TAMIL NADU NATIONAL LAW SCHOOL

(A STATE UNIVERSITY ESTABLISHED BY ACT NO.9 of 2012)

NAVALUKUTTAPATTU, SRIRANGAM TALUK
TIRUCHIRAPPALLI 620 009

ENGLISH PROJECT

JUDGEMENT REVIEW

SUBMITTED TO BY - Prakhar Bhatt

DR .G. DHARMARAJA, BA0150030

M.A., Ph.D., PDF

ASSISTANT PROFESSOR
 DECLARATION

I, Prakhar Bhatt do hereby declare that the project entitled Judgment Review submitted to Tamil Nadu National

Law School in partial fulfillment of requirement of award of degree in undergraduate in law is a record of original

work done by me under the guidance of Dr. G. Dharmaraja, Assistant Professor, English, Tamil Nadu National

Law School and has not formed the basis for the award of degree or diploma or fellowship or any other title to any

other candidate of any university.

 Manohar Lal Sharma vs. the Principal Secretary and Ors

In India, the corrupt accuse the corrupt of being corrupt and the corrupt

Investigate the corrupt and absolve the corrupt of being corrupt.

[Writ Petition (Crl) No.120 of 2012 with Writ Petition [C] NO. 463 OF 2012, Writ Petition

[C] NO. 515 OF 2012 and Writ Petition [C] NO. 283 OF 2013 (Under Article 32 of the

Constitution of India)]

Decided on 25th August 2014

BENCH

1. CJI R M .Lodha (judgment)

2. J. Madan B. Lokur

3. J. Kurian Joseph

ADVOCATES -

1. For Coal Producers Association Mr. K.K.Venugopal, Sr Adv

2. For the Sponge Iron Manufacturers Association and and Independent Power Producers Association of

India - Mr. Harish Salve, Sr Adv

3. For the Independent Power Producers Association of India - Dr. A.M. Singhvi, Sr Adv

4. For one of the interveners Dr. Rajeev Dhavan, Sr. Adv

5. Petitioner in person Manohar Lal Sharma

6. For Common Cause Prashant Bhushan

7. For Mr Sudeep Shrivastav Mr. Sanjay Parikh

RELAVANT ACTS/RULES/ORDERS/CASE LAWS

1. Mines and Minerals (Development and Regulation) Act, 1957 (for short, 1957 Act)

2. Coal Mines (Nationalization) Act, 1973 (for short, CMN Act)

3. The Mines and Minerals (Development and Regulation) Act, 1948 (for short, 1948 Act)

4. Coal Mines (Taking over of Management) Act, 15 of 1973, (for short, Coal Mines Management Act)

5. Government of India Act, 1935

6. The Mineral Concession Rules, 1960 (for short 1960 Rules)

7. Constitution of India
 ABSTRACT

In a landmark ruling on the interpretation of the powers of the Central Government under the Mines and Minerals

(Development and Regulation) Act, 1957 (Mines & Minerals Act) and Coal Mines (Nationalization) Act, 1973

(Coal Mines Act), the Supreme Court of India held that Central Government did not have power to allocate

coal blocks under these Acts. The Supreme Court further held that allocation by the Screening Committee was

arbitrary, contrary to the procedure established by law and consequently had to be set aside. In the view of the

above mentioned facts, I am obliged to take this case as a part of my English project.
 JUDGEMENT REVIEW

FACTS OF THE CASE

Allocation of coal blocks by Central Government from 1993 to 2011 through Screening Committee route and

Government Dispensation route - Validity of - All such allocations made from 1993 to 2011 [except the allocations

to UMPPs (Ultra Mega Power Projects) which were made through competitive bidding], held, are invalid, unfair

and arbitrary and suffer from diverse infirmities and flaws.

Coal blocks were allotted: (a) without any objective criteria, (b) without application of mind, (c) without

following guidelines or desired recommendations of Ministries or State Governments concerned, (d) without

assessment of comparative merit, and (e) without assessment of applicant's requirement vis--vis capacity of block

to be allotted - And the approach of allotment was ad hoc and casual and never consistent, transparent or fair -

Guidelines were violated - Policy of pick and choose was adopted - Even guidelines were altered in every meeting

to accommodate allottees, who otherwise would not have been eligible - Illegal methods were adopted in novel

ways - Total arbitrary and non-transparent allotments resulted in windfall gains to allottees and the State was

deprived of the full value of its resources.

It is no co-incidence that 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, had misrepresented the facts and were not more meritorious

than others whose claims were rejected, but by serious manipulations and abuse, they were able to get the coal

blocks - Allotments declared invalid, subject to consequential orders passed in Manohar Lal Sharma case.

ISSUES

This case pertains to the 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 alleging the allocation of coal blocks made

during 1993- 2010 by the Central Government, to be illegal and unconstitutional inter alia on the following

grounds:

1. Non-compliance of the mandatory legal procedure under 1957 Act

2. Breach of Section 3(3)(a)(iii) CMN Act
3. Violation of the principle of Trusteeship of natural resources by gifting away precious resources as largesse
 4. Arbitrariness, lack of transparency, lack of objectivity and non-application of mind
5. Allotment tainted with mala fides and corruption and made in favor of ineligible companies tainted with mala

fides and corruption.

ARGUMENTS OF THE ATTORNEY GENERAL

1. The Learned Attorney General sought to justify the allocation of coal blocks by arguing

that the government is empowered and duty bound to take the lead in allocation of coal blocks under Section

1A and Section 3(3)1of the CMN Act in addition to the declaration contained in Section 2 of the 1957 Act.

2. Ergo, neither any State government nor any person ever challenged the grant of allocation by the

Central Government on the ground that the Central Government was not empowered to allocate the

coal blocks.

ARGUMENTS OF THE DEFENDANTS

1. Mr. Harish N. Salve argued that any vestige of power in the State in the matter of selection of beneficiaries of

the mineral has been done away with. It intended to denude the State of power under Entry 23 of List II and

corresponding executive power. The grant or refusal of the lease (Coal blocks) by State is no longer governed by

Section 11 of the 1957 Act but by Sections 3(3) and 3(4) of the CMN Act and, thus, it is obvious that there has to

be first a recommendation by the Central Government before the State can exercise its discretion and that the

converse would lead to conferring upon the State an unguided and un-canalized power to grant or refuse a lease.

Ergo, the Central Government has the power to identify the beneficiary of an allotment and once the Central

Government has identified the beneficiary of allotment, the State will be obliged to grant a lease if other

conditions are satisfied.

To ensure that a lease is granted to a company engaged in stipulated permissible activities by making it a

two-step process, viz., the issue of letter of allotment conditional upon the end-use plant, followed by grant of a

lease once end usage is achieved.

2. Mr. K.K. Venugopal tried to established the similar premise by contending that under Article 73 of the

Constitution, the executive power of the Union extends to matters in regard to which the Parliament has legislative

competence which it possesses by the reason of the declarations contained in the 1957 Act and the CMN Act

enacted specifically for the regulation and development of coal and coal mines.
COURTS OBSERVATIONS

I. Supreme Court held that Central Government did not have power to allocate coal blocks in favor private

companies. Even assuming the Central Government did, the allocation by Screening Committee was

arbitrary and the improper allocation caused unfair distribution of national wealth. Hence, allocations were

to be cancelled.
II. Supreme Court holds that power exercised by Central Government left State Governments to only

complete formalities on of allocation of mines. Further, the interpretation placed on the provisions of the

relevant provisions would have to be in a manner that reconciled powers of Central and State Government.
III. Supreme Court held that coal blocks allocated to certain Ultra Mega Power Projects in respect of which

competitive bidding was carried out may be saved; however, in respect of all other allocations, unless

specifically exempted, the allocations were to be cancelled irrespective of the stage of mining activity

carried out.
IV. Allottees of the coal blocks must pay compensatory levy of Rs. 295/- metric ton of coal extracted as

additional levy as per a report of the Comptroller and Auditor General of India.
V. Companies participating in government contracts will have to ensure that the process of securing the

contract strictly complies with the procedure established by law. Reports of independent agencies such as

the Comptroller Auditor General should be considered before participating or concluding contracts with

Central or State Government.

VI. This was an unprecedented case of executive actions being quashed on the ground that the same lacked no

enabling provision in the relevant law.

VII. Aggrieved companies may have limited recourse in such circumstances.

LACUNAE IN THE SCREENING PROCESS -

A screening committee was put in place to allot the coal blocks accordingly, they also laid down certain guidelines

for the same in 1993. The guidelines thus followed are silent about the priority between the applicants of the same

block. The minutes of the 32nd meeting do not show clearly how the selections were made. A large number of

applicants may not be regarded as a proper defence.

 The guidelines do not contain any objective criterion for determining the merits of the applicants. The

guidelines do not provide for measures to prevent any unfair distribution of coal in the hands of few private

companies. As a matter of fact, no consistent or uniform norms were applied by the Screening Committee to

ensure that there was no unfair distribution of coal in the hands of the applicants.

The Screening Committee simply relied upon the information supplied by the applicants without laying

down any method to verify applicants experience in the end-use project for which allocation of coal block was

sought. The guidelines also do not lay down any method to allot coal blocks as per the end-use projects coal

requirement.

The Screening Committee kept on varying the guidelines from meeting to meeting. It failed to adhere to

any transparent system. No applications were invited through advertisement and thus the exercise of allocation

denied level playing field, healthy competition and equitable treatment.

A N A LYS I S

The Supreme Court decision was a logical outcome of the case. This decision allowed fresh, transparent means of

apportioning finite natural resources. The country is plagued by a morally compromised system in which public

policy is often overshadowed by power, influence and connections. Arbitrary, non-transparent and ad hoc

processes have eroded public faith in decision-making. The verdict, similar to the earlier one that cancelled 122

telecom licenses allotted illegally, is an affirmation of the principle that the courts will not countenance the

undesirable nexus between public office holders and big business, or anyone profiting from venality.

It is quite unusual that the SC Order does not record any submissions of individual allottees in respect of the

Screening Committee minutes. There does not appear to be any defence put forth even by Union of India in

respect of the minutes of meetings.

Unlike the 2G Scam Case7, this case is unprecedented for holding that Central Government fundamentally lacked

power under the law to allocate coal blocks. The Supreme Court did not hold that Central Government did not

have power to allocate at all but did not have power to allocate in favor of entities other than those mentioned in

Section 3 (3) (iii) of the Coal Mines Act. The Supreme Court also concluded that there was no notification in

terms of Section 3 (3) (iii) (4) such other end user the Central Government may, by notification, specify. The
lack of notifications has hurt private allottees. An argument that could have been raised but was not, is whether

Central Government can save the allottments through retrospective notifications or any other form of retrospective

amendment.

The ruling emphasizes the importance of adhering to procedural due process. However, the burden is clearly on

companies that contract with government to satisfy themselves that government has the power to contract with

companies. Companies contracting with government should also be prepared to defend these contracts in courts as

they can be challenged by anybody and at any time. The principle of laches has been completely ignored and the

Supreme Court has cancelled actions of the Central Government even though they relate to 1993. The additional

levy of Rs. 295/- per metric ton imposed uniformly on every allocatee without any finding of wrong doing against

them is a double whammy for the allocatees.

While the rewards from doing business with Government of India may be high, the risks appear to be even higher.