The allocations were not scrapped but their fate hangs in the balance with a bench of Chief Justice R M Lodha and Justices Madan B Lokur and Kurian Joseph suggesting that a committee of retired SC judges be set up to examine each case and recommend the next step.
The bench was unambiguous about the illegality of the allocation of all the coal blocks, 218 in all, including those to public sector undertakings, through the mechanism of a screening committee since 1993. "The entire coal block allocations, as per recommendations made by the screening committee from July 14, 1993 in 36 meetings, and the allocations through the government dispensation route, suffer from the vice of arbitrariness and legal flaws," the bench said.
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Writing the judgment for the bench, Justice Lodha said, "The screening committee has never been consistent, it has not been transparent, there is no proper application of mind, it has acted on no material in many cases, relevant factors have seldom been its guiding factors, there was no transparency and guidelines have seldom guided it... On many occasions, guidelines have been honoured more in their breach. There was no objective criteria, nay, no criteria for evaluation of comparative merits. The approach had been ad-hoc and casual. 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", the bench further said in response to a clutch of PIL s.
The court, however, spared ultra mega power projects (UMPPs) - defined as thermal power plants of 4,000 mw capacity and above - from the impact of the judgment, but termed the government's decision to permit them to divert coal for commercial exploitation illegal.
Bulk of the allocations, 162, declared illegal pertain to the UPA rule, with 48 dating to the period when then PM Manmohan Singh held charge of the coal ministry. Seven of the illegal allocations took place under the NDA government of Atal Bihari Vajpayee and the rest were made by the Narasimha Rao-led Congress government. UPA, which paid a stiff electoral price for the widespread perception that it was responsible for Coalgate and other scams, can derive some comfort from the apparent leveling of the field.
The SC's stinging observations were actually an indictment of the entire political class for the arbitrariness with which they have dealt with the allocation of natural resourc es. The Supreme Court took up the monitoring of CBI's investigation into the 'Coalgate scam' under UPA, which according to Comptroller and Auditor General caused a loss of Rs 1.86 lakh crore to the public exchequer, following allegations that the investigating agency was under political pressure.
The bench refrained from taking a view on what should be done with the allocations on which thousands of crores ride. "What should be the consequences is the issue which remains to be tackled. We are of the view that, to this limited extent, the matter requires further hearing," it said, even as it decided to hear the matter on September 1 for the next course of action.
It said the allocation of coal blocks through the government dispensation route, howsoever laudable the object might have been, were also illegal as it was impermissible under the scheme mandated under Coal Mines Nationalization (CMN) Act.
"No state government or public sector undertaki ngs of the state government are eligible for mining coal for commercial use. Since allocation of coal is permissible only to those categories under Section 3(3) and 3(4), the joint venture agreement with ineligible firms is also impermissible," it said.
"Equally there is also no question of any consortium/leader/association in allocation. Only an undertaking satisfying the eligibility criteria referred to in Section 3(3) of the CMN Act, for example, which has a unit engaged in the production of iron and steel and generation of power, washing of coal obtained from mine or production of cement, is entitled to the allocation in addition to central government...or a central government corporation," it said.
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