The higher judiciary in India is perhaps the most powerful in the world. From appointments to functioning to the scope of the judgements, the power it enjoys is unprecedented in a democratic setup. And this scope has only expanded under the ambit of public interest litigation (PIL) petitions and judicial activism prompting allegations of judicial overreach.

Although it is a very thin line between judicial activism and judicial overreach, the appropriation of the legislative and often executive roles by the judiciary has become frequent and often leads to complications like that in the case of the Scheduled Caste/Scheduled Tribe Act, or the Sabarimala case, or the university reservation roster case.

This issue has been highlighted by various commentators, but what has been ignored by and large is the economic cost imposed by judicial orders.

A recent case pertains to the Aadhaar judgment, which restricted the use of Aadhaar by private companies, thus dealing a blow to the entire FinTech ecosystem and innovations evolving around Aadhaar. This has the potential to substantially push the financial sector in India several years behind the curve when big data and artificial intelligence-fuelled innovations are restructuring and radically transforming the sector.

Similar was the case with the Supreme Court order to ban the sale of cars not complying with the Bharat Stage-IV norms from an abrupt date of 31 March 2017, without accounting for the lakhs of vehicles held in inventories and, thus, causing a loss of thousands of crore to the industry and affecting some 20,000 dealers as well as employment. The sudden ban on firecrackers days before Deepavali last year also jeopardised thousands of traders who had already purchased stocks.

A question, then, arises: Who, if anyone, is accountable for such massive costs imposed by the judiciary, which often ignore such costs in its deliberations?

An even greater fallout of such judicial verdicts, however, can be seen in the power and steel industry, where the cancellation of the allotment of coal blocks and imposition of massive fines on private players has crippled the industry. In 2014, the Supreme Court cancelled the allotment of 214 coal blocks since 1993 based on the estimated loss to the exchequer to the tune of 1.86 lakh crore, according to the Comptroller and Auditor General’s (CAG) report. The Supreme Court not only took over the monitoring of the Central Bureau of Investigation (CBI) enquiry into the allotments based on a PIL but also prohibited the CBI from sharing the report with the government. It dismissed the plea of the private players operating the functional mines to exempt them from cancellation. The miners had argued that it will lower “investors’ confidence, cause acute distress in some industries, affect 28,000 MW of power capacity, and cause an estimated loss of Rs. 4.4 lakh crore in terms of royalty, cess, direct and indirect taxes, besides raising the cost of coal imports and setting back the process of extraction and effective utilisation of coal by eight years.” The argument was valid, in hindsight.

It is true that the auction of coal blocks would have fetched higher revenues to the exchequer, but the estimates of the CAG were disputable and had fluctuated over time. The CAG had taken the Coal India-operated mines to estimate these numbers, but it is also true that Coal India has the best coal blocks under it, whereas the quality of coal varies across India. India lacks high-grade coal, which is also a major reason for the coal imports. Therefore, estimates arrived at by the CAG couldn’t be mechanically imposed on all the blocks and mines. But this is exactly what was done. Not only was the license of those blocks cancelled, where no mining activity/investment had commenced, but of functional mines as well, jeopardising huge investments and disrupting the entire backward and forward linkages across the industry.

Essentially, the judiciary took over all the power of policymaking, implementation, enquiry, and judgement, and the obvious blind spots such an arrangement creates has caused severe distress in the economy, with power and steel companies suffering from the disruption and, in combination with other problems, leading to the ballooning non performing assets (NPA) crisis in these sectors. The thirty-seventh and fortieth Parliamentary Standing Committee (PSC) reports on energy have also pointed out the shortage and non-availability of coal as a major reason for the stress in the power sector, with dozens of power projects heading to the National Company Law Tribunal after the Reserve Bank of India (RBI) deadline for the resolution expired.

The thirty-seventh PSC report on energy pointed out that there were 34 power plants categorised as “stressed”. The different categories of stressed power plants are (i) plants having power purchase agreements (PPA) and requiring coal; (ii) plants having neither coal linkage nor PPA; (iii) plants having coal block but where the issue of coal block is sub-judice; and (iv) the plants stressed on account of reasons other than coal linkage/block issues. And of the 34 coal-based power projects of 40,000 MW capacity, 17 projects are affected because of coal linkage that may be partial or due to full non-availability of coal linkage.

The Committee also noted that “despite serious attempts made by the Government to make available coal to the power sector, the desired results are not achieved, and the sector is starving for fuel”. Despite the various routes adopted by the government, like the Memorandum of Understanding (MoU) route, special forward e-auction, and extension of the term of the MoU, the situation remains far from satisfactory, which has seriously hampered not only the growth of the sector but has also become one of the major factors turning assets into NPAs.

This was to be expected as the Supreme Court gave Coal India the responsibility to take over coal production from the mines whose licenses were cancelled, till the new auctions were held. But a single entity can only do so much. It takes time to take over assets and manage them according to the new setup and then maintain the production. No proper view was taken of the enormity of the task. In fact, the court remarked: “That the CIL is inefficient and incapable of accepting the challenge is not an issue at all.” But now we find that it’s an important issue. After the initial jump in the coal stock due to the strenuous efforts of the government after 2014, there is a steep fall in the stock as can be seen from the picture below: