Coal block allotments deemed illegal, canceled with additional levy to rectify past irregularities

The judgment declared the allotment of coal blocks by the Screening Committee and Government dispensation route as "arbitrary and illegal." It canceled most coal block allotments, except a few, and imposed an additional levy of Rs. 295 per metric ton of coal extracted to compensate for financial losses. The decision aimed to rectify past irregularities, promote fair allocation practices, and prevent future arbitrary allotments.

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Issues Involved:
1. Legality of coal block allotments by the Screening Committee and Government dispensation route.
2. Consequences of the declaration of illegality in coal block allotments.
3. Economic and social impact of coal block cancellations.
4. Applicability of the principles of natural justice.
5. Additional levy on coal extracted from the allotted blocks.

Detailed Analysis:

1. Legality of Coal Block Allotments:
The judgment declared that the allotment of coal blocks by the Screening Committee and through the Government dispensation route was "arbitrary and illegal." It was noted that the allocations did not comply with the Coal Mines (Nationalization) Act (CMN Act), which restricts coal mining to specific categories, including Central Government entities and companies engaged in iron, steel, power, or cement production. The introduction of Section 11-A in the Mines and Minerals (Development and Regulation) Act, 1957, mandated competitive bidding for coal block allocation, further invalidating the previous allotments.

2. Consequences of the Declaration of Illegality:
The judgment left open the question of the consequences of the declaration of illegality for further hearing. The Union of India proposed two options: cancel all allotments except those mentioned in the judgment or allow continued extraction from 46 coal blocks under certain conditions. The Attorney General suggested that Coal India Limited (CIL) could take over these blocks to ensure continued coal production. Additionally, an additional levy of Rs. 295 per metric ton of coal extracted was proposed, based on the Comptroller and Auditor General's (CAG) report on financial loss.

3. Economic and Social Impact:
Senior Advocate Mr. Venugopal argued that cancellation of coal blocks would have severe economic repercussions, including power outages, loss of employment, and significant financial losses for banks and public sector corporations. It was also highlighted that the allottees had invested heavily in infrastructure and social development in the coal block areas. The potential delay in the auction and operationalization of new coal blocks was estimated to set back coal production by 7-8 years.

4. Applicability of the Principles of Natural Justice:
The contention was raised that the allottees were entitled to a hearing before cancellation of their coal blocks. However, the judgment noted that associations representing the allottees had been heard during the proceedings, fulfilling the principles of natural justice. The Court rejected the proposal to appoint a committee to examine individual allotments, emphasizing that the judgment addressed the flawed process of allotment, not individual cases.

5. Additional Levy on Coal Extracted:
The Court accepted the Attorney General's proposal for an additional levy of Rs. 295 per metric ton of coal extracted, based on the CAG's assessment. This levy was deemed compensatory for the financial loss caused by the illegal allotments. The allottees were directed to pay this levy within three months, with the coal extracted until 31st March 2015 also subject to the levy.

Final Orders:
- All coal block allotments, except those mentioned in the judgment, were cancelled.
- The cancellation of 42 out of 46 coal blocks would take effect from 31st March 2015, giving CIL and allottees time to adjust.
- The additional levy of Rs. 295 per metric ton was to be paid by 31st December 2014.
- The CBI's scrutiny of certain allotments would continue independently of the judgment.

The judgment emphasized corrective measures to prevent future arbitrary allocations and ensure fair utilization of natural resources.

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