New Delhi: In a major blow to the corporate sector, the Supreme Court on Wednesday quashed allocation of 214 out of 218 coal blocks alloted to various companies since 1993 terming it as "fatally flawed" and allowed the Centre to take over operation of 42 such blocks which are functional.
The apex court said the beneficiaries of the illegal process "must suffer" the consequences and refused to show sympathy to private companies which submitted that Rs 2.87 lakh crores have been invested in 157 coal blocks and Rs 4 lakh crores in end-use plants.
Today's order will paved the way for the Centre to put remaining 172 blocks for auction.
A bench headed by Chief Justice R M Lodha said that its judgement is intended to correct the wrong done by the Centre over the years and to send a message to Government not to deal with the natural resources as if they belong to a few individuals who can fritter them away at their sweet will.
It, however, saved from the "guillotine" four allocations one each to SAIL and NTPC and two blocks to Sasan Power Ltd owned by Anil Ambani's Reliance Power and also gave a six months breathing time to rest of them to wind up their operations by March 31, 2015.
The bench, also comprising justices Madan B Lokur and Kurian Joseph, directed the the allottees of coal blocks to pay within three months an additional levy of Rs 295 per metric ton of coal extracted to compensate financial loss caused to the exchequer by the illegal and arbitrary allotments.
"Except the above two allocations made to the UMPP(Ultra Mega Power Project) and the two allocations made to the Central Government public sector undertaking not having any joint venture mentioned above, all other allocations are cancelled," the bench said in its 27-page order.
"Our judgement highlighted the illegality and arbitrariness in the allotment of coal blocks and these consequence proceedings are intended to correct the wrong done by the Union of India; these proceedings look to the future in that by highlighting the wrong, it is expected that the Government will not deal with the natural resources that belong to the country as if they belong to a few individuals who can fritter them away at their sweet will; these proceedings may also compensate the exchequer for the loss caused to it," it said.
The NDA government had also favoured the cancellation of blocks before the Supreme Court but pleaded that 46 of them, which are operational or on the verge of being operational, be spared. It had also submitted that Centre is fully prepared to face the consequences of the cancellation of all coal blocks, if need be, and is desirous of moving forward.
The bench, after noting the Centre's stand, quashed 214 allocations and asked Coal India Limited (CIL)to fill the void and take things forward by taking over the operation of 42 blocks which are functional.
"Although we have quashed the allotment of 42 out of these 46 coal blocks, we make it clear that the cancellation will take effect only after six months from today, which is with effect from March 31, 2015.
"This period of six months is being given since the Attorney General submitted that the Central Government and CIL would need some time to adjust to the changed situation and move forward," it said.
It said this period will also give adequate time to the coal block allottees to adjust and manage their affairs.
The bench also turned down the plea of companies that a committee be appointed to go into legality of each allocation saying it would amount to permitting a body to examine the correctness of the judgement which is impermissible.
"The judgement did not deal with any individual case. It dealt only with the process of allotment of coal blocks and found it to be illegal and arbitrary. The process of allotment cannot be reopened collaterally through the appointment of a committee. This would virtually amount to nullifying the judgement. The process is a continuous thread that runs through all the allotments," it said.
The companies had urged the court not to quash the allocation saying that investments up to about Rs. 2.87 lakh crores have been made in 157 coal blocks as on December, 2012 and investments in end-use plants have been made to the extent of about Rs. 4 lakh crores and the employment of almost 10 lakh people is at stake.
They had contended that loans to the extent of about Rs. 2.5 lakh crores given by banks and financial institutions would become non-performing assets and SBI alone may suffer a loss of up to Rs 78,263 crores.
To buttress their point they submitted that closure of coal mines would result in an estimated loss of Rs. 4.4 lakh crore in terms of loss of royalty, cess, direct and indirect taxes.
The apex court rejected the plea of coal allottees which submitted that they were not given opportunity to place their case before it.
"It is incorrect to say that these associations which represented the bulk (if not all) the allottees or beneficiaries of coal blocks were not heard. They presented their point of view, like any other party to a lis and it was only then that judgment was delivered," it said.
The apex court had on August 25 held that all coal blocks allocation since 1993 by various regimes at the Centre have been made illegally and arbitrarily.
The apex court, which had used almost all terms to condemn the procedures adopted by 36 screening committee meetings since 1993, however, had stopped short of cancelling them saying, "what should be the consequences, is the issue which remains to be tackled.
The apex court, which examined the allocation of 218 blocks in pre-auction era till 2010, had held that they were done in an illegal manner by an "ad-hoc and casual" approach "without application of mind" and "Common good and public interest have, thus, suffered heavily" due to lack of fair and transparent procedure resulting in "unfair distribution" of the "national wealth" -- coal -- "which is king and paramount Lord of industry."
"To sum up, the entire allocation of coal block as per recommendations made by the Screening Committee from July 14, 1993 in 36 meetings and the allocation through the government dispensation route suffers from the vice of arbitrariness and legal flaws.
"The Screening Committee has never been consistent, it has not been transparent, there is no proper application of mind, it has acted on no material in many cases, relevant factors have seldom been its guiding factors, there was no transparency and guidelines have seldom guided it," the bench had said in its 163-page verdict.
