WP(C) No.8944/2005 Page 1 of 35 IN THE HIGH COURT OF DELHI AT NEW DELHI W.P.(C) 8944/2005 Reserved on: 3rd March 2010 Decision on: 16th April 2010 CENTRAL COLLIERIES COMPANY LTD. ..... Petitioner Through: Mr. Ravi Gupta, Sr. Advocate with Mr. Rishi Kapoor, Advocate versus UNION OF INDIA & OTHERS ..... Respondents Through: Mr. P.P. Malhotra, ASG with Mr. Ravinder Agarwal, CGSC for UOI Mr. Rahul Khurana, Advocate for Ms. Subhangi Tuli, Advocate for R-2 & 3 CORAM: JUSTICE S. MURALIDHAR 1. Whether Reporters of local papers may be allowed to see the judgment? No 2. To be referred to the Reporter or not? Yes 3. Whether the judgment should be reported in Digest? Yes JUDGMENT 16.04.2010 1. The challenge in this writ petition is to an order dated 3rd November 2004, passed by the Additional Secretary, Ministry of Coal and Mines, acting as the Revisional Authority under Section 30 of the Mines and Mineral (Development and Regulation) Act, 1957 [hereinafter referred to as the “MMDR Act”]. Also challenged in this petition is an order dated 30th October 2002, passed by the Coal Controller, Ministry of Coal and Mines, Government of India whereby the Petitioner was directed not to dispose of/supply the coal mined from the leased area of its captive coal mine to any agency or party other than its proposed power plant. WP(C) No.8944/2005 Page 2 of 35 Background Facts 2. The Petitioner Central Collieries Company Ltd. (hereinafter referred to “CCCL”) having its office at Nagpur and engaged inter alia in the business of mining applied on or around 4th July 1996 to Ministry of Coal for grant of a captive coal mining block for their proposed washery-cum- power generation project. It is stated that on 29th May 1998 the Screening Committee, an in-house mechanism set up by the Ministry of Coal, identified coal blocks which could be granted to CCCL. This was communicated to CCCL by a letter dated 29th May 1998 of the Director, Ministry of Coal. CCCL felt that these coal blocks were inadequate to sustain a power project and indicated this to the Ministry of Coal by its letter dated 16th June 1998. In terms of Section 5(2) of the MMDR Act, CCCL prepared a mining plan, and this was approved by the Central Government on 2nd September 1999. 3. On 15th October 1999, the Government of Maharashtra forwarded the proposal for grant of mining lease to the Central Government. The proposal was for grant of mining lease for coal over an area of 271.00 hectares in village Bellora–Jena Takli, South Part, Tehsil: Bhadravati, District Chandrapur for a period of thirty years. It was proposed that the lease should be granted on the terms and conditions along with three additional conditions: “i) No mining operation should be started in any area which is not prospected by State Government or by the company. ii) Minerals extracted from the above mines should be used as a captive source of raw material for their own plant only. iii) The coal should not be used for commercial and trading WP(C) No.8944/2005 Page 3 of 35 purpose.” 4. At this stage it requires to be noticed that under Rule 27(3) of the Mineral Concession Rules, 1960 (MCR) as it then stood, the power to impose such conditions was with the State Government. By a separate letter dated 15th October 1999, the State Government sought approval of the Central Government for the grant of mining lease in terms of Section 5(1) of the MMDR Act as coal was a mineral listed under Schedule I to the Act. Therefore, there were two distinct approvals sought by the state government from the central government: (i) under Section 5(1) of the MMDR Act and (ii) the other for the grant of lease with certain conditions imposed as contemplated by Rule 27(3) of the MCR. 5. In terms of the mining plan of the Petitioner which was approved by the Central Government, the mine was to reach its optimum capacity of 0.45 million tonnes per annum in the 6th year of operation. The power plant was scheduled to become operational by the 6th year so as to synchronize the availability of adequate coal. CCCL was aggrieved with the condition proposed by the State Government that it should not dispose of the coal which would be mined in the first six years. The proper development of the mine would require that the coal mined in smaller quantities in the first six years had to be disposed of. It is stated in the petition that an earlier proposal of the Petitioner to have the mine reach its optimum capacity in two years was rejected by the Central Government as not being technically feasible. CCCL submits that under Section 3(3) of the Coal Mines (Nationalisation) Act, 1973 [hereinafter referred as “CMNA”] WP(C) No.8944/2005 Page 4 of 35 as amended by the Coal Mines (Nationalisation) Amendment Act, 1993 [hereinafter referred as “the amended CMNA”] washing of coal obtained from mine was recognized as a permissible end-use for granting mining lease of coal to a private entrepreneur. In the above circumstances, CCCL wrote to the State Government on 10th November 1999 drawing its attention to the difficulties that it would have to encounter if it was not permitted to dispose of the coal that was mined till the sixth year. In response to this representation, the State Government wrote to the Petitioner on 21st December 1999 whereby it informed the Petitioner that the additional conditions mentioned in its letter dated 15th October 1999 to the Central Government, as extracted hereinbefore, were being waived. 6. By a letter dated 28th December 1999 the Central Government approved the State Government’s proposal for the grant of the mining lease to the Petitioner and it also accorded approval to the imposition of the three conditions as mentioned by the State Government in its letter dated 15th October 1999. On 29th January 2000, the State Government passed an order granting mining lease to the Petitioner without the additional conditions which had already been waived by it as communicated to the Petitioner by its letter dated 21st December 1999. On 17th February 2000 a mining lease was executed in favour of the Petitioner in terms of which the Petitioner was to commence developing the mine within one year. 7. In the process of seeking permission for opening the mine in terms of the Colliery Control Order (CCO), the Petitioner furnished to the Coal Controller along with its letter dated 8th February 2000 a copy of the order WP(C) No.8944/2005 Page 5 of 35 dated 29th January 2000 of the State Government granting it the lease. A copy of the said order was also sent to the Joint Secretary, Ministry of Mines and Minerals (Department of Coal) on 18th February 2000. By its letter dated 28th February 2000, the Ministry of Coal granted permission to CCCL under Clause 9 of the CCO to open the mine. Pursuant thereto CCCL commenced mining operations. 8. CCCL has in para 20 of the writ petition detailed the steps taken by it to make the power project operational. It is stated that the permission from the Maharashtra State Electricity Board (MSEB) under Section 44 of the Electricity Supply Act, 1948 could be obtained only on 29th September 2001. Although CCCL applied to the Collector, Chandrapur on 4th October 2000 for acquisition of additional land under the Land Acquisition Act, 1894 for the power project at village Tulana, Tehsil Warora, Dist. Chandrapur, steps were not taken by the authorities in that regard up to the date of the filing of the present petition. 9. On 9th July 2001, CCCL wrote to the State Government seeking permission to split up the project in two phases. It proposed to set up a washery in Phase-I while in Phase-II it would set up the power plant. This was accepted and permission was granted to CCCL by the State Government by a letter dated 31st July 2001. CCCL was allowed to dispose of the washed coal as waste which in any event was a permissible end-use in terms of CMNA as amended in 1993. 10. It is stated that on 13th July 2001 the Ministry of Coal, Government of WP(C) No.8944/2005 Page 6 of 35 India wrote to the State Government that it should cancel the lease of CCCL as it had violated the lease conditions. In the said letter, it is mentioned that soon after the grant of the mining lease, CCCL had started “looking to sell” the coal extracted from the said captive mine block as was borne out from CCCL’s letter dated 14th August 2000 to the MSEB. It also referred to a report dated 4th September 2000 received from the Western Coalfields Ltd. to the effect that the coal mining activities had already commenced in the said block by CCCL as was evident from the huge overburden dumps and movement of heavy earth moving machineries etc. whereas no activity for installation of the captive power plant was visible. Further, the Officer on Special Duty (OSD) in the Coal Controller’s Organisation, Nagpur undertook an inspection of CCCL’s captive coalmine block on 3rd July 2000 and found that the mine was working in full swing and the excavated portion was thereby overburdened to the tune of 1.9 lakh cubic metres having been removed till 30th June 2000. Yet no physical activity was visible for setting up the washery to wash the coal and for installing the power plant. It is stated that these observations were conveyed to the Petitioner by the OSD by the letter dated 3rd July 2000. 11. In the letter dated 13th July 2001 of the Ministry of Coal, reference was also made to a letter dated 12th May 2000 addressed to it by CCCL stating that since coal production was to commence shortly, it had tied up with various steel and cement parties to dispose of the coal extracted from the captive mine. Further on 7th August 2000, CCCL informed the Ministry that it had obtained the clearance from the Ministry of WP(C) No.8944/2005 Page 7 of 35 Environment and Forest (MOEF) and was proceeding with the disposing of the coal as indicated in the previous letter dated 12th May 2000. According to the Ministry of Coal all these factors showed that CCCL was engaged in the disposal of the coal mined from the captive mine, which was in violation of the lease conditions. The said communication dated 13th July 2001 from the Central Government to the State Government also mentioned that CCCL had been served with the show cause notice dated 17th October 2000 and the response thereto from CCCL was not found satisfactory. It was in the above circumstances that the recommendation was being made to the State Government to cancel the lease. 12. Acting on the above communication, a notice was issued by the State Government to CCCL on 4th December 2001 asking it to show cause, why the mining lease should not be cancelled under Section 4A (1) of the MMDR Act. CCCL submitted a reply on 13th December 2001, pointing out that the lease did not contain any captive use condition and that such a condition had been waived by the State Government by its communication dated 21st December 1999. After considering the said reply, the State Government by a letter dated 18th March 2002 informed the Central Government that on going through the explanation received from CCCL and the inspection report of the Directorate of Geology and Mining, Nagpur, it had been decided to withdraw the show cause notice issued to CCCL. It appears that two further letters were written by the Central Government to the State Government in this connection on 11th April 2002 and 14th May 2002. In response thereto, the State Government wrote to the Central Government on 30th July 2002 informing it that the State WP(C) No.8944/2005 Page 8 of 35 Government had permitted CCCL to split up its project in two phases and that it had been permitted in the first phase to install a washery and dispose of the washed coal. The State Government is stated that consequently “in larger interest of minerals and mineral based industries, it will not be possible for Government of Maharashtra to cancel the mining lease granted in favour of M/s Central Collieries Company Ltd and also to prevent them from extraction of coal from their mine”. 13. The Central Government did not take kindly to the above response of the State Government. By a communication dated 27th August 2002 addressed to “The Division Bench, Provisional Authority, Department of Coal” it requested the Revisional Authority to take suo motu notice of the violation of the conditions of the lease by CCCL and revise the order dated 29th January 2000 of the State Government granting mining lease to CCCL as well as the mining lease dated 17th February 2000 executed pursuant thereto. Enclosed with the said communication were “(i) facts of the case, (ii) chronology of events and (iii) a set of photocopies of documents relied upon”. In the last paragraph of the said communication dated 27th August 2002 a request was made to the Revisional Authority to pass suitable orders in the case “including due incorporation of the exclusive use condition in the lease grant order (u/s. 10(3) of MMDR Act) and the consequent lease deed”. 14. In the statement of facts of the case enclosed with the above communication dated 27th August 2002, it was stated that the decision of the State Government not to include the exclusive use condition in its WP(C) No.8944/2005 Page 9 of 35 order for grant of mining lease and the subsequent lease deed violated Section 5(1) of the MMDR Act read with Rule 27(3) of the MCR as “the said condition is a part of the prior approval of Central Govt. u/s. 5(1) instanced by the Central Govt. as an additional condition u/R.27(3)”. Consequently, it was submitted that the order of the State Government granting mining lease as well as the lease deed was void and of no effect under Section 19 of the MMDR Act. 15. The Central Government also prayed for interim relief of stay of the operation of mining lease by the Revisional Authority. Consequent thereto a notice dated 4th September 2002 was issued to CCCL by the Revisional Authority asking it to show cause why the interim relief should not be granted. CCCL submitted a detailed reply dated 9th December 2002. 16. By a communication dated 28th January 2003, the Revisional Authority informed the parties that it had decided to hear the suo motu revision petition itself finally rather than issuing an interim order. The Revisional Authority comprised of the Joint Secretary, Ministry of Coal and the Joint Secretary, Law and Judiciary heard the revision petition on 3rd March 2003. The Joint Secretary, Coal held that the order dated 29th January 2000 passed by the State Government and the consequent lease executed on 17th February 2000 were not sustainable in law. Consequently he directed the State Government to issue a fresh lease containing the additional conditions and left the issue of interim disposal of the coal to be decided by the Ministry of Coal within a reasonable time. The other Member, i.e., the Joint Secretary, Law and Judiciary differed and by his WP(C) No.8944/2005 Page 10 of 35 opinion dated 4th September 2003 held that the State Government’s order dated 29th January 2000 and the mining lease dated 17th February 2000 could not be held to be void. 17. By a letter dated 3rd September 2004, CCCL was informed by the Ministry of Coal that the suo motu proceedings against an order dated 29th January 2000 initiated by the State Government were once again placed before the Additional Secretary, Department of Coal, New Delhi. It is submitted by CCCL that this procedure was contrary to law as the revision petition ought to have been referred to a third member to decide the difference of opinion between the two Members who constituted the Revisional Authority. There was no power under Section 30 of MMDR Act to have the same matter decided afresh by another Revisional Authority. 18. The newly constituted Revisional Authority, i.e., the Respondent No. 4 herein heard the parties on 22nd and 23rd September 2004 and by an order dated 3rd November 2004 held that the order dated 29th January 2000 of the State Government and the consequent lease dated 17th February 2000 in favour of the Petitioner were void under Section 19 of the MMDR Act. Present petition and orders 19. The present petition was filed on 21st May 2005. When it came up for hearing on 25th May 2005, this Court was informed that the Petitioner had received a show cause notice dated 20th April 2005 from the Central WP(C) No.8944/2005 Page 11 of 35 Government on 13th May 2005. In that view of the matter, an application (CM No. 7277 of 2005) was filed seeking to amend the writ petition to the challenge the said show cause notice. This was allowed by an order dated 30th May 2005. 20. In the same order, this Court noted the submission that the said notice required CCCL to show cause against proposed penal action by the Central Government. The Court also noted that without prejudice to its rights and contentions, CCCL stated that it was willing to give an undertaking to the effect that it will not effect any mining activity from the coal mine in question, and also not dispose of or part with the coal which has already been mined from the mine in question. Subject to the said undertaking being filed within ten days, this Court directed that the Union of India would not take any penal action against CCCL. 21. By a further order dated 27th July 2006, CCCL was permitted to amend the writ petition to incorporate subsequent facts. By the aforementioned amendment, CCCL brought on record the facts concerning the steps taken by it to obtain permissions and approvals for its power project. It also brought on record the guidelines issued by the Central Government for disposal of the coal mined during the development phase of the mine. These guidelines were posted on the website of the Ministry of Coal. CCCL also brought on record a copy of the letter dated 16th June 2005 written by the State Government to the Central Government referring to a circular dated 29th November 2002 directing the State Governments to revise the mining lease including all WP(C) No.8944/2005 Page 12 of 35 the captive use conditions approved by the Central Government. In accordance with the said circular the State Government had decided to revise the mining lease granted by its order dated 29th January 2000 to CCCL, incorporating the conditions. With its letter dated 16th June 2005, the State Government enclosed a copy of the revised lease deed incorporating the said conditions. 22. It must be mentioned here that CCCL has categorically stated before this Court during the arguments as well as in its written submissions that it is open to the very same conditions being incorporated in the lease deed and it is only aggrieved by the cancellation of the lease itself. It is pointed out that CCCL has since taken effective steps for making the power project operational. CCCL has made heavy investments to acquire 250 hectares of land and more than Rs. 15 crores have already been spent by it on the project. It is stated that the holding cost of the project is Rs. 2.5 crores every year. CCL refers to certain other instances where the leases were not declared void for non-inclusion of the conditions but an order was passed requiring inclusion of such conditions. It is accordingly prayed that CCCL should not be discriminated against in this regard. Stand of the Central Government 23. The reply of the Central Government to this petition in defence of its impugned orders is that the non-inclusion by the State Government of the captive use conditions approved by the Central Government in its order dated 28th December 1999 in the lease deed was in violation of the CMNA; that the order dated 29th January 2000 passed by the State WP(C) No.8944/2005 Page 13 of 35 Government granting the lease in favour of the Petitioner and the consequent lease deed dated 17th February 2000 were null and void under Section 19 of the MMDR Act. While it is not denied that the two-member Revisional Authority had “failed to arrive at a consensus in their judgment”, the Central Government treats this as “a no decision” following which powers were delegated to the Additional Secretary to “decide the case afresh”. According to the Central Government, the Additional Secretary was a Single Bench Revisional Authority who considered the written submissions made before the two Member Revisional Authority, and further written submissions filed before him and “passed the impugned order dated 3rd November 2004”. It is asserted that the said order has been passed lawfully after following the due procedure. 24. In reply to the averment in para 14 of the writ petition that the State Government had sent a copy of its letter dated 21st December 1999 waiving the conditions to the Ministry of Coal, the Central Government states that the State Government “never wrote to the Central Government expressing their intention to withdraw the conditions and such withdrawal was never perhaps with reference to the letter dated 15th October 1999 wherein it proposed additional conditions”. In reply to the assertion made in para 18 of the writ petition that it had supplied to the Coal Controller a copy of the lease deed, it is stated that in para 12 of the counter affidavit that “the Petitioner deliberately did not forthwith submit a copy of the lease deed which did not contain the additional conditions till May 2003”. It is asserted likewise in para 13 of the counter affidavit as well. The stand WP(C) No.8944/2005 Page 14 of 35 of the Central Government as regards the Rule 27(3) of the MCR is that once the Central Government issues an order directing the incorporating of conditions in a lease deed in terms of Section 5(1) of the MMDR Act, the State Government cannot thereafter waive the conditions on the ground that they were not required. That would be in conflict with the approval given by the Central Government and therefore such withdrawal could not be unilateral and without consultation/prior approval of the Central Government. 25. What is significant is that in response to para 22 of the writ petition, which refers to the letter dated 13th July 2001 written by the State Government to the Central Government, it is stated in para 16 of the counter affidavit as under: “16. The submission of the petitioner in para 22 of the petition brings to fore the collusion of the petitioner and someone in the State Government of Maharashtra in waiving the additional conditions proposed to be imposed, without the approval of the Central Government. With the incorporation of the additional conditions in the lease deed, it would not have been possible for the petitioner to sell coal subsequently in the market in violation of the provisions of law.” Stand of the State Government 26. In its reply affidavit dated 19th September 2005, the Government of Maharashtra states that prior to making any change in the conditions, it was mandatory for the State Government to have obtained the approval of the Government of India which was, however, not done. It is factually not denied that the Government of Maharashtra issued the letter dated 31st WP(C) No.8944/2005 Page 15 of 35 July 2001 permitting CCCL to split up the project into two phases and also dispose of the washed coal. In para 13 it is stated as under: “13. That I say and submit that based on above background while reverting back to contentions