Supreme Court: While elaborating the scope of judicial review, Bench of L. Nageswara Rao, B.R. Gavai and B.V. Nagarathna, JJ., held that,
“It is not for the Court to determine whether a particular policy or a particular decision taken in the fulfilment of that policy is fair.”
Crux of the Matter
Question relating to interpretation of Section 11 of the Coal Mines (Special Provisions) Act, 2015 which was an outcome of the judgment of this Court’s decision in Manohar Lal Sharma v. Principal Secretary, (2014) 9 SCC 516, and ancillary question pertaining to the scope of judicial review of administrative action of the State authority arose for consideration in the instant appeals.
What are the present appeals challenging?
Present appeal challenged the decision of Punjab and Haryana High Court thereby allowing petitions filed by respondent – EMTA Coal Limited and holding that respondent herein will have the first right of refusal in the matter of lending of Mining Lease.
Punjab State Electricity Board (PSEB) now known as Punjab State Power Corporation Limited was proposed to be allotted Captive Coal Mines by the Union of India.
Bids were invited for the purpose of development of Captive Coal Mines and in the said bid, the respondent emerged successful. This resulted in an agreement, thereby creating a Joint Venture Company called Panem Coal Mines Limited.
Further, the said agreement provided the rights for mining of coal from the Coal Mines, transporting and delivery of it, wholly and exclusively to PSEB. Since EMTA being a partnership firm could not have been a shareholder of the Joint Venture Company, a follow up Joint Venture Agreement was entered between PSEB, EMTA and three partners of EMTA, incorporating the same terms and conditions as were found in the earlier agreement.
Later, Union of India allotted a Pachhwara Coal Block in the State of Jharkhand to PSEB.
In August, 2006 a coal purchase agreement was executed between Panem and PSEB, for the purpose of supply and delivery of the coal to power station of PSEB from Pachhwara Coal Block.
In 2007, Mining Lease was issued by the Jharkhand Government in favour of Panem, for mining coal even from the forest areas of the Coal Block.
When did the problem occur?
Manohar Lal Sharma v. Principal Secretary, (2014) 9 SCC 516, Supreme Court held that the entire allocation of Coal Blocks made between 1993 and 2011, except those which were made through competitive bidding, were invalid, unfair arbitrary and violative of Article 14 of the Constitution of India.
Further orders passed in the case of Manohar Lal Sharma v. Principal Secretary, (2014) 9 SCC 614, this Court quashed all Coal Block allocations made by the Central Government between 1993 and 2011.
Court also accepted the submission of the Attorney General that the allottees of the Coal Blocks other than those covered by the judgment and the four Coal Blocks covered by the subsequent order, must pay an amount of Rs 295/ per metric ton of coal extracted as an additional levy.
Further, Centre vide allotment order again allocated Pachhwara Captive Coal Block in favour of PSPCL.
On facing acute shortage of coal for paddy season, PSPCL entered into a transitory agreement and with EMTA later published Notice inviting Global Tender, inviting bids for the appointment of Mine Developer-cum-Operator, for supply of coal.
EMTA in view of the above facts, filed a petition before the Punjab and Haryana High Court challenging the said NIT.
Analysis, Law and Decision
Firstly, the Court referred to Section 11 of the Coal Mines (Special Provisions) Act, 2015.
“11. Discharge or adoption of third party contracts with prior allottees.—
- Notwithstanding anything contained in any other law for the time being in force, a successful bidder or allottee, as the case may be, in respect of Schedule I coal mines, may elect, to adopt and continue such contracts which may be existing with any of the prior allottees in relation to coal mining operations and the same shall constitute a novation for the residual term or residual performance of such contract:
Provided that in such an event, the successful bidder or allottee or the prior allottee shall notify the nominated authority to include the vesting of any contracts adopted by the successful bidder.
- In the event that a successful bidder or allottee elects not to adopt or continue with existing contracts which had been entered into by the prior allottees with third parties, in that case all such contracts which have not been adopted or continued shall cease to be enforceable against the successful bidder or allottee in relation to the Schedule I coal mine and the remedy of such contracting parties shall be against the prior allottees.”
Bench stated that, it is a settled principle of law that when, upon a plain and literal interpretation of the words used in a Statute, the legislative intent could be gathered, it is not permissible to add words to the Statute.
Equally, such an interpretation which would make some terms used in a Statute otiose or meaningless has to be avoided.
In view of the above stated, Bench added that considering Section 62 of the Contract Act, 1872 read with Section 11 of the said Act, it has observed that the parties to a contract may willingly agree to substitute a new contract or to rescind it or alter it.
Observing the above, Court added that the High Court erred in observing that EMTA had a legitimate expectation.
Hence, the High Court’s reasoning was totally wrong.
Bench further opined that High Court’s reasoning that PSCPCL was within its right to reject the arrangement if the performance of EMTA was unsatisfactory or if there was any other factor which the Corporation found relevant enough to discard the arrangement altogether was totally erroneous/
Supreme Court’s observation:
Merely because the Coal Mine Block was allotted to PSPCL, the same could not give any vested right in favour of EMTA, particularly in view of Section 11 of the Act.
High Court erred in forcing PSPCL to continue with the contract with EMTA, though it was not willing to do so.
Whether Section 11 of the said Act mandates the successful allottee to continue with the existing contract?
To the above question, Bench answered saying no.
The contention that order passed by PSPCL in 2018 was in a totally arbitrary and irrational manner was answered by the Court stating that the said order was passed by an authority of the State in exercise of its executive function.
Elaborating the above, Court stated that the scope of judicial review of administrative action has been well crystallised by this Court in Tata Cellular v. Union of India, (1994) 6 SCC 651.
Supreme Court expressed that while exercising powers of judicial review, the Court is not concerned with the ultimate decision but the decision-making process.
What all the Court can enquire in?
Whether a decision making authority has exceeded its powers, committed an error of law or committed breach of principle of natural justice.
Court can also examine whether an authority has reached decision that no reasonable Tribunal would have reached or has abused its powers.
Court will examine whether the decision of an authority is vitiated by illegality, irrationality or procedural impropriety. While examining the question of irrationality, the court will be guided by the principle of Wednesbury.
While applying the Wednesbury principle, the court will examine as to whether the decision of an authority is such that no authority properly directing itself on the relevant law and acting reasonably could have reached it.
Hence, in view of the above discussion, PSPCL’s decision cannot be questioned on the ground of illegality or procedural impropriety.
It was noted that, PSPCL had decided to go in for competitive bidding process for the purpose of eliciting the best operator.
A policy decision to get the best operator at the best price, cannot be said to be a decision which no reasonable person would take in his affairs.
While concluding the Court held the Punjab and Haryana High Court’s decision unsustainable in law and the appeals were allowed. [Punjab and State Power Corporation Ltd. v. EMTA Coal Ltd., 2021 SCC OnLine SC 766, decided on 21-09-2021]
Advocates before the Court:
For the appellant-PSPCL: K.V. Viswanathan, Senior Counsel
A.M. Singhvi, Senior Counsel appearing on behalf of appellant-DBLVPR Consortium
Mukul Rohatgi, Senior Counsel appearing on behalf of respondent-EMTC