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Delhi HC upholds centre’s coal ordinance norms, with caveats

LiveMint logoLiveMint 09-03-2017 Priyanka Mittal

The Delhi high court on Thursday upheld the 2014 coal ordinance’s provisions on determination of compensation payable to allottees who lost out in the 2015 coal mine auctions.

A bench comprising justices Badar Durrez Ahmed and Sanjeev Sachdeva, however, laid down how the provisions ought to be interpreted and how the compensation should be calculated so that they do not violate the constitutional protections of equality, right to carry on business and right to property.

The court said that if the compensation was not computed in the manner indicated by it, then the firms can raise the issue before the tribunal set up under the ordinance. The court’s ruling came on pleas by GVK Power Goindwal Sahib Ltd, Jayaswal Neco Industries Ltd, Jindal Power Ltd, Jindal Steel and Power Ltd and several other companies that have alleged under-compensation by the government for their land and mining infrastructure.

The petitions were filed by the companies whose coal block allocations were cancelled by the Supreme Court in 2014. These firms took part in the subsequent auction, which were conducted in 2015 as per the ordinance, and could not hold on to their mines.

The bench said that under the ordinance, the compensation was fixed to be the amount in the registered sale deeds along with simple interest of 12% from date of acquisition by prior allottee till date of issuance of the order vesting the land in the successful bidder.

The court said fixing a rigid formula for the value of the land as per the historical value given in the sale deeds together with 12% simple interest may operate unfairly against the prior allottee and to the benefit of the successful bidder.

Instead, it suggested that the amount in the sale deed along with the interest be made the benchmark and if the prior allottee was able to show that the fair market value of land was more than the benchmark figure when the vesting order was issued, then the company ought to be entitled to the higher amount.

“The point being that the successful bidder ought not to get the land for a song and, that too, at the expense of the prior allottee,” the bench said.

On the manner of calculating compensation for mine infrastructure, the court observed that under the ordinance it was to be determined as per the written-down value in the statutorily audited balance sheet of the previous fiscal year. It said that in the instant cases, it would not mean that the compensation has to be computed as equal to the written-down value as on 31 March 2014, and suggested making it the basis for determining the quantum of compensation.

The bench, in its 43-page verdict, was of the opinion that the valuation of mine infrastructure “should be done as on the date of execution of the vesting order or the allotment order, as the case may be”.

“The date of March 31, 2014 is to be taken only as the date for fixing the bench mark as that would be the date of the latest statutorily audited balance sheet. Whatever has transpired thereafter and goes towards affecting the quantum of compensation for mine infrastructure, must also be taken into account—whether it helps the prior allottee or not.”

The high court also upheld the centre’s decision to cancel Jindal Power’s bid for the Gare Palma IV/2 and 3 coal blocks in Jharkhand and Tara block in West Bengal.

The court, however, quashed the decision to allot the cancelled mines to state-owned Coal India Ltd (CIL) and gave the centre six weeks to decide whether the Gare Palma coal mine should be re-auctioned or allotted to CIL or any other public sector firm.

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