Lloyds Steel Industries Ltd. vs Uoi & Ors.
2012 Latest Caselaw 6488 Del

*      IN THE HIGH COURT OF DELHI AT NEW DELHI

                   Judgment reserved on:          02.02.2012

%                  Judgment delivered on:         06.11.2012


+      W.P.(C.) No.9033/2008 and C.M. No. 17353/2008


       LLOYDS STEEL INDUSTRIES LTD.                ..... Petitioner
                     Through: Mr. Sandeep Sethi, Senior Advocate
                              with Mr. Ankur S. Kulkarni,
                              Mr.Nirnimesh Dube and Ms. Jyoti
                              Gupta, Advocates.

                        versus

       UOI & ORS.                                              ..... Respondents
                                 Through:   Mr. S. K. Dubey, Mr. Vivek
                                            Pipersenia and Mr. Vibhor Gupta,
                                            Advocates for the respondent/UOI.
                                            Mr. T.K. Ganju, Senior Advocate
                                            with Mr. Gaurav Juneja, Advocate for
                                            the respondent No. 5.
                                            Mr. C.V. Singh, Senior Advocate
                                            with Ms. Surekha Raman and Mr.
                                            Varun     Singh,      Advocates     for
                                            respondent nos. 7 and 9.
                                            Mr. Rakesh Tiku, Senior Advocate
                                            with Mr. Devashish Mishra and
                                            Mr.Atul Pandey, Advocates for
                                            respondent no.8.

       CORAM:
       HON'BLE MR. JUSTICE VIPIN SANGHI

                                   JUDGMENT

VIPIN SANGHI, J.

1. By the present writ petition, the petitioner impugns the

recommendation of the Screening committee appointed by the Respondent

No.1/Union of India through the Secretary, Ministry of Coal, dated

03.07.2008. The said recommendation provided for the allocation of coal

block to various parties, viz. M/s Ispat Industries Ltd.(Ispat)/respondent

no.5, M/s ESSAR Steel Ltd.(Essar)/respondent no.6, M/s Mukund Ltd.

(Mukund)/ respondent no.7, M/s IND Synergy Ltd.(IND Synergy)/

respondent no.8, M/s Prakash Industries Ltd. (Prakash), M/s MESCO Steel

Ltd. (Mesco), M/s Jindal Steel Ltd. (Jindal), M/s Bhushan Steel & Strips

Ltd. (Bhushan) and M/s Monnet Ispat Ltd (Monnet). The Petitioner herein

also challenges the consequential order of Central Government dated

07.10.2008, making the allotment partly at variance with the

recommendation of the Screening Committee including to M/s Kalyani

Steels Ltd. (Kalyani)/respondent No.9.

2. The Petitioner also prays for a direction to the Respondents not to

take any action pursuant to the impugned recommendation of the Screening

Committee and the allocation letter issued by Coal Ministry/ Respondent no.

1 herein.

3. Respondent No. 1 (Govt. of India, Ministry of Coal) had advertised

for the allocation of 38 coal blocks on 06.11.2006 to the companies engaged

in the generation of power, production of iron, steel or cement. A Screening

Committee was also appointed by the Cabinet of Ministers to scrutinize the

applications for allocation of coal blocks. The Screening Committee

prescribed a ceiling on projected capacity at 2 Million Tones Per Annum

(MTPA). The Screening Committee formulated a set of guidelines and rules

for the allocation of coal blocks. The said guidelines provided the basis on

which priority was to be accorded for allocation of coal blocks. The

guidelines formulated were as follows:

"

 Status (stage) level of progress and state of preparedness of projects;

 Networth of the applicant company (or in the case of a new SP/JV, the networth of their principals);

 Production capacity as proposed in the application;

        Maximum recoverable        reserve as     proposed    in   the
         application;

 Date of commissioning of captive mine as proposed in the application;

 Date of completion of detailed exploration (in respect of unexplored blocks only) as proposed in the application;

 Technical experience (in terms of existing capacities in coal/lignite mining and specified end use);

 Recommendation of the Administrative Ministry concerned;

 Recommendation of the State Government concerned (i.e. where the captive block is located);

 Track record and financial strength of the company.

 Preference will be accorded to the power and the steel sectors. Within the power sector also, priority shall be accorded to projects with more than 500 MW capacity.

Similarly, in steel sector, priority shall be given to steel plants with more than 1 million tonne per annum capacity." (emphasis supplied) The aforesaid guidelines were modified to a limited extent, i.e., the capacity of steel plants to be given priority was reduced from 1 MTPA to 0.5 MTPA.

4. The petitioner claims to be engaged in the manufacturing of iron and

steel and for that purpose claims to have established an integrated steel plant

at Wardha, Maharashtra. The petitioner made an application on 10.01.2007

for the allocation of a captive coal block in Behraband North, Madhya

Pradesh. The petitioner submits that its application was scrutinized by the

ministries of Coal and Steel as well as by the State Govt. of Maharashtra.

The petitioner submits that the Govt. of Maharashtra on 15.06.2007

recommended the name of the petitioner company for the allocation of coal

block in Khapa and Khapa Extension, Gond Khairi and Dahe Gaon

Makardhokra-IV. However, the application of the petitioner was rejected by

the Screening Committee. The petitioner claims that the names of ineligible

and undeserving applicants were recommended by the Committee vide the

impugned order dated 03.07.2008.

5. The petitioner challenges the aforesaid allocation on a number of

grounds, which are as follows:

a) The primary ground of the petitioner is that the allocation is arbitrary

and illegal per-se. The petitioner herein relies upon the order of the

Central Government dated 07.10.2008 wherein the allocation was

changed, and Kalyani was included whose case was not even

recommended by the Screening Committee.

b) It is also the petitioner's case that the Screening Committee's action is

not in conformity with the rules of fair play and natural justice as no

reasons are given either for rejecting the petitioner's application or for

allocation to the allotees. It is submitted that the records produced by

the respondents also do not contain any reasons whatsoever for the

impugned actions. As per the petitioner, the recommendation of the

Screening Committee merely states that it has assessed the

applications having regard to certain matters, but there is no mention

as to how the petitioner and other applicants scored on these

parameters. The petitioner relies on the judgment of the Supreme

Court in Sandur Manganese and Iron Ores Limited Vs State of

Karnataka & Ors., (2010) 13 SCC 1, wherein it was observed that

"Although the summary of applications were made, the Government

gave no clear reasons to show as to why certain applicants were

preferred over the other and that there is no plausible reason as to

why the application of the Petitioner was not considered favourably."

The Supreme Court in that case quashed the order passed by the

Central Government.

The Petitioner also relies on the decision rendered in Mohinder

Singh Gill & Anr. Vs The Chief Election Commissioner, New Delhi

& Ors., (1978) 1 SCC 405, wherein it was observed that when a

statutory functionary makes any order based on certain grounds, its

validity must be judged by the reasons so mentioned and cannot be

supplemented by fresh reasons in shape of an affidavit or otherwise.

c) The petitioner asserts that the allocations were made in contravention

of the guidelines and that the coal blocks were allotted to parties who

are not even eligible. The petitioner herein relies on the minutes of the

36th meeting of the Screening Committee. As per the petitioner, the

coal blocks have been allotted to the undeserving, ineligible and non-

applicant companies, as the projected capacity of ISPAT and ESSAR

is 3.6 and 3.9 MTPA respectively which is more than the capacity

prescribed in the guidelines, i.e., 2.00 MTPA. Hence both the parties

were ineligible as per the norms prescribed by the Ministry.

Moreover, the 2 companies viz. Kalyani and Mukund have been

clubbed together as one, but they will be allotted individual shares.

The petitioner contends that the modified guidelines followed for the

allocation were in variance with the advertisement for allocation of

coal blocks, and these modified guidelines were not even disclosed to

the applicants.

(d) The petitioner also contends that the Hospet Steels Ltd. (Hospet)

which is a joint venture of Mukund & Kalyani is a non-applicant,

whereas, as per the guidelines, if any group of companies or

consortium whose individual existing capacities are ineligible, they

should make a viable joint venture to attain the eligible capacity, and

the application is to be submitted in the name of joint venture. This

has not been done.

(e) The petitioner also claims that the Coal Ministry has acted arbitrarily

and has by-passed the Screening Committee by changing the

allotment and the procedure criteria. The application of IND. Synergy

was favourably considered in ignorance of the fact that the company

does not fulfil the requirements. The Coal Ministry in order to allot

coal block to Kalyani changed the criteria completely, and by-passed

the recommendation of the Screening Committee. The grievance of

the petitioner is that Kalyani - which was not even considered by the

Screening Committee, has been granted 9.7 million tonnes of coal.

6. On the other hand, the collective submission of the Respondents is

that the eligibility criteria fixed was at 0.3 MTPA for the production of

sponge iron through an existing blast furnace route, and 0.5 MTPA for the

production of pig iron. But the petitioner's plant was not operating through

Blast furnace route. It was operating through direct reduced iron route,

which makes the petitioner ineligible. The proposed capacity of the

petitioner is 0.4 MTPA, which makes it ineligible to be allotted any coal

mine. The information provided by the petitioner is false because, as per the

petitioner, it has an existing capacity of 0.6 MTPA and proposed capacity of

0.4 MPTA. But he did not disclose that the existing capacity of 0.6 MPTA is

for non-cooking coal, which cannot be considered under the eligibility

criteria. The petitioner qualifies neither on the original policy guidelines nor

on the revised policy guidelines because, as per the original guidelines, in

steel sector, priority was required to be given to steel plants with more than

1 MTPA capacity and after revision of the criteria, the same was reduced to

0.5 MTPA. However, the proposed capacity disclosed by the petitioner in

the application for blast furnace is only 0.4 MTPA. It was also the

contention of the respondents that the petitioner has no locus standi to

challenge the allocation of coal block to the respondents as the petitioner has

not been able to set up the steel plant, nor utilize it till date. Since the

petitioner has itself not fulfilled the eligibility criteria, it cannot have any

legitimate expectation for a favourable consideration.

7. It was also the contention of the respondents that the petitioner has

been declared as a sick company and is, therefore, not eligible for applying

for any mining leases. Rather it is admitted by the petitioner that it is a sick

industry and has outstanding liabilities and dues of more than Rs.1427.97

crores. It also has an interest liability of about Rs.383 crores till 2008 and

its reference is also pending before the BIFR. A bare perusal of the

application made by the petitioner clearly shows that they have deliberately

not disclosed the profits for the years 2003-2004 and 2005-2006 and have

also not disclosed their net worth as on 31 st March, 2006. The petitioner has

also failed to disclose before this Court the declining financial net worth of

the petitioner company. Moreover, it is evident from the guidelines for

allotment that sound financial condition of the company was one of the

primary requirements for the allotment of coal block as the entire process

requires about Rs.100 crores worth of investment.

8. It is submitted that Mukund and Kalyani have been clubbed together

as they have common manufacturing unit at Hospet and not because of

favouritism. The Respondents also contended that as far as the case of

ISPAT and ESSAR are concerned, Para 12 of the Minutes of 36th Meeting of

the Screening Committee clearly show that even if the existing or proposed

capacity is more than 2 MTPA for steel, there will be a ceiling cap up to 2

MTPA for steel with regard to the allotment of coal to different applicants.

9. The respondents contend that the procedure adopted by the Screening

Committee is rational and is based on material reasons, and that the

petitioner herein has failed to prove that he is better placed than any other

allottee.

10. As far as the petitioner's contention with regard to Hospet's

application is concerned, it is pertinent to note that Hospet has jointly been

promoted by Mukund and Kalyani to manage, supervise and operate the

production sharing agreement of the blast furnace at Ginigera. Hospet

neither owns any manufacturing facility nor is the applicant for coal block

allocation. In the said composite steel making facility at Ginigera, Mukand

(Respondent No. 7) has investment of 580.62% and Kalyani (Respondent

No. 9) has investment of 41.38%. The composite steel making facility at

Ginigera has two 250M3 each Blast Furnaces (BFs) and one 350M3 BF.

Thus, the total steel production capacity at Ginigera is 700,000 MT per

annum. Hospet only supports production, planning, administrative needs

and delivery of the finished products, i.e., Blooms, Billets and Rounds to

Mukund and Kalyani in their agreed production ratio of 580.62% and

41.38% respectively. Therefore, there is no relation whatsoever, of Hospet

with the application filed by the Respondent No. 7 or 9 for allocation of

Coal.

11. After a perusal of the record and having considered the submissions

of the parties, I find no merit in this petition and I am inclined to dismiss the

same. It is clear that the petitioner is ineligible for the allotment of any coal

block, because priority was to be given to those projects in the steel sector,

whose capacity was more than 1 MTPA. After revision of the said criteria,

the preferential criteria were reduced to 0.5 MTPA. This makes the

petitioner ineligible for allotment on the original policy guidelines as well as

the revised policy guidelines, as the proposed capacity disclosed by the

petitioner in the application is only 0.4 MTPA. The petitioner has shown an

existing capacity of steel plant at 0.6 MTPA and a proposed capacity of 0.4

MTPA. But it is noteworthy that the petitioner's existing capacity is for non-

cooking coal, which cannot be considered for the purpose of this allotment,

as the allotment upon the petitioner's application was to be made for

cooking coal. Hence, the proposed capacity of 0.4 MTPA can only be

considered which makes it ineligible for allotment.

12. Secondly, the petitioner is a sick industrial company and has

outstanding dues of more than Rs.1427.97 crores and an interest liability of

about Rs.383 crores. It seems that the petitioner has deliberately not

disclosed the profits for the year 2003-2004 in its application. Since the

petitioner is not eligible for allotment of mining rights, in my view, the

petitioner has no locus standi to assail the allotment made to other eligible

applicants. At the petitioner's behest, this Court is not obliged to examine

the issue whether the allotment made to the other eligible applicants is good

or bad. It appears, no other eligible applicant has assailed the allotment

made by the respondent authorities till date. However, I am not inclined to

delve into the justifiability or legality of the allocations made to the other.

13. There is another basic infirmity in the petitioner's case. The case of

the petitioner is that the State of Maharashtra had recommended its case for

allotment of a coal block in Maharashtra. However, the application made by

the petitioner was for allotment of a coal block in Madhya Pradesh at

Behraband North. One fails to understand how a recommendation made by

the State of Maharashtra in respect of coal blocks at Khapa and Khapa

Extension, Gondkhairi and Dahl Gaon, Makardhokra- IV could be of any

avail to the petitioner, when its requirement was for a coal block at

Behraband North in Madhya Pradesh.

14. Yet another aspect that I may take note of is even though the

petitioner's challenge adversely affects various entities including Prakash,

Jindal and Monnet, the petitioner has not impleaded them as party

respondents. The present petition would also liable to be dismissed on

account of non impleadment of necessary parties.

15. As far as the petitioner's submission of favouritism by the Screening

Committee is concerned, it appears that Mukund and Kalyani have been

clubbed together not because of any favouritism but because they have a

common manufacturing facility at Hospet.

16. Moreover, it is noteworthy that Para 12 of the Minutes of 36 th

Meeting of the Screening Committee clearly show that even if the existing

or proposed capacity is more than 2 MTPA for steel, there will be a ceiling

cap up to 2 MTPA for steel with regard to the allotment of coal to different

applicants. Hence the fact the ESSAR and ISPAT have an existing or

proposed capacity of more than 2 MTPA is of no relevance here.

17. Thus on a consideration of the entire material so placed, I am of the

view that there is no merit in this petition for the aforesaid reasons.

18. Assuming that there is some force in the petitioner's submission with

regard to failure to observe natural justice, the question arises whether such

failure has resulted in any prejudice being caused to the petitioner.

19. The Supreme Court in S.L Kapoor vs. Jagmohan and Ors., AIR

1981 SC 136, has held that although non-observance of the principles

of natural justice is itself prejudicial, but the failure to observe the same does

not at all matter, if, the observance of natural justice would have made no

difference, the admitted or indisputable facts speak for themselves; where on

the admitted or indisputable facts only one conclusion is possible; and under

the law only one penalty is permissible. The Court may not issue its writ to

compel the observance of natural justice, not because it approves the non-

observance of natural justice, but because Courts do not issue futile writs.

However, at the same time, it will be a pernicious principle to apply in other

situations where conclusions are controversial, however, slightly, and

penalties are discretionary.

20. Similar view was expressed by the Supreme Court in case of Mohd.

Sartaj & Anr. vs State of U.P. & Ors., 2006 (2) SCC 315, wherein it was

held that no prejudice had been caused to the appellants by not serving a

notice of hearing before issuing the order of termination. The appellant in

that case was terminated from employment without compliance of the rule

of natural justice. However, it was held that appellant did not possess the

required qualifications and hence he did not have any right to hold the post.

Hence, no hearing was required. Considering the above views, it is apparent

that the petitioner is, in any event, not prejudiced by the non-compliance of

rules of natural justice as the petitioner is not qualified for any allotment.

21. As far as the petitioner's reference to Sandur Manganese (supra) is

concerned the same, in my view, has no application herein. In the said case,

the question before the Supreme Court was not with regard to the allotment

to an applicant for mining lease. The only fact involved in this case was

whether the recommendation made by the Chief Minister was contrary to the

provisions of Section 11 of the Mines and Minerals Act or to Rules 59 and

60 of Mineral Concession Rules. Whereas in the present case, there is no

such challenge made by the petitioner.

22. For the aforesaid reasons, I find no merit in the writ petition and the

application and dismiss the same leaving the parties to bear their respective

costs.

(VIPIN SANGHI) JUDGE NOVEMBER 06, 2012 SR