# MANOHAR LAL SHARMA v. THE PRINCIPAL SECRETARY & ORS

- **Citation:** [2014] 8 S.C.R. 446
- **Court:** Supreme Court of India
- **Decided:** 2014-08-25
- **Bench:** R.M. Lodha, Cji Madan, B. Lokur, Kurian Joseph
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/manohar-lal-sharma-v-the-principal-secretary-ors-30006
- **Pages:** 136

## Headnote

CONSTITUTION OF /NOIA,
1~50:
Art. 39 (b) - Material resources of community- Allocation
of coal blocks - Held: It cannot be said that auction is best
D way to select private parties under Art. 39 (b).
Art. 73 - Executive power of Union - Held: Executive
instructions can fill up the gaps not covered by statutory
provisions but the same cannot be in derogation of the
E statutory provisions.
Seventh Schedule - List I, Entry 54 - List II, Entry 23 -
Regulation o~ mines and mineral development - Held:
Requisite declarations made in s.2 of 'Mines and Mineral
F (Development and Regulation) Act and s.1-A of CMN Act,
have the effect of taking out regulation and development of
coal mines from Entry 23 of List II of Seventh Schedule.
G
MINES AND MINERALS (DEVELOPMENT AND
REGULATION) ACT, 1957:
s. 2 of 1957 ACt rlw s. 1-A of CM Act - Allocation of coal
H
446
MANOHAR LAL SHARMA v. PRINCIPAL SECRETARY
44 7
blocks - Held: The exercise undertaken by Central A
Government in a/locating coal blocks or selection of
beneficiaries between 1993 and 31.3.2011 is not traceable
either to 1957 Act or CMN Act - Allocation of coal blocks
made on the basis of recommendations of Screening
B
Committee as a/so by way of Government dispensation route
(Ministry of Coal) is arbitrary and illegal - The practice and
procedure followed by Central Government is clearly
inconsistent with law already enacted and rules framed - c
Executive instructions cannot be in derogation of statutory
provisions -- Coal Mines (Nationalisation) Act, 1973 - s. 1-A
- Constitution of India, 1950 - Art. 73 - Public Interest
Litigation.
COAL MINES (NATIONALISATION) ACT, 1973:
D
s. 3 (3) (a) (iii) - 'Company' - Held: The expression 'a
company' occurring in s. 3 (3) (a) (iii) does not cover
"consortium of companies" or "formulation of groups" or E
"common pool" - The procedure followed by Screening
Committee and finally by issuing allocation letters to one
leader company with obligation to share associate's share of
coal to associate company at a price determinable by
F
Government is in contravention to s. 3 (3) (A) (iii) -
Recommendation of block~ jointly in favour of 2-3 companies
is a/so in contravention of CMN Act.
s. 3 (3) (a) (iii) - Expression 'engaged in' - Held: Means
G
that the company that was applying for coal blocks must have
set up an iron and steel/power/cement plant and be engaged
in the respective production - The prospective engagement
H
448
SUPREME COURT REPORTS
[2014] 8 S.C.R.
A by a private company in production of steel, power or cement
would not entitle such company to carry out coal mining
operation.
ss. 3 (4), 4, 5, 6 and 7 - Expression 'Government
B company or a corporation owned, managed or controlled by
the Central Government - Held: Means Government of India
Public Undertaking - It does not include State Government
Public Sector Undertaking - Thus, commercial mining cannot
C be carried by State Government or State PSU, which became
entitled only to obtain sub-lease of reserves of coal in isolated
small pockets under clauses (i) and (ii) of proviso to s. 3 (3)
(c).
D
INTERPRETATION OF STATUTES:
Interpretation to statute received from contemporary
authority - Held: Is not binding upon courts and may have to
E be disregarded if it is clearly wrong.
In the instant writ petitions filed in public interest, the
allocation of coal blocks for the period 1993 to 2010 made
by the Central Government through the Screening
F Committee route as well as the Government dispensation
route was challenged as illegal and unconstitutional.
Disposing of the writ petitions, the Court
G
HELD: 1. It cannot be said that auction is the best
H
way to select private parties as per Art. 39(b) of the
Constitution. [para 99] [516-G]
Natural Resources Allocation, In re, Special Reference
MANOHAR LAL SHARMA v. PRINCIPAL SECRETARY
449
No. 1 of 2012, 2012(9) SCR 311= (2012) 10 SCC 1; Goa
A
Foundation v. Union of India and Others (2014) 6 SCC 590 -
relied on.
Centre for Public Interest l..itigation

## Text

_Characters 0–39,708 of 276,669. This is a partial read: ask again with offset=39708 for what follows._

A
B
c
[2014] 8 S.C.R. 446
MANOHAR LAL SHARMA
v.
THE PRINCIPAL SECRETARY & ORS.
(Writ Petition (Crl.) 120 of 2012)
AUGUST 25, 2014.
[R.M. LODHA, CJI MADAN, B. LOKUR AND KURIAN
JOSEPH, JJ.]
CONSTITUTION OF /NOIA,
1~50:
Art. 39 (b) - Material resources of community- Allocation
of coal blocks - Held: It cannot be said that auction is best
D way to select private parties under Art. 39 (b).
Art. 73 - Executive power of Union - Held: Executive
instructions can fill up the gaps not covered by statutory
provisions but the same cannot be in derogation of the
E statutory provisions.
Seventh Schedule - List I, Entry 54 - List II, Entry 23 -
Regulation o~ mines and mineral development - Held:
Requisite declarations made in s.2 of 'Mines and Mineral
F (Development and Regulation) Act and s.1-A of CMN Act,
have the effect of taking out regulation and development of
coal mines from Entry 23 of List II of Seventh Schedule.
G
MINES AND MINERALS (DEVELOPMENT AND
REGULATION) ACT, 1957:
s. 2 of 1957 ACt rlw s. 1-A of CM Act - Allocation of coal
H
446
MANOHAR LAL SHARMA v. PRINCIPAL SECRETARY
44 7
blocks - Held: The exercise undertaken by Central A
Government in a/locating coal blocks or selection of
beneficiaries between 1993 and 31.3.2011 is not traceable
either to 1957 Act or CMN Act - Allocation of coal blocks
made on the basis of recommendations of Screening
B
Committee as a/so by way of Government dispensation route
(Ministry of Coal) is arbitrary and illegal - The practice and
procedure followed by Central Government is clearly
inconsistent with law already enacted and rules framed - c
Executive instructions cannot be in derogation of statutory
provisions -- Coal Mines (Nationalisation) Act, 1973 - s. 1-A
- Constitution of India, 1950 - Art. 73 - Public Interest
Litigation.
COAL MINES (NATIONALISATION) ACT, 1973:
D
s. 3 (3) (a) (iii) - 'Company' - Held: The expression 'a
company' occurring in s. 3 (3) (a) (iii) does not cover
"consortium of companies" or "formulation of groups" or E
"common pool" - The procedure followed by Screening
Committee and finally by issuing allocation letters to one
leader company with obligation to share associate's share of
coal to associate company at a price determinable by
F
Government is in contravention to s. 3 (3) (A) (iii) -
Recommendation of block~ jointly in favour of 2-3 companies
is a/so in contravention of CMN Act.
s. 3 (3) (a) (iii) - Expression 'engaged in' - Held: Means
G
that the company that was applying for coal blocks must have
set up an iron and steel/power/cement plant and be engaged
in the respective production - The prospective engagement
H
448
SUPREME COURT REPORTS
[2014] 8 S.C.R.
A by a private company in production of steel, power or cement
would not entitle such company to carry out coal mining
operation.
ss. 3 (4), 4, 5, 6 and 7 - Expression 'Government
B company or a corporation owned, managed or controlled by
the Central Government - Held: Means Government of India
Public Undertaking - It does not include State Government
Public Sector Undertaking - Thus, commercial mining cannot
C be carried by State Government or State PSU, which became
entitled only to obtain sub-lease of reserves of coal in isolated
small pockets under clauses (i) and (ii) of proviso to s. 3 (3)
(c).
D
INTERPRETATION OF STATUTES:
Interpretation to statute received from contemporary
authority - Held: Is not binding upon courts and may have to
E be disregarded if it is clearly wrong.
In the instant writ petitions filed in public interest, the
allocation of coal blocks for the period 1993 to 2010 made
by the Central Government through the Screening
F Committee route as well as the Government dispensation
route was challenged as illegal and unconstitutional.
Disposing of the writ petitions, the Court
G
HELD: 1. It cannot be said that auction is the best
H
way to select private parties as per Art. 39(b) of the
Constitution. [para 99] [516-G]
Natural Resources Allocation, In re, Special Reference
MANOHAR LAL SHARMA v. PRINCIPAL SECRETARY
449
No. 1 of 2012, 2012(9) SCR 311= (2012) 10 SCC 1; Goa
A
Foundation v. Union of India and Others (2014) 6 SCC 590 -
relied on.
Centre for Public Interest l..itigation & Ors. v. Union of B
India &.Ors. 2012 (3) SCR 147 = (2012) 3 SCC 1; R.K. Garg
vs. Union of India & Ors. 1982(1) SCR'947 = (1981) 4 SCC
675; D.K. Trivedi vs. State of Gujarat 1986 SCR 479 = 986
Suppl. SCC 20; Kasturi Lal Lakshmi Reddy & Ors. v. State
of J&K & Anr. (1980) 4 SCC 1; Sachidanand Pandey & Anr.
C
v. State of West Bengal & )Ors. (1987) 2 SCC 295; Haji T.M.
Hassan Rawther v. Kera/a Financial Corporation; (1988) 1
SCC 166; M.P. Oil Extraction & Anr. v. State of M.P. & Ors.;
(1997) 7 SCC 592; Netai Bag & Ors. v. State of West Bengal
D
& Ors.; (2000) 8 SCC 262; Villianur /yarkkai Padukappu
Maiyam v. Union of India & Ors. 2009 (9) SCR 225 = (2009)
7 sec 561- referred to.
1.2. By virtue of the two declarations -s.2 of the Mines
E
and Minerals (Development and Regulation) Act, 1957
('1957 Act') and 1A of the Coal Mines (Nationalisation)
Act, 1973 (CMN Act) -- the States have lost their
jurisdiction to legislate to the extent to which the Union
F
had taken over control, regulation and development of
coal mines as manifested by the two enactments. Thus,
the requisite declarations have the effect of taking out
regulation and development of coal mines from Entry 23 · G
of List II of Seventh Schedule to the Constitution of India.
[para 51] [481-A-B, E]
Baijnath Kadio v. State of Bihar 1970 (2) SCR 100 =
H
450
SUPREME COURT REPORTS
[2014) 8 S.C.R.
A (1969) 3 SCC 838; Hingir-Rampur Coal Co. Ltd. v. State of
Orissa (1961) 2 SCR 537 =AIR 1961 SC 459; State of Orissa
v. M.A. Tulloch and Co. (1964) 4 SCR 461 =AIR 1964 SC
1284; Sandur Manganese and Iron Ores Ltd. v. State of
B Kamataka 2010 (11) SCR 240 = (2010) 13 SCC 1; State of
Assam v. Om Prakash Mehta (1973) 1 SCC 584; Orissa
Cement Ltd. v. State of Orissa 1991 (2) SCR 105 =1991
Supp. (1) SCC 430; Monnet /spat and Energy Ltd. v. Union
C of India and Ors. 2012 (7) SCR 644 = (2012) 11 SCC 1 -
referred to.
1.3. Power to regulate assumes the continued
existence of that which is to be regulated and it includes
D the authority to do all things which are necessary for the
doing of that which is authorized including whatever is
necessarily incidental to and consequential upon it, but
this incidental power cannot be read to empower the
E Central Government to allocate the coal blocks which is
neither contemplated by the CMN Act nor by the 1957
Act. It is so because where a statute requires to do a
certain thing in a certain way, the thing must be done in
that way or not at all. Other methods of performance are.
F necessarily forbidden. Allocation letter issued ~y the
Central Government is not the procedure which regulates
the exercise under r.22 of the Mineral Concession Rules,
1960. The source of power of the Central Government in
G allocation of coal blocks is dependant upon whether such
power exists in law or not. But once the letter allocating
a coal block is issued by the Central Government, the
statutory role of the State Government under the 1957
H Act to recommend or not to· recommend to the Central
MANOHAR LAL SHARMA v. PRINCIPAL SECRETARY
451
Government grant of prospecting licence or mining lease
A
for the coal mines, is reduced to completion of
processual formalities only. The allocation of coal block
by the Central Government results in the selection of
beneficiary which entitles the beneficiary to get the
8
prospecting licence and/or mining lease from the State
Government. Obviously, allocation of a coal block
amounts to grant of largesse. [para 58,59, 66 and 70] [485B-C, F-H; 486-A-B; 488-C-D; 494-D-E]
Nazir Ahmad v. King Emperor (1935-36) 63 IA 372 -
referred to.
1.4. This Court is of the opinion that nothing should
c
be read in the two Acts, namely CMN Act and the 1957
D
Act, which results in- destruction of the policy, purposeand scheme of the two Acts. It is not right to suggest that
by virtue of declaration u/s 1A of the CMN Act, the power
of the State u/s 10(3) of the 1957 Act has become
E
unavailable. [para 63] [489-D-E]
Tara Prasad Singh and others v. Union of India and
others 1980 (3) SCR 1042 = (1980) 4 sec 179 - relied on.
1.5. This Court holds that the exercise undertaken by
the Central Government in allocating the coal blocks or,
F
in other words, the selection of beneficiaries, is not
traceable either to the 1957 Act or the CMN Act. No such
G
legislative policy (allocation of coal blocks by the Central
Government) is discernible from these two enactments.
[para 65] [490-C-D]
H
452
SUPREME COURT REPORTS
[2014] 8 S.C.R.
A
1.6. Insofar as Art. 73 of the Constitution is
concerned, the executive power of the Union extends to
the matters with respect to which Parliament has power
to make laws and the executive instructions can fill up
8 the gaps not covered by statutory provisions but the
executive instructions cannot be in derogation of the
statutory prpvisions. The practice and procedure for
allocation of coal blocks by the Central Government
through administrative route is clearly inconsistent with
C the law already enacted or the rules framed. [para 65]
[490-D-F]
1. 7. An interpretation to the statute received from
0 contemporary authority is not binding upon the courts
and may have to be disregarded if such interpretation by
the contemporary authority is clearly wrong. The process
evolved by the Central. Government for allocation of coal
blocks for captive use has significantly and effectively
E reversed the scheme provided in the 1957 Act inasmuch
as in most of the cases the applications have been made
directly to the Central Government. [para 68] [492-F-G]
F
G
H
Desh Bandhu Gupta and Co. v.Delhi Stock Exchange
Association Ltd.
1979 (3) SCR 373 = (1979) 4 SCC 565;
Baleshwar Bagarti v. Bhagirathi Dass ILR 35 Calcutta 701;
Mathura Mohan Saha v. Ram Kumar Saha ILR 43 Calcutta
790 - referred to.
2.1. The expression 'a company' occurring in s.3
(3)(a)(iii) of the CMN Act does not cover "consortium of
companies" or "formulation of groups" or "common
MANOHAR LAL SHARMA v. PRINCIPAL SECRETARY
453
pool" CMN Act places embargo on granting the leases
A
for winning or mining coal to persons other than those
mentioned in s.3(3)(a)(iii). The decision of the Screening
Committee to recommend allocation of coal blocks to
consortium of companies or formulation of groups or
B
common pool and the procedure followed by it and finally
issuing allocation letters to one leader company is in
contravention of s.3(3)(a)(iii) of the CMN Act. The
recommendation for allocation of blocks jointly in favour
C
of two or three companies are in contravention to the
.J
CMN Act. Joint venture arrangement with ineligible firms
is also impermissible. [para 138, 143 and 155] [544-G-H;
545-A-B; 557-A; 580-B]
2.2. The expression "engaged in" occurring in
s.3(3)(a)(iii) means that the company that was applying for
the coal block must have set up an iron and steel plant,
power plant or cement plant and be engaged in the
production of steel, power or cement. The prospective
engagement by a private company in the production of
steel, power or cement would not entitle such private
company to carry out coal mining operation. Most of the
companies, which have been allocated coal blocks, were
not engaged in the production of steel, power or cement
at the time of allocation. Thus, the requirement of end-use
project, as per s.3(3) of CMN Act, was not met at the time
of allocation. [para 151] [574-F-H; 575-A]
2.3. As regards the legality of the allocations made
to the State/State PSUs through the Screening Committee
route as well as Government dispensation route,
the
D
E
F
G
H
454
SUPREME COURT REPORTS
[2014] 8 S.C.R.
A expression "Government company or a corporation
owned, managed or controlled by the Central
Government" occurring in s. 3(3)(a)(i) means Government
of India Public Undertaking. It does not include State
B Government Public Sector Undertaking. This is fortified
by s.3(4), s.4 and ss.5, 6 and 7. Thus, commercial mining
cannot be carried on by the State Government or the
State PSUs; they became entitled only to obtain subC lease of reserves of coal in isolated small pockets under
clauses (i) and (ii) of proviso to s.3(3)(c). The "isolated
small pockets" are those which are away from the main
coalfields and have limited known reserves which are not
·sufficient for scientific and economic development in a
D coordinated and integrated manner and the coal
produced from such areas would mainly be utilized for
local consumption without 'transportation by railways.
Therefore, allocation of coal blocks to the State PSUs
E which ultimately on getting mining leases may enable
them to win or mine coal commercially is clearly in breach
of the provisions of the CMN Act. [para 150, 153 and 153]
[575-D-E; 576-H; 577-A-C, E-F; 579-C-D]
F
2.4. The entire allocation of coal block as per
recommendations made by the Screening Committee
from 14.07.1993 in 36 meetings and the allocation through
the Government dispensation route suffers from the vice
G of arbitrariness and legal flaws. 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
H unfair distribution of the national wealth. Common good
MANOHAR LAL SHARMA v. PRINCIPAL SECRETARY
455
and public interest have, thus, suffered heavily. Therefore,
A
the allocation of coal blocks based on the
recommendations made in all the 36 meetings of the
Screening Committee is illegal. [para 154] [579-D-E, F-G]
3. It is clarified that no challenge was laid before in
respect of blocks where competitive bidding was held for
B
the lowest tariff for power for Ultra Mega Power Projects
(UMPPs) and the same was stated to be in accord with
the opinion given in Natural Resources Allocation
C
Reference and the benefit of the coal block is said to have
passed on to the public. However, it has been pointed out
that in some cases the Government has allowed
diversion of coal from UMPP to other end uses i.e. for o
commercial exploitation. Having regard to this, it is
directed that the coal blocks allocated for UMPP would
only be used for UMPP and no diversion of coal for
commercial exploitation would be permitted. [para 158]
[580-H; 581-A-C]
E
Case Law Reference:
2012 (7) SCR 644
referred to
para 49
F
1970 (2) SCR 100
referred to
para 50
(1961) 2 SCR 537
referred to
para 50
(1964) 4 SCR 461
referred to
para 50
2010 (11) SCR 240
referred to
para 53
G
(1973) 1 sec 584
referred to
para 54
1991 (2) SCR 105
referred to
para 56
(1935-36) 63 IA 372
relied on
para 59
H
456
SUPREME COURT REPORTS
(2014] 8 S.C.R.
A
1980 (3) SCR 1042
relied on
para 63
1979 (3) SCR 373
referred to
para 67
ILR 35 Calcutta 701
referred to
para 67
B
ILR 43 Calcutta 790
referred to
para 67
2012 (3) SCR 147
referred to
para 83
2012 (9) SCR 311
relied on
para 83
c
(1980) 4 sec 1
referred to
para ,84
(1987) 2 sec 295
referred to
para 84
(1988) 1 sec 166
referred to
para 86
(1997) 1 sec 592
referred to
para 87'"
D
(2000) 8 sec 262
referred to
para 88
2009 (9) SCR 225
referred to
para 89
1982 (1) SCR 947
referred to
para 95
E
1986 SCR 479
referred to
para 95
(2014) 6 sec 590
relied on
para 99
CRIMINAL ORIGINAL JURISDICTION : Writ Petition
F (Criminal) No. 120 of 2012.
WITH
W.P. (C) Nos. 463 and 515 of 2012
G
W.P. (C) No. 283 of 2013.
Ranjit Kumar, SG., Maninder Singh ASG., K.H.
Deshpande, Amrendra Sharan, H.N. Salve, Vivek Tankha,
H Suman, Vipin K. Saxena, Prasant Bhushan, Pranav Sachdeva,
MANOHAR LAL SHARMA v. PRINCIPAL SECRETARY
457
Satyajit A. Desai, Anagha S. Desai, Swetab Kumar, Jyoti
A
Mendiratta, Arijit Prasad, Satya Siddiqui, Sarfr()j A. Siddiqui,
S.K. Mishra, Anil Katiyar, D.S. Mahra, Amit Anand Tiwari
Sanchit Guru, Mahesh Agarwal, Neena Nagpal, E.C. Agrawala,
Asha Gopalan Nair, Ramesh Babu M.R., Anip Sachthey,
Tapesh K. Singh, Mohd. Waquas, D. Mahesh Babu, Amjid
B
Maqbool, Sanjay Kharde, A.P. Mayee,, Prasanto Chander Sen,
Sayuj Kumar Banerjee, C.D. Singh, Kirti Renu Mishra, Anip
Sachthey, · Shagun Matta, Saakar Sardana, Rishabti Sancheti,
Mishra Saurabh, Vanshaje Shukla, A.N. Singh, Mamta Saxena,
Milind Kumar, Gaurav Jeneja (For Khaitan & Co.), Aparna Bhat, c
Braj Kishore Mishra, Kaimini Jaiswal, Manohar Lal Sharma
Petitioner-In-Person for the appearing parties.
The Judgment of the Court was ~elivered by
R,M. LODHA, CJI. 1. Coal is king and paramount Lord
D
of industry is an old saying in the industrial world. Industrial
greatness has been built up on coal by many countries. In India,
coal is the most important indigenous energy resol:!rce and
remains the dominant fuel for power g·eneration and many
industrial applications. A number of major industrial sectors
E
including iron and steel production depend on coal as a source
of energy. The cement industry is also a major coal user. Coal's
potential as a feedstock for producing liquid transport fuels is
huge in India. Coal can help significant economic growth. India's
energy future and. prosperity are integrally dependant upon
F
mining arid using its most abundant, affordable.and dependant
energy supply - which is coal. Coal is extremely important
elemerrt in the industrial life of developing India. In power, iron
and steel, coal is used as an input and in cement, coal is used
.both as fuel and an input. It is no exaggeration that coal is
G
regarded by many as the black diamond.
2. Being such a significant, valuable and important natural
resource, the allocation of coal blocks for the period 1993 to
201 O is the subje9t matter of this'group of writ petitions filed in
H
458
SUPREME COURT" REPORTS
[2014] 8 S.C.R.
A
the nature of Public Interest Litigation, principally one by
Manohar Lal Sharma and the other by the Cammon Cause. The
allocation of coal blocks made during the above period by the
Central Government, according to petitioners, is illegal and
B
unconstitutional inter alia on the following grounds:
(a) Non-compliance of the mandatory legal procedure
under the Mines and Minerals (Development and Regulation)
Act, 1957 (for short, '1957 Act').
(b) Breach of Section 3("3)(a)(iii) of the Coal Mines
C (Nationalisation) Act, 1973 (for short, 'CMN Act').
(c) Violation of the principle of Trusteeship of natural
resources by gifting away precious resources as largesse.
0
(d) Arbitrariness, lack of transparency, lack-of objectivity
and non-application of mind; and
E
(e) Allotment .tainted with ma/a fides and corruption and
made in favour of ineligible companies tainted with ma/a fides
and corruption.
3. The first of these writ petitions was filed by Manohar Lal
Sharma. When that writ petition was listed for preliminary
hearing on 14.09.2012, the Court issued notice to Union of
India and directed it to file counter affidavit through Secretary,
F Ministry of Coal dealing with the following aspects:
(i) The details of guidelines framed by the Central
Government for allocation of subject coal blocks.
(ii) The process adopted for allocation of subject coal
G blocks.
H
(iii) Whether the guidelines contain inbuilt mechanism to
ensure that allocation does not lead to distribution of largesse I
unfairly in the hands of few private companies?
MANOHARLAL SHARMA v. PRINCIPAL SECRETARY
459
[RM. LODHA, CJI.]
(iv) Whether the guidelines were strictly followed and
A
whether by allocation of the subject coal blocks, the objectives
of the policy have been realised?
(v) What were the reasons for not following the policy of
competitive biddin~ adopted by the Government of India way
B
back in 2004 for allocation of coal blocks?
(vi) What steps have been taken or are proposed to be
taken against the allottees who have not adhered to the terms
of allotment or breached the terms thereof?
4. Another PIL came to be filed by Common Cause after
the above order was passed. PIL by Common Cause came
c
up for preliminary hearing on 19.11.2012. Since, certain
additional issues were raised and additional reliefs were also
made in the PIL by Common Cause, this Court issued notice
D
in that matter as well on 19.11.2012.
5. Principally, two prayers have been made in these
matters, first, for quashing the entire allocation of coal blocks
made to private companies by the Central Government
between 1993 and 2012 and second, a court monitored
E
investigation by the Central Bureau of Investigation (CBI) and
Enforcement Directorate (ED) or by a Special Investigation
Team (SIT) into the entire allocation of coal blocks by the
Central Government made between the above period covering
all aspects.
F
6. The present consideration of the matter is confined to
the first prayer, i.e., for quashing the allocation of coal blocks
to private companies made by the Central Government
between the above period. At the outset, therefore, it is clarified
G
that consideration of the present matter shall not be construed,
in any manner, as touching directly or indirectly upon the
investigation being conducted by CBI and ED into the allocation
of coal blocks.
H
460
SUPREME COURT REPORTS
[2014] 8 S.C.R.
A
7. The first counter affidavit was filed by the Central
Government on 22.01.2013 running into eleven volumes and
2607 pages. Thereafter, further/additional counter affidavit was
filed by the Central Government. However, when the matters
were listed on 10.07.2013, learned Attorney GeneraLsubmitted
B that in the counter affidavits filed so far, the Union of India had
focused on the six queries raised by the Court on 14.09.2012
in the writ petition filed by Manohar Lal Sharma. He sought
some time to enable the Central Government to file appropriate
counter affidavit justifying allocation of coal blocks. Thereafter,
c further/additional counter affidavits have also been filed by the
Central Government.
8. On 10.09.2013, the arguments with regard to challenge
to allocation of coal blocks commenced which continued on
11.09.2013, 12.09.2013, 17.09.2013, 18.09.2013, 24.09.2013,
D 25.09.2013 and 26.09.2013. On 26.09.2013, Attorney General
in the course of his arguments submitted that allocation letter
.
...
by the Central Government was only a first step towards
obtaining mining lease and that, by itself, did not confer any
right on the allottee to work mines. He submitted that at1the
E best, letter of allocation was a letter of intent and issuance of
such allocation letter in no way impinges the rights of the State
Governments under the 1957 Act. In light of the submissions
of the learned Attorney General on 26.09.2013, we wanted to
know from the counsel for the petitioners whether concerned
F State Governments should be asked to explain their position
in the matter to which Mr. Manohar Lal Sharma, petitioner-inperson and Mr. Prashant Bhushan agreed and, accordingly, the
Court issued notice to the States of Jharkhand, Chhattisgarh,
Odisha, Maharashtra, Andhra Pradesh, Madhya Pradesh and
G West Bengal as the subject coal blocks, for which the allocation
is in issue, were located in these States. The Court sought the
views of the above States on the following:
H
(i) How did the State Government understand the allocation ·
of coal blocks by the Central Government?
MANOHAR l:AL SHARMA v. PRINCIPAL SECRETARY
461
[R.M. LODHA, CJl.]
(ii) What was the" role of the State Government in the
A
allocation of coal blocks ?
I
(iii) What was the role of the State Government in the
subseq!Jent steps having regard to the provisions of the 1957
Act?
(iv) The details of the agreements entered into by the State
Public Sector Undertakings, which were allotted coal blocks,
with private parties for the coal blocks located in the State.
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9. In pursuance of the above, 7 States have filed their
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responses.
10. The arguments re-commenced on 05.12.2013. On that
day, arguments of the States of Jharkhand, Chhattisgarh and
Odisha were concluded and matters were fixed for 08.01.2014.
0
On 08.01.2014, the arguments on behalf of the States of
Maharashtra, Andhra Pradesh, Madhya Pradesh and West
Bengal were concluded and the matters were fixed for
09.01.2014. On that day, arguments of learned Attorney
General were concluded.
11. Three Associations, viz., Coal Producers Association,
Sponge Iron Manufacturers Association and Independent
Power Producers Association of India have made applications
for their intervention stating that these associations represented
large number of allottees who have been allocated subject coal
blocks. Accordingly, Mr. K.K. Venugopal, learned senior
counsel was heard for Coal Producers Association and Mr.
Harish N. Salve, learned senior counsel was heard on behalf
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of the Sponge Iron Manufacturers Association and Independent
Power Producers Association of India. They commenced their
G
arguments on 09.01.2014, which continued on 15.01.2014 and
concluded on 16.01.2014. The arguments in rejoinder by Mr.
Manohar Lal Sharma, petitioner-in-person and Mr. Prashant
Bhushal'), learned counsel for Common Cause were also
concluded on that day. The arguments of Mr. Sanjay Parikh,
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[2014] 8 S.C.R.
A who had made an application for intervention on behalf of Mr.
Sudeep Shrivastav were also heard and concluded. The
judgment was reserved on that day.
12. It is appropriate that we first notice the statutory
8
framework relevant for the issues under consideration. The
Mines and Minerals (Development and Regulation) Act, 1948
(for short, '1948 Act') was enacted to provide for the regulation
of mines and oil fields and for the development of the minerals
under entry 36 of the Government of India Act, 1935. It received
the assent of the Governor General on 08.09.1948 and came
C into effect from that date.
•
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13. 1948 Act was repealed by the 1957 Act. The
introduction of the 1957 Act reads:
"In the Seventh Schedule of the Constitution in Union List
entry 54 provides for regulation of mines and minerals
development to the extent to which such regulation and
development under the control of the Union is declared by
Parliament by law to, be expedient in the public interest.
On account of this provision it became imperative to have
a separate legislation. In order to provide for the regulation
of mines and the development of minerals, the Mines and
Minerals (Regulation and Development) Bill was
introduced in the Parliament."
14. 1957 Act has undergone amendments from time to
time. Section 2 of the 1957 Act reads:
"Declaration as to the expediency of Union Control - it is
hereby declared that it is expedient in the· public interest
that the Union should take under its control the regulation
of mines and the development of minerals to the extent
hereinafter provided."
15. Sections 3(a), (c), (d), (e), (f), (g) and (h) define:
"minerals", "mining lease", "mining operations", "minor
H
MANOHAR LAL SHARMA v. PRINCIPAL SECRETARY
463
[R.M. LODHA, CJI.]
minerals", "prescribed", "prospecting licence·, and "prospecting 'A
operations"1, respectively.
16. Section 4 mandates that prospecting or mining
operations shall be under licence or lease. Sub-section (2)
provides that no reconnaissance permit, prospecting licence
or mining lease shall be granted otherwise than in accordance
with the provisions of the Act" and the rules made thereunder.
B
17. Section 5 is a restrictive provision. The provision
mandates that in respect of any mineral specified in the First
Schedule, no reconnaissance permit, prospecting licence or C
mining lease shall be granted except with the previous approyal
. of the Central Government. Coal and Lignite are at item no.1
in Part A under the title "Hydro Carbons/Energy Minerals" in the
First Schedule appended to the 1957 Act.
18. Section 6 provides for maximum area for which a
prospecting licence or mining lease may be granted. Section
7 makes provisions for the periods for-which prospecting
licence may be granted or renewed and Section 8 provides for
periods for which mining leases may be granted or renewed.
Section 10 provides that application for reconnaissance permit,
prospecting licence or mining lease in respect of any land in
1.
(1 "3(a) "minerals" includes all minerals except mineral oils;
(c) "mining lease" means a lease granted for the purpose of undertaking
mining operations, and includes a sub-lease granted for such purpose;
(d) "mining operations" means any operations undertaken for the purpose of
winning any mineral;
D
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(e) "minor minerals" means building stones, gravel, ordinary clay, ordinary
.sand other than sand used for prescribed purposes, and any oiher mineral
which the Central Government may, by notification in the Official Gazette,
G
declare to be a minor mineral;
(f)
"prescribed" means prescribed by rules made under this Act;
(g) "prospecting licence" means a licence granted for the purpose of
undertaking prospecting operations;
(h) "prospecting operations" means any operations undertaken for the purpose
of exploring, locating or proving mineral deposit;"
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[2014) 8 S.C.R.
A which the minerals vest in the Government shall be made to the
State Government concerned, inter alia, it empowers the State
Government concerned to grant or refuse to grant permit,
licence or lease having regard to the provisions of the 1957
Act or the Mineral Concession Rules, 1960 (for short '1960
s Rules').
19. Section 11· provides for preferential right of certain
persons. Sub-.section ( 1) of Section 11 makes a provision that
where a reconnaissance permit or prospecting licence has
been granted in respect of any land, the permit holder or the
C licensee shall have a preferential right for obtaining a
prospecting licence or mining lease, as the case may be, in
respect of that land over any other person. This is, however,
subject to State Government's satisfaction and certain
conditions as provided therein. Sub-section (2) of Section 11
D says that where the State Government does not notify in the
Official Gazette the area for grant of reconnaissance permit or
prospecting licence or mining lease and two or more persons
have applied for a reconnaissance permit, prospecting licence
or a mining lease in respect of any land in such area, the
E applicant whose application was received earlier, shall have a
preferential right to be considered for such grant over the
applicant whose application was received later. This is,
however, subject to provisions of sub-section (1). The first
proviso appended thereto enacts that where an area is
F available for grant of reconnaissance permit, prospecting
licence or mining lease and the State Government has invited
applications by notification in the Official Gazette for grant of
such permit, licence or lease, the applications received during
the period specified in such notification and the applications
G which had been received prior to the publication of such
notification in respect of the lands within such area or had not
been disposed of, shall be deemed to have been received on
the same day for the purpose of assigning priority under subsection (2). The second proviso indicates that where such
H applications are received on the same day, the State
MANOHAR LAL SHARMA v. PRINCIPAL SECRETARY
465
[R.M. LODHA, CJI.]
Government, after taking into consideration the matter specified
A
in sub-section (3), may grant the reconnaissance permit,
prospecting licence or mining lease to one of the applicants
as it may deem fit. Sub-section (3) elaborates the matter
referred to in sub-section (2), namely, (a) any special knowledge
of, experience in reconnaissance operations, prospecting
B
operations or mining operations, possessed by the applicant;
(b) the financial resources of the applicant; (c) the nature and
quality of the technical staff employed or to be employed by the
applicant; (d) the investment which the applicant proposes to
make in the mines and in the industry based on yie minerals; c
and (e) such other matters as may be prescribed.
2-0. Section 13 empowers the Central Government to make
rules in respect of minerals. By virtue of the power conferred
upon the Central Government under Section 13(2), the 1960
Rules have been framed for regulating the grant of, inter alia,
D
mining leases in respect of minerals and for purposes
connected therewith.
21. By virtue of Section 17, the Central Government has
been given special powers to undertake prospecting or mining
E
operations in certain lands. Section 17-A authorises the Central
Government to reserve any area not already held under any
prospecting licence or mining lease with a view to conserve any
mineral and after consultation with the State Government by
notification in the Official Gazette.
F
22. Section 18 indicates that it shall be the duty of the
Central Government to take all such steps as will be necessary
for the conservation and systematic development of minerals
in India and for the protection of the environment by preventing
or controlling any pollution which may be caused by prospecting · G
or mining operations and for such purposes the Central
Government may, by notification in the Official Gazette, make
such rules as it thinks necessary.
23. Section 18Pt empowers the Central Government to
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[2014] 8 S.C.R.
A authorise the Geological Survey of India to carry out necessary
· investigation for the purpose of information with regard to the
availability of any mineral in or under any land in relation to which
any prospecting licence or mining lease has been granted by
a State Government or by any other person. The proviso that
B follows sub-section (1) of Section 18A provides that in cases
of prospecting licences or mining leases granted by a State
Government, no such authorisation shall be made except after
consultation with the State Governm~nt.
24. Section 19 provides that any prospecting licences and
C mining leases granted, renewed or acquired in contravention
of the 1957 Act or any rules or orders made thereunder shall
be void and of no effect.
,
25. The 1960 Rules were framed by the Central
D Government, as noted above, in exercise of the powers
conferred by·Section 13.
26. Chapter IV of 1960 Rules deals with grant of mining
leases in respect of land .in which the minerals vest in the
E Government. Sub-rule (1) of Rule 22 provides that an
application for the grant of a mining lease in respect of land in
which the minerals vest in the Government shall be made to the
State Government in Form I through such officer or authority as
the State Government may specify in this behalf. Sub-rule (3)
F provides for the documents to be annexed with the application
and so also that such application must be accompanied by a
non-refundable fee as prescribed therein. Sub-rule (4) of Rule
22 provides that on receipt of the application for the grant of
mining lease, the State Government shall take decision to grant
precise area and communicate such decision to the applicant.
G The applicant, on receipt of communication from the State
Government of the precise areas to be granted, is required to
submit a mining plan within a period of six months or such other
period as may be allowed by the State Government to the
Central Government for its approval. The applicant is required
H to submit the mining plan duty approved by the Central
MANOHAR LAL SHARMA v. PRINCIPAL SECRETARY
467
[R.M. LODHA, CJI.]
Government or by an officer duly authorized by the Central
A
Government to the State Government to grant mining legse over
that area. Sub-rule (5) of Rule 22 provides the details to be
incorporated in the mining plan.
27. Rule 26 empowers the State Government to refuse to
8
grant or renew mining lease over the whole or part of the area
applied for. But that has to be done after giving an opportunity
of being heard and for reasons to be recorded in writing and
communicated to the applicant.
28. Rule 31 provides for time within which lease is to be
C
executed where an order has been made for grant of such
lease on an application. Rule 34 provides for manner of
exercise of preferential rights for mining lease.
29. Rule 35 provides that where two or more persons have o
applied for a reconnaissance permit or a prospecting licence
or a mining lease in respect of the same land, the State
Government shall, for the purpose of sub-section (2) of Section
11, consider besides the matters mentioned in clauses (a) to
(d) of sub-section (3) of Section 11, the end use of the mineral
E
by the applicant.
30. In short, the 1957 Act provides for general restrictions
on undertaking prospecting and mining operations, the
procedure for obtaining prospecting licences or mining leases
in respect of lands in which the minerals vest in the government,
F
the rule-making power for regulating the grant of prospecting
licences and mining leases, special powers of Central
Government to undertake prospecting or mining operations in
certain cases, and for development of minerals.
31. The Coal Mines (Taking Over of Management) Act, 15
of 1973, (for short, 'Coal Mines Management Act') was passed,
"to provide for the taking over, in the public interest, of the
management of coal mines, pending nationalisation of
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[2014] 8 S.C.R.
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such mines, with a view to ensuring rational and
coordinated development of coal production and for
promoting optimum utilisation of the coal resources
consistent with the growing requirements of the country,
and for matters connected therewith or incidental thereto."
B
32. The Coal Mines Management Act received the assent
of the President on 31.03.1973 but it was made effective from
30.01.1973 except Section 8(2) which came into force at once.
Section 3( 1) provides that on and from the appointed day (that
C is, 31.01.1973) the management of all coal mines shaU vest in
the Central Government. By Section 3(2), the coal mines
specified in the Schedule shall be deemed to be the coal mines
the management of which shall vest in the Central Government
under sub-section (1). Under the proviso to Section 3(2), if, afte~
the appointed day, the existence of any other coal mine comes
D to the knowledge of the Central Government; it shall -by a
notified order make a declaration about the existence of such
mine, upon which the management of such coal mine also vests
in the Central Government and the provisions of the Act
become applicable thereto.
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33. Immediately after the Coal Mines Management Ad, the
Parliament enacted the CMN Act. CMN Act was passed,
"to provide for the acquisition and transfer of the right, title
and interest of the owners in respect of coal mines
specified in the Schedule with a view to reorganising and
reconstructing any such coal mines so as to ensure the
rational, coordinated and scientific development and
utilisation of coal resources consistent with the· growing
requirements of the country, in order that the ownership
and control of such resources are vested in the State and
thereby so distributed as best to subserve the common
good, and for matters connected therewith or incidental
thereto."
34. Section 2(b) of the CMN Act defines a coal mine in
MANOHAR LAL SHARMA v. PRINCIPAL SECRETARY
469
[RM. LODHA, CJI.]
the same manner as the corresponding provision of the Coal
A
Mines Management Act, namely, a mine "in which there exists
one or more seams of coal". Section 3(1) provides that on the
appointed day (i.e., 01.05.1973) the right, title and interest of
the owners in relation to the coal mines specified in the
Schedule shall stand transferred to, and shall vest absolutely
B
in the Central Government free from all encumbrances. Section
4(1) provides that where the rights of an owner under any mining
lease granted, or deemed to have been granted.