M/S ASHOKA SMOKELESS COAL IND. P. LTD. AND ORS. v. UNION OF INDIA AND ORS.

p. 998

A 1948, this Court in Hindustan Zinc Ltd. (supra), opined that the tariff cannot be fixed in such a mann.er by the Board while acting as a private trader and shedding its public utility character. It was observed :

" .. .In other words, if the profit is made not merely for the sake of profit, but for the purpose of better discharge of its obligations by the B Board, it cannot be said that the public enterprise has acted beyond its authority ... "

In Dr. P. Nalla Thampy Thera v. Union of India, [1983] 4 SCC 598, this Court observeJ :

c "25. We have said earlier that the Railways are a public utility service run on monopoly basis. Since it is a public utility, there is no justification to run it merely as a commercial venture with a view to making profits. We do not know - at any rate it does not fall for consideration • here if a monopoly based public utility should ever be a commercial venture geared to support the general revenue of the D State but there is not an iota of hesitation in us to say that the common man's mode of transport closely connected with the free play of his fundamental right should not be."

In. Mis S.N. Govinda Prabhu and Bros (supra), this Court observed that profit is not to be shunned but that service and not profit should inform actions of a Board. It was further observed :

" ... We do not think that either the character of Electricity Board as a Public Utility Undertaking or the provisions of the Electricity Supply Act preclude the Board from managing its affairs on sound commercial lines though not with a profit-thirst..."

As regard limitation of judicial review of price fixation after referring to the decision of the Constitution Bench of this Court in Shri Sitaram Sugar Company Ltd. v. Union of India, [1990] 3 SCC 223, this Court in Oi/ and Natural Gas Commission and Anr. v. Association of Natural Gas Consuming G Industries of Gujarat and Ors., [ 1990] Supp SCC 397 observed:

" ... It is, however, not necessary here to enter into a discussion of this and the earlier cases because those cases were primarily concerned with the question whether the price fixation had been made in consonance with the requirements of the relevant legislation fixing prices of essential commodities in the interests of the general public ~ ... -.

·- ASHOKA SMOKELESS COAL IND. P.LTD. v. U.0.1. [S.B. SINHA, J.] 999

and also because ONGC does not deny that, as a State instrumentality, its price fixation should be based on relevant material and should be fair and reasonable. None of these decisions hold that the cost plus method is the only relevant method for fixation of prices. On the contrary, there are indications in some judgments to indicate that not a minimum but a reasonable profit margin is permissible. Even in relation to a public utility undertaking like the State Electricity Boards B where the duty not to make undue profits by abusing its monopoly position is clear.... "

The action on the part of the State even in the matter of fixation of price of an essential commodity, thus, must be viewed from different angles, C some of which we shall advert to hereinafter.

Article 39(b) - Concept:

Article 39(b) was incorporated in the Constitution to indicate the necessity for ensuring equitable distribution of resources. D In State of Karnataka and Anr. v. Shri Ranganatha Reddy and Anr., [1977) 4 SCC 471, this Court analyzed the constitutional provisions contained in Article 39(b) of the Constitution, stating :

" ... The key word is "distribute" and the genius of the Article, if we may say so, cannot but be given full play as it fulfils the basic purpose of restructuring the economic order. Each word in the article has a strategic role and the whole article a social mission. It embraces the entire material resources of the community. Its task is to distribute such resources. Its goal is so to undertake distribution as best to subserve the common good. lt re-organizes by such distribution the ownership and control. f-

"Resources" is a sweeping expression and covers not only cash resources but even ability to borrow (credit resources). Its meaning given in Black's Legal Dictiona1y is: G "Money or any property that can be converted into supplies; means of raising money or supplies; capabilities of raising wealth or to supply necessary wants; available means or capability of any kind."

And material resources of the community in the context of re-ordering the national economy embraces all the national wealth, not merely H \. ..

p. 1000

A natural resources, all the private and public sources of meeting material needs, not merely public possessions. Every thing of value or use in the material world is material resource and the individual being a member of the community his resources are part of those of the community ...."

B [Also see Samatha v. State of A. P., [1997] 8 SCC 191]

Coal, being such a vital product to the Indian industries and the common man, nationalization of coal was necessary for realization of the ideals contained in Article 39(b) of the Constitution.

c In Sanjeev Coke Manufacturing Company etc. v. Mis Bharat Coking Coal Limited and Anr. etc., [1983] 1 SCC 147, this Court observed: .! " ... Coal is, of course, one of the most important known sources of energy, and, therefore, a vital national resource. While coal is necessary as a source of energy for very many industries, coking coal is indispensable for the country's crucial iron and steel industry. So, Parliament gave the first priority to coking coal. First there was legislation in regard to the coking coal mines and then there was legislation in regard to all coal mines, coking as well as non-coking. . By the Coking Coal Mines (Nationalisation) Act all coking coal mines known to exist in the country were nationalised. Coke oven plants which were part of the coking coal mines so nationalised being in or belonging to the owners of the mines also stood automatically nationalised. Other coke oven plants which did not belong to the owners of the mines but which were located near about the nationalised coking coal mines were also identified and nationalised by express provision to that effect. At that stage of the rationalisation and nationalisation of the coal mining industry, it was apparently thought necessary and sufficient to nationalise such coke oven plants as were "' in or belonged to the nationalised coking coal mines or as were identified as located near the nationalised coking coal mines, !eaving out all other coke oven plants. G The nationalisation of the coking coal mines and the coke oven plants was "with a view to reorganising and reconstructing such mines and plants for the purpose of protecting, conserving and promoting scientific development of the resources of coking coal needed ~o meet the growing requirements of the iron and steel industry and for matters +.., {

ASHOKA SMOKELESS COAL IND. P.LTD. v. U.0.1. [S.B. SINHA, J.] 1001 connected therewith or incidental thereto". We do not entertain the slightest doubt that the nationalisation of the coking coal mines and the specified coke oven plants for the above purpose was towards securing that "the ownership and control of the material resources of the community are so distributed as best to subserve the common good"." B [Also see l. Abu Kavur Bai - State of T. N., [1984] 1 SCC 515]

Article 3 7 of the Constitution of India provides that the provisions contained in Part IV of the Constitution of India shall not be enforceable by any court and it enjoins upon the State to apply the provisions of this Part in making laws. C It is of some interest to note that whenever an action is taken by a State in consonance with the provisions laid down in the Directive Principles of State Policy as envisaged under Part IV of the Constitution of India, the same is considered to be a reasonable action. D In MR.F. Ltd. v. Inspector Kera/a Govt. and Ors., [1998] 8 SCC 227, a question arose as to whether the rights of industrial concerns under Article 19(1 )(g) are said to be affected having regard to the provisions of the Kera la Industrial Establishments (National and Festival Holidays) (Amendment) Act, 1990 whereby the number of national holidays were increased. In view of E Article 43 of the Constitution of India, the restriction imposed were held to be reasonable restrictions stating:

"The plea under Article 14 also cannot be entertained. The decision by legislative amendment to raise the national and festival holidays is based upon relevant material considered by the Government, F including the fact that the holidays allowed by the Central Government and other public sector undertakings were far greater in number than those prescribed under the Act. As pointed out earlier, the Act is a social legislation to give effect to the Directive PrirtCiples of State Policy contained in Article 43 of the Constitution. The law so· made cannot be said to be arbitrary nor can it be struck down for being G violative of Article 14 of the Constitution."

Therein it was afso observed :

"In examining the reasonableness of a statutory provision, whether it is violative of the Fundamental Right guaranteed under Article 19, H

1002 SUPREME COURT REPORTS [2006] SUPP. 9 S.C.R. ·"' ':'

A one cannot lose sight of the Directive Principles of State Policy contained in Chapter IV of the Constitution as was laid down by this Court in Saghir Ahmad v. State of U.P. as also in Mohd. Hanif Quareshi v. State of Bihar.

12. This principle was also followed in Laxmi Khandsari case in B which the reasonableness ofrestrictions imposed upon the Fundamental Rights available under Article 19 was examined on the grounds, amongst uthers, that they were not violative of the Directive Principles of State Policy." .-

[Also see B. P. Sharma v. Union of India, [2003] 7 SCC 309: AIR c 2003 SC 3863; State of Pur.jab v. Devans Modern Breweries Ltd., (2004] 11 SCC 26; State of Gujarat v. Mirzapur Moti Kureshi Kassab Jamat, [2005] 8 sec 534] It may not be correct to say that any action which is not in consonance with the provisions of Part IV of the Constitution would be ultra vires but D there cannot be any doubt whatsoever that the principles contained therein would form a relevant consideration for determining a question in regard to price fixation of an essential commodity. Directive Principles of State Policy provides for a guidance to interpretation of Fundamental Rights of a citizen as also the statutory rights. E We have noticed hereinbefore that coal was nationalized under Coking Coal Mines (Nationalization) Act, 1972 and Coal Mines (Nationalization) Act, 1973. We have also noticed that the said Acts were enacted so as to fulfill the constitutional object contained in Article 39(b) of the Constitution of India. F In terms of the Nationalization Acts indisputably the coal companies as / also the Union of India were bound to take action in furtherance of the task -\

of achieving the purport and object for which the coking coal mines and the coal mines were nationalized. The Parliament also enacted Coal Mines (Nationalisation) Amendment Act, 1976. In the year 1976, even mining lease G of all the coal mines were rescinded. The constitutionality of the 1976 Amendment Act was upheld by this Court in Tara Prasad Singh and Ors. v. Union of India and Ors., [ 1980) 4 SCC 179 stating that the Nationalization Act was enacted in furtherance of Article 39(b) in the following t_erms: .>

"35. The Nationalisation Amendment Act needs no preamble, H f-. (

..

ASHOKA SMOKELESS COAL IND. P.LTD. v. U.0.1. [S.B. SINHA, J.] l 003 especially when it is backed up by a Statement of Objects and Reasons. A Generaliy, an Amendment Act is passed in order to advance the purpose of the parent Act as reflected in the preamble to that Act. Acquisition of coal mines, be it remembered, is not an end in itself but is only a means to an end. The fundamental object of the Nationalisation Act as also of the Nationalisation Amendment Act is to bring into existence a state of affairs which will be congenial for regulating mines and for mineral development. "

It may be true that prices are required to be fixed having regard to the market forces. Demand and supply is a relevant factor as regards fixation of the price. In a market governed by free economy where competition is the buzzword, producers may fix their own price. It is, however, difficult to give effect to the constitutional obligations of a State and the principles leading to a free economy at the same time. A level playing field is the key factor for invoking the new economy. Such a level playing field can be achieved when there are a number of suppliers and when there are competitors in the market enabling the consumer to exercise choices for the purpose of procurement of goods. If the policy of the open market is to be achieved the benefit of the consumer must be kept uppermost in mind by the State.

Can the consumer be expected to derive any such benefit from a monopoly concern? Would a situation of this nature lead to a hybrid situation where a coal company is allowed to fix its own price which may not be a fair price? These are some of the questions which were required to be kept in mind by the coal companies before formulating a policy of fixing price of an essential commodity.

The State when exercises its power of price fixation in relation to an essential commodity, has a different role to play. Object of such price fixation is to see that the ultimate consumers obtain the essential commodity at a fair price and for achieving the said purpose the profit margin of the manufacturer/ producer may be kept at a bare minimum. The question as to how such fair price is to be determined stricto. sensu does not arise in this case, as would appear from the discussions made hereinafter, as here the Central Government G has not fixed any price. It left the matter to the coal companies. The coal companies in taking recourse to E-Auction also did not fix a price. They only took recourse to a methodology by which the price of coal became variable. Its only object was to see that maximum possible price of coal is obtained. The Appellants do not question the right of the coal companies to fix the H

p. 1004

-· ""::'.

A price of coal. Such prices had been fixed on earlier occasions also wherefor legally or otherwise the Central Government used to give its nod of approval. The process of price fixation by the Central Government in exercise of its powers under the 1945 Order continued from 1996 to 2004.

Does E-Auction ultimately lead to fixation of a price ? The answer to B the said question must be rendered is a big emphatic 'No', as by reason thereof even the coal companies would not know what would be the price of different varieties of coal. The issue must be determined from the perspective "{- as to whether the coal companies can be allowed to say that despite their monopolistic character and they being a 'State' can fix a price which would otherwise be unfair or unreasonable. c The State or a public sector undertaking plays an important role in the society. It is expected of them that they would act fairly and reasonably in all fields; even as a landlord of a tenanted premises or in any any other capacity. [See Baburao Shantaram More v. The Bombay Housing Board and D Anr., [1954] SCR 572 at 577, Dwarkadas Marfatia & Sons v. Board of Trustees_ of the Port of Bombay, [1989] 2 SCR 751 at 760, 762 and Pathumma and Ors v. State of Kera/a and Ors., [1978] 2 SCR 537 at 545] ~

E-Auction is not a mode to fix price. It is only a mode to obtain maximum price. In other words, deriving the optimum benefit by sale of coal E is the goal. While doing so State does not have to follow the principles of fixation of price. It is not required to apply its mind as to its effect. It treats coal like any other commodity. It treats itself like a private trader. A distinction must be borne in mind when a State intends to part with a privilege or a largess as a competitor in the market and when it is expected to fuifill its constitutional goal enshrined under Article 39(b) of the Constitution. F Monopoly ,,., . " Coal companies are monopolies within the meaning of the provisons of the Nationalization Act. They would be deemed to be monopolies within the provisions of clause (6) of Article 19 of the Constitution of India. Our attention has been drawn to two decisions of this Court in Akadasi Pradhan v. State ofOrissa, [1963] Supp 2 SCR 691at715, and State of Rajasthan v. Mohan Lal Vyas, [1971] 3 SCC 705].

In Akadsi Pradhan (supra), it has been held that when a monopoly is created in terms of sub-clause (6) of Article 19, no agency can be appointed f-. , 1

,. ~ ASHOKA SMOKELESS COAL IND. P.LTD. v. U.O.I. [S.B. SINHA, J.] 1005

who would not answer the description of principal and agent. An agent of a A monopoly organization, it was held, cannot be appointed or act on its own.

In Mohan Lal Vyas (supra), it was held that there cannot be any law in violation of the Constitution of India and no monopoly right can be conferred on a citizen under the Constitution, nor can it be justified thereunder. B Constitutionality of £-Auction :

-' Coal is an essential commodity. Coal India Limited and its subsidiary companies enjoyed the monopoly of production, distribution and sale thereof. The question which arises for consideration is whether in the aforementioned situation a State within the meaning of Article 12 of the Constitution of India c can be permitted to take recourse to E-Auction which is not commensurate with the constitutional scheme of this country.

Some of the coal companies admittedly were reeling under financial problems. Three of them became sick industrial undertakings and a reference was made to BIFR. The Union of India in its counter-affidavit states that a D decision was taken to take recourse to E-Auction such that sick coal companies could turn around.

Union of India and the coal companies do not deny that they have a . monopoly. They do not deny or dispute that they are 'State' within the E meaning of Article 12 of the Constitution of India. They have also not raised any contention that the constitutional obligations in terms of Article 39(b) are not required to be complied with.

It is not in dispute that approximately 94 to 95% of the coal is made available to the core sector at a notified price. We have also noticed that F ).. NCCF as also various Central Government and State Government agencies were to get coal at the base price + 25% thereof. It is of some significance r to note by way of an example that whereas the core sector gets coal at a price of Rs.1155/- per metric tonne, NCCF, BCCL and Jharkhand State Minerals Development Corporation would get the same at a price of Rs. I 386/- per metric tonne, but the price payable by other non-core linked consumers and G traders having regard to the flexibility of the price in E-Auction, would be a sum of Rs.1660/- to Rs.1900/- per metric tonne.

The linked consumers constitute about I% of the total production. The linkage system so far as non-core sector consumers are concerned, has been \ ~ H

p. 1006

A prevailing since 1973. The beneficiaries of the system primarily are manufacturers of hard coke, smokeless fuel and other products for which the coal is essential raw material. The Open Sales Scheme which was meant for traders, in view of the 1Jriginal policy decision of the coal companies, E- Auction was to be applied to the traders for whom the Open Sales Scheme B was applicable. It is, however, not in dispute that having regard to the directions issued by the Central Government to the coal companies, all consumers irrespective of the fact that whether they are linked consumers of core sector or non-core sector, were entitled to take part in E-Auction. Ordinarily traders who are outside the scheme of linkage are entitled to take part in E-Auction. E-Auction was resorted to allegedly on the ground that various method tried C by the coal companies including the Open Sales Schemes and MPQ failed for one reason or the other. The Central Vigilance Commission also recommended, having regard to the irregularities committed in the matter of sale of coal through OSS, that publicity of tender should be done through website, in terms of the letter dated 18.12.2003 with a view to bring about greater transparency and to curb malpractice. The coal companies state that such a D direction was made in terms of Section 8(l)(h) of the CVC Act, 2003. It was recommended that wherever it is feasible and practical the organization should eventually switch over to the process of e-procurement/e-sale. It is, however, found that the directions are general in nature and no particular direction was issued to the coal companies in terms of Section 8(l)(h) of the CVC 2003 E Act which is otherwise permissible in law.

It may be that the practice ofE-Marketing and/or E-Advertisement and/ or E-Contract is prevailing in various parts of the world but E-Auction, which has a different concept, cannot be equated therewith.

F Coal is an essential commodity in terms of Section 3( I) of the Essential Commodities Act. Colliery Control Order was made, inter a/ia, for securing equitable distribution and availability of higher price of essential commodity. The coal companies as also the Central Government, therefore, have a constitutional and statutory obligation to fulfill. Coal companies exercising monopolistic power, thus, were required to distribute coal equitably and at a G fair price.

In Tara Prasad Singh (supra), this Court has categorically considered as to why the Parliament thought it fit to enact the Nationalisation Act i.e. to distribute the resources vested in the State to subserve the common good. H The State, it is trite, while fixing the price for the purpose of equitable

.. ASHOKA SMOKELESS COAL IND. P.LTD. v. U.0.1. [S.B. SINHA, J.] 1007

distribution or otherwise cannot be actuated purely by a profit motive. It A should not discharge its functions in such a way as to aspire to earn huge profit specially at the cost of those who are fully dependent upon them for supply of a monopoly item like coal. It cannot be the law that the public sector undertakings while selling essential commodities must suffer loss. It is also not the law that public sector undertakings must distribute subsidy, but what is required in terms of the constitutional scheme adumbrated under B Article 39(b) and Article 14 of the Constitution of India is to make the said essential commodity available at a fair price. However, for the purpose of this case, it may not be necessary for us to dilate on the principle of fixation of price, of coal as an essential commodity or otherwise.

Before us the learned counsel for the parties relied upon various decisions c of this Court as regard the mode and manner in which deliberations were _, made on fixation of price of essential commodities over which the monopoly right is exercised. We have also been taken through a recent decision of this Court in Pallavi Refractories (supra). By reason of E-Auction no price is fixed as it would vary from bids to bids. The coal is sold through E-Auction D at least twice a month. There will be various places where E-Auction would be conducted simultaneously. In E-Auction, the quantity and quality of coal depending upon its grade, size, colliery from which the same has been extracted, are specified. In such a situation invariably the price for same quality of coal would greatly vary as the bidders would bid having regard to E their own requirement. By allowing repeated bids, a person who may be requiring the essential commodity would not be able to prove the same and its non-availability may result in stoppage of production which would lead to various complications. He would, therefore, be driven to a desperate situation. The only price which is fixed for E-Auction is the reserved price which is 25% above the notified price. F .... While fixing a fair and reasonable price in terms of the provisions of the Essential Commodities Act (although the price is not dual), it is essential that price is actually fixed. Such price fixation is necessary in view of the fact that coal is an essential commodity. It is, therefore, vital that price is actually fixed and not kept variable. Fixation of price of coal is of utmost necessity G as it is a mineral of grave national importance. Non-availability of coal and consequently the other products may lead to hardship to a section of citizens. It may entail closure of factories and other industries which in tum would lead to Joss to State exchequer; as they would be deprived of its taxes. It will lead to loss of employment of a large number of employees and would be H I....(

1008 SUPREME COURT .REPORTS [2006) SUPP. 9 S.C.R.

A detrimental to the avowed object of the Central Government to encourage small scale industries.

Coal itself is considered to be a core sector. In terms of the provisions of the Industrial (Development and Regulation) Act, 1951, the Parliament requires the Central Government to take such steps which would enable the B SSl units to maintain their viability and strength so as to be effective in : (i) promoting. in a harmonious manner the industrial economy of the country and easing the problem of employment; (ii) securing the ownership and control of the material resources of the community such that the same are distributed .. to subserve the common good. c E-Auction has effect both on price of coal as also the availability thereof to the non-core sector consumers. Their availability would depend upon successful bids of the consumers. It was introduced for a definite purpose viz. to confine the same to the non-core sector and traders. A deviation to a great extent has been made therefrom. Even now the core sectors are taking D part in E-Auction, but no step has been taken in this behalf.

The Central Government, however, recently ensured availability of coal to the linked consumers but they have to pay average weighted price.

By its letter dated 08.04.2005, the Central Government informed the E Chairman, Coal India Ltd., that supply of coal to non-core sector linked consumers would continue on the basis of MPQ. However, the price for such supplies is to be computed on the basis of average E-Auction, stating :

"The coal supplied to non-core linked consumer on the basis of MPQ would continue. However, the price for such supplies would be F computed on the basis of average e-auction rate during the month. Sale of two million tones of coal to small consumers through NCCP would also continue. However, the price for coal supplies to NCCP would also be governed on the basis of e-auction prices, as mentioned above."

G Advantages or Disadvantages of £-Auction :

We may at this juncture notice the purported advantages of E-Auction as submitted on behalf of the Union of India.

(i) The system of E-Auction is simple, easily accessible, transparent H also offers equal opportunity to all coal customers/intending buyers.

ASHOKASMOKELESS COAL IND. P.LTD. v. U.0.1. [S.B. SINHA, J.] 1009

(ii) Any citizen of India can participate and purchase coal through A E-Auction by sitting in his home/office from any part of the country.

(iii) A bidder need not require to meet any formalities such as obtaining licence/quota/sponsorship/linkage etc. and is not required to meet any such formalities. B (iv) Even a buyer located in the remote part of India without electridty/computer is free to reach the nearest village/town with a cyber cafe and can participate in the E-Auction without requiring to come to the coal company/coalfield as earlier under OSS

(v) A bidder is free to choose the source/quality/quantity and C purch~se coal at a price determined by him on the basis of demand and supply.

(vi) To purchase coal the buyer need not depend on intermediaries/ middlemen and can directly purchase through E-Auction. This will reduce the chances of black marketing, ,if not totally eliminate it. D (vii) The buyer saves on middleman's commissions and other incidental charges.

(viii) The incidental benefit is also shared by coal company in the form of improved returns i.e. by diverting intermediary's share to E coal companies.

(ix) There are a large number of outlets for small consumers which enable them to draw their coal supplies from any of the companies/sources instead of limited outlets/coal companies as was the case in earlier schemes. F (x) The sale on the auction is held even in remote areas therefore is not subject to any manipulation/influence of antisocial elements.

(xi) The system provides for official channel of supplies to all categories of buyers without classification who were otherwise dependent on secondary market (black market) G (xii) The premium under the old system being appropriated by unscrupulous elements got checked/restricted.

(xiii) Any buyer of coal under non core-sector including SSI H

p. 1010

A units is able to avail of this opportunity by payment of a little more than the notified price. The system of E-Auction is not aimed at obtaining higher price but endeavours to create an equal opportunity amongst the buyers of non core sector.

However, we may notice that the said claim of the Union of India or the coal companies is not justified. The aforementioned claim of the Central Government is refuted by the consumers stating that the figures given by the Union of India are misleading. Price range of all the subsidiaries have been taken cumulatively instead of taking subsidiary-wise figures. The consumers belonging to core sectors, like power, steel, iron and chemical etc. are big companies like Grasim, Hindalco, Jindal and Haldia Steel who are taking part in the E-Auction as a result whereof the price of coal has shot at the cost of SSI units. Thus, even the linked consumers of core and non-core sectors have been participating therein. Participation of core sector in E-Auction is destructive of its own policy as would appear from the letter of the Ministry of Coal dated 08.04.2005 and, thus, it cannot be justified on the ground of profiteering wherewith the survival of SSI units is involved.

Although claim has been made by the companies that more and more persons are taking part therein, it is difficult for us to accept that out of 16000 (

consumers 12000 have taken part; as E-Auctions are more frequently done, the possibility of the same persons taking part again and again cannot be ruled out.

It is difficult to comprehend the stand of the Union of India that E- Auction is being taken recourse to by more and more persons and, if that be so, there was no reason as to why the price of coal by E-Auction has declined.

F Before us a chart has been filed with a view of show that after introduction of the scheme of E-Auction, supply of coal to many of the coke ovens has decreased affecting their ultimate production. Apprehensions have been raised that ultimately many of the units may have to be closed. We think that the coal companies should see to it that such a situation is avoided. G However, it is not in dispute that auction price being online, no other bidder is aware of the contents of the bid submitted by the bidder. No bidder will have access to the records pertaining to E-Ai.tction so as to ascertain who is the highest bidder or what is the highest bid price; or no bidder would have knowledge or access to the various bids submitted by the bidders against the H Ir- I

ASHOKA SMOKELESS COAL IND. P.LTD. v. U.O.I. [S.B. SINHA, J.] 1011 particular grade of coal so as to arrive at an average E-Auction price of particular grade of coal. Only MSTC and MJCPL and the companies who are conducting the E-Auction, would have access to the details of the bids submitted by the bidders. No eligibility criteria having been fixed, any person including traders can participate and bid in the E-Auction. Highest price and highest quantity are the only factors for sale/allocation of coal to a bidder in terms of the said scheme; as E-Auction results in traders buying large quantities of coal. Consequently, the manufacturers of hard coke and smokeless coal as also other small units have to buy coal at prohibitive rates from traders . The methodology for allocation of coal to a bidder of E-Auction is, thus, inequitable, irrational and fortuitous.

The methodology for allocation of coal at this juncture also may be c noticed by us :

Allocation is carried out by E-sale software on the following basis:

a. First preference is given to highest bid price. D b. If two or more parties bid the same price, then preference for allocation is given to party that placed the bid for higher quantity. c. In case two or more parties bid the same price and quantity, then preference is given to the party that placed the bid earlier. E Since a particular grade is allocated/sold at different prices to different bidders, E-Auction ultimately leads to sale of a particular grade of coal at variable prices in the market.

In spite of Government of India's office memorandum promising sale of coal to the linked consumers at average E-Auction rate, sale to linked consumers is being made at the highest bid price and not at the average bid price.

It is accepted that coal is a scarce commodity and the Government companies are not in a position to supply coal as per demand of the same, which may be enormous, despite the fact that a certain level of import of coal is also permitted.

However, the advantages of E-Auction per se or disadvantages thereof may not be decisive as this Court is concerned with the constitutionality thereof. It has not been denied or disputed that by reason of E-Auction price H ".

t

p. 1012

- ··A of coal is not fixed. The .concept of price fixation is that all persons who are in requirement of.the commodity should know the basis or criteria thereof. If a price is fixed, they would be. able to lay down their own business policy in such a manner so that they can have a level playing field in the market of competition .and such competition is not only between the persons whose end-project is similar or otherwise based on coal but who produce other B products not based completely on coal. Variability in the price of coal would affect all who have to depend on coal e.g. we may notice that hard coke is considered to be vital in the manufacturing process of steel. If the price of ~ coal is not fixed, the price of·hard coke cannot be fixed, which may give rise to uncertainty in the price of steel or smokeless coal which caters tO'the needs c of the small consumer~ both for domestic use also for use in the small hotels and/or use in rural areas. It was, therefore, necessary :that the price of coal be made known. The contention of the coal companies is that having regard is to the availability of LPG, smokeless coal no longer in use. Ex facie, the said plea is unacceptable.

D Moreover, even fixation of price of LPG in tum would depend upon the fixation of oil products in other countries. The Central Government, it is well known, having regard to the effect that may be caused to the people in general, takes all precautions before fixing the price thereof. The Central Government has never increased the LPG price exorbitantly. E While adopting a policy decision as regards the mode of determining the price of coal either fixed or variable, the coal companies were bound to keep in mind social and economic aspect of the matter. They .could not take any step which would defeat the constitutional goal [See Mahabir Auto Stores and Ors. v. Indian Oil Corporation and Ors., [1990] 3 SCC 752] F Even while fixation of tariff for the supply of electric energy in terms of the provisions of Section 49 of the Electricity (Supply) Act, l 948, only a reasonable profit is contemplated and not profiteering [See S.N. Govinda Prabhu (supra) and ONGC (supra).

G It may be true as has been held in the aforementioned cases that cost alone did not determine the prices and the same has to be determined upon taking into consideration many complex factors but no decision of this Court ., says that any arbitrary fixation of price and arbitrary mode of fixation would satisfy the test of reasonableness as contained in Article 14 of the Constitution of India. H r-4 . JI

., '

• ', ASHOKA SMOKELESS COAL IND. P.LTD. v. U.O.I. [S.B.SINHA, J.] 1013 The learned Additional Solicitor General placed strong reliance on a A decision of this Court in State of Orissa and Ors. v. Hari Narain Jaiswal & Ors., (1972] 2 SCC 36, wherein this Court held :

"Even apart from the power conferred on the Government under Sections 22 and 29, we fail to see how the power retained by the Government under clause (6) of its order, dated January 6, 1971, can B be considered as unconstitutional. As held by this Court in Cooverjee B. Bharucha case, one of the important purpose of selling the exclusive right to sell liquor in wholesale or retail is to raise revenue. Excise revenue forms an important part of every State's revenue. The Government is the guardian of the finances of the State. It is expected to protect the financial interest of the State. Hence quite naturally, the c Legislature has empowered the Government to see that there is no leakage in its revenue. It is for the Government to decide whether the price offered in an auction sale is adequate. While accepting or rejecting a bid, it is merely performing an executive function. The correctness of its conclusion is not open to judicial review. We fail to see how the plea of contravention of Article 19(1 )(g) or Article 14 can arise in these cases. The Government's power to sell the exclusive privileges ~ . set out in Section 22 was not denied. It was also not disputed that those privileges could be sold by public auction. Public auctions are held to get the best possible price. Once these aspects are recognised, there appears to be no basis for contending that the owner of the privileges in question who had offered to sell them cannot decline to accept the highest bid if he thinks that the price offered is inadequate. There is no concluded contract till the bid is accepted. Before there was a concluded contract, it was open to the bidders to withdraw their bids - see Union ofIndia v. Bhimsen Walaiti Ram. By merely giving bids, the bidders had not acquired any vested rights. The fact that the '-• Government was the seller does not change the legal position once its exclusive right to deal with those privileges is conceded. If the Government is the exclusive owner of those privileges, reliance on Article 19( l )(g) or Article 14 becomes irrelevant. Citizens cannot have any fundamental right to trade or carry on business in the properties or rights belonging to the Government-nor can there be any infringement of Article 14, if the Government tries to get the best available price for its valuable rights. The High Court was wholly wrong in thinking that purpose of Sections 22 and 29 of the Act was

- not to raise revenue. Raising revenue as held by this Court in H ~- -'(

,. f

p. 1014

A Cooverjee B. Bharucha case was one of the important purposes of such provisions. The fact that the price fetched by the sale of country liquor is an excise revenue does not change the nature of the right. The sale in question is but a mode of raising revenue. Assuming that the question of arbitrary or unguided power can arise in a case of this nature, it should not be forgotten that the power to accept or reject B the highest bid is given to the highest authority in the State i.e. the Government which is expected to safeguard the finances of the State. Such a power cannot be considered as an arbitrary power. If that y power is exercised for any collateral purposes, the exercise of the power will be struck down. It may also be remembered that herein we t c are not dealing with a delegated power but with' a power conferred by the Legislature. The High Court erroneously thought that the Government was bound to satisfy the Court that .there was collusion between the bidders. The High Court was not sitting on appeal against the order made by the Government. The inference of the Government that there was a collusion among the bidders may be right or wrong. D But that was not open to judicial review so long as it is not proved that it was a make-believe one. The real opinion formed by the Government was that the price fetched was not adequate. That . ( conclusion is taken on the basis of Government expectations. The conclusion reached by the Government does not affect any one's E rights. Hence, in our opinion, the High Court misapplied the ratio of the decision of this Court in Barium Chemicals ltd. v. Company Law Board and Rohtas Industries Ltd v. S. T Agarwal."

Citizens may not have any fundamental right to carry on trade or business in a commodity belonging to the Government. But therein, the court F was concerned with liquor which was considered to be res extra commercium.

We may, however, notice that this Court in State of Madhya Pradesh of v. Nandlal Jaiswal. (1986) 4 SCC 566, as also Khoday Distilleries ltd and 9rs. v. State of Karnataka and Ors., (1995) I SCC 574, has clearly held that even in respect of trade of liquor, Article 14 would be applicable. G In Ramana Dayaram Shetty v. International Airport of India and Ors [1979] 3 SCC 489 =AIR (1979) SC 1628, this Court held:

" ... the democratic form of Government demands equality and absence of arbitrariness and discrimination in such transactions... The activities H )" -I

-- r

.J!' ASHOKA SMOKELESS COAL IND. P.LTD. v. U.0.1. [S.B. SINHA, J.] 1015 of the Government have a public element and, therefore, there should be fairness and equality. The State need not enter into any contract with anyone, but if it does so, it must do so fairly without discrimination and without unfair procedure". This proposition would hold good in all cases of dealing by the Government with the public, where .the interest sought to be protected is a privilege. It must, therefore, be taken to be the law that where the Government is dealing with the public, whether by way of giving jobs or entering into contracts or ... issuing quotas or licences or granting other forms of largesse, the Government cannot act arbitrarily at its sweet will and, like a private individual, deal with any person it pleases, but its action must be in ·conformity with standard or nonns which is not arbitrary, irrational or c irrelevant. ... "

It is furthennore not a case like Kasturi Lal Lakshmi Reddy, represented by its Partner Shri Kasturi Lal, Ward No. 4, Palace Bar, Poonch, Jammu and Ors. v. State ofJammu & Kashmir and Ors., [1980] 4 SCC 1, whereupon again the learned Additional Solicitor General relied that the Government cannot act in a manner which would benefit a party but then the said decision would not apply when the State as a monopoly is dealing with an essential commodity.

A monopoly concern is meant to cater to the need of all sections of the people. Whereas the demand of the core sector must be given priority, the Central Government as also the Coal Controller in terms of 1945 Order thought of giving some preference to those industries which produce smokeless coal as well. Smokeless coal producers started manufacture the same on the basis of invention of new technology invented by the Central Fuel Research Institute, an unit of Council of Scientific and Industrial Research Institute as also the Coal Mining and Planning Development of India; which is a subsidiary of F Coal India Ltd . ..., We have noticed hereinbefore that when the coal companies themselves manufactured coke for domestic consumers, the same used to cause health hazards. They intended to outsource production of manufacturing soft coke; wherefor they had asked the Governments of Bihar and West Bengal to G encourage setting up of smokeless coal units assuring supply of coal. Such 'linkage system has, therefore, been developed under which the consumers are linked to specify mines from which they received specified quantities and specified grades of coal on a monthly basis.

~ -( H

.,, "!:-

p. 1016

A Coke oven units, in particular, are linked in the W-II, W-III & W-IV of the non-core sector. The importance of the linkage system despite resort to E-Auction has since been recognized by the Government of India, as would appear from its letter dated 19.04.2005. Whereas manufacturers of hard coke would require coking coal, others would require only non-coking coal.

B The necessity of having a fixed price of coal is supported by sub- section (3) of Section 9 of the MMRD Act, 1957 wherein it was provided that the rate of royalty shall not be revised within three years. (See AIR ( 1996) SC 2560). The period of three years has since been altered to a period of four years. Prior thereto a period of five years was fixed therefor. Even the Central c Government emphasized the requirement of having a fixed price of coal in a meeting held on 13.10.2001 and took note of the fact that the price increase would cause undue hardship which might be suffered by the small scale industries and which might concern their growth and in that view of the matter, it was decided that the price increase for the non-core sector should not be done more than once in a period of one year. D The court while considering such a question cannot also lose sight of the fact that apart from the Essential Commodities Act, 1955, the entire control and regulation of coal has been taken over by the Central Government in • f

terms of Entry 54 of List I as also Entry 52 of List I of the Seventh Schedule of the Constitution of India. In exercise of such power, the Parliament enacted the Industrial (Development and Regulation) Act, I 951 and Mines and Minerals (Regulation and Development) Act, 1957. A constantly variable price per se, therefore, appears to be unreasonable and unfair being . opposed to the professed policies under the said Act.

We are not suggesting that the linkage system can never be brought to an end but it may not be appreciated as to how while maintaining the linkage system, they can be deprived indirectly of the benefit therefrom; and how they should be treated equally with other traders. Traders indisputably would require coal but not for their own consumption. If they purchase coal at any price, they would sell the same at a higher price. They would certainly mind variability in the price of coal as the price of their end products would have nexus therewith. Moreover, if the traders would pay higher price for procuring coal, the general consumers would have to pay more. Those who are linked consumers or who are small traders, thus, stand on a different footing. Merely to sell it as a profit to the traders who do not possess the purchasing capacity is not limited or controlled by the market conditions, H ~t

.... ASHOKA SMOKELESSCOALIND. P.LTD. v. U.0.1. [S.B. SINHA, J.] 1017

whereas it is so for the linked non-core sector. The traders themselves create and control the market conditions.

In Mohd. Usman v. State of Andhra Pradesh AIR (1971) SC 1801, this Court held :

"The proposition of law that the doctrine of equality is attracted not only when equals are treated as unequals but also when unequals are treated as equals and that Article 14 is offended both by finding difference when there is none and by making no difference when there is one is unexceptional. But the rule of equality is intended to advance justice by avoiding discrimination." c [See also Motor General Traders v. State of Andhra Pradesh [1984] l SCC 222, Para l O; Indra Sawhney-II v. Union of India [2000] 1 SCC 168, para 27; State of U. P. v. Johri Mal - [2004] 4 SCC 714 para 41; and E. V Chinnaiah etc. v. State of A.P. and Ors etc., [2005] 1 SCC 394 paras 66 to 69].

The coal companies themselves highlighted this distinction in Civil D Appeal No. 5547 of2004 in Bijoy Kumar Poddar's case. We need not, however, deal with the said matter separately as the questions raised are interconnected with the other matters. We may notice at once that the necessity to maintain supply of coal to the linked sector was highlighted by the coal companies themselves in their special leave petitions filed before this Court. E It may be true that the linked consumers get two opportunities to procure coal; once by way of E-Auction and again by way of paying the average weighted price; but availability of coal itself is not certain having regard to the fact that admittedly keeping in view the concept of MPQ, they would not get the full supply for their demand. Even otherwise, a distinction should be made between consumers and traders and thus arises the necessity of different price regimes for the consumers as a class as against traders as a different class.

The original scheme of E-Auction was meant to be applied only to the linked non-core sector consumers and traders. Thus, thereby the policy that the linked consumers should form a class by themselves was sought to be given a go-bye. We have, however, noticed hereinbefore that having regard to the intervention of the Central Government, the coal companies deviated from the said scheme and considered even the non-core sector consumers to be a separate class; as they not only became entitled to take part in the E- H

'r' ~

p. 1018

A Auction along with traders but also were sought to be assured of supply of coal having regard to their own requirements as regard both quality and quantity subject, of course, to their paying the price at the average weighted price. The stand taken by the coal companies before the Calcutta High Court as also before this Court assumes significance only in that context. However, now it appears that the coal companies have given a complete go-bye to the B original scheme of E-Auction inasmuch as not only the traders or the non- core sector consumers but also core sector consumers had also been allowed to participate therein. A consumer of coal falling in any category as also a ...,. .

person who intends to purchase coal for his personal use would, therefore, be entitled to take part in E-Auction. Whereas the consumers in the core c sector would not only be entitled to allotment of coarat a price fixed by the coal companies but also would be entitled to take part in E-auction. The non- core sector consumers although as linked consumers form a separate and distinct class vis-a-vis the traders, they would not be entitled to the benefit of obtaining coal at a fixed price. The question as regards the discrimination between two categories of consumer assumes some importance. D The effect is that today, while the core sector (92%) on its own and nonf '\, core non-linked SSI/Tiny units (through the NCCF/other agencies) (I%) ,ate , ~

being supplied coal at a fixed price, on the other hand, the non-core linRed ~ SSl/Tiny units (4%) are being subjected to differential treatment without any rational classification by supplying the coal to the latter on the price to be E ascertained by the trader-controlled process of E-Auction and thereby putting the petitioner-units at par with the trader. The scheme ofE-Auction is, therefore, ultra vires Article 14 of the Constitution of India.

Judicial Review: F The submission of the learned Additional Solicitor General to the effect 4(' that the policy decision of a State cannot be the subject matter of judicial review is stated to be rejected.

E-Auction is not a policy decision of the Central Government. Such a G policy decision on the part of the executive of the Central Government must be strictly construed in terms of Article 77 of the Constitution of India. Its . exercise of such powers has nothing to do with the price fixation by a policy. The State while exercising its power under the Essential Commodities Act, fixes the price keeping in mind several factors, in partieular the larger interest of the people. Price fixation of an essential commodity, therefore, is determined on the touchstone of public interest. While doing so the State is expected to i--~

"' ASHOKA.SMOKELESS COAL IND. P.LTD. v. U.O.l. [S.B. SINHA, J.] 1019 follow a rational and fair procedure and for the said purpose may collect data, obtain public opinion, and may appoint an expert committee.

In the facts and circumstances of the case, however, the approach of the coal companies, who according to the Union of India had been given a free hand to determine its price for coal, is only earning profit. It has been accepted that three subsidiary companies and Coal India Ltd. who were sick companies, like Bharat Coking Coal Ltd. (BCCL), have started E-Auction. It has succeeded in its attempt to a great extent as the said coal companies are .... no longer sick companies. They have proceeded only to safeguard their own interests, as dealer and not as a State. Recourse to E-Auction had been taken primarily by way of a profit motive. No public opinion was sought for and no expert committee was appointed. The statutory and constitutional duties c had not been kept in view. Conveniently, while making the said policy decision, the coal companies did not remind themselves that as they are instrumentalities of the State, they are bound to adhere to the Directive Principles of the State and the prime object for which the Nationalization Acts were enacted. D Good governance and good corporate governance are distinct and separate. Whereas good governance would mean protection of the weaker sections of the people; so far as good corporate governance is concerned, t• the same may not be of much relevance. Even the coal <;ompanies in taking recourse to E-Auction did not give effect to the concept of corporate social responsibility. E.

What would be profiteering has been noticed in T.MA. Pai Foundation v State of Karnataka [2002] 8 SCC 481; Islamic Academy of Education v. State ofKarnataka [2003] 6 SCC 697 and P.A. Jnamdar v. State of Maharashtra [2005] 6 SCC 537. In these decisions, it has been held that although education F is an industry, and those who impart education do so as a part of their fundamental right in terms of Article 19(1 )(g) of the Constitution of India, profiteering should not be taken recourse to.

In fact the decisions of this Court on price fixation also point out that although a reasonable profit may be permissible, profiteering would not be. G The coal companies evolve price fixation but admittedly they have been doing so at the instance of the Central Government. The Central Government seeks to exercise its statutory power. Such a power, however, is confined to four-corners of the 2000 Order. When there is no control over price, the Central Government is forbidden to issue any direction which will have an H \--<;

'ol ,, 1020 SUPREME COURT REPORTS [2006] SUPP. 9 S.C.R. ~

A impact thereover. The coal companies which are, therefore, public authorities when seeking to give effect to the constitutional scheme as contained in the preamble of the Nationalization Acts of I 972 and 1973 were acting at the behest of the Central Government and not entirely on their own. In Hindustan Petroleum B Corpn. Ltd. v. Darius Shapur Chenai and Ors., [2005] 7 SCC 627, this Court noticed with approval the decisions in Commr. of Police v. Gordhandas Bhanji [I 952] SCR 135 : AIR (1952) SC 16 and Mohinder Singh Gill v. Chief Election Commnr. [1978] I SCC 405, in the following terms : ·.- "In Commr. of Police v. Gordhandas Bhanji it is stated: c "We are clear that public orders, publicly made in exercise of a statutory authority cannot be construed in the light of explanations subsequently given by the officer making the order of what he meant, or of what was in his mind, or what he intended to do. Public orders made by public authorities are meant to have public effect and are D intended to affect the actings and conduct of those to whom they are addressed and must be construed objectively with reference to the language used in the order itself."

Yet again in Mohinder Singh Gill this Court observed: "'' E "The second equally relevant matter is that when a statutory functionary makes an order based on certain grounds, its validity must be judged by the reasons so mentioned and cannot be supplemented by fresh reasons in the shape of affidavit or otherwise. Otherwise, an order bad in the beginning may, by the time it comes to Court on account of a challenge, get validated by additional grounds F later brought out. We may here draw attention to the observations of Bose, J. in Gordhandas Bhanji:" .,,, Referring to Gordhandas Bhanji it was further observed:

"Orders are not like old wine becoming better as they grow older."" G In relation to fixation of price or other related matters, the Central Government, therefore, had no say. Under the Colliery Control Order 2000, the power of the Central Government is merely to regulate supply and not to regulate price, the price of coal, it will bear to state, having been deregulated.

H Supply and/or disposal of coal which would come within the purview r-J

" • ASH OKA SMOKELESS COAL IND. P. LTD. v. U.0.1. [S.B. SINHA, .I.] I021

of Colliery Control Order, 2000, would, thus, take within its sweep only : to whom the supply would be made, what would be the quantity, the mode, period or the source of supply. Such a power to issue directions would not include fixation of price. E-Auction is not related to policy for supply of coal. It is essentially the price therefor. The Central Government in that view of the matter either directly or indirectly while purportedly exercising its power under clause 6 read with clause 9 of the Colliery Control Order could not have issued any direction in the garb of disposal of coal by way of E-Auction. The Central Government itself says that it allowed the coal companies to fix their own price; if that be so in terms of the statute it could not issue any direction which would have direct or indirect impact on price of coal. It, as indicated hereinbefore, directed that 10 lacs MT coal be sold through E-Auction; but c while doing so stricto sensu, its power and control to regulate supply of coal could not be exercised in that sense. Apart from the fact that it also does not satisfy the attributes of supply, as noticed hereinbefore, the supply of coal itself has not been brought within the purview thereof. Furthermore no notification has been issued by the Central Government regulating supply of coal. D

. By allowing E-Auction in respect of l 0 lacs MT of coal, it merely quantified the amount of coal which was required to be sold. It did not bring within its sweep taking recourse to the mode of E-Auction so as to enable the companies to obtain a valuable price. Clause 6 of the Colliery Control E Order does not envisage the same.

Promissory Estoppel :

We have noticed hereinbefore that smokeless coal operators had set up their units at the behest of the coal companies. Those who had set up their units in the erstwhile State of Bihar and West Bengal evidently did so at the ... behest of the companies having been encouraged therefor. It was done to share the burden of coal companies to supply soft coke to the small consumers. Doctrine of promissory estoppel would, therefore, be applicable.

The concerned States also intended to grant incentives to such industrial units by way of waiver and/ or deferment of payment of sales tax wherefor Rule 28A in the Sales Tax Rules was introduced. Sales Tax laws enacted by the States contain a provision empowering the State to grant such exemption.

The relevant provisions of the Act and the Rules framed thereunder indisputably were made keeping in view the industrial policy of the State . H ....-.(

1022 SUPREME COURT REPORTS [2006] SUPP. 9 S.C.R. • ,,..

A Such industrial policies by way of legislation or otherwise, subject of course to the provisions of the statute have been framed by several other States.

In Mis. Motilal Padampat Sugar Mills Co. Ltd. v. State of Uttar ,. Pradesh and Ors., [1979] 2 SCC 409, this Court rejected the plea of the State to the effect that in the absence of any notification issued under Section B 4-A of the U.P. Sales Tax Act, the State was entitled to enforce the liability to sales tax imposed on the petitioners thereof under the provisions of the Sales Tax Act and there could be no promissory estoppel against the State so as to inhibit it from formulating and implementing its policy in public interest. c The question came up for consideration before this Court in Pournami Oil Mills and Ors. v. State ofKera/a and Anr., [1986] (Supp) SCC 728, wherein it was held:·

"Under the order dated April 11, 1979, new small scale units were invited to set up their industries in the State of Kerala and with a view to boosting of industrialisation, exemption from sales tax and purchase tax for a period of five years was extended as a concession and the five-year period was to run from the date of commencement of production. If in response to such an ·order and in consideration of ~

the. concession made available, promoters of any sivall scale concern have set up their industries within the State of Kerala, they would certainly be entitled to plead the rule of estoppel in their favour when the State ofKerala purports to act differently. Several decisions of this Court were cited in support of the stand of the appellants that in similar circumstances the plea of estoppel can be and has been applied and the leading authority on this point is the case of MP. Sugar F Mills. On the other hand, reliance has been placed on behalf of the State on a judgment of this Court in Baku/ Cashew Co. v. STO. In Baku/ Cashew Co. case this Court found that there was no clear material to .show any definite or certain promise had been made by the "" Minister to the concerned persons and there was· no clear material G also in support of the stand that the parties had altered their position by acting upon the representations and suffered any prejudice. On facts, therefore, no case for raising the plea of estoppel was held to have been made out. This Court proceeded on the footing:that the notification granting exemption retrospectively was not in accordance with Section I 0 of the St.ate Sales Tax Act as it then stood, as there H H

• ASHOKA SMOKELESS COAL IND. P.L TD. v. U.0.1. [S.B. SINHA, J.] 1023

was no power to grant exemption retrospectively. By an amendment A that power has been subsequently conferred. In these appeals there is no question of retrospective exemption. We also find that no reference was made by the High Court to the decision in MP. Sugar Mills' case. In our view, to the facts of the present case, the ratio of MP. Sugar Mills' case directly applies and the plea of estoppel is unanswerable." B

Yet again in Assistant Commissioner of Commercial Taxes (Asst.) ,")It Dharwar and Ors. v. Dharmendra Trading Company and Ors., [1988} 3 SCC 570, this Court, on the factual situation obtaining therein, rejected the contention of the State that any misuse of the concessions granted was committed by the respondent therein and thus the State cannot go back on c its promise.

- It was further observed:

"The next submission of learned counsel for the appellants was that D the concessions granted by the said order dated 30-6-1969 were of no legal effect as there is no statutory provision under which such concessions could be granted and the order of 30-6-1969 was ultra ~· vires and bad in law. We totally fail to see how an As5istant Commissioner or Deputy Commissioner of Sales Tax who are functionaries of a State can say that a concession granted by the E State itself was beyond the powers of the State or how the State can say so either. Moreover, if the said argument of learned counsel is correct, the result would be that even the second order of 12-1-1977 would be equally invalid as it also grants concessions by way of refunds,· although in a more limited manner and that is not even the case of the appellants." F

Mangalore Chemicals and Fertilisers Limited v. Deputy Commissioner of Commercial Taxes and Ors., [1992} Supp 1 SCC 21, is a case where this Court had the occasion to consider as to whether subsequent change in the eligibility criteria can undo the eligibility for the condition stipulated in the G earlier notification and answered the same in the negative.

This Court reaffirmed the legal position in Pawan Alloys & Casting Pvt. Ltd., Meerut v. U.P. State Electricity Board and Ors., [1997} 7 SCC 251, holding: H "."-\

p. 1024

.. A "As a result of the aforesaid discussion on these points the conclusion becomes inevitable that the appellants are entitled to succeed. It must be held that the impugned notification of 31-7-1986 will have no adverse effect on the right of the appellant-new industries to get the development rebate of 10% for the unexpired period of three years from the respectiYe dates of commencement of electricity supply at B their units from the Board with effect from l -8-1986 onwards till the entire three years' period for each of them got exhausted. This result logically follows for the appellants who have admittedly entered into supply agreements with the Board as new industries prior to 1-8- 1986." c The question came up for consideration before this Court recently in State of Punjab v. Nestle India Ltd. and Anr [2004] 6 SCC 465, wherein this

D Court surveyed the growth of the said doctrine and held the doctrine to be applicable to legislative action also.

Legitimate Expectation : - Principle of natural justice will apply in cases where there is some right which is likely to be affected by an act of administration. Good administration, however, demands observance of doctrine of reasonableness in other situations also where the citizens may legitimately expect to be treated fairly. Doctrine E of legitimate expectation has been developed in the context of principles of natural justice.

Issue arises whether recourse to legitimate expectations can be taken when the expectation is based on unlawful representation (i.e., most often something that is ultravires the power of local authority). In Stretch v. U. K. F [2004] 38 EHRR 12, applicant was granted a lease for 22 yrs. by an authority that did not have the power to do so. It was only made known to the applicant at the time of renewal of the lease, when negotiations had already reached ... an advanced stage. While the court of appeal accepted the argument that the option to renew the lease could not be exercised (as beyond the local authority's power), it noticed that it was unjust that such authorities could G take advantage of their own wrong. The European Court of Human Rights however did not accept this argument and awarded damages as it found on facts that this action did not in any way go against public interest, nor did it prejudice the statutory duties of the authority.

H We may, however, notice a recent trend where doctrine of balancing has ~1

ASHOKA SMOKELESS COAL fND. P.LTD. v. U.0.1. [S.B. SINHA, J.) 1025

been advocated. A Rowland v. Environmental Agency [2003] EWCA Civ. (1885) involved a part of the Thames river, known as 'Hedsor Water', which the relevant authorities declared open for exercise of public navigation rights. Initially however, the authorities by regular and consistent practice had accepted that such rights did not exist. The Court of Appeal said that although the B expectations were legitimate, the action must fail. According to Peter Gibson L.J., the action failed as legitimate expectations could only be granted against lawful claims. Although May L.J., (like Menace L.J.) came to the same "' conclusion, they refused to accept legal incapacity as an automatic answer against legitimate expectation (amounting to convention right). They sought a kind of a balance where while allowing the Hedsor water to be open to rights c of navigation, such use would not be actively encouraged by the authority.

It was held that, however, there was no need to restrict such 'balancing' to cases where the right was one protected under the convention. It could be extended to all cases where the unlawful action was not adverse to public interest.

Conclusion

Coal being a scarce commodity, its utility for the purpose for which it is needed is essential. Although, technically, in view of the fact that no price is fixed for coal, there may not be any black marketing in the technical sense of the terms; but this Court cannot also encourage black marketing in general sense. Nobody should be allowed to take undue advantage while dealing with a scarce commodity. The very fact that despite best efforts of the Central Government, the coal companies failed to curb the menace of a section of people and to deal in coal exduding other general people therefrom or the linked consumers misusing their position of obtaining allotment of coal either wholly or in part, it is absolutely necessary that some mechanism should be found out for plugging the loopholes. The Union of India or the coal companies appear to have lost confidence in the State Governments. They had carried out joint inspection and in that process they must have arrived at a satisfaction about the genuineness of the claims of industrial units for which the linkage / system was meant for.

Before us most of the consumers, with a view to obtain supply of coal had filed documents to prove their genuineness. The said documents must be scrutinized by the authorities of the coal companies. In the event, they H ,.-<'. .(

1026 SUPREME COURT REPORTS (2006] SUPP. 9 S.C.R. c:- A have any suspicion, inspection should be carried out by officers appointed by the Chairman-cum-Managing Director of the concerned company within whose jurisdiction the unit is situated.

With a view to evolve a viable policy, a committee should be constituted by the Union of India with the Secretary of Coal being the Chairman. In such . B a committee, a technical expert in coal should also be associated as most of the projects involve consumers of coal, particularly manufacturers of hard coke and smokeless fuel. In our opinion, it may not be difficult to find out, having regard to the technologies used therein as regards the ratio of the input vis-a-vis the output, with a balance and 10% margin. On the basis of ... such finding alone, apart from the requirements of five years, supply should c form the basis of MPQ. We may, however, hasten to add that the Central Government in collaboration with the coal companies would be at liberty to evolve a policy which would meet the requirements of public interest vis-a- vis the interest of consumers of coal. They would be entitled to lay down such norms as may be found fit and proper. They would be entitled to fix appropriate norms therefor. In the event, any industrial unit is found to violate the norms, it should be stringently dealt with.

Hard coke plants are also coal mines within the meaning of Colliery Control Order, 2000. Hard coke is coal within the meaning of the provisions ~

thereof. The Central Government, therefore, may think it fit to widen the definition of coal so as to include the smokeless coal in exercise of its power under the Essential Commodities Act. We may notice in ONGC (supra), this Court has held that slurries -are a part of coal and_ is governed by the provisions of the Mines and Minerals (Regulation and Development) Act. Such being the wider definition of coal, we fail to see any· reason as to why proper measure cannot be taken by the Union of India to have a complete control thereover. Any strict mechanism to find out the genuine consumers would go a long way in taking preventive measures and dealing with coal by t- unscrupulous persons for unauthorized purposes. Those who do so, should be dealt with stringently but the same would not mean that the genuine consumers should suffer for want of coal. G We, in the peculiar facts and circumstances of this case, are of the opinion that it may not be difficult to find out as to who the genuine consumers are. So far as owners of the hard coke ovens are concerned, they are members of the association _,and their identity can easily be verified.

H However, discussions made hereinbefore should not be taken to lay H ,,____

ASHOKA SMOKELESS COAL IND. P.LTD. v. U.0.1. (S.B. SINHA, J.] 1027 down a law that the Central Government and for that matter the coal companies cannot change their policy decision. They evidently can; but therefor there should be a public interest as contra distinguished from a mere profit motive. Any change in the policy decision for cogent and valid reasons is acceptable in law; but such a change must take place only when it is necessary, and upon undertaking of an exercise of separating the genuine consumers of coal from the rest. If the coal companies intend to take any measure they may be free to do so. But the same must satisfy the requirements of constitutional as also .,. the statutory schemes; even in relation to an existing scheme e.g. Open Sales Schemes, indisputably the coal companies would be at liberty to fonnulate the new policy which would meet the changed situation. E-advertisement or E- tender would be welcome but then therefor a greater transparency should be maintained.

For the reasons aforementioned, Civil Appeal Nos. 2972 and 2975 of 2005 being devoid of any merits are dismissed. Civil Appeal arising out of S.L.P. (Civil) No. 24034 of2005 is allowed and the impugned judgment of the Madhya Pradesh High Court is set aside. No separate order is required to be D ' passed on Civil Appeal No.5547 of2004 arising out of the judgment and order -,. of the Calcutta High Court as the said case would also be governed by this judgment. All other appeals and transferred cases are disposed of with the aforementioned observations and directions.

K.K.T. Appeals Transfer Cases disposed of.