The Supreme Court of India
Criminal/ Civil Original Jurisdiction
Writ Petition (CRL.) No. 120 Of 2012
Manohar Lal Sharma …. Petitioner
Versus
The Principal Secretary & Ors. …. Respondent
Judgement
Date of Judgment: August 25, 2014
Bench: R.M. Lodha, C.J., Madan B. Lokur, J., Kurian Joseph, J.
Petitioner: Manohar Lal Sharma
Respondent: The principal Secretary
Facts of the case
- Manohar Lal Sharma had lodged a public interest litigation (PIL) in the Supreme Court in the year 2012 complaining irregularities in the allocation of coal blocks to private parties. The disbursements were done over the years with the various governments and between the period of 1993 and 2010. Sharma averred that they were arbitrary, illegal and unconstitutional.
- The case was taken to Supreme Court and it ordered the formation of a special committee to investigate the matter. The committee realized that most of the allocations were done without following some system, and most companies submitted fake net worth and experience.
- On the basis of this analysis, it was calculated by the CAG that the loss from such arbitrary allocations was about ₹1.86 lakhs crore which has been lost to the exchequer. On August 25, 2014, the court in a historic judgment quashed all 214 allocations of coal blocks stating that they were arbitrary and illegal.
- According to the observation of the court, the barring process was not proper and the government has not followed the right procedure. The court ordered that the government should take immediate physical possession of the concerned coal blocks and ordered for re auctioning of the coal blocks in a fair and just manner.
- The court also called on the government to look into cases of irregularities as far as the allocations of the jobs are concerned and this surprised people. Discontinuation of the practice of allocating coal block affected the India coal industry in a big way, with many operational businesses among companies recording losses and some operations being disrupted.
- Meantime, prosecutions by the CBI and the ED led to chargesheets and arrests of many people which include politicians and businessmen. The Coalgate Scam raised questions about efficiency, probity and integrity in matter of allocation of natural resources in India and has forced changes in this sector.
Issues Addressed
1. Was the distribution of the coal blocks arbitrary and entrenched in secrecy?
2. To what extent was the process adopted by the government, in the allocation of the coal blocks, transparent and fair?
3. Whether the guidelines laid down for the eligibility criteria for allocation of coal blocks were complied with?
4. Were enterprises less qualified than they portrayed themselves to be when they were being awarded coal block permits?
5. Were the arbitrary allocations a cause of loss to the exchequer?
6. Whether the process of allocation of coal blocks is constitutional or not, whether principles of natural justice and Article 14 of the Constitution of India have been violated or not?
7. Is there any Holding Accountable of the Government and the Officials?
8. To which party and how should the coal blocks be re-allocated to avoid a repeat of the previous mess?
9. If the irregularities have been perpetrated by those charged with their supervision or administration, should they be investigated and prosecuted?
10. What changes are called for to avoid such irregularities in future?
Arguments by Prosecution
1. Arbitrary allocation of coal blocks: The prosecution alleged that the allocation of the coal blocks was done in an arbitrary manner without following a transparent and fair process.
2. Misrepresentation by companies: According to the prosecution, companies gave wrong figures of their net worth, experience and other credentials to get allocation of coal blocks.
3. Undue favor to companies: The prosecution also accused the government officials of biasness in that they awarded some companies’ coal blocks.
4. Loss to the exchequer: The arbitrary allocations, the prosecution said caused severe loss to the exchequer and was approximated to be Rs. 1.86 lakh crores.
5. Criminal conspiracy: The prosecution said that government officials and company representatives acted with the intention to commit crimes of cheating, forgery as well as corruption.
6. Abuse of power: The prosecution accused government officials of abuse of their authority in the allocation of the coal blocks to favored companies.
7. Violations of policies and guidelines: According to the prosecution, the identified allocation process was inadequate in terms of compliance with the set policies and guidelines.
The prosecution since, it had the burden of proof, used documents and witnesses and expert opinions to establish the case. The idea of the prosecution case was that the coal block allocations were unprocedural, unlawful and arbitrary and caused a loss to the central exchequer and unfair gains to the licensees.
Arguments of Respondent
1. Denial of wrongdoing: The accused pled of no being guilty asserting that all the allocations of the coal block were done legally as provided by the law and existing polices.
2. Discretionary power: The defense contended that the government had discretion to allocate the blocks for exploitation and production of coal and therefore the court should not intercede on this policy.
3. No personal gain: The accused argued that they did not benefits out of the allocations and that the determinations were made for the benefit of the public.
4. Followed established procedures: The defense was that the allocation process was done by following protocols and procedures of the organization.
5. No misrepresentation: Most of the accused companies were in a position to refute the charges of having misrepresented their qualifications as well as their net worth.
6. CAG report flawed: The defense pointed out that the compliance audit of the CAG prepared the report pegging the loss at Rs. 1.86 lakh corers. It said the GDP calculation was based on wrong assumptions and benchmarks.
7. Lack of evidence: The defense argued that there was no proof of criminal conspiracy, cheating, corruption and other matters that have been leveled against the accused persons.
8. Government policy decisions: The defense on its part insisted that the court has no business to delve into government policy issues and that the allocations were legally made.
The rationale for the defense plea is to refute all the findings of the prosecution charging that the coal block allocations were unscrupulous and unlawful.
Witnesses
1. Former Coal Secretary, P. C. Parakh: Clarified on the issue of the coal block allocation process and the role of the Prime Minister’s Office.
2. Former Minister of State for Coal, Dasari Narayana Rao: Gave a statement concerning the ministerial decisions on allocations of coal blocks mainly.
3. Government officials: Deliberated on the process of allocation of coal blocks as well as the file notings and correspondence to such allocations.
4. Company representatives: Gave statements of how their companies are participating in the allocation process and any experience with state officials.
5. Whistleblowers: Gave a detailed account of the experiences and information regarding the existence of some hitches in the process of receiving allocations.
6. Expert witnesses: Chaired meetings for the government on monitoring the financial and technicalities involved in allocations of coal blocks and the estimated monetary losses to the exchequer.
7. CBI Investigators: Gave testimonies about their investigation concerning the coal block allocations and the evidence gathered.
8. CAG officials: Explained in details the audit process and the conclusions of the report of the CAG.
Evidences
- CAG Report: According to the Comptroller and Auditor General CAG report, this project is expected to lose Rs. 1.86 lakh crores to the exchequer cause by such arbitrary allocations.
- Company Records: Documents of few companies that were given coal blocks noting that the companies had inflated net worth, experience and credentials.
- Government Files: Letters, memoranda, file documents showing how the funds were gone round, and other related correspondence or papers.
- Witness Testimonies: Affidavits of government officials and company employees, and other participants in the allocations as testified before Parliament.
- Emails and Correspondence: Letters between officials of the state and the management of the company, evidencing partiality and bribery.
- Financial Records: CAG reports of the companies that had been provided with coal blocks, with suspicious transactions and payments.
- Expert Reports: Published articles of professionals such as the mining and the financial gurus that unveiled the process of allocation and quantified the effect on the exchequer.
- Government Policies: This report has revealed some of the government policies and guidelines on Coal Block allocation which was not implemented.
- Court Observations: Some of the points that were raised by the Supreme Court during the hearing of this matter which demonstrated a highly arbitrary and very opaque system of allocation at that time.
Putting together all these evidences, the SC has come to the conclusion that there were a plethora of irregularities and illegality in the process of coal block allocation and thereby quashed all such allotments and offered directions for fresh round of allocations.
Judgement
The Supreme Court quashed 214 coal field let out between 1993 and 2010 saying that the exercise was arbitrary and illegal. They further said that the allocation process was wrong, unlawful and not in compliance with the Rules and Regulations on Fairness and Equity.
The court commented that allocation of the coal blocks was not systematic and transparent hence resulting in favoritism and corruption.
The court endorsed the estimates of the CAG to the effect that the axe had fallen on Rs.1.86 lakh crores to the exchequer due to arbitrary allocations and directed the government to take steps to recover such loss. The court held that the government discretion in the allocation of the coal blocks has been abused leading to favoring certain companies.
The court ordered the government to make a new policy on allocation which includes transparency, fairness and competition in the allocation of coal blocks. The court did not call for the prosecution of those government officials who were involved in the granting of the licenses, it left it to the government to do as it wishes.
The judgment sought to bring back equity in the distribution of the natural resources with the view of benefiting the people.
Charge
- Criminal conspiracy: Criminal conspiracy under Section 120B Indian Penal code against government officials and representatives of the company.
- Cheating: Section 420 of the IPC status against certain individuals of the company for having submitted fake details and fake worth.
- Forgery: Cases of forgery contained under Section 468 of the IPC against the representatives of the company for presenting forged documents.
- Criminal breach of trust: Criminal breach of trust by public servants or by other persons in respect of anything entrusted to them by the government in India according to Section 409 of IPC.
- These charges were filed against several government officials involved in the allocation of the coal blocks and politicians, top executives of the companies, and others.
Author- Himanshi, a student at Khalsa College of Law, Amritsar
