#CoalGate Judgment Extracts

Brief Introduction

The Supreme Court judgment on coal block allocations, which came to be ubiquitously termed as #CoalGate because of overwhelming stench of corruption during UPA years, was delivered on 25th August 2014. The judgment makes important legal and procedural pronouncements, and in effect has termed all the allocations made under the policy, first framed by 1993 Congress government led by under P.V. Narasimha Rao, as illegal.

However, some important points to note are:

1. On Policy: Since the SC has termed the policy framed in 1993 itself as unsound, since no criteria was defined as to who will get coal block and who will not, hence all allocations made under that policy, including in NDA period, have been judged to be illegal.

2. NDA period allocations: Only 7 allocations done in NDA period have been judged to be illegal. In each of these allocations, there were recommendations by respective state governments, and detailed reasons were given as to why block X was allotted to company A and why block Y was not allotted to company B. This is why, although the allocations have been judged to be illegal since their founding policy itself is flawed, no criminal proceedings are underway on these decisions.

3. UPA period allocations:  During UPA period, 168 allocations now stand judged as illegal. Criminal proceedings are underway in many of these cases. As the Supreme Court notes, most of these allocations were capricious / done with mala fide intention / totally arbitrary / screening committee does not record any reasons as to why decisions were made a particular way and so on. Indeed the SC calls some of the companies, who got coal blocks in UPA period, as shady.

In many cases companies got coal blocks without any recommendation by respective state government ( unlike NDA period allocation) and in many other cases recommendations made by state governments were overlooked. The screening committee DID NOT allot coal blocks to 8 companies which were recommended by Ministry of Power but allotted to 11 others without any recommendation. No reasons were mentioned in screening committee minutes for such arbitrary decisions. This is why criminal cases are now underway in many of these cases.

4. Difference between NDA / UPA: Essential difference between NDA and UPA period allocations :Policy framed by Congress govt in 1993 itself was unsound hence it affects allocations made by NDA period also but SC itself makes scathing observations about dishonest and and criminal implementation of same during UPA period. It is this essential difference between the two periods.

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Verbatim extracts from SC order

Page 56:

Moreover, from 2006 even the requirement of end-use project was done away with and the Central Government allowed companies to apply and obtain coal blocks, and it was stated that the coal mined from these blocks would be transferred to an end-user company. Thus, the basic minimum statutory requirements were not adhered to and followed in making allocation of coal blocks.”

 

Page 57:

Screening Committee did not follow any objective criteria in determining as to who is to be selected or who is to be rejected. The minutes of the Screening Committee meetings do not show that selection was made after proper assessment. 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. It is no coincidence that a large number of allottees are either powerful corporate groups or shady companies linked with politicians and ministers or those who came with high profile recommendations. Most of these allottees were in fact ineligible for allocation; they had misrepresented the facts and were not more meritorious than others whose claims have been rejected, but by serious manipulations and abuse, they were able to get the coal blocks.

Page 65:

Learned Attorney General has fairly admitted that the minutes of the Screening Committee meetings in the third and fourth periods [29th June 2006 – 3rd July 2008] do not contain the particulars showing consideration of each application.

 

Page 84-85:

During this period [8 year period leading up to 2nd Feb 2012], many coal blocks were allocated giving rise to present controversy, which was avoidable because competitive bidding would have brought in transparency, objectivity and very importantly given a level playing field to all applicants of coal and lowered the difference between the market price of coal and the cost of coal for the allottee by way of premium which would have accrued to the Government.

Pages 93-96:

Pertain to the period 1997-99, and contain detailed case-by-case analysis by Screening Committee on why certain blocks could or could not be allocated to certain companies [i.e. no arbitrariness]

Page 97-98:

On 18th-19th June 1999, the Screening Committee decided as follows:

(i) The Administrative Ministries will assess the soundness of the proposals in consultation with the State Govt. before sending their comments/ recommendations to the Screening Committee for consideration of allotment of a captive mining block; and

 

(ii) The Administrative Ministries should consult State Governments as well as use their own agencies for assessing the progress of the implementation of end use plants for which blocks have already been allotted by the Screening Committee and send a report to the Screening Committee for further action.”

 Page 102:

In the 18th meeting held on 5th May 2003… The Chairman of the Committee put the following few general guidelines for consideration:

 

(i) The blocks in captive list should be allocated to an applicant only after the same have been put in the public domain for a reasonable time and not immediately upon their inclusion in the list of block identified for captive mining, so as to give an opportunity to interested parties to apply for the same and make the process more transparent. The need for giving very cogent and detailed reasons before withdrawal of a block from captive list by CIL was also emphasized.

 

(ii) The Administrative Ministries were requested to appraise the projects from the point of view of the genuineness of the applicant, techno-economic viability of the project and the state of preparedness/progress in the project while indicating the quantity and quality of coal requirement of the project and recommending allocation of captive block to the applicant. In case there were more than one applicant for the same block the Administrative Ministry should rank them based on the project appraisal and the past/track record of the applicant without necessarily naming the block to be allotted. This would facilitate the Screening Committee in allotting a suitable block to the applicant more objectively.

 

Page 107-108:

The compilation volume contains materials relating to recommendations made by the Screening Committee for allocation of coal blocks to private companies pursuant to its 22nd meeting to 30th meeting held between 04.11.2003 and 18.10.2005…

if all other factors (like suitability of coal grade, techno-economic viability/feasibility of the project, state of preparedness of the project, etc.) were equal but a careful look at these guidelines show that they do not lay down any criterion for evaluating the comparative merits of the applicants. As a matter of fact, the guidelines applied by the Screening Committee are totally cryptic and hardly meet the requirement of constitutional norms to ensure fairness, transparency and non-discrimination.

 

There is no comparative assessment of the merits of the applicants. There is so much of ad-hocism in consideration of the applications that in every meeting, the guidelines were altered.

Page 110:

The Committee noted that the transfer modalities were yet to be worked out in details. The Screening Committee in 24th meeting [9th Dec 2004] noted the particulars of each applicant but how each applicant met such parameters is neither mentioned nor are they discernible.

 Page 112:

The Screening Committee decided [on 10th Oct 2005] that for each such block, one applicant company who had the highest stake and which was likely to take up proper mining could be designated the leader company and allocated the block and a group of other companies could be nominated as associate companies for supply of coal by the leader company to these designated associates. In our opinion, such procedure is apparently in contravention of the statutory provision contained in Section 3(3)(a)(iii) of the CMN Act.

 

The rules of game were changed to adjust large number of applicants whose applications would have been otherwise rejected as their coal requirement was far less than the coal available in the coal block. However, in order to accommodate these applicants, a novel idea of choosing a leader company and associate companies was evolved which, as indicated above, is impermissible under the CMN Act.

 

Page 128:

 

As regards Jogeswar coal block, the Committee in view of the comments of the representative of the Government of Jharkand decided not to recommend allocation of that block in favour of any applicant for the time being. The minutes of 32nd meeting 29th-30th June 2006 do not show how and in what manner the applications of those companies were considered which did not come for presentation. There is no comparative assessment or evaluation of the applicants. Why the chosen companies have been preferred over the others is not discernible?

 

Merely because there were large number of applicants, it did not mean that the consideration of each applicant could not have been recorded or comparative assessment or evaluation of the applicants could not have been made. What are the reasons for recommending three blocks jointly in favour of more than one company are neither recorded nor disclosed in the minutes. The recommendations for allocation of blocks jointly in favour of two or three companies, as indicated earlier, are not in conformity with the CMN Act. Rather, they are in contravention thereto.

 

Page 133-134:

It is pertinent to notice that some of the companies like Chaman Metallics Ltd.,

which was recommended by the Screening Committee for Kosar Dongergaon block had no recommendation by the State Government (Maharashtra). Similarly, Pushp Steel and Mining Ltd., which was recommended for Brahmpuri block had no recommendation from the State Government (Madhya Pradesh) and so also Kohinoor Steel (P) Ltd. for Mednirai coal block had no recommendation from the State Government (Jharkhand). The minutes do not disclose in what manner the merits of the companies which were chosen for recommendation were determined. Even particulars of the applicants individually are not noticed. There is no indication at all in the minutes of 33rd meeting and 34th meeting or the meeting held on 22.09.2006 when final decision that the conditions laid down in the guidelines are met by these companies was taken. Twenty three companies were recommended by the four State Governments while fifteen companies were finally recommended for allocation by the Screening Committee but the reasons therefor are not discernible at all. The minutes also do not disclose the criterion which the Screening Committee applied in selection of the fifteen companies and the reason for allocating twelve blocks to fifteen companies. M/s. Grace Industries Limited was recommended allocation of a coal block although that company had no recommendation/categorization.

 

 

Page 135:

Many of the companies selected by the Screening Committee [June/July 2007] had no recommendation from the State Government or from the Ministry of Power and CEA and some of them had no recommendation either from the State Government or the Ministrya of Power and CEA at all.

 

Page 140:

The Screening Committee, as a matter of fact, did not select eight companies which were recommended by the Ministry of Power but selected eleven companies which were not recommended by Ministry of Power.

 

Page 142:

The minutes of 36th meeting do not contain the particulars showing consideration of each application. There is no assessment of comparative merits of the applicants who were selected for recommendation. The minutes do not disclose how and in what manner the selected companies meet the norms fixed for inter se priority. Many of the selected companies were neither recommended by the State Government nor by the Administrative Ministry.

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Note: The contents of this “Notes and Releases” has been prepared by Kartikeya Tanna and a person who shall remain unnamed for helping frame this blog for correct reading of the SC judgement.

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One thought on “#CoalGate Judgment Extracts

  1. sushil says:

    Hey Ram, All of them still have the cheek to say that there were no anamolies.Diff bet NDA & UPA in following principles is obvious and stark.

    Like

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