On 13 February 2015, the Hon’ble High Court of Delhi (Court) in Jindal Power Ltd and Anr v. Union of India and Anr[[1]] and Jindal Steel & Power Ltd and Ors v. Union of India and Ors[[2]], has asked the Ministry of Coal, Government of India to respond to the challenge on the constitutional validity of Section 16 read with Section 3 (1) (j) of the Coal Mines (Special Provisions) Second Ordinance, 2014 (Coal Ordinance). The Court has also directed that any steps taken with regard to the tender process in respect of the coal blocks in question i.e. Gare Palma IV/1, Gare Palma IV/2 and Gare Palma IV/3 shall be subject to further orders of this Court.

Background

Prior to the recent auction, the Ministry of Coal had valued the compensation payable to the prior allottee in respect of the land and mine infrastructure held by them. Many believed that the said compensation was valuation was done in an unfair, unjust and unreasonable manner and was completely inadequate in comparison to the figures provided by the prior allottee.

Two writ petitions were filed in the Court (Writ Petitions) by Jindal Power Ltd. (JPL) and Jindal Steel & Power Limited (JSPL) (Petitioners) challenging the vires of Section 16 read with Section 3 (1) (j) of the Coal Ordinance, which deals with valuation of compensation for payment to be made to the prior allottee by a successful bidder. By virtue of the said Writ Petitions, the Petitioners have also challenged the valuation of land and mine infrastructure carried out by the Ministry of Coal.

Main Arguments raised in the Writ Petitions

The Petitioners had raised the following questions in the Writ Petitions:

  1. The objective and the purpose behind any acquisition statute such as the Coal Ordinance is always to provide fair and reasonable compensation to the person whose properties / assets are being acquired. Any statute which shortchanges the person whose assets / properties are being acquired, amounts to expropriation and hence violative of Articles 14, 19 (1) (g) and 300A of the Constitution of India.
  2. Section 16 (2) of the Coal Ordinance is expropriatory since the quantum of compensation provided is unfair and unreasonable and hence violative of Article 14, 19 (1) (g) and 300A of the Constitution of India.
  3. Since the land under the Coal Ordinance is being transferred from the prior allottee to the successful bidder, there is no aspect of public purpose involved. Therefore, it is fair and reasonable that the compensation of land should be determined on the current market value.
  4. Since Section 21 of the Coal Ordinance adopts the valuation principles from the ‘Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013’, the inter se discrimination under the Coal Ordinance for the purpose of payment of quantum of compensation for land already acquired vis–a-vis. the land to be acquired, is de hors the constitutional principles enshrined under Article 14 of the Constitution of India.
  5. The definition of ‘mine infrastructure’ under Section 3 (1) (j) of the Coal Ordinance is the basis for calculation of compensation under Section 16 of the Coal Ordinance. However, though the definition is inclusive in nature, the Ministry of Coal has only given it a restrictive meaning. Therefore, the Coal Ordinance is unfair and unreasonable as it fails to take into account inter alia the various heads of expenditure incurred by the prior allottee.
  6. Section 16 (2) of the Coal Ordinance is also expropriatory since it provides for compensation on the basis of written down value reflected in statutory audited balance sheets of the previous years, instead of providing compensation for the mine infrastructure on market value.
  7. Additionally, even though some sections of the tender document provide for payment of a fixed amount for certain expenses, the same cannot be effectuated because of the absence of a corresponding provision in the Coal Ordinance.

Order

Based on the aforesaid points, the Court was of the view that the present issue requires consideration. The Court directed the Ministry of Coal to file its counter affidavit before the next date of hearing i.e. 23 February 2015. In the meanwhile, the Court has directed that any steps taken with regard to the tender process in respect of the coal blocks in issue which are Gare Palma IV/1, Gare Palma IV/2 and Gare Palma IV/3, shall be subject to further orders of the Court.

Khaitan Comment

Developments in relation to these Writ Petitions are very important since it may determine the course of future auctions of coal infrastructure. Also, it is to be noted that there are other writ petitions such as GVK Power (Goindwal Sahib) Ltd & Anr. v. Union of India & Anr[[1]], Jayaswal Neco Industries Ltd. v. Union of India & Anr[[2]], Electrosteel Casting Ltd & Anr v. Union of India & Anr[[3]] and Prakash Industries Ltd v. Union of India & Anr[[4]] wherein the validity of Section 16 of the Coal Ordinance has been challenged, are pending before the Court.

The Court has listed the matter for 19 March 2015 and had orally observed that it will decide the issue involved in these Writ Petitions before 31 March 2015.