JINDAL STEEL & POWER LIMITED & ANOTHER v. UNION OF INDIA & OTHERS

┌──────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────┐
│ Sl.   No. as    Name of coal       Location         Specified end-    Govt.(G)/     Recommendation of the Technical      │
│ No     per        block        (state/coal field)   use of previous    Pvt.(P)              Committee                    │
│       sche-                                           Allocattee       Earlier                                           │
│        dule                                                           Allocation      Classification        Classificati │
│                                                                                    (auction/government       n (auction/ │
│                                                                                         allotment)          government   │
│                                                                                                              allotment)  │
│                                                                                    Auction    Govern-                    │
│                                                                                    (sector)      ment                    │
│                                                                                               allotmen                   │
│                                                                                               t (sector)                 │
│ …              …..             …..                  …..               …..          …..        …..           …..          │
├──────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────┤
│ 4     31       Gare Palma      Mand      Raigarh,   Sponge Iron       P            Power      ------        Mining Plan  │
│                IV/6            Chhattisgarh                                                                 approved     │
│ …              …..             ……                   …..               …..          …..        …..           …..          │
│ 37.        It is evident from the above table that the end-use of Gare Palma IV/6                                        │
└──────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────┘

company Allocattee Allocation Classification Re

│
│                                                                                          (auction/government             │
│                                                                                               allotment)                 │
│                                                                                           Auction    Governmen           │
│                                                                                           (sector)   t allotment         │
│                                                                                                        (sector)          │
│ …     …..           …..                  ……               …..           …..              …..          …..          …..   │
├──────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────┤
│ 13    Jamkhani      Orissa-              Bhushan Ltd      Sponge Iron   P                DRI + CPP    ------             │
│                     lb Valley                                                                                            │
│ 14    Utkal-B-1*    Orissa-              Jindal Steel &   Sponge Iron   P                Power        ------       *For  │
│                     lb Valley            Power Ltd                                                                 conse │
│                                                                                                                    and   │
│ 15    Utkal-B-2*    Orissa-              Monet Ispat      Sponge Iron   P                Power        ------       feasi │
│                     lb Valley            and  Energy                                                               B1, B │
│                                          Ltd                                                                       be    │
│                                                                                                                    amalg │
│ …     …..           ……                   ……               …..           …..              …..          …..          …..   │
│ 34.         In the third meeting, the technical committee also recommended the                                           │
└──────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────�

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51. It was contended on behalf of the petitioners and, particularly by Dr Singhvi that the consideration of geological reserves as against extractable reserves for classifying mines having reserves of more or less than 100 million tonnes is without any basis. This is so because the standard tender document itself in clause 4.1.[2] (b) stipulates that one of the conditions that a bidder would have to satisfy before he is considered eligible for bidding for the coal mine is that the “extractable reserves” of the coal mine should not exceed 150% of the annual coal requirement of the specified end-use plant, taken over a period of 30 years, less the requirement of coal of such specified end-use plant met from any other coal mine allocated to the successful bidder pursuant to any other auction or allotment process conducted by the nominated authority under the said Ordinance and the said rules.

52. In response, the argument presented by the learned Attorney General is that the geological reserves were taken as a criteria for classification and that geological reserves are established by scientific methods of exploration in contradistinction to extractable reserves which is variable, dependent on technology employed for mining. First of all, we do not find any such reasoning in any of the record notes of the meetings of the Technical Committee. In fact, there is no reasoning given as to why geological reserves were considered and not the extractable reserves. Secondly, if geological reserves were the only relevant criteria, then why is there a reference to extractable reserves in an eligibility condition ? From this, it is clear that the relevant consideration ought to be extractable reserves and not geological reserves. Amalgamation of Utkal B-1 and Utkal B-2

53. It was submitted by Mr Sibal that the said Ordinance did not empower the respondent to consolidate coal mines that had been de-allocated. Furthermore, Schedules I and III of the said Ordinance identify Utkal B-1 and Utkal B-2 as separate coal mines and the Ordinance contemplates the auctioning of the coal mines listed in the said Schedules. He submitted that this meant that the mines had to be auctioned as such, that is, as separate mines. He also submitted that there is no rationale or justification for amalgamation of Utkal B-1 and Utkal B-2 inasmuch as the approval of the mining plans clearly stipulates that the allottee has to work out an understanding with the allottees of the adjoining block to extract coal from a common barrier. Therefore, mining under the common barrier is no justification for amalgamation of the blocks. The counter argument WP (C) Nos. 309/15 & 310/15 advanced by the learned Attorney General was that by merging Utkal B-1 and B-2 blocks, an additional 35 million tonnes of coal reserves would be available for mining by eliminating the common barrier. It was also contended that the Technical Committee had taken the decision to merge the two mines based on well considered criteria. Therefore, the petitioners cannot be heard to contend that a decision to the contrary could also be taken. It was contended that the writ court does not sit as an appellate body over the views of a Technical Committee.

54. Having considered the arguments on this aspect of the matter, we find that in the record notes of the Technical Committee, there is no discussion as to why the Utkal B-1 and B-2 coal mines are being amalgamated. It is only in the record note of the third meeting where, in Annexure-C thereto, in the remarks column of the table, it has been mentioned that Utkal B-1 and Utkal B-2 need to be amalgamated for ‘conservation and mining feasibility’. The expression “conservation and mining feasibility” is a very general expression and no specifics have been indicated in the record note of the Technical Committee. One of the factors, which, according to the respondent, justified the amalgamation of the said two coal blocks was that an additional 35 million tonnes of coal reserves would be available for mining by eliminating the common barrier. But, as pointed out by Mr Sibal, the approval to the mining plan of the two coal blocks, specifically stipulates that the allottee of one block shall work out an understanding with the allottee of an adjacent block to extract coal from the common barrier. Therefore, even if the two mines were not amalgamated, the coal reserves in the common barrier, would still be available for extraction. Thus, we agree WP (C) Nos. 309/15 & 310/15 with the submissions made by Mr Sibal that use of the common barrier cannot be a ground for amalgamation of the two blocks. We are not sitting in appeal over the decision of the Technical Committee. But, this court, in exercise of its jurisdiction under Article 226 of the Constitution, has to satisfy itself as to whether the Technical Committee had applied its mind to the relevant criteria. We are not questioning the decision as such, but, the decision making process. In this context, we find that there has not been a proper application of mind, while taking the decision to amalgamate Utkal B-1 and Utkal B-2. Extent of Coal Reserves in India.

55. Mr Kapil Sibal, in the context of the argument raised by the learned Attorney General that power was a critical and priority sector and that, therefore, coal mines need to be reserved for this critical sector, drew our attention to the fact that the coal reserves in India as on 01.04.2014 were 301.564 billion tonnes, the extractable reserves were to the extent of 216.10 billion tonnes. He submitted that the coal reserves with Coal India Limited as on 01.04.2014 were 64.781 billion tonnes (geological reserves) and 46.486 billion tonnes (extractable reserves). It was submitted that taking the current production of 462 million tonnes per annum as on 31.03.2014, the reserves with Coal India Limited would last for more than 100 years. It was further pointed out that the geological reserves in the 204 coal blocks (of Schedule I mines), was to the extent of 40.31 billion tonnes. Thus, the coal reserves, which are free and do not form part of the coal blocks covered by the said Ordinance or the coal reserves with coal India or the coal reserves WP (C) Nos. 309/15 & 310/15 with Singareni Collieries Company Limited are to the extent of 162.044 billion tonnes. It was, therefore, submitted that the coal blocks under the said Ordinance constituted a very small sub-set of the total coal reserves, which were available for further auction / allotment. Therefore, if power was a critical sector, those coal blocks would very well be employed for the purpose and there was no need to change the end-use of the coal blocks from Sponge Iron / Steel to power in respect of the coal blocks falling within the purview of the said Ordinance which did not give priority to power over steel. We feel that when the objective of the Ordinance was to ensure continuity in coal mining operations and production of coal and promoting optimum utilisation of coal resources consistent with the requirement of the country in national interest, these aspects ought to have been kept in mind, particularly, when the second recital in the said Ordinance specifically speaks of energy security of the country and allocation of coal mines to successful bidders and allottees while minimising any impact on core sectors, such as steel, cement and power utilities which have been recognised as vital for the development of the nation. It is obvious that when there is a shift from one end-use to another, such as from steel to power, there would be an adverse impact on steel. This impact has to be minimised as per the said Ordinance. This aspect, we find, has not been considered while changing the end-use of the Utkal B-1 and Utkal B-2 and Gare Palma IV/6 mines from Sponge Iron / Steel to power. Power includes captive power

56. Another point made on behalf of the petitioners was that while Section 3(1)(v)(ii) sets out clearly that the generation of power includes the WP (C) Nos. 309/15 & 310/15 generation of power for captive use, the latter has been excluded by executive action in the tender conditions. This, according to the learned counsel for the petitioners is illegal. At this juncture, it would be pertinent to point out that, as per the standard tender document (for power sector, issued by the nominated authority, Ministry of Coal, Government of India, New Delhi), it has been stipulated in clause 4.2.[1] as under:- “(f) Eligibility in case of generation of power being the specified end use: A person engaged in captive generation of power as defined in the Electricity Act, 2003 and the rules thereunder; or generation of power under Case 2 as specified in the Guidelines for Determination of Tariff by Bidding Process for Procurement of Power by Distribution Licensees, dated January 19, 2005, as amended, shall not be eligible to participate in the tender process.” The Attorney General submitted that power generation, transmission and supply are regulated under the Electricity Act, 2003, whereas captive power plants are deemed to be in the non-regulated power sector. Therefore, the mode of auction for the regulated power sector is by way of reverse auction and this mode cannot be applied to the non-regulated captive power plants and that is why captive power plants have been excluded from the standard tender documents.

57. We are of the view that there is merit in the contention raised by the learned counsel for the petitioners. The specified end-use stipulated by the Ordinance by virtue of Section 3(1)(v)(ii) clearly provides the specified end- WP (C) Nos. 309/15 & 310/15 use of generation of power to include the generation of power for captive use. This is the legislative mandate. The classification done / to be done under Section 7(1) of the Ordinance clearly requires the mines to be classified as per the specified end-uses. Therefore, once a mine is classified for the specified end-use – power, the same would include generation of power for captive use. This is the legislative intent and the same cannot be altered by executive action. This aspect also needs consideration inasmuch as the petitioners’ earlier end-use included power for captive consumption and they do have a power plant for captive consumption. But, because of the exclusion, the petitioners cannot participate in the subject auction in respect of Utkal B-1 and Utkal B-2 and Gare Palma IV/6. The March 31, 2015 deadline

58. It is also pertinent to note that the deadline of 31.03.2015 applies only to Schedule II coal mines and does not apply to Schedule III coal mines. This is for the reason that Schedule II coal mines are those mines which were operational and the Supreme Court had permitted the continuation of their operations by the prior allottees upto 31.03.2015 and thereafter it was for the Central Government / Coal India Limited to arrange for continuing the coal operations. By virtue of the said Ordinance, the auction / allotment route has been adopted and it is in respect of the Schedule II mines that the date of 31.03.2015 is critical. Insofar as Schedule III mines are concerned, they were nearly operational and the deadline of 31.03.2015 does not apply to them. Conclusion:

59. For the reasons discussed above, we are of the view that the classification of end-uses for the coal blocks involved in the present petitions as also the merger of the Utkal B-1 and Utkal B-2 needs to be reviewed. The points raised by the petitioners and, more importantly, the Ministry of Steel ought to have been given serious consideration. The guidelines and directions provided by the Preamble and the second recital of the said Ordinance have not been kept in mind by the Technical Committee while merging Utkal B-1 and Utkal B-2 and while specifying the end-use – “Power” for Utkal B-1, B-2 and Gare Palma IV/6. The logical sequitur is that such end-use classifications for the coal mines in question are quashed and the Utkal B-1 and Utkal B-2 are directed to be de-merged.

60. Consequently, we direct that Utkal B-1 and Utkal B-2 be taken off from the subject auction and the specified end-use as also the issue of their merger be reviewed in the light of the discussion above before they are put up for auction again. The same, as regards specification of end-use, would apply to Gare Palma IV/6, which is yet to be put up for auction. The writ petitions are allowed to this extent. The parties are left to bear their own costs.

BADAR DURREZ AHMED, J SANJEEV SACHDEVA, J FEBRUARY 11, 2015 HJ/dutt