2025 (9) TMI 866 - SC - Indian Laws

Interim coal policy notice valid; 20% linked non-core price increase upheld under Article 14; refunds denied without pass-on proof

SC held the appellant validly notified the Interim Coal Policy and had authority to fix interim prices. The 20% increase over notified prices for linked ... Dual pricing of coal - Authority of appellant to notify the Interim Coal Policy, in terms of the dictum of this Court in Ashoka Smokeless [2006 (12) TMI 516 - SUPREME COURT] - increase of 20% over and above the notified price introduced in the Interim Coal Policy for the linked consumers of the non-core sector was valid in terms of Article 14 or not - entitlement of refund of the 20% additional cost - principles of unjust enrichment. Whether the appellant had the authority to notify the Interim Coal Policy, in terms of the dictum of this Court in Ashoka Smokeless? - HELD THAT:- In Ashoka Smokeless, it was held that the e-auction system, despite having the aim of regulating the supply of coal, was in effect a price regulation mechanism that enabled the coal companies to obtain the maximum possible price for coal based on the market forces. This Court, inter alia, held that the e-auction policy was illegal as the Central Government was not empowered to regulate the prices of coal in view of the deregulation of prices by virtue of the CCO, 2000. The said control order brought the regulation of prices into the realm of the powers enjoyed by the coal companies. The respondents have only relied on the direction to the Central Government and the coal companies in Ashoka Smokeless to constitute an expert committee to evolve a viable policy for distribution of coal, to argue that the appellant was not empowered to decide interim prices till the time such a committee gave its recommendations. There are no force in the said submission as the dictum in Ashoka Smokeless is limpid insofar as the powers of the Central Government and coal companies respectively are concerned. Nowhere in the judgment was any restriction placed on the appellant company to notify prices. Even the direction for creation of an expert committee was made to provide suggestions in respect of a viable supply policy primarily. In continuation, the Court also granted liberty to the Central Government along with the coal companies to evolve a viable policy. There are no qualms observing that this Court placed no restriction on the appellant’s powers to regulate prices through the process of price notification as the same was already governed by the CCO, 2000 and the appellant was competent to notify interim prices by way of the Interim Coal Policy. Whether the increase of 20% over and above the notified price introduced in the Interim Coal Policy for the linked consumers of the non-core sector was valid in terms of Article 14? - HELD THAT:- The respondents relied on a judgment of the High Court at Patna in Maa Mundeshwari Carbon (P) Ltd. v. Central Coalfields Ltd. [2010 (4) TMI 1244 - PATNA HIGH COURT] wherein it was held that there was no cogent or valid explanation for charging the 20% excess amount over and above the prices notified in 2004, for the period prior to the introduction of the New Coal Distribution Policy. It was further observed that the 20% price hike was an innovation on part of the appellant herein to illegally compensate themselves for the outlay which they had to make by refunding 33.33% of the price differential paid by the private industries during the e-auction era. It is not agreed with the reasoning assigned by the High Court in Maa Mundeshwari as the same was not substantiated by the single judge therein. In our opinion, the single judge mechanically stated that there was a lack of valid explanation without properly considering the objective of the Interim Coal Policy, the context in which it was introduced and the dictum of this Court in Ashoka Smokless and Pallavi Refractories [2005 (1) TMI 668 - SUPREME COURT]. It is due to a superficial study of the policy objectives and its effects that perhaps the argument of mala fide off-setting of compensation impressed upon the bench. Therefore, the respondents’ reliance on Maa Mundeshwari is of no avail to them in the case on hand. Principles of unjust enrichment - HELD THAT:- The High Court, while dealing with Mafatlal [1996 (12) TMI 50 - SUPREME COURT] made no observations as regards the applicability of the concept of unjust enrichment and dismissed the argument of the appellant in a mechanical and non-speaking manner. Therefore, it is found apposite to refer to the same in great detail to determine whether the plea of unjust enrichment holds any water. Thus, where there is an apprehension that the party who is seeking refund may have passed the adverse cost impact or burden of loss onto a third party, then in such cases, no refund ought to be granted. In such cases, the onus is on the State to retain such monies and use the same for public purposes in its role as parens patrea. In the case on hand, the respondents did not provide any evidence, declaration or undertaking that they had not passed the burden of loss onto the end consumers before either the learned Single Judge or the Division Bench of the High Court. It is only at the stage of second appeal that they have sought to rebut the burden of proof in this regard despite raising the said plea before the Division Bench. It is trite law that generally, parties are not allowed to introduce new documents in a second appeal because at this stage, the focus is on questions of law rather than on new evidence. While we do not approve of the conduct of the respondents in not adducing relevant evidence before the High Court when they first prayed for the relief of refund, yet discretion may be allowed and such additional documents for the purpose of properly addressing this issue is allowed. The High Court committed an egregious error in passing the impugned judgment. There are no other option but to set aside the impugned judgment and order dated 04.04.2012 passed by the High Court - the appeal succeeds and is hereby allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether the entity responsible for coal production and distribution had authority to notify an interim pricing policy after the e-auction regime was struck down and pending formulation of a policy by an expert committee. 2. Whether a 20% increase over the previously notified price for linked consumers in the non-core sector constituted a valid classification under Article 14 of the Constitution. 3. If the 20% increase was invalid, whether purchasers who paid the increased price are entitled to a refund and, if so, whether the defence of unjust enrichment bars refund. ISSUE-WISE DETAILED ANALYSIS - ISSUE 1: AUTHORITY TO NOTIFY THE INTERIM PRICING POLICY Legal framework: The Colliery Control Order regime as amended removed central government power to fix coal prices and left pricing authority with coal companies; central government retained powers to regulate supply/disposal. Judicial review of executive economic policy is limited to legality, rationality and conformity with constitutional/statutory mandates. Precedent treatment: Prior jurisprudence held that courts ordinarily should not substitute their view on price policy and that price fixation is generally an executive/legislative domain; a prior decision struck down the e-auction mechanism and directed constitution of an expert committee to recommend a viable policy while permitting Central Government and coal companies to evolve appropriate norms. Interpretation and reasoning: The Court examined the text and effect of the delegation under the control orders and concluded that nothing in the earlier judgment or the statutory scheme disempowered coal companies from notifying interim prices. The direction to constitute an expert committee was to evolve a longer-term supply policy and did not strip coal companies of their pre-existing statutory competence to fix prices under the deregulated regime. Ratio vs. obiter: Ratio - coal companies retained competence to notify prices under the deregulated control order notwithstanding the expert-committee direction; the earlier direction to constitute a committee did not amount to a moratorium on interim price notifications. Obiter - remarks on separation of powers and impracticality of the Court substituting economic decisions. Conclusion: The entity was competent to notify the Interim Coal Policy and to fix interim prices while the expert committee carried out broader policy formulation. ISSUE-WISE DETAILED ANALYSIS - ISSUE 2: VALIDITY OF THE 20% INCREASE UNDER ARTICLE 14 Legal framework: Article 14 requires reasonable classification supported by an intelligible differentia and rational nexus to the object; where classificatory measures are challenged, the rational nexus test applies unless the challenge is to non-classificatory arbitrariness which calls for proportionality scrutiny. Article 39(b) and the Essential Commodities statutory purpose impose an obligation that distribution of material resources serve the common good. Precedent treatment: Earlier decisions recognized permissibility of dual pricing where classification is reasonable; an earlier judgment struck down the e-auction process because it abdicated state responsibility by making prices variable and profit-driven, undermining Article 39(b) and Article 14. Authorities also recognize that reasonable profits are permissible where aimed at sustaining supply and serving public interest. Interpretation and reasoning: The Court analysed the nature of the classification (core vs non-core linked consumers), the administrative character of linkage, and the objective asserted for the increase (mitigating operational cost increases to ensure sustainable operation, maintenance and development of coal mines and thereby maintain supply). The linkage system was held to be administrative/logistical without statutory right to fixed supply; the core sector's dominant public-facing role justified differing treatment to avoid cascading price effects on essential goods. Because the challenge was to classificatory differentiation, the rational nexus test applied; the Court found a legitimate aim (sustaining supply), a rational connection between raising price for a small consumer class and protecting broader public interest, and absence of evidence that the measure was solely profit-motivated or arbitrary in the relevant factual matrix. Ratio vs. obiter: Ratio - the 20% increase for linked non-core consumers formed a reasonable classification and did not violate Article 14 on the facts examined; Ashoka-era concerns about profiteering did not translate automatically to invalidity of an objectively justified interim price increase. Obiter - broader comments on when proportionality is required vs. rational nexus for classification challenges; discussion of policy/contextual considerations informing Article 39(b). Conclusion: The 20% increase constituted a permissible, reasonably classified measure under Article 14 given its legitimate objective of maintaining supply and financial sustainability of the producer; therefore it was valid. ISSUE-WISE DETAILED ANALYSIS - ISSUE 3: ENTITLEMENT TO REFUND AND UNJUST ENRICHMENT Legal framework: Principles of restitution/unjust enrichment require proof that claimant has not passed on the burden to third parties; when public monies are involved courts must guard against unfounded refunds that lead to windfalls. Earlier decisions have declined refund where burden was passed to end consumers and have conversely ordered refunds for sums paid under interim directions or where law authoritatively held a pricing mechanism invalid and refunds had been directed. Precedent treatment: Prior rulings granted refunds in the context of amounts collected under the e-auction era, especially amounts paid under interim court directions; other authorities upheld refusal of refund where the claimant had passed the burden to consumers or failed to prove otherwise, and recognized the State's parens patriae position where monies could not practically be restored to affected third parties. Interpretation and reasoning: The Court treated the refund question as contingent on the validity question; having upheld the Interim Policy, refund claim became moot. The Court nonetheless evaluated the unjust-enrichment argument: it placed the evidentiary burden on applicants seeking refund to prove they did not pass the increased cost to end consumers. The Court found the respondents had failed to produce complete, verifiable transactional documentation across the board; partial and uncertified records submitted by a subset of claimants were insufficient. The Court also distinguished earlier refund orders (which arose from different factual and procedural postures) and emphasised that public funds should not be refunded without cogent proof that claimants bore the burden themselves. Ratio vs. obiter: Ratio - where pricing measure is held valid, no refund is due; even where invalidity might be found, refund should be denied if claimant cannot discharge the burden of proving absence of passing-on of cost. Obiter - extended commentary on the proper application of unjust enrichment and the State's parens patriae role in cases where monies cannot be traced to ultimate sufferers. Conclusion: No refund is ordered because the Interim Coal Policy is valid; alternatively, even if invalid, refund would be denied in absence of complete and reliable proof that claimants did not pass the burden to end consumers and given public-interest considerations against unwarranted restitution. ADDITIONAL PRINCIPLES AND APPLICATIONS 1. Scope of judicial review in economic policy: Courts must be cautious, examine legality and reasonableness, and confine scrutiny to constitutionality and statutory compliance rather than substituting economic judgments; proportionality applies to non-classificatory arbitrariness, while rational nexus suffices for classificatory measures. 2. Interaction of Article 39(b) with pricing: Distribution of scarce natural resources must subserve the common good; revenue maximisation is not the sole criterion - legitimate developmental and supply-sustainability objectives can justify pricing measures that allow reasonable profit to ensure continued availability. 3. Evidentiary burden on refund claimants: Claimants seeking repayment of amounts paid in market transactions must produce comprehensive, verifiable evidence that they absorbed the additional cost and did not transfer it to downstream consumers; absence of such proof militates against refund from public funds. FINAL CONCLUSIONS 1. The pricing authority retained statutory competence to notify interim prices; the expert-committee direction did not preclude interim price notifications. 2. The 20% differential for linked non-core consumers was a constitutionally permissible classification with a rational nexus to legitimate objectives (sustainable supply and financial viability) and thus did not violate Article 14 on the record before the Court. 3. Because the Interim Pricing Policy is held valid, claimants are not entitled to refund; were the policy invalid, refund would still require strict proof that the burden was not passed to end consumers and courts may deny restitution to avoid unjust enrichment and protect public interest.