TaxTMI 
TaxTMI 
2025 (9) TMI 866
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.... Adv., Mr. Vijay Deora, Adv., M/S. Meharia & Company, AOR, For the Respondent(s): Mr. Ranjit Kumar Singh, Sr. Adv., Mr. Devashish Bharuka, Sr. Adv., Mr. Ravi Bharuka, AOR, Mr. Rohit Agarwal, Adv., Ms. Aishwarya Bhati, A.S.G., Mr. Gp. Capt. Karan Singh Bhati, AOR, Mr. Hemendra Sharma, Adv., Mr. Abhijeet Singh, Adv., Mr. Anirudh Singh, Adv., Mr. Yogeshwar Krishna Purohit, Adv., Mr. Shiv Autar Singh Sengar, Adv., Mr. Aishwary Mishra, Adv., Mr. Dhananjai Shekhwat, Adv., Ms. Anjali Saxena, Adv., Mr. Dashrath Singh, Adv., Mr. Anupam Lal Das, Sr. Adv., Mr. Amit Sharma, AOR, Mr. Dipesh Sinha, Adv., Mr. Dipesh Sinha, Adv., Ms. Pallavi Barua, Adv., Ms. Pallavi Barua, Adv., Ms. Aparna Singh, Adv. Mr. Manish Kumar Saran, AOR. JUDGMENT J.B. PARDIWALA, J. For the convenience of exposition, this judgment is divided into the following parts: INDEX A. FACTUAL MATRIX 3 B. SUBMISSIONS OF THE PARTIES 21 (a) Submissions of the appellant in its petition under Article 136, I.A. No. 1 of 2015 and additional affidavits 21 (b) Written submissions of the respondents 26 C. ISSUES FOR DETERMINATION 31 D. ANALYSIS 31 (i) Analysis of the ....
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.... falling in the non-core sector, in light of this Court's dictum in Ashoka Smokeless Coal India (P) Ltd. v. Union of India, reported in (2007) 2 SCC 640. A. FACTUAL MATRIX 4. The appellant herein is a public sector undertaking involved in the mining, production and marketing of coal and its products. It falls under the administrative control of the Ministry of Coal, Government of India. The respondents herein (original writ petitioners) are private limited companies engaged in the business of manufacturing of smokeless fuel for which coal is the raw material. 5. The respondents had challenged the Interim Coal Policy notified by the appellant on 15.12.2006, increasing the notified price of coal by 20% for the non-core linked sector. The Interim Coal Policy was introduced after this Court struck down the e-auction methodology of pricing in Ashoka Smokeless (supra). 6. For a better understanding of the pivotal issue involved in the case in hand, we find it apposite to provide a background of the coal sector. 7. The coal sector was primarily a private sector entity post-independence till the early 1970s. In 1972-73, the industry was nationalized in terms of the Coking Co....
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....and to whom the coal stocks were to be sold to. 11. The linkage committees were composed of stakeholders from a variety of areas, including the appellant, railways and the erstwhile planning commission, etc. Initially, the linkage system was extended only to the core sector, however, after noticing huge demand of coal by the non-core sector, the same was introduced for the consumers falling under the said category. It is noted that a "linkage" did not vest any right in the linked unit to claim coal from a particular company, coalfield or source. The system was introduced for logistical ease, and "linkage" acted only as a clearance to the linked coal company (either the appellant or one of its subsidiaries) to supply coal to a unit subject to availability of the commodity as well as regulatory directives given in respect of such unit or linked coal mine. 12. It is pertinent to note that the classification of core and non-core sectors as well as the linkage system is now dispensed with after the introduction of the New Coal Distribution Policy, 2007. However, for the purpose of answering the issues arising in this litigation, it is necessary for us to bear in mind the modalitie....
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....me, as determined by the market rates, were significantly higher than the prices notified by the appellant and its subsidiaries. This affected the linked consumers of the non-core sector disproportionately. Therefore, the e-auction system was challenged before several High Courts and was ultimately challenged before this Court in Ashoka Smokeless (supra) wherein the system of sale by way of e-auction was struck down on 01.12.2006. This Court also directed for the formation of a committee comprising of the Secretary, Ministry of Coal and technical experts, with a view to evolve a viable policy for sale of coal. 17. The said expert committee gave its recommendations on the coal policy of the country pursuant to which, the New Coal Distribution Policy was introduced in October, 2007. In the meantime, the appellant notified an Interim Coal Policy on 15.12.2006 to govern the period between 01.12.2006 and October 2007 as no policy was in place for this period and this Court in Ashoka Smokeless (supra) remained silent on this aspect. In the Interim Coal Policy, the appellant issued the price of coal for the linked consumers of the non-core sector at a rate 20% higher than the price not....
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.... not based on any market study or consumer pattern. The hike overlooked the effects on the end consumers of the coal. The action of the appellant in notifying the Interim Coal Policy, without conducting a study of the impact of the sudden increase of price was liable to be struck down on the touchstone of Article 14 for being arbitrary and unreasonable. vii) The appellant failed to assign any cogent reasons in the Interim Coal Policy for the price increase of 20% only for the linked consumers of the non-core sector as no such measure was adopted in respect of the linked consumers of the core sector. There was no rational basis for such classification between the consumers of the core and non-core sectors, therefore, such classification was arbitrary, discriminatory and in violation of Article 14 of the Constitution. viii) Linkage was granted to the respondents herein to share the burden of the coal companies in manufacturing and supplying smokeless fuel and were, as a consequence of such linkage, being charged the same notified price as for the core sector industries. The appellant could not have discriminated between the core and non-core linked consumers after p....
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....t by charging an increased price from the linked consumers of the non-core sector, it could mitigate 1.2% of the overall increase of 23.84% in the input costs. The respondents herein had impugned the increase in prices by contending that the same would lead to an appreciable increase in the cost of the end product causing undue hardship to the small consumers which was impermissible in terms of the Act, 1955. The learned Single Judge was of the view that the appellant had introduced the Interim Coal Policy with a view to earn profits which was impermissible in terms of this Court's decision in Ashoka Smokeless (supra) and that the appellant's attempt to compensate its input costs at the expense of only 6% of the consumer base of coal was unreasonable. It was held that the appellant had failed to strike a balance between its financial interests, the interests of the respondents herein and the ultimate consumers of the end product, that is the rural population. d) On the third issue of whether the decision rendered in Pallavi Refractories (supra) was applicable to the present case, the single judge held that though the observations therein permitted dual pricing and allowed ....
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....olicy was evolved by the formation of the committee. d) It was further held that the 20% price hike was not supported by any rationale or legal basis as the same was a measure taken by the appellant to protect its financial interests. Such justification could not have been the sole basis for introducing the Interim Coal Policy as the object of nationalization of the coal companies was not to enable them to earn profit but to expand the object of a welfare State. e) The Division Bench rejected the appellant's contention that the increase in price was to mitigate the increase of 23.84% in input costs of the appellant to the extent of 1.2%. It was held that such justification had not been established before the court by way of documentary evidence and the appellants had not pleaded anywhere that they were suffering losses. It was concluded that the 20% increase over and above the previously notified prices was done by the appellant only with a view to protect its financial interests and make profits at the cost of the welfare of the State. f) It was further held that coal was deleted from the list of goods mentioned under the Act, 1955 with effect from 24.12....
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.... appellant had also contended that the refund of the impugned amount would unjustly enrich the respondents as they had not proved in any way that they had not transferred the burden of this increment to the consumers and were operating at a loss during the time period for which the Interim Coal Policy was notified. The Division Bench declined to accept such contention on the ground that the burden was upon the appellants to prove that the respondents were benefitted by the doctrine of unjust enrichment by establishing that the price burden was passed to the end consumers of the product manufactured by the respondents. 23. In such circumstances referred to above, the appellants are here before this Court with their present appeals. 24. This Court vide its order dated 09.08.2012, had issued notice confined to the plea of unjust enrichment thereby confining the lis to the issue of refund. The appellant filed an application for the modification of the said order by way of the I.A. No. 1 of 2015 and prayed that the order dated 09.08.2012 be modified to include the question of validity of the Interim Coal Policy. The appellant submitted in the said I.A. that modification of the ord....
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....nce No. 1 of 2012, reported in (2012) 10 SCC 1, settles the contours of law on the issue of the extent to which the courts can make an inquiry into an economic policy decision of the executive. It was submitted that it is incumbent upon the courts to respect the mandate and wisdom of the executive branch of the government as regards the formulation of economic policies and therefore, not endeavour to evaluate the efficacy of one policy compared to another. The courts are empowered to look into a policy decision only if the same perpetuates hostile discrimination against a particular section of society or when it is not backed by a social or welfare purpose. 28. Further, the power of judicial review stands exhausted once the courts come to the conclusion that the authority fixing the prices determined the same on a rational basis. Thereafter, no re-evaluation of the prices and the considerations underlying it is possible even if the prices are found to be demonstrably injurious to some manufacturers and producers. 29. As regards the question whether the appellant company was authorized to fix the interim price of coal, it was submitted that the coal ceased to be a controlled c....
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.... levels intact for the core sector industries and to increase the notified prices for the linked non-core sector industries by 20%. 35. The learned counsel submitted that the objective of dual pricing was to ensure that the core sector industries are not unduly burdened with higher prices but at the same time, the appellant company also receives adequate return for its products in order to cover the mounting financial deficit. The appellant has submitted that the object of increasing the price of coal for the non-core linked sector by 20% was to mitigate the increase in operational costs so as to maintain an adequate supply of coal in the market. 36. On the question of whether a refund of the additional 20% amount charged over and above the notified prices could be granted to the linked industries of the non-core sector, it was submitted by the appellant that such entitlement to refund arises only in the event the respondents prove that they have not passed the burden of the increased price onto the consumers. The subsidiaries of CIL who are also the appellants herein placed reliance on this Court's judgments in Union of India v. Solar Pesticides (P) Ltd., reported in (2000) ....
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.... amounts refunded by the appellant to the smokeless fuel industries in compliance of the directions of this Court in Ashoka Smokeless (supra), Tetulia Coke (supra), SJ Coke Industries Private Ltd v Central Coalfields Ltd., reported in (2015) 8 SCC 72 and Horra Coke Industries v. Central Coalfields Limited & Ors. bearing Civil Appeal No. 9615/2024. 42. As regards the prayer for modification of the order dated 09.08.2012 wherein a limited notice was issued confined only to the question of unjust enrichment, it was submitted by the learned senior counsel that the I.A. No. 1 of 2015 was solely based on the dictum of this Court in the presidential reference Natural Resources Allocation (supra). It was submitted that the appellant had misread the said judgment. The presidential reference, instead of diluting the opinion of this Court in Ashoka Smokeless (supra), further strengthens the proposition that coal, as a natural resource, need not necessarily be sold only by auction. There can be other methods for sale of coal. 43. Additionally, the learned senior counsel submitted that the judgment rendered in the presidential reference had no relevance to the issue of validity of the Int....
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....mitted that the coal companies had also not taken the plea of unjust enrichment when contesting the refund sought for in respect of the excess price collected under the e-auction policy. The entirety of the excess price therein has already been refunded. Thus, the question of refund of excess monies collected under the Interim Coal Policy ought to be treated at parity. 49. Without prejudice to the aforesaid arguments, it was submitted by the respondents that they had not enhanced the sale price of their goods to include the interim increase of 20% over the notified price and therefore, had not passed on the burden of the additional cost onto the end consumers. In this regard, the respondents had filed additional documents on record including CA certifications therefor. 50. Accordingly, the learned senior counsel prayed that the petition by the appellant be dismissed by holding that the respondents are entitled for refund of the excess price collected under the Interim Coal Policy along with an interest of 10% per annum thereupon. C. ISSUES FOR DETERMINATION 51. Having heard the learned counsel appearing for the parties and having gone through the materials on record, th....
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.... non-core sector were exempted from paying the price of coal at the weighted average of the e-auction price. These included tiny units and the National Cooperative Consumers' Federation (NCCF) who were to be supplied coal at the floor price of 20% above the notified price. A similar benefit was extended to the agencies of the Central and State Governments. b. Submissions of the petitioners in Ashoka Smokeless (supra) 56. The petitioners therein had submitted that the introduction of the e-auction system was an arbitrary exercise of power of price fixation for the following reasons: a) The e-auction system was not in consonance with Article 14 read with Article 39(b). Coal, being an essential commodity as well as raw material for several manufacturing units, was required to be distributed at a fair and reasonable price. Fixation of an arbitrary price of a scarce commodity like coal would give rise to unhealthy competition amongst various manufacturers, which would be contrary to the object and spirit of Article 39(b) of the Constitution as the end consumers would be highly prejudiced. b) The classification between NCCF and other non-core sector consumers was ....
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....a word of wide import. It, in the context of application of a statute governing a monopoly concern and also with an essential commodity, would indisputably stand on a different footing from the business concern or a private person. The Central Government as also the coal companies having regard to the provisions of the Nationalisation Acts must be visualised not as profit-earning concerns but as an extended arm of a welfare State. They are expected to harmonise the business potential of a country to benefit the common man. The power of the Central Government to carry on trade or business activities emanates from the constitutional provisions contained in Article 298 of the Constitution of India. The coal companies, therefore, were under a constitutional obligation to fix a reasonable price. They must differentiate themselves from the private sectors which thrive only on a profit motive. As public sector undertakings, the coal companies, thus, would have a duty to fix the price of an essential commodity in such a manner so as to subserve the common good. Although the provisions of Section 3(2)(c) of the Essential Commodities Act are not attracted in relation to coal in view of the d....
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....rely as a commercial venture with a view to making profits. We do not know-at any rate it does not fall for consideration here-if a monopoly based public utility should ever be a commercial venture geared to support the general revenue of the State but there is not an iota of hesitation in us to say that the common man's mode of transport closely connected with the free play of his fundamental right should not be." 96. In S.N. Govinda Prabhu and Bros. [(1986) 4 SCC 198] this Court observed that profit is not to be shunned but that service and not profit should inform actions of a Board. It was further observed: (SCC p. 208, para 5) "We do not think that either the character of Electricity Board as a Public Utility Undertaking or the provisions of the Electricity Supply Act preclude the Board from managing its affairs on sound commercial lines though not with a profit-thirst." 97. As regards limitation of judicial review of price fixation after referring to the decision of the Constitution Bench of this Court in Shri Sitaram Sugar Co. Ltd. v. Union of India [(1990) 3 SCC 223] this Court in ONGC v. Assn. of Natural Gas Consuming Industries of Gujarat [1....
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....ss (supra) is reproduced below: "109. It may be true that prices are required to be fixed having regard to the market forces. Demand and supply is a relevant factor as regards fixation of the price. In a market governed by free economy where competition is the buzzword, producers may fix their own price. It is, however, difficult to give effect to the constitutional obligations of a State and the principles leading to a free economy at the same time. A level playing field is the key factor for invoking the new economy. Such a level playing field can be achieved when there are a number of suppliers and when there are competitors in the market enabling the consumer to exercise choices for the purpose of procurement of goods. If the policy of the open market is to be achieved the benefit of the consumer must be kept uppermost in mind by the State. 110. Can the consumer be expected to derive any such benefit from a monopoly concern? Would a situation of this nature lead to a hybrid situation where a coal company is allowed to fix its own price which may not be a fair price? These are some of the questions which were required to be kept in mind by the coal companies be....
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....o fix price. It is only a mode to obtain maximum price. In other words, deriving the optimum benefit by sale of coal is the goal. While doing so the State does not have to follow the principles of fixation of price. It is not required to apply its mind as to its effect. It treats coal like any other commodity. It treats itself like a private trader. A distinction must be borne in mind when a State intends to part with a privilege or a largesse as a competitor in the market and when it is expected to fulfil its constitutional goal enshrined under Article 39(b) of the Constitution." (Emphasis supplied) 59. Having discussed the constitutional requirement of reasonable pricing of essential commodities like coal, this Court in Ashoka Smokeless (supra) observed that: a) First, coal was an essential commodity in terms of Section 3(1) of the Act, 1955. This occasioned the introduction of the Colliery Control Orders for regulating the price fixation of the said commodity. The Colliery Control Orders read with Article 39(b) of the Constitution placed a constitutional as well as a statutory mandate on the coal companies to distribute coal equitably and at a fair price. ....
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....not only between the persons whose end-product is similar or otherwise based on coal but who produce other products not based completely on coal. Variability in the price of coal would affect all who have to depend on coal e.g. we may notice that hard coke is considered to be vital in the manufacturing process of steel. If the price of coal is not fixed, the price of hard coke cannot be fixed, which may give rise to uncertainty in the price of steel or smokeless coal which caters to the needs of the small consumers both for domestic use also for use in the small hotels and/or use in rural areas. It was, therefore, necessary that the price of coal be made known. The contention of the coal companies is that having regard to the availability of LPG, smokeless coal is no longer in use. Ex facie, the said plea is unacceptable. 143. Moreover, even fixation of price of LPG in turn would depend upon the fixation of oil products in other countries. The Central Government, it is well known, having regard to the effect that may be caused to the people in general, takes all precautions before fixing the price thereof. The Central Government has never increased the LPG price exorbitant....
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....to adhere to the Directive Principles of the State Policy and the prime object for which the Nationalisation Acts were enacted. 165. Good governance and good corporate governance are distinct and separate. Whereas good governance would mean protection of the weaker sections of the people; so far as good corporate governance is concerned, the same may not be of much relevance. Even the coal companies in taking recourse to e-auction did not give effect to the concept of corporate social responsibility. 166. What would be profiteering has been noticed in T.M.A. Pai Foundation v. State of Karnataka [(2002) 8 SCC 481] ; Islamic Academy of Education v. State of Karnataka [(2003) 6 SCC 697] and P.A. Inamdar v. State of Maharashtra [(2005) 6 SCC 537]. In these decisions, it has been held that although education is an industry, and those who impart education do so as a part of their fundamental right in terms of Article 19(1)(g) of the Constitution of India, profiteering should not be taken recourse to. 167. In fact the decisions of this Court on price fixation also point out that although a reasonable profit may be permissible, profiteering would not be." (Emp....
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.... had deregulated the power to fix price and delegated the same to the coal companies, the Central Government could not have introduced the e-auction policy which was essentially a policy for price determination of coal in the garb of supply regulation thereof. 64. In order to understand the distinct regulatory powers of the Central Government and the coal companies, we find it apposite to refer to Clauses 4 and 8 of the CCO, 1945 respectively as well as Clause 6 of the CCO, 2000. Relevant clauses under CCO, 1945 Corresponding clauses in CCO, 2000 Remarks Clause 4: "4. The Central Government may by notification in the official Gazette, fix the sale price at which, or the maximum or the minimum sale price or both, subject to which coal may be sold by colliery owners and any such notification may fix different prices - (i) for different grades and sizes of coal and (ii) for different collieries." - The omission of the power to regulate price of coal from the powers assigned to the Central Government in the CCO, 2000 is indicative of the fact that though coal was still an essential commodity, yet the operations and decisions pertaining thereto ....
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....ould come within the purview of the Colliery Control Order, 2000, would, thus, take within its sweep only: to whom the supply would be made, what would be the quantity, the mode, period or the source of supply. Such a power to issue directions would not include fixation of price. E-auction is not related to policy for supply of coal. It is essentially the price therefor. The Central Government in that view of the matter, either directly or indirectly, while purportedly exercising its power under clause 6 read with clause 9 of the Colliery Control Order could not have issued any direction in the garb of disposal of coal by way of e-auction. The Central Government itself says that it allowed the coal companies to fix their own price; if that be so in terms of the statute it could not issue any direction which would have direct or indirect impact on price of coal. It, as indicated hereinbefore, directed that 10 lakhs MT coal be sold through e-auction; but while doing so stricto sensu, its power and control to regulate supply of coal could not be exercised in that sense. Apart from the fact that it also does not satisfy the attributes of supply, as noticed hereinbefore, the supply of c....
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....ollowed, yet the other aspects of the supply of coal including price thereof were to be decided as per the statutory mandate prescribed in the CCO, 2000. Thus, the coal companies were still empowered to regulate the pricing of coal in terms of the CCO, 2000. f. Conclusions reached in Ashoka Smokeless (supra) 68. A comprehensive reading of the decision rendered by this Court in Ashoka Smokeless (supra) indicates the following: i. Though dual pricing is permissible in terms of this Court's dictum in Pallavi Refractories (supra), yet the principles of price fixation of essential commodities are required to be kept in mind to ensure that the constitutional and statutory goals enshrined in Article 39(b) and Act, 1955 respectively, are met. ii. It was clarified that the concept of distributive justice contained in Article 39(b) and the Act, 1955 placed an obligation on the State to ensure a fair price for the consumers. Such fair price cannot be taken to mean the least possible price without due regard for operational and production costs incurred by the State or the PSUs. While the State and its authorities cannot be actuated by profit motive, they are not barred....
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....pellant company herein would determine the economic price to be charged for the coal produced from time to time. Thereafter, the appellant herein issued the price notification dated 13.03.1997 wherein it was provided that the unlinked consumers and industries of the non-core sector were required to pay 20% additional price over and above the prices previously notified. 72. The petitioners therein had contended that the levy of an additional amount only on the unlinked consumers of the non-core sector was discriminatory and violative of Article 14 of the Constitution as the differentiation between linked and unlinked industries for the purpose of pricing was irrational and did not constitute intelligible differentia. It was also averred that such substantial price variation under the guise of an additional levy amounted to dual pricing which was arbitrary and excessive. 73. The High Court of Andhra Pradesh rejected these arguments and found no infirmity in the differential pricing adopted by the coal companies on the ground that the extent of bulk consumption of coal by the core/linked sector industries called for special treatment. It was observed that the core sector consume....
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.... may acquire a quasi-judicial character but, otherwise, price fixation is generally a legislative activity. After observing thus, the Court held that price fixation is neither the function nor the forte of the court. The court is neither concerned with the policy nor with the rates. But in appropriate proceedings it may enquire into the question, whether relevant considerations have gone in and irrelevant considerations kept out while determining the price. In case the legislature has laid down the pricing policy and prescribed the factors which should guide the determination of the price then the court will, if necessary, enquire into the question whether policy and factors were present to the mind of the authorities specifying the price. The assembling of raw materials and mechanics of price fixation are the concern of the executive and it should be left to the executive to do so and the courts would not revaluate the consideration even if the prices are demonstrably injurious to some manufacturers and producers. The court will however examine if there is any hostile discrimination. It was observed as under: (SCC p. 734, para 4) "4. We start with the observation, 'price ....
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....mphasis supplied) 76. What has been conveyed by this Court in so many words is that the matters of economic policy and price fixation are in the domain of executive action and the courts ought not to interfere in such decision-making unless it is shown that such policy does not conform to pre-existing legislative mandate or causes hostile discrimination. 77. In Pallavi Refractories (supra), the petitioners had argued that dual pricing caused hostile discrimination to the detriment of the non-core/unlinked sector. Therefore, this Court examined whether the imposition of the 20% additional price on the non-core/unlinked sector was discriminatory in terms of Article 14 of the Constitution. It was observed therein that: a) First, the core sector industries constituted nearly 90% of the entire consumer base of the appellant company herein and their usage of coal was of paramount importance to nation-building activities. Since, the industries belonging to the core sector produced and provided essential goods and services, any increase in the price of coal which was used as a raw material or energy source for such industries would lead to a cascading effect on every categor....
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....ate one unit of electricity, 0.5 kg to 1 kg quantity of coal is consumed. In case of cement, steel and fertilisers, the percentage of cost of coal in the entire cost of production is ranging from 15% to 25%. Keeping in view the several factors, the Board of Directors after due deliberations felt that the core sector industries are of intrinsic importance to the building of the nation and to the common man in general. It was thought fit to keep the price increase at particular levels for the core industries and charge a bit extra from other industries. This was a policy decision taken by the respondent Company with regard to price fixation. Any increase in prices for the core sector industries will automatically affect market economy. Taking an instance, increase in the price of coal, to the Electricity Board, will have a serious impact on every institution or an individual consuming electricity. Electricity has become an essential commodity and is required for running industry, commercial activity, locomotives, agriculture and for domestic use. Every category of consumer shall have to pay more resulting in cascading effect of increasing the price of every commodity. This is not the....
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....as to cover the financial deficit. There is no such law that a particular commodity cannot have a dual fixation of price. Dual fixation of price based on reasonable classification from different types of customers has met with approval from the courts. Monopolistic organisations like Electricity Boards and Petroleum Corporations are having dual price fixation. It is a common feature that Electricity Boards which generate power sell the power at different rates to different types of customers such as domestic, agricultural and industrial consumers. Even different types of industries are charged different rates. 20. Keeping in view the law laid down by this Court in Union of India v. Cynamide India Ltd. [(1987) 2 SCC 720 : AIR 1987 SC 1802] and Shri Sitaram Sugar Co. Ltd. v. Union of India [(1990) 3 SCC 223 : AIR 1990 SC 1277] in our opinion, the High Court did not fall into an error in upholding clause 10 of the price notification dated 14-3-1997. The High Court rightly came to the conclusion that clause 10 of the price notification did not violate the equality clause of Article 14 of the Constitution. By evolving the dual price policy and charging lesser price from the cor....
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....onform to the norms which are rational, informed with reasons and guided by public interest, etc. All these principles are inherent in the fundamental conception of Article 14. This is the mandate of Article 14 of the Constitution of India. ---xxx--- 116. The learned counsel for CPIL argued that revenue maximisation during the sale or alienation of a natural resource for commercial exploitation is the only way of achieving public good since the revenue collected can be channelised to welfare policies and controlling the burgeoning deficit. According to the learned counsel, since the best way to maximise revenue is through the route of auction, it becomes a constitutional principle even under Article 39(b). However, we are not persuaded to hold so. Auctions may be the best way of maximising revenue but revenue maximisation may not always be the best way to subserve public good. "Common good" is the sole guiding factor under Article 39(b) for distribution of natural resources. It is the touchstone of testing whether any policy subserves the "common good" and if it does, irrespective of the means adopted, it is clearly in accordance with the principle enshrined in Ar....
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.... good in terms of the economic and political philosophy of the Government. At this stage, we may, with a view to obviate any confusion, reiterate the dictum of this Court in Cynamide India (supra) and Sitaram Sugar (supra) that as a general rule, the courts ought not to interfere with the prices fixed by the State provided that such prices are determined in conformity with the principles enshrined in Articles 14 and 39(b). 83. This Court in Natural Resources Allocation (supra), observed that the alienation of natural resources is the prerogative of the executive as it involves making intricate economic choices for which the courts do not have the necessary expertise. Therefore, the courts should not endeavour to determine whether an instance of distribution of natural resources is economically or factually reasonable. The domain of the courts is limited to adjudging the reasonability of an economic policy decision to situations when such action is patently unreasonable in terms of the Constitution and/or the statute or regulations that are enacted to guide executive action in that regard. "146. To summarise in the context of the present Reference, it needs to be emphasi....
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.... exercise of power of judicial review, shall term the executive action as arbitrary, unfair, unreasonable and capricious due to its antimony with Article 14 of the Constitution." (Emphasis supplied) 84. This Court in Balco Employees' Union v. Union of India reported in (2002) 2 SCC 333 observed that the courts are not empowered to consider the merits of different economic policies and adjudge the relative efficacy thereof. Further, the courts must be circumspect in disturbing the conclusions reached by the executive in formulating an economic policy or fixing of prices unless and until there is an illegality in the decision-making process itself. The relevant observations are reproduced below: "93. Wisdom and advisability of economic policies are ordinarily not amenable to judicial review unless it can be demonstrated that the policy is contrary to any statutory provision or the Constitution. In other words, it is not for the Courts to consider relative merits of different economic policies and consider whether a wiser or better one can be evolved. For testing the correctness of a policy, the appropriate forum is the Parliament and not the Courts. ---x....
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....the legality of the decision-making process rather than the substantive merits of the policy itself. For example, if a government policy infringes on fundamental rights or discriminates against a particular group, the courts have a duty to strike down such policies. However, in the absence of constitutional or legal violations, the courts should respect the policy choices made by the executive or legislature. 58. The duty of the court in policy-related cases is primarily to determine whether the policy falls within the scope of the authority granted to the relevant body. If the policy decision is within the executive's legal authority and has been made following proper procedures, the courts should defer to the expertise and discretion of the policy-makers, even if the policy appears unwise or imprudent. This restraint ensures that the courts do not impose its own perspective on policy matters that are rightly the responsibility of other branches. 59. Economic and social policies often involve significant redistribution of resources, prioritisation of interests, and balancing of public needs, which requires careful consideration by those with specialised knowl....
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.... of the jurisdiction to decide the whole conspectus of legal and valid points. The relevant paragraph of the said judgment is extracted below: "16. We may now summarize the principles in view of the precedents noticed above. When a limited notice is issued by a bench on an appeal/petition, more often than not, the view taken is tentative. There could be occasions when the claim of the party succeeding before the court below is demonstrated to be untenable because of a patent infirmity in the findings recorded in the impugned judgment, or a glaring error in the procedure followed having the effect of vitiating the proceedings is shown to exist, at any subsequent stage of the proceedings, which might have been overlooked by the Bench when it issued limited notice. Justice could be a real casualty if the same or the subsequent Bench, in all situations of limited notice having been issued initially, is held to be denuded of its jurisdiction to rule on the merits of the contentions relatable to points not referred to in the notice issuing order. As it is, since exercise of jurisdiction under Article 136 is discretionary, notices on appeals/petitions are not frequently issued by....
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....gated the increase in operational costs only to the extent of 1.2%. 90. This conspectus of facts makes it necessary for us to look into the proposition of whether financial sustainability of operations of a PSU can be a reasonable basis for a price increase for a specific class of consumers. This Court in Shree Meenakshi Mills Ltd. v. Union of India, reported in (1974) 1 SCC 468 and Prag Ice & Oil Mills v. Union of India, reported in (1978) 3 SCC 459 had the occasion to address the issue of whether the price control measures adopted by the Government were in conflict with the fundamental rights i.e., Articles 19(1)(f) and 19(1)(g) respectively of the cotton textile mills and mustard oil producers respectively. We wish to clarify at the outset that the nature of price control was different in the Meenakshi Mills (supra) and Prag Ice (supra) from the nature of price increase in the case on hand. However, in our considered opinion, the principles expounded in these judgments are of common application. It was observed by this Court therein as follows: a) First, the dominant purpose of the Act, 1955, more particularly Section 3 thereof is to ensure equitable distribution of ....
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....le profit to the trader are not taken into accounts; and above everything else, the industry was not ensured a reasonable return on its investment. These contentions were rejected by this Court on the ground that, just as the industry cannot complain of rise and fall of prices due to economic factors in an open market, it cannot similarly complain of some increase in or reduction of prices as a result of a notification issued under Section 3(1) of the Essential Commodities Act because, such increase or reduction is also based on economic factors. Dealing with the contention that a reasonable profit must be assured to the manufacturers, the Court held that ensuring a fair price to the consumer was the dominant object and purpose of the Essential Commodities Act and that object would be completely lost sight of, if the producer's profit was kept in the forefront. Ray, C.J., speaking for the Court, observed: (SCC p. 490, para 66) "In determining the reasonableness of a restriction imposed by law in the field of industry, trade or commerce, it has to be remembered that the mere fact that some of those who are engaged in these are alleging loss after the imposition of law w....
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....increase in prices for the linked consumers of the non-core sector was reasonable for the sustainable operation, maintenance and development of the coal mines in light of the increase in operational costs of the appellant company. Further, it is imperative to consider the Interim Coal Policy in the context in which it was introduced. Though the e-auction system was held to be a price regulation mechanism in the garb of a supply regulation, yet it cannot be denied that one of the objectives of the said policy was to ensure supply to a common man and curb the black market sale of coal. While we are in agreement with the decision in Ashoka Smokeless (supra) that the e-auction system was in contravention of Articles 14 and 39(b) respectively for want of reasonableness, we find it apposite to consider the situation prevailing at the relevant point of time that necessitated the introduction of such a system. Once this Court struck down the e-auction system, the objective of maintenance of supply of coal remained unfulfilled and it became all the more important for the appellant company to ensure adequate production of coal. 94. In such view of the matter, we are of the considered opin....
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....ng") between the importance of achieving the proper purpose and the social importance of preventing the limitation on the constitutional right." (Emphasis supplied) 96. A perusal of the dictum in Modern Dental (supra) shows that for an action which is in contravention to a fundamental right(s), to be constitutional and proper, it must fulfil the test of proportionality. In balancing the rights and interests of two sections of the population, the courts must be mindful of the four sub-components of 'proportionality': (i) The action must be for a proper purpose that is, it should serve a legitimate aim; (ii) Such action must have a rational nexus with the fulfilment of such aim or object; (iii) Such action must be a 'necessity' insofar as it should be the best available measure with no other alternatives that may achieve the same purpose with a lesser degree of restrictions; and (iv) The action should not have a disproportionate impact and the benefits must be balanced against the harm caused by the restrictive measure. 97. However, the employment of the test of proportionality is not to be done mechanically, rather, it has to be see....
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....ntive review by focusing on the multi axle operation of equality and non-discrimination. ---xxx--- 29. The determination of whether the classification is under-inclusive is closely related to the test that is undertaken by the Court while determining the relationship of the means to the end. This Court follows the two-pronged test to determine if there has been a violation of Article 14. The test requires the Court to determine if there is a rational nexus with the object sought to be achieved. P.N. Bhagwati, J. (as the learned Chief Justice then was) in E.P. Royappa v. State of T.N. [E.P. Royappa v. State of T.N., (1974) 4 SCC 3 : 1974 SCC (L&S) 165] held that arbitrariness of State action is sufficient to constitute a violation of Article 14. Thus, it came to be recognised that the equality doctrine as envisaged in the Constitution not only guarantees against comparative unreasonableness but also non-comparative unreasonableness. [See Tarunabh Khaitan, "Equality : Legislative Review under Article 14" in Sujit Choudhry, Madhav Khosla, Pratap Bhanu Mehta (Eds.), The Oxford Handbook of the Indian Constitution (Oxford University Press, 2016).] This Court in Modern D....
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....e best means to achieve the object. It is sufficient if the means have a "rational nexus" to the object. Therefore, the courts show a greater degree of deference to cases where the rational nexus test is applied. A greater degree of deference is shown to classification because the legislature can classify based on the degrees of harm to further the principle of substantive equality, and such classification does not require mathematical precision. The Indian courts do not apply the proportionality standard to classificatory provisions. Though the two-Judge Bench in Anuj Garg [Anuj Garg v. Hotel Assn. of India, (2008) 3 SCC 1] articulated the proportionality standard for protective discrimination on the grounds in Article 15; and Malhotra, J. in Navtej Singh Johar [Navtej Singh Johar v. Union of India, (2018) 10 SCC 1 : (2019) 1 SCC (Cri) 1] held that less deference must be allowed when the classification is based on the "innate and core trait" of an individual, this is not the case to delve into it. Since the classification in the impugned scheme is based neither on the grounds in Article 15 nor on the "innate and core trait" of an individual, it cannot be struck down on the alleged....
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....his Court in so many words is that the objective identified by the legislature or executive cannot be taken at face value without any examination of the effects of the same, similar to the requirement of the first sub-component of the proportionality test. e) Lastly, the degree of scrutiny into the legitimacy of the objectives sought to be achieved by a restrictive measure would differ on the basis of the nature of the restriction and the test being used to examine the issue of arbitrariness. This Court, speaking through D.Y Chandrachud, J., described the tests of 'proportionality' and 'rational nexus' as those that determine the relationship between the measure being implemented and the objective sought to be achieved. When utilising the proportionality test, the degree of scrutiny of the perceived effects of the identified objective would be greater than the probing required when the rational nexus test is employed. This is because the courts show a greater degree of deference to classification. This is because the legislature or executive can classify based on the degrees of harm to further the principle of substantive equality, and such classification does not require ....
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....istrative decision and had no constitutional or statutory backing. It was introduced by the Government and the appellant company to ensure a steady supply of coal reserves to the core sector and to certain industries or manufacturers of the non-core sector. The factum of linkage vested no right in a particular industry, manufacturer or consumer to receive a definite quantity of coal from a specific mine or company. "Linkage" acted only as a clearance to the linked coal company (either the appellant or one of its subsidiaries) to supply coal to a unit, subject to the availability of the commodity as well as regulatory directives given in respect of such unit or linked coal mine. Therefore, such system was a purely policy decision with logistical ease as its sole objective. Such policy was subject to the discretion of the Government and could be reversed at any point in time. It is noteworthy that the said system was in fact rolled back by the Government upon the introduction of the new Coal Distribution Policy, 2007. Thus, the factum of linkage cannot serve as the basis for treating the industries of the core and non-core sectors alike. 103. In such view of the matter, we are of ....
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....ood. According to the appellant, the object of the Interim Coal Policy was to ensure sustainable operation, maintenance and development of the coal mines. We find the said objective to be legitimate in light of the increase in operational costs of the appellant company, and one that subserves the 'common good' of maintaining an adequate supply of coal in the market. 107. In view of the aforesaid reasons, we observe that the Interim Coal Policy made a reasonable classification between the linked industries of the core and non-core sectors and was introduced with the legitimate aim of ensuring an adequate supply of coal in the market by reinforcing the financial capabilities of the appellant company to sustainably operate and invest in the production of coal. Therefore, it can be no gainsaying that the Interim Coal Policy fulfilled the test of reasonable classification and hence, was not contrary to Article 14 to this extent. (vi) Determination of the issues framed 108. Having discussed the historical backdrop in which the Interim Coal Policy was introduced and the constitutional and legal principles necessary to address the issues arising in the matter on hand, we now proce....
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....f separation of powers. It is a settled position of law that the courts are not expected to substitute themselves with the appropriate decision-making authority while finding fault with a specific process or policy along with the reasons assigned [See: South Indian Bank Ltd. v. Naveen Mathew Philip, reported in (2023) 17 SCC 311]. 112. Thus, we have 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? 113. This issue has been discussed by us at length in the earlier parts of this judgment. We summarise our conclusions in this regard as follows: a) We affirm the classification made by this Court between the core sector and non-core sector in Pallavi Refractories (supra). b) The respondents' submission that the factum of linkage put the ....
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....the classification in the said judgment was held to be unreasonable because different pricing processes were adopted for the core and non-core sectors. The notified price system in which a fixed price was prescribed, was continued for the core sector, however, the non-core sector was subjected to the e-auction system in which the price remained variable thereby making it difficult for the non-core sector industries to form viable business strategies. It was found that such drastic difference between the treatment of the two classes bore no rational nexus with the objective of regulating the supply of coal. While we are in agreement with the application of the test of reasonable classification in Ashoka Smokeless (supra), it is not lost upon us that the factual backdrop of the said matter and the case on hand are very different. Therefore, Ashoka Smokeless (supra) does not have any applicability to the instant set of facts for the purposes of employing the test of reasonable classification or rational nexus. • Whether the respondents are entitled to refund of the 20% additional cost? 114. Since, we have answered the questions on the issue of validity of the Interim C....
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.... no permanent harm was caused to the appellant herein provided that the e-auction system was found to be constitutional and legal. It was also observed that in case the writ petition is decided by this Court in favour of the petitioners therein then the appellant herein would be liable to refund the said 33.33% amount forthwith. The relevant paragraph of the judgment in Domco Smokeless (supra) that states the said directions provided in the order dated 12.12.2005 is reproduced hereinbelow: "15. Learned senior counsel representing the appellant drew our attention to the order dated 12th December, 2005 passed by this Court in a matter involving same controversy in the case of Ashoka Smokeless Coal Industries (P) Ltd. v. Union of India, to be specific, para 8 wherein following observations/directions were passed:- "8. It is pointed out that in respect of some entities, coal was being supplied at the notified price enhanced by 20% thereof and this would be a guide for fixing the percentage of the excess price to be paid by the petitioners. It is pointed out that enhancement of the notified price only by 20% was in respect of very small consumers and in respect of Cent....
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....t stage. o Secondly, the refund prayed for was for excess price paid by the petitioners therein and not in the nature of a tax or duty refund. Therefore, principally, a plea of unjust enrichment could not be held to be maintainable. It was also held that the plea of unjust enrichment could not override the requirement of law to refund monies to the parties from whom the excess amount has been realised if it is found that the law, in consequence of which such monies were collected, is invalid. 117. For the aforesaid reasons, this Court in Tetulia Coke (supra) granted the request for refund of the 33% amount collected in excess during the operation of the e-auction system. A similar line of reasoning was followed in several other judgments referred to by the respondent before this Court, to argue that the refund of 20% additional price collected by virtue of the Interim Coal Policy ought to be granted. 118. In this regard, the respondents relied on a judgment of the High Court at Patna in Maa Mundeshwari Carbon (P) Ltd. v. Central Coalfields Ltd., reported in 2010 SCC OnLine Pat 2674 wherein it was held that there was no cogent or valid explanation for charging the 20%....
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.... No. 3040 of 2005, the petitioner therein filed the Interlocutory Application No. 4 of 2008 seeking a direction to refund the excess price paid over and above the notified price for the period between January, 2005 to October, 2007 along with 12% interest per annum. It is worth noting that this period includes the interim period after the striking down of the e-auction system on 01.12.2006 and prior to the introduction of the New Coal Distribution Policy (finally brought into effect from March 2008). c) Interestingly, the single judge of the High Court of Jharkhand allowed the Interlocutory Application No. 4 of 2008 vide the order dated 22.08.2008, without going into the merits of the validity of the Interim Coal Policy and relied only on the undertaking provided by the learned Solicitor General of India in Somal Pipes (P) Ltd. v. Coal India Ltd., reported in (2009) 16 SCC 721 wherein this Court vide the order dated 30.10.2007 directed for refund on the basis of the said undertaking of the Solicitor General. A perusal of the order dated 30.10.2007 indicates that no period was stipulated by this Court while directing for refund, nor was any period mentioned by the Solicitor....
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....fore the High Court. e) While adjudicating the said contempt case, the High Court of Jharkhand vide order dated 29.05.2010 directed the coal companies to refund the excess amount charged during the period mentioned in the order dated 22.08.2008 including the period covered by the Interim Coal Policy on the ground that a similar issue was addressed by the High Court at Patna in Maa Mundeshwari (supra) by granting refund of the 20% excess price collected by the coal companies. f) The order dated 29.05.2010 was challenged by the concerned coal company before this Court in SLP (Civil) No. 21019 of 2010 with the cause title M/s. Bharat Coking Coal Ltd. v. M/s. Domco Smokeless Fuels Pvt. Ltd. In the order dated 09.09.2010, this Court gave a short order wherein it found fit to not interfere with the proceedings before the High Court. The said order is reproduced below: "In the order passed, the High Court had held that in the facts and circumstances of the present case, a prima facie case was made out for initiation of the contempt proceeding but instead of proceeding further, the High Court thought it appropriate to issue a direction to the petitioners herein t....
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....the High Court for payment of refund. 123. As regards the argument of unjust enrichment raised by the appellant herein, we are conscious of the fact that this Court in Tetulia Coke (supra), SJ Coke (supra) and Horra Coke (supra) respectively has rejected the same on the basis of the reasons provided in Tetulia Coke (supra) which have been discussed in paragraph 116(e) of this judgment. However, a bare perusal of the factual background in which the argument of unjust enrichment was rejected in the aforesaid decisions indicates that there is a significant difference between the circumstances prevailing in those cases and the case in hand. 124. In Tetulia Coke (supra), SJ Coke (supra) and Horra Coke (supra) and other similar judgments, the petitioners therein were demanding a refund of the 33.33% of the excess amount paid by them for drawing coal under the e-auction system. However, it is worth noting that this excess amount was not paid by them to the coal companies in the normal course of transaction, rather it was paid in compliance of the direction of this Court in its interim order dated 12.12.2005 during the pendency of Ashoka Smokeless (supra) along with an undertaking th....
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.... justice. Considering that we are already in seisin of the issue of refund, we find ourselves compelled to give the argument of unjust enrichment equal weightage. 128. In this regard, we may refer to the judgment delivered in Mafatlal Industries Ltd. v. Union of India, reported in (1997) 5 SCC 536 wherein the concept of 'unjust enrichment' in relation to transactions between the State and private parties or levies imposed by the State, was discussed by this Court. 129. The High Court, while dealing with Mafatlal (supra) 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, we find it apposite to refer to the same in great detail to determine whether the plea of unjust enrichment holds any water. 130. The observations made in paragraph 83 and 308 of Mafatlal (supra) are summarized below: a) The general principle of unjust enrichment requires a three-pronged determination: first, that a party has been enriched upon receipt of a benefit; secondly, such enrichment is at the expense of the other party; and lastly, that the retention of enrichm....
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....den of the duty to others, his claim for refund may not be refused. In other words, if he is not able to allege and establish that he has not passed on the burden to others, his claim for refund will be rejected whether such a claim is made in a suit or a writ petition. It is a case of balancing public interest vis-à-vis private interest. Where the petitioner-plaintiff has not himself suffered any loss or prejudice (having passed on the burden of the duty to others), there is no justice or equity in refunding the tax (collected without the authority of law) to him merely because he paid it to the State. It would be a windfall to him. As against it, by refusing refund, the monies would continue to be with the State and available for public purposes. The money really belongs to a third party - neither to the petitioner/plaintiff nor to the State - and to such third party it must go. But where it cannot be so done, it is better that it is retained by the State. By any standard of reasonableness, it is difficult to prefer the petitioner-plaintiff over the State. Taxes are necessary for running the State and for various public purposes and this is the view taken in all jurisdicti....
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.... against public policy if refund or restitution is withheld in such a situation. It should also be stated that in cases of indirect levy of tax which was passed on, this Court has negatived the claim for refund in a few cases, mentioned in para 300 (supra) [...]. (Emphasis supplied) 131. What is discernible from the aforesaid exposition of law is that 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. 132. However, before we reach a conclusion as regards the plea of unjust enrichment, we must satisfy ourselves whether the understanding of the said plea in Tetulia Coke (supra), SJ Coke (supra) and Horra Coke (supra) respectively is correct or not. It was held in Tetulia Coke (supra) that the plea of unjust enrichment was not maintainable in cases of refund of excess price charged and that the same was applicable only in cases where the refund sought was of a wrongful levy of tax, duty or cess. 1....
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....e amount of the Fund can be utilised by the Government for the purpose for which the Fund was created, namely, development of sugarcane. There is no question of refunding the amount to the respondents who had not eventually paid the amount towards the Fund. Doing so would virtually amount to allow the respondents unjust enrichment." (Emphasis supplied) 135. 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 we may exercise our discretion and allow such additional documents for the ....
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.... to deal with the issue of interest to be charged thereupon. Therefore, we do not touch upon the observations made by this Court in Domco (supra) at this point in that respect. 141. Before we part with the judgment, we must address a short but important fact brought to our notice by the respondents. It was brought to our attention that the learned Solicitor General had given an undertaking to this Court when it was hearing the matter in Somal Pipes (supra) wherein he had stated that the refund of the excess amount charged for sale of coal prior to the notification of prices on 12.11.2007 would be granted provided that the parties seeking refund furnished the documents required by the appellant company for verification of purchase. As the period during which the Interim Coal Policy was in existence, that is 15.12.2006 to 31.03.2008, was included in such undertaking, the respondents herein have requested for refund. 142. We are of the view that such undertaking would hold good in the scenario where the validity of the Interim Coal Policy was not brought into dispute. Once the respondents herein filed the writ petition impugning the interim price determined by the appellant, the....