In a significant observation in the coal scam case, the Supreme Court made it plain that huge investments adding up to Rs 2 lakh crore could not be invoked as a ground for regularizing coal mines allotted in violation of norms.
The comment from a bench of Justice RM Lodha, Justice Madan B lokur and Kurian Joseph came after it noticed that project proponents in many pre-2006 coal block allocations had begun investing in plants anticipating grant of licences by states on the basis of an allocation letter from the Centre.
The government will note the remarks carefully as it hopes the court does not cancel allocations on a large scale, concerned as it is about the fallout on a power sector facing fuel shortages and price escalation and a further fallout on a slowing economy.
The bench found the action of project promoters to be incompatible with the laid down procedure — an allottee had to first secure a mining plan, followed by forest clearance (if block falls in forest land) and an environmental clearance before starting construction.
"They (companies) must suffer consequences no matter how much investment has been made by them. The alleged illegality cannot be compounded," the court said.
The court asked Attorney General G E Vahanvati if the Centre intended to de-allocate coal blocks in such circumstances. Vahanvati said the situation has to be reviewed on a case to case basis. However, he indicated some practical difficulties in de-allocation as project proponents have invested close to Rs 2 lakh crore in setting up of power or sponge iron plants.
"All such investments would go in drain and it cannot be a defence and no law would help them," said the bench. It was of the view that any company who invested did so at their own risk as their rights were yet to mature.
States jumped in to the defence of the allottees as about 29 such projects, many of which were joint venture partnerships with the state government PSUs were at stake. Madhya Pradesh, represented by senior advocate Mukul Rohatgi told the Court that once a person has been earmarked coal block by the Centre, the process of allocation mechanically followed.
As the environmental and forest clearances usually take four to five years, Rohatgi argued the balance of convenience lay in starting the process for setting up the plant while completing the formalities.
"There are cases where a man is stuck to get forest clearance which takes five years...Ideally, he would like to wait, but in doing so he will lose his allocation. If not, he loses on his investment," Rohatgi argued, presenting the catch 22 situation facing coal block beneficiaries.
Allocation could be cancelled on ground of unsatisfactory progress or breach of conditions attached with letter of allocation, the state said. The bench dismissed the argument as "matters of commerce" and said the allottee was taking a risk. Giving an example, the bench explained, "If area is in forest land, activity is forbidden. Obviously then it (work undertaken) leads to nothing."
Article referred: http://timesofindia.indiatimes.com/india/Investment-cant-legalize-mine-allocation-Supreme-Court/articleshow/28571340.cms
Comment:
This is an important judgment also in the sense that it raise precedence in matters where anything illegally procured/provided would not be justified through subsequent actions particularly in commercials ventures, even if such action is beneficial. In other words, if the beginning is wrong, it remains wrong.
The comment from a bench of Justice RM Lodha, Justice Madan B lokur and Kurian Joseph came after it noticed that project proponents in many pre-2006 coal block allocations had begun investing in plants anticipating grant of licences by states on the basis of an allocation letter from the Centre.
The government will note the remarks carefully as it hopes the court does not cancel allocations on a large scale, concerned as it is about the fallout on a power sector facing fuel shortages and price escalation and a further fallout on a slowing economy.
The bench found the action of project promoters to be incompatible with the laid down procedure — an allottee had to first secure a mining plan, followed by forest clearance (if block falls in forest land) and an environmental clearance before starting construction.
"They (companies) must suffer consequences no matter how much investment has been made by them. The alleged illegality cannot be compounded," the court said.
The court asked Attorney General G E Vahanvati if the Centre intended to de-allocate coal blocks in such circumstances. Vahanvati said the situation has to be reviewed on a case to case basis. However, he indicated some practical difficulties in de-allocation as project proponents have invested close to Rs 2 lakh crore in setting up of power or sponge iron plants.
"All such investments would go in drain and it cannot be a defence and no law would help them," said the bench. It was of the view that any company who invested did so at their own risk as their rights were yet to mature.
States jumped in to the defence of the allottees as about 29 such projects, many of which were joint venture partnerships with the state government PSUs were at stake. Madhya Pradesh, represented by senior advocate Mukul Rohatgi told the Court that once a person has been earmarked coal block by the Centre, the process of allocation mechanically followed.
As the environmental and forest clearances usually take four to five years, Rohatgi argued the balance of convenience lay in starting the process for setting up the plant while completing the formalities.
"There are cases where a man is stuck to get forest clearance which takes five years...Ideally, he would like to wait, but in doing so he will lose his allocation. If not, he loses on his investment," Rohatgi argued, presenting the catch 22 situation facing coal block beneficiaries.
Allocation could be cancelled on ground of unsatisfactory progress or breach of conditions attached with letter of allocation, the state said. The bench dismissed the argument as "matters of commerce" and said the allottee was taking a risk. Giving an example, the bench explained, "If area is in forest land, activity is forbidden. Obviously then it (work undertaken) leads to nothing."
Article referred: http://timesofindia.indiatimes.com/india/Investment-cant-legalize-mine-allocation-Supreme-Court/articleshow/28571340.cms
Comment:
This is an important judgment also in the sense that it raise precedence in matters where anything illegally procured/provided would not be justified through subsequent actions particularly in commercials ventures, even if such action is beneficial. In other words, if the beginning is wrong, it remains wrong.
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