutional
yardstick—it would depend on the economic and political philosophy of the
Government. Revenue maximisation is not the only way in which the common
good can be subserved. Where revenue maximisation is the object of a
policy, being considered qua that resource at that point of time to be the
best way to subserve the common good, auction would be one of the
preferable methods, though not the only method. Where revenue maximisation
is not the object of a policy of distribution, the question of [pic]auction
would not arise. Revenue considerations may assume secondary consideration
to developmental considerations.
120. Therefore, in conclusion, the submission that the mandate of Article
14 is that any disposal of a natural resource for commercial use must be
for revenue maximisation, and thus by auction, is based neither on law nor
on logic. There is no constitutional imperative in the matter of economic
policies—Article 14 does not predefine any economic policy as a
constitutional mandate. Even the mandate of Article 39(b) imposes no
restrictions on the means adopted to subserve the public good and uses the
broad term “distribution”, suggesting that the methodology of distribution
is not fixed. Economic logic establishes that alienation/allocation of
natural resources to the highest bidder may not necessarily be the only way
to subserve the common good, and at times, may run counter to public good.
Hence, it needs little emphasis that disposal of all natural resources
through auctions is clearly not a constitutional mandate.”
99. In light of the above legal position, the argument that auction
is a best way to select private parties as per Article 39(b) does not merit
acceptance. The emphasis on the word “best” in Article 39(b) by the
learned senior counsel for the intervener does not deserve further
discussion in light of the legal position exposited by the Constitution
Bench in Natural Resources Allocation Reference20 with reference to Article
39(b). We are fortified in our view by a recent decision of this Court (3-
Judge Bench) in Goa Foundation[29] wherein following Natural Resources
Allocation Reference20, it is stated, “…it is for the State Government to
decide as a matter of policy in what manner the leases of these mineral
resources would be granted, but this decision has to be taken in accordance
with the provisions of the MMDR Act and the Rules made thereunder and in
consonance with the constitutional provisions…”.
100. The explanation by the Central Government for not adopting the
competitive bidding is that coal is a natural resource used as a raw
material in several basic industries like power generation, iron and steel
and cement. The end products of these basic industries are, in turn, used
as inputs in almost all manufacturing and infrastructure development
industries. Therefore, the price of coal occupies a fundamental place in
the growth of the economy and any increase in the input price would have a
cascading effect. The auction of coal blocks could not have been possible
when the power generation and, consequently, coal mining sectors were first
opened up to private participants as the private sector needed to be
encouraged at that time to come forward and invest. Allocation of coal
blocks through competitive bidding in such a scenario would have been
impractical and unrealistic. When the proposal for introduction of
competitive bidding was first mooted in June, 2004, the State Governments
expressed their reservations based on diverse concerns. The Government of
Chhattisgarh inter alia pointed out that (a) competitive bidding would
result in substantial increase in the cost of coal for iron/steel
undertakings, (b) there were large number of projects under implementation
whose viability is based on availability of coal as per the then existing
policy, (c) competitive bidding would raise the price of domestic coal,
which would result in end-use projects in inland States like Chhattisgarh
becoming unviable due to additional costs by transporting coal by
rail/road, and (d) competitive bidding would result in only the bigger
players getting the coal blocks. The Government of West Bengal opposed the
introduction of competitive bidding because (a) the then existing system
could accommodate both subjective and objective aspects of the projects
whereas competitive bidding would only lead to coal blocks going to the
highest bidder, (b) competitive bidding would not allow priority being
accorded to the power sector, (c) competitive bidding would result in
views of the State Governments becoming redundant, and (d) competitive
bidding would lead to concentration of industries in a particular State.
The Government of Orissa opposed competitive bidding because (a) the State
Government had signed MOUs for investment in end-use plants based on
existing policy and those MOUs would suffer, (b) State Government’s
authority to recommend cases for allocation based on investment in the
State would not be available, and (c) competitive bidding would prevent the
State from leveraging its coal reserves to accelerate its industrial
development.
101. It was for the above reasons that the Central Government says
that competitive bidding was not introduced from 2004.
102. As a matter of fact, the Central Government has explained the
circumstances because of which since 1992-1993 competitive bidding for
allocation of coal blocks was not followed. The explanation is that in 1992-
1993, the power generation and coal mining sectors were first opened up to
private participants and, at that time, the private sector had to be
encouraged to come forward and invest. Allocation of coal blocks through
auction in such a scenario would have been impractical and unrealistic
because during that time existing demand for coal was not being fully met
by CIL and SCCL. There was supply-demand mismatch and there was also a huge
shortage of power in the country. The State Electricity Boards had been
unable to meet power requirements.
103. The material placed on record reveals that the then Coal
Secretary in his note dated 16.07.2004 and subsequent note dated 30.7.2004
mooted introduction of bidding system to achieve transparency and
objectivity in the allocation process and also to tap part of the windfall
gain to the allottee for captive mining. These notes were considered at the
level of Minister (Coal and Mines) and the PMO and certain disadvantages of
allocation of coal blocks through competitive bidding were noted.
Ultimately, it appears that in the month of October, 2004 the proposal for
competitive bidding was not pursued further as it was felt that this would
result in delay in the allocation of coal blocks. The Coal Secretary in
October, 2004 after discussion also felt that since a number of applicants
had requested for allotment of blocks based on the current policy, it would
not be appropriate to change the allotment policy through competitive
bidding in respect of applications received on the basis of existing
policy. He suggested that the policy of allotment through competitive
bidding could be made prospective and pending applications might be decided
on the basis of existing policy.
104. Then, there appears to be exchange of notes and discussion at
various levels on the question whether CMN Act needed to be amended before
the proposed competitive bidding becomes operational or 1957 Act so that
the system of competitive bidding could be made applicable to all minerals
covered under the said Act. The opinion of Department of Legal Affairs was
also sought. In 2006, it appears that Ministry of Coal communicated to the
PMO and Cabinet Secretariat that Ministry of Law and Justice has advised
Ministry of Coal to initiate suitable measures for amendment in the 1957
Act for addressing the issue of competitive bidding. A Bill to amend the
1957 Act was introduced in the Parliament by the Ministry of Mines. The
Amendment Bill was then referred to Standing Committee on Coal and Steel
for examination and for its report. On receipt of the report from the
Standing Committee in 2009, the MMDR Amendment Bill, 2008 was passed by
both the Houses of Parliament in 2010 and ultimately Section 11A was
inserted in the 1957 Act providing for competitive bidding for allocation
of coal blocks by the Central Government. Then, on 02.02.2012, rules for
auctions by competitive bidding of coal mines were notified.
105. The above facts show that it took almost 8 years in putting in
place allocation of captive coal blocks through competitive bidding. During
this period, many coal blocks were allocated giving rise to present
controversy, which was avoidable because competitive bidding would have
brought in transparency, objectivity and very importantly given a level
playing field to all applicants of coal and lowered the difference between
the market price of coal and the cost of coal for the allottee by way of
premium which would have accrued to the Government. Be that as it may,
once it is laid down by the Constitution Bench of this Court in Natural
Resources Allocation Reference20 that the Court cannot conduct a
comparative study of various methods of distribution of natural resources
and cannot mandate one method to be followed in all facts and
circumstances, then if the grave situation of shortage of power prevailing
at that time necessitated private participation and the Government felt
that it would have been impractical and unrealistic to allocate coal blocks
through auction and later on in 2004 or so there was serious opposition by
many State Governments to bidding system, and the Government did not pursue
competitive bidding/public auction route, then in our view, the
administrative decision of the Government not to pursue competitive bidding
cannot be said to be so arbitrary or unreasonable warranting judicial
interference. It is not the domain of the Court to evaluate the advantages
of competitive bidding vis-à-vis other methods of distribution / disposal
of natural resources. However, if the allocation of subject coal blocks is
inconsistent with Article 14 of the Constitution and the procedure that has
been followed in such allocation is found to be unfair, unreasonable,
discriminatory, non-transparent, capricious or suffers from favoritism or
nepotism and violative of the mandate of Article 14 of the Constitution,
the consequences of such unconstitutional or illegal allocation must
follow.
106. The Central Government in its first counter affidavit filed on
22.01.2013 has stated that for the period from 1993 to 31.03.2011, 216
allocations have been made. In the course of arguments, learned Attorney
General submitted that in addition to 216, 2 coal blocks for Coal to Liquid
(CTL) projects were also allocated. According to said affidavit, out of 216
allocations, 105 allocations were made to private companies, 99 allocations
were made to Government companies and 12 allocations were made to Ultra
Mega Power Projects (UMPPs) and that after adjusting 24 de-allocations and
2 re-allocations, a total number of 194 allocations, including allocations
to private parties, form the subject matter of the writ petitions. In the
course of arguments, however, learned Attorney General submitted that total
41 de-allocations have already been ordered.
107. In the first counter affidavit filed on 22.01.2013, the Central
Government has also given the details of the procedure adopted for
allocation of the above coal blocks, in which it is stated that the
allocations to the private companies were made through the Screening
Committee route. As regards allocations made to Government companies,
before 2001, allocations were made only through the Screening Committee
route but on and from 2001, allocations were made through the Screening
Committee route as well as directly by the Ministry of Coal. The
allocations which were made by the Ministry of Coal to the Government
companies are referred to by the Central Government as the Government
dispensation route. Insofar as UMPPs are concerned, it is the stand of the
Central Government that captive blocks were pre-identified for the
projects, that bidders for the projects were selected as per the
competitive bidding guidelines of the Ministry of Power (tariff based
bidding) and, thus, the 12 allocations to UMPPs were done by a competitive
method. It is further stated in the affidavit that the two blocks allotted
for Coal to Liquid (CTL) projects were after inviting applications through
advertisement in 2008 and that the applications received were considered by
an inter-Ministerial Group (IMG) under the Chairmanship of Member (Energy),
Planning Commission and Secretaries of Department of Expenditure, Ministry
of Coal, Department of Industrial Policy and Promotion, Department of
Science and Technology, Ministry of Petroleum and Natural Gas and Principal
Advisor (Energy), Planning Commission as members.
108. We shall first deal with the coal allocations made to the
private companies as well as Government companies for captive purpose
through Screening Committee route.
109. On 14.09.2012, while issuing notice to the Union of India, the
Court framed six questions on which answer was sought in the counter
affidavit. One of such questions was about the details of guidelines
framed by the Central Government for allocation of subject coal blocks. In
the first counter affidavit filed on 22.01.2013, it is stated that from
1993 until 31st meeting held on 23.06.2006, the Screening Committee framed
its own guidelines for allocation of coal blocks. Insofar as guidelines
for 31st to 36th meetings of the Screening Committee are concerned, it is
stated that the Ministry of Coal framed the guidelines and these guidelines
were brought to the attention of the members of the Screening Committee.
110. The minutes of the 1st meeting held on 14.07.1993 indicate that
the guidelines were framed in that meeting by the Screening Committee for
the primary purpose to identify suitable blocks for captive development by
power generating companies. The guidelines framed by the Screening
Committee on 14.07.1993 read as under:
“(i) Preferably blocks in green field areas where basic infrastructure
like road, rail links, etc. is yet to be developed should be given to the
private sector. The areas where CIL has already invested in creating such
infrastructure for opening new mines should not be handed over to the
private sector, except on reimbursement of costs.
(ii) The blocks offered to private sector should be at reasonable distance
from existing mines and projects of CIL in order to avoid operational
problems.
(iii) Blocks already identified for development by CIL, where adequate
funding is on hand or in sight should not be offered to the private sector.
(iv) Private sector should be asked to bear full cost of exploration in
these blocks which may be offered.
(v) While discussing proposals of power generating companies and
identifying blocks the requirement of coal for 30 years would be
considered.”
111. In its 2nd meeting held on 13.08.1993, the Screening Committee
accepted that any addition to generation of power, whether captive or
utility, amounted to value addition and, therefore, no distinction would be
made between the two.
112. In the 3rd meeting held on 27.09.1993, the Screening Committee
discussed whether the guidelines for identification of coal blocks for the
power sector were suitable for adoption in respect of the iron and steel
sector particularly in view of the position explained by the representative
of Ministry of Steel that requirement of coal for iron and steel plants
would be much less than the coal required by the power plants. The
Screening Committee, accordingly, decided to permit sub-blocking of blocks
identified by Central Mine Planning and Design Institute Ltd. (CMPDIL).
113. In the 4th meeting dated 12.01.1994, proposals relating to M/s.
RPG Industries Ltd./Calcutta Electric Supply Corporation, M/s. Kalinga
Power Corporation, M/s. Indian Aluminium Company, M/s. Indian Charge Chrome
Ltd., Andhra Pradesh State Electricity Board, M/s. Development Consultants
Ltd., M/s. Gujarat Power Corporation Ltd., M/s. Associated Cement Company
Ltd., M/s. Hellmuth, Obata and Kassabagm P.C. were considered in
continuation of earlier meetings. Certain blocks were identified for
allocation to some of these companies.
114. In its 5th meeting held on 26.05.1994, the Screening Committee
while considering whether any further changes were required in the
procedures being adopted for considering proposals for captive mining
recorded that in the earlier meetings, the Ministry of Coal had been
liberal in considering proposals with a view to make the scheme a success.
In the said meeting, the Committee reviewed the progress made by M/s. RPG
Industries Ltd., M/s. Kalinga Power Corporation Ltd., M/s. Nippon Denro
Ispat Nigam Ltd., Nagpur, M/s. Andhra Pradesh State Electricity Board, M/s.
Tamil Nadu Electricity Board, M/s. Indian Aluminium Company Ltd., M/s.
Development Consultants Ltd., M/s. Associated Cement Company Ltd., M/s.
Hellmuth, Obata and Kassabagm P.C. and M/s. Gujarat Power Corporation Ltd.
115. In the 6th meeting held on 20.01.1995, the Committee decided
to earmark Sarisatolli block and western part of Tara block for captive
mining by M/s. RPG Industries Ltd. for proposed Budge-Budge TPS and
Balagarh TPS. The proposal of M/s. Jindal Strips Ltd. for a captive block
for expansion of their Sponge Iron Plant from 2 lakh tonnes per annum to 6
lakh tonnes per annum was also discussed in the meeting and it was decided
that CMPDIL would carry out the exercise of sub-blocking so that a suitable
block can be allocated to M/s. Jindal Strips Ltd.
116. In the 7th meeting held on 06.06.1995, the Chairman felt the
need for fixing certain time limit and laying down corresponding milestones
otherwise there would be a tendency on the part of developer of the mining
block to proceed in a casual manner with the result that the coal
production would not be realized within the required time frame. It was
decided that once the blocks are identified, the party concerned should
complete necessary formalities and should be able to apply for lease within
6 months. In continuation of earlier meetings, the Screening Committee
further considered the proposal of M/s. RPG Industries Ltd. for
identification of coal mining blocks for supply of coal to the proposed
Budge-Budge TPS, Balagarh TPS and Dholpur TPS. In the said meeting, the
proposals of M/s. West Bengal State Electricity Board and M/s. Videocon
Power Ltd. were also considered.
117. In the 8th meeting held on 04.10.1995, the proposal of M/s.
Steel Authority of India Limited for captive blocks in Jharia coalfields
was discussed. The Committee decided to identify Parbatpur, Mahal,
Seetanala and Tasra blocks located in Jharia Coalfields for captive
development by SAIL.
118. In the 9th meeting held on 20.12.1995, the proposal of M/s.
Nippon Denro Ispat Ltd. for identification of additional coal mining blocks
for supply of coal to the 2nd stage of the Bhadravati TPS was discussed.
Apart from the above-mentioned proposal, the other proposals were from
Maharashtra State Electricity Board, National Thermal Power Corporation and
Lloyds Metals (Sponge Iron Plant) and Larsen & Tourbo captive power plant,
Chandrapur. Since there were conflicting requirements of various projects,
the Committee decided that the long-term coal requirements of various
projects of M/s. Nippon Denro Ispat Ltd., Maharashtra State Electricity
Board, National Thermal Power Corporation, Lloyds Metals and Larsen &
Tourbo should be examined in a comprehensive exercise so that the available
resources are optimally utilized. Review of the proposals of M/s. Jindal
Strips – Sponge Iron Plant and M/s. Monnet Ispat – Sponge Iron Plant was
also undertaken.
119. In the 10th meeting held on 03.04.1996, the Committee noted
with concern that out of the blocks already offered, only four parties have
taken action for development of blocks. The Committee decided that all the
identified parties should be issued a notice to pay the exploration cost by
30.06.1996 and take action for development of the block failing which the
offer would be cancelled.
120. In the 11th meeting held on 26/27.09.1997, the Screening
Committee carried out a review of the progress made so far. It was noted
that M/s. RPG Industries for Budge-Budge TPS, M/s. Indian Aluminium Company
Ltd. for new captive power plants in Orissa, M/s. Associated Cement Co.
Ltd. for new captive power plant at Wadi, Karnataka, M/s. West Bengal State
Electricity Board for higher generation for Bendel TPS and Santaldih TPS,
M/s. West Bengal Power Development Corpn. Ltd. for Bakreshwar TPS, M/s. BLA
Industries for 24 MW capacity power plant in Distt. Narsinghpur, Madhya
Pradesh, M/s. Jindal Strips Ltd. for Sponge Iron Plant in Madhya Pradesh
and M/s. Nippon Denko Ispat Ltd. for Bhadravati TPS, Stage – I, had paid
exploration charges to CIL and submitted mining plans which had been
approved by the Standing Committee of Ministry of Coal. In that meeting,
the representative of M/s. Nippon Denko Ispat Ltd. submitted that Bunder
block was far away from the power plant as well as from the other two
mining blocks allotted to them and requested that a block nearer to the
other two blocks, i.e., Baranj and Lohara West may be considered for
allotment by the Committee. Accordingly, the Committee decided to allocate
Monora Deep Block, which is adjacent to Baranj and Lohara Extn. (which is
adjacent to Lohara West) to M/s. Nippon Denko Ispat Ltd. The Committee
also discussed the proposals which were considered earlier but no final
decision could be taken. The Committee decided that Utkal ‘C’ block in
Talcher coalfield having geological reserves of about 190 m.t. may be
considered for allotment to M/s. Indian Charge Chrome Ltd. for two
additional captive power plants at Choudhwar, Orissa. It is pertinent to
mention that the Committee found that the total requirement for all the
three units would be about 2.36 m.t. and for a life of 30 years, it would
work out to be 71 m.t. The Committee, however, proposed allocation of
Utkal ‘C’ block having geological reserves of about 190 m.t. In that
meeting, Takli-Jena-Bellora block was allotted to M/s. Lloyds Metals and
Engineers Ltd. and the company was directed to obtain mining lease within
six months of issue of these minutes. As regards the proposal of M/s.
Associated Cement Company Ltd. for expansion at Wadi Cement Works in
Karnataka, the Committee decided to allot Bisrar block in addition to
Lohara (East) allocated earlier as the total requirement was of the order
of 3.7 m.t. In the said meeting, M/s. J.K.Corp. Ltd. was allocated Gare
IV/8 block with gross geological reserves of 91 m.t. for their Cement Plant
at Sirohi and Khemli in Rajasthan for which their total coal requirement
was 1.23 m.t.p.a.
121. In the 12th meeting held on 03.04.1998, the Committee allocated
Gare-Palma IV/2 and IV/3 blocks having Geological reserves of 100 and 110
m.t. to M/s. Jindal Power Ltd. for Raigarh TPS Stage – II (500 MW). In
the said meeting, M/s. Central Collieries Co. requested the Screening
Committee for a portion of the Takli-Jena-Bellora block which had already
been allotted to M/s. Lloyds Metals & Engineers Ltd. In the course of
discussions, it transpired that the total reserves in the block are higher
than the requirement of M/s. Lloyds Metals. The Committee was of the view
that it was possible to allot some of the reserves to a party other than
M/s. Lloyd Metals. The Committee noted the clarification made by DGM (MS)
that it was possible to cut out an independent sub-block of 40 m.t. coal
reserves within the Takli-Jena Bellora block. Accordingly, the same was
allotted to M/s. Central Collieries Co.
122. In the 13th meeting held on 24.08.1998, as regards the proposal
of M/s. Nippon Denro Ispat Ltd. – Bhandravati TPS I, the Committee was
informed that the Apex Committee of CIL on captive mining blocks had
objected to allocation of Kilhoni block to Nippon on the ground that the
company had been changing its preference from one block to another block
and allotment of Kilhoni block would not be sufficient to satisfy the
company’s coal requirement for 30 years. Therefore, it was suggested that
the company should either work the Lohara West block or enter into an
agreement with WCL for supply of their balance coal requirement. The
Ministry of Power, on the other hand, indicated that they had no objection
if the same was acceptable to the Government of Maharashtra. It was also
indicated that in the absence of firm figures of availability of coal and
its likely price on cost plus basis, only an in-principle agreement could
be arrived at for linkage in lieu of the Kilhoni block. It was also stated
that the Kilhoni block being adjacent to Baranj block would be more
practicable for them to mine the reserves whereas WCL would have to develop
the block as an isolated project. The Government of Maharashtra strongly
supported the allocation of Kilhoni block to the company. The Director
(Technical), CIL and CMD, WCL indicated that the Kilhoni block was likely
to be taken up in the 11th plan period and pointed out some unique
geographical and man-made features of the block which, according to them,
would make the project both cost and time intensive, resulting in very high
cost for WCL. The Committee felt that Nippon would be better placed to
tackle these problems. It was finally decided that M/s. Nippon Denro Ispat
Ltd will work Baranj I-IV, Manora Deep and Kilhoni Blocks for mining coal
for Bhadravati TPS, Lohara West and Lohara West Extension blocks will be
withdrawn from the party and no further request for change or modification
of blocks made by the party will be considered.
123. The Committee had decided in the 12th meeting to allocate
southern portion of Takli-Jena-Bellora block to M/s. Central Collieries Co.
Ltd. In the 13th meeting, the representative of M/s. Central Collieries
Co. Ltd. requested that a decision on allocation of a small portion of
Kilhoni block should be taken. It was informed to the Committee that the
area identified at Kilhoni by the company was actually a different
location, and that location did not form part of the identified blocks for
captive mining.
124. In its 14th meeting held on 18/19.06.1999, the Screening
Committee decided as follows:
“(i) The Administrative Ministries will assess the soundness of the
proposals in consultation with the State Govt. before sending their
comments/recommendations to the Screening Committee for consideration of
allotment of a captive mining block; and
(ii) The Administrative Ministries should consult State Governments as
well as use their own agencies for assessing the progress of the
implementation of end use plants for which blocks have already been
allotted by the Screening Committee and send a report to the Screening
Committee for further action.”
124.1. In the said meeting, Adviser (Projects), Ministry of Coal
informed that a policy has been framed that captive mining block producing
less than 1 m.t. of coal per annum from an opencast block and less than
0.25 m.t. of coal per annum from an underground block will not be
considered for allotment. The Committee agreed to adopt the above policy.
In that meeting, the Committee decided to withdraw the Gare-Palma IV/4
block allotted to M/s. Phoenix Cement Ltd. The block Gare-Palma IV/8
allotted to M/s. J.K. Corp. Ltd. was also withdrawn due to non-seriousness
of the party in the matter.
124.2 In the 14th meeting, the proposal of M/s. Monnet Ispat Ltd. for
a new Sponge Iron plant in Keonjhar area of Orissa of 1.2 million tonnes of
capacity for which the requirement of 2.2 m.t. of raw coal has been
indicated, was discussed. This plant will have a CPP of 40 MW in the 1st
phase. The party requested for Utkal-B2 block in Talcher coalfield having
106 m.t. of reserves. The party informed that the existing plant capacity
of 1 lakh tonnes is being expanded to 3 lakh tonnes by March, 2000 and to 5
lakh tonnes beyond that. During discussion, CMD MCL was of the view that
Chendipada block is likely to have better grade of coal and suggested to
the party in preference of Utkal B-2 block. However, the party insisted
for Utkal B-2 block and the same was allotted subject to the condition that
the party must achieve financial closure within one year of allotment of
the block, failing which the allotment will be withdrawn.
124.3. As regards the proposal of M/s. Jayaswal Neco Ltd. for their
Sponge Iron Plant, the party had earlier requested for Gare-Palma IV/6 and
IV/7 blocks for meeting their Sponge Iron Plant and a captive power plant.
Now, they requested for allocation of IV/4 and IV/8 blocks as the same have
been withdrawn from other firms. Accordingly, the same were allotted to
M/s. Jayaswal Neco Ltd.
124.4 The Brahmadiha block was allotted to M/s. Castron Technology in
the 14th meeting. The Committee noted that the mine did not fit in the
criteria of captive block as per its latest guidelines, but decided to make
the allocation in view of the fact that the reserves could either be
permitted to be exploited by a private party or lost forever.
125. In the 15th meeting held on 06.03.2000, M/s. Jindal Strips Ltd.
had submitted a request for a block in Talcher coalfield to meet the
requirement of sponge iron plant of 2 m.t. capacity. In January, 2000, the
party made an application for allocation of Utkal D block in MCL having
geological reserves of 190 m.t. for their proposed sponge iron plant of 1
m.t. capacity requiring clean coal of 1.2 mtpa. The party also proposed to
set up a washery of 3 m.t. input capacity. The requirement of the block
was proposed by the party for working the sponge iron plant and the CPP for
a period of 50 years. In the course of discussion, it was pointed out that
allocation of block for captive mining is generally made on the basis of 30
years’ requirement whereas the party had requested for allocation of block
on the basis of 50 years requirement for their sponge iron plant. It was
also indicated that the total requirement of coal for 30 years life period
of the project worked out to be 90 m.t. for which a geological reserve of
about 120 m.t. should be adequate. The estimated reserve of Utkal D block
was about 190 m.t. and was, therefore, higher than the probable
requirement. The representative of Ministry of Steel indicated that coal
block having geological reserve of about 125 m.t. would be adequate. Yet,
the Committee decided to allot Utkal D block in principle to M/s. Jindal
Strips Ltd. but this was cancelled in the 16th meeting.
125.1. The proposal of M/s. Prakash Industries was rejected in the
14th meeting in view of the company’s reference to BIFR and the party
enjoying coal linkage of 0.76 m.t. for their existing plant. In November
and December, 1999, they informed that they had a linkage of 0.5 mtpa only
and that they proposed to develop an underground mine for the balance 0.5
mtpa. The Committee in the 15th meeting decided to allocate Choita block,
having geological reserves of about 60.00 m.t. to M/s. Prakash Industries.
125.2. In the said meeting, M/s. Raipur Alloys & Steel Ltd. had
requested for allocation of Choita block for their sponge iron plant at
Siltara, Raipur, the capacity of which was proposed to be expanded from the
existing 60,000 tpa to 3 lakh tonnes per annum and for a captive power
plant of 18 MW. That block was not in the identified list of captive
mining. Accordingly, they revised their request for allocation of Gare
Palma IV/7 or any one of the three blocks in Gare Palma, i.e., IV/7, IV/6
and IV/8 in order of preference. The Committee decided to allocate Gare
Palma IV/7 to M/s. Raipur Alloys & Steel Ltd. with coal reserves of 156
m.t. which is on the much higher side than the requirement of the company.
126. In the 16th meeting held on 31.05.2001, M/s. Orissa Mining
Corporation Ltd. was allotted Utkal D block for generation of power through
Orissa Power Generation Corporation.
127. In the 17th meeting held on 28.11.2001, the request of M/s. GVK
Power Gowindal Sahib Ltd. for allotment of Tokusud coal block for their
proposed 2 x 250 MW power plant was considered and Tokusud North block was
allotted to them.
128. In the 18th meeting held on 05.05.2003, the Screening
Committee, for the first time, considered the issue of determining inter se
merit of applicants for the same block as well as certain other issues to
bring in transparency and felt that guidelines for determining inter se
priority among claims for blocks between public sector and private sector
for captive use and between public sector for non-captive use and private
sector for captive use need to be evolved. The Chairman of the Committee
put the following few general guidelines for consideration:
(i) The blocks in captive list should be allocated to an applicant only
after the same have been put in the pubic domain for a reasonable time and
not immediately upon their inclusion in the list of block identified for
captive mining, so as to give an opportunity to interested parties to apply
for the same and make the process more transparent. The need for giving
very cogent and detailed reasons before withdrawal of a block from captive
list by CIL was also emphasized.
(ii) The Administrative Ministries were requested to appraise the projects
from the point of view of the genuineness of the applicant, techno-economic
viability of the project and the state of preparedness/progress in the
project while indicating the quantity and quality of coal requirement of
the project and recommending allocation of captive block to the applicant.
In case there were more than one applicant for the same block the
Administrative Ministry should rank them based on the project appraisal and
the past/track record of the applicant without necessarily naming the block
to be allotted. This would facilitate the Screening Committee in allotting
a suitable block to the applicant more objectively.
(iii) Only those power projects would be considered for allocation which
are included in the Xth Plan Period.
128.1. The above guidelines met with general approval. The
Screening Committee also decided that while recommendations of the State
Governments would continue to be taken into consideration, the same would
not be taken as pre-condition for entertaining the application by it. In
that meeting, the two blocks- Bandhak (East) and Bandhak (West) were also
included in the list of captive blocks.
129. In the 19th meeting held on 26.05.2003, various projects
were reviewed.
129.1. In that meeting, the Committee allocated Bandhak (West) to M/s.
Shree Baidyanath Ayurved Bhawan Ltd. Similarly, M/s. Fieldmining & Ispat
Limited was allocated Warora (West) and Chinora blocks.
130. In the 20th meeting held on 06.06.2003, the Committee discussed
the matter of allocation of captive mining blocks to small Greenfield
projects or to applicant companies who did not have well known track
records in the sectors approved for allocation of captive blocks for mining
of coal. It adopted a policy that for such small projects the Committee
instead of straight away allocating the block, the Committee would reserve
the block and offer a temporary tapering linkage through CIL for achieving
financial closure and development of the end-use project first. The
allocation of the block would be made subject to the applicant company
achieving the project milestones submitted by them to the Committee, and
after financial closure is achieved.
130.1. In that meeting, M/s. Jindal Steel and Power Limited requested
for allocation of Utkal B-1 block for their sponge iron production, 200 MW
of captive power generation, steel plant and ferro alloy plants to be set
up in two phases. The Screening Committee decided to allocate Utkal B – 1
block to that company for exclusive and captive use of the entire coal
produced from the block in their own project in the end-use plants.
130.2. M/s. Usha Beltron Ltd. requested for allocation of a block for
their sponge iron and power plant. CIL had recommended allocation of
Kathautia UG block for their expansion project. Accordingly, the Committee
allocated the same subject to the existing linkages of coal from CIL
continuing.
130.3. The Committee also discussed the proposals of M/s. Shyam DRI
Power Ltd. for allocation of Radhikapur block and M/s. Neepaz Metalics Pvt.
Ltd. for allocation of Patrapara block. In both the cases, it was found
that the size of the block is larger in comparison to the need. However,
the applicants stated that while geological reserve in the block may be
large, the recoverable reserve would be very much less. Accordingly, the
blocks were allocated provisionally to them for detailed
exploration/prospecting purposes.
130.4. In that meeting, M/s. Ambuja Cement requested for allocation of
Baranj III and IV block for their new as well as expansion of existing
cement plants. Though the Government of Maharashtra supported the
proposal, the representative from Ministry of Power stated that there are
two contenders for the Baranj blocks and the Ministry of Power is
considering and evaluating the case. He stated that decision on allocation
of Baranj I to IV could be deferred by one month by which time the Ministry
of Power would be in a position to give their views. However, the
Screening Committee decided to allocate Baranj III and IV blocks to Ambuja
Cement Ltd. subject to any order of the High Court in the matter.
131. In the 21st meeting held on 19.08.2003, the issue of
competitive bidding was raised. On this, the Screening Committee felt that
further guidelines need to be evolved for allocation of blocks and
competitive bidding should also be looked at. In that meeting it was also
felt by the Committee that coal being only one of the inputs of end-use
projects, other matching inputs should also be considered before allocation
of a coal block.
132 Significantly, the guidelines framed and applied by the
Screening Committee for the period from 14.07.1993 (1st meeting) to
19.8.2003 (21st meeting) are conspicuously silent about inter se priority
between the applicants for the same block. In the 18th meeting, the
Screening Committee considered the issue of determining inter se merit of
applicants for the same block as well as certain other issues for bringing
in transparency. The Screening Committee felt that guidelines for
determining inter se priority among claims for block between public sector
and private sector for captive use and between public sector for non-
captive use and private sector for captive use need to be evolved.
However, no guidelines for determining inter se priority of applicants for
the same block was evolved. The guidelines also do not contain any
objective criterion for determining the merits of applicants and lack in
healthy competition and equitable treatment. In the first counter affidavit
filed by the Central Government, it is admitted that from the 1st meeting
(held on 14.07.1993) to the 21st Meeting (held on 19.08.2003), the
guidelines did not deal with the subject of determining inter se priority
between applicants.
133. As regards 26 coal blocks allocated to private companies
pursuant to the recommendations of the Screening Committee for the period
from 04.11.2003 (22nd meeting) and 18.10.2005 (30th meeting), the Attorney
General submits that the Screening Committee had devised guidelines to
determine inter se priority amongst applicants for the same block. It is
also submitted that the recommendations were made by the Screening
Committee after consideration of each application and assessment of each
applicant’s merits in terms of the criterion laid down in the guidelines.
134. The counter affidavit filed by the Central Government on
22.06.2013 at pages 102-159 deals with this period. The compilation
(Volume 3-B) contains materials relating to recommendations made by the
Screening Committee for allocation of coal blocks to private companies
pursuant to its 22nd meeting to 30th meeting held between 04.11.2003 and
18.10.2005. It transpires from the materials placed on record that there
was boom in the iron and steel sector at that time. The Screening Committee
was usually required to consider 3-4 applicants for each block. Though the
guidelines required that a captive block cannot be allocated as replacement
for a linkage and that coal blocks can only be allocated for specific
projects and not as back up in general and additional guidelines also
provided that Central PSU was to be accorded priority over State Government
PSU if all other factors (like suitability of coal grade, techno-economic
viability/feasibility of the project, state of preparedness of the project,
etc.) were equal but a careful look at these guidelines show that they do
not lay down any criterion for evaluating the comparative merits of the
applicants. As a matter of fact, the guidelines applied by the Screening
Committee are totally cryptic and hardly meet the requirement of
constitutional norms to ensure fairness, transparency and non-
discrimination.
135. In the 23rd meeting held on 29.11.2004 for Belgaon coal block,
three applicants, namely, (i) M/s. Chandrapur Ispat Ltd., (ii) M/s. Gupta
Metallics and Power Ltd. and (iii) M/s. Sunflag Iron and Steel Ltd. had
applied. The particulars of these three applicants have been noted by the
Screening Committee but besides that there is nothing to indicate as to why
M/s. Sunflag Iron and Steel Ltd. was found more meritorious than the other
two applicants. It is pertinent to note that Ministry of Steel had
supported the proposal of both Gupta Metallics and Power Ltd. and Sunflag
Iron and Steel Ltd. The consideration of inter se merit appears to be ad-
hoc. There is no comparative assessment of the merits of the applicants.
There is so much of ad-hocism in consideration of the applications that in
every meeting, the guidelines were altered.
136. In the 24th meeting held on 09.12. 2004, the Screening
Committee altered the norms by shifting insistence on achieving financial
closure of the end-use projects to some appropriate stage after the mining
plan approval. In that meeting, the Screening Committee was informed that
the proposal to allow disposal of coal produced during development phase of
the mine has been approved by the Government. In that meeting, the
Committee considered allocation of Brinda, Sisai, Dumri, Meral, Lohari,
Moitra, Kotre-Basantpur and Pachmo blocks. Applications were received from
M/s. Abhijeet Iron Processors Pvt. Ltd for allocation of Brinda, Sisai,
Dumri, Meral and Lohari blocks, M/s. Neelachal Iron and Power Ltd. for
allocation of Brinda, Sisai and Dumri blocks, M/s. Bajrang Ispat Pvt. Ltd.
for allocation of Dumri, Brinda and Sisai blocks and M/s. Pawanjay Steel
and Power Ltd. for allocation of Dumri and Brinda blocks. The Screening
Committee noticed that among applicants competing for Brinda and Sisai,
M/s. Abhijeet Iron Processors Pvt. Ltd., applied way ahead of others, its
requirement was large and it has a good track record and Ministry of Steel
had recommended its case. The other applicants, viz., M/s. Bajrang Ispat
and M/s. Pawanjay Steel were later applicants. The requirement of M/s.
Bajrang was small and sub-blocking was not desirable while M/s. Pawanjay
had not yet given the required details to Ministry of Steel. For Meral,
M/s. Abhijeet was the only applicant. The Screening Committee decided to
allocate Brinda, Sisai and Meral blocks to M/s. Abhijeet Infrastructure
Private Ltd.
136.1 In the same meeting, M/s. Jayaswal Neco Ltd. was allocated
Moitra block in place of Jogeshwar and Choritand-Tilaya, already allocated
to them. Lohari block was allocated to M/s. Usha Martin Limited subject to
the views of Ministry of Steel. It is important to mention that Lohari
coal block was acquired under the Coal Bearing Acquisition Act. The
Committee noted that the transfer modalities were yet to be worked out in
details.
136.2 The Screening Committee in 24th meeting noted the particulars
of each applicant but how each applicant met such parameters is neither
mentioned nor are they discernible.
137 In its 25th meeting* held on 10.01.2005, the Screening
Committee considered allocation of five coal blocks in the MCL area.
Thirty applicants made presentations before the Committee. Many of these
applicants were meritorious. The size of these blocks was large compared
to the requirement of the applicants. The Screening Committee decided that
for each such block, one applicant company who had the highest stake and
which was likely to take up proper mining could be designated the leader
company and allocated the block and a group of other companies could be
nominated as associate companies for supply of coal by the leader company
to these designated associates. In our opinion, such procedure is
apparently in contravention of the statutory provision contained in Section
3(3)(a)(iii) of the CMN Act. Moreover, the arrangement of consortium of
companies violates Section 3(3)(a)(iii) of the CMN Act as the leader
company supplies the associate share of coal to the associate company at a
price (though the price is determined by the Government). Winning or
mining of coal by such company is impermissible under the CMN Act. The
rules of game were changed to adjust large number of applicants whose
applications would have been otherwise rejected as their coal requirement
was far less than the coal available in the coal block. However, in order
to accommodate these applicants, a novel idea of choosing a leader company
and associate companies was evolved which, as indicated above, is
impermissible under the CMN Act. The merits of 13 companies whose
applications were rejected have not been comparatively assessed with the 17
companies (5 leaders and 12 associates) whose applications were accepted
and recommended for allocation to the Central Government.
138. In its 26th meeting** held on 01.02.2005, the Screening
Committee considered allocation of five blocks in SECL area. Twenty-five
applicants had applied for these blocks. Ten applicants who had submitted
their applications after the cut-off date were rejected. The remaining
fifteen were chosen for allocation on the same lines as was done in the
25th meeting for allocation of coal blocks in the MCL area. Of these 15
applicants, the Screening Committee listed out seven companies as possible
leaders for 5 blocks. The procedure followed in the 26th meeting suffered
from the flaws similar to recommendations made by the Screening Committee
in its 25th meeting. Moreover, the minutes of the 26th meeting reveal that
the Ministry of Steel raised the issue that a number of companies have, in
their presentations, mentioned the capacity of the end-use projects in
excess of what has been recommended by the Ministry of Steel. It is further
seen that the representative of the concerned State Government had stated
that the ground realities of the projects needed to be verified and the
capacities of the end-use plants and coal requirements of such projects is
required to be confirmed, but despite that, the Screening Committee
proceeded to list out the possible leaders from among the selected
companies, viz., 1. Hindustan Zinc Ltd.; 2. Chhattisgarh Electricity
Company Ltd.; 3. Jayaswal Neco Ltd.; 4. Jindal Steel & Power Ltd.; 5.
Prakash Industries Ltd.; 6. Sunflag Iron & Steel Co. Ltd.; and 7.
Consortium of Nav Bharat Coalfields Pvt. Ltd., Ind Agro Synergy Ltd., Ispat
Godawari Ltd., Sri Bajrang Power & Ispat Ltd., Sri Nakoda Ispat Ltd. and
Vandana Global Ltd. Moreover, the Screening Committee did not assess the
capacities and coal requirement of these companies. The Committee decided
that detailed formulation of groups or ‘common pool’ for allocation of
coal/blocks in line with the dispensation being contemplated in MCL blocks
will be worked out by the Ministry of Coal. In our view, the expression ‘a
company’ occurring in Section 3(3)(a)(iii) of the CMN Act does not cover
“consortium of companies” or “formulation of groups” or “common pool”. The
decision of the Screening Committee to recommend allocation of coal blocks
to consortium of companies or formulation of groups or common pool is in
contravention of Section 3(3)(a)(iii) of the CMN Act. CMN Act places
embargo on granting the leases for winning or mining coal to persons other
than those mentioned in Section 3(3)(a)(iii). Consortium of companies
surely falls outside Section 3(3)(a)(iii). The statutory scheme of the CMN
Act generally and Section 3(3)(a)(iii) in particular have been given a
complete go-bye in the procedure followed by the Screening Committee and
finally by issuing allocation letters to one leader company with obligation
to share associate’s share of coal to the associate company at a price
determinable by the Government.
139. In the 27th meeting*** held on 01.03.2005, the Screening
Committee considered allocation of blocks in the CCL area while in 28th
meeting**** held on 15.04.2005, the Committee considered allocation of
blocks in SECL area. Neither the counter affidavit nor the minutes of these
two meetings show that assessment of comparative merits of the applicants
was done. The Screening Committee continued with consortium / leader and
associate approach, as was done for the MCL area in the 26th meeting. This
procedure is clearly in contravention of Section 3(3)(a)(iii) of the CMN
Act. Except recording the particulars of these companies, who had given
presentation, nothing is said about inter se priority or comparative merits
of the applicants. By adopting consortium / leader and associate approach,
the Screening Committee had indirectly done away with inter se priority and
merit of the applicant companies. The consideration does not reveal
application of any objective criterion. It is admitted in para 206 of the
counter affidavit filed by the Central Government that as regards the
applicant - Neepaz Metalicks whose case was considered in 28th meeting, the
recommendation of the Administrative Ministry was contrary to the
recommendation of the State Government, yet the allocation of a sub-block
in Patrapara block was made on the basis of State Government’s
recommendation. Moreover, it may be noticed that though the representative
of the State Government supported the request of M/s Bhushan Steel and
Strips Limited for allocation of Patrapara block but he stated that the
State Government supports the claimants for Patrapara in the following
order: (a) M/s Neepaz Metalicks Limited, (b) M/s SCAW, (c) M/s Visa
Industries, (d) M/s Shree Metalicks, all of whom have already entered into
a MOU with the Government of Orissa and the order of priority for M/s
Bhushan Steel and Strips Limited would be lower than these four claimants.
As regards Panch Bahini block, the representative of the State Government
stated that the applicant, M/s Shree Radha Industries, may be considered
for a share and inclusion in the earliest list of blocks allocated in 26th
meeting, still the Screening Committee decided to recommend allocation of
Panch Bahini block to M/s Shree Radha Industries.
140. The counter affidavit in para 208 as regards 29th meeting*****
held on 03.06.2005 states that the Screening Committee considered a
detailed presentation of modalities of competitive bidding by the CMPDIL.
Despite the fact that modalities for auctioning through competitive bidding
were discussed in 29th meeting, that was not carried further as is seen
from the minutes of the 30th meeting of the Screening Committee held on
18.10.2005.
141. The minutes of 30th meeting! show that the Screening Committee
decided to club Gare Palma Blocks IV/1 and IV/6 and further decided to
allot the combined block (IV/1 and IV/6) to JSPL with Nalwa Sponge as a
partner company. The minutes also record that if surplus still remains in
the block, then JSPL-Nalwa be asked to select another allottee failing
which the excess reserves to be handed over to SECL, in terms of annual
production, at transfer price to be determined by the Government. Coal
availability and requirement in Gare Palma IV/1 block as recorded in the
minutes show that 31.05 m.t. remained surplus with these companies. In the
30th meeting, the Screening Committee also recommended to allot Dumri Coal
Block to M/s. Neelachal and M/s. Bajrang despite the fact that CMPDIL
informed the Committee that north portion (rise side) of Dumri remains
unexplored in detail on account of security problems. The unexplored
portion has superior grades of coal of about 15 m.t. As regards Gare Palma
IV/8 block, the minutes indicate that for this block M/s CECL; Consortium
of five applicants and M/s Jayaswal Neco Ltd. had made presentations.
Consortium of five applicants companies was not recommended apparently
inter alia for the reasons; (1) that the Consortium of five applicants
companies was yet to be incorporated and (2) that they claimed the blocks
mainly on the ground of promoting consortium approach. It is interesting to
note that in the earlier meetings for allocation of coal blocks in MCL,
SECL and CCL areas, the Screening Committee on its own adopted consortium /
leader and associate approach and the factor such as that the consortium
company was not incorporated was not at all viewed as an impediment for
recommendation but in this meeting the claim of consortium of five
companies was not accepted and it was noted that they may be accommodated
in other blocks. The application of norms by the Screening Committee
changed from meeting to meeting. There was no consistent or uniform
consideration. The portion of Dumri Coal Block bearing superior grade was
admittedly unexplored but it was recommended for allocation. The clubbing
of blocks or sub-blocks was done which was not the brief given to the
Screening Committee.
141.1 The recommendations made by the Screening Committee in its 30th
meeting suffer from the same infirmities as the recommendations made by it
in favour of other applicants in earlier meetings.
142. In the 31st meeting held on 23.06.2006, the Screening Committee
examined the applications for lignite blocks. 25 applicants made their
presentation. The Screening Committee, after noticing the particulars of
each of the 25 applicants individually and recording that it discussed the
presentations made by the applicants and that it took into consideration
the views/comments of the Ministry of Power, Ministry of Steel, concerned
State Governments and the guidelines, recommended allocation of lignite
blocks to 6 applicants.
143. In September, 2005, the Ministry of Coal issued advertisement
inviting applications for allocation of 20 coal blocks. This was the first
time when applications were invited for allocation of coal blocks by way of
an advertisement. The applications received pursuant to the above
advertisement were taken up for consideration by the Screening Committee in
32nd meeting held on 29.06.2006 and 30.06.2006, 33rd meeting held on
31.08.2006, 01.09.2006 and 02.09.2006 and 34th meeting held on 07.09.2006
and 08.09.2006. In the 32nd meeting, the Screening Committee considered
allocation of Rohne, Sitanala, Tenughat-Jhirki, Choritand-Taliya and
Jogeswar coal blocks. 54 companies (some of which were group companies)
made presentations. The Committee also considered applications of those
companies which did not come for presentation. The minutes of 32nd
meeting!! record that the applications received in the Ministry
regarding above coal blocks were sent to the State Government of Jharkhand
and the concerned Administrative Ministries in the Central Government for
their views/comments. The views/comments of the Government of Jharkhand
were received on 28.06.2006. The Committee then recommended the allocation
of Rohne coal block jointly in favour of M/s. JSW Steel Ltd., M/s. Bhushan
Steel and Power Ltd. and M/s. Jai Balaji Sponge Ltd. Tenughat–Jhirki coal
block was recommended jointly in favour of M/s. Rashtriya Ispat Nigam
Limited and M/s. Jindal Steel and Power Limited while
Choritand-Taliya was recommended jointly in favour of M/s. Sunflag
Iron and Steel Limited and M/s. Rungta Mines Limited. Insofar as Sitanala
coal block is concerned, the Committee recommended the said block in favour
of M/s. Steel Authority of India Limited. As regards Jogeswar coal block,
the Committee in view of the comments of the representative of the
Government of Jharkand decided not to recommend allocation of that block in
favour of any applicant for the time being. The minutes of 32nd meeting do
not show how and in what manner the applications of those companies were
considered which did not come for presentation. There is no comparative
assessment or evaluation of the applicants. Why the chosen companies have
been preferred over the others is not discernible? Merely because there
were large number of applicants, it did not mean that the consideration of
each applicant could not have been recorded or comparative assessment or
evaluation of the applicants could not have been made. What are the
reasons for recommending three blocks jointly in favour of more than one
company are neither recorded nor disclosed in the minutes. The
recommendations for allocation of blocks jointly in favour of two or three
companies, as indicated earlier, are not in conformity with the CMN Act.
Rather, they are in contravention thereto.
144. In the 33rd meeting, the Screening Committee considered
allocation of Tubed, Chakla, Jitpur and Pengedappa coal blocks. In that
meeting, 165 companies made their presentations. The applications of 16
companies which did not turn up for making presentations were also
considered. In the 32nd meeting held on three dates, namely, 31st August
and 1st and 2nd September, 2006, the Committee decided that recommendations
regarding the above four blocks would be finalised after hearing the
applicants for the remaining 11 blocks, for which the meeting was already
notified for 07.09.2006 and 08.09.2006.
145. On 07.09.2006 and 08.09.2006, the 34th meeting of the Screening
Committee was held to consider allocation of Ansettipali, Punukula-Chilka,
Brahmpuri, Mandla North, Rawanwara North, Sial-Shoghri Lohara East, Kosar-
Dongargaon, Warora West (North), Biharinath and Mednirai coal blocks. In
that meeting, geological reserves of some of the coal blocks were reported
by CMPDIL/SCCL. The presentations were made by 101 companies. 44
companies did not turn up for making presentations. However, their
applications were considered. In that meeting, it was decided that the
recommendations regarding the above 11 blocks would be finalized in the
next meeting.
146. As seen from the above, in the 33rd meeting held on 31.08.2006,
01.09.2006 and 02.09.2006 for allocation of four blocks and in the 34th
meeting held on 07.09.2006 and 08.09.2006 for allocation of 11 blocks, no
final decision was taken and the matters were deferred. On 22.09.2006, the
Screening Committee met regarding allocation of 15 coal blocks, which was
subject matter of consideration in its 33rd and 34th meetings. The
minutes!!! of the meeting held on 22.09.2006 record recommendation for
allocation of 15 coal blocks.
146.1 Of these 15 blocks, three namely, Ansettipali,
Punukula-Chilka and Pengedappa were recommended for allocation to Andhra
Pradesh Government undertaking as these blocks were located in the notified
tribal area. Of the remaining twelve, the Screening Committee recommended
their allocation to fifteen companies. Five companies were recommended for
their power plants, three were recommended for the cement plants and
remaining seven were recommended for the Sponge Iron Units. For these
twelve blocks, Jharkhand recommended seven companies, Madhya Pradesh
recommended five, Maharashtra recommended ten and West Bengal recommended
one company. It is pertinent to notice that some of the companies like
Chaman Metallics Ltd., which was recommended by the Screening Committee for
Kosar Dongergaon block had no recommendation by the State Government
(Maharashtra). Similarly, Pushp Steel and Mining Ltd., which was
recommended for Brahmpuri block had no recommendation from the State
Government (Madhya Pradesh) and so also Kohinoor Steel (P) Ltd. for
Mednirai coal block had no recommendation from the State Government
(Jharkhand). The minutes do not disclose in what manner the merits of the
companies which were chosen for recommendation were determined. Even
particulars of the applicants individually are not noticed. There is no
indication at all in the minutes of 33rd meeting and 34th meeting or the
meeting held on 22.09.2006 when final decision that the conditions laid
down in the guidelines are met by these companies was taken. Twenty three
companies were recommended by the four State Governments while fifteen
companies were finally recommended for allocation by the Screening
Committee but the reasons therefor are not discernible at all. The minutes
also do not disclose the criterion which the Screening Committee applied in
selection of the fifteen companies and the reason for allocating twelve
blocks to fifteen companies. M/s. Grace Industries Limited was recommended
allocation of a coal block although that company had no
recommendation/categorization. It is true that the
recommendation/allocation made in favour of M/s. Grace Industries Limited
was subsequently withdrawn/de-allocated but that is altogether a different
matter.
147. In 2006, the Ministry of Coal invited applications for
allocation of 38 coal blocks, of which 15 were reserved for the power
sector. The advertisement indicated that preference will be accorded to
the power sector and steel sector. Within the power sector, it was
indicated that priority shall be accorded to projects with more than 500 MW
capacity. Similarly, in the steel sector, priority would be given to steel
plants with more than 1 million ton per annum capacity. In response to the
advertisement, more than 1400 applications were received for 38 coal
blocks.
148. The allocation of coal blocks earmarked for power generation
was considered by the Screening Committee in its 35th meeting which was
held on 20.06.2007 to 23.06.2007, 30.07.2007 and 13.09.2007. The coal
block that was numbered as one block in the advertisement was subsequently
considered as two blocks. Thus, 15 coal blocks, namely, Amarkonda -
Murgadangal, Ashok Karkata Central, Durgapur-II/Sariya, Durgapur-
II/Taraimar, Fatehpur, Fatehpur (East), Ganeshpur, Gourangdih ABC, Lohara
West & Lohara East, Mahuagarhi, Mandakini, Patal East, Rampia Dip Side of
Rampia, Sayang and Seregarha were considered. The status of geological
reserve of 15 blocks was indicated. The minutes? of the 35th meeting
briefly record the proceedings of the meeting held on 20.06.2007 to
23.06.2007, 30.07.2007 and 13.09.2007. The Screening Committee in that
meeting recommended to allocate all the 15 blocks reserved for power
sector, many of which were recommended jointly in favour of two or more
companies. The minutes do not contain the particulars showing
consideration of each application. They also do not disclose any
comparative assessment or evaluation of the applicant companies. In what
manner and for what reasons the companies were selected for recommendation
are neither disclosed nor are they discernible from the minutes. Though,
the guidelines± provide for norms for consideration for inter se priority
for allocation of a block among competing applicants for a captive block
but the minutes do not disclose at all how the norms for inter se priority
are met by the companies selected for recommendation by the Screening
Committee. Many of the companies selected by the Screening Committee had no
recommendation from the State Government or from the Ministry of Power and
CEA and some of them had no recommendation either from the State Government
or the Ministry of Power and CEA at all. For example, for Durgapur-
II/Taraimar, the selected company Balco had no recommendation at all from
the State Government, Ministry of Power and CEA. Although the group
company M/s. Vedanta Alumina Ltd. was recommended by Ministry of Power and
CEA, but it was not selected. Similarly, for Mandakini block, M/s. Tata
Power Company Ltd. had no recommendation from the State Government and
Ministry of Power and CEA. For Rampia and Dip Side of Rampia, Reliance
Energy Ltd. did not have any recommendation from the State Government,
Ministry of Power and CEA. For Fatehpur East, the selected company Visa
Power Ltd. had no recommendation from Ministry of Power and CEA. For
Fatehpur block, Prakash Industries Ltd. had neither recommendation from the
State Government nor from the Ministry of Power and CEA. The Screening
Committee, as a matter of fact, did not select eight companies which were
recommended by the Ministry of Power but selected eleven companies which
were not recommended by Ministry of Power. Though in additional counter
affidavit, some justification in this regard has been sought to be made but
we are afraid that the said justification hardly merits acceptance as the
minutes of the 35th meeting of the Screening Committee do not disclose
anything what is now stated in the additional counter affidavit. The eight
companies which were recommended by the Ministry of Power but not selected
by the Screening Committee are (1) M/s. Rashmi Cement Ltd.; (2) M/s. TRN
Energy Pvt. Ltd.; (3) M/s. Maithon Power Ltd.; (4) M/s. Mahavir Global Coal
Ltd.; (5) M/s. Rosa Power Supply Ltd.; (6) M/s. Bhushan Energy; (7) M/s.
Lanco Amarkantak Power Ltd. and (8) M/s. Vedanta Alumina Ltd. The minutes
do not disclose any reason at all for not selecting these companies which
were recommended by the Ministry of Power. The eleven companies which were
not recommended by the Ministry of Power and selected by the Screening
Committee are (1) M/s. Tata Power Company Ltd.; (2) M/s. Reliance Energy
Ltd.; (3) M/s. Balco; (4) M/s. SKS Ispat and Power Ltd.; (5) M/s. Prakash
Industries Ltd.; (6) M/s. Green Infrastructure Pvt. Ltd.; (7) M/s. Visa
Power Ltd.; (8) M/s. Vandana Vidyut Energy Ltd.; (9) M/s. GVK (Govindwal
Sahib) Ltd.; (10) M/s. Gagan Sponge Iron Pvt. Ltd.; and (11) M/s. Lanco
Group Ltd. The reasons for selecting above eleven companies which were not
recommended by the Ministry of Power are neither disclosed nor discernible.
149. In the 36th meeting, which was held on 07.12.2007-08.12.2007,
07.02.2008-08.02.2008 and 03.07.2008, the Screening Committee considered
allocation of 23 coal blocks earmarked for non-power sector. For these 23
coal blocks earmarked for non-power sector, 674 applications were submitted
by 184 companies for allocation. Some companies had applied for more than
one block and some had submitted more than one application for single block
for different end use plants located at different locations. The
geological reserve of 23 blocks?? was noted by the Screening Committee.
The minutes of the 36th meeting show that the Committee decided to
recommend blocks earmarked for pig iron (coking coal) jointly to two or
more than two companies and nineteen blocks earmarked for other end-
uses/non-cooking coal were recommended for allocation to single companies
as well as jointly to two or more companies. The minutes of 36th meeting
do not contain the particulars showing consideration of each application.
There is no assessment of comparative merits of the applicants who were
selected for recommendation. The minutes do not disclose how and in what
manner the selected companies meet the norms fixed for inter se priority.
Many of the selected companies were neither recommended by the State
Government nor by the Administrative Ministry. Some of them were
recommended by the State Government but not recommended by the
Administrative Ministry while one of them was not recommended by the State
Government but recommended by the Administrative Ministry. For Rajhara
North (Central & Eastern) coal block, Vini Iron & Steel Udyog Ltd. had no
recommendation by the State Government or by the Administrative Ministry.
Similarly, for Thesgora-B/Rudrapuri coal block, Revati Cement P. Ltd. did
not have recommendation either from the State Government or from the
Administrative Ministry. As regards Tandsi-III and Tandsi-III (Extn.),
Mideast Integrated Steels Ltd. did not have recommendation from the State
Government. Similarly, as regards Thesgora-B/Rudrapuri, Kamal Sponge Steel
& Power Limited had no recommendation from the State Government. As
regards Moira Madhujore coal block, Ramswarup Lohh Udyog Ltd. had no
recommendation from the Administrative Ministry.
150. From the above discussion, it is clear that 21 coal blocks
stood allocated to private companies in pursuance of Screening Committee’s
recommendations during the period from the 1st meeting held on 14.07.1993
till the 21st meeting held on 19.08.2003. For the period from 04.11.2003
(22nd meeting) to 18.10.2005 (30th meeting) in pursuance of Screening
Committee’s recommendations, 26 coal blocks stood allocated to private
companies. Following 32nd meeting held on 29.06.2006/30.06.2006 till the
34th meeting on 07.09.2006/08.09.2006, in pursuance of the recommendations
made by the Screening Committee, two coking coal blocks were allocated to
private companies and twelve non-coking coal blocks were allocated to
private companies. In pursuance of the recommendations made by the
Screening Committee in 35th and 36th meetings, 33 coal blocks were
allocated to private companies. Some of the coal block allocations made to
the private companies have been de-allocated from time to time. For
consideration of legality and validity of allocations made to such
companies, it is not necessary to deal with de-allocation aspect. It needs
no emphasis that assuming that the Central Government had power of
allocation of coal blocks yet such power should have been exercised in a
fair, transparent and non-arbitrary manner. However, the allocation of
coal blocks to the private companies pursuant to the recommendations made
by the Screening Committee in 36 meetings suffers from diverse infirmities
and flaws which may be summarized as follows:
1st Meeting to 21st Meeting
1. The guidelines framed and applied by the Screening Committee
for the period from 14.07.1993 (1st meeting) to 19.08.2003 (21st meeting)
are conspicuously silent about inter se priority between the applicants for
the same block. As a matter of fact, for the 21 coal blocks allocated to
private companies in pursuance of Screening Committee’s recommendation
during the first period, inter se priority or merit of the applicants for
the same block had not at all been determined.
2. The guidelines do not contain any objective criterion for
determining the merits of the applicants. The guidelines do not provide
for measures to prevent any unfair distribution of coal in the hands of few
private companies. As a matter of fact, no consistent or uniform norms
were applied by the Screening Committee to ensure that there was no unfair
distribution of coal in the hands of the applicants.
3. The Screening Committee simply relied upon the information
supplied by the applicants without laying down any method to verify
applicant’s experience in the end-use project for which allocation of coal
block was sought. The guidelines also do not lay down any method to allot
coal blocks as per the end-use projects coal requirement.
4. The Screening Committee kept on varying the guidelines from
meeting to meeting. It failed to adhere to any transparent system.
5. No applications were invited through advertisement and thus the
exercise of allocation denied level playing field, healthy competition and
equitable treatment.
6. Certain coal blocks which did not fit into the criteria of
captive blocks were decided to be allocated by applying peculiar approach
that the reserves could either be permitted to be explored by a private
party or lost forever. For example, Brahmadiha block was allocated to M/s.
Castron Technology pursuant to the recommendations made by the Screening
Committee in the 14th meeting.
7. If a certain party requested for a particular block, it was so
recommended without objectively considering the merit of such request. For
example, in the 14th meeting, the proposal of M/s. Monnet Ispat Ltd. for a
new Sponge Iron plant in Keonjhar area of Orissa of 1.2 million tonnes of
capacity for which the requirement of 2.2 m.t. of raw coal has been
indicated, was discussed. The party requested for Utkal-B2 block in
Talcher coalfield having 106 m.t. of reserves. CMD, MCL was of the view
that Chendipada block is likely to have better grade of coal and suggested
to the party for preference of Utkal B-2 block. However, the party
insisted for Utkal B-2 block and the same was allotted. Similarly, as
regards the proposal of M/s. Jayaswal Neco Ltd. for their Sponge Iron
Plant, the party had earlier requested for Gare-Palma IV/6 and IV/7 blocks
for meeting their requirement of 1 m.t. Sponge Iron Plant and a captive
power plant. Then they requested for allocation of Gare-Palma IV/4 and
IV/8 blocks. On the representation made by the representative of the party
that 125 m.t. of reserves in Gare-Palma IV/4 block will be adequate for
meeting the requirement of their Sponge Iron Plant for a period of 30 years
and 91 m.t. of reserves in Gare-Palma IV/8 block will be adequate for 30
years life of the proposed CPP, the Screening Committee recommended
allocation of Gare-Palma IV/4 and IV/8 blocks to M/s. Jayaswal Neco Ltd.
The representation made by the party was accepted as it is without any
verification.
8. Certain blocks with coal reserves on the higher side were
recommended to the companies with lower requirement. There were no steps
or measures taken to prevent possible misuse of end-use project of private
companies. For example, M/s. Prakash Industries Limited, being a BIFR
company, was denied coal block earlier. However, the Screening Committee
recommended Chotia I and II coal blocks to M/s. Prakash Industries Limited
in 2003 for its proposed expansion project of 0.4 MTPA Sponge Iron though
the company was having capacity of only 0.3 MTPA.
9. Some coal blocks which were already identified for development
by CIL were offered to the private companies and some of the blocks which
were close to the projects of CIL were, in fact, recommended for allocation
and ultimately allocated. This was clearly in breach of the guidelines for
selection of captive blocks.
22nd Meeting to 30th Meeting
10. With regard to allocation of coal blocks to private companies
pursuant to its 22nd meeting to 30th meeting held between 04.11.2003 and
18.10.2005, the guidelines do not lay down any criteria for evaluating the
comparative merits of the applicants. The consideration had been ad-hoc in
so much so that in every meeting, the guidelines were altered.
11. In the 24th meeting held on 09.12.2004, the Screening Committee
altered the norms by shifting insistence on achieving financial closure of
the end-use projects to some appropriate stage after the mining plan
approval. Except mentioning the particulars of each applicants, the
minutes do not show that there was any application of mind by the Screening
Committee. How the guidelines are met by the recommended companies has not
been discussed.
12. In the 25th meeting held on 10.01.2005, the Screening Committee
considered allocation of 5 coal blocks in the MCL area. The size of these
blocks was large as compared to the requirement of the applicants. The
rules of game were changed to adjust large number of applicants whose
applications would have been otherwise rejected as their coal requirement
was far less than the coal available in the coal blocks. However, in order
to accommodate these applicants, a novel idea of choosing a leader company
and associate companies was evolved though such procedure is apparently in
contravention of the statutory provision contained in Section 3(3)(a)(iii)
of the CMN Act.
13. The merits of the companies, who were recommended for selection
and those companies whose applications were rejected were not comparatively
assessed.
14. While considering allocation for 5 blocks in SECL area in the
26th meeting, despite the revelation by the Ministry of Steel that number
of companies have in their presentations mentioned the capacity of the end-
use plants in excess of what has been recommended by the Ministry and the
concern expressed by the representative of the State Government that the
ground realities of the project needed to be verified and the capacities of
the end-use plants and coal requirements of such projects are required to
be confirmed, the Screening Committee proceeded to list out the possible
leaders without assessing the capacities of coal requirements of these
companies.
15. The minutes of the 27th and 28th meetings also do not show that
the assessment of comparative merits of the applicants was done. The
Screening Committee continued with consortium / leader and associate
approach which, as noted above, was in contravention of Section
3(3)(a)(iii) of the CMN Act. Even in case of a certain company, where
recommendation of the Administrative Ministry was contrary to the
recommendation of the State Government, yet the recommendation was made by
the Screening Committee that led to allocation on the basis of State
Government’s recommendation. The Screening Committee even decided to club
the blocks and recommended allotment of such combined block to two
companies jointly.
16. The consideration has been absolutely ad-hoc and without even
knowing how much surplus will remain, the company so chosen was asked to
select another allottee for surplus, if any. This is seen from the minutes
of the 30th meeting. In the 30th meeting, the Screening Committee also
recommended allocation of Dumri coal block although north portion of that
block remained unexplored and the unexplored portion had superior grade of
coal.
17. The policy of pick and choose was adopted. The application of
norms was changed from meeting to meeting with no uniform or consistent
consideration.
18. Certain companies which did not come for presentation were also
considered but how and in what manner the applications of those companies
were considered is not discernible. Why the chosen companies have been
preferred over the others is also not discernible.
32nd Meeting to 36th Meeting
19. The minutes of the 32nd meeting do not show the reasons for
recommending three blocks jointly in favour of more than one company.
20. Some of the companies which had no recommendation by the State
Government were recommended by the Screening Committee. The minutes of the
33rd and 34th meeting do not show in what manner the merits of the
companies which were chosen for recommendation were determined. The
minutes of the 33rd and 34th meeting even do not note the particulars of
the applicants individually. The criterion which the Screening Committee
applied in the selection of 15 companies and the reasons for allocating 12
blocks to these companies are not discernible.
21. A certain company which has no recommendation/categorisation
was also recommended for allocation and ultimately allocation was made.
The recommendation to allocate 15 blocks reserved for power sector by the
Screening Committee in its 35th meeting does not contain the particulars
showing consideration of each application. Though, at that time, the
guidelines provided for norms for consideration of inter se priority for
allocation of a block among competing applicants for a captive block, but
the minutes do not at all disclose how the norms for inter se priority are
met by the company selected for recommendation by the Screening Committee.
Many of the companies selected by the Screening Committee had no
recommendation from the State Government or from the Ministry of Power and
CEA and some of them had no recommendation from the State Government,
Ministry of Power and CEA at all. As many as eight companies which were
recommended by the Ministry of Power were not recommended by the Screening
Committee while eleven companies which were not recommended by the Ministry
of Power were recommended by the Screening Committee.
22. The minutes of the 36th meeting do not contain the particulars
showing consideration of each application for allocation of 23 coal blocks
earmarked for non-power sector. There is nothing in the minutes to
indicate how and in what manner the selected companies meet the norms fixed
for inter se priority. Many of the selected companies were neither
recommended by the State Government nor by the Administrative Ministry.
Some of them were recommended by the State Government but not recommended
by the Administrative Ministry while one of them was not recommended by the
State Government but recommended by the Administrative Ministry. Many
companies which had failed to secure allocations earlier yet they were
recommended. The Screening Committee failed to consider capability and
capacity of the applicant in implementing the projects.
151. The entire exercise of allocation through Screening Committee
route thus appears to suffer from the vice of arbitrariness and not
following any objective criteria in determining as to who is to be selected
or who is not to be selected. There is no evaluation of merit and no inter
se comparison of the applicants. No chart of evaluation was prepared. The
determination of the Screening Committee is apparently subjective as the
minutes of the Screening Committee meetings do not show that selection was
made after proper assessment. The project preparedness, track record etc.,
of the applicant company were not objectively kept in view. Until the
amendment was brought in Section 3(3) of the CMN Act w.e.f. 09.06.1993, the
Central Government alone was permitted to mine coal through its companies
with the limited exception of private companies engaged in the production
of iron and steel. By virtue of the bar contained in Section 3(3) of the
CMN Act, between 1976 and 1993, no private company (other than the company
engaged in the production of iron and steel) could have carried out coal
mining operations in India. Section 3(3) of the CMN Act, which was amended
on 09.06.1993 permitted private sector entry in coal mining operations for
captive use. The power for grant of captive coal block is governed by
Section 3(3)(a) of the CMN Act, according to which, only two kind of
entities, namely, (a) Central Government or undertakings/corporations owned
by the Central Government; or (b) companies having end-use plants in iron
and steel, power, washing of coal or cement can carry out coal mining
operations. The expression “engaged in” in Section 3(3)(a)(iii) means that
the company that was applying for the coal block must have set up an iron
and steel plant, power plant or cement plant and be engaged in the
production of steel, power or cement. The prospective engagement by a
private company in the production of steel, power or cement would not
entitle such private company to carry out coal mining operation. Most of
the companies, which have been allocated coal blocks, were not engaged in
the production of steel, power or cement at the time of allocation nor in
the applications made by them any disclosure was made whether or not the
power, steel or cement plant was operational. They only stated that they
proposed to set up such plants. Thus, the requirement of end-use project
was not met at the time of allocation.
152. It is pertinent to note here the stand of Maharashtra.
According to Maharashtra, the allocation of coal blocks by the Screening
Committee meant that the benefits of the differential in price of coal, as
the case may be, would accrue to the allottee of the coal block. The
differential in price would not necessarily be passed to the public as the
price of the final product of the company is determined by import parity
price in case of steel companies, competitive market price in case of
cement companies (many may not have access to captive coal) and the price
of power on an exchange or in bids by State utilities irrespective of
source of fuel. No material has been placed by the Central Government
which may rebut the Maharashtra’s stand.
153. The challenge has also been laid to the legality of the
allocations made to the State/State PSUs through the Screening Committee
route as well as Government dispensation route. It is not in dispute that
the Screening Committee has recommended allocation of coal blocks to 29
State Government PSUs while through Government dispensation route
allocation has been recommended for 72 PSUs. The question that requires
consideration is whether commercial mining operation can be carried on by
the State or State PSUs. The answer has to be found out from the statutory
provisions. By virtue of Section 3 of the CMN Act, as was originally
enacted, on and from the appointed day, the right, title and interest of
the owners in relation to the coal mines specified in the Schedule stood
transferred to and vested absolutely in the Central Government free from
all encumbrances. This provision further provides that if after the
appointed day, the existence of any other coal mine comes to the knowledge
of the Central Government, the provisions of the Coal Mines Management Act
shall apply until that mine is nationalized by an appropriate legislation.
Section 3 of the CMN Act was amended by the 1976 Nationalisation Amendment
Act whereby sub-sections (3) and (4) of Section 3 were inserted. Along
with this, Section 1A was also inserted in the CMN Act. By sub-section (3)
of Section 3, it is provided that on and from the commencement of amendment
in Section 3, no person other than the Central Government or a Government
company or a corporation owned, managed or controlled by the Central
Government or a person to whom the sub-lease has been granted by any such
Government, Government company or corporation or a company engaged in the
production of iron and steel shall carry on coal mining operation in any
form. Clause (b) of sub-section (3) also provides for termination of all
mining leases and sub-leases for winning or mining of coal except the
mining leases granted before such commencement in favour of the Government,
Government company or corporation and any sub-lease granted by any such
Government, Government company or corporation. Clause (c) of sub-section
(3) of Section 3 prohibits grant of lease for winning or mining coal in
favour of any person other than the Government, Government company or
corporation referred to in clause (a) thereof. But this prohibition is
subject to only one exception inasmuch as the Government, company or
corporation owned, managed or controlled by the Central Government may
grant a sub-lease to any person in any area on such terms and conditions as
may be specified in the instrument granting sub-lease provided the reserves
of coal in the area are in isolated small pockets or are not sufficient for
scientific and economical development in a coordinated and integrated
manner and the coal produced by the sub-lessee will not be required to be
transported by rail. Section 3(3)(a)(i) thus provides that only Central
Government or a Government company (Central PSU or a corporation owned or
managed by the Central Government) can carry on mining operations in India
in any form. In other words, commercial mining cannot be carried on by
the State Government or the State PSU. The expression “Government company
or a corporation owned, managed or controlled by the Central Government”
means Government of India Public Undertaking. It does not include State
Government Public Sector Undertaking. This is fortified by Section 3(4),
Section 4 and Sections 5, 6 and 7. The mining leases and sub-leases which
were terminated under Section 3(3)(b) were available only to the Central
Government or for that matter, the Government company or a corporation
owned, managed and controlled by the Central Government. The State
Government or State Public Sector Undertakings became entitled to obtain
sub-lease of reserves of coal in isolated small pockets under clauses (i)
and (ii) of proviso to Section 3(3)(c). It is pertinent to notice here
that Circular dated 30.07.1979 records the correct position of legislative
policy articulated in the CMN Act under which only the Central Government
Public Undertakings have been permitted to carry on coal mining operations
in the country. After the amendment was carried out in the CMN Act, the
circular states that while continuing the existing policy of the Central
Government carrying out coal mining operations by its own undertakings, the
State Governments might also be allowed to carry out coal mining operations
in isolated small pockets subject to the conditions set out therein. The
“isolated small pockets” are those which are away from the main coalfields
and have limited known reserves which are not sufficient for scientific and
economic development in a coordinated and integrated manner and the coal
produced from such areas would mainly be utilized for local consumption
without transportation by railways. However, almost after 22 years, vide
Circular dated 12.12.2001, the Central Government, reviewing its earlier
policy, allowed the State Government companies or undertakings to do mining
of coking and non-coking coal or lignite reserves either by opencast or
underground method, anywhere in the country, subject to the conditions set
out therein. Under the revised policy, the State Government
company/undertaking was permitted to mine non-coking coal and coking coal
reserves or lignite by opencast/underground method without the restriction
of “isolated small pockets”. Having carefully examined the Circular dated
12.12.2001, in light of the provisions of the CMN Act, as amended in 1976,
it appears to us that the circular is not in conformity with the provisions
of the CMN Act and, consequently, has no legal sanction. CMN Act and
further amendments therein carried out in 1976 do not allow State
Government or State PSUs to mine coal for commercial use. The problem
seems to have arisen because of the 2001 circular which permits the State
Government companies or undertakings to do mining of coking and non-coking
coal reserves but, as noted above, the legislative policy in the CMN Act
does not permit that. 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, as amended from time to time. Moreover, the
State PSUs, besides having been allocated coal mines for commercial
purpose, have also been allowed to form joint venture companies, i.e., 51%
shareholding of State PSUs and 49% of private company. However, in the
joint venture agreements between the State PSUs and the private companies,
mining operations have been given to private company. For example, the
notice inviting offer dated 02.07.2008 issued by Chhattisgarh Mineral
Development Corporation (CMDC) for selection of partner for formation of a
joint venture company for exploration, development, mining and marketing of
coal from coal blocks provided that the Joint Venture Company (JVC) to be
formed by CMDC and the selected offerers / bidder will explore, develop and
operate such coal deposits and the coal produced by JVC will be sold
commercially to various consumers in the open market. CMDC was allocated
Sondiha coal block and coal blocks Bhatgaon-II and Bhatgaon-II (Extension).
Similarly, the Joint Venture Agreement between the Madhya Pradesh State
Mining Corporation Limited and Monnet Ispat and Energy Limited reveals that
Joint Venture Company has been further allowed to enter into Mine
Development Operation Agreements with other private partner or sister
concern. This modus operandi has virtually defeated the legislative policy
in the CMN Act and winning and mining of coal mines has resultantly gone in
the hands of private companies for commercial use. As indicated above, by
1976 amendment in the CMN Act, other than the Central Government or Central
Government undertakings, a company engaged in the production of iron and
steel was permitted to carry on coal mining operations in any form. By
subsequent amendments in Section 3 of the CMN Act, besides a company
engaged in the production of iron and steel, a company engaged in
generation of power or a company engaged in washing of coal obtained from a
mine or such other end-use, as the Central Government may by notification
specify, no other company can “carry on mining operation in coal”.
Allocation of coal blocks to the State PSUs which ultimately on getting
mining leases may enable them to win or mine coal commercially is clearly
in breach of the provisions of the CMN Act.
154. To sum up, the entire allocation of coal block as per
recommendations made by the Screening Committee from 14.07.1993 in 36
meetings and the allocation through the Government dispensation route
suffers from the vice of arbitrariness and legal flaws. The Screening
Committee has never been consistent, it has not been transparent, there is
no proper application of mind, it has acted on no material in many cases,
relevant factors have seldom been its guiding factors, there was no
transparency and guidelines have seldom guided it. On many occasions,
guidelines have been honoured more in their breach. There was no objective
criteria, nay, no criteria for evaluation of comparative merits. The
approach had been ad-hoc and casual. There was no fair and transparent
procedure, all resulting in unfair distribution of the national wealth.
Common good and public interest have, thus, suffered heavily. Hence, the
allocation of coal blocks based on the recommendations made in all the 36
meetings of the Screening Committee is illegal.
155. The allocation of coal blocks through Government dispensation
route, however laudable the object may be, also is illegal since it is
impermissible as per the scheme of the CMN Act. No State Government or
public sector undertakings of the State Governments are eligible for mining
coal for commercial use. Since allocation of coal is permissible only to
those categories under Section 3(3) and (4), the joint venture arrangement
with ineligible firms is also impermissible. Equally, there is also no
question of any consortium / leader / association in allocation. Only an
undertaking satisfying the eligibility criteria referred to in Section 3(3)
of the CMN Act, viz., which has a unit engaged in the production of iron
and steel and generation of power, washing of coal obtained from mine or
production of cement, is entitled to the allocation in addition to Central
Government, a Central Government company or a Central Government
corporation.
156. In this context, it is worthwhile to note that the 1957 Act has
been amended introducing Section 11-A w.e.f. 13.02.2012. As per the said
amendment, the grant of reconnaissance permit or prospecting licence or
mining lease in respect of an area containing coal or lignite can be made
only through selection through auction by competitive bidding even among
the eligible entities under Section 3(3)(a)(iii), referred to above.
However, Government companies, Government corporations or companies or
corporations, which have been awarded power projects on the basis of
competitive bids for tariff (including Ultra Mega Power Projects) have been
exempted of allocation in favour of them is not meant to be through the
competitive bidding process.
157. As we have already found that the allocations made, both under
the Screening Committee route and the Government dispensation route, are
arbitrary and illegal, 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.
158. By way of footnote, it may be clarified and we do, that no
challenge was laid before us in respect of blocks where competitive bidding
was held for the lowest tariff for power for Ultra Mega Power Projects
(UMPPs). As a matter of fact, Mr. Prashant Bhushan, learned counsel for
Common Cause submitted that since allocation for UMPPs is in accord with
the opinion given in Natural Resources Allocation Reference20 and the
benefit of the coal block is passed on to the public, the said allocations
may not be cancelled. However, he submitted that in some cases the
Government has allowed diversion of coal from UMPP to other end uses i.e.
for commercial exploitation. Having regard to this, it is directed that
the coal blocks allocated for UMPP would only be used for UMPP and no
diversion of coal for commercial exploitation would be permitted.
….………..……………………CJI.
(R.M. Lodha)
…….………..……………………J.
(Madan B. Lokur)
…….………..……………………J. (Kurian Joseph)
NEW DELHI;
AUGUST 25, 2014.
-----------------------
[1] “3(a) "minerals” includes all minerals except mineral oils;
(c) "mining lease” means a lease granted for the purpose of
undertaking mining operations, and includes a sub-lease granted for such
purpose;
(d) “mining operations" means any operations undertaken for the
purpose of winning any mineral;
(e) "minor minerals" means building stones, gravel, ordinary clay,
ordinary sand other than sand used for prescribed purposes, and any other
mineral which the Central Government may, by notification in the Official
Gazette, declare to be a minor mineral;
(f) "prescribed" means prescribed by rules made under this Act;
(g) "prospecting licence" means a licence granted for the purpose of
undertaking prospecting operations;
(h)"prospecting operations" means any operations undertaken for the
purpose of exploring, locating or proving mineral deposit;”
[2] Monnet Ispat and Energy Ltd. v. Union of India and Ors.; [(2012) 11
SCC 1]
[3] Baijnath Kadio v. State of Bihar; [(1969) 3 SCC 838]
[4] Hingir-Rampur Coal Co. Ltd. v. State of Orissa; [AIR 1961 SC 459:
(1961) 2 SCR 537]
[5] State of Orissa v. M.A. Tulloch and Co.; [AIR 1964 SC 1284 : (1964)
4 SCR 461]
[6] Sandur Manganese and Iron Ores Ltd. v. State of Karnataka; [(2010)
13 SCC 1]
[7] State of Assam v. Om Prakash Mehta; [(1973) 1 SCC 584]
[8] Orissa Cement Ltd. v. State of Orissa; [1991 Supp. (1) SCC 430]
[9] Nazir Ahmad v. King Emperor; [(1935-36) 63 IA 372]
[10] Tara Prasad Singh and others v. Union of India and others; [(1980) 4
SCC 179]
[11] Desh Bandhu Gupta and Co. v.Delhi Stock Exchange Association Ltd.;
[(1979) 4 SCC 565]
[12] Baleshwar Bagarti v. Bhagirathi Dass; [ILR 35 Calcutta 701]
[13] Mathura Mohan Saha v. Ram Kumar Saha; [ILR 43 Calcutta 790]
[14] . NO.13011/3/92-CA
Government of India
Ministry of Coal
New Delhi, the 14th July, 1992.
OFFICE MEMORANDUM
Subject: Constitution of a Screening Committee for screening
proposals received for captive mining by private power generation
companies.
In the context of participation of private power generating companies
in power generation, proposals are also being received in the Ministry of
Coal from such companies requesting for ownership and operation of captive
coal mines. For screening of such applications/ proposals it has been
decided to constitute a Screening Committee comprising of the following
members:-
1. Additional Secretary, Ministry of Coal - Chairman
2. Adviser (Projects), Ministry of Coal - Member-
Convenor
3. Joint Secretary & Financial Adviser,
Ministry of Coal. - Member
4. Representative of Ministry of Railways - Member
5. Representative of Ministry of Power - Member
6. Representative of concerned
State Govt. (Revenue Deptt.) - Member
The Committee will meet once in a month and examine the proposals
received from various parties.
(S. KRISHNAN)
UNDER SECY. TO THE GOVERNMENT OF INDIA
[15] . NO.13011/3/92-CA
Government of India
Ministry of Coal
New Delhi, the 5th August, 93.
OFFICE MEMORANDUM
Subject: Constitution of a Screening Committee
for screening
proposals received for captive mining by private power generation
companies
– Matter regarding.
In continuation of this Ministry’s Office Memorandum of even number
dated 14.7.1992 constituting a Screening Committee for screening proposals
received for captive mining by private sector power generation companies,
it has been decided to revise partially the composition of the said
Screening Committee as under:-
1. Additional Secretary, - Chairman
Ministry of Coal, New Delhi.
2. Adviser (Project) - Member-convenor
Ministry of Coal, New Delhi.
3. JS & FA, - Member
Ministry of Coal, New Delhi.
4. Representative of Ministry - Member
of Railways, New Delhi.
5. Representative of Ministry - Member
of Power, New Delhi.
6. Representative of concerned - Member
State Govt. (Revenue Deptt.)
7. Director (Technical) CIL, - Member
Calcutta.
8. Chairman/Managing Director – - Member
CMPDIL, Ranchi.
9. CMD/ of concerned subsidiary - Member.
Companies of CIL.
(J.L. MEENA)
DEPUTY SECY. TO THE GOVERNMENT OF INDIA
[16] . No.47011/15/95-CPAM
Government of India
Ministry of Mines and Minerals
Department of Coal
New Delhi, the 10th January, 2000
Office Memorandum
Subject: Constitution of a Screening Committee for screening
proposals received for captive mining by companies engaged in the
generation of power and manufacture of iron, steel and cement.
The undersigned is directed to refer to this Ministry of O.M.
No.13011/3/92-CA dated 14.7.1992 and 5.8.1993 and No.47011/15/95-CPAM dated
26/28.10.1999 and to say that instead of Joint Secretary & Financial
Adviser, Deptt. Of Coal, Joint Secretary (Coal), Deptt. Of Coal will be
member of the Screening Committee. Accordingly, Screening Committee for
screening proposals for allocation of coal/ lignite blocks for manufacture
of iron/ steel captive production of power and production of cement in the
public / private sector is reconstituted as under:-
1. Additional Secretary, - Chairman
Department of Coal
2. Adviser (Projects) - Member - Convenor
Department of Coal
3. Joint Secretary (Coal) - Member
Department of Coal
4. Joint Secretary (LA) - Member
Department of Coal
5. Representative of Ministry of Railways, - Member
New Delhi,
6. Representative of Ministry of Power, - Member
New Delhi.
7. Representative of concerned State - Member
Govt. (Revenue Deptt.)
8. Director (Technical), CIL, Calcutta - Member
9. Chairman-cum-Managing Director, - Member
CMPDIL, Ranchi
10.CMD of concerned subsidiary company - Member
Of CIL/NLC
(T.K. Ghosh)
Director
[17] . No.13011/5/2003-CA
Government of India
Ministry of Coal
New Delhi, dated 17.4.2003
Office Memorandum
Subject:- Reconstitution of a Screening Committee for screening
proposals received for captive mining by companies engaged in the
generation of power and manufacture of iron, steel and cement.
The undersigned is directed to refer to this Ministry’s O.M.
No.13011/3/92-CA dated 14.7.1992 and 5.8.1993 and No. 47011/15/95-CPAM
dated 10.1.2000 and to state that from the date of issuance of this O.M.
the Screening Committee shall be headed by Secretary, Ministry of Coal and
Joint Secretary (Coal), Ministry of Coal shall be the member convenor.
Accordingly, Screening Committee for screening proposals for allocation of
coal / lignite blocks for generation of power and manufacture of iron,
steel and cement in the public/ private sector is reconstituted as under:-
1.Secretary
Ministry of CoalChairman2.Joint Secretary (Coal)
Ministry of CoalMember – Convenor3.Adviser (Projects)
Ministry of CoalMember4.Joint Secretary (LA)
Ministry of CoalMember5.Representative of Ministry of Railways, New
Delhi.Member6.Representative of Ministry of Power, New
DelhiMember7.Representative of concerned State Govt.Member8.Director
(Technical), CIL, CalcuttaMember9.Chairman-cum-Managing Director, CMPDIL,
RanchiMember10.CMD of concerned subsidiary company of CIL/NLCMember
(S. Gulati)
Director
[18] . No.13016/35/2005-CA-I
Government of India
Ministry of Coal
New Delhi, the 26th September, 2005
OFFICE MEMORANDUM
Subject: Reconstitution of Screening Committee for screening
proposals received from companies engaged in the generation of power and
manufacture of iron, steel and cement for allocation of coal blocks.
The undersigned is director to refer to this Ministry’s O.M.
No.13011/5/2003-CA dated 17.4.2003 and corrigendum No.13011/5/2003-CA
issued on 7.5.2003 and the O.M. of even no. dated 2.9.2003 on the subject
mentioned above and to state that from the date of issuance of this O.M.,
the following shall be the member of the Screening Committee in addition to
the existing members of the Committee:-
Secretary, or his representative, of Ministry of Environment &
Forests.
(S.Gulati)
Director.
[19] Centre for Public Interest Litigation & Ors. v. Union of India &
Ors.; [(2012) 3 SCC 1]
[20] Natural Resources Allocation, In re, Special Reference No.1 of 2012;
[(2012) 10 SCC 1]
[21] Kasturi Lal Lakshmi Reddy & Ors. v. State of J&K & Anr.; [(1980) 4
SCC 1]
[22] Sachidanand Pandey & Anr. v. State of West Bengal & Ors.; [(1987) 2
SCC 295]
[23] Haji T.M. Hassan Rawther v. Kerala Financial Corporation; [(1988) 1
SCC 166]
[24] M.P. Oil Extraction & Anr. v. State of M.P. & Ors.; [(1997) 7 SCC
592]
[25] Netai Bag & Ors. v. State of West Bengal & Ors.; [(2000) 8 SCC 262]
[26] Villianur Iyarkkai Padukappu Maiyam v. Union of India & Ors.;
[(2009) 7 SCC 561]
[27] R.K. Garg v. Union of India & Ors.; [(1981) 4 SCC 675]
[28] D.K. Trivedi & Sons & Ors. v. State of Gujarat & Ors.; [1986 Supp
SCC 20]
[29] Goa Foundation v. Union of India and Others; [(2014) 6 SCC 590]
* ………The sizes of blocks in terms of reserves are large and the
individual requirements of the sponge iron/steel producers were
comparatively smaller. All the meritorious applicants deserve to be given
captive coal.
In order to accommodate all the meritorious and deserving cases,
these blocks would need to be sub-divided which would result in enormous
loss of coal between barriers because of statutory and practical mining
conditions. Therefore, to sub-block the larger blocks as an alternative for
accommodating all the deserving cases had to be ruled out. The second
alternative was of grouping the deserving cases, so that they can form a
joint venture company, an SPV for mining of coal and carry out the coal
mining jointly in the allocated block. This alternative was also presented
to the applicant companies, but most of them had expressed reservations on
grounds like cultural and administrative differences among the constituents
of the joint venture company, inherently because they were competitors,
the joint venture company would be off balance-sheet and may not attract
sufficient lending, there could be intersee slippages in development of the
end-use projects and injection of equity by the constituents which could
jeopardize the mining project and would not lead to production at an early
stage. A number of other similar objections to the formation of joint
venture company or mining through SPV were put forward by a number of
applicants. This alternative also, therefore, had to be left alone. It
was then discussed that for each natural block, one applicant company who
had the highest stake and which was likely to take up proper mining at the
earliest, could be designated the Leader company and allocated a captive
block and a group of other meritorious companies could be nominated as
associated companies for supply of coal by the leader company to these
designated associates. The amount of coal to be supplied by the leader
company to the associate company would have a ceiling determined by the
assessed requirement of the associate company, after deducting the linked
quantum of coal given by CIL/its subsidiaries. The leader company would
commit to supply the ceiling amount of coal to the associate company
depending upon its requirements i.e. as and when the plant of the associate
company comes up, its requirements would be met upto the level of ceiling
quantum by the leader company. The yearly percentage of satisfaction
through this supply would be in the same proportion as the rated production
capacity of the mine, to be approved during the mining plan, to the total
of the assessed requirements of the leader (after fully protecting earlier
allocation, if any) and the associated companies attached to a coal block.
In the alternative, this supply of coal from the leader company to the
associated companies could be done through MCL also where depending on the
actual requirement of the associate company, subject to the ceiling, MCL
would add service charge, gather coal from the leader company and supply
the same to the associate company. In either of these cases, coal would be
transferred from the leader company to the associate company at
administratively determined transfer price and not at any free market price
or notified price of CIL, as this arrangement is in lieu of giving coal
blocks to the associate companies and their taking up captive mining
themselves. This administrative transfer price would be determined by
Ministry of Coal through its sub-committee headed by Addl. Secretary
(Coal). Having decided as above, the Screening Committee proceeded to
select the leader and the associate companies.
…….To sum up, the following companies were found deserving of
allocation of coal blocks alongwith their status:
Block Name of the Company Status
Utkal A To be merged with Gopalprasad for
Mining by MCL as one mine or by
Jindal Thermal Power Ltd./
Jindal Vijayanagar Ltd. and include
Jindal Stainless Steel Ltd. as a linked
Consumer
or an associate. Final decision and details
to be taken up in the Ministry of Coal.
Talabira II NLC
Priority linkage to be given for supply of
coal
to companies to be worked out in the Ministry
of Coal so that their yearly satisfaction
level
based on their assessed requirement after
adjusting the linkage is about equal to
those companies in the other blocks.
Bijahan Bhushan Limited Leader
Company
Associate companies to be worked out in the
Ministry of Coal
so that their yearly satisfaction level based on their assessed
requirement after adjusting the linkages is about equal to the
associate companies in the other block.
Radhikapur Rungta Mines Leader
Company
(West)
Associate companies to be worked out in the
Ministry of Coal, so that their yearly
satisfaction level based on their assessed requirement after
adjusting the linkages is about equal to the associate companies in
the
other block.
Radhikapur Tata Sponge Iron Ltd.
Leader Company
(East)
Associate companies to be worked out in the
Ministry of Coal, so that their yearly
satisfaction level based on their assessed requirement after
adjusting the linkages is about equal to the associate companies in
the
other block.
To the extent possible, linkaged/associate companies would be grouped
in the blocks sought by them.
Following companies were considered to be included as associate
companies or for linkages:
1) Jindal Stainless Steel Ltd.
2) Orissa Sponge Iron Ltd.
3) SMC Power Generation Ltd.
4) OCL India Limited
5) Shree Metalliks Limited
6) Scaw Industries Limited
7) Deepak Steel & Power Limited
8) SPS Sponge Iron Limited
9) Shyam DRI Power Limited
[However, subsequently after the long-term linkage of Aditya
Aluminium was revealed from records, the other three companies who
substantially met with the criteria employed for selection of the above
associate companies, were found includable without much change in
percentage satisfaction of the earlier determined associate companies.
These companies are:
Mahavir Ferro Alloys Ltd.
Nalwa Sponge Iron Ltd.
Bajrang Ispat Private Ltd.]
The companies whose cases were not decided in their favour for the
five captive blocks under consideration, are as follows:
N.T.P.C.
Bengal Sponge Iron Ltd.
Mundra SEZ
Gujarat Electricity Board
INDAL
OPGENCO
Madhya Utilities & Investment Ltd.
Deo Mines & Minerals P Ltd.
Madhyadesh paper Limited
Sunflag
Aditya Aluminium (HINDALCO)
Jaiswal Neco
MSEB
* *…..Considering the financial soundness of the companies, status of
advance action taken, requirement of the end-use projects already put up,
the likelihood of setting up of the entire capacity of the end-use projects
and the support of the Ministry of Steel and/or Power and the support of
the State Government the following companies were selected by the Screening
Committee for allocation of coal from captive blocks on the pattern similar
to the blocks in MCL area considered by the Screening Committee in its
meeting held on 10.1.2005.
Anjani Steels Pvt. Ltd.
Hindustan Zinc Limited
Chattisgarh Electricity Company Ltd.
Ind Agro-Synergy Ltd.
Ispat Godavari Ltd.
Jayaswal Neco Ltd.
Jindal Steel and Power Ltd.
MSP Steel and Power Ltd.
Nalwa Sponge Iron Ltd.
Nav Bharat Coalfields Pvt. Ltd.
Prakash Industries Ltd.
Sri Bajrang Power and Ispat Ltd.
Sri Nakoda Ispat Ltd.
Sunflag Iron & Steel Co. Ltd.
Vandana Global Ltd.
* It was decided to allocate coal from the captive blocks in the same
way as decided in case of blocks in MCL area, the Committee proceeded to
listing out the possible leaders from among the selected companies and
listed out the following possible leaders:
Hindustan Zinc Ltd.
Chhattisgarh Electricity Company Ltd.
Jayaswal Neco Ltd.
Jindal Steel & Power Ltd.
Prakash Industries Ltd.
Sunflag Iron & Steel Co. Ltd.
Consortium of Nav Bharat Coalfields Pvt. Ltd.,
Ind Agro Synergy; Ispat Godawari, Sri Bajrang Power & Ispat Ltd.,
Sri Nakoda Ispal Ltd., Vandana Global Ltd.
It was decided by the Committee that detailed formulation of groups or
‘common pool’ for allocation of coal/blocks in line with the dispensation
being contemplated in MCL blocks, will be worked out by the Ministry of
Coal. In this regard, it was decided that the following three alternative
formulations for mining and distribution of coal by the group from the
captive mine appear workable.
i) Formation of a Consortium company which will mine coal and
distribute among the consortium members.
ii) If no consortium emerges by consensus, a leader may be
identified in the group who will do mining of coal and distribute it among
the members of the group at a transfer price to be fixed by a Committee in
the Ministry of Coal. iii) If the group
members and leaders are not agreeable to a direct dealing with each other,
they being competitors among themselves, the subsidiary (here SECL) of CIL
operating in that area shall undertake distribution of the coal to the
associate companies at the transfer price fixed by a Committee in the
Ministry of Coal. Ministry of Steel
raised the issue that a number of companies have, in their presentations,
mentioned the capacity of the end-use projects in excess of what has been
recommended by the Ministry of Steel and a view has to be taken on the
same. Further it was also observed that a number of companies have raised
the proposed capacity of their end-use projects after the cut-off date of
28.6.2004. On this, representative of the State Government stated that the
ground realities of the projects need to be verified and the capacities of
the end-use plants and coal requirements of such projects require to be
confirmed. Therefore, the Screening Committee decided that a Committee of
the representatives of the Ministry of Steel and Ministry of Power,
Government of Chhattisgarh and the Ministry of Coal will sit in a meeting
and assess and firm up the capacities and coal requirement. The Meeting
would be convened in the Ministry of Coal.
* ** The above submissions of various companies who made presentation
before the Screening Committee were deliberated by the members of the
committee in details and with the support of the representatives of the
state governments concerned, representatives of the administrative
ministries, such as Ministry Steel, Ministry Power, Ministry of Commerce
and Industries (Deptt. of Industrial Policy and Promotion) and the Ministry
of Railway and other members, allocation of the following blocks in favour
of the companies mentioned against each in line with consortium/leader and
associate approach adopted in case of the blocks in MCL and SECL areas, was
decided:-
i) North Dhadu (670 mt.) -Tata Power - Leader
Subject to their studying the details and making
available their views to Min. of Coal who would
then take an appropriate decision in the matter.
M/s. Adhunik Alloys and Power Limited]
M/s. Pawanjay Iron and Steel Ltd. ]
Associates
M/s Jharkhand Ispat Ltd.
]
* ii) Bundu -Rungta Mines Ltd
Leader/consortium
Jai Balaji Sponge Ltd.
iii) Ardhagram -Sova Ispat Ltd. Leader
- Bengal Sponge Iron Manufactures
Mining Ltd.
iv) Parvatpur Electrosteels Casting Ltd.
v) Gondulpara -Tenughat Vidyut Nigam Ltd.
- Damodar Valley Corporation Ltd.
TVNL laid claim to Gondulpara on the assertion that since they have
the adjoining block of Badan, it would save coal if the two are mined
together. CMPDIL clarified that there had to be two separate mines looking
to the geography of the block and, therefore, the question of coal saving
does not arise. It was decided to share the produce between DVC and TVNL.
Leader would be decided in the Ministry of Coal.
vi) Pirpainti-Barahat - Shyam Sel Ltd.
- Rashmi Cement Ltd.
vii) Mahan - M/s. Hindalco (subject to confirmation
by Govt. of Madhya Pradesh)
viii) Gurha (East) -M/s. Marudhar Power Pvt. Ltd.
ix) Dumri - Neelachal Iron & Power Ltd.
- Bajrang Ispat Pvt. Ltd.
6. In regard to the decision taken on allocation of Mahan coal
block to M/s Hindalco since the representative of Govt. of Madhya Pradesh
made repeated request to consider to allocation of the block in favour of
the Madhya Pradesh State Mineral Development Corporation Limited, it was
observed by the Chairman of the Screening Committee that allocation of
Mahan block to Hindalco is likely to lead to substantial value addition and
economic activities in the state generating considerable revenue to the
State exchequer. The State Mineral Corporation can ask for other blocks
such as Amelia and Amelia north in the vicinity of the Mahan block.
However, considering the overall position, it was decided that it would be
appropriate to have the views of the Govt. of Madhya Pradesh on the same.
It was decided that within a CIL subsidiary area, production from the
blocks, instead of a one to one relation between the leader and the
associates, it could be pooled and shared amongst the associate companies
via the local CIL subsidiaries. The coal from these blocks would be mined
by the designated leader and transferred at a price to be determined
administratively as in the case of MCL and SECL blocks.
The issue of change of the area of the Gare-Palma-IV/I block which
was allocated to M/s. Jindal Steel and Power Ltd., by the allocatee company
themselves was also discussed. The details of the case was explained
before the Screening Committee. It was stated that M/s. Jindal Steel &
Power Limited had shifted the area of the block to cover an adjoining area
containing a coal reserve of about 15 million tonne between the border of
the State of Orissa and block boundary which is in the State of
Chhattisgarh. On the other side, a portion of the block containing a
reserve of about 36 million tonne under forest cover and human habitation
has been left out matching the acreage of the changed area with the acreage
area of the block allocated to them. It was pointed out by CMPDIL that the
area between Orissa border and block boundary which has been covered by
M/s. Jindal Steel and Power Ltd., could not form an independent block and
should have been included earlier in the area of Gare-Palma-IV/I. It was
also stated that M/s. Jindal Steel and Power Ltd., have already obtained a
lease over the area which contains the un-allocated area covered by them
with the approval to the mining plan and previous approval by the Central
Government for grant of mining lease. In view of the same it was held by
the Committee that it was an error both on the part of the Government and
the Company and this needed to be regularized. Thereafter, it was decided
that M/s. Jindal Steel and Power Ltd. should mine the left out area of the
block under forest cover and human habitation while mining the reserve in
the extra covered area. Accordingly, the representatives of M/s. Jindal
Steel and Power Ltd. were called before the Committee and they were
informed that they should work the entire area of the block including the
forest area and the area under villages and also the additional area in
question which has been covered by them and they should give details of the
whole area and its coal reserves to the CMPDIL and Ministry of Coal and the
mining plan be accordingly revised and considered.
*
* *** i) Patrapara
Looking to the size of the project, investment involved etc. it was decided
that the leadership should go to M/s. Bhushan Steel and Strips Limited and
for the associate status M/s. Nepaz Metalicks who had already been
allocated a sub-block in Patrapara would need to be included, M/s. Visa
Industries in view of the progress achieved by them need to be included and
after checking up the availability of reserves, case of M/s. Ocean Ispat
could be decided in the Ministry of Coal for inclusion of otherwise. The
committee discussed at length the limited reserve available in Patrapara.
Considering the requirement of the above applicants and the fact that Aunli
block, north of Patrapara, which was yet to be explored in detail, had
access from Patrapara and Machhakatta, most of the intervening boundaries
of Aunli being occupied by Patrapara, it was decided that CMPDIL would
redraw the boundary of Patrapara so as to include Aunli and the necessary
part of Machhakatta so as to result in a fairly large size block to meet
the requirement of these companies.
ii) Marki Mangli II, III and IV
It was decided that Marki Mangli II, III and IV be allocated to
M/s. Viangana. As regards the request of M/s BS Ispat it was felt that
since they already have MM I and if the percentage satisfaction with MM I
matches the percentage satisfaction of Virangana with Marki Mangli II, III
and then BS Ispat does not have a case for Marki Mangli II.
iii) Nirad Malegaon
The Screening Committee decided to allocate
this block to M/s. Gupta Metalicks and Power as the leader and they could
give rejects/middlings to M/s. Gupta Coalfields for their proposed power
plants. As the grade of coal was superior, allocation of this coal block
for power generation would not be desirable. iv) Panch Bahini
The Screening Committee
decided to allocate this block to M/s. Radhe Industries they being the sole
applicant for this block.
v) Bisrar
It was decided that this block be allocated to the
following companies: i) Chattisgarh State
Electricity Board as leader and the following as associates:
a) Ultra Tech (for their pre cut of project requirement)
b) M/s
Chattisgarh Steel and Power
c) M/s Singhal Enterprises
d) M/s Vnadana
e) M/s Akshay Investment (subject to the views of the
Ministry of Steel) CMD, CMPDIL informed that
earlier Madanpur was proposed to be sub-blocked into two blocks and now
Bisrar is also being proposed to be sub-blocked in two blocks. However,
between the four sub-blocks, i.e. two sub blocks of Bisrar and two of
Madanpur, one each from Bisrar and Madanpur, could be combined to be
called, Madanpur North or Bisrar (North) and Madanpur (South) or Bisrar
(South) could be mined as one block each. Consequently, the total number
of blocks between Bisrar and Madanpur would remain two. One would be with
about 10 million tones of extractable reserves and the other about 120
million tones of extractable reserves. It was decided that since CSEB
would be inducted as the leader consequently one leader from among those
selected as leaders in the 26th meeting would need to be dropped. This
matter would be analysed and decided in the Ministry of Coal. It was also
decided that the allocattees under the leader-associate/consortium concept
should be called in the Ministry of Coal for seeking their views and
finalizing the sharing of coal from captive mine arrangement between them.
*
*
*
* **** CMD, CMPDIL stated that with respect to mining in the new
patrapara block, which would include Aunil and part of Machhakatta, that
Aunil is yet to be explored in detail and part of Machhakatta would also
need to be explored. This would take like time. It was pointed out to
CMD, CMPDIL that they should examine the possibility of allowing mining in
the existing patrapara and thereafter dove-tailing the mining plan of new
patrapara which would include Machhakata and Aunil. In any cases Aunil is
in the dip side of patrapara and mining would reach there only after many
years. Therefore, its immediate exploration for the purposes of mining may
not be necessary. Chairman, Screening Committee pointed out that for the
purposes of calculating reserves, the data available as on date should be
taken into consideration. He also directed that Machhakatta should be
explored within the next six months by the time the mining plan for
existing patrapara comes up. In case dove-tailing is possible then the
mining plan should be approved otherwise it could be modified suitably,
instead of holding back the entire process.
* ……..Sharing of Mahan Block between M/s. Hindalco and Esser Power
Limited: The matter was discussed and by way of recapitulation the
screening committee was informed that in the last meeting of the screening
committee the representative of Government of Madhya Pradesh had taken a
position that the Mahan block should be given to the State Mineral
Development considering the overall merit of the competing claimants the
block should be allocated to M/s Hindalco for their aluminium project in
which the coal should be used in the captive power plant. However, the
final decision was to be taken in consultation with the Government of
Madhya Pradesh. The Government of Madhya Pradesh subsequently have given up
their position for allocation of Mahan block to the State Mineral
Development Corporation and have instead supported allocation of this block
to M/s Essar Power Limited. Representative from Government of Madhya
Pradesh stated that as they are power deficit state, they would recommend
allocation of mahan coal block to Essar Power Limited only. Representative
from the Ministry of power also supported the request of Government of
Madhya Pradesh. The Screening Committee decided that the views of the
State Government and of the representative of Ministry of power be taken on
record as they too had merit.
Iron and Case of M/s. Neelachal Power Limited: The Screening
Committee took note of the assessed requirement of M/s. Neelachal Iron and
Power Limited and also that of its possible associate M/s. Bajrang Ispat
Limited. It also took note of the fact that the overall percentage
satisfaction was nearly 50% from the allocated block of Dumri. The
decision for allocation of Dumri to M/s. Neelachal Iron and Power Limited
as leader with M/s. Bajrang Ispat as associate would remain unchanged.
*
*
*
! CMPDIL made an audio visual presentation Gare Pelma Blocks viz,
IV/1, IV/2, IV/3, IV/6 and IV/7 copy of the presentation is kept at
Annexure-II. CMPDIL essentially said that partial detailed exploration,
except in IV/6, was done by the allocattees themselves and exploration, in
the lower seams in IV/2 and 3 is underway, precise data would be available
only thereafter, and hence the estimates of reserves arrived at, based on
GSI boreholes which are very few, is highly tentative in respect of lower
seams.
On the availability side
Addition to Gare Pelma IV/1
On account of additional area is estimated at 33.6 mill. Tonnes.
On account of lower seams with inferior grade coals, which may not be
extracted being deep underground and of inferior grades, is for 4.76 mill.
T and is not being taken into amount.
Addition to Gare Pelma IV/2 and IV/3
On account of lower seams is estimated at 35 mill. Tonnes. Of which
22.12 mill tonnes is of superior grade.
Gare Pelma IV/6
The block has been detailed explored by CMPDIL and has total of
102.77 mill tonnes of extractable reserves of which 13.68 mill Tonnes in
the lower seams are of superior grades and the remaining 89.09 are inferior
grade of which 27.79 are in the lower seams (underground)
Gare Pelma IV/7
The block has been partially detail explored by the allocate.
Exploration of the lower seams has not yet been taken up or mandated. The
upper seams (opencast) in the approved mining plan show extractable
reserves of 56.62 million tonnes. Extractable Reserves in the lower seams
are tentatively assessed at 21.98 mill tones of which 14.56 are of superior
grade
On the Demand Side
JSPL and JPL
The existing Sponge Iron plant of JSPL of 6 Ltpa capacity requires 72
mill T of inferior grade coal for a 30 year life of which 11 million tones
have already been extracted from GP IV/1. The 1000 MW power plants of JPL
require about 158 mill T of ROM, considering the inferior grades of coal
for a 30 years life.
The Proposed expansion of 6.6. Itpa in sponge Iron capacity of JSPL
requires about 80 mill T of inferior grade coal for 30 year life for which
GP IV/6 is being sought. The proposed 2.6 itpa sponge iron through the
Rotary Hearth Furnace (RHF) of JSPL requires 6.34 mill T of 10-12% ash coal
which would result in an increased ROM Quantity depending upon the yield
upon washing.
The reserves available in IV/1, Considering 11 mill T already
extracted, would be 95.88 mill T. with extracted reserves it would be
106.88 mill. T another 4.76 mill T are inferior and in UG. Total reserve in
GP IV/2 and IV/3 would be 160 + 35 = 195 Mill T. Where the 35 addition is
highly tentative.
Total available in IV/1, IV/2 and IV/3 = 95.88 + 11 + 4.76 + 195 =
306.64 mill T including 22.12 superior in UG and 17.64 inferior in UG.
Inferior equivalent not counting 4.76 in GP IV/1 would be 326.86 mill. T
Total required = 72+79.2+157.5 = 308.7 mill T inferior grade. Not
counting the requirement of RHF as superior grade coal in IV/2 and IV/3 may
not be suitable for the RHF.
Another 34 mill T inferior equivalent count be added to the
requirement if washing yield is taken as 36% instead of 40% for sponge iron
and 80% yield is taken for power instead of 100% with rom as direct feed.
Addition on account of RHF would depend upon the wash yield, if it is taken
as 50% the addition would be about 13 mill tones of superior grade rom
coal.
Representative from the Government of Chhattisgarh stated that JSPL
and JPL are two separate Companies/legal entities. JPL cannot be compelled
to share coal given to them with JSPL. Company Law does not recognize Group
companies. Section 370(1B) mention companies under the same management and
JPSL JPL do not meet the criteria. Separate mining leases have been
executed with them. They have different shareholders, combining them would
create legal complications and therefore, they should be treated apart.
Reserves in GP IV/2 and GP IV/3 should be kept out of the reckoning when
considering request of GP IV/6 as the company is the same and the project
is of expansion in capacity.
CMD SECL stated that when allocation are being made in groups why
should sister companies not be asked to share first.
Representative from the Govt. of Chattisgarh stated that this would
be discrimination against JSPL JPL. When excess coal cannot be taken back
from earlier allocattees why should JSPL-JPL be singled out. Besides, all
is being based on data/projections which is admittedly highly tentative. He
further said that power generation (JPL) is crucial and should not be
affected.
Chairman sought views of the Ministry of Steel. The representatives
of Mos stated that the date is tentative, it is not fool proof. JSPL and
JPL are two separate companies and that they agreed with views of the
representative from Chattisgarh Govt.
Representative from CEA (power) stated that coal blocks given for
power project of JPL should be kept apart and not clubbed with Sponge Iron
project’s requirement of JSPL.
Chairman observed that large numbers of people are looking for coal.
There should be a sense of enquiry for meeting requirement of people. Legal
solution can and should be found for it.
Representative from the Govt. of Chattisgarh stated that JSPL and JPL
should not be clubbed. People have invested in these companies. They are
public limited companies, listed companies. There would be complications.
Chairman sought views of Chattisgarh on clubbing IV/1 and IV/6. This
was agreed and supported by Chattisgarh, CEA and MoS.
It was accordingly decided that reserves in GP IV/2 and IV/3 would be
kept out of consideration for deciding on extent of alloction in IV/6. The
extractable reserves in GP IV/1 + GP IV/6 are 95.88 + 102.77 = 198.65 mill.
T.
The Requirement of JSPL for 6 Itpa + 6.6 Itpa S.I comes to 72-
11+79.2=140.2 mill. T. And if 36% yield in washing is considered, given
high percentage of G grade coal in GP IV/1 and 6 this becomes 157.2 mill T
with addition of 17 mill. T.
As to the requirement in 2.6 Itpa in RHF, CMD CMDPIL was of the view
that coal from lower seams of IV/6 may not yield 10-12% ash coal on washing
and that JSPL should seek linkage of superior coal.
Representative from the Govt. of Chattisgarh stated that such
superior coal is available nowhere and that JSPL should be allowed to
innovate and use the lower seams to meet their RHF Requirement. MoC could
keep condition that when full facts are known at the mining plan
appropriately at the stage and allocate IV/6 to JSPL and Nalwa Sponge.
CMD CMPDIL said that superior coal in lower seams if IV/2 and IV/3
should not be used for power generation and but for sponge Iron marking.
Chairman, summing up the discussion, observed that IV/2 IV/3 are to
be kept out; reserve in IV/1 and IV/6 are be clubbed; RHF requirement be
kept out; requirement of partner company M/s Nalwa Sponge be included; the
existing requirement be accounted for at 100% satisfaction and expansion
requirement of JSPL and requirement of Nalwa Sponge be given same
satisfaction level as the overall in SECL area. If surplus still remains in
IV/1+ after this then JSPL-Nalwa be asked to select another allocattee
failing which the excess reserves be handed over to SECL, in terms of
annual production, at transfer price to be determined by the Government.
Coal availability and requirement in IV/1
Inferior
Superior
Total
Available; 95.88+89.09=184.97 13.68
198.65
Required : JSPL 157.2
NIL
At 100% Nalwa 026.6
Satisfaction
Required JSPL 144.7 (satisfaction level for
existing 6 Itpa SI at 100%)
At 86% Nalwa 022.9
Satisfaction 167.6
Surplus: 17.37
13.68
31.05
! ! The Screening Committee discussed in detail the presentations made
and the applications submitted by the companies. Taking into consideration
the views/comments of the Ministry of Power, Ministry of Steel, concerned
State Governments, and considering the guidelines laid down for the
allocation of coal/lignite blocks, the Screening Committee decided to
recommend the allocation of the coal blocks as follows:
i) Rohne coal block jointly in favour of M/s. JSW Steels Limited,
M/s. Bhushan Steel and Power Limited and M/s. Jai Balaji Sponge Limited.
ii) Sitanala coal block in favour of M/s. Steel Authority of India
Limited. iii) Tenughat-Jhirki coal block
jointly in favour of M/s. Rashtriya Ispat Nigam Limited and M/s. Jindal
Steel and Power Ltd.
iv) Choritand-Taliaya coal block jointly in favour of M/s. Sunflag
Iron and Steel Limited and M/s Rungta Mines Limited.
It was further decided that a sub-committee consisting of Joint
Secretary, Ministry of Coal and Joint Secretary, Ministry of Steel would
have discussions with the recommended joint allocattees of Rohne, Tenughat
Jhirki and Choritand-Taliaya coal blocks and work out the modalities and
details of the arrangements of the joint allocation. In case there is a
problem in the allocation as proposed, the sub-committee will bring the
matter again before the screening committee.
As regards Jogeswar coal block the representative of the Government
of Jharkand had informed the Committee that the State Government were of
the view that due to some problems at the local level, it may be difficult
for private companies to undertake coal mining. He further added that this
block may be earmarked for some State Public Sector Undertaking. The
Screening Committee also took note of the fact that this block was earlier
allocated but due to some local problems the allocattee could not commence
mining and it was consequently surrendered. The Screening Committee,
therefore, decided not to recommend allocation of Jogeswar block in favour
of any applicant for the time being.
!
! !! 5.3 The State Government of Jharkhand vide its letter no.571/M.C.
dated 29.8.06 and letter no. 592/CS dated 21.9.06 had conveyed the
following views regarding the captive coal blocks situated in the State of
Jharkhand:- S.No. BLOCK RECOMMENDATIONS
1. Tubed i) M/s Hindalco
ii) M/s Tata Power
iii) M/s Jindal Steel & Power Limited
2. Jitpur M/s Jindal Steel & Power
Limited
3. Chakla i) M/s Essar Power
ii) M/s Chaibasa Steel
4. Medinirai i) M/s JSMDC
ii) M/s Rungta Mines
5.4 The State Government of Madhya Pradesh vide its letter no.F-19-
36/2005/12/2 (part-I) dated 23.1.06 and letter no. F-19-36/2005/122 (Part-
1) dated 12.7.06 had conveyed the following views regarding the captive
coal blocks situated in the State of Madhya Pradesh.
S.No. BLOCK RECOMMENDATIONS
1. Brahmpuri M/s Satna Power Company Limited
2. Mandla North i) M/s Occidental Power Private
Limited ii) M/s Jaiprakash Associates
Limited
3. Rawanwara North M/s Ind Synergy Limited
4. Sial-Ghoghri M/s Prism Cement Limited
5.5 The State Government of Maharashtra vide its letter no. MMN-
1005/C.R.969/Ind-9 dated 19.11.05, letter no.MMN-1005/C.R. 1000/Ind-9 dated
10.1.06, letter no.MMN-1005/C.R.969 part-II/Ind-9 dated 4.5.06 and letter
no.MMN-1005/C.R.1000/Ind-9 dated 11.5.06 had conveyed the following views
regarding the captive coal blocks situated in the State of Maharashtra.
S.No. BLOCK RECOMMENDATIONS
1. Lohara East i) M/s Murli Agro Product Private
Limited ii) M/s Ultra Tech Cement
Limited iii) M/s IBEL Gas Power
Limited
2. Warora West i) M/s Bhatia International Limited
(North) ii) M/s
Shri Sidhbali Ispat limited iii)
M/s MSP Steel Private Limited
iv) M/s Central India Power Company Ltd.
v) M/s Gupta Energy Limited
vi) M/s Jas Toll Road Company Limited
3. Kosar-Dongargaon M/s Wardha Power Company Private
Ltd.
5.6 The State Government of West Bengal vide its letter
no.5477/PrS/CI dated 9.8.06 had conveyed the following views regarding the
captive coal blocks situated in the State of West Bengal.
S.No. BLOCK RECOMMENDATIONS
1. Biharinath i) M/s Bankura DRI
Manufacturing Pvt. Co. Limited
5.7 The Secretary, Industries, Government of Andhra Pradesh apprised
the Screening Committee that Ansettipali, Punkula-Chilka and Pengedappa are
located in the notified tribal areas where the provisions of AP Land
Transfer Regulations are applicable. In such areas, the State Government
will not be in a position to grant mining leases in favour of private
sector companies. The Government of Andhra Pradesh has also brought out
amendments to Section 11(5) of MMDR Act, 1957. Pursuant to this amendment
grant of mining lease in Andhra Pradesh to non-tribals except public sector
undertakings is prohibited in case of mines located in the notified tribal
areas.
5.8 The Screening Committee discussed in detail the presentations
made and the applications submitted by the companies. Taking into
consideration the views/comments of the Ministry of Power, Ministry of
Steel, concerned State Governments, and considering the guidelines laid
down for the allocation of coal/lignite blocks, the Screening Committee
decided to recommend the allocation of the coal blocks as follows:
S.No. BLOCK Company and end use plant
1. Tubed jointly to i) M/s Hindalco Industries Ltd. for its enduse
plant in Latehar, Jharkhand
ii) M/s Tata Power Company Ltd. for its enduse plant in Singhbhum,
Jharkhand
2. Chakla M/s Essar Power Limited for its enduse plant in Latehar,
Jharkhand
3. Jitpur M/s Jindal Steel and Power Limited for its enduse plant in
East Singhbhum, Jharkhand.
4. Mednirai jointly to i) M/s Rungta Mines Limited for its
enduse plant in Saraikela Kharswan, Jharkhand
ii) M/s Kohinoor Steels Pvt. Ltd. for its enduse plant in Saraikela
Kharswan, Jharkhand
5. Brahmpuri M/s Pushp Steel and Mining for its enduse plant in
Durg, Chhatisgarh
6. Mandla North M/s Jaiparkash Associates Limited for its enduse
plant in Madhya Pradesh/Himachal Pradesh
7. Rawanwara North M/s SKS Ispat Limited for its enduse plant in
Raipur, Chhatisgarh
8. Sial-Ghoghri M/s Prism Cement Ltd. for its enduse plant in
Satna, MP
9. Lohara East jointly to i) M/s Murli Agro Product Ltd. for its
enduse plant in Nagpur and Chandrapur, Maharashtra
ii) M/s Grace Industries Ltd. for its enduse plant in Chandrapur,
Maharashtra
10 Warora West (North) M/s Bhatia International Ltd. for its
enduse plant in Chandrapur, Maharashtra
11. Kosar-Dongargaon M/s Chaman Metallics Pvt. Ltd. for enduse
plant in Chandrapur, Maharashtra
12. Biharinath M/s Bankura DRI Manufacturing Pvt. Co. Ltd. for its
enduse plant in Bankura, West Bengal
13. Ansettipali M/s Andhra Pradesh Power Generation Corporation
Limited (APGENCO) for its enduse plants in Andhra Pradesh
14. Punkula-Chilka
15. Pengedappa
5.9 In respect of blocks recommended to be allocated jointly, the
allocatee companies shall share the coal in the ratio of their assessed
requirement for the capacities (end-use plants) as reflected in the
original applications.
!
!
? 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, Ministry of
Steel, 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:
Name of BlockRecommended CompaniesEnd use Plant1.Mandakini1. M/s.
Monnet Ispat & Energy Ltd.
2. M/s. Jindal Photo Ltd.
3. M/s. Tata Power Comp. Ltd.Orissa
Orissa
Orissa2.Rampia
&
Dip Side of Rampia 1. M/s. Sterlite Energy Ltd.
2. M/s. GMR Energy Ltd.
3. M/s. Lanco Group Ltd.
4. M/s. Navbharat Power Pvt.
5. M/s. Mittal Steel India Ltd.
6. M/s. Reliance Energy Ltd.Orissa
Orissa
Orissa
Orissa
Orissa
Orissa3.Durgapur II/Sariya 1. M/s. D.B. Power Ltd.
Chhattisgarh4.Durgapur II/Taraimar 1. M/s. Bharat Aluminium Co. Ltd.
Chhattisgarh5.Sayang 1. M/s. AES Chhattisgarh Energy Pvt.
Ltd.Chhattisgarh6.Fathepur 1. M/s. SKS Ispat & Power Ltd.
2. M/s. Prakash Industries Ltd.Chhattisgarh
Chhattisgarh7.Fathepur East 1. M/s. JLD Yavatmal Energy Ltd.
2. M/s. Green Infrastructure Pvt. Ltd.
3. M/s. R.K.M. Powergen Pvt. Ltd.
4. M/s. Visa Power Ltd.
5. M/s. Vandana Vidyut Energy Ltd.Maharashtra
Chhattisgarh
Chhattisgarh
Chhattisgarh
Chhattisgarh
8.Lohara West & Lohara East1. M/s. Adani Power (P) Ltd. (1200
MW)Maharashtra9.Ganeshpur1. M/s. Tata Steel Ltd. (CPP-600 MW)
2. M/s. Adhunik Thermal Energy Ltd. (Equal Share) 1000 MWJharkhand
Jharkhand10.Seregarha1. M/s Mittal Steel Ltd.
2. M/s GVK (Gonvindwal Sahib) Ltd.Jharkhand
Punjab11.Ashok Karkata CentralM/s. Essar Power Ltd.Jharkhand12.Patal
EastM/s. Bhushan Power & Steel Ltd. (750)Jharkhand13.Amarkonda
Murgadangal1. M/s. Jindal Steel & Power Ltd.
2. M/s. Gagan Sponge Iron Pvt. Ltd.Jharkhand
Jharkhand14.Mahuagarhi1. CESC
2. Jas Infrastructure Capital Pvt. Ltd.Jharkhand
West Bengal15.Gourangdih ABC1. M/s. Himachal Emta Power Ltd. and
M/s. JSW Steel Ltd. on equal share basis.
2. Representative from the West Bengal Govt. suggested that either
the block be allotted to WBMDTC Bengal or else be left unallotted. The
committee felt that since WBMTDC Bengal had not applied for the block, it
would not be possible to consider them. Regarding non-allotment, the
matter may be placed for consideration of the Govt.
± Inter-se priority for allocation of a block among competing
applicants for a captive block may be decided as per the following
guidelines.
Status (stage) level of progress and state of preparedness of the
projects;
Networth of the applicant company (or in the case of a new JV, the
networth of their principals);
Production capacity as proposed in the application;
Date of commissioning of captive mine as proposed in the application;
Date of completion of detailed exploration (in respect of unexplored
blocks only) as proposed in the application;
Technical experience (in terms of existing capacities in coal/lignite
mining and specified end use);
Recommendation of the Administrative Ministry concerned;
Recommendation of the State Government concerned (i.e. where the
captive block is located);
Track record and financial strength of the company
Preference will be accorded to the power and the steel sectors.
Within the power sector also, priority shall be accorded to projects with
more than 500 MW capacity. Similarly, in steel sector, priority shall be
given to steel plants with more than 1 million tonne per annum capacity.
? ? Urtan Beharaband North Extn., Tandsi-III & Tandsi-III extn., Urtan
North (coking blocks), Macherkunds, Rajhara North (Central & Eastern) Moira
Madhujore (North & South), Datima, Bhaskarpara, Kudari, Bikram, Vijay
Central Rajgamar Dipside (South of Phulakdih Nala), Kesla North, Gondkhari,
Kappa & Extn. Dahegaon-Makardhokra-IV, Bander, Hurilong, Hutar sector C,
Rajgamar Dipside (Deavnara), Tehsgora-B/Rudrapuri and Andal East (Non
cooking blocks)
?
-----------------------
164
impermissible as per the scheme of the CMN Act. No State Government or public sector undertakings of the State Governments are eligible for mining coal for commercial use. Since allocation of coal is permissible only to those categories under Section 3(3) and (4), the joint venture arrangement with ineligible firms is also impermissible. Equally, there is also no
question of any consortium / leader / association in allocation. Only an undertaking satisfying the eligibility criteria referred to in Section 3(3) of the CMN Act, viz., which has a unit engaged in the production of iron and steel and generation of power, washing of coal obtained from mine or production of cement, is entitled to the allocation in addition to Central Government, a Central Government company or a Central Government corporation. In this context, it is worthwhile to note that the 1957 Act has been amended introducing Section 11-A w.e.f. 13.02.2012. As per the said amendment, the grant of reconnaissance permit or prospecting licence or mining lease in respect of an area containing coal or lignite can be made
only through selection through auction by competitive bidding even among the eligible entities under Section 3(3)(a)(iii), referred to above. However, Government companies, Government corporations or companies or corporations, which have been awarded power projects on the basis of competitive bids for tariff (including Ultra Mega Power Projects) have been exempted of allocation in favour of them is not meant to be through the competitive bidding process. As we have already found that the allocations made, both under the Screening Committee route and the Government dispensation route, are arbitrary and illegal, 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. By way of footnote, it may be clarified and we do, that no
challenge was laid before us in respect of blocks where competitive bidding was held for the lowest tariff for power for Ultra Mega Power Projects (UMPPs). =
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.
The allocation of coal blocks made during the
above period by the Central Government, according to petitioners,
is
illegal and unconstitutional inter alia on the following grounds:
(a) Non-compliance of the mandatory legal procedure under the Mines and
Minerals (Development and Regulation) Act, 1957 (for short, ‘1957 Act’).
(b) Breach of Section 3(3)(a)(iii) of the Coal Mines (Nationalisation)
Act, 1973 (for short, ‘CMN Act’).
(c) Violation of the principle of Trusteeship of natural resources by
gifting away precious resources as largesse.
(d) Arbitrariness, lack of transparency, lack of objectivity and non-
application of mind; and
(e) Allotment tainted with mala fides and corruption and made in favour
of ineligible companies tainted with mala fides and corruption.=
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.=
In Natural Resources Allocation Reference20 the Constitution
Bench, in the main judgment, thus, concluded that auction despite being a
more preferable method of alienation / allotment of natural resources
cannot be held to be constitutional requirement or limitation for
alienation of all natural resources and, therefore, every method other than
auction cannot be struck down as ultra vires the constitutional mandate.
The Court also opined that auction as a mode cannot be conferred the status
of a constitutional principle.
While holding so, the Court held that
alienation of natural resources is a policy decision and the means adopted
for the same are, thus, executive prerogatives.
The Court summarized the
legal position as under:
“146. To summarise in the context of the present Reference, it needs to be
emphasised that this Court cannot conduct a comparative study of the
various methods of distribution of natural resources and suggest the most
efficacious mode, if there is one universal efficacious method in the first
place.
It respects the mandate and wisdom of the executive for such
matters.
The methodology pertaining to disposal of natural resources is
clearly an economic policy. It entails intricate economic choices and the
Court lacks the necessary expertise to make them. As has been repeatedly
said, it cannot, and shall not, be the endeavour of this Court to evaluate
the efficacy of auction vis-à-vis other methods of disposal of natural
resources.
The Court cannot mandate one method to be followed in all facts
and circumstances.
Therefore, auction, an economic choice of disposal of
natural resources, is not a constitutional mandate. We may, however, hasten
to add that the Court can test the legality and constitutionality of these
methods.
When questioned, the courts are entitled to analyse the legal
validity of different means of distribution and give a constitutional
answer as to which methods are ultra vires and intra vires the provisions
of the Constitution.
Nevertheless, it cannot and will not compare which
policy is fairer than the other, but, if a policy or law is patently unfair
to the extent that it falls foul of the fairness requirement of Article 14
of the Constitution, the Court would not hesitate in striking it down.
147. Finally, market price, in economics, is an index of the value that a
market prescribes to a good.
However, this valuation is a function of
several dynamic variables: it is a science and not a law. Auction is just
one of the several price discovery mechanisms.
Since multiple variables are
involved in such valuations, auction or any other form of competitive
bidding, cannot constitute even an economic mandate, much less a
constitutional mandate.
148. In our opinion, auction despite being a more preferable method of
alienation/allotment of natural resources, cannot be held to be a
constitutional requirement or limitation for alienation of all natural
resources and therefore, every method other than auction cannot be struck
down as ultra vires the constitutional mandate.
149. Regard being had to the aforesaid precepts, we have opined that
auction as a mode cannot be conferred the status of a constitutional
principle.
Alienation of natural resources is a policy decision, and the
means adopted for the same are thus, executive prerogatives. However, when
such a policy decision is not backed by a social or welfare purpose, and
precious and scarce natural resources are alienated for commercial pursuits
of profit maximising private entrepreneurs, adoption of means other than
those that are competitive and maximise revenue may be arbitrary and face
the wrath of Article 14 of the Constitution.
Hence, rather than prescribing
or proscribing a method, we believe, a judicial scrutiny of methods of
disposal of natural resources should depend on the facts and circumstances
of each case, in consonance with the principles which we have culled out
above.
Failing which, the Court, in exercise of power of judicial review,
shall term the executive action as arbitrary, unfair, unreasonable and
capricious due to its antimony with Article 14 of the Constitution.”=
The entire exercise of allocation through Screening Committee
route thus appears to suffer from the vice of arbitrariness and not
following any objective criteria in determining as to who is to be selected
or who is not to be selected. There is no evaluation of merit and no inter
se comparison of the applicants. No chart of evaluation was prepared. The
determination of the Screening Committee is apparently subjective as the
minutes of the Screening Committee meetings do not show that selection was
made after proper assessment. The project preparedness, track record etc.,
of the applicant company were not objectively kept in view. Until the
amendment was brought in Section 3(3) of the CMN Act w.e.f. 09.06.1993, the
Central Government alone was permitted to mine coal through its companies
with the limited exception of private companies engaged in the production
of iron and steel. By virtue of the bar contained in Section 3(3) of the
CMN Act, between 1976 and 1993, no private company (other than the company
engaged in the production of iron and steel) could have carried out coal
mining operations in India. Section 3(3) of the CMN Act, which was amended
on 09.06.1993 permitted private sector entry in coal mining operations for
captive use. The power for grant of captive coal block is governed by
Section 3(3)(a) of the CMN Act, according to which, only two kind of
entities, namely, (a) Central Government or undertakings/corporations owned
by the Central Government; or (b) companies having end-use plants in iron
and steel, power, washing of coal or cement can carry out coal mining
operations. The expression “engaged in” in Section 3(3)(a)(iii) means that
the company that was applying for the coal block must have set up an iron
and steel plant, power plant or cement plant and be engaged in the
production of steel, power or cement. The prospective engagement by a
private company in the production of steel, power or cement would not
entitle such private company to carry out coal mining operation. Most of
the companies, which have been allocated coal blocks, were not engaged in
the production of steel, power or cement at the time of allocation nor in
the applications made by them any disclosure was made whether or not the
power, steel or cement plant was operational. They only stated that they
proposed to set up such plants. Thus, the requirement of end-use project
was not met at the time of allocation.=
To sum up, the entire allocation of coal block as per
recommendations made by the Screening Committee from 14.07.1993 in 36
meetings and the allocation through the Government dispensation route
suffers from the vice of arbitrariness and legal flaws. The Screening
Committee has never been consistent, it has not been transparent, there is
no proper application of mind, it has acted on no material in many cases,
relevant factors have seldom been its guiding factors, there was no
transparency and guidelines have seldom guided it. On many occasions,
guidelines have been honoured more in their breach. There was no objective
criteria, nay, no criteria for evaluation of comparative merits. The
approach had been ad-hoc and casual. There was no fair and transparent
procedure, all resulting in unfair distribution of the national wealth.
Common good and public interest have, thus, suffered heavily. Hence, the
allocation of coal blocks based on the recommendations made in all the 36
meetings of the Screening Committee is illegal.
155. The allocation of coal blocks through Government dispensation
route, however laudable the object may be, also is illegal since it is
impermissible as per the scheme of the CMN Act. No State Government or
public sector undertakings of the State Governments are eligible for mining
coal for commercial use. Since allocation of coal is permissible only to
those categories under Section 3(3) and (4), the joint venture arrangement
with ineligible firms is also impermissible. Equally, there is also no
question of any consortium / leader / association in allocation. Only an
undertaking satisfying the eligibility criteria referred to in Section 3(3)
of the CMN Act, viz., which has a unit engaged in the production of iron
and steel and generation of power, washing of coal obtained from mine or
production of cement, is entitled to the allocation in addition to Central
Government, a Central Government company or a Central Government
corporation.
156. In this context, it is worthwhile to note that the 1957 Act has
been amended introducing Section 11-A w.e.f. 13.02.2012. As per the said
amendment, the grant of reconnaissance permit or prospecting licence or
mining lease in respect of an area containing coal or lignite can be made
only through selection through auction by competitive bidding even among
the eligible entities under Section 3(3)(a)(iii), referred to above.
However, Government companies, Government corporations or companies or
corporations, which have been awarded power projects on the basis of
competitive bids for tariff (including Ultra Mega Power Projects) have been
exempted of allocation in favour of them is not meant to be through the
competitive bidding process.
157. As we have already found that the allocations made, both under
the Screening Committee route and the Government dispensation route, are
arbitrary and illegal, 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.
158. By way of footnote, it may be clarified and we do, that no
challenge was laid before us in respect of blocks where competitive bidding
was held for the lowest tariff for power for Ultra Mega Power Projects
(UMPPs). As a matter of fact, Mr. Prashant Bhushan, learned counsel for
Common Cause submitted that since allocation for UMPPs is in accord with
the opinion given in Natural Resources Allocation Reference20 and the
benefit of the coal block is passed on to the public, the said allocations
may not be cancelled. However, he submitted that in some cases the
Government has allowed diversion of coal from UMPP to other end uses i.e.
for commercial exploitation. Having regard to this, it is directed that
the coal blocks allocated for UMPP would only be used for UMPP and no
diversion of coal for commercial exploitation would be permitted.
REPORTABLE
IN THE SUPREME COURT OF INDIA
ORIGINAL JURISDICTION
WRIT PETITION (CRL.) NO. 120 OF 2012
Manohar Lal Sharma …… Petitioner
Vs.
The Principal Secretary & Ors. ……
Respondents
WITH
WRIT PETITION [C] NO. 463 OF 2012
WRIT PETITION [C] NO. 515 OF 2012
WRIT PETITION [C] NO. 283 OF 2013
JUDGMENT
R.M. LODHA, CJI.
Coal is king and paramount Lord of industry is an old saying in
the industrial world. Industrial greatness has been built up on coal by
many countries. In India, coal is the most important indigenous energy
resource and remains the dominant fuel for power generation and many
industrial applications. A number of major industrial sectors including
iron and steel production depend on coal as a source of energy. The cement
industry is also a major coal user. Coal’s potential as a feedstock for
producing liquid transport fuels is huge in India. Coal can help
significant economic growth. India’s energy future and prosperity are
integrally dependant upon mining and using its most abundant, affordable
and dependant energy supply – which is coal. Coal is extremely important
element in the industrial life of developing India. In power, iron and
steel, coal is used as an input and in cement, coal is used both as fuel
and an input. It is no exaggeration that coal is regarded by many as the
black diamond.
2. Being such a significant, valuable and important natural
resource, 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. The allocation of coal blocks made during the
above period by the Central Government, according to petitioners, is
illegal and unconstitutional inter alia on the following grounds:
(a) Non-compliance of the mandatory legal procedure under the Mines and
Minerals (Development and Regulation) Act, 1957 (for short, ‘1957 Act’).
(b) Breach of Section 3(3)(a)(iii) of the Coal Mines (Nationalisation)
Act, 1973 (for short, ‘CMN Act’).
(c) Violation of the principle of Trusteeship of natural resources by
gifting away precious resources as largesse.
(d) Arbitrariness, lack of transparency, lack of objectivity and non-
application of mind; and
(e) Allotment tainted with mala fides and corruption and made in favour
of ineligible companies tainted with mala fides and corruption.
3. 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 Court issued notice to Union of India and directed it to
file counter affidavit through Secretary, Ministry of Coal dealing with the
following aspects:
(i) The details of guidelines framed by the Central Government for
allocation of subject coal blocks.
(ii) The process adopted for allocation of subject coal blocks.
(iii) 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?
(iv) Whether the guidelines were strictly followed and whether by
allocation of the subject coal blocks, the objectives of the policy have
been realised?
(v) 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?
(vi) 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?
4. Another PIL came to be filed by Common Cause after the above
order was passed. PIL by Common Cause came up for preliminary hearing on
19.11.2012. Since, certain additional issues were raised and additional
reliefs were also made in the PIL by Common Cause, this Court issued notice
in that matter as well on 19.11.2012.
5. Principally, two prayers have been made in these matters,
first, for quashing the entire allocation of coal blocks made to private
companies by the Central Government between 1993 and 2012 and second, 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 made
between the above period covering all aspects.
6. 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.
7. The first counter affidavit was filed by the Central Government
on 22.01.2013 running into eleven volumes and 2607 pages. Thereafter,
further/additional counter affidavit was filed by the Central Government.
However, when the matters were listed on 10.07.2013, learned Attorney
General submitted that in the counter affidavits filed so far, the Union of
India had focused on the six queries raised by the Court on 14.09.2012 in
the writ petition filed by Manohar Lal Sharma. He sought some time to
enable the Central Government to file appropriate counter affidavit
justifying allocation of coal blocks. Thereafter, further/additional
counter affidavits have also been filed by the Central Government.
8. On 10.09.2013, the arguments with regard to challenge to
allocation of coal blocks commenced which continued on 11.09.2013,
12.09.2013, 17.09.2013, 18.09.2013, 24.09.2013, 25.09.2013 and 26.09.2013.
On 26.09.2013, Attorney General 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,
we wanted to know from the counsel for the petitioners whether concerned
State Governments should be asked to explain their position in the matter
to which Mr. Manohar Lal Sharma, petitioner-in-person and Mr. Prashant
Bhushan agreed and, accordingly, the Court issued notice to the States 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. The Court sought the
views of the above States on the following:
(i) How did the State Government understand the allocation of coal
blocks by the Central Government?
(ii) What was the role of the State Government in the
allocation of coal blocks ?
(iii) What was the role of the State Government in the subsequent steps
having regard to the provisions of the 1957 Act?
(iv) The details of the agreements entered into by the State Public Sector
Undertakings, which were allotted coal blocks, with private parties for the
coal blocks located in the State.
9. In pursuance of the above, 7 States have filed their responses.
10. The arguments re-commenced on 05.12.2013. On that day,
arguments of the States of Jharkhand, Chhattisgarh and Odisha were
concluded and matters were fixed for 08.01.2014. On 08.01.2014, the
arguments on behalf of the States of Maharashtra, Andhra Pradesh, Madhya
Pradesh and West Bengal were concluded and the matters were fixed for
09.01.2014. On that day, arguments of learned Attorney General were
concluded.
11. Three Associations, viz., Coal Producers Association, Sponge
Iron Manufacturers Association and Independent Power Producers Association
of India have made applications for their intervention stating that these
associations represented large number of allottees who have been allocated
subject coal blocks. Accordingly, Mr. K.K. Venugopal, learned senior
counsel was heard for Coal Producers Association and Mr. Harish N. Salve,
learned senior counsel was heard on behalf of the Sponge Iron Manufacturers
Association and Independent Power Producers Association of India. They
commenced their arguments on 09.01.2014, which continued on 15.01.2014 and
concluded on 16.01.2014. The arguments in rejoinder by Mr. Manohar Lal
Sharma, petitioner-in-person and Mr. Prashant Bhushan, learned counsel for
Common Cause were also concluded on that day. The arguments of Mr. Sanjay
Parikh, who had made an application for intervention on behalf of Mr.
Sudeep Shrivastav were also heard and concluded. The judgment was reserved
on that day.
12. It is appropriate that we first notice the statutory framework
relevant for the issues under consideration. The Mines and Minerals
(Development and Regulation) Act, 1948 (for short, ‘1948 Act’) was enacted
to provide for the regulation of mines and oil fields and for the
development of the minerals under entry 36 of the Government of India Act,
1935. It received the assent of the Governor General on 08.09.1948 and
came into effect from that date.
13. 1948 Act was repealed by the 1957 Act. The introduction of the
1957 Act reads:
“In the Seventh Schedule of the Constitution in Union List entry 54
provides for regulation of mines and minerals development to the extent to
which such regulation and development under the control of the Union is
declared by Parliament by law to be expedient in the public interest. On
account of this provision it became imperative to have a separate
legislation. In order to provide for the regulation of mines and the
development of minerals, the Mines and Minerals (Regulation and
Development) Bill was introduced in the Parliament.”
14. 1957 Act has undergone amendments from time to time. Section 2
of the 1957 Act reads:
“Declaration as to the expediency of Union Control - it is hereby declared
that it is expedient in the public interest that the Union should take
under its control the regulation of mines and the development of minerals
to the extent hereinafter provided.”
15. Sections 3(a), (c), (d), (e), (f), (g) and (h) define:
“minerals”, “mining lease”, “mining operations”, “minor minerals”,
“prescribed”, “prospecting licence”, and “prospecting operations”[1],
respectively.
16. Section 4 mandates that prospecting or mining operations shall
be under licence or lease. Sub-section (2) provides that no reconnaissance
permit, prospecting licence or mining lease shall be granted otherwise than
in accordance with the provisions of the Act and the rules made thereunder.
17. Section 5 is a restrictive provision. The provision mandates
that in respect of any mineral specified in the First Schedule, no
reconnaissance permit, prospecting licence or mining lease shall be granted
except with the previous approval of the Central Government. Coal and
Lignite are at item no.1 in Part A under the title “Hydro Carbons/Energy
Minerals” in the First Schedule appended to the 1957 Act.
18. Section 6 provides for maximum area for which a prospecting
licence or mining lease may be granted. Section 7 makes provisions for the
periods for which prospecting licence may be granted or renewed and Section
8 provides for periods for which mining leases may be granted or renewed.
Section 10 provides that application for reconnaissance permit, prospecting
licence or mining lease in respect of any land in which the minerals vest
in the Government shall be made to the State Government concerned, inter
alia, it empowers the State Government concerned to grant or refuse to
grant permit, licence or lease having regard to the provisions of the 1957
Act or the Mineral Concession Rules, 1960 (for short ‘1960 Rules’).
19. Section 11 provides for preferential right of certain persons.
Sub-section (1) of Section 11 makes a provision that where a reconnaissance
permit or prospecting licence has been granted in respect of any land, the
permit holder or the licensee shall have a preferential right for obtaining
a prospecting licence or mining lease, as the case may be, in respect of
that land over any other person. This is, however, subject to State
Government’s satisfaction and certain conditions as provided therein. Sub-
section (2) of Section 11 says that where the State Government does not
notify in the Official Gazette the area for grant of reconnaissance permit
or prospecting licence or mining lease and two or more persons have applied
for a reconnaissance permit, prospecting licence or a mining lease in
respect of any land in such area, the applicant whose application was
received earlier, shall have a preferential right to be considered for such
grant over the applicant whose application was received later. This is,
however, subject to provisions of sub-section (1). The first proviso
appended thereto enacts that where an area is available for grant of
reconnaissance permit, prospecting licence or mining lease and the State
Government has invited applications by notification in the Official Gazette
for grant of such permit, licence or lease, the applications received
during the period specified in such notification and the applications which
had been received prior to the publication of such notification in respect
of the lands within such area or had not been disposed of, shall be deemed
to have been received on the same day for the purpose of assigning priority
under sub-section (2). The second proviso indicates that where such
applications are received on the same day, the State Government, after
taking into consideration the matter specified in sub-section (3), may
grant the reconnaissance permit, prospecting licence or mining lease to one
of the applicants as it may deem fit. Sub-section (3) elaborates the matter
referred to in sub-section (2), namely, (a) any special knowledge of,
experience in reconnaissance operations, prospecting operations or mining
operations, possessed by the applicant; (b) the financial resources of the
applicant; (c) the nature and quality of the technical staff employed or to
be employed by the applicant; (d) the investment which the applicant
proposes to make in the mines and in the industry based on the minerals;
and (e) such other matters as may be prescribed.
20. Section 13 empowers the Central Government to make rules in
respect of minerals. By virtue of the power conferred upon the Central
Government under Section 13(2), the 1960 Rules have been framed for
regulating the grant of, inter alia, mining leases in respect of minerals
and for purposes connected therewith.
21. By virtue of Section 17, the Central Government has been given
special powers to undertake prospecting or mining operations in certain
lands. Section 17-A authorises the Central Government to reserve any area
not already held under any prospecting licence or mining lease with a view
to conserve any mineral and after consultation with the State Government by
notification in the Official Gazette.
22. Section 18 indicates that it shall be the duty of the Central
Government to take all such steps as will be necessary for the conservation
and systematic development of minerals in India and for the protection of
the environment by preventing or controlling any pollution which may be
caused by prospecting or mining operations and for such purposes the
Central Government may, by notification in the Official Gazette, make such
rules as it thinks necessary.
23. Section 18A empowers the Central Government to authorise the
Geological Survey of India to carry out necessary investigation for the
purpose of information with regard to the availability of any mineral in or
under any land in relation to which any prospecting licence or mining lease
has been granted by a State Government or by any other person. The proviso
that follows sub-section (1) of Section 18A provides that in cases of
prospecting licences or mining leases granted by a State Government, no
such authorisation shall be made except after consultation with the State
Government.
24. Section 19 provides that any prospecting licences and mining
leases granted, renewed or acquired in contravention of the 1957 Act or any
rules or orders made thereunder shall be void and of no effect.
25. The 1960 Rules were framed by the Central Government, as noted
above, in exercise of the powers conferred by Section 13.
26. Chapter IV of 1960 Rules deals with grant of mining leases in
respect of land in which the minerals vest in the Government. Sub-rule (1)
of Rule 22 provides that an application for the grant of a mining lease in
respect of land in which the minerals vest in the Government shall be made
to the State Government in Form I through such officer or authority as the
State Government may specify in this behalf. Sub-rule (3) provides for the
documents to be annexed with the application and so also that such
application must be accompanied by a non-refundable fee as prescribed
therein. Sub-rule (4) of Rule 22 provides that on receipt of the
application for the grant of mining lease, the State Government shall take
decision to grant precise area and communicate such decision to the
applicant. The applicant, on receipt of communication from the State
Government of the precise areas to be granted, is required to submit a
mining plan within a period of six months or such other period as may be
allowed by the State Government to the Central Government for its approval.
The applicant is required to submit the mining plan duly approved by the
Central Government or by an officer duly authorized by the Central
Government to the State Government to grant mining lease over that area.
Sub-rule (5) of Rule 22 provides the details to be incorporated in the
mining plan.
27. Rule 26 empowers the State Government to refuse to grant or
renew mining lease over the whole or part of the area applied for. But
that has to be done after giving an opportunity of being heard and for
reasons to be recorded in writing and communicated to the applicant.
28. Rule 31 provides for time within which lease is to be executed
where an order has been made for grant of such lease on an application.
Rule 34 provides for manner of exercise of preferential rights for mining
lease.
29. Rule 35 provides that where two or more persons have applied
for a reconnaissance permit or a prospecting licence or a mining lease in
respect of the same land, the State Government shall, for the purpose of
sub-section (2) of Section 11, consider besides the matters mentioned in
clauses (a) to (d) of sub-section (3) of Section 11, the end use of the
mineral by the applicant.
30. In short, the 1957 Act provides for general restrictions on
undertaking prospecting and mining operations, the procedure for obtaining
prospecting licences or mining leases in respect of lands in which the
minerals vest in the government, the rule-making power for regulating the
grant of prospecting licences and mining leases, special powers of Central
Government to undertake prospecting or mining operations in certain cases,
and for development of minerals.
31. The Coal Mines (Taking Over of Management) Act, 15 of 1973,
(for short, ‘Coal Mines Management Act’) was passed,
“to provide for the taking over, in the public interest, of the management
of coal mines, pending nationalisation of such mines, with a view to
ensuring rational and coordinated development of coal production and for
promoting optimum utilisation of the coal resources consistent with the
growing requirements of the country, and for matters connected therewith or
incidental thereto.”
32. The Coal Mines Management Act received the assent of the
President on 31.03.1973 but it was made effective from 30.01.1973 except
Section 8(2) which came into force at once. Section 3(1) provides that on
and from the appointed day (that is, 31.01.1973) the management of all coal
mines shall vest in the Central Government. By Section 3(2), the coal mines
specified in the Schedule shall be deemed to be the coal mines the
management of which shall vest in the Central Government under sub-section
(1). Under the proviso to Section 3(2), if, after the appointed day, the
existence of any other coal mine comes to the knowledge of the Central
Government, it shall by a notified order make a declaration about the
existence of such mine, upon which the management of such coal mine also
vests in the Central Government and the provisions of the Act become
applicable thereto.
33. Immediately after the Coal Mines Management Act, the Parliament
enacted the CMN Act. CMN Act was passed,
“to provide for the acquisition and transfer of the right, title and
interest of the owners in respect of coal mines specified in the Schedule
with a view to reorganising and reconstructing any such coal mines so as to
ensure the rational, coordinated and scientific development and utilisation
of coal resources consistent with the growing requirements of the country,
in order that the ownership and control of such resources are vested in the
State and thereby so distributed as best to subserve the common good, and
for matters connected therewith or incidental thereto.”
34. Section 2(b) of the CMN Act defines a coal mine in the same
manner as the corresponding provision of the Coal Mines Management Act,
namely, a mine “in which there exists one or more seams of coal”. Section
3(1) provides that on the appointed day (i.e., 01.05.1973) the right, title
and interest of the owners in relation to the coal mines specified in the
Schedule shall stand transferred to, and shall vest absolutely in the
Central Government free from all encumbrances. Section 4(1) provides that
where the rights of an owner under any mining lease granted, or deemed to
have been granted, in relation to a coal mine, by a State Government or any
other person, vest in the Central Government under Section 3, the Central
Government shall, on and from the date of such vesting, be deemed to have
become the lessee of the State Government or such other person, as the case
may be, in relation to such coal mine as if a mining lease in relation to
such coal mine had been granted to the Central Government. The period of
such lease is to be the entire period for which the lease could have been
granted by the Central Government or such other person under the 1960 Rules
and thereupon all the rights under the mining lease granted to the lessee
are to be deemed to have been transferred to, and vested in, the Central
Government. By Section 4(2) on the expiry of the term of any lease referred
to in sub-section (1), the lease, at the option of the Central Government,
is liable to be renewed on the same terms and conditions on which it was
held by the lessor for the maximum period for which it could be renewed
under the 1960 Rules. Section 5(1) empowers the Central Government under
certain conditions to direct by an order in writing that the right, title
and interest of an owner in relation to a coal mine shall, instead of
continuing to vest in the Central Government, vest in the Government
company. Such company, under Section 5(2), is to be deemed to have become
the lessee of the coal mine as if the mining lease had been granted to it.
By Section 6(1), the property which vests in the Central Government or in a
government company is freed and discharged from all obligations and
encumbrances affecting it. Section 8 requires that the owner of every coal
mine or group of coal mines specified in the second column of the Schedule
shall be given by the Central Government in cash and in the manner
specified in Chapter VI, for the vesting in it under Section 3 of the
right, title and interest of the owner, an amount equal to the amount
specified against it in the corresponding entry in the fifth column of the
Schedule. By Section 11(1), the general superintendence, direction, control
and management of the affairs and business of a coal mine, the right, title
and interest of an owner in relation to which have vested in the Central
Government under Section 3 shall vest in the Government company or in the
Custodian, as the case may be.
35. The CMN Act came to be amended by the Coal Mines
(Nationalisation) Amendment Ordinance which was promulgated on 29.04.1976.
The Ordinance was replaced by the Coal Mines (Nationalisation) Amendment
Act, 1976 (for short, ‘1976 Nationalisation Amendment Act’). A new
section, Section 1-A was inserted by which it was declared that it was
expedient in the public interest that the Union should take under its
control the regulation and development of coal mines to the extent provided
in sub-sections (3) and (4) of Section 3 and sub-section (2) of Section 30
of the CMN Act. By sub-section (2) of Section 1-A, the declaration
contained in sub-section (1) was to be in addition to and not in derogation
of the declaration contained in Section 2 of the 1957 Act. By Section 3 of
the 1976 Nationalisation Amendment Act, a new sub-section (3) was
introduced in Section 3 of the principal Act. Under clause (a) of the newly
introduced sub-section (3) of Section 3, on and from the commencement of
Section 3 of the 1976 Nationalisation Amendment Act, no person other than
(i) Central Government or a Government company or a corporation owned,
managed or controlled by the Central Government or (ii) a person to whom a
sub-lease, referred to in the proviso to clause (c) has been granted by any
such Government, company or corporation or (iii) a company engaged in the
production of iron and steel, shall carry on coal mining operation, in
India in any form. Under clause (b) of sub-section (3), excepting the
mining leases granted before the 1976 Nationalisation Amendment Act in
favour of the Government company or corporation referred to in clause (a),
and any sub-lease granted by any such Government, Government company or
corporation, all other mining leases and sub-leases in force immediately
before such commencement shall insofar as they relate to the winning or
mining of coal, stand terminated. Clause (c) of the newly introduced sub-
section (3) of Section 3 provides that no lease for winning or mining coal
shall be granted in favour of any person other than the Government,
Government company or corporation referred to in clause (a). Under the
proviso to clause (c), the Government, Government company or the
corporation to whom a lease for winning or mining coal has been granted may
grant a sub-lease to any person in any area if, (i) the reserves of coal in
the area are in isolated small pockets or are not sufficient for scientific
and economical development in a coordinated and integrated manner, and (ii)
the coal produced by the sub-lessee will not be required to be transported
by rail. By sub-section (4) of Section 3, where a mining lease stands
terminated under sub-section (3), it shall be lawful for the Central
Government or a Government company or corporation owned or controlled by
the Central Government to obtain a prospecting licence or mining lease in
respect of the whole or part of the land covered by the mining lease which
stands terminated. Section 4 of the 1976 Nationalisation Amendment Act
introduces an additional provision in Section 30 of the principal Act by
providing that any person who engages, or causes any other person to be
engaged, in winning or mining coal from the whole or part of any land in
respect of which no valid prospecting licence or mining lease or sub-lease
is in force, shall be punishable with imprisonment for a term which may
extend to two years and also with fine which may extend to Rs.10,000/-.
36. By the Coal Mines (Nationalisation) Amendment Act, 1993 (for
short, ‘1993 Nationalisation Amendment Act’), the CMN Act was further
amended. The Statement of Objects and Reasons of the 1993 Nationalisation
Amendment Act reads thus:
“Considering the need to augment power generation and to create additional
capacity during the eighth plan, the Government have taken decision to
allow private sector participation in the power sector. Consequently, it
has become necessary to provide for coal linkages to power generating units
coming up in the private sector. Coal India Limited and Neyveli Lignite
Corporation Limited, the major producers of coal and lignite in the public
sector, are experiencing resource constraints. A number of projects cannot
be taken up in a short span of time. As an alternative, it is proposed to
offer new coal and lignite mines to the proposed power stations in the
private sector for the purpose of captive end use. The same arrangement is
also considered necessary for other industries who would be handed over
coal mines for captive end use. Washeries have to be encouraged in the
private sector also to augment the availability of washed coal for supply
to steel plants, power houses, etc.
Under the Coal Mines (Nationalisation) Act, 1973, coal mining is
exclusively reserved for the public sector, except in case of companies
engaged in the production of iron and steel, and mining in isolated small
pockets not amenable to economical development and not requiring rail
transport. In order to allow private sector participation in coal mining
for captive use for purpose of power generation as well as for other
captive end uses to be notified from time to time and to allow the private
sector to set up coal washeries, it is considered necessary to amend the
Coal and Coal Mines (Nationalisation) Act, 1973.
The Coal Mines (Nationalization) Amendment Bill, 1992 seeks to achieve the
aforesaid objectives.”
37. Section 3 of the CMN Act was amended and thereby in clause (a)
of sub-section (3) for item (iii), the following was substituted, namely,
(iii) a company engaged in –
(1) the production of iron and steel,
(2) generation of power,
(3) washing of coal obtained from a mine, or
(4) such other end use as the Central Government may, by notification,
specify.
38. By further Notification dated 15.03.1996, the Central
Government specified production of cement to be an end-use for the purposes
of the CMN Act.
39. By another Notification dated 12.07.2007, the Central
Government specified production of syn-gas obtained through coal
gasification (underground and surface) and coal liquefaction as end uses
for the purposes of the CMN Act.
40. The background in which Section 3(3) of the CMN Act was amended
to permit private sector entry in coal mining operation for captive use has
been sought to be explained by the Central Government. It is stated that
nationalization of coal through the CMN Act was done with the objective of
ensuring “rational, coordinated and scientific development and utilization
of coal resources consistent with the growing requirements of the country”
and as a first step in 1973, 711 coal mines specified in the Schedule
appended to CMN Act were nationalized and vested in the Central Government.
By 1976 Nationalisation Amendment Act, the Central Government alone was
permitted to mine coal with the limited exception of private companies
engaged in the production of iron and steel. In 1991, the country was
facing huge crisis due to (a) the situation regarding balance of payments;
(b) the economy being in doldrums; (c) dismal power situation; (d) shortage
in coal production; and (e) inability of Coal India Limited (CIL) to
produce coal because of lack of necessary resources to maximize coal
production amongst other reasons. There was a huge shortage of power in the
country. The State Electricity Boards were unable to meet power
requirements. Post liberalization, in the 8th Five Year Plan (1992-1997) a
renewed focus was placed on developing energy and infrastructure in the
country. CIL was not in a position to generate the resources required. It
was in this background that in a meeting taken by the Deputy Chairman of
the Planning Commission on 31.10.1991, it was decided that “private
enterprises may be permitted to develop coal and lignite mines as captive
units of power projects”. The approval of Cabinet was consequently sought
vide a Cabinet note dated 30.01.1992 for “allowing private sector
participation in coal mining operations for captive consumption towards
generation of power and other end use, which may be notified by Government
from time to time”. The Cabinet in the meeting held on 19.02.1992
considered the above Cabinet note and it was decided that the proposal may
be brought up only when specific projects of private sector participation
in coal mining come to the Government for consideration. Subsequently,
another Cabinet note dated 23.04.1992 was placed before the Cabinet
containing references to certain private projects like the two 250 MW
thermal power plants of RPG Enterprises, which had been recommended by the
Government of West Bengal. The proposal contained in the Cabinet note dated
23.04.1992 was approved by the Cabinet on 05.05.1992. On 15.07.1992, the
Bill for amendment of Section 3(3) of CMN Act was introduced in Rajya Sabha
and the same was passed on 21.07.1992. The Bill was passed in Lok Sabha on
19.04.1993 and got assent of the President on 09.06.1993.
41. The Central Government has highlighted that once Section 3(3)
of the CMN Act was amended to permit private sector entry in coal mining
operations for captive use, it became necessary to select the coal blocks
that could be offered to the private sector for captive use. The coal
blocks to be offered for captive mining were duly identified and a booklet
containing particulars of 40 blocks was prepared which was revised from
time to time.
42. Mr. Goolam E. Vahanvati, learned Attorney General with all
persuasive skill and eloquence at his command has sought to justify the
allocation of coal blocks by the Central Government. He submits that the
Central Government is not only empowered but is duty bound to take the lead
in allocation of coal blocks and that is what it did. He traces this power
to Sections 1A and 3(3) of the CMN Act. It is argued by the learned
Attorney General that in addition to the declaration contained in Section 2
of the 1957 Act, Parliament has made a further declaration in terms of
Entry 54 of List I (Union List) of the Seventh Schedule in Section 1A of
the CMN Act which makes specific reference to Section 3(3) of the CMN Act
and both have to be read in conjunction with each other. By virtue of
Parliament having placed the regulation and development of coal mines under
the control of the Union, Section 1A of the CMN Act regulates coal mining
operations under Sections 3(3) and 3(4). He argues that coal reserves are
primarily concentrated in seven States, viz., Maharashtra, Madhya Pradesh,
Chhattisgarh, Odisha, Jharkhand, Andhra Pradesh and West Bengal and all
these seven States have accepted and acknowledged the source of power of
Government of India with respect to allocation of coal blocks.
43. It is argued by the learned Attorney General that by virtue of
the bar contained in Section 3(3) of the CMN Act between 1976 and 1993, no
private company (other than the company engaged in the production of iron
and steel) could have carried out coal mining operations in India.
Therefore, if no other company could have carried on coal mining
operations, it follows that it could also not have applied to the State
Government for grant of lease for mining of coal. Even if they did (post
1993) make an application for grant of prospective licence/mining lease
directly to the State Government, the State Government could not process
the same until it received the letter of allocation from the Central
Government.
44. Learned Attorney General argues that the consideration of
proposals by the Central Government for allocation of coal blocks does not
contravene the provisions of the 1957 Act in any manner, firstly, because
Section 1A of CMN Act is in addition to and not in derogation of the 1957
Act; secondly, an application for allocation of a coal block is not dealt
with by the provisions of the 1957 Act; and thirdly, after allocation, the
allocatee has to make an application for grant of mining lease or
prospecting licence to the State Government in accordance with the 1957 Act
and the 1960 Rules. It is for these reasons, he submits, that none of the
States nor any private person ever challenged the grant of allocation by
the Central Government on the ground that the Central Government was not
empowered to allocate the coal blocks.
45. The above arguments of the learned Attorney General are
vehemently contested by Mr. Prashant Bhushan, learned counsel for Common
Cause. He submits that under the provisions of CMN Act only two kinds of
entities (a) Central Government and undertakings/corporations owned by the
Central Government; and (b) companies having end-use plants in iron and
steel, power, cement, etc., could work the coal mines. He submits that the
CMN Act does not, in any way, give the power of calling applications,
selection and allocation of coal blocks to the Central Government and
Section 3 of the CMN Act only provides eligibility criteria for allocation
of coal mines. The procedure for allocation continues to be governed by
the 1957 Act and it is for this reason that ultimately Section 11A
concerning allocation of coal mines was introduced in the 1957 Act only.
46. Mr. Harish N. Salve, learned senior counsel, who appeared for
interveners, Sponge Iron Manufacturers Association and Independent Power
Producers Association of India, argues that Section 1A(2) of the CMN Act
makes the declaration in addition to the existing declaration in Section 2
of the 1957 Act. The additional declaration has done away with any vestige
of power in the State in the matter of selection of beneficiaries of the
mineral and if Section 1A had not been inserted vide 1976 Nationalisation
Amendment Act, it may have been possible to argue that the State, as the
owner of the mineral, would nonetheless be required to grant the lease
under Section 10 of the 1957 Act by exercising its discretion under Section
10(3) albeit subject to further “conditionalities” imposed by Section 3(2)
of the CMN Act. The additional declaration, learned senior counsel for the
interveners submits, is intended to denude the State of power under Entry
23 of List II of the Seventh Schedule and corresponding executive power
under Article 162 of the Constitution of India. According to Mr. Harish N.
Salve, the grant or refusal of the lease by State insofar as coal is
concerned, is no longer governed by Section 11 of the 1957 Act and that it
is governed by Sections 3(3) and 3(4) of the CMN Act and, thus, it is
obvious that there has to be first a recommendation by the Central
Government before the State can exercise its discretion under Section 10(3)
of the 1957 Act and that the converse would lead to conferring upon the
State, in Section 10(3) of the 1957 Act, an unguided and un-canalised power
to grant or refuse a lease. He submits that if Section 3(3) of the CMN Act
is read as prescribing qualifications in addition to those in Section 5(1)
of the 1957 Act, such position would make the scheme of both the enactments
– 1957 Act and CMN Act – unworkable.
47. Mr. Harish N. Salve argues that the allocation letter issued by
the Central Government is the procedure which regulates the exercise under
Rule 22 of the 1960 Rules (and Section 10(3) of the 1957 Act) by the State
Government and that procedure is to ensure that a lease is granted to a
company engaged in stipulated permissible activities by making it a two
step process, viz., the issue of letter of allotment conditional upon the
end-use plant, followed by grant of a lease once end usage is achieved. He
submits that Section 3(3) of the CMN Act is fully satisfied where a lease
is granted to a company which engages in the permissible activity. Learned
senior counsel for the interveners fully supports the arguments of the
learned Attorney General that the Central Government has the power to
identify the beneficiary of an allotment and once the Central Government
has identified the beneficiary of allotment, the State will be obliged to
grant a lease if other conditions are satisfied.
48. Mr. K.K. Venugopal, learned senior counsel appearing for Coal
Producers Association argues that having regard to the declaration made
under Section 2 of the 1957 Act and the declaration under Section 1A of the
CMN Act and so also Section 3(3) thereof, it is perfectly legitimate for
the Central Government to exercise its power and jurisdiction in the manner
it has done for the purpose of selecting the allottees for coal blocks. He
contends that under Article 73 of the Constitution, the executive power of
the Union extends to matters in regard to which the Parliament has
legislative competence and this power it undoubtedly possesses by reason of
the declarations contained in the 1957 Act and the CMN Act enacted
specifically for the regulation and development of coal and coal mines.
49. It shall have been noticed that the thrust of the arguments of
the learned Attorney General and so also Mr. Harish N. Salve and Mr. K. K.
Venugopal hinges around the premise that Sections 1A and 3(3) of the CMN
Act clothe the Central Government with power to allocate the coal blocks
or, in other words, select the allottees for coal blocks. Is it so? The
constitutional philosophy about law making in relation to mines and
minerals and List I Entry 36 (Federal Legislative List) and List II Entry
23 (Provincial Legislative List) in Schedule VII of the Government of India
Act, 1935 which correspond to List I Entry 54 (Union List) and List II
Entry 23 (State List) in our Constitution has been noticed by this Court in
Monnet[2]. Speaking through one of us (R.M. Lodha, J., as he then was) in
Monnet2, this Court has noted the statement of the learned Solicitor
General in the House of Commons made in the course of debate in respect of
the above entries in the Government of India Bill that the rationale of
including only the “regulation of mines” and “development of minerals” and
that, too, only to the extent it was considered expedient in the public
interest by a federal law was to ensure that the provinces were not
completely cut out from the law relating to mines and minerals and if there
was inaction at the Centre, then the provinces could make their own laws.
Thus, power in relation to the mines and minerals was accorded to both, the
Centre and the States. The Court in Monnet2 said:
“130. …………... The management of the mineral resources has been left with
both the Central Government and the State Governments in terms of List I
Entry 54 and List II Entry 23. In the scheme of our Constitution, the State
Legislatures enjoy the power to enact legislation on the topics of “mines
and minerals development”. The only fetter imposed on the State
Legislatures under Entry 23 is by the latter part of the said entry which
says, “subject to the provisions of List I with respect to regulation and
development under the control of the Union”. In other words, the State
Legislature loses its jurisdiction to the extent to which the Union
Government had taken over control, the regulation of mines and development
of minerals as manifested by legislation incorporating the declaration and
no more. If Parliament by its law has declared that regulation of mines and
development of minerals should in the public interest be under the control
of the Union, which it did by making declaration in Section 2 of the 1957
Act, to the extent of such legislation incorporating the declaration, the
power of the State Legislature is excluded. The requisite declaration has
the effect of taking out regulation of mines and development of minerals
from List II Entry 23 to that extent. It needs no elaboration that to the
extent to which the Central Government had taken under “its control” “the
regulation of mines and development of minerals” under the 1957 Act, the
States had lost their legislative competence. By the presence of the
expression “to the extent hereinafter provided” in Section 2, the Union has
assumed control to the extent provided in the 1957 Act. The 1957 Act
prescribes the extent of control and specifies it. We must bear in mind
that as the declaration made in Section 2 trenches upon the State
legislative power, it has to be construed strictly. Any legislation by the
State after such declaration, trespassing the field occupied in the
declaration cannot constitutionally stand. …...”
50. The declaration made by Parliament in Section 2 of the 1957 Act
states that it is expedient in the public interest that the Union should
take under its control the regulation of mines and the development of
minerals to the extent provided in the Act. Legal regime relating to
regulation of mines and development of minerals is, thus, guided by the
1957 Act and the 1960 Rules. In addition to the above declaration in 1957
Act, a further declaration has been inserted by Section 1A of the CMN Act,
insofar as coal mines are concerned. By this provision, it is declared that
it is expedient in the public interest that the Union should take under its
control regulation and development of coal mines to the extent provided in
sub-sections (3) and (4) of Section 3 and sub-section (2) of Section 30 of
the CMN Act.
51. The two declarations – Section 2 of the 1957 Act and Section 1A
of the CMN Act – have to be conjointly read insofar as the control and
regulation of coal mines is concerned. As a consequence, the States have
lost their jurisdiction to legislate to the extent to which the Union had
taken over control, regulation and development of coal mines as manifested
by the two enactments. When the Parliament by its law contained in 1957 Act
has declared that regulation of mines and development of minerals should,
in the public interest, be under the control of the Union and by an
additional declaration in the CMN Act declared that regulation and
development of mines to the extent provided in sub-sections (3) and (4) of
Section 3 and sub-section (2) of Section 30 of the CMN Act should, in the
public interest, be under the control of the Union, the power of the State
legislature to legislate on the subject covered by these two enactments is
excluded. In other words, the field disclosed in the declarations under the
1957 Act and the CMN Act is abstracted from the legislative competence of
the State Legislature. The requisite declarations have the effect of taking
out regulation and development of coal mines from List II Entry 23. To
that extent, the States have lost their legislative competence.
52. In Baijnath Kadio[3] the Constitution Bench referred to two
earlier decisions of this Court in Hingir-Rampur Coal Co. Ltd.[4] and M.A.
Tulloch and Co.[5]. While dealing with declaration contained in Section 2
of the 1957 Act, the Court stated in para 14, page 847 of the Report, as
follows:
“14. The declaration is contained in Section 2 of Act 67 of 1957 and speaks
of the taking under the control of the Central Government the regulation of
mines and development of minerals to the extent provided in the Act itself.
We have thus not to look outside Act 67 of 1957 to determine what is left
within the competence of the State Legislature but have to work it out from
the terms of that Act……….”
53. In Sandur Manganese and Iron Ores Ltd.[6], this Court held that
the declaration made in Section 2 of the 1957 Act had denuded the State of
its legislative power to make any law with respect to the regulation of
mines and mineral development to the extent provided in the 1957 Act. As a
sequitur, it is also held that the State is also denuded of its executive
power in regard to matters covered by the 1957 Act and the 1960 Rules and
there is no question of the State having any power to frame a policy de-
hors the 1957 Act and the 1960 Rules.
54. Om Prakash Mehta[7] highlights that the 1957 Act and the 1960
Rules are a complete code in respect of the grant and renewal of
prospecting licences as well as mining leases in lands belonging to the
Government as well as lands belonging to private persons.
55. In Monnet2, the scope and extent of the word ‘regulation’
occurring in Section 2 has been examined and it is stated that ‘regulation’
must receive wide interpretation but the extent of control by the Union as
specified in the 1957 Act has to be construed strictly. The same meaning
must apply to the word ‘regulation’ occurring in Section 1A of the CMN Act.
In other words, the extent of control by the Union as specified in the CMN
Act has to be construed strictly.
56. In Orissa Cement Ltd.[8] a three Judge Bench of this Court
explained that in the case of a declaration under Entry 54, the legislative
power of the State Legislature is eroded only to the extent control is
assumed by the Union pursuant to such declaration as spelt out by the
legislative enactment which makes the declaration.
57. 1957 Act provides for general restrictions on undertaking
prospecting and mining operations, the procedure for obtaining
reconnaissance permits, prospecting licences and mining leases and the rule
making power of regulating the grant of reconnaissance permits, prospecting
licences and mining leases. Clause (a) of sub-section (3) of Section 3 of
the CMN Act enables persons specified therein only to carry on coal mining
operation. In clause (c), it is provided that no lease for winning or
mining coal should be granted in favour of any person other than the
Government, Government company or corporation referred to in clause (a).
Under clause (b) of sub-section (3), excepting the mining leases granted
before 1976 in favour of the Government, Government company or corporation
referred to in clause (a) and any sub-lease(s) granted by any such
Government, Government company or corporation, all other mining leases and
sub-leases in force immediately before such commencement insofar as they
relate to the winning or mining of coal stand terminated. When a sub-lease
stands terminated under sub-section (3), sub-section (4) of Section 3
provides that it shall be lawful for the Central Government or the
Government company or corporation owned or controlled by the Central
Government to obtain a prospecting licence or a mining lease in respect of
whole or part of the land covered by mining lease which stands so
terminated. The above provisions in the CMN Act, as inserted in 1976,
clearly show that the target of these provisions in the CMN Act is coal
mines, pure and simple. CMN Act effectively places embargo on granting the
leases for winning or mining of coal to persons other than those mentioned
in Section 3(3)(a). Does CMN Act for the purposes of regulation and
development of mines to the extent provided therein alter the legal regime
incorporated in the 1957 Act? We do not think so. What CMN Act does is
that in regard to the matters falling under the Act, the legal regime in
the 1957 Act is made subject to the prescription under Section 3(3)(a) and
(c) of the CMN Act. 1957 Act continues to apply in full rigour for
effecting prescription of Section 3(3)(a) and (c) of the CMN Act. For
grant of reconnaissance permit, prospecting licence or mining lease in
respect of coal mines, the MMDR regime has to be mandatorily followed.
1957 Act and so also the 1960 Rules do not provide for allocation of coal
blocks nor they provide any mechanism, mode or manner of such allocation.
58. Learned Attorney General submits that an application for allocation
of a coal block is not dealt with by the 1957 Act and, therefore,
consideration of proposals for allocation of coal blocks does not
contravene the provisions of the 1957 Act. The submission of the learned
Attorney General does not merit acceptance for more than one reason.
First, although the Central Government has pre-eminent role under the 1957
Act inasmuch as no reconnaissance permit, prospecting licence or mining
lease of coal mines can be granted by the State Government without prior
approval of the Central Government but that pre-eminent role does not
clothe the Central Government with the power to act in a manner in
derogation to or inconsistent with the provisions contained in the 1957
Act. Second, the CMN Act, as amended from time to time, does not have any
provision, direct or indirect, for allocation of coal blocks. Third, there
are no rules framed by the Central Government nor is there any notification
issued by it under the CMN Act providing for allocation of coal blocks by
it first and then consideration of an application of such allottee for
grant of prospecting licence or mining lease by the State Government.
Fourth, except providing for the persons who could carry out coal mining
operations and total embargo on all other persons undertaking such
activity, no procedure or mode or manner for winning or mining of coal
mines is provided in the CMN Act or the 1960 Rules or by way of any
notification. Fifth, even in regard to the matters falling under CMN Act,
such as prescriptive direction that no person other than those provided in
Sections 3(3) and 3(4) shall carry on mining operations in the coal mines,
the legal regime under the 1957 Act, subject to the prescription under
Sections 3(3) and 3(4), continues to apply in full rigour. Mr. Harish N.
Salve, learned senior counsel for the interveners, is not right in his
submission that allocation letter issued by the Central Government is the
procedure which regulates the exercise under Rule 22 of the 1960 Rules. Had
that been so, some provisions to that effect would have been made in the
CMN Act or the 1960 Rules framed thereunder but there is none.
59. The submission of the learned Attorney General that the 7
States - Maharashtra, Madhya Pradesh, Chhattisgarh, Odisha, Jharkhand,
Andhra Pradesh and West Bengal – which have coal deposits, have accepted
and acknowledged the source of power of the Central Government with regard
to allocation of coal blocks is not fully correct. Odisha has strongly
disputed that position. Odisha’s stand is that the system of allocation of
coal blocks by the Central Government is alien to the legal regime under
the CMN Act and the 1957 Act. It is true that many of these States have
taken the position that allocation letter confers a right on such allottee
to get mining lease and the only role left with the State Government is to
carry out the formality of processing the application and for execution of
lease deed, but, in our view, the source of power of the Central
Government in allocation of coal blocks is not dependant on the
understanding of the State Governments but it is dependant upon whether
such power exists in law or not. Indisputably, power to regulate assumes
the continued existence of that which is to be regulated and it includes
the authority to do all things which are necessary for the doing of that
which is authorized including whatever is necessarily incidental to and
consequential upon it but the question is, can this incidental power be
read to empower the Central Government to allocate the coal blocks which is
neither contemplated by the CMN Act nor by the 1957 Act? In our opinion,
the answer has to be in the negative. It is so because where a statute
requires to do a certain thing in a certain way, the thing must be done in
that way or not at all. Other methods of performance are necessarily
forbidden[9]. This is uncontroverted legal principle.
60. It is argued by the learned Attorney General that the
allocation letter does not by itself confer the right to work mines and the
identification of the coal block does not impinge upon the rights of the
State Government under the 1957 Act. Learned Attorney General argues that
allocation of coal block is essentially an identification exercise where
coal blocks selected by the CIL for captive mining were identified by the
Screening Committee for development by an allocatee, after considering the
suitability of the coal block (in terms of exercise and quality of reserve)
vis-à-vis the requirements of the end-use plan of the applicant. It is
submitted by the Attorney General that a letter of allocation is the first
step. It entitles the allocatee to apply to the State Government for grant
of prospecting licence/mining lease in accordance with the provisions of
the 1957 Act. The right to apply for grant of prospecting licence/mining
lease does not imply that with the issuance of allocation letter the
allocatee automatically gets the clearances and approval required under the
1957 Act, the 1960 Rules, the Forest (Conservation) Act, 1980 and the
Environment (Protection) Act, 1986, etc. According to the learned Attorney
General, after allocation, the following steps are required to be complied
with:
The allocatee is required to apply to the State Government for grant of
Prospecting Licence in case of an unexplored block, or a Mining Lease in
case of an explored block.
On receipt of the application for grant of Prospecting License or Mining
Lease, as the case may be, the State Government, in the case of Prospecting
Licence can process the application for Prospecting Licence in accordance
with Chapter III of the 1960 Rules.
In the case of application for Mining Lease (in Form I), the State
Government has to take a decision to grant precise area for the purpose of
the lease and communicate such decision to the applicant.
On receipt of the communication from the State Government of the precise
area to be granted, the applicant is required to submit a mining plan to
the Central Government for its approval. [Rule 22(4)]
After the mining plan has been duly approved by the Central Government, the
applicant submits the same to the State Government for grant of mining
lease over the area.
After receipt of the duly approved mining plan, the State Government makes
a proposal for grant of prior consent by the Central Government in terms of
the proviso to Section 5(1) of the 1957 Act.
In addition to the approved mining plan, the allocatee is required to
obtain permission under Section 2 of the Forest (Conservation) Act, 1980 if
the coal block is located in a scheduled forest. Further, the allocatee is
required to submit to the State Government, prior environmental clearance
from the Ministry of Environment and Forests, Government of India for the
project. Forest Clearance and EIA clearance operate separately.
Mining Lease is thereafter granted by the State Government, after verifying
that all statutory requirements have been duly complied with by the
allocatee.
61. There seems to be no doubt to us that allocation letter is not
merely an identification exercise as is sought to be made out by the
learned Attorney General. From the position explained by the concerned
State Governments, it is clear that the allocation letter by the Central
Government creates and confers a very valuable right upon the allottee. We
are unable to accept the submission of the learned Attorney General that
allocation letter is not bankable. As a matter of fact, the allocation
letter by the Central Government leaves practically or apparently nothing
for the State Government to decide save and except to carry out the
formality of processing the application and for execution of the lease deed
with the beneficiary selected by the Central Government. Though, the legal
regime under the 1957 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 processual formalities only. As noticed earlier, the
declaration under Section 1A of the CMN Act does not take away the power of
the State under Section 10(3) of the 1957 Act. It is so because the
declaration under Section 1A of the CMN Act is in addition to the
declaration made under Section 2 of the 1957 Act and not in its derogation.
1957 Act continues to apply with the same rigour in the matter of grant of
prospecting licence or mining lease of coal mines but the eligibility of
persons who can carry out coal mining operations is restricted to the
persons specified in Section 3(3)(a) of the CMN Act.
62. In Tara Prasad Singh[10], a seven Judge Constitution Bench
while dealing with the purposiveness of the CMN Act, as amended in 1976,
vis-à-vis the 1957 Act, stated that nothing in this Act (CMN) could be
construed as a derogation of the principle enunciated in Section 18 of the
1957 Act. The Court said:
“Therefore, even in regard to matters falling under the Nationalisation
Amendment Act which terminates existing leases and makes it lawful for the
Central Government to obtain fresh leases, the obligation of Section 18 of
the Act of 1957 will continue to apply in its full rigour. As contended by
the learned Solicitor General, Section 18 contains a statutory behest and
projects a purposive legislative policy. The later Acts on the subject of
regulation of mines and mineral development are linked up with the policy
enunciated in Section 18.”
(emphasis supplied by us)
63. The observations made by this Court in Tara Prasad Singh10
about interplay between the CMN Act and the 1957 Act with reference to the
policy enunciated in Section 18, in our view, apply equally to the entire
legal regime articulated in the 1957 Act. We are of the opinion that
nothing should be read in the two Acts, namely, CMN Act and the 1957 Act,
which results in destruction of the policy, purpose and scheme of the two
Acts. It is not right to suggest that by virtue of declaration under
Section 1A of the CMN Act, the power of the State under Section 10(3) of
the 1957 Act has become unavailable. The submission of Mr. Harish N.
Salve, learned senior counsel for the interveners that additional
declaration under Section 1A of the CMN Act seeks to do away with any
vestige of power in the State in the matter of selection of beneficiaries
of the mineral is not meritorious. Had that been so, Rule 35 of the 1960
Rules would not have been amended to provide that where two or more persons
have applied for reconnaissance permit or prospecting licence or a mining
lease in respect of the same land, the State Government shall, inter alia,
consider the end-use of the mineral by the applicant. The declaration under
Section 1A has not denuded the States of any power in relation to grant of
mining leases and determining of those permitted to carry on coal mining
operation.
64. The allocation of coal block is not simply identification of the
coal block or the allocatee as contended by the learned Attorney General
but it is in fact selection of beneficiary. As a matter of fact, Mr.
Harish N. Salve, learned senior counsel for the interveners, has taken a
definite position that allocation letter may not by itself confer purported
rights in the minerals but such allocation has legal consequences and
confers private rights to the allocatees for obtaining the coal mining
leases for their end-use plants.
65. In view of the foregoing discussion, we hold, as it must be,
that the exercise undertaken by the Central Government in allocating the
coal blocks or, in other words, the selection of beneficiaries, is not
traceable either to the 1957 Act or the CMN Act. No such legislative
policy (allocation of coal blocks by the Central Government) is discernible
from these two enactments. Insofar as Article 73 of the Constitution is
concerned, there is no doubt that the executive power of the Union extends
to the matters with respect to which the Parliament has power to make laws
and the executive instructions can fill up the gaps not covered by
statutory provisions but it is equally well settled that the executive
instructions cannot be in derogation of the statutory provisions. The
practice and procedure for allocation of coal blocks by the Central
Government through administrative route is clearly inconsistent with the
law already enacted or the rules framed.
66. The principle of Contemporanea Expositio was pressed into
service by the learned Attorney General and the learned senior counsel for
interveners. It is argued that the Ministries of Central Government, the
State Governments and all concerned have understood the declaration under
Section 1A read with Section 3 of the CMN Act recognizing that the
selection of beneficiaries through allocation letter is the task of the
Union. The exposition of the legal position by them must be accepted as
there is nothing to show that the exposition in respect of allocation of
coal blocks received by the Central Government, State Governments and all
concerned was clearly wrong. In this regard, reliance has been placed on
the decision of this Court in Desh Bandhu Gupta[11].
67. In Desh Bandhu Gupta11, this Court has dealt with the principle
of Contemporanea Expositio. While doing so, this Court referred to
Crawford on Statutory Construction (1940 ed.) and the two decisions of the
Calcutta High Court in Baleshwar Bagarti[12] and Mathura Mohan Saha[13]
and culled out the legal position in para 9 (page 572 of the Report) as
under:
“9. It may be stated that it was not disputed before us that these two
documents which came into existence almost simultaneously with the issuance
of the notification could be looked at for finding out the true intention
of the Government in issuing the notification in question, particularly in
regard to the manner in which outstanding transactions were to be closed or
liquidated. The principle of contemporanea expositio (interpreting a
statute or any other document by reference to the exposition it has
received from contemporary authority) can be invoked though the same will
not always be decisive of the question of construction (Maxwell 12th ed.p.
268). In Crawford on Statutory Construction (1940 ed.) in para 219 (at pp.
393-395) it has been stated that administrative construction (i.e.
contemporaneous construction placed by administrative or executive officers
charged with executing a statute) generally should be clearly wrong before
it is overturned; such a construction, commonly referred to as practical
construction, although not controlling, is nevertheless entitled to
considerable weight; it is highly persuasive. In Baleshwar Bagarti v.
Bhagirathi Dass [ILR 35 Cal 701 at 713] the principle, which was reiterated
in Mathura Mohan Saha v. Ram Kumar Saha [ILR 43 Cal 790 : AIR 1916 Cal 136]
has been stated by Mookerjee, J., thus:
‘It is a well settled principle of interpretation that courts in construing
a statute will give much weight to the interpretation put upon it, at the
time of its enactment and since, by those whose duty it has been to
construe, execute and apply it….. I do not suggest for a moment that such
interpretation has by any means a controlling effect upon the courts; such
interpretation may, if occasion arises, have to be disregarded for cogent
and persuasive reasons, and in a clear case of error, a court would without
hesitation refuse to follow such construction.
Of course, even without the aid of these two documents which contain a
contemporaneous exposition of the Government’s intention, we have come to
the conclusion that on a plain construction of the notification the proviso
permitted the closing out or liquidation of all outstanding transactions by
entering into a forward contract in accordance with the rules, bye-laws and
regulations of the respondent.”
68. The above is consistent view. In our view, an interpretation
to the statute received from contemporary authority is not binding upon the
courts and may have to be disregarded if such interpretation by the
contemporary authority is clearly wrong. The process evolved by the Central
Government for allocation of coal blocks for captive use has significantly
and effectively reversed the scheme provided in the 1957 Act inasmuch as in
most of the cases the applications have been made directly to the Central
Government. West Bengal has stated that in some cases, they had knowledge
of such applications and in some cases the State Government had no such
knowledge. Then once allocation letter has been issued by the Central
Government, virtually no power remains with the State Government in
objectively considering the application for reconnaissance permit,
prospecting licence or mining lease. Maharashtra says, “…the role of the
State Government is limited in the case of coal mines as the discretion to
reject once the Central Government has issued an allocation letter is
virtually non-existent………”. Odisha says, “……Once the beneficiary has been
identified by the Central Government by making the allocation of coal
block, there was nothing left out for the State Government to decide…………”.
It must be noted without an iota of hesitation that the process for
allocation of coal blocks for captive use has rendered the role of the
State Government only mechanical and the concept of ‘previous approval’ in
Section 5 of the 1957 Act meaningless after recommendation has been made
by the State Government. It is not without any reason that confronted with
this difficulty, the 1957 Act has been amended and Section 11A inserted in
2010 providing for allocation of coal blocks and also the mode and manner
of such allocation.
69. Assuming that the Central Government has competence to make
allocation of coal blocks, the next question is, whether such allocation
confers any valuable right amounting to grant of largesse? Learned
Attorney General argues that allocation of coal blocks does not amount to
grant of largesse since it is only the first statutory step. According to
him, the question whether the allocation amounts to grant of largesse must
be appreciated not from the perspective whether allocation confers any
rights upon the allocatee but whether allocation amounts to conferment of
largesse upon the allocatee. An allocatee, learned Attorney General
submits, does not get right to win or mine the coal on allocation and,
therefore, an allocation letter does not result in windfall gain for the
allocatee. He submits that diverse steps, as provided in Rules 22A, 22B,
and 22(5) of the 1960 Rules and the other statutory requirements, have to
be followed and ultimately the grant of prospecting licence in relation to
unexplored coal blocks or grant of mining lease with regard to explored
blocks entitles the allocatee/licensee/lessee to win or mine the coal.
70. We are unable to accept the submission of the learned Attorney
General that allocation of coal block does not amount to grant of largesse.
It is true that allocation letter by itself does not authorize the
allottee to win or mine the coal but nevertheless the allocation letter
does confer a very important right upon the allottee to apply for grant of
prospecting licence or mining lease. As a matter of fact, it is admitted
by the interveners that allocation letter issued by the Central Government
provides rights to the allottees for obtaining the coal mines leases for
their end-use plants. The banks, financial institutions, land acquisition
authorities, revenue authorities and various other entities and so also the
State Governments, who ultimately grant prospecting licence or mining
lease, as the case may be, act on the basis of the letter of allocation
issued by the Central Government. As noticed earlier, the allocation of
coal block by the Central Government results in the selection of
beneficiary which entitles the beneficiary to get the prospecting licence
and/or mining lease from the State Government. Obviously, allocation of a
coal block amounts to grant of largesse.
71. Learned Attorney General accepted the position that in the
absence of allocation letter, even the eligible person under Section 3(3)
of the CMN Act cannot apply to the State Government for grant of
prospecting licence or mining lease. The right to obtain prospecting
licence or mining lease of the coal mine admittedly is dependant upon the
allocation letter. The allocation letter, therefore, confers a valuable
right in favour of the allottee. Obviously, therefore, such allocation has
to meet the twin constitutional tests, one, the distribution of natural
resources that vest in the State is to sub-serve the common good and, two,
the allocation is not violative of Article 14.
72. The PIL petitioners have seriously criticized the entire
allocation process by the Central Government. They submit that allocations
made on the recommendations of the Screening Committee and through the
government dispensation route after 1993 are in violation of statutory
provisions contained in the 1957 Act. Moreover, the Central Government
while making the allocations failed to even follow the basic statutory
eligibility for grant of captive coal blocks. The power for grant of
captive coal block is governed by Section 3(3)(a) of the CMN Act.
According to which, only two kinds of entities, viz., (a) Central
Government, or undertakings/corporations owned by the Central Government or
(b) a company having end-use plants in iron, steel, power, washing of coal
or cement, can carry out coal mining operations. The State Government
undertakings are not included in the above provision and any allocation to
them can only be made if they are engaged in any of the end-uses specified
under that provision. Commercial mining by the State Public Sector
Undertakings/companies is not permitted, yet as many as 38 coal blocks were
allocated to State Public Sector Undertakings for commercial mining though
these undertakings were not engaged in any specified end-use activity. They
submit that allocation of coal blocks made by the Central Government,
whether by way of Screening Committee route or dispensation route, is ipso
facto illegal and it is in total violation of the CMN Act. Moreover, it is
submitted that almost all these State PSUs then signed agreements with
private companies wherein the right to mine coal was given to them which
later sold the coal to the State PSUs either at the market price or at CIL
price.
73. According to Mr. Prashant Bhushan, learned counsel for the
petitioner-Common Cause and Mr. Manohar Lal Sharma, petitioner-in-person,
the expression “engaged in” in Section 3(3)(a)(iii) means that the company
that was applying for the coal block must have set up an iron and steel
plant, power plant or cement plant and be engaged in the production of
steel, power or cement. Most companies were silent in their applications
as to whether or not the power, steel or cement plant was operational.
They only stated that they proposed to set up such plants. Moreover, from
2006 even the requirement of end-use project was done away with and the
Central Government allowed companies to apply and obtain coal blocks, and
it was stated that the coal mined from these blocks would be transferred to
an end-user company. Thus, the basic minimum statutory requirements were
not adhered to and followed in making allocation of coal blocks.
74. It is submitted on behalf of the PIL petitioners that the
allocation of those blocks which had reserves far in excess of requirement
for the end-use project was made which demonstrates the total non-
application of mind and arbitrariness in the decision making process.
Mr. Prashant Bhushan, learned counsel for Common Cause and Mr. Manohar Lal
Sharma, petitioner-in-person submit that the allocation of coal blocks
constitutes a largesse as it confers very valuable benefit on the applicant
to get mining lease. It is argued that the arbitrary and non-transparent
allocation process has resulted in windfall gain to the allottees and the
State has been deprived of the full value of its resources. Besides that
the process of allocation was arbitrary and non-transparent, it is
submitted by the PIL petitioners that the process also suffers from mala
fides inasmuch as though a comprehensive note on competitive bidding on
allocation of coal blocks was placed by the then Coal Secretary on
16.07.2004, the allocation process through the Screening Committee
continued leading to windfall gain to the private companies and thereby
corresponding loss to the public exchequer. In this regard, Mr. Prashant
Bhushan, learned counsel for Common Cause and Mr. Manohar Lal Sharma,
petitioner-in-person referred to Parliamentary Standing Committee Report
submitted on 24.03.2013, Central Empowered Committee Report made in I.A.
No.2167 to the Forest Bench regarding the loss from the allocation of coal
mines in the State of Madhya Pradesh, the additional affidavit of the
Government of Maharashtra filed on 09.01.2014 and the CAG Report.
75. It is argued on behalf of the PIL petitioners that the
Screening Committee did not follow any objective criteria in determining as
to who is to be selected or who is to be rejected. The minutes of the
Screening Committee meetings do not show that selection was made after
proper assessment. There is no evaluation of merit and no inter se
comparison of the applicants. No chart of evaluation was prepared. The
determination of the Screening Committee is apparently subjective. It is
no co-incidence that a large number of allottees are either powerful
corporate groups or shady companies linked with politicians and ministers
or those who came with high profile recommendations. Most of these
allottees were in fact ineligible for allocation; they had misrepresented
the facts and were not more meritorious than others whose claims have been
rejected, but by serious manipulations and abuse, they were able to get the
coal blocks.
76. With regard to Government dispensation route whereby public
sector corporations and undertakings were allocated coal blocks, it is
submitted by Mr. Prashant Bhushan, learned counsel for the Common Cause and
Mr. Manohar Lal Sharma, petitioner-in-person that such allocations were
violative of Section 3 of the CMN Act. The State Government undertakings
are not included in Section 3 and in any case allocation to them could have
been made only if they were engaged in any of the end-uses specified under
Section 3(3)(a)(iii) of the CMN Act. The State PSUs have signed agreements
with private companies under which substantial benefits or interest from
the coal blocks had accrued to the private companies thereby causing huge
loss to the public exchequer and windfall gain to the private companies.
The PIL petitioners, therefore, vehemently argued that the allocation of
coal blocks deserves to be quashed being non-transparent, arbitrary,
illegal and unconstitutional.
77. According to Central Government, the need for a Screening
Committee was felt because development of coal mines for captive end-uses
required consideration of inputs from a variety of stakeholders such as
the Ministry of Coal, Ministry of Railways, the concerned State Government
(owner of the coal block), the concerned Administrative Ministry like
Ministry of Power (for inputs pertaining to the end use plant) and Coal
India Limited (to protect CIL’s interest in coal blocks being developed by
its subsidiaries). Initially, by Office Memorandum dated 14.07.1992[14],
the Screening Committee was constituted by the Ministry of Coal for
scrutinizing applications/proposals received from private power generating
companies requesting for ownership and operation of captive coal mines.
The Screening Committee was reconstituted on more than one occasion by
Office Memorandum dated 05.08.1993[15], Office Memorandum dated
10.01.2000[16], Office Memorandum dated 17.04.2003[17] and Office
Memorandum dated 26.09.2005[18].
78. Learned Attorney General argues that the Screening Committee
provided opportunity to stakeholders to express their views about
permitting a particular company to develop a particular coal block for its
end-use plant. The State Governments as the owners of coal blocks within
their territories participated in the Screening Committee meetings. At no
stage, anybody objected to the allocation of coal blocks by the Central
Government through the Screening Committee route. Learned Attorney General
in this regard referred to the affidavits filed on behalf of Maharashtra,
Madhya Pradesh, Odisha, Chhattisgarh, West Bengal, Jharkhand and Andhra
Pradesh. The process of allocation was participatory. The coal blocks
were allocated to private companies only from the approved list of blocks
to be offered for captive mining and the interests of CIL, being paramount,
were duly protected and preserved. Only in such cases of subsisting lease,
where CIL had no plans to work these blocks in near future and consented to
these blocks being offered for captive mining, few of such blocks were
allocated but CIL’s interest was kept into consideration. He, thus,
submitted that allocation of coal blocks during the subject period was
transparent and it does not suffer from any constitutional vice or legal
infirmity.
79. Moreover, it is the submission of the learned Attorney General
that allocation of coal blocks by the Central Government has brought
significant benefits and investment to the States in which these coal
blocks and the associated end-use plants are located. Due to substantial
investment and employment opportunities generated in various States, the
State Governments have accepted, participated and made recommendations in
the meetings of the Screening Committee. A number of blocks have been
allocated in accordance with the recommendations of the State Governments.
Besides the benefits and investment to the State in which coal blocks and
the associated end-use plants are located, learned Attorney General also
submits that there are number of States where coal blocks are not located,
which have got benefits due to the substantial investment in associated end
use plants. For instance, it is submitted that blocks in Maharashtra,
namely, Baranj – I to IV, Kiloni and Manoradeep were allocated to Karnataka
Power Corporation for captive use in its power generation plants. The end-
use is the supply of coal to Bellary Thermal Power Station (in Karnataka)
which is supplying 1000 MW power to the State grid.
80. Learned Attorney General for the sake of convenience divided
the allocations recommended by the Screening Committee for the period
between 14.07.1993 and 03.07.2008 in 36 meetings into four periods: first
period between 14.07.1993 to 19.08.2003 (1st meeting till the 21st
meeting); second period from 04.11.2003 to 18.10.2005 (22nd meeting to 30th
meeting); third period from 29/30.06.2006 to 07/08.09.2006 (32nd meeting
till the 34th meeting) and the fourth period from 20.06.2007 to 03.07.2008
(35th and 36th meeting). Learned Attorney General argues that in the first
period, 21 coal blocks were recommended for allocation after full
consideration of each case. During the second period, 26 blocks were
recommended. These recommendations were also made by the Screening
Committee after consideration of each applicant. The third period relates
to recommendations made pursuant to the advertisement issued by Ministry of
Coal in September, 2005. The decision to advertise was taken as there was
growing demand for coal blocks which had substantially matured in the
economy by this time. In the third period, the Screening committee
recommended 20 blocks for allocation. In the fourth period, recommendations
were made by the Screening Committee pursuant to the advertisement issued
in 2006 whereby 38 coal blocks were advertised for allocation, out of which
15 blocks were reserved for the power sector. Learned Attorney General
clarified that a coal block that was approved as one block in the
advertisement has been subsequently considered as two blocks in the 36th
meeting of the Screening Committee. Learned Attorney General has fairly
admitted that the minutes of the Screening Committee meetings in the third
and fourth periods do not contain the particulars showing consideration of
each application. He, however, justifies the manner in which the exercise
was undertaken by the Screening Committee in the third and fourth periods
as, according to him, the huge number of applications had been received by
the Ministry of Coal in response to its advertisement and recording of
particulars of each application in the minutes was not possible. Moreover,
he submits that each application was duly considered and evaluated with
reference to other applications by the Administrative Ministry concerned
and the recommendations of the Screening Committee were primarily based on
the exercise conducted by the concerned Administrative Ministry. Thus,
learned Attorney General submits that the entire exercise by the Screening
Committee was done properly and in a non-arbitrary manner.
81. Learned Attorney General vehemently contends that allocation of
coal blocks without auction is not unlawful. He submits that lack of
public auction does not render the allocation process arbitrary. Moreover,
according to him, when coal mining sectors were first opened up to private
participants, the idea of the Central Government was to encourage the
private sector so that they could come forward and invest. Allocation of
coal blocks by public auction in such a scenario would have been
impractical and unrealistic. As a matter of fact, he would submit that
when the proposal for introduction of competitive bidding was first mooted
in June, 2004, the State Governments expressed their reservations and
concerns. In this regard, learned Attorney General referred to the letters
sent by the Governments of Chhattisgarh, West Bengal, Rajasthan and Odisha.
Learned Attorney General submits that the concerns of the State
Governments could not have been brushed aside by introducing competitive
bidding by an administrative fiat. Moreover, according to the learned
Attorney General, competitive bidding could have resulted in increase in
the input price which would have a cascading effect.
82. From the above submissions, the following questions fall for
determination:
(i) Whether the allocation of coal blocks ought to have been done only by
public auction?
(ii) Whether the allocation of coal blocks made on the basis of
recommendations of the Screening Committee suffer from any constitutional
vice and legal infirmity?
(iii) 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?
83. Two recent decisions viz., (1) Centre for Public Interest
Litigation (2G case)[19] and (2) Natural Resources Allocation
Reference[20] directly deal with the question of auction as mode for the
disposal or allocation of natural resources. But before we consider these
two decisions, reference to some of the decisions of this Court, which had
an occasion to deal with disposal of natural resources, may be of some help
in appreciating this aspect in correct perspective.
84. P.N. Bhagwati, J. in Kasturi Lal Lakshmi Reddy[21] had said
that where the State was allocating resources such as water, power, raw
materials, etc., for the purpose of encouraging setting up of industries
within the State, the State was not bound to advertise and tell the people
that it wanted a particular industry to be set up within the State and
invite those interested to come up with proposals for the purpose. It was
also observed that if any private party comes before the State and offers
to set up an industry, the State would not be committing breach of any
constitutional or legal obligation if it negotiates with such party and
agrees to provide resources and other facilities for the purpose.
85. In Sachidanand Pandey[22] this Court had observed that
ordinary rule for disposal of State-owned or public-owned property, was by
way of public auction or by inviting tenders but there could be situations
where departure from the said rule may be necessitated but then the reasons
for the departure must be rational and should not be suggestive of
discrimination and that nothing should be done which gives an appearance of
bias, jobbery or nepotism.
86. The statement of law in Sachidanand Pandey22 was echoed again
in Haji T.M. Hassan Rawther[23], wherein this Court reiterated that the
public property owned by the State or by an instrumentality of State should
be generally sold by public auction or by inviting tenders. It was
emphasized that this rule has been insisted upon not only to get the
highest price for the property but also to ensure fairness in the
activities of the State and public authorities and to obviate the factors
like bias, favoritism or nepotism. Clarifying that this is not an
invariable rule, the Court reiterated that departure from the rule of
auction could be made but then it must be justified.
87. The above principle is again stated by this Court in M.P. Oil
Extraction[24], in which this Court said that distribution of largesse by
inviting open tenders or by public auction is desirable but it cannot be
held that in no case distribution of such largesse by negotiation is
permissible.
88. In Netai Bag[25] this Court said that when any State land is
intended to be transferred or the State largesse is decided to be
conferred, resort should be had to public auction or transfer by way of
inviting tenders from the people as that would be a sure method of
guaranteeing compliance with mandate of Article 14 of Constitution but non-
floating of tenders or not holding public auction would not in all cases be
deemed to be the result of the exercise of the executive power in an
arbitrary manner.
89. In Villianur Iyarkkai Padukappu Maiyam[26] the matter before
this Court related to the selection of contractor for development of the
port of Pondicherry without floating a tender or holding public auction.
The Court said that where the State was allocating resources such as water,
power, raw materials, etc., for the purpose of encouraging development of
the port, the State was not bound to advertise and tell the people that it
wanted development of the port in a particular manner and invite those
interested to come up with proposals for the purpose.
90. There are numerous decisions of this Court dealing with the
mode and manner of disposal of natural resources but we think it is not
necessary to refer to all of them. Having indicated the view taken by this
Court in some of the cases, now we may turn to 2G case19. In that case,
the two-Judge Bench of this Court stated that a duly publicised auction
conducted fairly and impartially was perhaps the best method for alienation
of natural resources lest there was likelihood of misuse by unscrupulous
people who were only interested in garnering maximum financial benefit and
have no respect for the constitutional ethos and values. Court laid
emphasis that while transferring or alienating the natural resources, the
State is duty bound to adopt the method of auction by giving wide publicity
so that all eligible persons can participate in the process.
91. The above view in 2G case19 necessitated the reference by the
President of India to this Court under Article 143(1) of the Constitution.
The first two questions – Question 1 and Question 2 – referred to this
Court for consideration and report read as under:
“Question 1 - Whether the only permissible method for disposal of all
natural resources across all sectors and in all circumstances is by the
conduct of auctions?
Question 2 - Whether a broad proposition of law that only the
route of auctions can be resorted to for disposal of natural resources does
not run contrary to several judgments of the Supreme Court including those
of the larger Benches?”
92. The Constitution Bench which dealt with the above reference
observed that the answer to the following three questions would provide
comprehensive answer to the parent question, viz., Question 1:
(i) Are some methods ultra vires and others intra vires the Constitution
of India, especially Article 14?
(ii) Can disposal through the method of auction be elevated to a
constitutional principle?
(iii) Is this Court entitled to direct the executive to adopt a certain
method because it is the “best” method? If not, to what extent can the
executive deviate from such “best” method?
93. The Constitution Bench clarified that the statement of law in
2G case19 that while transferring or alienating the natural resources, the
State is duty bound to adopt the method of auction was confined to the
specific case of spectrum and not for dispensation of all natural
resources. The Constitution Bench said that findings of this Court in 2G
case19 were limited to the case of spectrum and not beyond that and that it
did not deal with the modes of allocation for natural resources other than
spectrum.
94. The Constitution Bench while dealing with the aspect of
disposal of natural resources other than auction, divided the consideration
of this aspect under two heads, viz., “Legitimate deviations from auction”
and “Potential of abuse”. Under the head “Legitimate deviations from
auction” the Court considered the earlier decisions of this Court in
Kasturi Lal Lakshmi Reddy21, Sachidanand Pandey22, Haji T.M. Hassan
Rawther23, M.P. Oil Extraction24, Netai Bag25 and Villianur Iyarkkai
Padukappu Maiyam26, which we have briefly noted above, and it was held that
there is no constitutional mandate in favour of auction under Article 14.
In the main judgment (paras 129 to 131, pg. 92), the Constitution Bench
stated as under:
“129. Hence, it is manifest that there is no constitutional mandate in
favour of auction under Article 14. The Government has repeatedly deviated
from the course of auction and this Court has repeatedly upheld such
actions. The judiciary tests such deviations on the limited scope of
arbitrariness and fairness under Article 14 and its role is limited to that
extent. Essentially whenever the object of policy is anything but revenue
maximization, the Executive is seen to adopt methods other than auction.
130. A fortiori, besides legal logic, mandatory auction may be contrary to
economic logic as well. Different resources may require different
treatment. Very often, exploration and exploitation contracts are bundled
together due to the requirement of heavy capital in the discovery of
natural resources. A concern would risk undertaking such exploration and
incur heavy costs only if it was assured utilization of the resource
discovered; a prudent business venture, would not like to incur the high
costs involved in exploration activities and then compete for that resource
in an open auction. The logic is similar to that applied in patents. Firms
are given incentives to invest in research and development with the promise
of exclusive access to the market for the sale of that invention. Such an
approach is economically and legally sound and sometimes necessary to spur
research and development. Similarly, bundling exploration and exploitation
contracts may be necessary to spur growth in a specific industry.
131. Similar deviation from auction cannot be ruled out when the object of
a State policy is to promote domestic development of an industry, like in
Kasturi Lal’s case, discussed above. However, these examples are purely
illustrative in order to demonstrate that auction cannot be the sole
criteria for alienation of all natural resources.”
95. While dealing with the argument that even if the method of
auction was not a mandate under Article 14, it must be the only permissible
method due to the susceptibility of other methods to abuse, the Court under
the head “Potential of abuse” held that a potential for abuse cannot be the
basis for striking down the method as ultra vires the Constitution. The
Court noted two decisions of this Court in R.K. Garg[27] and D.K.
Trivedi[28] and held that neither auction nor any other method of disposal
can be held ultra vires the Constitution merely because of a potential
abuse. The Constitution Bench (para 135, pgs. 93-94) stated as under:
“135. Therefore, a potential for abuse cannot be the basis for striking
down a method as ultra vires the Constitution. It is the actual abuse
itself that must be brought before the Court for being tested on the anvil
of constitutional provisions. In fact, it may be said that even auction has
a potential of abuse, like any other method of allocation, but that cannot
be the basis of declaring it as an unconstitutional methodology either.
These drawbacks include cartelization, “winners curse” (the phenomenon by
which a bidder bids a higher, unrealistic and unexecutable price just to
surpass the competition; or where a bidder, in case of multiple auctions,
bids for all the resources and ends up winning licenses for exploitation of
more resources than he can pragmatically execute), etc. However, all the
same, auction cannot be called ultra vires for the said reasons and
continues to be an attractive and preferred means of disposal of natural
resources especially when revenue maximization is a priority. Therefore,
neither auction, nor any other method of disposal can be held ultra vires
the Constitution, merely because of a potential abuse.”
96. In Natural Resources Allocation Reference20 the Constitution
Bench, in the main judgment, thus, concluded that auction despite being a
more preferable method of alienation / allotment of natural resources
cannot be held to be constitutional requirement or limitation for
alienation of all natural resources and, therefore, every method other than
auction cannot be struck down as ultra vires the constitutional mandate.
The Court also opined that auction as a mode cannot be conferred the status
of a constitutional principle. While holding so, the Court held that
alienation of natural resources is a policy decision and the means adopted
for the same are, thus, executive prerogatives. The Court summarized the
legal position as under:
“146. To summarise in the context of the present Reference, it needs to be
emphasised that this Court cannot conduct a comparative study of the
various methods of distribution of natural resources and suggest the most
efficacious mode, if there is one universal efficacious method in the first
place. It respects the mandate and wisdom of the executive for such
matters. The methodology pertaining to disposal of natural resources is
clearly an economic policy. It entails intricate economic choices and the
Court lacks the necessary expertise to make them. As has been repeatedly
said, it cannot, and shall not, be the endeavour of this Court to evaluate
the efficacy of auction vis-à-vis other methods of disposal of natural
resources. The Court cannot mandate one method to be followed in all facts
and circumstances. Therefore, auction, an economic choice of disposal of
natural resources, is not a constitutional mandate. We may, however, hasten
to add that the Court can test the legality and constitutionality of these
methods. When questioned, the courts are entitled to analyse the legal
validity of different means of distribution and give a constitutional
answer as to which methods are ultra vires and intra vires the provisions
of the Constitution. Nevertheless, it cannot and will not compare which
policy is fairer than the other, but, if a policy or law is patently unfair
to the extent that it falls foul of the fairness requirement of Article 14
of the Constitution, the Court would not hesitate in striking it down.
147. Finally, market price, in economics, is an index of the value that a
market prescribes to a good. However, this valuation is a function of
several dynamic variables: it is a science and not a law. Auction is just
one of the several price discovery mechanisms. Since multiple variables are
involved in such valuations, auction or any other form of competitive
bidding, cannot constitute even an economic mandate, much less a
constitutional mandate.
148. In our opinion, auction despite being a more preferable method of
alienation/allotment of natural resources, cannot be held to be a
constitutional requirement or limitation for alienation of all natural
resources and therefore, every method other than auction cannot be struck
down as ultra vires the constitutional mandate.
149. Regard being had to the aforesaid precepts, we have opined that
auction as a mode cannot be conferred the status of a constitutional
principle. Alienation of natural resources is a policy decision, and the
means adopted for the same are thus, executive prerogatives. However, when
such a policy decision is not backed by a social or welfare purpose, and
precious and scarce natural resources are alienated for commercial pursuits
of profit maximising private entrepreneurs, adoption of means other than
those that are competitive and maximise revenue may be arbitrary and face
the wrath of Article 14 of the Constitution. Hence, rather than prescribing
or proscribing a method, we believe, a judicial scrutiny of methods of
disposal of natural resources should depend on the facts and circumstances
of each case, in consonance with the principles which we have culled out
above. Failing which, the Court, in exercise of power of judicial review,
shall term the executive action as arbitrary, unfair, unreasonable and
capricious due to its antimony with Article 14 of the Constitution.”
97. J.S. Khehar, J., while concurring with the main opinion has
stated that auction is certainly not a constitutional mandate in the manner
expressed, but it can be applied in some situations to maximise revenue
returns, to satisfy legal and constitutional requirements. In his view, if
the State arrives at a conclusion, in a given situation, that maximum
revenue would be earned by auction of the particular natural resource, then
that alone would be the process which it would have to adopt. In the
penultimate para of his opinion, J.S. Khehar, J., observed, “………there can
be no doubt about the conclusion recorded in the “main opinion” that
auction which is just one of the several price recovery mechanisms, cannot
be held to be the only constitutionally recognised method for alienation of
natural resources. That should not be understood to mean, that it can
never be a valid method for disposal of natural resources…………..”.
98. In Natural Resources Allocation Reference20, the Constitution
Bench said that reading auction as a constitutional mandate would be
impermissible because such an approach may distort another constitutional
principle embodied in Article 39(b). In the main judgment, with reference
to Article 39(b), the Court stated as follows:
“113…The disposal of natural resources is a facet of the use and
distribution of such resources. Article 39(b) mandates that the ownership
and control of natural resources should be so distributed so as to best
subserve the common good. Article 37 provides that the provisions of Part
IV shall not be enforceable by [pic]any court, but the principles laid down
therein are nevertheless fundamental in the governance of the country and
it shall be the duty of the State to apply these principles in making laws.
Therefore, this Article, in a sense, is a restriction on “distribution”
built into the Constitution. But the restriction is imposed on the object
and not the means. The overarching and underlying principle governing
“distribution” is furtherance of common good. But for the achievement of
that objective, the Constitution uses the generic word “distribution”.
Distribution has broad contours and cannot be limited to meaning only one
method i.e. auction. It envisages all such methods available for
distribution/allocation of natural resources which ultimately subserve the
“common good”.
*** *** ***
115. It can thus, be seen from the aforequoted paragraphs that the term
“distribute” undoubtedly, has wide amplitude and encompasses all manners
and methods of distribution, which would include classes, industries,
regions, private and public sections, etc. Having regard to the basic
nature of Article 39(b), a narrower concept of equality under Article 14
than that discussed above, may frustrate the broader concept of
distribution, as conceived in Article 39(b). There cannot, therefore, be a
cavil that “common good” and “larger public interests” have to be regarded
as constitutional reality deserving actualisation.
116. The learned counsel for CPIL argued that revenue maximisation during
the sale or alienation of a natural resource for commercial exploitation is
the only way of achieving public good since the revenue collected can be
channelised to welfare policies and controlling the burgeoning deficit.
According to the learned counsel, since the best way to maximise revenue is
through the route of auction, it becomes a constitutional principle even
under Article 39(b). However, we are not persuaded to hold so. Auctions may
be [pic]the best way of maximising revenue but revenue maximisation may not
always be the best way to subserve public good. “Common good” is the sole
guiding factor under Article 39(b) for distribution of natural resources.
It is the touchstone of testing whether any policy subserves the “common
good” and if it does, irrespective of the means adopted, it is clearly in
accordance with the principle enshrined in Article 39(b).
*** *** ***
119. The norm of “common good” has to be understood and appreciated in a
holistic manner. It is obvious that the manner in which the common good is
best subserved is not a matter that can be measured by any constitutional
yardstick—it would depend on the economic and political philosophy of the
Government. Revenue maximisation is not the only way in which the common
good can be subserved. Where revenue maximisation is the object of a
policy, being considered qua that resource at that point of time to be the
best way to subserve the common good, auction would be one of the
preferable methods, though not the only method. Where revenue maximisation
is not the object of a policy of distribution, the question of [pic]auction
would not arise. Revenue considerations may assume secondary consideration
to developmental considerations.
120. Therefore, in conclusion, the submission that the mandate of Article
14 is that any disposal of a natural resource for commercial use must be
for revenue maximisation, and thus by auction, is based neither on law nor
on logic. There is no constitutional imperative in the matter of economic
policies—Article 14 does not predefine any economic policy as a
constitutional mandate. Even the mandate of Article 39(b) imposes no
restrictions on the means adopted to subserve the public good and uses the
broad term “distribution”, suggesting that the methodology of distribution
is not fixed. Economic logic establishes that alienation/allocation of
natural resources to the highest bidder may not necessarily be the only way
to subserve the common good, and at times, may run counter to public good.
Hence, it needs little emphasis that disposal of all natural resources
through auctions is clearly not a constitutional mandate.”
99. In light of the above legal position, the argument that auction
is a best way to select private parties as per Article 39(b) does not merit
acceptance. The emphasis on the word “best” in Article 39(b) by the
learned senior counsel for the intervener does not deserve further
discussion in light of the legal position exposited by the Constitution
Bench in Natural Resources Allocation Reference20 with reference to Article
39(b). We are fortified in our view by a recent decision of this Court (3-
Judge Bench) in Goa Foundation[29] wherein following Natural Resources
Allocation Reference20, it is stated, “…it is for the State Government to
decide as a matter of policy in what manner the leases of these mineral
resources would be granted, but this decision has to be taken in accordance
with the provisions of the MMDR Act and the Rules made thereunder and in
consonance with the constitutional provisions…”.
100. The explanation by the Central Government for not adopting the
competitive bidding is that coal is a natural resource used as a raw
material in several basic industries like power generation, iron and steel
and cement. The end products of these basic industries are, in turn, used
as inputs in almost all manufacturing and infrastructure development
industries. Therefore, the price of coal occupies a fundamental place in
the growth of the economy and any increase in the input price would have a
cascading effect. The auction of coal blocks could not have been possible
when the power generation and, consequently, coal mining sectors were first
opened up to private participants as the private sector needed to be
encouraged at that time to come forward and invest. Allocation of coal
blocks through competitive bidding in such a scenario would have been
impractical and unrealistic. When the proposal for introduction of
competitive bidding was first mooted in June, 2004, the State Governments
expressed their reservations based on diverse concerns. The Government of
Chhattisgarh inter alia pointed out that (a) competitive bidding would
result in substantial increase in the cost of coal for iron/steel
undertakings, (b) there were large number of projects under implementation
whose viability is based on availability of coal as per the then existing
policy, (c) competitive bidding would raise the price of domestic coal,
which would result in end-use projects in inland States like Chhattisgarh
becoming unviable due to additional costs by transporting coal by
rail/road, and (d) competitive bidding would result in only the bigger
players getting the coal blocks. The Government of West Bengal opposed the
introduction of competitive bidding because (a) the then existing system
could accommodate both subjective and objective aspects of the projects
whereas competitive bidding would only lead to coal blocks going to the
highest bidder, (b) competitive bidding would not allow priority being
accorded to the power sector, (c) competitive bidding would result in
views of the State Governments becoming redundant, and (d) competitive
bidding would lead to concentration of industries in a particular State.
The Government of Orissa opposed competitive bidding because (a) the State
Government had signed MOUs for investment in end-use plants based on
existing policy and those MOUs would suffer, (b) State Government’s
authority to recommend cases for allocation based on investment in the
State would not be available, and (c) competitive bidding would prevent the
State from leveraging its coal reserves to accelerate its industrial
development.
101. It was for the above reasons that the Central Government says
that competitive bidding was not introduced from 2004.
102. As a matter of fact, the Central Government has explained the
circumstances because of which since 1992-1993 competitive bidding for
allocation of coal blocks was not followed. The explanation is that in 1992-
1993, the power generation and coal mining sectors were first opened up to
private participants and, at that time, the private sector had to be
encouraged to come forward and invest. Allocation of coal blocks through
auction in such a scenario would have been impractical and unrealistic
because during that time existing demand for coal was not being fully met
by CIL and SCCL. There was supply-demand mismatch and there was also a huge
shortage of power in the country. The State Electricity Boards had been
unable to meet power requirements.
103. The material placed on record reveals that the then Coal
Secretary in his note dated 16.07.2004 and subsequent note dated 30.7.2004
mooted introduction of bidding system to achieve transparency and
objectivity in the allocation process and also to tap part of the windfall
gain to the allottee for captive mining. These notes were considered at the
level of Minister (Coal and Mines) and the PMO and certain disadvantages of
allocation of coal blocks through competitive bidding were noted.
Ultimately, it appears that in the month of October, 2004 the proposal for
competitive bidding was not pursued further as it was felt that this would
result in delay in the allocation of coal blocks. The Coal Secretary in
October, 2004 after discussion also felt that since a number of applicants
had requested for allotment of blocks based on the current policy, it would
not be appropriate to change the allotment policy through competitive
bidding in respect of applications received on the basis of existing
policy. He suggested that the policy of allotment through competitive
bidding could be made prospective and pending applications might be decided
on the basis of existing policy.
104. Then, there appears to be exchange of notes and discussion at
various levels on the question whether CMN Act needed to be amended before
the proposed competitive bidding becomes operational or 1957 Act so that
the system of competitive bidding could be made applicable to all minerals
covered under the said Act. The opinion of Department of Legal Affairs was
also sought. In 2006, it appears that Ministry of Coal communicated to the
PMO and Cabinet Secretariat that Ministry of Law and Justice has advised
Ministry of Coal to initiate suitable measures for amendment in the 1957
Act for addressing the issue of competitive bidding. A Bill to amend the
1957 Act was introduced in the Parliament by the Ministry of Mines. The
Amendment Bill was then referred to Standing Committee on Coal and Steel
for examination and for its report. On receipt of the report from the
Standing Committee in 2009, the MMDR Amendment Bill, 2008 was passed by
both the Houses of Parliament in 2010 and ultimately Section 11A was
inserted in the 1957 Act providing for competitive bidding for allocation
of coal blocks by the Central Government. Then, on 02.02.2012, rules for
auctions by competitive bidding of coal mines were notified.
105. The above facts show that it took almost 8 years in putting in
place allocation of captive coal blocks through competitive bidding. During
this period, many coal blocks were allocated giving rise to present
controversy, which was avoidable because competitive bidding would have
brought in transparency, objectivity and very importantly given a level
playing field to all applicants of coal and lowered the difference between
the market price of coal and the cost of coal for the allottee by way of
premium which would have accrued to the Government. Be that as it may,
once it is laid down by the Constitution Bench of this Court in Natural
Resources Allocation Reference20 that the Court cannot conduct a
comparative study of various methods of distribution of natural resources
and cannot mandate one method to be followed in all facts and
circumstances, then if the grave situation of shortage of power prevailing
at that time necessitated private participation and the Government felt
that it would have been impractical and unrealistic to allocate coal blocks
through auction and later on in 2004 or so there was serious opposition by
many State Governments to bidding system, and the Government did not pursue
competitive bidding/public auction route, then in our view, the
administrative decision of the Government not to pursue competitive bidding
cannot be said to be so arbitrary or unreasonable warranting judicial
interference. It is not the domain of the Court to evaluate the advantages
of competitive bidding vis-à-vis other methods of distribution / disposal
of natural resources. However, if the allocation of subject coal blocks is
inconsistent with Article 14 of the Constitution and the procedure that has
been followed in such allocation is found to be unfair, unreasonable,
discriminatory, non-transparent, capricious or suffers from favoritism or
nepotism and violative of the mandate of Article 14 of the Constitution,
the consequences of such unconstitutional or illegal allocation must
follow.
106. The Central Government in its first counter affidavit filed on
22.01.2013 has stated that for the period from 1993 to 31.03.2011, 216
allocations have been made. In the course of arguments, learned Attorney
General submitted that in addition to 216, 2 coal blocks for Coal to Liquid
(CTL) projects were also allocated. According to said affidavit, out of 216
allocations, 105 allocations were made to private companies, 99 allocations
were made to Government companies and 12 allocations were made to Ultra
Mega Power Projects (UMPPs) and that after adjusting 24 de-allocations and
2 re-allocations, a total number of 194 allocations, including allocations
to private parties, form the subject matter of the writ petitions. In the
course of arguments, however, learned Attorney General submitted that total
41 de-allocations have already been ordered.
107. In the first counter affidavit filed on 22.01.2013, the Central
Government has also given the details of the procedure adopted for
allocation of the above coal blocks, in which it is stated that the
allocations to the private companies were made through the Screening
Committee route. As regards allocations made to Government companies,
before 2001, allocations were made only through the Screening Committee
route but on and from 2001, allocations were made through the Screening
Committee route as well as directly by the Ministry of Coal. The
allocations which were made by the Ministry of Coal to the Government
companies are referred to by the Central Government as the Government
dispensation route. Insofar as UMPPs are concerned, it is the stand of the
Central Government that captive blocks were pre-identified for the
projects, that bidders for the projects were selected as per the
competitive bidding guidelines of the Ministry of Power (tariff based
bidding) and, thus, the 12 allocations to UMPPs were done by a competitive
method. It is further stated in the affidavit that the two blocks allotted
for Coal to Liquid (CTL) projects were after inviting applications through
advertisement in 2008 and that the applications received were considered by
an inter-Ministerial Group (IMG) under the Chairmanship of Member (Energy),
Planning Commission and Secretaries of Department of Expenditure, Ministry
of Coal, Department of Industrial Policy and Promotion, Department of
Science and Technology, Ministry of Petroleum and Natural Gas and Principal
Advisor (Energy), Planning Commission as members.
108. We shall first deal with the coal allocations made to the
private companies as well as Government companies for captive purpose
through Screening Committee route.
109. On 14.09.2012, while issuing notice to the Union of India, the
Court framed six questions on which answer was sought in the counter
affidavit. One of such questions was about the details of guidelines
framed by the Central Government for allocation of subject coal blocks. In
the first counter affidavit filed on 22.01.2013, it is stated that from
1993 until 31st meeting held on 23.06.2006, the Screening Committee framed
its own guidelines for allocation of coal blocks. Insofar as guidelines
for 31st to 36th meetings of the Screening Committee are concerned, it is
stated that the Ministry of Coal framed the guidelines and these guidelines
were brought to the attention of the members of the Screening Committee.
110. The minutes of the 1st meeting held on 14.07.1993 indicate that
the guidelines were framed in that meeting by the Screening Committee for
the primary purpose to identify suitable blocks for captive development by
power generating companies. The guidelines framed by the Screening
Committee on 14.07.1993 read as under:
“(i) Preferably blocks in green field areas where basic infrastructure
like road, rail links, etc. is yet to be developed should be given to the
private sector. The areas where CIL has already invested in creating such
infrastructure for opening new mines should not be handed over to the
private sector, except on reimbursement of costs.
(ii) The blocks offered to private sector should be at reasonable distance
from existing mines and projects of CIL in order to avoid operational
problems.
(iii) Blocks already identified for development by CIL, where adequate
funding is on hand or in sight should not be offered to the private sector.
(iv) Private sector should be asked to bear full cost of exploration in
these blocks which may be offered.
(v) While discussing proposals of power generating companies and
identifying blocks the requirement of coal for 30 years would be
considered.”
111. In its 2nd meeting held on 13.08.1993, the Screening Committee
accepted that any addition to generation of power, whether captive or
utility, amounted to value addition and, therefore, no distinction would be
made between the two.
112. In the 3rd meeting held on 27.09.1993, the Screening Committee
discussed whether the guidelines for identification of coal blocks for the
power sector were suitable for adoption in respect of the iron and steel
sector particularly in view of the position explained by the representative
of Ministry of Steel that requirement of coal for iron and steel plants
would be much less than the coal required by the power plants. The
Screening Committee, accordingly, decided to permit sub-blocking of blocks
identified by Central Mine Planning and Design Institute Ltd. (CMPDIL).
113. In the 4th meeting dated 12.01.1994, proposals relating to M/s.
RPG Industries Ltd./Calcutta Electric Supply Corporation, M/s. Kalinga
Power Corporation, M/s. Indian Aluminium Company, M/s. Indian Charge Chrome
Ltd., Andhra Pradesh State Electricity Board, M/s. Development Consultants
Ltd., M/s. Gujarat Power Corporation Ltd., M/s. Associated Cement Company
Ltd., M/s. Hellmuth, Obata and Kassabagm P.C. were considered in
continuation of earlier meetings. Certain blocks were identified for
allocation to some of these companies.
114. In its 5th meeting held on 26.05.1994, the Screening Committee
while considering whether any further changes were required in the
procedures being adopted for considering proposals for captive mining
recorded that in the earlier meetings, the Ministry of Coal had been
liberal in considering proposals with a view to make the scheme a success.
In the said meeting, the Committee reviewed the progress made by M/s. RPG
Industries Ltd., M/s. Kalinga Power Corporation Ltd., M/s. Nippon Denro
Ispat Nigam Ltd., Nagpur, M/s. Andhra Pradesh State Electricity Board, M/s.
Tamil Nadu Electricity Board, M/s. Indian Aluminium Company Ltd., M/s.
Development Consultants Ltd., M/s. Associated Cement Company Ltd., M/s.
Hellmuth, Obata and Kassabagm P.C. and M/s. Gujarat Power Corporation Ltd.
115. In the 6th meeting held on 20.01.1995, the Committee decided
to earmark Sarisatolli block and western part of Tara block for captive
mining by M/s. RPG Industries Ltd. for proposed Budge-Budge TPS and
Balagarh TPS. The proposal of M/s. Jindal Strips Ltd. for a captive block
for expansion of their Sponge Iron Plant from 2 lakh tonnes per annum to 6
lakh tonnes per annum was also discussed in the meeting and it was decided
that CMPDIL would carry out the exercise of sub-blocking so that a suitable
block can be allocated to M/s. Jindal Strips Ltd.
116. In the 7th meeting held on 06.06.1995, the Chairman felt the
need for fixing certain time limit and laying down corresponding milestones
otherwise there would be a tendency on the part of developer of the mining
block to proceed in a casual manner with the result that the coal
production would not be realized within the required time frame. It was
decided that once the blocks are identified, the party concerned should
complete necessary formalities and should be able to apply for lease within
6 months. In continuation of earlier meetings, the Screening Committee
further considered the proposal of M/s. RPG Industries Ltd. for
identification of coal mining blocks for supply of coal to the proposed
Budge-Budge TPS, Balagarh TPS and Dholpur TPS. In the said meeting, the
proposals of M/s. West Bengal State Electricity Board and M/s. Videocon
Power Ltd. were also considered.
117. In the 8th meeting held on 04.10.1995, the proposal of M/s.
Steel Authority of India Limited for captive blocks in Jharia coalfields
was discussed. The Committee decided to identify Parbatpur, Mahal,
Seetanala and Tasra blocks located in Jharia Coalfields for captive
development by SAIL.
118. In the 9th meeting held on 20.12.1995, the proposal of M/s.
Nippon Denro Ispat Ltd. for identification of additional coal mining blocks
for supply of coal to the 2nd stage of the Bhadravati TPS was discussed.
Apart from the above-mentioned proposal, the other proposals were from
Maharashtra State Electricity Board, National Thermal Power Corporation and
Lloyds Metals (Sponge Iron Plant) and Larsen & Tourbo captive power plant,
Chandrapur. Since there were conflicting requirements of various projects,
the Committee decided that the long-term coal requirements of various
projects of M/s. Nippon Denro Ispat Ltd., Maharashtra State Electricity
Board, National Thermal Power Corporation, Lloyds Metals and Larsen &
Tourbo should be examined in a comprehensive exercise so that the available
resources are optimally utilized. Review of the proposals of M/s. Jindal
Strips – Sponge Iron Plant and M/s. Monnet Ispat – Sponge Iron Plant was
also undertaken.
119. In the 10th meeting held on 03.04.1996, the Committee noted
with concern that out of the blocks already offered, only four parties have
taken action for development of blocks. The Committee decided that all the
identified parties should be issued a notice to pay the exploration cost by
30.06.1996 and take action for development of the block failing which the
offer would be cancelled.
120. In the 11th meeting held on 26/27.09.1997, the Screening
Committee carried out a review of the progress made so far. It was noted
that M/s. RPG Industries for Budge-Budge TPS, M/s. Indian Aluminium Company
Ltd. for new captive power plants in Orissa, M/s. Associated Cement Co.
Ltd. for new captive power plant at Wadi, Karnataka, M/s. West Bengal State
Electricity Board for higher generation for Bendel TPS and Santaldih TPS,
M/s. West Bengal Power Development Corpn. Ltd. for Bakreshwar TPS, M/s. BLA
Industries for 24 MW capacity power plant in Distt. Narsinghpur, Madhya
Pradesh, M/s. Jindal Strips Ltd. for Sponge Iron Plant in Madhya Pradesh
and M/s. Nippon Denko Ispat Ltd. for Bhadravati TPS, Stage – I, had paid
exploration charges to CIL and submitted mining plans which had been
approved by the Standing Committee of Ministry of Coal. In that meeting,
the representative of M/s. Nippon Denko Ispat Ltd. submitted that Bunder
block was far away from the power plant as well as from the other two
mining blocks allotted to them and requested that a block nearer to the
other two blocks, i.e., Baranj and Lohara West may be considered for
allotment by the Committee. Accordingly, the Committee decided to allocate
Monora Deep Block, which is adjacent to Baranj and Lohara Extn. (which is
adjacent to Lohara West) to M/s. Nippon Denko Ispat Ltd. The Committee
also discussed the proposals which were considered earlier but no final
decision could be taken. The Committee decided that Utkal ‘C’ block in
Talcher coalfield having geological reserves of about 190 m.t. may be
considered for allotment to M/s. Indian Charge Chrome Ltd. for two
additional captive power plants at Choudhwar, Orissa. It is pertinent to
mention that the Committee found that the total requirement for all the
three units would be about 2.36 m.t. and for a life of 30 years, it would
work out to be 71 m.t. The Committee, however, proposed allocation of
Utkal ‘C’ block having geological reserves of about 190 m.t. In that
meeting, Takli-Jena-Bellora block was allotted to M/s. Lloyds Metals and
Engineers Ltd. and the company was directed to obtain mining lease within
six months of issue of these minutes. As regards the proposal of M/s.
Associated Cement Company Ltd. for expansion at Wadi Cement Works in
Karnataka, the Committee decided to allot Bisrar block in addition to
Lohara (East) allocated earlier as the total requirement was of the order
of 3.7 m.t. In the said meeting, M/s. J.K.Corp. Ltd. was allocated Gare
IV/8 block with gross geological reserves of 91 m.t. for their Cement Plant
at Sirohi and Khemli in Rajasthan for which their total coal requirement
was 1.23 m.t.p.a.
121. In the 12th meeting held on 03.04.1998, the Committee allocated
Gare-Palma IV/2 and IV/3 blocks having Geological reserves of 100 and 110
m.t. to M/s. Jindal Power Ltd. for Raigarh TPS Stage – II (500 MW). In
the said meeting, M/s. Central Collieries Co. requested the Screening
Committee for a portion of the Takli-Jena-Bellora block which had already
been allotted to M/s. Lloyds Metals & Engineers Ltd. In the course of
discussions, it transpired that the total reserves in the block are higher
than the requirement of M/s. Lloyds Metals. The Committee was of the view
that it was possible to allot some of the reserves to a party other than
M/s. Lloyd Metals. The Committee noted the clarification made by DGM (MS)
that it was possible to cut out an independent sub-block of 40 m.t. coal
reserves within the Takli-Jena Bellora block. Accordingly, the same was
allotted to M/s. Central Collieries Co.
122. In the 13th meeting held on 24.08.1998, as regards the proposal
of M/s. Nippon Denro Ispat Ltd. – Bhandravati TPS I, the Committee was
informed that the Apex Committee of CIL on captive mining blocks had
objected to allocation of Kilhoni block to Nippon on the ground that the
company had been changing its preference from one block to another block
and allotment of Kilhoni block would not be sufficient to satisfy the
company’s coal requirement for 30 years. Therefore, it was suggested that
the company should either work the Lohara West block or enter into an
agreement with WCL for supply of their balance coal requirement. The
Ministry of Power, on the other hand, indicated that they had no objection
if the same was acceptable to the Government of Maharashtra. It was also
indicated that in the absence of firm figures of availability of coal and
its likely price on cost plus basis, only an in-principle agreement could
be arrived at for linkage in lieu of the Kilhoni block. It was also stated
that the Kilhoni block being adjacent to Baranj block would be more
practicable for them to mine the reserves whereas WCL would have to develop
the block as an isolated project. The Government of Maharashtra strongly
supported the allocation of Kilhoni block to the company. The Director
(Technical), CIL and CMD, WCL indicated that the Kilhoni block was likely
to be taken up in the 11th plan period and pointed out some unique
geographical and man-made features of the block which, according to them,
would make the project both cost and time intensive, resulting in very high
cost for WCL. The Committee felt that Nippon would be better placed to
tackle these problems. It was finally decided that M/s. Nippon Denro Ispat
Ltd will work Baranj I-IV, Manora Deep and Kilhoni Blocks for mining coal
for Bhadravati TPS, Lohara West and Lohara West Extension blocks will be
withdrawn from the party and no further request for change or modification
of blocks made by the party will be considered.
123. The Committee had decided in the 12th meeting to allocate
southern portion of Takli-Jena-Bellora block to M/s. Central Collieries Co.
Ltd. In the 13th meeting, the representative of M/s. Central Collieries
Co. Ltd. requested that a decision on allocation of a small portion of
Kilhoni block should be taken. It was informed to the Committee that the
area identified at Kilhoni by the company was actually a different
location, and that location did not form part of the identified blocks for
captive mining.
124. In its 14th meeting held on 18/19.06.1999, the Screening
Committee decided as follows:
“(i) The Administrative Ministries will assess the soundness of the
proposals in consultation with the State Govt. before sending their
comments/recommendations to the Screening Committee for consideration of
allotment of a captive mining block; and
(ii) The Administrative Ministries should consult State Governments as
well as use their own agencies for assessing the progress of the
implementation of end use plants for which blocks have already been
allotted by the Screening Committee and send a report to the Screening
Committee for further action.”
124.1. In the said meeting, Adviser (Projects), Ministry of Coal
informed that a policy has been framed that captive mining block producing
less than 1 m.t. of coal per annum from an opencast block and less than
0.25 m.t. of coal per annum from an underground block will not be
considered for allotment. The Committee agreed to adopt the above policy.
In that meeting, the Committee decided to withdraw the Gare-Palma IV/4
block allotted to M/s. Phoenix Cement Ltd. The block Gare-Palma IV/8
allotted to M/s. J.K. Corp. Ltd. was also withdrawn due to non-seriousness
of the party in the matter.
124.2 In the 14th meeting, the proposal of M/s. Monnet Ispat Ltd. for
a new Sponge Iron plant in Keonjhar area of Orissa of 1.2 million tonnes of
capacity for which the requirement of 2.2 m.t. of raw coal has been
indicated, was discussed. This plant will have a CPP of 40 MW in the 1st
phase. The party requested for Utkal-B2 block in Talcher coalfield having
106 m.t. of reserves. The party informed that the existing plant capacity
of 1 lakh tonnes is being expanded to 3 lakh tonnes by March, 2000 and to 5
lakh tonnes beyond that. During discussion, CMD MCL was of the view that
Chendipada block is likely to have better grade of coal and suggested to
the party in preference of Utkal B-2 block. However, the party insisted
for Utkal B-2 block and the same was allotted subject to the condition that
the party must achieve financial closure within one year of allotment of
the block, failing which the allotment will be withdrawn.
124.3. As regards the proposal of M/s. Jayaswal Neco Ltd. for their
Sponge Iron Plant, the party had earlier requested for Gare-Palma IV/6 and
IV/7 blocks for meeting their Sponge Iron Plant and a captive power plant.
Now, they requested for allocation of IV/4 and IV/8 blocks as the same have
been withdrawn from other firms. Accordingly, the same were allotted to
M/s. Jayaswal Neco Ltd.
124.4 The Brahmadiha block was allotted to M/s. Castron Technology in
the 14th meeting. The Committee noted that the mine did not fit in the
criteria of captive block as per its latest guidelines, but decided to make
the allocation in view of the fact that the reserves could either be
permitted to be exploited by a private party or lost forever.
125. In the 15th meeting held on 06.03.2000, M/s. Jindal Strips Ltd.
had submitted a request for a block in Talcher coalfield to meet the
requirement of sponge iron plant of 2 m.t. capacity. In January, 2000, the
party made an application for allocation of Utkal D block in MCL having
geological reserves of 190 m.t. for their proposed sponge iron plant of 1
m.t. capacity requiring clean coal of 1.2 mtpa. The party also proposed to
set up a washery of 3 m.t. input capacity. The requirement of the block
was proposed by the party for working the sponge iron plant and the CPP for
a period of 50 years. In the course of discussion, it was pointed out that
allocation of block for captive mining is generally made on the basis of 30
years’ requirement whereas the party had requested for allocation of block
on the basis of 50 years requirement for their sponge iron plant. It was
also indicated that the total requirement of coal for 30 years life period
of the project worked out to be 90 m.t. for which a geological reserve of
about 120 m.t. should be adequate. The estimated reserve of Utkal D block
was about 190 m.t. and was, therefore, higher than the probable
requirement. The representative of Ministry of Steel indicated that coal
block having geological reserve of about 125 m.t. would be adequate. Yet,
the Committee decided to allot Utkal D block in principle to M/s. Jindal
Strips Ltd. but this was cancelled in the 16th meeting.
125.1. The proposal of M/s. Prakash Industries was rejected in the
14th meeting in view of the company’s reference to BIFR and the party
enjoying coal linkage of 0.76 m.t. for their existing plant. In November
and December, 1999, they informed that they had a linkage of 0.5 mtpa only
and that they proposed to develop an underground mine for the balance 0.5
mtpa. The Committee in the 15th meeting decided to allocate Choita block,
having geological reserves of about 60.00 m.t. to M/s. Prakash Industries.
125.2. In the said meeting, M/s. Raipur Alloys & Steel Ltd. had
requested for allocation of Choita block for their sponge iron plant at
Siltara, Raipur, the capacity of which was proposed to be expanded from the
existing 60,000 tpa to 3 lakh tonnes per annum and for a captive power
plant of 18 MW. That block was not in the identified list of captive
mining. Accordingly, they revised their request for allocation of Gare
Palma IV/7 or any one of the three blocks in Gare Palma, i.e., IV/7, IV/6
and IV/8 in order of preference. The Committee decided to allocate Gare
Palma IV/7 to M/s. Raipur Alloys & Steel Ltd. with coal reserves of 156
m.t. which is on the much higher side than the requirement of the company.
126. In the 16th meeting held on 31.05.2001, M/s. Orissa Mining
Corporation Ltd. was allotted Utkal D block for generation of power through
Orissa Power Generation Corporation.
127. In the 17th meeting held on 28.11.2001, the request of M/s. GVK
Power Gowindal Sahib Ltd. for allotment of Tokusud coal block for their
proposed 2 x 250 MW power plant was considered and Tokusud North block was
allotted to them.
128. In the 18th meeting held on 05.05.2003, the Screening
Committee, for the first time, considered the issue of determining inter se
merit of applicants for the same block as well as certain other issues to
bring in transparency and felt that guidelines for determining inter se
priority among claims for blocks between public sector and private sector
for captive use and between public sector for non-captive use and private
sector for captive use need to be evolved. The Chairman of the Committee
put the following few general guidelines for consideration:
(i) The blocks in captive list should be allocated to an applicant only
after the same have been put in the pubic domain for a reasonable time and
not immediately upon their inclusion in the list of block identified for
captive mining, so as to give an opportunity to interested parties to apply
for the same and make the process more transparent. The need for giving
very cogent and detailed reasons before withdrawal of a block from captive
list by CIL was also emphasized.
(ii) The Administrative Ministries were requested to appraise the projects
from the point of view of the genuineness of the applicant, techno-economic
viability of the project and the state of preparedness/progress in the
project while indicating the quantity and quality of coal requirement of
the project and recommending allocation of captive block to the applicant.
In case there were more than one applicant for the same block the
Administrative Ministry should rank them based on the project appraisal and
the past/track record of the applicant without necessarily naming the block
to be allotted. This would facilitate the Screening Committee in allotting
a suitable block to the applicant more objectively.
(iii) Only those power projects would be considered for allocation which
are included in the Xth Plan Period.
128.1. The above guidelines met with general approval. The
Screening Committee also decided that while recommendations of the State
Governments would continue to be taken into consideration, the same would
not be taken as pre-condition for entertaining the application by it. In
that meeting, the two blocks- Bandhak (East) and Bandhak (West) were also
included in the list of captive blocks.
129. In the 19th meeting held on 26.05.2003, various projects
were reviewed.
129.1. In that meeting, the Committee allocated Bandhak (West) to M/s.
Shree Baidyanath Ayurved Bhawan Ltd. Similarly, M/s. Fieldmining & Ispat
Limited was allocated Warora (West) and Chinora blocks.
130. In the 20th meeting held on 06.06.2003, the Committee discussed
the matter of allocation of captive mining blocks to small Greenfield
projects or to applicant companies who did not have well known track
records in the sectors approved for allocation of captive blocks for mining
of coal. It adopted a policy that for such small projects the Committee
instead of straight away allocating the block, the Committee would reserve
the block and offer a temporary tapering linkage through CIL for achieving
financial closure and development of the end-use project first. The
allocation of the block would be made subject to the applicant company
achieving the project milestones submitted by them to the Committee, and
after financial closure is achieved.
130.1. In that meeting, M/s. Jindal Steel and Power Limited requested
for allocation of Utkal B-1 block for their sponge iron production, 200 MW
of captive power generation, steel plant and ferro alloy plants to be set
up in two phases. The Screening Committee decided to allocate Utkal B – 1
block to that company for exclusive and captive use of the entire coal
produced from the block in their own project in the end-use plants.
130.2. M/s. Usha Beltron Ltd. requested for allocation of a block for
their sponge iron and power plant. CIL had recommended allocation of
Kathautia UG block for their expansion project. Accordingly, the Committee
allocated the same subject to the existing linkages of coal from CIL
continuing.
130.3. The Committee also discussed the proposals of M/s. Shyam DRI
Power Ltd. for allocation of Radhikapur block and M/s. Neepaz Metalics Pvt.
Ltd. for allocation of Patrapara block. In both the cases, it was found
that the size of the block is larger in comparison to the need. However,
the applicants stated that while geological reserve in the block may be
large, the recoverable reserve would be very much less. Accordingly, the
blocks were allocated provisionally to them for detailed
exploration/prospecting purposes.
130.4. In that meeting, M/s. Ambuja Cement requested for allocation of
Baranj III and IV block for their new as well as expansion of existing
cement plants. Though the Government of Maharashtra supported the
proposal, the representative from Ministry of Power stated that there are
two contenders for the Baranj blocks and the Ministry of Power is
considering and evaluating the case. He stated that decision on allocation
of Baranj I to IV could be deferred by one month by which time the Ministry
of Power would be in a position to give their views. However, the
Screening Committee decided to allocate Baranj III and IV blocks to Ambuja
Cement Ltd. subject to any order of the High Court in the matter.
131. In the 21st meeting held on 19.08.2003, the issue of
competitive bidding was raised. On this, the Screening Committee felt that
further guidelines need to be evolved for allocation of blocks and
competitive bidding should also be looked at. In that meeting it was also
felt by the Committee that coal being only one of the inputs of end-use
projects, other matching inputs should also be considered before allocation
of a coal block.
132 Significantly, the guidelines framed and applied by the
Screening Committee for the period from 14.07.1993 (1st meeting) to
19.8.2003 (21st meeting) are conspicuously silent about inter se priority
between the applicants for the same block. In the 18th meeting, the
Screening Committee considered the issue of determining inter se merit of
applicants for the same block as well as certain other issues for bringing
in transparency. The Screening Committee felt that guidelines for
determining inter se priority among claims for block between public sector
and private sector for captive use and between public sector for non-
captive use and private sector for captive use need to be evolved.
However, no guidelines for determining inter se priority of applicants for
the same block was evolved. The guidelines also do not contain any
objective criterion for determining the merits of applicants and lack in
healthy competition and equitable treatment. In the first counter affidavit
filed by the Central Government, it is admitted that from the 1st meeting
(held on 14.07.1993) to the 21st Meeting (held on 19.08.2003), the
guidelines did not deal with the subject of determining inter se priority
between applicants.
133. As regards 26 coal blocks allocated to private companies
pursuant to the recommendations of the Screening Committee for the period
from 04.11.2003 (22nd meeting) and 18.10.2005 (30th meeting), the Attorney
General submits that the Screening Committee had devised guidelines to
determine inter se priority amongst applicants for the same block. It is
also submitted that the recommendations were made by the Screening
Committee after consideration of each application and assessment of each
applicant’s merits in terms of the criterion laid down in the guidelines.
134. The counter affidavit filed by the Central Government on
22.06.2013 at pages 102-159 deals with this period. The compilation
(Volume 3-B) contains materials relating to recommendations made by the
Screening Committee for allocation of coal blocks to private companies
pursuant to its 22nd meeting to 30th meeting held between 04.11.2003 and
18.10.2005. It transpires from the materials placed on record that there
was boom in the iron and steel sector at that time. The Screening Committee
was usually required to consider 3-4 applicants for each block. Though the
guidelines required that a captive block cannot be allocated as replacement
for a linkage and that coal blocks can only be allocated for specific
projects and not as back up in general and additional guidelines also
provided that Central PSU was to be accorded priority over State Government
PSU if all other factors (like suitability of coal grade, techno-economic
viability/feasibility of the project, state of preparedness of the project,
etc.) were equal but a careful look at these guidelines show that they do
not lay down any criterion for evaluating the comparative merits of the
applicants. As a matter of fact, the guidelines applied by the Screening
Committee are totally cryptic and hardly meet the requirement of
constitutional norms to ensure fairness, transparency and non-
discrimination.
135. In the 23rd meeting held on 29.11.2004 for Belgaon coal block,
three applicants, namely, (i) M/s. Chandrapur Ispat Ltd., (ii) M/s. Gupta
Metallics and Power Ltd. and (iii) M/s. Sunflag Iron and Steel Ltd. had
applied. The particulars of these three applicants have been noted by the
Screening Committee but besides that there is nothing to indicate as to why
M/s. Sunflag Iron and Steel Ltd. was found more meritorious than the other
two applicants. It is pertinent to note that Ministry of Steel had
supported the proposal of both Gupta Metallics and Power Ltd. and Sunflag
Iron and Steel Ltd. The consideration of inter se merit appears to be ad-
hoc. There is no comparative assessment of the merits of the applicants.
There is so much of ad-hocism in consideration of the applications that in
every meeting, the guidelines were altered.
136. In the 24th meeting held on 09.12. 2004, the Screening
Committee altered the norms by shifting insistence on achieving financial
closure of the end-use projects to some appropriate stage after the mining
plan approval. In that meeting, the Screening Committee was informed that
the proposal to allow disposal of coal produced during development phase of
the mine has been approved by the Government. In that meeting, the
Committee considered allocation of Brinda, Sisai, Dumri, Meral, Lohari,
Moitra, Kotre-Basantpur and Pachmo blocks. Applications were received from
M/s. Abhijeet Iron Processors Pvt. Ltd for allocation of Brinda, Sisai,
Dumri, Meral and Lohari blocks, M/s. Neelachal Iron and Power Ltd. for
allocation of Brinda, Sisai and Dumri blocks, M/s. Bajrang Ispat Pvt. Ltd.
for allocation of Dumri, Brinda and Sisai blocks and M/s. Pawanjay Steel
and Power Ltd. for allocation of Dumri and Brinda blocks. The Screening
Committee noticed that among applicants competing for Brinda and Sisai,
M/s. Abhijeet Iron Processors Pvt. Ltd., applied way ahead of others, its
requirement was large and it has a good track record and Ministry of Steel
had recommended its case. The other applicants, viz., M/s. Bajrang Ispat
and M/s. Pawanjay Steel were later applicants. The requirement of M/s.
Bajrang was small and sub-blocking was not desirable while M/s. Pawanjay
had not yet given the required details to Ministry of Steel. For Meral,
M/s. Abhijeet was the only applicant. The Screening Committee decided to
allocate Brinda, Sisai and Meral blocks to M/s. Abhijeet Infrastructure
Private Ltd.
136.1 In the same meeting, M/s. Jayaswal Neco Ltd. was allocated
Moitra block in place of Jogeshwar and Choritand-Tilaya, already allocated
to them. Lohari block was allocated to M/s. Usha Martin Limited subject to
the views of Ministry of Steel. It is important to mention that Lohari
coal block was acquired under the Coal Bearing Acquisition Act. The
Committee noted that the transfer modalities were yet to be worked out in
details.
136.2 The Screening Committee in 24th meeting noted the particulars
of each applicant but how each applicant met such parameters is neither
mentioned nor are they discernible.
137 In its 25th meeting* held on 10.01.2005, the Screening
Committee considered allocation of five coal blocks in the MCL area.
Thirty applicants made presentations before the Committee. Many of these
applicants were meritorious. The size of these blocks was large compared
to the requirement of the applicants. The Screening Committee decided that
for each such block, one applicant company who had the highest stake and
which was likely to take up proper mining could be designated the leader
company and allocated the block and a group of other companies could be
nominated as associate companies for supply of coal by the leader company
to these designated associates. In our opinion, such procedure is
apparently in contravention of the statutory provision contained in Section
3(3)(a)(iii) of the CMN Act. Moreover, the arrangement of consortium of
companies violates Section 3(3)(a)(iii) of the CMN Act as the leader
company supplies the associate share of coal to the associate company at a
price (though the price is determined by the Government). Winning or
mining of coal by such company is impermissible under the CMN Act. The
rules of game were changed to adjust large number of applicants whose
applications would have been otherwise rejected as their coal requirement
was far less than the coal available in the coal block. However, in order
to accommodate these applicants, a novel idea of choosing a leader company
and associate companies was evolved which, as indicated above, is
impermissible under the CMN Act. The merits of 13 companies whose
applications were rejected have not been comparatively assessed with the 17
companies (5 leaders and 12 associates) whose applications were accepted
and recommended for allocation to the Central Government.
138. In its 26th meeting** held on 01.02.2005, the Screening
Committee considered allocation of five blocks in SECL area. Twenty-five
applicants had applied for these blocks. Ten applicants who had submitted
their applications after the cut-off date were rejected. The remaining
fifteen were chosen for allocation on the same lines as was done in the
25th meeting for allocation of coal blocks in the MCL area. Of these 15
applicants, the Screening Committee listed out seven companies as possible
leaders for 5 blocks. The procedure followed in the 26th meeting suffered
from the flaws similar to recommendations made by the Screening Committee
in its 25th meeting. Moreover, the minutes of the 26th meeting reveal that
the Ministry of Steel raised the issue that a number of companies have, in
their presentations, mentioned the capacity of the end-use projects in
excess of what has been recommended by the Ministry of Steel. It is further
seen that the representative of the concerned State Government had stated
that the ground realities of the projects needed to be verified and the
capacities of the end-use plants and coal requirements of such projects is
required to be confirmed, but despite that, the Screening Committee
proceeded to list out the possible leaders from among the selected
companies, viz., 1. Hindustan Zinc Ltd.; 2. Chhattisgarh Electricity
Company Ltd.; 3. Jayaswal Neco Ltd.; 4. Jindal Steel & Power Ltd.; 5.
Prakash Industries Ltd.; 6. Sunflag Iron & Steel Co. Ltd.; and 7.
Consortium of Nav Bharat Coalfields Pvt. Ltd., Ind Agro Synergy Ltd., Ispat
Godawari Ltd., Sri Bajrang Power & Ispat Ltd., Sri Nakoda Ispat Ltd. and
Vandana Global Ltd. Moreover, the Screening Committee did not assess the
capacities and coal requirement of these companies. The Committee decided
that detailed formulation of groups or ‘common pool’ for allocation of
coal/blocks in line with the dispensation being contemplated in MCL blocks
will be worked out by the Ministry of Coal. In our view, the expression ‘a
company’ occurring in Section 3(3)(a)(iii) of the CMN Act does not cover
“consortium of companies” or “formulation of groups” or “common pool”. The
decision of the Screening Committee to recommend allocation of coal blocks
to consortium of companies or formulation of groups or common pool is in
contravention of Section 3(3)(a)(iii) of the CMN Act. CMN Act places
embargo on granting the leases for winning or mining coal to persons other
than those mentioned in Section 3(3)(a)(iii). Consortium of companies
surely falls outside Section 3(3)(a)(iii). The statutory scheme of the CMN
Act generally and Section 3(3)(a)(iii) in particular have been given a
complete go-bye in the procedure followed by the Screening Committee and
finally by issuing allocation letters to one leader company with obligation
to share associate’s share of coal to the associate company at a price
determinable by the Government.
139. In the 27th meeting*** held on 01.03.2005, the Screening
Committee considered allocation of blocks in the CCL area while in 28th
meeting**** held on 15.04.2005, the Committee considered allocation of
blocks in SECL area. Neither the counter affidavit nor the minutes of these
two meetings show that assessment of comparative merits of the applicants
was done. The Screening Committee continued with consortium / leader and
associate approach, as was done for the MCL area in the 26th meeting. This
procedure is clearly in contravention of Section 3(3)(a)(iii) of the CMN
Act. Except recording the particulars of these companies, who had given
presentation, nothing is said about inter se priority or comparative merits
of the applicants. By adopting consortium / leader and associate approach,
the Screening Committee had indirectly done away with inter se priority and
merit of the applicant companies. The consideration does not reveal
application of any objective criterion. It is admitted in para 206 of the
counter affidavit filed by the Central Government that as regards the
applicant - Neepaz Metalicks whose case was considered in 28th meeting, the
recommendation of the Administrative Ministry was contrary to the
recommendation of the State Government, yet the allocation of a sub-block
in Patrapara block was made on the basis of State Government’s
recommendation. Moreover, it may be noticed that though the representative
of the State Government supported the request of M/s Bhushan Steel and
Strips Limited for allocation of Patrapara block but he stated that the
State Government supports the claimants for Patrapara in the following
order: (a) M/s Neepaz Metalicks Limited, (b) M/s SCAW, (c) M/s Visa
Industries, (d) M/s Shree Metalicks, all of whom have already entered into
a MOU with the Government of Orissa and the order of priority for M/s
Bhushan Steel and Strips Limited would be lower than these four claimants.
As regards Panch Bahini block, the representative of the State Government
stated that the applicant, M/s Shree Radha Industries, may be considered
for a share and inclusion in the earliest list of blocks allocated in 26th
meeting, still the Screening Committee decided to recommend allocation of
Panch Bahini block to M/s Shree Radha Industries.
140. The counter affidavit in para 208 as regards 29th meeting*****
held on 03.06.2005 states that the Screening Committee considered a
detailed presentation of modalities of competitive bidding by the CMPDIL.
Despite the fact that modalities for auctioning through competitive bidding
were discussed in 29th meeting, that was not carried further as is seen
from the minutes of the 30th meeting of the Screening Committee held on
18.10.2005.
141. The minutes of 30th meeting! show that the Screening Committee
decided to club Gare Palma Blocks IV/1 and IV/6 and further decided to
allot the combined block (IV/1 and IV/6) to JSPL with Nalwa Sponge as a
partner company. The minutes also record that if surplus still remains in
the block, then JSPL-Nalwa be asked to select another allottee failing
which the excess reserves to be handed over to SECL, in terms of annual
production, at transfer price to be determined by the Government. Coal
availability and requirement in Gare Palma IV/1 block as recorded in the
minutes show that 31.05 m.t. remained surplus with these companies. In the
30th meeting, the Screening Committee also recommended to allot Dumri Coal
Block to M/s. Neelachal and M/s. Bajrang despite the fact that CMPDIL
informed the Committee that north portion (rise side) of Dumri remains
unexplored in detail on account of security problems. The unexplored
portion has superior grades of coal of about 15 m.t. As regards Gare Palma
IV/8 block, the minutes indicate that for this block M/s CECL; Consortium
of five applicants and M/s Jayaswal Neco Ltd. had made presentations.
Consortium of five applicants companies was not recommended apparently
inter alia for the reasons; (1) that the Consortium of five applicants
companies was yet to be incorporated and (2) that they claimed the blocks
mainly on the ground of promoting consortium approach. It is interesting to
note that in the earlier meetings for allocation of coal blocks in MCL,
SECL and CCL areas, the Screening Committee on its own adopted consortium /
leader and associate approach and the factor such as that the consortium
company was not incorporated was not at all viewed as an impediment for
recommendation but in this meeting the claim of consortium of five
companies was not accepted and it was noted that they may be accommodated
in other blocks. The application of norms by the Screening Committee
changed from meeting to meeting. There was no consistent or uniform
consideration. The portion of Dumri Coal Block bearing superior grade was
admittedly unexplored but it was recommended for allocation. The clubbing
of blocks or sub-blocks was done which was not the brief given to the
Screening Committee.
141.1 The recommendations made by the Screening Committee in its 30th
meeting suffer from the same infirmities as the recommendations made by it
in favour of other applicants in earlier meetings.
142. In the 31st meeting held on 23.06.2006, the Screening Committee
examined the applications for lignite blocks. 25 applicants made their
presentation. The Screening Committee, after noticing the particulars of
each of the 25 applicants individually and recording that it discussed the
presentations made by the applicants and that it took into consideration
the views/comments of the Ministry of Power, Ministry of Steel, concerned
State Governments and the guidelines, recommended allocation of lignite
blocks to 6 applicants.
143. In September, 2005, the Ministry of Coal issued advertisement
inviting applications for allocation of 20 coal blocks. This was the first
time when applications were invited for allocation of coal blocks by way of
an advertisement. The applications received pursuant to the above
advertisement were taken up for consideration by the Screening Committee in
32nd meeting held on 29.06.2006 and 30.06.2006, 33rd meeting held on
31.08.2006, 01.09.2006 and 02.09.2006 and 34th meeting held on 07.09.2006
and 08.09.2006. In the 32nd meeting, the Screening Committee considered
allocation of Rohne, Sitanala, Tenughat-Jhirki, Choritand-Taliya and
Jogeswar coal blocks. 54 companies (some of which were group companies)
made presentations. The Committee also considered applications of those
companies which did not come for presentation. The minutes of 32nd
meeting!! record that the applications received in the Ministry
regarding above coal blocks were sent to the State Government of Jharkhand
and the concerned Administrative Ministries in the Central Government for
their views/comments. The views/comments of the Government of Jharkhand
were received on 28.06.2006. The Committee then recommended the allocation
of Rohne coal block jointly in favour of M/s. JSW Steel Ltd., M/s. Bhushan
Steel and Power Ltd. and M/s. Jai Balaji Sponge Ltd. Tenughat–Jhirki coal
block was recommended jointly in favour of M/s. Rashtriya Ispat Nigam
Limited and M/s. Jindal Steel and Power Limited while
Choritand-Taliya was recommended jointly in favour of M/s. Sunflag
Iron and Steel Limited and M/s. Rungta Mines Limited. Insofar as Sitanala
coal block is concerned, the Committee recommended the said block in favour
of M/s. Steel Authority of India Limited. As regards Jogeswar coal block,
the Committee in view of the comments of the representative of the
Government of Jharkand decided not to recommend allocation of that block in
favour of any applicant for the time being. The minutes of 32nd meeting do
not show how and in what manner the applications of those companies were
considered which did not come for presentation. There is no comparative
assessment or evaluation of the applicants. Why the chosen companies have
been preferred over the others is not discernible? Merely because there
were large number of applicants, it did not mean that the consideration of
each applicant could not have been recorded or comparative assessment or
evaluation of the applicants could not have been made. What are the
reasons for recommending three blocks jointly in favour of more than one
company are neither recorded nor disclosed in the minutes. The
recommendations for allocation of blocks jointly in favour of two or three
companies, as indicated earlier, are not in conformity with the CMN Act.
Rather, they are in contravention thereto.
144. In the 33rd meeting, the Screening Committee considered
allocation of Tubed, Chakla, Jitpur and Pengedappa coal blocks. In that
meeting, 165 companies made their presentations. The applications of 16
companies which did not turn up for making presentations were also
considered. In the 32nd meeting held on three dates, namely, 31st August
and 1st and 2nd September, 2006, the Committee decided that recommendations
regarding the above four blocks would be finalised after hearing the
applicants for the remaining 11 blocks, for which the meeting was already
notified for 07.09.2006 and 08.09.2006.
145. On 07.09.2006 and 08.09.2006, the 34th meeting of the Screening
Committee was held to consider allocation of Ansettipali, Punukula-Chilka,
Brahmpuri, Mandla North, Rawanwara North, Sial-Shoghri Lohara East, Kosar-
Dongargaon, Warora West (North), Biharinath and Mednirai coal blocks. In
that meeting, geological reserves of some of the coal blocks were reported
by CMPDIL/SCCL. The presentations were made by 101 companies. 44
companies did not turn up for making presentations. However, their
applications were considered. In that meeting, it was decided that the
recommendations regarding the above 11 blocks would be finalized in the
next meeting.
146. As seen from the above, in the 33rd meeting held on 31.08.2006,
01.09.2006 and 02.09.2006 for allocation of four blocks and in the 34th
meeting held on 07.09.2006 and 08.09.2006 for allocation of 11 blocks, no
final decision was taken and the matters were deferred. On 22.09.2006, the
Screening Committee met regarding allocation of 15 coal blocks, which was
subject matter of consideration in its 33rd and 34th meetings. The
minutes!!! of the meeting held on 22.09.2006 record recommendation for
allocation of 15 coal blocks.
146.1 Of these 15 blocks, three namely, Ansettipali,
Punukula-Chilka and Pengedappa were recommended for allocation to Andhra
Pradesh Government undertaking as these blocks were located in the notified
tribal area. Of the remaining twelve, the Screening Committee recommended
their allocation to fifteen companies. Five companies were recommended for
their power plants, three were recommended for the cement plants and
remaining seven were recommended for the Sponge Iron Units. For these
twelve blocks, Jharkhand recommended seven companies, Madhya Pradesh
recommended five, Maharashtra recommended ten and West Bengal recommended
one company. It is pertinent to notice that some of the companies like
Chaman Metallics Ltd., which was recommended by the Screening Committee for
Kosar Dongergaon block had no recommendation by the State Government
(Maharashtra). Similarly, Pushp Steel and Mining Ltd., which was
recommended for Brahmpuri block had no recommendation from the State
Government (Madhya Pradesh) and so also Kohinoor Steel (P) Ltd. for
Mednirai coal block had no recommendation from the State Government
(Jharkhand). The minutes do not disclose in what manner the merits of the
companies which were chosen for recommendation were determined. Even
particulars of the applicants individually are not noticed. There is no
indication at all in the minutes of 33rd meeting and 34th meeting or the
meeting held on 22.09.2006 when final decision that the conditions laid
down in the guidelines are met by these companies was taken. Twenty three
companies were recommended by the four State Governments while fifteen
companies were finally recommended for allocation by the Screening
Committee but the reasons therefor are not discernible at all. The minutes
also do not disclose the criterion which the Screening Committee applied in
selection of the fifteen companies and the reason for allocating twelve
blocks to fifteen companies. M/s. Grace Industries Limited was recommended
allocation of a coal block although that company had no
recommendation/categorization. It is true that the
recommendation/allocation made in favour of M/s. Grace Industries Limited
was subsequently withdrawn/de-allocated but that is altogether a different
matter.
147. In 2006, the Ministry of Coal invited applications for
allocation of 38 coal blocks, of which 15 were reserved for the power
sector. The advertisement indicated that preference will be accorded to
the power sector and steel sector. Within the power sector, it was
indicated that priority shall be accorded to projects with more than 500 MW
capacity. Similarly, in the steel sector, priority would be given to steel
plants with more than 1 million ton per annum capacity. In response to the
advertisement, more than 1400 applications were received for 38 coal
blocks.
148. The allocation of coal blocks earmarked for power generation
was considered by the Screening Committee in its 35th meeting which was
held on 20.06.2007 to 23.06.2007, 30.07.2007 and 13.09.2007. The coal
block that was numbered as one block in the advertisement was subsequently
considered as two blocks. Thus, 15 coal blocks, namely, Amarkonda -
Murgadangal, Ashok Karkata Central, Durgapur-II/Sariya, Durgapur-
II/Taraimar, Fatehpur, Fatehpur (East), Ganeshpur, Gourangdih ABC, Lohara
West & Lohara East, Mahuagarhi, Mandakini, Patal East, Rampia Dip Side of
Rampia, Sayang and Seregarha were considered. The status of geological
reserve of 15 blocks was indicated. The minutes? of the 35th meeting
briefly record the proceedings of the meeting held on 20.06.2007 to
23.06.2007, 30.07.2007 and 13.09.2007. The Screening Committee in that
meeting recommended to allocate all the 15 blocks reserved for power
sector, many of which were recommended jointly in favour of two or more
companies. The minutes do not contain the particulars showing
consideration of each application. They also do not disclose any
comparative assessment or evaluation of the applicant companies. In what
manner and for what reasons the companies were selected for recommendation
are neither disclosed nor are they discernible from the minutes. Though,
the guidelines± provide for norms for consideration for inter se priority
for allocation of a block among competing applicants for a captive block
but the minutes do not disclose at all how the norms for inter se priority
are met by the companies selected for recommendation by the Screening
Committee. Many of the companies selected by the Screening Committee had no
recommendation from the State Government or from the Ministry of Power and
CEA and some of them had no recommendation either from the State Government
or the Ministry of Power and CEA at all. For example, for Durgapur-
II/Taraimar, the selected company Balco had no recommendation at all from
the State Government, Ministry of Power and CEA. Although the group
company M/s. Vedanta Alumina Ltd. was recommended by Ministry of Power and
CEA, but it was not selected. Similarly, for Mandakini block, M/s. Tata
Power Company Ltd. had no recommendation from the State Government and
Ministry of Power and CEA. For Rampia and Dip Side of Rampia, Reliance
Energy Ltd. did not have any recommendation from the State Government,
Ministry of Power and CEA. For Fatehpur East, the selected company Visa
Power Ltd. had no recommendation from Ministry of Power and CEA. For
Fatehpur block, Prakash Industries Ltd. had neither recommendation from the
State Government nor from the Ministry of Power and CEA. The Screening
Committee, as a matter of fact, did not select eight companies which were
recommended by the Ministry of Power but selected eleven companies which
were not recommended by Ministry of Power. Though in additional counter
affidavit, some justification in this regard has been sought to be made but
we are afraid that the said justification hardly merits acceptance as the
minutes of the 35th meeting of the Screening Committee do not disclose
anything what is now stated in the additional counter affidavit. The eight
companies which were recommended by the Ministry of Power but not selected
by the Screening Committee are (1) M/s. Rashmi Cement Ltd.; (2) M/s. TRN
Energy Pvt. Ltd.; (3) M/s. Maithon Power Ltd.; (4) M/s. Mahavir Global Coal
Ltd.; (5) M/s. Rosa Power Supply Ltd.; (6) M/s. Bhushan Energy; (7) M/s.
Lanco Amarkantak Power Ltd. and (8) M/s. Vedanta Alumina Ltd. The minutes
do not disclose any reason at all for not selecting these companies which
were recommended by the Ministry of Power. The eleven companies which were
not recommended by the Ministry of Power and selected by the Screening
Committee are (1) M/s. Tata Power Company Ltd.; (2) M/s. Reliance Energy
Ltd.; (3) M/s. Balco; (4) M/s. SKS Ispat and Power Ltd.; (5) M/s. Prakash
Industries Ltd.; (6) M/s. Green Infrastructure Pvt. Ltd.; (7) M/s. Visa
Power Ltd.; (8) M/s. Vandana Vidyut Energy Ltd.; (9) M/s. GVK (Govindwal
Sahib) Ltd.; (10) M/s. Gagan Sponge Iron Pvt. Ltd.; and (11) M/s. Lanco
Group Ltd. The reasons for selecting above eleven companies which were not
recommended by the Ministry of Power are neither disclosed nor discernible.
149. In the 36th meeting, which was held on 07.12.2007-08.12.2007,
07.02.2008-08.02.2008 and 03.07.2008, the Screening Committee considered
allocation of 23 coal blocks earmarked for non-power sector. For these 23
coal blocks earmarked for non-power sector, 674 applications were submitted
by 184 companies for allocation. Some companies had applied for more than
one block and some had submitted more than one application for single block
for different end use plants located at different locations. The
geological reserve of 23 blocks?? was noted by the Screening Committee.
The minutes of the 36th meeting show that the Committee decided to
recommend blocks earmarked for pig iron (coking coal) jointly to two or
more than two companies and nineteen blocks earmarked for other end-
uses/non-cooking coal were recommended for allocation to single companies
as well as jointly to two or more companies. The minutes of 36th meeting
do not contain the particulars showing consideration of each application.
There is no assessment of comparative merits of the applicants who were
selected for recommendation. The minutes do not disclose how and in what
manner the selected companies meet the norms fixed for inter se priority.
Many of the selected companies were neither recommended by the State
Government nor by the Administrative Ministry. Some of them were
recommended by the State Government but not recommended by the
Administrative Ministry while one of them was not recommended by the State
Government but recommended by the Administrative Ministry. For Rajhara
North (Central & Eastern) coal block, Vini Iron & Steel Udyog Ltd. had no
recommendation by the State Government or by the Administrative Ministry.
Similarly, for Thesgora-B/Rudrapuri coal block, Revati Cement P. Ltd. did
not have recommendation either from the State Government or from the
Administrative Ministry. As regards Tandsi-III and Tandsi-III (Extn.),
Mideast Integrated Steels Ltd. did not have recommendation from the State
Government. Similarly, as regards Thesgora-B/Rudrapuri, Kamal Sponge Steel
& Power Limited had no recommendation from the State Government. As
regards Moira Madhujore coal block, Ramswarup Lohh Udyog Ltd. had no
recommendation from the Administrative Ministry.
150. From the above discussion, it is clear that 21 coal blocks
stood allocated to private companies in pursuance of Screening Committee’s
recommendations during the period from the 1st meeting held on 14.07.1993
till the 21st meeting held on 19.08.2003. For the period from 04.11.2003
(22nd meeting) to 18.10.2005 (30th meeting) in pursuance of Screening
Committee’s recommendations, 26 coal blocks stood allocated to private
companies. Following 32nd meeting held on 29.06.2006/30.06.2006 till the
34th meeting on 07.09.2006/08.09.2006, in pursuance of the recommendations
made by the Screening Committee, two coking coal blocks were allocated to
private companies and twelve non-coking coal blocks were allocated to
private companies. In pursuance of the recommendations made by the
Screening Committee in 35th and 36th meetings, 33 coal blocks were
allocated to private companies. Some of the coal block allocations made to
the private companies have been de-allocated from time to time. For
consideration of legality and validity of allocations made to such
companies, it is not necessary to deal with de-allocation aspect. It needs
no emphasis that assuming that the Central Government had power of
allocation of coal blocks yet such power should have been exercised in a
fair, transparent and non-arbitrary manner. However, the allocation of
coal blocks to the private companies pursuant to the recommendations made
by the Screening Committee in 36 meetings suffers from diverse infirmities
and flaws which may be summarized as follows:
1st Meeting to 21st Meeting
1. The guidelines framed and applied by the Screening Committee
for the period from 14.07.1993 (1st meeting) to 19.08.2003 (21st meeting)
are conspicuously silent about inter se priority between the applicants for
the same block. As a matter of fact, for the 21 coal blocks allocated to
private companies in pursuance of Screening Committee’s recommendation
during the first period, inter se priority or merit of the applicants for
the same block had not at all been determined.
2. The guidelines do not contain any objective criterion for
determining the merits of the applicants. The guidelines do not provide
for measures to prevent any unfair distribution of coal in the hands of few
private companies. As a matter of fact, no consistent or uniform norms
were applied by the Screening Committee to ensure that there was no unfair
distribution of coal in the hands of the applicants.
3. The Screening Committee simply relied upon the information
supplied by the applicants without laying down any method to verify
applicant’s experience in the end-use project for which allocation of coal
block was sought. The guidelines also do not lay down any method to allot
coal blocks as per the end-use projects coal requirement.
4. The Screening Committee kept on varying the guidelines from
meeting to meeting. It failed to adhere to any transparent system.
5. No applications were invited through advertisement and thus the
exercise of allocation denied level playing field, healthy competition and
equitable treatment.
6. Certain coal blocks which did not fit into the criteria of
captive blocks were decided to be allocated by applying peculiar approach
that the reserves could either be permitted to be explored by a private
party or lost forever. For example, Brahmadiha block was allocated to M/s.
Castron Technology pursuant to the recommendations made by the Screening
Committee in the 14th meeting.
7. If a certain party requested for a particular block, it was so
recommended without objectively considering the merit of such request. For
example, in the 14th meeting, the proposal of M/s. Monnet Ispat Ltd. for a
new Sponge Iron plant in Keonjhar area of Orissa of 1.2 million tonnes of
capacity for which the requirement of 2.2 m.t. of raw coal has been
indicated, was discussed. The party requested for Utkal-B2 block in
Talcher coalfield having 106 m.t. of reserves. CMD, MCL was of the view
that Chendipada block is likely to have better grade of coal and suggested
to the party for preference of Utkal B-2 block. However, the party
insisted for Utkal B-2 block and the same was allotted. Similarly, as
regards the proposal of M/s. Jayaswal Neco Ltd. for their Sponge Iron
Plant, the party had earlier requested for Gare-Palma IV/6 and IV/7 blocks
for meeting their requirement of 1 m.t. Sponge Iron Plant and a captive
power plant. Then they requested for allocation of Gare-Palma IV/4 and
IV/8 blocks. On the representation made by the representative of the party
that 125 m.t. of reserves in Gare-Palma IV/4 block will be adequate for
meeting the requirement of their Sponge Iron Plant for a period of 30 years
and 91 m.t. of reserves in Gare-Palma IV/8 block will be adequate for 30
years life of the proposed CPP, the Screening Committee recommended
allocation of Gare-Palma IV/4 and IV/8 blocks to M/s. Jayaswal Neco Ltd.
The representation made by the party was accepted as it is without any
verification.
8. Certain blocks with coal reserves on the higher side were
recommended to the companies with lower requirement. There were no steps
or measures taken to prevent possible misuse of end-use project of private
companies. For example, M/s. Prakash Industries Limited, being a BIFR
company, was denied coal block earlier. However, the Screening Committee
recommended Chotia I and II coal blocks to M/s. Prakash Industries Limited
in 2003 for its proposed expansion project of 0.4 MTPA Sponge Iron though
the company was having capacity of only 0.3 MTPA.
9. Some coal blocks which were already identified for development
by CIL were offered to the private companies and some of the blocks which
were close to the projects of CIL were, in fact, recommended for allocation
and ultimately allocated. This was clearly in breach of the guidelines for
selection of captive blocks.
22nd Meeting to 30th Meeting
10. With regard to allocation of coal blocks to private companies
pursuant to its 22nd meeting to 30th meeting held between 04.11.2003 and
18.10.2005, the guidelines do not lay down any criteria for evaluating the
comparative merits of the applicants. The consideration had been ad-hoc in
so much so that in every meeting, the guidelines were altered.
11. In the 24th meeting held on 09.12.2004, the Screening Committee
altered the norms by shifting insistence on achieving financial closure of
the end-use projects to some appropriate stage after the mining plan
approval. Except mentioning the particulars of each applicants, the
minutes do not show that there was any application of mind by the Screening
Committee. How the guidelines are met by the recommended companies has not
been discussed.
12. In the 25th meeting held on 10.01.2005, the Screening Committee
considered allocation of 5 coal blocks in the MCL area. The size of these
blocks was large as compared to the requirement of the applicants. The
rules of game were changed to adjust large number of applicants whose
applications would have been otherwise rejected as their coal requirement
was far less than the coal available in the coal blocks. However, in order
to accommodate these applicants, a novel idea of choosing a leader company
and associate companies was evolved though such procedure is apparently in
contravention of the statutory provision contained in Section 3(3)(a)(iii)
of the CMN Act.
13. The merits of the companies, who were recommended for selection
and those companies whose applications were rejected were not comparatively
assessed.
14. While considering allocation for 5 blocks in SECL area in the
26th meeting, despite the revelation by the Ministry of Steel that number
of companies have in their presentations mentioned the capacity of the end-
use plants in excess of what has been recommended by the Ministry and the
concern expressed by the representative of the State Government that the
ground realities of the project needed to be verified and the capacities of
the end-use plants and coal requirements of such projects are required to
be confirmed, the Screening Committee proceeded to list out the possible
leaders without assessing the capacities of coal requirements of these
companies.
15. The minutes of the 27th and 28th meetings also do not show that
the assessment of comparative merits of the applicants was done. The
Screening Committee continued with consortium / leader and associate
approach which, as noted above, was in contravention of Section
3(3)(a)(iii) of the CMN Act. Even in case of a certain company, where
recommendation of the Administrative Ministry was contrary to the
recommendation of the State Government, yet the recommendation was made by
the Screening Committee that led to allocation on the basis of State
Government’s recommendation. The Screening Committee even decided to club
the blocks and recommended allotment of such combined block to two
companies jointly.
16. The consideration has been absolutely ad-hoc and without even
knowing how much surplus will remain, the company so chosen was asked to
select another allottee for surplus, if any. This is seen from the minutes
of the 30th meeting. In the 30th meeting, the Screening Committee also
recommended allocation of Dumri coal block although north portion of that
block remained unexplored and the unexplored portion had superior grade of
coal.
17. The policy of pick and choose was adopted. The application of
norms was changed from meeting to meeting with no uniform or consistent
consideration.
18. Certain companies which did not come for presentation were also
considered but how and in what manner the applications of those companies
were considered is not discernible. Why the chosen companies have been
preferred over the others is also not discernible.
32nd Meeting to 36th Meeting
19. The minutes of the 32nd meeting do not show the reasons for
recommending three blocks jointly in favour of more than one company.
20. Some of the companies which had no recommendation by the State
Government were recommended by the Screening Committee. The minutes of the
33rd and 34th meeting do not show in what manner the merits of the
companies which were chosen for recommendation were determined. The
minutes of the 33rd and 34th meeting even do not note the particulars of
the applicants individually. The criterion which the Screening Committee
applied in the selection of 15 companies and the reasons for allocating 12
blocks to these companies are not discernible.
21. A certain company which has no recommendation/categorisation
was also recommended for allocation and ultimately allocation was made.
The recommendation to allocate 15 blocks reserved for power sector by the
Screening Committee in its 35th meeting does not contain the particulars
showing consideration of each application. Though, at that time, the
guidelines provided for norms for consideration of inter se priority for
allocation of a block among competing applicants for a captive block, but
the minutes do not at all disclose how the norms for inter se priority are
met by the company selected for recommendation by the Screening Committee.
Many of the companies selected by the Screening Committee had no
recommendation from the State Government or from the Ministry of Power and
CEA and some of them had no recommendation from the State Government,
Ministry of Power and CEA at all. As many as eight companies which were
recommended by the Ministry of Power were not recommended by the Screening
Committee while eleven companies which were not recommended by the Ministry
of Power were recommended by the Screening Committee.
22. The minutes of the 36th meeting do not contain the particulars
showing consideration of each application for allocation of 23 coal blocks
earmarked for non-power sector. There is nothing in the minutes to
indicate how and in what manner the selected companies meet the norms fixed
for inter se priority. Many of the selected companies were neither
recommended by the State Government nor by the Administrative Ministry.
Some of them were recommended by the State Government but not recommended
by the Administrative Ministry while one of them was not recommended by the
State Government but recommended by the Administrative Ministry. Many
companies which had failed to secure allocations earlier yet they were
recommended. The Screening Committee failed to consider capability and
capacity of the applicant in implementing the projects.
151. The entire exercise of allocation through Screening Committee
route thus appears to suffer from the vice of arbitrariness and not
following any objective criteria in determining as to who is to be selected
or who is not to be selected. There is no evaluation of merit and no inter
se comparison of the applicants. No chart of evaluation was prepared. The
determination of the Screening Committee is apparently subjective as the
minutes of the Screening Committee meetings do not show that selection was
made after proper assessment. The project preparedness, track record etc.,
of the applicant company were not objectively kept in view. Until the
amendment was brought in Section 3(3) of the CMN Act w.e.f. 09.06.1993, the
Central Government alone was permitted to mine coal through its companies
with the limited exception of private companies engaged in the production
of iron and steel. By virtue of the bar contained in Section 3(3) of the
CMN Act, between 1976 and 1993, no private company (other than the company
engaged in the production of iron and steel) could have carried out coal
mining operations in India. Section 3(3) of the CMN Act, which was amended
on 09.06.1993 permitted private sector entry in coal mining operations for
captive use. The power for grant of captive coal block is governed by
Section 3(3)(a) of the CMN Act, according to which, only two kind of
entities, namely, (a) Central Government or undertakings/corporations owned
by the Central Government; or (b) companies having end-use plants in iron
and steel, power, washing of coal or cement can carry out coal mining
operations. The expression “engaged in” in Section 3(3)(a)(iii) means that
the company that was applying for the coal block must have set up an iron
and steel plant, power plant or cement plant and be engaged in the
production of steel, power or cement. The prospective engagement by a
private company in the production of steel, power or cement would not
entitle such private company to carry out coal mining operation. Most of
the companies, which have been allocated coal blocks, were not engaged in
the production of steel, power or cement at the time of allocation nor in
the applications made by them any disclosure was made whether or not the
power, steel or cement plant was operational. They only stated that they
proposed to set up such plants. Thus, the requirement of end-use project
was not met at the time of allocation.
152. It is pertinent to note here the stand of Maharashtra.
According to Maharashtra, the allocation of coal blocks by the Screening
Committee meant that the benefits of the differential in price of coal, as
the case may be, would accrue to the allottee of the coal block. The
differential in price would not necessarily be passed to the public as the
price of the final product of the company is determined by import parity
price in case of steel companies, competitive market price in case of
cement companies (many may not have access to captive coal) and the price
of power on an exchange or in bids by State utilities irrespective of
source of fuel. No material has been placed by the Central Government
which may rebut the Maharashtra’s stand.
153. The challenge has also been laid to the legality of the
allocations made to the State/State PSUs through the Screening Committee
route as well as Government dispensation route. It is not in dispute that
the Screening Committee has recommended allocation of coal blocks to 29
State Government PSUs while through Government dispensation route
allocation has been recommended for 72 PSUs. The question that requires
consideration is whether commercial mining operation can be carried on by
the State or State PSUs. The answer has to be found out from the statutory
provisions. By virtue of Section 3 of the CMN Act, as was originally
enacted, on and from the appointed day, the right, title and interest of
the owners in relation to the coal mines specified in the Schedule stood
transferred to and vested absolutely in the Central Government free from
all encumbrances. This provision further provides that if after the
appointed day, the existence of any other coal mine comes to the knowledge
of the Central Government, the provisions of the Coal Mines Management Act
shall apply until that mine is nationalized by an appropriate legislation.
Section 3 of the CMN Act was amended by the 1976 Nationalisation Amendment
Act whereby sub-sections (3) and (4) of Section 3 were inserted. Along
with this, Section 1A was also inserted in the CMN Act. By sub-section (3)
of Section 3, it is provided that on and from the commencement of amendment
in Section 3, no person other than the Central Government or a Government
company or a corporation owned, managed or controlled by the Central
Government or a person to whom the sub-lease has been granted by any such
Government, Government company or corporation or a company engaged in the
production of iron and steel shall carry on coal mining operation in any
form. Clause (b) of sub-section (3) also provides for termination of all
mining leases and sub-leases for winning or mining of coal except the
mining leases granted before such commencement in favour of the Government,
Government company or corporation and any sub-lease granted by any such
Government, Government company or corporation. Clause (c) of sub-section
(3) of Section 3 prohibits grant of lease for winning or mining coal in
favour of any person other than the Government, Government company or
corporation referred to in clause (a) thereof. But this prohibition is
subject to only one exception inasmuch as the Government, company or
corporation owned, managed or controlled by the Central Government may
grant a sub-lease to any person in any area on such terms and conditions as
may be specified in the instrument granting sub-lease provided the reserves
of coal in the area are in isolated small pockets or are not sufficient for
scientific and economical development in a coordinated and integrated
manner and the coal produced by the sub-lessee will not be required to be
transported by rail. Section 3(3)(a)(i) thus provides that only Central
Government or a Government company (Central PSU or a corporation owned or
managed by the Central Government) can carry on mining operations in India
in any form. In other words, commercial mining cannot be carried on by
the State Government or the State PSU. The expression “Government company
or a corporation owned, managed or controlled by the Central Government”
means Government of India Public Undertaking. It does not include State
Government Public Sector Undertaking. This is fortified by Section 3(4),
Section 4 and Sections 5, 6 and 7. The mining leases and sub-leases which
were terminated under Section 3(3)(b) were available only to the Central
Government or for that matter, the Government company or a corporation
owned, managed and controlled by the Central Government. The State
Government or State Public Sector Undertakings became entitled to obtain
sub-lease of reserves of coal in isolated small pockets under clauses (i)
and (ii) of proviso to Section 3(3)(c). It is pertinent to notice here
that Circular dated 30.07.1979 records the correct position of legislative
policy articulated in the CMN Act under which only the Central Government
Public Undertakings have been permitted to carry on coal mining operations
in the country. After the amendment was carried out in the CMN Act, the
circular states that while continuing the existing policy of the Central
Government carrying out coal mining operations by its own undertakings, the
State Governments might also be allowed to carry out coal mining operations
in isolated small pockets subject to the conditions set out therein. The
“isolated small pockets” are those which are away from the main coalfields
and have limited known reserves which are not sufficient for scientific and
economic development in a coordinated and integrated manner and the coal
produced from such areas would mainly be utilized for local consumption
without transportation by railways. However, almost after 22 years, vide
Circular dated 12.12.2001, the Central Government, reviewing its earlier
policy, allowed the State Government companies or undertakings to do mining
of coking and non-coking coal or lignite reserves either by opencast or
underground method, anywhere in the country, subject to the conditions set
out therein. Under the revised policy, the State Government
company/undertaking was permitted to mine non-coking coal and coking coal
reserves or lignite by opencast/underground method without the restriction
of “isolated small pockets”. Having carefully examined the Circular dated
12.12.2001, in light of the provisions of the CMN Act, as amended in 1976,
it appears to us that the circular is not in conformity with the provisions
of the CMN Act and, consequently, has no legal sanction. CMN Act and
further amendments therein carried out in 1976 do not allow State
Government or State PSUs to mine coal for commercial use. The problem
seems to have arisen because of the 2001 circular which permits the State
Government companies or undertakings to do mining of coking and non-coking
coal reserves but, as noted above, the legislative policy in the CMN Act
does not permit that. 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, as amended from time to time. Moreover, the
State PSUs, besides having been allocated coal mines for commercial
purpose, have also been allowed to form joint venture companies, i.e., 51%
shareholding of State PSUs and 49% of private company. However, in the
joint venture agreements between the State PSUs and the private companies,
mining operations have been given to private company. For example, the
notice inviting offer dated 02.07.2008 issued by Chhattisgarh Mineral
Development Corporation (CMDC) for selection of partner for formation of a
joint venture company for exploration, development, mining and marketing of
coal from coal blocks provided that the Joint Venture Company (JVC) to be
formed by CMDC and the selected offerers / bidder will explore, develop and
operate such coal deposits and the coal produced by JVC will be sold
commercially to various consumers in the open market. CMDC was allocated
Sondiha coal block and coal blocks Bhatgaon-II and Bhatgaon-II (Extension).
Similarly, the Joint Venture Agreement between the Madhya Pradesh State
Mining Corporation Limited and Monnet Ispat and Energy Limited reveals that
Joint Venture Company has been further allowed to enter into Mine
Development Operation Agreements with other private partner or sister
concern. This modus operandi has virtually defeated the legislative policy
in the CMN Act and winning and mining of coal mines has resultantly gone in
the hands of private companies for commercial use. As indicated above, by
1976 amendment in the CMN Act, other than the Central Government or Central
Government undertakings, a company engaged in the production of iron and
steel was permitted to carry on coal mining operations in any form. By
subsequent amendments in Section 3 of the CMN Act, besides a company
engaged in the production of iron and steel, a company engaged in
generation of power or a company engaged in washing of coal obtained from a
mine or such other end-use, as the Central Government may by notification
specify, no other company can “carry on mining operation in coal”.
Allocation of coal blocks to the State PSUs which ultimately on getting
mining leases may enable them to win or mine coal commercially is clearly
in breach of the provisions of the CMN Act.
154. To sum up, the entire allocation of coal block as per
recommendations made by the Screening Committee from 14.07.1993 in 36
meetings and the allocation through the Government dispensation route
suffers from the vice of arbitrariness and legal flaws. The Screening
Committee has never been consistent, it has not been transparent, there is
no proper application of mind, it has acted on no material in many cases,
relevant factors have seldom been its guiding factors, there was no
transparency and guidelines have seldom guided it. On many occasions,
guidelines have been honoured more in their breach. There was no objective
criteria, nay, no criteria for evaluation of comparative merits. The
approach had been ad-hoc and casual. There was no fair and transparent
procedure, all resulting in unfair distribution of the national wealth.
Common good and public interest have, thus, suffered heavily. Hence, the
allocation of coal blocks based on the recommendations made in all the 36
meetings of the Screening Committee is illegal.
155. The allocation of coal blocks through Government dispensation
route, however laudable the object may be, also is illegal since it is
impermissible as per the scheme of the CMN Act. No State Government or
public sector undertakings of the State Governments are eligible for mining
coal for commercial use. Since allocation of coal is permissible only to
those categories under Section 3(3) and (4), the joint venture arrangement
with ineligible firms is also impermissible. Equally, there is also no
question of any consortium / leader / association in allocation. Only an
undertaking satisfying the eligibility criteria referred to in Section 3(3)
of the CMN Act, viz., which has a unit engaged in the production of iron
and steel and generation of power, washing of coal obtained from mine or
production of cement, is entitled to the allocation in addition to Central
Government, a Central Government company or a Central Government
corporation.
156. In this context, it is worthwhile to note that the 1957 Act has
been amended introducing Section 11-A w.e.f. 13.02.2012. As per the said
amendment, the grant of reconnaissance permit or prospecting licence or
mining lease in respect of an area containing coal or lignite can be made
only through selection through auction by competitive bidding even among
the eligible entities under Section 3(3)(a)(iii), referred to above.
However, Government companies, Government corporations or companies or
corporations, which have been awarded power projects on the basis of
competitive bids for tariff (including Ultra Mega Power Projects) have been
exempted of allocation in favour of them is not meant to be through the
competitive bidding process.
157. As we have already found that the allocations made, both under
the Screening Committee route and the Government dispensation route, are
arbitrary and illegal, 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.
158. By way of footnote, it may be clarified and we do, that no
challenge was laid before us in respect of blocks where competitive bidding
was held for the lowest tariff for power for Ultra Mega Power Projects
(UMPPs). As a matter of fact, Mr. Prashant Bhushan, learned counsel for
Common Cause submitted that since allocation for UMPPs is in accord with
the opinion given in Natural Resources Allocation Reference20 and the
benefit of the coal block is passed on to the public, the said allocations
may not be cancelled. However, he submitted that in some cases the
Government has allowed diversion of coal from UMPP to other end uses i.e.
for commercial exploitation. Having regard to this, it is directed that
the coal blocks allocated for UMPP would only be used for UMPP and no
diversion of coal for commercial exploitation would be permitted.
….………..……………………CJI.
(R.M. Lodha)
…….………..……………………J.
(Madan B. Lokur)
…….………..……………………J. (Kurian Joseph)
NEW DELHI;
AUGUST 25, 2014.
-----------------------
[1] “3(a) "minerals” includes all minerals except mineral oils;
(c) "mining lease” means a lease granted for the purpose of
undertaking mining operations, and includes a sub-lease granted for such
purpose;
(d) “mining operations" means any operations undertaken for the
purpose of winning any mineral;
(e) "minor minerals" means building stones, gravel, ordinary clay,
ordinary sand other than sand used for prescribed purposes, and any other
mineral which the Central Government may, by notification in the Official
Gazette, declare to be a minor mineral;
(f) "prescribed" means prescribed by rules made under this Act;
(g) "prospecting licence" means a licence granted for the purpose of
undertaking prospecting operations;
(h)"prospecting operations" means any operations undertaken for the
purpose of exploring, locating or proving mineral deposit;”
[2] Monnet Ispat and Energy Ltd. v. Union of India and Ors.; [(2012) 11
SCC 1]
[3] Baijnath Kadio v. State of Bihar; [(1969) 3 SCC 838]
[4] Hingir-Rampur Coal Co. Ltd. v. State of Orissa; [AIR 1961 SC 459:
(1961) 2 SCR 537]
[5] State of Orissa v. M.A. Tulloch and Co.; [AIR 1964 SC 1284 : (1964)
4 SCR 461]
[6] Sandur Manganese and Iron Ores Ltd. v. State of Karnataka; [(2010)
13 SCC 1]
[7] State of Assam v. Om Prakash Mehta; [(1973) 1 SCC 584]
[8] Orissa Cement Ltd. v. State of Orissa; [1991 Supp. (1) SCC 430]
[9] Nazir Ahmad v. King Emperor; [(1935-36) 63 IA 372]
[10] Tara Prasad Singh and others v. Union of India and others; [(1980) 4
SCC 179]
[11] Desh Bandhu Gupta and Co. v.Delhi Stock Exchange Association Ltd.;
[(1979) 4 SCC 565]
[12] Baleshwar Bagarti v. Bhagirathi Dass; [ILR 35 Calcutta 701]
[13] Mathura Mohan Saha v. Ram Kumar Saha; [ILR 43 Calcutta 790]
[14] . NO.13011/3/92-CA
Government of India
Ministry of Coal
New Delhi, the 14th July, 1992.
OFFICE MEMORANDUM
Subject: Constitution of a Screening Committee for screening
proposals received for captive mining by private power generation
companies.
In the context of participation of private power generating companies
in power generation, proposals are also being received in the Ministry of
Coal from such companies requesting for ownership and operation of captive
coal mines. For screening of such applications/ proposals it has been
decided to constitute a Screening Committee comprising of the following
members:-
1. Additional Secretary, Ministry of Coal - Chairman
2. Adviser (Projects), Ministry of Coal - Member-
Convenor
3. Joint Secretary & Financial Adviser,
Ministry of Coal. - Member
4. Representative of Ministry of Railways - Member
5. Representative of Ministry of Power - Member
6. Representative of concerned
State Govt. (Revenue Deptt.) - Member
The Committee will meet once in a month and examine the proposals
received from various parties.
(S. KRISHNAN)
UNDER SECY. TO THE GOVERNMENT OF INDIA
[15] . NO.13011/3/92-CA
Government of India
Ministry of Coal
New Delhi, the 5th August, 93.
OFFICE MEMORANDUM
Subject: Constitution of a Screening Committee
for screening
proposals received for captive mining by private power generation
companies
– Matter regarding.
In continuation of this Ministry’s Office Memorandum of even number
dated 14.7.1992 constituting a Screening Committee for screening proposals
received for captive mining by private sector power generation companies,
it has been decided to revise partially the composition of the said
Screening Committee as under:-
1. Additional Secretary, - Chairman
Ministry of Coal, New Delhi.
2. Adviser (Project) - Member-convenor
Ministry of Coal, New Delhi.
3. JS & FA, - Member
Ministry of Coal, New Delhi.
4. Representative of Ministry - Member
of Railways, New Delhi.
5. Representative of Ministry - Member
of Power, New Delhi.
6. Representative of concerned - Member
State Govt. (Revenue Deptt.)
7. Director (Technical) CIL, - Member
Calcutta.
8. Chairman/Managing Director – - Member
CMPDIL, Ranchi.
9. CMD/ of concerned subsidiary - Member.
Companies of CIL.
(J.L. MEENA)
DEPUTY SECY. TO THE GOVERNMENT OF INDIA
[16] . No.47011/15/95-CPAM
Government of India
Ministry of Mines and Minerals
Department of Coal
New Delhi, the 10th January, 2000
Office Memorandum
Subject: Constitution of a Screening Committee for screening
proposals received for captive mining by companies engaged in the
generation of power and manufacture of iron, steel and cement.
The undersigned is directed to refer to this Ministry of O.M.
No.13011/3/92-CA dated 14.7.1992 and 5.8.1993 and No.47011/15/95-CPAM dated
26/28.10.1999 and to say that instead of Joint Secretary & Financial
Adviser, Deptt. Of Coal, Joint Secretary (Coal), Deptt. Of Coal will be
member of the Screening Committee. Accordingly, Screening Committee for
screening proposals for allocation of coal/ lignite blocks for manufacture
of iron/ steel captive production of power and production of cement in the
public / private sector is reconstituted as under:-
1. Additional Secretary, - Chairman
Department of Coal
2. Adviser (Projects) - Member - Convenor
Department of Coal
3. Joint Secretary (Coal) - Member
Department of Coal
4. Joint Secretary (LA) - Member
Department of Coal
5. Representative of Ministry of Railways, - Member
New Delhi,
6. Representative of Ministry of Power, - Member
New Delhi.
7. Representative of concerned State - Member
Govt. (Revenue Deptt.)
8. Director (Technical), CIL, Calcutta - Member
9. Chairman-cum-Managing Director, - Member
CMPDIL, Ranchi
10.CMD of concerned subsidiary company - Member
Of CIL/NLC
(T.K. Ghosh)
Director
[17] . No.13011/5/2003-CA
Government of India
Ministry of Coal
New Delhi, dated 17.4.2003
Office Memorandum
Subject:- Reconstitution of a Screening Committee for screening
proposals received for captive mining by companies engaged in the
generation of power and manufacture of iron, steel and cement.
The undersigned is directed to refer to this Ministry’s O.M.
No.13011/3/92-CA dated 14.7.1992 and 5.8.1993 and No. 47011/15/95-CPAM
dated 10.1.2000 and to state that from the date of issuance of this O.M.
the Screening Committee shall be headed by Secretary, Ministry of Coal and
Joint Secretary (Coal), Ministry of Coal shall be the member convenor.
Accordingly, Screening Committee for screening proposals for allocation of
coal / lignite blocks for generation of power and manufacture of iron,
steel and cement in the public/ private sector is reconstituted as under:-
1.Secretary
Ministry of CoalChairman2.Joint Secretary (Coal)
Ministry of CoalMember – Convenor3.Adviser (Projects)
Ministry of CoalMember4.Joint Secretary (LA)
Ministry of CoalMember5.Representative of Ministry of Railways, New
Delhi.Member6.Representative of Ministry of Power, New
DelhiMember7.Representative of concerned State Govt.Member8.Director
(Technical), CIL, CalcuttaMember9.Chairman-cum-Managing Director, CMPDIL,
RanchiMember10.CMD of concerned subsidiary company of CIL/NLCMember
(S. Gulati)
Director
[18] . No.13016/35/2005-CA-I
Government of India
Ministry of Coal
New Delhi, the 26th September, 2005
OFFICE MEMORANDUM
Subject: Reconstitution of Screening Committee for screening
proposals received from companies engaged in the generation of power and
manufacture of iron, steel and cement for allocation of coal blocks.
The undersigned is director to refer to this Ministry’s O.M.
No.13011/5/2003-CA dated 17.4.2003 and corrigendum No.13011/5/2003-CA
issued on 7.5.2003 and the O.M. of even no. dated 2.9.2003 on the subject
mentioned above and to state that from the date of issuance of this O.M.,
the following shall be the member of the Screening Committee in addition to
the existing members of the Committee:-
Secretary, or his representative, of Ministry of Environment &
Forests.
(S.Gulati)
Director.
[19] Centre for Public Interest Litigation & Ors. v. Union of India &
Ors.; [(2012) 3 SCC 1]
[20] Natural Resources Allocation, In re, Special Reference No.1 of 2012;
[(2012) 10 SCC 1]
[21] Kasturi Lal Lakshmi Reddy & Ors. v. State of J&K & Anr.; [(1980) 4
SCC 1]
[22] Sachidanand Pandey & Anr. v. State of West Bengal & Ors.; [(1987) 2
SCC 295]
[23] Haji T.M. Hassan Rawther v. Kerala Financial Corporation; [(1988) 1
SCC 166]
[24] M.P. Oil Extraction & Anr. v. State of M.P. & Ors.; [(1997) 7 SCC
592]
[25] Netai Bag & Ors. v. State of West Bengal & Ors.; [(2000) 8 SCC 262]
[26] Villianur Iyarkkai Padukappu Maiyam v. Union of India & Ors.;
[(2009) 7 SCC 561]
[27] R.K. Garg v. Union of India & Ors.; [(1981) 4 SCC 675]
[28] D.K. Trivedi & Sons & Ors. v. State of Gujarat & Ors.; [1986 Supp
SCC 20]
[29] Goa Foundation v. Union of India and Others; [(2014) 6 SCC 590]
* ………The sizes of blocks in terms of reserves are large and the
individual requirements of the sponge iron/steel producers were
comparatively smaller. All the meritorious applicants deserve to be given
captive coal.
In order to accommodate all the meritorious and deserving cases,
these blocks would need to be sub-divided which would result in enormous
loss of coal between barriers because of statutory and practical mining
conditions. Therefore, to sub-block the larger blocks as an alternative for
accommodating all the deserving cases had to be ruled out. The second
alternative was of grouping the deserving cases, so that they can form a
joint venture company, an SPV for mining of coal and carry out the coal
mining jointly in the allocated block. This alternative was also presented
to the applicant companies, but most of them had expressed reservations on
grounds like cultural and administrative differences among the constituents
of the joint venture company, inherently because they were competitors,
the joint venture company would be off balance-sheet and may not attract
sufficient lending, there could be intersee slippages in development of the
end-use projects and injection of equity by the constituents which could
jeopardize the mining project and would not lead to production at an early
stage. A number of other similar objections to the formation of joint
venture company or mining through SPV were put forward by a number of
applicants. This alternative also, therefore, had to be left alone. It
was then discussed that for each natural block, one applicant company who
had the highest stake and which was likely to take up proper mining at the
earliest, could be designated the Leader company and allocated a captive
block and a group of other meritorious companies could be nominated as
associated companies for supply of coal by the leader company to these
designated associates. The amount of coal to be supplied by the leader
company to the associate company would have a ceiling determined by the
assessed requirement of the associate company, after deducting the linked
quantum of coal given by CIL/its subsidiaries. The leader company would
commit to supply the ceiling amount of coal to the associate company
depending upon its requirements i.e. as and when the plant of the associate
company comes up, its requirements would be met upto the level of ceiling
quantum by the leader company. The yearly percentage of satisfaction
through this supply would be in the same proportion as the rated production
capacity of the mine, to be approved during the mining plan, to the total
of the assessed requirements of the leader (after fully protecting earlier
allocation, if any) and the associated companies attached to a coal block.
In the alternative, this supply of coal from the leader company to the
associated companies could be done through MCL also where depending on the
actual requirement of the associate company, subject to the ceiling, MCL
would add service charge, gather coal from the leader company and supply
the same to the associate company. In either of these cases, coal would be
transferred from the leader company to the associate company at
administratively determined transfer price and not at any free market price
or notified price of CIL, as this arrangement is in lieu of giving coal
blocks to the associate companies and their taking up captive mining
themselves. This administrative transfer price would be determined by
Ministry of Coal through its sub-committee headed by Addl. Secretary
(Coal). Having decided as above, the Screening Committee proceeded to
select the leader and the associate companies.
…….To sum up, the following companies were found deserving of
allocation of coal blocks alongwith their status:
Block Name of the Company Status
Utkal A To be merged with Gopalprasad for
Mining by MCL as one mine or by
Jindal Thermal Power Ltd./
Jindal Vijayanagar Ltd. and include
Jindal Stainless Steel Ltd. as a linked
Consumer
or an associate. Final decision and details
to be taken up in the Ministry of Coal.
Talabira II NLC
Priority linkage to be given for supply of
coal
to companies to be worked out in the Ministry
of Coal so that their yearly satisfaction
level
based on their assessed requirement after
adjusting the linkage is about equal to
those companies in the other blocks.
Bijahan Bhushan Limited Leader
Company
Associate companies to be worked out in the
Ministry of Coal
so that their yearly satisfaction level based on their assessed
requirement after adjusting the linkages is about equal to the
associate companies in the other block.
Radhikapur Rungta Mines Leader
Company
(West)
Associate companies to be worked out in the
Ministry of Coal, so that their yearly
satisfaction level based on their assessed requirement after
adjusting the linkages is about equal to the associate companies in
the
other block.
Radhikapur Tata Sponge Iron Ltd.
Leader Company
(East)
Associate companies to be worked out in the
Ministry of Coal, so that their yearly
satisfaction level based on their assessed requirement after
adjusting the linkages is about equal to the associate companies in
the
other block.
To the extent possible, linkaged/associate companies would be grouped
in the blocks sought by them.
Following companies were considered to be included as associate
companies or for linkages:
1) Jindal Stainless Steel Ltd.
2) Orissa Sponge Iron Ltd.
3) SMC Power Generation Ltd.
4) OCL India Limited
5) Shree Metalliks Limited
6) Scaw Industries Limited
7) Deepak Steel & Power Limited
8) SPS Sponge Iron Limited
9) Shyam DRI Power Limited
[However, subsequently after the long-term linkage of Aditya
Aluminium was revealed from records, the other three companies who
substantially met with the criteria employed for selection of the above
associate companies, were found includable without much change in
percentage satisfaction of the earlier determined associate companies.
These companies are:
Mahavir Ferro Alloys Ltd.
Nalwa Sponge Iron Ltd.
Bajrang Ispat Private Ltd.]
The companies whose cases were not decided in their favour for the
five captive blocks under consideration, are as follows:
N.T.P.C.
Bengal Sponge Iron Ltd.
Mundra SEZ
Gujarat Electricity Board
INDAL
OPGENCO
Madhya Utilities & Investment Ltd.
Deo Mines & Minerals P Ltd.
Madhyadesh paper Limited
Sunflag
Aditya Aluminium (HINDALCO)
Jaiswal Neco
MSEB
* *…..Considering the financial soundness of the companies, status of
advance action taken, requirement of the end-use projects already put up,
the likelihood of setting up of the entire capacity of the end-use projects
and the support of the Ministry of Steel and/or Power and the support of
the State Government the following companies were selected by the Screening
Committee for allocation of coal from captive blocks on the pattern similar
to the blocks in MCL area considered by the Screening Committee in its
meeting held on 10.1.2005.
Anjani Steels Pvt. Ltd.
Hindustan Zinc Limited
Chattisgarh Electricity Company Ltd.
Ind Agro-Synergy Ltd.
Ispat Godavari Ltd.
Jayaswal Neco Ltd.
Jindal Steel and Power Ltd.
MSP Steel and Power Ltd.
Nalwa Sponge Iron Ltd.
Nav Bharat Coalfields Pvt. Ltd.
Prakash Industries Ltd.
Sri Bajrang Power and Ispat Ltd.
Sri Nakoda Ispat Ltd.
Sunflag Iron & Steel Co. Ltd.
Vandana Global Ltd.
* It was decided to allocate coal from the captive blocks in the same
way as decided in case of blocks in MCL area, the Committee proceeded to
listing out the possible leaders from among the selected companies and
listed out the following possible leaders:
Hindustan Zinc Ltd.
Chhattisgarh Electricity Company Ltd.
Jayaswal Neco Ltd.
Jindal Steel & Power Ltd.
Prakash Industries Ltd.
Sunflag Iron & Steel Co. Ltd.
Consortium of Nav Bharat Coalfields Pvt. Ltd.,
Ind Agro Synergy; Ispat Godawari, Sri Bajrang Power & Ispat Ltd.,
Sri Nakoda Ispal Ltd., Vandana Global Ltd.
It was decided by the Committee that detailed formulation of groups or
‘common pool’ for allocation of coal/blocks in line with the dispensation
being contemplated in MCL blocks, will be worked out by the Ministry of
Coal. In this regard, it was decided that the following three alternative
formulations for mining and distribution of coal by the group from the
captive mine appear workable.
i) Formation of a Consortium company which will mine coal and
distribute among the consortium members.
ii) If no consortium emerges by consensus, a leader may be
identified in the group who will do mining of coal and distribute it among
the members of the group at a transfer price to be fixed by a Committee in
the Ministry of Coal. iii) If the group
members and leaders are not agreeable to a direct dealing with each other,
they being competitors among themselves, the subsidiary (here SECL) of CIL
operating in that area shall undertake distribution of the coal to the
associate companies at the transfer price fixed by a Committee in the
Ministry of Coal. Ministry of Steel
raised the issue that a number of companies have, in their presentations,
mentioned the capacity of the end-use projects in excess of what has been
recommended by the Ministry of Steel and a view has to be taken on the
same. Further it was also observed that a number of companies have raised
the proposed capacity of their end-use projects after the cut-off date of
28.6.2004. On this, representative of the State Government stated that the
ground realities of the projects need to be verified and the capacities of
the end-use plants and coal requirements of such projects require to be
confirmed. Therefore, the Screening Committee decided that a Committee of
the representatives of the Ministry of Steel and Ministry of Power,
Government of Chhattisgarh and the Ministry of Coal will sit in a meeting
and assess and firm up the capacities and coal requirement. The Meeting
would be convened in the Ministry of Coal.
* ** The above submissions of various companies who made presentation
before the Screening Committee were deliberated by the members of the
committee in details and with the support of the representatives of the
state governments concerned, representatives of the administrative
ministries, such as Ministry Steel, Ministry Power, Ministry of Commerce
and Industries (Deptt. of Industrial Policy and Promotion) and the Ministry
of Railway and other members, allocation of the following blocks in favour
of the companies mentioned against each in line with consortium/leader and
associate approach adopted in case of the blocks in MCL and SECL areas, was
decided:-
i) North Dhadu (670 mt.) -Tata Power - Leader
Subject to their studying the details and making
available their views to Min. of Coal who would
then take an appropriate decision in the matter.
M/s. Adhunik Alloys and Power Limited]
M/s. Pawanjay Iron and Steel Ltd. ]
Associates
M/s Jharkhand Ispat Ltd.
]
* ii) Bundu -Rungta Mines Ltd
Leader/consortium
Jai Balaji Sponge Ltd.
iii) Ardhagram -Sova Ispat Ltd. Leader
- Bengal Sponge Iron Manufactures
Mining Ltd.
iv) Parvatpur Electrosteels Casting Ltd.
v) Gondulpara -Tenughat Vidyut Nigam Ltd.
- Damodar Valley Corporation Ltd.
TVNL laid claim to Gondulpara on the assertion that since they have
the adjoining block of Badan, it would save coal if the two are mined
together. CMPDIL clarified that there had to be two separate mines looking
to the geography of the block and, therefore, the question of coal saving
does not arise. It was decided to share the produce between DVC and TVNL.
Leader would be decided in the Ministry of Coal.
vi) Pirpainti-Barahat - Shyam Sel Ltd.
- Rashmi Cement Ltd.
vii) Mahan - M/s. Hindalco (subject to confirmation
by Govt. of Madhya Pradesh)
viii) Gurha (East) -M/s. Marudhar Power Pvt. Ltd.
ix) Dumri - Neelachal Iron & Power Ltd.
- Bajrang Ispat Pvt. Ltd.
6. In regard to the decision taken on allocation of Mahan coal
block to M/s Hindalco since the representative of Govt. of Madhya Pradesh
made repeated request to consider to allocation of the block in favour of
the Madhya Pradesh State Mineral Development Corporation Limited, it was
observed by the Chairman of the Screening Committee that allocation of
Mahan block to Hindalco is likely to lead to substantial value addition and
economic activities in the state generating considerable revenue to the
State exchequer. The State Mineral Corporation can ask for other blocks
such as Amelia and Amelia north in the vicinity of the Mahan block.
However, considering the overall position, it was decided that it would be
appropriate to have the views of the Govt. of Madhya Pradesh on the same.
It was decided that within a CIL subsidiary area, production from the
blocks, instead of a one to one relation between the leader and the
associates, it could be pooled and shared amongst the associate companies
via the local CIL subsidiaries. The coal from these blocks would be mined
by the designated leader and transferred at a price to be determined
administratively as in the case of MCL and SECL blocks.
The issue of change of the area of the Gare-Palma-IV/I block which
was allocated to M/s. Jindal Steel and Power Ltd., by the allocatee company
themselves was also discussed. The details of the case was explained
before the Screening Committee. It was stated that M/s. Jindal Steel &
Power Limited had shifted the area of the block to cover an adjoining area
containing a coal reserve of about 15 million tonne between the border of
the State of Orissa and block boundary which is in the State of
Chhattisgarh. On the other side, a portion of the block containing a
reserve of about 36 million tonne under forest cover and human habitation
has been left out matching the acreage of the changed area with the acreage
area of the block allocated to them. It was pointed out by CMPDIL that the
area between Orissa border and block boundary which has been covered by
M/s. Jindal Steel and Power Ltd., could not form an independent block and
should have been included earlier in the area of Gare-Palma-IV/I. It was
also stated that M/s. Jindal Steel and Power Ltd., have already obtained a
lease over the area which contains the un-allocated area covered by them
with the approval to the mining plan and previous approval by the Central
Government for grant of mining lease. In view of the same it was held by
the Committee that it was an error both on the part of the Government and
the Company and this needed to be regularized. Thereafter, it was decided
that M/s. Jindal Steel and Power Ltd. should mine the left out area of the
block under forest cover and human habitation while mining the reserve in
the extra covered area. Accordingly, the representatives of M/s. Jindal
Steel and Power Ltd. were called before the Committee and they were
informed that they should work the entire area of the block including the
forest area and the area under villages and also the additional area in
question which has been covered by them and they should give details of the
whole area and its coal reserves to the CMPDIL and Ministry of Coal and the
mining plan be accordingly revised and considered.
*
* *** i) Patrapara
Looking to the size of the project, investment involved etc. it was decided
that the leadership should go to M/s. Bhushan Steel and Strips Limited and
for the associate status M/s. Nepaz Metalicks who had already been
allocated a sub-block in Patrapara would need to be included, M/s. Visa
Industries in view of the progress achieved by them need to be included and
after checking up the availability of reserves, case of M/s. Ocean Ispat
could be decided in the Ministry of Coal for inclusion of otherwise. The
committee discussed at length the limited reserve available in Patrapara.
Considering the requirement of the above applicants and the fact that Aunli
block, north of Patrapara, which was yet to be explored in detail, had
access from Patrapara and Machhakatta, most of the intervening boundaries
of Aunli being occupied by Patrapara, it was decided that CMPDIL would
redraw the boundary of Patrapara so as to include Aunli and the necessary
part of Machhakatta so as to result in a fairly large size block to meet
the requirement of these companies.
ii) Marki Mangli II, III and IV
It was decided that Marki Mangli II, III and IV be allocated to
M/s. Viangana. As regards the request of M/s BS Ispat it was felt that
since they already have MM I and if the percentage satisfaction with MM I
matches the percentage satisfaction of Virangana with Marki Mangli II, III
and then BS Ispat does not have a case for Marki Mangli II.
iii) Nirad Malegaon
The Screening Committee decided to allocate
this block to M/s. Gupta Metalicks and Power as the leader and they could
give rejects/middlings to M/s. Gupta Coalfields for their proposed power
plants. As the grade of coal was superior, allocation of this coal block
for power generation would not be desirable. iv) Panch Bahini
The Screening Committee
decided to allocate this block to M/s. Radhe Industries they being the sole
applicant for this block.
v) Bisrar
It was decided that this block be allocated to the
following companies: i) Chattisgarh State
Electricity Board as leader and the following as associates:
a) Ultra Tech (for their pre cut of project requirement)
b) M/s
Chattisgarh Steel and Power
c) M/s Singhal Enterprises
d) M/s Vnadana
e) M/s Akshay Investment (subject to the views of the
Ministry of Steel) CMD, CMPDIL informed that
earlier Madanpur was proposed to be sub-blocked into two blocks and now
Bisrar is also being proposed to be sub-blocked in two blocks. However,
between the four sub-blocks, i.e. two sub blocks of Bisrar and two of
Madanpur, one each from Bisrar and Madanpur, could be combined to be
called, Madanpur North or Bisrar (North) and Madanpur (South) or Bisrar
(South) could be mined as one block each. Consequently, the total number
of blocks between Bisrar and Madanpur would remain two. One would be with
about 10 million tones of extractable reserves and the other about 120
million tones of extractable reserves. It was decided that since CSEB
would be inducted as the leader consequently one leader from among those
selected as leaders in the 26th meeting would need to be dropped. This
matter would be analysed and decided in the Ministry of Coal. It was also
decided that the allocattees under the leader-associate/consortium concept
should be called in the Ministry of Coal for seeking their views and
finalizing the sharing of coal from captive mine arrangement between them.
*
*
*
* **** CMD, CMPDIL stated that with respect to mining in the new
patrapara block, which would include Aunil and part of Machhakatta, that
Aunil is yet to be explored in detail and part of Machhakatta would also
need to be explored. This would take like time. It was pointed out to
CMD, CMPDIL that they should examine the possibility of allowing mining in
the existing patrapara and thereafter dove-tailing the mining plan of new
patrapara which would include Machhakata and Aunil. In any cases Aunil is
in the dip side of patrapara and mining would reach there only after many
years. Therefore, its immediate exploration for the purposes of mining may
not be necessary. Chairman, Screening Committee pointed out that for the
purposes of calculating reserves, the data available as on date should be
taken into consideration. He also directed that Machhakatta should be
explored within the next six months by the time the mining plan for
existing patrapara comes up. In case dove-tailing is possible then the
mining plan should be approved otherwise it could be modified suitably,
instead of holding back the entire process.
* ……..Sharing of Mahan Block between M/s. Hindalco and Esser Power
Limited: The matter was discussed and by way of recapitulation the
screening committee was informed that in the last meeting of the screening
committee the representative of Government of Madhya Pradesh had taken a
position that the Mahan block should be given to the State Mineral
Development considering the overall merit of the competing claimants the
block should be allocated to M/s Hindalco for their aluminium project in
which the coal should be used in the captive power plant. However, the
final decision was to be taken in consultation with the Government of
Madhya Pradesh. The Government of Madhya Pradesh subsequently have given up
their position for allocation of Mahan block to the State Mineral
Development Corporation and have instead supported allocation of this block
to M/s Essar Power Limited. Representative from Government of Madhya
Pradesh stated that as they are power deficit state, they would recommend
allocation of mahan coal block to Essar Power Limited only. Representative
from the Ministry of power also supported the request of Government of
Madhya Pradesh. The Screening Committee decided that the views of the
State Government and of the representative of Ministry of power be taken on
record as they too had merit.
Iron and Case of M/s. Neelachal Power Limited: The Screening
Committee took note of the assessed requirement of M/s. Neelachal Iron and
Power Limited and also that of its possible associate M/s. Bajrang Ispat
Limited. It also took note of the fact that the overall percentage
satisfaction was nearly 50% from the allocated block of Dumri. The
decision for allocation of Dumri to M/s. Neelachal Iron and Power Limited
as leader with M/s. Bajrang Ispat as associate would remain unchanged.
*
*
*
! CMPDIL made an audio visual presentation Gare Pelma Blocks viz,
IV/1, IV/2, IV/3, IV/6 and IV/7 copy of the presentation is kept at
Annexure-II. CMPDIL essentially said that partial detailed exploration,
except in IV/6, was done by the allocattees themselves and exploration, in
the lower seams in IV/2 and 3 is underway, precise data would be available
only thereafter, and hence the estimates of reserves arrived at, based on
GSI boreholes which are very few, is highly tentative in respect of lower
seams.
On the availability side
Addition to Gare Pelma IV/1
On account of additional area is estimated at 33.6 mill. Tonnes.
On account of lower seams with inferior grade coals, which may not be
extracted being deep underground and of inferior grades, is for 4.76 mill.
T and is not being taken into amount.
Addition to Gare Pelma IV/2 and IV/3
On account of lower seams is estimated at 35 mill. Tonnes. Of which
22.12 mill tonnes is of superior grade.
Gare Pelma IV/6
The block has been detailed explored by CMPDIL and has total of
102.77 mill tonnes of extractable reserves of which 13.68 mill Tonnes in
the lower seams are of superior grades and the remaining 89.09 are inferior
grade of which 27.79 are in the lower seams (underground)
Gare Pelma IV/7
The block has been partially detail explored by the allocate.
Exploration of the lower seams has not yet been taken up or mandated. The
upper seams (opencast) in the approved mining plan show extractable
reserves of 56.62 million tonnes. Extractable Reserves in the lower seams
are tentatively assessed at 21.98 mill tones of which 14.56 are of superior
grade
On the Demand Side
JSPL and JPL
The existing Sponge Iron plant of JSPL of 6 Ltpa capacity requires 72
mill T of inferior grade coal for a 30 year life of which 11 million tones
have already been extracted from GP IV/1. The 1000 MW power plants of JPL
require about 158 mill T of ROM, considering the inferior grades of coal
for a 30 years life.
The Proposed expansion of 6.6. Itpa in sponge Iron capacity of JSPL
requires about 80 mill T of inferior grade coal for 30 year life for which
GP IV/6 is being sought. The proposed 2.6 itpa sponge iron through the
Rotary Hearth Furnace (RHF) of JSPL requires 6.34 mill T of 10-12% ash coal
which would result in an increased ROM Quantity depending upon the yield
upon washing.
The reserves available in IV/1, Considering 11 mill T already
extracted, would be 95.88 mill T. with extracted reserves it would be
106.88 mill. T another 4.76 mill T are inferior and in UG. Total reserve in
GP IV/2 and IV/3 would be 160 + 35 = 195 Mill T. Where the 35 addition is
highly tentative.
Total available in IV/1, IV/2 and IV/3 = 95.88 + 11 + 4.76 + 195 =
306.64 mill T including 22.12 superior in UG and 17.64 inferior in UG.
Inferior equivalent not counting 4.76 in GP IV/1 would be 326.86 mill. T
Total required = 72+79.2+157.5 = 308.7 mill T inferior grade. Not
counting the requirement of RHF as superior grade coal in IV/2 and IV/3 may
not be suitable for the RHF.
Another 34 mill T inferior equivalent count be added to the
requirement if washing yield is taken as 36% instead of 40% for sponge iron
and 80% yield is taken for power instead of 100% with rom as direct feed.
Addition on account of RHF would depend upon the wash yield, if it is taken
as 50% the addition would be about 13 mill tones of superior grade rom
coal.
Representative from the Government of Chhattisgarh stated that JSPL
and JPL are two separate Companies/legal entities. JPL cannot be compelled
to share coal given to them with JSPL. Company Law does not recognize Group
companies. Section 370(1B) mention companies under the same management and
JPSL JPL do not meet the criteria. Separate mining leases have been
executed with them. They have different shareholders, combining them would
create legal complications and therefore, they should be treated apart.
Reserves in GP IV/2 and GP IV/3 should be kept out of the reckoning when
considering request of GP IV/6 as the company is the same and the project
is of expansion in capacity.
CMD SECL stated that when allocation are being made in groups why
should sister companies not be asked to share first.
Representative from the Govt. of Chattisgarh stated that this would
be discrimination against JSPL JPL. When excess coal cannot be taken back
from earlier allocattees why should JSPL-JPL be singled out. Besides, all
is being based on data/projections which is admittedly highly tentative. He
further said that power generation (JPL) is crucial and should not be
affected.
Chairman sought views of the Ministry of Steel. The representatives
of Mos stated that the date is tentative, it is not fool proof. JSPL and
JPL are two separate companies and that they agreed with views of the
representative from Chattisgarh Govt.
Representative from CEA (power) stated that coal blocks given for
power project of JPL should be kept apart and not clubbed with Sponge Iron
project’s requirement of JSPL.
Chairman observed that large numbers of people are looking for coal.
There should be a sense of enquiry for meeting requirement of people. Legal
solution can and should be found for it.
Representative from the Govt. of Chattisgarh stated that JSPL and JPL
should not be clubbed. People have invested in these companies. They are
public limited companies, listed companies. There would be complications.
Chairman sought views of Chattisgarh on clubbing IV/1 and IV/6. This
was agreed and supported by Chattisgarh, CEA and MoS.
It was accordingly decided that reserves in GP IV/2 and IV/3 would be
kept out of consideration for deciding on extent of alloction in IV/6. The
extractable reserves in GP IV/1 + GP IV/6 are 95.88 + 102.77 = 198.65 mill.
T.
The Requirement of JSPL for 6 Itpa + 6.6 Itpa S.I comes to 72-
11+79.2=140.2 mill. T. And if 36% yield in washing is considered, given
high percentage of G grade coal in GP IV/1 and 6 this becomes 157.2 mill T
with addition of 17 mill. T.
As to the requirement in 2.6 Itpa in RHF, CMD CMDPIL was of the view
that coal from lower seams of IV/6 may not yield 10-12% ash coal on washing
and that JSPL should seek linkage of superior coal.
Representative from the Govt. of Chattisgarh stated that such
superior coal is available nowhere and that JSPL should be allowed to
innovate and use the lower seams to meet their RHF Requirement. MoC could
keep condition that when full facts are known at the mining plan
appropriately at the stage and allocate IV/6 to JSPL and Nalwa Sponge.
CMD CMPDIL said that superior coal in lower seams if IV/2 and IV/3
should not be used for power generation and but for sponge Iron marking.
Chairman, summing up the discussion, observed that IV/2 IV/3 are to
be kept out; reserve in IV/1 and IV/6 are be clubbed; RHF requirement be
kept out; requirement of partner company M/s Nalwa Sponge be included; the
existing requirement be accounted for at 100% satisfaction and expansion
requirement of JSPL and requirement of Nalwa Sponge be given same
satisfaction level as the overall in SECL area. If surplus still remains in
IV/1+ after this then JSPL-Nalwa be asked to select another allocattee
failing which the excess reserves be handed over to SECL, in terms of
annual production, at transfer price to be determined by the Government.
Coal availability and requirement in IV/1
Inferior
Superior
Total
Available; 95.88+89.09=184.97 13.68
198.65
Required : JSPL 157.2
NIL
At 100% Nalwa 026.6
Satisfaction
Required JSPL 144.7 (satisfaction level for
existing 6 Itpa SI at 100%)
At 86% Nalwa 022.9
Satisfaction 167.6
Surplus: 17.37
13.68
31.05
! ! The Screening Committee discussed in detail the presentations made
and the applications submitted by the companies. Taking into consideration
the views/comments of the Ministry of Power, Ministry of Steel, concerned
State Governments, and considering the guidelines laid down for the
allocation of coal/lignite blocks, the Screening Committee decided to
recommend the allocation of the coal blocks as follows:
i) Rohne coal block jointly in favour of M/s. JSW Steels Limited,
M/s. Bhushan Steel and Power Limited and M/s. Jai Balaji Sponge Limited.
ii) Sitanala coal block in favour of M/s. Steel Authority of India
Limited. iii) Tenughat-Jhirki coal block
jointly in favour of M/s. Rashtriya Ispat Nigam Limited and M/s. Jindal
Steel and Power Ltd.
iv) Choritand-Taliaya coal block jointly in favour of M/s. Sunflag
Iron and Steel Limited and M/s Rungta Mines Limited.
It was further decided that a sub-committee consisting of Joint
Secretary, Ministry of Coal and Joint Secretary, Ministry of Steel would
have discussions with the recommended joint allocattees of Rohne, Tenughat
Jhirki and Choritand-Taliaya coal blocks and work out the modalities and
details of the arrangements of the joint allocation. In case there is a
problem in the allocation as proposed, the sub-committee will bring the
matter again before the screening committee.
As regards Jogeswar coal block the representative of the Government
of Jharkand had informed the Committee that the State Government were of
the view that due to some problems at the local level, it may be difficult
for private companies to undertake coal mining. He further added that this
block may be earmarked for some State Public Sector Undertaking. The
Screening Committee also took note of the fact that this block was earlier
allocated but due to some local problems the allocattee could not commence
mining and it was consequently surrendered. The Screening Committee,
therefore, decided not to recommend allocation of Jogeswar block in favour
of any applicant for the time being.
!
! !! 5.3 The State Government of Jharkhand vide its letter no.571/M.C.
dated 29.8.06 and letter no. 592/CS dated 21.9.06 had conveyed the
following views regarding the captive coal blocks situated in the State of
Jharkhand:- S.No. BLOCK RECOMMENDATIONS
1. Tubed i) M/s Hindalco
ii) M/s Tata Power
iii) M/s Jindal Steel & Power Limited
2. Jitpur M/s Jindal Steel & Power
Limited
3. Chakla i) M/s Essar Power
ii) M/s Chaibasa Steel
4. Medinirai i) M/s JSMDC
ii) M/s Rungta Mines
5.4 The State Government of Madhya Pradesh vide its letter no.F-19-
36/2005/12/2 (part-I) dated 23.1.06 and letter no. F-19-36/2005/122 (Part-
1) dated 12.7.06 had conveyed the following views regarding the captive
coal blocks situated in the State of Madhya Pradesh.
S.No. BLOCK RECOMMENDATIONS
1. Brahmpuri M/s Satna Power Company Limited
2. Mandla North i) M/s Occidental Power Private
Limited ii) M/s Jaiprakash Associates
Limited
3. Rawanwara North M/s Ind Synergy Limited
4. Sial-Ghoghri M/s Prism Cement Limited
5.5 The State Government of Maharashtra vide its letter no. MMN-
1005/C.R.969/Ind-9 dated 19.11.05, letter no.MMN-1005/C.R. 1000/Ind-9 dated
10.1.06, letter no.MMN-1005/C.R.969 part-II/Ind-9 dated 4.5.06 and letter
no.MMN-1005/C.R.1000/Ind-9 dated 11.5.06 had conveyed the following views
regarding the captive coal blocks situated in the State of Maharashtra.
S.No. BLOCK RECOMMENDATIONS
1. Lohara East i) M/s Murli Agro Product Private
Limited ii) M/s Ultra Tech Cement
Limited iii) M/s IBEL Gas Power
Limited
2. Warora West i) M/s Bhatia International Limited
(North) ii) M/s
Shri Sidhbali Ispat limited iii)
M/s MSP Steel Private Limited
iv) M/s Central India Power Company Ltd.
v) M/s Gupta Energy Limited
vi) M/s Jas Toll Road Company Limited
3. Kosar-Dongargaon M/s Wardha Power Company Private
Ltd.
5.6 The State Government of West Bengal vide its letter
no.5477/PrS/CI dated 9.8.06 had conveyed the following views regarding the
captive coal blocks situated in the State of West Bengal.
S.No. BLOCK RECOMMENDATIONS
1. Biharinath i) M/s Bankura DRI
Manufacturing Pvt. Co. Limited
5.7 The Secretary, Industries, Government of Andhra Pradesh apprised
the Screening Committee that Ansettipali, Punkula-Chilka and Pengedappa are
located in the notified tribal areas where the provisions of AP Land
Transfer Regulations are applicable. In such areas, the State Government
will not be in a position to grant mining leases in favour of private
sector companies. The Government of Andhra Pradesh has also brought out
amendments to Section 11(5) of MMDR Act, 1957. Pursuant to this amendment
grant of mining lease in Andhra Pradesh to non-tribals except public sector
undertakings is prohibited in case of mines located in the notified tribal
areas.
5.8 The Screening Committee discussed in detail the presentations
made and the applications submitted by the companies. Taking into
consideration the views/comments of the Ministry of Power, Ministry of
Steel, concerned State Governments, and considering the guidelines laid
down for the allocation of coal/lignite blocks, the Screening Committee
decided to recommend the allocation of the coal blocks as follows:
S.No. BLOCK Company and end use plant
1. Tubed jointly to i) M/s Hindalco Industries Ltd. for its enduse
plant in Latehar, Jharkhand
ii) M/s Tata Power Company Ltd. for its enduse plant in Singhbhum,
Jharkhand
2. Chakla M/s Essar Power Limited for its enduse plant in Latehar,
Jharkhand
3. Jitpur M/s Jindal Steel and Power Limited for its enduse plant in
East Singhbhum, Jharkhand.
4. Mednirai jointly to i) M/s Rungta Mines Limited for its
enduse plant in Saraikela Kharswan, Jharkhand
ii) M/s Kohinoor Steels Pvt. Ltd. for its enduse plant in Saraikela
Kharswan, Jharkhand
5. Brahmpuri M/s Pushp Steel and Mining for its enduse plant in
Durg, Chhatisgarh
6. Mandla North M/s Jaiparkash Associates Limited for its enduse
plant in Madhya Pradesh/Himachal Pradesh
7. Rawanwara North M/s SKS Ispat Limited for its enduse plant in
Raipur, Chhatisgarh
8. Sial-Ghoghri M/s Prism Cement Ltd. for its enduse plant in
Satna, MP
9. Lohara East jointly to i) M/s Murli Agro Product Ltd. for its
enduse plant in Nagpur and Chandrapur, Maharashtra
ii) M/s Grace Industries Ltd. for its enduse plant in Chandrapur,
Maharashtra
10 Warora West (North) M/s Bhatia International Ltd. for its
enduse plant in Chandrapur, Maharashtra
11. Kosar-Dongargaon M/s Chaman Metallics Pvt. Ltd. for enduse
plant in Chandrapur, Maharashtra
12. Biharinath M/s Bankura DRI Manufacturing Pvt. Co. Ltd. for its
enduse plant in Bankura, West Bengal
13. Ansettipali M/s Andhra Pradesh Power Generation Corporation
Limited (APGENCO) for its enduse plants in Andhra Pradesh
14. Punkula-Chilka
15. Pengedappa
5.9 In respect of blocks recommended to be allocated jointly, the
allocatee companies shall share the coal in the ratio of their assessed
requirement for the capacities (end-use plants) as reflected in the
original applications.
!
!
? 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, Ministry of
Steel, 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:
Name of BlockRecommended CompaniesEnd use Plant1.Mandakini1. M/s.
Monnet Ispat & Energy Ltd.
2. M/s. Jindal Photo Ltd.
3. M/s. Tata Power Comp. Ltd.Orissa
Orissa
Orissa2.Rampia
&
Dip Side of Rampia 1. M/s. Sterlite Energy Ltd.
2. M/s. GMR Energy Ltd.
3. M/s. Lanco Group Ltd.
4. M/s. Navbharat Power Pvt.
5. M/s. Mittal Steel India Ltd.
6. M/s. Reliance Energy Ltd.Orissa
Orissa
Orissa
Orissa
Orissa
Orissa3.Durgapur II/Sariya 1. M/s. D.B. Power Ltd.
Chhattisgarh4.Durgapur II/Taraimar 1. M/s. Bharat Aluminium Co. Ltd.
Chhattisgarh5.Sayang 1. M/s. AES Chhattisgarh Energy Pvt.
Ltd.Chhattisgarh6.Fathepur 1. M/s. SKS Ispat & Power Ltd.
2. M/s. Prakash Industries Ltd.Chhattisgarh
Chhattisgarh7.Fathepur East 1. M/s. JLD Yavatmal Energy Ltd.
2. M/s. Green Infrastructure Pvt. Ltd.
3. M/s. R.K.M. Powergen Pvt. Ltd.
4. M/s. Visa Power Ltd.
5. M/s. Vandana Vidyut Energy Ltd.Maharashtra
Chhattisgarh
Chhattisgarh
Chhattisgarh
Chhattisgarh
8.Lohara West & Lohara East1. M/s. Adani Power (P) Ltd. (1200
MW)Maharashtra9.Ganeshpur1. M/s. Tata Steel Ltd. (CPP-600 MW)
2. M/s. Adhunik Thermal Energy Ltd. (Equal Share) 1000 MWJharkhand
Jharkhand10.Seregarha1. M/s Mittal Steel Ltd.
2. M/s GVK (Gonvindwal Sahib) Ltd.Jharkhand
Punjab11.Ashok Karkata CentralM/s. Essar Power Ltd.Jharkhand12.Patal
EastM/s. Bhushan Power & Steel Ltd. (750)Jharkhand13.Amarkonda
Murgadangal1. M/s. Jindal Steel & Power Ltd.
2. M/s. Gagan Sponge Iron Pvt. Ltd.Jharkhand
Jharkhand14.Mahuagarhi1. CESC
2. Jas Infrastructure Capital Pvt. Ltd.Jharkhand
West Bengal15.Gourangdih ABC1. M/s. Himachal Emta Power Ltd. and
M/s. JSW Steel Ltd. on equal share basis.
2. Representative from the West Bengal Govt. suggested that either
the block be allotted to WBMDTC Bengal or else be left unallotted. The
committee felt that since WBMTDC Bengal had not applied for the block, it
would not be possible to consider them. Regarding non-allotment, the
matter may be placed for consideration of the Govt.
± Inter-se priority for allocation of a block among competing
applicants for a captive block may be decided as per the following
guidelines.
Status (stage) level of progress and state of preparedness of the
projects;
Networth of the applicant company (or in the case of a new JV, the
networth of their principals);
Production capacity as proposed in the application;
Date of commissioning of captive mine as proposed in the application;
Date of completion of detailed exploration (in respect of unexplored
blocks only) as proposed in the application;
Technical experience (in terms of existing capacities in coal/lignite
mining and specified end use);
Recommendation of the Administrative Ministry concerned;
Recommendation of the State Government concerned (i.e. where the
captive block is located);
Track record and financial strength of the company
Preference will be accorded to the power and the steel sectors.
Within the power sector also, priority shall be accorded to projects with
more than 500 MW capacity. Similarly, in steel sector, priority shall be
given to steel plants with more than 1 million tonne per annum capacity.
? ? Urtan Beharaband North Extn., Tandsi-III & Tandsi-III extn., Urtan
North (coking blocks), Macherkunds, Rajhara North (Central & Eastern) Moira
Madhujore (North & South), Datima, Bhaskarpara, Kudari, Bikram, Vijay
Central Rajgamar Dipside (South of Phulakdih Nala), Kesla North, Gondkhari,
Kappa & Extn. Dahegaon-Makardhokra-IV, Bander, Hurilong, Hutar sector C,
Rajgamar Dipside (Deavnara), Tehsgora-B/Rudrapuri and Andal East (Non
cooking blocks)
?
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