Delhi High Court
Prakash Industries Ltd. vs Union Of India & Ors. on 18 May, 2010
Author: S. Muralidhar
IN THE HIGH COURT OF DELHI AT NEW DELHI
W.P.(C) No. 7135 of 2008 & CMs 13784/08,
5035, 13945/2009
Reserved on: 23rd March 2010
Decision on: 18th May, 2010
PRAKASH INDUSTRIES LTD. ..... Petitioners
Through: Mr. A. Sharan Sr. Advocate with
Mr. B.R. Menon, Mr. Alok Singh,
Ms. Divya Kesar and
Mr. Ashwini Kumar, Advocates.
Versus
UNION OF INDIA & ORS. ..... Respondents
Through: Ms. Anjana Gosain with
Ms. S. Fatima, Advocates for UOI.
Mr. Atul Jha, Advocate for
Respondent No.3.
Mr. Kailash Vasdev, Sr. Advocate with
Mr. Manoj Sharma, Mr. Kapil Kaushik and
Mr. Sumit Bhardwaj, Advocates for
Respondent No.4.
Mr. Arvind Nigam, Sr. Advocate with
Mr. S.K. Mishra, Mr. Adil Ali and
Mr. Ashutosh, Advocates for
proposed Respondent No.5.
CORAM: JUSTICE S. MURALIDHAR
1. Whether reporters of the local newspapers be
allowed to see the Judgment? No
2. To be referred to the Reporter or not? Yes
3. Whether the Judgment should be reported
in the Digest? Yes
JUDGMENT
18.05.2010
1. The challenge in this petition under Article 226 of the
Constitution by Prakash Industries Ltd. (`PIL‟) is to a letter
dated 6th February, 2008 issued by the Government of India,
Ministry of Coal allocating 73.85 MT of coal reserves to M/s
W.P.(C) Nos. 7135 of 2008 page 1 of 33
S.K.S. Ispat & Power Ltd. (`SKS‟), Respondent No.4 herein.
The further prayer is for a direction to the Ministry of Coal to
allocate the non-coking coal block to both the Petitioner, PIL
and Respondent No.4 (on the basis of the capacity of the
proposed power plant) as recommended by the Government of
Chhattisgarh (Respondent No.3) on 18th June, 2007.
Background Facts
2. The background facts are that on 6th November, 2006,
Respondent No.1 through Ministry of Coal advertised a list of
38 coal blocks for captive coal mining for allocation to
companies engaged in the generation of power, production of
iron and steel and production of cement. 15 out of the 38 coal
blocks were earmarked for power generation. The remaining
23 blocks were to be made available for other specified end-
uses like production of iron and steel and production of
cement.
3. PIL states that it was incorporated in the year 1980, and is
engaged in the business of manufacturing sponge iron, power
co-generation, steel (blooms and billets) etc. PIL states that it
has developed a fully integrated Steel Plant at Champa in
Chhattisgarh which commenced production in 1993. The
original installed capacity was 4 LTPA of sponge iron, 1.6
LTPA of liquid steel, 1.5 LTPA of structural steel along with
12 MW power co-generation.
W.P.(C) Nos. 7135 of 2008 page 2 of 33
4. On 7th January, 2005, PIL entered into a Memorandum of
Understanding (MOU) with the Government of Chhattisgarh
(Respondent No.3) for setting up of a 190 MW coal based
captive power plant with a proposed investment of Rs. 1017
crores.
5. Pursuant to an advertisement issued by Respondent No.1,
the Petitioner on 12th January 2007 applied for allocation of
non-coking coal block for its proposed power plant at
Fatehpur, in Chhattisgarh. In its application PIL indicated that
the coal was required for meeting its part requirement for the
power plant of 625 MW capacity. The power plant project was
to be executed in phases. The first phase of 250 MW was to be
commissioned in April 2010 and second phase of 250 MW in
April 2011.
6. On 12th January, 2007 Respondent No.4 SKS also applied
pursuant to the same advertisement dated 6th November 2006
for allocation of a non-coking coal block. It was indicated in
the application that the power generation capacity of its
proposed power plant was 1000 MW+100 MW, i.e., 1100
MW.
7. PIL planned to expand its facilities in Chhattisgarh where it
proposed to set up a coal based thermal power plant having a
power generation capacity of 500 MW thus having a combined
W.P.(C) Nos. 7135 of 2008 page 3 of 33
capacity of 690 MW at an approximate project cost of Rs.
3,218.75 crores. Accordingly, another MOU was entered into
by PIL with Respondent No. 3 on 18th June, 2007 for an
integrated steel plant with additional annual capacity/unit of
1.2 mTPA at a cost of Rs. 440 crores and a captive power plant
(thermal) of 500 MW at a cost of Rs. 1625 crores.
8. In the meanwhile on 24th January 2007, Respondent No. 4
entered into an MOU with Respondent No. 3 for setting up of a
power plant having a capacity of 600 MW.
9. Respondent No.1 appointed a Screening Committee,
Respondent No.2 herein, to examine the applications made
pursuant to the advertisement dated 6 th November 2006. It held
meetings between June and September 2007 and considered
the applications filed by the both the Petitioner as well as
Respondent No.4. On 6th November, 2007 the Respondent
No.1 wrote to both the Petitioner as well as Respondent No.4
informing them that the central government was contemplating
a joint allocation of the Fatehpur non-coking coal block in
Chhattisgarh in favour of both the Petitioner as well as
Respondent No.4 for meeting their proportionate requirement
of coal. It was stated that based on mineable capacity of the
total geological reserves and requirement of coal as assessed
by the Central Mine Planning and Design Institute Ltd.
W.P.(C) Nos. 7135 of 2008 page 4 of 33
(CMPDIL), the tentative proportionate share of the reserves
was as indicated in the form of a table a copy of which read:
Blocks Geological Tentative Proposed Coal Proportionate
Reserve(Mt) Mine for Requirement share of
Capacity Company For 30 yrs (Mt) reserves of
(Mtpa) coal MT
Fatehpur 120 3/0 M/s SKS 4.6x30=138 73.85
Ispat For 1000
Power MW (IPP)
Ltd.
M/s 2.875x30=86.25 46.15
Prakash for 625 MW
Industries (CPP)
Ltd.
Total 224.25
10. The first option indicated in the said letter was that mining
could be carried out:
"in consortium of two or more allocattees in any
given block by constituting a joint venture/special
purpose vehicle company wherein there would be
equity stake and management participation from
all the consortium partners. The production from
the mine could be distributed among the
consortium partners in proportion to their assessed
requirement at the time of allocation, net of
linkages, if any. The equity shares should be held
in proportion to the assessed requirement of all
the consortium partners."
11. The second option was that one of the allocattee companies
be designated as the leader for the block and the other
allocattees be treated as associates. In such event, the mining
operation would be carried out by the leader and the
production from the mine would be shared between the leader
and the associates in the ratio of their respective requirements
at the time of allocation.
W.P.(C) Nos. 7135 of 2008 page 5 of 33
12. The third option was that for each block, one allocattee was
chosen as the leader and other allocattees as associates. The
CIL would have to arrange the transfer of coal from the leader
to the associates as per the ratio determined at the time of
allocation.
13. It was stated in the letter dated 6th November 2007 that the
Petitioner and Respondent No. 4 should discuss the modalities
mutually acceptable to them and finalise a legally binding and
enforceable agreement opting for any one of the three
alternatives. It was stated that the agreement was required to be
in conformity with the provisions of the Coal Mines
(Nationalisation) Act, 1973 [CMNA] and the guidelines issued
in this regard. The options were directed to be exercised within
thirty days.
14. On 13th November, 2007 PIL wrote to Respondent No.1
drawing the latter‟s attention to the fact that the ratio of share
of coal reserves has not been specified by the Screening
Committee (Respondent No.2) while deciding the allocation of
the Fatehpur coal block. Secondly, PIL had proposed to set up
a thermal power Plant of 625 MW capacity whereas
Respondent No.4 had proposed to set up a power plant of 600
MW and not 1000 MW. It was stated that coal reserves should
be allocated to PIL and the Respondent No.4 in the ratio of the
proposed capacity of their respective power plants. It was
W.P.(C) Nos. 7135 of 2008 page 6 of 33
pointed out that any allocation of share on the basis of 1000
MW capacity of Respondent No.4 would amount to excess
allocation of coal beyond the consumption of 600 MW and,
therefore, would also not be in consonance with the policy and
purpose of captive mining for which the coal block was being
allocated. Reference was also made by the PIL to the
correspondence between Chhattisgarh Government and the
Chhattisgarh State Electricity Board (CSEB) with Respondent
No.4 on 1st April, 2007, 10th July, 2007 and 5th September,
2007 which showed that the power plant of Respondent No.4
as proposed was only of 600 MW capacity. The Petitioner
wrote another letter on 15th November, 2007 followed by
various personal visits to Respondent No.1.
15. On 22nd January, 2008 Respondent No.1 asked the
Petitioner and Respondent No.4 to attend a meeting on 30th
January, 2008 in the office of the Joint Secretary, (Coal) "to
discuss the issue relating to formation of Joint Venture
Agreement and for taking final decision relating to allocation
of Coal Block". Thereafter on 29th January, 2008 the Petitioner
and Respondent No.4 entered into a Joint Venture Agreement
(JVA) with a view to complying with the directions of
Respondent No.1. According to the Petitioner, this was done
on the assurance given over to it "that a necessary correction
shall be made and proportionate allocation should also be
made in favour of the parties on the basis of actual proposed
W.P.(C) Nos. 7135 of 2008 page 7 of 33
power generation capacity of their plants." Thereafter on 6 th
February 2008, the impugned letter was issued by the
Respondent No.1 in the manner indicated hereinbefore.
16. The Petitioner waited for several months and thereafter on
28th August, 2008 wrote to Respondent No.1 seeking redressal
of its grievance, for necessary correction to be made and a
revised allocation letter to be issued. Thereafter the present
petition was filed. On 3rd October 2008, an interim order was
passed by this Court to the effect that the "case of the
Petitioner pursuant to the communication dated 06.02. 2008
shall not be processed further." The said interim order has
continued since.
Applications to implead Respondents 5 and 6
17. CM No.5035 of 2009 was filed by the Petitioner on 15th
April 2009 soon after the hearing of the case on 25th March,
2009. PIL by this application sought to amend the writ petition.
It was stated in the said application, inter alia, as under:
"3. That it has come to the knowledge of the
Petitioner that the Respondent No.4 Company is
promoted by the family of Sh. Subodh Kant Sahai,
Union Minister of State for Food Processing
Industries (Independent Charge).
4. It is submitted that the said fact could only be
confirmed when the Respondent No.1 filed its
Counter Affidavit in another case being CWP
W.P.(C) Nos. 7135 of 2008 page 8 of 33
No.6449 of 2008 wherein Sh. Sudhir K. Sahai,
brother of said Sh. Subodh Kant Sahai has been
shown to attend a meeting of the Screening
Committee on 06.02.2008 as a Director of the
Respondent No.4 Company.
5. It is submitted that the representatives of the
Respondent No.4, with an object to avail favours
to the Respondent No.4, have been holding out
before the various Governmental authorities that
SKS stands for Subodh Kant Sahai.
6. That under the circumstances it is clear that the
Respondent No.1 & 2 are acting in a malafide and
partisan manner and in collusion with Respondent
No.4 allocated the coal blocks to Respondent No.4
under influence of Sh. Subodh Kant Sahai."
18. The Petitioner sought to insert paras 38a, 38b and 38c in
the writ petition and add grounds P and Q which read as under:
have acted malafide in allocating coal
blocks to Respondent No.4, under political
influence of Sh. Subodh Kant Sahai, the
Union Minister of State for Food
Processing Industries (Independent
Charge)."
Q. Because the Respondent No.4 and
proposed Respondent Nos.5 & 6 have
created a corporate veil around Respondent
No.4 to mislead and defraud the general
public and thereby gain an undue and
illegal advantage by influencing the
Respondent Nos.1 & 2 by not showing in
W.P.(C) Nos. 7135 of 2008 page 9 of 33
public documents that the proposed
Respondent No.6 is not a director of the
company but at the same time before
Respondent Nos.1 and 2 holding out that he
is a director of Respondent No.4 and as
such gain undue and malafide favours from
the said respondents."
19. On the above basis, the Petitioner sought to implead Mr.
Subodh Kant Sahai, as Respondent No.5 and his brother
Mr.Sudhir Kant Sahai, who is a Director of Respondent No.4,
as Respondent No.6.
20. Notice was issued on the above application on 17th April,
2009. Replies have been filed by the proposed Respondent
Nos. 5 and 6 to the aforementioned application.
21. CM No. 13945 of 2009 was filed by PIL for taking on
record an additional affidavit dated 27th October, 2009 to
include a reference to the minutes of the 36th meeting of the
Screening Committee held on 7-8th February, 2008 and 3rd
July, 2008 which considered the allocation of 23 coal blocks
earmarked for the non-power sector. Notice was issued on this
application as well on 7th November 2009.
Case of the Petitioner
22. Mr. Amarendra Sharan, learned Senior counsel for the
Petitioner submits that the central question involved is the
W.P.(C) Nos. 7135 of 2008 page 10 of 33
legality of the allocation made by Respondent No. 1 of a larger
percentage of the coal block in favour of Respondent No. 4.
The petitioner assails the decision, made by the impugned
letter dated 6th February 2008, as being discriminatory,
arbitrary and vitiated by malice in law and in fact. It is
submitted that PIL was compelled by the circumstances into
entering into a JVA reflecting the shares of the Petitioner and
Respondent No. 4 as 625 MW and 1000 MW. At the time of
signing the JVA the petitioner‟s representations dated 13th and
16th November 2007 were pending with Respondent No.1.
Therefore the signing of the JVA did not amount to waiver by
PIL of its right to challenge the allocation so made. In this
connection, reliance was placed on the judgments of
Basheshar Nath v. CIT AIR 1959 SC 149; Behram Khurshed
Pesikaka v. State of Bombay (1955) 1 SCR 613 and Olga
Tellis v. Bombay Municipal Corporation (1985) 3 SCC 545.
23. Mr. Sharan submitted that the allocation is not based on
relevant materials. Importantly, it is inconsistent with the
recommendation made by State Government on 16th June,
2007 in favour of the Respondent No. 4 for a thermal power
plant of 600 MW capacity. It is submitted that in all the
documents emanating from Respondent No. 4, the request was
for allocation of a coal block for its 600 MW thermal power
plant. At the presentation made by Respondent No. 4 before
the Screening Committee which met on 20th and 23rd June
W.P.(C) Nos. 7135 of 2008 page 11 of 33
2007, the capacity projected of the proposed thermal power
plant was of 600 MW only. Both in its letter dated 5th
September, 2007 addressed to Respondent No.1 and in the
MOU entered into with Respondent No. 3 the projected
capacity of the power plant of Respondent No. 4 was only 600
MW.
24. Thirdly, PIL contests the averment in the counter affidavit
of Respondent No.1 that by a letter dated 5th September 2007,
Respondent No. 3 had "superseded" its earlier
recommendation dated 18th June 2007 and indicated the
proposed end use plant capacity of Respondent No. 4 as 1000
MW. The petitioner relies on a response dated 22nd November
2008 received by it from Respondent No. 3 pursuant to an
application made by PIL under the Right to Information Act,
2005 („RTI Act‟) confirming that it had not made a further
recommendation after 18th June 2007. The petitioner PIL states
that in response to a query to it by Respondent No. 1 about the
status of preparedness of the various projects in the State of
Chhattisgarh, Respondent No. 3 had written to Respondent
No.1 on 5th September 2007 indicating inter alia the
information relating to Respondent No. 4 and stating in the
„remarks‟ column that an MOU had been signed by
Respondent No. 4 and Respondent No. 3 on 24th January 2001
for a 600 MW power plant. The proceedings of the meeting of
the Screening Committee, Respondent No. 2 herein, held on
W.P.(C) Nos. 7135 of 2008 page 12 of 33
13th September 2007 did not reflect that any representative of
the State of Chhattisgarh was present and in any event a
recommendation of such representative could not supersede
the MOU signed between Respondent Nos. 3 and 4. It is
submitted that by determining the proportionate share of
Respondent No. 4 on the basis that the capacity of its thermal
power plant was 1000 MW, Respondent No. 1 had committed
a manifest error.
25. It is further submitted by Mr. Sharan that the final
allocation order issued on 6th February, 2008 made no mention
of the objections raised by PIL in its letters of 13th and 16th
November 2007. In any event, the said order contained no
reasons why the share of PIL was reduced by nearly 13%.
Reliance was placed on the decisions in Union of India v. G.
Ganayutham (1997) 7 SCC 463 and Common Cause v. Union
of India (1996) 6 SCC 530.
26. Mr. Sharan submitted that the JVA has nothing to do with
the allocation of the coal block but only extraction of coal. It
was in the nature of a quasi-statutory contract. It is submitted
that the allocation finally made to Respondent No. 4, was
contrary to the recommendations of Respondent No. 3. With
Respondent No. 3 confirming that it had not reviewed its
recommendation made by its letter of 18th June 2007 the very
basis of the allocation made in the impugned letter dated 6th
W.P.(C) Nos. 7135 of 2008 page 13 of 33
February 2008 was erroneous. It is submitted that on account
of the illegal excess allocation of non-coking coal block by
Respondent No. 1 to Respondent No. 4 the rightful share of the
petitioner in non-coking coal block has been illegally curtailed.
This would result in its power plant not being operated to its
optimal capacity and might result in the failure of its project.
27. Lastly, in support of the plea of malafides both in law as
well as fact, it is pointed out by Mr. Sharan that Mr. Subodh
Kant Sahai (proposed Respondent No. 5), a Union Minister for
State in the Ministry of Food Processing Industries
(Independent Charge) wrote a letter dated 5th February 2008 to
the Prime Minister asking for his personal intervention as
regards the application made by Respondent No. 4 for two coal
blocks. Immediately on the next day, i.e., 6th February 2008,
the Prime Minister‟s Office (PMO) forwarded the said letter to
the Respondent No. 1 "for action as appropriate." It is
submitted that the speed with which on 6th February, 2008
itself the final letter of allocation was issued indicated the
extent to which Respondent No. 4 could bring influence to
have the allocation made in its favour. The Respondent No. 4
admitted that the Minister‟s brother Mr. Sudhir Kant Sahai
(proposed Respondent No. 6) was a Director in the company
and had in that capacity attended the meeting of the Screening
Committee on 7th February 2008. In support of the plea of legal
and factual malafides, reliance was placed on the decisions in
W.P.(C) Nos. 7135 of 2008 page 14 of 33
Express Newspapers Ltd. v. Union of India 1986 (1) SCC
133, Bahadursingh Lakhubhai Gohil v. Jagdishbhai M.
Kamala (2004) 2 SCC 65 and S.P. Kapoor v. State of H.P.
(1981) 4 SCC 716.
28. In the additional written submissions of the Petitioner, it is
contended that "SKS was imposed upon the Petitioner by the
Respondent No.1." It is also said that "Respondent No.1
threatened the Petitioner that if it did not sign the JVA it will
cancel the allocation as such the Petitioner had no choice but to
sign the JVA to avail its quota of coal." It is further submitted
as under:
"Sh. Sudhir K Sahai who has been designated as a
Director of Respondent No.4 though his name
does not appear in the returns filed before the
ROC, has been holding out to public at large and
Government authorities that SKS stands for
Subodh Kant Sahai."
29. The contention of Respondent No. 4 that SKS stands for
"Shree Krishna Structures" is dismissed of as "no good
inasmuch as that being so there was no need to change the
name to SKS in the year 2000. It is apparent that the said
change was effected only with a view to avail political benefits
by holding out that SKS stands for Subodh Kant Sahai."
W.P.(C) Nos. 7135 of 2008 page 15 of 33
Case of the Respondents
30. On behalf of Respondent No. 4, Mr. Kailash Vasdev,
learned Senior counsel submitted that as per the Mega Power
Policy of the Ministry of Power, Government of India, any
independent power project of 1000 MW and above would be
considered for exemption from customs duty. It is with this
view that Respondent No. 4 submitted a proposal to
Respondent No. 3 Government of Chhatisgarh on 24th October,
2006 for setting up of a thermal power plant of that capacity,
much before the advertisement inviting bids for the coal
blocks. Reference is made to the proposal dated 24th October,
2006 and the letter dated 11th December, 2006 of the Ministry
of Commerce and Industry, Government of India issuing an
IEM Code to Respondent No.4 for 1000 MW coal based
thermal power plant. On 13th December, 2006 Respondent No.
4 informed the Principal Secretary (Energy) of Respondent No.
3 that it had completed the preparation of the detailed project
report for setting up a power plant with a capacity of 500 x 2
MW (i.e 1000 MW). This was acknowledged on 6th January
2007 by Respondent No. 3.
31. Mr. Vasdev referred to the application of Respondent No. 4
in which it was indicated that an extent of 500 MW capacity
would be completed in the first phase within 24 months and
the remaining 500 MW within 24 months of the
commissioning of the first phase. It is pointed out that Clause
W.P.(C) Nos. 7135 of 2008 page 16 of 33
27 of the MOU dated 24th January, 2007 entered into between
Respondents No. 3 and 4 states:
"In the event of any increase in the installed
capacity as mentioned above or any expanded
capacity to the existing unit(s) under the Project, a
fresh MOU shall be signed for such increase in
the capacity as per prevailing policies of the
Government, at that time."
32. Further, in a power point representation made on 17th
August, 2007 to the Screening Committee, Respondent No. 4
stated that "600 MW IPP shall be expanded to 1100 MW in II
Phase."
33. It is submitted by Mr. Vasdev that the Petitioner had
accepted the offer made by Respondent No. 1 in the allocation
letter dated 6th February, 2008 and consequent thereto on 19th
May, 2008 a Joint Venture Company in the name of Fatehpur
Coal Mining Company Ltd. (FCMCL) was incorporated jointly
by the Petitioner and the Respondent No.4. Two board
meetings of the Directors of FCMCL were held on 28th May
and 31st July, 2008. Reference was made to the several steps
taken by Respondent No.4 including inviting tenders for an
EPC contract, getting land allotted by the Respondent No. 3
and allocation of water on 4th October, 2008. It is pointed out
that Respondent No.4 has accepted such allotment and
invested several crores of rupees for executing the power plant
W.P.(C) Nos. 7135 of 2008 page 17 of 33
project. It is pointed out that PIL has already been declared a
willful defaulter in a list prepared by the Reserve Bank of India
(RBI). PIL was refusing to provide bank guarantee to the Joint
Venture Company.
34. Mr. Vasdev refers to the statement made by the Auditors of
PIL in their report for the period ended 31st March 2007 to the
effect that PIL "has defaulted in repayment of dues to financial
institutions, banks and debenture holders aggregating to Rs.
40,533 lakhs (excluding interest). The annexure to the report
also lists out the amounts due on account of excise duty, entry
tax, income tax and energy cess. It is contended that PIL can
"never raise the required resources in view of their past track
record and financial position of the company. Hence, they are
trying to garner more and more coal blocks and at the same
time resorting to unfair practices to stall the process of
allotment to other industries."
35. Finally, it is pointed out that the JVA was executed on 29th
January, 2008, the final allotment letter was issued on 6 th
February, 2008 and the present writ petition was filed only on
29th September, 2008. The allegation of malafides is denied.
36. Mr. Arvind Nigam, Senior Advocate appeared on behalf of
the proposed Respondent No. 5 vehemently denied the
allegations stating that the very basis of the inference that the
W.P.(C) Nos. 7135 of 2008 page 18 of 33
initial SKS stand for Subodh Kant Sahai was false since those
initials stood for Shree Krishna Structures which had initially
been promoted as a private limited company in April, 1995 by
Sri Anil Gupta and Deepak Gupta, both of whom were
devotees of Lord Krishna. Respondent No. 5 categorically
stated that he had nothing to do with the Respondent No. 4
company. As regards the letter dated 5th February, 2008 written
by the proposed Respondent No. 5 and the letter dated 6th
February, 2008 from the PMO to Respondent No.1 it is stated
as under:
"It is most respectfully submitted that replying
Respondent being a public figure and
representative from Parliament Constituency in
the State of Jharkhand is naturally concerned with
development of his constituency. SKS Ispat &
Power Ltd. proposed to establish Steel Plants in
the State of Jharkhand and Chhattisgarh. The
replying Respondent on considering of potential
development and scope of generation of
employment in the State had requested that the
application filed by the SKS Ispat & Power for
allotment of Coal Blocks for proposed Steel
Plant in the State of Jharkhand be duly
considered." (emphasis supplied)
37. Mr. Nigam pointed out that in view of the fact that the
recommendation was not for allocation of coal blocks for the
power project of SKS in Chhattisgarh but for its steel plant in
Jharkhand, the allegations made by PIL were wholly
W.P.(C) Nos. 7135 of 2008 page 19 of 33
misconceived. The letter written on 5th February, 2008 was
considered by the 36th Screening Committee which was
considering allocation of coal blocks for non-power sectors.
The decision to jointly allocate the Fatehpur coal block to both
PIL and Respondent No. 4 had already been taken by the
Screening Committee at the meeting held on 13th September,
2007 and this was communicated to both of them on 6th
November, 2007 long before the letter dated 6th February,
2008. It is reiterated that PIL‟s allegation that Respondent No.
4 was promoted by the family of Respondent No.5 was
baseless and malicious and the petition ought to be rejected
with exemplary costs.
38. Appearing for Respondent No.1, Ms. Anjana Gosain,
learned counsel referred to the detailed affidavit filed by it. She
also referred to a subsequent additional affidavit dated 27th
October 2009, in which it was clarified by Respondent No. 1
that the statement that Respondent No. 3 had by its letter dated
5th September 2007 "superseded" its earlier decision dated 18th
June 2007 was an error. It was clarified that Respondent No. 3
had by its letter dated 5th September 2007 furnished a status of
preparedness of the end use projects of applicants and "the
decision to recommend 1000 MW for the end use plant of
Respondent No.4 is based on the recommendations made by
the State Govt. and the capacity indicated in the application of
Respondent No. 4." Ms. Gosain submitted that no illegality
W.P.(C) Nos. 7135 of 2008 page 20 of 33
had been committed as the joint allocation was strictly in terms
of the policy. PIL and Respondent No. 4 had formed a joint
venture company preceded by a JVA incorporating the very
percentages of allocation that had been offered to them jointly
by the letter dated 6th November 2007. The impugned letter
dated 6th February 2008 was merely consequential and did not
suffer from any illegality. She denied that any pressure was
brought upon PIL to agree to the JVA as alleged.
39. Respondent No. 3 has filed a counter affidavit reiterating
that its representative was present at the meeting of the
Screening Committee on 13th September 2007. It confirmed
having sent the letter dated 5th September 2007 giving the
status of preparedness of the end use projects as requested by
Respondent No. 1 on 2nd August 2007.
PIL under no compulsion to enter into JVA with SKS
40. The entire thrust of PIL‟s argument has been that it was
arm-twisted into signing a JVA with Respondent No. 4 and
that it was compelled to follow that up with forming a joint
venture company with Respondent No. 4. Yet, till date PIL has
not withdrawn from the joint venture and the joint venture
company FCMCL continues with both PIL and Respondent
No.4 holding the same equity shareholding which mirrors the
share of their coal allocation. This factor is significant in
evaluating PIL‟s submissions about the unfairness of the coal
W.P.(C) Nos. 7135 of 2008 page 21 of 33
allocation made by the impugned letter dated 6 th February
2008.
41. The second factor is that the basis on which a joint
allocation was made by Respondent No. 1 to both PIL and
Respondent No. 4 is the guidelines issued by Respondent No. 1
for allocation of captive coal blocks. Para 7 of the guidelines
which are relevant for the present case reads as under:
7. Allotment of Captive blocks to consortium
of group of companies
(i) If requirement of coal by an applicant
does not match with the reserves in a natural
block then clubbing of requirements may be
resorted to and in case a number of applicant
companies form a consortium for utilization
of a block for their captive use, the same may
be considered for allocation under a legally
tenable arrangement.
(ii) More than one eligible and deserving
companies will be allowed to do captive
mining of coal by forming a joint venture
coal mining company. The constituent
applicant companies would hold equity in the
joint venture company in proportion to their
assessed requirement of coal and the coal
produced would be exclusively consumed in
their respective end use projects. Distribution
of coal would be in proportion to their
respective assessed requirements.
(iii) One or more companies (to be called
leader companies) from amongst the
W.P.(C) Nos. 7135 of 2008 page 22 of 33
selected, could be allowed to do mining of
coal in one or more captive blocks and the
other companies (to be called associate
companies) would get coal from the captive
block in proportion to their assessed
requirements. The local Coal India subsidiary
could facilitate this arrangement by taking a
nominal service charge. Leader companies
will deliver coal to associate companies at a
transfer prices to be determined by the
Central Government."
42. The above guidelines have not been challenged by PIL. On
the other hand, when PIL applied on 12th January 2007 for
allocation of a captive coal block pursuant to the advertisement
issued by Respondent No. 1 on 6th November 2006, it was
aware that the guidelines would apply. Consistent with the
above guidelines both Respondent No. 4 and PIL were
informed by Respondent No. 1 on 6th November 2007 that it
was proposed to make a joint allocation to both of them. The
letter dated 6th November, 2007 clearly indicated the proposed
capacity of the thermal power plant of Respondent No. 4 as
1000 MW and that of PIL as 625 MW. It also clearly indicated
the proportional share of coal reserves as 73.85 MT for
Respondent No. 4 and 46.15 MT for PIL.
43. PIL wrote two letters dated 13th and 16th November 2007
raising the plea that Respondent No. 4 was proposing to set up
a 600 MW Power Plant and that it was on that basis that the
W.P.(C) Nos. 7135 of 2008 page 23 of 33
Screening Committee and Respondent No.3 had proceeded. It
asked that the coal allocation be made in the ratio of 625 MW:
600 MW. Having taken that stand, when it was called by
Respondent No. 1 by the letter dated 22nd January 2008 to the
negotiating table PIL gave up its opposition. This is apparent
from the fact that it entered into the JVA on 29th January 2008.
On that basis the joint allocation was made on 6th February
2008.
44. A copy of the Joint Venture Agreement dated 29th January,
2008 entered into between PIL and Respondent No. 4 was
placed on record. In the preamble, it is clearly stated as under:
"The mineable capacity of the total geological
reserves as assessed by CMPDIL, the
proportionate share of reserves allocated to the
parties is indicated under :
Block Fatehpur
Geological 120 Million Tons
Reserve
Tentative 3 Million Tons per
Mine Annum
Capacity
Name of the Coal requirement for Proportionate
Company 30 Years (Mill Tons) Share of
Reserves of Coal
(Mill Tons)
SKS Ispat 4.6X30=138 Mill 73.85
and Power Tons for 1000 MW
Limited Independent Power
Plant
Prakash 2.875X30=86.25 Mill 46.15
Industries Tons for 625 MW
Limited Captive Power Plant.
In case of any amendment/change in sharing of
coal ratio, by Ministry of Coal in future, in such
case the JVA shall be amended accordingly."
45. The above table is a virtual reproduction what was
W.P.(C) Nos. 7135 of 2008 page 24 of 33
contended in the letter dated 6th November, 2007. For good
measure in Clause 1 (A) it was stated as under:
1 (A) AGREEMENT ON OPTION TO CARRY
OUT MINING: The parties have agreed to chose
the Option-I as stated in the annexure-I, whereby
the mining of allotted block shall be carried out in
a joint venture by the parties through a special
purpose vehicle company (hereinafter referred to
as "Joint Venture Company" and/or "JVC")
wherein both the parties shall hold equity stake and
management participation. The production from
the mine shall be shared in proportion to the
assessed requirements at the time of allocation or
amended from time to time by the Ministry of
Coal, Govt. of India as stated above. The equity
shares shall also be held in proportion to the
assessed requirement."
46. PIL did not protest at all at that stage. It is impossible to
believe that there was compulsion on PIL to enter into the
above JVA. On the basis of the said JVA a letter was
addressed jointly by PIL and Respondent No. 4 to Respondent
No.1 on 29th January 2008 enclosing a copy of the said
agreement. The said letter, signed by both PIL and SKS, reads
as under:-
"The Under Secretary CA-1 29th January, 2008
Government of India
Ministry of Coal
Shastri Bhawan
New Delhi 110001.
Sub: Allotment of Fatehpur Non-Coking Coal
Block in the State of Chhattisgarh-Joint
Venture Agreement thereof
W.P.(C) Nos. 7135 of 2008 page 25 of 33
Dear Sir,
This is with reference to your letter
No.38011/2007-CA-I dated 22nd January, 2008
vide which you have called a meeting on 30 th
January, 2008 at 11.00 a.m. in the Chamber of
Joint Secretary (Coal) to discuss the issue relating
to formation of Joint Venture Agreement for the
allotted coal block.
In this regard, we would like to inform your
goodself that a Joint Venture Agreement has been
executed on 29th January, 2008 as per the copy of
Joint Venture Agreement in original is enclosed
herewith for your kind perusal and further action
please.
Thanking you,
Yours Truly
For Prakash Industries Ltd. for SKS Ispat &
Power Ltd.
Sd. Sd.
(G.L. Mohta) (Ravindranath Ratho)
Director Director "
47. On the basis of the above JVA, the coal block allocation
was made by Respondent No.1 jointly to PIL and SKS by the
impugned letter dated 6th February 2008, the contents of which
have already been extracted. Not only did PIL not protest at
that stage but it went ahead and formed the joint venture
company with SKS on 19th May 2008. The questioning of the
allocation was done much later on 28th August 2008.
W.P.(C) Nos. 7135 of 2008 page 26 of 33
48. In the circumstances, this court holds that there is
absolutely no basis for the challenge by PIL to the validity of
the coal block allocation made by Respondent No. 1 by the
impugned letter dated 6th February 2008. There is no merit in
the submission regarding PIL having been compelled to enter
into the JVA. No illegality was committed by Respondent No.
1 in issuing the above letter. It was consistent with policy and
guidelines which were known to both PIL and Respondent No.
4. The series of subsequent events completely demolishes the
case of PIL that it was arm-twisted into entering into a JVA
with Respondent No.4.
Proceedings before the Screening Committee
49. This Court is also not impressed with the submission on
behalf of PIL that the 35th Screening Committee which
considered the applications of the Petitioner and Respondent
No. 4 on 13th September 2007 did not have the full facts before
it. In the counter affidavit filed by the Respondent No.1 in para
10, it is stated as under:
"10. Based on the data furnished by the applicants,
and the feedback received from the State
Governments and the Ministry of Power and
CMPDIL, the Screening Committee assessed the
applications having regard to matters such as
techno-economic feasibility of end-use plant, past
track record in execution of projects, financial and
technical capabilities of applicant companies,
recommendations of the State Governments and
W.P.(C) Nos. 7135 of 2008 page 27 of 33
the Administrative Ministry concerned. Taking
cognizance of the advice given by the Ministry of
Power that in view of the capacity constraints in
transmission network, power producers should
limit plant capacity to 500 to 1000 MW, the
Committee agreed that this should be taken as the
guiding principle. Therefore, 1000 MW was taken
as the maximum limit for allocation of coal blocks
and the shares of geological reserves in the block,
in case the capacity indicate in the application is
higher than the maximum limit suggested by
Ministry of Power. In view of large number of
applications and limited number of blocks on offer,
the Committee felt that it would be reasonable to
have a satisfaction level in the range of around 40
to 70% to the extent feasible."
50. This Court is unable to find any basis for the criticism of
the manner in which the Screening Committee processed the
applications and took its decisions. There was nothing arbitrary
or irrational about the decision to make a joint allocation to
PIL and SKS in the ratio of their respective power plant
capacities. A careful examination of the chart enclosed with
the letter dated 5th September 2007 from Respondent No. 3 to
Respondent No. 1 shows that in Column No. 3 which is titled
"proposed capacity of end use plant" the figure mentioned
against the name of SKS at Sl. No.173 is 1100 MW. In
Column No. 7 titled "Total requirement (as per feedback
form)" the figure indicated is 1000 MW. The last Column
Remarks no doubt mentions only the MOU dated 24 th January
W.P.(C) Nos. 7135 of 2008 page 28 of 33
2007 but what is not mentioned there is that by that date the
Respondent No. 4 had submitted a proposal (on 24th October
2006) to Respondent No. 3 for a 1200 MW power plant and it
had on 11th December 2006 been issued an IEM Code by the
Ministry of Commerce for a 1000 MW coal based thermal
power plant. In addition Respondent No. 3 confirms that its
representative was present at the meeting of the 35 th Screening
Committee on 13th September 2007.
51. Therefore, no fault can be found with the decision of the
Screening Committee to make a joint allocation to PIL and
Respondent No. 4 in the ratio of their respective power plant
capacities. The parties have acted upon the said decision and
taken several steps pursuant thereto. It is now not possible to
accept the case of PIL to issue directions to the Respondents to
go back to an anterior stage and make allocation of the coal
blocks on the basis of recommendation made by the
Respondent No. 3 on 18th June, 2007.
No basis for the case of malafides
52. The above two being the only prayers made in the writ
petition even after its amendment, there is no scope for
examining any other issue. However, since extensive
arguments were advanced by Mr. Sharan learned senior
counsel for the Petitioner that the allocation in favour of
Respondent No. 4 was malafide, this court is required to deal
W.P.(C) Nos. 7135 of 2008 page 29 of 33
with that issue as well.
53. The basis for the claim of malafides is that according to
PIL, Respondent No. 4 has been promoted by the family of
proposed Respondent No. 5 who is a Minister of State in the
Union Cabinet and that Respondent No. 5 went out of his way
to get a decision in favour Respondent No. 4 in which his
brother, the proposed Respondent No. 6, was a Director.
54. After examining the records and considering the
submissions of the learned Senior counsel for the Petitioner,
this Court is of the view that PIL has proceeded on a wholly
erroneous premise. It is clear that the initials `SKS‟ in the
name of Respondent No. 4 do not stand for Subodh Kant
Sahai. With Respondent No. 4 itself explaining the history of
its formation, this allegation can only be termed a product of
the fanciful imagination of PIL. Further, not a scrap of paper
has been produced by PIL to prove its claim that Respondent
No. 4 was promoted by the family of Respondent No. 5. This
has turned out to be a preposterous claim made on affidavit by
PIL without any sensible responsibility.
55. The other plank of the plea of malafides is the letter dated
5th February 2008 written by the proposed Respondent No. 5 to
the Prime Minister, the complete text of which reads as under:
"05th February, 2008
W.P.(C) Nos. 7135 of 2008 page 30 of 33
Respected Dr. Sahab
I would like to bring to your kind notice that M/s SKS
Ispat and Power Limited have applied for two Coal
Blocks for their Steel Plants in the State of Chattisgarh
and Jharkhand. A brief note in this regard is enclosed.
I shall be grateful for your personal intervention in this
matter.
Yours sincerely,
Sd./-
(Subodh Kant Sahai)"
(emphasis supplied)
56. It does not take much to realize that the above letter has
nothing to do with the allocation of coal blocks for a power
project. It specifically mentions allocation of coal blocks for
steel plants to Respondent No. 4. Therefore, nothing also turns
on the subsequent letter dated 6th February 2008 written by the
PMO to the Coal Ministry. The decision to make the allocation
to PIL and Respondent No. 4 jointly was made at the 35th
meeting of the Screening Committee on 13th September 2007
long before the above letter dated 5th February 2008.
57. The presence of proposed Respondent No. 6 at the meeting
of the 36th Screening Committee held on 7th February 2008 is
made much of by PIL. But that meeting was not about making
allocations to the power sector at all. The minutes of the said
meeting show that it was concerned with allocations to the
non-power sectors. It could not have influenced the decision to
allocate coal blocks jointly to PIL and Respondent No. 4,
W.P.(C) Nos. 7135 of 2008 page 31 of 33
which decision in any event was already taken at the previous
meeting of the Screening Committee held on 13th September
2007.
58. The above facts show that PIL has set itself on a hopeless
task of trying to join completely unconnected events to bring
about a story of malafides. Not willing to accept that it has
nothing to show for its allegations PIL has desperately
persisted with this misconceived line even in its written
submissions. PIL has needlessly dragged Respondent Nos. 5
and 6 into this litigation knowing fully well that it would be
unable to substantiate its case against them.
59. What is also a matter for concern is that PIL has managed
to have an interim order in its favour for over eighteen months
on the basis of averments which it has been unable to prove.
The inescapable conclusion is that this petition is nothing but
an abuse of the process of law. This case has consumed several
extended hearing days thus resulting in wastage of valuable
time of the court.
Conclusion
60. For the above reasons, this court concludes that the present
petition is an instance of a vexatious litigation that has wasted
the precious time of the court. It should be dismissed with
exemplary costs.
W.P.(C) Nos. 7135 of 2008 page 32 of 33
61. Accordingly, the writ petition and pending applications are
dismissed with costs of Rs. 2.5 lakhs out of which Rs. 50,000/-
will be paid by the Petitioner to Respondent Nos. 1 & 2 jointly
and Rs. 50,000/- each to Respondent Nos. 3, 4 and proposed
Respondent Nos. 5 and 6 respectively within a period of four
weeks from today. The interim order stands vacated.
S. MURALIDHAR, J
MAY 18, 2010
bs
W.P.(C) Nos. 7135 of 2008 page 33 of 33
