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           REPORTABLE    

IN THE SUPREME COURT OF INDIA  

ORIGINAL JURISDICTION  

WRIT PETITION (CRL.) NO. 120 OF 2012      

Manohar Lal Sharma                                ……  Petitioner             Vs.    The Principal Secretary & Ors.                              ……  Respondents    

WITH    

WRIT PETITION [C] NO. 463 OF 2012    

WRIT PETITION [C] NO. 515 OF 2012    

WRIT PETITION [C] NO. 283 OF 2013          

JUDGMENT    R.M. LODHA, CJI.       

 Coal is king and paramount Lord of industry is an old  

saying in the industrial world.  Industrial greatness has been built up  

on coal by many countries.  In India, coal is the most important  

indigenous energy resource and remains the dominant fuel for  

power generation and many industrial applications.  A number of  

major industrial sectors including iron and steel production depend

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on coal as a source of energy.  The cement industry is also a major  

coal user. Coal’s potential as a feedstock for producing liquid  

transport fuels is huge in India. Coal can help significant economic  

growth. India’s energy future and prosperity are integrally dependant  

upon mining and using its most abundant, affordable and dependant  

energy supply – which is coal. Coal is extremely important element  

in the industrial life of developing India. In power, iron and steel, coal  

is used as an input and in cement, coal is used both as fuel and an  

input.  It is no exaggeration that coal is regarded by many as the  

black diamond.  

2.  Being such a significant, valuable and important  

natural resource, the allocation of coal blocks for the period 1993 to  

2010 is the subject matter of this group of writ petitions filed in the  

nature of Public Interest Litigation, principally one by Manohar Lal  

Sharma and the other by the Common Cause. The allocation of  

coal blocks made during the above period by the Central  

Government, according to petitioners, is illegal and unconstitutional  

inter alia on the following grounds:  

(a) Non-compliance of the mandatory legal procedure  

under the Mines and Minerals (Development and Regulation) Act,  

1957 (for short, ‘1957 Act’).  

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(b) Breach of Section 3(3)(a)(iii) of the Coal Mines  

(Nationalisation) Act, 1973 (for short, ‘CMN Act’).  

(c) Violation of the principle of Trusteeship of natural  

resources by gifting away precious resources as largesse.  

(d)   Arbitrariness, lack of transparency, lack of objectivity  

and non-application of mind; and   

(e) Allotment tainted with mala fides and corruption and  

made in favour of ineligible companies tainted with mala fides and  

corruption.  

3.  The first of these writ petitions was filed by Manohar  

Lal Sharma.  When that writ petition was listed for preliminary  

hearing on 14.09.2012, the Court issued notice to Union of India  

and directed it to file counter affidavit through Secretary, Ministry of  

Coal dealing with the following aspects:  

(i) The details of guidelines framed by the Central  

Government for allocation of subject coal blocks.  

(ii) The process adopted for allocation of subject coal  

blocks.  

(iii) Whether the guidelines contain inbuilt mechanism to  

ensure that allocation does not lead to distribution of largesse  

unfairly in the hands of few private companies?

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(iv) Whether the guidelines were strictly followed and  

whether by allocation of the subject coal blocks, the objectives of  

the policy have been realised?       

(v) What were the reasons for not following the policy of  

competitive bidding adopted by the Government of India way back  

in 2004 for allocation of coal blocks?  

(vi) What steps have been taken or are proposed to be  

taken against the allottees who have not adhered to the terms of  

allotment or breached the terms thereof?  

4.  Another PIL came to be filed by Common Cause after  

the above order was passed.  PIL by Common Cause came up for  

preliminary hearing on 19.11.2012.  Since, certain additional issues  

were raised and additional reliefs were also made in the PIL by  

Common Cause, this Court issued notice in that matter as well on  

19.11.2012.  

 5.  Principally, two prayers have been made in these  

matters, first, for quashing the entire allocation of coal blocks made  

to private companies by the Central Government between 1993  

and 2012 and second, a court monitored investigation by the  

Central Bureau of Investigation (CBI) and Enforcement Directorate  

(ED) or by a Special Investigation Team (SIT) into the entire

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allocation of coal blocks by the Central Government made between  

the above period covering all aspects.      

6.  The present consideration of the matter is confined to  

the first prayer, i.e., for quashing the allocation of coal blocks to  

private companies made by the Central Government between the  

above period.  At the outset, therefore, it is clarified that  

consideration of the present matter shall not be construed, in any  

manner, as touching directly or indirectly upon the investigation  

being conducted by CBI and ED into the allocation of coal blocks.  

7.  The first counter affidavit was filed by the Central  

Government on 22.01.2013 running into eleven volumes and 2607  

pages.  Thereafter, further/additional counter affidavit was filed by  

the Central Government.  However, when the matters were listed  

on 10.07.2013, learned Attorney General submitted that in the  

counter affidavits filed so far, the Union of India had focused on the  

six queries raised by the Court on 14.09.2012 in the writ petition  

filed by Manohar Lal Sharma. He sought some time to enable the  

Central Government to file appropriate counter affidavit justifying  

allocation of coal blocks.  Thereafter, further/additional counter  

affidavits have also been filed by the Central Government.  

8.  On 10.09.2013, the arguments with regard to challenge  

to allocation of coal blocks commenced which continued on

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11.09.2013, 12.09.2013, 17.09.2013, 18.09.2013, 24.09.2013,  

25.09.2013 and 26.09.2013.   On 26.09.2013, Attorney General in  

the course of his arguments submitted that allocation letter by the  

Central Government was only a first step towards obtaining mining  

lease and that, by itself, did not confer any right on the allottee to  

work mines.  He submitted that at the best, letter of allocation was a  

letter of intent and issuance of such allocation letter in no way  

impinges the rights of the State Governments under the 1957 Act.   

In light of the submissions of the learned Attorney General on  

26.09.2013, we wanted to know from the counsel for the petitioners  

whether concerned State Governments should be asked to explain  

their position in the matter to which Mr. Manohar Lal Sharma,  

petitioner-in-person and Mr. Prashant Bhushan agreed and,  

accordingly, the Court issued notice to the States of Jharkhand,  

Chhattisgarh, Odisha, Maharashtra, Andhra Pradesh, Madhya  

Pradesh and West Bengal as the subject coal blocks, for which the  

allocation is in issue, were located in these States.  The Court  

sought the views of the above States on the following:     

(i)    How did the State Government understand the  

allocation of coal blocks by the Central Government?  

(ii)    What  was  the  role  of  the  State  Government  in  the            

allocation of  coal blocks ?

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(iii) What was the role of the State Government in the  

subsequent steps having regard to the provisions of the 1957 Act?  

(iv) The details of the agreements entered into by the State  

Public Sector Undertakings, which were allotted coal blocks, with  

private parties for the coal blocks located in the State.  

9.  In pursuance of the above, 7 States have filed their  

responses.    

10.  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.    

11.  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

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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.  The arguments in rejoinder by Mr. Manohar Lal  

Sharma, petitioner-in-person and Mr. Prashant Bhushan, learned  

counsel for Common Cause were also concluded on that day.  The  

arguments of Mr. Sanjay Parikh, who had made an application for  

intervention on behalf of Mr. Sudeep Shrivastav were also heard  

and concluded.  The judgment was reserved on that day.    

12.  It is appropriate that we first notice the statutory  

framework relevant for the issues under consideration. The Mines  

and Minerals (Development and Regulation) Act, 1948 (for short,  

‘1948 Act’) was enacted to provide for the regulation of mines and oil  

fields and for the development of the minerals under entry 36 of the  

Government of India Act, 1935.  It received the assent of the  

Governor General on 08.09.1948 and came into effect from that  

date.    

13.  1948 Act was repealed by the 1957 Act.  The  

introduction of the 1957 Act reads:  

“In the Seventh Schedule of the Constitution in Union  List entry 54 provides for regulation of mines and  minerals development to the extent to which such  regulation and development under the control of the  Union is declared by Parliament by law to be expedient  in the public interest.  On account of this provision it

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became imperative to have a separate legislation.  In  order to provide for the regulation of mines and the  development of minerals, the Mines and Minerals  (Regulation and Development) Bill was introduced in the  Parliament.”  

 14.  1957 Act has undergone amendments from time to  

time. Section 2 of the 1957 Act reads:  

“Declaration as to the expediency of Union Control - it is  hereby declared that it is expedient in the public interest  that the Union should take under its control the  regulation of mines and the development of minerals to  the extent hereinafter provided.”  

15.  Sections 3(a), (c), (d), (e), (f), (g) and (h) define:  

“minerals”, “mining lease”, “mining operations”, “minor minerals”,  

“prescribed”, “prospecting licence”, and “prospecting operations”1,  

respectively.   

16.  Section 4 mandates that prospecting or mining  

operations shall be under licence or lease.  Sub-section (2) provides  

that no reconnaissance permit, prospecting licence or mining lease                                                    

1 “3(a) "minerals” includes all minerals except mineral oils;    (c) "mining lease” means a lease granted for the purpose of undertaking mining  operations, and includes a sub-lease granted for such purpose;    (d) “mining operations" means any operations undertaken for the purpose of  winning any mineral;    (e) "minor minerals" means building stones, gravel, ordinary clay, ordinary  sand other than sand used for prescribed purposes, and any other mineral which  the Central Government may, by notification in the Official Gazette, declare to  be a minor mineral;    (f) "prescribed" means prescribed by rules made under this Act;    (g) "prospecting licence" means a licence granted for the purpose of undertaking  prospecting operations;    (h)"prospecting operations" means any operations undertaken for the purpose of  exploring, locating or proving mineral deposit;”  

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shall be granted otherwise than in accordance with the provisions of  

the Act and the rules made thereunder.       

17.  Section 5 is a restrictive provision. The provision  

mandates that in respect of any mineral specified in the First  

Schedule, no reconnaissance permit, prospecting licence or mining  

lease shall be granted except with the previous approval of the  

Central Government. Coal and Lignite are at item no.1 in Part A  

under the title “Hydro Carbons/Energy Minerals” in the First  

Schedule appended to the 1957 Act.     

18.  Section 6 provides for maximum area for which a  

prospecting licence or mining lease may be granted.  Section 7  

makes provisions for the periods for which prospecting licence may  

be granted or renewed and Section 8 provides for periods for which  

mining leases may be granted or renewed.  Section 10 provides that  

application for reconnaissance permit, prospecting licence or mining  

lease in respect of any land in which the minerals vest in the  

Government shall be made to the State Government concerned,  

inter alia, it empowers the State Government concerned to grant or  

refuse to grant permit, licence or lease having regard to the  

provisions of the 1957 Act or the Mineral Concession Rules, 1960  

(for short ‘1960 Rules’).

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19.  Section 11 provides for preferential right of certain  

persons.  Sub-section (1) of Section 11 makes a provision that  

where a reconnaissance permit or prospecting licence has been  

granted in respect of any land, the permit holder or the licensee shall  

have a preferential right for obtaining a prospecting licence or mining  

lease, as the case may be, in respect of that land over any other  

person.  This is, however, subject to State Government’s satisfaction  

and certain conditions as provided therein. Sub-section (2) of  

Section 11 says that where the State Government does not notify in  

the Official Gazette the area for grant of reconnaissance permit or  

prospecting licence or mining lease and two or more persons have  

applied for a reconnaissance permit, prospecting licence or a mining  

lease in respect of any land in such area, the applicant whose  

application was received earlier, shall have a preferential right to be  

considered for such grant over the applicant whose application was  

received later.  This is, however, subject to provisions of sub-section  

(1).  The first proviso appended thereto enacts that where an area is  

available for grant of reconnaissance permit,  prospecting licence or  

mining lease and the State Government has invited applications by  

notification in the Official Gazette for grant of such permit, licence or  

lease,  the applications received during the period specified in such  

notification and the applications which had been received prior to the

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publication of such notification in respect of the lands within such  

area or had not been disposed of, shall be deemed to have been  

received on the same day for the purpose of assigning priority under  

sub-section (2).  The second proviso indicates that where such  

applications are received on the same day, the State Government,  

after taking into consideration the matter specified in sub-section (3),  

may grant the reconnaissance permit, prospecting licence or mining  

lease to one of the applicants as it may deem fit. Sub-section (3)  

elaborates the matter referred to in sub-section (2), namely, (a) any  

special knowledge of,  experience in reconnaissance operations,  

prospecting operations or mining operations, possessed by the  

applicant; (b) the financial resources of the applicant; (c) the nature  

and quality of the technical staff employed or to be employed by the  

applicant; (d) the investment which the applicant proposes to make  

in the mines and in the industry based on the minerals; and (e) such  

other matters as may be prescribed.   

20.  Section 13 empowers the Central Government to make  

rules in respect of minerals.  By virtue of the power conferred upon  

the Central Government under Section 13(2), the 1960 Rules have  

been framed for regulating the grant of, inter alia, mining leases in  

respect of minerals and for purposes connected therewith.

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21.  By virtue of Section 17, the Central Government has  

been given special powers to undertake prospecting or mining  

operations in certain lands.  Section 17-A authorises the Central  

Government to reserve any area not already held under any  

prospecting licence or mining lease with a view to conserve any  

mineral and after consultation with the State Government by  

notification in the Official Gazette.  

22.  Section 18 indicates that it shall be the duty of the  

Central Government to take all such steps as will be necessary for  

the conservation and systematic development of minerals in India  

and for the protection of the environment by preventing or controlling  

any pollution which may be caused by prospecting or mining  

operations and for such purposes the Central Government may, by  

notification in the Official Gazette, make such rules as it thinks  

necessary.  

23.  Section 18A  empowers the Central Government to  

authorise the Geological Survey of India to carry out necessary  

investigation for the purpose of information with regard to the  

availability of any mineral in or under any land in relation to which  

any prospecting licence or mining lease has been granted by a State  

Government or by any other person.  The proviso that follows sub-

section (1) of Section 18A provides that in cases of prospecting

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licences or mining leases granted by a State Government, no such  

authorisation shall be made except after consultation with the State  

Government.  

24.  Section 19 provides that any prospecting licences and  

mining leases granted, renewed or acquired in contravention of the  

1957 Act or any rules or orders made thereunder shall be void and  

of no effect.  

25.  The 1960 Rules were framed by the Central  

Government, as noted above, in exercise of the powers conferred by  

Section 13.  

26.  Chapter IV of 1960 Rules deals with grant of mining  

leases in respect of land in which the minerals vest in the  

Government. Sub-rule (1) of Rule 22 provides that an application for  

the grant of a mining lease in respect of land in which the minerals  

vest in the Government shall be made to the State Government in  

Form I through such officer or authority as the State Government  

may specify in this behalf.  Sub-rule (3) provides for the documents  

to be annexed with the application and so also that such  application  

must be accompanied by a non-refundable fee as prescribed  

therein.  Sub-rule (4) of Rule 22 provides that on receipt of the  

application for the grant of mining lease, the State Government shall  

take decision to grant precise area and communicate such decision

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to the applicant. The applicant, on receipt of communication from the  

State Government of the precise areas to be granted, is required to  

submit a mining plan within a period of six months or such other  

period as may be allowed by the State Government to the Central  

Government for its approval. The applicant is required to submit the  

mining plan duly approved by the Central Government or by an  

officer duly authorized by the Central Government to the State  

Government to grant mining lease over that area.  Sub-rule (5) of  

Rule 22 provides the details to be incorporated in the mining plan.  

27.  Rule 26 empowers the State Government to refuse to  

grant or renew mining lease over the whole or part of the area  

applied for.  But that has to be done after giving an opportunity of  

being heard and for reasons to be recorded in writing and  

communicated to the applicant.  

28.  Rule 31 provides for time within which lease is to be  

executed where an order has been made for grant of such lease on  

an application.  Rule 34 provides for manner of exercise of  

preferential rights for mining lease.  

29.  Rule 35 provides that where two or more persons have  

applied for a reconnaissance permit or a prospecting licence or a  

mining lease in respect of the same land, the State Government  

shall, for the purpose of sub-section (2) of Section 11, consider

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besides the matters mentioned in clauses (a) to (d) of sub-section  

(3) of Section 11, the end use of the mineral by the applicant.  

30.  In short, the 1957 Act provides for general restrictions  

on undertaking prospecting and mining operations, the procedure  

for obtaining prospecting licences or mining leases in respect of  

lands in which the minerals vest in the government, the rule-making  

power for regulating the grant of prospecting licences and mining  

leases, special powers of Central Government to undertake  

prospecting or mining operations in certain cases, and for  

development of minerals.  

31.   The Coal Mines (Taking Over of Management) Act, 15  

of 1973, (for short, ‘Coal Mines Management Act’) was passed,   

“to provide for the taking over, in the public interest, of  

the management of coal mines, pending nationalisation  

of such mines, with a view to ensuring rational and  

coordinated development of coal production and for  

promoting optimum utilisation of the coal resources  

consistent with the growing requirements of the country,  

and for matters connected therewith or incidental  

thereto.”  

32.  The Coal Mines Management Act received the assent  

of the President on 31.03.1973 but it was made effective from

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30.01.1973 except Section 8(2) which came into force at once.   

Section 3(1) provides that on and from the appointed day (that is,  

31.01.1973) the management of all coal mines shall vest in the  

Central Government. By Section 3(2), the coal mines specified in  

the Schedule shall be deemed to be the coal mines the  

management of which shall vest in the Central Government under  

sub-section (1). Under the proviso to Section 3(2), if, after the  

appointed day, the existence of any other coal mine comes to the  

knowledge of the Central Government, it shall by a notified order  

make a declaration about the existence of such mine, upon which  

the management of such coal mine also vests in the Central  

Government and the provisions of the Act become applicable  

thereto.   

33.  Immediately after the Coal Mines Management Act, the  

Parliament enacted the CMN Act.  CMN Act was passed,  

“to provide for the acquisition and transfer of the right,  

title and interest of the owners in respect of coal mines  

specified in the Schedule with a view to reorganising  

and reconstructing any such coal mines so as to ensure  

the rational, coordinated and scientific development and  

utilisation of coal resources consistent with the growing  

requirements of the country, in order that the ownership

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and control of such resources are vested in the State  

and thereby so distributed as best to subserve the  

common good, and for matters connected therewith or  

incidental thereto.”    

34.  Section 2(b) of the CMN Act defines a coal mine in the  

same manner as the corresponding provision of the Coal Mines  

Management Act, namely,  a mine “in which there exists one or  

more seams of coal”. Section 3(1) provides that on the appointed  

day (i.e., 01.05.1973) the right, title and interest of the owners in  

relation to the coal mines specified in the Schedule shall stand  

transferred to, and shall vest absolutely in the Central Government  

free from all encumbrances. Section 4(1) provides that where the  

rights of an owner under any mining lease granted, or deemed to  

have been granted, in relation to a coal mine, by a State  

Government or any other person, vest in the Central Government  

under Section 3, the Central Government shall, on and from the  

date of such vesting, be deemed to have become the lessee of the  

State Government or such other person, as the case may be, in  

relation to such coal mine as if a mining lease in relation to such  

coal mine had been granted to the Central Government. The period  

of such lease is to be the entire period for which the lease could  

have been granted by the Central Government or such other person

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under the 1960 Rules and thereupon all the rights under the mining  

lease granted to the lessee are to be deemed to have been  

transferred to, and vested in, the Central Government. By Section  

4(2) on the expiry of the term of any lease referred to in sub-section  

(1), the lease, at the option of the Central Government, is liable to  

be renewed on the same terms and conditions on which it was held  

by the lessor for the maximum period for which it could be renewed  

under the 1960 Rules. Section 5(1) empowers the Central  

Government under certain conditions to direct by an order in writing  

that the right, title and interest of an owner in relation to a coal mine  

shall, instead of continuing to vest in the Central Government, vest  

in the Government company. Such company, under Section 5(2), is  

to be deemed to have become the lessee of the coal mine as if the  

mining lease had been granted to it. By Section 6(1), the property  

which vests in the Central Government or in a government company  

is freed and discharged from all obligations and encumbrances  

affecting it.  Section 8 requires that the owner of every coal mine or  

group of coal mines specified in the second column of the Schedule  

shall be given by the Central Government in cash and in the manner  

specified in Chapter VI, for the vesting in it under Section 3 of the  

right, title and interest of the owner, an amount equal to the amount  

specified against it in the corresponding entry in the fifth column of

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the Schedule. By Section 11(1), the general superintendence,  

direction, control and management of the affairs and business of a  

coal mine, the right, title and interest of an owner in relation to which  

have vested in the Central Government under Section 3 shall vest in  

the Government company or in the Custodian, as the case may be.   

35.  The CMN Act came to be amended by the Coal Mines  

(Nationalisation) Amendment Ordinance which was promulgated on  

29.04.1976.  The Ordinance was replaced by the Coal Mines  

(Nationalisation) Amendment Act, 1976 (for short, ‘1976  

Nationalisation Amendment Act’).  A new section, Section 1-A was  

inserted by which it was declared that it was expedient in the public  

interest that the Union should take under its control the regulation  

and development of coal mines to the extent provided in sub-

sections (3) and (4) of Section 3 and sub-section (2) of Section 30 of  

the CMN Act. By sub-section (2) of Section 1-A, the declaration  

contained in sub-section (1) was to be in addition to and not in  

derogation of the declaration contained in Section 2 of the 1957 Act.  

By Section 3 of the 1976 Nationalisation Amendment Act, a new  

sub-section (3) was introduced in Section 3 of the principal Act.  

Under clause (a) of the newly introduced sub-section (3) of Section  

3, on and from the commencement of Section 3 of the 1976  

Nationalisation Amendment Act, no person other than (i) Central

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Government or a Government company or a corporation owned,  

managed or controlled by the Central Government or (ii) a person to  

whom a sub-lease, referred to in the proviso to clause (c) has been  

granted by any such Government, company or corporation or (iii) a  

company engaged in the production of iron and steel, shall carry on  

coal mining operation, in India in any form. Under clause (b) of sub-

section (3), excepting the mining leases granted before the 1976  

Nationalisation Amendment Act in favour of the Government  

company or corporation referred to in clause (a), and any sub-lease  

granted by any such Government, Government company or  

corporation, all other mining leases and sub-leases in force  

immediately before such commencement shall insofar as they relate  

to the winning or mining of coal, stand terminated. Clause (c) of the  

newly introduced sub-section (3) of Section 3 provides that no lease  

for winning or mining coal shall be granted in favour of any person  

other than the Government, Government company or corporation  

referred to in clause (a). Under the proviso to clause (c), the  

Government, Government company or the corporation to whom a  

lease for winning or mining coal has been granted may grant a sub-

lease to any person in any area if, (i) the reserves of coal in the area  

are in isolated small pockets or are not sufficient for scientific and  

economical development in a coordinated and integrated manner,

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and (ii) the coal produced by the sub-lessee will not be required to  

be transported by rail. By sub-section (4) of Section 3, where a  

mining lease stands terminated under sub-section (3), it shall be  

lawful for the Central Government or a Government company or  

corporation owned or controlled by the Central Government to  

obtain a prospecting licence or mining lease in respect of the whole  

or part of the land covered by the mining lease which stands  

terminated. Section 4 of the 1976 Nationalisation Amendment Act  

introduces an additional provision in Section 30 of the principal Act  

by providing that any person who engages, or causes any other  

person to be engaged, in winning or mining coal from the whole or  

part of any land in respect of which no valid prospecting licence or  

mining lease or sub-lease is in force, shall be punishable with  

imprisonment for a term which may extend to two years and also  

with fine which may extend to Rs.10,000/-.   

36.  By the Coal Mines (Nationalisation) Amendment Act,  

1993 (for short, ‘1993 Nationalisation Amendment Act’), the CMN  

Act was further amended.  The Statement of Objects and Reasons  

of the 1993 Nationalisation Amendment Act reads thus:  

“Considering the need to augment power generation  and to create additional capacity during the eighth plan,  the Government have taken decision to allow private  sector participation in the power sector. Consequently, it  has become necessary to provide for coal linkages to

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power generating units coming up in the private sector.   Coal India Limited and Neyveli Lignite Corporation  Limited, the major producers of coal and lignite in the  public sector, are experiencing resource constraints.  A  number of projects cannot be taken up in a short span  of time.  As an alternative, it is proposed to offer new  coal and lignite mines to the proposed power stations in  the private sector for the purpose of captive end use.   The same arrangement is also considered necessary  for other industries who would be handed over coal  mines for captive end use.  Washeries have to be  encouraged in the private sector also to augment the  availability of washed coal for supply to steel plants,  power houses, etc.  Under the Coal Mines (Nationalisation) Act, 1973, coal  mining is exclusively reserved for the public sector,  except in case of companies engaged in the production  of iron and steel, and mining in isolated small pockets  not amenable to economical development and not  requiring rail transport.  In order to allow private sector  participation in coal mining for captive use for purpose  of power generation as well as for other captive end  uses to be notified from time to time and to allow the  private sector to set up coal washeries, it is considered  necessary to amend the Coal and Coal Mines  (Nationalisation) Act, 1973.  The Coal Mines (Nationalization) Amendment Bill, 1992  seeks to achieve the aforesaid objectives.”                   

37.  Section 3 of the CMN Act was amended and thereby in   

clause (a) of sub-section (3) for item (iii), the following was  

substituted, namely,   

(iii) a company engaged in –  

(1)    the production of iron and steel,  

(2)    generation of power,  

(3)     washing of coal obtained from a mine, or

24

(4) such other end use as the Central Government may, by  notification, specify.                

38.  By further Notification dated 15.03.1996, the Central  

Government specified production of cement to be an end-use for the  

purposes of the CMN Act.  

39.  By another Notification dated 12.07.2007, the Central  

Government  specified production of syn-gas obtained through coal  

gasification (underground and surface) and coal liquefaction as end  

uses for the purposes of the CMN Act.   

40.  The background in which Section 3(3) of the CMN Act  

was amended to permit private sector entry in coal mining  

operation for captive use has been sought to be explained by the  

Central Government.  It is stated that nationalization of coal through  

the CMN Act was done with the objective of ensuring “rational,  

coordinated and scientific development and utilization of coal  

resources consistent with the growing requirements of the country”  

and as a first step in 1973, 711 coal mines specified in the  

Schedule appended to CMN Act were nationalized and vested in  

the Central Government. By 1976 Nationalisation Amendment Act,  

the Central Government alone was permitted to mine coal with the  

limited exception of private companies engaged in the production of  

iron and steel. In 1991, the country was facing huge crisis due to

25

(a) the situation regarding balance of payments; (b) the economy  

being in doldrums; (c) dismal power situation; (d) shortage in coal  

production; and (e) inability of Coal India Limited (CIL) to produce  

coal because of lack of necessary resources to maximize coal  

production amongst other reasons. There was a huge shortage of  

power in the country. The State Electricity Boards were unable to  

meet power requirements. Post liberalization, in the 8th Five Year  

Plan (1992-1997) a renewed focus was placed on developing  

energy and infrastructure in the country. CIL was not in a position to  

generate the resources required. It was in this background that in a  

meeting taken by the Deputy Chairman of the Planning  

Commission on 31.10.1991, it was decided that “private enterprises  

may be permitted to develop coal and lignite mines as captive units  

of power projects”. The approval of Cabinet was consequently  

sought vide a Cabinet note dated 30.01.1992 for “allowing private  

sector participation in coal mining operations for captive  

consumption towards generation of power and other end use,  

which may be notified by Government from time to time”. The  

Cabinet in the meeting held on 19.02.1992 considered the above  

Cabinet note and it was decided that the proposal may be brought  

up only when specific projects of private sector participation in coal  

mining come to the Government for consideration. Subsequently,

26

another Cabinet note dated 23.04.1992 was placed before the  

Cabinet containing references to certain private projects like the  

two 250 MW thermal power plants of RPG Enterprises, which had  

been recommended by the Government of West Bengal. The  

proposal contained in the Cabinet note dated 23.04.1992 was  

approved by the Cabinet on 05.05.1992. On 15.07.1992, the Bill for  

amendment of Section 3(3) of CMN Act was introduced in Rajya  

Sabha and the same was passed on 21.07.1992. The Bill was  

passed in Lok Sabha on 19.04.1993 and got assent of the  

President on 09.06.1993.   

41.  The Central Government has highlighted that once  

Section 3(3) of the CMN Act was amended to permit private sector  

entry in coal mining operations for captive use, it became  

necessary to select the coal blocks that could be offered to the  

private sector for captive use. The coal blocks to be offered for  

captive mining were duly identified and a booklet containing  

particulars of 40 blocks was prepared which was revised from time  

to time.   

42.  Mr. Goolam E. Vahanvati, learned Attorney General  

with all persuasive skill and eloquence at his command has sought  

to justify the allocation of coal blocks by the Central Government.   

He submits that the Central Government is not only empowered but

27

is duty bound to take the lead in allocation of coal blocks and that is  

what it did.  He traces this power to Sections 1A and 3(3) of the  

CMN Act.  It is argued by the learned Attorney General that in  

addition to the declaration contained in Section 2 of the 1957 Act,  

Parliament has made a further declaration in terms of Entry 54 of  

List I (Union List) of the Seventh Schedule in Section 1A of the  

CMN Act which makes specific reference to Section 3(3) of the  

CMN Act and both have to be read in conjunction with each other.  

By virtue of Parliament having placed the regulation and  

development of coal mines under the control of the Union, Section  

1A of the CMN Act regulates coal mining operations under Sections  

3(3) and 3(4). He argues that coal reserves are primarily  

concentrated in seven States, viz., Maharashtra, Madhya Pradesh,  

Chhattisgarh, Odisha, Jharkhand, Andhra Pradesh and West  

Bengal and  all these seven States have accepted and  

acknowledged the source of power of Government of India with  

respect to allocation of coal blocks.  

43.  It is argued by the learned Attorney General that by  

virtue of the bar contained in Section 3(3) of the CMN Act between  

1976 and 1993, no private company (other than the company  

engaged in the production of iron and steel) could have carried out  

coal mining operations in India. Therefore, if no other company

28

could have carried on coal mining operations, it follows that it could  

also not have applied to the State Government for grant of lease for  

mining of coal. Even if they did (post 1993) make an application for  

grant of prospective licence/mining lease directly to the State  

Government, the State Government could not process the same  

until it received the letter of allocation from the Central Government.   

44.  Learned Attorney General argues that the  

consideration of proposals by the Central Government for allocation  

of coal blocks does not contravene the provisions of the 1957 Act in  

any manner, firstly, because Section 1A of CMN Act is in addition to  

and not in derogation of the 1957 Act; secondly, an application for  

allocation of a coal block is not dealt with by the provisions of the  

1957 Act; and thirdly, after allocation, the allocatee has to make an  

application for grant of mining lease or prospecting licence to the  

State Government in accordance with the 1957 Act and the 1960  

Rules. It is for these reasons, he submits, that none of the States  

nor any private person ever challenged the grant of allocation by  

the Central Government on the ground that the Central  

Government was not empowered to allocate the coal blocks.  

45.  The above arguments of the learned Attorney General  

are vehemently contested by Mr. Prashant Bhushan, learned  

counsel for Common Cause. He submits that under the provisions

29

of CMN Act only two kinds of entities (a) Central Government and  

undertakings/corporations owned by the Central Government; and  

(b) companies having end-use plants in iron and steel, power,  

cement, etc., could work the coal mines. He submits that the CMN  

Act does not, in any way, give the power of calling applications,  

selection and allocation of coal blocks to the Central Government  

and Section 3 of the CMN Act only provides eligibility criteria for  

allocation of coal mines.  The procedure for allocation continues to  

be governed by the 1957 Act and it is for this reason that ultimately  

Section 11A concerning allocation of coal mines was introduced in  

the 1957 Act only.   

46.  Mr. Harish N. Salve, learned senior counsel, who  

appeared for interveners, Sponge Iron Manufacturers Association  

and Independent Power Producers Association of India, argues that  

Section 1A(2) of the CMN Act makes the declaration in addition to  

the existing declaration in Section 2 of the 1957 Act.  The additional  

declaration has done away with any vestige of power in the State in  

the matter of selection of beneficiaries of the mineral and if Section  

1A had not been inserted vide 1976 Nationalisation Amendment  

Act, it may have been possible to argue that the State, as the  

owner of the mineral, would nonetheless be required to grant the  

lease under Section 10 of the 1957 Act by exercising its discretion

30

under Section 10(3) albeit subject to further “conditionalities”  

imposed by Section 3(2) of the CMN Act. The additional  

declaration, learned senior counsel for the interveners submits, is  

intended to denude the State of power under Entry 23 of List II of  

the Seventh Schedule and corresponding executive power under  

Article 162 of the Constitution of India. According to Mr. Harish N.  

Salve, the grant or refusal of the lease by State insofar as coal is  

concerned, is no longer governed by Section 11 of the 1957 Act  

and that it is governed by Sections 3(3) and 3(4) of the CMN Act  

and, thus, it is obvious that there has to be first a recommendation  

by the Central Government before the State can exercise its  

discretion under Section 10(3) of the 1957 Act and that the  

converse would lead to conferring upon the State, in Section 10(3)  

of the 1957 Act, an unguided and un-canalised power to grant or  

refuse a lease. He submits that if Section 3(3) of the CMN Act is  

read as prescribing qualifications in addition to those in Section 5(1)  

of the 1957 Act, such position would make the scheme of both the  

enactments – 1957 Act and CMN Act – unworkable.  

47.  Mr. Harish N. Salve argues that the allocation letter  

issued by the Central Government is the procedure which regulates  

the exercise under Rule 22 of the 1960 Rules (and Section 10(3) of  

the 1957 Act) by the State Government and that procedure is to

31

ensure that a lease is granted to a company engaged in stipulated  

permissible activities by making it a two step process, viz., the  

issue of letter of allotment conditional upon the end-use plant,  

followed by grant of a lease once end usage is achieved. He  

submits that Section 3(3) of the CMN Act is fully satisfied where a  

lease is granted to a company which engages in the permissible  

activity. Learned senior counsel for the interveners fully supports  

the arguments of the learned Attorney General that the Central  

Government has the power to identify the beneficiary of an  

allotment and once the Central Government has identified the  

beneficiary of allotment, the State will be obliged to grant a lease if  

other conditions are satisfied.   

48.  Mr. K.K. Venugopal, learned senior counsel appearing  

for  Coal Producers Association argues that having regard to the  

declaration made under Section 2 of the 1957 Act and the  

declaration under Section 1A of the CMN Act and so also Section  

3(3) thereof, it is perfectly legitimate for the Central Government to  

exercise its power and jurisdiction in the manner it has done for the  

purpose of selecting the allottees for coal blocks. He contends that  

under Article 73 of the Constitution, the executive power of the  

Union extends to matters in regard to which the Parliament has  

legislative competence and this power it undoubtedly possesses by

32

reason of the declarations contained in the 1957 Act and the CMN  

Act enacted specifically for the regulation and development of coal  

and coal mines.   

49.  It shall have been noticed that the thrust of the  

arguments of the learned Attorney General and so also Mr. Harish  

N. Salve and Mr. K. K. Venugopal hinges around the premise that  

Sections 1A and 3(3) of the CMN Act clothe the Central  

Government with power to allocate the coal blocks or, in other  

words, select the allottees for coal blocks.  Is it so?  The  

constitutional philosophy about law making in relation to mines and  

minerals and List I Entry 36 (Federal Legislative List) and List II  

Entry 23 (Provincial Legislative List) in Schedule VII of the  

Government of India Act, 1935 which correspond to List I Entry 54  

(Union List) and List II Entry 23 (State List) in our Constitution has  

been noticed by this Court in Monnet2.  Speaking through one of us  

(R.M. Lodha, J., as he then was) in Monnet2,  this Court has noted  

the statement of the learned Solicitor General in the House of  

Commons made in the course of debate in respect of the above  

entries in the Government of India Bill that the rationale of including  

only the “regulation of mines” and “development of minerals” and  

that, too, only to the extent it was considered expedient in the  

                                                 2 Monnet Ispat and Energy Ltd. v. Union of India and Ors.; [(2012) 11 SCC 1]

33

public interest by a federal law was to ensure that the provinces  

were not completely cut out from the law relating to mines and  

minerals and if there was inaction at the Centre, then the provinces  

could make their own laws. Thus, power in relation to the mines  

and minerals was accorded to both, the Centre and the States. The  

Court in Monnet2 said:   

“130. …………... The management of the mineral resources  has been left with both the Central Government and the  State Governments in terms of List I Entry 54 and List II  Entry 23. In the scheme of our Constitution, the State  Legislatures enjoy the power to enact legislation on the  topics of “mines and minerals development”. The only fetter  imposed on the State Legislatures under Entry 23 is by the  latter part of the said entry which says, “subject to the  provisions of List I with respect to regulation and  development under the control of the Union”. In other words,  the State Legislature loses its jurisdiction to the extent to  which the Union Government had taken over control, the  regulation of mines and development of minerals as  manifested by legislation incorporating the declaration and  no more. If Parliament by its law has declared that regulation  of mines and development of minerals should in the public  interest be under the control of the Union, which it did by  making declaration in Section 2 of the 1957 Act, to the extent  of such legislation incorporating the declaration, the power of  the State Legislature is excluded. The requisite declaration  has the effect of taking out regulation of mines and  development of minerals from List II Entry 23 to that extent.  It needs no elaboration that to the extent to which the  Central Government had taken under “its control” “the  regulation of mines and development of minerals” under the  1957 Act, the States had lost their legislative competence.  By the presence of the expression “to the extent hereinafter  provided” in Section 2, the Union has assumed control to the  extent provided in the 1957 Act. The 1957 Act prescribes the  extent of control and specifies it. We must bear in mind that  as the declaration made in Section 2 trenches upon the  State legislative power, it has to be construed strictly. Any  legislation by the State after such declaration, trespassing

34

the field occupied in the declaration cannot constitutionally  stand. …...”  

50.  The declaration made by Parliament in Section 2 of the  

1957 Act states that it is expedient in the public interest that the  

Union should take under its control the regulation of mines and the  

development of minerals to the extent provided in the Act. Legal  

regime relating to regulation of mines and development of minerals  

is, thus, guided by the 1957 Act and the 1960 Rules.  In addition to  

the above declaration in 1957 Act, a further declaration has been  

inserted by Section 1A of the CMN Act, insofar as coal mines are  

concerned. By this provision, it is declared that it is expedient in the  

public interest that the Union should take under its control  

regulation and development of coal mines to the extent provided in  

sub-sections (3) and (4) of Section 3 and sub-section (2) of Section  

30 of the CMN Act.  

51.  The two declarations – Section 2 of the 1957 Act and  

Section 1A of the CMN Act – have to be conjointly read insofar as  

the control and regulation of coal mines is concerned. As a  

consequence, the States have lost their jurisdiction to legislate to  

the extent to which the Union had taken over control, regulation and  

development of coal mines as manifested by the two enactments.  

When the Parliament by its law contained in 1957 Act has declared

35

that regulation of mines and development of minerals should, in the  

public interest, be under the control of the Union and by an  

additional declaration in the CMN Act declared that regulation and  

development of mines to the extent provided in sub-sections (3)  

and (4) of Section 3 and sub-section (2) of Section 30 of the CMN  

Act should, in the public interest, be under the control of the Union,  

the power of the State legislature to legislate on the subject  

covered by these two enactments is excluded. In other words, the  

field disclosed in the declarations under the 1957 Act and the CMN  

Act is abstracted from the legislative competence of the State  

Legislature. The requisite declarations have the effect of taking out  

regulation and development of coal mines from List II Entry 23.  To  

that extent, the States have lost their legislative competence.  

52.  In Baijnath Kadio3 the Constitution Bench referred to  

two earlier decisions of this Court in Hingir-Rampur Coal Co. Ltd.4  

and M.A. Tulloch and Co.5. While dealing with declaration  

contained in Section 2 of the 1957 Act, the Court stated in para 14,  

page 847 of the Report, as follows:  

 “14. The declaration is contained in Section 2 of Act 67  of 1957 and speaks of the taking under the control of  the Central Government the regulation of mines and  development of minerals to the extent provided in the  

                                                 3 Baijnath Kadio v. State of Bihar; [(1969) 3 SCC 838]  4 Hingir-Rampur Coal Co. Ltd. v. State of Orissa; [AIR 1961 SC 459: (1961) 2 SCR 537]  5 State of Orissa v. M.A. Tulloch and Co.; [AIR 1964 SC 1284 : (1964) 4 SCR 461]

36

Act itself. We have thus not to look outside Act 67 of  1957 to determine what is left within the competence of  the State Legislature but have to work it out from the  terms of that Act……….”  

53.  In Sandur Manganese and Iron Ores Ltd.6, this Court  

held that the declaration made in Section 2 of the 1957 Act had  

denuded the State of its legislative power to make any law with  

respect to the regulation of mines and mineral development to the  

extent provided in the 1957 Act. As a sequitur, it is also held that  

the State is also denuded of its executive power in regard to  

matters covered by the 1957 Act and the 1960 Rules and there is  

no question of the State having any power to frame a policy de-hors  

the 1957 Act and the 1960 Rules.  

54.  Om Prakash Mehta7 highlights that the 1957 Act and  

the 1960 Rules are a complete code in respect of the grant and  

renewal of prospecting licences as well as mining leases in lands  

belonging to the Government as well as lands belonging to private  

persons.   

55.  In Monnet2, the scope and extent of the word  

‘regulation’ occurring in Section 2 has been examined and it is  

stated that ‘regulation’ must receive wide interpretation but the  

extent of control by the Union as specified in the 1957 Act has to be  

                                                 6 Sandur Manganese and Iron Ores Ltd. v. State of Karnataka; [(2010) 13 SCC 1]  7 State of Assam v. Om Prakash Mehta; [(1973) 1 SCC 584]

37

construed strictly.   The same meaning must apply to the word  

‘regulation’ occurring in Section 1A of the CMN Act.  In other words,  

the extent of control by the Union as specified in the CMN Act has  

to be construed strictly.   

56.  In Orissa Cement Ltd.8 a three Judge Bench of this  

Court explained that in the case of a declaration under Entry 54, the  

legislative power of the State Legislature is eroded only to the  

extent control is assumed by the Union pursuant to such  

declaration as spelt out by the legislative enactment which makes  

the declaration.   

57.  1957 Act provides for general restrictions on  

undertaking prospecting and mining operations, the procedure for  

obtaining reconnaissance permits, prospecting licences and mining  

leases and the rule making power of regulating the grant of  

reconnaissance permits, prospecting licences and mining leases.   

Clause (a) of sub-section (3) of Section 3 of the CMN Act enables   

persons specified therein only to carry on coal mining operation. In   

clause (c),  it is provided that no lease for winning or mining coal  

should be granted in favour of any person other than the  

Government, Government company or corporation referred to in  

clause (a).  Under clause (b) of sub-section (3), excepting the  

                                                 8 Orissa Cement Ltd. v. State of Orissa; [1991 Supp. (1) SCC 430]

38

mining leases granted before 1976 in favour of the Government,  

Government company or corporation referred to in clause (a) and  

any sub-lease(s) granted by any such Government, Government  

company or corporation, all other mining leases and sub-leases in  

force immediately before such commencement insofar as they  

relate to the winning or mining of coal stand terminated.  When a  

sub-lease stands terminated under sub-section (3), sub-section (4)  

of Section 3 provides that it shall be lawful for the Central  

Government or the Government company or corporation owned or  

controlled by the Central Government to obtain a prospecting  

licence or a mining lease in respect of whole or part of the land  

covered by mining lease which stands so terminated.  The above  

provisions in the CMN Act, as inserted in 1976, clearly show that  

the target of these provisions in the CMN Act is coal mines, pure  

and simple.  CMN Act effectively places embargo on granting the  

leases for winning or mining of coal to persons other than those  

mentioned in Section 3(3)(a).  Does CMN Act for the purposes of  

regulation and development of mines to the extent provided therein  

alter the legal regime incorporated in the 1957 Act?  We do not  

think so.  What CMN Act does is that in regard to the matters falling  

under the Act, the legal regime in the 1957 Act is made subject to  

the prescription under Section 3(3)(a) and (c) of the CMN Act.   

39

1957 Act continues to apply in full rigour for effecting prescription of  

Section 3(3)(a) and (c) of the CMN Act.  For grant of  

reconnaissance permit, prospecting licence or mining lease in  

respect of coal mines, the MMDR regime has to be mandatorily  

followed.  1957 Act and so also the 1960 Rules do not provide for  

allocation of coal blocks nor they provide any mechanism, mode or  

manner of such allocation.   

58.  Learned Attorney General submits that an application for  

allocation of a coal block is not dealt with by the 1957 Act and,  

therefore, consideration of proposals for allocation of coal blocks  

does not contravene the provisions of the 1957 Act.  The  

submission of the learned Attorney General does not merit  

acceptance for more than one reason.   First, although the Central  

Government has pre-eminent role under the 1957 Act inasmuch as  

no reconnaissance permit, prospecting licence or mining lease of  

coal mines can be granted by the State Government without prior  

approval of the Central Government but that pre-eminent role does  

not clothe the Central Government with the power to act in a  

manner in derogation to or inconsistent with the provisions  

contained in the 1957 Act. Second, the CMN Act, as amended from  

time to time, does not have any provision, direct or indirect, for  

allocation of coal blocks.  Third, there are no rules framed by the

40

Central Government nor is there any notification issued by it under  

the CMN Act providing for allocation of coal blocks by it first and  

then consideration of an application of such allottee for grant of  

prospecting licence or mining lease by the State Government.   

Fourth, except providing for the persons who could carry out coal  

mining operations and total embargo on all other persons  

undertaking such activity, no procedure or mode or manner for  

winning or mining of coal mines is provided in the CMN Act or the   

1960 Rules or by way of any notification. Fifth, even in regard to the  

matters falling under CMN Act, such as prescriptive direction that  

no person other than those provided in Sections 3(3) and 3(4) shall  

carry on mining operations in the coal mines, the legal regime  

under the 1957 Act, subject to the prescription under Sections 3(3)  

and 3(4), continues to apply in full rigour.   Mr. Harish N. Salve,  

learned senior counsel for the interveners, is not right in his  

submission that allocation letter issued by the Central Government  

is the procedure which regulates the exercise under Rule 22 of the  

1960 Rules. Had that been so, some provisions to that effect would  

have been made in the CMN Act or the 1960 Rules framed  

thereunder but there is none.   

59.  The submission of the learned Attorney General that  

the 7 States - Maharashtra, Madhya Pradesh, Chhattisgarh,

41

Odisha, Jharkhand, Andhra Pradesh and West Bengal – which  

have coal deposits, have accepted and acknowledged the source  

of power of the Central Government with regard to allocation of coal  

blocks is not fully correct.  Odisha has strongly disputed that  

position.  Odisha’s stand is that the system of allocation of coal  

blocks by the Central Government is alien to the legal regime under  

the CMN Act and the 1957 Act.  It is true that many of these States  

have taken the position that allocation letter confers a right on such  

allottee to get mining lease and the only role left with the State  

Government is to carry out the formality of processing the  

application and for execution of lease deed, but,  in our view, the  

source of power of the Central Government in allocation of coal  

blocks is not dependant on the understanding of the State  

Governments but it is dependant upon whether such power exists  

in law or not.  Indisputably, power to regulate assumes the  

continued existence of that which is to be regulated and it includes  

the authority to do all things which are necessary for the doing of  

that which is authorized including whatever is necessarily incidental  

to and consequential upon it but the question is, can this incidental  

power be read to empower the Central Government to allocate the  

coal blocks which is neither contemplated by the CMN Act nor by  

the 1957 Act?  In our opinion, the answer has to be in the negative.  

42

It is so because where a statute requires to do a certain thing in a  

certain way, the thing must be done in that way or not at all.  Other  

methods of performance are necessarily forbidden9. This is  

uncontroverted legal principle.    

60.  It is argued by the learned Attorney General that the  

allocation letter does not by itself confer the right to work mines and  

the identification of the coal block does not impinge upon the rights  

of the State Government under the 1957 Act.  Learned Attorney  

General argues that allocation of coal block is essentially an  

identification exercise where coal blocks selected by the CIL for  

captive mining were identified by the Screening Committee for  

development by an allocatee, after considering the suitability of the  

coal block (in terms of exercise and quality of reserve) vis-à-vis the  

requirements of the end-use plan of the applicant.  It is submitted  

by the Attorney General that a letter of allocation is the first step. It  

entitles the allocatee to apply to the State Government for grant of  

prospecting licence/mining lease in accordance with the provisions  

of the 1957 Act.  The right to apply for grant of prospecting  

licence/mining lease does not imply that with the issuance of  

allocation letter the allocatee automatically gets the clearances and  

approval required under the 1957 Act, the 1960 Rules, the Forest  

                                                 9 Nazir Ahmad v. King Emperor; [(1935-36) 63 IA 372]

43

(Conservation) Act, 1980 and the Environment (Protection) Act,  

1986, etc.  According to the learned Attorney General, after  

allocation, the following steps are required to be complied with:    

a. The allocatee is required to apply to the State Government for  

grant of Prospecting Licence in case of an unexplored block, or a  

Mining Lease in case of an explored block.   

b. On receipt of the application for grant of Prospecting License  

or Mining Lease, as the case may be, the State Government, in the  

case of Prospecting Licence can process the application for  

Prospecting Licence in accordance with Chapter III of the 1960  

Rules.  

c. In the case of application for Mining Lease (in Form I), the  

State Government has to take a decision to grant precise area for  

the purpose of the lease and communicate such decision to the  

applicant.    

d. On receipt of the communication from the State Government  

of the precise area to be granted, the applicant is required to submit  

a mining plan to the Central Government for its approval. [Rule  

22(4)]

44

e. After the mining plan has been duly approved by the Central  

Government, the applicant submits the same to the State  

Government for grant of mining lease over the area.   

f. After receipt of the duly approved mining plan, the State  

Government makes a proposal for grant of prior consent by the  

Central Government in terms of the proviso to Section 5(1) of the  

1957 Act.   

g. In addition to the approved mining plan, the allocatee is  

required to obtain permission under Section 2 of the Forest  

(Conservation) Act, 1980 if the coal block is located in a scheduled  

forest.  Further, the allocatee is required to submit to the State  

Government, prior environmental clearance from the Ministry of  

Environment and Forests, Government of India for the project.   

Forest Clearance and EIA clearance operate separately.   

h. Mining Lease is thereafter granted by the State Government,  

after verifying that all statutory requirements have been duly  

complied with by the allocatee.             

61.  There seems to be no doubt to us that allocation letter  

is not merely an identification exercise as is sought to be made out  

by the learned Attorney General.  From the position explained by  

the concerned State Governments, it is clear that the allocation

45

letter by the Central Government creates and confers a very  

valuable right upon the allottee.  We are unable to accept the  

submission of the learned Attorney General that allocation letter is  

not bankable.  As a matter of fact, the allocation letter by the  

Central Government leaves practically or apparently nothing for the  

State Government to decide save and except to carry out the  

formality of processing the application and for execution of the  

lease deed with the beneficiary selected by the Central  

Government.  Though, the legal regime under the 1957 Act  

imposes responsibility and statutory obligation upon the State  

Government to recommend or not to recommend to the Central  

Government grant of prospecting licence or mining lease for the  

coal mines, but once the letter allocating a coal block is issued by  

the Central Government, the statutory role of the State Government  

is reduced to completion of processual formalities only.  As noticed  

earlier, the declaration under Section 1A of the CMN Act does not  

take away the power of the State under Section 10(3) of the 1957  

Act.  It is so because the declaration under Section 1A of the CMN  

Act is in addition to the declaration made under Section 2 of the  

1957 Act and not in its derogation.  1957 Act continues to apply  

with the same rigour in the matter of grant of prospecting licence or  

mining lease of coal mines but the eligibility of persons who can

46

carry out coal mining operations is restricted to the persons  

specified in Section 3(3)(a) of the CMN Act.                 

62.  In Tara Prasad Singh10, a seven Judge Constitution  

Bench while dealing with the purposiveness of the CMN Act, as  

amended in 1976, vis-à-vis the 1957 Act, stated that nothing in this  

Act (CMN) could be construed as a derogation of the principle  

enunciated in Section 18 of the 1957 Act. The Court said:  

“Therefore, even in regard to matters falling under the  Nationalisation Amendment Act which terminates existing  leases and makes it lawful for the Central Government to  obtain fresh leases, the obligation of Section 18 of the Act of  1957 will continue to apply in its full rigour. As contended by  the learned Solicitor General, Section 18 contains a statutory  behest and projects a purposive legislative policy. The later  Acts on the subject of regulation of mines and mineral  development are linked up with the policy enunciated in  Section 18.”                      (emphasis supplied by us)  

63.  The observations made by this Court in Tara Prasad  

Singh10 about interplay between the CMN Act and the 1957 Act  

with reference to the policy enunciated in Section 18, in our view,  

apply equally to the entire legal regime articulated in the 1957 Act.    

We are of the opinion that nothing should be read in the two Acts,  

namely, CMN Act and the 1957 Act, which results in destruction of  

the policy, purpose and scheme of the two Acts.  It is not right to  

suggest that by virtue of declaration under Section 1A of the CMN  

                                                 10 Tara Prasad Singh and others v. Union of India and others; [(1980) 4 SCC 179]

47

Act, the power of the State under Section 10(3) of the 1957 Act has  

become unavailable.  The submission of Mr. Harish N. Salve,  

learned senior counsel for the interveners that additional  

declaration under Section 1A of the CMN Act seeks to do away with  

any vestige of power in the State in the matter of selection of  

beneficiaries of the mineral is not meritorious.  Had that been so,  

Rule 35 of the 1960 Rules would not have been amended to  

provide that where two or more persons have applied for  

reconnaissance permit or prospecting licence or a mining lease in  

respect of the same land, the State Government shall, inter alia,   

consider the end-use of the mineral by the applicant. The  

declaration under Section 1A has not denuded the States of any  

power in relation to grant of mining leases and determining of those  

permitted to carry on coal mining operation.  

64.      The allocation of coal block is not simply identification of  

the coal block or the allocatee as contended by the learned  

Attorney General but it is in fact selection of beneficiary.  As a  

matter of fact, Mr. Harish N. Salve, learned senior counsel for the  

interveners, has taken a definite position that allocation letter may  

not by itself confer purported rights in the minerals but such  

allocation has legal consequences and confers private rights to the

48

allocatees for obtaining the coal mining leases for their end-use  

plants.           

65.  In view of the foregoing discussion, we hold, as it must  

be, that the exercise undertaken by the Central Government in  

allocating the coal blocks or, in other words, the selection of  

beneficiaries, is not traceable either to the 1957 Act or the CMN  

Act.  No such legislative policy (allocation of coal blocks by the  

Central Government) is discernible from these two enactments.   

Insofar as Article 73 of the Constitution is concerned, there is no  

doubt that the executive power of the Union extends to the matters  

with respect to which the Parliament has power to make laws and  

the executive instructions can fill up the gaps not covered by  

statutory provisions but it is equally well settled that the executive  

instructions cannot be in derogation of the statutory provisions.   

The practice and procedure for allocation of coal blocks by the  

Central Government through administrative route is clearly  

inconsistent with the law already enacted or the rules framed.   

66.  The principle of Contemporanea Expositio was  

pressed into service by the learned Attorney General and the  

learned senior counsel for interveners.  It is argued that the  

Ministries of Central Government, the State Governments and all  

concerned have understood the declaration under Section 1A read

49

with Section 3 of the CMN Act recognizing that the selection of  

beneficiaries through allocation letter is the task of the Union. The  

exposition of the legal position by them must be accepted as there  

is nothing to show that the exposition in respect of allocation of coal  

blocks received by the Central Government, State Governments  

and all concerned was clearly wrong.  In this regard, reliance has  

been placed on the decision of this Court in Desh Bandhu Gupta11.    

67.  In Desh Bandhu Gupta11, this Court has dealt with the  

principle of Contemporanea Expositio.  While doing so, this Court  

referred to Crawford on Statutory Construction (1940 ed.) and the  

two decisions of the Calcutta High Court in Baleshwar Bagarti12 and  

Mathura Mohan Saha13  and culled out the legal position in para 9  

(page 572 of the Report) as under:        

“9. It may be stated that it was not disputed before us  that these two documents which came into existence  almost simultaneously with the issuance of the  notification could be looked at for finding out the true  intention of the Government in issuing the notification in  question, particularly in regard to the manner in which  outstanding transactions were to be closed or  liquidated.  The principle of contemporanea expositio  (interpreting a statute or any other document by  reference to the exposition it has received from  contemporary authority) can be invoked though the  same will not always be decisive of the question of  construction (Maxwell 12th ed.p. 268).  In Crawford on  Statutory Construction (1940 ed.) in para 219 (at pp.  393-395) it has been stated that administrative  

                                                 11 Desh Bandhu Gupta and Co. v.Delhi Stock Exchange Association Ltd.; [(1979) 4 SCC 565]  12 Baleshwar Bagarti v. Bhagirathi Dass; [ILR 35 Calcutta 701]  13 Mathura Mohan Saha v. Ram Kumar Saha; [ILR 43 Calcutta 790]

50

construction (i.e. contemporaneous construction placed  by administrative or executive officers charged with  executing a statute) generally should be clearly wrong  before it is overturned; such a construction, commonly  referred to as practical construction, although not  controlling, is nevertheless entitled to considerable  weight; it is highly persuasive.  In Baleshwar Bagarti v.  Bhagirathi Dass [ILR 35 Cal 701 at 713] the principle,  which was reiterated in Mathura Mohan Saha v. Ram  Kumar Saha [ILR 43 Cal 790 : AIR 1916 Cal 136] has  been stated by Mookerjee, J., thus:  

 ‘It is a well settled principle of interpretation  that courts in construing a statute will give  much weight to the interpretation put upon  it, at the time of its enactment and since, by  those whose duty it has been to construe,  execute and apply it….. I do not suggest for  a moment that such interpretation has by  any means a controlling effect upon the  courts; such interpretation may, if occasion  arises, have to be disregarded for cogent  and persuasive reasons, and in a clear  case of error, a court would without  hesitation refuse to follow such  construction.   

 Of course, even without the aid of these two documents  which contain a contemporaneous exposition of the  Government’s intention, we have come to the  conclusion that on a plain construction of the notification  the proviso permitted the closing out or liquidation of all  outstanding transactions by entering into a forward  contract in accordance with the rules, bye-laws and  regulations of the respondent.”  

 68.  The above is consistent view.  In our view, an  

interpretation to the statute received from contemporary authority is  

not binding upon the courts and may have to be disregarded if such  

interpretation by the contemporary authority is clearly wrong. The

51

process evolved by the Central Government for allocation of coal  

blocks for captive use has significantly and effectively reversed the  

scheme provided in the 1957 Act inasmuch as in most of the cases  

the applications have been made directly to the Central  

Government. West Bengal has stated that in some cases, they had  

knowledge of such applications and in some cases the State  

Government had no such knowledge.  Then once allocation letter  

has been issued by the Central Government, virtually no power  

remains with the State Government in objectively considering the  

application for reconnaissance permit, prospecting licence or  

mining lease. Maharashtra says, “…the role of the State  

Government is limited in the case of coal mines as the discretion to  

reject once the Central Government has issued an allocation letter  

is virtually non-existent………”.  Odisha says, “……Once the  

beneficiary has been identified by the Central Government by  

making the allocation of coal block, there was nothing left out for  

the State Government to decide…………”.  It must be noted without  

an iota of hesitation that the process for allocation of coal blocks for  

captive use has rendered the role of the State Government only  

mechanical and the concept of ‘previous approval’ in Section 5 of  

the 1957 Act meaningless  after recommendation has been made  

by the State Government.  It is not without any reason that

52

confronted with this difficulty, the 1957 Act has been amended and  

Section 11A inserted in 2010 providing for allocation of coal blocks  

and also the mode and manner of such allocation.   

69.  Assuming that the Central Government has  

competence to make allocation of coal blocks, the next question is,  

whether such allocation confers any valuable right amounting to  

grant of largesse?  Learned Attorney General argues that allocation  

of coal blocks does not amount to grant of largesse since it is only  

the first statutory step.  According to him, the question whether the  

allocation amounts to grant of largesse must be appreciated not  

from the perspective whether allocation confers any rights upon the  

allocatee but whether allocation amounts to conferment of largesse  

upon the allocatee.  An allocatee, learned Attorney General  

submits, does not get right to win or mine the coal on allocation  

and, therefore, an allocation letter does not result in windfall gain  

for the allocatee.  He submits that diverse steps, as provided in  

Rules 22A, 22B, and 22(5) of the 1960 Rules and the other  

statutory requirements, have to be followed and ultimately the grant  

of prospecting licence in relation to unexplored coal blocks or grant  

of mining lease with regard to explored blocks entitles the  

allocatee/licensee/lessee to win or mine the coal.

53

70.  We are unable to accept the submission of the learned  

Attorney General that allocation of coal block does not amount to  

grant of largesse.  It is true that allocation letter by itself does not  

authorize the allottee to win or mine the coal but nevertheless the  

allocation letter does confer a very important right upon the allottee  

to apply for grant of prospecting licence or mining lease.  As a  

matter of fact, it is admitted by the interveners that allocation letter  

issued by the Central Government provides rights to the allottees  

for obtaining the coal mines leases for their end-use plants.  The  

banks, financial institutions, land acquisition authorities, revenue  

authorities and various other entities and so also the State  

Governments, who ultimately grant prospecting licence or mining  

lease, as the case may be, act on the basis of the letter of  

allocation issued by the Central Government.  As noticed earlier,  

the allocation of coal block by the Central Government results in the  

selection of beneficiary which entitles the beneficiary to get the  

prospecting licence and/or mining lease from the State  

Government.  Obviously, allocation of a coal block amounts to grant  

of largesse.   

71.   Learned Attorney General accepted the position that  

in the absence of allocation letter, even the eligible person under  

Section 3(3) of the CMN Act cannot apply to the State Government

54

for grant of prospecting licence or mining lease.  The right to obtain  

prospecting licence or mining lease of the coal mine admittedly is  

dependant upon the allocation letter.   The allocation letter,  

therefore, confers a valuable right in favour of the allottee.   

Obviously, therefore, such allocation has to meet the twin  

constitutional tests, one, the distribution of natural resources that  

vest in the State is to sub-serve the common good and, two, the  

allocation is not violative of Article 14.    

72.  The PIL petitioners have seriously criticized the entire  

allocation process by the Central Government.  They submit that  

allocations made on the recommendations of the Screening  

Committee and through the government dispensation route after  

1993 are in violation of statutory provisions contained in the 1957  

Act.  Moreover, the Central Government while making the  

allocations failed to even follow the basic statutory eligibility for  

grant of captive coal blocks.  The power for grant of captive coal  

block is governed by Section 3(3)(a) of the CMN Act.  According to  

which, only two kinds of entities, viz., (a) Central Government, or  

undertakings/corporations owned by the Central Government or (b)  

a company having end-use plants in iron, steel, power, washing of  

coal or cement, can carry out coal mining operations.  The State  

Government undertakings are not included in the above provision

55

and any allocation to them can only be made if they are engaged in  

any of the end-uses specified under that provision.  Commercial  

mining by the State Public Sector Undertakings/companies is not  

permitted, yet as many as 38 coal blocks were allocated to State  

Public Sector Undertakings for commercial mining though these  

undertakings were not engaged in any specified end-use activity.  

They submit that allocation of coal blocks made by the Central  

Government, whether by way of Screening Committee route or  

dispensation route, is ipso facto illegal and it is in total violation of  

the CMN Act.  Moreover, it is submitted that almost all these State  

PSUs then signed agreements with private companies wherein the  

right to mine coal was given to them which later sold the coal to the  

State PSUs either at the market price or at CIL price.  

73.  According to Mr. Prashant Bhushan, learned counsel  

for the petitioner-Common Cause and Mr. Manohar Lal Sharma,  

petitioner-in-person, the expression “engaged in” in Section  

3(3)(a)(iii) means that the company that was applying for the coal  

block must have set up an iron and steel plant, power plant or  

cement plant and be engaged in the production of steel, power or  

cement.  Most companies were silent in their applications as to  

whether or not the power, steel or cement plant was operational.   

They only stated that they proposed to set up such plants.  

56

Moreover, from 2006 even the requirement of end-use project was  

done away with and the Central Government allowed companies to  

apply and obtain coal blocks, and it was stated that the coal mined  

from these blocks would be transferred to an end-user company.   

Thus, the basic minimum statutory requirements were not adhered  

to and followed in making allocation of coal blocks.  

74.  It is submitted  on behalf of the PIL petitioners that the  

allocation of those blocks which had reserves far in excess of  

requirement for the end-use project was made which demonstrates  

the total non-application of mind and arbitrariness in the decision  

making process.  Mr. Prashant Bhushan, learned counsel for  

Common Cause and Mr. Manohar Lal Sharma, petitioner-in-person  

submit that the allocation of coal blocks constitutes a largesse as it  

confers very valuable benefit on the applicant to get mining lease.   

It is argued that the arbitrary and non-transparent allocation  

process has resulted in windfall gain to the allottees and the State  

has been deprived of the full value of its resources.  Besides that  

the process of allocation was arbitrary and non-transparent, it is  

submitted by the PIL petitioners that the process also suffers from  

mala fides inasmuch as though a comprehensive note on  

competitive bidding on allocation of coal blocks was placed by the  

then Coal Secretary on 16.07.2004, the allocation process through

57

the Screening Committee continued leading to windfall gain to the  

private companies and thereby corresponding loss to the public  

exchequer.  In this regard, Mr. Prashant Bhushan, learned counsel  

for Common Cause and Mr. Manohar Lal Sharma, petitioner-in-

person referred to Parliamentary Standing Committee Report  

submitted on 24.03.2013, Central Empowered Committee Report  

made in I.A. No.2167 to the Forest Bench regarding the loss from  

the allocation of coal mines in the State of Madhya Pradesh, the  

additional affidavit of the Government of Maharashtra filed on  

09.01.2014 and the CAG Report.  

75.  It is argued on behalf of the PIL petitioners that the  

Screening Committee did not follow any objective criteria in  

determining as to who is to be selected or who is to be rejected.   

The minutes of the Screening Committee meetings do not show  

that selection was made after proper assessment. There is no  

evaluation of merit and no inter se comparison of the applicants.   

No chart of evaluation was prepared.  The determination of the  

Screening Committee is apparently subjective.   It is no co-

incidence that a large number of allottees are either powerful  

corporate groups or shady companies linked with politicians and  

ministers or those who came with high profile recommendations.  

Most of these allottees were in fact ineligible for allocation; they had

58

misrepresented the facts and were not more meritorious than  

others whose claims have been rejected, but by serious  

manipulations and abuse, they were able to get the coal blocks.  

76.  With regard to Government dispensation route  

whereby public sector corporations and undertakings were  

allocated coal blocks, it is submitted by Mr. Prashant Bhushan,  

learned counsel for the Common Cause and Mr. Manohar Lal  

Sharma, petitioner-in-person that such allocations were violative of  

Section 3 of the CMN Act.  The State Government undertakings are  

not included in Section 3 and in any case allocation to them could  

have been made only if they were engaged in any of the end-uses  

specified under Section 3(3)(a)(iii) of the CMN Act.  The State  

PSUs have signed agreements with private companies under which  

substantial benefits or interest from the coal blocks had accrued to  

the private companies thereby causing huge loss to the public  

exchequer and windfall gain to the private companies.  The PIL  

petitioners, therefore, vehemently argued that the allocation of coal  

blocks deserves to be quashed being non-transparent, arbitrary,  

illegal and unconstitutional.   

77.  According to Central Government, the need for a  

Screening Committee was felt because development of coal mines  

for captive end-uses required consideration of inputs from a variety

59

of  stakeholders such as the Ministry of Coal, Ministry of Railways,  

the concerned State Government (owner of the coal block), the  

concerned Administrative Ministry like Ministry of Power (for inputs  

pertaining to the end use plant) and Coal India Limited (to protect  

CIL’s interest in coal blocks being developed by its subsidiaries).   

Initially, by Office Memorandum dated 14.07.199214, the Screening  

Committee was constituted by the Ministry of Coal for scrutinizing  

applications/proposals received from private power generating  

companies requesting for ownership and operation of captive coal  

mines.  The Screening Committee was reconstituted on more than  

one occasion by Office Memorandum dated 05.08.199315, Office  

                                                 14.          NO.13011/3/92-CA  

Government of India  Ministry of Coal  

New Delhi, the 14th July, 1992.  OFFICE MEMORANDUM  

Subject:  Constitution of a Screening Committee for screening proposals received for captive mining  by private power generation companies.   In the context of participation of private power generating companies in power generation,  proposals are also being received in the Ministry of Coal from such companies requesting for  ownership and operation of captive coal mines.  For screening of such applications/ proposals it has  been decided to constitute a Screening Committee comprising of the following members:-  1. Additional Secretary, Ministry of Coal   -  Chairman  2. Adviser (Projects), Ministry of Coal      -  Member-Convenor    3. Joint Secretary & Financial Adviser,      Ministry of Coal.    - Member  4. Representative of Ministry of Railways  - Member  5. Representative of Ministry of Power  - Member  6. Representative of concerned       State Govt. (Revenue Deptt.)   - Member   The Committee will meet once in a month and examine the proposals received from  various parties.  

                  (S. KRISHNAN)                  UNDER SECY. TO THE GOVERNMENT OF INDIA     15.                                              NO.13011/3/92-CA  

Government of India

60

Memorandum dated 10.01.200016,  Office Memorandum dated  

17.04.200317 and Office Memorandum dated 26.09.200518.   

                                                                                                                                                             Ministry of Coal  

New Delhi, the 5th August, 93.  OFFICE MEMORANDUM  

           Subject:  Constitution   of  a  Screening  Committee  for  screening   proposals received for captive mining by private power generation companies   – Matter regarding.  

In continuation of this Ministry’s Office Memorandum of even number dated 14.7.1992  constituting a Screening Committee for screening proposals received for captive mining by private  sector power generation companies, it has been decided to revise partially the composition of the  said Screening Committee as under:-    1. Additional Secretary,     -  Chairman      Ministry of Coal, New Delhi.   2. Adviser (Project)    - Member-convenor      Ministry of Coal, New Delhi.   3. JS & FA,     - Member      Ministry of Coal, New Delhi.      4. Representative of Ministry    - Member      of Railways, New Delhi.   5. Representative of Ministry    - Member      of Power, New Delhi.    6. Representative of concerned    - Member      State Govt. (Revenue Deptt.)     7. Director (Technical) CIL,   - Member      Calcutta.  8. Chairman/Managing Director –   - Member      CMPDIL, Ranchi.  9. CMD/ of concerned subsidiary   - Member.      Companies of CIL.             (J.L. MEENA)      DEPUTY SECY. TO THE GOVERNMENT OF INDIA    16.        No.47011/15/95-CPAM  

Government of India  Ministry of Mines and Minerals  

Department of Coal  New Delhi, the 10th January, 2000  

Office Memorandum    

Subject: Constitution of a Screening Committee for screening proposals received for  captive mining by companies engaged in the generation of power and manufacture of  iron, steel and cement.   The undersigned is directed to refer to this Ministry of O.M. No.13011/3/92-CA  dated 14.7.1992 and 5.8.1993 and No.47011/15/95-CPAM dated 26/28.10.1999 and to  say that instead of Joint Secretary & Financial Adviser, Deptt. Of Coal, Joint Secretary  (Coal), Deptt. Of Coal will be member of the Screening Committee. Accordingly,  Screening Committee for screening proposals for allocation of coal/ lignite blocks for

61

                                                                                                                                                             manufacture of iron/ steel captive production of power and production of cement in the  public / private sector is reconstituted as under:-    1. Additional Secretary,     -  Chairman      Department of Coal   2. Adviser (Projects)    - Member - Convenor      Department of Coal        3. Joint Secretary (Coal)    - Member      Department of Coal    4. Joint Secretary (LA)    - Member      Department of Coal  5. Representative of Ministry of Railways,  - Member      New Delhi,   6. Representative of Ministry of Power,  - Member      New Delhi.   7. Representative of concerned State   - Member      Govt. (Revenue Deptt.)     8. Director (Technical), CIL, Calcutta  - Member  9. Chairman-cum-Managing Director,   - Member      CMPDIL, Ranchi  10.CMD of concerned subsidiary company  - Member       Of CIL/NLC         (T.K. Ghosh)             Director   

17.         No.13011/5/2003-CA  Government of India  

Ministry of Coal  New Delhi, dated 17.4.2003  

Office Memorandum    Subject:- Reconstitution of a Screening Committee for screening proposals  received for captive mining by companies engaged in the generation of power and  manufacture of iron, steel and cement.   The undersigned is directed to refer to this Ministry’s O.M. No.13011/3/92-CA  dated 14.7.1992 and 5.8.1993 and No. 47011/15/95-CPAM dated 10.1.2000 and to state  that from the date of issuance of this O.M. the Screening Committee shall be headed by  Secretary, Ministry of Coal and Joint Secretary (Coal), Ministry of Coal shall be the  member convenor.  Accordingly, Screening Committee for screening proposals for  allocation of coal / lignite blocks for generation of power and manufacture of iron, steel  and cement in the public/ private sector is reconstituted as under:-    

1. Secretary  Ministry of Coal  

Chairman  

2. Joint Secretary (Coal)  Ministry of Coal  

Member –  Convenor  

3. Adviser (Projects)  Ministry of Coal  

Member  

4. Joint Secretary (LA)  Ministry of Coal  

Member  

5. Representative of Ministry of Railways,  New Delhi.  

Member  

6. Representative of Ministry of Power,  New Delhi  

Member  

7. Representative of concerned State Govt. Member

62

78.  Learned Attorney General argues that the Screening  

Committee provided opportunity to stakeholders to express their  

views about permitting a particular company to develop a particular  

coal block for its end-use plant. The State Governments as the  

owners of coal blocks within their territories participated in the  

Screening Committee meetings.  At no stage, anybody objected to  

the allocation of coal blocks by the Central Government through the  

Screening Committee route.  Learned Attorney General in this  

regard referred to the affidavits filed on behalf of Maharashtra,  

Madhya Pradesh, Odisha, Chhattisgarh, West Bengal, Jharkhand  

and Andhra Pradesh.   The process of allocation was participatory.   

                                                                                                                                                             8. Director (Technical), CIL, Calcutta Member  9. Chairman-cum-Managing Director,  

CMPDIL, Ranchi  Member  

10. CMD of concerned subsidiary company  of CIL/NLC  

Member  

       (S. Gulati)            Director     

18.            No.13016/35/2005-CA-I  Government of India  

Ministry of Coal  New Delhi, the 26th September, 2005  

OFFICE MEMORANDUM    Subject: Reconstitution of Screening Committee for screening proposals received from  companies engaged in the generation of power and manufacture of iron, steel and cement  for allocation of coal blocks.   The undersigned is director to refer to this Ministry’s O.M. No.13011/5/2003- CA dated 17.4.2003 and corrigendum No.13011/5/2003-CA issued on 7.5.2003 and the  O.M. of even no. dated 2.9.2003 on the subject mentioned above and to state that from  the date of issuance of this O.M., the following shall be the member of the Screening  Committee in addition to the existing members of the Committee:-   Secretary, or his representative, of Ministry of Environment & Forests.     

(S.Gulati)                                                    Director.  

63

The coal blocks were allocated to private companies only from the  

approved list of blocks to be offered for captive mining and the  

interests of CIL, being paramount, were duly protected and  

preserved. Only in such cases of subsisting lease, where CIL had  

no plans to work these blocks in near future and consented to these  

blocks being offered for captive mining, few of such blocks were  

allocated but CIL’s interest was kept into consideration.  He, thus,  

submitted that allocation of coal blocks during the subject period  

was transparent and it does not suffer from any constitutional vice  

or legal infirmity.  

79.  Moreover, it is the submission of the learned Attorney  

General that allocation of coal blocks by the Central Government  

has brought significant benefits and investment to the States in  

which these coal blocks and the associated end-use plants are  

located.  Due to substantial investment and employment  

opportunities generated in various States, the State Governments  

have accepted, participated and made recommendations in the  

meetings of the Screening Committee.  A number of blocks have  

been allocated in accordance with the recommendations of the  

State Governments.    Besides the benefits and investment to the  

State in which coal blocks and the associated end-use plants are  

located, learned Attorney General also submits that there are

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number of States where coal blocks are not located, which have got  

benefits due to the substantial investment in associated end use  

plants. For instance, it is submitted that blocks in Maharashtra,  

namely, Baranj – I to IV, Kiloni and Manoradeep were allocated to  

Karnataka Power Corporation for captive use in its power  

generation plants.   The end-use is the supply of coal to Bellary  

Thermal Power Station (in Karnataka) which is supplying 1000 MW  

power to the State grid.   

80.  Learned Attorney General for the sake of convenience  

divided the allocations recommended by the Screening Committee  

for the period between 14.07.1993 and 03.07.2008 in 36 meetings  

into four periods: first period between 14.07.1993 to 19.08.2003 (1st  

meeting till the 21st meeting); second period from 04.11.2003 to  

18.10.2005 (22nd meeting to 30th meeting); third period from  

29/30.06.2006 to 07/08.09.2006 (32nd meeting till the 34th meeting)  

and the fourth period from 20.06.2007 to 03.07.2008 (35th and 36th  

meeting).  Learned Attorney General argues that in the first period,   

21 coal blocks were recommended for allocation after full  

consideration of each case.  During the second period, 26 blocks  

were recommended.  These recommendations were also made by  

the Screening Committee after consideration of each applicant.   

The third period relates to recommendations made pursuant to the

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advertisement issued by Ministry of Coal in September, 2005.  The  

decision to advertise was taken as there was growing demand for  

coal blocks which had substantially matured in the economy by this  

time.  In the third period, the Screening committee recommended  

20 blocks for allocation. In the fourth period, recommendations  

were made by the Screening Committee pursuant to the  

advertisement issued in 2006 whereby 38 coal blocks were  

advertised for allocation, out of which 15 blocks were reserved for  

the power sector.  Learned Attorney General clarified that a coal  

block that was approved as one block in the advertisement has  

been subsequently considered as two blocks in the 36th meeting of  

the Screening Committee.  Learned Attorney General has fairly  

admitted that the minutes of the Screening Committee meetings in  

the third and fourth periods do not contain the particulars showing  

consideration of each application.  He, however, justifies the  

manner in which the exercise was undertaken by the Screening  

Committee in the third and fourth periods as, according to him, the  

huge number of applications had been received by the Ministry of  

Coal in response to its advertisement and recording of particulars of  

each application in the minutes was not possible.  Moreover, he  

submits that each application was duly considered and evaluated  

with reference to other applications by the Administrative Ministry

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concerned and the recommendations of the Screening Committee  

were primarily based on the exercise conducted by the concerned  

Administrative Ministry.  Thus, learned Attorney General submits  

that the entire exercise by the Screening Committee was done  

properly and in a non-arbitrary manner.  

81.  Learned Attorney General vehemently contends that  

allocation of coal blocks without auction is not unlawful.  He submits  

that lack of public auction does not render the allocation process  

arbitrary.  Moreover, according to him, when coal mining sectors  

were first opened up to private participants, the idea of the Central  

Government was to encourage the private sector so that they could  

come forward and invest.  Allocation of coal blocks by public  

auction in such a scenario would have been impractical and  

unrealistic.  As a matter of fact, he would submit that when the  

proposal for introduction of competitive bidding was first mooted in  

June, 2004, the State Governments expressed their reservations  

and concerns. In this regard, learned Attorney General referred to  

the letters sent by the Governments of Chhattisgarh, West Bengal,  

Rajasthan and Odisha.  Learned Attorney General submits that the  

concerns of the State Governments could not have been brushed  

aside by introducing competitive bidding by an administrative fiat.   

Moreover, according to the learned Attorney General, competitive

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bidding could have resulted in increase in the input price which  

would have a cascading effect.   

82.  From the above submissions, the following questions  

fall for determination:  

 (i) Whether the allocation of coal blocks ought to  

have been done only by public auction?   (ii) Whether the allocation of coal blocks made on the  

basis of recommendations of the Screening Committee   

suffer from any constitutional vice and legal infirmity?  

(iii) Whether the allocation of coal blocks made by  

way of Government dispensation route (Ministry of  

Coal) is consistent with the constitutional principles and  

the fundamentals of the equality clause enshrined in the  

Constitution?  

83.  Two recent decisions viz., (1) Centre for Public Interest  

Litigation (2G case)19  and (2) Natural Resources Allocation  

Reference20 directly deal with the question of auction as mode for  

the disposal or allocation of natural resources.  But before we  

consider these two decisions, reference to some of the decisions of  

this Court, which had an occasion to deal with disposal of natural  

resources, may be of some help in appreciating this aspect in  

correct perspective.   

                                                 19 Centre for Public Interest Litigation & Ors. v. Union of India & Ors.; [(2012) 3 SCC 1]  20 Natural Resources Allocation, In re, Special Reference No.1 of 2012; [(2012) 10 SCC 1]

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84.  P.N. Bhagwati, J. in Kasturi Lal Lakshmi Reddy21 had  

said that where the State was allocating resources such as water,  

power, raw materials, etc., for the purpose of encouraging setting  

up of industries within the State, the State was not bound to  

advertise and tell the people that it wanted a particular industry to  

be set up within the State and invite those interested to come up  

with proposals for the purpose. It was also observed that if any  

private party comes before the State and offers to set up an  

industry, the State would not be committing breach of any  

constitutional or legal obligation if it negotiates with such party and  

agrees to provide resources and other facilities for the purpose.  

85.  In Sachidanand Pandey22 this Court had observed   

that ordinary rule for disposal of State-owned or public-owned  

property, was by way of public auction or by inviting tenders but   

there could be situations where departure from the said rule may be  

necessitated but then the reasons for the departure must be  

rational and should not be suggestive of discrimination and that  

nothing should be done which gives an appearance of bias, jobbery  

or nepotism.  

                                                 21 Kasturi Lal Lakshmi Reddy & Ors. v. State of J&K & Anr.; [(1980) 4 SCC 1]  22 Sachidanand Pandey & Anr. v. State of West Bengal & Ors.; [(1987) 2 SCC 295]

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86.  The statement of law in Sachidanand Pandey22 was  

echoed again in Haji T.M. Hassan Rawther23, wherein this Court  

reiterated that the public property owned by the State or by an  

instrumentality of State should be generally sold by public auction  

or by inviting tenders. It was emphasized that this rule has been  

insisted upon not only to get the highest price for the property but  

also to ensure fairness in the activities of the State and public  

authorities and to obviate the factors like bias, favoritism or  

nepotism.  Clarifying that this is not an invariable rule, the Court  

reiterated that departure from the rule of auction could be made but  

then it must be justified.  

87.  The above principle is again stated by this Court in  

M.P. Oil Extraction24, in which this Court said that distribution of  

largesse by inviting open tenders or by public auction is desirable  

but it cannot be held that in no case distribution of such largesse by  

negotiation is permissible.   

88.  In Netai Bag25 this Court said that when any State land  

is intended to be transferred or the State largesse is decided to be  

conferred, resort should be had to public auction or transfer by way  

of inviting tenders from the people as that would be a sure method  

of guaranteeing compliance with mandate of Article 14 of                                                    23 Haji T.M. Hassan Rawther v. Kerala Financial Corporation; [(1988) 1 SCC 166]  24 M.P. Oil Extraction & Anr. v. State of M.P. & Ors.; [(1997) 7 SCC 592]  25 Netai Bag & Ors. v. State of West Bengal & Ors.; [(2000) 8 SCC 262]

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Constitution but non-floating of tenders or not holding public auction  

would not in all cases be deemed to be the result of the exercise of  

the executive power in an arbitrary manner.   

89.  In Villianur Iyarkkai Padukappu Maiyam26 the matter  

before this Court related to the selection of contractor for  

development of the port of Pondicherry without floating a tender or  

holding public auction. The Court said that where the State was  

allocating resources such as water, power, raw materials, etc., for  

the purpose of encouraging development of the port, the State was  

not bound to advertise and tell the people that it wanted  

development of the port in a particular manner and invite those  

interested to come up with proposals for the purpose.   

90.  There are numerous decisions of this Court dealing  

with the mode and manner of disposal of natural resources but we  

think it is not necessary to refer to all of them.  Having indicated the  

view taken by this Court in some of the cases, now we may turn to  

2G case19.  In that case, the two-Judge Bench of this Court stated  

that a duly publicised auction conducted fairly and impartially was  

perhaps the best method for alienation of natural resources lest  

there was likelihood of misuse by unscrupulous people who were  

only interested in garnering maximum financial benefit and have no  

                                                 26 Villianur Iyarkkai Padukappu Maiyam v. Union of India & Ors.; [(2009) 7 SCC 561]

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respect for the constitutional ethos and values.  Court laid  

emphasis that while transferring or alienating the natural resources,  

the State is duty bound to adopt the method of auction by giving  

wide publicity so that all eligible persons can participate in the  

process.   

91.  The above view in 2G case19 necessitated the  

reference by the President of India to this Court under Article  

143(1) of the Constitution.  The first two questions – Question 1 and  

Question 2 – referred to this Court for consideration and report read  

as under:  

“Question 1  - Whether the only permissible method for  disposal of all natural resources across  all sectors and in all circumstances is by  the conduct of auctions?  

     Question 2  - Whether a broad proposition of law that  only the route of auctions can be  resorted to for disposal of natural  resources does not run contrary to  several judgments of the Supreme Court  including those of the larger Benches?”  

92.  The Constitution Bench which dealt with the above  

reference observed that the answer to the following three questions  

would provide comprehensive answer to the parent question, viz.,  

Question 1:  

(i) Are some methods ultra vires and others intra vires  the Constitution of India, especially Article 14?

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(ii) Can disposal through the method of auction be  elevated to a constitutional principle?  

(iii) Is this Court entitled to direct the executive to adopt a  certain method because it is the “best” method? If not, to  what extent can the executive deviate from such “best”  method?    

93.  The Constitution Bench clarified that the statement of  

law in 2G case19 that while transferring or alienating the natural  

resources, the State is duty bound to adopt the method of auction  

was confined to the specific case of spectrum and not for  

dispensation of all natural resources. The Constitution Bench said  

that findings of this Court in 2G case19 were limited to the case of  

spectrum and not beyond that and that it did not deal with the  

modes of allocation for natural resources other than spectrum.   

94.  The Constitution Bench while dealing with the aspect  

of disposal of natural resources other than auction, divided the  

consideration of this aspect under two heads, viz., “Legitimate  

deviations from auction” and “Potential of abuse”. Under the head  

“Legitimate deviations from auction” the Court considered the  

earlier decisions of this Court in Kasturi Lal Lakshmi Reddy21,  

Sachidanand Pandey22, Haji T.M. Hassan Rawther23, M.P. Oil  

Extraction24, Netai Bag25 and Villianur Iyarkkai Padukappu  

Maiyam26, which we have briefly noted above, and it was held that  

there is no constitutional mandate in favour of auction under Article

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14. In the main judgment (paras 129 to 131, pg. 92), the  

Constitution Bench stated as under:  

“129. Hence, it is manifest that there is no constitutional  mandate in favour of auction under Article 14. The  Government has repeatedly deviated from the course of  auction and this Court has repeatedly upheld such actions.  The judiciary tests such deviations on the limited scope of  arbitrariness and fairness under Article 14 and its role is  limited to that extent. Essentially whenever the object of  policy is anything but revenue maximization, the Executive is  seen to adopt methods other than auction.  

130. A fortiori, besides legal logic, mandatory auction may  be contrary to economic logic as well. Different resources  may require different treatment. Very often, exploration and  exploitation contracts are bundled together due to the  requirement of heavy capital in the discovery of natural  resources. A concern would risk undertaking such  exploration and incur heavy costs only if it was assured  utilization of the resource discovered; a prudent business  venture, would not like to incur the high costs involved in  exploration activities and then compete for that resource in  an open auction. The logic is similar to that applied in  patents. Firms are given incentives to invest in research and  development with the promise of exclusive access to the  market for the sale of that invention. Such an approach is  economically and legally sound and sometimes necessary to  spur research and development. Similarly, bundling  exploration and exploitation contracts may be necessary to  spur growth in a specific industry.   

131. Similar deviation from auction cannot be ruled out when  the object of a State policy is to promote domestic  development of an industry, like in Kasturi Lal’s case,  discussed above. However, these examples are purely  illustrative in order to demonstrate that auction cannot be the  sole criteria for alienation of all natural resources.”  

95.  While dealing with the argument that even if the  

method of auction was not a mandate under Article 14, it must be  

the only permissible method due to the susceptibility of other

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methods to abuse, the Court under the head “Potential of abuse”  

held that a potential for abuse cannot be the basis for striking down  

the method as ultra vires the Constitution. The Court noted two  

decisions of this Court in R.K. Garg27 and D.K. Trivedi28 and held  

that neither auction nor any other method of disposal can be held  

ultra vires the Constitution merely because of a potential abuse.  

The Constitution Bench (para 135, pgs. 93-94) stated as under:  

“135. Therefore, a potential for abuse cannot be the basis for  striking down a method as ultra vires the Constitution. It is  the actual abuse itself that must be brought before the Court  for being tested on the anvil of constitutional provisions. In  fact, it may be said that even auction has a potential of  abuse, like any other method of allocation, but that cannot  be the basis of declaring it as an unconstitutional  methodology either. These drawbacks include cartelization,  “winners curse” (the phenomenon by which a bidder bids a  higher, unrealistic and unexecutable price just to surpass the  competition; or where a bidder, in case of multiple auctions,  bids for all the resources and ends up winning licenses for  exploitation of more resources than he can pragmatically  execute), etc. However, all the same, auction cannot be  called ultra vires for the said reasons and continues to be an  attractive and preferred means of disposal of natural  resources especially when revenue maximization is a  priority. Therefore, neither auction, nor any other method of  disposal can be held ultra vires the Constitution, merely  because of a potential abuse.”  

96.  In Natural Resources Allocation Reference20 the  

Constitution Bench, in the main judgment, thus, concluded that  

auction despite being a more preferable method of alienation /  

                                                 27 R.K. Garg v. Union of India & Ors.; [(1981) 4 SCC 675]  28 D.K. Trivedi & Sons & Ors. v. State of Gujarat & Ors.; [1986 Supp SCC 20]

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allotment of natural resources cannot be held to be constitutional  

requirement or limitation for alienation of all natural resources and,  

therefore, every method other than auction cannot be struck down  

as ultra vires the constitutional mandate. The Court also opined that  

auction as a mode cannot be conferred the status of a  

constitutional principle. While holding so, the Court held that  

alienation of natural resources is a policy decision and the means  

adopted for the same are, thus, executive prerogatives. The Court  

summarized the legal position as under:  

“146. To summarise in the context of the present Reference,  it needs to be emphasised that this Court cannot conduct a  comparative study of the various methods of distribution of  natural resources and suggest the most efficacious mode, if  there is one universal efficacious method in the first place. It  respects the mandate and wisdom of the executive for such  matters. The methodology pertaining to disposal of natural  resources is clearly an economic policy. It entails intricate  economic choices and the Court lacks the necessary  expertise to make them. As has been repeatedly said, it  cannot, and shall not, be the endeavour of this Court to  evaluate the efficacy of auction vis-à-vis other methods of  disposal of natural resources. The Court cannot mandate  one method to be followed in all facts and circumstances.  Therefore, auction, an economic choice of disposal of  natural resources, is not a constitutional mandate. We may,  however, hasten to add that the Court can test the legality  and constitutionality of these methods. When questioned,  the courts are entitled to analyse the legal validity of different  means of distribution and give a constitutional answer as to  which methods are ultra vires and intra vires the provisions  of the Constitution. Nevertheless, it cannot and will not  compare which policy is fairer than the other, but, if a policy  or law is patently unfair to the extent that it falls foul of the  fairness requirement of Article 14 of the Constitution, the  Court would not hesitate in striking it down.

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147. Finally, market price, in economics, is an index of the  value that a market prescribes to a good. However, this  valuation is a function of several dynamic variables: it is a  science and not a law. Auction is just one of the several  price discovery mechanisms. Since multiple variables are  involved in such valuations, auction or any other form of  competitive bidding, cannot constitute even an economic  mandate, much less a constitutional mandate.  

148. In our opinion, auction despite being a more preferable  method of alienation/allotment of natural resources, cannot  be held to be a constitutional requirement or limitation for  alienation of all natural resources and therefore, every  method other than auction cannot be struck down as ultra  vires the constitutional mandate.  

149. Regard being had to the aforesaid precepts, we have  opined that auction as a mode cannot be conferred the  status of a constitutional principle. Alienation of natural  resources is a policy decision, and the means adopted for  the same are thus, executive prerogatives. However, when  such a policy decision is not backed by a social or welfare  purpose, and precious and scarce natural resources are  alienated for commercial pursuits of profit maximising private  entrepreneurs, adoption of means other than those that are  competitive and maximise revenue may be arbitrary and  face the wrath of Article 14 of the Constitution. Hence, rather  than prescribing or proscribing a method, we believe, a  judicial scrutiny of methods of disposal of natural resources  should depend on the facts and circumstances of each case,  in consonance with the principles which we have culled out  above. Failing which, the Court, in exercise of power of  judicial review, shall term the executive action as arbitrary,  unfair, unreasonable and capricious due to its antimony with  Article 14 of the Constitution.”  

97.  J.S. Khehar, J., while concurring with the main opinion  

has stated that auction is certainly not a constitutional mandate in  

the manner expressed, but it can be applied in some situations to  

maximise revenue returns, to satisfy legal and constitutional  

requirements.  In his view, if the State arrives at a conclusion, in a

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given situation, that maximum revenue would be earned by auction  

of the particular natural resource, then that alone would be the  

process which it would have to adopt.  In the penultimate para of  

his opinion, J.S. Khehar, J., observed, “………there can be no  

doubt about the conclusion recorded in the “main opinion” that  

auction which is just one of the several price recovery mechanisms,  

cannot be held to be the only constitutionally recognised method for  

alienation of natural resources.  That should not be understood to  

mean, that it can never be a valid method for disposal of natural  

resources…………..”.   

98.  In Natural Resources Allocation Reference20, the  

Constitution Bench said that reading auction as a constitutional  

mandate would be impermissible because such an approach may  

distort another constitutional principle embodied in Article 39(b).  In  

the main judgment, with reference to Article 39(b), the Court stated  

as follows:  

“113…The disposal of natural resources is a facet of the use  and distribution of such resources. Article 39(b) mandates  that the ownership and control of natural resources should  be so distributed so as to best subserve the common good.  Article 37 provides that the provisions of Part IV shall not be  enforceable by any court, but the principles laid down therein  are nevertheless fundamental in the governance of the  country and it shall be the duty of the State to apply these  principles in making laws. Therefore, this Article, in a sense,  is a restriction on “distribution” built into the Constitution. But

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the restriction is imposed on the object and not the means.  The overarching and underlying principle governing  “distribution” is furtherance of common good. But for the  achievement of that objective, the Constitution uses the  generic word “distribution”. Distribution has broad contours  and cannot be limited to meaning only one method i.e.  auction. It envisages all such methods available for  distribution/allocation of natural resources which ultimately  subserve the “common good”.  

***    ***    ***  

115. It can thus, be seen from the aforequoted paragraphs  that the term “distribute” undoubtedly, has wide amplitude  and encompasses all manners and methods of distribution,  which would include classes, industries, regions, private and  public sections, etc. Having regard to the basic nature of  Article 39(b), a narrower concept of equality under Article 14  than that discussed above, may frustrate the broader  concept of distribution, as conceived in Article 39(b). There  cannot, therefore, be a cavil that “common good” and “larger  public interests” have to be regarded as constitutional reality  deserving actualisation.  

116. The learned counsel for CPIL argued that revenue  maximisation during the sale or alienation of a natural  resource for commercial exploitation is the only way of  achieving public good since the revenue collected can be  channelised to welfare policies and controlling the  burgeoning deficit. According to the learned counsel, since  the best way to maximise revenue is through the route of  auction, it becomes a constitutional principle even under  Article 39(b). However, we are not persuaded to hold so.  Auctions may be the best way of maximising revenue but  revenue maximisation may not always be the best way to  subserve public good. “Common good” is the sole guiding  factor under Article 39(b) for distribution of natural resources.  It is the touchstone of testing whether any policy subserves  the “common good” and if it does, irrespective of the means  adopted, it is clearly in accordance with the principle  enshrined in Article 39(b).  

***    ***    ***  

119. The norm of “common good” has to be understood and  appreciated in a holistic manner. It is obvious that the  manner in which the common good is best subserved is not  a matter that can be measured by any constitutional

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yardstick—it would depend on the economic and political  philosophy of the Government. Revenue maximisation is not  the only way in which the common good can be subserved.  Where revenue maximisation is the object of a policy, being  considered qua that resource at that point of time to be the  best way to subserve the common good, auction would be  one of the preferable methods, though not the only method.  Where revenue maximisation is not the object of a policy of  distribution, the question of auction would not arise.  Revenue considerations may assume secondary  consideration to developmental considerations.  

120. Therefore, in conclusion, the submission that the  mandate of Article 14 is that any disposal of a natural  resource for commercial use must be for revenue  maximisation, and thus by auction, is based neither on law  nor on logic. There is no constitutional imperative in the  matter of economic policies—Article 14 does not predefine  any economic policy as a constitutional mandate. Even the  mandate of Article 39(b) imposes no restrictions on the  means adopted to subserve the public good and uses the  broad term “distribution”, suggesting that the methodology of  distribution is not fixed. Economic logic establishes that  alienation/allocation of natural resources to the highest  bidder may not necessarily be the only way to subserve the  common good, and at times, may run counter to public good.  Hence, it needs little emphasis that disposal of all natural  resources through auctions is clearly not a constitutional  mandate.”  

99.  In light of the above legal position, the argument that  

auction is a best way to select private parties as per Article 39(b)  

does not merit acceptance.  The emphasis on the word “best” in  

Article 39(b) by the learned senior counsel for the intervener does  

not deserve further discussion in light of the legal position exposited  

by the Constitution Bench in Natural Resources Allocation  

Reference20 with reference to Article 39(b).  We are fortified in our  

view by a recent decision of this Court (3-Judge Bench) in Goa

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Foundation29 wherein following Natural Resources Allocation  

Reference20, it is stated, “…it is for the State Government to decide  

as a matter of policy in what manner the leases of these mineral  

resources would be granted, but this decision has to be taken in  

accordance with the provisions of the MMDR Act and the Rules  

made thereunder and in consonance with the constitutional  

provisions…”.  

100.  The explanation by the Central Government for not  

adopting the competitive bidding is that coal is a natural resource  

used as a raw material in several basic industries like power  

generation, iron and steel and cement. The end products of these  

basic industries are, in turn, used as inputs in almost all  

manufacturing and infrastructure development industries.   

Therefore, the price of coal occupies a fundamental place in the  

growth of the economy and any increase in the input price would  

have a cascading effect.  The auction of coal blocks could not have  

been possible when the power generation and, consequently, coal  

mining sectors were first opened up to private participants as the  

private sector needed to be encouraged at that time to come  

forward and invest.  Allocation of coal blocks through competitive  

bidding in such a scenario would have been impractical and  

                                                 29 Goa Foundation v. Union of India and Others; [(2014) 6 SCC 590]

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unrealistic.  When the proposal for introduction of competitive  

bidding was first mooted in June, 2004, the State Governments  

expressed their reservations based on diverse concerns. The  

Government of Chhattisgarh inter alia pointed out that (a)  

competitive bidding would result in substantial increase in the cost  

of coal for iron/steel undertakings, (b) there were large number of  

projects under implementation whose viability is based on  

availability of coal as per the then existing policy, (c)  competitive  

bidding would raise the price of domestic coal, which would result in  

end-use projects in inland States like Chhattisgarh becoming  

unviable due to additional costs by transporting coal by rail/road,  

and (d) competitive bidding would result in only the bigger players  

getting the coal blocks.  The Government of West Bengal opposed  

the introduction of competitive bidding because (a) the then existing  

system could accommodate both subjective and objective aspects  

of the projects whereas competitive bidding would only lead to coal  

blocks going to the highest bidder, (b) competitive bidding would not  

allow priority being accorded to the power sector, (c)  competitive  

bidding would result in views of the State Governments becoming  

redundant, and (d) competitive bidding would lead to concentration  

of industries in a particular State.  The Government of Orissa  

opposed competitive bidding because (a) the State Government had

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signed MOUs for investment in end-use plants based on existing  

policy and those MOUs would suffer, (b) State Government’s  

authority to recommend cases for allocation based on investment in  

the State would not be available, and (c) competitive bidding would  

prevent the State from leveraging its coal reserves to accelerate its  

industrial development.  

101.  It was for the above reasons that the Central  

Government says that competitive bidding was not introduced from  

2004.     

102.  As a matter of fact, the Central Government has  

explained the circumstances because of which since 1992-1993  

competitive bidding for allocation of coal blocks was not followed.  

The explanation is that in 1992-1993, the power generation and coal  

mining sectors were first opened up to private participants and, at  

that time, the private sector had to be encouraged to come forward  

and invest. Allocation of coal blocks through auction in such a  

scenario would have been impractical and unrealistic because  

during that time existing demand for coal was not being fully met by  

CIL and SCCL. There was supply-demand mismatch and there was  

also a huge shortage of power in the country. The State Electricity  

Boards had been unable to meet power requirements.   

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103.  The material placed on record reveals that the then  

Coal Secretary in his note dated 16.07.2004 and subsequent note  

dated 30.7.2004 mooted introduction of bidding system to achieve  

transparency and objectivity in the allocation process and also to  

tap part of the windfall gain to the allottee for captive mining. These  

notes were considered at the level of Minister (Coal and Mines) and  

the PMO and certain disadvantages of allocation of coal blocks  

through competitive bidding were noted.  Ultimately, it appears that  

in the month of October, 2004 the proposal for competitive bidding  

was not pursued further as it was felt that this would result in delay  

in the allocation of coal blocks.  The Coal Secretary in October,  

2004 after discussion also felt that since a number of applicants  

had requested for allotment of blocks based on the current policy, it  

would not be appropriate to change the allotment policy through  

competitive bidding in respect of applications received on the basis  

of existing policy.  He suggested that the policy of allotment through  

competitive bidding could be made prospective and pending  

applications might be decided on the basis of existing policy.    

104.  Then, there appears to be exchange of notes and  

discussion at various levels on the question whether CMN Act  

needed to be amended before the proposed competitive bidding  

becomes operational or 1957 Act so that the system of competitive

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bidding could be made applicable to all minerals covered under the  

said Act. The opinion of Department of Legal Affairs was also  

sought.  In 2006, it appears that Ministry of Coal communicated to  

the PMO and Cabinet Secretariat that Ministry of Law and Justice  

has advised Ministry of Coal to initiate suitable measures for  

amendment in the 1957 Act for addressing the issue of competitive  

bidding.  A Bill to amend the 1957 Act was introduced in the  

Parliament by the Ministry of Mines.  The Amendment Bill was then  

referred to Standing Committee on Coal and Steel for examination  

and for its report.  On receipt of the report from the Standing  

Committee in 2009, the MMDR Amendment Bill, 2008 was passed  

by both the Houses of Parliament in 2010 and ultimately Section  

11A was inserted in the 1957 Act providing for competitive bidding  

for allocation of coal blocks by the Central Government.  Then, on  

02.02.2012, rules for auctions by competitive bidding of coal mines  

were notified.    

105.  The above facts show that it took almost 8 years in  

putting in place allocation of captive coal blocks through  

competitive bidding. During this period, many coal blocks were  

allocated giving rise to present controversy, which was avoidable  

because competitive bidding would have brought in transparency,  

objectivity and very importantly given a level playing field to all

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applicants of coal 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.  Be that as it may,  

once it is laid down by the Constitution Bench of this Court in  

Natural Resources Allocation Reference20 that the Court cannot  

conduct a comparative study of various methods of distribution of  

natural resources and cannot mandate one method to be followed  

in all facts and circumstances, then if the grave situation of  

shortage of power prevailing at that time necessitated private  

participation and the Government felt that it would have been  

impractical and unrealistic to allocate coal blocks through auction  

and later on in 2004 or so there was serious opposition by many  

State Governments to bidding system, and the Government did not  

pursue competitive bidding/public auction route, then in our view,  

the administrative decision of the Government not to pursue  

competitive bidding cannot be said to be so arbitrary or  

unreasonable warranting judicial interference.  It is not the domain  

of the Court to evaluate the advantages of competitive bidding vis-

à-vis other methods of distribution / disposal of natural resources.  

However, if the allocation of subject coal blocks is inconsistent with  

Article 14 of the Constitution and the procedure that has been  

followed in such allocation is found to be unfair, unreasonable,

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discriminatory, non-transparent, capricious or suffers from  

favoritism or nepotism and violative of the mandate of Article 14 of  

the Constitution, the consequences of such unconstitutional or  

illegal allocation must follow.  

106.   The Central Government in its first counter affidavit  

filed on 22.01.2013 has stated that for the period from 1993 to  

31.03.2011, 216 allocations have been made. In the course of  

arguments, learned Attorney General submitted that in addition to  

216, 2 coal blocks for Coal to Liquid (CTL) projects were also  

allocated. According to said affidavit, out of 216 allocations, 105  

allocations were made to private companies, 99 allocations were  

made to Government companies and 12 allocations were made to  

Ultra Mega Power Projects (UMPPs) and that after adjusting 24 de-

allocations and 2 re-allocations, a total number of 194 allocations,  

including allocations to private parties, form the subject matter of the  

writ petitions. In the course of arguments, however, learned Attorney  

General submitted that total 41 de-allocations have already been  

ordered.   

107.  In the first counter affidavit filed on 22.01.2013, the  

Central Government has also given the details of the procedure  

adopted for allocation of the above coal blocks, in which it is stated

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that the allocations to the private companies were made through the  

Screening Committee route. As regards allocations made to  

Government companies, before 2001, allocations were made only  

through the Screening Committee route but on and from 2001,  

allocations were made through the Screening Committee route as  

well as directly by the Ministry of Coal. The allocations which were  

made by the Ministry of Coal to the Government companies are  

referred to by the Central Government as the Government  

dispensation route. Insofar  as UMPPs are concerned, it is the stand  

of the Central Government that captive blocks were pre-identified for  

the projects, that bidders for the projects were selected as per the  

competitive bidding guidelines of the Ministry of Power (tariff based  

bidding) and, thus, the 12 allocations to UMPPs were done by a  

competitive method. It is further stated in the affidavit that the two  

blocks allotted for Coal to Liquid (CTL) projects were after inviting  

applications through advertisement in 2008 and that the applications  

received were considered by an inter-Ministerial Group (IMG) under  

the Chairmanship of Member (Energy), Planning Commission and  

Secretaries of Department of Expenditure, Ministry of Coal,  

Department of Industrial Policy and Promotion, Department of  

Science and Technology, Ministry of Petroleum and Natural Gas  

and Principal Advisor (Energy), Planning Commission as members.  

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108.  We shall first deal with the coal allocations made to the  

private companies as well as Government companies for captive  

purpose through Screening Committee route.   

109.  On 14.09.2012, while issuing notice to the Union of  

India, the Court framed six questions on which answer was sought  

in the counter affidavit.  One of such questions was about the details  

of guidelines framed by the Central Government for allocation of  

subject coal blocks.  In the first counter affidavit filed on 22.01.2013,  

it is stated that from 1993 until 31st meeting held on 23.06.2006, the  

Screening Committee framed its own guidelines for allocation of  

coal blocks.  Insofar as guidelines for 31st to 36th meetings of the  

Screening Committee are concerned, it is stated that the Ministry of  

Coal framed the guidelines and these guidelines were brought to the  

attention of the members of the Screening Committee.  

110.  The minutes of the 1st meeting held on 14.07.1993  

indicate that the guidelines were framed in that meeting by the  

Screening Committee for the primary purpose to identify suitable  

blocks for captive development by power generating companies.  

The guidelines framed by the Screening Committee on 14.07.1993  

read as under:  

“(i)  Preferably blocks in green field areas where basic  infrastructure like road, rail links, etc. is yet to be  developed should be given to the private sector. The

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areas where CIL has already invested in creating  such infrastructure for opening new mines should not  be handed over to the private sector, except on  reimbursement of costs.  

(ii) The blocks offered to private sector should be at  reasonable distance from existing mines and projects  of CIL in order to avoid operational problems.  

(iii) Blocks already identified for development by CIL,  where adequate funding is on hand or in sight should  not be offered to the private sector.  

(iv) Private sector should be asked to bear full cost of  exploration in these blocks which may be offered.  

(v) While discussing proposals of power generating  companies and identifying blocks the requirement of  coal for 30 years would be considered.”  

111.  In its 2nd meeting held on 13.08.1993,  the Screening  

Committee accepted that any addition to generation of power,  

whether captive or utility, amounted to value addition and, therefore,  

no distinction would be made between the two.  

112.  In the 3rd meeting held on 27.09.1993, the Screening  

Committee discussed whether the guidelines for identification of  

coal blocks for the power sector were suitable for adoption in  

respect of the iron and steel sector particularly in view of the  

position explained by the representative of Ministry of Steel that  

requirement of coal for iron and steel plants would be much less  

than the coal required by the power plants. The Screening  

Committee, accordingly, decided to permit sub-blocking of blocks

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identified by Central Mine Planning and Design Institute Ltd.  

(CMPDIL).   

113.   In the 4th meeting dated 12.01.1994, proposals relating  

to M/s. RPG Industries Ltd./Calcutta Electric Supply Corporation,  

M/s. Kalinga Power Corporation, M/s. Indian Aluminium Company,  

M/s. Indian Charge Chrome Ltd., Andhra Pradesh State Electricity  

Board, M/s. Development Consultants Ltd., M/s. Gujarat Power  

Corporation Ltd., M/s. Associated Cement Company Ltd., M/s.  

Hellmuth, Obata and Kassabagm P.C. were considered in  

continuation of earlier meetings.  Certain blocks were identified for  

allocation to some of these companies.  

114.  In its 5th meeting held on 26.05.1994, the Screening  

Committee while considering whether any further changes were  

required in the procedures being adopted for considering proposals  

for captive mining recorded that in the earlier meetings, the Ministry  

of Coal had been liberal in considering proposals with a view to  

make the scheme a success.  In the said meeting, the Committee  

reviewed the progress made by M/s. RPG Industries Ltd., M/s.  

Kalinga Power Corporation Ltd., M/s. Nippon Denro Ispat Nigam  

Ltd., Nagpur, M/s. Andhra Pradesh State Electricity Board, M/s.  

Tamil Nadu Electricity Board, M/s. Indian Aluminium Company Ltd.,  

M/s. Development Consultants Ltd., M/s. Associated Cement

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Company Ltd., M/s. Hellmuth, Obata and Kassabagm P.C. and M/s.  

Gujarat Power Corporation Ltd.  

115.    In the 6th meeting held on 20.01.1995, the Committee  

decided to earmark Sarisatolli block and western part of Tara block  

for captive mining by M/s. RPG Industries Ltd. for proposed Budge-

Budge TPS and Balagarh TPS.   The proposal of M/s. Jindal Strips  

Ltd. for a captive block for expansion of their Sponge Iron Plant from  

2 lakh tonnes per annum to 6 lakh tonnes per annum was also  

discussed in the meeting and it was decided that CMPDIL would  

carry out the exercise of sub-blocking so that a suitable block can  

be allocated to M/s. Jindal Strips Ltd.  

116.  In the 7th meeting held on 06.06.1995, the Chairman felt  

the need for fixing certain time limit and laying down corresponding  

milestones otherwise there would be a tendency on the part of  

developer of the mining block to proceed in a casual manner with  

the result that the coal production would not be realized within the  

required time frame.  It was decided that once the blocks are  

identified, the party concerned should complete necessary  

formalities and should be able to apply for lease within 6 months. In  

continuation of earlier meetings, the Screening Committee further  

considered the proposal of M/s. RPG Industries Ltd. for identification  

of coal mining blocks for supply of coal to the proposed Budge-

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Budge TPS, Balagarh TPS and Dholpur TPS.  In the said meeting,  

the proposals of M/s. West Bengal State Electricity Board and M/s.  

Videocon Power Ltd. were also considered.    

117.   In the 8th meeting held on 04.10.1995, the proposal of  

M/s. Steel Authority of India Limited for captive blocks in Jharia  

coalfields was discussed.  The Committee decided to identify  

Parbatpur, Mahal, Seetanala and Tasra blocks located in Jharia  

Coalfields for captive development by SAIL.  

118.   In the 9th meeting held on 20.12.1995, the proposal of  

M/s. Nippon Denro Ispat Ltd. for identification of additional coal  

mining blocks for supply of coal to the 2nd stage of the Bhadravati  

TPS was discussed.  Apart from the above-mentioned proposal, the  

other proposals were from Maharashtra State Electricity Board,  

National Thermal Power Corporation and Lloyds Metals (Sponge  

Iron Plant) and Larsen & Tourbo captive power plant, Chandrapur.   

Since there were conflicting requirements of various projects, the  

Committee decided that the long-term coal requirements of various  

projects of M/s. Nippon Denro Ispat Ltd., Maharashtra State  

Electricity Board, National Thermal Power Corporation, Lloyds  

Metals and Larsen & Tourbo should be examined in a  

comprehensive exercise so that the available resources are  

optimally utilized.  Review of the proposals of M/s. Jindal Strips –

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Sponge Iron Plant and M/s. Monnet Ispat – Sponge Iron Plant was  

also undertaken.  

119.   In the 10th meeting held on 03.04.1996, the Committee  

noted with concern that out of the blocks already offered, only four  

parties have taken action for development of blocks.  The  

Committee decided that all the identified parties should be issued a  

notice to pay the exploration cost by 30.06.1996 and take action for  

development of the block failing which the offer would be cancelled.  

120.   In the 11th meeting held on 26/27.09.1997, the  

Screening Committee carried out a review of the progress made so  

far.  It was noted that M/s. RPG Industries for Budge-Budge TPS,  

M/s. Indian Aluminium Company Ltd. for new captive power plants  

in Orissa, M/s. Associated Cement Co. Ltd. for new captive power  

plant at Wadi, Karnataka, M/s. West Bengal State Electricity Board  

for higher generation for Bendel TPS and Santaldih TPS, M/s. West  

Bengal Power Development Corpn. Ltd. for Bakreshwar TPS, M/s.  

BLA Industries for 24 MW capacity power plant in Distt.  

Narsinghpur, Madhya Pradesh, M/s. Jindal Strips Ltd. for Sponge  

Iron Plant in Madhya Pradesh and M/s. Nippon Denko Ispat Ltd. for  

Bhadravati TPS, Stage – I, had paid exploration charges to CIL and  

submitted mining plans which had been approved by the Standing  

Committee of Ministry of Coal.   In that meeting, the representative

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of M/s. Nippon Denko Ispat Ltd. submitted that Bunder block was far  

away from the power plant as well as from the other two mining  

blocks allotted to them and requested that a block nearer to the  

other two blocks, i.e., Baranj and Lohara West may be considered  

for allotment by the Committee.  Accordingly, the Committee  

decided to allocate Monora Deep Block, which is adjacent to Baranj  

and Lohara Extn. (which is adjacent to Lohara West)  to M/s. Nippon  

Denko Ispat Ltd.  The Committee also discussed the proposals  

which were considered earlier but no final decision could be taken.   

The Committee decided that Utkal ‘C’ block in Talcher coalfield  

having geological reserves of about 190 m.t. may be considered for  

allotment to M/s. Indian Charge Chrome Ltd. for two additional  

captive power plants at Choudhwar, Orissa.  It is pertinent to  

mention that the Committee found that the total requirement for all  

the three units would be about 2.36 m.t. and for a life of 30 years, it  

would work out to be 71 m.t.  The Committee, however, proposed  

allocation of Utkal ‘C’ block having geological reserves of about 190  

m.t.  In that meeting, Takli-Jena-Bellora block was allotted to M/s.  

Lloyds Metals and Engineers Ltd. and the company was directed to  

obtain mining lease within six months of issue of these minutes.  As  

regards the proposal of M/s. Associated Cement Company Ltd. for  

expansion at Wadi Cement Works in Karnataka, the Committee

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decided to allot Bisrar block in addition to Lohara (East) allocated  

earlier as the total requirement was of the order of 3.7 m.t.  In the  

said meeting, M/s. J.K.Corp. Ltd. was allocated Gare IV/8 block with  

gross geological reserves of 91 m.t. for their Cement Plant at Sirohi  

and Khemli in Rajasthan for which their total coal requirement was  

1.23 m.t.p.a.  

121.   In the 12th meeting held on 03.04.1998, the Committee  

allocated Gare-Palma IV/2 and IV/3 blocks having Geological  

reserves of 100 and 110 m.t. to  M/s. Jindal Power Ltd. for Raigarh  

TPS Stage – II (500 MW).  In the said meeting, M/s. Central  

Collieries Co. requested the Screening Committee for a portion of  

the Takli-Jena-Bellora block which had already been allotted to M/s.  

Lloyds Metals & Engineers Ltd.  In the course of discussions, it  

transpired that the total reserves in the block are higher than the  

requirement of M/s. Lloyds Metals.   The Committee was of the view  

that it was possible to allot some of the reserves to a party other  

than M/s. Lloyd Metals.  The Committee noted the clarification made  

by DGM (MS) that it was possible to cut out an independent sub-

block of 40 m.t. coal reserves within the Takli-Jena Bellora block.   

Accordingly, the same was allotted to M/s. Central Collieries Co.  

122.   In the 13th meeting held on 24.08.1998, as regards the  

proposal of M/s. Nippon Denro Ispat Ltd. – Bhandravati TPS I, the

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Committee was informed that the Apex Committee of CIL on captive  

mining blocks had objected to allocation of Kilhoni block to Nippon  

on the ground that the company had been changing its preference  

from one block to another block and allotment of Kilhoni block would  

not be sufficient to satisfy the company’s coal requirement for 30  

years.  Therefore, it was suggested that the company should either  

work the Lohara West block or enter into an agreement with WCL  

for supply of their balance coal requirement.  The Ministry of Power,  

on the other hand, indicated that they had no objection if the same  

was acceptable to the Government of Maharashtra.  It was also  

indicated that in the absence of firm figures of availability of coal and  

its likely price on cost plus basis, only an in-principle agreement  

could be arrived at for linkage in lieu of the Kilhoni block.  It was also  

stated that the Kilhoni block being adjacent to Baranj block would be  

more practicable for them to mine the reserves whereas WCL would  

have to develop the block as an isolated project.  The Government  

of Maharashtra strongly supported the allocation of Kilhoni block to  

the company.  The Director (Technical), CIL and CMD, WCL  

indicated that the Kilhoni block was likely to be taken up in the 11th  

plan period and pointed out some unique geographical and man-

made features of the block which, according to them, would make  

the project both cost and time intensive, resulting in very high cost

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for WCL.  The Committee felt that Nippon would be better placed to  

tackle these problems.  It was finally decided that M/s. Nippon  

Denro Ispat Ltd will work Baranj I-IV, Manora Deep and Kilhoni  

Blocks for mining coal for Bhadravati TPS, Lohara West  and  

Lohara West Extension blocks will be withdrawn from the party and  

no further request for change or modification of blocks made by the  

party will be considered.  

123.   The Committee had decided in the 12th meeting to  

allocate southern portion of Takli-Jena-Bellora block to M/s. Central  

Collieries Co. Ltd.  In the 13th meeting, the representative  of M/s.  

Central Collieries Co. Ltd. requested that a decision on allocation of  

a small portion of Kilhoni block should be taken.  It was informed to  

the Committee that the area identified at Kilhoni by the company  

was actually a different location, and that location did not form part  

of the identified blocks for captive mining.    

124.  In its 14th meeting held on 18/19.06.1999, the  

Screening Committee decided as follows:  

“(i) The Administrative Ministries will assess the  soundness of the proposals in consultation with the  State Govt. before sending their  comments/recommendations to the Screening  Committee for consideration of allotment of a captive  mining block; and  

(ii) The Administrative Ministries should consult State  Governments as well as use their own agencies for  assessing the progress of the implementation of end

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use plants for which blocks have already been allotted  by the Screening Committee and send a report to the  Screening Committee for further action.”    

124.1.  In the said meeting, Adviser (Projects), Ministry of Coal  

informed that a policy has been framed that captive mining block  

producing less than 1 m.t. of coal per annum from an opencast  

block and less than 0.25 m.t. of coal per annum from an  

underground block will not be considered for allotment.  The  

Committee agreed to adopt the above policy.  In that meeting, the  

Committee decided to withdraw the Gare-Palma IV/4 block allotted  

to M/s. Phoenix Cement Ltd.  The block Gare-Palma IV/8 allotted to  

M/s. J.K. Corp. Ltd. was also withdrawn due to non-seriousness of  

the party in the matter.  

124.2  In the 14th meeting, the proposal of M/s. Monnet Ispat  

Ltd. for a new Sponge Iron plant in Keonjhar area of Orissa of 1.2  

million tonnes of capacity for which the requirement of 2.2 m.t. of  

raw coal has been indicated, was discussed.  This plant will have a  

CPP of 40 MW in the 1st phase.  The party requested for Utkal-B2  

block in Talcher coalfield having 106 m.t. of reserves.  The party  

informed that the existing plant capacity of 1 lakh tonnes is being  

expanded to 3 lakh tonnes by March, 2000 and to 5 lakh tonnes  

beyond that.  During discussion, CMD MCL was of the view that  

Chendipada block is likely to have better grade of coal and

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suggested to the party in preference of Utkal B-2 block.  However,   

the party insisted for Utkal B-2 block and the same was allotted  

subject to the condition that the party must achieve financial closure  

within one year of allotment of the block, failing which the allotment  

will be withdrawn.    

124.3.  As regards the proposal of M/s. Jayaswal Neco Ltd. for  

their Sponge Iron Plant, the party had earlier requested for Gare-

Palma IV/6 and IV/7 blocks for meeting their Sponge Iron Plant and  

a captive power plant.  Now, they requested for allocation of IV/4  

and IV/8 blocks as the same have been withdrawn from other firms.    

Accordingly, the same were allotted to M/s. Jayaswal Neco Ltd.    

124.4   The Brahmadiha block was allotted to M/s. Castron  

Technology in the 14th meeting.  The Committee noted that the mine  

did not fit in the criteria of captive block as per its latest guidelines,  

but decided to make the allocation in view of the fact that the  

reserves could either be permitted to be exploited by a private party  

or lost forever.    

125.   In the 15th meeting held on 06.03.2000, M/s. Jindal  

Strips Ltd. had submitted a request for a block in Talcher coalfield to  

meet the requirement of sponge iron plant of 2 m.t. capacity.  In  

January, 2000, the party made an application for allocation of Utkal  

D block in MCL having geological reserves of 190 m.t. for their

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proposed sponge iron plant of 1 m.t. capacity requiring clean coal of  

1.2 mtpa.  The party also proposed to set up a washery of 3 m.t.   

input capacity.  The requirement of the block was proposed by the  

party for working the sponge iron plant and the CPP for a period of  

50 years.  In the course of discussion, it was pointed out that  

allocation of block for captive mining is generally made on the basis  

of 30 years’ requirement whereas the party had requested for  

allocation of block on the basis of 50 years requirement for their  

sponge iron plant.  It was also indicated that the total requirement of  

coal for 30 years life period of the project worked out to be 90 m.t.  

for which a geological reserve of about 120 m.t. should be  

adequate.  The estimated reserve of Utkal D block was about 190  

m.t. and was, therefore, higher than the probable requirement.  The  

representative of Ministry of Steel indicated that coal block having  

geological reserve of about 125 m.t. would be adequate.  Yet, the  

Committee decided to allot Utkal D block in principle to M/s. Jindal  

Strips Ltd. but this was cancelled in the 16th meeting.   

125.1.  The proposal of M/s. Prakash Industries was rejected in  

the 14th meeting in view of the company’s reference to BIFR and the  

party enjoying coal linkage of 0.76 m.t. for their existing plant.  In  

November and December, 1999, they informed that they had a  

linkage of 0.5 mtpa only and that they proposed to develop an

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underground mine for the balance 0.5 mtpa.  The Committee in the  

15th meeting decided to allocate Choita block, having geological  

reserves of about 60.00 m.t. to M/s. Prakash Industries.  

125.2. In the said meeting, M/s. Raipur Alloys & Steel Ltd. had  

requested for allocation of Choita block for their sponge iron plant at  

Siltara, Raipur, the capacity of which was proposed to be expanded  

from the existing  60,000 tpa to 3 lakh tonnes per annum and for a  

captive power plant of 18 MW.  That block was not in the identified  

list of captive mining.  Accordingly, they revised their request for  

allocation of Gare Palma IV/7 or any one of the three blocks in Gare  

Palma, i.e., IV/7, IV/6 and IV/8 in order of preference.  The  

Committee decided to allocate Gare Palma IV/7 to M/s. Raipur  

Alloys & Steel Ltd. with coal reserves of 156 m.t. which is on the  

much higher side than the requirement of the company.  

126.    In the 16th meeting held on 31.05.2001, M/s. Orissa  

Mining Corporation Ltd. was allotted Utkal D block for generation of  

power through Orissa Power Generation Corporation.  

127.   In the 17th meeting held on 28.11.2001, the request of  

M/s. GVK Power Gowindal Sahib Ltd. for allotment of Tokusud coal  

block for their proposed 2 x 250 MW power plant was considered  

and  Tokusud North block was allotted to them.    

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128.  In the 18th meeting held on 05.05.2003, the Screening  

Committee, for the first time, considered the issue of determining  

inter se merit of applicants for the same block as well as certain  

other issues to bring in transparency and felt that guidelines for  

determining inter se priority among claims for blocks between public  

sector and private sector for captive use and between public sector  

for non-captive use and private sector for captive use need to be  

evolved. The Chairman of the Committee put the following few  

general guidelines for consideration:  

(i) The blocks in captive list should be allocated to an  applicant only after the same have been put in the  pubic domain for a reasonable time and not  immediately upon their inclusion in the list of block  identified for captive mining, so as to give an  opportunity to interested parties to apply for the same  and make the process more transparent. The need for  giving very cogent and detailed reasons before  withdrawal of a block from captive list by CIL was also  emphasized.   

(ii) The Administrative Ministries were requested to  appraise the projects from the point of view of the  genuineness of the applicant, techno-economic  viability of the project and the state of  preparedness/progress in the project while indicating  the quantity and quality of coal requirement of the  project and recommending allocation of captive block  to the applicant. In case there were more than one  applicant for the same block the Administrative  Ministry should rank them based on the project  appraisal and the past/track record of the applicant  without necessarily naming the block to be allotted.  This would facilitate the Screening Committee in  allotting a suitable block to the applicant more  objectively.

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(iii) Only those power projects would be considered for  allocation which are included in the Xth Plan Period.    

128.1.  The above guidelines met with general approval.  

The Screening Committee also decided that while recommendations  

of the State Governments would continue to be taken into  

consideration, the same would not be taken as pre-condition for  

entertaining the application by it.  In that meeting, the two blocks-  

Bandhak (East) and Bandhak (West) were also included in the list of  

captive blocks.  

129.   In the 19th meeting held on 26.05.2003, various projects  

were reviewed.    

129.1.   In that meeting, the Committee allocated Bandhak  

(West) to M/s. Shree Baidyanath Ayurved Bhawan Ltd.  Similarly,  

M/s. Fieldmining & Ispat Limited was allocated Warora (West) and  

Chinora blocks.  

130.   In the 20th meeting held on 06.06.2003, the Committee  

discussed the matter of allocation of captive mining blocks to small  

Greenfield projects or to applicant companies who did not have well  

known track records in the sectors approved for allocation of captive  

blocks for mining of coal.  It adopted a policy that for such small  

projects the Committee instead of straight away allocating the block,  

the Committee would reserve the block and offer a temporary

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tapering linkage through CIL for achieving financial closure and  

development of the end-use project first.  The allocation of the block  

would be made subject to the applicant company achieving the  

project milestones submitted by them to the Committee, and after  

financial closure is achieved.   

130.1.  In that meeting, M/s. Jindal Steel and Power Limited  

requested for allocation of Utkal B-1 block for their sponge iron  

production, 200 MW of captive power generation, steel plant and  

ferro alloy plants to be set up in two phases. The Screening  

Committee decided to allocate Utkal B – 1 block to that company for  

exclusive and captive use of the entire coal produced from the block  

in their own project in the end-use plants.  

130.2.  M/s. Usha Beltron Ltd. requested for allocation of a  

block for their sponge iron and power plant.   CIL had recommended  

allocation of Kathautia UG block for their expansion project.   

Accordingly, the Committee allocated the same subject to the  

existing linkages of coal from CIL continuing.  

130.3. The Committee also discussed the proposals of M/s.  

Shyam DRI Power Ltd. for allocation of Radhikapur block and M/s.  

Neepaz Metalics Pvt. Ltd. for allocation of Patrapara block.  In both  

the cases, it was found that the size of the block is larger in  

comparison to the need.  However, the applicants stated that while

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geological reserve in the block may be large, the recoverable  

reserve would be very much less.  Accordingly, the blocks were  

allocated provisionally to them for detailed exploration/prospecting  

purposes.   

130.4.  In that meeting, M/s. Ambuja Cement requested for  

allocation of Baranj III and IV block for their new as well as  

expansion of existing cement plants.  Though the Government of  

Maharashtra supported the proposal, the representative from  

Ministry of Power stated that there are two contenders for the Baranj  

blocks and the Ministry of Power is considering and evaluating the  

case.  He stated that decision on allocation of Baranj I to IV could be  

deferred by one month by which time the Ministry of Power would  

be in a position to give their views.  However, the Screening  

Committee decided to allocate Baranj III and IV blocks to Ambuja  

Cement Ltd. subject to any order of the High Court in the matter.    

131.  In the 21st meeting held on 19.08.2003, the issue of  

competitive bidding was raised.  On this, the Screening Committee  

felt that further guidelines need to be evolved for allocation of blocks  

and competitive bidding should also be looked at. In that meeting it  

was also felt by the Committee that coal being only one of the inputs  

of end-use projects, other matching inputs should also be  

considered before allocation of a coal block.

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132  Significantly, the guidelines framed and applied by the  

Screening Committee for the period from 14.07.1993 (1st meeting)  

to 19.8.2003 (21st meeting) are conspicuously silent about inter se  

priority between the applicants for the same block.  In the 18th  

meeting, the Screening Committee considered the issue of  

determining inter se merit of applicants for the same block as well  

as certain other issues for bringing in transparency.  The Screening  

Committee felt that guidelines for determining inter se priority  

among claims for block between public sector and private sector for  

captive use and between public sector for non-captive use and  

private sector for captive use need to be evolved.  However, no  

guidelines for determining inter se priority of applicants for the same  

block was evolved. The guidelines also do not contain any objective  

criterion for determining the merits of applicants and lack in healthy  

competition and equitable treatment. In the first counter affidavit  

filed by the Central Government, it is admitted that from the 1st  

meeting (held on 14.07.1993) to the 21st Meeting (held on  

19.08.2003), the guidelines did not deal with the subject of  

determining inter se priority between applicants.     

133.  As regards 26 coal blocks allocated to private  

companies pursuant to the recommendations of the Screening  

Committee for the period from 04.11.2003 (22nd meeting) and

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18.10.2005 (30th meeting), the Attorney General submits that the  

Screening Committee had devised guidelines to determine inter se  

priority amongst applicants for the same block.  It is also submitted  

that the recommendations were made by the Screening Committee  

after consideration of each application and assessment of each  

applicant’s merits in terms of the criterion laid down in the  

guidelines.  

134.  The counter affidavit filed by the Central Government  

on 22.06.2013 at pages 102-159 deals with this period.  The  

compilation (Volume 3-B) contains materials relating to  

recommendations made by the Screening Committee for allocation  

of coal blocks to private companies pursuant to its 22nd meeting to  

30th meeting held between 04.11.2003 and 18.10.2005.  It  

transpires from the materials placed on record that there was boom  

in the iron and steel sector at that time. The Screening Committee  

was usually required to consider 3-4 applicants for each block.   

Though the guidelines required that a captive block cannot be  

allocated as replacement for a linkage and that coal blocks can only  

be allocated for specific projects and not as back up in general and  

additional guidelines also provided that Central PSU was to be  

accorded priority over State Government PSU if all other factors  

(like suitability of coal grade, techno-economic viability/feasibility of

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the project, state of preparedness of the project, etc.) were equal  

but a careful look at these guidelines show that they do not lay down  

any criterion for evaluating the comparative merits of the applicants.  

As a matter of fact, the guidelines applied by the Screening  

Committee are totally cryptic and hardly meet the requirement of  

constitutional norms to ensure fairness, transparency and non-

discrimination.   

135.  In the 23rd meeting held on 29.11.2004 for Belgaon coal  

block, three applicants, namely, (i) M/s. Chandrapur Ispat Ltd., (ii)  

M/s. Gupta Metallics and Power Ltd. and (iii) M/s. Sunflag Iron and  

Steel Ltd. had applied.  The particulars of these three applicants  

have been noted by the Screening Committee but besides that there  

is nothing to indicate as to why M/s. Sunflag Iron and Steel Ltd. was  

found more meritorious than the other two applicants.  It is pertinent  

to note that Ministry of Steel had supported the proposal of both  

Gupta Metallics and Power Ltd. and Sunflag Iron and Steel Ltd.  The  

consideration of inter se merit appears to be ad-hoc.  There is no  

comparative assessment of the merits of the applicants. There is so  

much of ad-hocism in consideration of the applications that in every  

meeting, the guidelines were altered.    

136.  In the 24th meeting held on 09.12. 2004, the Screening  

Committee altered the norms by shifting insistence on achieving

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financial closure of the end-use projects to some appropriate stage  

after the mining plan approval.  In that meeting, the Screening  

Committee was informed that the proposal to allow disposal of coal  

produced during development phase of the mine has been  

approved by the Government.  In that meeting, the Committee  

considered allocation of Brinda, Sisai, Dumri, Meral, Lohari, Moitra,  

Kotre-Basantpur and Pachmo blocks.  Applications were received  

from M/s. Abhijeet Iron Processors Pvt. Ltd for allocation of Brinda,  

Sisai, Dumri, Meral and Lohari blocks, M/s. Neelachal Iron and  

Power Ltd. for allocation of Brinda, Sisai and Dumri blocks, M/s.  

Bajrang Ispat Pvt. Ltd. for allocation of Dumri, Brinda and Sisai  

blocks and M/s. Pawanjay Steel and Power Ltd. for allocation of  

Dumri and Brinda blocks.  The Screening Committee noticed that  

among applicants competing for Brinda and Sisai, M/s. Abhijeet Iron  

Processors Pvt. Ltd., applied way ahead of others, its requirement  

was large and it has a good track record and Ministry of Steel had  

recommended its case.  The other applicants, viz., M/s. Bajrang  

Ispat and M/s. Pawanjay Steel were later applicants.  The  

requirement of M/s. Bajrang was small and sub-blocking was not  

desirable while M/s. Pawanjay had not yet given the required details  

to Ministry of Steel.  For Meral, M/s. Abhijeet was the only applicant.  

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The Screening Committee decided to allocate Brinda, Sisai and  

Meral blocks to M/s. Abhijeet Infrastructure Private Ltd.  

136.1   In the same meeting, M/s. Jayaswal Neco Ltd.  

was allocated Moitra block in place of Jogeshwar and Choritand-

Tilaya, already allocated to them. Lohari block was allocated to M/s.  

Usha Martin Limited subject to the views of Ministry of Steel.  It is  

important to mention that Lohari coal block was acquired under the  

Coal Bearing Acquisition Act.  The Committee noted that the  

transfer modalities were yet to be worked out in details.    

136.2  The Screening Committee in 24th meeting noted the  

particulars of each applicant but how each applicant met such  

parameters is neither mentioned nor are they discernible.    

137  In its 25th meeting *  held on 10.01.2005, the Screening  

                                                 *

………The sizes of blocks in terms of reserves are large and the individual requirements of the sponge iron/steel  producers were comparatively smaller.  All the meritorious applicants deserve to be given captive coal.  In order to accommodate all the meritorious and deserving cases, these blocks would need to be sub-divided which  would result in enormous loss of coal between barriers because of statutory and practical mining conditions.  Therefore, to sub-block the larger blocks as an alternative for accommodating all the deserving cases had to be  ruled out.  The second alternative was of grouping the deserving cases, so that they can form a joint venture  company, an SPV for mining of coal and carry out the coal mining jointly in the allocated block.  This alternative  was also presented to the applicant companies, but most of them had expressed reservations on grounds like cultural  and administrative differences among the constituents of the joint venture company, inherently because they were   competitors, the joint venture company would be off balance-sheet and may not attract sufficient lending, there  could be intersee slippages in development of the end-use projects and injection of equity by the constituents which   could jeopardize the mining project and would not lead to production at an early stage.  A number of other similar  objections to the formation of joint venture company or mining through SPV were put forward by a number of  applicants.  This alternative also, therefore, had to be left alone.  It was then discussed that for each natural block,  one applicant company who had the highest stake and which was likely to take up proper mining at the earliest,  could be designated the Leader company and allocated a captive block and a group of other meritorious companies  could be nominated as associated companies for supply of coal by the leader company to these designated  associates.  The amount of coal to be supplied by the leader company to the associate company would have a  ceiling determined by the assessed requirement of the associate company, after deducting the linked quantum of  coal given by CIL/its subsidiaries.  The leader company would commit to supply the ceiling amount of coal to the

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                                                                                                                                                             associate company depending upon its requirements i.e. as and when the plant of the associate company comes up,  its requirements would be met upto the level of ceiling quantum by the leader company.  The yearly percentage of  satisfaction through this supply would be in the same proportion as the rated production capacity of the mine, to be  approved during the mining plan, to the total of the assessed requirements of the leader (after fully protecting earlier  allocation, if any) and the associated companies attached to a coal block.  In the alternative, this supply of coal from  the leader company to the associated companies could be done through MCL also where depending on the actual  requirement of the associate company, subject to the ceiling, MCL would add service charge, gather coal from the  leader company and supply the same to the associate company.  In either of these cases, coal would be transferred  from the leader company to the associate company at administratively determined transfer price and not at any free  market price or notified price of CIL, as this arrangement is in lieu of giving coal blocks to the associate companies  and their taking up captive mining themselves.  This administrative transfer price would be determined by Ministry  of Coal through its sub-committee headed by Addl. Secretary (Coal).  Having decided as above, the Screening  Committee  proceeded to select the leader and the associate companies.  …….To sum up, the following companies were found deserving of allocation of coal blocks alongwith their status:      Block   Name of the Company   Status      Utkal A   To be merged with Gopalprasad for       Mining by MCL as one mine or by       Jindal Thermal Power Ltd./       Jindal Vijayanagar Ltd. and include       Jindal Stainless Steel Ltd. as a linked Consumer       or an associate.  Final decision and details       to be taken up in the Ministry of Coal.      Talabira II  NLC         Priority linkage to be given for supply of coal       to companies to be worked out in the Ministry       of Coal so that their yearly satisfaction level       based on their assessed requirement after        adjusting the linkage is about equal to        those companies in the other blocks.         Bijahan   Bhushan Limited    Leader Company       Associate companies to be worked out in the Ministry of Coal  

so that their yearly satisfaction level based on their assessed   requirement  after adjusting the linkages is about equal to the   associate companies in the other block.    

 Radhikapur  Rungta Mines    Leader Company      (West)       Associate companies to be worked out in the Ministry of Coal, so that      their yearly satisfaction level based on their assessed requirement after       adjusting the linkages is about equal to the associate companies in the  

other block.         

                  Radhikapur  Tata Sponge Iron Ltd.   Leader Company      (East)       Associate companies to be worked out in the Ministry of Coal, so that      their yearly satisfaction level based on their assessed requirement after       adjusting the linkages is about equal to the associate companies in the  

other block.     

To the extent possible, linkaged/associate companies would be grouped in the blocks sought by  them.

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Committee considered allocation of five coal blocks in the MCL  

area.  Thirty applicants made presentations before the Committee.   

Many of these applicants were meritorious.  The size of these  

blocks was large compared to the requirement of the applicants.   

The Screening Committee decided that for each such block, one  

applicant company who had the highest stake and which was likely  

                                                                                                                                                               Following companies were considered to be included as associate companies or for linkages:  

1) Jindal Stainless Steel Ltd.  2) Orissa Sponge Iron Ltd.  3) SMC Power Generation Ltd.  4) OCL India Limited  5) Shree Metalliks Limited  6) Scaw Industries Limited  7) Deepak Steel & Power Limited  8) SPS Sponge Iron Limited  9) Shyam DRI Power Limited  

 [However, subsequently after the long-term linkage of Aditya Aluminium was revealed from  records, the other three companies who substantially met with the criteria employed for selection  of the above associate companies, were found includable without much change in percentage  satisfaction of the earlier determined associate companies.  These companies are:    

10) Mahavir Ferro Alloys Ltd.  11) Nalwa Sponge Iron Ltd.  12) Bajrang Ispat Private Ltd.]  

 The companies whose cases were not decided in their favour for the five captive blocks  

under consideration, are as follows:  i. N.T.P.C.  ii. Bengal Sponge Iron Ltd.  iii. Mundra SEZ  iv. Gujarat Electricity Board  v. INDAL  vi. OPGENCO  vii. Madhya Utilities & Investment Ltd.  viii. Deo Mines & Minerals P Ltd.  ix. Madhyadesh paper Limited  x. Sunflag       xi. Aditya Aluminium (HINDALCO)  xii. Jaiswal Neco  xiii. MSEB  

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to take up proper mining could be designated the leader company  

and allocated the block and a group of other companies could be  

nominated as associate companies for supply of coal by the leader  

company to these designated associates.  In our opinion, such  

procedure is apparently in contravention of the statutory provision  

contained in Section 3(3)(a)(iii) of the CMN Act. Moreover, the  

arrangement of consortium of companies violates Section 3(3)(a)(iii)  

of the CMN Act as the leader company supplies the associate share  

of coal to the associate company at a price (though the price is  

determined by the Government).  Winning or mining of coal by such  

company is impermissible under the CMN Act. The rules of game  

were changed to adjust large number of applicants whose  

applications would have been otherwise rejected as their coal  

requirement was far less than the coal available in the coal block.  

However, in order to accommodate these applicants, a novel idea of  

choosing a leader company and associate companies was evolved  

which, as indicated above, is impermissible under the CMN Act. The  

merits of 13 companies whose applications were rejected have not  

been comparatively assessed with the 17 companies (5 leaders and  

12 associates) whose applications were accepted and  

recommended for allocation to the Central Government.  

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138.  In its 26th meeting ** held on 01.02.2005, the Screening  

                                                 **

…..Considering the financial soundness of the companies, status of advance action taken, requirement of the  end-use projects already put up, the likelihood of setting up of the entire capacity of the end-use projects and the  support of the Ministry of Steel and/or Power and the support of the State Government the following companies  were selected by the Screening Committee for allocation of coal from captive blocks on the pattern similar to the  blocks in MCL area considered by the Screening Committee in its meeting held on 10.1.2005.  

1. Anjani Steels Pvt. Ltd.  2.  Hindustan Zinc Limited  3. Chattisgarh Electricity Company Ltd.  4. Ind Agro-Synergy Ltd.  5. Ispat Godavari Ltd.  6. Jayaswal Neco Ltd.  7. Jindal Steel and Power Ltd.  8. MSP Steel and Power Ltd.  9. Nalwa Sponge Iron Ltd.  10. Nav Bharat Coalfields Pvt. Ltd.  11. Prakash Industries Ltd.  12. Sri Bajrang Power and Ispat Ltd.  13. Sri Nakoda Ispat Ltd.  14. Sunflag Iron & Steel Co. Ltd.  15. Vandana Global Ltd.  

 It was decided to allocate coal from the captive blocks in the same way as decided in case of blocks in  

MCL area, the Committee proceeded to listing out the possible leaders from among the selected  companies and  listed out the following possible leaders:  

 1. Hindustan Zinc Ltd.  2. Chhattisgarh Electricity Company Ltd.  3. Jayaswal Neco Ltd.  4. Jindal Steel & Power Ltd.  5. Prakash Industries Ltd.  6. Sunflag Iron & Steel Co. Ltd.  7. Consortium of Nav Bharat Coalfields Pvt. Ltd.,      Ind Agro Synergy; Ispat Godawari, Sri Bajrang Power & Ispat Ltd.,    Sri Nakoda Ispal Ltd., Vandana Global Ltd.         It was decided by the Committee that detailed formulation of groups or ‘common pool’  for allocation of coal/blocks in line with the dispensation being contemplated in MCL blocks, will  be worked out by the Ministry of Coal.  In this regard, it was decided that the following three  alternative formulations for mining and distribution of coal by the group from the captive mine  appear workable.           i) Formation of a Consortium company which will mine coal and distribute    among the consortium members.          ii) If no consortium emerges by consensus, a leader may be identified in the group  who will do mining of coal and distribute it among the members of the group at a transfer price to  be fixed by a Committee in the Ministry of Coal.       iii) If the group members and leaders are not agreeable to a direct dealing with each  other, they being competitors among themselves, the subsidiary (here SECL) of CIL operating in  that area shall undertake distribution of the coal to the associate companies at the transfer price  fixed by a Committee in the Ministry of Coal.        Ministry of Steel raised the issue that a number of companies have, in their  presentations, mentioned the capacity of the end-use projects in excess of what has been  recommended by the Ministry of Steel and a view has to be taken on the same.  Further it was

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Committee considered allocation of five blocks in SECL area.  

Twenty-five applicants had applied for these blocks. Ten applicants  

who had submitted their applications after the cut-off date were  

rejected.  The remaining fifteen were chosen for allocation on the  

same lines as was done in the 25th meeting for allocation of coal  

blocks in the MCL area. Of these 15 applicants, the Screening  

Committee listed out seven companies as possible leaders for 5  

blocks.  The procedure followed in the 26th meeting suffered from  

the flaws similar to recommendations made by the Screening  

Committee in its 25th meeting. Moreover, the minutes of the 26th  

meeting reveal that the Ministry of Steel raised the issue that a  

number of companies have, in their presentations, mentioned the  

capacity of the end-use projects in excess of what has been  

recommended by the Ministry of Steel. It is further seen that the  

representative of the concerned State Government had stated that  

the ground realities of the projects needed to be verified and the  

capacities of the end-use plants and coal requirements of such  

projects is required to be confirmed, but despite that, the Screening  

Committee proceeded to list out the possible leaders from among                                                                                                                                                                

also observed that a number of companies have raised the proposed capacity of their end-use  projects after the cut-off date of 28.6.2004.  On this, representative of the State Government stated  that the ground realities of the projects need to be verified and the capacities of the end-use plants  and coal requirements of such projects require to be confirmed.  Therefore, the Screening  Committee decided that a Committee of the representatives of the Ministry of Steel and Ministry  of Power, Government of Chhattisgarh and the Ministry of Coal will sit in a meeting and assess  and firm up the capacities and coal requirement.  The Meeting would be convened in the Ministry  of Coal.        

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the selected companies, viz., 1. Hindustan Zinc Ltd.; 2. Chhattisgarh  

Electricity Company Ltd.; 3. Jayaswal Neco Ltd.; 4. Jindal Steel &  

Power Ltd.; 5. Prakash Industries Ltd.; 6. Sunflag Iron & Steel Co.  

Ltd.; and 7. Consortium of Nav Bharat Coalfields Pvt. Ltd., Ind Agro  

Synergy Ltd., Ispat Godawari Ltd., Sri Bajrang Power & Ispat Ltd.,  

Sri Nakoda Ispat Ltd. and Vandana Global Ltd.  Moreover, the  

Screening Committee did not assess the capacities and coal  

requirement of these companies.  The Committee decided that  

detailed formulation of groups or ‘common pool’ for allocation of  

coal/blocks in line with the dispensation being contemplated in MCL  

blocks will be worked out by the Ministry of Coal.  In our view, the  

expression ‘a company’ occurring in Section 3(3)(a)(iii) of the CMN  

Act does not cover “consortium of companies” or “formulation of  

groups” or “common pool”.  The decision of the Screening  

Committee to recommend allocation of coal blocks to consortium of  

companies or formulation of groups or common pool is in  

contravention of Section 3(3)(a)(iii) of the CMN Act.  CMN Act  

places embargo on granting the leases for winning or mining coal to  

persons other than those mentioned in Section 3(3)(a)(iii).   

Consortium of companies surely falls outside Section 3(3)(a)(iii).   

The statutory scheme of the CMN Act generally and Section  

3(3)(a)(iii) in particular have been given a complete go-bye in the

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procedure followed by the Screening Committee and finally by  

issuing allocation letters to one leader company with obligation to  

share associate’s share of coal to the associate company at a price  

determinable by the Government.     

139.  In the 27th meeting *** held on 01.03.2005, the  

                                                 ***

The above submissions of various companies who made presentation before the Screening  Committee were deliberated by the members of the committee in details and with the support of the  representatives of the state governments concerned, representatives of the administrative ministries, such  as Ministry Steel, Ministry Power, Ministry of Commerce and Industries (Deptt. of Industrial Policy and  Promotion) and the Ministry of Railway and other members, allocation of the following blocks in favour  of the companies mentioned against each in line with consortium/leader and associate approach adopted in  case of the blocks in MCL and SECL areas, was decided:-    i) North Dhadu (670 mt.) -Tata Power   -  Leader      Subject to their studying the details and making       available their views to Min. of Coal who would        then take an appropriate decision in the matter.         

   M/s. Adhunik Alloys and Power Limited]         M/s. Pawanjay Iron and  Steel Ltd.         ] Associates                  M/s Jharkhand Ispat Ltd.          ]           ii) Bundu   -Rungta Mines Ltd  Leader/consortium       Jai Balaji Sponge Ltd.      iii) Ardhagram  -Sova Ispat Ltd.    Leader       - Bengal Sponge Iron Manufactures        Mining Ltd.    iv) Parvatpur  Electrosteels Casting Ltd.    v) Gondulpara  -Tenughat Vidyut Nigam Ltd.        - Damodar Valley Corporation Ltd.    TVNL laid claim to Gondulpara on the assertion that since they have the adjoining block of Badan, it  would save coal if the two are mined together.  CMPDIL clarified that there had to be two separate mines  looking to the geography of the block and, therefore, the question of coal saving does not arise.  It was  decided to share the produce between DVC and TVNL.  Leader would be decided in the Ministry of Coal.    vi) Pirpainti-Barahat  - Shyam Sel Ltd.      - Rashmi Cement Ltd.    vii) Mahan      - M/s. Hindalco (subject to confirmation by Govt. of Madhya Pradesh)    viii) Gurha (East)  -M/s. Marudhar Power Pvt. Ltd.

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Screening Committee considered allocation of blocks in the CCL  

area while in 28th meeting ****

held on 15.04.2005, the Committee  

                                                                                                                                                               ix) Dumri    - Neelachal Iron & Power Ltd.         - Bajrang Ispat Pvt. Ltd.    6. In regard to the decision taken on allocation of Mahan coal block to M/s Hindalco since the  representative of Govt. of Madhya Pradesh made repeated request to consider to allocation of the block in  favour of the Madhya Pradesh State Mineral Development Corporation Limited, it was observed by the  Chairman of the Screening Committee that  allocation of Mahan block to Hindalco is likely to lead to  substantial value addition and economic activities in the state generating considerable revenue to the State  exchequer.  The State Mineral Corporation can ask for other blocks such as Amelia and Amelia north in  the vicinity of the Mahan block.  However, considering the overall position, it was decided that it would be  appropriate to have the views of the Govt. of Madhya Pradesh on the same.  It was decided that within a  CIL subsidiary area, production from the blocks, instead of a one to one relation between the leader and  the associates, it could be pooled and shared amongst the associate companies via the local CIL  subsidiaries.  The coal from these blocks would be mined by the designated leader and transferred at a  price to be determined administratively as in the case of MCL and SECL blocks.    The issue of change of the area of the Gare-Palma-IV/I block which was allocated to M/s. Jindal Steel and  Power Ltd., by the allocatee company themselves was also discussed.  The details of the case was  explained before the Screening Committee.  It was stated that M/s. Jindal Steel & Power Limited had  shifted the area of the block to cover an adjoining area containing a coal reserve of about 15 million tonne  between the border of the State of Orissa and block boundary which is in the State of Chhattisgarh.  On the  other side, a portion of the block containing a reserve of about 36 million tonne under forest cover and  human habitation has been left out matching the acreage of the changed area with the acreage area of the  block allocated to them.  It was pointed out by CMPDIL that the area between Orissa border and block  boundary which has been covered by M/s. Jindal Steel and Power Ltd., could not form an independent  block and should have been included earlier in the area of Gare-Palma-IV/I.  It was also stated that M/s.  Jindal Steel and Power Ltd., have already obtained a lease over the area which contains the un-allocated  area covered by them with the approval to the mining plan and previous approval by the Central  Government for grant of mining lease.  In view of the same it was held by the Committee that it was an  error both on the part of the Government and the Company and this needed to be regularized.  Thereafter,  it was decided that M/s. Jindal Steel and Power Ltd. should mine the left out area of the block under forest  cover and human habitation while mining the reserve in the extra covered area.  Accordingly, the  representatives of M/s. Jindal Steel and Power Ltd. were called before the Committee and they were  informed that they should work the entire area of the block including the forest area and the area under  villages and also the additional area in question which has been covered by them and they should give  details of the whole area and its coal reserves to the CMPDIL and Ministry of Coal and the mining plan be  accordingly revised and considered.       

 **** i) Patrapara             Looking to the size of the project, investment involved etc. it was decided that the leadership should go to  M/s. Bhushan Steel and Strips Limited and for the associate status M/s. Nepaz Metalicks who had already   been allocated a sub-block in Patrapara would need to be included, M/s. Visa Industries in view of the  progress achieved by them need to be included and after checking up the availability of reserves, case of  M/s. Ocean Ispat could be decided in the Ministry of Coal for inclusion of otherwise. The committee  discussed at length the limited reserve available in Patrapara. Considering the requirement of the above  applicants and the fact that Aunli block, north of Patrapara, which was yet to be explored in detail, had  access from Patrapara and Machhakatta, most of the intervening boundaries of Aunli being occupied by

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considered allocation of blocks in SECL area. Neither the counter  

affidavit nor the minutes of these two meetings show that  

assessment of comparative merits of the applicants was done. The  

Screening Committee continued with consortium / leader and  

associate approach, as was done for the MCL area in the 26th  

meeting.  This procedure is clearly in contravention of Section  

3(3)(a)(iii) of the CMN Act. Except recording the particulars of these  

                                                                                                                                                             Patrapara, it was decided that CMPDIL would redraw the boundary of Patrapara so as to include Aunli and  the necessary part of Machhakatta so as to result in a fairly large size block to meet the requirement of  these  companies.                                                                                                                  ii) Marki Mangli II, III and IV                    It was decided that Marki Mangli II, III and IV be allocated to M/s. Viangana.  As regards the request of  M/s BS Ispat it was felt that since they already have MM I and if the percentage satisfaction with MM I  matches the percentage satisfaction of Virangana with Marki Mangli II, III and then BS Ispat does not  have a case for Marki Mangli II.                   iii) Nirad Malegaon                  The Screening Committee decided to allocate this block to M/s. Gupta Metalicks and Power as the leader  and they could give rejects/middlings to M/s. Gupta Coalfields for their proposed power plants.  As the  grade of coal was superior, allocation of this coal block for power generation would not be desirable.       iv) Panch Bahini                   The Screening Committee decided to allocate this block to M/s. Radhe Industries they being the sole  applicant for this block.  

v) Bisrar                                      It was decided that this block be allocated to the following companies:                 i) Chattisgarh State Electricity Board as leader and the following as associates:                a) Ultra Tech (for their pre cut of project requirement)                                                                        b) M/s Chattisgarh Steel and Power                                  c)  M/s Singhal Enterprises                      d) M/s Vnadana                       e) M/s Akshay Investment (subject to the views of the Ministry of Steel)       CMD, CMPDIL informed that earlier Madanpur was proposed to be sub-blocked into two blocks and now  Bisrar is also being proposed to be sub-blocked in two blocks.  However, between the four sub-blocks, i.e.  two sub blocks of Bisrar and two of Madanpur, one each from Bisrar and Madanpur, could be combined to  be called, Madanpur North or Bisrar (North) and Madanpur (South) or Bisrar (South) could be mined as one  block each.  Consequently, the total number of blocks between Bisrar and Madanpur would remain two.   One would be with about 10 million tones of extractable reserves and the other about 120 million tones of  extractable reserves.  It was decided that since CSEB would be inducted as the leader consequently one  leader from among those selected as leaders in the 26th meeting would need to be dropped.  This matter  would be analysed and decided in the Ministry of Coal.  It was also decided that the allocattees under the  leader-associate/consortium concept should be called in the Ministry of Coal for seeking their views and  finalizing the sharing of coal from captive mine arrangement between them.   

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companies, who had given presentation, nothing is said about inter  

se priority or comparative merits of the applicants. By adopting  

consortium / leader and associate approach, the Screening  

Committee had indirectly done away with inter se priority and merit  

of the applicant companies. The consideration does not reveal  

application of any objective criterion.  It is admitted in para 206 of  

the counter affidavit filed by the Central Government that as regards  

the applicant - Neepaz Metalicks whose case was considered in 28th  

meeting, the recommendation of the Administrative Ministry was  

contrary to the recommendation of the State Government, yet the  

allocation of a sub-block in Patrapara block was made on the basis  

of State Government’s recommendation.  Moreover, it may be  

noticed that though the representative of the State Government  

supported the request of M/s Bhushan Steel and Strips Limited for  

allocation of Patrapara block but he stated that the State  

Government supports the claimants for Patrapara in the following  

order: (a) M/s Neepaz Metalicks Limited, (b) M/s SCAW, (c) M/s  

Visa Industries, (d) M/s Shree Metalicks, all of whom have already  

entered into a MOU with the Government of Orissa and the order of  

priority for M/s Bhushan Steel and Strips Limited would be lower  

than these four claimants.  As regards Panch Bahini block, the  

representative of the State Government stated that the applicant,

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M/s Shree Radha Industries, may be considered for a share and  

inclusion in the earliest list of blocks allocated in 26th meeting, still  

the Screening Committee decided to recommend allocation of  

Panch Bahini block to M/s Shree Radha Industries.   

140.  The counter affidavit in para 208 as regards 29th  

meeting ***** held on 03.06.2005 states that the Screening  

Committee considered a detailed presentation of modalities of  

                                                 *****

CMD, CMPDIL stated that with respect to mining in the new patrapara block, which would include  Aunil and part of Machhakatta, that Aunil is yet to be explored in detail and part of Machhakatta would  also need to be explored.  This would take like time.  It was pointed out to CMD, CMPDIL that they  should examine the possibility of allowing mining in the existing patrapara and thereafter dove-tailing the  mining plan of new patrapara which would include Machhakata and Aunil.  In any cases Aunil is in the dip  side of patrapara and mining would reach there only after many years.  Therefore, its immediate  exploration for the purposes of mining may not be necessary.  Chairman, Screening Committee pointed out  that for the purposes of calculating reserves, the data available as on date should be taken into  consideration.  He also directed that Machhakatta should be explored within the next six months by the  time the mining plan for existing patrapara comes up.  In case dove-tailing is possible then the mining plan  should be approved otherwise it could be modified suitably, instead of holding back the entire process.  ……..Sharing of Mahan Block between M/s. Hindalco and Esser Power Limited:  The matter was  discussed and by way of recapitulation the screening committee was informed that in the last meeting of  the screening committee the representative of Government of Madhya Pradesh had taken a position that the  Mahan block should be given to the State Mineral Development considering the overall merit of the  competing claimants the block should be allocated to M/s Hindalco for their aluminium project in which  the coal should be used in the captive power plant.  However, the final decision was to be taken in  consultation with the Government of Madhya Pradesh. The Government of Madhya Pradesh subsequently  have given up their position for allocation of Mahan block to the State Mineral Development Corporation  and have instead supported allocation of this block to M/s Essar Power Limited. Representative from  Government of Madhya Pradesh stated that as they are power deficit state, they would recommend  allocation of mahan coal block to Essar Power Limited only. Representative from the Ministry of power  also supported the request of Government of Madhya Pradesh.  The Screening Committee decided that the  views of the State Government and of the representative of Ministry of power be taken on record as they  too had merit.             

Iron and Case of M/s. Neelachal Power Limited: The Screening Committee took note of the assessed  requirement of M/s. Neelachal Iron and Power Limited and also that of its possible associate M/s. Bajrang  Ispat Limited.  It also took note of the fact that the overall percentage satisfaction was nearly 50% from the  allocated block of Dumri.  The decision for allocation of Dumri to M/s. Neelachal Iron and Power Limited  as leader with M/s. Bajrang Ispat as associate would remain unchanged.  

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competitive bidding by the CMPDIL. Despite the fact that  

modalities for auctioning through competitive bidding were  

discussed in 29th meeting, that was not carried further as is seen  

from the minutes of the 30th meeting of the Screening Committee  

held on 18.10.2005.    

141.   The minutes of 30th meeting ! show that the Screening  

                                                 ! CMPDIL made an audio visual presentation Gare Pelma Blocks viz, IV/1, IV/2, IV/3, IV/6 and IV/7  copy of the presentation is kept at Annexure-II. CMPDIL essentially said that partial detailed exploration,  except in IV/6, was done by the allocattees themselves and exploration, in the lower seams in IV/2 and 3 is  underway, precise data would be available only thereafter, and hence the estimates of reserves arrived at,  based on GSI boreholes which are very few, is highly tentative in respect of lower seams.  On the availability side  Addition to Gare Pelma IV/1  On account of additional area is estimated at 33.6 mill. Tonnes.  On account of lower seams with inferior grade coals, which may not be extracted being deep underground  and of inferior grades, is for 4.76 mill. T and is not being taken into amount.  Addition to Gare Pelma IV/2 and IV/3  On account of lower seams is estimated at 35 mill. Tonnes.  Of which 22.12 mill tonnes is of superior  grade.  Gare Pelma IV/6  The block has been detailed explored by CMPDIL and has total of 102.77 mill tonnes of extractable  reserves of which 13.68 mill Tonnes in the lower seams are of superior grades and the remaining 89.09 are  inferior grade of which 27.79 are in the lower seams (underground)  Gare Pelma IV/7  The block has been partially detail explored by the allocate. Exploration of the lower seams has not yet  been taken up or mandated. The upper seams (opencast) in the approved mining plan show extractable  reserves of 56.62 million tonnes. Extractable Reserves in the lower seams are tentatively assessed at 21.98  mill tones of which 14.56 are of superior grade    On the Demand Side  JSPL and JPL  The existing Sponge Iron plant of JSPL of 6 Ltpa capacity requires 72 mill T of inferior grade coal for a 30  year life of which 11 million tones have already been extracted from GP IV/1. The 1000 MW power plants  of JPL require about 158 mill T of  ROM, considering the inferior grades of coal for a 30 years life.  The Proposed expansion of 6.6. Itpa in sponge Iron capacity of JSPL requires about 80 mill T of inferior  grade coal for  30 year life for which GP IV/6 is being sought. The proposed 2.6 itpa sponge iron through  the Rotary Hearth Furnace (RHF) of JSPL requires 6.34 mill T of 10-12% ash coal which would result in  an increased ROM Quantity depending upon the yield upon washing.  The reserves available in IV/1, Considering 11 mill T already extracted, would be 95.88 mill T. with  extracted reserves it would be 106.88 mill. T another 4.76 mill T are inferior and in UG. Total reserve in  GP IV/2 and IV/3 would be 160 + 35 = 195 Mill T. Where the 35 addition is highly tentative.  Total available in IV/1, IV/2 and IV/3 = 95.88 + 11 + 4.76 + 195 = 306.64 mill T including 22.12 superior  in UG and 17.64 inferior in UG. Inferior equivalent not counting 4.76 in GP IV/1 would be 326.86 mill. T

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                                                                                                                                                             Total required = 72+79.2+157.5 = 308.7 mill T inferior grade. Not counting the requirement of RHF as  superior grade coal in IV/2 and IV/3 may not be suitable for the RHF.  Another 34 mill T inferior equivalent count be added to the requirement if washing yield is taken as 36%  instead of 40% for sponge iron and 80% yield is taken for power instead of 100% with rom as direct feed.  Addition on account of RHF would depend upon the wash yield, if it is taken as 50% the addition would  be about 13 mill tones of superior grade rom coal.  Representative from the Government of Chhattisgarh stated that JSPL and JPL are two separate  Companies/legal entities. JPL cannot be compelled to share coal given to them with JSPL. Company Law  does not recognize Group companies. Section 370(1B) mention companies under the same management  and JPSL JPL do not meet the criteria. Separate mining leases have been executed with them. They have  different shareholders, combining them would create legal complications and therefore, they should be  treated apart. Reserves in GP IV/2 and GP IV/3 should be kept out of the reckoning when considering   request of GP IV/6 as the company is the same and the project is of expansion in capacity.  CMD SECL stated that when allocation are being made in groups why should sister companies not be  asked to share first.  Representative from the Govt. of Chattisgarh stated that this would be discrimination against JSPL JPL.  When excess coal cannot be taken back from earlier allocattees why should JSPL-JPL be singled out.  Besides, all is being based on data/projections which is admittedly highly tentative. He further said that  power generation (JPL) is crucial and should not be affected.  Chairman sought views of the Ministry of Steel. The representatives of Mos stated that the date is  tentative, it is not fool proof. JSPL and JPL are two separate companies and that they agreed with views of  the representative from Chattisgarh Govt.   Representative from CEA (power) stated that coal blocks given for power project of JPL should be kept  apart and not clubbed with Sponge Iron project’s requirement of JSPL.  Chairman observed that large numbers of people are looking for coal. There should be a sense of enquiry  for meeting requirement of people. Legal solution can and should be found for it.  Representative from the Govt. of Chattisgarh stated that JSPL and JPL should not be clubbed. People have  invested in these companies. They are public limited companies, listed companies. There would be  complications.  Chairman sought views of Chattisgarh on clubbing IV/1 and IV/6. This was agreed and supported by  Chattisgarh, CEA and MoS.  It was accordingly decided that reserves in GP IV/2 and IV/3 would be kept out of consideration for  deciding on extent of alloction in IV/6. The extractable reserves in GP IV/1 + GP IV/6 are 95.88 + 102.77  = 198.65 mill. T.  The Requirement of JSPL for 6 Itpa + 6.6 Itpa S.I comes to 72-11+79.2=140.2 mill. T. And if 36% yield in  washing is considered, given high percentage of G grade coal in GP IV/1 and 6 this becomes 157.2 mill T  with addition of 17 mill. T.  As to the requirement in 2.6 Itpa in RHF, CMD CMDPIL was of the view that coal from lower seams of  IV/6 may not yield 10-12% ash coal on washing and that JSPL should seek linkage of superior coal.  Representative from the Govt. of Chattisgarh stated that such superior coal is available nowhere and that  JSPL should be allowed to innovate and use the lower seams to meet their RHF Requirement. MoC could  keep condition that when full facts are known at the mining plan appropriately at the stage and allocate  IV/6 to JSPL and Nalwa Sponge.  CMD CMPDIL said that superior coal in lower seams if IV/2 and IV/3 should not be used for power  generation and but for sponge Iron marking.  Chairman, summing up the discussion, observed that IV/2 IV/3 are to be kept out; reserve in IV/1 and IV/6  are be clubbed; RHF requirement be kept out; requirement of partner company M/s Nalwa Sponge be  included; the existing requirement be accounted for at 100% satisfaction and expansion requirement of  JSPL and requirement of Nalwa Sponge be given same satisfaction level as the overall in SECL area. If  surplus still remains in IV/1+ after this then JSPL-Nalwa be asked to select another allocattee failing which  the excess reserves be handed over to SECL, in terms of annual production, at transfer price to be  determined by the Government.  Coal availability and requirement in IV/1                                              Inferior                                      Superior  Total                    Available;    95.88+89.09=184.97    13.68

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Committee decided to club Gare Palma Blocks IV/1 and IV/6 and  

further decided to allot the combined block (IV/1 and IV/6) to JSPL  

with Nalwa Sponge as a partner company.  The minutes also record  

that if surplus still remains in the block, then JSPL-Nalwa be asked  

to select another allottee failing which the excess reserves to be  

handed over to SECL, in terms of annual production, at transfer  

price to be determined by the Government.  Coal availability and  

requirement in Gare Palma IV/1 block as recorded in the minutes  

show that 31.05 m.t. remained surplus with these companies.  In the  

30th meeting, the Screening Committee also recommended to allot  

Dumri Coal Block to M/s. Neelachal and M/s. Bajrang despite the  

fact that CMPDIL informed the Committee that north portion (rise  

side) of Dumri remains unexplored in detail on account of security  

problems.  The unexplored portion has superior grades of coal of  

about 15 m.t. As regards Gare Palma IV/8 block, the minutes  

indicate that for this block M/s CECL; Consortium of five applicants  

                                                                                                                                                             198.65    Required    :    JSPL             157.2                                           NIL  At 100%          Nalwa           026.6  Satisfaction    Required       JSPL                    144.7 (satisfaction level for existing 6 Itpa SI at 100%)              At 86%        Nalwa                   022.9               Satisfaction                                   167.6    Surplus:                                          17.37                                        13.68  31.05   

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and M/s Jayaswal Neco Ltd. had made presentations. Consortium  

of five applicants companies was not recommended apparently inter  

alia for the reasons; (1) that the Consortium of five applicants  

companies was yet to be incorporated and (2) that they claimed the  

blocks mainly on the ground of promoting consortium approach. It is  

interesting to note that in the earlier meetings for allocation of coal  

blocks in MCL, SECL and CCL areas, the Screening Committee on  

its own adopted consortium / leader and associate approach and  

the factor such as that the consortium company was not   

incorporated was not at all viewed as an impediment for  

recommendation but in this meeting the claim of consortium of five  

companies was not accepted and it was noted that they may be  

accommodated in other blocks. The application of norms by the  

Screening Committee changed from meeting to meeting.  There  

was no consistent or uniform consideration.  The portion of Dumri  

Coal Block bearing superior grade was admittedly unexplored but it  

was recommended for allocation.  The clubbing of blocks or sub-

blocks was done which was not the brief given to the Screening  

Committee.   

141.1  The recommendations made by the Screening  

Committee in its 30th meeting suffer from the same infirmities as the

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recommendations made by it in favour of other applicants in earlier  

meetings.   

142.  In the 31st meeting held on 23.06.2006, the Screening  

Committee examined the applications for lignite blocks.  25  

applicants made their presentation.  The Screening Committee,  

after noticing the particulars of each of the 25 applicants individually  

and recording that it discussed the presentations made by the  

applicants and that it took into consideration the views/comments of  

the Ministry of Power, Ministry of Steel, concerned State  

Governments and the guidelines, recommended allocation of lignite  

blocks to 6 applicants.     

143.  In September, 2005, the Ministry of Coal issued  

advertisement inviting applications for allocation of 20 coal blocks.   

This was the first time when applications were invited for allocation  

of coal blocks by way of an advertisement.  The applications  

received pursuant to the above advertisement were taken up for  

consideration by the Screening Committee in  32nd meeting held on  

29.06.2006 and 30.06.2006, 33rd meeting held on 31.08.2006,  

01.09.2006 and 02.09.2006 and 34th meeting held on 07.09.2006  

and 08.09.2006.  In the 32nd meeting, the Screening Committee  

considered allocation of Rohne, Sitanala, Tenughat-Jhirki,  

Choritand-Taliya and  Jogeswar coal blocks.  54 companies (some

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of which were group companies) made presentations.  The  

Committee also considered applications of those companies which  

did not come for presentation.  The minutes of 32nd meeting !!      

record that the applications received in the Ministry regarding above  

coal blocks were sent to the State Government of Jharkhand and  

the concerned Administrative Ministries in the Central Government  

for their views/comments.  The views/comments of the Government  

of Jharkhand were received on 28.06.2006.  The Committee then  

recommended the allocation of Rohne coal block jointly in favour of  

M/s. JSW Steel Ltd., M/s. Bhushan Steel and Power Ltd. and M/s.  

Jai Balaji Sponge Ltd. Tenughat–Jhirki coal block was  

recommended jointly in favour of M/s. Rashtriya Ispat Nigam Limited                                                                          !!

The Screening Committee discussed in detail the presentations made and the applications submitted by the  companies.  Taking into consideration the views/comments of the Ministry of Power,  Ministry of Steel, concerned  State Governments, and considering the guidelines laid down for the allocation of coal/lignite blocks, the Screening  Committee decided to recommend the allocation of the coal blocks as follows:  i)  Rohne coal block jointly in favour of M/s. JSW Steels Limited, M/s. Bhushan Steel and Power Limited and M/s.  Jai Balaji Sponge Limited.  ii) Sitanala coal block in favour of M/s. Steel Authority of India Limited.                  iii) Tenughat-Jhirki coal block jointly in favour of M/s. Rashtriya Ispat Nigam Limited and M/s. Jindal Steel and  Power Ltd.   iv)  Choritand-Taliaya coal block jointly in favour of M/s. Sunflag Iron and Steel Limited and M/s Rungta Mines  Limited.  It was further decided that a sub-committee consisting of Joint Secretary, Ministry of Coal and Joint Secretary,  Ministry of Steel would have discussions with the recommended joint allocattees of Rohne, Tenughat Jhirki and  Choritand-Taliaya coal blocks and work out the modalities and details of the arrangements of the joint allocation.   In case there is a problem in the allocation as proposed, the sub-committee will bring  the matter again before the  screening committee.  As regards Jogeswar coal block the representative of the Government of Jharkand had informed the Committee that  the State Government were of the view that due to some problems at the local level, it may be difficult for private  companies to undertake coal mining.  He further added that this block may be earmarked for some State Public  Sector Undertaking.  The Screening Committee also took note of the fact that this block was earlier allocated but  due to some local problems the allocattee could not commence mining and it was consequently surrendered.  The  Screening Committee, therefore, decided not to recommend allocation of Jogeswar block in favour of any applicant  for the time being.    

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and M/s. Jindal Steel and Power Limited while Choritand-Taliya          

was recommended jointly in favour of M/s. Sunflag Iron and Steel  

Limited and M/s. Rungta Mines Limited.  Insofar as Sitanala coal  

block is concerned, the Committee recommended the said block in  

favour of M/s. Steel Authority of India Limited.  As regards Jogeswar  

coal block, the Committee in view of the comments of the  

representative of the Government of Jharkand decided not to  

recommend allocation of that block in favour of any applicant for the  

time being.  The minutes of 32nd meeting do not show how and in  

what manner the applications of those companies were considered  

which did not come for presentation.  There is no comparative  

assessment or evaluation of the applicants.  Why the chosen  

companies have been preferred over the others is not discernible?   

Merely because there were large number of applicants, it did not  

mean that the consideration of each applicant could not have been  

recorded or comparative assessment or evaluation of the applicants  

could not have been made.   What are the reasons for  

recommending three blocks jointly in favour of more than one  

company are neither recorded nor disclosed in the minutes.  The  

recommendations for allocation of blocks jointly in favour of two or  

three companies, as indicated earlier, are not in conformity with the  

CMN Act.  Rather, they are in contravention thereto.   

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144.  In the 33rd meeting, the Screening Committee  

considered allocation of Tubed, Chakla, Jitpur and Pengedappa  

coal blocks.  In that meeting, 165 companies made their  

presentations. The applications of 16 companies which did not turn  

up for making presentations were also considered.  In the 32nd  

meeting held on three dates, namely, 31st August and 1st and 2nd  

September, 2006, the Committee decided that recommendations  

regarding the above four blocks would be finalised after hearing the  

applicants for the remaining 11 blocks, for which the meeting was  

already notified for 07.09.2006 and 08.09.2006.  

145.  On 07.09.2006 and 08.09.2006, the 34th meeting of the  

Screening Committee was held to consider allocation of Ansettipali,  

Punukula-Chilka, Brahmpuri, Mandla North, Rawanwara North, Sial-

Shoghri Lohara East, Kosar-Dongargaon, Warora West (North),  

Biharinath and Mednirai coal blocks.  In that meeting, geological  

reserves of some of the coal blocks were reported by  

CMPDIL/SCCL.  The presentations were made by 101 companies.   

44 companies did not turn up for making presentations.  However,  

their applications were considered.  In that meeting, it was decided  

that the recommendations regarding the above 11 blocks would be  

finalized in the next meeting.

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146.  As seen from the above, in the 33rd meeting held on  

31.08.2006, 01.09.2006 and 02.09.2006 for allocation of four blocks  

and in the 34th meeting held on 07.09.2006 and 08.09.2006 for  

allocation of 11 blocks, no final decision was taken and the matters  

were deferred.  On 22.09.2006, the Screening Committee met  

regarding allocation of 15 coal blocks, which was subject matter of  

consideration in its 33rd and 34th meetings.  The minutes !!!

of the  

!!!  5.3 The State Government of Jharkhand vide its letter no.571/M.C. dated 29.8.06 and letter no. 592/CS dated  

21.9.06 had conveyed the following views regarding the captive coal blocks situated in the State of Jharkhand:-  S.No.   BLOCK     RECOMMENDATIONS  

1.    Tubed     i) M/s Hindalco           ii) M/s Tata Power          iii) M/s Jindal Steel & Power Limited   

2.   Jitpur     M/s Jindal Steel & Power Limited  

3.   Chakla     i) M/s Essar Power          ii) M/s Chaibasa Steel  

4.   Medinirai    i) M/s JSMDC           ii) M/s Rungta Mines  

5.4 The State Government of Madhya Pradesh vide its letter no.F-19-36/2005/12/2 (part-I) dated 23.1.06 and letter  no. F-19-36/2005/122 (Part-1) dated 12.7.06 had conveyed the following views regarding the captive coal blocks  situated in the State of Madhya Pradesh.  

S.No.   BLOCK   RECOMMENDATIONS  

1.   Brahmpuri   M/s Satna Power Company Limited  

2.   Mandla North   i) M/s Occidental Power Private Limited        ii) M/s Jaiprakash Associates Limited  

3.   Rawanwara North  M/s Ind Synergy Limited  

4.   Sial-Ghoghri   M/s Prism Cement Limited

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5.5 The State Government of Maharashtra vide its letter no. MMN-1005/C.R.969/Ind-9 dated 19.11.05, letter  no.MMN-1005/C.R. 1000/Ind-9 dated 10.1.06, letter no.MMN-1005/C.R.969 part-II/Ind-9 dated 4.5.06 and letter  no.MMN-1005/C.R.1000/Ind-9 dated 11.5.06 had conveyed the following views regarding the captive coal blocks  situated in the State of Maharashtra.  

S.No.   BLOCK   RECOMMENDATIONS  

1.   Lohara East   i) M/s Murli Agro Product Private Limited        ii) M/s Ultra Tech Cement Limited         iii) M/s IBEL Gas Power Limited  

2. Warora  West    i) M/s Bhatia International Limited                                   (North)    ii) M/s Shri Sidhbali Ispat limited         iii) M/s MSP Steel Private Limited                                               iv) M/s Central India Power Company Ltd.        v) M/s Gupta Energy Limited         vi) M/s Jas Toll Road Company Limited  

3. Kosar-Dongargaon    M/s Wardha Power Company Private Ltd.  

5.6  The State Government of West Bengal vide its letter no.5477/PrS/CI dated 9.8.06 had conveyed the following  views regarding the captive coal blocks situated in the State of West Bengal.  

S.No.   BLOCK         RECOMMENDATIONS  

1.                        Biharinath  i) M/s Bankura DRI Manufacturing Pvt. Co. Limited  

5.7  The Secretary, Industries, Government of Andhra Pradesh apprised the Screening Committee that Ansettipali,  Punkula-Chilka and Pengedappa are located in the notified tribal areas where the provisions of AP Land Transfer  Regulations are applicable. In such areas, the State Government will not be in a position to grant mining leases in  favour of private sector companies. The Government of Andhra Pradesh has also brought out amendments to  Section 11(5) of MMDR Act, 1957. Pursuant to this amendment grant of mining lease in Andhra Pradesh to non- tribals except public sector undertakings is prohibited in case of mines located in the notified tribal areas.   

5.8 The Screening Committee discussed in detail the presentations made and the applications submitted by the  companies. Taking into consideration the views/comments of the Ministry of Power, Ministry of Steel, concerned  State Governments, and considering the guidelines laid down for the allocation of coal/lignite blocks, the Screening  Committee decided to recommend the allocation of the coal blocks as follows:  

S.No.  BLOCK    Company and end use plant  

1. Tubed jointly to  i) M/s Hindalco Industries Ltd. for its enduse plant in Latehar,  Jharkhand  

ii) M/s Tata Power Company Ltd. for its enduse plant in  Singhbhum, Jharkhand  

2. Chakla  M/s Essar Power Limited for its enduse plant in Latehar,  Jharkhand

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3. Jitpur  M/s Jindal Steel and Power Limited for its enduse plant in  East Singhbhum, Jharkhand.  

4. Mednirai jointly to  i) M/s Rungta Mines Limited for its enduse plant in Saraikela  Kharswan, Jharkhand  

ii) M/s Kohinoor Steels Pvt. Ltd. for its enduse plant in  Saraikela Kharswan, Jharkhand  

5. Brahmpuri  M/s Pushp Steel and Mining for its enduse plant in Durg,  Chhatisgarh  

6. Mandla North  M/s Jaiparkash Associates Limited for its enduse plant in  Madhya Pradesh/Himachal Pradesh  

7. Rawanwara North  M/s SKS Ispat Limited for its enduse plant in Raipur,  Chhatisgarh  

8. Sial-Ghoghri  M/s Prism Cement Ltd. for its enduse plant in Satna, MP  

9. Lohara East jointly to  i) M/s Murli Agro Product Ltd. for its enduse plant in Nagpur  and Chandrapur, Maharashtra  

ii) M/s Grace Industries Ltd. for its enduse plant in  Chandrapur, Maharashtra  

10 Warora West (North)  M/s Bhatia International Ltd. for its enduse plant in  Chandrapur, Maharashtra   

11. Kosar-Dongargaon  M/s Chaman Metallics Pvt. Ltd. for enduse plant in  Chandrapur, Maharashtra  

12. Biharinath  M/s Bankura DRI Manufacturing Pvt. Co. Ltd. for its enduse  plant in Bankura, West Bengal  

13. Ansettipali  M/s Andhra Pradesh Power Generation Corporation Limited  (APGENCO) for its enduse plants in Andhra Pradesh  

14. Punkula-Chilka  

15. Pengedappa  

5.9 In respect of blocks recommended to be allocated jointly, the allocatee companies shall share the coal in the  ratio of their assessed requirement for the capacities (end-use plants) as reflected in the original applications.  

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meeting held on 22.09.2006 record recommendation for allocation  

of 15 coal blocks.  

146.1  Of these 15 blocks, three namely,                   

Ansettipali, Punukula-Chilka and Pengedappa were recommended  

for allocation to Andhra Pradesh Government undertaking as these  

blocks were located in the notified tribal area.  Of the remaining  

twelve, the Screening Committee recommended their allocation to  

fifteen companies.  Five companies were recommended for their  

power plants, three were recommended for the cement plants and  

remaining seven were recommended for the Sponge Iron Units.  For  

these twelve blocks, Jharkhand recommended seven companies,  

Madhya Pradesh recommended five, Maharashtra recommended  

ten and West Bengal recommended one company.   It is pertinent to  

notice that some of the companies like Chaman Metallics Ltd.,  

which was recommended by the Screening Committee for Kosar  

Dongergaon block had no recommendation by the State  

Government (Maharashtra).  Similarly, Pushp Steel and Mining Ltd.,  

which was recommended for Brahmpuri block had no  

recommendation from the State Government (Madhya Pradesh) and  

so also Kohinoor Steel (P) Ltd. for Mednirai coal block had no  

recommendation from the State Government (Jharkhand).  The

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minutes do not disclose in what manner the merits of the companies  

which were chosen for recommendation were determined. Even  

particulars of the applicants individually are not noticed.  There is no  

indication at all in the minutes of 33rd meeting and 34th meeting or  

the meeting held on 22.09.2006 when final decision that the  

conditions laid down in the guidelines are met by these companies  

was taken.  Twenty three companies were recommended by the  

four State Governments while fifteen companies were finally  

recommended for allocation by the Screening Committee but the  

reasons therefor are not discernible at all.  The minutes also do not  

disclose the criterion which the Screening Committee applied in  

selection of the fifteen companies and the reason for allocating  

twelve blocks to fifteen companies.  M/s. Grace Industries Limited  

was recommended allocation of a coal block although that company  

had no recommendation/categorization.  It is true that the  

recommendation/allocation made in favour of M/s. Grace Industries  

Limited was subsequently withdrawn/de-allocated but that is  

altogether a different matter.  

147.  In 2006, the Ministry of Coal invited applications for  

allocation of 38 coal blocks, of which 15 were reserved for the  

power sector.  The advertisement indicated that preference will be  

accorded to the power sector and steel sector.  Within the power

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sector, it was indicated that priority shall be accorded to projects  

with more than 500 MW capacity.  Similarly, in the steel sector,  

priority would be given to steel plants with more than 1 million ton  

per annum capacity.  In response to the advertisement, more than  

1400 applications were received for 38 coal blocks.  

148.  The allocation of coal blocks earmarked for power  

generation was considered by the Screening Committee in its 35th  

meeting which was held on 20.06.2007 to 23.06.2007, 30.07.2007  

and 13.09.2007.  The coal block that was numbered as one block in  

the advertisement was subsequently considered as two blocks.   

Thus, 15 coal blocks, namely, Amarkonda - Murgadangal, Ashok  

Karkata Central, Durgapur-II/Sariya, Durgapur-II/Taraimar,  

Fatehpur, Fatehpur (East), Ganeshpur, Gourangdih ABC, Lohara  

West & Lohara East, Mahuagarhi, Mandakini, Patal East, Rampia  

Dip Side of Rampia, Sayang and Seregarha were considered.  The  

status of geological reserve of 15 blocks was indicated.  The  

minutes ≠  of the 35th meeting briefly record the proceedings of the  

                                                 ≠ The Screening Committee, thereafter, deliberated at length over the information furnished by  the applicant companies in the application forms, during the presentations and subsequently.  The  Committee also took into consideration the views/comments of the Ministry of Power, Ministry  of Steel, State Governments concerned, guidelines laid down for allocation of coal blocks, and  other factors as mentioned in paragraph 10 above.  The Screening Committee, accordingly,  decided to recommend for allocation of coal blocks in the manner as follows:       

Name of Block Recommended Companies End use Plant

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                                                                                                                                                             1. Mandakini 1. M/s. Monnet Ispat & Energy  

Ltd.  2.  M/s. Jindal Photo Ltd.  3. M/s. Tata Power Comp. Ltd.  

Orissa    Orissa  Orissa  

2. Rampia   &   Dip Side of Rampia  

1. M/s. Sterlite Energy Ltd.   2. M/s. GMR Energy Ltd.   3. M/s. Lanco Group Ltd.   4. M/s. Navbharat Power Pvt.   5. M/s. Mittal Steel India Ltd.    6. M/s. Reliance Energy Ltd.  

Orissa  Orissa  Orissa  Orissa  Orissa  Orissa  

3. Durgapur II/Sariya  1. M/s. D.B. Power Ltd.  Chhattisgarh  4. Durgapur II/Taraimar  1. M/s. Bharat Aluminium Co.  

Ltd.   Chhattisgarh  

5. Sayang  1. M/s. AES Chhattisgarh Energy  Pvt. Ltd.  

Chhattisgarh  

6. Fathepur 1.  M/s. SKS Ispat & Power Ltd.  2. M/s. Prakash Industries Ltd.  

Chhattisgarh  Chhattisgarh  

7. Fathepur East 1.  M/s. JLD Yavatmal Energy  Ltd.  2. M/s. Green Infrastructure Pvt.  Ltd.  3. M/s. R.K.M. Powergen Pvt.  Ltd.  4.  M/s. Visa Power Ltd.  5. M/s. Vandana Vidyut Energy  Ltd.  

Maharashtra    Chhattisgarh    Chhattisgarh    Chhattisgarh    Chhattisgarh    

8. Lohara West & Lohara  East  

1. M/s. Adani Power (P) Ltd.  (1200 MW)  

Maharashtra  

9. Ganeshpur 1. M/s. Tata Steel Ltd. (CPP-600  MW)  2. M/s. Adhunik Thermal Energy  Ltd. (Equal Share) 1000 MW  

Jharkhand    Jharkhand  

10. Seregarha 1.  M/s Mittal Steel Ltd.  2.  M/s GVK (Gonvindwal Sahib)  Ltd.  

Jharkhand  Punjab  

11. Ashok Karkata Central M/s.  Essar Power Ltd. Jharkhand  12. Patal East M/s. Bhushan Power & Steel Ltd.  

(750)  Jharkhand  

13. Amarkonda Murgadangal 1. M/s. Jindal Steel & Power Ltd.  2. M/s. Gagan Sponge Iron Pvt.  Ltd.  

Jharkhand  Jharkhand  

14. Mahuagarhi 1. CESC  2. Jas Infrastructure Capital Pvt.  Ltd.  

Jharkhand  West Bengal

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meeting held on 20.06.2007 to 23.06.2007, 30.07.2007 and  

13.09.2007. The Screening Committee in that meeting  

recommended to allocate all the 15 blocks reserved for power  

sector, many of which were recommended jointly in favour of two or  

more companies.  The minutes do not contain the particulars  

showing consideration of each application.  They also do not  

disclose any comparative assessment or evaluation of the applicant  

companies.  In what manner and for what reasons the companies  

were selected for recommendation are neither disclosed nor are  

they discernible from the minutes.  Though, the guidelines ±  provide  

                                                                                                                                                             15. Gourangdih ABC 1.  M/s. Himachal Emta Power  

Ltd. and M/s. JSW Steel Ltd. on  equal share basis.  

2.   Representative from the West  Bengal Govt. suggested that either  the block be allotted to  WBMDTC Bengal or else be left  unallotted.  The committee felt  that since WBMTDC Bengal had  not applied for the block, it would  not be possible to consider them.   Regarding non-allotment, the  matter may be placed for  consideration of the Govt.   

± Inter-se priority for allocation of a block among competing applicants for a captive block may  be decided as per the following guidelines.  Status (stage) level of progress and state of preparedness of the projects;  Networth of the applicant company (or in the case of a new JV, the networth of their principals);     Production capacity as proposed in the application;  Date of commissioning of captive mine as proposed in the application;  Date of completion of detailed exploration (in respect of unexplored blocks only) as proposed in  the application;  Technical experience (in terms of existing capacities in coal/lignite mining and specified end use);  Recommendation of the Administrative Ministry concerned;

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for norms for consideration for inter se priority for allocation of a  

block among competing applicants for a captive block but the  

minutes do not disclose at all how the norms for inter se priority are  

met by the companies selected for recommendation by the  

Screening Committee. Many of the companies selected by the  

Screening Committee had no recommendation from the State  

Government or from the Ministry of Power and CEA and some of  

them had no recommendation either from the State Government or  

the Ministry of Power and CEA at all.  For example, for Durgapur-

II/Taraimar, the selected company Balco had no recommendation at  

all from the State Government, Ministry of Power and CEA.   

Although the group company M/s. Vedanta Alumina Ltd. was  

recommended by Ministry of Power and CEA, but it was not  

selected.  Similarly, for Mandakini block, M/s. Tata Power Company  

Ltd. had no recommendation from the State Government and  

Ministry of Power and CEA.  For Rampia and Dip Side of Rampia,  

Reliance Energy Ltd. did not have any recommendation from the  

State Government, Ministry of Power and CEA.  For Fatehpur East,  

the selected company Visa Power Ltd. had no recommendation  

                                                                                                                                                             Recommendation of the State Government concerned (i.e. where the captive block is located);  Track record and financial strength of the company  Preference will be accorded to the power and the steel sectors. Within the power sector also,  priority shall be accorded to projects with more than 500 MW capacity.  Similarly, in steel sector,  priority shall be given to steel plants with more than 1 million tonne per annum capacity.    

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from Ministry of Power and CEA.  For Fatehpur block, Prakash  

Industries Ltd. had neither recommendation from the State  

Government nor from the Ministry of Power and CEA.  The  

Screening Committee, as a matter of fact, did not select eight  

companies which were recommended by the Ministry of Power but  

selected eleven companies which were not recommended by  

Ministry of Power.  Though in additional counter affidavit, some  

justification in this regard has been sought to be made but we are  

afraid that the said justification hardly merits acceptance as the  

minutes of the 35th meeting of the Screening Committee do not  

disclose anything what is now stated in the additional counter  

affidavit.  The eight companies which were recommended by the  

Ministry of Power but not selected by the Screening Committee are  

(1) M/s. Rashmi Cement Ltd.; (2) M/s. TRN Energy Pvt. Ltd.; (3)  

M/s. Maithon Power Ltd.; (4) M/s. Mahavir Global Coal Ltd.; (5) M/s.  

Rosa Power Supply Ltd.; (6) M/s. Bhushan Energy; (7) M/s. Lanco  

Amarkantak Power Ltd. and (8) M/s. Vedanta Alumina Ltd.  The  

minutes do not disclose any reason at all for not selecting these  

companies which were recommended by the Ministry of Power.   

The eleven companies which were not recommended by the  

Ministry of Power and selected by the Screening Committee are (1)  

M/s. Tata Power Company Ltd.; (2) M/s. Reliance Energy Ltd.; (3)

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M/s. Balco; (4) M/s. SKS Ispat and Power Ltd.; (5) M/s. Prakash  

Industries Ltd.; (6) M/s. Green Infrastructure Pvt. Ltd.; (7) M/s. Visa  

Power Ltd.; (8) M/s. Vandana Vidyut Energy Ltd.; (9) M/s. GVK  

(Govindwal Sahib) Ltd.; (10) M/s. Gagan Sponge Iron Pvt. Ltd.; and  

(11) M/s. Lanco Group Ltd. The reasons for selecting above eleven  

companies which were not recommended by the Ministry of Power  

are neither disclosed nor discernible.  

149.  In the 36th meeting, which was held on 07.12.2007-

08.12.2007, 07.02.2008-08.02.2008 and 03.07.2008, the Screening  

Committee considered allocation of 23 coal blocks earmarked for  

non-power sector.  For these 23 coal blocks earmarked for non-

power sector, 674 applications were submitted by 184 companies  

for allocation.  Some companies had applied for more than one  

block and some had submitted more than one application for single  

block for different end use plants located at different locations.  The  

geological reserve of 23 blocks≠≠ was noted by the Screening  

Committee.  The minutes of the 36th meeting show that the  

Committee decided to recommend blocks earmarked for pig iron  

(coking coal) jointly to two or more than  two companies and                                                    ≠≠ Urtan Beharaband North Extn., Tandsi-III & Tandsi-III extn., Urtan North (coking blocks), Macherkunds,  Rajhara North (Central & Eastern) Moira Madhujore (North & South), Datima, Bhaskarpara, Kudari, Bikram, Vijay  Central Rajgamar Dipside (South of Phulakdih Nala), Kesla North, Gondkhari, Kappa & Extn. Dahegaon- Makardhokra-IV, Bander, Hurilong, Hutar sector C, Rajgamar Dipside (Deavnara), Tehsgora-B/Rudrapuri and  Andal East (Non cooking blocks)    

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nineteen blocks earmarked for other end-uses/non-cooking coal  

were recommended for allocation to single companies as well as  

jointly to two or more companies.  The minutes of 36th meeting do  

not contain the particulars showing consideration of each  

application.   There is no assessment of comparative merits of the  

applicants who were selected for recommendation.  The minutes do  

not disclose how and in what manner the selected companies meet  

the norms fixed for inter se priority.  Many of the selected  

companies were neither recommended by the State Government  

nor by the Administrative Ministry.  Some of them were  

recommended by the State Government but not recommended by  

the Administrative Ministry while one of them was not recommended  

by the State Government but recommended by the Administrative  

Ministry.  For Rajhara North (Central & Eastern) coal block, Vini Iron  

& Steel Udyog Ltd. had no recommendation by the State  

Government or by the Administrative Ministry. Similarly, for  

Thesgora-B/Rudrapuri coal block, Revati Cement P. Ltd. did not  

have recommendation either from the State Government or from the  

Administrative Ministry. As regards Tandsi-III and Tandsi-III (Extn.),  

Mideast Integrated Steels Ltd. did not have recommendation from  

the State Government.  Similarly, as regards Thesgora-B/Rudrapuri,  

Kamal Sponge Steel & Power Limited had no recommendation from

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the State Government.  As regards Moira Madhujore coal block,  

Ramswarup Lohh Udyog Ltd. had no recommendation from the  

Administrative Ministry.    

150.  From the above discussion, it is clear that 21 coal  

blocks stood allocated to private companies in pursuance of  

Screening Committee’s recommendations during the period from  

the 1st meeting held on 14.07.1993 till the 21st meeting held on  

19.08.2003.  For the period from 04.11.2003 (22nd meeting) to  

18.10.2005 (30th meeting) in pursuance of Screening Committee’s  

recommendations, 26 coal blocks stood allocated to private  

companies.  Following 32nd meeting held on 29.06.2006/30.06.2006  

till the 34th meeting on 07.09.2006/08.09.2006, in pursuance of the  

recommendations made by the Screening Committee, two coking  

coal blocks were allocated to private companies and twelve non-

coking coal blocks were allocated to private companies.  In  

pursuance of the recommendations made by the Screening  

Committee in 35th and 36th meetings, 33 coal blocks were allocated  

to private companies.  Some of the coal block allocations made to  

the private companies have been de-allocated from time to time.   

For consideration of legality and validity of allocations made to such  

companies, it is not necessary to deal with de-allocation aspect.  It  

needs no emphasis that assuming that the Central Government had

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power of allocation of coal blocks yet such power should have been  

exercised in a fair, transparent and non-arbitrary manner.     

However, the allocation of coal blocks to the private companies  

pursuant to the recommendations made by the Screening  

Committee in 36 meetings suffers from diverse infirmities and flaws  

which may be summarized as follows:  

1st Meeting to 21st Meeting    

1. The guidelines framed and applied by the Screening  

Committee for the period from 14.07.1993 (1st meeting) to  

19.08.2003 (21st meeting) are conspicuously silent about inter se  

priority between the applicants for the same block.  As a matter of  

fact, for the 21 coal blocks allocated to private companies in  

pursuance of Screening Committee’s recommendation during the  

first period, inter se priority or merit of the applicants for the same  

block had not at all been determined.  

2. The guidelines do not contain any objective criterion for  

determining the merits of the applicants.  The guidelines do not  

provide for measures to prevent any unfair distribution of coal in the  

hands of few private companies.  As a matter of fact, no consistent  

or uniform norms were applied by the Screening Committee to  

ensure that there was no unfair distribution of coal in the hands of  

the applicants.

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3. The Screening Committee simply relied upon the  

information supplied by the applicants without laying down any  

method to verify applicant’s experience in the end-use project for  

which allocation of coal block was sought.  The guidelines also do  

not lay down any method to allot coal blocks as per the end-use  

projects coal requirement.  

4. The Screening Committee kept on varying the  

guidelines from meeting to meeting.  It failed to adhere to any  

transparent system.   

5. No applications were invited through advertisement and  

thus the exercise of allocation denied level playing field, healthy  

competition and equitable treatment.  

6. Certain coal blocks which did not fit into the criteria of  

captive blocks were decided to be allocated by applying peculiar  

approach that the reserves could either be permitted to be explored  

by a private party or lost forever.  For example, Brahmadiha block  

was allocated to M/s. Castron Technology pursuant to the  

recommendations made by the Screening Committee in the 14th  

meeting.     

7. If a certain party requested for a particular block, it was  

so recommended without objectively considering the merit of such  

request.  For example, in the 14th meeting, the proposal of M/s.

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Monnet Ispat Ltd. for a new Sponge Iron plant in Keonjhar area of  

Orissa of 1.2 million tonnes of capacity for which the requirement of  

2.2 m.t. of raw coal has been indicated, was discussed.  The party  

requested for Utkal-B2 block in Talcher coalfield having 106 m.t. of  

reserves.   CMD, MCL was of the view that Chendipada block is  

likely to have better grade of coal and suggested to the party for  

preference of Utkal B-2 block.  However, the party insisted for Utkal  

B-2 block and the same was allotted.  Similarly, as regards the  

proposal of M/s. Jayaswal Neco Ltd. for their Sponge Iron Plant, the  

party had earlier requested for Gare-Palma IV/6 and IV/7 blocks for  

meeting their requirement of 1 m.t. Sponge Iron Plant and a captive  

power plant.  Then they requested for allocation of Gare-Palma IV/4  

and IV/8 blocks.  On the representation made by the representative  

of the party that 125 m.t. of reserves in Gare-Palma IV/4 block will  

be adequate for meeting the requirement of their Sponge Iron Plant  

for a period of 30 years and 91 m.t. of reserves in Gare-Palma IV/8  

block will be adequate for 30 years life of the proposed CPP, the  

Screening Committee recommended allocation of Gare-Palma IV/4  

and IV/8 blocks to M/s. Jayaswal Neco Ltd.  The representation  

made by the party was accepted as it is without any verification.  

8. Certain blocks with coal reserves on the higher side  

were recommended to the companies with lower requirement.  

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There were no steps or measures taken to prevent possible misuse  

of end-use project of private companies.  For example, M/s.  

Prakash Industries Limited, being a BIFR company, was denied coal  

block earlier. However, the Screening Committee recommended  

Chotia I and II coal blocks to M/s. Prakash Industries Limited in  

2003 for its proposed expansion project of 0.4 MTPA Sponge Iron  

though the company was having capacity of only 0.3 MTPA.  

9. Some coal blocks which were already identified for  

development by CIL were offered to the private companies and  

some of the blocks which were close to the projects of CIL were, in  

fact, recommended for allocation and ultimately allocated.  This was  

clearly in breach of the guidelines for selection of captive blocks.  

22nd Meeting to 30th Meeting   

10. With regard to allocation of coal blocks to private  

companies pursuant to its 22nd meeting to 30th meeting held  

between 04.11.2003 and 18.10.2005, the guidelines do not lay  

down any criteria for evaluating the comparative merits of the  

applicants.  The consideration had been ad-hoc in so much so that  

in every meeting, the guidelines were altered.  

11. In the 24th meeting held on 09.12.2004, the Screening  

Committee altered the norms by shifting insistence on achieving  

financial closure of the end-use projects to some appropriate stage

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after the mining plan approval.  Except mentioning the particulars of  

each applicants, the minutes do not show that there was any  

application of mind by the Screening Committee.  How the  

guidelines are met by the recommended companies has not been  

discussed.  

12. In the 25th meeting held on 10.01.2005, the Screening  

Committee considered allocation of 5 coal blocks in the MCL area.    

The size of these blocks was large as compared to the requirement  

of the applicants. The rules of game were changed to adjust large  

number of applicants whose applications would have been  

otherwise rejected as their coal requirement was far less than the  

coal available in the coal blocks.  However, in order to  

accommodate these applicants, a novel idea of choosing a leader  

company and associate companies was evolved though such  

procedure is apparently in contravention of the statutory provision  

contained in Section 3(3)(a)(iii) of the CMN Act.  

13. The merits of the companies, who were recommended  

for selection and those companies whose applications were rejected  

were not comparatively assessed.  

14. While considering allocation for 5 blocks in SECL area  

in the 26th meeting, despite the revelation by the Ministry of Steel  

that number of companies have in their presentations mentioned the

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capacity of the end-use plants in excess of what has been  

recommended by the Ministry and the concern expressed by the  

representative of the State Government that the ground realities of  

the project needed to be verified and the capacities of the end-use  

plants and coal requirements of such projects are required to be  

confirmed,  the Screening Committee proceeded to list out the  

possible leaders without assessing the capacities of coal  

requirements of these companies.  

15. The minutes of the 27th and 28th meetings also do not  

show that the assessment of comparative merits of the applicants  

was done. The Screening Committee continued with consortium /  

leader and associate approach which, as noted above, was in  

contravention of Section 3(3)(a)(iii) of the CMN Act. Even in case of  

a certain company, where recommendation of the Administrative  

Ministry was contrary to the recommendation of the State  

Government, yet the recommendation was made by the Screening  

Committee that led to allocation on the basis of State Government’s  

recommendation. The Screening Committee even decided to club  

the blocks and recommended allotment of such combined block to  

two companies jointly.     

16. The consideration has been absolutely ad-hoc and   

without even knowing how much surplus will remain, the company

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so chosen was asked to select another allottee for surplus, if any.   

This is seen from the minutes of the 30th meeting.  In the 30th  

meeting, the Screening Committee also recommended allocation of  

Dumri coal block although north portion of that block remained  

unexplored and the unexplored portion had superior grade of coal.  

17. The policy of pick and choose was adopted.   The  

application of norms was changed from meeting to meeting with no  

uniform or consistent consideration.  

18. Certain companies which did not come for presentation  

were also considered but how and in what manner the applications  

of those companies were considered is not discernible.  Why the  

chosen companies have been preferred over the others is also not  

discernible.    

32nd Meeting to 36th Meeting  

19. The minutes of the 32nd meeting do not show the  

reasons for recommending three blocks jointly in favour of more  

than one company.  

20. Some of the companies which had no recommendation  

by the State Government were recommended by the Screening  

Committee.  The minutes of the 33rd and 34th meeting do not show  

in what manner the merits of the companies which were chosen for  

recommendation were determined.  The minutes of the 33rd   and

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34th meeting even do not note the particulars of the applicants  

individually.  The criterion which the Screening Committee applied in  

the selection of 15 companies and the reasons for allocating 12  

blocks to these companies are not discernible.  

21. A certain company which has no  

recommendation/categorisation was also recommended for  

allocation and ultimately allocation was made.  The  

recommendation to allocate 15 blocks reserved for power sector by  

the Screening Committee in its 35th meeting does not contain the  

particulars showing consideration of each application.  Though, at  

that time, the guidelines provided for norms for consideration of inter  

se priority for allocation of a block among competing applicants for a  

captive block, but the minutes do not at all disclose how the norms  

for inter se priority are met by the company selected for  

recommendation by the Screening Committee.  Many of the  

companies selected by the Screening Committee had no  

recommendation from the State Government or from the Ministry of  

Power and CEA and some of them had no recommendation from  

the State Government, Ministry of Power and CEA at all.  As many  

as eight companies which were recommended by the Ministry of  

Power were not recommended by the Screening Committee while

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eleven companies which were not recommended by the Ministry of  

Power were recommended by the Screening Committee.     

22. The minutes of the 36th meeting do not contain the  

particulars showing  consideration of each application for allocation  

of 23 coal blocks earmarked for non-power sector.   There is nothing  

in the minutes to indicate how and in what manner the selected  

companies meet the norms fixed for inter se priority.  Many of the  

selected companies were neither recommended by the State  

Government nor by the Administrative Ministry.  Some of them were  

recommended by the State Government but not recommended by  

the Administrative Ministry while one of them was not recommended  

by the State Government but recommended by the Administrative  

Ministry.  Many companies which had failed to secure allocations  

earlier yet they were recommended.  The Screening Committee  

failed to consider capability and capacity of the applicant in  

implementing the projects.    

151.  The entire exercise of allocation through Screening  

Committee route thus appears to suffer from the vice of arbitrariness  

and not following any objective criteria in determining as to who is to  

be selected or who is not to be selected.  There is no evaluation of  

merit and no inter se comparison of the applicants.  No chart of  

evaluation was prepared.  The determination of the Screening

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Committee is apparently subjective as the minutes of the Screening  

Committee meetings do not show that selection was made after  

proper assessment.  The project preparedness, track record etc., of  

the applicant company were not objectively kept in view. Until the  

amendment was brought in Section 3(3) of the CMN Act w.e.f.  

09.06.1993, the Central Government alone was permitted to mine  

coal through its companies with the limited exception of private  

companies engaged in the production of iron and steel.  By virtue of  

the bar contained in Section 3(3) of the CMN Act, between 1976  

and 1993, no private company (other than the company engaged in  

the production of iron and steel) could have carried out coal mining  

operations in India.  Section 3(3) of the CMN Act, which was  

amended on 09.06.1993 permitted private sector entry in coal  

mining operations for captive use.  The power for grant of captive  

coal block is governed by Section 3(3)(a) of the CMN Act, according  

to which, only two kind of entities, namely, (a) Central Government  

or undertakings/corporations owned by the Central Government; or  

(b) companies having end-use plants in iron and steel, power,  

washing of coal or cement can carry out coal mining operations.   

The expression “engaged in” in Section 3(3)(a)(iii) means that the  

company that was applying for the coal block must have set up an  

iron and steel plant, power plant or cement plant and be engaged in

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the production of steel, power or cement.  The prospective  

engagement by a private company in the production of steel, power  

or cement would not entitle such private company to carry out coal  

mining operation.  Most of the companies, which have been  

allocated coal blocks, were not engaged in the production of steel,  

power or cement at the time of allocation nor in the applications  

made by them any disclosure was made whether or not the power,  

steel or cement plant was operational. They only stated that they  

proposed to set up such plants.  Thus, the requirement of end-use  

project was not met at the time of allocation.  

152.  It is pertinent to note here the stand of Maharashtra.   

According to Maharashtra, the allocation of coal blocks by the  

Screening Committee meant that the benefits of the differential in  

price of coal, as the case may be, would accrue to the allottee of the  

coal block.  The differential in price would not necessarily be passed  

to the public as the price of the final product of the company is  

determined by import parity price in case of steel companies,  

competitive market price in case of cement companies (many may  

not have access to captive coal) and the price of power on an  

exchange or in bids by State utilities irrespective of source of fuel.   

No material has been placed by the Central Government which may  

rebut the Maharashtra’s stand.  

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153.  The challenge has also been laid to the legality of the  

allocations made to the State/State PSUs through the Screening  

Committee route as well as Government dispensation route.  It is  

not in dispute that the Screening Committee has recommended  

allocation of coal blocks to 29 State Government PSUs while  

through Government dispensation route allocation has been  

recommended for 72 PSUs.  The question that requires  

consideration is whether commercial mining operation can be  

carried on by the State or State PSUs. The answer has to be found  

out from the statutory provisions.  By virtue of Section 3 of the CMN  

Act, as was originally enacted, on and from the appointed day, the  

right, title and interest of the owners in relation to the coal mines  

specified in the Schedule stood transferred to and vested absolutely  

in the Central Government free from all encumbrances.  This  

provision further provides that if after the appointed day, the  

existence of any other coal mine comes to the knowledge of the  

Central Government, the provisions of the Coal Mines Management  

Act shall apply until that mine is nationalized by an appropriate  

legislation.  Section 3 of the CMN Act was amended by the 1976  

Nationalisation Amendment Act whereby sub-sections (3) and (4) of  

Section 3 were inserted.  Along with this, Section 1A was also  

inserted in the CMN Act.  By sub-section (3) of Section 3, it is

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provided that on and from the commencement of amendment in  

Section 3, no person other than the Central Government or a  

Government company or a corporation owned, managed or  

controlled by the Central Government or a person to whom the sub-

lease has been granted by any such Government, Government  

company or corporation or a company engaged in the production of  

iron and steel shall carry on coal mining operation in any form.    

Clause (b) of sub-section (3) also provides for termination of all  

mining leases and sub-leases for winning or mining of coal except  

the mining leases granted before such commencement in favour of  

the Government, Government company or corporation and any sub-

lease granted by any such Government, Government company or  

corporation.  Clause (c) of sub-section (3) of  Section 3 prohibits  

grant of lease for winning or mining coal in favour of any person  

other than the Government, Government company or corporation  

referred to in clause (a)  thereof.  But this prohibition is subject to  

only one exception inasmuch as the Government, company or  

corporation owned, managed or controlled by the Central  

Government may grant a sub-lease to any person in any area on  

such terms and conditions as may be specified in the instrument  

granting sub-lease provided the reserves of coal in the area are in  

isolated small pockets or are not sufficient for scientific and

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economical development in a coordinated and integrated manner  

and the coal produced by the sub-lessee will not be required to be  

transported by rail.   Section 3(3)(a)(i) thus provides that only  

Central Government or a Government company (Central PSU or a  

corporation owned or managed by the Central Government) can  

carry on mining operations in India in any form.   In other words,  

commercial mining cannot be carried on by the State Government  

or the State PSU.  The expression “Government company or a  

corporation owned, managed or controlled by the Central  

Government” means Government of India Public Undertaking.  It  

does not include State Government Public Sector Undertaking.  This  

is fortified by Section 3(4), Section 4 and Sections 5, 6 and 7.  The  

mining leases and sub-leases which were terminated under Section  

3(3)(b) were available only to the Central Government or for that  

matter, the Government company or a corporation owned, managed  

and controlled by the Central Government.  The State Government  

or State Public Sector Undertakings became entitled to obtain sub-

lease of reserves of coal in isolated small pockets under clauses (i)  

and (ii) of proviso to Section 3(3)(c).  It is pertinent to notice here  

that Circular dated 30.07.1979  records the correct position of  

legislative policy articulated in the CMN Act under which only the  

Central Government Public Undertakings have been permitted to

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carry on coal mining operations in the country.  After the  

amendment was carried out in the CMN Act, the circular states that  

while continuing the existing policy of the Central Government  

carrying out coal mining operations by its own undertakings, the  

State Governments might also be allowed to carry out coal mining  

operations in isolated small pockets subject to the conditions set out  

therein.  The “isolated small pockets” are those which are away from  

the main coalfields and have limited known reserves which are not  

sufficient for scientific and economic development in a coordinated  

and integrated manner and the coal produced from such areas  

would mainly be utilized for local consumption without transportation  

by railways.   However, almost after 22 years, vide Circular dated  

12.12.2001, the Central Government, reviewing its earlier policy,  

allowed the State Government companies or undertakings to do  

mining of coking and non-coking coal or lignite reserves either by  

opencast or underground method, anywhere in the country, subject  

to the conditions set out therein.  Under the revised policy, the State  

Government company/undertaking was permitted to mine non-

coking coal and coking coal reserves or lignite by  

opencast/underground method without the restriction of “isolated   

small pockets”.  Having carefully examined the Circular dated  

12.12.2001, in light of the provisions of the CMN Act, as amended in

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1976, it appears to us that the circular is not in conformity with the  

provisions of the CMN Act and, consequently, has no legal sanction.   

CMN Act and further amendments therein carried out in 1976 do not  

allow State Government or State PSUs to mine coal for commercial  

use.  The problem seems to have arisen because of the 2001  

circular which permits the State Government companies or  

undertakings to do mining of coking and non-coking coal reserves  

but, as noted above, the legislative policy in the CMN Act does not  

permit that.  The recommendation for allocation by the Screening  

Committee to the State PSUs and also the allocation made to the  

State PSUs through Government dispensation route are, therefore,  

in violation of the provisions of the CMN Act, as amended from time  

to time.  Moreover, the State PSUs, besides having been allocated  

coal mines for commercial purpose, have also been allowed to form  

joint venture companies, i.e., 51% shareholding of State PSUs and  

49% of private company.  However, in the joint venture agreements  

between the State PSUs and the private companies, mining  

operations have been given to private company. For example, the  

notice inviting offer dated 02.07.2008 issued by Chhattisgarh  

Mineral  Development Corporation (CMDC) for selection of partner  

for formation of a joint venture company for exploration,  

development, mining and marketing of coal from coal blocks

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provided that the Joint Venture Company (JVC) to be formed by  

CMDC and the selected offerers / bidder will explore, develop and  

operate such coal deposits and the coal produced by JVC will be  

sold commercially to various consumers in the open market.    

CMDC was allocated Sondiha coal block and coal blocks Bhatgaon-

II and Bhatgaon-II (Extension).  Similarly, the Joint Venture  

Agreement between the Madhya Pradesh State Mining Corporation  

Limited and Monnet Ispat and Energy Limited reveals that Joint  

Venture Company has been further allowed to enter into Mine  

Development Operation Agreements with other private partner or  

sister concern.  This modus operandi 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.  As indicated above, by 1976 amendment in the  

CMN Act, other than the Central Government or Central  

Government undertakings, a company engaged in the production of  

iron and steel was permitted to carry on coal mining operations in  

any form.  By subsequent amendments in Section 3 of the CMN Act,  

besides a company engaged in the production of iron and steel, a  

company engaged in generation of power or a company engaged in  

washing of coal obtained from a mine or such other end-use, as the  

Central Government may by notification specify, no other company

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can “carry on mining operation in coal”.  Allocation of coal blocks to  

the State PSUs which ultimately on getting mining leases may  

enable them to win or mine coal commercially is clearly in breach of  

the provisions of the CMN Act.                

154.  To sum up, the entire allocation of coal block as per  

recommendations made by the Screening Committee from  

14.07.1993 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.  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 is illegal.   

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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

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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.    

158.  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).  As a matter of fact, Mr. Prashant  

Bhushan, learned counsel for Common Cause submitted that since  

allocation for UMPPs is in accord with the opinion given in Natural  

Resources Allocation Reference20 and the benefit of the coal block  

is passed on to the public, the said allocations may not be  

cancelled.  However, he submitted that in some cases the  

Government has allowed diversion of coal from UMPP to other end  

uses i.e. for commercial exploitation.  Having regard to this, it is

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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.                                        

      ….………..……………………CJI.      (R.M. Lodha)  

      …….………..……………………J.      (Madan B. Lokur)    

       …….………..……………………J.           (Kurian Joseph)  

NEW DELHI;             AUGUST 25, 2014.