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SC holds coal blocks allocation illegal, but no cancellation yet

SC holds coal blocks allocation illegal, but no cancellation yet

New Delhi: The Supreme Court Monday held the coal blocks allocated from 1993 onwards by a steering committee and through government dispensation route were illegal, arbitrary, and non-transparent without any objective criteria but did not cancel them yet.

A bench of Chief Justice R.M. Lodha, Justice Madan B. Lokur, and Justice Kurian Joseph said: "The entire allocation of coal block as per recommendations made by the Screening Committee from July 14, 1993 in 36 meetings and the allocation through the government dispensation route suffers from the vice of arbitrariness and legal flaws."

Pronouncing the judgment, Chief Justice Lodha noted there was "no objective criteria" for evaluation of comparative merit.

"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."

The verdict came on a batch of PILs initially by advocate M.L.Sharma and NGO Common Cause challenging the validity of allocation and seeking their cancellation.

Unlike the court verdict in 2G case where it cancelled all the 121 licences, the court took a cautious approach as it wanted to address the consequences of its verdict and how to tackle it.

"As we have already found that the allocations made, both under the Screening Committee route and the government dispensation route, are arbitrary and illegal, what should be the consequences, is the issue which remains to be tackled. We are of the view that, to this limited extent, the matter requires further hearing," the court said as it directed the next hearing on Sep 1.

It said one way of dealing with it is to appoint a committee headed by a retired apex court judge and the such a committee's report may help the court to have an objective view on the options available for allocation.

The court said as it pointed out that the former attorney general was not able to give facts and figures and the money involved in these allotments, as whatever figures he gave were disputed by the state governments.

Pointing to the ad-hoc manner in which the screening committee had acted in its 36 meetings from 1993 till 2010, the court said: "The Screening Committee has never been consistent, it has not been transparent, there is no proper application of mind, it has acted on no material in many cases, relevant factors have seldom been its guiding factors, there was no transparency and guidelines have seldom guided it. On many occasions, guidelines have been honoured more in their breach."

Holding that the allocations based on the committee's recommendations as illegal, the court said that the allocations through the government dispensation route, "however laudable the object may be", were also illegal as they were impermissible as per The Coal Mines (Nationalisation) Act, 1973.

Referring to some of coal mines allocated to the state governments or its undertakings which in turn entered into joint venture for mining and prospecting, the judgment said that no state governments or their public sector undertakings are eligible for mining coal for commercial use.

"Since allocation of coal is permissible only to those categories under section 3(3) and (4) (of the CMN Act, 1973), the joint venture arrangement with ineligible firms is also impermissible. Equally, there is also no question of any consortium/leader/association in allocation," the court said.

The court also said that "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)".

"It is directed that the coal blocks allocated for UMPPs would only be used for UMPPs and no diversion of coal for commercial exploitation would be permitted," the court stressed.

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