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“A policy decision to get the best operator at the best price, cannot be said to be a decision which no reasonable person would take in his affairs,” the Supreme Court on Tuesday upheld the decision of the Punjab State Electricity Board (PSEB) now known as Punjab State Power Corporation Limited (PSPCL) to select the lowest bidder DBL­VPR Consortium for supply of coal, saving crores of rupees for PSPCL.

 

The Bench also stated that the PSPCL’s decision dated April 6, 2018, cannot be questioned on the ground of illegality or procedural impropriety. 

The decision was taken in accordance with Section 11 of the Coal Mines (Special Provisions) Act, 2015 and after following the principle of natural justice.

“In the result, the impugned judgment and order passed by the High Court of Punjab and Haryana is unsustainable in law. The appeals are therefore allowed and the judgment and order passed by the High Court of Punjab and Haryana dated 25th January 2019, is quashed and set aside,” the Bench observed.

Holding that the impugned judgment and order passed by the High Court of Punjab and Haryana was unsustainable in law, a three judge Bench of Justice LN Rao, Justice BR Gavai and Justice BV Nagarathna observed that,

“the reasoning given by the high court that PSPCL was within its rights to reject the arrangement if the performance of EMTA was unsatisfactory or if there was any other factor which the corporation found relevant enough to discard the arrangement altogether, in our view, is totally erroneous.”

The Bench further observed that,

“It could thus be seen that PSPCL has decided to go in for competitive bidding process for the purpose of eliciting the best operator. It has further noticed that the composition with respect to capital/revenue investment is altogether different. Hence, the bidding parameters have entirely changed.”

The said verdict came on appeals challenging the High Court’s order allowing the petitions filed by EMTA Coal Limited giving the first right of refusal in the matter of lending of coal mining lease to EMTA.

Court also elaborated on the issue of Judicial Review and the extent to which the Court can really go into while concerning itself with policies.

“While exercising powers of judicial review, the court is not concerned with the ultimate decision but the decision-making process. The limited areas in which the court can inquire are as to whether a decision-making authority has exceeded its powers, committed an error of law or committed breach of principle of natural justice,” observed the Bench

Justice Gavai further stated that it is not for the court to determine whether a particular policy or decision taken in the fulfilment of that policy is fair.

"The court will examine as to whether the decision of an authority is vitiated by illegality, irrationality or procedural impropriety. While examining the question of irrationality, the court will be guided by the principle of Wednesbury...the court will examine whether the decision of an authority is such that no authority properly directing itself on the relevant law and acting reasonably could have reached it."

In this regard, Court noted that fact that PSPCL went for a competitive bidding process for the purpose of eliciting the best operator was known to the bench and that it has referred to its decision that held the allotment should be through a competitive bidding process.

The PSEB (now PSPCL) was proposed to be allotted Captive Coal Mines by the Centre.

There were issuance of a tender inviting bids for the purpose of development of Captive Coal Mines, ETMA Coal Limited emerged the winner which was followed by the creation of a Joint Venture Company, the Centre on December 26, 2001 allotted a Captive Coal Block in Pachhwara (Central Block) Coal Mine, Jharkhand to PSEB.

However, on August 25, 2014, the Supreme Court in Manohar Lal Sharma v. Principal Secretary and Others case held that, “the entire allocation of Coal Blocks made between 1993 and 2011, except those which were made through competitive bidding, were invalid, unfair, and arbitrary.”

Following which on September 24, 2014, it quashed all Coal Block allocations made by the Central Government between 1993 and 2011.

On March 31, 2015, the Centre again allocated Pachhwara Captive Coal Block in favour of PSPCL and PSPCL entered into a Transitory Agreement with EMTA on June 30, 2015 for nine months or till Mine Developer­-cum-­Operator was appointed by PSPCL through competitive bidding.

When the lowest bidder DBL­VPR Consortium was selected through a global tender issued by PSPCL, EMTA coal ltd challenged it before the high court which on January 25, 2019  held that the ETMA will have the first right of refusal in the matter of lending of coal mining lease. It was this HC order that was under challenge before the SC.

"We find that the reasoning adopted by the high court is totally wrong. Merely because the coal mine block was allotted to PSPCL, the same could not give any vested right in favour of EMTA, particularly in view of the language used in section 11 of the said Act,” observed SC.

“In the result, the impugned judgment and order passed by the High Court of Punjab and Haryana is unsustainable in law. The appeals are therefore allowed and the judgment and order passed by the High Court of Punjab and Haryana dated 25^th January 2019, is quashed and set aside,” noted the Bench

[Case title - PUNJAB STATE POWER CORPORATION LIMITED AND ANOTHER   VERSUS EMTA COAL LIMITED]

Access Copy of Judgment Here