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Hi there,

Whether the union is entitled to claim compensatory payment from the petitioner who was allocated coal mines through the screening committee route and/or the government dispensation route?

FACTS:

The petitioner has approached this Court under Article 32 of the Constitution of India raising a grievance against the respondent No.1 – Ministry of Coal, Union of India1 for having included its name and mining lease area in the Schedules appended to the Coal Mines (Special Provisions) Ordinance, 2014, even though, the Screening Committee constituted by the Ministry of Coal, Union of India had not allocated any coal block to it.

Herein, the petitioner had submitted an application dated 8th November, 1994 under Section 2 of the Forest (Conservation) Act, 1980 to the District Collector, Narsinghpur District, Narsingpur, Madhya Pradesh for permission to undertake coal mining on forest land. On 21st November, 1994, the petitioner applied to the respondent No.2 – State of Madhya Pradesh in Form-I under the Mineral Concession Rules, 1960 for grant of a mining lease. On 7th April, 1995, the petitioner submitted an application to the respondent No.1 – UOI under Section 5(2) of the Mines and Minerals (Development & Regulation) Act, 1957 for approval of the mining plan.

On 15th May, 1995, the District Collector, Narsinghpur forwarded the petitioner’s application to the Principal Secretary of the respondent No.2 – State Government with a recommendation for grant of a mining lease in its favour. In the very same month, in reply to a letter dated 5th May, 1995 received from the respondent No. 1 – UOI seeking essential details regarding the approval of the mining plan, the petitioner furnished the necessary information under cover of letter dated 19th May, 1995. On 15th December, 1995, the respondent No. 1- UOI issued a letter to the petitioner calling upon it to appear before the Screening Committee in a meeting scheduled on 20th December, 1995 for screening the proposals relating to captive mining by power generation companies and companies engaged in the manufacture of iron and steel. Accordingly, the petitioner participated in the 9th Meeting held by the Screening Committee on 20th December, 1995.

On 23rd December, 1995, the Department of Mineral Resources of the respondent No.2 – State Government addressed a letter to the respondent No.1 – UOI for seeking prior approval under Section 5(1) of MMDR Act for grant of mining lease for coal in favour of the petitioner for a period of 30 years over an area measuring 249.243 hectares situated in Villages Mohapani, Richhai and Chargaonkhurd. On 21st June, 1996, the respondent No.1 – UOI wrote a letter to the petitioner informing it that the Screening Committee had identified “Gotitoria (East & West) Coal Blocks” in Mohapani Coalfield, Madhya Pradesh to meet the coal requirements of the captive power plant and that the petitioner should approach the authorities for obtaining a mining lease of the specified blocks. Pertinently, a copy of the aforesaid letter was not marked by the respondent No.1 – UOI to the respondent No.2 – State Government. Instead, the same was marked to the Chief Secretary, Government of Maharashtra, Mumbai. The fact that the said letter was not endorsed to the respondent No.2 – State Government was also confirmed by the respondent No.1 – UOI in its reply dated 10th April, 2015 to a query raised in an application under the Right to Information Act, 2005.

On its part, the petitioner responded to the letter dated 21st June, 1996 sent by the respondent No.1 – Union of India by writing back on 3rd July, 1996, stating inter alia that it had already applied to the State Government in the prescribed form for grant of a mining lease through the District Collector, Narsinghpur, Madhya Pradesh and the said proposal had been recommended by the respondent No. 2 – State Government to the Ministry of Coal for grant of approval. The petitioner requested that the approval to the proposal forwarded by the respondent No.2 – State Government for grant of a mining lease be accorded by the respondent No.1 – UOI at the earliest.

Finally, vide letter dated 27th August, 1997, addressed by the respondent No.1 – UOI to the respondent No.2 – State Government, approval was accorded by the Central Government for grant of a mining lease in favour of the petitioner under Section 5(1) of the MMDR Act. Pursuant to the aforesaid letter, the mining lease for the area in question was executed by the respondent No.2 – State Government in favour of the petitioner on 21st May, 1998. On the petitioner setting up a coal washery operation in September, 2001, coal mining operations were finally commenced in October, 2004.

After passage of almost a decade, a group of petitions in the nature of Public Interest Litigations were filed before this Court with the grievance that coal blocks had been arbitrarily allocated between the years 1993 to 2011 without adhering to the mandatory legal procedure prescribed under the MMDR Act and in breach of the relevant provisions of the Coal Mines (Nationalization) Act, 1973, to favour ineligible companies tainted with mala fides and corruption. The said group of petitions were decided by a three Judges Bench of this Court, by a detailed judgment dated 25th August, 2014 in Manohar Lal Sharma v. Principal Secretary and Others wherein, the prayer regarding quashing of the allocation of coal blocks to private companies made by the Central Government between 1993 to 2011, was considered extensively and it was held that the exercise undertaken by the Central Government of allocation of coal blocks, was neither traceable to the MMDR Act or the CMN Act and the practice and procedure adopted by the Central Government for allocation of coal blocks to the beneficiaries through the Screening Committee Route, was inconsistent with the extant law already enacted and the Rules framed. Consequently, this Court declared that the entire allocation of coal blocks, as per the recommendations made by the Screening Committee constituted by the respondent No.1 – Union of India from 14th July, 1993 onwards and the allocations made through the Government Dispensation Route after 1993 suffered from the vice of arbitrariness and were illegal.

The outcome of the illegal allocations was the subject matter of the subsequent judgment dated 24th September, 2014 delivered in the same case. After carefully examining all the consequences of cancellation of the coal blocks, as put forth by the respondent No.1 – UOI and the learned counsel appearing for the allottees, this Court divided the coal block allotments in two categories on the basis of the documents that were furnished by the respondent No.1 – UOI. The first category was of allotments other than those that were mentioned by the respondent No.1 – UOI in Annexure-1 and Annexure-2, filed by it. The second category comprised of 46 coal blocks mentioned in Annexure-1 and Annexure-2 that could possibly be “saved” from cancellation on imposition of certain terms and conditions. The first category of the allotments was quashed outright by the Court as patently illegal and arbitrary. This left the second category of coal block allotments that had come into production or were likely to come into production.

Out of 46 coal blocks, mentioned in Annexure-1 and Annexure-2, 42 coal blocks were cancelled with a grace period of six months granted for the said cancellation to take effect. Pertinently, the coal blocks allocated to the petitioner herein were mentioned at Sr. No.22 and 23 of Annexure-1 that was extracted at the end of the Second Judgment. Besides deferment of cancellation, this Court issued the following directions:

“38. 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 tonne of coal extracted as an additional levy. This compensatory amount is based on the assessment made by CAG. It may well be that the cost of extraction of coal from an underground mine has not been taken into consideration by 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 tonne 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 31-12-2014. The coal extracted hereafter till 31-3-2015 will also attract the additional levy of Rs 295 per metric tonne.”

ISSUE RAISED:

Whether the petitioner was allocated coal mines through the Screening Committee Route and/or the Government Dispensation Route. Only if the answer to the said question is in the affirmative, would the respondent No. 1 – UOI be entitled to claim compensatory payment from the petitioner in terms of the Second Judgment and not otherwise.

JUDGEMENT:

The Supreme Court held that allocation of the coal block made in form of the petitioner did not run foul of the procedure prescribed in the MMDR Act and the MC Rules. The petitioner was not allocated the coal block either through the Screening Committee Route or the Central Government Dispensation Route, which fact was not pointed out by the respondent No. 1 – UOI at the appropriate stage, that led to painting the petitioner with the same brush as the other allottee listed in Annexures – 1 and 2. Having held that the petitioner was not a beneficiary of the flawed process, the consequences spelt out in the Second Judgment would not apply to it and therefore, it cannot be called upon to pay penalty as compensatory payment, as demanded by the respondent No. 1 – UOI.

The upshot of the aforesaid discussion is that the respondent No. 1 – UOI is not entitled to claim payment of an additional levy for the coal extracted by the petitioner from the subject mine. Any such demand raised by the respondent No. 1 – UOI is hereby quashed and set aside. The writ petition is allowed on the aforesaid terms. Contempt Petition (Crl.) No.7 of 2016 is dismissed as meritless.

Before parting with this matter, we are constrained to make certain observations regarding the conduct of the respondent no. 1 – UOI. Here is a case where a private party followed all the rules and the law, as applicable, before investing large sums of money to undertake business. In fact, it appears from the facts of the case that it was the respondent no. 1 – UOI that did not follow the letter of the law. But ultimately, it was the private party that had to suffer the consequences of the careless and callous approach of the respondent no. 1 – UOI. To compound the petitioner’s woes, the respondent no. 1 – UOI filed an affidavit before this Court including the petitioner in the list of errant mine owners, based on its own unlawful conduct. It did not undertake the necessary due diligence to determine as to whether the petitioner had been allotted the mine through the lawful procedure. As a result of this callous, careless and casual approach of the respondent no. 1 – UOI, the present petitioner had to suffer loss and ignominy.

Therefore, litigation costs quantified at ₹ 1,00,000/- (Rupees one lakh) shall be paid by the respondent No.1 – UOI to the petitioner within four weeks.

Link to the Judgment – https://main.sci.gov.in/supremecourt/2015/428/428_2015_1_1501_37350_Judgement_17-Aug-2022.pdf

Written by Priya Raj, (Academic Year 2018-2023) School of Law, Mody University of Science and Technology, Rajasthan

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