JINDAL STEEL & POWER LIMITED & ANOTHER vs. UNION OF INDIA & OTHERS

* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ W.P. (C) 309/2015
% Judgment delivered on: 11.02.2015
JINDAL STEEL & POWER LIMITED & ANOTHER … Petitioners
versus
UNION OF INDIA & OTHERS … Respondents
Advocates who appeared in this case :-
For the Petitioners : Mr Kapil Sibal, Mr Rajiv Nayar, Sr Advocates with
Mr Sanjeev Kapoor, Mr Rajat Jariwal and Mr Aakash Bajaj
For the Respondents : Mr Mukul Rohatgi, AG and Mr Sanjay Jain, ASG with
Mr Akshay Makhija, Mr Shresth Jain and Ms Devanshi Singh.
WITH
WP (C) 310/2015
JINDAL STEEL & POWER LIMITED & OTHERS … Petitioners
versus
UNION OF INDIA & ANOTHER … Respondents
Advocates who appeared in this case :-
For the Petitioners : Dr A.M. Singhvi with Mr Jayant Bhushan, Sr Advocates,
Mr Sanjeev Kapoor, Mr Prateek Kumar, Ms Diya Chaturvedi
and Mr L. Zafeer Ahmed
For the Respondents : Mr Mukul Rohatgi, AG and Mr Sanjay Jain, ASG with
Mr Akshay Makhija, Mr Shresth Jain and Ms Astha Jain.
CORAM:
HON'BLE MR JUSTICE BADAR DURREZ AHMED
HON'BLE MR JUSTICE SANJEEV SACHDEVA
WP (C) Nos. 309/15 & 310/15 Page 1 of 73

JUDGMENT
BADAR DURREZ AHMED, J.
1. These writ petitions raise common issues and therefore they are being
dealt with together. WPC 309/2015 pertains to the Utkal B1 and B2 coal
blocks in Odisha. WPC 310/2015 pertains to the Gare Palma IV/6 coal
block in Chhattisgarh.
2. In WPC 309/2015, inter alia, the following prayers have been made:-
“(a) Issue an appropriate writ, order or direction to set aside
the order dated 18.12.2014 and order dated 06.01.2015 issued
by the Respondents to the extent that it changes the end use of
coal block Utkal B-1 from sponge iron / steel to power as per e-
auction/tendering process for the said coal block and;
(b) Issue an appropriate writ, order or direction thereby
directing the Respondents to earmark the end use of coal block
Utkal B-1 to Sponge Iron/ Steel sector in the present case,
which was the original classification as per e-auction/tendering
process for the said coal block;
(c) Issue an appropriate writ, order or direction thereby
setting aside the order dated 18.12.2014 and 06.01.2015 issued
by the Respondents to the extent that it consolidates Utkal B-1
and Utkal B-2 into one coal block as per e-auction/tendering
process for the said coal block and/or;
(d) Alternatively in case in the context of Grounds , it is held
that Section 7 of the Ordinance read with Rule 8 (2) of the
Rules allows the Respondents to change the end use of coal
block Utkal B1 which was earlier earmarked for Sponge Iron/
Steel to Power then issue an appropriate writ/ order/ direction
and hold that Section 7 (1) of the Ordinance and/ or Rule 8 (2)
of the Rules is unconstitutional to the extent that it allows the
WP (C) Nos. 309/15 & 310/15 Page 2 of 73

Respondents to change the end use of the Coal Block and set it
aside to that extent;”
3. In WPC 310/2015, inter alia, the following prayers have been made:
“(a) Issue an appropriate writ, order or direction to set aside
the order dated 18.12.2014 issued by the Respondents to the
extent that it changes the end use of coal block Gare Palma IV/6
from sponge iron / steel to power;
(b) Issue an appropriate writ, order or direction thereby
directing the Respondents to earmark the end use of coal block
Gare Palma IV/6 to "non-regulated sector" i.e. the Sponge Iron/
Steel sector in the present case, which was the original
classification;
(c) Alternatively in case in the context of Grounds T,U, V
and W, it is held that Section 7 read with Rule 8(2) allows the
Central Government to change the end use of coal block Gare
Palma IV/6 which was earlier earmarked for Sponge Iron/ Steel
to Power than issue an appropriate writ/ order/ direction and
hold that Section 7 of the Ordinance and Rule 8(2) of the Rules
are unconstitutional to the extent that they allow the
Respondents to change the end use of the Coal Block and set it
aside to that extent;”
4. In the course of the arguments the learned counsel for the petitioners
did not, however, press the alternative prayers challenging the constitutional
validity of certain provisions of the THE COAL MINES (SPECIAL
PROVISIONS) SECOND ORDINANCE, 2014 (hereinafter referred to as
"the said ordinance") and THE COAL MINES (SPECIAL PROVISIONS)
RULES, 2014 (hereinafter referred to as "the said rules").
WP (C) Nos. 309/15 & 310/15 Page 3 of 73

5. The order dated 18/12/2014, which is the subject matter of challenge
in both the petitions is as under: –
“No. 13016/9/2014-CA-III
Government of India
Ministry of Coal
Shastri Bhawan, New Delhi,
th
Dated the 18 December, 2014
ORDER
Subject:- Earmarking of coal mines/blocks for auction and
allotment under the Coal Mines (Special Provisions)
Ordinance, 2014- reg.
The undersigned is directed to inform that the provisions of Rule 8
(2) (a) & Rule 8 (2) (b) of the Coal Mines (Special Provisions)
Rules, 2014 provides that the Central Government shall issue an
order to the nominated authority regarding the manner of
allocation of the Schedule I coal mine through public auction
under Section 4 or Allotment under Section 5 and the Specified
end use of any Schedule-II coal mine or Schedule III coal mine.
2. Accordingly, with the approval of the competent
authority a list of Coal Mines/Blocks earmarked for Allotment
with their specified end-use (Annexure-I) and another list of
Coal Mines/Blocks earmarked for Auction with their specified
end-use (Annexure-II) are forwarded herewith for the said purposes.
Sd/-
(Anurag Kapil)
Director (CA-I&II)
Ph. No. 23384594
Encl: Annexure-I & II
Nominated Authority,
Ministry of Coal”
WP (C) Nos. 309/15 & 310/15 Page 4 of 73

WP (C) Nos. 309/15 & 310/15 Page 5 of 73

Annexure-II

WP (C) Nos. 309/15 & 310/15 Page 6 of 73

WP (C) Nos. 309/15 & 310/15 Page 7 of 73

WP (C) Nos. 309/15 & 310/15 Page 8 of 73

6. The impugned order dated 06/01/2015 reads as under:-
“No. 13016/9/2014-CA-III
Government of India
Ministry of Coal
Shastri Bhawan, New Delhi
th
Dated the 06 January, 2015
Subject: Earmarking of coal mines/blocks for auction
and allotment under the Coal Mines (Special
Provisions) Second Ordinance, 2014-reg.
The undersigned is directed to inform that Rule 8(2) (a) & Rule
8 (2) (b) of the Coal Mines (Special Provisions) Rules, 2014
provide that the Central Government shall issue an order to the
Nominated Authority regarding the manner of allocation of the
Schedule I coal mine through public auction under Section 4 or
Allotment under Section 5 and the Specified use of any
Schedule II coal mine or Schedule III coal mine.
2. Accordingly, in continuation of order of even no. dated
24.12.2014, a list of 23 Schedule- III Coal Mines/Blocks is
forwarded herewith for conducting e-auction by the Nominated
Authority.
(S.K. SHAHI)
Director (CA-III & NA)
To,
Nominated Authority
Ministry of Coal
WP (C) Nos. 309/15 & 310/15 Page 9 of 73

Copy to :
TD (NIC), MoC. – with the request to upload on the website of the
Ministry.”

WP (C) Nos. 309/15 & 310/15 Page 10 of 73

7. The Schedule of the tender process for Utkal B-1 and B-2, as
prescribed in clause 3.8 of the Standard Tender Document (for power
sector), stipulates that the last date for sale of tender documents at the
website of MSTC Limited would be 12.02.2015 and the bid due date has
been specified as 14.02.2015. The opening of Technical bids is scheduled
for 15.02.2015 and the announcement of qualified bidders is scheduled to be
made on 23.02.2015. The conduct of electronic auction (financial bid) for
the qualified bidders is scheduled for 25.02.2015 to 05.03.2015. Insofar as
Gare Palma IV/6 is concerned, no schedule has as yet been notified.
8. Two things have been done by the impugned orders dated 18/12/2015
and 06/01/2015. First of all, the end-use of the coal block Utkal B1, which
had earlier been allotted to Petitioner No.1, has been changed from “sponge
iron/steel” to “power”. Secondly, two blocks – Utkal B1 and Utkal B2 -
have been consolidated for auction as a single mine. The Petitioners are
WP (C) Nos. 309/15 & 310/15 Page 11 of 73

aggrieved by both. According to them, the end-use could not have been
changed and the two coal blocks could not have been consolidated and was
certainly not warranted by the said ordinance.
9. Insofar as WPC 310/2015 is concerned, the only issue pertains to the
change of end-use of the Gare Palma IV/6 coal mine from “sponge iron/
steel” to “power”. While the Utkal B1 and Utkal B2 mines have been put up
for auction, Gare Palma IV/6 has not yet been put up for auction but, that
eventuality is imminent.
10. Essentially, the change of end-use is being objected to because the
petitioners were prior allottees of these mines with specific end-use of
“sponge iron/steel” and have set up end-use steel plants. Both the mines
were nearly operational when the allotments were, amongst others, cancelled
by the Supreme Court in Manohar Lal Sharma v. The Principal Secretary
& Ors [WP(Crl) No.120/2012] and other connected petitions by virtue of its
judgment and order dated 25/08/2014 and follow up order dated 24/09/2014.
The Petitioner’s pre-cancellation status in WPC 309/2015
11. In WP(C) 309/2015, the petitioner No.1 had earlier been allocated the
Utkal B-1 Coal Block in Odisha by an Allocation Letter dated 29.09.2013
for use in a Sponge Iron / Steel Plant and a Captive Power Plant. Based on
such allocations and two Memoranda of Understanding dated 18.11.2004
and 03.11.2005 with the Government of Odisha, the said petitioner set up its
1.8 million tonnes per annum (MTPA) capacity Sponge Iron Plant, 2 MTPA
WP (C) Nos. 309/15 & 310/15 Page 12 of 73

Capacity Steel Plant and 810 MW Captive Power Plant at Angul at a
distance of about 5 kms from the Utkal B-1 Coal Block. It is stated by the
petitioners that an investment of Rs 19,016.14 crores as on 30.09.2014 was
made on the end use plant and Rs 138.11 crores was spent on the
development of the Utkal B-1 Coal Block. It was stated on behalf of the
petitioners that the allocation letter dated 29.09.2003 was end-use specific
for the setting up of a Sponge Iron Plant / Steel Plant and for a Captive
Power Plant. The MOUs with the State Government also stipulated that the
said Coal Block was allocated to the petitioner for the Sponge Iron/ Steel
Plant as well as for the Captive Power Plant. The Ministry of Coal had
conveyed its approval to the Mining Plan submitted by the said petitioner on
18.11.2005. Approval was also granted under Section 5(1) of the Mines and
Minerals (Development and Regulation) Act, 1957 (hereinafter referred to
as ‘the Mines Act’) in respect of Utkal B-1, subject to the condition that the
coal produced from the mine would be used for the 1.8 MTPA Sponge Iron
Plant, 2 MTPA Steel Plant and Captive Power Plant proposed to be set up by
the said petitioner. A draft Mining Lease was also forwarded by the
Ministry of Coal to the said petitioner for execution which had been
accepted by the latter through its letter dated 12.12.2007. Environmental
clearance as well as Stage-1 and Stage-2 Forest clearances in respect of
Utkal B-1 Coal Block had also been obtained by the said petitioner. The
environmental clearance dated 04.04.2007 for the Steel Plant clearly
mentioned that the coal was to be sourced from the captive coal block and
the said clearance also mentions that transportation of coal from the block to
the plant would be by a 7.5 km long conveyer belt system. The State
WP (C) Nos. 309/15 & 310/15 Page 13 of 73

Government, passed an order under the Mines Act, granting the Mining
Lease in favour of the said petitioner for the end use – Sponge Iron / Steel
Plant and Captive Power Plant – in the light of the clearances and approvals
having been obtained by the said petitioner. The Collector, Angul had
communicated compliance by the petitioner of all the terms and conditions
and recommended the grant of an execution order to the State Government
on 08.07.2011. It is stated that the petitioner No.1’s Sponge Iron Plant of
1.8 MTPA, Steel Plant of 2 MTPA and Captive Power Plant of 810 MW
capacity are complete and are in operation.
The case of the petitioners – in brief
12. Briefly put, the case of the petitioners is that the Supreme Court
cancelled the earlier allotments but said nothing about the future manner of
allocation of the cancelled coal block allotments. According to the
petitioners, even the said ordinance does not contemplate a change of end-
use in respect of operational mines (Schedule II mines) and nearly
operational mines (Schedule III mines). Hence, executive orders/actions in
the shape of the impugned orders dated 18/12/2014 and 06/01/2015 which
changed the end-use of the subject mines are liable to be quashed as they are
contrary to the said ordinance in letter and spirit. The manner of change in
end-use has also been challenged as being arbitrary and not backed by any
reason or logic and without proper application of mind.
The case of the Union of India – in brief
13. On the other hand, the contention of the Union of India is that upon
the cancellation of the earlier allotments by the Supreme Court all
WP (C) Nos. 309/15 & 310/15 Page 14 of 73

connections with the past were severed and the central government was
presented with a clean slate. It was contended that the end-use specified in
earlier allotments became irrelevant for the purpose of future allocations. It
did not matter whether the mines were operational or nearly operational, the
allottees of the cancelled allotments would have to bear the consequences
and no equity could be claimed by them on the ground that they had set up
end-use plants at a heavy cost etc. It was also contended that the central
government adopted a policy of priority to the power sector as that was the
crying need of the hour and that mines having larger reserves and lower
quality coal were earmarked for power and those having lower reserves and
higher grades of coal were set apart for, inter alia, steel. It was contended
that the Technical Committee which was constituted for this purpose
conducted the exercise of classification and earmarking based on the above
parameters and it is only thereafter that the order dated 18/12/2014 was
issued whereby end-uses have been specified for, inter alia, the schedule III
mines and conduct of e-auction of 23 such mines has been set up by the
order dated 06/01/2014. Therefore, according to the Union of India, there is
no cause to interfere with the impending auction of the coal blocks involved
in these petitions.
The Supreme Court judgment dated 25/08/2014
14. The following extracts from the said judgment dated 25/08/2014
would clearly indicate as to what were the issues before the Supreme Court
and what were its findings on those issues:
“2. Being such a significant, valuable and important
natural resource, the allocation of coal blocks for the period 1993
WP (C) Nos. 309/15 & 310/15 Page 15 of 73

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: …”
“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 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.”
“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
WP (C) Nos. 309/15 & 310/15 Page 16 of 73

principles and the fundamentals of the equality
clause enshrined in the Constitution?”
“ 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 Committee is
apparently subjective as the minutes of the Screening
Committee meetings do not show that selection was made
after proper assessment…… ”
“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…….”
“ 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.
155. The allocation of coal blocks through Government
dispensation route, however laudable the object may be, also is
WP (C) Nos. 309/15 & 310/15 Page 17 of 73

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……”
“ 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. ”
(emphasis supplied)
The follow up order dated 24/09/2014 of the Supreme Court
14. The consequences of cancellation of the coal blocks were spelt out
in the order dated 24/09/2014. Some of the relevant extracts from the
said order are as under:-
“4. For the purposes of these “consequence proceedings”, the
Union of India filed an affidavit dated 8th September, 2014. It is
stated in the affidavit that coal is actually being mined from 40
coal blocks listed in Annexure I to the affidavit. This list includes
two coal blocks allotted to an Ultra Mega Power Projects (Sasan
Power Ltd. [UMPP] allotted the coal blocks Moher and Moher
Amroli Extension). Coal blocks allotted to UMPPs have not been
disturbed in the judgment. The list of the 40 coal blocks is
attached to this order as Annexure 1.
5. In addition to the above 40 coal blocks, it is stated in the
affidavit that 6 more coal blocks are ready for extraction of coal
in 2014-15 and this list is Annexure II to the affidavit. These
6 coal blocks have obtained the Mine Opening Permission
from the Coal Controller’s Organization under Rule 9 of the
Colliery Control Rules 2004[1] (framed under the Mines and
Minerals (Development and Regulation) Act, 1957). This
WP (C) Nos. 309/15 & 310/15 Page 18 of 73

permission is granted subsequent to the execution of a mining
lease. The list of these 6 coal blocks is attached to this order as
Annexure 2.
6. Therefore, the affidavit is quite clear that 40 coal blocks are
already producing coal and 6 coal blocks are in a position to
produce coal virtually with immediate effect. The question is
whether the allotment of these coal blocks should be cancelled or
not.”
“26. Learned counsels for the allottees have essentially raised
two contentions. Firstly, the principles of natural justice require
that they must be heard before their coal block allotments are
cancelled. Secondly, we should appoint a committee to consider
each individual case to determine whether the coal block
allotments should be cancelled or not.
27. As far as the second contention is concerned, this is strongly
opposed by the learned Attorney General and we think he is right
in doing so. The judgment did not deal with any individual
case. It dealt only with the process of allotment of coal
blocks and found it to be illegal and arbitrary. The process
of allotment cannot be reopened collaterally through the
appointment of a committee. This would virtually amount to
nullifying the judgment. The process is a continuous thread that
runs through all the allotments. Since it was fatally flawed, the
beneficiaries of the flawed process must suffer the
consequences thereof and the appointment of a committee would
really amount to permitting a body to examine the correctness of
the judgment. This is clearly impermissible.”
“34. There are two categories of coal block allotments: the first
category being allotments other than those mentioned in Annexure
1 and Annexure 2; the second category being the 46 coal blocks
mentioned in Annexure 1 and Annexure 2 that could possibly
be “saved” from cancellation on certain terms and conditions,
as submitted by the learned Attorney General.
35. As far as the first category of coal block allotments is
concerned, they must be cancelled (except those mentioned in the
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judgment). There is no reason to “save” them from cancellation.
The allocations are illegal and arbitrary; the allottees have not
yet entered into any mining lease and they have not yet
commenced production. Whether they are 95% ready or 92%
ready or 90% ready for production (as argued by some
learned counsel) is wholly irrelevant. Their allocation was
illegal and arbitrary, as already held, and therefore we quash
all these allotments.
36. Learned Attorney General identified 46 coal blocks that
could be “saved” from the guillotine, since all of them have
commenced production or are on the verge of commencing
production. As these allocations are also illegal and arbitrary they
are also liable to be cancelled. However, the allotment of three
coal blocks in Annexure 1 is not disturbed and they are Moher and
Moher Amroli Extension allocated to Sasan Power Ltd. (UMPP)
and Tasra (allotted to Steel Authority of India Ltd. (SAIL), a
Central Government public sector undertaking not having any
joint venture). As far the 6 coal blocks mentioned in Annexure
2 are concerned, the allocatees have not yet commenced
production. They do not stand on a different or better footing as
far the consequences are concerned. These allotments are also
liable to be cancelled. The allocation of the Pakri Barwadih coal
block (allotted to National Thermal Power Corporation (NTPC),
being a Central Government public sector undertaking not having
any joint venture) is not liable to be cancelled.
37. Except the above two allocations made to the UMPP
and the two allocations made to the Central Government
public sector undertaking not having any joint venture
mentioned above, all other allocations mentioned in
Annexure 1 and Annexure 2 are cancelled.
38. It was submitted by the learned Attorney General that
on the cancellation of the coal block allotments, CIL would
require some breathing time to manage its affairs. The Central
Government is keen to move ahead but some time would be
required to manage the emerging situation. Similarly,
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breathing time is also required to be given to the allottees to
manage their affairs on the cancellation of the coal blocks.
39. In view of the submissions made, although we have
quashed the allotment of 42 out of these 46 coal blocks, we
make it clear that the cancellation will take effect only after
six months from today, which is with effect from 31st
March, 2015. This period of six months is being given since
the learned Attorney General submitted that the Central
Government and CIL would need some time to adjust to the
changed situation and move forward. This period will also
give adequate time to the coal block allottees to adjust and
manage their affairs. That the CIL is inefficient and incapable of
accepting the challenge, as submitted by learned counsel, is not an
issue at all. The Central Government is confident, as submitted by
the learned Attorney General, that the CIL can fill the void and
take things forward.
40. In addition to the request for deferment of
cancellation, we also accept the submission of the learned
Attorney General that the allottees of the coal blocks other
than those covered by the judgment and the four coal blocks
covered by this order must pay an amount of Rs. 295/- per
metric ton of coal extracted as an additional levy. This
compensatory amount is based on the assessment made by the
CAG. It may well be that the cost of extraction of coal from
an underground mine has not been taken into consideration by
the CAG, but in matters of this nature it is difficult to arrive at
any mathematically acceptable figure quantifying the loss
sustained. The estimated loss of Rs. 295/- per metric ton of coal
is, therefore, accepted for the purposes of these cases. The
compensatory payment on this basis should be made within a
period of three months and in any case on or before 31st
December, 2014. The coal extracted hereafter till 31st March,
2015 will also attract the additional levy of Rs. 295/- per metric
ton.”
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Effect of the Supreme Court judgment and order
15. Mr Kapil Sibal, Senior advocate, appearing on behalf of the petitioner
No.1 in WP(C) 309/2015, submitted that the cancellation of the coal block
allocations by the Supreme Court by virtue of its judgment dated 25.08.2014
and the follow up order dated 24.09.2014 does not, in any way, foreclose the
challenge in the present petitions. He submitted that the Supreme Court
cancelled the coal block allocations on the ground that the process of
allocations suffered from irregularities and illegalities. He submitted that
the investments which had by then been made by the allottees were
considered to be irrelevant by the Supreme Court for the purposes of
examining the legality of the allotments. He submitted that the Supreme
Court did not hold that the investments and the end-uses of the earlier
allotments would not been relevant at the stage of re-auctioning / re-
allotment of the blocks. It was submitted that the Supreme Court was only
concerned with the legality of the earlier allocations / allotments and was not
at all concerned with the issue of subsequent auctioning of coal blocks. It
was also submitted by Mr Sibal that the impression given to the Supreme
Court by the Union of India was that after cancellation, the mines would be
taken over by Coal India Limited (CIL). As such, the issue of re-auctioning
was not considered by the Supreme Court. It was also submitted that the
question of auctioning as a method of disposal of the natural resources was
only generally considered by the Supreme Court and it was observed that
auctioning is not necessarily the best way of disposal of all natural
resources. Consequently, it was contended that the assertions on the part of
the Union of India that the current auctioning is being carried out under the
WP (C) Nos. 309/15 & 310/15 Page 22 of 73

aegis of the orders of the Supreme Court is misplaced. It was also submitted
by Mr Sibal that while the Supreme Court held the earlier allocations /
allotments to be illegal, it did not hold that the specification of a particular
end use was illegal, nor did the Supreme Court consider the aspect of re-
allocation of mines.
16. Dr Abhishek Manu Singhvi, the learned Senior counsel, appearing for
one of the petitioners in WP(C) 310/2015 submitted that the Supreme
Court’s judgment dated 25.08.2014 and the subsequent order dated
24.09.2014, were prior to the Ordinance and prior to the notification for
auction. Both the orders of the Supreme Court related to one issue only and,
that is, whether the allotment of coal blocks to several entities by way of the
Screening Committee process from 1993 onwards was valid and legal? The
Supreme Court held the allotments to be arbitrary and illegal, being violative
of Article 14 of the Constitution of India as also contrary to Section 3(1)(a)
of the Coal Mines (Nationalisation) Act, 1973. Dr Singhvi further submitted
that the Supreme Court was not concerned with how and in what manner the
coal resources would be disposed of after the cancellation order. According
to Dr Singhvi, there were several eventualities. The coal blocks could have
been taken over by Coal India Limited (CIL), which was the suggestion
before the Supreme Court; the coal blocks could be set up for auction or for
allotment through the Government route. There were other proposals also.
But, the Supreme Court was not concerned with that. The only question
before the Supreme Court was the legality of the earlier coal block
allocations / allotments, which, ultimately, the Supreme Court cancelled.
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17. On the other hand, Mr Mukul Rohatgi, the Attorney General of India,
submitted that the Supreme Court judgment dated 25.08.2014 and the
consequent order dated 24.09.2014 completely effaced the previous
allotments and freed-up all linkages with end-uses. The slate was wiped
clean, as it were. It was submitted that the fact that the petitioners were
prior allottees of a mine and had set up plants was completely irrelevant.
The Supreme Court had cancelled all the allotments in their entirety and the
Government had to start afresh. He submitted that footprints of prior
allotments stood completely erased. It was contended that there could be no
vested right in the prior allotments or arising out of prior allotments and that
arguments similar to those raised in these petitions had been unequivocally
rejected by the Supreme Court. A reference was made to para 15 of the
order dated 24.09.2014, where the Supreme Court, as pointed out above,
observed that the allocations were illegal and arbitrary and whether the
allottees were 95% ready, or 92% ready or 90% ready for production was
wholly irrelevant. The allocation was held to be illegal and arbitrary and,
therefore, the Supreme Court quashed all these allotments. It was submitted
that the argument of the petitioners that the Supreme Court was dealing only
with cancellation of the allotments and that the Supreme Court orders could
not be construed to mean that no equities arose out of the existing
investments, was without merit. It was submitted that the Supreme Court
left it to the Central Government to deal with the emergent situation in the
best manner possible by giving the Central Government time upto
31.03.2015. According to the Attorney General, all equities even if they had
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existed at the time of the Supreme Court decision, stood extinguished on the
cancellation of the allotments by the Supreme Court. He submitted that the
Supreme Court cancelled all the allotments after being aware of the end-use
investments of the prior allottees. It took a conscious decision of cancelling
the allotments and that such decision also resulted in the severance of the
links to the end-use plants. In fact, the Supreme Court went to the extent of
not event saving the blocks which were operational. He submitted that the
stand of the Central Government before the Supreme Court was not that the
mines, after cancellation, would be taken over by CIL on a permanent basis.
According to the Attorney General, what was submitted by the Central
Government to the Supreme Court was that CIL could take over and
continue the extraction of coal from the blocks without adversely affecting
the rights of those employed therein. This was in order to ensure that coal
production would not stop notwithstanding the cancellation of the coal
producing blocks. It is for this reason that breathing time was given upto
31.03.2015 to the prior allottees to continue coal operations and to enable
CIL to make appropriate arrangements for taking over after that date.
18. In our view, as would be evident from the extracts from the Supreme
Court judgment dated 25.08.2014, the allocations of coal blocks for the
period 1993-2010 was the subject matter of the petitions before the Supreme
Court. The consideration before the Supreme Court was confined to the
quashing of the allocation of coal blocks to, inter alia, private companies
made by the government during the period 1993 to 2010, as would be
evident from the extract of para 6 set out earlier in this judgment. The
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questions which the Supreme Court was examining were set out in
paragraph 82 of the said judgment which include the issue of whether the
allocation of coal blocks made on the basis of recommendations of the
Screening Committee suffered from any legal infirmity. In other words, the
Supreme Court was concerned about the legality and validity of the
allocation of coal blocks during the period 1993-2010. The Supreme Court
came to the conclusion that the entire exercise of allocation through the
Screening Committee route appeared to suffer on the vice of arbitrariness
and of not following any objective criteria in determining as to who was to
be selected and who was not to be selected. There was no evaluation of
merit and no inter se comparison of the applicants. The Supreme Court was
dismayed at the fact that no chart of evaluation had been prepared and that
the determination of the Screening Committee was apparently subjective as
was disclosed by the minutes of their meetings. In para 154 of the said
judgment, the Supreme Court concluded that the entire allocation of coal
blocks as per the recommendations made the Screening Committee from
14.07.1997 in 36 meetings and the allocation through the government
dispensation route suffered from the vice of arbitrariness and legal flaws.
And, from para 157 of the judgment dated 25.08.2014, it is evident that the
Supreme Court having once decided that the allocations were illegal, set up
the matter for further hearing to consider as to what would be the
consequences.
19. This was considered in the follow-up order dated 24.09.2014. In para
27 of the order dated 24.09.2014, the Supreme Court made it clear that the
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judgment dated 25.08.2014 did not deal with any individual case and that it
had only dealt with the process of allotment of coal blocks and found it to be
illegal and arbitrary and repelled the argument that a committee be
appointed to consider each individual case as to whether the coal block
allotment orders should be cancelled or not. The Supreme Court held that
the process of allotment cannot be reopened collaterally through the
appointment of the committee as that would virtually amount to nullifying
the judgment. The Supreme Court observed that since the process of
allotment was fatally flawed, the beneficiary of the flawed process must
suffer the consequences thereof.
20. On going through both, the judgment and the follow-up order of the
Supreme Court, we are of the view that the Supreme Court was only
concerned with the legality of the allocations/ allotments of coal blocks
made between 1993 and 2010 through the Screening Committee process.
The Supreme Court found that the process was flawed and held the
allotments/allocations to be illegal. While doing so, the Supreme Court
observed that investments made by the allottees was not a relevant
consideration for the purposes of considering the legality of the
allocations/allotments. We agree with the learned counsel for the petitioners
that the Supreme Court was not concerned with the future manner of
allocations/ allotments/ utilisation of the coal blocks. The cancellation of
the coal block allocations cannot be regarded as a circumstance which would
make the consideration of end-use for the purposes of future allocation
irrelevant. In other words, while the investments made by the prior allottees
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were construed as irrelevant for the purpose of cancellation, it does not
follow that the end-use earlier specified in respect of the previous allocations
would be irrelevant for the purposes of future allocations. Therefore, the
Supreme Court judgment and the follow-up order do not, in our view, come
in the way of the petitioners in challenging the change of end-use based
upon the provisions of the said Ordinance.
The Ordinances and the Rules
15. Pursuant to the Supreme Court cancelling the coal block allocations
and its directions pertaining to the 42 coal blocks which were permitted to
continue till 31/03/2015 under some conditions, The Coal Mines (Special
Provisions) Ordinance, 2014 was promulgated by the President of India on
21/10/2014. Thereafter, the Central Government made The Coal Mines
(Special Provisions) Rules, 2014 (hereinafter referred to as ‘the said rules’)
on 11/12/2014. A second ordinance – The Coal Mines (Special Provisions)
Second Ordinance, 2014 (“the said ordinance”) – was promulgated by the
President to replace the earlier ordinance with certain modifications so as to
provide for dispute settlement, bar of jurisdiction of civil courts and
protection of action taken in good faith by the authorities in the performance
of their duties under the ordinance.
16. The Preamble of the said ordinance is as follows:-
“An Ordinance to provide for allocation of coal mines and
vesting of the right, title and interest in and over the land and
mine infrastructure together with mining leases to successful
bidders and allottees with a view to ensure continuity in coal
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mining operations and production of coal, and for promoting
optimum utilisation of coal resources consistent with the
requirement of the country in national interest and for matters
connected therewith or incidental thereto”.
(underlining added)
Two relevant recitals are as under:-
“WHEREAS the Supreme Court of India vide judgment dated
25th August, 2014 read with its order dated 24th September, 2014
has cancelled the allocation of coal blocks and issued directions
with regard to such coal blocks and the Central Government in
pursuance of the said directions has to take immediate action to
implement the said order;
AND WHEREAS it is expedient in public interest for the Central
Government to take immediate action to allocate coal mines to
successful bidders and allottees keeping in view the energy
security of the country and to minimise any impact on core sectors
such as steel, cement and power utilities, which are vital for the
development of the nation;”
(underlining added)
17. The other relevant provisions of the said ordinance are:-
“3. (1) In this Ordinance, unless the context otherwise
requires,-
xxxx xxxx xxxx xxxx xxxx xxxx
(c) “appointed date” in relation to-
(i) Schedule I coal mines excluding Schedule II coal mines,
th
shall be the 24 day of September, 2014 being the date on which
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the allocation of coal blocks to prior allottees stood cancelled;
and
st
(ii) Schedule II coal mines shall be the 1 day of April, 2015
being the date on which the allocation of coal blocks to prior
allottees shall stand cancelled,
In pursuance of the order of the Supreme Court dated the 24the
September, 2014 passed in Writ petition (Criminal) No. 120 of
2012
xxxx xxxx xxxx xxxx xxxx
(n) “prior allottee”means prior allottee of Schedule I coal
mines as listed therein who had been allotted coal mines between
st
1993 and 31 day of March, 2011, whose allotments have been
cancelled pursuant to the judgment of the Supreme Court dated
th th
25 August, 2014 and its order dated 24 September, 2014
including those allotments which may have been de-allocated
prior to and during the pendency of the Writ Petition (Criminal)
No. 120 of 2012.
Explanation .– In case a mining lease has been executed in favour
of a third party, subsequent to such allocation of Schedule I coal
mines, then, the third party shall be deemed to be the prior
allottee;
(o) “Schedule” means a Schedule appended to this Ordinance;
(p) “Schedule I coal mines” means, –
(i) all the coal mines and coal blocks the allocation of which
th
was cancelled by the judgment dated 25 August, 2014 and its
th
order dated 24 September, 2014 passed in Writ Petition
(Criminal) No. 120 of 2012, including those allotments which
may have been de-allocated prior to and during the pendency of
the said Writ Petition;
(ii) all the coal bearing land acquired by the prior allottee and
lands, in or adjacent to the coal mines used for coal mining
operations acquired by the prior allottee;
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(iii) any existing mine infrastructure as defined in clause (j);
(q) “Schedule II coal mines” means the forty-two Schedule I
coal mines listed in Schedule II which are the coal mines in
th
relation to which the order of the Supreme Court dated 24 day
of September, 2014 was made;
(r) “Schedule III coal mines” means the thirty-two Schedule I
coal mines listed in Schedule III or any other Schedule I coal
mine as may be notified under sub-section (2) of section 7;
xxxx xxxx xxxx xxxx xxxx
(v) “specified end-use” means any of the following end-uses
and the expression “specified end user” shall with its
grammatical variations be construed accordingly,—
(i) production of iron and steel;
(ii) generation of power including the generation of
power for captive use;
(iii) washing of coal obtained from a mine;
(iv) cement;
(v) such other end-use as the Central Government
may, by notification, specify;
xxxx xxxx xxxx xxxx xxxx”
4. (1) Subject to the provisions of section 5. Schedule I coal
mines shall be allocated by way of public auction in
accordance with such rules, and on the payment of such fees
which shall not exceed five crore rupees, as may be
prescribed.
(2) Subject to the provisions in sub-section (3) of this
section and section 5, the Central Government may, for the
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purpose of granting reconnaissance permit, prospecting
licence or mining lease in respect of any area containing
coal, select any of the following companies through auction
by competitive bidding, on such terms and conditions as may
be prescribed—
(a) a Government company or corporation or a joint venture
company formed by such company or corporation or
between the Central Government or the State
Government, as the case may be, or any other company
incorporated in India; or
(b) a company or a joint venture company formed by two or
more companies,
that carry on coal mining operations in India, in any form
either for own consumption, sale or for any other purpose in
accordance with the permit, prospecting licence or mining
lease, as the case may be, and the State Government shall
grant such reconnaissance permit, prospecting licence or
mining lease in respect of any area containing coal to such
company as selected through auction by competitive bidding
under this section.
(3) Subject to the provisions of section 5, the following
persons who fulfil such norms as may be prescribed, shall be
eligible to bid in an auction of Schedule II coal mines and
Schedule III coal mines and to engage in coal mining
operations in the event they are successful bidders, namely:—
(a) a company engaged in specified end-use including a
company having a coal linkage which has made such
investment as may he prescribed;
Explanation.--A "company with a coal linkage"
includes any such company whose application is
pending with the Central Government on the date
of commencement of this Ordinance;
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(b) a joint venture company formed by two or
more companies having a common specified end-
use and are independently eligible to hid in
accordance with this Ordinance:
(c) a Government company or corporation or a
joint venture company formed by such company
or corporation or with any other company having
common specified end-use:
Provided that nothing contained in sub-section (2)
shall apply to this sub-section.
(4) A prior allottee shall be eligible to participate in the
auction process subject to payment of the additional levy
within such period as may be prescribed and if the prior
allottee has not paid such levy, then, the prior allottee, its
promoter or any of its company of such prior allottee shall
not be eligible to bid either by itself or by way of a joint
venture.
(5) Any prior allottee who is convicted for an offence
relating to coal block allocation and sentenced with
imprisonment for more than three years, shall not be eligible
to participate in the auction.
5. (1) Notwithstanding the provisions contained in sub-
sections (1) and (3) of section 4, the Central Government
may allot a Schedule I coal mine to a Government
company or corporation or to a joint venture between two
or more Government companies or corporations or to a
company which has been awarded a power project on the
basis of competitive bids for tariff (including Ultra Mega
Power Projects) from specified Schedule I coal mines by
making an allotment order in accordance with such rules as
may he prescribed and the State Government shall grant a
reconnaissance permit, prospecting licence or mining lease
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in respect of any area containing coal to such company or
corporation:
Provided that the Government company or corporation
may carry on Coal Mining in any form either for its own
consumption, sale or for any other purpose in accordance with
the permit, prospecting licence or mining lease, as the case may
be:
Provided further that no company other than a
Government company or corporation shall hold more than
twenty-six per cent of the paid up share capital in the
Government company or corporation or in the joint venture
between a Government company or corporation, either directly
or through any of its subsidiary company or associate company:
Provided also that a joint venture of any two or more
Government companies or corporations shall be prohibited from
alienating or transferring any interest, except the taking of loans
or advances from a bank or financial institution, in the joint
venture of whatsoever nature including ownership in favour of a
third party.
(2) No allotment under sub-section (1) shall be made to a
prior allottee, if that allottee has not made the payment of the
additional levy within the specified period.
7. (1) The Central Government may, before notifying the
particulars of auctibn, classify mines identified from Schedule I
coal mines as earmarked for the same class of specified end-
uses.
(2) The Central Government may in public interest, by
notification, modify Schedule III coal mines by adding any
other Schedule I coal mine for the purposes of specified end-use.
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8 (1) The nominated authority shall notify the prior allottees of
Schedule I coal mines to enable them to furnish information
required for notifying the particulars of Schedule I coal mines to
be auctioned in accordance with such rules as may be
prescribed.
(2) The information required to be furnished under sub-
section (1) shall be furnished within a period of fifteen days
from the date of such notice.
(3) A successful bidder in an auction conducted on a
competitive basis in accordance with such rules as may be
prescribed, shall be entitled to the vesting of Schedule I coal
mine for which it bid, pursuant to a vesting order drawn up in
accordance with such rules.
(4) The vesting order shall transfer and vest upon the
successful bidder, the following, namely:—,
(a) all the rights, title and interest of the prior allottee,
in Schedule I coal mine concerned with the
relevant auction;
(b) entitlement to a mining lease to be granted by the
State Government;
(c) any statutory licence, permit, permission, approval
or consent required to undertake coal mining
operations in Schedule I coal mines if already
issued to the prior allottee;
(d) rights appurtenant to the approved mining plan of
the prior allottee;
(e) any right, entitlement or interest not specifically
covered under clauses (a) to (d).
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(5) The nominated authority shall, in consultation with the
Central Government, determine the floor price or reserve price
in accordance with such rules as may be prescribed.
(6) The successful bidder shall, prior to the issuance and
execution of a vesting order, furnish a performance bank
guarantee for an amount as notified in relation to Schedule I
coal mine auctioned to such bidder within such time, form and
manner as may be prescribed.
(7) After the issuance of a vesting order under this section
and its filing with the Central Government and with the
appropriate authority designated by the respective State
Governments, the successful bidder shall be entitled to take
possession of the Schedule I coal mine without let or
hindrance.
(8) Upon the execution of the vesting order, the successful
bidder of the Schedule I coal mine shall be granted a
prospecting licence or a mining lease, as applicable, by the
concerned State Government in accordance with the Mines and
Minerals (Development and Regulation) Act, 1957.
(9) A Government company or corporation or a joint venture
company formed by such company or corporation or between
the Central Government or the State Government, as the case
may be, or any other company incorporated in India, allotted a
Schedule I coal mine shall be granted a prospecting licence or a
mining lease, as applicable, by the concerned State Government
in accordance with the Mines and Minerals (Development and
Regulation) Act, 1957.
(10) In relation to Schedule II coal mines, the successful
bidder which was a prior allottee, shall continue coal mining
operations after the appointed date in terms of the approved
mining plan, till the mining lease in terms of sub-section (8) is
granted, upon the grant of a vesting order and to that extent, the
successful bidder shall be deemed to have been granted a
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mining lease till the execution of the mining lease in terms of
the said sub-section,
(11) In relation to Schedule II coal mines, the Government
company or corporation which was a prior allottee can
continue coal mining operations after the appointed date in
terms of the approved mining plan, till the mining lease in
terms of sub-section (9) is granted, upon execution of the
allotment order and to that extent, the allottee shall be
deemed to have been granted a mining lease till the
execution of the mining lease in terms of the said sub-
section.
(12) The provisions of sub-sections (1) and (2) and sub-
sections (4) to (7) (both inclusive) of this section as applicable
to a vesting order, shall mutatis mutandis be also applicable to
an allotment order.
SCHEDULE I

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SCHEDULE III

The relevant provisions of the said Rules are as follows:-
“ CHAPTER III: AUCTION AND ALLOTMENT PROCESS
8. Allocation process.- ( 1) In connection with the allocation of
Schedule I coal mines-
(a) the nominated authority shall finalise a mine
dossier in the manner specified in rule 9;
(b) the Central Government shall issue an order to the
nominated authority as provided in sub-rule (2) of
rule 8;
(c) pursuant to the order issued by the Central
Government under sub-rule (2) of rule 8, the
nominated authority shall conduct the auction process
in accordance with the provisions of rule 10 or the
allotment process in accordance with rule 11 and rule
12, as the case may be.
(2) The Central Government shall issue an order to the
nominated authority regarding the following, namely:-
(a) the manner of allocation of the Schedule I coal mine
through -
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(i) public auction in accordance with the provisions of
section 4 of the Ordinance; or
(ii) allotment under section 5 of the Ordinance;
(b) the specified end use in case of any Schedule II coal
mine or Schedule III coal mine;
(c) broad parameters for conducting auction or allotment;
and
(d) any other matter that the Central Government may deem
expedient in accordance with the Ordinance or these rules.
(3) The Central Government may recommend the methodology
for determination of the Floor Price or Reserve Price, as the case
may be, to the nominated authority which shall make the
determination of the same in accordance with the Ordinance and
these rules.
(4) The sum for auction or allotment shall, inter-alia, include-
(a) a fixed amount for the value of land and mine
infrastructure,
(b) the floor price or reserve price, as the case may be,
(c) a variable amount of bid, in case of auction,
to be paid in such manner as may be specified by the Central
Government.”
Analysis of the provisions of the Ordinance and Rules
18. The Preamble of the said Ordinance makes it clear that it has been
promulgated to provide for the allocation of coal mines to successful bidders
and allottees with a view to ensure continuity in coal mining operations and
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production of coal and for promoting the optimum utilisation of the coal
resources consistent with the requirement of the country in the national
interest. The avowed object of the Ordinance, therefore, is to provide for
allocation of coal mines. The allocation is to be done to successful bidders
in auctions or to allottees. Auction and allotment have been specifically
dealt with under Chapter II of the said Ordinance. The auction procedure
and eligibility conditions have been set out in Section 4, whereas the
allotment of mines to Government companies or corporations would be in
terms of Section 5. We may point out that the said Ordinance is comprised
of three Schedules – Schedule I, Schedule II and Schedule III. Schedule I
can be regarded as the set of 204 coal blocks which were cancelled by the
Supreme Court. Schedule II comprises of 42 coal blocks which find
mention in the Supreme Court order dated 24.09.2014, which were
operational and in respect of which the appointed date is 01.04.2015. This is
so because the Supreme Court permitted the operation of those mines by the
prior allottees upto 31.03.2015 to enable the prior allottees as also Coal
India Limited / Government to manage their affairs. Schedule III, at the
time the Ordinance was promulgated comprised of 32 coal mines. This
Schedule lists those coal mines which are nearly operational as pointed out
in the counter-affidavit of the Union of India. Subsequently, 27 other mines
have been added to Schedule III from the Schedule I mines. The first set of
32 mines in Schedule III includes the Utkal B-1 and Utkal B-2 coal blocks.
The additional set of 27 mines which have been migrated from Schedule I
subsequently, includes Gare Palma IV/6.
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19. We now need to refer to the second recital of the said Ordinance
which provides that it is expedient in public interest for the Central
Government to take immediate action to allocate coal mines to successful
bidders and allottees keeping in view the “energy security of the country”
and to “minimise any impact on the core sectors, such as steel, cement and
power utilities” which are vital for the development of the nation.
According to Mr Sibal and the other learned counsel appearing for the
petitioners, this recital provides the key to the guidelines and / or statutory
policy which ought to govern the allocations and allotments. There was a
great deal of debate on the meaning, width and amplitude of this recital. It
was contended on behalf of the petitioners that the coal block allocations
and allotments have to be done in such a manner as to minimise any impact
on the core sectors, such as steel, cement and power utilities. A two-fold
submission was made. First of all, it was submitted that, while allocating
coal mines, the impact of such allocation on any of the core sectors would
have to be minimised. In other words, if an allocation to cement or to power
utilities was to be made, then the adverse impact on the steel sector has to be
examined and minimised and the vice-versa. The second submission was
that there is no inter se priority given to any of the core sectors, namely,
steel, cement and power utilities. Each one of them has been regarded as
vital for the development of the nation. It was, therefore, contended that the
Central Government’s stand, as expressed by the learned Attorney General,
that the power sector has to be accorded a higher priority, would be contrary
to the policy of the said Ordinance which does not accord any such priority.
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20. The learned Attorney General had argued that it is for the
Government to decide as to which coal block should go where and that the
past had no relevance. He submitted that the requirement for power was
critical and there was a great dearth and shortage of power. It was submitted
that most of the coal in India is of an inferior quality, which is suitable for
the power sector and, therefore, it was for the Government to decide to
change the end use from steel to power as the Government was duty bound
to use the coal resources in the best manner possible in general public
interest. The learned Attorney General had also submitted that the whole
objective was to keep in view “the energy security of the country” and that
this expression meant that the power sector had to be given priority.
21. We do not agree with this interpretation of the said recital. The use of
the expression “energy security of the country” refers to the ‘coal reserves’
and not to the ‘power sector’. Coal is a primary source of energy, whereas
power is not. Power can be generated through use of coal in thermal power
plants, it could be generated using through hydroelectric stations, it can be
generated using solar energy, wind energy and atomic energy. These are all
energy sources from which power can be generated. Power itself is not an
energy source and, therefore, in our view, the expression ‘energy security of
the country’ refers to the ‘coal resources’ of this nation and not to ‘power’.
On the contrary, power utilities has been regarded as a core sector in much
the same way as steel and cement. Both expressions – “energy security of
the country” and “power utilities” appear in the same recital and would,
therefore, have to be given different meanings. We are in agreement with
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the submissions made by the learned counsel for the petitioners that from the
second recital of the said Ordinance, it cannot be concluded that power has
been given priority over steel and other sectors. On the contrary, all the core
sectors have been placed at par.
22. We shall now examine the provisions of Section 7 of the said
Ordinance in respect of which a great deal of arguments were addressed on
both sides. Section 7(1) empowers the Central Government to classify
mines identified from Schedule I coal mines as earmarked for the same class
of specified end-users, prior to notifying the particulars of the auction. In
our view, this provision is not happily worded and that is what is creating
the confusion. According to the petitioners, this provision entails that the
prior-cancellation end-uses cannot be altered. On the other hand, the
Attorney General was of the view that the Central Government was
empowered to classify mines by specifying end-uses without bothering
about the pre-cancellation end-uses. ‘Specified end-use has been defined in
Section 3(1)(v) and refers to 5 categories:-
1) Production of iron and steel;
2) Generation of power, including the generation of power for
captive use;
3) Washing of coal obtained from a mine;
4) Cement; and
5) Such other end-use as the Central Government may, by
notification, specify.
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23. So, according to the Attorney General, it is open for the Central
Government to specify any of the above end-uses in respect of any of the
Schedule I coal mines. The fall out of this submission is that the end-uses of
Schedule II and Schedule III coal mines can be different from the end-uses
of these mines in the pre-cancellation era. In fact, the submission on behalf
of the Central Government was that the link between a coal block and an
end-use had been severed by the cancellation of the coal blocks by the
Supreme Court.
24. Having considered the arguments and counter-arguments on the
interpretation of Section 7 of the said Ordinance, we are of the view that,
although the Central Government has the right to classify the Schedule I
mines for specified end-uses, which may be different from the end-uses
prescribed prior to cancellation, the Central Government cannot ignore or be
oblivious of the earlier end-use. Before we elaborate on this aspect, we
would like to express our view on the expressions “classify mines” and
“earmarked” appearing in Section 7(1) of the said Ordinance. In our view,
the classification of mines has reference to the specification of end-use,
whereas the earmarking has a reference to whether the mine is to be
auctioned following the process stipulated in Section 4 or to be allotted
under the provisions of Section 5.
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25. We have already indicated above that, in our view, the Central
Government can specify an end-use for a coal mine, different from its earlier
end-use. But, this does not mean that it can completely ignore the earlier
end-use and arbitrarily specify a new end-use. The classification of mines
on specified end-uses must be based on some objective and palpable criteria
which has a clear nexus with the very object of the said Ordinance as
indicated in the second recital to which we have already alluded above. In
other words, the specification for an end-use for a coal mine has to be
guided by the fact that the allocation or allotment has to be made keeping in
view the energy security of the country. In other words, for promoting the
optimum utilisation of coal resources. Secondly, the allocation has to be
such that it minimises any adverse impact on the core sectors, such as steel,
cement and power utilities. This means that if an allocation is altered by
altering the end-use from, say, steel to power, the adverse impact on steel
would have to be considered before the allocation is changed. It is in this
sense that the earlier end-use has to be considered and has not become
irrelevant.
26. At this point of time, it may also be pointed out that by virtue of
Section 8(4) of the said Ordinance, all the rights, etc. of a prior allottee get
transferred to a successful bidder. These rights include the mining plan,
licences, permits, permissions and approvals, many of which are end-use
specific. If the end use is changed, then all these approvals, permissions,
permits would be rendered useless and the process of obtaining them would
have to be started all over again. This would, in all probability entail a delay
WP (C) Nos. 309/15 & 310/15 Page 45 of 73

in coal mining operations and would probably run counter to the objective
(enshrined in the Preamble) of ensuring continuity in coal mining operations
and production of coal. These considerations have to be kept in mind and
factored in while classifying mines for specified end-uses in exercise of the
power granted by Section 7(1) of the said Ordinance.
27. We shall examine later in this judgment as to whether the Central
Government has been able to do so insofar as the petitioners’ specific cases
in these writ petitions are concerned.
28. At this juncture, it would be appropriate to consider the provisions of
Section 7(2) of the said Ordinance. It stipulates that the Central
Government, may, in public interest, by notification, notify Schedule III coal
mines by adding any other schedule I coal mine for the purposes of a
specified end-use. We were intrigued by this provision and had requested
the counsel on both sides to explain as to what is the objective of placing a
coal mine in Schedule III and what is the common thread that ran through
the coal mines, which had been put in Schedule III. The answer given on
the side of the respondents was that Schedule III, as it originally stood
comprised of 32 coal mines, which were nearly operational. 27 other coal
mines, which have met that criteria, have been added subsequently on
19.12.2014 which includes the Gare Palma IV/6 coal block. The definition
given to Schedule III coal mines in Section 3(1)(r) simply refers to them as
the 32 Schedule I coal mines listed in Schedule III or any other Schedule I
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coal mine as may be notified under sub-section (2) of Section 7. Although
this explanation is somewhat circular, similar to a snake eating its tail, we
think that what is meant by a Schedule III coal mine is a coal mine from the
larger set of Schedule I coal mines and which is not a part of Schedule II, for
which an end-use has been specified. Initially, this Schedule contained the
32 Schedule I coal mines, which were nearly operational. If this meaning is
to be given, then there may be some merit in the argument raised by the
learned counsel for the petitioners that end-use of Schedule III coal mines
cannot be altered within the meaning of the said Ordinance. But, there is a
counter-argument that the Schedule does not specify any end-use. Either
way, it is quite baffling as to what is the object and purpose behind Schedule
III. But that should not detain us because an end-use can only be specified
or changed, for that matter, in the manner indicated by us while discussing
the provisions of Section 7(1).
The Technical Committee and its Deliberations
29. The learned counsel for the Union of India had handed over two files–
(1) File No.43020/06/2014-CPAM [dealing with constitution of the
Technical Committee and record notes of its meetings and related matters]
and (2) File No.43020/06/2014-CPAM-Work Sheet [containing data sheets
and work sheets for deliberations of the Technical Committee] – for our
consideration. We may point out that the first file (as handed over to us) has
page numbers 1 to 7A in ink and the rest (8 to 143) in pencil. There are
some other pages after page 143 which bear no page number and therefore it
is not known as to whether they form part of the contemporaneous record or
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not. The file also had 13 pages of notes (green sheets) from 29/10/2014 to
07/01/2015. On going through the said files the facts narrated hereinbelow
have been revealed.
30. By an office memorandum dated 29/10/2014 issued by the
government of India, Ministry of coal, the technical committee under the
chairmanship of Advisor (projects), Ministry of coal with the following
members was constituted to formulate criteria and classify coal mines/coal
blocks for auction and allotment with the approval of the competent
authority: –
1. Advisor (projects), Ministry of coal Chairman
2. Representatives of Ministry of Power member
3. Representative of DIPP member
4. Representatives of Ministry of steel member
5. Director (Tech.), C I L or representative of C I L member
6. Director (technical), CMPDIL member
7. Director (technical), Ministry of coal member secretary
The proposed terms of reference of the technical committee were as under: –
I. To formulate criteria for classifying coal mines/coal blocks for
auction and allotment.
II. To classify 204 coal mines/coal blocks for the purpose.
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III. The classification regarding schedule II & III of The Coal
Mines (Special Provisions) Ordinance, 2014, dated 21/10/2014
be completed within 7 days.
IV. To prepare pre-determined evaluation criteria for allotment of
coal mines/coal blocks as provided in The Coal Mines (Special
Provisions) Ordinance, 2014.
V. Any other issues as may be deemed necessary by the
committee.
The First Meeting (31/10/2014)
31. The first meeting of the technical committee was held on 31/10/2014.
The committee proposed the following criteria for classifying
coalmines/coal blocks for auction and allotment:
(a) De-allocated coal mines/coal blocks which are contiguous to
the mines/blocks of CIL/ its subsidiary companies may be
allotted to CIL/ its subsidiary companies keeping in view the
conservation of resources and operational convenience to the
extent possible.
(b) De-allocated coal mines/coal blocks which were allotted earlier
to government companies/corporations may be considered for
allotment to the government companies/corporations for the
specified end-use purposes with regard to the blocks in
schedule II and III of the ordinance as a number of blocks are
earmarked for power which is a priority sector .
(c) The remaining de-allocated coal blocks/mines may be
considered for auction based on the grade of coal and
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quantum of reserves and size of the block. Generally E, F
& G grade coal are for power. DRI and cement industries
use D grade and superior grade coal. However E & F grade
coal with washing are also being used for DRI and cement.
This needs to be kept in view while earmarking the blocks.
(d) De-allocated coal mines/coal blocks having coking coal
reserves may be considered for steel sector.
(e) The blocks having reserves of more than 100 million tonnes
may be considered for power sector (end use). However, if
part of the reserves contain better grade of coal say grade-E
or superior, it may also be considered for captive power
along with DRI plants/cement as end-use for auction. In
this regard, the EUP considered earlier will also be kept in
view for schedule II mines/blocks.
(f) The blocks having reserves of less than 100 million tonnes
may be considered for auction for DRI/cement/captive
power depending upon the grade of coal.
(g) Keeping number of blocks same, the committee has also
considered clubbing of some adjoining blocks from
conservation and mining feasibility point of view.
With regard to the predetermined evaluation criteria for allotment of coal
mines/coal blocks, the committee proposed the following:
(a) Location of plant--distance from the proposed coal block;
distance from the nearest rail head; distance by road.
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(b) Status/preparedness of the end-use plant (EUP) -- Project report
preparation; land acquisition; water tie up; environmental
approvals; financial closure.
(c) Demand-supply gap of the state during the XII plan and XIII
plan as per CEA/MOP.
(d) Total quantity of coal required -- normative requirement as per
CEA for power or as per the normative requirement of the
concerned line Ministry; annual requirement for the given size
of the unit and for other sectors.
(e) Financials --space authorised capital; turnover (last 5 years);
profit after tax (last 5 years); net worth.
(f) General particulars-- registered office, legal status of
ownership, administrative ministry of the state/Central
government, core business of the company, names of the
directors.
The proposed criteria were to be discussed further in the second meeting of
the technical committee for finalisation.
The Second Meeting (05/11/2014)
32. The second meeting of the technical committee was held on
05/11/2014. In that meeting, the technical committee adopted the criteria
which had been proposed in the first meeting for classifying coal mines/coal
blocks for auction and allotment. In the said meeting it was also proposed to
classify the mines / blocks listed under schedule II and schedule III of the
WP (C) Nos. 309/15 & 310/15 Page 51 of 73

ordinance initially which would be followed for the rest of the blocks as per
the criteria mentioned above. The technical committee requested the
representative of CMPDIL to go through the blocks/mines listed in the
schedules of the ordinance and to classify the blocks/mines for discussions
in the third meeting of the committee as per the criteria adopted. It was also
proposed to explore the bringing of blocks from schedule I to schedule III
for consideration of the committee in the next meeting.
The Third Meeting (12/11/2014)
33. The third meeting of the technical committee was held on 12/11/2014.
The second paragraph of the record note of discussions at this meeting reads
as under:–
"2. Welcoming the participants, advisor (projects),
Ministry of coal presented the details worked out by
CMPDI to classify coal mines/coal blocks in the
schedule II and III of the ordinance based on the
nd
criteria finalised in the 2 meeting for further
discussion. After detailed discussions the committee
classified the mines/blocks listed in schedule II of the
ordinance as enclosed act Annexure-B and those listed
in schedule III of the ordinance as enclosed at
Annexure-C .”
In these petitions, we are concerned with schedule III mines. Consequently,
Annexure-C, to the extent relevant, is set out herein below: –
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34. In the third meeting, the technical committee also recommended the
combining of, inter alia, the Utkal B1 and Utkal B2 blocks of Schedule III
“ keeping in mind the conservation and mining feasibility ”. Finally, the
committee also discussed the scope of bringing the blocks from Schedule I
to Schedule III and proposed to identify such blocks which had approved
mining plans or where geological reports were available and which could go
for production in about 2 to 3 year’s time.
35. As per the data sheet for the first meeting, the geological reserves for
Utkal-B1 has been shown to be 228.14 million tonnes (within barrier: D –
0.204; E – 2.219; F – 18.166; G – 6.955 & beyond barrier: D – 2.261; E –
WP (C) Nos. 309/15 & 310/15 Page 53 of 73

15.473; F – 116.653; G – 66.209). For Utkal-B2 the geological reserves
have been shown to be 114.34 million tonnes (C: 0.0040; D: 0.3313; E:
7.1513; F: 56.0114; G: 50.8390). For Jamkhani the geological reserves have
been shown as 222.12 million tonnes (Proved: B – 0.2002; C – 4.2935; D –
7.6104; E – 7.4339; F – 170.3385; G – 14.4754 & Indicated: C – 1.7864; D
– 5.0891; E – 4.4823; F – 5.2344; G – 1.1813). In other words, the range of
grades of coal in Utkal B1 is D – G, in Utkal B2 is C – G and in Jamkhani it
is B – G. But, in the data sheet for the third meeting, the range of grades of
coal for Utkal B1, Utkal B2 and Jamkhani have been shown as E – G, E – G
and C – G, respectively. The data sheet for the third meeting suggests that
“for conservation and mining feasibility Utkal B1 and B2 blocks need to be
amalgamated” and that the end-use classification for auction be stipulated as
“Power”. Insofar as Jamkhani is concerned, the end-use suggested was DRI
+ CPP.
The Fourth Meeting (19/11/2014)
36. In this meeting the technical committee examined the list of 45 coal
blocks falling in Schedule I for earmarking and classification so that the
same could be brought to Schedule III. The committee classified 44 blocks
as mentioned in Annexure-B to the record note. We are only concerned
with Gare Palma IV/6 as that was proposed to be migrated from Schdeule I
to Schedule III and the said annexure is reproduced to that extent:
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37. It is evident from the above table that the end-use of Gare Palma IV/6
was changed from “sponge iron” to “power”. In the data sheet for the fourth
meeting, the geological reserves of Gare Palma IV/6 has been shown to be
158 million tonnes (OC: 74; UG: 84) and the grade of coal has been
indicated as E – F.
38. It is pertinent to note that on 10/11/2014, the Secretary, Ministry of
Steel, Government of India wrote to the Secretary, Ministry of Coal.
Paragraphs 3, 4 and 5 of the said letter are relevant. They are reproduced
below:-
“3. Presently, Ministry of Steel is in the process of targeting to
achieve a crude steel capacity level of 300 MT by 2025-26 in
pursuance of a decision taken in the High Level Committee on
Manufacturing. The requirement of coking and non-coking coal for
steel sector for 300 MT capacity is broadly estimated as 170 Million
Tonne & 140 Million Tonne respectively.
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4. It is relevant to mention that coal of both varieties i.e. coking
and non-coking is the most important raw material for steel sector
besides iron ore. Whereas coking coal is required in blast furnaces in
pig iron production or in integrated steel plants through blast furnace
route after conversion to coke, non-coking coal is required for the
production of sponge iron through DRI route. Besides, non-coking
coal is also required by steel sector for cold dust injection (CDI) or
pulverised coal injection (PCI) in blast furnace to substitute coking
coal/Coke as well as captive power generation in their plants. Hence,
it is vital for the survival of the Indian steel sector that all coal blocks
earlier allocated for end-use in iron and steel projects may be
earmarked for allocation in end-use projects of iron and steel sector in
the future allocation process.
5. You may kindly appreciate that some urgent steps are required
to be taken to ensure the domestic availability of coal in the interests
of the Indian steel sector. It may be ensured that auction/allocations
under fresh process not only meet the linked capacity which de-
allocated but also exceeds the same, in view of the target to achieve
300 MT capacity for steel. In this regard, it is proposed that some
coal mines/coal blocks may also be earmarked for allocation to PSUs
under the administrative control of Ministry of steel like NMDC,
SAIL, KIOCL and MOIL or joint ventures under section 5 of "The
Coal Mines (Special Provisions) Ordinance, 2014" to carry on coal
mining for its own consumption and meeting the requirements of steel
sector."
(underlining added)
39. This letter of 10/11/2014 from the Secretary, Ministry of Steel was
responded to by the Secretary, Ministry of Coal on 17/11/2014 by stating
that “ Ministry of Coal is deliberating on the issue and action as appropriate
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would be taken keeping the interest of different end use sectors while putting
the coal blocks on offer. ”
40. On 28/11/2014 the Joint Secretary, Ministry of Steel issued a letter,
with the approval of the Steel Minister, to his counterpart in the Ministry of
Coal. Paragraphs 2, 5 and 6 of the said letter are relevant and they are
reproduced hereinbelow: –
“2. I am informed that Technical Committee is earmarking
coal blocks to be put for auction as per the provisions of Coal
Mines (Special Provisions) Ordinance, 2014. It is requested to
have a relook on the criteria Being Considered by the Technical
Committee for earmarking as discussed below: –
(i) Ministry of Steel is of the view that some coal
mines/coal blocks may be earmarked for PSUs under the
administrative control of this Ministry to carry out coal
mining for meeting the requirements of steel sector. Such
commercial operation would require earmarking of larger
coal blocks or iron and steel sector. Present criteria of
smaller coal block of less than 100 MT based on grade of
coal for end use sector would defeat the above objective.
This needs to be considered for amendment so that larger
blocks of appropriate grade are earmarked for iron and
steel sector under government dispensation route for
commercial mining.
(ii) Similarly, there is another criteria adopted by the
Technical Committee that the blocks having reserves of
more than 100 MT may be considered for power sector
(end use). However if part of the reserves contain better
grade of coal say E or superior, it may also be considered
WP (C) Nos. 309/15 & 310/15 Page 57 of 73

inter alia for DRI plants along with CPP. The criteria is
based on traditional steel making assumptions, but today
there are green coal technologies available for steel
making which use inferior grade of coal like of F grade.
You may appreciate that policy should be forward-looking
providing encouragement to technological advancement
rather than prohibitive to innovation. This criteria also
may be revisited and large reserves of more than 100 MT
having F or better grade may also be considered for iron &
steel sector.
xxxx xxxx xxxx xxxx xxxx
5. The Government has an extremely aggressive goal of
producing 300 MT of steel by 2025. The domestic availability of
coal for the steel sector would be critical for achieving this goal
by ensuring that Indian steel remains cost competitive.
Accordingly, it is reiterated that all coal blocks earlier allocated
for end-use in iron and steel projects may continue to remain
earmarked for iron and steel sector in the forthcoming auction
process. In any case, the overall quantity of coal available to the
iron and steel sector prior to deallocation of coal blocks should
not be reduced.
6. I request you to consider above issues urgently in view of
the deadline for auction process in respect of Schedule-II and
Schedule-III mines. Matter concerning allocation of coal to steel
PSUs under government dispensation route for own use and
commercial operations may kindly be considered before the
bidding for the Schedule-I block is initiated.”
(underlining added)
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41. The said letter dated 28/11/2014 was put up before the Adviser
(Projects) [who also happens to be the Chairman of the Technical
Committee](pages 7-8/N) on 01/12/2014. His comments are at page 9/N
and are, inter alia, as under:-
“...Ministry of Steel’s contention is that with the advanced green
technologies for steel making using inferior grade coals (F Grade),
blocks with such inferior grade coals should also be considered for
steel sector while earmarking such blocks. In fact , the Technical
Committee constituted for earmarking/ classification of coal
blocks in which the representative of Ministry of steel was also
present, has already completed its exercise and circulated its
minutes. While carrying out this exercise the committee has
earmarked/classified some of the coal blocks earlier earmarked for
sponge iron to power sector in view of quality and quantity of the
results occurring in these blocks. If this earmarking/classification
is to be reviewed by the technical committee, a direction needs to
be there from the competent authority to this effect. Accordingly,
the file is submitted for consideration.”
(underlining added)
The Secretary, Ministry of Coal by virtue of his noting dated 02/12/2014
was of the view that “ it would be appropriate for the Technical Committee
to consider the matter and give its view ”. This was endorsed by the Minister
on 04/12/2014.
The Fifth Meeting (12/12/2014)
42. In the fifth meeting of the technical committee held on 12/12/2014 the
views of the Ministry of steel were taken up for consideration but, they were
rejected in the following manner: –
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“4. The Committee also discussed about the representation
received from Ministry of Steel in regard to the criteria adopted
by the Technical Committee for coal blocks of less than 100
million tonnes based on grade of coal for end-use sector. They
mentioned that larger blocks of appropriate grade may be
earmarked for iron and steel sector under government
dispensation route for commercial mining. The Technical
Committee deliberated the subject and observed that this will be
kept in mind when the blocks for commercial mining are taken
up for classification.
5. Further, in regard to modifying the criteria based on the
green coal technologies available for steel making and
considering inferior grade of coal like ‘F’ for DRI sector, the
Technical Committee was of the opinion that this issue has
already been considered while framing criteria, where it was
mentioned that DRI and cement industries use ‘E’ and ‘F’ grade
of coal with washing. The committee further noted the criteria
that if part of the reserve contains better grade of coal say grade
E or superior, it may also be considered for captive power along
with DRI plants/cement as an end use. As such, the Committee
is of the opinion that the request of Ministry of Steel to review
the criteria for classification of blocks adopted by the Technical
Committee is not warranted.”
(underlining added)
The Sixth Meeting (23/12/2014)
43. The sixth meeting of the Technical Committee, though slated for
23/12/2014, could not be held because of the absence of one of the
members.
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44. Pursuant to the meetings of the Technical Committee, the impugned
order dated 18/12/2014 and order dated 06/01/2015 were issued whereby (a)
Utkal B1 and Utkal B2 were merged, to be auctioned as one mine and (b)
the end use was changed from “sponge iron” to “Power”. The end use of
Gare Palma IV/6 was also changed to “Power” from “Sponge Iron”.
Analysis of Technical Committee deliberations
45. Let us now analyse as to how the Technical Committee has gone
about in assigning specified end-uses to the coal blocks. The Technical
Committee was constituted to formulate criteria and classify coal mines /
coal blocks for auction and allotment. In the first meeting, a criteria for
classifying coal mines / coal blocks was proposed for auction and allotment.
This proposal was accepted in the second meeting of the Technical
Committee. As per the criteria, de-allocated blocks, which could be
considered for auction, were sought to be classified on the basis of the grade
of coal and quantum of the reserves and the size of the blocks. It was
accepted that generally, lower grades of coal – grade ‘E’, ‘F’ and ‘G’ were
suitable for power and that DRI and cement industries use grade ‘D’ and
superior grades coal. What is important is that it was recognized that ‘E’
and ‘F’ grade coal with washing were also being used by DRI and cement
industries and that this needed to be kept in view while earmarking the coal
blocks. It was also noted that de-allocated coal mines / coal blocks having
coking coal reserves could be considered for steel. Another criteria used
was that blocks having ‘reserves’ of more than 100 million tonnes could be
considered for the power sector. However, if a part of the reserves
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contained better grades of coal, such as grade ‘E’ or superior, the same could
be considered for captive power alongwith DRI plants / cement as an end-
use for auction. It was also noted that the earlier end-use would also be kept
in view for Schedule II mines / blocks. Furthermore, it was felt that blocks
having reserves of less than 100 million tonnes could be considered for
auction for DRI / cement/captive power depending upon the grade of coal.
Furthermore, the Committee also considered clubbing of some adjoining
blocks from the “conservation and mining feasibility” point of view.
46. We have gone through the two files, as mentioned above, which had
been handed over to us for our consideration. We were unable to discern
from that as to how the figure of ‘reserves’ of 100 million tonnes which was
to be used as a cut-off point, was arrived at. It could very well have been
150 million tonnes or even 200 million tonnes. The reasons for adopting the
figure of 100 million tonnes are not discernible from the record notes.
Furthermore, the criteria only speaks of ‘reserves’. It does not specify as to
whether it refers to geological reserves or extractable reserves. According to
the petitioners, the reference must always be to extractable reserves and not
to geological reserves. On the other hand, the submission on the part of the
respondents is that the reference should be to geological reserves and not to
extractable reserves because the quantum of extractable reserves changes
according to the technology adopted. Be that as it may, the position is that
the criteria adopted does not specify the nature of the ‘reserves’ whether
geological or extractable. This issue is further discussed later in this
judgment.
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47. It is important to note that there are new technologies as a result of
which lower grade coal can be used for production of steel as in the case of
the petitioners’ steel plant which uses the technology of Syn gas (for the first
time in India). We also note that when the classification was done in the
third meeting of the Technical Committee, Utkal B-1 and Utkal B-2 were
merged and combined as a simple block. The avowed reason given for this
was conservation and mining feasibility. This is the only expression that has
been used in the record note of the third meeting of the Technical
Committee. It is not clear as to what was considered with regard to
‘conservation and mining feasibility’. The parameters employed for
deciding to merge Utkal B-1 and Utkal B-2 are not palpable from the record
note of the third meeting of the Technical Committee. This aspect is also
dealt with in greater detail later in this judgment.
48. We also note that there is no discussion with regard to the individual
coal blocks which, we think, was necessary even in view of the criteria
adopted by the Technical Committee. When it was recognized that even ‘E’
and ‘F’ grade coal with washing could be used for steel and that this aspect
had to be kept in view while earmarking the blocks, the same ought to have
been considered while changing the end-use of the Utkal B-1 and Utkal B-2
blocks. It was contended on the part of the petitioners and, not without
basis, that while the Jamkhani coal block had reserves in excess of 100
million tonnes, its end-use was retained as steel and captive power plant,
whereas the criteria sought to be employed indicated that the coal blocks
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having reserves of more than 100 million tonnes would go to power. At the
same time, Utkal B-1 and Utkal B-2 blocks have been re-classified for
power.
49. We may also note that the Ministry of Steel had also raised concerns
about the negative impact the change of the end-use would have on the steel
sector. It is pertinent to recollect that the letter dated 10.11.2004 issued by
the Secretary, Ministry of Steel as also the letter dated 28.11.2004 issued by
the Joint Secretary, Ministry of Steel with the approval of the Steel Minister
requested the Coal Ministry not to change the end-use from steel to power or
any other end-use. There was also a clear-cut request for revisiting the
criteria of 100 million tonnes and that coal blocks having more than 100
million tonnes and having low grade of coal should also be considered for
the iron and steel sector. These requests made by the Ministry of Steel were
rejected by the Technical Committee on the ground that the Technical
Committee had already considered the subject matter of the request while
framing the criteria. We are afraid that we do not see as to how the concerns
raised by the Ministry of Steel were addressed by the Technical Committee,
particularly in the light of the considerations that were required to be given
at the time of classification of the end-uses under Section 7(1) read with the
Preamble and the second recital of the said Ordinance. There is no
discussion in the record notes of the Technical Committee as to what would
be the impact on the steel sector on account of the change of end-use of the
coal blocks in issue in the present petitions. That was a vital aspect which
has been completely ignored.
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Whether criteria adopted by Technical Committee was uniformly
followed
50. The learned counsel for the petitioners also raised the issue that even
the alleged policy / criteria adopted by the Technical Committee was not
followed in classifying the specified end-use. As an example, it was
submitted that the Jamkhani coal block, which had geological reserves of
178.414 million tonnes (extractable reserves of 114.98 million tonnes), was
retained for the end-use of, inter alia , Sponge Iron/ Steel and was not
earmarked for the power sector, although the criteria was that mines having
reserves in excess of 100 million tonnes would be for the power sector.
Similarly, the geological reserves of the Mandla (North) coal block was 187
million tonnes (extractable reserves 84 million tonnes), yet, its end-use has
been retained as for cement and has not been changed to power, although the
geological reserves exceed 100 million tonnes. Similarly, Talabira-I, which
has geological reserves of only 37.60 million tonnes (extractable reserves of
27.77 million tonnes), has been specified for power, although its reserves are
below 100 million tonnes. The Utkal B-2 coal block had geological reserves
of 114.33 million tonnes and extractable reserves of only 58.5 million tonnes
and also had grade ‘E’ coal alongwith grades ‘F’ and ‘G’, the same has been
earmarked for the end-use – power as against its earlier end-use Sponge Iron
/ Steel. One criteria said to have been adopted by the Technical Committee
was that if part of the reserves of a coal mine contain a better grade of coal,
say grade ‘E’ or superior, it could be considered for captive power alongwith
DRI plants/cement as end-use for auction. Utkal B-2 block clearly fits into
this criteria and yet its end-use was changed from Sponge Iron / Steel to
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power. The Jitpur coal mine has geological reserves of 81.095 million
tonnes (extractable reserves of 65.53 million tonnes), yet, it has been
earmarked for power. There is no discussion in the record notes of the
meetings of the Technical Committee as to why the criteria was not
uniformally followed and, particularly as to why the end-use of Utkal B-1
and Utkal B-2 and Gare Palma IV/6 was altered from the earlier end-use of
Sponge Iron / Steel to power, although each of these coal mines could fit in
the criteria adopted by the Technical Committee for specifying the end-use
of Sponge Iron / Steel.
Geological Reserves versus Extractable Reserves
51. It was contended on behalf of the petitioners and, particularly by Dr
Singhvi that the consideration of geological reserves as against extractable
reserves for classifying mines having reserves of more or less than 100
million tonnes is without any basis. This is so because the standard tender
document itself in clause 4.1.2 (b) stipulates that one of the conditions that a
bidder would have to satisfy before he is considered eligible for bidding for
the coal mine is that the “extractable reserves” of the coal mine should not
exceed 150% of the annual coal requirement of the specified end-use plant,
taken over a period of 30 years, less the requirement of coal of such
specified end-use plant met from any other coal mine allocated to the
successful bidder pursuant to any other auction or allotment process
conducted by the nominated authority under the said Ordinance and the said
rules.
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52. In response, the argument presented by the learned Attorney General
is that the geological reserves were taken as a criteria for classification and
that geological reserves are established by scientific methods of exploration
in contradistinction to extractable reserves which is variable, dependent on
technology employed for mining. First of all, we do not find any such
reasoning in any of the record notes of the meetings of the Technical
Committee. In fact, there is no reasoning given as to why geological
reserves were considered and not the extractable reserves. Secondly, if
geological reserves were the only relevant criteria, then why is there a
reference to extractable reserves in an eligibility condition ? From this, it is
clear that the relevant consideration ought to be extractable reserves and not
geological reserves.
Amalgamation of Utkal B-1 and Utkal B-2
53. It was submitted by Mr Sibal that the said Ordinance did not empower
the respondent to consolidate coal mines that had been de-allocated.
Furthermore, Schedules I and III of the said Ordinance identify Utkal B-1
and Utkal B-2 as separate coal mines and the Ordinance contemplates the
auctioning of the coal mines listed in the said Schedules. He submitted that
this meant that the mines had to be auctioned as such, that is, as separate
mines. He also submitted that there is no rationale or justification for
amalgamation of Utkal B-1 and Utkal B-2 inasmuch as the approval of the
mining plans clearly stipulates that the allottee has to work out an
understanding with the allottees of the adjoining block to extract coal from a
common barrier. Therefore, mining under the common barrier is no
justification for amalgamation of the blocks. The counter argument
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advanced by the learned Attorney General was that by merging Utkal B-1
and B-2 blocks, an additional 35 million tonnes of coal reserves would be
available for mining by eliminating the common barrier. It was also
contended that the Technical Committee had taken the decision to merge the
two mines based on well considered criteria. Therefore, the petitioners
cannot be heard to contend that a decision to the contrary could also be
taken. It was contended that the writ court does not sit as an appellate body
over the views of a Technical Committee.
54. Having considered the arguments on this aspect of the matter, we find
that in the record notes of the Technical Committee, there is no discussion as
to why the Utkal B-1 and B-2 coal mines are being amalgamated. It is only
in the record note of the third meeting where, in Annexure-C thereto, in the
remarks column of the table, it has been mentioned that Utkal B-1 and Utkal
B-2 need to be amalgamated for ‘conservation and mining feasibility’. The
expression “conservation and mining feasibility” is a very general
expression and no specifics have been indicated in the record note of the
Technical Committee. One of the factors, which, according to the
respondent, justified the amalgamation of the said two coal blocks was that
an additional 35 million tonnes of coal reserves would be available for
mining by eliminating the common barrier. But, as pointed out by Mr Sibal,
the approval to the mining plan of the two coal blocks, specifically stipulates
that the allottee of one block shall work out an understanding with the
allottee of an adjacent block to extract coal from the common barrier.
Therefore, even if the two mines were not amalgamated, the coal reserves in
the common barrier, would still be available for extraction. Thus, we agree
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with the submissions made by Mr Sibal that use of the common barrier
cannot be a ground for amalgamation of the two blocks. We are not sitting
in appeal over the decision of the Technical Committee. But, this court, in
exercise of its jurisdiction under Article 226 of the Constitution, has to
satisfy itself as to whether the Technical Committee had applied its mind to
the relevant criteria. We are not questioning the decision as such, but, the
decision making process. In this context, we find that there has not been a
proper application of mind, while taking the decision to amalgamate Utkal
B-1 and Utkal B-2.
Extent of Coal Reserves in India.
55. Mr Kapil Sibal, in the context of the argument raised by the learned
Attorney General that power was a critical and priority sector and that,
therefore, coal mines need to be reserved for this critical sector, drew our
attention to the fact that the coal reserves in India as on 01.04.2014 were
301.564 billion tonnes, the extractable reserves were to the extent of 216.10
billion tonnes. He submitted that the coal reserves with Coal India Limited
as on 01.04.2014 were 64.781 billion tonnes (geological reserves) and
46.486 billion tonnes (extractable reserves). It was submitted that taking the
current production of 462 million tonnes per annum as on 31.03.2014, the
reserves with Coal India Limited would last for more than 100 years. It was
further pointed out that the geological reserves in the 204 coal blocks (of
Schedule I mines), was to the extent of 40.31 billion tonnes. Thus, the coal
reserves, which are free and do not form part of the coal blocks covered by
the said Ordinance or the coal reserves with coal India or the coal reserves
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with Singareni Collieries Company Limited are to the extent of 162.044
billion tonnes. It was, therefore, submitted that the coal blocks under the
said Ordinance constituted a very small sub-set of the total coal reserves,
which were available for further auction / allotment. Therefore, if power
was a critical sector, those coal blocks would very well be employed for the
purpose and there was no need to change the end-use of the coal blocks from
Sponge Iron / Steel to power in respect of the coal blocks falling within the
purview of the said Ordinance which did not give priority to power over
steel. We feel that when the objective of the Ordinance was to ensure
continuity in coal mining operations and production of coal and promoting
optimum utilisation of coal resources consistent with the requirement of the
country in national interest, these aspects ought to have been kept in mind,
particularly, when the second recital in the said Ordinance specifically
speaks of energy security of the country and allocation of coal mines to
successful bidders and allottees while minimising any impact on core
sectors, such as steel, cement and power utilities which have been
recognised as vital for the development of the nation. It is obvious that
when there is a shift from one end-use to another, such as from steel to
power, there would be an adverse impact on steel. This impact has to be
minimised as per the said Ordinance. This aspect, we find, has not been
considered while changing the end-use of the Utkal B-1 and Utkal B-2 and
Gare Palma IV/6 mines from Sponge Iron / Steel to power.
Power includes captive power
56. Another point made on behalf of the petitioners was that while
Section 3(1)(v)(ii) sets out clearly that the generation of power includes the
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generation of power for captive use, the latter has been excluded by
executive action in the tender conditions. This, according to the learned
counsel for the petitioners is illegal. At this juncture, it would be pertinent
to point out that, as per the standard tender document (for power sector,
issued by the nominated authority, Ministry of Coal, Government of India,
New Delhi), it has been stipulated in clause 4.2.1 as under:-
“(f) Eligibility in case of generation of power being the
specified end use:
A person engaged in captive generation of power as defined in
the Electricity Act, 2003 and the rules thereunder; or generation
of power under Case 2 as specified in the Guidelines for
Determination of Tariff by Bidding Process for Procurement of
Power by Distribution Licensees, dated January 19, 2005, as
amended, shall not be eligible to participate in the tender
process.”
The Attorney General submitted that power generation, transmission and
supply are regulated under the Electricity Act, 2003, whereas captive power
plants are deemed to be in the non-regulated power sector. Therefore, the
mode of auction for the regulated power sector is by way of reverse auction
and this mode cannot be applied to the non-regulated captive power plants
and that is why captive power plants have been excluded from the standard
tender documents.
57. We are of the view that there is merit in the contention raised by the
learned counsel for the petitioners. The specified end-use stipulated by the
Ordinance by virtue of Section 3(1)(v)(ii) clearly provides the specified end-
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use of generation of power to include the generation of power for captive
use. This is the legislative mandate. The classification done / to be done
under Section 7(1) of the Ordinance clearly requires the mines to be
classified as per the specified end-uses. Therefore, once a mine is classified
for the specified end-use – power, the same would include generation of
power for captive use. This is the legislative intent and the same cannot be
altered by executive action. This aspect also needs consideration inasmuch
as the petitioners’ earlier end-use included power for captive consumption
and they do have a power plant for captive consumption. But, because of
the exclusion, the petitioners cannot participate in the subject auction in
respect of Utkal B-1 and Utkal B-2 and Gare Palma IV/6.
The March 31, 2015 deadline
58. It is also pertinent to note that the deadline of 31.03.2015 applies only
to Schedule II coal mines and does not apply to Schedule III coal mines.
This is for the reason that Schedule II coal mines are those mines which
were operational and the Supreme Court had permitted the continuation of
their operations by the prior allottees upto 31.03.2015 and thereafter it was
for the Central Government / Coal India Limited to arrange for continuing
the coal operations. By virtue of the said Ordinance, the auction / allotment
route has been adopted and it is in respect of the Schedule II mines that the
date of 31.03.2015 is critical. Insofar as Schedule III mines are concerned,
they were nearly operational and the deadline of 31.03.2015 does not apply
to them.
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Conclusion:
59. For the reasons discussed above, we are of the view that the
classification of end-uses for the coal blocks involved in the present
petitions as also the merger of the Utkal B-1 and Utkal B-2 needs to be
reviewed. The points raised by the petitioners and, more importantly, the
Ministry of Steel ought to have been given serious consideration. The
guidelines and directions provided by the Preamble and the second recital of
the said Ordinance have not been kept in mind by the Technical Committee
while merging Utkal B-1 and Utkal B-2 and while specifying the end-use –
“Power” for Utkal B-1, B-2 and Gare Palma IV/6. The logical sequitur is
that such end-use classifications for the coal mines in question are quashed
and the Utkal B-1 and Utkal B-2 are directed to be de-merged.
60. Consequently, we direct that Utkal B-1 and Utkal B-2 be taken off
from the subject auction and the specified end-use as also the issue of their
merger be reviewed in the light of the discussion above before they are put
up for auction again. The same, as regards specification of end-use, would
apply to Gare Palma IV/6, which is yet to be put up for auction. The writ
petitions are allowed to this extent. The parties are left to bear their own
costs.
BADAR DURREZ AHMED, J
SANJEEV SACHDEVA, J
FEBRUARY 11, 2015
HJ/dutt
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