# M/S ASHOKA SMOKELESS COAL IND. P. LTD. AND ORS v. UNION OF INDIA AND ORS

- **Citation:** [2006] Supp. 9 S.C.R. 954
- **Court:** Supreme Court of India
- **Decided:** 2006-12-01
- **Case number:** Civil Appeal No. 5302 of2006
- **Bench:** S.B. Sinha, P.P. Naolekar
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/m-s-ashoka-smokeless-coal-ind-p-ltd-and-ors-v-union-of-india-and-ors-22207
- **Pages:** 74

## Headnote

Coal-Price fi:xation-Of essential commodity (coal)-Coking coal mines
and coal mines subjected to nationalisation-Subsequntly price and distribution
C thereof deregulated by Government-Price fixation left to coal companiesIntroduction of Scheme of £-Auction-Agencies of the Central Government
and the State Governments kept out of the purview of E-Auction-F or promotion
of manufacture of special smokeless fuel, advertisements inviting entrepreneurs
to manufacture the same, assuring them to provide them coal and the
manufacturing technology-Pursuant thereto, plants for manufacturing
D smokeless coal set up-Validity of the scheme of £-Auction-Held: The
methodology for allocation of coal to a bidder of £-Auction is in equitable,
irrational and fortuitous-Central Government while exercising its power under
Colliery Central Order, could not have issued any direction in the garb of
disposal of coal by wcry of £-Auction-The Coal Companies were under a
E constitutional obligation to fix a reasonable price-While fi:xing a fair and
reasonable price in terms of Essential Commodities Act, it is necessary that
price is actually fixed and not kept viable-Price fixation of an essential
commodity is determined on the touch stone of public interest-While adopting
a policy decision as regards mode of determination of price of coal either
fixed on variable, the coal companies were bound to keep in mind social and .
F economic aspect of the matter-Although a reasonable profit is permissible,
but profiteering would not be-Scheme of £-Auction is also ultra vires Article
14-Central Government in collaboration with the coal companies would be
at liberty to evolve a policy which would meet the requirements of public
interest vis-a-vis the interest of consumers of coal-Central Government also
advised to widen definition of coal so as to include the smokeless coalG Colliery Control Order, 1945-Colliery Control Order, 2000-Essential
Commodities Act, 1955-Coking Coal Mines (Nationalization) Act, 1972Coal Mines (Nationalization) Act, 197 3-Constitution of India, 1950-Part IV
and Articles 14 and I9(6).
H
954
'
ASHOKA SMOKELESS COAL IND. P.LTD. v. U.0.1.
955
Constitution of India, 1950:
A
Part JV-Article 39 (b)--Directive Principles-Violation-Effect of--
On price fixation of essential commodities-Held: Though violation of Directive
Principles would not be ultra vires, but they would from a relevant
consideration for determining a question of price fixation of essential
commodity.
B
Directive Principles-Role of-Held: They provide for a guidance to
interpretation of Fundamental Rights of a citizen as also the statut01y rights.
Judicial Review-Permissibility of--ln cases of policy decision-Held:
Policy decision is a subject matter of judicial review-But such policy on the C
part of executive of Central Government must be strictly construed in terms
of Article 77--C_onstitution of India, 1950-Article 77.
Doctrines:
Doctrine of legitimate expectation-Applicability of
D
Doctrine of reasonableness-Applicability of
Doctrine of Promissory Estoppel--Applicability of
Doctrine of public necessity-Applicability of
E
Words and Phrases:
'Business'--Meaning of
Production, distribution, supply and price of coal were controlled
and regulated under the Colliery Control Order, 1945 framed under F
Defence of India Rules. The Order was continued under the Essential
Commodities Act, 1955. Coking Coal Mines and Coal Mines were
subjected to nationalization in terms of Coking Coal Mines
(Nationalization) Act, 1972 and Coal Mines (Nationalization) Act, 1973
with a view to give effect to the provisions of Article 39 (b) of the G
Constitution of India.
After the nationalization, consumers of coal were categorized as Core
Sector and Non-core Sector. Linkage system was evolved initially for Core
Sector and then also for Non-Core consumers. The linkage was to be
determined on the basis of availability of coal, requirements thereof in H
956
SUPREME COURT REPORTS [2006] SUPP. 9 S.C.R.
A respec

## Text

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A
M/S ASHOKA SMOKELESS COAL IND. P. LTD. AND ORS.
B
v.
UNION OF INDIA AND ORS.
DECEMBER 1, 2006
[S.B. SINHA AND P.P. NAOLEKAR, JJ.]
Coal-Price fi:xation-Of essential commodity (coal)-Coking coal mines
and coal mines subjected to nationalisation-Subsequntly price and distribution
C thereof deregulated by Government-Price fixation left to coal companiesIntroduction of Scheme of £-Auction-Agencies of the Central Government
and the State Governments kept out of the purview of E-Auction-F or promotion
of manufacture of special smokeless fuel, advertisements inviting entrepreneurs
to manufacture the same, assuring them to provide them coal and the
manufacturing technology-Pursuant thereto, plants for manufacturing
D smokeless coal set up-Validity of the scheme of £-Auction-Held: The
methodology for allocation of coal to a bidder of £-Auction is in equitable,
irrational and fortuitous-Central Government while exercising its power under
Colliery Central Order, could not have issued any direction in the garb of
disposal of coal by wcry of £-Auction-The Coal Companies were under a
E constitutional obligation to fix a reasonable price-While fi:xing a fair and
reasonable price in terms of Essential Commodities Act, it is necessary that
price is actually fixed and not kept viable-Price fixation of an essential
commodity is determined on the touch stone of public interest-While adopting
a policy decision as regards mode of determination of price of coal either
fixed on variable, the coal companies were bound to keep in mind social and .
F economic aspect of the matter-Although a reasonable profit is permissible,
but profiteering would not be-Scheme of £-Auction is also ultra vires Article
14-Central Government in collaboration with the coal companies would be
at liberty to evolve a policy which would meet the requirements of public
interest vis-a-vis the interest of consumers of coal-Central Government also
advised to widen definition of coal so as to include the smokeless coalG Colliery Control Order, 1945-Colliery Control Order, 2000-Essential
Commodities Act, 1955-Coking Coal Mines (Nationalization) Act, 1972Coal Mines (Nationalization) Act, 197 3-Constitution of India, 1950-Part IV
and Articles 14 and I9(6).
H
954
'
ASHOKA SMOKELESS COAL IND. P.LTD. v. U.0.1.
955
Constitution of India, 1950:
A
Part JV-Article 39 (b)--Directive Principles-Violation-Effect of--
On price fixation of essential commodities-Held: Though violation of Directive
Principles would not be ultra vires, but they would from a relevant
consideration for determining a question of price fixation of essential
commodity.
B
Directive Principles-Role of-Held: They provide for a guidance to
interpretation of Fundamental Rights of a citizen as also the statut01y rights.
Judicial Review-Permissibility of--ln cases of policy decision-Held:
Policy decision is a subject matter of judicial review-But such policy on the C
part of executive of Central Government must be strictly construed in terms
of Article 77--C_onstitution of India, 1950-Article 77.
Doctrines:
Doctrine of legitimate expectation-Applicability of
D
Doctrine of reasonableness-Applicability of
Doctrine of Promissory Estoppel--Applicability of
Doctrine of public necessity-Applicability of
E
Words and Phrases:
'Business'--Meaning of
Production, distribution, supply and price of coal were controlled
and regulated under the Colliery Control Order, 1945 framed under F
Defence of India Rules. The Order was continued under the Essential
Commodities Act, 1955. Coking Coal Mines and Coal Mines were
subjected to nationalization in terms of Coking Coal Mines
(Nationalization) Act, 1972 and Coal Mines (Nationalization) Act, 1973
with a view to give effect to the provisions of Article 39 (b) of the G
Constitution of India.
After the nationalization, consumers of coal were categorized as Core
Sector and Non-core Sector. Linkage system was evolved initially for Core
Sector and then also for Non-Core consumers. The linkage was to be
determined on the basis of availability of coal, requirements thereof in H
956
SUPREME COURT REPORTS [2006] SUPP. 9 S.C.R.
A respect of each industry as certified by the State, and the capacity of the
railways to transport coal. Government issued several Notifications from
time to time leading to deregulation as regard price and distribution of
coal. By Colliery Control Order, 2000, Order of 1945 was repealed and
thereby control and regulation over coal as was prevailing under the 1945
Order, was done away with. By reason of 2000 Order, Central
B Government, apart from certain other statutory functions to be performed
by coal controller, retained the power to issue directions for regulating
disposal of stocks of coal. Coal India became entitled to determine the
price. Coal India discontinued grant of fresh linkages to Non-core Sector
consumers due to mismatch in respect of demand and availability of coal.
C Thus the consumers having no linkages were constrained to purchase coal
from black market at a higher price. A resolution was passed to remove
the difference between Open Sales Scheme price and the price of the linked
consumers. To prevent misuse of linkage, verification of the units of the
linked consumer was undertaken. The Standing committee on coal and
Steel found that there were bogus companies not using coal and black
D marketing it.
A new scheme known as E-Auction was made purportedly to meet
the liberalization policy of the Central Government in regard to import
of coal and opening of private coal mines and to provide pragmatic and
E transparent system of distribution of coal. The agencies of the Central
Government and the State Governments were kept out of the purview of
E-Auction. Central Government asked Coal India Ltd. to take urgent
necessary actions to popularize the technology given by CFRI by giving
more linkages to the intending entrepreneurs and also encourage stepping
up of production of SSR and Briquetts in order to ensure availability of
F alternate fuel for domestic consumption. Advertisements were published
inviting entrepreneurs to manufacture special smokeless fuel and assuring
to provide them coal and the manufacturing technology. Pursuant to such
invitation the entrepreneurs set up plants for manufacturing smokeless
coal.
G
The scheme of E-Auction was challenged before Guahati and
Madhya Pradesh High Courts. Guahati High Court set aside the scheme
holding that the method adopted for the same was arbitrary in nature;
and that the Chairman of Coal India Ltd. had no authority to issue such
direction or to frame such a Scheme. Madhya Pradesh High Court held
H the Scheme to be valid and legal.
'I
ASHOKA SMOKELESS COAL IND. P.LTD. v. U.0.1.
957
Writ Petition was also filed before Calcutta High Court questioning A
the validity of sponsorship Scheme and the same was allowed holding that
mini classification on the basis of sponsorship system was ultra vires the
Constitution of India.
Appeals were filed before this Court against the judgments of the
three High Courts.
B
In the meantime several Writ Petitions were filed before different
, 1
High Courts questioning the validity of E-Auction. Those Writ Petitions
were transferred to this Court.
Disposing of the appeals and transferred cases, the Court
HELD: 1.1. The methodology for allocation of coal to a bidder of
E-Auction is inequitable, irrational and fortuitous. (1010-B-C}
c
1.2. The coal companies which are public authorities when seeking
to give effect to the constitutional scheme as contained in the preamble of D
the Nationalization Acts of 1972 and 1973 were acting at the behest of the
Central Government and not entirely on their own. In relation to fixation
of price or other related matters, the Central Government, therefore, had
no say. Under the Colliery Control Order 2000, the power of the Central
Government is merely to regulate supply and not to regulate price, the E
price of coal, it will bear to state, having been deregulated. 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 F
in the garb of disposal of coal by way of E-Auction.
(1020-A-B; G-H; 1021-A-B)
Hindustan Petroleum Corpn. Ltd. v. Darius Shapur Chenai and Ors.,
(2005) 7 SCC 627; Commr. of Police v. Gordhandas Bhanji, (1952) SCR 135
and Mohinder Singh Gill v. Chief Election Commnr., (1978] 1 SCC 405, G
referred to.
1.3. Coal is an essential commodity in terms of Section 3(1) of the
Essential Commodities Act. Colliery Control Order was made, inter alia,
for securing equitable distribution and availability of higher price of
essential commodity. The coal companies as also the Central Government, H
958
SUPREME COURT REPORTS [2006] SUPP. 9 S.C.R.
,...
A therefore, have a constitutional and statutory obligation to fulfill. Coal
companies exercising monopolistic power, thus, were required to distribute
coal equitably and at a fair price. [1006-F-G)
1.4. By reason of E-Auction no price is fixed as it would vary from
B
bids to bids. The only price which is fixed for E-Auction is the reserved
. price which is 25% above the notified price. [1007-D; Fl
1.5. While fixing a fair and reasonable price in terms of the
provisions of the Essential Commodities Act (although the price is not
dual), it is essential that price is actually fixed. Such price fixation is
c necessary in view of the fact that coal is an essential commodity. Fixation
I of price of coal is of utmost necessity as it is a mineral of grave national
importance. Non-availability of coal and consequently the other products
may lead to hardship to a section of citizens. It may entail closure of
factories and other industries which in turn would lead to loss to State
exchequer, as they would be deprived of its taxes. It will lead to loss of
D employment of a large number of employees and would be detrimental to
'·
l.
the avowed object of the Central Government to encourage small scale
industries. [1007-F-H)
1.6. E-Auction has effect, both on price of coal as also the availability
E
thereof to the Non-core Sector consumers. Their availability would depend
' upon successful bids of the consumers. It was introduced for a definite
phrpose viz. to confine the same to the Non-core Sector and traders. A
deviation to a great extent has been made therefrom. Even now the core
sectors are taking part in E-Auction, but no step rias been taken in this
behalf. [1008-C-DJ
F
'
I. 7. E-Auction is not a mode to fix price. It is only a mode to obtain
maximum price. While doing so State does not have to follow the principles
of fi~ation of price. It is not required to apply its mind as to its effect. It
....
'1
.
treat.s coal like any other commodity. It treats itself like a private trader.
"( ) ,,
A (Jistinction must be borne in mind when a State intends to part with a
qi pfWilege or a largess as a competitor in the market and when it is expected
to fulfill its constitutional goal enshrined under Article 39(b) of the
Cons~itution. [1004-D-F]
1~8. 'Business' is a word of wide import. It, in the context of
H application of a statute governing a monopoly concern and also with an
• ~ .• ·• {1 !.i' ";
l ,
~
-
ASHOKA SMOKELESS COAL IND. P.LTD. v. U.0.1.
959
essential commodity, would indisputably stand on a different footing from A
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 visualized not as profit earning concerns but as an extended
arm of a welfare State. They are expected to harmonize the business
potential of a country to benefit the common man. The power of the B
Central Government to carry on trade on 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 C
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 deregulation of price by the Central Government under the 2000
Order, the reasonable attributes for the purpose of fixing the price of coal
should be borne in mind. 1996-G-H; 997-A-C)
D
Oil and Natural Gas Commission and Anr. v. Association of Natural Gas
Consuming Industries of Gujarat and Ors., (1990) Supp. SCC 397; Hindustan
Zinc ltd. etc. v. Andhra Pradesh State Electricity Board and Ors., 11991) 3
SCC 299; Dr. P. Na/la Thampy Thera v. Union of India, (1983) 4 SCC 598 E
and Kera/a State Electricity Board v. Mis S.N. Govinda Prabhu and Bros.
and Ors. etc., 11986) 4 SCC 198, referred to.
1.9. Recourse to E-Auction had been taken primarily by way of a
profit motive. No public opinion was sought for and no expert committee
was appointed. The statutory and constitutional duties had not been kept F
in view. Conveniently, while making the said policy decision, the coal
companies did not remind themselves that as they are instrumentalities.
of the State, they are bound to adhere to the Directive Principles of the
State and the prime object for which the Nationalization Acts were
enacted. Good governance and good corporate governance are distinct and
separate. Whereas good governance would mean protection of the weaker G
sections of the people; so far as good corporate governance is concerned,
the- same may not be of much relevance. The coal companies in taking
recourse to E-Auction did not give effect to the concept of corporate social
responsibility. Although a reasonable profit may be permissible,
profiteering would not be. [1019-B-GI
H
960
SUPREME COURT REPORTS [2006] SUPP. 9 S.C.R.
;
A
T.MA. Pai Foundation v. State of Karnataka, (2002J 8 SCC 481; Islamic
Academy of Education v. State of Karnataka, 12003) 6 SCC 697 and P.A.
lnamdar v. State of Maharashtra, [20051 6 SCC 537, relied on.
1.10. The State when exercises its power of price fixation in relation
to an essential commodity, has a different role to play. Object of such price
B fixation is to see that the ultimate consumers obtain the essential
commodity at a fair price and for achieving the said purpose the profit
margin of the manufacturer/producer may be kept at a bare minim_um.
The question as to how such fair price is to be determined stricto sensu
,._
does not arise in this case as here the Central Government has not fixed
c any price. It left the matter to the coal companies. The coal companies in
taking recourse to E-Auction also did not fix a price. They only took
recourse to a methodology by which the price of coal became variable.
Its only object was to see that maximum possible price of coal is obtained.
(1003-F-HI
D
1.11. The modality of price fixation will depend upon the nature of
the commodity, the provisions of the concerned statute governing the same
and other relevant factors. When price is fixed in terms of the provisions
of the Essential Commodities Act, the State would be governed by the
doctrine of public necessity. It may in terms of its statutory power and
having regard to the penal provisions engrafted therein compel a
E manufacturer or a dealer of an essential commodity to sell it to the public
at a reasonable price or at no profit. Price fixation by the State for its
own benefit, however, have an element of profit. Whenever a dual price
is resorted to, the same must be rational. The formula for fixing the dual
price may be reasonable only under certain circumstances.
F
(994-F-H; 995-AI
Union of India and Ors. etc. v. Hindustan Development Corpn. and Ors.,
[199311 SCC 467; Gujarat Ambuja Cement Ltd and Anr. v. Union of India
'!---
and Ors., rt99818SCC208 and Kera/a State Electricity Boardv. Mis. S.N.
Govinda Prabhu Bros. and Ors. etc., [19861 4 SCC 198, relied on.
G
Hindustan Zinc Ltd. etc. v. Andhra Pradesh State Electricity Board and
Ors., 11991) 3 SCC 299; Oil and Natural Gas Commission and Anr. v.
Association of Natural Gas Consuming Industries of Gujarat and Ors., (1990)
Supp. SCC 397 and Dr. P. Na/la Thamphy Thera v. Union of India and Ors.,
(1983) 4 sec 598, referred to.
H
1.12. However, dual pricing having regard to a distinct classification
~ ...
-..
ASHOKA SMOKELESS COAL IND. P.LTD. v. U.0.1.
961
between a core sector and non-core sector is permissible. The State, A
however, while distributing its largess at a price, if involved in distribution
of a commodity, which would attract the provision of Article 39(b) of the
Constitution of India, would stand on a different footing. (996-F-GI
Pallavi Refractories and Ors. v. SCCL and Ors., (20051 2 SCC 227,
relied on.
B
1.13. While fixing the price of an essential commodiiy like coal, t.he
capacity to bid of small manufacturers may also be taken into account.
The court exercising a power of judicial review in a given situation may
determine the question on the basis of the material brought on records. C
(996-D-E]
1.14. While adopting a policy decision as regards the mode of
determining the price of coal either fixed or variable, the coal companies
were bound to keep in mind social and economic aspect of the matter. They
could not take any step which would defeat the constitutional goal.
(1012-E-Fl D
Mahabir Auto Stores and Ors, v. Indian Oil Corporation and Ors.,
[19901 3 sec 752, relied on.
Kera/a State Electricity Board v. S.N. Govinda Prabhu Bros. and Ors.
etc. (19861 4 SCC 198 and Oil and Natural Gas Commission and Anr. v. E
Association of Natural Gas Consuming Industries of Gujarat and Ors. [1990}
Sup. SCC 397, referred to.
1.15. Article 39(b) was incorporated in the Constitution to indicate
the necessity for ensuring equitable distribution of resources. Coal, being
such a vital product to the Indian industries and the common man, F
nationalization of coal was necessary for realization of the ideals contained
in Article 39(b) of the Constitution. (999-D; 1000-B-C)
State of Karnataka and Anr. v. Shri Ranganatha Reddy and Anr. (19771
4 SCC 471; Samatha v. State of A. P. (1997) 8 SCC 191; Sanjeev Coke
Manufacturing Company etc. v. Mis Bharat Coking Coal limited and Anr. G
etc. (1983) 1SCC147 and l. Abu Kavur Bai v. State ofT. N., (1984( 1 SCC
515, referred to.
1. 16. Whenever an action is taken by a State in consonance with the
provisions laid down in the Directive Principles of State Policy as envisaged
under Part IV of the Constitution of India, the same is considered to be a H
962
SUPREME COURT REPORTS [2006] SUPP. 9 S.C.R.
~
A reasonable action. [1001-C-D)
MR.F Ltd v. Inspector Kera/a Govt. and Ors. (199818 SCC 227, relied
on.
B. P. Sharma v. Union of India (20031 7 SCC 309: AIR (2003) SC
B 3863; State of Punjab v. Devans Modern Breweries Ltd. (20041 11 SCC 26
and State of Gujarat v. Mirzapur Moti Kureshi Kassab Jamat (20051 8 SCC
534, referred to.
,
~
1.17. It may not be correct to say that any action which is l'lot in
consonance with the provisions of Part IV of the Constitution would be
c ultra vires but there cannot be any doubt whatsoever that the principles
contained therein would form a relevant consideration for determining a
question in regard to price fixation of an essential commodity. Directive
Principles of State Policy provides for a guidance to interpretation of
Fundamental Rights of a citizen as also the statutory rights. (1002-C-E)
D
Tara Prasad Singh and Ors. v. Union of India and Ors. ( 1980( 4 SCC
179, referred to.
1. 18. The State or a public sector undertaking plays an important
~
role in the society. It is expected of them that they would act fairly and
E reasonably in all fields. (1004-C-D)
Baburao Shantaram More v. The Bombay Housing Board and Anr.
[1954) SCR 572; Dwarkadas Marfatia and Sons v. Board of Trustees of the
Port of Bombay (1989) 2 SCR 751 and Pathumma and Ors. v. State of Kera/a
and Ors. (1978) 2 SCR 537, referred to.
F
1.19. Coal companies are monopolies within the meaning <;if the
provisons of the Nationalization Act. They would be deemed to be
monopolies within the provisions of clause (6) of Article 19 of the
Constitution of India. (1004-F-GI
G
Akadasi Pradhan v. State of Orissa (19631Supp2 SCR 691; State of
Rajasthan v. Mohan Lal Vyas (19711 3 SCC 705, referred to.
1.20. However, since the coal companies have given a complete gobye to the original scheme of E-Auction inasmuch as not only the traders
or the Non-core Sector consumers but also Core Sector consumers had
H also been allowed to participate therein. The Non-core Sector consumers
....
. .J
'.
_!_
ASHOKA SMOKELESS COAL IND. P.LTD. v. U.0.1.
963
although as linked consumers form a separate and distinct class vis-a~vis A
the traders, they would not be entitled to the benefit of obtaining coal at
a fixed price. The question as regards the discrimination between two
categories of consumer assumes some importance. (1018-A-DI
1.21. The effect is that today, while the Core Sector (92%) on its own
and Non-core non-linked SSl/Tiny units (through the NCCF/other B
agencies) (l %) are being supplied coal at a fixed price, on the other hand,
the Non-core linked SSiffiny units (4%) are being subjected to differentlal
treatment without any rational classification by supplying the coal to the
latter on the price to be ascertained by the trader-controlled process of
E-Auction and thereby putting the petitioner-units at par with the trader. C
The scheme of E-Auction is, therefore, ultra vires Article 14 of the
Constitution of India. [1018-D-FI
Mohd. Usman v. State of Andhra Prades~ AIR (1971) SC 1801, relied
on.
State of Orissa and Ors. v. Hari Narain Jaiswal and Ors. 11972) 2 SCC
36 and Kasturi Lal Lakshmi Reddy, represented by its Partner Shri Kasturi
Lal, Ward No. 4, Palace Bar, Poonch, Jammu and Ors. v. State ofJammu
and Kashmir and Ors. (19801 4 SCC 1, distinguished.
D
State of Madhya Pradesh v. Nandlal Jaiswal 119861 4 SCC 566; Khoday E
Distilleries Ltd. and Ors. v. State of Karnataka and Ors. (1995]1 SCC 574;
Ramana Dayaram Shetty v. International Airport of India and Ors. 11979] 3
SCC 489; Motor General Traders v. State of Andhra Pradesh 11984] 1 SCC
222; Indra Sawhney-11 v. Union of India, [200011 SCC 168; State of U.P. v.
Johri Mal 12004) 4 SCC 714 and£. V Chinnaiah etc. v. State of A.P. and
Ors. etc. 12005) 1 sec 394, referred to.
F
1.22. Coal being a scarce commodity, its utility for the purpose for
which it is needed is essential. Although, technically, in view of the fact
that no price is fixed for coal, there may not be any black marketing in
the technical sense of the term; but this Court cannot also encourage black G
marketing in general sense. Nobody should be allowed to take undue
advantage while dealing with a scarce commodity. (1025-D-F]
2. It cannot be said that the policy decision of a State cannot be the
subject matter of judicial review. E-Auction is not a policy decision of the
Central Government. Such a policy decision on the part of the executive H
964
SUPREME COURT REPORTS [2006] SUPP. 9 S.C.R.
A of the Central Government must be strictly construed in terms of Article
77 of the Constitution of India. Its exercise of such powers has nothing to
do with the price fixation by a policy. The State while exercising its power
under the Essential Commodities Act, fixes the price keeping in mind
several factors, in particular the larger interest of the people. Price fixation
of an essential commodity, therefore, is determined on the touchstone of
B public interest. While doing so the State is expected to follow a rational
and fair procedure and for the said purpose may collect data, obtain public
opinion, and may appoint an expert committee. [1018-F-H; 1019-A)
3.1. Smokeless coal operators had set up their units at the behest of
C the coal companies. Those who had set up their units in the erstwhile State
of Bihar and West Bengal evidently did so at the behest of the companies
having been encouraged therefor. It was done to share the burden of coal
companies to supply soft coke to the small consumers. Doctrine of
promissory estoppel would, !herefore, be applicable. [1021-E-F)
D
3.2. The concerned States also intended to grant incentives to such
industrial units by way of waiver and/ or deferment of payment of sales
tax. Such industrial policies by way of legislation or otherwise, subject of
course to the provisions of the statute have been framed by several other
States. [1021-G-H; 1022-A[
E
Mis. Motilal Padampat Sugar Mills Co. Ltd v. State of Uttar Pradesh
and Ors. [1979) 2 SCC 409; Pournami Oil Mills and Ors. v. State of Kera/a
and Anr. (1986) (Supp) SCC 728; Assistant Commissioner of Commercial
Taxes (Asst.) Dharwar and Ors. v. Dharmendra Trading Company and Ors.
[1988) 3 SCC 570; Mangalore Chemicals and Fertilisers Limited v. Deputy
F Commissioner of Commercial Taxes and Ors. [19921Supp1 SCC 21; Pawan
Alloys and Casting Pvt. Ltd, Meerut v. U.P. State Electricity Board and Ors.
[1997) 7 SCC 251 and State of Punjab v. Nestle India Ltd. and Anr. (2004)
6 sec 465, referred to.
4. Principle of natural justice will apply in cases where the_re is some
G right which is likely to be affected by an act of administration. Good
administration, however, demands observance of doctrine of
reasonableness in other situations also where the citizens may legitimately
expect to be treated fairly. Doctrine of legitimate expectation has been
developed in the context of principles of natural justice. (1024-D-E)
H
Stretch v. U. K. [2004) 38 EHRR 12 and Rowland v. Environmental
- I_
.,..
..
ASHOKA SMOKELESS COAL IND. P.L TD. v. U.0.1.
965
Agency 12003) EWCA Civ. 1885, referred to.
A
5.1. Most of the consumers, with a view to obtain supply of coal had
filed documents to prove their genuineness. The said documents must be
scrutinized by the authorities of the coal companies. In the event, they have
any suspicion, inspection should be carried out by officers appointed by B
the Chairman-cum-Managing Director of the concerned company within
whose jurisdiction the unit is situated. (1025-G-H; 1026-A)
5.2. With a view to evolve a viable policy, a committee should be
constituted by the Union of India with the Secretary of Coal being the
Chairman. In such a committee, a technical expert in coal should also be C
associated as most of the projects involve consumers of coal, particularly
manufacturers of hard coke and smokeless fuel. It may not be difficult to
find out, having regard to the technologies used therein as regards the ratio
of the input vis-a-vis the output, with a balance and 10% margin. On the
basis of such finding alone, apart from the requirements of five years,
supply should form the basis of MPQ. Central Government in D
collaboration with the coal companies would be at liberty to evolve a policy
which would meet the requirements of public interest vis-a-vis the interest
of consumers of coal. They would be entitled to lay down such norms as
may be found fit and proper. They would be entitled to fix appropriate
norms therefor. In the event, any industrial unit is found to violate the .E
norms, it should be stringently dealt with. [1026-A-DI
5.3. The Central Government, therefore, may think it fit to widen
the definition of coal so as to include the smokeless coal in exercise of its
power under the Essential Commodities Act. This Court has held that
slurries are a part of coal and is governed by the provisions of the Mines
and Minerals (Regulation and Development) Act. Such being the wider
definition of coal, there is no reason as to why proper measure cannot be
taken by the Union of India to have a complete control thereover. Any
strict mechanism to find out the genuine consumers would go a long way
F
in taking preventive measures and dealing with coal by unscrupulous G
persons for unauthorized purposes. Those who do so, should be dealt with
stringently but the same would not mean that the genuine consumers
should suffer for want of coal. (1026-D-G)
5.5. Central Government and for that matter the coal companies can H
966
SUPREME COURT REPORTS [2006) SUPP. 9 S.C.R.
A change their policy decision, but thC;refor there should be a public interest
as contra- distinguished from a mere profit motive. Any change in the
policy decision for cogent and valid reasons is acceptable in law, but such
a change must take place only when it is necessary, and upon undertaking
of an exercise of separating the genuine consumers of coal from the rest.
B If the coal companies intend to take any measure they may be free to do
so. But the same must satisfy the requirements of constitutional as also
the statutory schemes, even in relation to an existing scheme e.g. Open
Sales Schemes, indisputably the coal companies would be at liberty to
formulate the new policy which would meet the changed situation. Eadvertise1nent or E-tender would be welcome but then therefor a greater
C transparency should be maintained. ( 1027-A-CJ
D
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 5302 of2006.
f'rom the interim Order dated 13.9.2005 of the High Court of Jharkhand
at Ranchi in W.P. (C) No. 2460/2005.
WITH
C.A. Nos. 5329, 5303, 5304, 5305, 5324, 5306, 5307, 5308, 5309,
5310, 5311, 5312, 5313, 5314, 5317, 5315, 5318, 5319, 5320, 5321, 5322,
E 5323 and 5316 of2006, T.C. (Civil) Nos. 89-124, 126-136 of2005 and T.C.
(Civil) Nos. 4-5, 7-45, 75, 125, 137-139 of 2006, C.A. Nos. 5547 of 2004
and 2972-2976 of 2005, W.P. (C) No. 67 of 2005.
Gopal Subramanium, A.S.G., A. Sharan, A.S.G., A.K. Ganguli, Altaf
Ahmad, Jaideep Gupta, Dipankar Gupta, S.K. Bagga, Shanti Bhushan, Bhaskar
F Gupta, Mahabir Singh, K. Radhakrishnan, T.R. Andhyarujina, S.D. Sanjay,
Devashish Bharuka, Pankaj Bhagat, Hansa Bharuka, Dr. Sushil Balwada,
Rana Mukherjee, Siddharth Gautam, Goodwill Indeevar, M.P. Jha, Ram
Ekbal Roy, Harshvardhan Jha, Amit Meharia, Mohan Prasad Meharia, Seeraj
Bagga, Sureshta Bagga, Bijan Kumar Ghosh, Sukhendu Sekhar, Rajiv Mehta,
B. Aggarwal, A. Henry, T. Anil Kumar, Manish Shankar Verma, Anupam
G Lal Das, Arjun V. Bobde, Hrishikesh Baruah, Jyoti Mendiratta, Manish Pitale,
Chander Shekhar Ashri, Rajesh Singh, Gouri Karuna Das, Anu Gupta, Kamal
Kant Tripathi, Rudreshwar Singh, Tapesh Kumar Singh, Manish Kumar Saran,
Dr. Meena Agarwal, R.C. Mishra, Anil Kumar Sinha, Gaurav Agrawal, S.
Chandra Shekhar, Kanchan Kaur Dhodi, Manoj Sharma, P.K. Jain, Surya
H Kant, K.S. Bhati, Aishwarya Bhati, Anip Sachthey, Ajit Kumar Sinha, Krishan
r c
.,
...
,•
ASHOKA SMOKELESS COAL IND. P.LTD. v. U.0.1. (S.B. SINHA, J.] 967
Mahajan, Satyakam, Navin Prakash,
V.K. Verma, Chetan Sharma, Rajiv A
Nanda, Ramni Taneja, Babu G., Nishant Gupta, Vani Mehta, Vimla Sinha,
Gogpal Singh, Shriniwas R. Khalap, Mohit Paul, C. Mukund, Ashok Kumar
Jain, Animesh Saha, Bijoy Kumar Jain, Pankaj Jain, B.B. Singh, Manik
Karanjawala, N.D.B. Raju, Bharathi R., N. Ganpathy, Guntur Prabhakar and
Rajendra Kumar for the appearing parties.
The Judgment of the Court was delivered by
S.B. SINHA, J. Introduction :
Leave granted in all the special leave petitions.
B
The va_lidity and/or legality of a scheme framed by the Coal India C
Limited for sale of coal by Electronic Auction (E-Auction) is in question in
these appeals and transferred applications.
"Coal" indisputably plays an important role in the development of
economy of the country. It had been the subject-matter of regulatory measures
even under the Defence of lhdia Rules. Production, distribution, supply and D
price of coal were controlled and regulated under the Colliery Control Order,
1945 (l 945 Order) framed under the said Rules. The said Order was continued
under the Essential Commodities Act, 1955. Under the Colliery Control Order,
the Coal Controller was even authorised to allot quotas of coal to the Central
Government as well as the State Governments; although the said procedure E
is now not in,vogue in view of decontrolling notifications issued thereunder
by the Central Government from time to time. The quality as well as quantity
of coal required by all consumers used to be regulated by the Coal Controller.
Coal was the only mineral which was subjected to nationalisation, in terms
of the Coking Coal Mines (Nationalisation) Act, 1972 and the Coal Mines
(Nationalisation) Act, 1973. Even coal-mining leases granted to the lessees F
stood terminated by reason of Section 4-A of the Mines and Minerals
(Regulation and Development) Act, 1957 in the year 1976.
Coal is used as a primary raw material in many core sectors which are
vital for the economy of the country e.g. power, steel, oil etc. Fixation of
price of coal by the Central Government, regarding the quality thereof, had G
all along been subjected to statutory orders. The gradation of coal dependent
upon the quality thereof was to be determined by the "Coal Board" constituted
under the Coal. Mines (Conservation and Development) Act. Quality of coal
may depend not only on the location of the coal mines but also on the
particular seams wherefrom it is extracted. Requirement of maintenance of H
fixed price ofcoal on an all-India basis, as far as practicable had all along
968
SUPREME COURT REPORTS [2006] SUPP. 9 S.C.R.
A been considered to be imperative in the economic and industrial development
of the country.
Control over coal :
Coal indisputably is an essential commodity. Its importance is widely
B accepted. The Essential Commodities Act, 1955 was enacted inter alia for
securing equitable qistribution and availability of essential commodities at
fair price. Coal despite partial deregulation having regard to Colliery Control
Order, 2000 (2000 Order) is still a regulated commodity.
1945 Order made provisions for regulating production, supply and
C distribution of coal. It dealt with class of coal, grade of coal, size of coal and
price of coal. Clause (3) empowered the Central Government to prescribe
classes, sizes, grades, etc. into which coal may be categorized as also the
specifications thereof on the said basis.
Whereas coking coal having inherent property of swelling on heating
D is essentially used for metallurgical purposes in the steel plant for production
of steel; all other categories of coal are non-coking coals. Non-coking coal
is used as a raw material in manufacturing processes such as cement, graphite,
soft coke, domestic fuel and for production of various products such as glass,
food processing, ceramics, chemicals, re-rolling mills, salt glazed stoneware
E pipes, refractory used for steel making etc. The different sizes of the coal are
inter alia known as 'Run of the Mine', 'Steam' and 'Slack'. The price of coal
depends not only with reference to the grade but size as also the seams
situated in the coking coal mines or coal mines, as the case may be.
Clauses 128 and f2E of the 1945 Order were, however, invoked by the
F Central Government from time to time by issuing notifications as a result
whereof controls over price and distribution of coal were withdrawn. However,
complete regulation over coking coal used for metallurgical industries was
retained.
Several notifications leading to deregulation as regard price and
G distribution of coal had been issued from time to time. Distribution and
pricing of coal came to be controlled in a phased manner. A circular was
issued on 5.1.1991 that Coal India could issue coal clearance/ linkages upto
5,000 metric ton per month. By a notification dated 23.2.1996, price,
distribution of some grades of coal were deregulated whereas the same was
H extended to certain other grades of coal on 12.3.1997. A clarification was
1
'\
ASHOKA SMOKELESS COAL IND. P. LTD. v. U.O.L[S.B. SINHA, J.] 969
issued that the coal companies can determine the price to be charged for the A
coal produced from time to time.
On and from l .1.2000, the 1945 Order was repealed and replaced by
the Colliery Control Order, 2000 (2000 Order); in terms whereof control and
regulation over coal, as was prevailing under the 1945 Order, was done away
with. In terms of the said order, the functions as regards categorization of B
coal, disposal of coal, stock vested in the Central Government whereas the
Coal Controller was conferred with the power of surveillance over quality.
By reason of the said Order, the Central Government, however, apart from
certain other statutory functions to be performed by coal controller retained
the power to issue directions for regulating disposal of stocks of coal.
C
Nationalisation of coal :
Both coking coal mines and coal mines were subjected to nationalization
in terms of Coking Coal Mines (Nationalization) Act, 1972 (for short, 'the
1972 Act) and the Coal Mines (Nationalization) Act, 1973 (for short, 'the D
1973 Act'). The said Acts, as would appear from Section 2 thereof, were
enacted with a view to give effect to the provisions of Article 39(b) of the
Constitution of India. Under the said Acts, both Coking Coal Mines and Coal
Mines vested in the Central Government under the said Acts.
The preamble of both the Nationalisation Acts are in the same vein. E
The Preamble of the 1973 Act states that "control of such resources are
vested in the State and thereby so distributed as best to subserve the common
good." By reason of the said statutes, the coal companies had not only acquired
coking coal mines and coal mines but also have been carrying on business
in coal. Indisputably, they enjoy a monopoly character.
F
"'·
It is also not in dispute that there had been huge demand of coal both
...
-I
from the core sector as also non-core sector consumers.
The Central Government, however, issued appropriate notifications
whereby and whereunder the said coal mines both in terms of the 1972 Act
as also the 1973 Act instead of continuing to vest in the Central Government
vested in the Government companies specified therein who are parties herein.
linkage:
G
After the nationalization of coal, consumers were categorized in two
main sectors, namely, core sector and non-core sector. ~inkage system H
970
SUPREME COURT REPORTS [2006] SUPP. 9 S.C.R.
A admittedly at the first stage had been evolved for core sector. In the year
1993, a Standing Linkage Committee was set up for supply of coal to thennal
power stations.
Linkage was extended also to cement in the said year in tenns of
Resolution No.Cl-21 (20/73 dated 19.11.1973.