The Supreme Court on Thursday questioned the Centre's power to allocate coal blocks to firms, saying it has a lot of "legal explanation" to do as the relevant Act in fact empowers only states to undertake this task.
The top court said despite the fact that the Centre had already allocated more than 200 captive coal blocks to public and private sector companies, it is planning to allocate more. While the Centre allocates the blocks, mining leases are being granted by the concerned states, subject to the condition that Coal Mines (Nationalisation) Act and and Mines and Minerals (Development and Regulation) Act (MMDR)1957 must be complied with.
Comprehensive amendments to the MMDR Act is under Parliament's consideration which, among other things, will do away with the need to obtain prior approval of the Centre, except in the case of coal and atomic minerals for mining rights, even as the licensing and leasing powers are vested with the states.
The apex court said that the Centre cannot undermine the MMDR Act, which has given no power to it to allocate coal block to companies.
A bench of Justices RM Lodha and J Chelameswar asked the government to go through other legislations, particularly the Coal Mines (Nationalisation) Act, to find out whether it is empowered to allocate the resources.
The bench was hearing a PIL filed by advocate ML Sharma and various members of civil society including former CEC N Gopalaswami, ex-Navy chief L Ramdas and former Cabinet secretary TSR Subramanian, seeking a SIT probe into the coal block allocation scam.
Though what the the apex court has said is just an observation, it is still a big setback to the Centre, which is already rattled by the adverse remarks made by the Comptroller and Auditor (CAG) in a recent performance audit of coal blocks. The CAG observed that private companies got undue benefits of R1.85 lakh crore because of a delay in the auction of coal blocks.
“There is absolutely no power given to the Centre under the Mines and Minerals (Development and Regulation) Act, 1957. There is no provision overriding the Act. You require to give a lot of legal explanation,” the court said, adding that “allocation of coal blocks, prima facie, does not seem to be backed by any statutory provision and that surprises us.
The situation raises a few fundamental legal questions right away regarding your (Centre's) authority. If there has been no amendments in the Act, it is doubtful that you can do it through executive decisions.”
Critical of the current policy, the bench said that the government's actions amounted to “putting a cart before the horse” since there was no discretion left with the state governments in the matter of allocation.
“It strikes at the root of all the allocation…Can you override the statutory process by administrative or executive orders? The fundamental question is if there are provisions empowering the government to allocate coal blocks without following the procedure contemplated in the Act,” the bench told the Centre.
Attorney general GE Vahanvati said he does not want to give 'off the cuff' answers to these questions and sought time to go into these issues.
"From your affidavit itself it appears that minerals-and-mining lease has to be executed by the state and not by the Centre. It strikes at the root of all allocations," the bench said.
“As per law, the Centre will do allocation but terms and conditions of allocation have to be in consonance in the Coal Mine Nationalisation Act and the MMDR Act,” said Dilip Kumar Jena, senior consultant and knowledge manager, PWC. “Unless states grant mining leases, allocatee cannot start mining.”