MANOHAR LAL SHARMA v. THE PRINCIPAL SECRETARY & ORS.

A Screening Committee considered allocation of blocks in the not arise. It was decided to share the produce between DVC and TVNL. Leader would be decided in the Ministry of Coal. vi) Pirpainti-Barahat - Shyam Sel Ltd. - Rashmi Cement Ltd. vii) Mahan - Mis. Hindalco (subject B to confirmation by Govt. of Madhya Pradesh viii) Gurha (East) -Mis. Marudhar Power Pvt. Ltd. ix) Dumri - Neelachal Iron & Power Ltd. - BajTang !spat Pvt. Ltd. c 6. In regard to the decision taken on allocation of Mahan coal block to M/s Hindalco since the representative of Govt. of Madhya Pradesh made repeated request to consider to allocation of the block in favour of the Madhya Pradesh State Mineral Development Corporation Limited, it was observed by the Chairman of the Screening Committee that allocation of Mahan block to Hindalco is likely to lead to substantial value addition and economic activities in the state generating considerable revenue to the State exchequer. The State D Mineral Corporation can ask for other blocks such as Amelia and Amelia north in the vicinity of the Mahan block. However, considering the overall position, it was decided that it would be appropriate to have the views of the Govt. of Madhya Pradesh on the same. It was decided that within a CIL subsidiary area, production from the blocks, instead of a one to one relation between the leader and the associates, it could be pooled and shared amongst the E associate companies via the local Cl L subsidiaries. The coal from these blocks would be mined by the designated leader and transferred at a price to be determined administratively as in the case of MCL and SECL blocks. The issue of change of the area of the Gare-Palma-IV/I block which was allocated to Mis. Jindal Steel and Power Ltd., by the allocatee company themselves was also discussed. The details of the case was explained before the Screening Committee. It was stated that Mis. Jindal Steel & Power Limited F had shifted the area of the block to cover an adjoining area containing a coal reserve of about 15 million tonne between the border of the State of Orissa and block boundary which is in the State of Chhattisgarh. On the other side, a portion of the block containing a reserve of about 36 million tonne under forest cover and human habitation has been left out matching the acreage of the changed area with the acreage area of the block allocated to them. It was G pointed out by CMPDIL that the area between Orissa border and block boundary which has been covered by Mis. Jindal Steel and Power Ltd., could not form an independent block and should have been included earlier in the area of Gare-Palma-IV/I. It was also stated that Mis. Jindal Steel and Power Ltd., have already obtained a lease over the area which contains the un- allocated area covered by them with the approval to the mining plan and previous approval by the Central Government for grant of mining lease. In view H

MANOHAR LAL SHARMA v. PRINCIPAL SECRETARY 54 7 [R.M. LODHA, CJI.] CCL area while in 28th meeting**** held on 15.04.2005, the A Committee considered allocation of blocks in SECL area. of the same it was held by the Committee that it was an error both on the part of the Government and the Company and this needed to be regularized. Thereafter, it was decided that Mis. Jindal Steel and Power Ltd. should mine the left out area of the block under forest cover and human habitation while mining the reserve in the extra covered area. Accordingly, the representatives B of Mis. Jindal Steel and Power Ltd. were called before the Committee and they were informed that they should work the entire area of the block including the forest area and the area under villages and also the additional area in question which has been covered by them and they should give details of the whole area and its coal reserves to the CMPDIL and Ministry of Coal and the mining plan be accordingly revised and considered. c **** i) Patrapara Looking to the size of the project, investment involved etc. it was decided that the leadership should go to Mis. Bhushan Steel and Strips Limited and for the associate status Mis. Nepaz Metalicks who had already been allocated a sub-block in Patrapara would need to be included, Mis. Visa Industries in view of the progress achieved by them need to be included and after checking up the availability of reserves, case of Mis. Ocean lspat could be decided in the Ministry of Coal for inclusion of otherwise. The committee discussed at length the limited reserve available in Patrapara. Considering the requirement of the above applicants and the fact that Aunli block, north of Patrapara, which was -yetto be explored in detail, had access from Patrapara and Machhakatta, most of the intervening boundaries of Aunli being occupied by Patrapara, it was decided that CMPDIL would redraw the boundary of Patrapara so as to include Aunli and the necessary part of Machhakatta so as to result in a fairly large size block to meet the requirement of these companies. ii}Marki Mangli II, Ill and IV It was decided that Marki Mangli II, Ill and IV be allocated to Mis. Viangana. As regards the request of Mis BS lspat it was felt that since they already have MM F I and if the percentage satisfaction with MM I matches the percentage satisfaction of Virangana with Marki Mangli II, Ill and then BS lspat does not have a case for Marki Mangli II. iii) Nirad Malegaon The Screening Committee decided to allocate this block to Mis. Gupta Metalicks c.nd Power as the leader and they could give rejects'fmiddlings to G Mis. Gupta Coalfields for their proposed power plants. As the grade of coal was superior, allocation of this coal block for power generation would not be desirable. iv) Panch Bahini The Screening Committee decided to allocate this block to Mis. Radhe Industries they being the sole applicant for this block. H

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A Neither the counter affidavit nor the minutes of these two meetings show that assessment of comparative merits of the applicants was done. The Screening Committee continued with consortium/ leader and associate approach, as was done for the MCL area in the 26th meeting. This procedure is clearly in B contravention of Section 3(3)(a)(iii) of the CMN Act. Except recording the particulars of these companies, who had given presentation, nothing is said about inter se priority or comparative merits of the applicants. By adopting consortium I leader and associate approach, the Screening Committee c had indirectly done away with inter se priority and merit of the applicant companies. The consideration does not reveal application of any objective criterion. It is admitted in para 206 of the counter affidavit filed by the Central Government that as regards the applicant - Neepaz Metalicks whose case was considered in 28th meeting, the recommendation of the 0 v)'Bisrar It was decided that this block be allocated to the following companies: i) Chattisgarh State Electricity Board as leader and the following as associates: a) Ultra Tech (for their pre cut of project requirement) E b) Mis Chattisgarh Steel and Power c) M/s Singhal Enterprises d) M/s Vnadana e) M/s Akshay Investment (subject to the views of the Ministry of Steel) CMD, CMPDIL informed that earlier Madanpur was proposed to be sub- F blocked into two blocks and now Bisrar is also being proposed to be sub- blocked in two blocks. However, between the four sub-blocks, i.e. two sub blocks of Bisrar and two of Madanpur. one each from Bisrar and Madanpur, could be combined to be called, Madanpur North or Bisrar (North) and Madanpur (South) or Bisrar (South) could bi; mined as one block each. Consequently, the total number of blocks between Bisrar and Madanpur would remain two. One would be with about 10 million tones of extractable reserves and the other about 120 million tones of extractable reserves. It was decided that since CSEB would be inducted as the leader consequently one leader from among those selected as leaders in the 26th meeting would need to be dropped. This matter would be analysed and decided in the Ministry of Coal. It was also decided that the allocattees under the leader-associate/consortium concept should be called in the Ministry of Coal for seeking their views and finalizing the sharing of coal from captive mine arrangement between them.

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[R.M. LODHA, CJI.] Administrative Ministry was contrary to the recommendation of A the State Government, yet the allocation of a sub-block in Patrapara block was made on the basis of State Government's recommendation. Moreover, it may be noticed that though the representative of the State Government supported the request of M/s Bhushan Steel and Strips Limited for allocation of B Patrapara block but he stated that the State Government supports the claimants for Patrapara in the following order: (a) M/s Neepaz Metalicks Limited, (b) M/s SCAW, (c) M/s Visa Industries, (d) M/s Shree Metalicks, all of whom have already entered into a MOU with the Government of Orissa and the c order of priority for M/s Bhushan Steel and Strips Limited would be lower than these four claimants. As regards Panch Bahini block, the representative of the State Government stated that the applicant, M/s Shree Radha Industries, may be considered for a share and inclusion in the earliest list of blocks allocated D in 26th meeting, still the Screening Committee decided to recommend allocation of Panch Bahini block to Mis Shree Radha Industries.

140Copy pinpoint140. The counter affidavit in para 208 as regards 29th meeting***** held on 03.06.2005 states that the Screening E

***** CMD, CMPDIL stated that with respect to mining in the new patrapara block, which would include Aunil and part of Machhakatta, that Aunil is yet to be explqred in detail and part of Machhakatta would also need to be explored. This would take like time. It was pointed out to CMD, CMPDIL that they should examine the possibility of allowing mining in the existing patrapara and thereafter dove-tailing the mining plan of new patrapara which ~ould include Machhakata and Aunil. In any cases Aunil is in the dip side of patrapara and mining would reach there only after many years. Therefore, its. immediate exploration for the purposes of mining may not be necessary. Chairman, Screening Committee pointed out that for the purposes of calculating reserves, the data available as on date should be taken into consideration. He also directed that Machhakatta should be explored within the next six months by the time the mining plan for existing patrapara comes up. In case dove-tailing is possible then the mining plan should be approved otherwise it could be modified suitably, instead of holding back the entire process . .. . . .. .. Sharing of Mahan Block between M/s. Hindalco and Esser Power Limited: H The matter was discussed and by way of recapitulation the screening

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A Committee considered a detailed presentation of modalities of competitive bidding by the CMPDIL. Despite the fact that modalities for auctioning through competitive bidding were discussed in 29th meeting, that was not carried further as is -seen from the minutes of the 30th meeting of the Screening B Committee held on 18.10.2005.

141Copy pinpoint141. The minutes of 30th meeting show that the Screening Committee decided to club Gare Palma Blocks IV/1 and IV/6 committee was informed that in the last meeting of the screening committee the representative of Government of Madhya Pradesh had taken a position c that the Mahan block should be given to the State Mineral Development considering the overall merit of the competing claimants the block should be allocated to M/s Hindalco for their aluminium project in which the coal should be used in the captive power plant. However, the final decision was to be taken in consultation with the Government of Madhya Pradesh. The Government of Madhya Pradesh subsequently have given up their position for allocation of D Mahan block to the State Mineral Development Corporation and have Instead supported allocation of this block to Mis Essar Power Limited. Representative from Government of Madhya Pradesh stated that as they are power deficit state, they would recommend allocation of mahan coal block to Essar Power Limited only. Representative from the Ministry of power also supported the request of Government of Madhya Pradesh.The Screening Committee decided that the views of the State Government and of the representative of Ministry of power be taken on record. as they too had merit. Iron and Case of M/s. Neelachal Power Limited: The Screening Committee took note of the assessed requirement of Mis. Neelachal Iron and Power Limited and also that of its possible associate Mis. Bajrang !spat Limited. It also took note of the fact that the overall percentage satisfaction was nearly 50% from the allocated block of Dumri. The decision for allocation of Dumri to Mis. Neelachal Iron and Power Limited as leader with Mis. Bajrang !spat as associate would remain unchanged. ! CMPDIL made an audio visual presentation Gare Pelma Blocks viz, IV/1, IV/ 2, IV/3, IV/6 and IVn copy of the presentation is kept at Annexure-11. CMPDIL essentially said that partial detailed exploration, except in IV/6, was done by the allocattees themselves and exploration, in the lower seams in IV/2 and 3 is underway, precise data would be available only thereafter, and hence the estimates of reserves arrived at, based on GSI boreholes which are very few, is highly tentative in respect of lower seams. On the availability side Addition to Gare Pelma IV/1 On account of additional area is estimated at 33.6• mill. Tonnes. H ' On account of lower seams with inferior grade coals, which may not be

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[R.M. LODHA, CJI.] and further decided to allot the combined block (IV/1 and IV/6) A to JSPL with Nalwa Sponge as a partner company. The extracted being deep underground and of inferior grades, is for 4. 76 mill. T and is not being taken into amount. Addition to Gare Pelma IV/2 and IV/3 On account of lower seams is estimated at 35 mill. Tonnes. Of which 22.12 B mill tonnes is of superior grade. Gare Pelma IV/6 The block has been detailed explored by CMPDIL and has total of 102.77 mill tonnes of extractable reserves of which 13.68 mill Tonnes in the lower seams are of superior grades and the remaining 89.09 are inferior grade of which 27.79 are in the lower seams (underground) c Gare Pelma IV/7 The block has been partially detail explored by the allocate. Exploration of the lower seams has not yet been taken up or mandated. The upper seams (opencast) in the approved mining plan show extractable reserves of 56.62 million tonnes. Extractable Reserves in the lower seams are tentatively assessed at 21.98 mill tones of which 14.56 are of superior grade D On the Demand Side JSPL and JPL The existing Sponge Iron plant of JSPL of 6 Ltpa capacity requires 72 mill T of inferior grade coal for a 30 year life of which 11 million tones have already been extracted from GP IV/1. The 1000 MW power plants of JPL require about 158 mill T of ROM, considering the inferior grades of coal for a 30 years life. E The Proposed expansion of 6.6. ltpa in sponge Iron capacity of JSPL requires about 80 mill T of inferior grade coal for 30 year life for which GP IV/6 is being sought. The proposed 2.6 itpa sponge iron through the Rotary Hearth Furnace (RHF) of JSPL requires 6.34 mill T of 10-12% ash coal which would result in an increased ROM Quantity depending upon the yield upon washing. The reserves available in IV/1, Considering 11 mill T already extracted, would be 95.88 mill T. with extracted reserves it would be 106.88 mill. T another F 4.76 mill Tare inferior and in UG. Total reserve in GP IV/2 and IV/3 would be 160 + 35 = 195 Mill T. Where the 35 addition is highly tentative. = = Total available in IV/1, IV/2 and IV/3 95.88 + 11 + 4. 76 + 195 306.64 mill T including 22.12 superior in UG and 17.64 inferior in UG. Inferior equivalent not counting 4.76 in GP IV/1 would be 326.86 mill. T Total required = 72+79.2+157.5 = 308.7 mill T inferior grade. Not counting the requirement of G RHF as superior grade coal in IV/2 and IV/3 may not be suitable for the RHF. Another 34 mill T inferior equivalent count be added to the requirement if washing yield is taken as 36% instead of 40% for sponge iron and 80% yield is taken for power instead of 100% with ram as direct feed. Addition on account of RHF would depend upon the wash yield, if it is taken as 50% the addition would be about 13 mill tones of superior grade ram coal. H

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A .minutes also record that if surplus still remains in the block, then JSPL-Nalwa be asked to select another allottee failing which Representative from the Government of Chhattisgarh stated that JSPL and JPL are two separate Companies/legal entities. JPL cannot be compelled to share coal given to them with JSPL. Company Law does not recognize Group companies. Section 370(1 B) mention companies under the same B management and JPSL JPL do not meet the criteria. Separate mining leases have been executed with them. They have different shareholders, combining them would create legal r.omp!ications and therefore, they should be treated apart. Reserves in GP IV/2 and GP IV/3 should be kept out of the reckoning when considering request of GP IV/6 as the company is the same and the project is of expansion in capacity. c CMD SECL stated that when allocation are being made in groups why should sister companies not be asked to share first. Representative from the Govt. of Chattisgarh stated that this would be discrimination against JSPL JPL. When excess coal cannot be taken back from earlier allocattees why should JSPL-JPL be singled out. Besides, all is being based on data/projections which is admittedly highly tentative. He further said that power generation (JPL) is crucial and should not be affected. Chairman sought views of the Ministry of Steel. The representatives of Mos stated that the date is tentative, it is not fool proof. JSPL and JPL are two separate companies and that they agreed with views of the representative from Chattisgarh Govt. Representative from CEA (power) stated that coal blocks given for power project of JPL should be kept apart and not clubbed with Sponge Iron project's requirement of JSPL. Chairman observed that large numbers of people are looking for coal. There should be a sense of enquiry for meeting requirement of people. Legal solution can and should be found for it. Representative from the Govt. of Chattisgarh stated that JSPL and JPL should not be clubbed. People have invested in these companies. They are public limited companies, listed companies. There would be complications. Chairman sought views of Chattisgarh on clubbing IV/1 and IV/6. This was agreed and supported by Chattisgarh, CEA and MoS. It was accordingly decided that reserves in GP IV/2 and IV/3 would be kept out of consideration for deciding on extent of alloction in IV/6. The extractable reserves in GP IV/1 +GP IV/6 are 95.88 + 102.77 = 198.65 mill. T. G The Requirement of JSPL for 6 ltpa + 6.6 ltpa S.I comes to 72-11+79.2=140.2 mill. T. And if 36% yield in washing is considered, given high percentage of grade coal in GP IV/1 and 6 this becomes 157.2 mill T with addition of 17 mill. T. As to the requirement in 2.6 ltpa in RHF, CMD CMDPIL was of the view that coal from lower seams of IV/6 may not yield 10-12% ash coal on washi;-- H and that JSPL should seek linkage of superior coal. Representative from t

MANOHAR LAL SHARMA v.-PRINCIPAL SECRETARY &53 [R.M. LODHA, CJI.] the excess reserves to be handed over to SECL, in terms of A annual production, at transfer price to be determined by the Government. Coal availability and requirement in Gar~ Palma IV/1 block as recorded in the minutes show that 31.05 m.t. remained surplus with these companies. In the 30th meeting, the Screening Committee also recommended to allot Dumri 8 Coal Block to M/s. Neelachal and Mis. Bajrang despite the fact that CMPDIL informed the Committee that north portion (rise

Govt. of Chattisgarh stated that such superior coal is available nowhere and that JSPL should be allowed to innovate and use the lower seams to meet their RHF Requirement. MoC could keep condition that when full facts are known at the mining plan appropriately at the stage and allocate IV/6 to JSPl and Nalwa Sponge. CMD CMPDIL said that superior coal ih lower seams if IV/2 and IV/3 should not be used for power generation and but for sponge Iron marking. Chairman, summing up the discussion, observed that IV/2 IV/3 are to be kept out; reserve in IV/1 and IV/6 are be clubbed; RHF requirement be kept out; requirement of partner company M/s Nalwa Sponge be included; the existin9 requirement be accounted for at 100% satisfaction and expansion requirement of JSPL and requirement of Nalwa Sponge be given same satisfaction level as the overall in SECL area. If surplus still remains in IV/1 + after this then JSPL-Nalwa be asked to select another allocattee failing which the excess reserves be handed over to SECL, in terms of annual production, at transfer price to be determined by the Government. Coal availability and requirement in IV/1 Inferior Superior Total Available; 95.88+89.09=184.97 13.68 F 198.65 Required JSPL 157.2 NIL At 100% Nalwa 026.6 Satisfaction Required JSPL 144.7 (satisfaction level for existing 6 G ltpa SI at 100%) At86% Nalwa022.9 Satisfaction 167.6 Surplus: 17.37 13.68 31.05 H

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A side) of Dumri remains unexplored in detail on account of security problems. The unexplored portion has superior grades of coal of about 15 m.t. As regards Gare Palma IV/8 block, the minutes indicate that for this block Mis CECL; Consortium of five applicants and Mis Jayaswal Neco Ltd. had made 8 presentations. Consortium of five applicants companies was not recommended apparently inter alia for the reasons; (1) that the Consortium of five applicants companies was yet to be incorporated and (2) that they claimed the blocks mainly on the ground of promoting consortium approach. It is interesting to note.that in the earlier meetings for allocation of coal blocks in MCL, SECL and CCL areas, the Screening Committee on its own adopted consortium / leader and associate approach and the factor such as that the consortium company was not incorporated was not at all viewed as an impediment for recommendation but in this meeting the claim of consortium of five companies was not accepted and it was noted that they imay be accommodated in other blocks.· The application of norms by the Screening Committee changed from meeting to meeting. There was no consistent or uniform consideration. The portion of Dumri Coal Block bearing superior grade was admittedly unexplored but it was recommended for allocation. The clubbing of blocks or sub-blocks was done which was not the brief given to the Screening Committee.

141.1 . The recommendations made by the Screening F Committee in its 30th meeting suffer from the same infirmities as the recommendations made by it in favour of other applicants in earlier meetings.

142Copy pinpoint142. In the 31st meeting held on 23.06.2006, the Screening Committee examined the applications for lignite G blocks. 25 applicants made their presentation. The Screening Committee, after noticing_ the particulars of each of the 25 applicants individually and recording that it discussed the presentations made by the applicants and that it took into consideration the views/comments of the Ministry of Power, H

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[R.M. LODHA, CJI.] Ministry of Steel, concerned State Governments and the guidelines, recommended allocation of lignite blocks to 6 applicants.

143Copy pinpoint143. In September, 2005, the Ministry of Coal issued advertisement inviting· a~ ,:>lications for allocation of 20 coal blocks. This was the first time when applications were invited ·for allocation of coal blocks by way of an advertisement. The applications received pursuant to the abo~e advertisement were taken up for consideration by the Screening Committee in 32nd meeting held on 29.06.2006 and 30.06.2006, 33rd meeting held on 31.08.2006, Q1.09.2006 and 02.09.2006 and c 34th meeting held on 07.09.2006 and 08.09.2006. In the 32nd meeting, the Screening C-ommittee considered allocation of Rohne, Sitanala, Tenughat-Jhirki, Choritand-Taliya and Jogeswar coal blocks. 54 companies (some of which were group companies) made presentations. The Committee also considered applications of those companies which did not come for presentation. The minutes of 32nd meeting!! record

!! The Screening Committee discussed in detail the presentations made and the applications submitted by thEi companies. Taking into consideration the views/comments of the Ministry of Power, Ministry of Steel, concerned State Governments, and considering the guidelines laid down for the allocation of coal/lignite bfo·cks, the Screening Committee decided to recommend the allocation of the coal blocks as follows: i) Rohne coal block jointly in favour of Mis. JSW Steels Limited, M/s. Bhushan Steel and Power Limited and Mis. Jai Balaji Sponge Limited. F ii) Sitanala coal bloc!<. in favour _of M/s. Steel Authority of India Limited. iii) Tenughat-Jhirki coal bloc(S }Ointly in favour of M/s. Rashtriya !spat Nigam Limited and Mls. Jindal Steel and Power ltd. iv) Choritand-Taliaya coal block iointly in favour of M/s. Sunflag Iron and Steel Limited and M/s Rungta Mines Limited. G It was further decided that a sub-committee consisting of Joint Stlcretary, Ministry of CoaJ and Joint Secretary, Ministry of Steel would have discussions with the recommended joint allocattees of Rohne, Tenughat Jhirki and ChOritand-Taliaya coal blocks and work out the modalities and details of the arrangements of the joint allocation. In case there is a problem in the allocation as proposed, the sub-committee will bring the matter again before. the s_creening committee. H

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A that the applications received in the Ministry regarding above coal blocks were sent to the State Government of Jharkhand and the concerned Administrati\~e Ministries in the Central Governmen.t for their views/comments. The views/comments of the Government of Jharkhand were received on 28.06.2006. B The Committee then recommended the allocation of Rohne coal block jointly in favour of M/s. JSW Steel Ltd., Mis. Bhushan Steel and Power Ltd. arid Mis. Jai Balaji Sponge Ltd. Tenughat-Jhirki coal block was recommended jointly in favour of Mis. Rashtriya lspat Nigam Limited and Mis. Jindal Steel and c Power Limited while Choritand-Taliya was recommended jointly in favour of Mis. Sunflag Iron and Steel Limited and Mis. Ri.mgta Mines Limited. Insofar as Sitanala coal block is concerned, the Committee recommended the said block in favour of M/s. Steel Authority of India Limited. As regards Jogeswar coal block, the Committee in view of the comments of the representative of the 0 Government of Jharkand decided not to recommend allocation of that block in favour of any app!icant for the time being. The minutes of 32nd meeting do not show how and in what manner. the applications of those companies were considered which did not come for presentation. There is no comparative assessment or evaluation of the applicants. Why the chosen companies have been preferred over the others is not discernible? Merely because there were large number of applicants, it did not mean .that the consideration of each applicant could not have been recorded or comparative assessment or evaluation of the applicants could not have been made. What are the reasons for recommending three blocks jointly in favour of more than

As regards Jogeswar coal block the representative of the Government of Jharkand had informed the Committee that the State Government were of the view that due to some problems at the local level, it may be difficult for private ~mpanies to undertake coal mining. He further added that this block may be earmarked for some State Public Sector Undertaking. The Screbning Committee also took note of the fact that this block was earlier allocated but due to some local problems the allocattee could not commence mining and it was consequently surrendered. The Screening Committee, \llerefore, decided not to recommend allocation of Jogeswar H block in favoJr of any applicant for the time being.

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[R.M. LODHA, CJI.] one company are neither recorded nor disclosed in the minutes. A The recommendations for allocation of blocks jointly in favour of two or three companies, as indicated earlier, are not in conformity with the CMN Act. Rather, they are in contravention thereto. B

144Copy pinpoint144. In the 33rd meeting, the Screening Committee considered allocation of Tubed, Chakla, Jitpur and Pengedappa coal blocks. In that meeting, 165 companies made their presentations. The applications of 16 companies which did not turn up for making presentations were also considered. In the 32nd meeting held on three dates, namely, C 31st August and 1st and 2nd September, 2006, the Committee decided that recommendations regarding the above four blocks would be finalised aJter hearing the applicants for the remaining 11 blocks, for which the meeting was already notified for 07.09.2006 and 08.09.2006. D

145Copy pinpoint145. On 07.09.2006 and 08.09.2006, the 34th meeting of the Screening Committee was .held to consider allocation ·of Ansettipali, Punukula-Chilka, Brahmpuri, Mandia North, Rawanwara North, Sial-Shoghri Lohara East, Kosar- E Dongargaon, Warora West (North), Biharinath and Mednirai coal blocks. In that meeting, geological reserves of some of the coal blocks were reported by. CMPDIL/SCCL. The presentations were made by 101 companies. 44 companies did not turn up for mal<ing presentations. However, their applications were consi~ered. In that meeting, it was decided that the recommendatiohs regarding the above 11 blocks would be finalized in the next meeting.

146Copy pinpoint146. As seen ftom the above, in the 33rd meeting held on 31.08.2006, 01.09.2006 and 02.09.2006 for allocation of four blocks and in the 34th meeting held on 07.09.2006 and 08.09.2006 for allocation of 11 blocks, no final decision was taken and the matters were deferred. On 22.09.2006, the Screening Committee met regarding allocation of 15 coal H

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A blocks, which was subject matter of consideration in its 33rd and 34th meetings. The minutes 111 of the meeting held on !!! 5.3 The State Government of Jharkhand vide its letter no.5711M.C. dated 29.8.06 and letter no. 592/CS dated 21.9.06 had conveyed the following views regarding the captive coal blocks situated in the State of Jharkhand:- 8 S.No. BLOCK RECOMMENDATIONS

1. Tubed i) Mis Hindalco ii) Mis Tata Power iii) Mis Jindal Steel & Power Limited

2. Jitpur Mis Jindal Steel & Power Limited

3. Chakla i) Mis Essar Power c ii) Mis Chaibasa Steel

4. Medinirai i) Mis JSMDC ii) Mis Rungta Mines 5.4 The State Government of Madhya Pradesh vide its letter no.F-19-36120051 1212 (part-I) dated 23.1.06 and letter no. F-19-36120051122 (Part-1) dated 12.7.06 had conveyed the following views regarding the captive coal blocks situated in D the State of Madhya Pradesh. S.No. BLOCK RECOMMENDATIONS

1. Brahmpuri Mis Satna Power Company Ljmited

2. · Mandia North i) Mis Occidental Power Private Limited ii) Mis Jaiprakash Associates. Limited

E 3. Rawanwara North Mis Ind Synergy Limited

4. Sial-Ghoghri Mis Prism Cement Limited 5.5 The State Govemment9f Maharashtra vide its letter no. MMN-10051C.R.969/ lnd-9 dated 19.11.05, letter no.MMN-10051C.R. 1000/lnd-9 dated 10.1.06, letter no.MMN- 10051C.R.969 part-11/lnd-9 dated 4.5.06 arid letter no.MMN-10051 C.R.1000/lnd-9 dated 11.5.06 had conveyed the following views regarding the' F captive coal blocks situated in the State of Maharashtra. · S.No. BLOCK RECOMMENDATIONS

1. Lohara East i) Mis Murti Agro Product Private Limited ii) Mis Ultra Tech Cement Limited iii) Mis IBEL Gas Power Lim1te

2. Warora West i) Mis Bhatia International Limited G (North) ii) Mis Shri Sidhbali lspat limited iii) Mis MSP Steel Private Limited iv) Mrs Central India Power Company Ltd. v) Mis Gupta Energy Limited vi) Mis Jas Toll Road Company Limited 3.Kosar-Dongargaon Mis Wardha Power Company Private ltd. H

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[R.M. LODHA, CJI.] 22.09.2006 record recommendation for allocation of 15 coal A blocks. 5.6 The State Government of West Bengal vide its.letter no.5477/PrS/CI dated 9.8.06 had conveyed the following views regarding the captive coal blocks situated in the State of West Bengal. S.No. BLOCK RECOMMENDATIONS B

1. Biharinath i) Mis Bankura DRI Manufacturing Pvt. Co. Limited 5.7 The Secretary, Industries, Government of Andhra Pradesh apprised the Screening Committee that Ansettipali, Punkula-Chilka and Pengedappa are located in the notified tribal areas where the provisions of AP Land Transfer Regulations are applicable. In such areas, the State Government will not be in a position to grant mining leases in favour of private sector companies. The c Government of Andhra Pradesh has also brought out amendments to Section 11(5) of MMDR Act, 1957. Pursuant to this amendment grant of mining lease in Andhra Pradesh to non-tribals except public sector undertakings is prohibited in case of mines located in the notified tribal areas. 5.8 The Screening Committee discussed in detail the presentations made and the applications submitted by the companies. Taking into consideration the views/comments of the Ministry of Power, Ministry of Steel, concerned State Governments, and considering the guidelines laid down for the allocation of coal/lignite blocks, the Screening Committee decided to recommend the allocation of the coal blocks as follows: S.No. BLOCK Company and end use plant

1. Tubed jointly to i) Mis Hindalco Industries Ltd. for its enduse plant in Latehar, Jharkhand ii) Mis Tata Power Company Ltd. for its enduse plant in Singhbhum, Jharkhand

2. Chakla Mis Essar Power Limited for its enduse plant in Latehar, Jharkhand F

3. Jitpur Mis Jindal Steel and Power Limited for its enduse plant in East Singhbhum, Jharkhand.

4. Mednirai jointly to i) Mis Rungta Mines Limited for its enduse plant in Saraikela Kharswan, Jharkhand ii) Mis Kohinoor Steels Pvt. Ltd. for its enduse plant in Saraikela Kharswan, Jharkhand G

5. Brahmpuri Mis Pushp Steel and Mining for its enduse plant in Durg, Chhatisgarh

6. Mandia North Mis Jaiparkash Associates Limited for its enduse plant in Madhya Pradesh/Himachal Pradesh

7. Rawanwara North Mis SKS lspat Limited for its enduse plant in Raipur, Chhatisgarh H

560 SUPREME COURT REPORTS [2014] 8 S.C.R ..

A 146.1. Of these 15 blocks, three namely, Ansettipali, Punukula-Chilka and Pengedappa were recommended for allocation to Andhra Pradesh Government undertaking as these blocks were located in the notified tribal area. Of the remaining twelve, the Screening Committee recommended their allocation s to fifteen companies. Five.companies were recommended for their power plants, three were recommended for the cement plants and remaining seven were recommended for the Sponge Iron Units. For these twelve blocks, Jharkhand recommended seven companies, Madhya Pradesh recommended five, c Maharashtra recommended ten and West Bengal recommended one company. It is pertinent to notice that some of the companies like Chaman Metallics Ltd., which was recommended by the Screening Committee for Kosar Dongergaon block had no recommendation by the State Government (Maharashtra). Similarly, Pushp Steel and Mining 0 Ltd., which was recommended for Brahmpuri block had no recommendation from the State Government (Madhya Pradesh)

8. Sial-Ghoghri Mis Prism Cement Ltd. for its enduse plant in Satna, MP

E 9. Lohara East i) Mis Murli Agro Product Ltd. for its enduse plant in jointly to Nagpur and Chandrapur, Maharashtra ii) Mis Grace Industries Ltd. for its enduse plant in Chandrapur, Maharashtra 10 Warora West Mis Bhatia International Ltd. for its enduse plant in (North) Chandrapur, Maharashtra

11. Kosar- Mis Chaman Metallics Pvt. Ltd. for enduse plant in Dongargaon Chandrapur. Maharashtra

12. Biharinath Mis Bankura ORI Manufacturing Pvt. Co. Ltd. for its enduse plant in Bankura, West Bengal

13. Ansettipali Mis Andhra Pradesh Power Generation Corporation Limited (APGENCO) for its enduse plants in Andhra G Pradesh

14. Punkula-Chilka

15. Pengedappa 5.9 Jn respect of blocks recommended to be allocated jointly, the allocatee companies shall share the coal in the ratio of their assessed requirement for H the capacities (end-use plants) as reflected in the original applicatidns.

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[R.M. LODHA, CJI.] and so also Kohinoor Steel (P) Ltd. for Mednirai coal block had A no recommendation from the State Government (Jharkhand). The minutes do not disclose in what manner the merits of the companies which wer~ chosen for recommendation were determined. Even particulars of the applicants individually are not noticed. There is no indication at all in the minutes of 33rd B meeting and 34th meeting or the meeting held on 22.09.2006 when final decision that the conditions laid down in the guidelines are met by these companies was taken. Twenty three companies were recommended by the four State Governments while fifteen companies were finally c recommended for allocation by the Screening Committee but the reasons t_herefor are not discernible at all. The minutes also do not disclose the criterion which the Screening Committee applied in selection of the fifteen companies and the reason for allocating twelve blocks to fifteen companies. M/s. Grace 0 Industries Limited was recommended allocation of a coal block although that company had no recommendation/categorization. It is true that the recommendation/allocation made in favour of M/s. Grace Industries Limited was subsequently withdrawn/de- allocated but that is altogether a different matter. E

147Copy pinpoint147. In 2006, the Ministry of Coal invited applications for allocation of 38 coal blocks, of which 15 were reserved for the power sector. The advertisement indicated that preference will be accorded to the power sector and steel sector. Within the power sector, it was indicated that priority shall be accorded F to projects with more than 500 MW capacity. Similarly, in the steel sector, priority would be given to steel plants with more than 1 million ton per annum capacity. In response to the advertisement, more than 1400 applications were received for 38 coal 'blocks. G

148Copy pinpoint148. The allocation of coal blocks earmarked for power generation was considered by the Screening Committee in its 35th meeting· which was held on 20.06.2007 to 23.06.2007, 3'-'· ", .2007 and 13.09.2007. The coal block that was numbered H

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A as one block in the advertisement was subsequently considered as two blocks. Thus, 15 coal blocks, namely, Amarkonda - Murgadangal, Ashok Karkata Central, Durgapur- 11/Sariya, Durgapur-11/Taraimar, Fatehpur, Fatehpur (East), Ganeshpur, Gourangdih ABC, Lohara West & Lohara East, B Mahuagarhi, Mandakini, Patal East, Rampia Dip Side of Rampia, Sayang and Seregarha were considered. The status · of geological reserve of 15 blocks was indicated. The minutes~ of the 35th meeting briefly record the proceedings of the meeting held on 20.06.2007 to 23.06.2007, 30.07.2007 and c 13.09.2007. The Screening Committee in that meeting recommended to allocate all the 15 blocks reserved for power sector, many of which were recommended jointly in favour of two or more companies. The minutes do not contain the particulars showing consideration of each application. They also do not disclose any comparative assessment or evaluation of 0 the applicant companies. In what manner and for what reasons the companies were selected for recommendation are neither disclosed nor are they discernible from the minutes. Though,

;<The Screening Committee, thereafter, deliberated at length over the information furnished by the applicant companies in the application forms, during the presentations and subsequently. The Committee also took into consideration the views/comments of the Ministry of Power, Ministry of Steel, State Governments concerned, guidelines laid down for allocation of coal blocks, and· other factors as mentioned in paragraph 10 above. The Screening Committee, accordingly, decided to recommend for allocation of coal blocks ln the manner as follows: Name of Block Recommended Companies End use Plant

1. Mandakini 1. Mis. Monnet lspat & Energy Orissa Ltd.

2. Mis. Jindal Photo Ltd. Orissa

G 3. Mis. Tata Power Comp. Ltd. Orissa

2. Rampia 1. Mis. Sterlite Energy Ltd. Orissa & 2. Mis. GMR Energy Ltd. Orissa Dip Side of Rampia 3. Mis. Lanco Group Ltd. Orissa

4. Mis. Navbharat Power Pvt. Orissa

5. Mis. Mittal Steel India Ltd. Orissa

6. Mis. Reliance Energy Ltd. Orissa

H 3. Durgapur lllSariya 1. Mis. D.B. Power Ltd. Chhattisgarh

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[RM. LODHA, CJI.] the guidelines± provide for norms for consideration for inter se A priority for allocation of a block among competing applicants for a captive block but the minutes do not disclose at all how the norms for inter se priority are met by the companies selected

4. Durgapur ll!Taraimar 1. Mis. Bharat Aluminium Co. Chhattisgarh B Ltd.

5. Sayang 1. Mis. AES Chhattisgarh Energy Chhattisgarh Pvt. Ltd.

6. Fathepur 1. Mis. SKS lspat & Power Ltd. Chhattisgarh

2. Mis. Prakash Industries Ltd. Chhattisgarh

7. Fathepur East 1. Mis. JLD Yavatmal Energy Maharashtra c Ltd.

2. Mis. Green Infrastructure Pvt. Chhattisgarh Ltd.

3. Mis. R.K.M. Powergen Pvt. Chhattisgarh Ltd. D

4. Mis. Visa Power Ltd. Chhattisgarh

5. Mis. Vandana Vidyut Energy Ltd Chhattisgarh

8. ~ohara West 1. Mis. Adani Power (P) Ltd. Maharashtra & Lohara East (1200 MW)

9. Ganeshpur 1. Mis. Tata Steel Ltd. (CPP-600 Jharkhand E MW)

2. Mis. Adhunik Thermal Energy Jh:irkhand Ltd. (Equal Share) .1000 MW

10. Seregarha 1. Mis Mittal Steel Ltd. Jharkhand

2. Mis GVK (Gonvindwal Sahib) Punjab Ltd. F

11. Ashok Karkata Mis. Essar Power Ltd. Jharkhand Central

12. Pata! East Mis. Bhushan Power & Steel Ltd. Jharkhand (750)

13. Amarkonda 1. Mis. Jindal Steel & Power Ltd. Jharkhand G Mu~gadangal

2. Mis. Gagan Sponge Iron Pvt. Jharkhand Ltd.

14. Mahuagarhi 1. CESC Jharkhand

2. Jas Infrastructure Capital Pvt. West Bengal Ltd. H

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A for recommendation by the Screening Committee. Many of the companies selected -by the Screening Committee had no recommendation from the State Government or from the Ministry of Power and CEA and some of them had no recommendation either from the State Government or the Ministry of Power and B CEA at all. For example, for Durgapur-llrraraimar, the selected company Balco had no recommendation at all from the State

15. Gourangdih ABC 1. Mis: Himachal Emta Power Ltd. and Mis. 'JSW Steel Ltd. c on equal share- basis.

2. Representative from the West Bengal GoV!. suggested that either the block be allotted to WBMQTC Bengal or else be left unallotted. The committee felt that since D WBMTDC Bengal had not applied for the block. it would not be possible to consider them. Regarding non- allotment, the matter may be placed for consideration of the Govt. E ± lnter-se priority for allocation of a block among competing applicants for a captive block may be decided as per the following guidelines. Status (stage) level of progress and state of preparedness of the projects; Networth of the applicant company (or in the case of a new JV, the networth of their principals); Production capacity as proposed in the application; F Date of commissioning of captive mine as proposed in·the application; Date of completion of detailed exploration (in respect of unexplored blocks only) as proposed in the application; Technical experience (in terms of existing capacities in coal/lignite mining and specified end use); Recommendation of the Administrative Ministry concerned; G Recommendation of the State Government concerned (i.e. where the captive block is located); Track record and financial strength of the company Preference will be accorded to the power and the steel sectors. Within the power sector also, priority shall be accorded to projects with more than 500 MW capacity. Similarly, in steel sector, priority shall be given to steel plants with more than 1 million tonne per annum capacity. H

MANOHAR LAL SHARMAv. PRINCIPAL SECRETARY 565 [R.M. LODHA, CJI.] Government, Ministry of Power and CEA. Although the group A company Mis. Vedanta Alumina Ltd. was recommended by Ministry of Power and CEA, but it was not selected. Similarly, for Mandakini block, Mis. Tata Power Company Ltd. had no recommendation from the State Government and Ministry of Power and CEA. For Rampia and Dip Side of Rampia, B Reliance Energy Ltd. did not have any recommendation from the State Government, Ministry of Power and CEA. For Fatehpur East, the selected company Visa Power Ltd. had no recommendation from Ministry of Power and CEA. For Fatehpur block, Prakash Industries Ltd. had neither recommendation from the State Government nor from the Ministry of Power and CEA. The Screening Committee, as a matter of fact, did not select eight companies which were recommended by the Ministry of Power but selected eleven companies which were not recommended by Ministry of Power. Though in additional counter affidavit, some justification in this regard has been sought to be made but we are afraid that the said justification hardly merits acceptance as the minutes of the 35th meeting of the Screening Committee do not disclose anything what is now stated in the additional counter affidavit. The eight companies which were recommended by the Ministry E of Power but not selected by the Screening Committee are (1) Mis. Rashmi Cement Ltd.; (2) Mis. TRN Energy Pvt. Ltd.; (3) Mis. Maithon Power Ltd.; (4) Mis. Mahavir Global Coal Ltd.; (5) Mis. Rosa Power Supply Ltd.; (6) Mis. Bhushan Energy; (7) Ml s. Lanco Amarkantak Power Ltd. and (8) Mis. Vedanta Alumina F Ltd. The minutes do not disclose any reason at all for not selecting these companies which were recommended by the Ministry of Power. The eleven companies which were not recommended by the Ministry of Power and selected by the Screening Committee are (1) Mis. Tata Power Company Ltd.; G (2) Mis. Reliance Energy Ltd.; (3) Mis. Balco; (4) Mis. SKS lspat and Power Ltd.; (5) Mis. Prakash Industries Ltd.; (6) Mis. Green Infrastructure Pvt. Ltd.; (7) Mis. Visa Power Ltd.; (8) Mis. Vandana Vidyut Energy Ltd.; (9) Mis. GVK (Govindwal Sahib) Ltd.; (10) Mis. Gagan Sponge Iron Pvt. Ltd.; and (11) Mis. Lance H

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A Group Ltd. The reasons for selecting above eleven companies which were not recommended by the Ministry of Power are neither disclosed nor discernible.

149Copy pinpoint149. In the 36th meeHng, which was held on 07.12.2007- 08.12.2007, 07.02.2008-08.02.2008 and 03.07.2008, the 8 Screening Committee considered allocation of 23 coal blocks earmarked for non-power sector. For these 23 coal blocks earmarked for non-power sector, 674 applications were submitted by 184 companies for allocation. Some companies had applied for more than one block and some had submitted C more than one application for single block for different end use plants located at different locations. The geological reserve of 23 blocks;!!~ was noted by the Screening Committee. The minutes of the 36th meeting show that the Committee decided 'to recommend blocks earmarked for pig iron (coking coal) D jointly to two or more than two companies and nineteen blocks earmarked for other end-uses/non-cooking coal were recommended for allocation to single companies as well as jointly to two or more companies. The minutes of 36th meeting do not contain the particulars showing consideration of each E application. There is no assessment of comparative merits of the applicants who were selected for recommendation. The minutes do not disclose how and in what manner the selected companies meet the norms fixed for inter se priority. Many of the selected companies were neither recommended by the F State Government nor by the Administrative Ministry. Some of them were recommended by the State Government but not ~ecommended by the Administrative Ministry while one of them was not recommended by the State Government but

.G # Urtan Beharaband North Extn., Tandsi-111 & Tandsi-111 extn., Urtan North (coking blocks), Macherkunds, Rajhara North (Central & Eastern) Moira Madhujore (North & South), Datima, Bhaskarpara, Kudari, Bikram, Vijay Central Rajgamar Dipside (South of Phulakdih Nata), Kesla North, Gondkhari, Kappa & Extn. Dahegaon-Makardhokra-IV, Bander, Hurilong, Hutar sector C, Rajgamar Dipside (Deavnara), Tehsgora-B/Rudrapuri and Andal East (Non cooking blocks) H

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[R.M. LODHA, CJI.] recommended by the Administrative Ministry. For Rajhara North A ' (Central & Eastern) coal block, Vini Iron & Steel Udyog Ltd. had no recommendation by the State Government or by the Administrative Ministry. Similarly, for Thesgora-8/Rudrapuri 1 coal block, Revati Cement P. Ltd. did not have recommendation

either from the State Government or from the Administrative 8 Ministry. As regards Tandsi-111 and Tandsi-111 (Extn.), Mideast Integrated Steels Ltd. did not have recommendation from the State Government. Similarly, as regards Thesgora-8/Rudrapuri, Kamal Sponge Steel & Power Limited had no recommendation from the State Government. As regards Moira Madhujore coal c block, Ramswarup Lohh Udyog Ltd. had no recommendation from the Administrative Ministry.

150Copy pinpoint150. From the above discussion;-it is clear that 21 coal blocks stood allocated to private companies in pursuance of Screening Committee's recommendations during the period from the 1st meeting held on 14.07.1993 till the 21st meeting held on 19.08.2003. For the period from 04.11.2003 (22nd meeting) to 18.10.2005 (30th meeting) in pursuance of Screening Committee's recommendations, 26 coal blocks stood allocated to private companies. Following 32nd meeting held on 29.06.2006/30.06.2006 till the 34th meeting on 07.09.2006/08.09.2006, in pursuance of the recommendations made by the Screening Committee, two coking coal blocks were allocated to private companies and twelve non-coking coal blocks were allocated to private companies. In pursuance of the recommendations made by the Screening Committee in 35th and 36th meetings, 33 coal blocks were allocated to private companies. Some of the coal block allocations made to the private companies have been de-allocated from time to time. For consideration of legality and validity of allocations made to such companies, it is not necessary to deal with de-allocation aspect. It needs no emphasis that assuming that the Central Government had power of allocation of coal blocks yet such power should have been exercised in a fair, transparent and non-arbitrary manner. However, the allocation of coal blocks to H

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A the private companies pursuant to the recommendations made by the Screening Committee in 36 meetings suffers from diverse infirmities and flaws which may be summarized as follows:

1st Meeting to 21st Meeting 8

1. The guidelines framed and applied by the Screening Committee for the period frorn 14.07.1993 (1st meeting) to 19.08.2003 (21st meeting) are conspicuously silent about inter se priority between the applicants for the same block. As a C matter of fact, for the 21 coal blocks allocated to private companies in pursuance of Screen.ing Committee's recommendation during the first period, inter se priority or merit of the applicants for the same block had not at all been · determined. D

2. The guidelines do not contain any objective criterion for determining the merits of the applicants. The guidelines do not provide for measures to prevent any unfair distribution of coal in the hands of few private companies. As a matter of fact, no consistent or uniform norms were applied by the Screening Committee to ensure that there was no unfair distribution of coal in the hands of the applicants.

3. The Screening Committee simply relied upon the information supplied by the applicants without laying down any method to•verify applicant's experience in the end-use project for which allocation of coal block was sought. The guidelines also do not lay down any method to allot coal blocks as per the end-use projects coal requirement.

G 4. The Screening Committee kept on varying the guidelines from meeting to meeting. It failed to adhere to any transparent system.

5. No applications were invited through advertisement and thus the exercise of allocation denied level playing field, healthy H competition and equitable treatment.

p. 569 Copy page pinpoint

[R.M. LODHA, CJI.]

6. Certain coal blocks which did not fit into the criteria of A captive blocks were decided to be allocated by applying peculiar approach that the reserves could either be permitted to be explored by a private party or lost forever. For example, Brahmadiha block was allocated to Mis. Castron Technology pursuant to the recommendations made by the Screening B Committee in the 14th meeting.

7. If a certain party requested for a particular block, it was so recommended without objectively considering the merit of such request. For example, in the 14th meeting, the proposal of M/s. Monnet lspat Ltd. for a new Sponge Iron pTant in c Keonjhar area of Orissa of 1.2 million tonnes of capacity for which the requirement of 2.2 m.t. of raw coal has been indicated, was discussed. The party requested for Utkal-82 block in Talcher coalfield having 106 m.t. of reserves. CMD, .MCL was of the view that Chendipada block is likely to rave D better grade of coal and suggested to the party for preference of Utkal B-2 block. However, the party insisted for Utkal B-2 bfock and the same was allotted. Similarly, 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 E blocks for meeting their requirement of 1 m.t. Sponge Iron Plant and a captive power plant. Then they requested for allocation of Gare-Palma IV/4 and IV/8 blocks. On the representation made by the representative of the party that 125 m.t. of reserves in Gare-Palma IV/4 block will be adequate for meeting the requirement of their Sponge Iron Plant for a period of 30 years and 91 m.t. of reserves in Gare-Palma IV/8 block will be adequate for 30 years life of the proposed CPP, the Screening Committee recommended allocation of Gare-Palma IV/4 and IV/8 blocks to M/s. Jayaswal Neco Ltd. The representation made by the party was accepted as it is without any veriftcation.

8. Certain blocks with coal reserves on the higher side . were recommended to the companies with lower requirement. There 'f'ere no steps or measures taken to prevent possible · H

57'0 SUPREME COURT REPORTS [2014] 8 S.C.R.

A misuse of end-use project of private companies. For example, M/s. Prakash Industries Limited, being a BIFR company, was denied coal block earlier. However, the Screening Committee recommended Chotia I and II coal blocks to Mis. Prakash Industries Limited in 2003 for its proposed expansion project of 0.4 MTPA Sponge Iron though the company was having capacity of only 0.3 MTPA.

9. Some coal blocks which were already identified for development by CIL were offered to the private companies and some of the blocks which were close to the projects of CIL were, in fact, recommended for allocation and ultimately allocated. This was clearly in breach of the guidelines for selection of captive blocks.

22nd Meeting to 30th Meeting D

10. With regard to allocation of coal blocks to private companies pursuant to its 22nd meeting to 30th meeting held between 04.11.2003 and 18.10.2005, the guidelines do not lay down any criteria for evaluating the comparative merits of the applicants. The consideration had been ad-hoc in so much so that in every meeting, the guidelines were altered.

11. 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. Except mentioning the particulars of each applicants, the minutes do not show that there was any application of mind by the Screening Committee. How the guidelines are met by the recommended companies has not been discussed. , G

12. In the 25th meeting held on 10.01.2005, the Screening Committee considered allocation of 5 coal blocks in the MCL area. The size of these blocks was large as compared to the requirement of the applicants. The rules of game were changed H to adjust large number of applicants whose applications would

p. 571 Copy page pinpoint

[R.M. LODHA, CJI.] have been otherwise rejected as their coal requirement was far A less than the coal available in the coal blocks. However, in order to accommodate these applicants, a novel idea of choosing a leader company and associate companies was evolved though such procedure is apparently in contravention of the statutory provision contained in Section 3(3)(a)(iii) of the CMN Act. B

13. The merits of the companies, who were recommended for selection and those companies whose applications were rejected were not comparatively assessed.

14. While considering allocation for 5 blocks in SECL area C in the 26th meeting, despite the revelation by the Ministry of Steel that number of companies have in their presentations mentioned the capacity of the end-use plants in excess of what has been recommended by the Ministry and the concern . expressed by the representative of the State Government that · D the ground realities of the project needed to be verified and the capacities of the end-use plants and coal requirements of such . projects are required to be confirmed, the Screening Committee proceeded to list out the possible leaders witho'Ul. assessing the capacities of coal requirements of these companies.

15. The minutes of the 27th and 28th meetings also do not show that the assessment of comparative merits of the applicants was done. The Screening Committee continued with consortium I leader and associate approach which, as noted above, was in contravention of Section 3(3)(a)(iii) of the CMN Act. Even in case of a certain company, where recommendation of the Administrative Ministry was contrary to the recommendation of the State Government, yet the rec~mmendation was made by the Screening Committee that led to allocation on the basis of State Government's recommendation. The Screening Committee even decided to club the blocks and recommended allotment of such combined block to two companies jointly. H

p. 572 Copy page pinpoint

A 16. The consideration has been absolutely ad-hoc and without even knowing how much surplus will remain, the company so chosen was asked to select another allottee for surplus, if any. This is seen from the minutes of the 30th meeting. In the 30th' meeting, the Screening Committee also B recommended allocation of Dumri coal block although north portion of that blocl< remained unexplored and the unexplored portion had superior grade of coal.

17. The policy of pick and choose was adopted. The C application of norms was changed from meeting to meeting with no uniform or consistent consideration.

18. Certain companies which did not come for presentation were also considered but how and in what manner the applications of those companies were considered is not discernible. Why the chosen companies have been preferred over the others is also not discernible.

32nd Meeting to 36th Meeting

19. The minutes of the 32nd meeting do not show the reasons for recommending three blocks jointly in favour of more than one company.

20. Some of the companies which had no recommendation by the State Government were recommended by the Screening F Committee. The minutes of the 33rd and 34th meeting do not show in what manner the merits of the companies which were chosen for recommendation were determined. The minutes of the 33rd and 34th meeting even do not note the particulars of the applicants individually. The criterion which the Screening G Committee applied in the selection of 15 companies and the reasons for allocating 12 blocks to these companies are not discernible.

21. A certain company which has no recommendation/ categorisation was also recommended for allocation and H

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[R.M. LODHA, CJI.] ultimately allocation was made. The recommendation to allocate A 15 blocks reserved for power sector by the Screening Committee in its 35th meeting does not contain the particulars showing consideration of each ap·plication. Though, at that time, the guidelines provided for norms for consideration of inter se priority for allocation of a block among competing applicants B for a captive block, but the minutes do not at all disclose how the norms for inter se priority are met by the company selected for recommendation by the Screening Committee.1Many of the companies selected by the Screening Committee had no recommendation from the State Government or from the Ministry c of Power and CEA and some of them had no recommendation from the State Government, Ministry of Power and CEA at all. As many as eight companies which were recommended by the Ministry of Power were not recommended by the Screening Committee while eleven companies which were not 0 recommended by the Ministry of Power were recommended by the Screening Committee.

22. The minutes of the 36th meeting do not contain the particulars showing consideration of each application for allocation of 23 coal blocks earmarked for non-power sector. E There is nothing in the minutes to indicate how and in what manner the selected companies meet the norms fixed for inter se priority. Many of the selected companies were neither recommended by the State Government nor by the Administrative Ministry. Some of them were recommended by F the State Government but not recommended by the Administrative Ministry while one of them was not recommended by the State Government but recommended by the Administrative Ministry. Many companies which had failed to secure allocations earlier yet they were recommended. The G Screening Committee failed to consider capability and capacity of the applicant in implementing the projects.

151Copy pinpoint151. The entire exercise of allocation through Screening Committee route thus appears to suffer from the vice of H

p. 574 Copy page pinpoint

A arbitrariness and not following any objective criteria in determining as to who is to be selected or who is not to be . selected. There is no evaluation of merit and no inter se comparison of the applicants. No chart of evaluation was I prepared. The determination of the Screening Committee is B apparently subjective as the minutes of the Screening Committee meetings do not show that selection was made after proper assessment. The project preparedness, track record etc., of the applicant company were not objectively kept in view. Until the amendment was brought in Section 3(3) of the CMN c Act w.e.f. 09.06.1993, the Central Government alone was permitted to mine coal through its companies with the limited exception of private companies engaged in the production of iron and steel. By virtue of the bar contained in Section 3(3) of the CMN Act, between 1976 and 1993, no private company (other than the company engaged in the production of iron and 0 steel) could have carried out coal mining operations in India. Section 3(3) of the CMN Act, which was amended on. 09.06.1993 permitted private sector entry in coal mining operations for captive use. The power for grant of captive coal E block is governed by Section 3(3)(a) of the CMN Act, according to which, only two kind of entities, namely, (a) Central Government or undertakings/corporations owned by the Central Government; or (b) companies having end-use plants in iron and steel, l?ower, washing of coal or cement can carry out coal mining operations. The expression "engaged in" in Section ·F 3(3)(a)(iii) means that the company that was applying for the COC!I block must have set up an iron and steel plant, power plant or cement plant and be engaged in the production of steel, power or cement. The prospective engagement by a private company in the production of steel, power or cement would not entitle such private company to carry out coal mining operation. Most of the companies, which have been allocated coal blocks, were not engaged in the production of steel, power or cement at the time of allocation nor in the applications made by them any disclosure was made whether or not the power, steel or cement plant was operational. They only stated that they

p. 575 Copy page pinpoint

[R.M. LODHA, CJI.] ~proposed to set up such plants. Thus, the requirement of end- . A use project was not met at the time of allocation.

152Copy pinpoint152. It is pertinent to note here the stand of Maharashtra. According to Maharashtra, the allocation of coal blocks by the Screening Committee meant that the benefits. of the differential 8 in price of coal, as the case may be, would accrue to the allottee of the coal block. The differential in price would not necessarily be passed to the public as the price of the final product of the company is determined by import parity price in case of steel companies, competitive market price in case of cement C companies (many may not have access to captive coal) and the price of power on an exchange or in bids by State utilities irrespective of source of fuel. No material has been placed by the Central Government which may rebut the Maharashtra's stand. D

153Copy pinpoint153. The challenge has also been laid to the legality of the allocations made to the State/State PSUs through the Screening Committee route as well as Government dispensation route. It is not in dispute that the Screening Committee has recommended allocation of coal blocks to 29 E State Government PSUs while through Government dispensation route allocation has been recommended for 72 PSUs. The question that requires consideration is whether commercial mining operation can be carried on by the State or State PSUs. The answer has to be found out from the statutory provisions. By virtue of Section 3 of the CMN Act, as was originally enacted, on and from the appointed day, the right, title and interest of the owners in relation to the coal mines specified in the Schedule stood transferred to and vested absolutely il"l_ the Central Government free from all encumbrances. This provision further provides that if after the appointed day, the existence of any other coal mine comes to the knowledge of the Central Government, the provisions of the Coal Mines Management Act shall apply until that mine is nationalized by an appropriate legislation. Section 3 of the CMN H

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A Act was amended by the 1976 Nationalisation Amendment Act whereby sub-sections (3) and (4) of Section 3 were inserted. Along with this, Section 1A was also inserted in the CMN Act. By sub-section (3) of Section 3, it is provided that on and from the commencement of amendment in Section 3, no person other than the Central Government or a Government company or a corporation owned .. managed or controlled by the Central Government or a person to whom the sub-lease has been granted by any such Government, Government company or corporation or a company engaged in the production of iron and steel shall carry on coal mining operation in any form. Clause (b) of sub-section (3) also provides for termination of all mining. leases and sub-leases for winning or mining of coal except the mining leases granted before such commencement in favour of the Government, Government company or corporation and any sub-lease granted by any such Government, Government company or corporation. Clause (c) of sub-section (3) of Section 3 prohibits grant of lease for winning or mining coal in favour of any person other than the Government, Government company or corporation referred to in clause (a) thereof •. But this prohibition is subject to only one exception inasmuch· as the Government, company or corporation owned, managed or controlled by the Central Government may grant a sub-lease to any person in any area on such terms and conditions as may be specified in the instrument granting sub-lease provided the reserves of coal in the area are in isolated small pockets or are not sufficient for scientific and economical development in a coordinated and integrated manner and the coal produced by the sub-lessee will not be required to be transported by rail. Section 3(3)(a)(i) thus provides that only Central Government or a Government company (Central PSU or a corporation owned or managed by the Central Government) can carry on mining operations in India in any form. In other words, commercial mining cannot be carried on by the State . Government or the State PSU. The expression '"Government company or a corporation owned, managed or controlled by the H Central Government" means Government of India Pttblic

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[R.M. LODHA, CJI.] Undertaking. It does not include State Government Public A Sector Undertaking. This is fortified by Section 3(4), Section 4 and Sections 5, 6 and 7. The mining leases and sub-leases which were terminated under Section 3(3)(b) were available only to the Central Government or for that matter, the Government company or a corporation owned, managed and controlled by the Central Government. The State Government or State Public Sector Undertakings became entitled to obtain sub-lease of reserves of coal in isolated small pockets under clauses (i) and (ii) of proviso to Section 3(3)(c). It is pertinent to notice here that Circular dated 30.07.1979 records the correct position of legislative policy articulated in the CMN Act under which only the Central Government Public Undertakings have been permitted to carry on coal mining operations in the country. After the amendment was carried out in the CMN Act, the circular states that while continuing the existing policy of the Central Government carrying out coal mining operations by its own 0 undertakings, the State Governments might also be allowed to carry out coal mining operations in isolated small pockets subject to the conditions set out therein. The "isolated small pockets" are those which are away from the main coalfields and have limited known reserves which are not sufficient for scientific and economic development in a coordinated and integrated manner and the coal produced from. such areas would mainly be utilized for local consumption without transportation by railways. However, almost after 22 years, vide Circular dated 12.12.2001, the Central Government, reviewing its earlier policy, allowed the State Government companies or undertakings to do mining of coking and non-coking coal or lignite reserves either by opencast or underground method, anywhere in the country, subject to the conditions set out therein. Under the revised policy, the State Government company/ G undertaking was permitted to mine non-coking coal and coking coal reserves or lignite by opencast/underground method without the restriction of "isolated small pockets". Having carefully examined the Circular dated 12.12.2001, in light of the provisions of the CMN Act, as amended in 1976, it appears to H

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A us that the circular is not in conformity with the provisions of the CMN Act and, consequently, has no legal sanction·. CMN Act and further amendments therein carried out in 1976 do not allow State Government or State PSUs to mine coal for commercial use. The problem seems to have arisen because of the 2001 B circular which permits the State Government companies or undertakings to do mining of coking and non-coking coal reserves but, as noted above, the legislative policy in the CMN Act does not permit that. The recommendation for allocation by the Screening Committee to the State PSUs and also the allocation made to the State PSUs through Government dispensation route are, therefore, in violation of the provisions of the CMN Act, as amended from. time to time.. Moreover, the State PSUs, besides having been allocated coal mines for commercial purpose, have also been allowed to form joint venture companies, i.e., 51 % shareholding of State PSUs and 49% of private company. However, in the joint venture agreements between th_e State PSUs and the private companies, mining operations have been given to private company. For example, the notice inviting offer dated· 02.07.2008 issued by Chhattisgarh Mineral Development E Corporation (CMDC) for selection of partner for formation of a joint venture company for exploration, development, mining and marketing of coal from coal blocks provided that the Joint Venture Company (JVC) to be formed by CMDC and the selected offerers I bidder will explore, develop and operate F such coal deposits and the' coal produced by JVC will be sold commercially to various consumers in the open market. CMDC was allocated Sondiha coal block and coal blocks Bhatgaon- 11 and Bhatgaon-11 (Extension). Similarly, the Joint Venture Agreement between the Madhya Pradesh State_ Mining G Corporation Limited and Monnet lspat and Energy Limited reveals that Joint Venture Company has been further allowed to enter into Mine Development Operation Agreements with other private partner or sister concern. This modus operandi has virtually defeated the legislative policy in the CMN Act and winning and mining of coal mines has resultantly gone in the

MANOHAR LAL SHARMA v. PRINCIPAk·SECRETARY 579 [R.M. LODHA, CJI.] hands of private companies for commercial use. As indicated above, by 1976 amendment in the CMN Act, other than the Central Government or Central Government undertakings, a company engaged in the production of iron and steel was permitted to carry on coal mining operations in any form. By subsequent amendments in Section 3 of the CMN Act, besides B a company engaged in the production of iron and steel, a company engaged in generation of power or a company ' engaged in washing of coal obtained from a mine or such other end-use, as the Central Government may by notification specify, no other company can "carry on mining operation in coal". c Allocation of coal blocks to the State PSUs which ultimately on getting mining leases may enable them to win or mine coal commercially is clearly in breach ofthe provisions of the CMN Act.

154Copy pinpoint154. To'sum up, the entire allocation of coal block as per recommendations made by the Screening Committee from 14.07.1993 in 36 meetings and the allocation through the Government dispensation route suffers from the vice of arbitrariness and legal flaws. The Screening Committee has never been consistent, it has not been transparent, there Is no proper application of mind, it has acted on no material in many cases, relevant factors have seldom been its guiding factors, there was no transparency and guidelines have seldom guided it. On many occasions, guidelines have been honoured more in their breach. There was no objective criteria, nay, no criteria for evaluation of comparative merits. The approach had been ad-hoc and casual. There was no fair and transparent procedure, all resulting in unfair distribution of the national wealth. Common good and public interest have, thus, suffered heavily. Hence, the allocation of coal blocks based on the recommendations made in all the 36 meetings of the Screening Committee is illegal.

155Copy pinpoint155. The allocation of coal blocks through Government dispensation route, however laudable the object may be, also H

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A is illegal since it is impermissible as per the· scheme of the CMN Act. No State Government or public sector undertakings of the State Governments are eligible for mining coal for commercial use. Since allocation of coal is permissible only to those categories under Section 3(3) and (4), the joint venture B arrangement with ineligible firms is also impermissible. Equally, there is also no question of any consortium / leader I association in allocation. Only an un·dertaking satisfying the ·eligibility criteria referred to in Section 3(3) of the CMN Act, viz., which has a unit engaged in the production of iron and steel and generation c of power, washing of coal obtained from mine or production of cement, is entitled to the allocation in addition. to Central Government, a Central Government company or a Central Government corporation.

156Copy pinpoint156. In this context, it is worthwhile to note that the 1957 D Act has been amended introducing Section 11-A .w.e.f. 13.02.2012. As per the said amendment, the grant of reconnaissance permit or prospecting licence or mining lease in respect of an area containing coal or lignite can be made only through selection through auction by competitive bidding even among the eligible entities under Section 3(3)(a)(iii), referred to above. However, Government companies, Government corporations or compa11ies or corporations, which have been awarded power projects on the basis of competitive bids for tariff (including Ultra Mega Power Projects) have been exempted of allocation in fa1t0ur of them is not meant to be through the competitive bidding process.

157Copy pinpoint157. As we have already found that the allocations made, both under the Screening Committee route and th~ Government G dispensation route, are arbitrary and illegal, what should be the consequences, is the issue which remains to be tackled. We are of the view that, to this limited extent, the matter requires further hearing,

158Copy pinpoint158. By way of footnote, it may be clarified and we do, that H no challenge was laid before us in respect of blocks where

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[RM. LODHA, CJI.] competitive bidding was held for the lowest tariff for power for A Ultra Mega Power Projects (UMPPs). As a matter of fact, Mr. Prashant Bhushan, learned counsel for Common Cause submitted that since allocation for UMPPs is in accord with the opinion given in Natural Resources Allocation Reference20 and the benefit of the coal block is passed on to the public, the B said allocations may not be cancelled. However, he submitted that in some cases the Government has allowed diversion of coal from UMPP to other end uses i.e. for commercial exploitation. Having regard to this, it is directed that the coal block~ allocated for UMPP would only be used for UMPP and c no diversion of coal for commercial exploitation would be permitted. Rajendra Prasad Matter pending.