2014 Supreme(SC) 600

SUPREME COURT OF INDIA
R.M. Lodha, CJI., Madan B. Lokur, Kurian Joseph, JJ
Manohar Lal Sharma – Petitioner
Vs.
The Principal Secretary & Ors. – Respondents
WITH WRIT PETITION [C] NO. 463 OF 2012 WRIT PETITION [C] NO. 515 OF 2012 WRIT PETITION [C] NO. 283 OF 2013 WRIT PETITION (CRL.) NO. 120 OF 2012
Decided On : 25-08-2014

IMPORTANT POINTS
• By Section 3(3) and (4) and 30(2) of CMNN Act regulation and development of coal mines have been taken out from List II Entry 23 of the seventh Schedule of the Constitution.
• Declarations under Section 2 r/w Section 1A, CMN Act have to be read conjointly and strictly.
• No provision – 1957 Act, CMN Act or 1960 Rules – provide for allocation of coal blocks.
• If a statute requires doing a certain thing in a certain way, that thing must be done in that way or not at all. Other methods of performance are necessarily forbidden.
• Allocation of coal blocks amounts to grant of largesse.
• Entire exercise of allocation suffers from arbitrariness and does not follow any objective criteria. Hence all allocations are illegal.

Headnote:(a) Coal Mines (Nationalisation) Act, 1973 (CMN Act) – Sections 1A, 3(3)&(4) and 30(2) r/w List I Entry 54 (Union List) and List II Entry 23 (State list), Seventh Schedule, Constitution of India – “Regulation of mines” and “development of minerals” – Only to the extent as considered expedient in the public interest by a federal law – Centre and States both have been accorded power in relation to mines and minerals – However, in terms of declarations under sections 2 of 1957 Act and section 1A of CMN Act States have lost jurisdiction to legislate to the extent to which the Union had taken over control, regulation and development of coal mines – Effect of Section 3(3) and (4) and 30(2) is that regulation and development of coal mines have been taken out from List II Entry 23. (Para 49, 51)

       (2012) 11 SCC 1 – Relied upon

       (b) Mines and Minerals (Development and Regulation) Act, 1957 – Section 2 r/w Section 1A, CMN Act – Declarations – Have to be read conjointly – Act 1957 and Mineral Concession Rules, 1960 have denuded States of legislative and executive power – State cannot frame a policy de-hors the 1957 Act and the 1960 Rules. (Para 53)

       (1969) 3 SCC 838; AIR 1961 SC 459: (1961) 2 SCR 537; AIR 1964 SC 1284 : (1964) 4 SCR 461; (2010) 13 SCC 1; (1973) 1 SCC 584; (2012) 11 SCC 1; 1991 Supp. (1) SCC 430 – Relied upon

       (c) Interpretation of statute – Declarations u/s 2 of 1957 Act and 1A of CMN Act have to be construed strictly – Thus the extent of control by the Union has to be construed strictly. (Para 55)

       (d) Mines and Minerals (Development and Regulation) Act, 1957 – Section 2 r/w section 3(3)(a) and (c), CMN Act – Legal regime in the 1957 Act applies in full rigour for effecting prescription of Section 3(3)(a) and (c) of the CMN Act – Thus for grant of reconnaissance permit, prospecting licence or mining lease in respect of coal mines, provisions of the Act 1957 has to be mandatorily followed – Act 1957 and the Mineral Concession Rules, 1960 do not provide for allocation of coal blocks nor they provide any mechanism, mode or manner of such allocation. (Para 57, 58)

       (e) Allocation of coal blocks – No provision: 1957 Act, CMN Act or 1960 Rules providing for allocation of coal blocks – Contention that allocation letter is the procedure which regulates the exercise under Rule 22 of the 1960 Rules – Not correct. (Para 58)

       (f) Administration of Justice – Legal propriety – Statute requiring doing a certain thing in a certain way – That thing must be done in that way or not at all – Other methods of performance are necessarily forbidden. (Para 59)

       (1935-36) 63 IA 372 – Relied upon

       (g) Allocation letters – Response of concerned States – Allocation letters create valuable right in the allottees – Allocation letter leaves practically or apparently nothing for the State Government to decide save and except to formally process and execute lease deed with beneficiary selected by Central Government – Allocation letter is thus bankable – Contravening the legal regime that declaration under Section 1A of the CMN Act is in addition to the declaration made under Section 2 of the 1957 Act and not in its derogation – Eligibility of persons to carry out coal mining operations must be restricted to Section 3(3)(a) of the CMN Act. (Para 61)

       (1980) 4 SCC 179 – Relied upon

       (h) Allocation of coal blocks – Not simply identification of the coal block or the allocatee but in fact selection of beneficiary – The allocation of coal blocks by Central Government is not traceable either to the 1957 Act or the CMN Act – Such exercise could not be undertaken even under Article 73 of the Constitution being derogatory to enacted legislation. (Para 64, 65)

       (i) Allocation of coal blocks – 1957 Act requiring State Governments to recommend applications for mining rights etc. to Central Government – Central Government, by directly inviting and accepting application and allocating coal blocks significantly and effectively reversing the scheme of 1957 Act – Contemporanea Expositio cannot be pressed into service – Section 11A. (Para 68)

       (1979) 4 SCC 565; ILR 35 Calcutta 701; ILR 43 Calcutta 790 – Referred

       (j) Allocation letter – Allocation letter by itself does not authorize the allottee to win or mine the coal – But it confers right to apply for grant of prospecting licence or mining lease – No person can get a prospecting licence or mining lease without letter of allocation – Banks, financial institutions, land acquisition authorities, revenue authorities and various other entities and so also the State Governments act on the basis of the letter of allocation – Obviously it amounts to grant of largesse. (Para 70, 71)

       (k) Constitution of India – Article 39(b) – distribution of natural resources – Process – Competitive bidding or auction vis-à-vis other methods – Court cannot conduct a comparative study of various methods of distribution of natural resources and cannot mandate one method to be followed in all facts and circumstances – Government, in prevailing circumstances, not taking competitive bidding route for allotting coal blocks – Cannot be said to be so arbitrary or unreasonable warranting judicial interference – Any process adopted by the Government must not be violative of Article 14 – It must be transparent, reasonable and not arbitrary. (Para 105)

       (2012) 10 SCC 1; (1980) 4 SCC 1; (1987) 2 SCC 295; (1988) 1 SCC 166 – Relied upon

       (2012) 3 SCC 1; (1997) 7 SCC 592; (2000) 8 SCC 262; (2009) 7 SCC 561; (1981) 4 SCC 675; 1986 Supp SCC 20; (2014) 6 SCC 590 – Referred

       (l) Allocation of coal blocks – Guidelines of screening committee – Captive block cannot be allocated as replacement for a linkage – Coal blocks can only be allocated for specific projects and not as back up in general – Central PSU was to be accorded priority over State Government PSU – Still the guidelines not laying down any criterion for evaluating comparative merits of applicants – Too much of ad-hocism, guidelines being altered in every meeting – Guidelines totally cryptic, hardly meeting requirement of constitutional norms to ensure fairness, transparency and nondiscrimination. (Para 134, 135)

       (m) Allocation of coal blocks – 36 meetings of the screening committee – Allocation of coal blocks to the private companies pursuant to the recommendations made by the Screening Committee in 36 meetings suffers from diverse infirmities and flaws – Court noticing 22 such instances. (Para 150)

       (n) Allocation of coal blocks – Circular dated 12.12.2001 – State Government company/undertaking permitted to mine non-coking coal and coking coal reserves or lignite by opencast/underground method without the restriction of “isolated small pockets” – Circular not in conformity with the provisions of the CMN Act which do not allow State Government or State PSUs to mine coal for commercial use – Circular has no legal sanction. (Para 153)

       (o) Allocation of coal blocks – Entire exercise of allocation suffering from arbitrariness and not following any objective criteria – All allocations are illegal. (Para 154)

       Facts of the case:

       The allocation of coal blocks for the period 1993 to 2010 is the subject matter of this 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. The allocation of coal blocks made during the above period by the Central Government, according to petitioners, is illegal and unconstitutional inter alia on the following grounds:

       (a) Non-compliance of the mandatory legal procedure under the Mines and Minerals (Development and Regulation) Act, 1957.

       (b) Breach of Section 3(3)(a)(iii) of the Coal Mines (Nationalisation) Act, 1973.

       (c) Violation of the principle of Trusteeship of natural resources by gifting away precious resources as largesse.

       (d) Arbitrariness, lack of transparency, lack of objectivity and non-application of mind; and

       (e) Allotment tainted with mala fides and corruption and made in favour of ineligible companies tainted with mala fides and corruption.

       Principally, two prayers have been made in these matters, first, for quashing the entire allocation of coal blocks made to private companies by the Central Government between 1993 and 2012 and second, a court monitored investigation by the Central Bureau of Investigation (CBI) and Enforcement Directorate (ED) or by a Special Investigation Team (SIT) into the entire allocation of coal blocks by the Central Government made between the above period covering all aspects.

       The present consideration of the matter is confined to the first prayer, i.e., for quashing the allocation of coal blocks to private companies made by the Central Government between the above period.

       Finding of the Court:

       The entire exercise of allocation through Screening Committee route thus appears to suffer from the vice of arbitrariness and not following any objective criteria in determining as to who is to be selected or who is not to be selected. The allocation of coal blocks based on the recommendations made in all the 36 meetings of the Screening Committee is illegal.

       Result: Allocation of coal blocks held illegal.