The Supreme Court while hearing the coal block allocation scam case on Wednesday warned allottees that they run the risk of losing the allocations if they set up plants without obtaining mining lease and forest and environment clearances by State Governments.
In the case of several coal block allocations made prior to 2006, the Court noticed that allottees began investing in the project without awaiting the time-consuming approval of lease agreements. Finding this situation to be incongruous with the legal position that an allottee had to first secure a mining plan, followed by forest clearance (if the block falls in forest land) and environmental clearance, the bench hearing the case said: “They (companies) must suffer consequences no matter how much investment has been made by them. The alleged illegality cannot be compounded.”
The bench asked Attorney-General GE Vahanvati if the Centre intended to de-allocate the coal blocks in such circumstances. Clarifying its stand, the Centre informed the Court that the situation has to be reviewed on a case-to-case basis. However, he indicated some practical difficulties in de-allocation as the project’s proponents have invested close to 2 lakh crore in setting up of power plants or sponge iron plants.
“All such investments would go down the drain and it cannot be a defence and no law would help them,” said the bench comprising Justices RM lodha, Madan B lokur and Kurian Joseph. It was of the view that any company who invested did so at their own risk as their rights were yet to mature.
States jumped to the defence of the allottees as about 29 such projects, many of which were joint venture partnerships with State Government PSUs were at stake. Madhya Pradesh, represented by senior advocate Mukul Rohatgi told the court that once a person has been earmarked a coal block by the Centre, the process of allocation mechanically follows.
As the environmental and forest clearances usually take four to five years, Rohatgi argued that the balance of convenience lay in setting up the plant. “There are cases where an investor is stuck trying to get forest clearance which takes five years…Ideally, he would like to wait, but in doing so he will lose his allocation.
If not, he loses his investment,” Rohatgi argued, presenting the dichotomy facing coal block beneficiaries. Allocation can be cancelled on grounds of unsatisfactory progress or breach of conditions attached with letter of allocation, the State said. The bench dismissed the argument as “matters of commerce” while maintaining that the allottee must pay for taking the risk. Giving an illustration, the bench explained: “If the area is in forest land, activity is forbidden. Obviously then it (work undertaken) leads to nothing.”
Even on the primacy of the Centre in the allocation process, the SC found the submission of the Centre to be suspect after it found States taking a divergent view to that taken by the Attorney-General who was representing the Centre. For instance, Maharashtra, which is Congress-ruled, submitted that once a coal block was identified for allocation by the Centre, States understood it to be binding on them. The AG had said that the identification of coal block was only the first step as the final approval of mining lease was left to the State under the Mines and Minerals (Development and Regulation) Act.
Andhra Pradesh also took a stand similar to Maharashtra while West Bengal, Madhya Pradesh, Jharkhand, Odisha and Chhattisgarh earlier informed the apex court that they played a small role in the allocation process as it merely followed the Centre’s diktat.