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SC deems all coal blocks allocated since 1993-2010 as illegal
New Delhi (25th August, 2014): The Supreme Court on Monday held that all coal block allocations made since 1993 till 2010 before pre-auction era during previous NDA and UPA regimes have been done in an illegal manner by an "ad-hoc and casual" approach "without application of mind".
However, the consequences arising from the verdict of such coal blocks will be considered after further hearing by the apex court.
The apex court, which examined the allocation of 218 blocks, said "Common good and public interest have, thus, suffered heavily" as "there was no fair and transparent procedure, all resulting in unfair distribution of the national wealth."
A bench headed by Chief Justice R M Lodha also held that "no State Government or public sector undertakings of the State Governments are eligible for mining coal for commercial use".
The bench also clarified that there was no challenge laid before it for cancellation in respect of blocks where competitive bidding was held for the lowest tariff for power for Ultra Mega Power Projects (UMPPs) in accordance with the opinion given in Natural Resources Allocation Reference.
However, it said "having regard to this, it is directed that the coal blocks allocated for UMPP would only be used for UMPP and no diversion of coal for commercial exploitation would be permitted".
The bench, also comprising justices Madan B Lokur and Kurian Joseph, said as allocation made both under the Screening Committee route and the Government dispensation route, are arbitrary and illegal, further hearing was needed to deterimine the consequences for which it would hear the matter on September 1.
"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," the bench in its 163-page judgement said.
After the pronouncement, the bench orally said though the Attorney General had given the figures of coal blocks, they were not verified and even the state governments had raised objections. These issues have to be gone into, the court said while suggesting that a small committee comprising retired Supreme Court judges can be set up to give its report on the issue in the shortest possible time.
The bench, which had marathon hearing on the PILs filed in 2012 by advocate M L Sharma and NGO, Common Cause, seeking quashing of the coal blocks allocated during the relevant period, said, "To sum up, the entire allocation of coal blocks as per recommendations made by the Screening Committee from July 14, 1993 in 36 meetings and the allocation through the Government dispensation route suffers from the vice of arbitrariness and legal flaws."
"The Screening Committee has never been consistent, it has not been transparent, there is no proper application of mind, it has acted on no material in many cases, relevant factors have seldom been its guiding factors, there was no transparency and guidelines have seldom guided it," it said.
On many occasions, guidelines have been honoured more in their breach, the bench observed.
"There was no objective criteria, nay, no criteria for evaluation of comparative merits. The approach had been ad-hoc and casual. There was no fair and transparent procedure, all resulting in unfair distribution of the national wealth.
"Common good and public interest have, thus, suffered heavily. Hence, the allocation of coal blocks based on the recommendations made in all the 36 meetings of the Screening Committee is illegal," the bench said.
It observed that 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 (Coal Mines Nationalisation) Act.
While holding that State Government or its public sector undertakings are not eligible for mining coal for commercial use, the bench said, "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," the bench added.
In the conclusion, the bench said "By way of footnote, it may be clarified and we do, that no challenge was laid before us in respect of blocks where competitive bidding was held for the lowest tariff for power for Ultra Mega Power Projects (UMPPs)".
The bench noted that Common Cause counsel Prashant Bhushan had submitted that since allocation for UMPPs was in accord with the opinion given in Natural Resources Allocation Reference and the benefit of the coal block is passed on to the public, the said allocations may not be cancelled.
It accepted the NGOs submission that there should be an order to restrain in some cases in which the Government has allowed diversion of coal from UMPP to other end uses i.e. for commercial exploitation.
"Having regard to this, it is directed that the coal blocks allocated for UMPP would only be used for UMPP and no diversion of coal for commercial exploitation would be permitted," the bench said.