Delhi HC Dismisses Pleas Against GOs To Club All Sectors For Coal Block Auctions [Read Judgment]

The Delhi High Court has dismissed four writ petitions against the government orders to classify coal blocks into either power or non-power categories during the 2015 auction due to different reasons.

The judgment delivered by bench comprising Justice Badar Durrez Ahmed and Justice Sanjeev Sachdeva agreed that clubbing separate and distinct end-uses of coal mines for an auction would result in unequals being treated equally and lead to arbitrariness and unfair bidding process, yet the petitioners were not entitled to any relief.

The four petitioners are Monnet Ispat & Energy Limited, Utkal Coal Limited, Jayaswal Neco Industries and Bhushan Power & Steel Ltd.

The essential issues raised in the petitions are the clubbing of specified end-uses of Coal mines under one category for auction and the splitting captive use from generation of power.

The petitioners represented by P. Chidambram and Kapil Sibal argued the case against ASG Sanjay Jain, Akshay Makhija and Ashish Rana.

There are essentially two reliefs, which have been sought in the first writ petition Monnet Ispat & Energy Limited v. Union of India & Anr. One is for setting aside the order dated 18.12.2014, as being in violation of Section 3 of the Coal Mines (Special Provisions) Second Ordinance, 2014 (‘Second Ordinance‘). The second relief for declaration was sought that the generation of power for captive use ought to be categorised in terms of Section 3(1)(v)(ii) of the said Second Ordinance along with ‘generation of power‘ and not separately.

It was submitted by counsel for the government that the standard tender document was published on 27.12.2015, and the petitioner was well aware of the tender conditions and the tender process and it had, in fact, participated in the tender process and had even been successful in its bid in respect to Coal block Gare Palma V/7. It was pointed out that Gare Palma V/7 was also classified under the ‘non-regulated sector‘. The bids were filed by the petitioner on 03.02.2015 and the present writ petition was filed on 12/13.02.2015 after the petitioner had participated in the tender process. Therefore the petitioner cannot now be allowed to challenge the tender conditions.

Hindalco, the successful bidder for Gare Palma IV/5, the one for which Monnet Ispat filed the petition, submitted that the auction process cannot be challenged by the petitioner, once the petitioner had participated in the same.

The court held:

“In our view, clubbing of specific end-uses would run counter to the principle of classification. Coal mines would have to be specified for an end-use and, therefore, it cannot be said that a particular coal mine would have a specified end-use of ‘iron and steel‘ as well as ‘cement‘ or ‘iron and steel‘ and ‘captive power plants‘. The requirements are different. Therefore, the clubbing of different specified end-uses together runs counter to the logic of classification itself. This is apart from the other difficulties of treating unequals equally which in itself would amount to arbitrariness. Each coal mine had to be classified for a specific end-use.”

As for the petitioner, it was decided that once the petitioner had participated in the tender process and even succeeded in respect of Gare Palma IV/7, it cannot be permitted to challenge the same as it has lost out in the auction. Therefore, the petitioner would not be entitled to any order in its favour and the auction of Gare Palma IV/5 coal mine, in which Hindalco was the successful bidder, cannot be interfered with.

The second writ petition Utkal Coal Limited & Anr. v. Union of India & Ors., pertains to Utkal ‘C‘ Coal Blocks, which is a Schedule III mine. The specified end use for Utkal ‘C‘ is ‘power‘ and the petitioners‘ grievance was that this should have also included generation of power for captive use. As per the Clause 4.1.2(f) of the standard tender document for the power sector, a person engaged in captive generation of power, as defined in the Electricity Act, 2003, and the Rules thereunder shall not be eligible to participate in the tender process. Although the court in Jindal Steel Group held that the specified end use stipulated by the Ordinance by virtue of Section 3(1)(v)(ii) clearly provides the specified end use of generation of power to include the generation of power for captive use. And that this was the legislative mandate. However, the Utkal Coal Limited could not avail the benefit of an interim order passed by the court that gave it permission to present its bid, while considering the review of the classification in light of the judgment in the Jindal Steel case. The court decided that Utkal Coal Limited failed to avail the opportunity given by this court by virtue of its interim order dated 13.02.2015 allowing it to place its bid. Utkal Co. submitted that if it had participated, that would have been an empty formality as a captive power plant cannot participate in a reverse bidding process. However, the Court held that this contention of the process being an ‘empty formality’ did not hold good because the entire tender process was known to Utkal Coal Limited and it requested for permission to participate and when that permission was given, they chose not to participate. Consequently, the court decided that Utkal Limited is not entitled to any relief.

The third writ petition filed by Jayaswal Neco Industries  v. Union of India & Anr., prayed against the clubbing of specified end-uses and the splitting of generation of power for captive use from generation of power. It pertained to specific coal mine Gare Palma IV/8 which was classified under ‘non-regulated’ sector and the Government’s corrigendum dated 24.12.2012 defined ‘non-regulated sector’ to include ‘iron and steel‘, ‘cement‘ and ‘captive power plants‘. The observations made in Monnet Ispat & Energy Limited were reproduced and it was reasserted that prospective bidders who want to utilize coal for ‘iron and steel‘ are different from prospective bidders who want to utilise coal for ‘cement‘ or for ‘captive power plants‘. Therefore, putting them all together in one auction would amount to treating unequals equally.

While dealing with the question of splitting of generation of power it was held that the auction process for independent power plants is reverse bidding whereas the auction process for captive power plants is forward bidding and therefore, the two cannot be placed in the very same auction. But at the same time, the court opined that captive power plants ought to have been dealt with independently and separately and not clubbed together with ‘cement‘ and ‘iron and steel‘. But as to getting relief, the opposing parties contended that Jayaswal Neco Industries hadn’t raised any demur, protest or let known their reservation regarding the clubbing of specified end-uses or splitting of end-uses and had not challenged the order dated 18^th December, 2014, even though the writ petitions of Monnet Ispat and Utkal Coal Limited were pending before the court. Protest against the order was made much later and the court decided that the sanctity of the auction process cannot be challenged after participation in the same and the petition was barred by doctrine of estopple, res judicata, approbation and reprobation, waiver and acquiescence. Consequently, the petitioner was held to be not entitled to any relief in the present petition.

In the final writ petition Bhushan Power & Steel Ltd. & Anr. v. Union of India & Anr., raised similar contentions as previous three petitions. Earlier, prior to cancellation, Jamkhani coal block was allocated for iron and steel‘. By virtue of an order dated 04.06.2015, its specified end-use was indicated as ― ‘iron and steel’, ‘cement’ and ‘captive power plants.’ Mostly, the issues were same as the others but the additional question raised by counsel Kabil Sibal was that the technical committee‘s recommendation for Jamkhani was DRI+CPP, according to the finding of the Jindal Steel Group case. It was, therefore, submitted that having specifically indicated that Jamkhani coal block would be for the steel sector, the order dated 04.06.2015 is illegal to the extent the specified end-use for Jamkhani coal block has been altered to ‘iron and steel‘, ‘cement‘and ‘captive power plants‘whereas it should only have been ‘iron and steel‘or ‘iron and steel‘plus ‘captive power plants‘. As regards relief, the petitioner participated in the tender process and was even declared technically qualified in respect of its bid in the Jamkhani coal block. The petitioner having participated in the tender process was not allowed to challenge the tender conditions.

Read the Judgment here.