Delhi HC order grants some respite for JSPL as 3 coal blocks taken off auction

New Delhi: In a relief for Jindal Steel and Power Ltd (JSPL) and its promoter Naveen Jindal, Delhi High Court today directed a technical committee to review its own decision to change the end-use of two coal blocks earlier alloted to the company and removing the mines from the auction.

 Delhi HC order grants some respite for JSPL as 3 coal blocks taken off auction

Naveen Jindal. Image courtesy PIB

A bench of justices Badar Durrez Ahmed and Sanjeev Sachdeva took out Utkal B1 and B2 blocks in Odisha and Gare Palma IV/6 in Chhattisgarh, from the auction process, saying that while changing end-use of these blocks to power sector, the aspect of its adverse impact on steel sector "has not been considered".

It also directed the committee, which had been set up to classify coal blocks as well as formulate criteria for their auction and allotment, to review its decision to merge Utkal B1 and B2, saying "there was no application of mind".

JSPL had been allocated Utkal B1 for operating a steel unit and Gare Palma IV/6 for a sponge iron industry. However, the allocations, along with with others, were cancelled by Supreme Court last year.

JSPL had contended that change of end-use of these blocks from steel and iron to power has prevented them from bidding for them, which could result in their investments of over Rs 24,000 crore, to set up units close to these mines, going waste.

Government, on the other hand had contended that end-use of both blocks was changed in view of the "energy security of the country".

Disagreeing with the government's reason for changing end-use, the bench said the expression "energy security of the country" refers to the coal reserves and not to the power sector and added that power can be generated through various other sources - water, wind, nuclear, solar, etc.

It observed as per the Coal Mines (Special Provisions) Second Ordinance, 2014, "it cannot be concluded that power has been given priority over steel and other sectors. On the contrary, all the core sectors have been placed at par."

"Consequently, we direct that Utkal B-1 and Utkal B-2 be taken off from the subject auction and the specified end-use as also the issue of their merger be reviewed in the light of the discussion above before they are put up for auction again. The same, as regards specification of end-use, would apply to Gare Palma IV/6, which is yet to be put up for auction," it said.

Referring to the records of meetings held by the technical committee prior to taking its decisions, the bench in its 73-page judgement said the panel "ignored" the "vital aspect" of impact on steel sector on account of changing the end-use of coal blocks Utkal B1 and Gare Palma IV/6.

The court asked why the committee's criteria for specifying end-use was not uniformly followed, while noting that both the blocks fit the criteria for steel and sponge iron but were changed to use for power.

It also questioned the lack of reasoning in the panel's records with respect to why geological reserves were considered by it while classifying mines for a specific end-use, instead of extractable reserves when "there is a reference to extractable reserves in eligibility conditions".

It also observed that end-use of power "would include generation of power for captive use" and said "this is the legislative intent and the same cannot be altered by executive action".

The government had excluded captive power from generation of power for captive use.

The bench also agreed with company that the apex court "was not concerned with the future manner of allocations/allotments/utilisation of the coal blocks."

"The cancellation of the coal block allocations cannot be regarded as a circumstance which would make the consideration of end-use for the purposes of future allocation irrelevant.

"In other words, while the investments made by the prior allottees were construed as irrelevant for the purpose of cancellation, it does not follow that the end-use earlier specified in respect of the previous allocations would be irrelevant for the purposes of future allocations," it said.


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Updated Date: Feb 11, 2015 19:11:37 IST