PUNJAB STATE POWER CORPORATION LTD. vs. EMTA COAL LIMITED

Case Type: Civil Appeal

Date of Judgment: 21-09-2021

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Full Judgment Text

REPORTABLE IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION  CIVIL APPEAL NOS. 5823­5824  OF 2021 [Arising out of SLP(C) Nos. 9924­9925 of 2019] PUNJAB STATE POWER CORPORATION LIMITED AND ANOTHER       ...APPELLANT(S) VERSUS EMTA COAL LIMITED    ...RESPONDENT(S) WITH CIVIL APPEAL NOS. 5825­5826  OF 2021 [Arising out of SLP(C) Nos.14384­14385 of 2021] DBL­VPR CONSORTIUM THROUGH  AUTHORISED REPRESENTATIVE        ...APPELLANT(S) VERSUS EMTA COAL LIMITED AND OTHERS    ...RESPONDENT(S) J U D G M E N T B.R. GAVAI, J. 1 1. Leave granted. 2. A short question relating to interpretation of Section 11 of the   Coal   Mines   (Special   Provisions)   Act,   2015   (hereinafter referred   to   as   the   “said   Act”)   which   is   an   outcome   of   the judgment of this Court in the case of  Manohar Lal Sharma v. 1 Principal Secretary and Others   (hereinafter referred to as “  and an ancillary question pertaining Manohar Lal Sharma­I”) to scope of judicial review of an administrative action of the State Authority arise for consideration in these appeals. 3. These appeals challenge the judgment and order passed by the Division Bench of the High Court of Punjab and Haryana th dated   25   January   2019,   thereby   allowing   the   civil   writ petitions being CWP Nos. 10055 and 16245 of 2018, filed by the respondent herein­EMTA Coal Limited (hereinafter referred to as “EMTA”) and holding that the respondent herein will have the  first  right  of  refusal  in  the   matter   of  lending   of  Mining Lease. 1 (2014) 9 SCC 516 2 4. The facts in the present case are not in dispute,   which are taken from appeals arising out of SLP(C) Nos. 9924­25 of 2019. The Punjab State Electricity Board (hereinafter referred to 5. as the “PSEB”) which is now known as Punjab State Power Corporation Limited (hereinafter referred to as the “PSPCL”), was proposed to be allotted Captive Coal Mines by the Union of th India. On 16   February 1999, PSEB issued a tender, thereby inviting bids for the purpose of development of Captive Coal th Mines.   In   the   said   bid,   opened   on   9   February   2000,   the respondent­EMTA   emerged   successful.   Accordingly,   an th agreement was entered into between PSEB and EMTA on 5 May 2000, thereby creating a Joint Venture Company called Panem Coal Mines Limited (hereinafter referred to as “Panem”). The said agreement provided the rights for mining of coal from the   Coal   Mines,   transporting   and   delivery   of   it,   wholly   and exclusively to PSEB.    Since  EMTA being a partnership  firm could   not   have   been   a   shareholder   of   the   Joint   Venture Company, a follow up Joint Venture Agreement was entered st into on 21   March 2001 between PSEB, EMTA and the three 3 partners of EMTA, incorporating the same terms and conditions th as were found in the earlier agreement dated 5  May 2000. The same was intimated to the Union of India by PSEB. Thereafter th on 26  December 2001, Union of India allotted a Captive Coal Block being Pachhwara (Central Block) Coal Mine (hereinafter referred   to   as   “Pachhwara   Coal   Block”)   in   the   State   of nd Jharkhand to PSEB.   On 22   February 2002, Union of India notified the supply of coal from the Pachhwara Coal Block by the Joint Venture Company (Panem) to the power stations of PSEB on an exclusive basis as an end use under Section 3(3)(a) (iii) of the Coal Mines (Nationalization) Act, 1973, in the official th gazette.   On 25  November 2004, a Mining Lease was executed between the Government of Jharkhand and Panem for mining coal   from   the   non­forest   areas   of   Pachhwara   Coal   Block. th Subsequently on 30  August 2006, a Coal Purchase Agreement was executed between Panem and PSEB, for the purpose of supply and delivery of the coal from Pachhwara Coal Block to th the power stations  of PSEB.   On 6   January 2007,  Mining Lease was issued by the Government of Jharkhand in favour of 4 Panem, for mining coal even from the forest areas of the Coal Block. th 6. Till 2014, there was no problem.  However, on 25  August 2014, this Court in the case of  Manohar Lal Sharma­I,  held that the entire allocation of Coal Blocks made between 1993 and 2011, except those which were made through competitive bidding, were invalid, unfair, arbitrary and violative of Article th 14 of the Constitution of India.  On 24  September 2014, vide further orders passed in the case of  Manohar Lal Sharma v. 2 this Court quashed all Coal Principal Secretary and Others Block   allocations   made   by   the   Central  Government  between 1993 and 2011.   This Court also accepted the submission of the   learned   Attorney   General   that   the   allottees   of   the   Coal Blocks other than those covered by the judgment and the four Coal Blocks covered by the subsequent order, must pay an amount   of   Rs.295/­   per   metric   ton   of   coal   extracted   as  an additional levy.  In pursuance of the judgment of this Court in the case of   Manohar Lal Sharma­I,   the Coal Mines (Special 2 (2014) 9 SCC 614 5 Provisions)   Ordinance,   2014   (“First   Ordinance”)   came   to   be st promulgated   on   21   October   2014.     The   Second   Ordinance th came to be promulgated on 26  December 2014.  Vide further orders   passed   by   this   Court  in   February   2015   in   contempt proceedings   in   the   case   of   an Manohar   Lal   Sharma­I,   additional   levy   at   the   rate   of   Rs.295/­   per   metric   ton   was th directed to be paid by the prior allottees.  Subsequently on 30 March 2015, the said Act was notified, repealing the Second Ordinance.  st 7. The Central Government vide Allotment Order dated 31 March 2015, again allocated Pachhwara Captive Coal Block in favour of PSPCL.  As PSPCL was facing acute shortage of coal for paddy season, and closure of Coal Block had resulted in sudden   loss   of   employment,   it   entered   into   a   Transitory th Agreement with EMTA on 30  June 2015.  As per Clause 1.1.20 of the Transitory Agreement, the said contract was for a period of   nine   months   or   till   Mine   Developer­cum­Operator   was rd appointed by PSPCL through competitive bidding.  On 23  July 2015,   PSPCL   informed   Union   of   India   about   the   Transitory 6 st Agreement.   On   31   August   2015,   PSPCL   published   Notice inviting   Global  Tender   (hereinafter   referred   to  as   the   “NIT”), inviting   bids   for   the   appointment   of   Mine   Developer­cum­ Operator, for supply of coal.   EMTA filed a civil writ petition being CWP No. 26180 of 8. 2015 before the High Court of Punjab and Haryana, thereby th challenging the said NIT.   On 10   February 2016, the High Court passed a direction restraining PSPCL from opening the th st financial bids till 29   February 2016.   On 1   February 2018, CWP No. 26180 of 2015 was dismissed as withdrawn by the High Court on the basis of the statement made by PSPCL that it shall consider the representation­cum­claims made by EMTA and it shall take a decision thereon before finalizing the fresh tender   process   for   allotment   of   Coal   Mines   at   Pachhwara. th Accordingly,   a   representation   was   made   by   EMTA   on   20 th February 2018, which came to be rejected by PSPCL on 6  April 2018.  The same was challenged by EMTA by filing a civil writ petition being CWP No. 10055 of 2018 before the High Court of Punjab and Haryana. 7 9. It is to be noted that in the meantime, since the tender process   was   held   up   due   to   various   writ   petitions,   PSPCL th passed a Resolution on 30   June 2017, to drop the Global st Tender dated 31  August 2015.  During the pendency of CWP th No. 10055 of 2018, on 30   April 2018, PSPCL issued a fresh Request   For   Proposal   (RFP),   to   invite   Global   Bids   for   the selection of Mine Developer­cum­Operator for Pachhwara Coal Block through competitive reverse bidding process.   The same was challenged by EMTA by filing another civil writ petition being CWP No. 16245 of 2018 before the High Court of Punjab and Haryana.   PSPCL contested the same by filing a written th statement.   Pursuant to RFP dated 30   April 2018, the bids th were   opened   on   10   August   2018.     The   lowest   bid   was submitted   by  DBL­VPR   Consortium   who   is   the   appellant  in appeal arising out of SLP(C) Nos. 14384­14385 of 2021.  Letter of Award was issued in favour of the said DBL­VPR Consortium th and a Coal Mining Agreement was signed on 11   September th 2018.     By   the   impugned   judgment   and   order   dated   25 8 January 2019, the High Court allowed the civil writ petitions as aforesaid.   Being aggrieved thereby, the present appeals. 10. Shri K.V. Viswanathan, learned Senior Counsel appearing on behalf of appellant­PSPCL submitted that the High Court has grossly erred in holding that EMTA had a first right of refusal.   The learned Senior Counsel submitted that the prior allotment   of   the   Coal   Blocks   between   1993   and   2011   was cancelled, since this Court had held in  Manohar Lal Sharma­ I,  that the said allotments were arbitrary, illegal and violative of Article 14 of the Constitution.  He submitted that Section 11 of the said Act clearly provides that it was the discretion of PSPCL to allow a successful allottee to continue or not to continue with the   existing   contracts,   which   were   in   existence   prior   to   the fresh   allotment   in   relation   to   coal   mining   operation.     Shri Viswanathan submitted that only when the allottee decides to continue with the old contracts, the question of constitution of novation for residual term would arise.   The learned Senior Counsel submitted that in view of sub­section (2) of Section 11 of the said Act, when an allottee decides not to continue with 9 the existing contracts entered into by the prior allottees with third parties, all such contracts shall cease to be enforceable against the successful bidder or allottee in relation to Schedule I coal mines and the remedy of such contracting parties shall be   against   the   prior   allottees.     The   learned   Senior   Counsel submitted   that   Section   16   of   the   said   Act   provides   for compensation for land as well as for mining infrastructure.   11. The   learned   Senior   Counsel   further   submitted   that   in pursuance of the directions issued by this Court for payment of Rs.295/­ per metric ton, it was the liability of EMTA to make the said payment amounting to Rs.1400 crore.  He submitted that   however,   EMTA   had   failed   to   make   the   said   payment resulting in a huge loss to the public exchequer.  The learned Senior Counsel further submitted that the findings of the High Court with regard to the legitimate expectation of EMTA, are totally unsustainable.   The learned Senior Counsel submitted that the legitimate expectation would not be applicable against the Statute.   He further submitted that PSPCL has taken a policy   decision   to   appoint   Mine   Developer­cum­Operator   by 10 competitive bidding process.   He submitted that the policy is reasonable and as such, the legitimate expectation would not be applicable as against such a reasonable policy.  The learned Senior Counsel relied on the judgment of this Court in the case of  Kerala State Beverages (M and M) Corporation Limited v. 3 P.P. Suresh and Others . 12. Shri Viswanathan further submitted that in view of Clause 12.4 of the Allotment Agreement, PSPCL was bound to appoint a   Mine   Developer­cum­Operator   only   through   a   competitive bidding process. He submitted that due to certain exigencies, PSPCL had entered into a transitory arrangement with EMTA for a limited period of nine months.   However, the same was disapproved by Union of India and a Show­Cause Notice came to   be   issued   to   PSPCL.   He   therefore   submitted   that understanding the Clause 12.4 of the Allotment Agreement in correct perspective, PSPCL had decided to issue RFP, inviting Global Tenders for appointing Mine Developer­cum­Operator.  3 (2019) 9 SCC 710 11 13. Dr. A.M. Singhvi, learned Senior Counsel appearing on behalf   of   appellant­DBL­VPR   Consortium,   also   supports   the submissions made by Shri Viswanathan.   He submitted that DBL­VPR Consortium had participated in the Global Tender and is the lowest bidder. He submitted that the High Court has grossly erred in holding that EMTA had a right of first refusal after the bidding process was complete and DBL­VPR’s offer was known to all.   He therefore submitted that the impugned judgment and order passed by the High Court needs to be set aside. 14. Shri Mukul Rohatgi, learned Senior Counsel appearing on behalf   of   respondent­EMTA   vehemently   opposed   the submissions made on behalf of PSPCL.   The learned Senior Counsel submitted that EMTA has made huge investment by deploying   specialized   machinery   for   the   purpose   of   mining, construction   of   roads   to   the   Mining   Blocks   and   other infrastructural   developments.     He   submitted   that   since   the contract was entered into for a period of 30 years, EMTA has a legitimate expectation to continue till completion of the said 12 period of 30 years.  He therefore submitted that the High Court has   rightly   held   that   EMTA   had   a   legitimate   right   of   first refusal. Shri Rohatgi submitted that the legislative intent behind 15. Section 11(1) of the said Act is to permit an existing contractor to continue if his performance is found to be satisfactory, and nothing adverse against EMTA has been found.   The learned Senior Counsel submitted that however, PSPCL, in an arbitrary and   irrational  manner,  has   denied   the   claim   of  EMTA.   He submitted   that   only   when   the   performance   of   the   existing contractor is found to be unsatisfactory or there is something against him, the allottee would be entitled to take recourse to the competitive bidding. 16. Shri Rohatgi would further submit that a similar view has been taken by the Karnataka High Court in the case of  KPCL v. 4 EMTA Coal Limited and Others . He submitted that aggrieved by   the   judgment   of   the   Karnataka   High   Court,   KPCL   had approached this Court.  This Court appointed a Committee of 4 ILR 2016 Kar 4301 13 Experts to determine the price and EMTA, who was also a Mine Developer in the said matter, was permitted to continue with the operations at the rates fixed by the Experts Committee.  He th further submitted that from the letter dated 9   June 2020, addressed by the Joint Secretary, Ministry of Coal, Government of India, it would be clear that it is also the stand of Union of India that Section 11 of the said Act prevails over Clause 12 of the   Allotment   Agreement.   The   learned   Senior   Counsel submitted   that   the   contention   on   behalf   of   PSPCL   that   on account of Clause 12.4 of the Allotment Agreement, PSPCL was bound   to   appoint   a   Mine   Developer­cum­Operator   by competitive bidding, is unsustainable.   17. He further submitted that no prejudice is caused to PSPCL by the impugned judgment and order.  He submitted that the price is now known and what has been done by the High Court is only granting a right of first refusal.  If EMTA is desirous to continue,   it   will   have   to   continue   at   the   same   rate   and therefore, no financial loss would be caused to PSPCL.   14 18. Shri Rohatgi further submitted that in the earlier round of litigation, the High Court had recorded the statement of PSPCL that if a representation is made by EMTA, the same would be considered by PSPCL and a decision would be taken on merits. He however submitted that, a perusal of the order passed by th PSPCL dated 6  April 2018, would show that the representation of EMTA has been decided in a perfunctory manner without giving any valid reasons. For appreciating the rival submissions, it will be necessary 19. to refer to Section 11 of the said Act:­ “ 11.   Discharge   or   adoption   of   third   party contracts   with   prior   allottees . —(1) Notwithstanding   anything   contained   in   any   other law for the time being in force, a successful bidder or   allottee,   as   the   case   may   be,   in   respect   of Schedule   I   coal   mines,   may   elect,   to   adopt   and continue such contracts which may be existing with any of the prior allottees in relation to coal mining operations and the same shall constitute a novation for   the   residual   term   or   residual   performance   of such contract: Provided   that   in   such   an   event,   the   successful bidder or allottee or the prior allottee shall notify the nominated authority to include the vesting of any contracts adopted by the successful bidder. 15 (2) In the event that a successful bidder or allottee elects   not   to   adopt   or   continue   with   existing contracts which had been entered into by the prior allottees with third parties, in that case all such contracts   which   have   not   been   adopted   or continued shall cease to be enforceable against the successful   bidder   or   allottee   in   relation   to   the Schedule   I   coal   mine   and   the   remedy   of   such contracting   parties   shall   be   against   the   prior allottees.” 20. It will not be out of place to mention that the said Act came to be enacted in pursuance of the decision of this Court in the case of  Manohar Lal Sharma­I,  wherein this Court held that the allotment of Coal Blocks between 1993 and 2011 was arbitrary, illegal and violative of Article 14 of the Constitution. A plain reading of Section 11 of the said Act would reveal that it begins with a non­obstante clause. It provides that a successful bidder or allottee, as the case may be, in respect of Schedule I coal mines, may elect, to adopt and continue such contracts which may be existing with any of the prior allottees in relation to   coal   mining   operations   and   the   same   shall   constitute   a novation for the residual term or residual performance of such contract.   16 21. The   words   “may   elect”   would   clearly   show   that   the legislature has given complete discretion to a successful bidder or allottee to elect.  The words “may elect” would also mean a discretion not to elect.  Only in the event, a successful bidder or allottee decides to adopt and continue such contract, which may be existing with any of the prior allottees in relation to coal mining   operations,   the   same   shall  constitute   a  novation  for residual term or residual performance of such contract.  In the event, the successful allottee does not elect to adopt or continue such contract, there is no question of novation for residual term or   residual   performance   of   such   contract.     Perusal   of   sub­ section (2) of Section 11 of the said Act would also make it clear that, it provides that in the event a successful bidder or allottee elects not to adopt or continue with the existing contract which had been entered into by the prior allottees with third parties, all such contracts which have not been adopted or continued shall cease to be enforceable against the successful bidder or allottee in relation to Schedule I coal mines and the remedy of such contracting parties shall be against the prior allottees.  It 17 could thus be seen that on a plain reading of sub­sections (1) and   (2)   of   Section   11   of   the   said   Act,   it   is   clear   that   the successful allottee or bidder has complete freedom to decide as to whether he desires to continue or adopt any such existing contracts in relation to coal mining operation. Only in the event he elects to adopt or continue with existing contracts, it shall constitute novation for residual term or residual performance of such contracts.  In the event the successful bidder or allottee elects not to adopt or continue with the existing contracts, all such   contracts   shall   cease   to   be   enforceable   against   the successful   bidder   or   allottee   in   relation   to   Schedule   I   coal mines.   The only remedy of such contracting parties shall be against the prior allottees.   22. The principle of giving a plain and literal meaning to the words in a Statute is well recognized for ages.  Though there are a number of judgments, we may gainfully refer to the judgment of this Court delivered by Das, J. as early as 1955 in the case of 5 Jugalkishore Saraf v. Raw Cotton Company Limited 5 [1955] 1 SCR 1369 18 “The cardinal rule of construction of statutes is to read the statute literally, that is by giving to the words used by the legislature their ordinary, natural and   grammatical   meaning.     If,   however,   such   a reading   leads   to   absurdity   and   the   words   are susceptible   of   another   meaning   the   Court   may adopt   the   same.     But   if   no   such   alternative construction is possible, the Court must adopt the ordinary rule of literal interpretation.”    Though there are various authorities on the said subject, we do not wish to burden the present judgment by reproducing those.  In our considered view, if the words used in Section 11 of the said Act are construed in plain and literal term, they do not lead to an absurdity and as such, the rule of plain and literal interpretation will have to be followed.  We find that in case the interpretation as sought to be placed by Shri Rohatgi is to be accepted, it will do complete violence to the language of Section 11 of the said Act.  If it is held that under Section 11 of the said Act, a prior contractor is entitled to continue if his performance is found to be satisfactory and if there is nothing against him, then it will be providing something in Section 11 of the said Act which the Statute has not provided for.  It will also lead to making the words “may elect, to adopt and continue” 19 redundant and otiose.  It is a settled principle of law that when, upon a plain and literal interpretation of the words used in a Statute,   the   legislative   intent   could   be   gathered,   it   is   not permissible   to   add   words   to   the   Statute.   Equally,   such   an interpretation which would make some terms used in a Statute otiose or meaningless, has to be avoided.  We therefore find that if an interpretation as sought to be placed by EMTA is to be accepted, the same would be wholly contrary to the principle of literal   interpretation.   There   are   number   of   authorities   in support   of   the   said   proposition.   However,   we   refrain   from referring to them in view of the following observations made by this Court in a recent judgment in the case of  Ajit Mohan and Others v. Legislative Assembly National Capital Territory 6 of Delhi and Others
239. …..In our view if the proposition of law is not
doubted by the Court, it does not need a precedent
unless asked for. If a question is raised about a
legal proposition, the judgment must be relatable to
that proposition ­ and not multiple judgments…..”
6 2021 SCC OnLine SC 456 20 As   such,   the   contention   in   that   regard   is   found   to  be without merit. 23. We find that the High Court has also clearly understood the said legal position with regard to language used in Section 11   of   the   said   Act.     When   considering   Section   62   of   the Contract Act, 1872 read with Section 11 of the said Act, it has observed that the parties to a contract may willingly agree to substitute a new contract or to rescind it or alter it.   Having observed this, the High Court has, however, erred in observing that EMTA had a legitimate expectation.  The High Court has observed thus:­ “It could not therefore, have been left in the lurch particularly when the same mine was re­allocated to the Corporation suggestive of continuity.   Indeed, the respondents were very well within their rights to reject   the   arrangement   while   granting   a consideration under Section 11 if the performance of the petitioner was unsatisfactory or if there was any   other   factor   which   the   Corporation   found relevant   enough   to   discard   the   arrangement altogether.” 24. We find that the reasoning adopted by the High Court is totally wrong.  Merely because the Coal Mine Block was allotted 21 to PSPCL, the same could not give any vested right in favour of EMTA, particularly in view of the language used in Section 11 of the said Act.   The reasoning given by the High Court that PSPCL was within its right to reject the arrangement if the performance of EMTA was unsatisfactory or if there was any other factor which the Corporation found relevant enough to discard   the   arrangement   altogether,   in   our   view,   are   totally erroneous. 25. Having observed in earlier para that in view of Section 11 of the said Act read with Section 62 of the Contract Act, 1872, the parties to a contract may willingly agree to substitute a new contract or to rescind it or alter it, the High Court has erred in forcing PSPCL to continue with the contract with EMTA, though it was not willing to do so. 26. The issue with regard to legitimate expectation has been recently considered by a bench of this Court to which one of us (L.   Nageswara   Rao,   J.)   was   a   member.     After   considering various authorities on the issue, in the case of   Kerala State 22 Beverages  (M and M) Corporation Limtied (supra) , it was observed thus:­
“20.The decision­makers' freedom to change the
policy in public interest cannot be fettered by
applying the principle of substantive legitimate
expectation. [Findlay, In re, 1985 AC 318 : (1984) 3
WLR 1159 : (1984) 3 All ER 801 (HL)] So long as the
Government does not act in an arbitrary or in an
unreasonable manner, the change in policy does not
call for interference by judicial review on the ground
of a legitimate expectation of an individual or a
group of individuals being defeated.”
27. Shri   Viswanathan   has   relied   on   the   judgment   of   the Calcutta High Court in the case of   EMTA Coal Limited and 7 Another v. West Bengal Power Development Corporation . Per  contra,   Shri  Rohatgi  has   relied  on  the  judgment   of  the Karnataka High Court in  KPCL v. EMTA Coal Limited (supra). We do not desire to go into the issue of correctness of either of the judgments inasmuch as we are independently considering the   issue   and   examining   the   correctness   of   the   judgment impugned before us. 28. Insofar as the reliance placed by Shri Rohatgi on the letter th of Union of India dated 9   January 2020 is concerned, there 7 (2016) 2 Cal LJ 424 23 can be no doubt that between Section 11 of the said Act and Clause 12.4.1 of the Allotment Agreement, Section 11 of the said Act would prevail.  The question is, whether, Section 11 of the said Act mandates the successful allottee to continue with the existing contract.     The answer, obviously, is no.   In any case, the claim of EMTA is not rejected by PSPCL solely on the ground of Clause 12.4.1 of the Allotment Agreement. 29. That leaves us with the last submission of Shri Rohatgi.  It is his submission that as per the statement made by PSPCL before  the   High   Court  in   first  round   of   litigation,   it  was to consider the representation of EMTA in a reasonable and just th manner.  He however submitted that the order dated 6  April 2018, was passed by PSPCL in a totally arbitrary and irrational manner.   th 30. The order passed by PSPCL dated 6   April 2018, is an order passed by an authority of the State in exercise of its executive   functions.   The   scope   of   judicial   review   of administrative action has been well crystalised by this Court in 24 8 the   judgment   of   Tata   Cellular   v.   Union   of   India .   The judgment   in   the   case   of   has   been Tata   Cellular   (supra),   subsequently followed in a number of judgments of this Court. This   Court   in   the   case   of   Rashmi   Metaliks   Limited   and Another   v.   Kolkata   Metropolitan   Development   Authority 9 and Others ,   has observed that the decision which holds the field with regard to issue of judicial review of an administrative action, is the judgment in the case of  by Tata Cellular (supra),  a three­Judge Bench.   The Court has held that the rule of precedent mandates that this exposition of law be followed and applied by coordinate or co­equal Benches and certainly by all smaller   Benches   and   subordinate   courts.     This   Court   has further   deprecated   the   practice   of   referring   to   catena   of judgments   following   the   said   pronouncement   of   law.     We therefore refrain from referring to the subsequent judgment, and   reproduce   the   relevant   observations   in   Tata   Cellular which read thus:­ (supra),  8 (1994) 6 SCC 651 9 (2013) 10 SCC 95 25
“70. It cannot be denied that the principles of<br>judicial review would apply to the exercise of<br>contractual powers by Government bodies in order<br>to prevent arbitrariness or favouritism. However, it<br>must be clearly stated that there are inherent<br>limitations in exercise of that power of judicial<br>review. Government is the guardian of the finances of<br>the State. It is expected to protect the financial<br>interest of the State. The right to refuse the lowest or<br>any other tender is always available to the<br>Government. But, the principles laid down in Article<br>14 of the Constitution have to be kept in view while<br>accepting or refusing a tender. There can be no<br>question of infringement of Article 14 if the<br>Government tries to get the best person or the best<br>quotation. The right to choose cannot be considered<br>to be an arbitrary power. Of course, if the said<br>power is exercised for any collateral purpose the<br>exercise of that power will be struck down.
71. Judicial quest in administrative matters has<br>been to find the right balance between the<br>administrative discretion to decide matters whether<br>contractual or political in nature or issues of social<br>policy; thus they are not essentially justiciable and<br>the need to remedy any unfairness. Such an<br>unfairness is set right by judicial review.
72. Lord Scarman in Nottinghamshire County<br>Council v. Secretary of State for the<br>Environment [1986 AC 240, 251 : (1986) 1 All ER<br>199] proclaimed:
“ ‘Judicial review’ is a great weapon in the<br>hands of the judges; but the judges must<br>observe the constitutional limits set by our<br>parliamentary system upon the exercise of this<br>beneficial power.”
26
Commenting upon this Michael Supperstone and<br>James Goudie in their work Judicial Review (1992<br>Edn.) at p. 16 say:
“If anyone were prompted to dismiss this sage<br>warning as a mere obiter dictum from the most<br>radical member of the higher judiciary of<br>recent times, and therefore to be treated as an<br>idiosyncratic aberration, it has received the<br>endorsement of the Law Lords generally. The<br>words of Lord Scarman were echoed by Lord<br>Bridge of Harwich, speaking on behalf of the<br>Board when reversing an interventionist<br>decision of the New Zealand Court of Appeal<br>in Butcher v. Petrocorp Exploration Ltd. 18­3­<br>1991.”
73. Observance of judicial restraint is currently the<br>mood in England. The judicial power of review is<br>exercised to rein in any unbridled executive<br>functioning. The restraint has two contemporary<br>manifestations. One is the ambit of judicial<br>intervention; the other covers the scope of<br>the court's ability to quash an administrative<br>decision on its merits. These restraints bear the<br>hallmarks of judicial control over administrative<br>action.
74. Judicial review is concerned with reviewing not<br>the merits of the decision in support of which the<br>application for judicial review is made, but the<br>decision­making process itself.
75. In Chief Constable of the North Wales<br>Police v. Evans [(1982) 3 All ER 141, 154] Lord<br>Brightman said:
“Judicial review, as the words imply, is not an<br>appeal from a decision, but a review of the<br>manner in which the decision was made.
***
27
Judicial review is concerned, not with the<br>decision, but with the decision­making<br>process. Unless that restriction on the power<br>of the court is observed, the court will in my<br>view, under the guise of preventing the abuse<br>of power, be itself guilty of usurping power.”
In the same case Lord Hailsham commented on the<br>purpose of the remedy by way of judicial review<br>under RSC, Ord. 53 in the following terms:
“This remedy, vastly increased in extent, and<br>rendered, over a long period in recent years, of<br>infinitely more convenient access than that<br>provided by the old prerogative writs and<br>actions for a declaration, is intended to protect<br>the individual against the abuse of power by a<br>wide range of authorities, judicial, quasi­<br>judicial, and, as would originally have been<br>thought when I first practised at the Bar,<br>administrative. It is not intended to take away<br>from those authorities the powers and<br>discretions properly vested in them by law and<br>to substitute the courts as the bodies making<br>the decisions. It is intended to see that the<br>relevant authorities use their powers in a<br>proper manner (p. 1160).”
In R. v. Panel on Take­overs and Mergers, ex p<br>Datafin plc [(1987) 1 All ER 564] , Sir John<br>Donaldson, M.R. commented:
“An application for judicial review is not an<br>appeal.”
In Lonrho plc v. Secretary of State for Trade and<br>Industry [(1989) 2 All ER 609], Lord Keith said:
“Judicial review is a protection and not a<br>weapon.”
It is thus different from an appeal. When hearing an<br>appeal the Court is concerned with the merits of the<br>decision under appeal. In Amin, Re [Amin v. Entry
28
Clearance Officer, (1983) 2 All ER 864] , Lord Fraser<br>observed that:
“Judicial review is concerned not with the<br>merits of a decision but with the manner in<br>which the decision was made…. Judicial<br>review is entirely different from an ordinary<br>appeal. It is made effective by the court<br>quashing the administrative decision without<br>substituting its own decision, and is to be<br>contrasted with an appeal where the appellate<br>tribunal substitutes its own decision on the<br>merits for that of the administrative officer.”
76. In R. v. Panel on Take­overs and Mergers, ex p in<br>Guinness plc [(1990) 1 QB 146 : (1989) 1 All ER 509]<br>, Lord Donaldson, M.R. referred to the judicial<br>review jurisdiction as being supervisory or ‘longstop’<br>jurisdiction. Unless that restriction on the power of<br>the court is observed, the court will, under the guise<br>of preventing the abuse of power, be itself guilty of<br>usurping power.
77. The duty of the court is to confine itself to the<br>question of legality. Its concern should be:
1. Whether a decision­making authority<br>exceeded its powers?
2. Committed an error of law,
3. committed a breach of the rules of natural<br>justice,
4. reached a decision which no reasonable<br>tribunal would have reached or,
5. abused its powers.
Therefore, it is not for the court to determine<br>whether a particular policy or particular decision<br>taken in the fulfilment of that policy is fair. It is only<br>concerned with the manner in which those<br>decisions have been taken. The extent of the duty to<br>act fairly will vary from case to case. Shortly put,<br>the grounds upon which an administrative action is
29
subject to control by judicial review can be classified<br>as under:
(i) Illegality : This means the decision­maker<br>must understand correctly the law that<br>regulates his decision­making power and must<br>give effect to it.
(ii) Irrationality, namely, Wednesbury<br>unreasonableness.
(iii) Procedural impropriety.
The above are only the broad grounds but it does<br>not rule out addition of further grounds in course of<br>time. As a matter of fact, in R. v. Secretary of State<br>for the Home Department, ex Brind [(1991) 1 AC<br>696], Lord Diplock refers specifically to one<br>development, namely, the possible recognition of the<br>principle of proportionality. In all these cases the<br>test to be adopted is that the court should,<br>“consider whether something has gone wrong of a<br>nature and degree which requires its intervention”.
78. What is this charming principle of Wednesbury<br>unreasonableness? Is it a magical formula?<br>In R. v. Askew [(1768) 4 Burr 2186 : 98 ER 139] ,<br>Lord Mansfield considered the question whether<br>mandamus should be granted against the College of<br>Physicians. He expressed the relevant principles in<br>two eloquent sentences. They gained greater value<br>two centuries later:
“It is true, that the judgment and discretion of<br>determining upon this skill, ability, learning<br>and sufficiency to exercise and practise this<br>profession is trusted to the College of<br>Physicians and this Court will not take it from<br>them, nor interrupt them in the due and<br>proper exercise of it. But their conduct in the<br>exercise of this trust thus committed to them<br>ought to be fair, candid and unprejudiced; not
30
arbitrary, capricious, or biased; much less,<br>warped by resentment, or personal dislike.”
79. To quote again, Michael Supperstone and<br>James Goudie; in their work Judicial Review (1992<br>Edn.) it is observed at pp. 119 to 121 as under:
“The assertion of a claim to examine the<br>reasonableness been done by a public<br>authority inevitably led to differences of<br>judicial opinion as to the circumstances in<br>which the court should intervene. These<br>differences of opinion were resolved in two<br>landmark cases which confined the<br>circumstances for intervention to narrow<br>limits. In Kruse v. Johnson [(1898) 2 QB 91 :<br>(1895­9) All ER Rep 105] a specially<br>constituted divisional court had to consider<br>the validity of a bye­law made by a local<br>authority. In the leading judgment of Lord<br>Russell of Killowen, C.J., the approach to be<br>adopted by the court was set out. Such bye­<br>laws ought to be ‘benevolently’ interpreted, and<br>credit ought to be given to those who have to<br>administer them that they would be<br>reasonably administered. They could be held<br>invalid if unreasonable : Where for instance<br>bye­laws were found to be partial and unequal<br>in their operation as between different classes,<br>if they were manifestly unjust, if they disclosed<br>bad faith, or if they involved such oppressive<br>or gratuitous interference with the rights of<br>citizens as could find no justification in the<br>minds of reasonable men. Lord Russell<br>emphasised that a bye­law is not unreasonable<br>just because particular judges might think it<br>went further than was prudent or necessary or<br>convenient.
31
In 1947 the Court of Appeal confirmed a similar<br>approach for the review of executive discretion<br>generally in Associated Provincial Picture Houses<br>Ltd. v. Wednesbury Corpn [(1948) 1 KB 223 : (1947)<br>2 All ER 680] . This case was concerned with a<br>complaint by the owners of a cinema in Wednesbury<br>that it was unreasonable of the local authority to<br>licence performances on Sunday only subject to a<br>condition that ‘no children under the age of 15<br>years shall be admitted to any entertainment<br>whether accompanied by an adult or not’. In an<br>extempore judgment, Lord Greene, M.R. drew<br>attention to the fact that the word ‘unreasonable’<br>had often been used in a sense which<br>comprehended different grounds of review. (At p.<br>229, where it was said that the dismissal of a<br>teacher for having red hair (cited by Warrington,<br>L.J. in Short v. Poole Corpn. [(1926) 1 Ch 66, 91 :<br>1925 All ER Rep 74] , as an example of a ‘frivolous<br>and foolish reason’) was, in another sense, taking<br>into consideration extraneous matters, and might<br>be so unreasonable that it could almost be<br>described as being done in bad faith; see<br>also R. v. Tower Hamlets London Borough Council,<br>ex p Chetnik Developments Ltd. [1988 AC 858, 873 :<br>(1988) 2 WLR 654 : (1988) 1 All ER 961] (Chapter 4,<br>p. 73, supra). He summarised the principles as<br>follows:
‘The Court is entitled to investigate the action<br>of the local authority with a view to seeing<br>whether or not they have taken into account<br>matters which they ought not to have taken<br>into account, or, conversely, have refused to<br>take into account or neglected to take into<br>account matter which they ought to take into<br>account. Once that question is answered in<br>favour of the local authority, it may still be<br>possible to say that, although the local
32
authority had kept within the four corners of<br>the matters which they ought to consider, they<br>have nevertheless come to a conclusion so<br>unreasonable that no reasonable authority<br>could ever have come to it. In such a case,<br>again, I think the court can interfere. The<br>power of the court to interfere in each case is<br>not as an appellate authority to override a<br>decision of the local authority, but as a judicial<br>authority which is concerned, and concerned<br>only, to see whether the local authority has<br>contravened the law by acting in excess of the<br>power which Parliament has confided in them.’
This summary by Lord Greene has been applied in<br>countless subsequent cases.
“The modern statement of the principle is<br>found in a passage in the speech of Lord<br>Diplock in Council of Civil Service<br>Unions v. Minister for Civil Service [(1985) 1 AC<br>374 : (1984) 3 All ER 935 : (1984) 3 WLR 1174]<br>:
‘By “irrationality” I mean what can now be<br>succinctly referred to as “Wednesbury<br>unreasonableness”. (Associated Provincial<br>Picture Houses Ltd. v. Wednesbury<br>Corpn. [(1948) 1 KB 223 : (1947) 2 All ER 680])<br>It applies to a decision which is so outrageous<br>in its defiance of logic or of accepted moral<br>standards that no sensible person who had<br>applied his mind to the question to be decided<br>could have arrived at.’ ”
80. At this stage, The Supreme Court Practice, 1993,<br>Vol. 1, pp. 849­850, may be quoted:
“4. Wednesbury principle.— A decision of a<br>public authority will be liable to be quashed or<br>otherwise dealt with by an appropriate order in<br>judicial review proceedings where the court
33
concludes that the decision is such that no<br>authority properly directing itself on the<br>relevant law and acting reasonably could have<br>reached it. (Associated Provincial Picture<br>Houses Ltd. v. Wednesbury Corpn. [(1948) 1<br>KB 223 : (1947) 2 All ER 680] , per Lord<br>Greene, M.R.)”
81. Two other facets of irrationality may be<br>mentioned.
(1) It is open to the court to review the<br>decision­maker's evaluation of the facts. The<br>court will intervene where the facts taken as a<br>whole could not logically warrant the<br>conclusion of the decision­maker. If the weight<br>of facts pointing to one course of action is<br>overwhelming, then a decision the other way,<br>cannot be upheld. Thus, in Emma Hotels<br>Ltd. v. Secretary of State for<br>Environment [(1980) 41 P & CR 255] , the<br>Secretary of State referred to a number of<br>factors which led him to the conclusion that a<br>non­resident's bar in a hotel was operated in<br>such a way that the bar was not an incident of<br>the hotel use for planning purposes, but<br>constituted a separate use. The Divisional<br>Court analysed the factors which led the<br>Secretary of State to that conclusion and,<br>having done so, set it aside. Donaldson, L.J.<br>said that he could not see on what basis the<br>Secretary of State had reached his conclusion.
(2) A decision would be regarded as<br>unreasonable if it is impartial and unequal in<br>its operation as between different classes. On<br>this basis in R. v. Barnet London Borough<br>Council, ex p Johnson [(1989) 88 LGR 73] the<br>condition imposed by a local authority<br>prohibiting participation by those affiliated
34 with political parties at events to be held in the authority's parks was struck down.” 31. It   could   thus   be   seen   that   while   exercising   powers   of judicial review, the Court is not concerned with the ultimate decision but the decision­making process.  The limited areas in which   the   court   can   enquire   are   as   to   whether   a  decision­ making authority has exceeded its powers, committed an error of law or committed breach of principle of natural justice.   It can examine as to whether an authority has reached a decision which   no   reasonable   Tribunal   would   have   reached   or   has abused its powers. It is not for the court to determine whether a particular policy or a particular decision taken in the fulfilment of that policy is fair.  The court will examine as to whether the decision of an authority is vitiated by illegality, irrationality or procedural   impropriety.     While   examining   the   question   of irrationality,   the   court   will   be   guided   by   the   principle   of Wednesbury.   While   applying   the   Wednesbury   principle,   the court will examine as to whether the decision of an authority is 35 such that no authority properly directing itself on the relevant law and acting reasonably could have reached it. 32. Applying the aforesaid principle, it can clearly be seen that th the   decision   of   PSPCL   dated   6   April   2018,   cannot   be questioned   on   the   ground   of   illegality   or   procedural impropriety.  The decision is taken in accordance with Section 11 of the said Act and after following the principle of Natural Justice.  The limited area that would be available for attack is as to whether the decision is hit by the Wednesbury principle. Can it be said that the decision taken by the authority is such that no reasonable person would have taken it?  No doubt, that the authority has also relied on Clause 12.4.1 of the Allotment Agreement, however, that is not the only ground on which the representation   of   EMTA   is   rejected.     No   doubt,   that   while considering   EMTA’s   representation,   PSPCL   has   referred   to Clause 12.4.1 of the Allotment Agreement which requires the coal   mines   to   be   developed   through   contractors   who   were selected through a competitive bidding process, however, that is not the only ground on which the representation of EMTA is 36 rejected.  It will be relevant to refer to the following observations th in the order passed by PSPCL dated 6  April 2018:­ “Moreover,   there   is   no   reason   why   competitive bidding process for the purposes of eliciting the best operator be not preferred.  Needless to mention that as the composition with respect to capital/revenue investment is altogether different, hence the bidding parameters have entirely changed.” 33. It could thus be seen that PSPCL has decided to go in for competitive bidding process for the purpose of eliciting the best operator.     It   has   further   noticed   that   the   composition   with respect  to capital/revenue investment is altogether  different. Hence, the bidding parameters have entirely changed.   It has further referred to the decision of this Court wherein it has been held that the allotment should be through competitive bidding process.  We ask a question to ourselves, as to whether the said reasoning can be said to be irrational or arbitrary.  A policy decision to get the best operator at the best price, cannot be said to be a decision which no reasonable person would take in his affairs. In that view of the matter, the attack on the th order/letter dated 6  April 2018, is without merit. 37 34. Insofar as the contention of Shri Rohatgi with regard to the huge investment being made by EMTA is concerned, the said Act itself provides remedy for seeking compensation apart from the other remedies that are available in law.  In that view of   the   matter,   we   are   not   impressed   with   the   arguments advanced in that behalf. 35. In the result, the impugned judgment and order passed by the High Court of Punjab and Haryana is unsustainable in law. The appeals are therefore allowed and the judgment and order th passed by the High Court of Punjab and Haryana dated 25 January 2019, is quashed and set aside.  Pending I.A (s), if any, shall stand disposed of accordingly. …..…..….......................J.    [L. NAGESWARA RAO]          …….........................J.           [B.R. GAVAI] …..…..….......................J.      [B.V. NAGARATHNA] NEW DELHI; SEPTEMBER 21, 2021. 38