Coal block allocation cannot be arbitrary: statutory authority, transparency and Article 14 control the distribution of natural resources.

The statutory scheme under the Mines and Minerals (Development and Regulation) Act, 1957 and the Coal Mines (Nationalisation) Act, 1973 did not authorise the Central Government to allocate coal blocks by an administrative process selecting beneficiaries, so the impugned allocation mechanism was outside the enactments. Public auction was recognised as a preferred method for natural resource allocation, but not as a constitutional mandate in every case; legality depended on fairness, transparency and Article 14 compliance. The Screening Committee and Government dispensation routes were found arbitrary, non-transparent and inconsistent with the statutory scheme, so the coal block allocations were held illegal.

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Issues: (i) Whether the Central Government had statutory authority to allocate coal blocks and select allottees under the existing mineral and coal legislation; (ii) whether public auction was a constitutional mandate for allocation of coal blocks; (iii) whether the allocations made through the Screening Committee route and Government dispensation route were valid, fair and consistent with the governing statutory scheme.

Issue (i): Whether the Central Government had statutory authority to allocate coal blocks and select allottees under the existing mineral and coal legislation.

Analysis: The statutory scheme under the Mines and Minerals (Development and Regulation) Act, 1957 and the Coal Mines (Nationalisation) Act, 1973 regulated mining rights and eligibility for coal mining, but did not contain any provision authorising the Central Government to allocate coal blocks by identifying beneficiaries through an administrative process. The declaration under Section 1A of the Coal Mines (Nationalisation) Act, 1973 operated in addition to the declaration under Section 2 of the Mines and Minerals (Development and Regulation) Act, 1957, and did not displace the State's role under the 1957 Act in the grant process. The Court held that the allocation exercise, as undertaken, was not traceable to either enactment and was inconsistent with the statutory framework.

Conclusion: The Central Government had no statutory power, under the two enactments, to allocate coal blocks by selecting beneficiaries through the impugned administrative route.

Issue (ii): Whether public auction was a constitutional mandate for allocation of coal blocks.

Analysis: The Court applied the settled position that auction is a preferred and often desirable method for alienation of natural resources, but it is not a constitutional requirement in every case. The choice of method remains an executive policy decision, subject to judicial review on grounds of arbitrariness, unfairness and violation of Article 14 of the Constitution of India. The Court accepted that revenue maximisation is not the sole constitutional yardstick and that the legality of a distribution method depends on the facts, the object of the policy and its consistency with constitutional norms.

Conclusion: Public auction was not a constitutional mandate for all coal block allocations.

Issue (iii): Whether the allocations made through the Screening Committee route and Government dispensation route were valid, fair and consistent with the governing statutory scheme.

Analysis: The Court found that the Screening Committee process suffered from arbitrariness, lack of objective criteria, shifting guidelines, absence of comparative evaluation, inadequate transparency, and repeated departures from the stated norms. It also held that allocations made to State Government companies and State PSUs for commercial mining were contrary to the scheme of the Coal Mines (Nationalisation) Act, 1973, and that consortium, leader-company and associate-company arrangements were not contemplated by the statute. The Government dispensation route was likewise held impermissible, and the Court emphasised that natural resource allocation must satisfy the requirements of fairness, transparency and the equality guarantee under Article 14 of the Constitution of India.

Conclusion: The coal block allocations made through the Screening Committee route and Government dispensation route were illegal and arbitrary.

Final Conclusion: The impugned allocation regime was struck down as being inconsistent with the statutory framework and the constitutional requirement of fair and non-arbitrary distribution of natural resources, while the question of consequential reliefs was left for further hearing.

Ratio Decidendi: Where the governing statute does not authorise an administrative allocation mechanism for natural resources, and the chosen method is arbitrary, non-transparent and inconsistent with the statutory scheme, the allocation is liable to be held illegal under Article 14 of the Constitution of India.

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