Manohar Lal Sharma Vs. The Principal Secretary & Ors.

[Writ Petition (CRL.) No. 120 of 2012]

[Writ Petition [C] No. 463 of 2012]

[Writ Petition [C] No. 515 of 2012]

[Writ Petition [C] No. 283 of 2013]

R.M. LODHA, CJI.

1. Coal is king and paramount Lord of industry is an old saying in the industrial world. Industrial greatness has been built up on coal by many countries. In India, coal is the most important indigenous energy resource and remains the dominant fuel for power generation and many industrial applications. A number of major industrial sectors including iron and steel production depend on coal as a source of energy. The cement industry is also a major coal user. Coal's potential as a feedstock for producing liquid transport fuels is huge in India. Coal can help significant economic growth. India's energy future and prosperity are integrally dependant upon mining and using its most abundant, affordable and dependant energy supply - which is coal. Coal is extremely important element in the industrial life of developing India. In power, iron and steel, coal is used as an input and in cement, coal is used both as fuel and an input. It is no exaggeration that coal is regarded by many as the black diamond.

2. Being such a significant, valuable and important natural resource, the allocation of coal blocks for the period 1993 to 2010 is the subject matter of this group of writ petitions filed in the nature of Public Interest Litigation, principally one by Manohar Lal Sharma and the other by the Common Cause. The allocation of coal blocks made during the above period by the Central Government, according to petitioners, is illegal and unconstitutional inter alia on the following grounds:

(a) Non-compliance of the mandatory legal procedure under the Mines and Minerals (Development and Regulation) Act, 1957 (for short, '1957 Act').

(b) Breach of Section 3(3)(a)(iii) of the Coal Mines (Nationalisation) Act, 1973 (for short, 'CMN Act'). (c) Violation of the principle of Trusteeship of natural resources by gifting away precious resources as largesse.

(d) Arbitrariness, lack of transparency, lack of objectivity and non- application of mind; and

(e) Allotment tainted with mala fides and corruption and made in favour of ineligible companies tainted with mala fides and corruption.

3. The first of these writ petitions was filed by Manohar Lal Sharma. When that writ petition was listed for preliminary hearing on 14.09.2012, the Court issued notice to Union of India and directed it to file counter affidavit through Secretary, Ministry of Coal dealing with the following aspects:

(i) The details of guidelines framed by the Central Government for allocation of subject coal blocks.

(ii) The process adopted for allocation of subject coal blocks.

(iii) Whether the guidelines contain inbuilt mechanism to ensure that allocation does not lead to distribution of largesse unfairly in the hands of few private companies?

(iv) Whether the guidelines were strictly followed and whether by allocation of the subject coal blocks, the objectives of the policy have been realised?

(v) What were the reasons for not following the policy of competitive bidding adopted by the Government of India way back in 2004 for allocation of coal blocks?

(vi) What steps have been taken or are proposed to be taken against the allottees who have not adhered to the terms of allotment or breached the terms thereof?

4. Another PIL came to be filed by Common Cause after the above order was passed. PIL by Common Cause came up for preliminary hearing on 19.11.2012. Since, certain additional issues were raised and additional reliefs were also made in the PIL by Common Cause, this Court issued notice in that matter as well on 19.11.2012.

5. Principally, two prayers have been made in these matters, first, for quashing the entire allocation of coal blocks made to private companies by the Central Government between 1993 and 2012 and second, a court monitored investigation by the Central Bureau of Investigation (CBI) and Enforcement Directorate (ED) or by a Special Investigation Team (SIT) into the entire allocation of coal blocks by the Central Government made between the above period covering all aspects.

6. The present consideration of the matter is confined to the first prayer, i.e., for quashing the allocation of coal blocks to private companies made by the Central Government between the above period. At the outset, therefore, it is clarified that consideration of the present matter shall not be construed, in any manner, as touching directly or indirectly upon the investigation being conducted by CBI and ED into the allocation of coal blocks.

7. The first counter affidavit was filed by the Central Government on 22.01.2013 running into eleven volumes and 2607 pages. Thereafter, further/additional counter affidavit was filed by the Central Government. However, when the matters were listed on 10.07.2013, learned Attorney General submitted that in the counter affidavits filed so far, the Union of India had focused on the six queries raised by the Court on 14.09.2012 in the writ petition filed by Manohar Lal Sharma. He sought some time to enable the Central Government to file appropriate counter affidavit justifying allocation of coal blocks. Thereafter, further/additional counter affidavits have also been filed by the Central Government.

8. On 10.09.2013, the arguments with regard to challenge to allocation of coal blocks commenced which continued on 11.09.2013, 12.09.2013, 17.09.2013, 18.09.2013, 24.09.2013, 25.09.2013 and 26.09.2013. On 26.09.2013, Attorney General in the course of his arguments submitted that allocation letter by the Central Government was only a first step towards obtaining mining lease and that, by itself, did not confer any right on the allottee to work mines. He submitted that at the best, letter of allocation was a letter of intent and issuance of such allocation letter in no way impinges the rights of the State Governments under the 1957 Act.

In light of the submissions of the learned Attorney General on 26.09.2013, we wanted to know from the counsel for the petitioners whether concerned State Governments should be asked to explain their position in the matter to which Mr. Manohar Lal Sharma, petitioner-in-person and Mr. Prashant Bhushan agreed and, accordingly, the Court issued notice to the States of Jharkhand, Chhattisgarh, Odisha, Maharashtra, Andhra Pradesh, Madhya Pradesh and West Bengal as the subject coal blocks, for which the allocation is in issue, were located in these States. The Court sought the views of the above States on the following:

(i) How did the State Government understand the allocation of coal blocks by the Central Government?

(ii) What was the role of the State Government in the allocation of coal blocks ?

(iii) What was the role of the State Government in the subsequent steps having regard to the provisions of the 1957 Act? (iv) The details of the agreements entered into by the State Public Sector Undertakings, which were allotted coal blocks, with private parties for the coal blocks located in the State.

9. In pursuance of the above, 7 States have filed their responses.

10. The arguments re-commenced on 05.12.2013. On that day, arguments of the States of Jharkhand, Chhattisgarh and Odisha were concluded and matters were fixed for 08.01.2014. On 08.01.2014, the arguments on behalf of the States of Maharashtra, Andhra Pradesh, Madhya Pradesh and West Bengal were concluded and the matters were fixed for 09.01.2014. On that day, arguments of learned Attorney General were concluded.

11. Three Associations, viz., Coal Producers Association, Sponge Iron Manufacturers Association and Independent Power Producers Association of India have made applications for their intervention stating that these associations represented large number of allottees who have been allocated subject coal blocks. Accordingly, Mr. K.K. Venugopal, learned senior counsel was heard for Coal Producers Association and Mr. Harish N. Salve, learned senior counsel was heard on behalf of the Sponge Iron Manufacturers Association and Independent Power Producers Association of India. They commenced their arguments on 09.01.2014, which continued on 15.01.2014 and concluded on 16.01.2014. The arguments in rejoinder by Mr. Manohar Lal Sharma, petitioner-in-person and Mr. Prashant Bhushan, learned counsel for Common Cause were also concluded on that day. The arguments of Mr. Sanjay Parikh, who had made an application for intervention on behalf of Mr. Sudeep Shrivastav were also heard and concluded. The judgment was reserved on that day.

12. It is appropriate that we first notice the statutory framework relevant for the issues under consideration. The Mines and Minerals (Development and Regulation) Act, 1948 (for short, '1948 Act') was enacted to provide for the regulation of mines and oil fields and for the development of the minerals under entry 36 of the Government of India Act, 1935. It received the assent of the Governor General on 08.09.1948 and came into effect from that date.

13. 1948 Act was repealed by the 1957 Act. The introduction of the 1957 Act reads: "In the Seventh Schedule of the Constitution in Union List entry 54 provides for regulation of mines and minerals development to the extent to which such regulation and development under the control of the Union is declared by Parliament by law to be expedient in the public interest. On account of this provision it became imperative to have a separate legislation. In order to provide for the regulation of mines and the development of minerals, the Mines and Minerals (Regulation and Development) Bill was introduced in the Parliament."

14. 1957 Act has undergone amendments from time to time. Section 2 of the 1957 Act reads: "Declaration as to the expediency of Union Control - it is hereby declared that it is expedient in the public interest that the Union should take under its control the regulation of mines and the development of minerals to the extent hereinafter provided."

15. Sections 3(a), (c), (d), (e), (f), (g) and (h) define: "minerals", "mining lease", "mining operations", "minor minerals", "prescribed", "prospecting licence", and "prospecting operations"[1], respectively.

16. Section 4 mandates that prospecting or mining operations shall be under licence or lease. Sub-section (2) provides that no reconnaissance permit, prospecting licence or mining lease shall be granted otherwise than in accordance with the provisions of the Act and the rules made thereunder.

17. Section 5 is a restrictive provision. The provision mandates that in respect of any mineral specified in the First Schedule, no reconnaissance permit, prospecting licence or mining lease shall be granted except with the previous approval of the Central Government. Coal and Lignite are at item no.1 in Part A under the title "Hydro Carbons/Energy Minerals" in the First Schedule appended to the 1957 Act.

18. Section 6 provides for maximum area for which a prospecting licence or mining lease may be granted. Section 7 makes provisions for the periods for which prospecting licence may be granted or renewed and Section 8 provides for periods for which mining leases may be granted or renewed. Section 10 provides that application for reconnaissance permit, prospecting licence or mining lease in respect of any land in which the minerals vest in the Government shall be made to the State Government concerned, inter alia, it empowers the State Government concerned to grant or refuse to grant permit, licence or lease having regard to the provisions of the 1957 Act or the Mineral Concession Rules, 1960 (for short '1960 Rules').

19. Section 11 provides for preferential right of certain persons. Sub-section (1) of Section 11 makes a provision that where a reconnaissance permit or prospecting licence has been granted in respect of any land, the permit holder or the licensee shall have a preferential right for obtaining a prospecting licence or mining lease, as the case may be, in respect of that land over any other person. This is, however, subject to State Government's satisfaction and certain conditions as provided therein. Sub- section (2) of Section 11 says that where the State Government does not notify in the Official Gazette the area for grant of reconnaissance permit or prospecting licence or mining lease and two or more persons have applied for a reconnaissance permit, prospecting licence or a mining lease in respect of any land in such area, the applicant whose application was received earlier, shall have a preferential right to be considered for such grant over the applicant whose application was received later. This is, however, subject to provisions of sub-section (1).

The first proviso appended thereto enacts that where an area is available for grant of reconnaissance permit, prospecting licence or mining lease and the State Government has invited applications by notification in the Official Gazette for grant of such permit, licence or lease, the applications received during the period specified in such notification and the applications which had been received prior to the publication of such notification in respect of the lands within such area or had not been disposed of, shall be deemed to have been received on the same day for the purpose of assigning priority under sub-section (2).

The second proviso indicates that where such applications are received on the same day, the State Government, after taking into consideration the matter specified in sub-section (3), may grant the reconnaissance permit, prospecting licence or mining lease to one of the applicants as it may deem fit. Sub-section (3) elaborates the matter referred to in sub-section (2), namely,

(a) any special knowledge of, experience in reconnaissance operations, prospecting operations or mining operations, possessed by the applicant;

(b) the financial resources of the applicant;

(d) the investment which the applicant proposes to make in the mines and in the industry based on the minerals; and

(e) such other matters as may be prescribed.

20. Section 13 empowers the Central Government to make rules in respect of minerals. By virtue of the power conferred upon the Central Government under Section 13(2), the 1960 Rules have been framed for regulating the grant of, inter alia, mining leases in respect of minerals and for purposes connected therewith.

21. By virtue of Section 17, the Central Government has been given special powers to undertake prospecting or mining operations in certain lands. Section 17-A authorises the Central Government to reserve any area not already held under any prospecting licence or mining lease with a view to conserve any mineral and after consultation with the State Government by notification in the Official Gazette.

22. Section 18 indicates that it shall be the duty of the Central Government to take all such steps as will be necessary for the conservation and systematic development of minerals in India and for the protection of the environment by preventing or controlling any pollution which may be caused by prospecting or mining operations and for such purposes the Central Government may, by notification in the Official Gazette, make such rules as it thinks necessary.

23. Section 18A empowers the Central Government to authorise the Geological Survey of India to carry out necessary investigation for the purpose of information with regard to the availability of any mineral in or under any land in relation to which any prospecting licence or mining lease has been granted by a State Government or by any other person. The proviso that follows sub-section (1) of Section 18A provides that in cases of prospecting licences or mining leases granted by a State Government, no such authorisation shall be made except after consultation with the State Government.

24. Section 19 provides that any prospecting licences and mining leases granted, renewed or acquired in contravention of the 1957 Act or any rules or orders made thereunder shall be void and of no effect.

25. The 1960 Rules were framed by the Central Government, as noted above, in exercise of the powers conferred by Section 13.

26. Chapter IV of 1960 Rules deals with grant of mining leases in respect of land in which the minerals vest in the Government. Sub-rule (1) of Rule 22 provides that an application for the grant of a mining lease in respect of land in which the minerals vest in the Government shall be made to the State Government in Form I through such officer or authority as the State Government may specify in this behalf. Sub-rule (3) provides for the documents to be annexed with the application and so also that such application must be accompanied by a non-refundable fee as prescribed therein. Sub-rule (4) of Rule 22 provides that on receipt of the application for the grant of mining lease, the State Government shall take decision to grant precise area and communicate such decision to the applicant.

The applicant, on receipt of communication from the State Government of the precise areas to be granted, is required to submit a mining plan within a period of six months or such other period as may be allowed by the State Government to the Central Government for its approval. The applicant is required to submit the mining plan duly approved by the Central Government or by an officer duly authorized by the Central Government to the State Government to grant mining lease over that area. Sub-rule (5) of Rule 22 provides the details to be incorporated in the mining plan.

27. Rule 26 empowers the State Government to refuse to grant or renew mining lease over the whole or part of the area applied for. But that has to be done after giving an opportunity of being heard and for reasons to be recorded in writing and communicated to the applicant.

28. Rule 31 provides for time within which lease is to be executed where an order has been made for grant of such lease on an application. Rule 34 provides for manner of exercise of preferential rights for mining lease.

29. Rule 35 provides that where two or more persons have applied for a reconnaissance permit or a prospecting licence or a mining lease in respect of the same land, the State Government shall, for the purpose of sub-section (2) of Section 11, consider besides the matters mentioned in clauses (a) to (d) of sub-section (3) of Section 11, the end use of the mineral by the applicant.

30. In short, the 1957 Act provides for general restrictions on undertaking prospecting and mining operations, the procedure for obtaining prospecting licences or mining leases in respect of lands in which the minerals vest in the government, the rule-making power for regulating the grant of prospecting licences and mining leases, special powers of Central Government to undertake prospecting or mining operations in certain cases, and for development of minerals.

31. The Coal Mines (Taking Over of Management) Act, 15 of 1973, (for short, 'Coal Mines Management Act') was passed, "to provide for the taking over, in the public interest, of the management of coal mines, pending nationalisation of such mines, with a view to ensuring rational and coordinated development of coal production and for promoting optimum utilisation of the coal resources consistent with the growing requirements of the country, and for matters connected therewith or incidental thereto."

32. The Coal Mines Management Act received the assent of the President on 31.03.1973 but it was made effective from 30.01.1973 except Section 8(2) which came into force at once. Section 3(1) provides that on and from the appointed day (that is, 31.01.1973) the management of all coal mines shall vest in the Central Government. By Section 3(2), the coal mines specified in the Schedule shall be deemed to be the coal mines the management of which shall vest in the Central Government under sub-section (1). Under the proviso to Section 3(2), if, after the appointed day, the existence of any other coal mine comes to the knowledge of the Central Government, it shall by a notified order make a declaration about the existence of such mine, upon which the management of such coal mine also vests in the Central Government and the provisions of the Act become applicable thereto.

33. Immediately after the Coal Mines Management Act, the Parliament enacted the CMN Act. CMN Act was passed, "to provide for the acquisition and transfer of the right, title and interest of the owners in respect of coal mines specified in the Schedule with a view to reorganising and reconstructing any such coal mines so as to ensure the rational, coordinated and scientific development and utilisation of coal resources consistent with the growing requirements of the country, in order that the ownership and control of such resources are vested in the State and thereby so distributed as best to subserve the common good, and for matters connected therewith or incidental thereto."

34. Section 2(b) of the CMN Act defines a coal mine in the same manner as the corresponding provision of the Coal Mines Management Act, namely, a mine "in which there exists one or more seams of coal". Section 3(1) provides that on the appointed day (i.e., 01.05.1973) the right, title and interest of the owners in relation to the coal mines specified in the Schedule shall stand transferred to, and shall vest absolutely in the Central Government free from all encumbrances.

Section 4(1) provides that where the rights of an owner under any mining lease granted, or deemed to have been granted, in relation to a coal mine, by a State Government or any other person, vest in the Central Government under Section 3, the Central Government shall, on and from the date of such vesting, be deemed to have become the lessee of the State Government or such other person, as the case may be, in relation to such coal mine as if a mining lease in relation to such coal mine had been granted to the Central Government.

The period of such lease is to be the entire period for which the lease could have been granted by the Central Government or such other person under the 1960 Rules and thereupon all the rights under the mining lease granted to the lessee are to be deemed to have been transferred to, and vested in, the Central Government. By Section 4(2) on the expiry of the term of any lease referred to in sub-section (1), the lease, at the option of the Central Government, is liable to be renewed on the same terms and conditions on which it was held by the lessor for the maximum period for which it could be renewed under the 1960 Rules.

Section 5(1) empowers the Central Government under certain conditions to direct by an order in writing that the right, title and interest of an owner in relation to a coal mine shall, instead of continuing to vest in the Central Government, vest in the Government company. Such company, under Section 5(2), is to be deemed to have become the lessee of the coal mine as if the mining lease had been granted to it.

By Section 6(1), the property which vests in the Central Government or in a government company is freed and discharged from all obligations and encumbrances affecting it. Section 8 requires that the owner of every coal mine or group of coal mines specified in the second column of the Schedule shall be given by the Central Government in cash and in the manner specified in Chapter VI, for the vesting in it under Section 3 of the right, title and interest of the owner, an amount equal to the amount specified against it in the corresponding entry in the fifth column of the Schedule. By Section 11(1), the general superintendence, direction, control and management of the affairs and business of a coal mine, the right, title and interest of an owner in relation to which have vested in the Central Government under Section 3 shall vest in the Government company or in the Custodian, as the case may be.

35. The CMN Act came to be amended by the Coal Mines (Nationalisation) Amendment Ordinance which was promulgated on 29.04.1976. The Ordinance was replaced by the Coal Mines (Nationalisation) Amendment Act, 1976 (for short, '1976 Nationalisation Amendment Act'). A new section, Section 1-A was inserted by which it was declared that it was expedient in the public interest that the Union should take under its control the regulation and development of coal mines to the extent provided in sub-sections (3) and (4) of Section 3 and sub-section (2) of Section 30 of the CMN Act. By sub-section (2) of Section 1-A, the declaration contained in sub-section (1) was to be in addition to and not in derogation of the declaration contained in Section 2 of the 1957 Act. By Section 3 of the 1976 Nationalisation Amendment Act, a new sub-section (3) was introduced in Section 3 of the principal Act. Under clause (a) of the newly introduced sub-section (3) of Section 3, on and from the commencement of Section 3 of the 1976 Nationalisation Amendment Act, no person other than

(i) Central Government or a Government company or a corporation owned, managed or controlled by the Central Government or

(ii) a person to whom a sub-lease, referred to in the proviso to clause (c) has been granted by any such Government, company or corporation or

(iii) a company engaged in the production of iron and steel, shall carry on coal mining operation, in India in any form. Under clause (b) of sub-section (3), excepting the mining leases granted before the 1976 Nationalisation Amendment Act in favour of the Government company or corporation referred to in clause (a), and any sub-lease granted by any such Government, Government company or corporation, all other mining leases and sub-leases in force immediately before such commencement shall insofar as they relate to the winning or mining of coal, stand terminated. Clause (c) of the newly introduced sub- section (3) of Section 3 provides that no lease for winning or mining coal shall be granted in favour of any person other than the Government, Government company or corporation referred to in clause (a). Under the proviso to clause (c), the Government, Government company or the corporation to whom a lease for winning or mining coal has been granted may grant a sub-lease to any person in any area if,

(i) the reserves of coal in the area are in isolated small pockets or are not sufficient for scientific and economical development in a coordinated and integrated manner, and

(ii) the coal produced by the sub-lessee will not be required to be transported by rail. By sub-section (4) of Section 3, where a mining lease stands terminated under sub-section (3), it shall be lawful for the Central Government or a Government company or corporation owned or controlled by the Central Government to obtain a prospecting licence or mining lease in respect of the whole or part of the land covered by the mining lease which stands terminated. Section 4 of the 1976 Nationalisation Amendment Act introduces an additional provision in Section 30 of the principal Act by providing that any person who engages, or causes any other person to be engaged, in winning or mining coal from the whole or part of any land in respect of which no valid prospecting licence or mining lease or sub-lease is in force, shall be punishable with imprisonment for a term which may extend to two years and also with fine which may extend to Rs.10,000/-.

36. By the Coal Mines (Nationalisation) Amendment Act, 1993 (for short, '1993 Nationalisation Amendment Act'), the CMN Act was further amended. The Statement of Objects and Reasons of the 1993 Nationalisation Amendment Act reads thus: "Considering the need to augment power generation and to create additional capacity during the eighth plan, the Government have taken decision to allow private sector participation in the power sector. Consequently, it has become necessary to provide for coal linkages to power generating units coming up in the private sector. Coal India Limited and Neyveli Lignite Corporation Limited, the major producers of coal and lignite in the public sector, are experiencing resource constraints.

A number of projects cannot be taken up in a short span of time. As an alternative, it is proposed to offer new coal and lignite mines to the proposed power stations in the private sector for the purpose of captive end use. The same arrangement is also considered necessary for other industries who would be handed over coal mines for captive end use. Washeries have to be encouraged in the private sector also to augment the availability of washed coal for supply to steel plants, power houses, etc.

Under the Coal Mines (Nationalisation) Act, 1973, coal mining is exclusively reserved for the public sector, except in case of companies engaged in the production of iron and steel, and mining in isolated small pockets not amenable to economical development and not requiring rail transport. In order to allow private sector participation in coal mining for captive use for purpose of power generation as well as for other captive end uses to be notified from time to time and to allow the private sector to set up coal washeries, it is considered necessary to amend the Coal and Coal Mines (Nationalisation) Act, 1973. The Coal Mines (Nationalization) Amendment Bill, 1992 seeks to achieve the aforesaid objectives."

37. Section 3 of the CMN Act was amended and thereby in clause (a) of sub-section (3) for item (iii), the following was substituted, namely,

(iii) a company engaged in -

(1) the production of iron and steel,

(2) generation of power,

(3) washing of coal obtained from a mine, or

(4) such other end use as the Central Government may, by notification, specify.

38. By further Notification dated 15.03.1996, the Central Government specified production of cement to be an end-use for the purposes of the CMN Act.

39. By another Notification dated 12.07.2007, the Central Government specified production of syn-gas obtained through coal gasification (underground and surface) and coal liquefaction as end uses for the purposes of the CMN Act.

40. The background in which Section 3(3) of the CMN Act was amended to permit private sector entry in coal mining operation for captive use has been sought to be explained by the Central Government. It is stated that nationalization of coal through the CMN Act was done with the objective of ensuring "rational, coordinated and scientific development and utilization of coal resources consistent with the growing requirements of the country" and as a first step in 1973, 711 coal mines specified in the Schedule appended to CMN Act were nationalized and vested in the Central Government. By 1976 Nationalisation Amendment Act, the Central Government alone was permitted to mine coal with the limited exception of private companies engaged in the production of iron and steel. In 1991, the country was facing huge crisis due to

(a) the situation regarding balance of payments;

(b) the economy being in doldrums;

(d) shortage in coal production; and

(e) inability of Coal India Limited (CIL) to produce coal because of lack of necessary resources to maximize coal production amongst other reasons. There was a huge shortage of power in the country. The State Electricity Boards were unable to meet power requirements. Post liberalization, in the 8th Five Year Plan (1992-1997) a renewed focus was placed on developing energy and infrastructure in the country. CIL was not in a position to generate the resources required. It was in this background that in a meeting taken by the Deputy Chairman of the Planning Commission on 31.10.1991, it was decided that "private enterprises may be permitted to develop coal and lignite mines as captive units of power projects".

The approval of Cabinet was consequently sought vide a Cabinet note dated 30.01.1992 for "allowing private sector participation in coal mining operations for captive consumption towards generation of power and other end use, which may be notified by Government from time to time". The Cabinet in the meeting held on 19.02.1992 considered the above Cabinet note and it was decided that the proposal may be brought up only when specific projects of private sector participation in coal mining come to the Government for consideration. Subsequently, another Cabinet note dated 23.04.1992 was placed before the Cabinet containing references to certain private projects like the two 250 MW thermal power plants of RPG Enterprises, which had been recommended by the Government of West Bengal. The proposal contained in the Cabinet note dated 23.04.1992 was approved by the Cabinet on 05.05.1992. On 15.07.1992, the Bill for amendment of Section 3(3) of CMN Act was introduced in Rajya Sabha and the same was passed on 21.07.1992. The Bill was passed in Lok Sabha on 19.04.1993 and got assent of the President on 09.06.1993.

41. The Central Government has highlighted that once Section 3(3) of the CMN Act was amended to permit private sector entry in coal mining operations for captive use, it became necessary to select the coal blocks that could be offered to the private sector for captive use. The coal blocks to be offered for captive mining were duly identified and a booklet containing particulars of 40 blocks was prepared which was revised from time to time.

42. Mr. Goolam E. Vahanvati, learned Attorney General with all persuasive skill and eloquence at his command has sought to justify the allocation of coal blocks by the Central Government. He submits that the Central Government is not only empowered but is duty bound to take the lead in allocation of coal blocks and that is what it did. He traces this power to Sections 1A and 3(3) of the CMN Act. It is argued by the learned Attorney General that in addition to the declaration contained in Section 2 of the 1957 Act, Parliament has made a further declaration in terms of Entry 54 of List I (Union List) of the Seventh Schedule in Section 1A of the CMN Act which makes specific reference to Section 3(3) of the CMN Act and both have to be read in conjunction with each other. By virtue of Parliament having placed the regulation and development of coal mines under the control of the Union, Section 1A of the CMN Act regulates coal mining operations under Sections 3(3) and 3(4). He argues that coal reserves are primarily concentrated in seven States, viz., Maharashtra, Madhya Pradesh, Chhattisgarh, Odisha, Jharkhand, Andhra Pradesh and West Bengal and all these seven States have accepted and acknowledged the source of power of Government of India with respect to allocation of coal blocks.

43. It is argued by the learned Attorney General that by virtue of the bar contained in Section 3(3) of the CMN Act between 1976 and 1993, no private company (other than the company engaged in the production of iron and steel) could have carried out coal mining operations in India. Therefore, if no other company could have carried on coal mining operations, it follows that it could also not have applied to the State Government for grant of lease for mining of coal. Even if they did (post 1993) make an application for grant of prospective licence/mining lease directly to the State Government, the State Government could not process the same until it received the letter of allocation from the Central Government.

44. Learned Attorney General argues that the consideration of proposals by the Central Government for allocation of coal blocks does not contravene the provisions of the 1957 Act in any manner, firstly, because Section 1A of CMN Act is in addition to and not in derogation of the 1957 Act; secondly, an application for allocation of a coal block is not dealt with by the provisions of the 1957 Act; and thirdly, after allocation, the allocatee has to make an application for grant of mining lease or prospecting licence to the State Government in accordance with the 1957 Act and the 1960 Rules. It is for these reasons, he submits, that none of the States nor any private person ever challenged the grant of allocation by the Central Government on the ground that the Central Government was not empowered to allocate the coal blocks.

45. The above arguments of the learned Attorney General are vehemently contested by Mr. Prashant Bhushan, learned counsel for Common Cause. He submits that under the provisions of CMN Act only two kinds of entities (a) Central Government and undertakings/corporations owned by the Central Government; and (b) companies having end-use plants in iron and steel, power, cement, etc., could work the coal mines. He submits that the CMN Act does not, in any way, give the power of calling applications, selection and allocation of coal blocks to the Central Government and Section 3 of the CMN Act only provides eligibility criteria for allocation of coal mines. The procedure for allocation continues to be governed by the 1957 Act and it is for this reason that ultimately Section 11A concerning allocation of coal mines was introduced in the 1957 Act only.

46. Mr. Harish N. Salve, learned senior counsel, who appeared for interveners, Sponge Iron Manufacturers Association and Independent Power Producers Association of India, argues that Section 1A(2) of the CMN Act makes the declaration in addition to the existing declaration in Section 2 of the 1957 Act. The additional declaration has done away with any vestige of power in the State in the matter of selection of beneficiaries of the mineral and if Section 1A had not been inserted vide 1976 Nationalisation Amendment Act, it may have been possible to argue that the State, as the owner of the mineral, would nonetheless be required to grant the lease under Section 10 of the 1957 Act by exercising its discretion under Section 10(3) albeit subject to further "conditionalities" imposed by Section 3(2) of the CMN Act.

The additional declaration, learned senior counsel for the interveners submits, is intended to denude the State of power under Entry 23 of List II of the Seventh Schedule and corresponding executive power under Article 162 of the Constitution of India. According to Mr. Harish N. Salve, the grant or refusal of the lease by State insofar as coal is concerned, is no longer governed by Section 11 of the 1957 Act and that it is governed by Sections 3(3) and 3(4) of the CMN Act and, thus, it is obvious that there has to be first a recommendation by the Central Government before the State can exercise its discretion under Section 10(3) of the 1957 Act and that the converse would lead to conferring upon the State, in Section 10(3) of the 1957 Act, an unguided and un-canalised power to grant or refuse a lease. He submits that if Section 3(3) of the CMN Act is read as prescribing qualifications in addition to those in Section 5(1) of the 1957 Act, such position would make the scheme of both the enactments - 1957 Act and CMN Act - unworkable.

47. Mr. Harish N. Salve argues that the allocation letter issued by the Central Government is the procedure which regulates the exercise under Rule 22 of the 1960 Rules (and Section 10(3) of the 1957 Act) by the State Government and that procedure is to ensure that a lease is granted to a company engaged in stipulated permissible activities by making it a two step process, viz., the issue of letter of allotment conditional upon the end-use plant, followed by grant of a lease once end usage is achieved. He submits that Section 3(3) of the CMN Act is fully satisfied where a lease is granted to a company which engages in the permissible activity. Learned senior counsel for the interveners fully supports the arguments of the learned Attorney General that the Central Government has the power to identify the beneficiary of an allotment and once the Central Government has identified the beneficiary of allotment, the State will be obliged to grant a lease if other conditions are satisfied.

48. Mr. K.K. Venugopal, learned senior counsel appearing for Coal Producers Association argues that having regard to the declaration made under Section 2 of the 1957 Act and the declaration under Section 1A of the CMN Act and so also Section 3(3) thereof, it is perfectly legitimate for the Central Government to exercise its power and jurisdiction in the manner it has done for the purpose of selecting the allottees for coal blocks. He contends that under Article 73 of the Constitution, the executive power of the Union extends to matters in regard to which the Parliament has legislative competence and this power it undoubtedly possesses by reason of the declarations contained in the 1957 Act and the CMN Act enacted specifically for the regulation and development of coal and coal mines.

49. It shall have been noticed that the thrust of the arguments of the learned Attorney General and so also Mr. Harish N. Salve and Mr. K. K. Venugopal hinges around the premise that Sections 1A and 3(3) of the CMN Act clothe the Central Government with power to allocate the coal blocks or, in other words, select the allottees for coal blocks. Is it so? The constitutional philosophy about law making in relation to mines and minerals and List I Entry 36 (Federal Legislative List) and List II Entry 23 (Provincial Legislative List) in Schedule VII of the Government of India Act, 1935 which correspond to List I Entry 54 (Union List) and List II Entry 23 (State List) in our Constitution has been noticed by this Court in Monnet[2].

Speaking through one of us (R.M. Lodha, J., as he then was) in Monnet2, this Court has noted the statement of the learned Solicitor General in the House of Commons made in the course of debate in respect of the above entries in the Government of India Bill that the rationale of including only the "regulation of mines" and "development of minerals" and that, too, only to the extent it was considered expedient in the public interest by a federal law was to ensure that the provinces were not completely cut out from the law relating to mines and minerals and if there was inaction at the Centre, then the provinces could make their own laws. Thus, power in relation to the mines and minerals was accorded to both, the Centre and the States. The Court in Monnet2 said:

"130. ................. The management of the mineral resources has been left with both the Central Government and the State Governments in terms of List I Entry 54 and List II Entry 23. In the scheme of our Constitution, the State Legislatures enjoy the power to enact legislation on the topics of "mines and minerals development". The only fetter imposed on the State Legislatures under Entry 23 is by the latter part of the said entry which says, "subject to the provisions of List I with respect to regulation and development under the control of the Union". In other words, the State Legislature loses its jurisdiction to the extent to which the Union Government had taken over control, the regulation of mines and development of minerals as manifested by legislation incorporating the declaration and no more.

If Parliament by its law has declared that regulation of mines and development of minerals should in the public interest be under the control of the Union, which it did by making declaration in Section 2 of the 1957 Act, to the extent of such legislation incorporating the declaration, the power of the State Legislature is excluded. The requisite declaration has the effect of taking out regulation of mines and development of minerals from List II Entry 23 to that extent. It needs no elaboration that to the extent to which the Central Government had taken under "its control" "the regulation of mines and development of minerals" under the 1957 Act, the States had lost their legislative competence. By the presence of the expression "to the extent hereinafter provided" in Section 2, the Union has assumed control to the extent provided in the 1957 Act. The 1957 Act prescribes the extent of control and specifies it. We must bear in mind that as the declaration made in Section 2 trenches upon the State legislative power, it has to be construed strictly. Any legislation by the State after such declaration, trespassing the field occupied in the declaration cannot constitutionally stand......."

50. The declaration made by Parliament in Section 2 of the 1957 Act states that it is expedient in the public interest that the Union should take under its control the regulation of mines and the development of minerals to the extent provided in the Act. Legal regime relating to regulation of mines and development of minerals is, thus, guided by the 1957 Act and the 1960 Rules. In addition to the above declaration in 1957 Act, a further declaration has been inserted by Section 1A of the CMN Act, insofar as coal mines are concerned. By this provision, it is declared that it is expedient in the public interest that the Union should take under its control regulation and development of coal mines to the extent provided in sub-sections (3) and (4) of Section 3 and sub-section (2) of Section 30 of the CMN Act.

51. The two declarations - Section 2 of the 1957 Act and Section 1A of the CMN Act - have to be conjointly read insofar as the control and regulation of coal mines is concerned. As a consequence, the States have lost their jurisdiction to legislate to the extent to which the Union had taken over control, regulation and development of coal mines as manifested by the two enactments. When the Parliament by its law contained in 1957 Act has declared that regulation of mines and development of minerals should, in the public interest, be under the control of the Union and by an additional declaration in the CMN Act declared that regulation and development of mines to the extent provided in sub-sections (3) and (4) of Section 3 and sub-section (2) of Section 30 of the CMN Act should, in the public interest, be under the control of the Union, the power of the State legislature to legislate on the subject covered by these two enactments is excluded. In other words, the field disclosed in the declarations under the 1957 Act and the CMN Act is abstracted from the legislative competence of the State Legislature. The requisite declarations have the effect of taking out regulation and development of coal mines from List II Entry 23. To that extent, the States have lost their legislative competence.

52. In Baijnath Kadio[3] the Constitution Bench referred to two earlier decisions of this Court in Hingir-Rampur Coal Co. Ltd.[4] and M.A. Tulloch and Co.[5]. While dealing with declaration contained in Section 2 of the 1957 Act, the Court stated in para 14, page 847 of the Report, as follows: "14. The declaration is contained in Section 2 of Act 67 of 1957 and speaks of the taking under the control of the Central Government the regulation of mines and development of minerals to the extent provided in the Act itself. We have thus not to look outside Act 67 of 1957 to determine what is left within the competence of the State Legislature but have to work it out from the terms of that Act..........."

53. In Sandur Manganese and Iron Ores Ltd.[6], this Court held that the declaration made in Section 2 of the 1957 Act had denuded the State of its legislative power to make any law with respect to the regulation of mines and mineral development to the extent provided in the 1957 Act. As a sequitur, it is also held that the State is also denuded of its executive power in regard to matters covered by the 1957 Act and the 1960 Rules and there is no question of the State having any power to frame a policy de- hors the 1957 Act and the 1960 Rules.

54. Om Prakash Mehta[7] highlights that the 1957 Act and the 1960 Rules are a complete code in respect of the grant and renewal of prospecting licences as well as mining leases in lands belonging to the Government as well as lands belonging to private persons.

55. In Monnet2, the scope and extent of the word 'regulation' occurring in Section 2 has been examined and it is stated that 'regulation' must receive wide interpretation but the extent of control by the Union as specified in the 1957 Act has to be construed strictly. The same meaning must apply to the word 'regulation' occurring in Section 1A of the CMN Act. In other words, the extent of control by the Union as specified in the CMN Act has to be construed strictly.

56. In Orissa Cement Ltd.[8] a three Judge Bench of this Court explained that in the case of a declaration under Entry 54, the legislative power of the State Legislature is eroded only to the extent control is assumed by the Union pursuant to such declaration as spelt out by the legislative enactment which makes the declaration.

57. 1957 Act provides for general restrictions on undertaking prospecting and mining operations, the procedure for obtaining reconnaissance permits, prospecting licences and mining leases and the rule making power of regulating the grant of reconnaissance permits, prospecting licences and mining leases. Clause (a) of sub-section (3) of Section 3 of the CMN Act enables persons specified therein only to carry on coal mining operation. In clause (c), it is provided that no lease for winning or mining coal should be granted in favour of any person other than the Government, Government company or corporation referred to in clause (a). Under clause (b) of sub-section (3), excepting the mining leases granted before 1976 in favour of the Government, Government company or corporation referred to in clause (a) and any sub-lease(s) granted by any such Government, Government company or corporation, all other mining leases and sub-leases in force immediately before such commencement insofar as they relate to the winning or mining of coal stand terminated.

When a sub-lease stands terminated under sub-section (3), sub-section (4) of Section 3 provides that it shall be lawful for the Central Government or the Government company or corporation owned or controlled by the Central Government to obtain a prospecting licence or a mining lease in respect of whole or part of the land covered by mining lease which stands so terminated. The above provisions in the CMN Act, as inserted in 1976, clearly show that the target of these provisions in the CMN Act is coal mines, pure and simple. CMN Act effectively places embargo on granting the leases for winning or mining of coal to persons other than those mentioned in Section 3(3)(a).

Does CMN Act for the purposes of regulation and development of mines to the extent provided therein alter the legal regime incorporated in the 1957 Act? We do not think so. What CMN Act does is that in regard to the matters falling under the Act, the legal regime in the 1957 Act is made subject to the prescription under Section 3(3)(a) and (c) of the CMN Act. 1957 Act continues to apply in full rigour for effecting prescription of Section 3(3)(a) and (c) of the CMN Act. For grant of reconnaissance permit, prospecting licence or mining lease in respect of coal mines, the MMDR regime has to be mandatorily followed. 1957 Act and so also the 1960 Rules do not provide for allocation of coal blocks nor they provide any mechanism, mode or manner of such allocation.

58. Learned Attorney General submits that an application for allocation of a coal block is not dealt with by the 1957 Act and, therefore, consideration of proposals for allocation of coal blocks does not contravene the provisions of the 1957 Act. The submission of the learned Attorney General does not merit acceptance for more than one reason. First, although the Central Government has pre-eminent role under the 1957 Act inasmuch as no reconnaissance permit, prospecting licence or mining lease of coal mines can be granted by the State Government without prior approval of the Central Government but that pre-eminent role does not clothe the Central Government with the power to act in a manner in derogation to or inconsistent with the provisions contained in the 1957 Act.

Second, the CMN Act, as amended from time to time, does not have any provision, direct or indirect, for allocation of coal blocks. Third, there are no rules framed by the Central Government nor is there any notification issued by it under the CMN Act providing for allocation of coal blocks by it first and then consideration of an application of such allottee for grant of prospecting licence or mining lease by the State Government. Fourth, except providing for the persons who could carry out coal mining operations and total embargo on all other persons undertaking such activity, no procedure or mode or manner for winning or mining of coal mines is provided in the CMN Act or the 1960 Rules or by way of any notification.

Fifth, even in regard to the matters falling under CMN Act, such as prescriptive direction that no person other than those provided in Sections 3(3) and 3(4) shall carry on mining operations in the coal mines, the legal regime under the 1957 Act, subject to the prescription under Sections 3(3) and 3(4), continues to apply in full rigour. Mr. Harish N. Salve, learned senior counsel for the interveners, is not right in his submission that allocation letter issued by the Central Government is the procedure which regulates the exercise under Rule 22 of the 1960 Rules. Had that been so, some provisions to that effect would have been made in the CMN Act or the 1960 Rules framed thereunder but there is none.

59. The submission of the learned Attorney General that the 7 States - Maharashtra, Madhya Pradesh, Chhattisgarh, Odisha, Jharkhand, Andhra Pradesh and West Bengal - which have coal deposits, have accepted and acknowledged the source of power of the Central Government with regard to allocation of coal blocks is not fully correct. Odisha has strongly disputed that position. Odisha's stand is that the system of allocation of coal blocks by the Central Government is alien to the legal regime under the CMN Act and the 1957 Act.

It is true that many of these States have taken the position that allocation letter confers a right on such allottee to get mining lease and the only role left with the State Government is to carry out the formality of processing the application and for execution of lease deed, but, in our view, the source of power of the Central Government in allocation of coal blocks is not dependant on the understanding of the State Governments but it is dependant upon whether such power exists in law or not.

Indisputably, power to regulate assumes the continued existence of that which is to be regulated and it includes the authority to do all things which are necessary for the doing of that which is authorized including whatever is necessarily incidental to and consequential upon it but the question is, can this incidental power be read to empower the Central Government to allocate the coal blocks which is neither contemplated by the CMN Act nor by the 1957 Act? In our opinion, the answer has to be in the negative. It is so because where a statute requires to do a certain thing in a certain way, the thing must be done in that way or not at all. Other methods of performance are necessarily forbidden[9]. This is uncontroverted legal principle.

60. It is argued by the learned Attorney General that the allocation letter does not by itself confer the right to work mines and the identification of the coal block does not impinge upon the rights of the State Government under the 1957 Act. Learned Attorney General argues that allocation of coal block is essentially an identification exercise where coal blocks selected by the CIL for captive mining were identified by the Screening Committee for development by an allocatee, after considering the suitability of the coal block (in terms of exercise and quality of reserve) vis-Ã -vis the requirements of the end-use plan of the applicant. It is submitted by the Attorney General that a letter of allocation is the first step.

It entitles the allocatee to apply to the State Government for grant of prospecting licence/mining lease in accordance with the provisions of the 1957 Act. The right to apply for grant of prospecting licence/mining lease does not imply that with the issuance of allocation letter the allocatee automatically gets the clearances and approval required under the 1957 Act, the 1960 Rules, the Forest (Conservation) Act, 1980 and the Environment (Protection) Act, 1986, etc. According to the learned Attorney General, after allocation, the following steps are required to be complied with: The allocatee is required to apply to the State Government for grant of Prospecting Licence in case of an unexplored block, or a Mining Lease in case of an explored block. On receipt of the application for grant of Prospecting License or Mining Lease, as the case may be, the State Government, in the case of Prospecting Licence can process the application for Prospecting Licence in accordance with Chapter III of the 1960 Rules.

In the case of application for Mining Lease (in Form I), the State Government has to take a decision to grant precise area for the purpose of the lease and communicate such decision to the applicant. On receipt of the communication from the State Government of the precise area to be granted, the applicant is required to submit a mining plan to the Central Government for its approval. [Rule 22(4)] After the mining plan has been duly approved by the Central Government, the applicant submits the same to the State Government for grant of mining lease over the area.

After receipt of the duly approved mining plan, the State Government makes a proposal for grant of prior consent by the Central Government in terms of the proviso to Section 5(1) of the 1957 Act. In addition to the approved mining plan, the allocatee is required to obtain permission under Section 2 of the Forest (Conservation) Act, 1980 if the coal block is located in a scheduled forest. Further, the allocatee is required to submit to the State Government, prior environmental clearance from the Ministry of Environment and Forests, Government of India for the project. Forest Clearance and EIA clearance operate separately. Mining Lease is thereafter granted by the State Government, after verifying that all statutory requirements have been duly complied with by the allocatee.

61. There seems to be no doubt to us that allocation letter is not merely an identification exercise as is sought to be made out by the learned Attorney General. From the position explained by the concerned State Governments, it is clear that the allocation letter by the Central Government creates and confers a very valuable right upon the allottee. We are unable to accept the submission of the learned Attorney General that allocation letter is not bankable. As a matter of fact, the allocation letter by the Central Government leaves practically or apparently nothing for the State Government to decide save and except to carry out the formality of processing the application and for execution of the lease deed with the beneficiary selected by the Central Government.

Though, the legal regime under the 1957 Act imposes responsibility and statutory obligation upon the State Government to recommend or not to recommend to the Central Government grant of prospecting licence or mining lease for the coal mines, but once the letter allocating a coal block is issued by the Central Government, the statutory role of the State Government is reduced to completion of processual formalities only. As noticed earlier, the declaration under Section 1A of the CMN Act does not take away the power of the State under Section 10(3) of the 1957 Act. It is so because the declaration under Section 1A of the CMN Act is in addition to the declaration made under Section 2 of the 1957 Act and not in its derogation. 1957 Act continues to apply with the same rigour in the matter of grant of prospecting licence or mining lease of coal mines but the eligibility of persons who can carry out coal mining operations is restricted to the persons specified in Section 3(3)(a) of the CMN Act.

62. In Tara Prasad Singh[10], a seven Judge Constitution Bench while dealing with the purposiveness of the CMN Act, as amended in 1976, vis-Ã -vis the 1957 Act, stated that nothing in this Act (CMN) could be construed as a derogation of the principle enunciated in Section 18 of the 1957 Act. The Court said: "Therefore, even in regard to matters falling under the Nationalisation Amendment Act which terminates existing leases and makes it lawful for the Central Government to obtain fresh leases, the obligation of Section 18 of the Act of 1957 will continue to apply in its full rigour. As contended by the learned Solicitor General, Section 18 contains a statutory behest and projects a purposive legislative policy. The later Acts on the subject of regulation of mines and mineral development are linked up with the policy enunciated in Section 18."

(emphasis supplied by us)

63. The observations made by this Court in Tara Prasad Singh10 about interplay between the CMN Act and the 1957 Act with reference to the policy enunciated in Section 18, in our view, apply equally to the entire legal regime articulated in the 1957 Act. We are of the opinion that nothing should be read in the two Acts, namely, CMN Act and the 1957 Act, which results in destruction of the policy, purpose and scheme of the two Acts. It is not right to suggest that by virtue of declaration under Section 1A of the CMN Act, the power of the State under Section 10(3) of the 1957 Act has become unavailable.

The submission of Mr. Harish N. Salve, learned senior counsel for the interveners that additional declaration under Section 1A of the CMN Act seeks to do away with any vestige of power in the State in the matter of selection of beneficiaries of the mineral is not meritorious. Had that been so, Rule 35 of the 1960 Rules would not have been amended to provide that where two or more persons have applied for reconnaissance permit or prospecting licence or a mining lease in respect of the same land, the State Government shall, inter alia, consider the end-use of the mineral by the applicant. The declaration under Section 1A has not denuded the States of any power in relation to grant of mining leases an