TMI Blog2014 (8) TMI 1170X X X X Extracts X X X X X X X X Extracts X X X X ..... arency 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. 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. S 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ignificant 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, 12.09.20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 effe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te 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 f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovides 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 mi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rnment 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 sublease 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 rationa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. v. State of Karnataka [(2010) 13 SCC 1], 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. State of Assam v. Om Prakash Mehta [1973) 1 SCC 584] 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 Monnet Ispat and Energy Ltd. v. Union of India and Ors. [(2012) 11 SCC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Central Government, the applicant submits the same to the State Government for grant of mining lease over the area. f. 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. g. 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. h. 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 Centra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 18. (Emphasis supplied by us) 63. The observations made by this Court in Tara Prasad Singh and Ors. v. Union of India and Ors. [(1980) 4 SCC 179] 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 la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt, 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 and Company v. Delhi Stock Exchange Association Ltd. [(1979) 4 SCC 565]. 67. In Desh Bandhu Gupta and Co. v. Delhi Stock Exchange Association Ltd. [(1979) 4 SCC 565], 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 v. Bhagirathi Dass [ILR 35 Calcutta 701] and Mathura Mohan Saha v. Ram Kumar Saha [ILR 43 Calcutta 790] 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l 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 amen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ernment. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 14.07.19923, 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 05.08.19934, Office Memorandum dated 10.01.20005, Office Memorandum dated 17.04.20036 and Office Memorandum dated 26.09.20057. 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 New Delhi, the 5th August, 93. 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, anyb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .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 Ge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowing 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 and Ors. v. Union of India and Ors. [ (2012) 3 SCC 1] and (2) Natural Resources Allocation, In re, Special Reference No. 1 of 2012 : [(2012) 10 SCC 1] 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 and Ors. v. State of J and K and Anr. [(1980) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his 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 v. Union of India and Ors. [ (2009) 7 SCC 561] 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 r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Reddy and Ors. v. State of J and K and Anr. [(1980) 4 SCC 1], Sachidanand Pandey and Anr. v. State of West Bengal and Ors. [(1987) 2 SCC 295], Haji T.M. Hassan Rawther v. Kerala Financial Corporation [(1988) 1 SCC 166], M.P. Oil Extraction and Anr. v. State of M.P. and Ors. [(1997) 7 SCC 592], Netai Bag and Ors. v. State of West Bengal and Ors. [(2000) 8 SCC 262] and Villianur Iyarkkai Padukappu Maiyam v. Union of India and Ors. [(2009) 7 SCC 561], 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 Arti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tra 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 dispos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eless 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions 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, In re, Special Reference No. 1 of 2012 : [ (2012) 10 SCC 1] 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 v. Union of India and Ors. [ (2014) 6 SCC 590] wherein following Natural Resources Allocation, In re, Special Reference No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ector, (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 aucti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ommittee 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, In re, Special Reference No. 1 of 2012 : [(2012) 10 SCC 1] that the Court cannot conduct a comparative study of various methods of distribution of natural resources and cannot mandate one m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vernment 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd, 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 5t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to identify Parbatpur, Mahal, Sitanala 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 and 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 and 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 off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd 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. Corporation 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 Company requested the Screening Committee for a portion of the Takli-Jena-Bellora block which had already been allotted to M/s. Lloyds Metals and 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Takli-Jena-Bellora block to M/s. Central Collieries Company Ltd. In the 13th meeting, the representative of M/s. Central Collieries Company 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 fram ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 m.t.p.a. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 guideline ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m 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 Belgaum 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch 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. 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 and Power Ltd.; 5. Prakash Industries Ltd.; 6. Sunflag Iron and Steel Company Ltd.; and 7. Consortium of Nav Bharat Coalfields Pvt. Ltd., Ind Agro Synergy Ltd., Ispat Godawari Ltd., Sri Ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tral 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 Pan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or 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 Mednir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 pla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mended by the Administrative Ministry. For Rajhara North (Central and Eastern) coal block, Vini Iron and 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 and 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 companie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ning 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 selec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 op ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Government or a Government company or a corporation owned, managed or controlled by the Central Government or a person to whom the sublease 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 sublease 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing 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 ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 undertakin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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