Clubbing or splitting of ‘end uses’ under Section 3(5) of the Coal Mines Second Ordinance, 2014 held, arbitrary

Delhi High Court: The issue in this case was regarding the allotment of coal block allocations and the dispute revolved around Section 3(5) of the Coal Mines Second Ordinance, 2014 that deals with ‘specified end uses’ of the coalmines to be allocated. Section 3(5) reads:

“specified end-use” means any of the following end-uses and the expression “specified end user” shall with its grammatical variations be construed accordingly:

(i) production of iron and steel;

(ii) generation of power including the generation of power for captive use;

(iii) washing of coal obtained from a mine;

(iv) cement;

(v) such other end use as the Central Government, may by notification, specify.

The petitioners were aggrieved on account of an executive order that clubbed specific end uses and organized a cumulative bid for the coal blocks. Resultantly, what originally was an individual and separate bid for every specific end use of coal has now turned into a conjoint bid for three end uses namely (a) iron and steel, (b) generation of power for captive use and (c) cement. The contention of the petitioners is two fold: firstly, the coal block allocations violate Section 3(5) by clubbing or splitting the specified end uses as prescribed and secondly, ‘power’ is itself a specific end use thus, ‘generation of power for captive use’ cannot be split up from it [see Section 3(5)(ii)].

The respondents justified the clubbing of ‘end uses’ of Section 3(5) by showing that this action would lead in more allocation of coal mines. This was demonstrated by the deficiency of coal that stood at 85 million tonnes per annum in 2014 whereas; the government has a desired goal of 300 million tonnes by 2025. The two broad contentions of the respondents were firstly, the petitioners have participated in the process of the tender and have questioned the very same process. Secondly, the judiciary shall not interfere in the realm of contracting power of the Central Government, as there is no judicial scrutiny of an invitation to tender.

The Court dealt with two questions (a) whether the order of clubbing and splitting of end uses is violative of Article 14? And consequently, (b) whether the tender has to be struck down and fresh bids are to be ordered for the allocation of coal blocks?

The Bench comprising Badar Ahmed and Sanjeev Sachdeva, JJ. recorded that the petitioners have shown the clubbing of end uses leads to discrimination because there are specific end uses mentioned in Section 3(5) are deliberate and their dynamics differ in cost, uses, prospective bidders, requirements, etc. More so, the objective is to secure iron and steel, cement and power as end uses whereas if clubbed, captive power plants would lead to production of aluminum (not an end use) over iron and steel. This would be contrary to the Coal Mines Second Ordinance, 2014. Therefore, clubbing or splitting end uses under Section 3(5) would be amounting to arbitrariness, as the clubbing would treat unequals equally. However, the plea that there needs to be a fresh bid for petitioners was turned down because the petitioners had willfully participated in the tender by registering bids and subsequently challenged the terms of that very tender. [Monnet Ispat and Energy Ltd. v. Union of India, 2016 SCC OnLine Del 5456, decided on 5.10.2016]

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