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TMI Blog2006 (12) TMI 516X X X X Extracts X X X X X X X X Extracts X X X X ..... oke and smokeless coal as also other small units have to buy coal at prohibitive rates from traders . The methodology for allocation of coal to a bidder of E-Auction is, thus, inequitable, irrational and fortuitous. We have noticed that having regard to the intervention of the Central Government, the coal companies deviated from the said scheme and considered even the non-core sector consumers to be a separate class; as they not only became entitled to take part in the E- Auction along with traders but also were sought to be assured of supply of coal having regard to their own requirements as regard both quality and quantity subject, of course, to their paying the price at the average weighted price. The stand taken by the coal companies before the Calcutta High Court as also before this Court assumes significance only in that context. However, now it appears that the coal companies have given a complete go- bye to the original scheme of E-Auction inasmuch as not only the traders or the non-core sector consumers but also core sector consumers had also been allowed to participate therein. A consumer of coal falling in any category as also a person who intends to purchase coal for hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions thereof. The Central Government, therefore, may think it fit to widen the definition of coal so as to include the smokeless coal in exercise of its power under the Essential Commodities Act. We may notice in ONGC (supra), this Court has held that slurries are a part of coal and is governed by the provisions of the Mines and Minerals (Regulation and Development) Act. Such being the wider definition of coal, we fail to see any reason as to why proper measure cannot be taken by the Union of India to have a complete control there over. Any strict mechanism to find out the genuine consumers would go a long way in taking preventive measures and dealing with coal by unscrupulous persons for unauthorized purposes. Those who do so, should be dealt with stringently but the same would not mean that the genuine consumers should suffer for want of coal. We are of the opinion that it may not be difficult to find out as to who the genuine consumers are. So far as owners of the hard coke ovens are concerned, they are members of the association and their identity can easily be verified. However, discussions made hereinbefore should not be taken to lay down a law that the Central Governm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mohanprasad Meharia, Seeraj Bagga, Sureshta Bagga, Bijan Kumar Ghosh, Sukhendu Sekhar Ray, Rajiv Mehta, B. Aggarwal, Ahanthem Henry, T. Anil Kumar, Manish Shanker Verma, Anupam Lal Das, Arjun Vinod Bobde, Hrishikesh Baruah, Jyoti Mendiratta, Manish Pitale, Chander Shekhar Ashri, Rajesh Singh, Gouri Karuna Das, Anu Gupta, Kamal Kant Tripathi, Rudreshwar Singh, Tapesh Kumar Singh, Manish Kumar Saran, Meena Agarwal, R.C. Mishra, Anil Kumar Sinha, Gaurav Agarwal, S. Chandra Shekhar, Kanchan Kaur Dhodi, Manoj Sharma, P.K. Jain, Surya Kant, K.S. Bhati, Aishwarya Bhati, Anip Sachthey, Ajit Kumar Sinha, Krishan Mahajan, Satyakam, Navin Prakash, V.K. Verma, Chetan Sharma, Rajiv Nanda, Ramni Taneja, Balu G., Nishant Gupta, Vani Mehta, Vimla Sinha, Gopal Singh, Shriniwas R. Khalap, Mohit Paul, C. Mukund, Ashok Kumar Jain, Animesh Saha, Bijoy Kumar Jain, Pankaj Jain, B.B. Singh, Manik Karanjawala, N.D.B. Raju, Bharathi R., N. Ganapathy, Guntur Prabhakar and Rajender Kumar, Advs. JUDGMENT S.B. SINHA, J. Introduction: 1. Leave granted in all the special leave petitions. 2. The validity and/or legality of a scheme framed by the Coal India Limited for sale of coal by Electronic Auction (E-Auc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l a regulated commodity. 1945 Order made provisions for regulating production, supply and distribution of coal. It dealt with class of coal, grade of coal, size of coal and price of coal. Clause (3) empowered the Central Government to prescribe classes, sizes, grades, etc. into which coal may be categorized as also the specifications thereof on the said basis. Whereas coking coal having inherent property of swelling on heating is essentially used for metallurgical purposes in the steel plant for production of steel; all other categories of coal are non-coking coals. Non-coking coal is used as a raw material in manufacturing processes such as cement, graphite, soft coke, domestic fuel and for production of various products such as glass, food processing, ceramics, chemicals, re-rolling mills, salt glazed stoneware pipes, refractory used for steel making etc. The different sizes of the coal are inter alia known as 'Run of the Mine', 'Steam' and 'Slack'. The price of coal depends not only with reference to the grade but size as also the seams situated in the coking coal mines or coal mines, as the case may be. Clauses 12B and 12E of the 1945 Order were, howeve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red coking coal mines and coal mines but also have been carrying on business in coal. Indisputably, they enjoy a monopoly character. It is also not in dispute that there had been huge demand of coal both from the core sector as also non-core sector consumers. The Central Government, however, issued appropriate notifications whereby and whereunder the said coal mines both in terms of the 1972 Act as also the 1973 Act instead of continuing to vest in the Central Government vested in the Government companies specified therein who are parties herein. Linkage: 7. After the nationalization of coal, consumers were categorized in two main sectors, namely, core sector and non-core sector. Linkage system admittedly at the first stage had been evolved for core sector. In the year 1993, a Standing Linkage Committee was set up for supply of coal to thermal power stations. Linkage was extended also to cement in the said year in terms of Resolution No. CI-21(20/73 dated 19.11.1973. The scheme for linkage of coal started in the year 1973 in terms of the resolution dated 6.1.1973, whereby, inter alia, a Standing Linkage Committee consisting of the members specified therein, was set up, the releva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e sector and non-core sector. The core sector consumers include the vital sectors of national economy related to infrastructural development as for example, power, steel, cement, defence, fertilizer, railways, paper, aluminium, export, central public sector undertaking etc. All other remaining industries/consumers constituted non-core sector. A table showing comparison in growth in production and dispatches to different industrial sectors which shows a phenomenal growth in production of coal and also commensurate growth in coal dispatch particularly in the power sector is as under: COMPARATIVE COAL DISPATCHES FROM COAL MINES AUTHORITY LTD. IN 1974-75 AND COAL INDIA LTD. IN 2004-05 PRODUCTION (Figs. in Million tones) Item From CMAL in 1974-75 From CIL in 2004-05 Coal Production 78.99 323.88 Coal Dispatch 72.83 319.12 SECTOR-WISE BREAK-UP OF COAL DISPATCH Item Quantity %age Quantity % age Power*20.16 27.66 249.26 78.11 Steel CPP 1.22 1.67 6.427 2.01 Steel plants 8.71 11.95 5.654 1.77 Loco 12.82 17.59 0.00 0.00 Cement (including Cement CPP) 3.48 4.77 10.043 3.15 Fertilizer 0.95 1.30 2.150 0.67 Export 0.528 0.72 0.021 0.01 Paper 1. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ICE MAXIMUM PERMISSIBLE QUANTITY (MPQ)/MONTH However, coal will be supplied by the Linked Coal Company on the basis of annual sponsorship/recommendation from the concerned sponsoring authority. The linkage of coal will be subject to the conditions as mentioned below/overleaf. Yours faithfully, Dy. Chief Sales Manager (Linkage), Coal India Ltd. (HQ) Some of the conditions of such linkage which are relevant for our purpose are as under: 1. "Linkage" is a clearance to the linked coal company for supplying coal to the unit, subject to "availability" and in accordance with the "directives", if any from time to time, of the appropriate competent authority regulating "disposal of stock of coal". Linkage does not establish any right for the linked unit to claim coal from any particular coal company/coalfield/source/grade etc. 4. Coal allotted against the linkage is for actual consumption in the linked unit and cannot be delivered or sold to others except with prior written consent of Government of India/Coal India Limited. 9. "Linkage" is subject to cancellation in case of: (a) Any violation of the terms and conditions c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its linkage advice letter. Thereafter, in absence of any ceiling limit imposed by the railways for movement, a tendency was noticed on the part of the State sponsoring authorities to issue sponsorship indiscriminately without due regard to availability of coal, transport capacity and actual consumption. In view thereof as also due to insufficient attention to details, linkages used to be granted indiscriminately with total linked quantity being several times higher than the actual availability. In order to minimize the mismatch between the linked demand and availability of coal, steps were taken in terms of the Linkage Conditions and the linked quantity was reduced in respect of the linked non-core sector consumers who were not drawing full linked quantity of coal. Since quantity commitments were subject to availability of the total quantity for which linkages got granted, it exceeded the availability manifold. For example, during the year 2000, total sponsorship received for industries alone worked out to be about 6000 wagons per day of which the share of UP alone was about 5300 wagons per day. On the other hand, the total wagon loading for non core sector by Coal India Ltd. was f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the total quantity of coal offered to non-core sector remained variable and supply of coal was within the range of 45% to 75% of the demand made by the concerned industries. Such allotment of coal used to be month wise. However, the said linkage system was necessarily dependent upon the sponsorship by the sponsoring authorities. In para 27 of its counter affidavit the Union of India states: That the quantity of coal supply was, initially, determined based on the sponsorship by the sponsoring authorities. Sponsorship was mandatory for the movement of coal by Rail. The Preferential Traffic Schedule provided the list of the authorities/agencies who were authorized to sponsor. The said sponsoring agency would recommend the quantity requirement of the consumer and also the size of coal and mode of supply. Based on such sponsorship and considering other factors including the availability of coal, the quantity of coal to be supplied to a particular non-core sector consumer was determined. Even after the sponsorship, and link capacity of the consumer, railway had its own ceiling limits which were with a view to provide sufficient checks and balances in the determination of the quantit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... meeting taken by the Minister for Coal and Mines on 21.3.2002 regarding new coal sale policy of Coal India Ltd. was forwarded, amongst others, to the Chairman-cum- Managing Director of the subsidiary companies of Coal India Ltd. along with the Director (Marketing), Coal India Ltd. It was noted in the minutes that the total number of linked units were 7015 out of which linkage of 2217 had been snapped. That the total number of units having valid linkage as on date was 4798 out of which 3317 units had been verified either by State Government/sponsoring agencies or by internal vigilance units of coal companies. While 3064 were reported to be existing, 253 units were found to be either non-existing or non-operating. It was further noticed that during coal company wise review, it was noted that in cases where vigilance departments of coal companies had verified the units, about 40-50% of the units were found to be either non-existing or non-operational. On the other hand, the State Government/sponsoring agencies had reported more than 90% of the verified units to be in existence. The coal companies were advised to get the verification done through vigilance.... 15. With a view to cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it was impermissible for one purchaser to purchase coal for more than 33% from each colliery. The linked consumers or the sponsored consumers, were not entitled to take part in such open sales schemes. 17. The coal companies contend that the schemes of linkage, sponsorship or OSS were part of the policy decisions which were taken by them from time to time with a view to meet the exigencies of the situation which were prevailing then. Keeping in view, however, the fact that the supply could not meet the demand which to a great extent was artificial and man-made, a new policy decision was required to be evolved so as to meet the new situation; particularly when measures taken to prevent black marketing of coal by procuring coal in excess of their requirements and/or the units being non-existent as also by the traders, did not fructify. E-Auction: 18. A new scheme known as E-Auction was made purportedly to meet the liberalization policy of the Central Government in regard to import of coal and opening of private coal mines and to provide pragmatic and transparent system of distribution of coal. 4.8 million tones of coal were offered to the non-core sector in 2003-04. The quantity e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Consumers through E-auction on trial basis going by succeeds of this trial. It is being considered to extend this scheme in other coal companies of CIL also. In a phased manner, to cover all the consumers of non-core Sector, including non- consumers/traders. The broad benefits and modalities for subsequent trial run for sale of coal though E-auction are as under: Benefits: i) Elimination of differences between linked and non-linked consumers as directed by Calcutta High Court. xxx xxx xxx The concept of sale of coal through E-Auction was introduced on trial basis by BCCL in October 2004. E-Auction was also introduced by North Eastern Coal Limited. As an interim measure, a decision was taken to sell about ten millions tones of coal through E-Auction in 2005-06, in various subsidiaries of Coal India Limited. The quantity which was to be put on E-Auction and the price thereof was to be in the following order: a) 10 million tones only released through e-auction; b) About 12 million tones released to linked consumers of non-core sector through MPQ concept at e-auction price; c) 2 million tones to NCCF, 0.5 million tones to Govt. of UP both at average e-auction price. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (a Government of India Undertaking) and M/s Metal Junction Services (a joint venture of Steel Authority of India Ltd. and Tata Iron & Steel Co. Ltd.), specialized in conducting electronic auction have been engaged to conduct sale of coal through e-auction by the subsidiary producing companies of Coal India Ltd. Under the scheme, the interested buyers are required to initially register themselves with the abovesaid auctioneering agencies and are also published for information to all concerned, well in advance. The information displayed in advance about an auction includes details of the source, quantity, grade, size, mode of transport as well as the floor price. E- auctions are conducted for each of the Subsidiary Companies separately under the scheme. Each subsidiary company conducts on an average four auctions every month except NCL which conducts at least two auctions in a month. A chart setting out details of e- auction conducted in the month of January, 2006 would show that till 19th of January, 2006, 26 auctions have already been conducted. The buyers are required to deposit requisite Earnest Money Deposit (hereinafter referred to as EMD) for coal they desire to bid with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for supply of coal to NCCF and the State Government nominated agencies to be at a floor price i.e. 20% above the fixed notified price of a particular grade instead of weighted average E- Auction price. The quantity of supply of coal to the State Government nominated agencies was further increased by one MT for 2005-06. This Court's attention has, however, been drawn to various cash memos. issued by the NCCF, from a perusal whereof it would appear that the NCCF instead of supplying coal only to a cross-section of tiny and small consumers e.g. potters, blacksmith, tea stall vendors, who require a very small quantity of coal for running their business, had been selling coal even to linked consumers. The Chairman of Coal India Ltd., however, vide letter dated 30.09.2005 addressed to the Chief Secretaries of various State Governments sought to define the tiny and small consumers stating that those whose consumption was less than 500 tonnes per year would come within the purview thereof. Admittedly, small consumers were to be charged not exceeding 105% of the base price at which coal had been received from Coal India Ltd and its subsidiaries. By the said letter, it was directed that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... For the purpose of working out the feasibility of sale of coal at E-Auction, a committee was directed to be constituted. Civil Appeal Nos. 2972 to 2974 of 2005 have been filed by Coal India Limited against the said judgment. When the scheme of E-Auction was introduced in Western Coal Field Limited, its authority was questioned before the Madhya Pradesh High Court by way of a writ petition. By a judgment and order dated 29.09.2005 the said High Court, however, held the said scheme to be legal and valid. Special Leave Petition (Civil) No. 24034 of 2005 has been filed there against. Before the Calcutta High Court, one Bijoy Kumar Poddar filed a writ petition questioning the validity of the sponsorship scheme. The said writ petition has been allowed. Findings of the Gauhati High Court.: 24. Before the Gauhati High Court, as noticed hereinbefore, the traders filed a writ petition. Five writ petitions were filed by traders and SSI owners, inter alia, questioning a notice of E-Auction which was for sale of coal loaded in rakes. One rake consists of 41 wagons having about 60 MT of coal in each wagon. By reason of the said notice, it was directed that if the bid was for one rake only, fl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Constitution of India. Coal India Limited filed a SLP before this Court on 30th July, 2004 (Civil Appeal No. 5547 of 2004) inter alia taking a categorical stand before this Court that the linked consumers form a separate class. On the said averments, it obtained an order of stay of the operation of the judgment of the Calcutta High Court on 8.10.2004. However, despite the same, they implemented the judgment of the Calcutta High Court by taking a conscious decision in that behalf within a short span of time. Coal India Limited and other coal companies have filed several transfer applications which having been allowed, the writ petitions have been transferred to this Court. Proceedings before this Court : 27. Civil Appeal Nos. 2972 and 2975 of 2005 arises out of a judgment of the Gauhati High Court dated 08.04.2005. Questioning the judgment and order of the Madhya Pradesh High Court dated 29.09.2005, S.L.P. (Civil) No. 24134 of 2005 has been filed. Coal India Ltd. has filed Civil Appeal No. 5547 of 2004 which arises out of the judgment of the Calcutta High Court in Bijoy Kumar Poddar's case. In the meantime, writ petitions were filed in several High Court including Calcut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nated against in regard to fixation of price of coal as a result whereof the small scale industries may either purchase coal through E-Auction or purchase coal from NCCF, which would give rise to dual pricing and, thus, the same is unreasonable; (iv) The State agencies like BISCAUMAN and Jharkhand State Mineral Development Corporation also having been brought at par with the linked consumers could not have been given priority for the purpose of trading in coal; (v) The power to fix prices for the essential commodities must maintain an inbuilt character having regard to the fact that the coal companies have been given the monopoly status in terms of Clause 6 of Article 19 of the Constitution of India; (vi) The price through E-Auction being artificially inflated one, the same has caused uncertainty as a result whereof the manufacturers cannot fix price for their products; (vii) The Central Government and/or coal companies having themselves made a policy decision that the price of coal should not be varied at least for one year, the scheme of E-Auction being inconsistent therewith, must be held to be unreasonable; (vii) Fixation of arbitrary price of coal which being a scare ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble and only because some units are not genuine consumers, the same would not mean that all the consumers would be deprived of a valuable national assets. Hard Coke : 33. Some of the appellants before us are manufacturers of hard coke. It is not in dispute that hard coke although does not come within the purview of 'core sector', for the purpose of distribution of coal, recommendations have been made by the Ministry of Steel that it should be included in the said category. The said move, however, has been opposed by the Ministry of Coal and Energy. We would, therefore, proceed on the basis that hard coke comes within the purview of non-core sector. 34. Mr. Dipankar Gupta, the learned Senior Counsel appearing on behalf of the Hard Coke Oven Plants, submitted : (i) that as the hard coke manufactured by the hard coke owners having been recommended to be brought within the purview of core sector by the Ministry of Steel, certain attributes to their being belonging to a special category within the non-core sector must be held to have been made out and, thus, all the 106 hard coke ovens manufacturing hard coke form a special class and in that view of the matter their right to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of E-Auction; the same is sustainable in law; (iii) Taking recourse to E-Auction by way of an experiment was made to overcome a difficult situation; (iv) As there had been no complaint about functioning of the said scheme in view of the fact that 12000 out 16000 non-consumers are satisfied therewith; no grievance can be raised that by reason thereof the coal companies had taken recourse to any arbitrary measure; (v) E-Auction had to be introduced in view of the fact that linkage and sponsorship as also open sales schemes were found to be defective and furthermore in view of the fact that both linkage and sponsorship schemes had come to an end; (vi) The Central Government took recourse to the deregulation of coal as it was found that by taking recourse to the linkage, obstructions have been created to free and fair distribution of coal as also the movement thereof. Moreover each consumer must be given equal access thereto; (vii) Only because the linked consumers would have to pay a higher price, the same by itself cannot be said to be unfair and unreasonable in view of the fact that even in terms of the linked scheme the price of coal was not fixed nor any representatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nion of India and Ors. AIR1998SC2750 , this Court had the occasion to consider the matter relating to fixation of price of coal wherein in terms of the Colliery Control Order, 1945, the quotas thereof were allotted by the Central Government to the consumers. A Government company having regard to the constitutional scheme, therefore, cannot forsake its public duty [See Hindustan Zinc Ltd. etc. v. Andhra Pradesh State Electricity Board and Ors. [1991]2SCR643 . It can neither have a private thrust nor aggrandizement of the wealth at the cost of the common man. 40. In Kerala State Electricity Board v. M/s. S.N. Govinda Prabhu Bros. and Ors. etc. [1986]3SCR628 , the law was laid down in the following terms: ...It is a public utility monopoly undertaking which may not be driven by pure profit motive - not that profit is to be shunned but that service and not profit should inform its actions. It is not the function of the Board to so manage its affairs as to earn the maximum profit; even as a private corporate body may be inspired to earn huge profits with a view to paying large dividends to its shareholders. But it does not follow that the Board may not and need not earn profits for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Ltd. (supra)] However, dual pricing having regard to a distinct classification between a core sector and non-core sector is permissible. [See Pallavi Refractories (supra)] The State, however, while distributing its largess at a price, if involved in distribution of a commodity, which would attract the provision of Article 39(b) of the Constitution of India, would stand on a different footing. 42. 'Business' is a word of wide import. It, in the context of application of a statute governing a monopoly concern and also with an essential commodity, would indisputably stand on a different footing from the business concern or a private person. The Central Government as also the coal companies having regard to the provisions of the Nationalisation Acts must be visualized not as profit earning concerns but as an extended arm of a welfare State. They are expected to harmonize the business potential of a country to benefit the common man. The power of the Central Government to carry on trade on business activities emanates from the constitutional provisions contained in Article 298 of the Constitution of India. The coal companies, therefore, were under a constitutional obligation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, it cannot be said that the public enterprise has acted beyond its authority.... 45. In Dr. P. Nalla Thampy Thera v. Union of India [1984]1SCR709 , this Court observed: 25. We have said earlier that the Railways are a public utility service run on monopoly basis. Since it is a public utility, there is no justification to run it merely as a commercial venture with a view to making profits. We do not know at any rate it does not fall for consideration here - if a monopoly based public utility should ever be a commercial venture geared to support the general revenue of the State but there is not an iota of hesitation in us to say that the common man's mode of transport closely connected with the free play of his fundamental right should not be.... 46. In M/s S.N. Govinda Prabhu and Bros. (supra), this Court observed that profit is not to be shunned but that service and not profit should inform actions of a Board. It was further observed: ...We do not think that either the character of Electricity Board as a Public Utility Undertaking or the provisions of the Electricity Supply Act preclude the Board from managing its affairs on sound commercial lines though not with a prof ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... covers not only cash resources but even ability to borrow (credit resources). Its meaning given in Black's Legal Dictionary is: Money or any property that can be converted into supplies; means of raising money or supplies; capabilities of raising wealth or to supply necessary wants; available means or capability of any kind. And material resources of the community in the context of re-ordering the national economy embraces all the national wealth, not merely natural resources, all the private and public sources of meeting material needs, not merely public possessions. Everything of value or use in the material world is material resource and the individual being a member of the community his resources are part of those of the community.... [Also see Samatha v. State of A.P. AIR1997SC3297 ] Coal, being such a vital product to the Indian industries and the common man, nationalization of coal was necessary for realization of the ideals contained in Article 39(b) of the Constitution. 49. In Sanjeev Coke Manufacturing Company etc. v. Bharat Coking Coal Limited and Anr. etc. [1983]1SCR1000 , this Court observed: ...Coal is, of course, one of the most important known sources ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rective Principles of State Policy as envisaged under Part IV of the Constitution of India, the same is considered to be a reasonable action. 50. In M.R.F. Ltd. v. Inspector Kerala Govt. and Ors. (1999)ILLJ289SC , a question arose as to whether the rights of industrial concerns under Article 19(1)(g) are said to be affected having regard to the provisions of the Kerala Industrial Establishments (National and Festival Holidays) (Amendment) Act, 1990 whereby the number of national holidays were increased. In view of Article 43 of the Constitution of India, the restriction imposed were held to be reasonable restrictions stating: The plea under Article 14 also cannot be entertained. The decision by legislative amendment to raise the national and festival holidays is based upon relevant material considered by the Government, including the fact that the holidays allowed by the Central Government and other public sector undertakings were far greater in number than those prescribed under the Act. As pointed out earlier, the Act is a social legislation to give effect to the Directive Principles of State Policy contained in Article 43 of the Constitution. The law so made cannot be said to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Article 39(b) in the following terms: 35. The Nationalisation Amendment Act needs no preamble, especially when it is backed up by a Statement of Objects and Reasons. Generally, an Amendment Act is passed in order to advance the purpose of the parent Act as reflected in the preamble to that Act. Acquisition of coal mines, be it remembered, is not an end in itself but is only a means to an end. The fundamental object of the Nationalisation Act as also of the Nationalisation Amendment Act is to bring into existence a state of affairs which will be congenial for regulating mines and for mineral development. It may be true that prices are required to be fixed having regard to the market forces. Demand and supply is a relevant factor as regards fixation of the price. In a market governed by free economy where competition is the buzzword, producers may fix their own price. It is, however, difficult to give effect to the constitutional obligations of a State and the principles leading to a free economy at the same time. A level playing field is the key factor for invoking the new economy. Such a level playing field can be achieved when there are a number of suppliers and when there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... role in the society. It is expected of them that they would act fairly and reasonably in all fields; even as a landlord of a tenanted premises or in any any other capacity. [See Baburao Shantaram More v. The Bombay Housing Board and Anr. [1954]1SCR572 at 577, Dwarkadas Marfatia & Sons v. Board of Trustees of the Port of Bombay [1989]2SCR751 and Pathumma and Ors. v. State of Kerala and Ors. [1978]2SCR537 ] E-Auction is not a mode to fix price. It is only a mode to obtain maximum price. In other words, deriving the optimum benefit by sale of coal is the goal. While doing so State does not have to follow the principles of fixation of price. It is not required to apply its mind as to its effect. It treats coal like any other commodity. It treats itself like a private trader. A distinction must be borne in mind when a State intends to part with a privilege or a largess as a competitor in the market and when it is expected to fulfill its constitutional goal enshrined under Article 39(b) of the Constitution. Monopoly 55. Coal companies are monopolies within the meaning of the provisions of the Nationalization Act. They would be deemed to be monopolies within the provisions of Clause (6) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce payable by other non-core linked consumers and traders having regard to the flexibility of the price in E- Auction, would be a sum of Rs. 1660/- to Rs. 1900/- per metric tonne. 57. The linked consumers constitute about 1% of the total production. The linkage system so far as non-core sector consumers are concerned, has been prevailing since 1973. The beneficiaries of the system primarily are manufacturers of hard coke, smokeless fuel and other products for which the coal is essential raw material. The Open Sales Scheme which was meant for traders, in view of the original policy decision of the coal companies, E- Auction was to be applied to the traders for whom the Open Sales Scheme was applicable. It is, however, not in dispute that having regard to the directions issued by the Central Government to the coal companies, all consumers irrespective of the fact that whether they are linked consumers of core sector or non-core sector, were entitled to take part in E-Auction. Ordinarily traders who are outside the scheme of linkage are entitled to take part in E-Auction. E-Auction was resorted to allegedly on the ground that various method tried by the coal companies including the O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a is to make the said essential commodity available at a fair price. However, for the purpose of this case, it may not be necessary for us to dilate on the principle of fixation of price, of coal as an essential commodity or otherwise. 59. Before us the Learned Counsel for the parties relied upon various decisions of this Court as regard the mode and manner in which deliberations were made on fixation of price of essential commodities over which the monopoly right is exercised. We have also been taken through a recent decision of this Court in Pallavi Refractories (supra). By reason of E- Auction no price is fixed as it would vary from bids to bids. The coal is sold through E-Auction at least twice a month. There will be various places where E-Auction would be conducted simultaneously. In E-Auction, the quantity and quality of coal depending upon its grade, size, colliery from which the same has been extracted, are specified. In such a situation invariably the price for same quality of coal would greatly vary as the bidders would bid having regard to their own requirement. By allowing repeated bids, a person who may be requiring the essential commodity would not be able to prove t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pply of coal to non-core sector linked consumers would continue on the basis of MPQ. However, the price for such supplies is to be computed on the basis of average E-Auction, stating: The coal supplied to non-core linked consumer on the basis of MPQ would continue. However, the price for such supplies would be computed on the basis of average e-auction rate during the month. Sale of two million tones of coal to small consumers through NCCP would also continue. However, the price for coal supplies to NCCP would also be governed on the basis of e-auction prices, as mentioned above. Advantages or Disadvantages of E-Auction: 62. We may at this juncture notice the purported advantages of E- Auction as submitted on behalf of the Union of India. i) The system of E-Auction is simple, easily accessible, transparent also offers equal opportunity to all coal customers/intending buyers. ii) Any citizen of India can participate and purchase coal through E-Auction by sitting in his home/office from any part of the country. iii) A bidder need not require to meet any formalities such as obtaining licence/quota/sponsorship/linkage etc. and is not required to meet any such formalities. iv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Thus, even the linked consumers of core and non- core sectors have been participating therein. Participation of core sector in E-Auction is destructive of its own policy as would appear from the letter of the Ministry of Coal dated 08.04.2005 and, thus, it cannot be justified on the ground of profiteering wherewith the survival of SSI units is involved. 63. Although claim has been made by the companies that more and more persons are taking part therein, it is difficult for us to accept that out of 16000 consumers 12000 have taken part; as E-Auctions are more frequently done, the possibility of the same persons taking part again and again cannot be ruled out. It is difficult to comprehend the stand of the Union of India that E- Auction is being taken recourse to by more and more persons and, if that be so, there was no reason as to why the price of coal by E-Auction has declined. 64. Before us a chart has been filed with a view of show that after introduction of the scheme of E-Auction, supply of coal to many of the coke ovens has decreased affecting their ultimate production. Apprehensions have been raised that ultimately many of the units may have to be closed. We think that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wever, the advantages of E-Auction per se or disadvantages thereof may not be decisive as this Court is concerned with the constitutionality thereof. It has not been denied or disputed that by reason of E-Auction price of coal is not fixed. The concept of price fixation is that all persons who are in requirement of the commodity should know the basis or criteria thereof. If a price is fixed, they would be able to lay down their own business policy in such a manner so that they can have a level playing field in the market of competition and such competition is not only between the persons whose end-project is similar or otherwise based on coal but who produce other products not based completely on coal. Variability in the price of coal would affect all who have to depend on coal e.g. we may notice that hard coke is considered to be vital in the manufacturing process of steel. If the price of coal is not fixed, the price of hard coke cannot be fixed, which may give rise to uncertainty in the price of steel or smokeless coal which caters to the needs of the small consumers both for domestic use also for use in the small hotels and/or use in rural areas. It was, therefore, necessary th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has empowered the Government to see that there is no leakage in its revenue. It is for the Government to decide whether the price offered in an auction sale is adequate. While accepting or rejecting a bid, it is merely performing an executive function. The correctness of its conclusion is not open to judicial review. We fail to see how the plea of contravention of Article 19(1)(g) or Article 14 can arise in these cases. The Government's power to sell the exclusive privileges set out in Section 22 was not denied. It was also not disputed that those privileges could be sold by public auction. Public auctions are held to get the best possible price. Once these aspects are recognised, there appears to be no basis for contending that the owner of the privileges in question who had offered to sell them cannot decline to accept the highest bid if he thinks that the price offered is inadequate. There is no concluded contract till the bid is accepted. Before there was a concluded contract, it was open to the bidders to withdraw their bids - see Union of India v. Bhimsen Walaiti Ram [1970]2SCR594 . By merely giving bids, the bidders had not acquired any vested rights. The fact that the G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o carry on trade or business in a commodity belonging to the Government. But therein, the court was concerned with liquor which was considered to be res extra commercium. We may, however, notice that this Court in State of Madhya Pradesh v. Nandlal Jaiswal [1987]1SCR1 as also Khoday Distilleries Ltd. and Ors. v. State of Karnataka and Ors. (1995)1SCC574 has clearly held that even in respect of trade of liquor, Article 14 would be applicable. 69. In Ramana Dayaram Shetty v. International Airport of India and Ors. (1979)IILLJ217SC , this Court held: ...the democratic form of Government demands equality and absence of arbitrariness and discrimination in such transactions.... The activities of the Government have a public element and, therefore, there should be fairness and equality. The State need not enter into any contract with anyone, but if it does so, it must do so fairly without discrimination and without unfair procedure". This proposition would hold good in all cases of dealing by the Government with the public, where the interest sought to be protected is a privilege. It must, therefore, be taken to be the law that where the Government is dealing with the public, whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of coal is supported by Sub-section (3) of Section 9 of the MMRD Act, 1957 wherein it was provided that the rate of royalty shall not be revised within three years. [See AIR 1996 SC 2560]. The period of three years has since been altered to a period of four years. Prior thereto a period of five years was fixed therefore. Even the Central Government emphasized the requirement of having a fixed price of coal in a meeting held on 13.10.2001 and took note of the fact that the price increase would cause undue hardship which might be suffered by the small scale industries and which might concern their growth and in that view of the matter, it was decided that the price increase for the non-core sector should not be done more than once in a period of one year. The court while considering such a question cannot also lose sight of the fact that apart from the Essential Commodities Act, 1955, the entire control and regulation of coal has been taken over by the Central Government in terms of Entry 54 of List I as also Entry 52 of List I of the Seventh Schedule of the Constitution of India. In exercise of such power, the Parliament enacted the Industrial (Development and Regulation) Act, 195 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4. It may be true that the linked consumers get two opportunities to procure coal; once by way of E-Auction and again by way of paying the average weighted price; but availability of coal itself is not certain having regard to the fact that admittedly keeping in view the concept of MPQ, they would not get the full supply for their demand. Even otherwise, a distinction should be made between consumers and traders and thus arises the necessity of different price regimes for the consumers as a class as against traders as a different class. The original scheme of E-Auction was meant to be applied only to the linked non-core sector consumers and traders. Thus, thereby the policy that the linked consumers should form a class by themselves was sought to be given a go-bye. We have, however, noticed hereinbefore that having regard to the intervention of the Central Government, the coal companies deviated from the said scheme and considered even the non-core sector consumers to be a separate class; as they not only became entitled to take part in the E- Auction along with traders but also were sought to be assured of supply of coal having regard to their own requirements as regard both quali ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erest of the people. Price fixation of an essential commodity, therefore, is determined on the touchstone of public interest. While doing so the State is expected to follow a rational and fair procedure and for the said purpose may collect data, obtain public opinion, and may appoint an expert committee. 76. In the facts and circumstances of the case, however, the approach of the coal companies, who according to the Union of India had been given a free hand to determine its price for coal, is only earning profit. It has been accepted that three subsidiary companies and Coal India Ltd. who were sick companies, like Bharat Coking Coal Ltd. (BCCL), have started E-Auction. It has succeeded in its attempt to a great extent as the said coal companies are no longer sick companies. They have proceeded only to safeguard their own interests, as dealer and not as a State. Recourse to E-Auction had been taken primarily by way of a profit motive. No public opinion was sought for and no expert committee was appointed. The statutory and constitutional duties had not been kept in view. Conveniently, while making the said policy decision, the coal companies did not remind themselves that as they a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in his mind, or what he intended to do. Public orders made by public authorities are meant to have public effect and are intended to affect the acting and conduct of those to whom they are addressed and must be construed objectively with reference to the language used in the order itself. Yet again in Mohinder Singh Gill this Court observed: The second equally relevant matter is that when a statutory functionary makes an order based on certain grounds, its validity must be judged by the reasons so mentioned and cannot be supplemented by fresh reasons in the shape of affidavit or otherwise. Otherwise, an order bad in the beginning may, by the time it comes to Court on account of a challenge, get validated by additional grounds later brought out. We may here draw attention to the observations of Bose, J. in Gordhandas Bhanji. Referring to Gordhandas Bhanji it was further observed: Orders are not like old wine becoming better as they grow older. In relation to fixation of price or other related matters, the Central Government, therefore, had no say. Under the Colliery Control Order 2000, the power of the Central Government is merely to regulate supply and not to regulate pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... where for Rule 28A in the Sales Tax Rules was introduced. Sales Tax laws enacted by the States contain a provision empowering the State to grant such exemption. The relevant provisions of the Act and the Rules framed thereunder indisputably were made keeping in view the industrial policy of the State. Such industrial policies by way of legislation or otherwise, subject of course to the provisions of the statute have been framed by several other States. 80. In M/s. Motilal Padampat Sugar Mills Co. Ltd. v. State of Uttar Pradesh and Ors. [1979]118ITR326(SC) this Court rejected the plea of the State to the effect that in the absence of any notification issued under Section 4-A of the U.P. Sales Tax Act, the State was entitled to enforce the liability to sales tax imposed on the petitioners thereof under the provisions of the Sales Tax Act and there could be no promissory estoppel against the State so as to inhibit it from formulating and implementing its policy in public interest. The question came up for consideration before this Court in Pournami Oil Mills and Ors. v. State of Kerala and Anr. [1987]165ITR57(SC) wherein it was held: Under the order dated April 11, 1979, new smal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its promise. It was further observed: The next submission of Learned Counsel for the appellants was that the concessions granted by the said order dated 30-6-1969 were of no legal effect as there is no statutory provision under which such concessions could be granted and the order of 30-6-1969 was ultra vires and bad in law. We totally fail to see how an Assistant Commissioner or Deputy Commissioner of Sales Tax who are functionaries of a State can say that a concession granted by the State itself was beyond the powers of the State or how the State can say so either. Moreover, if the said argument of Learned Counsel is correct, the result would be that even the second order of 12-1-1977 would be equally invalid as it also grants concessions by way of refunds, although in a more limited manner and that is not even the case of the appellants. Mangalore Chemicals and Fertilisers Limited v. Deputy Commissioner of Commercial Taxes and Ors. 1993ECR23(SC) is a case where this Court had the occasion to consider as to whether subsequent change in the eligibility criteria can undo the eligibility for the condition stipulated in the earlier notification and answered the same in the negati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n did not in any way go against public interest, nor did it prejudice the statutory duties of the authority. We may, however, notice a recent trend where doctrine of balancing has been advocated. 83. Rowland v. Environmental Agency (2003) EWCA Civ. 1885 involved a part of the Thames river, known as 'Hedsor Water', which the relevant authorities declared open for exercise of public navigation rights. Initially however, the authorities by regular and consistent practice had accepted that such rights did not exist. The Court of Appeal said that although the expectations were legitimate, the action must fail. According to Peter Gibson L.J., the action failed as legitimate expectations could only be granted against lawful claims. Although May L.J., (like Menace L.J.) came to the same conclusion, they refused to accept legal incapacity as an automatic answer against legitimate expectation (amounting to convention right). They sought a kind of a balance where while allowing the Hedsor water to be open to rights of navigation, such use would not be actively encouraged by the authority. It was held that, however, there was no need to restrict such 'balancing' to cases where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompanies would be at liberty to evolve a policy which would meet the requirements of public interest vis-à-vis the interest of consumers of coal. They would be entitled to lay down such norms as may be found fit and proper. They would be entitled to fix appropriate norms therefore. In the event, any industrial unit is found to violate the norms, it should be stringently dealt with. 86. Hard coke plants are also coal mines within the meaning of Colliery Control Order, 2000. Hard coke is coal within the meaning of the provisions thereof. The Central Government, therefore, may think it fit to widen the definition of coal so as to include the smokeless coal in exercise of its power under the Essential Commodities Act. We may notice in ONGC (supra), this Court has held that slurries are a part of coal and is governed by the provisions of the Mines and Minerals (Regulation and Development) Act. Such being the wider definition of coal, we fail to see any reason as to why proper measure cannot be taken by the Union of India to have a complete control there over. Any strict mechanism to find out the genuine consumers would go a long way in taking preventive measures and dealing with ..... X X X X Extracts X X X X X X X X Extracts X X X X
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