Date | March 10, 2017

In a setback to Naveen Jindal-controlled Jindal Power (JPL), the Delhi High Court (HC) on Thursday declared the company as the unsuccessful bidder for two coal blocks. The order has come as a legal endorsement of the National Democratic Alliance (NDA) government’s auctioning of coal mining rights. There were two other breakthrough orders associated with the coal block e-auction held in 2015-16.

The first case pertained to the two coal blocks — Tara in West Bengal and Gare Palma IV/2&3 in Jharkhand. Though JPL emerged the winning bidder, the coal ministry did not approve the bids received for these coal blocks, citing reasons of “comparatively low bids”. JPL moved the Delhi HC in March 2015. The court upheld the government’s discretion, as it did not find “any fault with the decision of the government in not declaring JPL as the successful bidder.” The Nominated Authority was the designated office for implementing the coal block e-auction. “The court’s order vindicates our stand that the auction was held transparently and objectively. Coal e-auction stands out as an example of government’s effort to streamline natural resource allocation and remove any arbitrariness in the process,” said Vivek Bhardwaj, Nominated Authority for the coal block e-auction.

The court, however, quashed the decision to allot the cancelled mines to state-owned Coal India Limited (CIL). In a separate matter, filed by JSPL (Jindal Steel & Power Limited), GVK Power, Jayaswal Neco Industries and Mandakini Coal against the amount of compensation given by the coal ministry, the court again ruled in favour of the government.

The companies were the prior owners of the coal blocks when a Supreme Court judgment in August 2014 cancelled all allocations made over the past two decades. These companies had contended that the government’s calculation of compensation was much lower than the figures they had submitted. The government had paid Rs 280 crore against the total compensation amount of Rs 1,757 crore. In the judgment, Justice Ahmed and Sachdeva upheld the compensation amount based on registered sale deeds (along with 12 per cent interest per annum) as set by the government, calling it a valid benchmark. However, the court has left it open to the companies to produce tangible evidence to the Nominated Authority if the fair market value of the block on the date of the executing order was higher than the government figure, which would then be subject to review under the adjudicatory process.

“Section 16 of the said Ordinance and Rule 14 of the said Rules are to be interpreted and worked in the manner indicated above. As such, they cannot be held to be violative of Articles 14, 19(1)(g) or 300-A of the Constitution,” noted the division Bench.

The third case was filed by Monnet Power, Jaiprakash Power and Mandakini Exploration & Mining for withdrawing their bank guarantees , as they had pulled out of the bidding process after the government made changes to rules of cost pass through during the proceedings.

The government, by invoking the provisions of the Electricity Act, had capped the energy charge that the coal block owners could pass through as the final tariff for the power produced from the coal blocks won in the auction.

“Since the decision to put a cap on fixed charges/capacity charges would have had an impact on the bidding process and this, in our view, was not known to the petitioners, the petitioners would be entitled to the alternative prayer of withdrawing from the bids and for refund of the bid security without any penalty,” said Justice Ahmed and Sachdeva in the order.

Coal crushing:

• The coal block e-auctions were held in 2015-16
• Though JPL emerged the winning bidder, the coal ministry did not approve the bids received for these coal blocks, citing reasons of comparatively low bids
• The court, however, quashed the government decision to allot the cancelled mines to state-owned Coal India

(Source: http://www.business-standard.com/)