Coalgate back to haunt govt: SC talks illegality, not just loss

The Coalgate scam, which further damaged the anti-corruption credentials of the Congress-led UPA last year, is headed for an interesting twist. The allocation of coal blocks by the government, it seems, may not only have been non-transparent, leading to a loss to the exchequer, but also partly illegal.

Thus far, the main bone of contention was whether the Centre allocated coal blocks fairly and transparently - even if they were allotted free, costing the Centre Rs 1,86,000 crore in lost revenues, according to the Comptroller and Auditor General (CAG) last year.[caption id=“attachment_602517” align=“alignleft” width=“380”] Supreme Court of India. Reuters[/caption]

But the Supreme Court, which is currently hearing a bunch of public interest litigations (PILs) seeking cancellation of the coal blocks, sprang a surprise yesterday when it suggested that the allocations may, prima facie, be of doubtful legality.

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Reason: coal is a mineral owned by states, and the whole business of the Centre allocating the blocks without the authority to do so could be unconstitutional.

While the court’s general observations during the hearings do not amount to an actual verdict, they indicate a trend in thinking that could result in the cancellation of all the allocations - unless the states now come up and say they had a say, and it was their decision.

Given that the whole allocation mess is now considered a scam, it is highly unlikely that states will now come out and claim it was all their decision, and hence their scam.

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According to a report in The Indian Express, a bench led by Justices RM Lodha and Jasti Chelameswar, said that the Mines and Minerals (Regulation and Development) Act did not give the Central government any authority to allocate coal blocks. Initially in the NDA regime, and substantially in the UPA regime, 194 coal blocks were allocated free to various parties, including several that were ineligible. Some were allotted through a screening committee set up at the Centre when Manmohan Singh was also coal minister in UPA-1.

“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 have been no amendments in the Act, it is doubtful that you can do it through executive decisions,” Justice RM Lodha told Attorney General GE Vahanvati at a PIL hearing yesterday (24 January).

Lodha is not new to the MMDR Act, having dealt with it extensively in an earlier case involving Monnet Ispat.

How did this legal ambiguity get missed by the centre? The law as it stands now clearly says that coal as a mineral is owned by the states. However, the power of allocation seems to be with the centre. So when the centre approves a coal block allocation, it seems the states just have to comply.

Justice Lodha raises a pertinent point: “The problem is that there is absolutely no power given to the Central government under the (MMDR) Act. The question is if the government’s power of prior approval extends to you the authority to allocate coal blocks by overriding the entire statutory mechanism under the Act. Can you override the statutory process by administrative or executive orders?” the Express quotes the bench as asking.

What the court is asking is this: does the power to allocate mean the Centre automatically gets the right to give away coal blocks without a legal enabling mechanism in place?

The Centre also does not seem to have followed clear procedures while allocating coal blocks. While some were allocated by the coal ministry, others were allocated by a so-called screening committee, whose procedures, CAG said, did not appear transparent.

The CAG report on Coalgate last year said: “There was nothing on record in the said minutes or in other documents on any comparative evaluation of the applicants for a coal block which was relied upon by the screening committee. Minutes of the screening committee did not indicate how each one of the applicants for a particular coal block was evaluated. Thus, a transparent method for allocation of coal blocks was not followed by the screening committee.”

Now, with the Supreme Court looking closely at the allocations, it looks like the actions of the screening committee were not only opaque, but may even have been illegal. The court noted: “Under the Rules of Business, has the screening committee been given any power? If it has not been authorised under the Rules of Business, the whole exercise had to be deemed extra legal.”

Of the PILs being heard, one by ML Sharma seeks to cancel 194 coal block allocations, while another by NGO Common Cause wants both a cancellation and a court-monitored CBI investigation.

Coalgate is back in the limelight to haunt the UPA. And the PM is in the thick of it all.