Writ Petition (Crl.) Nos. 120, 463 and 515 of 2012, 283 of 2013. Case: Manohar Lal Sharma Vs The Principle Secretary. Supreme Court (India)

Case NumberWrit Petition (Crl.) Nos. 120, 463 and 515 of 2012, 283 of 2013
JudgesR.M. Lodha, C.J.I., Madan B. Lokur and Kurian Joseph, JJ.
IssueCoal Mines (Nationalisation) Act - Sections 3(3), 3(4), 11; Mines and Minerals (Development and Regulation) Act, 1957; Colliery Control Rule, 2004 - Rule 9
Judgement DateSeptember 24, 2014
CourtSupreme Court (India)


  1. On 25th August, 2014 judgment was delivered in these cases and it was held, inter alia, that the allotment of coal blocks made by the Screening Committee of the Government of India, as also the allotments made through the Government dispensation route are arbitrary and illegal. Since the conclusion arrived at would have potentially had far-reaching consequences, on which submissions were not made when the case was heard, the question of what should be the consequences of the declaration was left open for hearing.

  2. The relevant paragraphs of the judgment dated 25th August, 2014 read as follows:

  3. 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.

  4. 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.

  5. 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.

  6. Accordingly, we heard several learned Counsels appearing for a very large number of interveners, impleadment applicants and State Governments. Substantive submissions were made, amongst others, by the Coal Producers Association, the Independent Power Producers Association of India and the Sponge Iron Manufacturers Association. These associations had also been heard on an earlier occasion well before judgment was delivered on 25th August, 2014.

  7. For the purposes of these "consequence proceedings", the Union of India filed an affidavit dated 8th September, 2014. It is stated in the affidavit that coal is actually being mined from 40 coal blocks listed in Annexure I to the affidavit. This list includes two coal blocks allotted to an Ultra Mega Power Projects (Sasan Power Ltd.. [UMPP] allotted the coal blocks Moher and Moher Amroli Extension). Coal blocks allotted to UMPPs have not been disturbed in the judgment. The list of the 40 coal blocks is attached to this order as Annexure 1.

  8. In addition to the above 40 coal blocks, it is stated in the affidavit that 6 more coal blocks are ready for extraction of coal in 2014-15 and this list is Annexure II to the affidavit. These 6 coal blocks have obtained the Mine Opening Permission from the Coal Controller's Organization Under Rule 9 of the Colliery Control Rules 20041 (framed under the Mines and Minerals (Development and Regulation) Act, 1957). This permission is granted subsequent to the execution of a mining lease. The list of these 6 coal blocks is attached to this order as Annexure 2.

  9. Therefore, the affidavit is quite clear that 40 coal blocks are already producing coal and 6 coal blocks are in a position to produce coal virtually with immediate effect. The question is whether the allotment of these coal blocks should be cancelled or not.

  10. It was submitted by the learned Attorney General that after the declaration of law and the conclusion that the allotment of coal blocks was arbitrary and illegal, only two consequences flow from the judgment. The first is the natural consequence, that is, the allotment of the coal blocks (other than those mentioned in the judgment) should be cancelled and the Central Government is fully prepared to take things forward. The second option is that 46 coal blocks (as above) be left undisturbed (subject to conditions) and the allotment of the remaining coal blocks should be cancelled.

  11. Expounding on the alternative consequence, it was submitted that Coal India Limited (CIL) a public sector undertaking can take over and continue the extraction of coal from these 44 coal blocks without adversely affecting the rights of those employed therein. However, it was submitted that CIL would require some time to take over the coal blocks and manage its affairs for continuing the mining process. Effectively therefore, it was submitted that even if the allotment of these 44 coal blocks is cancelled, the Central Government can ensure that coal production will not stop.

  12. Learned Attorney General submitted that all the allottees of coal blocks should be directed to pay an additional levy of Rs. 295/- per metric ton of coal extracted from the date of extraction as per the Report of the Comptroller and Auditor General (CAG) dealing with the financial loss caused to the exchequer by the illegal and arbitrary allotments. It was further submitted that in the case of allottees supplying coal to the power sector, they should be mandated to enter into Power Purchase Agreements (PPAs) with the State utility or distribution company (as the case may be) so that the benefit is passed on to the consumers.

  13. By way of abundant precaution, the learned Attorney General pointed out that in respect of the allotment of 6 coal blocks, a First Information Report has been lodged by the Central Bureau of Investigation (CBI). Therefore, investigations are in progress to ascertain whether any criminal offence has been committed in respect of the allotment of 6 coal blocks. In addition, it is pointed out that the CBI has on 3rd September, 2014 informed that a final decision with regard to any alleged criminality or otherwise in the allotment of 6 other coal blocks is pending consideration. In other words, the alleged criminality in the allotment of 12 out of the 46 coal blocks identified by...

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