On 11 February 2015, the Hon’ble High Court of Delhi (Court), in the Jindal Steel & Power Limited and Ors v Union of India and Ors1 case, has ordered that the Utkal B1 and Utkal B2 coal blocks should be excluded from the oncoming coal block auction (scheduled for 14 February 2015). The Court has also directed that the specified end-use in case of Utkal B1 – Utkal B2 coal blocks and the Gare Palma IV/6 coal block should be reconsidered by the Technical Committee, Ministry of Coal, Government of India (Technical Committee) before laying forth the said coal blocks for auction.

Background

Two writ petitions had been filed in the Court by Jindal Steel and Power Limited (JSPL) challenging the consolidation of Utkal B1- Utkal B2 coal blocks and change in the specified end use of Utkal B1 and Gare Palma IV/ 6 coal blocks from sponge iron/steel to power.

Important Observations on the Technical Committee

The Court made the following observations in relation to Technical Committee’s criteria for earmarking and determination of the specified end-use:

  1. At the outset, the Court has held that the Coal Block De-allocation Judgment2 and Order3, passed by the Hon’ble Supreme Court of India on 25 August 2014 and 24 September 2014 respectively, only stipulate the rule on the legality of the allocation procedure followed by the Screening Committee and does not impede the adjudication by the Court on the issue of specified end-use for future allocation.
  2. The Court maintained that the object and intent of the Coal Mines (Special Provisions) Second Ordinance, 2014 (Coal Ordinance) ought to be observed while determining the specified end-use of a coal mine. The Court asserted the need to ensure promotion of optimum utilization of coal resources and minimizing adverse impact on core sectors such as steel cement and power utility. In light of the objective of the Coal Ordinance, the contention that the earlier end-use forms a relevant part while determining the criteria, met the approval of the Court.
  3. The Court affirmed that change in the specified end-use would defeat the Coal Ordinance’s intended objective of ensuring continuity in the coal mining operations. It weighed Section 8(4) of the Coal Ordinance against the Coal Ordinance’s objective of ensuring continuity in coal mining operations and held that a change in specified end-use would render the earlier approvals, permissions and permits inoperable. It was observed that in the eventuality of change in specified end-use, the successful bidder would be constrained to undergo the entire process of obtaining the clearances as the rights of the prior allottees transferred in its favour would be of no avail.
  4. While considering the parameters laid down by the Technical Committee, the Court held that changes in the specified end-use of a coal mine from its earlier end-use must be based on a classification, steered by an objective and palpable criteria which bears a clear nexus with the object of the Coal Ordinance. The Court further noted that the criteria adopted by the Technical Committee did not weigh the concerns of the Ministry of Steel, Government of India which had recommended that the specified end-use for blocks originally earmarked for iron and steel should remain unchanged, in view of its goal to achieve 300 million tons of capacity by 2025.
  5. The Court observed that the Technical Committee had failed to clarify whether the reserves adopted were geological reserves or extractable reserves. Further, no rationale for adopting 100 million tonnes as the cut off figure for specifying the end-use to power was provided. In the words of the Court, this figure could very well have been 150 million tonnes or even 200 million tonnes and the adoption of 100 million tonnes by the Technical Committee remained unexplained.
  6. The Court also noted that the Technical Committee had failed to follow a uniform criterion in its determination. For instance, the Mandla North, Gare IV/6, Talabira 1 and Utkal B2 coal blocks were not considered on a mine-specific basis; while the Utkal B1, Utkal B2 and Gare Palma IV/6 coal blocks could have very well fit in the criteria adopted by the Technical Committee for specifying the end-use as sponge iron / steel.​

Judgement

Based on the aforesaid observations, the Court held the following:

  1. The Technical Committee had failed to show an underlying rational or justification for amalgamation of Utkal B1 and Utkal B2 coal blocks;
  2. While shifting from one specified end-use to another, such as in case of a shift from sponge iron / steel to power, there would be an adverse impact on sponge iron / steel. While the Coal Ordinance had envisaged that this impact should be minimized, the same was disregarded while changing the specified end-use of Utkal B1, Utkal B2 and Gare Palma IV/6 coal blocks from sponge iron steel to power;
  3. Referring to Section 3 (v) (ii) of the Coal Ordinance, the Court held that the specified end-use of generation of power includes generation of power for captive use and being the legislative mandate, the same cannot be sought to be altered by way of executive action. It further observed that exclusion of captive power from power (as a specified end-use) would disentitle the petitioner from participating in respect of Utkal B1, Utkal B2 and Gare Palma Iv/6 coal blocks.
  4. In light of the aforesaid, the Court quashed the change in the specified end-use of Utkal B1-Utkal B2 and Gare Palma IV/ 6 coal blocks and directed that: (i) the Utkal B1-B2 coal blocks were to be excluded from the oncoming auction; and (ii) the said blocks should be demerged.

​Essentially, the issue of merger of coal blocks and change in specified end-use has now been directed to be reviewed in consonance with the observations made, prior to the said blocks, being laid out for auction.