Supreme Court of India
MANOHAR LAL SHARMAversusTHE PRINCIPLE SECRETARY & ORS.
- Citation
- 2014 INSC 677
- Decided
- 24 September 2014
- Disposal
- Disposed off
Holding
All coal block allocations, except the Moher and Moher Amroli Extension blocks to Sasan Power Ltd., the Tasra block to SAIL, and the Pakri Barwadih block to NTPC, are to be cancelled with a six‑month deferment, and the remaining allottees must pay an additional levy of Rs.295 per metric ton.
Summary
The Supreme Court was hearing the consequence proceedings arising from its earlier judgment that the allocation of coal blocks by the Screening Committee and the Government dispensation route was arbitrary and illegal. The Union of India submitted affidavits showing that 40 blocks were already producing coal and six were ready for extraction, and sought guidance on whether these allocations should be cancelled. The Court examined whether the allottees were entitled to a hearing, whether a committee should be set up to review each case, and whether an additional levy of Rs.295 per metric ton was justified. It held that the process of allotment could not be reopened and that all allotments, except for three blocks allotted to Sasan Power Ltd., one to SAIL and one to NTPC, must be cancelled, with a six‑month deferment to allow adjustment. The Court also ordered the remaining allottees to pay the additional levy and affirmed that CBI investigations into 12 of the blocks would continue.
Issues considered
- The legality and arbitrariness of coal block allocations made by the Screening Committee and Government dispensation route.
- What consequences should follow the declaration of illegality – whether all allocations should be cancelled or some preserved.
- Whether the principles of natural justice require a hearing to each allottee before cancellation.
- Whether a committee should be appointed to examine individual allotments.
- The propriety and quantum of an additional levy of Rs.295 per metric ton of coal extracted.
Legislation cited
Subjects
coal block allocationillegal allotmentnatural justiceadditional levycancellation of allotmentsSupreme CourtArticle 32mining leaseCAGCBI investigation
Judgment
[2014] 12 S.C.R. 110
A MANOHAR LAL SHARMA
. v.
THE PRINCIPLE SECRETARY & ORS.
(Writ Petition (Criminal) No. 120 of 2012)
SEPTEMBER 24, 2014
B
[R.M. LODHA, CJI, MADAN B. LOKUR AND
KURIAN JOSEPH, JJ.]
Coal - Allotment of coal blocks - Cancellation of -
C Allotment of coal blocks made by Screening Committee of
the Government of India and Government Dispensation route
held arbitrary and illegal - Consequences of such
cancellation - Affidavit by Union of India to the effect that coal
is actually mined from 40 coal blocks listed in Annexure I to
D the affidavit and 6 coal blocks listed in Annexure II are ready
for extraction - Issue whether the allotment of these coal
blocks to be cancelled or not - Held: Process of allotment
cannot be reopened collaterally through the appointment of
a committee, as it would virtually amount to nullifying the
E judgment - All the parties likely to be adversely affected were
given a hearing, .thus, principle of natural justice was applied
- The first category of allotments are o,ther than those
mentioned in Annexure 1 and Annexure 2 which are illegal
and arbitrary, the allottees have not yet entered into any
· F ·mining lease and they have not yet commenced production,
thus, all these allotments are quashed - Second category
being the 46 coal blocks mentioned in Annexure 1 and
Annexure 2, though have commenced production or are on
the verge of commencing production - These allocations are
G illegal and arbitrary, thus, are liable to be cancelled -
However, the allotment of coal blocks Moher and Moher
Amroli Extension allocated to Sasan Power Ltd. (UMPP),
Tasia (allotted to Steel Authority of India Ltd. (SAIL), and Pakri
Barwadih coal block (allotted to National Thermal Power
H 110
MANOHAR LAL SHARMA v. PRINCIPLE 111
SECRETARY
Corporation (NTPC), not liable to be cancelled - The A
cancellation would take effect from 31st March, 2015- Period
of six months is being given since the Central Government
and GIL would need some time to adjust to the changed
situation and move forward as a/so adequate time is given
to the coal block allottees to adjust and manage their affairs B
- Allottees of the coal blocks other than those covered by the
judgment and the four coal blocks covered by this order to
pay an amount of Rs. 2951- per metric ton of coal extracted
as an additional levy within the stipulated period - Coal
extracted hereafter ti/131 st March, 2015 would also attract the c
additional levy of Rs. 2951- per metric ton - Scrutiny by CBI
in respect of allotment of 12 coal blocks out of 46 would
continue.
Samaj Parivartana Samudaya v. State of Kamataka I.A.
No.201 & 219, 223 in I.A. No.204 and I.A. Nos. 224 in I.A. D
No.215 in WP(C) No. 562/2009;; Ashok Hurrah v. Rupa
Ashok Hurrah 2002 (2 ) SCR 1006 : (2002) 4 SCC 388;
National Textile Workers' Union v. P. R. Ramakrishna 1983
(1) SCR 922 : (1983) 1 SCC 228; Sheela Barse v. Union of
India 1988 ( 2) Suppl. SCR 643: (1988) 4 SCC 226; Onkar E
Lal Bajaj v. Union of India 2002 (5) Suppl. SCR 605 :(200~)
2 SCC 673; Chingleput Bottlers v. Majestic Bottling
Company 1984 (3) SCR 190 : AIR 1984 SC 1030 - referred
to.
Case Law Reference:
F
2002 (2) SCR 1006 Referred to Para 16
1983 (1) SCR 922 Referred to Para 18
1988 (2) Suppl. SCR 643 Referred to Para 20 G
2002 (5) Suppl. SCR 605 Referred to Para 21
1984 (3) SCR 190 Referred to Para 22
H
112 SUPREME COURT REPORTS [2014] 12 S.C.R.
A CRIMINAL ORIGINAL JURISDICTION : Writ Petition
(Criminal) No. 120 of 2012.
Under Article 32 of the Constitution of India.
WITH
B
W.P. (C) No. 463 and 515 of 2012
W.P. (C) No. 283 of 2013
Manohar Lal Sharma (Petitioner -in -person), Summan,
C Prashant Bhushan, Pranav Sachdeva, Satyajit Desai, Akshaya
M. Sudame, Anagha S. Desai, Jyoti Mendiratta for the
petitioner.
Mukul Rohatgi, AG., Ranjit Kumar, SG., Maninder Singh,
D ASG., A. Saran, Anil B.' Divan, K.K. Venugopal, Ra11.ndra
Srivastava, K.V. Viswanathan, Dr. Abhishek Manu Singhvi,
Harish N. Salve, Dushyant Dave, Krishnan Venugopal, Paras
Kuhad, Gopal Jain, Rakesh Dwivedi, Ajit Kumar Sinha, Vikas
Singh, Dr. Rajeev Dhawan, T.R. Andhyarujina, Gopal Jian, Arijit
E Prasad, Binu Tamta, Sushma Suri, D.S. Mahra, Amit Anand
Tiwari, Sanchit Guru, Ashutosh Jha, Avinash Tripathi, Ramesh
Babu M.R., Anip Sachthey, Mahi! Paul, Shagun Matta, Saakaar
Sardana, Apoorv Kurup, Prashanto Sen, C.D. Singh, Rathi
Rohit, V.C. Shukla, Sakshi Kakkar, Sanjeev K. Kapoor, Gauri
F Rasgotra, Saman Ahsan, Prateek Kumar, Gaurav Juneja, Raja!
Jariwal Raunak Dhilon, Sahil Narang, Karan Khanna, Shikhar
Shrivstava (for Khaitan & Co.), Aditya Ganju (for Khaitan & Co.),
Mahesh Agarwal, Rishi Agrawala, E.C. Agrawala, Neeha
Nagpal, Parul Shukla, V. Shyam Mohan, Kuriakose Varghese,
G Shrevas Mehrotra, Chaitali Dhinojia, D. Mahesh Babu, Nikhil
Nayyar, Kirti Renu Mishra, Tapesh Kumar Singh, Mohd.
Waquas, Aparna Bhat, Mamta Saxena, A.N. Singh, Tanima
Kishore, Bhavanishankar V. Gadnis, Varun Pathak, Ravi
Prakash, Raheel Kohli, Aditya Dewan, Ratan K. Singh, Suraj
H Prakash, Shashi Bhushan, Akshay Malhotra, Tushar Roy, Rauf
MANOHAR LAL SHARMA v. PRINCIPLE 113
SECRETARY
Rahim, Nandini Gore, Devina Sehgal, Trishala Kulkarni, Manik A
Karanjawala (For Karanjawala & Co.), Braj Kishore Mishra,
Mishra Saurabh, Vanshaja Shukala, Ankit Kumar Lal, Kamini
Jaiswal, S. Udaya Kumar Sagar, Hemantika Wahi, Jesal,
Preeti Bhardwaj, Puja Singh, Anuradha Dutta, Fereshte D.
Sethna, Vijayalakshmi Menon, Akriti, Tarinee Sudan, Varun B
Mishra, B.R. Menon, Pawan Upadhyaya, Sharmila Upadhyaya,
· E.R. Kumar, Shashank, Faisal Sherwani, Abhinay, Abhishek
Deshmukh (For Parekh & Co.), Meenakshi Grover, Aishwarya
Sinha, Kunal Verma, Aarohi Bhalla, Ashish Bermard, Sujata
Kurdukar, Bharat Sangal, I. Abenla Aier, Pallavi Langar, Tushal c
Bakshi, Anitha Shenoy, Soumik Ghosal, Rana Mukherjee,
Neha Sharma, D. Verma, B. Balaji, R. Rakesh Sharma, S.
Anand, Shase, Lalit Bhasin, Nina Gupta, Sanjay Gupta, Mudit
Sharma, Amit Sharma, Dipesh Sinha, Ashok Kr. Pariya,
Anand Varma, Dhananjay Mishra, Ramendra Mohan Patnaik, D
L.K. Bhushan, Vaibhav Joshi (For Dua Associates) Dinesh
Kumar Garg for the respondents.
The Order of the Court was delivered
ORDER E
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
F
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.
G
2. The relevant paragraphs of the judgment dated 25th
August, 2014 read as follows:-
"155. The allocation of coal blocks through Government
H
114 SUPREME COURT REPORTS (2014) 12 S.C.R.
A 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
B 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
c
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.
D
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
E 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
F 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.
G 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
H
MANOHAR LAL SHARMA v. PRINCIPLE 115
SECRETARY
remains to be tackled. We are of the view that, to this A
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
8
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.
c
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 D
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.
E
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
F
(Development and Regulation) Act, 1957). This permission is
1. 9. Requirement of prior permission to open a coal mine, seam or
section of a seam.--
G
' of a colliery shall open a coal mine, seam or a section of a
(1) No owner
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. H
116 SUPREME COURT REPORTS [2014) 12 S.C.R.
A 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 .
8
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
C 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
D 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
E 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
F 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
G 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
H submitted that in the case of allottees supplying coal to the
MANOHAR LAL SHARMA v. PRINCIPLE 117
SECRETARY
power sector, they should be mandated to enter into Power A
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 B
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, C
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. D
11. To put the suggestions of the learned Attorney General
in perspective, they are summarized below:
( 1) All coal block allotments (except those mentioned E
in the judgment) may be cancelled.
(2) Alternatively,
(a) Extraction of coal from the 40 functional and 6
"ready" coal blocks may be permitted and the F
remai~ing coal blocks be cancelled;
(b) 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
G
(c) 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 H
118 SUPREME COURT REPORTS [2014) 12 S.C.R.
A 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
s 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.
C 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
D 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
E 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
F were categorized by Mr. Venugopal under various heads and
these are detailed below.
(1) There would be a serious adverse impact on the
economy of the country: It was submitted that Government
G 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 Jong 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
H of the National Thermal Power Corporation (NTPC) and the
MANOHAR LAL SHARMA v. PRINCIPLE 119
SECRETARY
Damodar Valley Corporation (DVC) have been shut down A
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 B
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 c
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
0
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 E
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 capac[ty 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 F
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. G
(2) 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 H
120 SUPREME COURT REPORTS [2014] 12 S.C.R.
A 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
s 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
C 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
D 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
E already been paid by the coal block allottees by way of direct
and indirect taxes 3nd 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.
F (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
G 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
H
MANOHAR LAL SHARMA v. PRINCIPLE 121
SECRETARY
permission etc.; this Court has tacitly acknowledged A
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. B
(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 C
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 D
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; E
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 F
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. G
Rupa Ashok3 Hurrah 3 to contend that the allottees are entitled
to a hearing before the cancellation of their coal blocks in
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 sec 388. H
122 SUPREME COURT REPORTS [2014) 12 S.C.R.
A 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
B
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 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
c 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."
D 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
E 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
F granting a hearing to each allottee and referred to a passage
from National Textile Workers' Union v. P. R.
Ramakrishna" wherein the Constitution Bench emphasized
the importance of natural justice in paragraph 16 of the Report.
Particular emphasis was laid on the following passage:
G " .... 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
H 4. (1983) 1 sec 228.
MANOHAR LAL SHARMA v. PRINCIPLE 123
SECRETARY
administrative law. It is not. It is first a universal principle A
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 systell)s of justice - certainly of the
Anglo-Saxon System - that in litigation both sides of a B
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 c
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." D
19. Mr. Salve also referred to a passage from
Administrative Law5 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 E
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 F
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 lndia 6 cited by Dr.
A.M. Singhvi, Senior Advocate (appearing for the Independent
Power Producers Association of India) wherein this Court G
observed the future is important (and that is what we are
looking at). This Court said:
·s. Administrative Law by Sir William Wade, 9th Edn.
6. (1988) 4 sec 226. H
124 SUPREME COURT REPORTS [2014] 12 S.C.R.
A "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
B 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
. c assistance of expert panels, Commissioners, Advisory
Committee, amici etc. This wi:de 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"
D
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
E made by Mr. Venugopal. It is not, therefore, necessary to repeat
those submissions. He also referred to Onkar Lal Bajaj v.
Union of lndia7 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
F 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" to emphasize the necessity of
G applying the principles of natural justice before cancelling the
allotments made in favour of the allottees.
7. (2003) 2 sec 673 .
H 8. AIR 1984 SC 1030.
MANOHAR LAL SHARMA v. PRINCIPLE 125
SECRETARY
23. Other learned counsels more or less repeated ar:i,d A
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 8
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 C
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.
D
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. E
26. Learned counsels for the ·a11ottees 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
F
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 G
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 H
126 SUPREME COURT REPORTS [2014] 12 S.C.R.
A 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.
B
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
C 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
D 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
E
Power Producers Association of l~dia 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
F 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 C'ommenced their
· arguments on 09.01.2014, which continued on 15.01.2014
G 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
H their point of view, like any other party to a /is and it was only
MANOHAR LAL SHARMA v. PRINCIPLE 127
SECRETARY
then that judgment was delivered. A
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, Chhatt\sgarh 8
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 C
· 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_ o
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 E
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 F
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 G
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 H
128 SUPREME COURT REPORTS (2014] 12 S.C.R.
A 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
8
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
C 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
D 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
E 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 ventu"re).
As far the 6 coal blocks mentioned in Annexure 2 are
F 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
G 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
H sector undertaking. not having any joint venture mentioned
MANOHAR LAL SHARMA v. PRINCIPLE 129
SECRETARY
above, all other allocations mentioned in Annexure 1 and A
, 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 8
Government is keen to move ahead but some time would be.
required to manage the emerging situation. Similarly, breathing
tfme 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 C
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 D
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 E
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,
F
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 G
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 H
130 SUPREME COURT REPORTS (2014] 12 S.C.R.
A purposes of these cases. The compensatory paymerit,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.
B
41. lt 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.
C Needless to say, the observations and findings in this order
shall have no bearing on the pending investigations.
Nidhi Jain Order passed in consequence proceedings.
MANOHAR LAL SHARMA v. PRINCIPLE 131
SECRETARY
Annexure 1 A
Details of 40 coal blocks which have come into
oroduction
SI. Name of Coal Block Name of Allocatee
No. Company 8
1. Gare Palma IV/4 Jayaswal Neco Ltd.
2. '· Chotia Prakash Industries Ltd.
.
3. Namchik Namphuk Arunachal Pradesh c
Mining Corp.
4-5. GarePalma IV/2&3 JSPL
6. Belgaon Sunflag Iron &Steel Ltd
D
7-12. Baranj I-IV, Kiloni and Karnataka Power Corp
Manoradeep Ltd.
13. Kathautia Usha Martin Ltd.
E
14. Parbatpur Electrosteel Castings
Ltd.
15. Gare Palma IV/7 RAPL
(Now Sarda Energy
Ltd.) F
16. Barjore WBPDCL
17. Tara (East) WBSEB
18. Tara (West) WBPDCL G
19. Gare Palma IV/1 Jindal Power Ltd.
20. Sarshatali CESC
21 T~l<>hira-1 Hjnrl~I"" lnrlu<:trie<: I +rl H
132 SUPREME COURT REPORTS [2014] 12 S.C.R.
A 22-23. Gotitoria (East & West) BLA Industries
24.
.
Gare Palma IV/5 Monnet lspat Ltd.
25. Pachwara Central Punjab State Electricity
Board
B
26. Tasra Steel Authority of India
Ltd.
27. Barjora North DVC
c 28. Marki Mangli-1 B.S. lspat
29-30. Marki Mangli-111
Marki Mangli-11
D 31. Trans Damodar WBMTCDL
32-33. Moher & Moher Amlori Sasan Power Ltd.
Extension
34. Ard hag ram Sova lspat Ltd. & Jai
E Balaji Industries Ltd.
35-36. Parsa (east) & Kanta RRVUN Ltd.
Bas an
37-38. Gangaramchak & WBPDCL
F Gangaramchak Bhadulia
39. Amelia North MPSMDC Ltd.
40. Pachwara North WBPDCL
G
H
MANOHAR LAL SHARMA v. PRINCIPLE 133
SECRETARY
Annexure 2 A
Details of Coal Blocks which are likely come into
production during 2014-15
SI. Company Name Name of Coal Block
No. B
of
block
1. GVK Power (Govindwal Tokisud North
Sahib) c
2. DVC Khagra Joydev
3. Prism Cement Sial Ghogri
4. Jaiprakash Associates Mandia North D
Ltd.
5. MPSMCL Bicharpur
6. NTPC Pakri Barwadih
E
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