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Coal Block De-allocation: Will Review Petitions Succeed?

Published on Sat, Oct 04,2014 | 17:56, Updated at Tue, Oct 07 at 19:16Source : CNBC-TV18 |   Watch Video :

On August 25th the Supreme Court found all coal block allocations made between 1992- 2010 are arbitrary and illegal. On September 24th, in the second part of its decision - the court decided that the consequence of these illegalities is de-allocation or cancellation of all blocks involved. The cancellation is effective March 31st, 2015 - giving the government and government owned Coal India enough time to take over the operation of the blocks. The SC has also imposed a penalty of Rs 295/mt on all coal extracted so far. Quite obviously, the order is a difficult one to swallow for all the affected companies; more so for the 46 entities who have operationalised the mines or are close to doing so. Some of them such as Nalco & Jayaswal Neco are keen to seek a review of the de-allocation. Others such as JSPL want the penalty amount reviewed. Will any of these review petitions find success? To answer those questions CNBC-TV18's Menaka Doshi speaks to well-known constitutional expert PP Rao & Supreme Court Senior Counsel Gopal Jain.


SC: 24th September, 2014

SC cancels allocation of all coal blocks Cancellation will take effect from 31st March, 2015

Government & Coal India need some time to adjust to changed situation

Allottees will also get adequate time to manage their affairs


SC: 24th September, 2014

‘We also accept the submission of the learned Attorney General that the allottees…must pay an amount of Rs. 295/- per metric ton of coal extracted as an additional levy. This compensatory amount is based on the assessment made by the CAG…’

‘The compensatory payment on this basis should be made within a period of three months and in any case on or before 31st December, 2014’

Doshi: Justice Krishna Iyer in 1980 said that unless the first judicial view is manifestly distorted a plea of review is likely asking for the moon. Review petitions very rarely succeed. In this situation, do you think any of the affected parties are likely to find success if they were to file a review petition? On what grounds can they find success?


Review Petition?Justice Krishna Iyer, 1980

‘…a plea of review, unless the first judicial view is manifestly distorted, is like asking for the moon…’

Rao: Unless we see the review petition and the grounds formulated by them, it is difficult to comment about the rate of success. However as a general proposition, review petitions rarely succeed. The reason is this; the grounds of review are very limited. One ground which is commonly invoked is there is some error or mistake apparent on the face of the recorded judgment which has been given. That means there is something which stares you in the eye- that there is something wrong on the face of it.

I find it is very difficult to say that on the face of it, there is something is wrong with the judgment. It is a judgment which I consider as a well-considered judgment. They have gone through the entire record and they came to the conclusion that the procedure followed is arbitrary and there has been no proper rules and principles and this is a matter of largest public property and therefore, the various methods followed by the Screening Committee and also the government dispensation method and administrative dispensation method - all three are found to be wrong. So it seems to be a conscious application of mind to the facts of the case and the findings have been regarded.

It is only when we see the formulations made by the petitioners who want to seek review, then one can reassess the position as to how far these grounds will stand. So far as the question of the amount which is precipitated by the court that they should pay for per metric ton Rs 295 etc- that also the court has said that they don't have accurate data but they are going by the report estimate made by the Comptroller and Auditor General (CAG) and therefore they said that under circumstance we had to make a guess estimate of it and they reasonably came to the conclusion that this is the amount. Probably if they are able to demonstrate that this calculation of Rs 295 is wrong, then maybe the court will be inclined to review that part of it- that is my view.

DE-ALLOCATED! Grounds For Review

  1. In light of new evidence that was not available when the judgment was pronounced
  2. If a mistake occurred on the face of the record
  3. Any other sufficient reason

Doshi: You have raised both grounds on which petitioners are likely to file review. One is against the actual de-allocation itself and some other petitioners such as Jindal Steel and Power Ltd (JSPL) have suggested that they would like to file a review petition against the amount of penalty imposed. I will try and place arguments on both grounds but before that if you were representing any of the affected parties, would you see enough grounds for a review petition to succeed?

Jain: When a review petition is normally filed, the grounds being limited and the court having considered all these aspects, the likelihood is very slim. But having said that, one very important aspect is the larger pubic interest aspect which is that many of these companies having made significant investments and are very close to operationalising the end use as well. And the fact that core sectors like power and steel have a cascading effect on the entire economy and therefore overriding public interest should have been a ground which the court could have considered in moulding the relief.

Doshi: These are arguments made by several of the Senior Counsels representing the affected parties - Mr Venugopal, Harish Salve, Abhishek Manu Singhvi - and these are arguments that the Supreme Court bench did consider and yet decided to de-allocate on mass. So would making these arguments again through a review petition hold any water?

Jain: Let me take a step back- the letter of allocation is the crucial document on which the whole case hinged. Now letters of allocation where issued was like a bankable document on which banks etc lend several thousand crores to various of core sectors. These were implemented and acted upon and eventually the court found that this letter of allocation had no legal value at all. Now, this according to me, could fall within the considerations of an error apparent because this was the very basis which was acted upon by people making investments by end use, industries those developing the block and several times government said to several of the allottees- look if you don't comply with these conditions, we will be forced to de-allocate.

So the substratum of the whole case hinged on the legality and validity of the letter of allocation which in my view was a bankable document and that really goes to the root of the matter. Second point that I was trying to make is the impact and consequences may have been considered, but consideration did not take the larger focus into account and the effect and merely going by the government's assurance that we would be able to handle the situation is like saying if there is a storm or a blast, let it come; we will be good at rehabilitation. The idea is could it have been prevented, could they had offered the right of first refusal saying whatever is the auction determined price or the market price if people were to match it….(Interrupted by Anchor)

Doshi: Why should the SC step into determining or designing, what the re-allocation process should be? That clearly falls within the ambit of the Executive and the SC wouldn’t you say has done the right thing by staying away from trying to design a re-allocation policy? Let me get a view from PP Rao on what he thinks of your suggestion of error apparent being suitable grounds for review petition.

Several of the senior counsels that represented the affected parties did put in big numbers out there in terms of the impact- saying investments to the tune of Rs 4 lakh crore will be impacted, 28,000 megawatt of power capacity will be affected, estimated loss of 4.4 lakh crore in terms of royalty, CESS, direct and indirect taxes, bank loans will be impacted. The SC heard all of this and yet decided to de-allocate the blocks. Would you then agree with Gopal that this might still serve as grounds for review?


Arguments by Allottees

Govt not in position to supply enough coal Issue of poor quality of coal supplied by Coal India

Rs 2.87 lakh cr invested in 157 blocks as of Dec 2012 Approx Rs 4 lakh cr invested in end-use plants

Employment of 10 lakh people at stake

Loans of Rs 2.5 lakh cr will become NPAs

28000 MW of power capacity affected Estimated loss of Rs 4.4 lakh cr in royalty, cess, taxes

Rao: You are absolutely right. The SC has listed out all the possible consequences mentioned by Gopal and other counsels who have appeared in the matter and have applied mind to those consequences and still it came to the conclusion that the process of allocation was arbitrary and cannot be sustained and only in a few cases, they have allowed the allocation to continue - in the case of public sector undertakings which did not have joint venture. The concept of an error apparent needs to be understood clearly. SC in various decisions said you should be able to point it out- should take a few minutes- it is not a question of rearguing the whole matter on the grounds which were already added but not accepted by the court. So that re-hearing is not what is contemplated by review but that kind of an error apparent in the face of the record is difficult to find out in this case. That is what it is.

Doshi: I just want to add to one other argument that several critics of this decision have been making which is whether the SC ignored the principles of natural justice in not granting each individual affected party a hearing when determining the consequences. Now the SC has discussed this in its order and said- look we did listen to the large industry groups and we did listen to the Senior Counsels representing those groups. So in a sense we have heard all the arguments including the arguments of various State Governments. Yet, there are some companies who believe that there are specific circumstances regarding the allocation that must be heard before they are penalised either by way of de-allocation or the monetary penalty. Would you think that grounds of natural justice might be one way a review petition would succeed?


SC: 24th September, 2014

‘The judgment did not deal with any individual case. It dealt only with the process of allotment of coal blocks and found it to be illegal and arbitrary. The process of allotment cannot be reopened collaterally through the appointment of a committee. This would virtually amount to nullifying the judgment’


SC: 24th September, 2014

‘…it is incorrect to say that these associations which represented the bulk (if not all) the allottees or beneficiaries of coal blocks were not heard. They presented their point of view, like any other party to a lis and it was only then that judgment was delivered’

Rao: This aspect was considered by the court and this was also raised before the court that all the individual companies were not issued notices and they did not have the opportunity to present their cases and the court has taken the view that all possible arguments have already been advanced before the court. Therefore in this situation there is also a decision of SC which says if hearing each individual is not going to make any material change, then it is a futile exercise and courts will not resort to futile exercise. The line of decision was also there. So the whole question is if every individual comes and says look here if I have these XYZ points which were not considered by the court then the affected parties could come forward before the court and point out those things if they are going to make any material difference in the ultimate conclusion. But unless there is a concrete case like that, it is merely saying that opportunity is not given which is the aspect which was already considered by the bench is not going to make any difference but broadly the position is this - it is very difficult to say that in the face of it, the judgment is wrong because the judgment has considered all the aspects. A judgment can be right or wrong- two views are possible- the court has taken one view where another view is also possible but that is not a ground for a review.

Doshi: We have discussed many legal technical grounds for review. Let me come to one argument that has been raging with many of the affected parties that I have spoken to and that is how is it our fault and why are we being punished? The allocations were made by the Screening Committee set up by successive governments over a two decade period, companies believe they had grounds for asking for a coal block allocation and that when they got it, they did not sit in judgment of the process through which they got it because they just assumed the government was working to a process that was well laid down. Many of these companies are saying or drawing a distinction between the 2G decision and what has taken place in this decision. In the 2G decision, the SC bench very clearly found malafide;infact it said that this arbitrary action of the Minister of Communications & IT appears to be innocuous but was actually intended to benefit some of the real estate companies who did not have any experience in dealing with telecom services. But this coal decision makes no suggestion of any malafide. So companies are saying if we haven’t done anything wrong, why are we being punished?


SC: 25TH August, 2014

‘the entire allocation of coal block…suffers from the vice of arbitrariness and legal flaws….There was no fair and transparent procedure, all resulting in unfair distribution of the national wealth. Common good and public interest have, thus, suffered heavily. Hence, the allocation of coal blocks based on the recommendations made in all the 36 meetings of the Screening Committee is illegal’


Review Petition?

SC: 2G spectrum/licence cancellation order (2012)

‘this arbitrary action of the Minister of C&IT though appears to be innocuous was actually intended to benefit some of the real estate companies who did not have any experience in dealing with telecom services’


Review Petition?

SC: 2G spectrum/licence cancellation order (2012)

‘this arbitrary action of the Minister of C&IT though appears to be innocuous was actually intended to benefit some of the real estate companies who did not have any experience in dealing with telecom services’

Jain: This is where I think the first issue that you raised of natural justice also becomes important. Apart from the fact that it is a basic feature of the Constitution, the story of each allocate was different and if you are going to visit the punishment, which is de-allocation or cancellation, it would have made sense to hear each person to give their side of the story to say what is it they have done with the block, what is the end use, what is the investment they made etc at that should have been considered.

Secondly, the court could have said alright, even if we felt the procedure was wrong, they could have overruled it prospectively like they did in the arbitration case where they said after the date of the judgment any arbitration agreement, the judgement would apply not prior to that.

Thirdly, yes, it is important in a case like this to say instead of clubbing everybody and painting them with the same brush, it would have been helpful to see those who had used the blocks and those who had put it to an end use with the investment should have been treated differently from those who had not worked the block at all or invested in it. So yes, there is some merit in that version.

Doshi: But will that other view succeed on a review petition?

Jain:  No, I think in a review petition the chance is very slim or unlikely because the court did consider it. So it will be difficult to say it falls within the error apparent test.

Doshi: I am going to bring to you some of the arguments made by some of the affected companies. For instance, the public sector company NALCO says that it will consider filing a review because it too should have been spared just as SAIL and NTPC were and they were spared on grounds of being central government units and that was well within the allocation policy. So NALCO is asking the question as to why it was not spared and that is an important question it hopes to address through the review petition. Then you have a company for instance like Jayaswal Neco who says look, how can you impose a penalty of Rs 295 on us given that that coal that was mined from those blocks has already, through various processes, been sold or consumed and now where are we going to recover that additional money from since this is a matter of several years back. You have got JSPL, which says that that Rs 295 per metric tonne is a figure arrived by the CAG taking into account different kinds of coal mines but we work with a lower grade of coal mine and therefore Rs 295 should not apply to us. Would any of these grounds, especially on the penalty front, may have more success than fighting the full scale de-allocation?


Review Petition?


‘Nalco is a PSU. It has not entered into a joint venture with any private company. We have asked our legal experts to examine the apex court verdict….We will request the court to reconsider our case and will explain the reasons for delay in developing the block’

Jayaswal Neco

‘We have produced material, sold it out to consumers and now from where will the money come? We will definitely go for review’


‘Rs 295/ mt (penalty) is with reference to coal of premium grade whereas coal that we have produced all along from these mines is of ‘E’ and ‘F’ grade. We certainly are going to make a review petition on that’

Jain: On the first point that you said about NALCO, they are trying to make out a case for parity saying that I am also a public sector and should have been excluded but again whether it falls strictly within the error apparent test - possibly or possibly not - because it was the considered view taken by the court to save these four blocks and not include NALCO. It was a good case to do before the judgment but whether again it is reviewable or not - in my view, it would be difficult.

Second on the penalty aspect - the CAG recommendation was adapted and made as a benchmark or the yardstick but again the penalty has civil and adverse consequence and it should have been a case of hearing the affected parties at that and the court could have considered whether they should have been subjected to this penalty and this amount of penalty. So, both aspects are there. One is the aspect of whether penalty should be imposed and the aspect of the quantum of penalty and the SC itself has said that being a civil measure with adverse consequences, even on a quantum, parties are entitled to be heard. So nobody was heard on the aspect of quantum. It was a figure taken from the CAG recommendation and report and it was imposed across the board.

Doshi: So you think that they might find success, some of these companies if they were to argue through their review petitions for a lower quantum of penalty?

Jain: I think again unlikely because like I said the common threat through the courts judgement is cancel all blocks and impose the penalty across the board. So that is the considered view of the court and therefore it is unlikely that any of these points will warrant any success in a review petition.

Doshi: You have raised the issue of penalty right in your first response. The SC acknowledged in its order that in matters of this nature, it is difficult to arrive at any mathematical acceptable figure quantifying the loss sustained. Do you believe that any of these companies, however justified their grounds are for a lower penalty, will succeed in arguing for a lower penalty through a review petition?

Rao: If they are able to demonstrate by facts and figures that the estimate given by the CAG is obviously wrong, then there maybe a chance but that is a herculeantask and now in retrospect also, in the 2G Spectrum case, the court was guided by CAG’s estimate of loss but which has turned out to be after subsequent auctions etc was a very highly inflated figure. So therefore, CAG also cannot be taken as sacrosanct or absolutely authentic. It is just an estimate. If it is shown, if it is demonstrated to the court in the review petition then the estimate is obviously wrong, then maybe there is a chance the court will consider that aspect. I don’t rule out the possibility but of course it is very unlikely that a review petition will succeed.

Doshi: Given the slim chances that it will succeed, let me add to the odds and that is that several companies might have different take. For instance JSPL says the penalty amount actually refers to coal of grade A, B, C and we are mining coal of Grade E, F. Some other company may have the issue like Jayaswal Neco pointed out saying; look, we have already consumed this coal, where are we going to recover the additional Rs 295 from. A third company may have a third argument for a third amount that should be imposed on them. So in a review petition, will the review bench that listens to this- sans the outgoing CJI - will they be able to say, okay, your argument calls for Rs 290 and somebody else’s argument calls for Rs 250 and a third party’s argument calls for Rs 150 and hence allocate different penalties based on different review petition arguments?

Rao: Well that will be very difficult, it is very unlikely.

Doshi: So how will they go about it?

Rao: The fact that the outgoing Chief Justice has already retired means only this much that another judge will be added to the bench that now is in place.

Doshi: That is fine but it could very well be that the review bench will have to listen to 40 arguments because there are 40 operational mines and therefore 40 entities that will dispute the penalty amount. Are they going to be able to do that- is that realistic, is that what takes place in a review and therefore would you say that there are zero chances for a review of the penalty amount?

Rao: If at all the bench is impressed with any of the facts and figures given by them to disputing the amount of Rs 295 prima facie they may have a limited hearing to clarify the position further and may issue some further directions by way of clarifications but that is all one can expect at the most but not that it will happen but generally as I said it is very difficult to make out a case to show that this estimate is wrong because this was an estimate given by the CAG, it was on record before the court, everybody knew what it was.

Doshi: The government endorsed this figure as well because the Attorney General Mukul Rohatgi in fact in his submission to the court said that the court must apply a penalty of Rs 295; retrospectively at that. Should I then take away from this conversation that the chances of any review succeeding - whether on grounds of de-allocation or the penalty itself- are absolutely zero?


SC: 24th September, 2014

‘…we also accept the submission of the learned Attorney General that the allottees…must pay an amount of Rs. 295/- per metric ton of coal extracted as an additional levy. This compensatory amount is based on the assessment made by the CAG. It may well be that the cost of extraction of coal from an underground mine has not been taken into consideration by the CAG, but in matters of this nature it is difficult to arrive at any mathematically acceptable figure quantifying the loss sustained. The estimated loss of Rs. 295/- per metric ton of coal is, therefore, accepted for the purposes of these cases’

Jain: Yes, it is very slim; the chances of a review succeeding in a case like this because as we have just discussed all these arguments were made and rightly or wrongly the court rejected them and said the block should be de-allocated and a penalty should be put.

Doshi: In all of this, the ministers and the bureaucrats which for over two decades occupied the Screening Committee, assisted the Screening Committee and allowed for this processless allocation to take place or this arbitrary series of allocations to take place have escaped unaffected and instead it is the companies who have very well applied in good faith who are now going to bear not just some brunt of this order but the full brunt of this order retrospectively. What would you say about the justice that this order has delivered?

Jain: You have raised a very important point of accountability of those who took decisions. If they had taken decisions which were arbitrary or wrong, then squarely the blame/punishment/liability should have been on them. As you said, this has basically clubbed all the allottees together and given, if I may use the word, like a mass punishment and if you remember years ago when petrol pumps had been cancelled, the Supreme Court itself reversed it and said, no, you can’t have an mass block cancellations; you should hear each case and then decide.

So in a sense those who took these decisions have at the moment gotten away scot free and that doesn’t send the right signal because they should be held accountable for their decisions and it should not be that only the allocates themselves were to blame, because the procedure and the policy was framed by the government and they were beneficiaries of that but they certainly were not the authors or the architects of that.

Rao: The persons who had taken part in the process of processing these applications or in helping these allocations, they were not individually made parties before the court. There is no relief sought against them individually. We have only focused on the legality of the allocations and that the court has decided. If individuals had to be proceeded against and they were to be punished, then they have to have been made parties to the court and proper allegations should have been made against them and they should have an opportunity to reply to them and only then the court could have taken action against them. In this proceeding - which has been decided now by the court - that issue could not have been gone into within the parameters of law.


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