The Telegraph
Tuesday , August 26 , 2014
CIMA Gallary

Coal allotments over 17 years illegal: SC

- Order covers NDA and UPA decisions, fate of 153 blocks uncertain as court reserves decision till hearing next week

New Delhi, Aug. 25: The Supreme Court today declared as “arbitrary and illegal” the allocation of 153 coal blocks by the Centre between 1993 and 2010 — nearly two decades that straddle the NDA and the UPA regimes.

But the court has not yet decided to cancel the allocations. The final decision will be taken after hearing out the parties concerned on September 1.

In a related ruling, the apex court has said state-level public sector units can neither undertake commercial mining nor enter into joint ventures for mining. ( )

In Bengal, the fate of some steel and power projects — which are far from fruition — could be affected if the court decides to cancel the allocation of non-operational coal blocks.

The court refrained from interfering with the allocations made to 20 ultra mega projects as they were auctioned off and not challenged by the petitioners. But the projects have been restrained from diverting coal for commercial exploitation.

The apex court termed the allocation process illegal not because the coal blocks were not auctioned but because they were farmed out in an arbitrary manner without any criterion and without following many of the established procedures.

The court did not go into whether auctions should have been held or not — a larger bench has already clarified that competitive bidding does not have the status of a constitutional principle but the mode of allocation is the policy prerogative of the executive. However, in the last days of UPA II a switch towards auction-based allocation had begun.

Among the 153 coal blocks marked out today, only around 30 are said to be in operation, accounting for around 0.4 per cent of the total output of 565 million tonnes in the country in 2013.

Originally, 194 coal blocks were under the scanner, of which the UPA on its own had de-allotted 41, leaving 153 with the court. Of the original 194 blocks, as many as 121 were allotted to state-level public sector units while the remaining 73 were given to private players.

A three-judge bench of Chief Justice R.M. Lodha and Justices Madan B. Lokur and Kurien Joseph today stopped short of cancelling the allocations, saying “what should be the consequences is the issue which remains to be tackled”. This hearing will be held next Monday.

In 2012, another bench of the apex court had cancelled 122 telecom licences in the 2G scandal, a ruling that had triggered a debate. The coal ruling comes at a time a fresh debate is going on about the judges’ appointment bills in which the court today refused to intervene as the act has not yet been cleared by the President. ( )

Today’s coal judgment was delivered on two PILs filed by advocate Manohar Lal Sharma and an NGO, Common Cause, who relied on a CAG report that had estimated a Rs 1.75-lakh-crore loss to the exchequer on account of the arbitrary allocations.

The allocations were made by screening committees and through the “government dispensation route” (administrative order).

The court said: “The entire allocation 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.”

The court added: “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… is illegal,” said Chief Justice Lodha, writing the judgment.

The bench noted that most of the companies that had been allocated coal blocks were not engaged in producing steel, power or cement at the time of allotment. They only stated that they proposed to set up such plants. Thus, the requirement of end-use was not met at the time of allocation.

The court listed the following lacunae while the allocations were made:

Non-compliance with the mandatory legal procedure under the Mines and Minerals (Development and Regulation) Act

Breach of a section of the Coal Mines (Nationalisation) Act

Violation of the principle of trusteeship of natural resources by gifting away precious resources as largesse

Arbitrariness, lack of transparency, lack of objectivity and non-application of mind

Allotment tainted with corruption and made in favour of ineligible companies as raised in the two PILs.

The court flayed the “pick-and-choose” policy. “The policy of pick and choose was adopted. The application of norms was changed from meeting to meeting with no uniform or consistent consideration. 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.”

“Some of the companies which had no recommendation by the state government were recommended by the screening committee,” the court added. “The minutes of the 33rd and 34th meeting even do not note the particulars of the applicants individually.”

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