Coal scam: fait accompli no ground for not cancelling coal blocks, says SC

Apex court says companies which invested money on coal blocks without getting green clearances took the decision at their own risk

By Anupam Chakravartty
Published: Wednesday 08 January 2014


Coal mining firms that present a fait accompli to justify mining in areas for which clearances are yet to be granted may end up losing the coal blocks allocated to them. A Supreme Court bench headed by Justice R L Lodha said that any investment made in anticipation of clearances cannot be justified and such coal blocks cannot be protected if the companies fail to get clearances within the time frame fixed under the law. The court said this on Wednesday while hearing a public interest petition relating to the coal scam.

The petition, which was filed in 2012 by non-profit Common Cause and other eminent citizens, including former cabinet secretary T S R Subramanian, former chief election commissioner N Gopalaswami, has questioned the legality of allocation of coal blocks to private companies from 1993 onwards.

On Wednesday, the bench asked the Union government whether it intends to de-allocate coal blocks which have not been able to secure various clearances. Attorney General Goolam E Vahanvati told the court that approximately Rs 2 lakh crore has been invested in such coal blocks and that cancelling licences for want of clearances would lead to huge financial losses.

The court, however, rejected this plea. “All such investments would go into the drain and it cannot be a defence and no law would help them … They [companies] must suffer the consequences no matter how much investment has been made by them. The alleged illegality cannot be compounded,” the bench said. The companies which invested money on blocks without getting all clearances took the decision at their own risk, the court added. The court sought reply from the government on the matter.

States blame Centre

During the hearing the court also considered submissions made by Maharashtra and Andhra Pradesh state governments regarding coal block allocations.  They state counsels said that coal block allocation is entirely controlled and regulated by the Central government and states have a subordinate role to play. Earlier, West Bengal, Madhya Pradesh, Jharkhand, Odisha and Chattisgarh had similarly blamed Central government for coal block allocations.

This contradicts the submission made by Vahanvati in September, 2013 to the effect that the role of the Central government is only limited to the identification of coal blocks and issuing letters of intent for the identified coal blocks to companies. Vahanvati had stated that issuing letters on intent does not guarantee any right over the natural resources. Following the attorney general's statements, the court asked seven coal-rich states to respond. However, all the respondent states told the apex court that most of the coal block allocations between 1993 to 2011 were based on Central government's own mechanism, which includes forming screening committees to pass coal mining projects as well as forming guidelines, vetted by the Union coal ministry from time to time. 

The petition filed by Common Cause seeks cancellation of all coal block allocations made to private companies from 1993 onwards and launch of a criminal investigation against politicians, bureaucrats, company owners and enforcement agencies involved in it. The petition followed a Comptroller Auditor General of India reports that said the government exchequer incurred a loss of Rs 1.86 lakh crore because of allocation of coal blocks to private companies without taking a proper auction route. Essar, Tata and Jindal Steel and Power were among the beneficiaries named in the report.

The allocation of coal blocks to private companies for captive use started in 1993 when Coal Mines (Nationalisation) Act, 1973 was amended with the objective of attracting private investments in specified end-uses such as power, cement and steel because of the growing economy. The coal-gate scam was brought to light by a draft report of CAG in March 2012, after which CBI has been probing into the alleged irregularities in coal blocks allotment made since 1993.

A writ petition in public interest seeking cancellation of the entire allocation of coal blocks to private companies between the year 1993-2012

Application for Directions filed by Common Cause seeking a probe on the allocation of coal blocks

Allocation of coal blocks and augmentation of coal production by Coal India Limited: draft performance audit

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