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Coal block allocations illegal: Apex court

Judgment covers 1993-2010 period; final view on projects' fate on Sep 1

BS Reporters  |  New Delhi 

The Supreme Court on Monday held as illegal all coal blocks allocated by the Union government between 1993 and 2010. It said a final decision on the fate of the blocks would be taken on September 1.

Questioning the allocation of 194 coal blocks in a period that fell under the regime of both the National Democratic Alliance and the United Progressive Alliance governments, the apex court said in its 163-page judgment that the screening committee, which sat 36 times to take decisions, did not make any objective evaluation while distributing national wealth.

The three-judge Bench, headed by Chief Justice R M Lodha, said the allocations under both the screening committee and the government dispensation routes were arbitrary and illegal. "There was no transparency by the companies, as well as the central government. On many occasions, guidelines had been breached, the approach was casual and at times illegal," the court said.

Citing instances of arbitrary allocation of mines, the judgment mentioned companies Chaman Metallics, Pushp Steel and Mining and Kohinoor Steel, which failed to get recommendations from their respective state governments of Maharashtra, Madhya Pradesh and Jharkhand. These companies, however, were recommended by the screening committee for allocation of coal blocks.

"The minutes of the screening committee meetings do not disclose in what manner and on what merits the companies were chosen for recommendations; even particulars of the applicants were not noticed individually," said the Supreme Court judgment. In another irregularity, 23 companies were recommended by four state governments but 15 were recommended by the screening committee. The reasons, again, were not discernible.

The Chief Justice observed the apex court was considering setting up a panel under a retired judge of the court to examine individual cases. It said the consequences of the observations would be considered on September 1, taking into account the investments made by firms for various projects and the procedure to be adopted for coal block cancellations.

  • Jun ’93: Coal Mines (Nationalisation) Amendment Act to allow captive coal mining passed
  • 1993 to 2009: Govt allocates 201 coal blocks to private and public-sector firms for captive consumption
  • Aug 17, ’12: CAG alleges govt extended undue gains to companies by not auctioning 57 blocks allocated between 2006 and 2011
  • Aug 27, ’12: PM tells Parliament that CAG’s assessment of Rs 1.86-lakh-crore loss to exchequer due to allocation of blocks not justified
  • Sep ’12: CBI begins grilling in the alleged coal scam after Central Vigilance Commission forwards complaints; raids are conducted, FIRs filed
  • Jun ’13: FIR filed against JSPL Chairman Naveen Jindal; former minister Dasari Narayan Rao also named as an accused
  • Oct ’13: FIR filed against industrialist Kumar Mangalam Birla and former coal secretary P C Parakh for alleged criminal conspiracy and abuse of official position
  • Aug ’14: SC terms allocations made between 1993 and 2010 illegal

Of the 216 allocations, 105 allocations were made to private companies, 99 to government companies and 12 to ultra mega power projects (UMPPs). After adjusting 24 de-allocations and two re-allocations, the order covers a total of 194 allocations. In the course of arguments, however, the government de-allocated 41 blocks that were found illegal.

To the coal blocks allocated to UMPPs, the SC ruled, though these were allocated in a legal manner, any diversion of coal for commercial usage apart from captive use was not allowed. It also disallowed the state government and public-sector undertakings of the state governments to mine coal for commercial use.

Following the court's decision, there was a sharp fall in the share prices of Jindal Steel and Power and Hindalco Industries - two of the firms that won blocks during the time. While Jindal Steel was the biggest loser on the National Stock Exchange, crashing 15.1 per cent to Rs 249.9, Hindalco slumped 9.8 per cent to Rs 164.3. Other metal stocks also felt the heat.

The coal blocks were allocated in Jharkhand, Chhattisgarh, Maharashtra, West Bengal, Odisha and Madhya Pradesh. The Comptroller and Auditor General had estimated a loss of Rs 1.64 lakh crore to the exchequer due to coal block allocations.

Piyush Goyal, minister of state for coal, power and renewable energy, said this decision had given the much-needed clarity to the sector. "We look forward to finality in the matter as it has kept the sector in limbo for quite long. The sector can now start progressing, expedite power production, look at better delivery of coal and reduce dependence on imports," said Goyal.

Goyal, who was a spokesperson of the Bharatiya Janata Party when it was in Opposition during the UPA regime, cited portions from the ruling to highlight that coal blocks allocated during the NDA regime steered clear of any dispute. Citing the order, he said the Attorney General argued 21 coal blocks were recommended for allocation in the first period (1993-2003) after full consideration of each case. "He fairly admitted the minutes of the screening committee meetings in the third (June to September, 2006) and fourth (2007-2008) periods dis not contain the particulars showing consideration of each application."

On the question of re-allocation and giving out undisputed coal blocks, the minister said the government was ready to act swiftly. "Decisions will be taken expeditiously on new allocations," said Goyal.

The Aam Aadmi Party, which had made corruption its main plank during the general elections earlier this year, said all allocations made during the 17-year period mentioned were clearly illegal and had no legal effect any longer. The party demanded BJP's central government immediately cancel all these allocations without waiting any further.

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First Published: Tue, August 26 2014. 00:59 IST