There was no fair and transparent procedure, says Bench

The Supreme Court on Monday pulled up the Centre on coal block allocations and declared all >218 allocations made from 1993 to 2011 illegal and arbitrary.

A Bench of Chief Justice R.M. Lodha and Justices Madan B. Lokur and Kurian Joseph said the entire allocation of coal blocks as recommended by the Screening Committee from July 14, 1993, in 36 meetings and the allocation made through the government dispensation route suffered from the vice of >arbitrariness and legal flaws.

In February 2012, the court ordered the cancellation of spectrum allocations and directed fresh auction.

Though >the present judgment would imply that the coal block allocations are to be cancelled, the Bench said the consequences of declaring the allocations illegal would be considered on September 1 >taking into account the investments made by companies for various projects and the >procedure to be adopted for cancellation.

In its 163-page judgment, the Bench said, “As we have 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 to be tackled. To this limited extent, the matter requires further hearing. The Screening Committee has never been consistent, it has not been transparent, there is no proper application of mind.”

Writing the judgment, the CJI said, “On many occasions, guidelines have been honoured more in their breach. There were no objective criteria, nay, no criteria for evaluation of comparative merits. There was no fair and transparent procedure. ”

SC may appoint panel on block allocations

Justice Lodha on Monday indicated that a committee headed by a retired Supreme Court judge could be appointed to go into the consequences arising out of the order declaring coal block allocations illegal.

The Bench disposed of writ petitions filed by advocate M.L. Sharma and Common Cause, challenging the allocation of 218 coal blocks (these include 41 de-allocations and re-allocations) — 105 to private companies, 99 to government firms, 12 to ultra power projects and two coal-to-liquid projects.

After reading out the >judgment, the CJI told Attorney-General Mukul Rohatgi, senior counsel Harish Salve and counsel Prashant Bhushan that one way of dealing with the issue would be to appoint a committee headed by a retired Supreme Court judge.

He said the committee’s report indicating the options available would help the court in taking an objective view on the issue. Mr. Salve and Mr. Bhushan told the court that they would give their suggestions after going through the judgment.

The Bench said the government dispensation route, whereby public sector corporations and undertakings were allocated coal blocks and joint venture companies had been allowed to enter into Mine Development Operation Agreements with other private partners or sister concerns, had virtually defeated the legislative policy in the Coal Mines Management Act. Winning and mining of coal mines had resultantly gone into the hands of private companies for commercial use. Allocation of coal blocks through the government dispensation route, however laudable the object might be, was illegal since it was impermissible as per the scheme of the Coal Mines Management Act.

The Bench clarified that allocations made through competitive bidding for the lowest tariff for power for Ultra Mega Power Projects (UMPPs) might not be cancelled. However, the Bench said the blocks allocated for UMPPs would only be used for UMPPs and no diversion of coal for commercial exploitation would be permitted.

The Bench pointed out that it took almost eight years in putting in place >allocation of captive coal blocks through competitive bidding. During this period, many coal blocks were allocated, giving rise to the present controversy, which was avoidable because competitive bidding would have brought in transparency, objectivity and very importantly given a level playing field to all 85 applicants and lowered the difference between the market price and the cost of coal for the allottee by way of premium, which would have accrued to the government, the court said.