Coal block allocations from 1993 ‘illegal’

The Supreme Court on Monday declared 218 coal-block allocations made between 1993 and 2010 as illegal and arbitrary.

A three-judge Bench consisting of Chief Justice RM Lodha and Justices Madan B Lokur and Kurian Joseph said: “The entire allocation of coal blocks as per recommendations made by the Screening Committee from July 14, 1993, in 36 meetings, and also the allocation made through the Government dispensation route, suffers from the vice of arbitrariness and legal flaws.”

Though the judgment implies that the allocations should be cancelled, the Bench said the consequences of declaring them illegal would be considered on September 1, taking into account the investments made by companies for various projects and the procedure to be adopted for cancellation.

Explaining the judgment, the Bench said: “The Screening Committee has never been consistent, it has not been transparent, there is no proper application of mind, it has acted on no material in many cases, relevant factors have seldom been its guiding factors, there was no transparency and guidelines have seldom guided it.”

The Chief Justice said: “On many occasions, guidelines have been honoured more in their breach. There was no objective criteria, nay, no criteria for evaluation of comparative merits. The approach had been ad-hoc and casual. There was no fair and transparent procedure, all resulting in unfair distribution of the national wealth. Common good and public interest have, thus, suffered heavily. Hence, the allocation of coal blocks based on the recommendations made in all the 36 meetings of the Screening Committee are illegal.”

Chief Justice Lodha further indicated that a committee headed by a retired apex court judge could be appointed to go into the consequences arising out of declaring the coal block allocations illegal.

The Bench disposed of writ petitions filed by advocate ML Sharma and Common Cause challenging the allocation of 218 coal blocks ( including 41 de-allocations and re-allocations), of which 105 were to private companies, 99 were to state-owned firms, 12 went to ultra mega power projects (UMPP) and two to coal-to-liquid projects.

Dispensation route criticised The Bench said, “The Government dispensation route whereby public sector corporations and undertakings were allocated coal blocks, and a Joint Venture Company has been further allowed to enter into Mine Development Operation Agreements with other private partner or sister concern... has virtually defeated the legislative policy in the CMN Act and winning and mining of coal mines has resultantly gone in the hands of private companies for commercial use. The Bench clarified that coal block allocations made through competitive bidding for the lowest tariff for power for UMPPs might not be cancelled.

However, the Bench said the coal blocks allocated to UMPPs would only be used for that purpose and no diversion of coal for commercial exploitation would be permitted.

The Bench pointed out that it took almost eight years to put in place allocation of captive coal blocks through competitive bidding.

It said: “During this period, many coal blocks were allocated giving rise to the present controversy, which was avoidable because competitive bidding would have brought in transparency, objectivity and very importantly, given a level playing field to all 85 applicants … and lowered the difference between the market price of coal and the cost of coal for the allottee by way of premium, which would have accrued to the Government.”

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