MANOHAR LAL SHARMA v. THE PRINCIPAL SECRETARY & ORS.

A mines for captive end-uses required consideration of inputs from a variety of stakeholders such as the 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) B and Coal India Limited (to protect CIL's interest in coal blocks being developed by its subsidiaries). Initially, by Office Memorandum dated 14.⁷.1992 14 , the Screening Committee was constituted by the Ministry of Coal for scrutinizing applications/proposals received from private power generating c companies requesting for ownership and operation of captive coal mines. The Screening Committee was reconstituted on

14. N0.13011/3/92-CA Government of India D Ministry of Coal New Delhi, the 14th July, 1992. OFFICE MEMORANDUM Subject: Constitution of a Screening Committee for screening proposals received for captive mining by private power generation companies. In the context of participation of private power generating companies in E power generation, proposals are also being received in the Ministry of Coal from such companies requesting for ownership and operation of captive coal mines. For screening of such applications/ proposals it has been decided to constitute a Screening Committee comprising of the following members:-

1. Additional Secretary, Ministry of Coal Chairman F

2. Adviser (Projects), Ministry of Coal Member-Convenor

3. Joint Secretary & Financial Adviser, Ministry of Coal. Member

4. Representative of Ministry of Railways Member

5. Representative of Ministry of Power Member

G 6. Representative of concerned State Govt. (Revenue Deptt.) Member The Committee will meet once in a month and examine the proposals received from various parties. (S. KRISHNAN) H UNDER SECY. TO THE GOVERNMENT OF INDIA

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[R.M. LODHA, CJI.] more than one occasion by Office Memorandum dated A 05.⁸.1993 15 , Office Memorandum. dated 10.01.200016, Office

15. N0.1301113192-CA Government of India Ministry of Coal B New Delhi, the 5th August, 93. OFFICE MEMORANDUM Subject: Constitution of a Screening Committee for screening proposals received for captive mining by private power generation companies- Matter regarding. In continuation of this Ministry's Office Memorandum of even number C dated 14.⁷.1992 constituting a Screening Committee for screening proposals received for captive mining by private sector power generation companies, it has been decided to revise partially the composition of the said Screening Committee as under:-

1. Additional Secretary, Chairman Ministry of Coal, New Delhi. D

2. Adviser (Project) Member-convenor Ministry of Coal, New Delhi.

3. JS & FA. Member Ministry of Coal, New Delhi.

4. Representative of Ministry Member of Railways, New Delhi. E

5. Representative of Ministry Member of Power, New Delhi.

6. Representative of concerned Member State Govt. (Revenue Dept!.)

7. Director (Technical) CIL, Member F Calcutta.

8. ChairmanlManaging Director - - Member CMPDIL, Ranchi.

9. CMDI of concerned subsidiary - Member. Companies of CIL. (J.L. MEENA) G DEPUlY SECY. TO THE GOVERNMENT OF INDIA

16. No.47011115195-CPAM Government of India Ministry of Mines and Minerals Department of Coal New Delhi, the 10th January, 2000 H

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A Memorandum dated 17.04.200317 and Office Memorandum Office Memorandum Subject: Constitution of a Screening Committee for screening proposals received for captive mining by companies engaged in the generation of power and manufacture of iron, steel and cement. The undersigned is directed to refer to this Ministry of O.M. No.13011/3/ B 92-CA dated 14.⁷.1992 and 5.⁸.1993 and No.47011/15/95-CPAM dated 26/ 28.10.1999 and to say that instead of Joint Secretary & Financial Adviser, Deptt. Of Coal, Joint Secretary (Coal), Deptt. Of Coal will be member of the Screening Committee. Accordingly, Screening Committee for screening proposals for alloeation of coal/ lignite blocks for manufacture of iron/ steel captive production of power and production of cement in the public I private c sector is reconstituted as under:- ·

1. Additional Secretary, Chairman Department of Coal

2. Adviser (Projects) Member - Convenor Department of Coal

3. Joint Secretary (Coal) Member D Department of Coal

4. Joint Secretary (LA) Member Department of Coal

5. Representative of Ministry Member of Railways, New Delhi,

6. Representative of Ministry Member E of Power, New Delhi.

7. Representative of concerned Member State Govt. (Revenue Deptt.)

8. Director (Technical), CIL, Calcutta Member

9. Chairman-cum-Managing Director, Member F CMPDIL, Ranchi

10. CMD of concerned subsidiary Member company Of CIUNLC (T.K. Ghosh) Director

17. No.13011/5/2003-CA G Government of India Ministry of Coal New Delhi, dated 17.4.2003 Office Memorandum Subject:- Reconstitution of a Screening Committee for screening proposals received for captive mining by companies engaged in the generation of H power and manufacture of iron, steel and cement.

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[R.M. LODHA, CJI.] dated 26.09.200518 A

The undersigned is directed to refer to this Ministry's O.M. No.13011/3/92- CA dated 14.⁷.1992 and 5.⁸.1993 and No. 47011/15/95-CPAM dated 10.1.2000 and to state that from the date of issuance of this O.M. the Screening Committee shall be headed by Secretary, Ministry of Coal and Joint Secretary (Coal), Minlstry of Coal shall be the member convenor. B Accordingly, Screening Committ~e for screening proposals for allocation of coal I lignite blocks for generation of power and manufacture of iron, steel and cement in the public/ private sector is reconstituted as under:-

1. Secretary Chairman Ministry of Coal

2. Joint Secretary (Coal) Member - c Ministrv of Coal Convenop

3. Adviser (Projects) Member Ministry of Coal •

4. Joint Secretary (LA) Member Ministry of Coal

5. Representative of Ministry Member D of Railways, New Delhi.

6. Representative of Ministry of Power, Member New Delhi

7. Representative of concerned State Govt. Member

8. Director (Technical), CIL, Calcutta Member E

9. Chairman-cum-Managing Director, Member CMPDIL, Ranchi

10. CMD of concerned subsidiary company Member of CIUNLC (S. Gulati) F Director

18. No.13016/35/2005-CA-I Government of India Ministry of Coal New Delhi, the 26th September, 2005 OFFICE MEMORANDUM G Subject: Reconstitution of Screening Committee for screening proposals received from companies engaged in the generation of power and manufacture of iron, steel and cement for allocation of coal blocks. The undersigned is director to refer to this Ministry's O.M. No.13011/5/ 2003-CA dated 17.4.2003 and corrigendum No.1301115/2003-CA issued on 7.5~·~003 and th~ 0.M. of even no. dated 2.9.2003 on the subject H

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78Copy pinpoint78. 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 coal block for its end-use plant. The State Governments as the owners of coal blocks within their territories B participated in the Screening Committee meetings. At no stage, anybody objected to the allocation of coal blocks by the Central Government through the Screening Committee route. Learned Attorney General in this regard referred to the affidavits filed on behalf of Maharashtra, Madhya Pradesh, c Odisha, Chhattisgarh, West Bengal, Jharkhand and Andhra Pradesh. The process of allocation was participatory. The coal blocks were allocated to private companies only from the approved list of blocks to be offered for captive mining and the interests of CIL, being paramount, were duly protected and 0 preserved. Only in such cases of subsisting lease, where CIL had no plans to work these blocks in near future and consented to these blocks being offered for captive mining, few of such blocks were allocated but CIL's interest was kept into consideration. He, thus, submitted that allocation of coal blocks E during the subject period was transparent and it does not suffer from any constitutional vice or legal infirmity.

79Copy pinpoint79. Moreover, it is the submission of the learned Attorney General that allocation of coal blocks by the Central Government has brought significant benefits and investment to the States F in which these coal blocks and the associated end-use plants are located. Due to substantial investment and employment opportunities generated in various States, the State Governments have accepted, participated and made recommendations in the meetings of the Screening Committee. G mentioned above and to state that from the date of issuance of this O.M., the following shall be the member of the Screening Committee in addition to the existing members of the Committee:- Secretary, or his representative, of Ministry of Environment & Forests. (S.Gulati) H Director.

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[R.M. LODHA, CJI.] A number of blocks have been allocated in accordance with A the recommendations of the State Governments. Besides the benefits and investment to the State in which coal blocks and the associated end-use plants are located, learned Attorney General also submits that there are number of States where coal' blocks are not located, which have got benefits due to the 8 substantial investment in associated end use plants. For instance, it is submitted that blocks in Maharashtra, namely, Baranj - I to IV, Kiloni and Manoradeep were allocated to Karnataka Power Corporation for captive use in its power generation plants. The end-use is the supply of coal to Bellary C Thermal Power Station (in Karnataka) which is supplying 1000 MW power to the State grid.

80Copy pinpoint80. Learned Attorney General for the sake of convenience divided the allocations recommended by the Screening Committee for the period between 14.⁷.1993 and 03.⁷.2908 D in 36 meetings into four periods: first period between 14.⁷.1993 to 19.⁸.2003 (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 071 08.09.2006 (32nd meeting till the 34th meeting) and the fourth period from 20.06.2007 to 03.⁷.2008 (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 H

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A allocation, out of which 15 blocks were reserved for the power 1 sector. Learned Attorney General clarified that a coal block that was approved as one block in the advertisement has been subsequently considered as two blocks in the 36th meeting of the Screening Committe~. Learned Attorney General has fairly 8 admitted that the minutes of the Screening Committee meetings in the third and fourth periods do not contain the particulars showing consideration of each application. He, however, justifies the manner in which the exercise was undertaken by the Screening Committee in the third and fourth C periods as, according to him, the huge number of applications had been received by the Ministry of Coal in response to its advertisement and recording of particulars of each application in the minutes was ~ot possible. Moreover, he submits that each application wa~ duly considered and evaluated with reference to other applications by the Administrative Ministry D concerned and the recommendations of the Screening Committee were primarily based on the exercise conducted by the concerned Administrative Ministry. Thus, learned Attorney General submits that the entire exercise by the Screening Committee was done properly and in a non-arbitrary manner. E

81Copy pinpoint81. Learned Attorney General vehemently contends that allocation of coal blocks without auction is not unlawful. He submits that lack of public auction does not render the allocation process arbitrary. Moreover, according to him, when coal mining sectors were first opened up to private participants, the idea of the Central Government was to encourage the private sector so that they could come forward and invest. Allocation of coal blocks by public auction in such a scenario would have been impractical and unrealistic. As a matter of fact, he would submit that when the proposal for introduction of competitive bidding was first mooted in June, 2004, the State Governments expressed their reservations and concerns. In this regard, learned Attorney General referred to the letters sent by the Governments of Chhattisgarh, West Bengal, Rajasthan anrl H Odisha. Learned Attorney General submits that the conce:

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[R.M. LODHA, CJI.] of the State Governments could not have been ~rusned aside A by introducing competitive bidding by an administrative fiat. Moreover, according to the learned Attorney General, competitive bidding could have resulted in increase in the input price which would have a cascading effect. B

82Copy pinpoint82. From the above submissions; the following questions fall for determination:

(i) Whether the allocation of coal blocks ought to have been done only by public auction? c (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 0 Government dispens!ition route (Ministry of Coal) is consistent with the constitutional principles and the fundamentals of the equality clause enshrine.cl in the Constitution?

83Copy pinpoint83. Two recent.decisions viz., (1) Centre for Public Interest E Litigation (2G case) 19 and (2) Natural Resources A/location Reference 20 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 F disposal of natural resources, may be of some help in appreciating this aspect in correct perspective.

84Copy pinpoint84. P.N. Bhagwati, J. in Kasturi Lal Lakshmi Reddy21 had .said that wher~ the State was allocating resources such as G

19. Centre for Public Interest.Litigation & Ors. v. Union of India & Ors.; ((2012) 3 sec 11.

20. Natural Resources Allocation, In re, Special Reference No.1 of2012; [(2012) 10 sec 11.

21. Kasturi Lal Lakshmi Reddy & Ors. v. State of J&K & Anr.; ((1980) 4 SCC 1]. H

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A water, power, raw materials, etc., for the purpose of encouraging setting up of industries within the State, the State was not bound to advertise and tell the people that it wanted a particular industry to be set up within the State and invite those interested to come up with proposals for the purpose. It was B !]lso observed that if any private party comes before the State and offers to set up an industry, the State would not be committing breach of any constitutional or legal obligation if it negotiates with such party and agrees to provide resources and other facilities for the purpose. c 85. In Sachidanand Pandey22 this Court had observed that ordinary rule for disposal of St<:1te-owned or public-owned property, was by way of pu~lic auction or by inviting tenders but there could be situations where departure from the said rule may be necessitated but then the reasons for the departure must D ·be rational and should not be suggestive of discrimination and that nothing should be done which gives an appearance of bias, jobbery or nepotism.

86Copy pinpoint86. The statement of law in Sachidanand Pandey22 was echoed again in Haji T.M. Hassan Rawther23 , wherein this Court reiterated that the public property owned by the State or by an instrumentality of State should be generally sold by public auction or by inviting tenders. It was emphasized that this rule has been insisted upon not only to get the highest price for the property but also to ensure fairness in the activities of the State and public autho~ities a·nd to obviate the factors like bias, favoritism or nepotism. Clarifying that this is·not an invariable rule, the Court reiterate_d that departure from the rule of auction could be made but then it must be justified. ·

87Copy pinpoint87. The above principle is again stated by this Court in

22. Sachidanand Pandey & Anr. v. State of West Bengal & Ors.; ((1987) 2 SCC 295]. 23 Haji T.M. Hassan Rawther v. Kerala Financial Corporation; [(1988) 1 SCC H 1661.

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[R.M. LODHA, CJI.] M.P. Oil E;xtraction 24 , in which this Court said that distribution. A of largesse by inviting open tenders or by public auction is desirable but it cannot be held that in no case distribution of such largesse by negotiation is permissible.

88Copy pinpoint88. In Netai 8ag25 this 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.

89Copy pinpoint89. In Villianur /yarkkai Padukappu Maiyam 26 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.

90Copy pinpoint90. There are numerous decisions of this Court dealing with the mode and manner of disposal of natural resources but we think it is not necessary to refer to all of them. Having indicated the view taken by this Court in some of the cases, now we may turn to 2G case 19 • In that case, the two-Judge Bench of this Court stated that a duly publicised auction conducted fairly and impartially was perhaps the best method for alienation of natural resources lest there was likelihood of G

26. Viilianur lyarkkai Padukappu Maiyam v. Union of India & Ors.; [(2009) 7 SCC 561] H

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A misuse by unscrupulous people who were only interested in garnering maximum financial benefit and have no respect for the constitutional ethos and values. Court laid emphasis that while transferring or alienating the natural resources, the State is duty bound to adopt the method of auction by giving wide B publicity so that all eligible persons can participate in the process.

91Copy pinpoint91. The above view in 2G case 19 necessitated the reference by the President of India to this Court under Article 143(1) of the Constitution. The first two questions - Question C 1 and Question 2 - referred to this Court for consideration and report read as under:

"Question 1 -Whether the only permissible method for disposal of all natural resources across all sectors and in all circumstances is by the conduct of auctions?

Question 2 -Whether a broad proposition of law that only the route of auctions can be resorted 'o for disposal of natural resources does not run contrary to several judgments of the Supreme Court including those of the larger Benches?"

92Copy pinpoint92. The Constitution Bench which dealt with the above reference observed that the answer to the following three questions would provide comprehensive answer to the parent question, viz., Question 1:

(i) Are some methods ultra vires and others intra vires the Constitution of India, especially Article 14? G (ii) Can disposal through the method of auction be elevated to a constitutional principle?

(iii) Is this Court entitled to direct the executive to adopt a certain method because it is the "best" method? If not, to H

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[R.M. LODHA, CJI.] what extent can the executive deviate from such "best" A method?

93Copy pinpoint93. The Constitution Bench clarified that the statement of law in'2G case19 that while transferring 9r alienating the natural resources, the State is duty bound to adopt the method of auction was confined to the specific case of spectrum and not for dispensation of all natural resources. The Constitution Bench said that findings of this Court in 2G case19 were limited to the case of spectrum and not beyond that and that it did not deal with the modes of allocation for natural resources other than spectrum.

94Copy pinpoint94. 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 21 , Sachidanand Pandey 22 , Haji T. M. Hassan Rawther23 , M.P. Oil Extraction 24 , Netai Bag 25 and Villianur /yarkkai Padukappu Maiyam26, 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: F "129. Hence, it is manifest that there is_ no constitutional mandate in favour of auction under Article 14. The Government has repeatedly deviated from the course of auction and this Court has repeatedly upheld such actions. The judiciary tests such deviations on the limited scope of G arbitrariness and fairness under Article 14 and its role is limited to that extent. Essentially whenever the object of policy is anything but revenue maximization, the Executive is seen to adopt methods other than auction. H

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A 130. A fortiori, besides legal logic, mandatory auction may be contrary to economic logic as well. Different resources may require different treatment. Very often, exploration and exploitation contracts are bundled together due to the requirement of heavy capital in the discovery of natural B resources. A concern would risk undertaking such exploration and incur heavy costs only if it was assured utilization of the resource discovered; a prudent business venture, would not like to incur the high costs involved in exploration activities and then compete for that resource c in an open auction. The logic is similar to that applied in patents. Firms are given incentives to invest in research and development with the promise of exclusive access to the market for the sale of that invention. Such an approach is economically and legally sound and sometimes necessary to spur research and development. Similarly, D bundling exploration and exploitation contracts may be necessary to spur growth in a specific industry.

131. Similar deviation from auction cannot be ruled out when the object of a State policy is to promote domestic E development of an industry, like in Kasturi Lat's case, discussed above. However, these examples are purely illustrative in order to demonstrate that auction cannot be the sole criteria for alienation of all natural resources."

95Copy pinpoint95. While dealing with the argument that even if the method of auction was not a mandate under Article 14, it must be the only permissible method due to the susceptibility of other methods to abuse, the Court under the head "Potential of abuse" held that a potential for abuse cannot be the basis for G striking down the method as ultra vires the Constitution. The Court noted two decisions of this Court in R.K. Garg27 and D.K. Trivedi28 and held that neither auction nor any other method of. disposal can be held ultra vires the Constitution merely

27. R.K. Garg v. Union of India & Ors.; [(1981) 4 SCC 675].

H 28. D.K. Trivedi & Sons & Ors. v. State of Gujarat & Ors.; [1986 Supp SCC 20).

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[R.M. LODHA, CJI.] because of a potential abuse. The Constitution Bench (para A 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 B 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 C 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. D 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 disposal can be held ultra vires the Constitution, merely because of a potential abuse."

96Copy pinpoint96. In Natural Resources Allocation Reference 20 the Constitution Bench, in the main judgment, thus, concluded that auction despite being a more preferable method of alienation allotment of natural resources cannot be held to be 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. G ·The Court also opined that auction as a mode·canilot be conferred the status of a constitutional principle. While holding so, the Court held that alienation of natural resources is a policy decisio,n and the means adopted for the same are, thus, executive prerogatives. The Court summarized the legal position as under: H

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A "146. To summarise in the context of the present Reference, it needs to be emphasised that this Court cannot conduct a comparative study of the various methods of distribution of natural resources and suggest the most efficacious mode, if there is one universal efficacious method in the B first place. It respects the mandate and wisdom of ti .d executive for such matters. The methodology pertaining to disposar of natural resources is clearly an economic policy. It entails intricate economic choices and the Court l~cks the necessary expertise to make them. As has been c repeatedly said, it cannot, and shall not, be the endeavour of this Court to evaluate)he efficacy of auction vis-a-vis other methods of disposal of natural resources. The Court cannot mandate one method to be followed in all facts and circumstances. Therefore, auction, an economic choice of disposal of natural resources, is not a constitutional mandate. We may, however, hasten to add that the Court can test the legality and constitutionality of these methods. When questioned, the courts are entitled to analyse the legal validity of different means of distribution and give a constitutional answer as to which methods are ultra vires and intra vires the provisions of the Constitution. Nevertheless, it cannot and will not compare which policy is fairer than the othe~. but, if a policy or law is patently unfair to the extent thatit falls foul of the fairness requirement .of Article 14 of the Constitution, the Court F would not hesitate in striking it down.

147. Finally, marketprice, in economics, is an index of the value that a market prescribes to a good. However, this valuatidn is a function of several dynamic variables: it is a G science and not a law. Auction is ju~t 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 econol')'lic mandate, much less a constitutional mandate. H

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[R.M. LODHA, CJI.]

148. In our opinion, auction despite being a more IA 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 B mandate.

149. Regard being had to the aforesaid precepts, we have opined that auction as a mode cannot be conferreci the status of a constitutional principle. Afienation of na_tural resources is a policy decision, and the means adoptoo for c 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 resource:s are alienated for commercial pursuits of profit maxinriising private entrepreneurs, adoption of means other than ·those that are competitive and maximise revenue may be arbitrary and face the wrath of Article 14 of the Consfltution. Hence, rather than prescribing or proscribing a method, we believe, a judicial scrutiny of methods of disposal of natural resources should depend on the facts and circumstances of each case, in consonance with the principles which we have culled out above. Failing which, the Court, in exercise of power of judicial review, S'hall term the executive action as arbitrary, unfair, unreasonable and capricious due to its antimony with Article 14 of the F Constitution."

97Copy pinpoint97. J.S. Khehar, J., while concurring with the main opinion has stated that auction is certainly not a constitutional mandate in the manner expressed, but it can be applied in some G situations to maximise revenue returns, to satisfy legal and constitutional requirements. In his view, if the State arrives at a conclusion, in a given situation, that maximum revenue would be earned by auction of the particular natural resource, then that <::t,..,,1e would be the process which it would have to adopt. In H

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A the penultimate para of his opinion, J.S. Khehar, J., observed, " ......... there can be no doubt about the conclusion recorded in the "main opinion" that auction which is just one of the several price recovery mechanisms, cannot be held to be the only constitutionally recognised method for alienation of B natural resources. That should not be understood to mean, that it can never be a valid method for disposal of natural resources .............. ".

98Copy pinpoint98. In Natural Resources Allocation Reference 20 , the C Constitution Bench said that reading auction as a constitutional mandate would be impermissible because such an approach may distort another constitutional principle embodied in Article 39(b). In the main judgment, with reference to Article 39(b), the Court stated as follows:

D "113 ... The disposal of natural resources is a facet of thE. use and distribution of such resources. Article 39(b) mandates that the ownership and control of natural resources should be so distributed so as to best subserve · the common good. Article 37 provides that the provisions E of Part IV shall not be enforceable by any court, but the principles laid down therein are nevertheless 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 F "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 com111on good. But for the achievement of that objective, the Constitution uses the generic word "distribution". Distribution has broad contours G 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".

MANOHAR LAL SHARMA v. PRINCIPAL SECRJZ:TARY 515 [RM. LODHA, CJI.]

115. It can thus, be seen from the :aforequoted paragraphs that the term "distribute" undoubtedly, has wide amplitude and encompasses all man?ers 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' Articfe 14 than that discussed above, may frustrate the broader concept of distribution, as conceived in Article 39(b). There cannot, therefore, be a cavil that "common good" and "larger public interests" have to be regarded as constitutional reality deserving actualisation. c

116. The learned counsel for CPIL argued that revenue maximisation during the sale or alienation of a natural resource for commercial exploitation is the only way of ach'ieving public good since the revenue collected can be channelised to welfare policies and controlling the burgeoning deficit. According to the learned counsel, since the best way to maximise revenue is through the route of auction, it becomes a constitutional principle even under Article 39(b). However, we are not persuaded to hold so. Auctions may be the best way of maximising revenue but revenue maximisation may not always be the best way to subserve public good. "Common good" is the sole guiding factor under Article 39(b) for distribution of natural resources. It is the touchstone of testing whether any policy subserves the "common good" and if it does, irrespective of the means adopted, it is clearly in accordance with the principle enshrined in Article 39(b).

119. The norm of "common good" has to be understood and appreciated in a holistic manner. It is obvious that the manner in which the common good is best subserved is not a matter that can be measured by any constitutional yardstick-it would depend on the economic and political H

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A philosophy of the Government. Revenue maximisation is not the only way in which the common good can be subserved. Where revenue maximisation is the object of a policy, being considered qua that resource at that point of time to be the best way to subserve the common good, B auction would be one of the preferable methods, though not the only method. Where revenue maximisation is not the object of a policy of distribution, the question of auction would not arise. Revenue considerations may assume secondary consideration to developmental considerations. c 120. Therefore, in conclusion, the submission that the mandate of Article 14 is that any disposal of a natural resource for commercial use must be for revenue maximisation, and thus by auction, is based neither on law nor on logic. There is no constitutional imperative in the matter of economic policies-Article 14 does not predefine any economic policy as a constitutional mandate. Even the mandate of Article 39(b) imposes no restrictions 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 ncit a constitutional mandate."

99Copy pinpoint99. In light of the above legal position, the argument that auctiQn is a best way to select private parties as per Article 39(b) does not merit acceptance. The emphasis on the word G "best" in Article 39(b) by the learned senior counsel for the intervener does not deserve further discussion in light of the leg~! position exposited by the Constitution Bench in Natural Re.sources Allocation Reference20 with reference to Article 39(b). We are fortified in our view by a recent decision of this H

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[R.M. LODHA, CJI.) Court (3-Judge Bench) in GoaFoundation 29 wherein following A Natural Resources A/location Reference 20 , it is stated, " ... it is for the State Government to decide as a matter of policy in what manner the leases of these mineral resources would, be granted, but this decision has to be taken in accordance with the provisions of the MMDR Act and ths Rules made thereunder and in consonance,with the constitutional provisions ... ".

100Copy pinpoint100. The explanation by the Central Government for not adopting the competitive bidding is that coal is a natural resource used as a raw material in several basic industries like power generation, iron and steel and cement. The end products of these basic industries are, in turn, used as inputs in almost all manufacturing· and infrastructure development industries. Therefpre, the price of coal occupies a fundamental place in · the growth of the economy and any increase in the input price would have a cascading effect. The auction of coal blocks could not have been possible when the power generation and, consequently, coal mining sectors were first opened up to private participants as the private sector needed to be encouraged at that time to come forward and invest. Allocation E of coal blocks through competitive bidding in such a scenario would have been impractical and unrealistic. When the proposal for introduction of competitive bidding was first mooted in June, 2004, the State Governments expressed their reservations based on diverse concerns. The Government of Chhattisgarh F inter alia pointed out that (a) competitive bidding would result in substantial increase in the cost of coal for ironlsteel undertakings, (b) there were large number of projects under implementation whose viabilitY. is based on availability of coal as per the then existing policy, (c) competitive bidding would G raise the price of domestic coal, which would result in end-use projects in inland States like Chhattisgarh becoming unviable due to additional costs by transporting coal by rail/road, and

. 29. Goa Foundation v. Union of India and Others; [(2014) 6 SCC 590) H

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A (d) competitive bidding would result in only the bigger players getting the coal blocks. The Government of West Bengal opposed the introduction of competitive bidding because (a) the then existing system could accommodate both subjective and objective aspects of the projects whereas competitive s bidding would only lead to coal blocks going to the highest 'bidder, (b) competitive bidding would not allow priority being accorded to the power sector, (c) competitive bidding would result in views of the State Governments becoming redundant, and (d) competitive bidding would lead to concentratign of c 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 0 (c) competitive bidding would prevent the State from leveraging its coal reserves to accelerate its industrial development.

101Copy pinpoint101. It was for the above reasons that the Central Government says that competitive bidding was not introduced from 2004.

102Copy pinpoint102. 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 auction in such a scenario would have been impractical and unrealistic because during that time existing demand for coal was not being fully met by CIL and SCCL. There was supply-demand mismatch and there was also a huge shortage of power in the country. The State Electricity Boards had been unable to meet power requirements.

103Copy pinpoint103. The material placed on record reveals that the then

MANOHAR LAL SHARMAv. PRINCIPAL SECRETARY 519 [R.M. LODHA, CJI.] Coal Secretary in his note dated 16.⁷.2004 and. subsequent note dated 30.⁷.20.04 mooted introduction of bidding system to achieve transparency and objectivity in the allocation process and also to tap part of the windfall gain to the allottee ;tor captive mining. These notes were considered at the level · of Minister (Coal and Mines) and the PMO and certain disadvantages of allocation of coal blocks through competitive bidding were noted. Ultimately, it appears that in the month of October, 2004 fhe proposal for competitive bidding was not pursued further as it was felt that this would result in delay in the allocation of c;oal blocks. The Coal Secretaryin October, c 2004 after discussion also felt that since a number of applicants had requested for allotment of blocks based on the current policy, it would not be appropriate to change the allotment policy through competitive bidding in respect of applications received on the basis of existing policy. He suggested that the policy of 0 allotment through competitive bidding could be made prospective and pending applications might be decided on the basis of existing policy.

· 104. Then, there appears to be exchange of notes· and discussion at various levels on the question whether CMN Act E needed to be amended before the proposed competitive bidding becomes operational or 1957 Act so that the system of competitive bidding could be made applicable to all minerals covered under the said Act. The opinion of Department of Legal Affairs was also sought. In 2006, it appears that Ministry F of Coal communicated to the PMO and Cabinet Secretariat that Ministry of Law and Justice has advised Ministry of Coal to initiate suitable measures for amendment in the 1957 Act for addressing the issue of competitive bidding. A Bill to amend the 1957 Act was introduced in the Parliament by the Ministry G of Mines. The Amendment Bill was then referred to Standing Committee on Coal and Steel for examination and for its report. On receipt of the report from the Standing Committee in 2009, the MMDR Amendment Bill, 2008 was passed by both the Houses of Parliament in 2010 and ultimately Section 11A H

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A 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.

105Copy pinpoint105. 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 C transparency, objectivity and very importantly given a level playing fie1d 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 D Allocation Reference 20 that the Court cannot conduct a comparative study of various methods of distribution of natural resources and cannot mandate one method to be followed in all facts and circumstances, then if the grave situation of shortage of power prevailing at that time necessitated private participation and the Government felt that it would have been impractical and unrealistic to allocate coal blocks through auction and later on in 2004 or so there was serious opposition by many State Governments to bidding system, and the Government did not pursue competitive bidding/public auction route, then in our view, the administrative decision of the Government not to pursue competitive bidding cannot be said to be so arbitrary or unreasonable warranting judicial interference. It is not the domain of the Court to evaluate the advantages of competitive bidding vis-a-vis other methods of distribution I disposal of natural resources. However, if the allocation of subject coal blocks is inconsistent with Article 14 of the Constitution and the procedure that has been followed in such allocation is found to be unfair, unreasonable, discriminatory, non-transparent, capricious or suffers from favoritism or nepotism and violative of the mandate of Article

p. 521 Copy page pinpoint

[R.M. LODHA, CJI.] 14 of the Constitution, the consequences of such A unconstitutional or illegal allocation must follow.

106Copy pinpoint106. The Central· Government in its first counter' affidavit filed on 22.01.2013 has stated that for the period from 1993 to 31.03.2011, 216 allocations have been made. In the course 8 of arguments, learned Attorney General submitted that in addition to 216, 2 coal blocks for Coal to Liquid (CTL) projects were also allocated. According. to said. affidavit, out of 216 allocations, 105 allocations were made to private companies, 99 allocations were made to Government companies and 12 C allocations were made to Ultra Mega Power Projects (UMPPs) and that after adjusting 24 de-allocations and 2 re-allocations, a total number of 194 allocations, including allocations to private parties, form the subject matter of the writ petitions. In the course of arguments, however, learned Attorney General submitted that total 41 de-allocations have already been ordered.

107Copy pinpoint107. In the first counter affidavit filed on 22.01.2013, the Central Government has also given the details of the procedure adopted for allocation of the above coal blocks, in which it is stated that the allocations to the private companies were made through the Screening Committee route. As regards allocations made to Government companies, before 2001, allocations were made only through the Screening Committee route but on and from 2001, allocations were made through the Screening F 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 G 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 H

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A 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 B of Expenditure, Ministry of Coal, Department of Industrial Policy and Promotion, Department of Science and Technology, Ministry of Petroleum and Natural Gas and Principal Advisor (Energy), Planning Commission as members.

108Copy pinpoint108. We shall first deal with the coal allocations made to the private companies as well as Government companies for captive purpose through Screening Committee route.

109Copy pinpoint109. On 14.09.2012, while issuing notice to the Union of India, the Court framed six questions on which answer was sought in the counter affidavit. One of such questions was about the details of guidelines framed by the Central Government for allocation of subject coal blocks. In the first counter affidavit filed on 22.01.2013, it is stated that from 1993 until 31st meeting held on 23.06.2006, the Screening Committee framed its own guidelines for allocation of coal blocks. Insofar as guidelines for 31st to 36th meetings of the Screening Committee are concerned, it is stated that the Ministry of Coal framed the guidelines and these guidelines were brought to the attention of the members of the Screening Committee.

110Copy pinpoint110. The minutes of the 1st meeting held on 14.⁷ .1993 indicate that the guidelines were framed in that meeting by the Screening Committee for the primary purpose to identify suitable blocks for captive development by power generating companies. The guidelines framed by the Screening G Committee on 14.⁷.1993 read as under:

"(i) Preferably blocks in green field areas where basic infrastructure like road, rail links, etc. is yet to be developed should be given to the private sector. H The areas where CIL has already invested in

p. 523 Copy page pinpoint

[R.M. LODHA, CJI.] creating such infrastructure for opening new mines A should not be handed over to the private sector, except on reimbursement of costs.

(ii) The blocks offered to private sector should be at reasonable distance from existing mines and 8 proj.ects of CIL in order to avoid operational problems.

(iii) Blocks already identified for development by CIL, where adequate funding is on hand or in sight should not be offered to the private sector. C

(iv) Private sector should be asked to bear full cost of exploration in these blocks which may be offered.

(v) While discussing proposals of power generating companies and identifying blocks the requirement of coal for 30 years would bt:i considered."

111Copy pinpoint111. In its 2nd meeting held on 13.⁸.1993, the Screening Committee accepted that any addition to generation of power, whether captive or utility, amounted to value addition and, therefore, no distinction would be made between the two.

112Copy pinpoint112. 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 G Ltd. (CMPDIL).

. 113. In the 4th meeting dated 12.01.1994, proposals .relating to Mis. RPG Industries Ltd./Calcutta Electric Supply H

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A Corporation, Mis. Kalinga Power Corporation, Mis. Indian Aluminium Company, Mis. lndian Charge Chrome Ltd., Andhra Pradesh State Electricity Board, Mis. Development Consultants Ltd., Mis. Gujarat Power Corporation Ltd., Mis. Associated Cement Company Ltd., Mis. Hellmuth, Obata and Kassabagm B P.C. were considered in continuation of earlier meetings. Certain blocks were identified for allocation to some of these companies.

114Copy pinpoint114. In its 5th meeting held on 26.05.1994, the Screening Committee while considering whether any further changes were ·c required in the procedures being adopted for considering proposals for captive mining recorded that in the earlier meetings, the Ministry of Coal had been liberal in considering proposals with a view to make the scheme a success. In the said meeting, the Committee reviewed the progress made by D Mis. RPG Industries Ltd., Mis. Kalinga Power Corporation Ltd., Mis. Nippon Denro lspat Nigam Ltd., Nagpur, Mis. Andhra Pradesh State Electricity Board, Mis. Tamil Nadu Electricity Board, Mis. Indian Aluminium Company Ltd., Mis. Development Consultants Ltd., Mis. Associated Cement Company Ltd., Ml E s. Hellmuth, Obata and Kassabagm P.C. and Mis.Gujarat Power Corporation Ltd.

115Copy pinpoint115. In the 6th meeting held on 20.01.1995, the Committee decided to earmark Sarisatolli block and western part of Tara F block for captive mining by Mis. RPG Industries Ltd. for proposed Budge-Budge TPS and Balagarh TPS. The proposal of Mis. Jindal Strips Ltd. for a captive block for expansion of their Sponge Iron Planf from 2 lakh tonnes per annum to 6 lakh tonnes per annum was also discussed in the meeting and it was decided that CMPDIL would carry out the exercise of sub- G blocking so that a suitable block can be allocated to Mis. Jindal Strips Ltd.

116Copy pinpoint116. In the 7th meeting held on 06.06.1995, the Chairman felt the need for fixing certain time limit and layin~ down H

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[R.M. LODHA, CJI.] corresponding milestones otherwise there would be a tendency on the part of developer of the mining block to proceed in a casual manner with the result that the coal production would not be realized within the required time frame. It was decided that once the blocks are identified, the party concerned should complete necessary formalities and should be able to apply for lease within 6 months. In continuation of earlier meetings, the .Screening Committee further considered the proposal of M/s. RPG Industries ltd. for identification of coal mining blocks for supply of coal to the proposed Budge-Bddge TPS, Balagarh TPS and Dholpur TPS. In the said meeting, the proposals of c M/s. West Bengal State Electricity Board and M/s. Videocon Power ltd. were also considered.

117Copy pinpoint117. In the 8th meeting held on 04.10.1995, the proposal of M/s. Steel Authority of India Limited for captive blocks in Jharia coalfields was discussed. The Committee decided to identify ~arbatpur, Mahal, Seetanala and Tasra blocks located in Jharia Coalfields for captive development by SAIL.

118Copy pinpoint118. In the 9th meeting held on 20.12.1995, the proposal of M/s. Nippon Denro !spat ltd. for identification of additional coal mining blocks for supply of coal to the 2nd stage of the Bhadravati TPS was discuss.ed. 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 F & 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 lspat ltd., Maharashtra State Electricity Board, National Thermal Power Corporation, Lloyds G Metals and Larsen & 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 lspat- Sponge Iron Plant was also undertaken. H

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119Copy pinpoint119. In the 10th meeting held on 03.04.1996, the Committee noted with concern 'that out of the blocks already offered, only four parties have taken action for development of blocks. The Committee decided that all the identified parties should be issued a notice to pay the exploration cost by B 30.06.1996 and take action for development of the block failing which the offer would be cancelled.

120Copy pinpoint120. In the 11th meeting held. on 26/27.09.1997, the Screening Committee carried out a review of the progress C made so far. It was noted that M/s. RPG Industries for Budge- Budge TPS, Mis. Indian Aluminium Company Ltd. for new captive power plants in Orissa, M/s. Associated Cement Co. Ltd. for new captive power plant at Wadi, Karnataka, M/s. West Bengal State Electricity Board for higher generation for Bendel TPS and Santaldih TPS, Mis. West Bengal Power D Development Corpn. Ltd. for Bakreshwar TPS, Mis. BLA Industries for 24 MW capacity power plant in Distt. Narsinghpur, Madhya Pradesh; M/s. Jindal Strips Ltd. for Sponge Iron Plant in Madhya Pradesh and M/s. Nippon Denko lspat Ltd. for Bhadravati TPS, Stage- I, had paid exploration charges to CIL E and submitted mining plans which had been approved by the Standing Committee of Ministry of Coal. In that meeting, the representative of Mis. Nippon Denko lspatltd. submitted that Sunder block \NaS far away from the pOWerplant as well as from the othertWo mining blocks allotted to thernand requested that F a block neareflb the other two bloc~s,· i.e., Baranj and Lohara West may be considered for alfotrytefl't bf ttie Committee. Accordingly; the Committee ·decidedfo allocate~Monora Deep Block, which is .adjacent to Baranj and Lohara EXtn. (which is adjacent t6 Lohara West) to M/s. Nippon Denko lspat Ltd. Th•: G Committee also discussed the proposals which were considered earlier but no final decision could be taken. The. Committee decided that Utl<al 'C' block in Talcher coalfiefd' having ~feologicaf reserves of a'bout 190 m.t may be consider~d for allotment to Mis. Indian Charge Chrome Ltd. for H two additional captive power plants at Choudhwar, Orissa. It

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[R.M. LODHA, CJI.] is pertinent to mention that the Committee found that the total requirement for all the three units would be about 2.36 m.t. and for a life of 30 years, it would work out to be 71 m.t. The Committee, .however, proposed allocation of Utkal 'C' block having geological reserves of about 190 m.t. In that meeting, Takli-Jena-Bellora block was allotted to M/s. Lloyds Metals and B Engineers Ltd. and 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 c (East) allocated earlier as the total requirement was of the order of 3.⁷ m.t. In the said meeting, M/s. J.K.Corp. 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. D

121Copy pinpoint121. 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 ar'ld 110 m.t. to Mis. Jindal Power Ltd. for Raigarh TPS Stage - II (500 MW). In the said meeting, M/s. Central Collieries Co. requested the Screening E Committee for a portion of the Takli-Jena-Bellora block which had already been allotted to M/s. Lloyds. Metals & Engineers Ltd. In the course qf discussions, it transpired that the total reserves in the block are higher than the requirement of Mis. L.loyds Metals. lhe Committee was of the view that it was F B()SSible to allot some of the reserves to a party other than M/ ~· Lloyd Metals. The.Committee noted the clarification made _by DGM (MS) that. it was possible to cut out an independent sub-block of 40 m.t. coal reser:ves within the Takli-Jena Bellora block. Accordingly, the. same was allotted to M/s. Central G ·collieries Co.,: .

122Copy pinpoint122. In the 13th meeting held on 24.⁸.1998, as regards the proposal of Mis. Nippon Denro lspat Ltd. - Bhandravati TPS I, th⁷ Committee was informed that the Apex Committee of CIL H

52~ SUPREME COURT REPORTS [2014) 8 S.C.R.

A on captive mining blocks had objected to allocation of Kilhoni block to Nippon on the ground that the company had been changing its preference from one block to another block and allotment of Kilhoni block would not be sufficient to satisfy the company's coal requirement for 30 years. Therefore, it was suggested that the company should either work the Lohara West block or enter into an agreement with WCL for supply of their balance coal requirement. The Ministry of Power, on the other hand, indicated that they had no objection ifthe same was acceptable to the Government of Maharashtra. It was also C3 indicated that in the absence of firm figures of availability of coal and its likely price on cost plus basis, only an in-principle agreement could be arrived at for linkage in lieu of the Kilhoni block. It was also stated that the Kilhoni block being adjacent to Baranj block would be more practicable for them to mine the reserves whereas WCL would have to develop the block as an 0 isolated project. The Government of Maharashtra strongly support~d the allocation of Kilhoni block to the company. The Director- (Technical), CIL and CMD, WCL indicated that the Kilhoni block was likely to be taken up in the 11th plan period and pointed out some unique geogfaphical and man-made E features of the block which, according to them, would make the project both cost and time intensive, resulting in very high cost for WCL. The Committee felt that Nippon would be better placed to tackle these problems. It was finally decided that M/ s. Nippon Denro lspat Ltd will work Baranj I-IV, Manora Deep F and Kilhoni B_Jocks for mining coal for Bhadravati TPS, Lohara West and Lohara West Extension blocks will be. withdrawn from the party and· no further request for change or modification of blocks made by the party will be considered.

123Copy pinpoint123. The Committee had decided in the 12th meeting to allocate southern portion of Takli-Jena-Bellora block to M/s. Central Collieri~s .co. Ltd. In the 13th meeting, the representative of M/s. Central Collieries Go. Ltd. requested that a decision pn allocation of a small portion of Kilhoni block H should be taken. It was informed to the Committee that the area

p. 529 Copy page pinpoint

[R.M. LODHA, CJI.] identified at Kilhoni by the company was actually a different A location, and that 1.ocation did not form part of the identified blocks for captive mining.

124Copy pinpoint124. In its 14th meeting held on 18/19.06.1999, the Screening Committee decided as follows: 8 "(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; C and

(ii) The Administrative Ministries should consult State Governments as well as use their own agencies for assessing the progress of the implementation of o 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 E Coal informed that a policy has been framed that captive mining block producing less than 1 m.t. of coal per annum from an opencast block and less than 0.25 m.t. of coal per annum from an underground block will not be considered for allotment. The Committee agreed to adopt the above policy. In that meeting, F the Committee decided to withdraw the Gare-Palma IV/4 block allotted to M/s. Phoenix Cement Ltd. The block Gare-Palma IV/ 8 allotted to M/s. J.K. Corp. Ltd. was also withdrawn due to non- seriousness of the party in the matter. G 124.2. In the 14th meeting, the proposal of M/s. Monnet lspat 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 ::!:scussed. This plant will have a CPP of 40 MW in the 1st H

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A phase. The party requested for Utkal-82 block in Talcher coalfield having 106 m.t. of reserves. The party informed that the existing plant capacity of 1 lakh tonnes is being expanded to 3 lakh tonnes by March, 2000 and to 5 lakh tonnes beyond that. During discussion, CMD MCL was of the view that B Chendipada block is likely to have better grade of coal and suggested to the party in preference of Utkal B-2 block. However, the party insisted for Utkal B-2 block and the same was allotted subject to th~ condition that the party must achieve financial closure within one year of allotment of the block, failing c which the allotment will be withdrawn.

124.3. As regards the proposal of M/s. Jayaswal Neco Ltd. for their Sponge Iron Plant, the party had earlier requested for Gare-Palma IV/6 and IV/7 blocks for meeting their Sponge Iron Plant and. a captive power plant. Now, they requested for D allocation of IV/4 and IV/8 blocks as the same have been withdrawn from other firms. Accordingly, the same were allotted to M/s. Jayaswal Neco Ltd.

124.4. The Brahmadiha block was allotted to M/s. Castron E Technology in the 14th meeting. The Committee noted that the mine did not fit in the criteria of captive block as per its latest, guidelines, but decided to make the allocation in view of the' fact that the reserves could either be permitted to be exploited: by a private party or lost forever.

125Copy pinpoint125. In the 15th meeting held on 06.03.2000, M/s. Jindal Strips Ltd. had submitted a request for a block in Talcher coalfield to meet the requirement of sponge iron plant of 2 m.t. capacity. In January, 2000, .the party made an application for allocation of Utkal D block in MCL having geological reserves: G of 190 m.t. for their proposed sponge iron plant of 1. m.t. capacity requir.ing clean coal of 1.2 mtpa. 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 H the cours-e of discussion, it was pointed out that allocation of

p. 531 Copy page pinpoint

[R.M. LODHA, CJI.] block for captive mining is generally made on the basis of 30 A 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 B 120 m.t. should be adequate. The estimated reserve of Utkal D block was about 190 n;i.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 c Utkal D block in principle to M/s. Jindal Strips Ltd. but this was cancelled in the 16th meeting.

125.1. The proposal of M/s. Prakash Industries was rejected in the 14th meeting in view of the company's reference i to BIFR and the party enjoying coal linkage of G:76 m.t. for their D ' existing plant. In November and December, 1999, they informed that they had a linkage of 0.5 mtpa only and that they proposed to develop an underground mine for the balance 0.5 mtpa. The Committee in the 15th meeting decided to allocate Choita block, having geological reserves of about 60.00 m.t. to M/s. E?G Prakash Industries.

125.2. In the said meeting, M/s. Raipur Alloys & Steel Ltd. had requested for allocation of Choita block for their sponge iron plant at Siltara, Raipur, the capacity of which was proposed F to be expanded from the existing 60,000 tpa to 3 lakh tonnes per annum and for a captive power plant of 18 MW. That block was not in the identified list of captive mining. Accordingly, they revised their request for allocation of Gare Palma IV/7 or any one of the three blocks in Gare Palma, i.e., IV/7, IV/6 and IV/8 G in order of preference. The Committee decided to allocate Gare Palma IV/7 to Mis. Raipur Alloys & Steel Ltd. with coal reserves of 156 m.t. which is on the much higher side than the requirement of the company.

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126Copy pinpoint126. In the 16th meeting held on 31.05.2001, Mis. Orissa Mining Corporation Ltd. WqS allotted Utkal .D block for generation of power through Orissa Power Generation Corporation.

127Copy pinpoint127. ·1n the 17th meeting held on 28.11.2001, the request 8 of Mis. GVK Power Gowindal Sahib Ltd. for allotment of Tokusud coal block for their proposed 2 x 250 MW power plant was considered and Tokusud North block was allotted to them.

128Copy pinpoint128. In the 18th meeting held on 05.05.2003, the C Screening Committee, for the first time, considered the issue of.determining inter se merit of applicants for the same block asA:Vell as certain other issues to bring in transparency and felt that guidelines for determining interse priority among claims for blocks between public secto~ and private sector for captive - D use and between public sector for non-captive use and private sector for captive use need to be evolved. The Chairman of the Committee put the· following few general guidelines for consideration:

(i) The blocks i!l captive list should be allocated to an E applicant only after the same have been put in the pubic domain for a reasonable 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 F ·same,and make the process more transparent. T.he .- need,for giving very cogeri\ and detailed reasons before withdrawal of a bloc~ from captive list by CIL . wa~ also empha~ized~.

G (ii) The Administtative Mtriistries 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 preparednes~/progress in the project while indic<;iting the quantity and. quality of coal

.MANOHAR LAL SHARMA v. PRINCIPfo.f SECRETARY 533 ·[R.M. LODHA, CJI.] requirement of the project and reco·mmending allocation of captive block to the applicant. In case there were more than one applicant for the same block the Administratiye Ministry should rank them based on the project appraisal and the pasUtrack 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 guidelines met with general approval. The Screening Committee also' decided that while recommendations of the State Governments would continue to be taken into consideration, the same would not be taken as pre-condition for entertaining the application by it. In that meeting, the two blocks-Bandhak (East) and Bandhak (West) were also included in the list of captive blocks.

129Copy pinpoint129. In the 19th meeti119 held on 26.05.2003, various projects were reviewed.

129.1. In that meeting, the Committee allocated Bandhak (West) to Mis. Shree Baidyanath Ayurved Bhawan Ltd. Similarly, Mis. Fieldmining & lspat Limited was allocated Warora (West) and Chinora blocks. F

130Copy pinpoint130. In the 20th me~ting held on 06.06.2003, the .Committee discussed the matter of allocation' of captive mining blocks to small Greenfield projects or to applicant companies ·who ,,did not have well known track records in the sectors G approved for allocation of captive blocks for mining of coal. It adopted a policy that for such small projects the Committee instead of straight away allocating the block, the Committee would reserve the block and offer a temporary tapering linkage through CIL for achieving financial closure and development of H

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A the end-use project first. The allocation of the block would be made subject to the applicant company achieving the project milestones submitted by them to the Committee, and after financial closure is achieved.

130.1. In that meeting, Mis. Jindal Steel and Power Limited 8 requested for allocation of Utkal 8-1 block for their sponge iron production, 200 MW of captive power generation, steel plant and ferro alloy plants to be set up in two phases. The Screening Committee decided to allocate Utkal 8 - 1 block to that company for exclusive and captive use of the entire coal produced from the block in their own project in the end-use plants.

130.2. M/s. Usha Beltron Ltd. requested for allocation of a block for their sponge iron and power plant. GIL had recommended allocation of Kathautia UG block for their expansion project. Accordingly, the Committee allocated the same subject to the existing linkages of coal from CIL continuing.

E 130.3. The Committee also discussed th~ proposals of M/ s. Shyam ORI Power Ltd. for allocation of Radhikapur block and M/s. Neepaz Metalics Pvt. Ltd. for allocation of Patrapara block. In both the cases, it was found that the size of the block is larger in 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 Ill 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

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[R.M. LODHA, CJI.] Baranj I to IV could be deferred by one month by which time A the Ministry of Power would be in a position to give their views. How.ever, the Screening Committee decided to allocate Baranj Ill and IV blocks to Ambuja Cement Ltd. subject to any order of the High Col_Jrt in the matter. B

131Copy pinpoint131. In the 21st meeting held on 19.⁸.2003, the issue of competitive bidding was raised. On this, the Screening Committee felt that further guidellnes need to be evolved for allocation of blocks and competitive bidding should also be looked at. In that meeting it was also felt by the Committee that C coal being only one of the inputs of end-use projects, other matching inputs should also be considered before allocation of a coal block.

132Copy pinpoint132. Significantly, the guidelines framed and applied by the Screening Committee for the period from 14.⁷ .1993 (1st D meeting) to 19.⁸.2003 (21st meeting) are conspicuously silent about inter se priority. between the applicants for the same block. In the 18th meeting, the Screening Committee considered the issue of determining inter se merit of applicants for the same block as well as certain other issues for bringing in transparency. The Screening Committee felt that guidelines for determining inter se priority among claims for block between public sector and private sector for captive use and between public sector for non-captive use and private sector for captive use need to be evolved. However, no guidelines for determining inter se priority of applicants for the same block was evolved. The guidelines also do not contain any objective criterion for determining the merits of applicants and lack in healthy · competition and equitable treatment. In the first counter affidavit fl.led by the Central Government, it is admitted that from the 1st G meeting (held on 14.⁷.1993) to the 21st Meeting (held on 19.⁸.2003), the guidelines did not deal with the subject of determining inter se priority between applicants.

133Copy pinpoint133. As regards 26 coal blocks allocated to private H

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A companies pursuant to the recommendations of the Screening Committee for the period from 04.11.2003 (22nd meeting) and 18.10.2005 (30th meeting), the Attorney General submits that the Screening Committee had devised guidelines to determine inter se priority.amongst applicants for the same block. It is also B submitted that the recommendations were made by th.e Screening Committee after consideration of each application and assessment of each applicant's merits in terms of the criterion laid down in the guidelines.

134Copy pinpoint134. The counter affidavitfiled by the Central Government C on 22.06.2013 at pages 102:-159 deals with this period. The compilation (Volume 3-8) contains materials relating to . recommendations made by the Screening Committee for allocation of coal blo.cks to private companies pursuant to its 22nd meeting to 30th meeting held between 04.11.2003 and D 18.10.2005. It transpires from 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 E 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 Centr~I 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.

135Copy pinpoint135. In the 23rd meeting held on 29.11.2004 for Belgaon coal block; three applicants, namely, (i) Mis. Chandrapur ispat H Ltd., (ii) M/s. Gupta Metallics and Power Ltd. and (iii) Mis.

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[R.M. LODHA, CJI.] Sunflag Iron and Steel Ltd. had applied. The particulars of A these three applicants have been noted by the Screening Committee but besides that there is nothing to indicate as to Why Mis. Sunflag Iron and Steel Ltd. was found more meritorious ·than the other two applicants. It is pertinent to note that Ministry of Steel had supported the proposal of both Gupta Metallics B and Power Ltd. and Sunflag Iron and Steel Ltd . The consideration of inter se merit appears to be ad-hoc. There is no comparative assessment of the merits ~f the applicants. There is so Q1Uch of ad-hocism in consjderation of the applications that in every meeting, the guidelines were altered. c

136Copy pinpoint136. In the.24th meeting held on 09.12. 2004, the Screening Committee altered the norms by shifting insistence on achieving financial closure of the end-use projects to some appropriate stage after the mining plan approval. In that meeting, tAe Screening Committee was informed that the D proposal to allow disposal of coal produced during development phase of the mine has been approved by the Government. In that meeting, the Committee considered allocation of Brinda, Sisai, Dumri, Meral, Lohari, Moitra, Kotre- Basantpur and Pachmo ·blocks. Applications were received \. E from M/s. Abhijeet Iron Processors Pvt. Ltd for allocation of Brinda, Sisai, Dumri, Meral and Lohari blocks, Mis. Neelachal Iron and Power Ltd. for allocation of Brinda, Sisai and Dumri blocks, M/s. Bajrang lspat Pvt. Ltd. for allocation of Dumri, ·Brinda and Sisai blocks and Mis. Pawanjay Steel and Power F Ltd. for allocation of Dumri and Brinda blocks. The Screening Committee noticed that among applicants competing for Brinda and Sisai, Mis. Abhijeet Iron Processors Pvt. Ltd., applied way ahead of others, its requirement was large and it has a good track record and Ministry of Steel had recommended its case. G The other applicants, viz., Mis. Bajrang lspat and M/s. Pawanjay Steel were later .applicants. The requirement of M/s. Bajrang was small and sub-blocking was not desirable while Mis. Pawanjay had not yet given the required details to Ministry of Steel. For Meral, M/s. Abhijeet was the only applicant. The H

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A Screening Committee decided to allocate Brinda, Sisai and Meral blocks to Mis. Abhijeet Infrastructure Private Ltd.

136.1. In the same meeting, Mis. Jayaswal Neco Ltd. was allocated _Moitra block in place of Jogeshwar and Choritand- B Tilaya, already allocated to 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. c 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.

0 137. In its 25th meeting* held on 10.01.2005, the * ........The sizes of blocks in terms of reserves are large and the individual requirements of the sponge iron/steel producers were comparatively smaller. All the meritorious applicants deserve to be given captive coal. In order to accommodate all the meritorious and deserving cases, these blocks would need to be sub-divided which would result in enormous loss of coal between barriers because of statutory and practical mining conditions. Therefore, to sub-block the larger blocks as an alternative for accommodating all the deserving cases had to be ruled out. The second alternative was of grouping the deserving cases, so that they can form a joint venture company, an SPV for mining of coal and carry out the coal mining jointly in the allocated block. This alternative was also presented to the applicant companies, but most of them had expressed reservations on grounds like cultural and administrative differences among the constituents of the joint venture company, inherently because they weM competitors, the joint venture company would be off balance-sheet and ma_y . not attract sufficient lending, there could be intersee slippage$ Jn· development of the end-use projects and injection of equity by the: constituents which could jeopardize the mining project and would not j"d · to production at an early stage. A number of other similar objections IQ Jtte G formation of joint venture company or mining through SPV were put fo('flard by a number of applicants. This alternative also, therefore, had to be tefl alone. It was then discussed that for each natural block, one apl)li<;ant company who had the highest stake and which was likely to take up proper mining at the earliest, could be designated the Leader company and allocated a captive block and a group of .other meritorious companies could H be nominated as associated companies for supply of coal by the leader

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.[R.M. LODHA, CJI.] Screening Committee considered allocation of five coal blocks A in the MCL area. Thirty applicants made presentations before company to these designated associates. The amount of coal to be supplied by the l~ader company to the associate company would have a ceiling determined by the assessed requirement of the associate company, after deducting the linked quantum of coal given by CIL/its subsidiaries. B The leader company would commit to supply the ceiling amount of coal to the associate company depending upon its requirements i.e. as and when the plant of the associate company comes up, its requirements would be met upto the level of ceiling quantum by the leader company. The yearly percentage of satisfaction through this supply would be in the same proportion as the rated production capacity of the mine, to be approved during the mining plan, to the total of the assessed requirements of the c leader (after fully protecting earlier allocation, if any) and the associated companies attached to a coal block. In the alternative, this supply of coal from the leader comp<inY to the associated companies could be done through MCL also where depending on the actual requirement of the associate company, subject to the ceiling, MCL would add service charge, gather coal from the leader company and supply the same to the associate company. In either of these cases, coal would be transferred from the D leader company to the associate company at administratively determined transfer price and not at any free market price or notified priC:e of CIL, as this arrangement is in lieu of giving coal blocks to the associate companies and their taking up captive mining themselves. This administrative transfer price would be determined by Ministry of Coal through its sub- committee headed by Addi. Secretary (Coa~ . Having decided as above, the Screening E Committee proceeded to select the leader and the associate companies . ... . .. .To sum up, the following companies were founa deserving of allocation of coal blocks alongwith their status: Block Name of the Company Status Utkal A To be merged with Gopalprasad for Mining by MCL as one mine or by F Jindal Thermal Power Ltd./Jindal Vijayanagar ltd. and include Jliidal Stainless Steel ltd. as a linked Consumer or an associate. Final decision and details to be taken up in the Ministry of Coal. G Talabira II NLC Priority linkage to be given for supply of coal to companies to be worked out in the Ministry of Coal so that their yearly satisfaction level based on their assessed requirement after adjusting the linkage is about equal to those companies in the other blocks. H

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A the Committee. Many of these applicants were 'meritorious. The size of these blocks was large compared to the requif~ment of the applicants. The Screening Committee decided that for Bijahan Bhushan Limited Leader Company Associate companies to be worked B out in the Ministry of Coal so that their yearly satisfaction level based on their assessed requirement after adjusting the linkages is about equal to the associate companies in the ottier block. Radhikapur Rungta Mines Leader Company c (West) Associate companies to be worked out in the Ministry of Coal, so that their yearly satisfaction level based on their assessed requirement after adjusting the linkages is about equal to !he associate companies in the other block. Radhikapur Tata Sponge Iron Ltd. Leader Company (East) Associate companies to be worked out in the Ministry of Coal, so that their yearly satisfaction level based on their assessed requirement after adjusting the linkages is about equal to the associate companies in the other block. To the extent possible, linkaged/associate companies would be grouped in the blocks sought by them. F Following companies were considered to be included as associate companies or for linkages: (1) Jindal Stainless Steel Ltd. (2) o}issa Sponge Iron Ltd. (3) SMC Power Generation Ltd.

G (4) OCL India Limited (5) Shree Metalliks Limited (6) Scaw Industries Limited (7) Deepak Steel & Power Limited (8) SPS Sponge Iron Limited H (9) Shyam ORI Power Limited

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[R.M. LODHA, CJI.] each such block, one applicant company who had the highest stak~ 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 contravention of the statutory provision contained in Section 3(3)(a)(iii) of the CMN Act. Moreover, the ! arrangement of consortium of companies violates Section

3(3)(a)(iii) of the CMN Act as the leader company supplies the associate share of coal to the associate company at a price c : (though the price is determined by the Government). Winning or mining of coal by such company is impermissible under the [However, subsequently after the long -term linkage of Aditya Aluminium was revealed from records, the other three companies who substantially met with Jhe criteria employed for selection of the above associate D companies, were found includable without much change in percentage satisfaction of the earlier determined associate companies. These companies are: (10) Mahavir Ferro Alloys Ltd. (11) Nalwa Sponge Iron Ltd. (12) Bajrang lspat Private Ltd.] E The companies whose cases were not decided in their favour for the five captive blocks under consideration, are as follows: i. N.T.P.C. ii. Bengal Sponge Iron Ltd. iii. Mundra SEZ F iv. Gujarat Electricity Board v. INDAL vi. OPGENCO vii. Madhya Utilities & Investment Ltd. viii. Deo Mines & Minerals P Ltd. G ix. Madhyadesh paper Limited x. Sunflag xi. Aditya Aluminium (HINDALCO) xii. Jaiswal Neco xiii. MSEB H

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A CMN Act. 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 block. However, in order to accommodate these applicants, a novel idea of choosing a B leader company and associate companies was evolved which, as indicated above, is impermissible under the CMN Act. The merits of 13 companies whose applications were rejected have not been comparatively assessed with the 17 companies (5 leaders and 12 associates) whose applications were accepted c and recommended for allocation to the Central Government.

138Copy pinpoint138. In its 26th meeting** held on 01.02.2005, the •• ..... Considering the financial SOL.tndness of the companies, status of advance action taken, requirement of the end-use projects already put up, the likelihood of setting up of the entire capacity of the end-use projects and D the support of the Ministry of Steel and/or Power and the support of the State Government the following companies were selected by the Screening Committee for allocation of coal from captive blocks on the pattern similar to the blocks in MCL area considered by the Screening Committee in its meeting held on 10.1.2005.

1. Anjani Steels Pvt. Ltd.

E 2. Hindustan Zinc Limited

3. Chattisgarh Electricity Company Ltd.

4. Ind Agro-Synergy Ltd.

5. lspat Godavari Ltd.

6. Jayaswal Neco Ltd.

F 7. Jindal Steel and Power Ltd.

8. MSP Steel and Power Ltd.

9. Nalwa Sponge Iron Ltd.

10. Nav Bharat Coalfields Pvt. Ltd.

11. Prakash Industries Ltd.

G 12. Sri Bajrang Power and lspat Ltd.

13. Sri Nakoda lspat Ltd.

14. 'Sunflag Iron & Steel Co. Ltd. -15. Vandana Global Ltd. It was decided to allocate coalirom the captive blocks in the same way as· H decided in case of blocks in MqL area, the Committe.e proceeded to listing

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[R.M. LODHA, CJI.] Screening Committee considered allocation of five blocks in A SECL area. Twenty-five applicants had applied for these out the possible leaders from among the selected companies and listed out the following possible leaders: ·

1. Hindustan Zinc Ltd.

2. Chhattisgarh Electricity Company Ltd. B

3. Jayaswal Neco Ltd.

4. Jindal Steel & Power Ltd.

5. Prakash Industries Ltd.

6. Sunflag Iron & Steel Co. Ltd.

7. Consortium of Nav Bharat Coalfields Pvt. Ltd., c Ind Agro Synergy; !spat Godawari, Sri Bajrang Power & !spat Ltd., Sri Nakada lspal Ltd., Vandana Global Ltd. It was 'decided by the Committee that detailed formulation of groups or 'common pool' for allocation of coal/blocks in line with the dispensation being contemplated in MCL blocks, will be worked out by the Ministry of Coal. In this regard, it was decided that the following three alternative formulations for mining and distribution of coal by the group from the captive mine appear workable. (i) Formation of a Consortium company which will mine coal and distribute among the consortium members. (ii) If no consortium emerges by consensus, a leader may be identified in the group who will do mining of coal and distribute it among the members of the group at a transfer price to be fixed by a Committee in the Ministry of Coal. (iii) If the group members and leaders are not agreeable to a direct dealing with each other, they being competitors among themselves, the subsidiary (here SECL) of CIL operating in that area shall undertake distribution of the coal to the associate companies at the transfer price fixed by a Committee in the Ministry of Coal. Ministry of Steel raised the issue that a number of companLes have, in their presentations, mentioned the capacity of the end-use projects in excess of what has been recommended by the Ministry of Steel and a view has to be taken on the same. Further it was also observed that a number of companies have raised the proposed capacity of their end-use projects after the cut-off date of 28.6.2004. On this, representative of the State Government stated that the ground realities of the projects need to be verified and the capacities of the end -use plants and coal requirements of such 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. H

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A blocks. Ten applicants who had submitted their applications after the cut-off date were rejected. The remaining fifteen were chosen for allocation on the same lines as was done in the 25th meeting for allocation of coal blocks in the MCL area. Of these 15 applicants, the Screening Committee listed out seven B companies as possible leaders for 5 blocks. The procedure followed in the 26th meeting suffered from the flaws similar to recommendations made by the Screening Committee in its 25th meeting. Moreover, the minutes of the 26th meeting reveal that the Ministry of Steel raised the issue that a number of c 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 0 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. Jay~wal Neco Ltd.; 4. Jindal Steel & Power Ltd.; 5. Prakash Industries E Ltd.; 6. Sunflag Iron & Steel Co. Ltd.; and 7. Consortium of Nav Bharat Coalfields Pvt. Ltd., Ind Agro Synergy Ltd., lspat Godawari Ltd., Sri Bajrang Power & lspat Ltd., Sri Nakada lspat Ltd. and Vandana Global Ltd. Moreover, the Screening Committee did not assess the capacities and coal requirement of these companies. The Committee decided that detailed formulation of groups 'or 'common pool' for allocation of coal/ blocks in line with the dispensation being contemplated in MCL blocks will be worked out by the Ministry of Coal. In our view, the expression 'a comp~ny' occurring in Section 3(3)(a)(iii) of the CMN Act does not cover "consortiym of companies" or "formulation of groups" or ''.common pool". The decision of the Screening Committee to recommend allocation of coal blocks to consortium of companies or formulation t>f groups or comll)on pool is in 'contravention of Section 3(3)(a)(iii) of the H CMN Act. CMN Act places ecnbargo on granting the leases for

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[R.M. LODHA, CJI.] winning or mining coal to persons other than those mentioned in Section 3(3)(a)(iii). Consortium of companies surely falls outside Section 3(3)(a)(iii). The statutory scheme of the CMN Act generally and Section 3(3)(a)(iii) in particular have been given a complete go-bye in the procedure followed by the Screening Committee and finally by issuing allocation letters to one leader company with obligation to share associate's share of coal to the associate company at a price determinable by the Government.

139Copy pinpoint139. In the 27th meeting*** held on 01.03.2005, the c ••• The above submissions of various companies who made presentation • before the Screening Committee were deliberated by the members of the committee in details and with the support of the representatives of the state governments concerned, representatives of the administrative ministries, such as Ministry Steel, Ministry Power, Ministry of Commerce and Industries (Dept!. of Industrial Policy and Promotion) and the Ministry of Railway and other members, allocation of the following blocks in favour of the companies mentioned against each in line with consortium/leader and associate approach adopted in case of the blocks in MCL and SECL areas, was decided:- i) North Dhadu (670 mt.) -Tata Power - Leader Subject to their studying the details and making available their views to Min. of Coal who would then take an appropriate decision in the matter. M/s. Adhunik Alloys and Power Limited] M/s. Pawanjay Iron and Steel Ltd.] Associates M/s Jharkhand lspat Ltd. ] F ii) Bundu -Rungta Mines Ltd Leader/consortium Jai Balaji Sponge Ltd. iii) Ardhagram -Sova !spat Ltd. Leader Bengal Sponge Iron Manufactures Mining Ltd. iv) Parvatpur Electrosteels Casting Ltd. G v) Gondulpara -Tenughat Vidyut Nigam Ltd. - Damodar Valley Corporation Ltd. TVNL laid claim to Gondulpara on the assertion that since they have the adjoining block of Sadan, it would save coal if the two are mined together. CMPDIL clarified that there had to be two separate mines looking to the geography of the block and, therefore, the question of coal saving does H

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