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2021 Supreme(SC) 560

SUPREME COURT OF INDIA
L. NAGESWARA RAO, B.R. GAVAI, B.V. NAGARATHNA, JJ.
Punjab State Power Corporation Limited and Another – Appellants
Versus
EMTA Coal Limited – Respondent
With
DBL-VPR Consortium through Authorised Representative – Appellant
Versus
EMTA Coal Limited and Others – Respondents
Civil Appeal Nos. 5823-5824, 5825-5826 of 2021, SLP (C) Nos. 9924-9925 of 2019, 14384-14385 of 2021
Decided On : 21-09-2021

Advocates appeared:
For the Petitioner(s): Mr. Salman Khurshid, Sr. Adv. Mr. KV Vishvanathan, Sr Adv Mr. Atul Nanda, Adv Mr. Karan Bharihoke,AOR Mr. Venkataraman R., Adv Mr. Siddhant Sharma, Adv Ms. Neha Sahai Bharihoke,Adv. Ms. Sakshi Kotiyal, Adv Mr. Zafar Khurshid, Adv Mr. Asif Rashida, Adv Mr. Abhishek Manu Singhvi, Sr. Adv. Mr. Dhruv Mehta, Sr. Adv. Ms. Vanshaja Shukla, Adv. Ms. Gunjan Chowksey, Adv. Mr. Shantanu Shrivastava, Adv. Mr. Abhishek Singh, AOR
For the Respondent(s): Mr. Mukul Rohatgi, Sr. Adv. Mr. Abhimanyu Bhandari,Adv. Mr. Sangram S. Saron, Adv. Ms. Roohe Hina Dua, Adv. Mr. Ejaz Maqbool, AOR Ms. Akriti Chaubey, Adv Mr. Saif Zia,Adv. Mr. K.V. Viswanathan, Sr Adv. Mr. Atul Nanda, Adv. Mr. Karan Bharihoke,AOR Mr. Venkataraman R., Adv. Ms. Neha Sahai Bharihoke, Adv. Mr. Siddhant Sharma, Adv. Mr. Sanjay Jain, ASG Ms. Aishwarya Bhati, ASG Mr. Gurmeet Singh Makkar, AOR Ms. Ruchi Kohli, Adv. Ms. Archana Pathak Dave, Adv. Mr. Mohd.Akhil, Adv.

IMPORTANT POINTS
(1) The rule of precedent mandates that this exposition of law be followed and applied by coordinate or co-equal Benches and certainly by all smaller Benches and subordinate courts.
(2) Government is the guardian of the finances of the State. It is expected to protect the financial interest of the State. The right to refuse the lowest or any other tender is always available to the Government. But, the principles laid down in Article 14 of the Constitution have to be kept in view while accepting or refusing a tender.
(3) The decision-makers' freedom to change the policy in public interest cannot be fettered by applying the principle of substantive legitimate expectation
(4) The cardinal rule of construction of statutes is to read the statute literally, that is by giving to the words used by the legislature their ordinary, natural and grammatical meaning
(5) The words “may elect” would clearly show that the legislature has given complete discretion to a successful bidder or allottee to elect. The words “may elect” would also mean a discretion not to elect.

Headnote:
(A) Coal Mines (Special Provisions) Act, 2015 - Section 11 - Coal Mines (Nationalization) Act, 1973 - Section 3(3)(a) (iii) - Contract Act, 1872 - Section 62 - Bidder - Joint Venture Agreement - Partnership firm - Discharge or adoption of third party contracts with prior allottees - Agreement provided rights for mining of coal from Coal Mines, transporting and delivery of it, wholly and exclusively to PSEB - Principle of Natural Justice - Interpretation of Section 11 of Act, 2015 - In view of Section 11 of said Act r/w Section 62 of Act, 1872, parties to a contract may willingly agree to substitute a new contract or to rescind it or alter it, High Court has erred in forcing PSPCL to continue with contract with EMTA, though it was not willing to do so - Merely because Coal Mine Block was allotted to PSPCL, same could not give any vested right in favour of EMTA, particularly in view of Section 11 of said Act - Decision is taken in accordance with Section 11 of said Act and after following principle of Natural Justice - In any case, claim of EMTA is not rejected by PSPCL solely on ground of Clause 12.4.1 of Allotment Agreement - Moreover, there is no reason why competitive bidding process for purposes of eliciting best operator be not preferred - Needless to mention that as composition with respect to capital/revenue investment is altogether different, hence bidding parameters have entirely changed - A policy decision to get best operator at best price, cannot be said to be a decision which no reasonable person would take in his affairs - Impugned judgment and order passed by High Court of Punjab and Haryana is unsustainable in law. (Paras 24, 25, 32 and 33)
(B) Constitution of India, 1950 - Article 14 - Equality before law - Power of judicial review - Scope of judicial review of an administrative action of State Authority - It cannot be denied that principles of judicial review would apply to exercise of contractual powers by Government bodies in order to prevent arbitrariness or favouritism - However, it must be clearly stated that there are inherent limitations in exercise of that power of judicial review. (Para 30)
Facts of the case:
Whether, Section 11 of said Act mandates the successful allottee to continue with the existing contract - Whether a decision-making authority has exceeded its powers, committed an error of law or committed breach of principle of natural justice - Whether an authority has reached a decision which no reasonable Tribunal would have reached or has abused its powers - Whether he desires to continue or adopt any such existing contracts in relation to coal mining operation - Whether decision of an authority is vitiated by illegality, irrationality or procedural impropriety - Whether decision of an authority is such that no authority properly directing itself on the relevant law and acting reasonably could have reached it - Whether the said reasoning can be said to be irrational or arbitrary - Appeals challenge judgment and order passed by Division Bench of High Court of Punjab and Haryana thereby allowing the civil writ petitions being CWP filed by the respondent herein-EMTA Coal Limited ( “EMTA”) and holding that respondent herein will have the first right of refusal in the matter of lending of Mining Lease.
Finding of the court:
A plain reading of Section 11 of the said Act would reveal that it begins with a non-obstante clause. It provides that a successful bidder or allottee, as the case may be, in respect of Schedule I coal mines, may elect, to adopt and continue such contracts which may be existing with any of the prior allottees in relation to coal mining operations and the same shall constitute a novation for residual term or residual performance of such contract - Decision is taken in accordance with Section 11 of said Act and after following principle of Natural Justice. The limited area that would be available for attack is as to whether decision is hit by the Wednesbury principle - The authority has also relied on Clause 12.4.1 of the Allotment Agreement, however, that is not only ground on which the representation of EMTA is rejected - It could thus be seen that PSPCL has decided to go in for competitive bidding process for purpose of eliciting the best operator. It has further noticed that the composition with respect to capital/revenue investment is altogether different. Hence, the bidding parameters have entirely changed. It has further referred to the decision of this Court wherein it has been held that the allotment should be through competitive bidding process. We ask a question to ourselves, as to whether the said reasoning can be said to be irrational or arbitrary. A policy decision to get the best operator at the best price, cannot be said to be a decision which no reasonable person would take in his affairs. In that view of the matter, the attack on the order/letter dated 6th April 2018, is without merit - Judgment and order passed by High Court quashed and set aside.
Result: Appeals allowed

JUDGMENT :

B.R. GAVAI, J.

1. Leave granted.

2. A short question relating to interpretation of Section 11 of the Coal Mines (Special Provisions) Act, 2015 (hereinafter referred to as the “said Act”) which is an outcome of the judgment of this Court in the case of Manohar Lal Sharma vs. Principal Secretary and Others, (2014) 9 SCC 516 (hereinafter referred to as “Manohar Lal Sharma-I”) and an ancillary question pertaining to scope of judicial review of an administrative action of the State Authority arise for consideration in these appeals.

3. These appeals challenge the judgment and order passed by the Division Bench of the High Court of Punjab and Haryana dated 25th January 2019, thereby allowing the civil writ petitions being CWP Nos. 10055 and 16245 of 2018, filed by the respondent herein-EMTA Coal Limited (hereinafter referred to as “EMTA”) and holding that the respondent herein will have the first right of refusal in the matter of lending of Mining Lease.

4. The facts in the present case are not in dispute, which are taken from appeals arising out of SLP(C) Nos. 9924-9925 of 2019.

5. The Punjab State Electricity Board (hereinafter referred to as the “PSEB”) which is now known as Punjab State Power Corporation Limited (hereinafter referred to as the “PSPCL”) was proposed to be allotted Captive Coal Mines by the Union of India. On 16th February 1999, PSEB issued a tender, thereby inviting bids for the purpose of development of Captive Coal Mines. In the said bid, opened on 9th February 2000, the respondent-EMTA emerged successful. Accordingly, an agreement was entered into between PSEB and EMTA on 5th May 2000, thereby creating a Joint Venture Company called Panem Coal Mines Limited (hereinafter referred to as “Panem”). The said agreement provided the rights for mining of coal from the Coal Mines, transporting and delivery of it, wholly and exclusively to PSEB. Since EMTA being a partnership firm could not have been a shareholder of the Joint Venture Company, a follow up Joint Venture Agreement was entered into on 21st March 2001 between PSEB, EMTA and the three partners of EMTA, incorporating the same terms and conditions as were found in the earlier agreement dated 5th May 2000. The same was intimated to the Union of India by PSEB. Thereafter on 26th December 2001, Union of India allotted a Captive Coal Block being Pachhwara (Central Block) Coal Mine (hereinafter referred to as “Pachhwara Coal Block”) in the State of Jharkhand to PSEB. On 22nd February 2002, Union of India notified the supply of coal from the Pachhwara Coal Block by the Joint Venture Company (Panem) to the power stations of PSEB on an exclusive basis as an end use under Section 3(3)(a) (iii) of the Coal Mines (Nationalization) Act, 1973, in the official gazette. On 25th November 2004, a Mining Lease was executed between the Government of Jharkhand and Panem for mining coal from the non-forest areas of Pachhwara Coal Block. Subsequently on 30th August 2006, a Coal Purchase Agreement was executed between Panem and PSEB, for the purpose of supply and delivery of the coal from Pachhwara Coal Block to the power stations of PSEB. On 6th January 2007, Mining Lease was issued by the Government of Jharkhand in favour of Panem, for mining coal even from the forest areas of the Coal Block.

6. Till 2014, there was no problem. However, on 25th August 2014, this Court in the case of Manohar Lal Sharma-I, held that the entire allocation of Coal Blocks made between 1993 and 2011, except those which were made through competitive bidding, were invalid, unfair, arbitrary and violative of Article 14 of the Constitution of India. On 24th September 2014, vide further orders passed in the case of Manohar Lal Sharma vs. Principal Secretary and Others, (2014) 9 SCC 614 this Court quashed all Coal Block allocations made by the Central Government between 1993 and 2011. This Court also accepted the submission of the learned Attorney General that the allottees of the Coal Blocks other than t

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2021 Supreme(SC) 560

Cases Referred (7)