HC junks Sarda plea against two-phased coal auction process

Delhi High Court today lifted the stay on final bidding for three Chhattisgarh coal blocks and dismissed a plea of Sarda Energy and Minerals Ltd's challenging the two-phased coal auction process saying it was not arbitrary or irrational.
A bench of justices Badar Durrez Ahmed and Sanjeev Sachdeva said the bid procedures were "working well" and not "arbitrary" as it dismissed the plea and lifted the stay on final bidding for the Gare Palma IV/1, IV/4 and IV/7 blocks in Chhattisgarh, in which Sarda had submitted initial price offers (IPOs).
The court concluded that "the auction process (of two rounds and multiple bidding) by itself does not appear to be arbitrary or irrational".

Its conclusion came after it went through the statistics of 11 auctions conducted so far in which the final bid was "several times higher than the floor price and the applicable floor price which was based on IPOs".
Additional Solicitor General (ASG) Sanjay Jain and advocate Akshay Makhija, appearing for Coal Ministry, said the statistics of auctions conducted so far indicated that the bid conditions in tender document were working well.
"Having seen the results, we agree with the ASG. This is because closing bid price is many times higher than floor price and the applicable floor price which is based upon the IPO.

"After having considered the submissions, it appears that methodology adopted by respondent (ministry) for conducting the auctions is working well," the court said and added that as per the statistics, "there is no indication or evidence of cartelisation".

"What has convinced us is that auction process has worked out well. In view of foregoing, we do not see any reason to proceed with the writ petition. Consequently, interim order (of February 12) is vacated. Writ petition is dismissed.
"Apart from experience of 11 auctions, the process by itself does not appear to be arbitrary or irrational," the bench said.
Sarda, in its plea challenging the two-phased auction process and the multiple bidding conditions in tender document, had contended that these could lead to cartelisation.

The government on the other hand had stated that two- phased auction would encourage aggressive bidding by all players and rule out possibility of cartelisation.
It also submitted the list of 11 auctions, seven in non-regulated and four in regulated sector, which were successfully completed till date.