Coal is king and paramount Lord of industry is an old saying in the industrial world, the Supreme Court said while emphasising the importance of the mineral resource regarded by many as black diamond.
“Coal is king and paramount Lord of industry is an old saying in the industrial world. Industrial greatness has been built up on coal by many countries. In India, coal is the most important indigenous energy resource and remains the dominant fuel for power generation and many industrial applications,” a bench headed by Chief Justice R M Lodha said.
It said coal can help significant economic growth. India’s energy future and prosperity are integrally dependant upon mining and using its most abundant, affordable and dependant energy supply, which is coal.
“Coal is an extremely important element in the industrial life of developing India. In power, iron and steel, coal is used as an input and in cement, coal is used both as fuel and as an input. It is no exaggeration that coal is regarded by many as the black diamond,” the bench said.
It said a number of major industrial sectors, including iron and steel production, depend on coal as a source of energy and coal’s potential as a feedstock for producing liquid transport fuels is huge in India.
The apex court said that allocation of a coal block by the Centre amounts to grant of largesse, rejecting government contention that it is only a first statutory step.
“The allocation of coal block by the Central Government results in the selection of beneficiary which entitles the beneficiary to get the prospecting licence or mining lease from the state government. Obviously, allocation of a coal block amounts to grant of largesse,” the bench said.
The bench rejected the contentions raised by the then Attorney General G E Vahanvati who had submitted that allocation itself did not confer any right on the allottees to mine the block and lot of procedures are to be followed thereafter.
“We are unable to accept the submission of the learned Attorney General that allocation of coal block does not amount to grant of largesse,” the bench also comprising justices Madan B Lokur and Kurian Joseph said.
The bench said, “It is true that allocation letter by itself does not authorise the allottee to win or mine the coal but nevertheless the allocation letter does confer a very important right upon the allottee to apply for grant of prospecting licence or mining lease.”
The Centre had said that an allocatee does not get right to win or mine the coal on allocation and, therefore, an allocation letter does not result in windfall gain for the allocatee.
The bench, however, said that allocation letter issued by the Central Government provides rights to the allottees for obtaining the coal mines leases for their end-use plants.
“The banks, financial institutions, land acquisition authorities, revenue authorities and various other entities and so also the state governments, who ultimately grant prospecting licence or mining lease, as the case may be, act on the basis of the letter of allocation issued by the Central Government,” it said.
“The right to obtain prospecting licence or mining lease of the coal mine admittedly is dependent upon the allocation letter. The allocation letter, therefore, confers a valuable right in favour of the allottee,” it said.
Arbitrariness in the allocation of coal blocks through Screening Committee route was apparent as there was failure to consider capability and capacity of the applicant and important requirement of end-use project at the time of allocation was given a go by, the Supreme Court said.
“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 bench said.
It said not only there was no evaluation of merit and no inter se comparison of the applicants, but also no chart of evaluation was prepared.
Observing that the determination of the Screening Committee was apparently subjective as minutes of its meetings do not show that selection was made after proper assessment, the bench said, “The project preparedness, track record etc, of the applicant company were not objectively kept in view.”
Elaborating on the laws for grant of coal blocks, the bench, also comprising justices M B Lokur and Kurian Joseph, said the company that was applying for the coal block must have set up an iron and steel plant, power plant or cement plant and be engaged in the production of steel, power or cement.
Further, the bench said the prospective engagement by a private company in the production of steel, power or cement would not entitle such private company to carry out coal mining operation.
However, on these aspects there was fault by Screening Committee, the bench said, adding, “most of the companies, which have been allocated coal blocks, were not engaged in the production of steel, power or cement at the time of allocation nor in the applications made by them any disclosure was made whether or not the power, steel or cement plant was operational”.
The bench noted that the companies only stated that they proposed to set up such plants.
“Thus, the requirement of end-use project was not met at the time of allocation,” the bench said.