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2017 Supreme(Kar) 1338
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
SUBHRO KAMAL MUKHERJEE, P.S. DINESH KUMAR, JJ.
Karnataka Emta Coal Mines Limited & Ors. - Petitioners
Vs.
Union of India Ministry of Coal Through Its Secretary & Ors. - Respondents
Writ Petition Nos. 19823-24 of 2015 (GM-RES)
Decided On : 04-10-2017
For the Petitioners:Sri Shanthi Bhushan, Senior Advocate, for Sri Reuben Jacob, Advocate.
For the Respondents:Sri Prabhuling K. Navadgi, ASG, Sri Madhusudhan R. Naik, Senior Advocate for Sri Ajay J. Nandalike, Advocate.
Headnote:COAL MINES (SPECIAL PROVISIONS) ACT, 2015 [C.A. No. 11/2015] - Section 3(1)(n) Explanation - Allotment of coal mines - Constitutional validity of Explanation to Section 3(1)(n) being challenged - Explanation to Section 3(1)(n) providing for additional levy from those upon whom 'windfall profits' were showered - Held, [Per Subhro Kamal Mukherjee, C.J.]: The Act of 2015 has been passed to implement judgement of Supreme Court which includes collection of additional levy from persons, who are liable to pay them including Power Corporation as allottee of coal mines. Additional levy determined by Supreme Court, is required to be collected only from person identified by Supreme Court. Without any charging provision in Act, Central Government has no legislative competence to impose additional levy. Act identifies 'prior allottees' as person liable to pay additional levy. Legislature competent to create legal fiction cannot extend it beyond purpose for which it is created. Coal mines originally allotted to Power Corporation and it in return entered into contract with petitioner companies only for exploitation of mines. Neither mines nor coal mined was property of petitioner at any point of time. If Explanation to Section 3(1)(n) is struck down, functioning of Act to extent of levying additional duty would be impeded. Explanation to Section 3(1)(n), therefore has to be read down so as to not to apply to the petitioner company.
[Per Dinesh Kumar, J]: Explanation to Section 3(1)(n) is added to give effect to judgment of Supreme Court to recover additional levy from persons, upon whom 'windfall profits' were showered. Section 3(1)(n) is intra vires the Constitution. Coal mines were originally allotted to Power Corporation and Power Corporation in return entered into contract allotting Coal Block with lessee. Lessor, company entering into independent lease with lessee, only for exploitation of mines. Lessee Companies only agreed to supply coal and lessor having majority stakes are entitled for commensurate profits. Neither mines nor coal extracted can be property of lessee at any point of time. Faulty procedure followed in allotment of Coal Blocks resulted in unfair distribution of wealth. Therefore, Lessor and not lessee, to be held liable for paying additional levy.
COAL MINES (SPECIAL PROVISIONS) ACT, 2015 [C.A. No. 11/2015] -Section 3(1)(n), Explanation - Allottee of coal mines - Additional levy - (Per Dinesh Kumar, J.) Mining lease issued in name of lessee, company at request of Power Corporation - Power Corporation having 36% stakes in lessee, company and equal representation in Board - Power Corporation calling upon lessee to deposit additional levy after depositing 26% of such levy as per share-holding pattern - Lessee however asking Power Corporation to deposit remaining levy as well, resulting in complete levy to be borne by State out of public funds - Such request by lessee, contrary to object of statute and unacceptable - Power Corporation taking no remedial measures to protect its interest - State Government was directed to take appropriate steps in matter of payment of additional levy.
COAL MINES (SPECIAL PROVISIONS) ACT, 2015 [C.A. No. 11/2015] -Section 3(1)(n), Explanation - Allottee of coal mines - 'Beneficiary'of allotment - (Per Subhro Kamal Mukherjee, C. J.). Power company allotted Coal Block after issuance of 'specified end-user' allotment letter - Mining lease issued in name of petitioner company at request of Power Corporation - Arrangement between Power Corporation and petitioner company merely to facilitate structure whereby Petitioner could undertake mining activity, subject to condition that entire extracted coal is supplied to Power Corporation - Petitioner company only having role of 'mine operator' - Neither mines nor coal extracted was property of petitioner company at any point of time - Held, Petitioner company cannot be construed as 'beneficiary'of allotment.
COAL MINES (SPECIAL PROVISIONS) ACT, 2015 [C.A. No. 11/2015] -Sections 3(1)(a), 3(1)(n) Explanation - Allottee of Coal mines - Recovery of additional levy - (Per Subhro Kamal Mukherjee, C. J.) - Power company allotted Coal Block after issuance of 'specified end user' - allotment letter - Mining lease issued in name of petitioner company at request of Power Corporation - Statues of Power Company as allottee of Coal Mines, remaining unchanged - Mere grant of mining lease cannot be considered as allotment of Coal Block, making petitioner company liable to pay additional levy - Neither mines nor coal extracted was property of petitioner company at any point of time - Petitioner company being neither beneficiary nor allottee of Coal Mines, are not liable to pay additional levy.
CONSTITUTION OF INDIA - Articles 226, 129 - Writ petition - Maintainability - Pendency of contempt proceedings - (Per Subhro Kamal Mukherjee, C. J.) Contempt petition filed under Article 129, completely independent and different from matter determining constitutional validity of any statutory provision - Power to punish for contempt relates to violation of order of Supreme Court - Scope of testing constitutional validity before High Court, completely different - Right vested in petitioners to challenge constitutional validity of statute cannot be taken away, merely due to pendency of contempt petition - Especially when subject-matter of contempt petition not related to statute whose constitutional validity is challenged.
Subhro Kamal Mukherjee, J.
These writ petitions are filed, inter alia, challenging the constitutional validity of the Explanation to Section 3(1)(n) of the Coal Mines (Special Provisions) Act, 2015, (hereinafter ‘the said Act’) for a declaration that Section 3(1)(n) refers to no party other than allottees, who have been allotted the mines by the Union as contemplated in the judgment in Manohar Lal Sharma Vs. Principal Secretary and others reported in (2014) 9 SCC 516 and the order of the Supreme Court of India in Crl.M.P. No. 24063 of 2014 filed by respondent No.4; for a declaration that the respondents are not entitled to recover the additional levy from any person other than the original allottees; restraining the respondents to recover the additional levy amount from the petitioners, and for quashing of various orders of demand made by respondent Nos. 1 to 4.
2. The facts relevant to the case are as under :
(a) Karnataka Power Corporation Ltd. (‘KPCL’ in short), respondent No.4 in the present petitions, is a government of Karnataka Public Sector Undertaking, which is in the business of power generation. Among others, it owns and operates Thermal Power Stations in Raichur, Bellary and other places.
(b) As KPCL required a steady source of supply of coal for its intended Thermal Power Station (‘TPS’ in short) in Bellary, KPCL applied for allotment of a coal block for the specified end use in Bellary TPS in 2003 in terms of Section 3(3)(iii)(4) of the Coal Mines Nationalization Act, 1973 to the Central Government.
(c) By way of the allotment letter dated November 10, 2003, the Central Government allotted the coal blocks at Manoradeep, Kiloni and Baranj I to IV to KPCL prescribing that the coal blocks must be utilized only for Bellary TPS.
(d) As KPCL did not have any expertise in mining matters, it called for open tender for the purpose of identifying a competent entity to develop and operationalise the coal blocks. Pursuant to the transparent tender process, EMTA Coal Ltd. (‘EMTA’ in short) was selected as the entity, which would develop and operate the coal blocks on behalf of KPCL, for the captive consumption of KPCL.
(e) EMTA and KPCL, pursuant to the above tender process, constituted a Special Purpose Vehicle called Karnataka EMTA Coal Mines Limited (‘KECML’ in short), which was a joint venture between EMTA and KPCL, with equal representation in the Board of Directors and the nominee of KPCL being the Chairman of the Board and the casting vote with KPCL.
(f) The above said structure was intended to operate for 25 (twenty five) years wherein the mine would be explored and all the coal extracted from the mines would be supplied to KPCL at the tendered price. EMTA was to recover its investment made towards the development and the operationalisation of the mine over a period of 25 (twenty five) years, by supplying coal exclusively to KPCL.
(g) In the light of the above, KPCL, in the letter dated November 19, 2003, sought for the mining lease to be registered in favour of KECML with the condition that the entire coal extracted from the mines allotted to KPCL would be utilised for KPCL’s Thermal Power Station at Bellary. Pursuant to acceptance of this condition, the Central Government notified on July 16, 2004 the coal blocks at Kiloni, Manoradeep and Baranj I to IV to KECML with the condition that the end use of the coal would be only to KPCL’s Thermal Power Station at Bellary.
(h) After the mining lease dated September 25, 2006 was executed in favour of KECML, KECML got the mining plan approved and invested in the development and the operations of the mine. Once the mining operations commenced, KECML signed a Fuel Supply Agreement dated May 9, 2007 with KPCL under which the coal mines was exclusively supplied to KPCL at the pre-determined tendered rate.
(i) This arrangement continued till the Supreme Court of India in Manohar Lal Sharma (supra) (for ease of convenience referred to as ‘the 1st ML Sharma judgment’) held that all coa
