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Coal Blocks – Apex court Declared as arbitrary and illegal – consequences left open – granted 6 months time as breathe taking time for allottees and CIL to manage their affairs in view of cancellation of coal blocks – heard – Apex court held that It was submitted by the learned Attorney General that on the cancellation of the coal block allotments, CIL would require some breathing time to manage its affairs. The Central Government is keen to move ahead but some time would be required to manage the emerging situation.Similarly, breathing time is also required to be given to the allottees to manage their affairs on the cancellation of the coal blocks. In view of the submissions made, although we have quashed the allotment will take effect only after six months from today, which is with effect from 31st March, 2015. This period of six months is being given since the learned Attorney General submitted that the Central Government and CIL would need some time to adjust to the changed situation and move forward.This period will also give adequate time to the coal block allottees to adjust and manage their affairs. =CRIMINAL/CIVIL ORIGINAL JURISDICTION WRIT PETITION (CRL.) NO. 120 OF 2012 Manohar Lal Sharma ….Petitioner Versus The Principle Secretary & Ors. …Respondents =2014 – Sept.Month – http://judis.nic.in/supremecourt/imgst.aspx?filename=41955

Coal Blocks – Apex court Declared as arbitrary and illegal – consequences left open –  granted 6 months time as breathe taking time for allottees and CIL to manage their affairs in view of cancellation of coal blocks – heard – Apex court held that It  was  submitted  by  the  learned  Attorney  General  that  on   the cancellation of the coal block allotments, CIL would require some  breathing time to manage its affairs. The Central Government is  keen  to  move  ahead but  some  time  would  be  required  to  manage  the  emerging   situation.Similarly, breathing time is also required to be given to the  allottees  to manage their affairs on the cancellation of the coal blocks.  In view of the submissions made, although we have quashed the  allotment will take effect only after six months from  today,  which  is  with  effect from 31st March, 2015. This period of six months is being  given  since  the learned Attorney General submitted  that  the  Central  Government  and  CIL would need some time to adjust to the changed situation  and  move  forward.This period will also give adequate time to  the  coal  block  allottees  to adjust and manage their affairs. =

On 25th August, 2014 judgment was delivered in these cases  and  it  was

held, inter alia, that the allotment of coal blocks made  by  the  Screening

Committee of the Government of India, as also the  allotments  made  through

the Government dispensation route  are  arbitrary  and  illegal.

Since  the

conclusion arrived at would have potentially had far-reaching  consequences,

on which submissions were not made when the case was heard, the question  of

what should be the  consequences  of  the  declaration  was  left  open  for

hearing.=

There are two categories of coal block allotments:

the  first  category

being allotments other than those mentioned in Annexure 1  and  Annexure  2;

the second category 

being the 46 coal blocks mentioned  in  Annexure  1  and

Annexure 2 that could possibly  be  “saved”  from  cancellation  on  certain

terms and conditions, as submitted by the learned Attorney General.

35. As far as the first category of  coal  block  allotments  is  concerned,

they must be cancelled (except those mentioned in the  judgment).

There  is no reason to “save” them from cancellation. The allocations are illegal  and

arbitrary;

the allottees have not yet entered  into  any  mining  lease  and they have not yet commenced production.

Whether they are 95%  ready  or  92%

ready or 90% ready for production (as argued by  some  learned  counsel)  is wholly irrelevant.

Their allocation was illegal and  arbitrary,  as  already held, and therefore we quash all these allotments.

36. Learned Attorney  General  identified  46  coal  blocks  that  could  be

“saved” from the guillotine, since all of them have commenced production  or

are on the verge of commencing production.

As  these  allocations  are  also illegal and arbitrary they are also liable to  be  cancelled.  

However,  the

allotment of three coal blocks in Annexure 1 is not disturbed and  

they  are

Moher and Moher Amroli Extension allocated to Sasan Power  Ltd.  (UMPP)  and

Tasra  (allotted  to  Steel  Authority  of  India  Ltd.  (SAIL),  a  Central

Government public sector undertaking not having any joint venture).

As far the 6  coal  blocks  mentioned  in  Annexure  2  are  concerned,  the

allocatees have not yet  commenced  production.

They  do  not  stand  on  a

different or better footing as far the  consequences  are  concerned.  

These allotments are also liable to be cancelled.

The  allocation  of  the  Pakri

Barwadih coal block (allotted to National Thermal Power Corporation  (NTPC),

being a Central Government public sector undertaking not  having  any  joint

venture) is not liable to be cancelled.

37. Except  the  above  two  allocations  made  to  the  UMPP  and  the  two

allocations made to the Central Government  public  sector  undertaking  not

having any joint venture mentioned above, all  other  allocations  mentioned

in Annexure 1 and Annexure 2 are cancelled.

38.  It  was  submitted  by  the  learned  Attorney  General  that  on   the

cancellation of the coal block allotments, CIL would require some  breathing

time to manage its affairs. The Central Government is  keen  to  move  ahead

but  some  time  would  be  required  to  manage  the  emerging   situation.

Similarly, breathing time is also required to be given to the  allottees  to

manage their affairs on the cancellation of the coal blocks.

39. In view of the submissions made, although we have quashed the  allotment

of 42 out of these 46 coal blocks, we make it clear  that  the  cancellation

will take effect only after six months from  today,  which  is  with  effect

from 31st March, 2015. This period of six months is being  given  since  the

learned Attorney General submitted  that  the  Central  Government  and  CIL

would need some time to adjust to the changed situation  and  move  forward.

This period will also give adequate time to  the  coal  block  allottees  to

adjust and manage their affairs. 

That the CIL is inefficient  and  incapable

of accepting the challenge, as submitted  by  learned  counsel,  is  not  an

issue at all. 

The Central Government  is  confident,  as  submitted  by  the

learned Attorney General, that the CIL can fill the  void  and  take  things

forward.

40. In addition to the  request  for  deferment  of  cancellation,  we  also

accept the submission of the learned Attorney General that the allottees  of

the coal blocks other than those covered by the judgment and the  four  coal

blocks covered by this order must pay an amount of Rs. 295/- per metric  ton

of coal extracted as an additional levy. This compensatory amount  is  based

on the assessment made by  the  CAG.  It  may  well  be  that  the  cost  of

extraction of coal  from  an  underground  mine  has  not  been  taken  into

consideration by the CAG, but in matters of this nature it is  difficult  to

arrive  at  any  mathematically  acceptable  figure  quantifying  the   loss

sustained. The estimated loss of Rs.  295/-  per  metric  ton  of  coal  is,

therefore, accepted for  the  purposes  of  these  cases.  The  compensatory

payment on this basis should be made within a period of three months and  in

any case on or before 31st December,  2014.  The  coal  extracted  hereafter

till 31st March, 2015 will also attract the additional  levy  of  Rs.  295/-

per metric ton.

41. It is made clear that  the  scrutiny  by  the  CBI  in  respect  of  the

allotment of 12 coal blocks out of 46 identified  by  the  learned  Attorney

General (and for that matter against any other allottee) will  continue  and

be taken to its logical conclusion. Needless to say,  the  observations  and

findings in this order shall have no bearing on the pending investigations.

2014 – Sept.Month – http://judis.nic.in/supremecourt/imgst.aspx?filename=41955

REPORTABLE
IN THE SUPREME COURT OF INDIA
CRIMINAL/CIVIL ORIGINAL JURISDICTION
WRIT PETITION (CRL.) NO. 120 OF 2012

Manohar Lal Sharma ….Petitioner
Versus
The Principle Secretary & Ors. …Respondents
WITH
WRIT PETITION (CIVIL) NO. 463 OF 2012
WITH
WRIT PETITION (CIVIL) NO. 515 OF 2012
AND
WRIT PETITION (CIVIL) NO. 283 Of 2013

O R D E R

1. On 25th August, 2014 judgment was delivered in these cases and it was
held, inter alia, that the allotment of coal blocks made by the Screening
Committee of the Government of India, as also the allotments made through
the Government dispensation route are arbitrary and illegal. Since the
conclusion arrived at would have potentially had far-reaching consequences,
on which submissions were not made when the case was heard, the question of
what should be the consequences of the declaration was left open for
hearing.
2. The relevant paragraphs of the judgment dated 25th August, 2014 read as
follows:-
“155. The allocation of coal blocks through Government dispensation route,
however laudable the object may be, also is illegal since it is
impermissible as per the scheme of the CMN Act. No State Government or
public sector undertakings of the State Governments are eligible for mining
coal for commercial use. Since allocation of coal is permissible only to
those categories under Section 3(3) and (4), the joint venture arrangement
with ineligible firms is also impermissible. Equally, there is also no
question of any consortium/leader/association in allocation. Only an
undertaking satisfying the eligibility criteria referred to in Section 3(3)
of the CMN Act, viz., which has a unit engaged in the production of iron
and steel and generation of power, washing of coal obtained from mine or
production of cement, is entitled to the allocation in addition to Central
Government, a Central Government company or a Central Government
corporation.

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

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

3. Accordingly, we heard several learned counsels appearing for a very
large number of interveners, impleadment applicants and State Governments.
Substantive submissions were made, amongst others, by the Coal Producers
Association, the Independent Power Producers Association of India and the
Sponge Iron Manufacturers Association. These associations had also been
heard on an earlier occasion well before judgment was delivered on 25th
August, 2014.
4. For the purposes of these “consequence proceedings”, the Union of India
filed an affidavit dated 8th September, 2014. It is stated in the affidavit
that coal is actually being mined from 40 coal blocks listed in Annexure I
to the affidavit. This list includes two coal blocks allotted to an Ultra
Mega Power Projects (Sasan Power Ltd. [UMPP] allotted the coal blocks Moher
and Moher Amroli Extension). Coal blocks allotted to UMPPs have not been
disturbed in the judgment. The list of the 40 coal blocks is attached to
this order as Annexure 1.
5. In addition to the above 40 coal blocks, it is stated in the affidavit
that 6 more coal blocks are ready for extraction of coal in 2014-15 and
this list is Annexure II to the affidavit. These 6 coal blocks have
obtained the Mine Opening Permission from the Coal Controller’s
Organization under Rule 9 of the Colliery Control Rules 2004[1] (framed
under the Mines and Minerals (Development and Regulation) Act, 1957). This
permission is granted subsequent to the execution of a mining lease. The
list of these 6 coal blocks is attached to this order as Annexure 2.
6. Therefore, the affidavit is quite clear that 40 coal blocks are already
producing coal and 6 coal blocks are in a position to produce coal
virtually with immediate effect. The question is whether the allotment of
these coal blocks should be cancelled or not.
7. It was submitted by the learned Attorney General that after the
declaration of law and the conclusion that the allotment of coal blocks was
arbitrary and illegal, only two consequences flow from the judgment. The
first is the natural consequence, that is, the allotment of the coal blocks
(other than those mentioned in the judgment) should be cancelled and the
Central Government is fully prepared to take things forward. The second
option is that 46 coal blocks (as above) be left undisturbed (subject to
conditions) and the allotment of the remaining coal blocks should be
cancelled.
8. Expounding on the alternative consequence, it was submitted that Coal
India Limited (CIL) a public sector undertaking can take over and continue
the extraction of coal from these 44 coal blocks without adversely
affecting the rights of those employed therein. However, it was submitted
that CIL would require some time to take over the coal blocks and manage
its affairs for continuing the mining process. Effectively therefore, it
was submitted that even if the allotment of these 44 coal blocks is
cancelled, the Central Government can ensure that coal production will not
stop.
9. Learned Attorney General submitted that all the allottees of coal
blocks should be directed to pay an additional levy of Rs. 295/- per metric
ton of coal extracted from the date of extraction as per the Report of the
Comptroller and Auditor General (CAG) dealing with the financial loss
caused to the exchequer by the illegal and arbitrary allotments. It was
further submitted that in the case of allottees supplying coal to the power
sector, they should be mandated to enter into Power Purchase Agreements
(PPAs) with the State utility or distribution company (as the case may be)
so that the benefit is passed on to the consumers.
10. By way of abundant precaution, the learned Attorney General pointed out
that in respect of the allotment of 6 coal blocks, a First Information
Report has been lodged by the Central Bureau of Investigation (CBI).
Therefore, investigations are in progress to ascertain whether any criminal
offence has been committed in respect of the allotment of 6 coal blocks. In
addition, it is pointed out that the CBI has on 3rd September, 2014
informed that a final decision with regard to any alleged criminality or
otherwise in the allotment of 6 other coal blocks is pending consideration.
In other words, the alleged criminality in the allotment of 12 out of the
46 coal blocks identified by the learned Attorney General is under scrutiny
by the CBI.
11. To put the suggestions of the learned Attorney General in perspective,
they are summarized below:
All coal block allotments (except those mentioned in the judgment) may be
cancelled.
Alternatively,
Extraction of coal from the 40 functional and 6 “ready” coal blocks may be
permitted and the remaining coal blocks be cancelled;
The allottees of all 46 coal blocks be directed to pay an additional levy
of Rs.295/- per metric ton of coal extracted from the date of extraction;
and
The allottees of coal blocks for the power sector be also directed to enter
into PPAs with the State utility or distribution company as the case may
be.
12. Learned Attorney General made two supplementary submissions, not
directly connected with the suggestions made. It was submitted that though
all the allotments made by the Screening Committee and through the
Government dispensation route were held illegal and arbitrary, the
allotment of lignite blocks was not the subject matter of discussion in the
judgment delivered on 25th August, 2014. This is correct and it is made
clear that the judgment delivered on 25th August, 2014 does not concern
lignite blocks at all and their allotments are not covered by the said
judgment.
13. Secondly, the figure of Rs. 295/- per metric ton of coal extracted as
additional levy (based on the Report of the Comptroller and Auditor
General) has been calculated on the basis of open cast mines and mixed
mines, while underground mines were not taken into calculation. Of the coal
blocks sought to be “saved” from cancellation, it has not been pointed out
by any learned counsel whether any one of the 46 coal blocks contains an
underground mine or not. Therefore, there is no occasion to deal with a
hypothetical case.
14. In response to the submissions of the learned Attorney General, Mr.
K.K. Venugopal, Senior Advocate, appearing on behalf of the Coal Producers
Association submitted that cancellation of all the coal blocks would have
very serious and far reaching consequences.
15. The consequences of cancellation of the coal blocks were categorized by
Mr. Venugopal under various heads and these are detailed below.
There would be a serious adverse impact on the economy of the country: It
was submitted that Government companies are not in a position to supply the
required quantity of coal; in fact, a large number of applications are
pending with the Ministry of Coal for long term coal linkages; power
stations have a supply of less than one week of coal and therefore there
are possibilities of power outages; as many as 10 power plants of the
National Thermal Power Corporation (NTPC) and the Damodar Valley
Corporation (DVC) have been shut down because of shortage of coal supply by
Coal India Ltd. (CIL); there is an issue of poor quality of coal supplied
by CIL; huge investments up to about Rs. 2.87 lakh crores have been made in
157 coal blocks as on December, 2012; investments in end-use plants have
been made to the extent of about Rs. 4 lakh crores; the employment of
almost 10 lakh people is at stake; end-use plants have been designed
keeping in mind the specification of coal in the allocated coal block and
cancellation of the coal blocks would result in the end-use plant becoming
redundant; loans to the extent of about Rs. 2.5 lakh crores given by banks
and financial institutions would become non-performing assets; the State
Bank of India may suffer a loss of up to Rs. 78,263 crores which is almost
7.9% of its net worth for the financial year 2013; other Public Sector
Banks such as the Punjab National Bank and the Union Bank will receive a
massive set back; Public Sector Corporations like Rural Electricity
Corporation and Power Finance Corporation have an even higher exposure than
banks; there will be global ramifications of the de-allotments such as a
negative impact on investor confidence; acute distress in some industries;
the country’s dependence on coal as a primary fuel source with up to 60%
for power generation may result in inflationary trends; 28,000 MW of power
capacity will be affected due to de-allocation; closure of coal mines would
result in an estimated loss of Rs. 4.4 lakh crores in terms of loss of
royalty, cess, direct and indirect taxes; coal imports (already very high)
will go up even more in FY 2016-17 to the extent of Rs.1.44 lakh crores
(without de-allocation); and on the other hand, the production of coal
would substantially increase in case all coal blocks are made operational
after the grant of necessary permission.
The cancellation of coal blocks would set back the process (of extraction
and effective utilization of coal) by about 7 to 8 years: It was submitted
that the auction of coal blocks would take at least 1-2 years and from past
experience, it is unlikely that the auction would be successful due to lack
of bids or proper participation; it would take at least 5-6 years for
making the auctioned coal blocks operational; in any event (based on the
time lines given by the Ministry of Coal in the allocation letters) it
would take 36-42 months to develop an open cast mine and about 48-54 months
to develop an underground mine; and the commissioning of end-use plants
after obtaining various clearances would take a minimum of 3-4 years.
(3) If the coal blocks are not cancelled, the allottees could continue
their contribution towards corporate social responsibility and socio-
economic development of the country: It was submitted on a positive note
that the allottees have invested in basic infrastructure like road, rail
links etc. since the coal blocks allotted to them were in areas where CIL
was not interested in making an investment; the allottees have made huge
investments in setting up other infrastructure such as schools, hospitals,
facilities for clean and potable water, residential colonies, community
centers, playground etc. and in creation of job opportunities; thousands of
crores of rupees have already been paid by the coal block allottees by way
of direct and indirect taxes and in the form of royalty, cess etc.; and if
the coal blocks are cancelled, the development activities initiated by the
allottees would come to a standstill.
(4) Many of the allottees have problems peculiar to them which need to be
examined along with ground realities: It was submitted that the delay in
development of coal blocks is not attributable to the allottees who are
actually victims of the faults of the Screening Committee; delays are
attributable to various reasons such as administrative delays on the part
of the Ministry of Environment and Forest and Ministry of Coal, the consent
by the Pollution Control Boards was not given on time, Court orders,
Naxalite issues in some areas, State Governments directing that mining
lease should not be executed, introduction of go/no go areas or without
statutory permission etc.; this Court has tacitly acknowledged
administrative delays in grant of clearances in an order passed on 1st
September, 2014 in Samaj Parivartana Samudaya v. State of Karnataka;[2] the
appropriate course of action to adopt would be for this Court to appoint a
Committee to examine the peculiar facts of each individual allotment.
(5) The additional levy of Rs. 295/- per metric ton of coal extracted
(described as a penalty) is unjustified: The figure of loss of revenue to
the exchequer to the extent of Rs. 295/- per metric ton of coal extracted
is borrowed from the Report of the CAG which Report is contested by the
Government of India and is pending consideration before a Parliamentary
Committee on Public Undertakings; the Report itself suggested that only a
part of the financial gain could have accrued to the national exchequer;
the Government of India has not applied its mind while suggesting the
figure of Rs. 295/- per metric ton and it has only considered the average
price of coal as given by CIL for the year 2010-11 (being Rs.1028/- per
metric ton) and that cannot be adopted for earlier financial years; the
coal extracted from the blocks allotted are of an inferior quality and the
sale price thereof is much lower than the average sale price of CIL; the
CAG has not taken into consideration underground mines while calculating
the alleged financial loss; the cost of production of coal for CIL is less
since CIL has economically viable mines as compared to the mines allocated
to the private sector which lack infrastructure and have several other
problems; and penalty cannot be imposed with retrospective effect since the
coal extracted by the allottees has already been utilized for production of
power, steel, cement etc.
16. Finally, Mr. Venugopal relied on Ashok Hurrah v. Rupa Ashok Hurrah[3]
to contend that the allottees are entitled to a hearing before the
cancellation of their coal blocks in accordance with the well accepted
principles of natural justice since the cancellation adversely affects
their interests. Paragraph 51 of the Report was relied on and this reads as
follows:
“Nevertheless, we think that a petitioner is entitled to relief ex debito
justitiae if he establishes (1) violation of the principles of natural
justice in that he was not a party to the lis but the judgment adversely
affected his [pic]interests or, if he was a party to the lis, he was not
served with notice of the proceedings and the matter proceeded as if he had
notice, and (2) where in the proceedings a learned Judge failed to disclose
his connection with the subject-matter or the parties giving scope for an
apprehension of bias and the judgment adversely affects the petitioner.”

17. Mr. Harish Salve, Senior Advocate, appearing for the Sponge Iron
Manufacturers Association generally supported the submissions made by Mr.
Venugopal. He emphasized that the more appropriate course for this Court to
adopt would be to appoint a Committee of three persons, including experts,
to examine each individual allotment and consider the facts peculiar to
each allottee and report to this Court whether the coal block allotment
should be cancelled or not.
18. Learned counsel also emphasized the necessity of granting a hearing to
each allottee and referred to a passage from National Textile Workers’
Union v. P. R. Ramakrishna[4] wherein the Constitution Bench emphasized the
importance of natural justice in paragraph 16 of the Report. Particular
emphasis was laid on the following passage:
“….It will surely be a travesty of justice to deny natural justice on the
ground that courts know better. There is a peculiar and surprising
misconception of natural justice, in some quarters, that it is,
exclusively, a principle of administrative law. It is not. It is first a
universal principle and, therefore, a rule of administrative law. It is
that part of the judicial procedure which is imported into the
administrative process because of its universality. “It is of the essence
of most systems of justice – certainly of the Anglo-Saxon System – that in
litigation both sides of a dispute musts be heard before decision. ‘Audi
Alteram Partem’ was the aphorism of St. Augustine which was adopted by the
courts at a time when Latin Maxims were fashionable”. “Audi Alteram Partem
is as much a principle of African, as it is of English legal procedure : a
popular Yoruba saying is “ ‘wicked and iniquitous is he who decides a case
upon the testimony of only one party to it” (T.O. Elias : The Nature of
African Customary Law). Courts even more than administrators must observe
natural justice.”

19. Mr. Salve also referred to a passage from Administrative Law[5] to
contend that the principle of legal relativity should be borne in mind by
the Court so that “the law can be made to operate justly and reasonably in
cases where doctrine of ultra vires, rigidly applied, would produce
unacceptable results.”
20. Unfortunately, it is difficult to see relevance of the passage cited by
learned counsel since it deals with the nullity and voidness of an Act or
order which is ultra vires. The applicable principles are completely
different and we are not dealing with such a case. It would be more
apposite to refer to a passage from Sheela Barse v. Union of India[6] cited
by Dr. A.M. Singhvi, Senior Advocate (appearing for the Independent Power
Producers Association of India) wherein this Court observed the future is
important (and that is what we are looking at). This Court said:
“Again, the relief to be granted looks to the future and is, generally,
corrective rather than compensatory which, sometimes, it also is. The
pattern of relief need not necessarily be derived logically from the rights
asserted or found. More importantly, the court is not merely a passive,
disinterested umpire or onlooker, but has a more dynamic and positive role
with the responsibility for the organization of the proceedings, moulding
of the relief and – this is important – also supervising the implementation
thereof. The court is entitled to, and often does, seek the assistance of
expert panels, Commissioners, Advisory Committee, amici etc. This wide
range of the responsibilities necessarily implies correspondingly higher
measure of control over the parties, the subject matter and the procedure.
Indeed as the relief is positive and implies affirmative action the
decisions are not “one-shot” determinations but have ongoing implications.
Remedy is both imposed, negotiated or quasi-negotiated.”

21. Dr. A.M. Singhvi also submitted a note which essentially and
substantially reiterates some of the submissions made by Mr. Venugopal. It
is not, therefore, necessary to repeat those submissions. He also referred
to Onkar Lal Bajaj v. Union of India[7] to submit that in the case of
apparently tainted allotment of dealerships for petroleum products, this
Court felt the necessity of appointing a Committee and therefore we should
also appoint a Committee of retired judges to examine each individual case
of coal block allotment.
22. Dr. Rajeev Dhavan, Senior Advocate appearing for one of the interveners
referred to Chingleput Bottlers v. Majestic Bottling Company[8] to
emphasize the necessity of applying the principles of natural justice
before cancelling the allotments made in favour of the allottees.
23. Other learned counsels more or less repeated and reiterated the
submissions made, with slight variations and emphasis depending upon the
facts of the case of their respective clients, including State Governments.

24. In response to the submissions made by various learned counsels, it was
submitted by the learned Attorney General that all the aspects mentioned
above including the economic implications or fall-out of the cancellation
of coal block allotments and the possible adverse impact that it may have
on other socio-economic factors have been taken into consideration and it
is only thereafter that the affidavit has been filed by the Union of India,
which has been explained by him in his opening address. In other words, the
Union of India is fully prepared to face the consequences of the
cancellation of all coal blocks, if need be, and is desirous of moving
forward.
25. The learned Attorney General vehemently opposed the setting up of any
committee as proposed by learned counsels. He categorically and
emphatically stated that the Central Government has no difficulty in taking
matters forward consequent upon the cancellation of the coal blocks.
26. Learned counsels for the allottees have essentially raised two
contentions. Firstly, the principles of natural justice require that they
must be heard before their coal block allotments are cancelled. Secondly,
we should appoint a committee to consider each individual case to determine
whether the coal block allotments should be cancelled or not.
27. As far as the second contention is concerned, this is strongly opposed
by the learned Attorney General and we think he is right in doing so. The
judgment did not deal with any individual case. It dealt only with the
process of allotment of coal blocks and found it to be illegal and
arbitrary. The process of allotment cannot be reopened collaterally through
the appointment of a committee. This would virtually amount to nullifying
the judgment. The process is a continuous thread that runs through all the
allotments. Since it was fatally flawed, the beneficiaries of the flawed
process must suffer the consequences thereof and the appointment of a
committee would really amount to permitting a body to examine the
correctness of the judgment. This is clearly impermissible.
28. It is true that this Court has taken the assistance of one committee or
the other in several cases but that was where an inquiry was required to be
conducted and this Court was obviously not in a position to conduct any
such inquiry. This had happened, for example, in Onkar Lal Bajaj. No such
occasion or situation has arisen in the present case to necessitate the
appointment of a committee. Therefore, the question of appointing a
committee simply does not arise.
29. The first contention relates to the applicability of the principles of
natural justice. As far as this is concerned, it has specifically been
recorded in the judgment (in paragraph 11) to the following effect:
“Three Associations, viz., Coal Producers Association, Sponge Iron
Manufacturers Association and Independent Power Producers Association of
India have made applications for their intervention stating that these
associations represented large number of allottees who have been allocated
subject coal blocks. Accordingly, Mr. K.K. Venugopal, learned senior
counsel was heard for Coal Producers Association and Mr. Harish N. Salve,
learned senior counsel was heard on behalf of the Sponge Iron Manufacturers
Association and Independent Power Producers Association of India. They
commenced their arguments on 09.01.2014, which continued on 15.01.2014 and
concluded on 16.01.2014.”

30. Therefore, it is incorrect to say that these associations which
represented the bulk (if not all) the allottees or beneficiaries of coal
blocks were not heard. They presented their point of view, like any other
party to a lis and it was only then that judgment was delivered.
31. Similarly, several States were also heard as recorded in paragraph 10
of the judgment. In this regard, it was said:
“The arguments re-commenced on 05.12.2013. On that day, arguments of the
States of Jharkhand, Chhattisgarh and Odisha were concluded and matters
were fixed for 08.01.2014. On 08.01.2014, the arguments on behalf of the
States of Maharashtra, Andhra Pradesh, Madhya Pradesh and West Bengal were
concluded and the matters were fixed for 09.01.2014. On that day, arguments
of learned Attorney General were concluded.”

32. In effect, therefore, all parties likely to be adversely affected were
given a hearing. The principles of natural justice, though universal, must
be realistically and pragmatically applied.
33. In Sheela Barse it was observed, and we endorse that view, that the
relief to be granted in a case always looks to the future. It is generally
corrective and in some cases it is compensatory. The present case takes
within its fold all three elements mentioned in Sheela Barse. Our judgment
highlighted the illegality and arbitrariness in the allotment of coal
blocks and these “consequence proceedings” are intended to correct the
wrong done by the Union of India; these proceedings look to the future in
that by highlighting the wrong, it is expected that the Government will not
deal with the natural resources that belong to the country as if they
belong to a few individuals who can fritter them away at their sweet will;
these proceedings may also compensate the exchequer for the loss caused to
it, in the manner suggested by the learned Attorney General, and which we
now propose to consider.
34. There are two categories of coal block allotments: the first category
being allotments other than those mentioned in Annexure 1 and Annexure 2;
the second category being the 46 coal blocks mentioned in Annexure 1 and
Annexure 2 that could possibly be “saved” from cancellation on certain
terms and conditions, as submitted by the learned Attorney General.
35. As far as the first category of coal block allotments is concerned,
they must be cancelled (except those mentioned in the judgment). There is
no reason to “save” them from cancellation. The allocations are illegal and
arbitrary; the allottees have not yet entered into any mining lease and
they have not yet commenced production. Whether they are 95% ready or 92%
ready or 90% ready for production (as argued by some learned counsel) is
wholly irrelevant. Their allocation was illegal and arbitrary, as already
held, and therefore we quash all these allotments.
36. Learned Attorney General identified 46 coal blocks that could be
“saved” from the guillotine, since all of them have commenced production or
are on the verge of commencing production. As these allocations are also
illegal and arbitrary they are also liable to be cancelled. However, the
allotment of three coal blocks in Annexure 1 is not disturbed and they are
Moher and Moher Amroli Extension allocated to Sasan Power Ltd. (UMPP) and
Tasra (allotted to Steel Authority of India Ltd. (SAIL), a Central
Government public sector undertaking not having any joint venture).
As far the 6 coal blocks mentioned in Annexure 2 are concerned, the
allocatees have not yet commenced production. They do not stand on a
different or better footing as far the consequences are concerned. These
allotments are also liable to be cancelled. The allocation of the Pakri
Barwadih coal block (allotted to National Thermal Power Corporation (NTPC),
being a Central Government public sector undertaking not having any joint
venture) is not liable to be cancelled.
37. Except the above two allocations made to the UMPP and the two
allocations made to the Central Government public sector undertaking not
having any joint venture mentioned above, all other allocations mentioned
in Annexure 1 and Annexure 2 are cancelled.
38. It was submitted by the learned Attorney General that on the
cancellation of the coal block allotments, CIL would require some breathing
time to manage its affairs. The Central Government is keen to move ahead
but some time would be required to manage the emerging situation.
Similarly, breathing time is also required to be given to the allottees to
manage their affairs on the cancellation of the coal blocks.
39. In view of the submissions made, although we have quashed the allotment
of 42 out of these 46 coal blocks, we make it clear that the cancellation
will take effect only after six months from today, which is with effect
from 31st March, 2015. This period of six months is being given since the
learned Attorney General submitted that the Central Government and CIL
would need some time to adjust to the changed situation and move forward.
This period will also give adequate time to the coal block allottees to
adjust and manage their affairs. That the CIL is inefficient and incapable
of accepting the challenge, as submitted by learned counsel, is not an
issue at all. The Central Government is confident, as submitted by the
learned Attorney General, that the CIL can fill the void and take things
forward.
40. In addition to the request for deferment of cancellation, we also
accept the submission of the learned Attorney General that the allottees of
the coal blocks other than those covered by the judgment and the four coal
blocks covered by this order must pay an amount of Rs. 295/- per metric ton
of coal extracted as an additional levy. This compensatory amount is based
on the assessment made by the CAG. It may well be that the cost of
extraction of coal from an underground mine has not been taken into
consideration by the CAG, but in matters of this nature it is difficult to
arrive at any mathematically acceptable figure quantifying the loss
sustained. The estimated loss of Rs. 295/- per metric ton of coal is,
therefore, accepted for the purposes of these cases. The compensatory
payment on this basis should be made within a period of three months and in
any case on or before 31st December, 2014. The coal extracted hereafter
till 31st March, 2015 will also attract the additional levy of Rs. 295/-
per metric ton.
41. It is made clear that the scrutiny by the CBI in respect of the
allotment of 12 coal blocks out of 46 identified by the learned Attorney
General (and for that matter against any other allottee) will continue and
be taken to its logical conclusion. Needless to say, the observations and
findings in this order shall have no bearing on the pending investigations.
…………………………….CJI.
( R.M. Lodha )

….…………………………..J.
( Madan B. Lokur )

…….………………………..J.
( Kurian Joseph )
New Delhi;
September 24, 2014
Annexure 1
Details of 40 coal blocks which have come into production

|Sl. No.|Name of Coal Block |Name of Allocatee Company |
| |
|1. |Gare Palma IV/4 |Jayaswal Neco Ltd. |
|2. |Chotia |Prakash Industries Ltd. |
|3. |Namchik Namphuk |Arunachal Pradesh Mining |
| | |Corp. |
|4-5. |GarePalma IV/2&3 |JSPL |
|6. |Belgaon |Sunflag Iron &Steel Ltd. |
|7-12. |Baranj I-IV, Kiloni and |Karnataka Power Corp. Ltd. |
| |Manoradeep | |
|13. |Kathautia |Usha Martin Ltd. |
|14. |Parbatpur |Electrosteel Castings Ltd. |
|15. |Gare Palma IV/7 |RAPL |
| | |(Now Sarda Energy Ltd.) |
|16. |Barjore |WBPDCL |
|17. |Tara (East) |WBSEB |
|18. |Tara (West) |WBPDCL |
|19. |Gare Palma IV/1 |Jindal Power Ltd. |
|20. |Sarshatali |CESC |
|21. |Talabira-I |Hindalco Industries Ltd. |
|22-23. |Gotitoria (East & West) |BLA Industries |
|24. |Gare Palma IV/5 |Monnet Ispat Ltd. |
|25. |Pachwara Central |Punjab State Electricity |
| | |Board |
|26. |Tasra |Steel Authority of India |
| | |Ltd. |
|27. |Barjora North |DVC |
|28. |Marki Mangli-I |B.S. Ispat |
|29-30. |Marki Mangli-III |Shree Virangana Iron & Steel|
| | |Ltd. |
| |Marki Mangli-II | |
|31. |Trans Damodar |WBMTCDL |
|32-33. |Moher & Moher Amlori |Sasan Power Ltd. |
| |Extension | |
|34. |Ardhagram |Sova Ispat Ltd. & Jai Balaji|
| | |Industries Ltd. |
|35-36. |Parsa (east) & Kanta Basan |RRVUN Ltd. |
|37-38. |Gangaramchak & Gangaramchak |WBPDCL |
| |Bhadulia | |
|39. |Amelia North |MPSMDC Ltd. |
|40. |Pachwara North |WBPDCL |

Annexure 2

Details of Coal Blocks which are likely come into production during 2014-15
|Sl.No.|Company Name |Name of Coal Block |
|of | | |
|block | | |
| |
|1. |GVK Power (Govindwal Sahib) |Tokisud North |
|2. |DVC |Khagra Joydev |
|3. |Prism Cement |Sial Ghogri |
|4. |Jaiprakash Associates Ltd. |Mandla North |
|5. |MPSMCL |Bicharpur |
|6. |NTPC |Pakri Barwadih |
———————–
[1] 9. Requirement of prior permission to open a coal mine, seam or
section of a seam.–
(1) No owner of a colliery shall open a coal mine, seam or a section of
a seam without the prior permission in writing of the Central Government.
(2) No owner of a colliery shall also commence mining operations in a
colliery or seam or a section of a seam, in which the mining operation has
been discontinued for a period exceeding one hundred and eighty days,
without the prior permission in writing of the Central Government.
[2] I.A. No.201 & 219, 223 in I.A. No.204 and I.A. Nos. 224 in I.A. No.215
in WP(C) No. 562/2009
[3] (2002) 4 SCC 388
[4] (1983) 1 SCC 228
[5] Administrative Law by Sir William Wade, 9th Edn.
[6] (1988) 4 SCC 226
[7] (2003) 2 SCC 673
[8] AIR 1984 SC 1030

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