Violation of Natural Justice in Compensation Allocation Voids Order Despite Availability of Statutory Alternative Remedy

The dispute concerns the Datima Coal Mine in Chhattisgarh.

Originally allotted to Binani Cement, the allotment was cancelled by the Supreme Court in *Manohar Lal Sharma v. Principal Secretary* (2014) for being arbitrary.

Respondent No. 3 (UltraTech) succeeded Binani Cement following an IBC resolution plan.

The Petitioner (Shree Cement) became the new Successful Allottee via a 2022 tender and deposited ₹11,81,21,568.32 as Geological Report (GR) costs with the Nominated Authority (NA).

On 22.07.2025, the NA initially ruled that no compensation was payable to the Prior Allottee due to lack of documents and kept the funds with the Government.

However, on 16.10.2025, upon a representation by UltraTech, the NA recalled its earlier order and directed the release of the entire GR cost to UltraTech without notifying the Petitioner.

The Petitioner challenged this order as a violation of natural justice.

1. Whether the Nominated Authority violated the principles of natural justice by passing the impugned order dated 16.10.2025 without affording the Petitioner an opportunity of hearing.

2. Whether the Petitioner should be relegated to an alternative remedy under Section 27 of the Coal Mines (Special Provisions) Act, 2015, despite the alleged violation of natural justice.

The Court primarily applied the principle of *Audi Alteram Partem* (duty to hear), holding that its exclusion is an exception limited to cases where no prejudice is caused or where a hearing is a "useless formality".

It relied on the precedent in *Whirlpool Corporation v. Registrar of Trade Marks*, which establishes that a writ petition under Article 226 is maintainable despite an alternative remedy if there is a violation of the principles of natural justice.

Furthermore, it applied the doctrine from *State of Orissa v. Dr. (Miss) Binapani Dei*, asserting that any order involving civil consequences passed against a party to their prejudice without a hearing is a nullity.

Statutory interpretation of Sections 16, 26, and 27 of the Coal Mines (Special Provisions) Act, 2015, regarding compensation and dispute resolution was also considered.

The Court rejected the Respondents' contention that a hearing would have been a "useless formality".

It reasoned that the Petitioner was "demonstrably prejudiced" because a substantial sum (over ₹11.81 Crores) deposited by it was directed to be released to a third party (UltraTech).

The Court noted that in the impugned order itself, the NA justified the release by expressly rejecting the Petitioner’s previous request for a refund, yet did so without hearing the Petitioner on that specific recognition of UltraTech’s rights.

This lack of notice rendered the decision-making process arbitrary.

Consequently, the Court determined that since the fundamental procedure of fairness was bypassed, the Petitioner could not be forced to pursue the statutory remedy under Section 27 of the Act, as the jurisdictional threshold for a Writ under Article 226 was met due to the procedural breach.

The High Court set aside the order and remitted the matter back to the Nominated Authority for fresh consideration after providing a fair hearing to all concerned parties.

It further directed that any amount already released to UltraTech shall remain subject to the final orders passed by the NA upon re-adjudication.

The writ petition was accordingly disposed of.