Author: Chinki Gera, Geeta Institute of Law
LinkedIn Profile: https://www.linkedin.com/in/chinki-gera-0109b6325
To the point
The Great Indian Coal Scam popularly known as ‘Coalgate’. The scandal that occurred Between 1993 – 2010, the Indian government’s allocation of 155 coal blocks to both public and private sector companies was carried out without any competitive bidding. This process of awarding these coal blocks without competitive bidding exposes various forms of corruption and favouritism. The Comptroller and Auditor General (CAG) had initially calculated a loss of ₹10.7 lakh crore to the Indian government; however, the estimate was later revised to a loss of ₹1.86 lakh crore, still a substantial loss.
In 2014, the Supreme Court crashed the party it declared each allocation of coal blocks made by the government since 1993 to be arbitrary, illegal and subsequently nullified 214 of the 218 allocations, while allowing four companies that made a promise of power generation the luxury of not returning the remaining blocks with any obligations defined by them. The Court made it clear that the government made allocations illegally or arbitrarily and all affected companies acted on and caused an indefensible loss in public confidence for unwilling to deal transparently or equitably. The companies involved in the scam included various well-established corporate identities: Tata Steel, Hindalco, Jindal Steel, among others. Different companies were implicated to different degrees some were facing legal cases, while others simply had to pay levies to compensate for the coal they extracted. The impacts of the take-off scam include changes to the coal allocation process: competitive bidding was the minimum to restore transparency and equitable distribution for future allocations.
Abstract
India (CAG) estimated that the wrongful allocation of coal blocks to private sector firms had caused a national loss of ₹1.86 lakh crores to the nation exchequer, which raised a public trial and led to regulator action.
In 2014, the Supreme Court of India ruled that the coal block allocations were illegal, and ordered the cancellation of 214 coal blocks. In addition, many individuals have been prosecuted, including a former Union Minister Dilip Ray who was prosecuted based on his cooperation in the allocations of the Brahmadiha coal block.The entirety of the scam reflected an obvious failure of governance, particularly in terms of the transparency, accountability, and responsibility in the public administration. It had also helped to shed light on the reform of resource allocation probably and misuse of economic resources and equitable distribution. The court’s rulings and subsequent sentences sent a strong message against corrupt commercial practice in private sector firms and reinforced the rule of law for a functioning democracy like India.
Use of legal Jargon
The phrase ‘Coalgate’ refers to various alleged crimes that may include conspiracy as defined in Section 120B IPC, cheating as defined in Section 420 IPC and abuse of public office as defined in Section 13(2) (read with Section 13 (1)(d) of the Prevention of Corruption Act.). CBI formed a Special Investigation Team to assist with the inquiry and there resulted in a great many (approx. (100+) FIRs against public servants and private corporations. The supreme court took Suo moto cognisance of the issues, cancelled 214 coal out of 218 coal block allocations and reviewed executive action invoking elements of ‘Judicial Review’. The Supreme Court judgement noted that ‘rule of law’ and ‘ accountability’ are essential elements of a functioning bureaucracy. After these proceedings, trial courts have been able to convict for rescuing of public officials for conspiracy, cheating, forgery and corruption under IPC and Prevention of Corruption Act. These cases evidence that substantive and procedural criminal legislation can be effective in combatting the systemic dimensions of corruption
The proof
The evidence concerning the Coalgate case was initiated with the (CAG) report, which effectively estimated a notional loss of ₹1.86 lakh crore with regard to coal blocks allocated without competitive bidding. The Comptroller and auditor general (CAG) identified 25 discrete companies who had benefitted from this allocation, including: Essar Power, Hindalco, Tata Steel, Tata Power, and Jindal Steel and Power.
Key evidence was provided with witness accounts and documentation in relation to the proceedings. For instance, the prosecution in the proceedings against Prakash Industries Ltd., provided evidence that demonstrated that Prakash Industries misrepresented its capacity which consequently impacted their entitlement to be allocated the Vijay Central Coal Block. Gautam Kumar Basak, former Deputy Secretary in the Ministry of Steel, was convicted for corruption under the Prevention of Corruption Act. Furthermore, the order of the Supreme Court vacating and cancelling 214 coal out of 218 coal block allocations, ultimately constituted judicial adjudication of the illegality of the allocations. To sum up, these types of evidence substantially demonstrated evidence of corruption and misconduct in the coal allocation process.
Case Laws
1. Dilip Ray v. State of Jharkhand
In this case, Dilip Ray, a former Union Minister, he was convicted for misusing his position and for his role in the allocation of the Brahmadiha coal block in 1999. The court found that Mr. Ray had allocated the coal block and misused his position as a Member of Parliament.
2. JIPL v. State of Jharkhand
In this case, Jharkhand Ispat Pvt. Ltd (JIPL), its directors were found guilty for conviction of conspiracy and cheating relating to the allocation of the North Dhadu coal block. The court found the direction of the JIPL used false, fabricated and concealed material facts in order to acquire the allocation.
Conclusion
The Great Indian Coal Scam, while an example of the fragility of India’s resource allocation machinery and the potential systemic corruption, became a very costly affair reflected in the CAG’s estimates of a loss of ₹1.86 lakh crore and the disorganisation it revealed and how it affected the country is staggering. Judicial measures, notably the Supreme Court’s served an important role to address the irregularities. The cancellation of 214 coal blocks, convictions for violations indicated a seriousness of the judiciary to adhere to the rule of the law and act for the public good and accountability. However, the loss to the state revealed limits to reforms. Competitive bidding was a step toward transparency, but issues such as delays in auction of blocks and underutilization of allocated blocks persisted. Continuous monitoring and consolidation of institutional frameworks will be essential to limit prospects of revisiting Coalgate or state’s incapacity to act in the interest of the public good.
In conclusion, the Coalgate scam demonstrated much more than a monumental failure of governance but it catalysed various reforms that hope to address aspects of resource allocation that embed as much transparency and accountability as possible. The lessons learned from the scam continue to serve as compass and perform coordinating function for policy choices in India’s pursuing of an agenda to readdress corruption, formally enshrining reasonable development.
FAQS
1. Which authority was responsible for allocating coal blocks?
The Ministry of Coal (Ministry), as a part of various governments over the period of 1993 -2010, released coal blocks using the screening committee process instead of competitive bidding.
2. What role did CAG have in exposing the scam?
The Comptroller and Auditor General (CAG) provided a report in 2012 that brought the issues forward and challenged the lack of transparency and fairness in the allocations, as well as estimating the enormous loss of revenue in terms of an undervaluation of highly valuable coal resources.
3. What reforms followed the scam?
After the scandal, the government of India introduced auction-based systems to allocate coal blocks through new laws including the Coal Mines (Special Provisions) Act, 2015.
4. What was the impact of the scam in India from economic and political perspectives?
The scam damaged public confidence, affected investor sentiment, produced legal uncertainty in the coal and power sectors and became a political issue that influenced elections and policy reform.
5. What was the estimated loss due to the scam?
Supporters and experts associated with the Comptroller and Auditor General (CAG) estimated a notional loss of ₹1.86 lakh crore to the public exchequer due to these allocations.
