PUNJAB STATE POWER CORPORATION LIMITED AND ANOTHER versus EMTA COAL LIMITED

[2021] 11 S.C.R.

APUNJAB STATE POWER CORPORATION LIMITED ANDANOTHER

EMTA COAL LIMITED

B(Civil Appeal Nos. 5823-5824 of 2021)

SEPTEMBER 21, 2021

[L. NAGESWARA RAO, B. R. GAVAI ANDB. V. NAGARATHNA, JJ.]

Coal Mines (Special Provisions) Act, 2015 – s.11 – In ManoharCLal Sharma v. Principal Secretary and Others reported as [2014] 8SCR 446, Supreme Court held that the allotment of Coal Blocksbetween 1993 and 2011 was arbitrary and illegal – All such CoalBlock allocations were quashed – Respondent-prior contractor ifhad the first right of refusal in the matter of lending of MiningDLease, as held by High Court – On appeal, held: s.11 provides thata successful bidder or allottee, as the case may be, in respect ofSchedule I coal mines, may elect, to adopt and continue suchcontracts which may be existing with any of the prior allottees inrelation to coal mining operations – In the event the successful bidderEor allottee elects not to adopt or continue with the existing contracts,all such contracts shall cease to be enforceable against the successfulbidder or allottee in relation to Schedule I coal mine and the onlyremedy of such contracting parties shall be against the prior allotteesF– If it is held that u/s.11, prior contractor is entitled to continue ifhis performance is found to be satisfactory and if there is nothingagainst him, then it will be providing something in s.11 which theStatute has not provided for – High Court erred in observing thatrespondent had legitimate expectation – Merely because the CoalGMine Block was again allotted to the appellant, the same could notgive any vested right in favour of respondent – High Court erred inforcing the appellant to continue the contract with respondent,though it was not willing to do so – Decision of the appellant dtd.06.04.18 was taken in accordance with s.11 and after followingHthe principle of natural justice – Impugned judgment set aside –

Interpretation of Statutes – Literal Interpretation – Doctrine ofLegitimate Expectation – Principle of Natural Justice – Judicialreview.

Interpretation of Statutes – Literal Interpretation – Plain andliteral meaning – Held: When upon plain and literal interpretationof the words used in Statute, the legislative intent could begathered, it is not permissible to add words to the Statute – CoalMines (Special Provisions) Act, 2015 – s.11.

Administrative Law:

Exercise of power of judicial review – Scope of – Discussed.

Judicial review – Wednesbury Principle – Held: Whileapplying the Wednesbury principle, the Court will examine as towhether the decision of an authority is such that no authorityproperly directing itself on the relevant law and acting reasonablycould have reached it.

Words and Phrases – “may elect” in s.11, 2015 Act – Meaningof – Discussed – Coal Mines (Special Provisions) Act, 2015 – s.11.

Allowing the appeals, this Court

HELD: 1.1 The Coal Mines (Special Provisions) Act, 2015came to be enacted in pursuance of the decision of this Court inthe case of Manohar Lal Sharma-I, wherein this Court held thatthe allotment of Coal Blocks between 1993 and 2011 was arbitrary,illegal and violative of Article 14 of the Constitution. plainreading of Section 11 of the said Act would reveal that it beginswith non-obstante clause. It provides that successful bidderor allottee, as the case may be, in respect of Schedule I coalmines, may elect, to adopt and continue such contracts whichmay be existing with any of the prior allottees in relation to coalmining operations and the same shall constitute novation forthe residual term or residual performance of such contract. Thewords “may elect” would clearly show that the legislature hasgiven complete discretion to successful bidder or allottee toelect. The words “may elect” would also mean discretion notto elect. Only in the event, successful bidder or allottee decidesto adopt and continue such contract, which may be existing with

Aany of the prior allottees in relation to coal mining operations,the same shall constitute novation for residual term or residualperformance of such contract. In the event, the successful allotteedoes not elect to adopt or continue such contract, there is noquestion of novation for residual term or residual performance ofsuch contract. Perusal of sub- section (2) of Section 11 of the saidBAct would also make it clear that, it provides that in the event asuccessful bidder or allottee elects not to adopt or continue withthe existing contract which had been entered into by the priorallottees with third parties, all such contracts which have not beenadopted or continued shall cease to be enforceable against theCsuccessful bidder or allottee in relation to Schedule I coal minesand the remedy of such contracting parties shall be against theprior allottees. It could thus be seen that on plain reading ofsub-sections (1) and (2) of Section 11 of the said Act, it is clearthat the successful allottee or bidder has complete freedom todecide as to whether he desires to continue or adopt any suchDexisting contracts in relation to coal mining operation. Only inthe event he elects to adopt or continue with existing contracts,it shall constitute novation for residual term or residualperformance of such contracts. In the event the successful bidderor allottee elects not to adopt or continue with the existing

Econtracts, all such contracts shall cease to be enforceable againstthe successful bidder or allottee in relation to Schedule I coalmines. The only remedy of such contracting parties shall beagainst the prior allottees. [Paras 20, 21][784-E-H; 785-A-E]

Manohar Lal Sharma v. Principal Secretary and OthersF(2014) 9 SCC 516 : [2014] 8 SCR 446; Manohar LalSharma v. Principal Secretary and Others (2014) 9 SCC614 : [2014] 12 SCR 110 – referred to.

1.2 If the words used in Section 11 of the said Act areconstrued in plain and literal term, they do not lead to an absurdityGand as such, the rule of plain and literal interpretation will haveto be followed. If it is held that under Section 11 of the said Act, aprior contractor is entitled to continue if his performance is foundto be satisfactory and if there is nothing against him, then it willbe providing something in Section 11 of the said Act which theStatute has not provided for. It will also lead to making the wordsH

“may elect, to adopt and continue” redundant and otiose. When,upon plain and literal interpretation of the words used in aStatute, the legislative intent could be gathered, it is notpermissible to add words to the Statute. Equally, such aninterpretation which would make some terms used in Statuteotiose or meaningless, has to be avoided. [Para 22][785-G-H;786-A, B-C]

Jugalkishore Saraf v. Raw Cotton Company Limited[1955] 1 SCR 1369; Ajit Mohan and Others v.Legislative Assembly National Capital Territory of Delhiand Others 2021 SCC OnLine SC 456 – relied on.

1.3 When considering Section 62 of the Contract Act, 1872read with Section 11 of the said Act, High Court has observedthat the parties to contract may willingly agree to substitute anew contract or to rescind it or alter it. Having observed this,the High Court has, however, erred in observing that EMTA hada legitimate expectation. The reasoning adopted by the HighCourt is totally wrong. Merely because the Coal Mine Blockwas allotted to PSPCL, the same could not give any vested rightin favour of EMTA, particularly in view of the language used inSection 11 of the said Act. Having observed in earlier para that inview of Section 11 of the said Act read with Section 62 of theContract Act, 1872, the parties to contract may willingly agreeto substitute new contract or to rescind it or alter it, the HighCourt has erred in forcing PSPCL to continue with the contractwith EMTA, though it was not willing to do so. [Paras 23-25][786-F-G; 787-B, C-D]

Kerala State Beverages (M and M) Corporation Limitedv. P.P. Suresh and Others (2019) 9 SCC 710 : [2019]17 SCR 164 – relied on.

1.4 There can be no doubt that between Section 11 of thesaid Act and Clause 12.4.1 of the Allotment Agreement, Section11 of the said Act would prevail. The question is, whether, Section11 of the said Act mandates the successful allottee to continuewith the existing contract. The answer is no. In any case, theclaim of EMTA is not rejected by PSPCL solely on the ground ofClause 12.4.1 of the Allotment Agreement. [Para 28][788-B-C]

776SUPREME COURT REPORTS

A1.5 The order passed by PSPCL dated 6th April 2018, is anorder passed by an authority of the State in exercise of itsexecutive functions. While exercising powers of judicial review,the Court is not concerned with the ultimate decision but thedecision-making process. The limited areas in which the courtcan enquire are as to whether decision making authority hasBexceeded its powers, committed an error of law or committedbreach of principle of natural justice. It can examine as to whetheran authority has reached decision which no reasonable Tribunalwould have reached or has abused its powers. It is not for thecourt to determine whether particular policy or particularCdecision taken in the fulfilment of that policy is fair. The courtwill examine as to whether the decision of an authority is vitiatedby illegality, irrationality or procedural impropriety. Whileexamining the question of irrationality, the court will be guidedby the principle of Wednesbury. While applying the Wednesburyprinciple, the court will examine as to whether the decision of anDauthority is such that no authority properly directing itself onthe relevant law and acting reasonably could have reached it.[Paras 30, 31][788-D-E; 795-F-H; 796-A-B]

Tata Cellular v. Union of India (1994) 6 SCC 651 :[1994] 2 Suppl. SCR 122 Rashmi Metaliks Limited andEAnother v. Kolkata Metropolitan Development Authorityand Others (2013) 10 SCC 95 : [2013] 17 SCR 345 –relied on.

1.6 Applying the aforesaid principle, it can clearly be seenthat the decision of PSPCL dated 6th April 2018, cannot beFquestioned on the ground of illegality or procedural impropriety.The decision is taken in accordance with Section 11 of the saidAct and after following the principle of Natural Justice. The limitedarea that would be available for attack is as to whether the decisionis hit by the Wednesbury principle. Can it be said that the decisionGtaken by the authority is such that no reasonable person wouldhave taken it? No doubt, that the authority has also relied onClause 12.4.1 of the Allotment Agreement, however, that is notthe only ground on which the representation of EMTA is rejected.No doubt, that while considering EMTA’s representation, PSPCL

has referred to Clause 12.4.1 of the Allotment Agreement whichrequires the coal mines to be developed through contractors whowere selected through competitive bidding process, however,that is not the only ground on which the representation of EMTAis rejected. PSPCL decided to go in for competitive biddingprocess for the purpose of eliciting the best operator. It has furthernoticed that the composition with respect to capital/revenueinvestment is altogether different. Hence, the bidding parametershave entirely changed. policy decision to get the best operatorat the best price, cannot be said to be decision which noreasonable person would take in his affairs. In that view of thematter, the attack on the order/letter dated 6th April 2018, iswithout merit. The impugned judgment and order passed by theHigh Court is quashed and set aside. [Paras 32, 33 and 35][796-B-D, F-H; 797-B]

KPCL v. EMTA Coal Limited and Others ILR 2016 Kar4301; EMTA Coal Limited and Another v. West BengalPower Development Corporation (2016) 2 Cal LJ 424– referred to.

CIVIL APPELLATE JURISDICTION: Civil Appeal Nos.5823-5824 of 2021.

From the Judgment and Order dated 25.01.2019 of the High Courtof Punjab and Haryana at Chandigarh in CWP No.10055 of 2018 andCWP No.16245 of 2018 (O&M).

Sanjay Jain, Ms. Aishwarya Bhati, ASGs, Salman Khurshid, K.V. Vishvanathan, Abhishek Manu Singhvi, Dhruv Mehta, Mukul Rohatgi,Sr. Advs., Atul Nanda, Karan Bharihoke, Venkataraman R., Siddhant

ASharma, Ms. Sakshi Kotiyal, Zafar Khurshid, Asif Rashida, Ms. VanshajaShukla, Ms. Gunjan Chowksey, Shantanu Shrivastava, Abhishek Singh,Abhimanyu Bhandari, Sangram S. Saron, Ms. Roohe Hina Dua, EjazMaqbool, Ms. Akriti Chaubey, Ms. Neha Sahai Bharihoke, Gurmeet SinghMakkar, Ms. Ruchi Kohli, Ms. Archana Pathak Dave, Mohd. Akhil,Advs. for the Appearing parties.B

The Judgment of the Court was delivered by

B. R. GAVAI, J.

1. Leave granted.

C2. short question relating to interpretation of Section 11 of theCoal Mines (Special Provisions) Act, 2015 (hereinafter referred to asthe “said Act”) which is an outcome of the judgment of this Court in thecase of Manohar Lal Sharma v. Principal Secretary and Others[1](hereinafter referred to as “Manohar Lal Sharma-I”) and an ancillaryquestion pertaining to scope of judicial review of an administrative actionDof the State Authority arise for consideration in these appeals.

3. These appeals challenge the judgment and order passed by theDivision Bench of the High Court of Punjab and Haryana dated 25[th]January 2019, thereby allowing the civil writ petitions being CWP Nos.10055 and 16245 of 2018, filed by the respondent herein-EMTA CoalELimited (hereinafter referred to as “EMTA”) and holding that therespondent herein will have the first right of refusal in the matter oflending of Mining Lease.

4. The facts in the present case are not in dispute, which aretaken from appeals arising out of SLP(C) Nos. 9924-25 of 2019.F

5. The Punjab State Electricity Board (hereinafter referred to asthe “PSEB”) which is now known as Punjab State Power CorporationLimited (hereinafter referred to as the “PSPCL”), was proposed to beallotted Captive Coal Mines by the Union of India. On 16[th] February1999, PSEB issued tender, thereby inviting bids for the purpose ofGdevelopment of Captive Coal Mines. In the said bid, opened on 9[th]February 2000, the respondent-EMTA emerged successful. Accordingly,an agreement was entered into between PSEB and EMTA on 5[th] May2000, thereby creating Joint Venture Company called Panem CoalMines Limited (hereinafter referred to as “Panem”). The said agreement

H1 (2014) 9 SCC 516

provided the rights for mining of coal from the Coal Mines, transportingand delivery of it, wholly and exclusively to PSEB. Since EMTA being apartnership firm could not have been shareholder of the Joint VentureCompany, follow up Joint Venture Agreement was entered into on 21[st]March 2001 between PSEB, EMTA and the three partners of EMTA,incorporating the same terms and conditions as were found in the earlieragreement dated 5[th] May 2000. The same was intimated to the Union ofIndia by PSEB. Thereafter on 26[th] December 2001, Union of India allotteda Captive Coal Block being Pachhwara (Central Block) Coal Mine(hereinafter referred to as “Pachhwara Coal Block”) in the State ofJharkhand to PSEB. On 22[nd] February 2002, Union of India notified thesupply of coal from the Pachhwara Coal Block by the Joint VentureCompany (Panem) to the power stations of PSEB on an exclusive basisas an end use under Section 3(3)(a)(iii) of the Coal Mines (Nationalization)Act, 1973, in the official gazette. On 25[th] November 2004, MiningLease was executed between the Government of Jharkhand and Panemfor mining coal from the non-forest areas of Pachhwara Coal Block.Subsequently on 30[th] August 2006, Coal Purchase Agreement wasexecuted between Panem and PSEB, for the purpose of supply anddelivery of the coal from Pachhwara Coal Block to the power stationsof PSEB. On 6[th] January 2007, Mining Lease was issued by theGovernment of Jharkhand in favour of Panem, for mining coal evenfrom the forest areas of the Coal Block.

6. Till 2014, there was no problem. However, on 25[th] August 2014,this Court in the case of Manohar Lal Sharma-I, held that the entireallocation of Coal Blocks made between 1993 and 2011, except thosewhich were made through competitive bidding, were invalid, unfair,arbitrary and violative of Article 14 of the Constitution of India. On 24[th]September 2014, vide further orders passed in the case of ManoharLal Sharma v. Principal Secretary and Others[2], this Court quashedall Coal Block allocations made by the Central Government between1993 and 2011. This Court also accepted the submission of the learnedAttorney General that the allottees of the Coal Blocks other than thosecovered by the judgment and the four Coal Blocks covered by thesubsequent order, must pay an amount of Rs.295/- per metric ton of coalextracted as an additional levy. In pursuance of the judgment of thisCourt in the case of Manohar Lal Sharma-I, the Coal Mines (Special

AProvisions) Ordinance, 2014 (“First Ordinance”) came to be promulgatedon 21[st] October 2014. The Second Ordinance came to be promulgatedon 26[th] December 2014. Vide further orders passed by this Court inFebruary 2015 in contempt proceedings in the case of Manohar LalSharma-I, an additional levy at the rate of Rs.295/- per metric ton wasdirected to be paid by the prior allottees. Subsequently on 30[th] MarchB2015, the said Act was notified, repealing the Second Ordinance.

7. The Central Government vide Allotment Order dated 31[st] March2015, again allocated Pachhwara Captive Coal Block in favour of PSPCL.As PSPCL was facing acute shortage of coal for paddy season, andclosure of Coal Block had resulted in sudden loss of employment, itCentered into Transitory Agreement with EMTA on 30[th] June 2015. Asper Clause 1.1.20 of the Transitory Agreement, the said contract wasfor period of nine months or till Mine Developer-cum-Operator wasappointed by PSPCL through competitive bidding. On 23[rd] July 2015,PSPCL informed Union of India about the Transitory Agreement. OnD31[st] August 2015, PSPCL published Notice inviting Global Tender(hereinafter referred to as the “NIT”), inviting bids for the appointmentof Mine Developer-cum-Operator, for supply of coal.8. EMTA filed civil writ petition being CWP No. 26180 of 2015before the High Court of Punjab and Haryana, thereby challenging theEsaid NIT. On 10[th] February 2016, the High Court passed directionrestraining PSPCL from opening the financial bids till 29[th] February 2016.On 1[st] February 2018, CWP No. 26180 of 2015 was dismissed aswithdrawn by the High Court on the basis of the statement made byPSPCL that it shall consider the representation-cum-claims made byEMTA and it shall take decision thereon before finalizing the freshFtender process for allotment of Coal Mines at Pachhwara. Accordingly,a representation was made by EMTA on 20[th] February 2018, whichcame to be rejected by PSPCL on 6[th] April 2018. The same waschallenged by EMTA by filing civil writ petition being CWP No. 10055of 2018 before the High Court of Punjab and Haryana.G

9. It is to be noted that in the meantime, since the tender processwas held up due to various writ petitions, PSPCL passed Resolution on30[th] June 2017, to drop the Global Tender dated 31[st] August 2015. Duringthe pendency of CWP No. 10055 of 2018, on 30[th] April 2018, PSPCLissued fresh Request For Proposal (RFP), to invite Global Bids for theHselection of Mine Developer-cum-Operator for Pachhwara Coal Block

through competitive reverse bidding process. The same was challengedby EMTA by filing another civil writ petition being CWP No. 16245 of2018 before the High Court of Punjab and Haryana. PSPCL contestedthe same by filing written statement. Pursuant to RFP dated 30[th] April2018, the bids were opened on 10[th] August 2018. The lowest bid wassubmitted by DBL-VPR Consortium who is the appellant in appeal arisingout of SLP(C) Nos. 14384-14385 of 2021. Letter of Award was issuedin favour of the said DBL-VPR Consortium and Coal MiningAgreement was signed on 11[th] September 2018. By the impugnedjudgment and order dated 25[th] January 2019, the High Court allowed thecivil writ petitions as aforesaid. Being aggrieved thereby, the presentappeals.

10. Shri K.V. Viswanathan, learned Senior Counsel appearing onbehalf of appellant-PSPCL submitted that the High Court has grosslyerred in holding that EMTA had first right of refusal. The learnedSenior Counsel submitted that the prior allotment of the Coal Blocksbetween 1993 and 2011 was cancelled, since this Court had held inManohar Lal Sharma-I, that the said allotments were arbitrary, illegaland violative of Article 14 of the Constitution. He submitted that Section11 of the said Act clearly provides that it was the discretion of PSPCL toallow successful allottee to continue or not to continue with the existingcontracts, which were in existence prior to the fresh allotment in relationto coal mining operation. Shri Viswanathan submitted that only when theallottee decides to continue with the old contracts, the question ofconstitution of novation for residual term would arise. The learned SeniorCounsel submitted that in view of sub-section (2) of Section 11 of thesaid Act, when an allottee decides not to continue with the existingcontracts entered into by the prior allottees with third parties, all suchcontracts shall cease to be enforceable against the successful bidder orallottee in relation to Schedule I coal mines and the remedy of suchcontracting parties shall be against the prior allottees. The learned SeniorCounsel submitted that Section 16 of the said Act provides forcompensation for land as well as for mining infrastructure.

11. The learned Senior Counsel further submitted that in pursuanceof the directions issued by this Court for payment of Rs.295/- per metricton, it was the liability of EMTA to make the said payment amounting toRs.1400 crore. He submitted that however, EMTA had failed to makethe said payment resulting in huge loss to the public exchequer. Thelearned Senior Counsel further submitted that the findings of the High

ACourt with regard to the legitimate expectation of EMTA, are totallyunsustainable. The learned Senior Counsel submitted that the legitimateexpectation would not be applicable against the Statute. He furthersubmitted that PSPCL has taken policy decision to appoint MineDeveloper-cum-Operator by competitive bidding process. He submittedthat the policy is reasonable and as such, the legitimate expectation wouldBnot be applicable as against such reasonable policy. The learned SeniorCounsel relied on the judgment of this Court in the case of Kerala StateBeverages (M and M) Corporation Limited v. P.P. Suresh andOthers[3].

12. Shri Viswanathan further submitted that in view of ClauseC12.4 of the Allotment Agreement, PSPCL was bound to appoint MineDeveloper-cum-Operator only through competitive bidding process.He submitted that due to certain exigencies, PSPCL had entered into atransitory arrangement with EMTA for limited period of nine months.However, the same was disapproved by Union of India and Show-Cause Notice came to be issued to PSPCL. He therefore submitted thatDunderstanding the Clause 12.4 of the Allotment Agreement in correctperspective, PSPCL had decided to issue RFP, inviting Global Tendersfor appointing Mine Developer-cum-Operator.

13. Dr. A.M. Singhvi, learned Senior Counsel appearing on behalfof appellant-DBL-VPR Consortium, also supports the submissions madeEby Shri Viswanathan. He submitted that DBL-VPR Consortium hadparticipated in the Global Tender and is the lowest bidder. He submittedthat the High Court has grossly erred in holding that EMTA had rightof first refusal after the bidding process was complete and DBL-VPR’soffer was known to all. He therefore submitted that the impugnedjudgment and order passed by the High Court needs to be set aside.F

14. Shri Mukul Rohatgi, learned Senior Counsel appearing onbehalf of respondent-EMTA vehemently opposed the submissions madeon behalf of PSPCL. The learned Senior Counsel submitted that EMTAhas made huge investment by deploying specialized machinery for thepurpose of mining, construction of roads to the Mining Blocks and otherGinfrastructural developments. He submitted that since the contract wasentered into for period of 30 years, EMTA has legitimate expectationto continue till completion of the said period of 30 years. He thereforesubmitted that the High Court has rightly held that EMTA had legitimateright of first refusal.H3 (2019) 9 SCC 710

15. Shri Rohatgi submitted that the legislative intent behind Section11(1) of the said Act is to permit an existing contractor to continue if hisperformance is found to be satisfactory, and nothing adverse againstEMTA has been found. The learned Senior Counsel submitted thathowever, PSPCL, in an arbitrary and irrational manner, has denied theclaim of EMTA. He submitted that only when the performance of theexisting contractor is found to be unsatisfactory or there is somethingagainst him, the allottee would be entitled to take recourse to thecompetitive bidding.16. Shri Rohatgi would further submit that similar view has beentaken by the Karnataka High Court in the case of KPCL v. EMTA CoalLimited and Others[4]. He submitted that aggrieved by the judgment ofthe Karnataka High Court, KPCL had approached this Court. This Courtappointed Committee of Experts to determine the price and EMTA,who was also Mine Developer in the said matter, was permitted tocontinue with the operations at the rates fixed by the Experts Committee.He further submitted that from the letter dated 9[th] June 2020, addressedby the Joint Secretary, Ministry of Coal, Government of India, it wouldbe clear that it is also the stand of Union of India that Section 11 of thesaid Act prevails over Clause 12 of the Allotment Agreement. The learnedSenior Counsel submitted that the contention on behalf of PSPCL thaton account of Clause 12.4 of the Allotment Agreement, PSPCL wasbound to appoint Mine Developer-cum-Operator by competitive bidding,is unsustainable.

17. He further submitted that no prejudice is caused to PSPCL bythe impugned judgment and order. He submitted that the price is nowknown and what has been done by the High Court is only granting aright of first refusal. If EMTA is desirous to continue, it will have tocontinue at the same rate and therefore, no financial loss would be causedto PSPCL.

18. Shri Rohatgi further submitted that in the earlier round oflitigation, the High Court had recorded the statement of PSPCL that if arepresentation is made by EMTA, the same would be considered byPSPCL and decision would be taken on merits. He however submittedthat, perusal of the order passed by PSPCL dated 6[th] April 2018, wouldshow that the representation of EMTA has been decided in perfunctorymanner without giving any valid reasons.

A19. For appreciating the rival submissions, it will be necessary torefer to Section 11 of the said Act:-

“11. Discharge or adoption of third party contracts with priorallottees.—(1) Notwithstanding anything contained in any otherlaw for the time being in force, successful bidder or allottee, asBthe case may be, in respect of Schedule I coal mines, may elect,to adopt and continue such contracts which may be existing withany of the prior allottees in relation to coal mining operations andthe same shall constitute novation for the residual term or residualperformance of such contract:

Provided that in such an event, the successful bidder or allottee orthe prior allottee shall notify the nominated authority to includethe vesting of any contracts adopted by the successful bidder.

(2) In the event that successful bidder or allottee elects not toadopt or continue with existing contracts which had been enteredDinto by the prior allottees with third parties, in that case all suchcontracts which have not been adopted or continued shall ceaseto be enforceable against the successful bidder or allottee inrelation to the Schedule I coal mine and the remedy of suchcontracting parties shall be against the prior allottees.”

E20. It will not be out of place to mention that the said Act came tobe enacted in pursuance of the decision of this Court in the case ofManohar Lal Sharma-I, wherein this Court held that the allotment ofCoal Blocks between 1993 and 2011 was arbitrary, illegal and violativeof Article 14 of the Constitution. plain reading of Section 11 of the saidAct would reveal that it begins with non-obstante clause. It providesFthat successful bidder or allottee, as the case may be, in respect ofSchedule I coal mines, may elect, to adopt and continue such contractswhich may be existing with any of the prior allottees in relation to coalmining operations and the same shall constitute novation for the residualterm or residual performance of such contract.G21. The words “may elect” would clearly show that the legislaturehas given complete discretion to successful bidder or allottee to elect.The words “may elect” would also mean discretion not to elect. Onlyin the event, successful bidder or allottee decides to adopt and continuesuch contract, which may be existing with any of the prior allottees inrelation to coal mining operations, the same shall constitute novationH

for residual term or residual performance of such contract. In the event,the successful allottee does not elect to adopt or continue such contract,there is no question of novation for residual term or residual performanceof such contract. Perusal of sub-section (2) of Section 11 of the said Actwould also make it clear that, it provides that in the event successfulbidder or allottee elects not to adopt or continue with the existing contractwhich had been entered into by the prior allottees with third parties, allsuch contracts which have not been adopted or continued shall cease tobe enforceable against the successful bidder or allottee in relation toSchedule I coal mines and the remedy of such contracting parties shallbe against the prior allottees. It could thus be seen that on plain readingof sub-sections (1) and (2) of Section 11 of the said Act, it is clear thatthe successful allottee or bidder has complete freedom to decide as towhether he desires to continue or adopt any such existing contracts inrelation to coal mining operation. Only in the event he elects to adopt orcontinue with existing contracts, it shall constitute novation for residualterm or residual performance of such contracts. In the event thesuccessful bidder or allottee elects not to adopt or continue with theexisting contracts, all such contracts shall cease to be enforceable againstthe successful bidder or allottee in relation to Schedule I coal mines. Theonly remedy of such contracting parties shall be against the prior allottees.

22. The principle of giving plain and literal meaning to the wordsin Statute is well recognized for ages. Though there are number ofjudgments, we may gainfully refer to the judgment of this Court deliveredby Das, J. as early as 1955 in the case of Jugalkishore Saraf v. RawCotton Company Limited[5]:-

“The cardinal rule of construction of statutes is to read the statuteliterally, that is by giving to the words used by the legislature theirordinary, natural and grammatical meaning. If, however, such areading leads to absurdity and the words are susceptible of anothermeaning the Court may adopt the same. But if no such alternativeconstruction is possible, the Court must adopt the ordinary rule ofliteral interpretation.”

Though there are various authorities on the said subject, we donot wish to burden the present judgment by reproducing those. In ourconsidered view, if the words used in Section 11 of the said Act areconstrued in plain and literal term, they do not lead to an absurdity and as

5 [1955] 1 SCR 1369

Asuch, the rule of plain and literal interpretation will have to be followed.We find that in case the interpretation as sought to be placed by ShriRohatgi is to be accepted, it will do complete violence to the language ofSection 11 of the said Act. If it is held that under Section 11 of the saidAct, prior contractor is entitled to continue if his performance is foundto be satisfactory and if there is nothing against him, then it will beBproviding something in Section 11 of the said Act which the Statute hasnot provided for. It will also lead to making the words “may elect, toadopt and continue” redundant and otiose. It is settled principle of lawthat when, upon plain and literal interpretation of the words used in aStatute, the legislative intent could be gathered, it is not permissible toCadd words to the Statute. Equally, such an interpretation which wouldmake some terms used in Statute otiose or meaningless, has to beavoided. We therefore find that if an interpretation as sought to be placedby EMTA is to be accepted, the same would be wholly contrary to theprinciple of literal interpretation. There are number of authorities in supportof the said proposition. However, we refrain from referring to them inDview of the following observations made by this Court in recent judgmentin the case of Ajit Mohan and Others v. Legislative Assembly NationalCapital Territory of Delhi and Others[6]:-

“239. …..In our view if the proposition of law is not doubted bythe Court, it does not need precedent unless asked for. If aEquestion is raised about legal proposition, the judgment must berelatable to that proposition - and not multiple judgments…..”

As such, the contention in that regard is found to be without merit.

23. We find that the High Court has also clearly understood theFsaid legal position with regard to language used in Section 11 of the saidAct. When considering Section 62 of the Contract Act, 1872 read withSection 11 of the said Act, it has observed that the parties to contractmay willingly agree to substitute new contract or to rescind it or alterit. Having observed this, the High Court has, however, erred in observingthat EMTA had legitimate expectation. The High Court has observedGthus:-

“It could not therefore, have been left in the lurch particularlywhen the same mine was re-allocated to the Corporation suggestiveof continuity. Indeed, the respondents were very well within their

rights to reject the arrangement while granting considerationunder Section 11 if the performance of the petitioner wasunsatisfactory or if there was any other factor which theCorporation found relevant enough to discard the arrangementaltogether.”

24. We find that the reasoning adopted by the High Court is totallywrong. Merely because the Coal Mine Block was allotted to PSPCL,the same could not give any vested right in favour of EMTA, particularlyin view of the language used in Section 11 of the said Act. The reasoninggiven by the High Court that PSPCL was within its right to reject thearrangement if the performance of EMTA was unsatisfactory or if therewas any other factor which the Corporation found relevant enough todiscard the arrangement altogether, in our view, are totally erroneous.

25. Having observed in earlier para that in view of Section 11 ofthe said Act read with Section 62 of the Contract Act, 1872, the partiesto contract may willingly agree to substitute new contract or to rescindit or alter it, the High Court has erred in forcing PSPCL to continue withthe contract with EMTA, though it was not willing to do so.

26. The issue with regard to legitimate expectation has beenrecently considered by bench of this Court to which one of us (L.Nageswara Rao, J.) was member. After considering various authoritieson the issue, in the case of Kerala State Beverages (M and M)Corporation Limtied (supra), it was observed thus:-

“20. The decision-makers’ freedom to change the policy in publicinterest cannot be fettered by applying the principle of substantivelegitimate expectation. [Findlay, In re, 1985 AC 318 : (1984) 3WLR 1159 : (1984) 3 All ER 801 (HL)] So long as the Governmentdoes not act in an arbitrary or in an unreasonable manner, thechange in policy does not call for interference by judicial reviewon the ground of legitimate expectation of an individual or agroup of individuals being defeated.”

27. Shri Viswanathan has relied on the judgment of the CalcuttaHigh Court in the case of EMTA Coal Limited and Another v. WestBengal Power Development Corporation[7]. Per contra, Shri Rohatgihas relied on the judgment of the Karnataka High Court in KPCL v.EMTA Coal Limited (supra). We do not desire to go into the issue of

Acorrectness of either of the judgments inasmuch as we are independentlyconsidering the issue and examining the correctness of the judgmentimpugned before us.

28. Insofar as the reliance placed by Shri Rohatgi on the letter ofUnion of India dated 9[th] January 2020 is concerned, there can be noBdoubt that between Section 11 of the said Act and Clause 12.4.1 of theAllotment Agreement, Section 11 of the said Act would prevail. Thequestion is, whether, Section 11 of the said Act mandates the successfulallottee to continue with the existing contract. The answer, obviously, isno. In any case, the claim of EMTA is not rejected by PSPCL solely on

the ground of Clause 12.4.1 of the Allotment Agreement.C

29. That leaves us with the last submission of Shri Rohatgi. It ishis submission that as per the statement made by PSPCL before theHigh Court in first round of litigation, it was to consider the representationof EMTA in reasonable and just manner. He however submitted thatDthe order dated 6[th] April 2018, was passed by PSPCL in totally arbitraryand irrational manner.

30. The order passed by PSPCL dated 6[th] April 2018, is an orderpassed by an authority of the State in exercise of its executive functions.The scope of judicial review of administrative action has been wellEcrystalised by this Court in the judgment of Tata Cellular v. Union ofIndia[8]. The judgment in the case of Tata Cellular (supra), has beensubsequently followed in number of judgments of this Court. This Courtin the case of Rashmi Metaliks Limited and Another v. KolkataMetropolitan Development Authority and Others[9], has observed thatthe decision which holds the field with regard to issue of judicial reviewFof an administrative action, is the judgment in the case of Tata Cellular(supra), by three-Judge Bench. The Court has held that the rule ofprecedent mandates that this exposition of law be followed and appliedby coordinate or co-equal Benches and certainly by all smaller Benchesand subordinate courts. This Court has further deprecated the practiceGof referring to catena of judgments following the said pronouncement oflaw. We therefore refrain from referring to the subsequent judgment,and reproduce the relevant observations in Tata Cellular (supra), whichread thus:-

8 (1994) 6 SCC 651H9 (2013) 10 SCC 95

PUNJAB STATE POWER CORPORATION LTD. v. EMTA COAL LTD.[B. R. GAVAI, J. ]

“70. It cannot be denied that the principles of judicial review wouldapply to the exercise of contractual powers by Government bodiesin order to prevent arbitrariness or favouritism. However, it mustbe clearly stated that there are inherent limitations in exercise ofthat power of judicial review. Government is the guardian ofthe finances of the State. It is expected to protect the financialinterest of the State. The right to refuse the lowest or any othertender is always available to the Government. But, the principleslaid down in Article 14 of the Constitution have to be kept in viewwhile accepting or refusing tender. There can be no question ofinfringement of Article 14 if the Government tries to get the bestperson or the best quotation. The right to choose cannot beconsidered to be an arbitrary power. Of course, if the said poweris exercised for any collateral purpose the exercise of that powerwill be struck down.

71. Judicial quest in administrative matters has been to find theright balance between the administrative discretion to decidematters whether contractual or political in nature or issues of socialpolicy; thus they are not essentially justiciable and the need toremedy any unfairness. Such an unfairness is set right by judicialreview.

72. Lord Scarman in Nottinghamshire County Council v.Secretary of State for the Environment [1986 AC 240, 251 :(1986) 1 All ER 199] proclaimed:

“ ‘Judicial review’ is great weapon in the hands of the judges;but the judges must observe the constitutional limits set by ourparliamentary system upon the exercise of this beneficialpower.”

Commenting upon this Michael Supperstone and James Goudie intheir work Judicial Review (1992 Edn.) at p. 16 say:

“If anyone were prompted to dismiss this sage warning as amere obiter dictum from the most radical member of the higherjudiciary of recent times, and therefore to be treated as anidiosyncratic aberration, it has received the endorsement ofthe Law Lords generally. The words of Lord Scarman wereechoed by Lord Bridge of Harwich, speaking on behalf of theBoard when reversing an interventionist decision of the NewZealand Court of Appeal in Butcher v. Petrocorp ExplorationLtd. 18-3-1991.”

ABC

73. Observance of judicial restraint is currently the mood inEngland. The judicial power of review is exercised to rein in anyunbridled executive functioning. The restraint has twocontemporary manifestations. One is the ambit of judicialintervention; the other covers the scope of the court’s ability toquash an administrative decision on its merits. These restraintsbear the hallmarks of judicial control over administrative action.

74. Judicial review is concerned with reviewing not the merits ofthe decision in support of which the application for judicial reviewis made, but the decision-making process itself.

75. In Chief Constable of the North WalesPolice v. Evans [(1982) 3 All ER 141, 154] Lord Brightman said:“Judicial review, as the words imply, is not an appeal from adecision, but review of the manner in which the decision wasmade.

Judicial review is concerned, not with the decision, but withthe decision-making process. Unless that restriction on thepower of the court is observed, the court will in my view, underthe guise of preventing the abuse of power, be itself guilty ofusurping power.”

In the same case Lord Hailsham commented on the purpose ofthe remedy by way of judicial review under RSC, Ord. 53 in thefollowing terms:

“This remedy, vastly increased in extent, and rendered, over along period in recent years, of infinitely more convenient accessthan that provided by the old prerogative writs and actions fora declaration, is intended to protect the individual against theabuse of power by wide range of authorities, judicial, quasi-judicial, and, as would originally have been thought when I firstpractised at the Bar, administrative. It is not intended to takeaway from those authorities the powers and discretions properlyvested in them by law and to substitute the courts as the bodiesmaking the decisions. It is intended to see that the relevantauthorities use their powers in proper manner (p. 1160).”

PUNJAB STATE POWER CORPORATION LTD. v. EMTA COAL LTD.[B. R. GAVAI, J. ]

In R. v. Panel on Take-overs and Mergers, ex p Datafinplc [(1987) 1 All ER 564] , Sir John Donaldson, M.R. commented:

“An application for judicial review is not an appeal.”

In Lonrho plc v. Secretary of State for Trade andIndustry [(1989) 2 All ER 609], Lord Keith said:

“Judicial review is protection and not weapon.”

It is thus different from an appeal. When hearing an appeal theCourt is concerned with the merits of the decision under appeal.In Amin, Re [Amin v. Entry Clearance Officer, (1983) 2 All ER864] , Lord Fraser observed that:

“Judicial review is concerned not with the merits of decisionbut with the manner in which the decision was made…. Judicialreview is entirely different from an ordinary appeal. It is madeeffective by the court quashing the administrative decisionwithout substituting its own decision, and is to be contrastedwith an appeal where the appellate tribunal substitutes its owndecision on the merits for that of the administrative officer.”

76. In R. v. Panel on Take-overs and Mergers, ex p in Guinnessplc [(1990) 1 QB 146 : (1989) 1 All ER 509] , Lord Donaldson,M.R. referred to the judicial review jurisdiction as being supervisoryor ‘longstop’ jurisdiction. Unless that restriction on the power ofthe court is observed, the court will, under the guise of preventingthe abuse of power, be itself guilty of usurping power.

77. The duty of the court is to confine itself to the question oflegality. Its concern should be:

1. Whether decision-making authority exceeded its powers?

2. Committed an error of law,

3. committed breach of the rules of natural justice,

4. reached decision which no reasonable tribunal would havereached or,

5. abused its powers.

Therefore, it is not for the court to determine whether particularpolicy or particular decision taken in the fulfilment of that policy isfair. It is only concerned with the manner in which those decisionshave been taken. The extent of the duty to act fairly will vary

from case to case. Shortly put, the grounds upon which anadministrative action is subject to control by judicial review canbe classified as under:

(i) Illegality : This means the decision-maker must understandcorrectly the law that regulates his decision-making power andmust give effect to it.

(ii) Irrationality, namely, Wednesbury unreasonableness.

(iii) Procedural impropriety.

The above are only the broad grounds but it does not rule outaddition of further grounds in course of time. As matter of fact,in R. v. Secretary of State for the Home Department, exBrind [(1991) 1 AC 696], Lord Diplock refers specifically to onedevelopment, namely, the possible recognition of the principle ofproportionality. In all these cases the test to be adopted is that thecourt should, “consider whether something has gone wrong of anature and degree which requires its intervention”.

78. What is this charming principle of Wednesburyunreasonableness? Is it magical formula? In R. v. Askew [(1768)4 Burr 2186 : 98 ER 139] , Lord Mansfield considered the questionwhether mandamus should be granted against the College ofPhysicians. He expressed the relevant principles in two eloquentsentences. They gained greater value two centuries later:

“It is true, that the judgment and discretion of determining uponthis skill, ability, learning and sufficiency to exercise and practisethis profession is trusted to the College of Physicians and thisCourt will not take it from them, nor interrupt them in the dueand proper exercise of it. But their conduct in the exercise ofthis trust thus committed to them ought to be fair, candid andunprejudiced; not arbitrary, capricious, or biased; much less,warped by resentment, or personal dislike.”

79. To quote again, Michael Supperstone and James Goudie; intheir work Judicial Review (1992 Edn.) it is observed at pp. 119to 121 as under:

“The assertion of claim to examine the reasonableness beendone by public authority inevitably led to differences of judicialopinion as to the circumstances in which the court shouldintervene. These differences of opinion were resolved in two

PUNJAB STATE POWER CORPORATION LTD. v. EMTA COAL LTD.[B. R. GAVAI, J. ]

landmark cases which confined the circumstances forintervention to narrow limits. In Kruse v. Johnson [(1898) 2QB 91 : (1895-9) All ER Rep 105] specially constituteddivisional court had to consider the validity of bye-law madeby local authority. In the leading judgment of Lord Russell ofKillowen, C.J., the approach to be adopted by the court wasset out. Such bye-laws ought to be ‘benevolently’ interpreted,and credit ought to be given to those who have to administerthem that they would be reasonably administered. They couldbe held invalid if unreasonable : Where for instance bye-lawswere found to be partial and unequal in their operation asbetween different classes, if they were manifestly unjust, ifthey disclosed bad faith, or if they involved such oppressive orgratuitous interference with the rights of citizens as could findno justification in the minds of reasonable men. Lord Russellemphasised that bye-law is not unreasonable just becauseparticular judges might think it went further than was prudentor necessary or convenient.In 1947 the Court of Appeal confirmed similar approach for thereview of executive discretion generally in Associated ProvincialPicture Houses Ltd. v. Wednesbury Corpn [(1948) 1 KB 223 :(1947) 2 All ER 680] . This case was concerned with complaintby the owners of cinema in Wednesbury that it was unreasonableof the local authority to licence performances on Sunday onlysubject to condition that ‘no children under the age of 15 yearsshall be admitted to any entertainment whether accompanied byan adult or not’. In an extempore judgment, Lord Greene, M.R.drew attention to the fact that the word ‘unreasonable’ had oftenbeen used in sense which comprehended different grounds ofreview. (At p. 229, where it was said that the dismissal of teacherfor having red hair (cited by Warrington, L.J. in Short v. PooleCorpn. [(1926) 1 Ch 66, 91 : 1925 All ER Rep 74] , as an exampleof ‘frivolous and foolish reason’) was, in another sense, takinginto consideration extraneous matters, and might be sounreasonable that it could almost be described as being done inbad faith; see also R. v. Tower Hamlets London BoroughCouncil, ex p Chetnik Developments Ltd. [1988 AC 858, 873 :(1988) 2 WLR 654 : (1988) 1 All ER 961] (Chapter 4, p. 73,supra). He summarised the principles as follows:

‘The Court is entitled to investigate the action of the localauthority with view to seeing whether or not they have takeninto account matters which they ought not to have taken intoaccount, or, conversely, have refused to take into account orneglected to take into account matter which they ought to takeinto account. Once that question is answered in favour of thelocal authority, it may still be possible to say that, although thelocal authority had kept within the four corners of the matterswhich they ought to consider, they have nevertheless come toa conclusion so unreasonable that no reasonable authority couldever have come to it. In such case, again, I think the courtcan interfere. The power of the court to interfere in each caseis not as an appellate authority to override decision of thelocal authority, but as judicial authority which is concerned,and concerned only, to see whether the local authority hascontravened the law by acting in excess of the power whichParliament has confided in them.’

This summary by Lord Greene has been applied in countlesssubsequent cases.

“The modern statement of the principle is found in passagein the speech of Lord Diplock in Council of Civil ServiceUnions v. Minister for Civil Service [(1985) 1 AC 374 : (1984)3 All ER 935 : (1984) 3 WLR 1174] :

‘By “irrationality” I mean what can now be succinctly referredto as “Wednesbury unreasonableness”. (AssociatedProvincial Picture Houses Ltd. v. Wednesbury Corpn.[(1948) 1 KB 223 : (1947) 2 All ER 680]) It applies to decisionwhich is so outrageous in its defiance of logic or of acceptedmoral standards that no sensible person who had applied hismind to the question to be decided could have arrived at.’”

80. At this stage, The Supreme Court Practice, 1993, Vol. 1, pp.849-850, may be quoted:

“4. Wednesbury principle.— decision of public authoritywill be liable to be quashed or otherwise dealt with by anappropriate order in judicial review proceedings where the courtconcludes that the decision is such that no authority properlydirecting itself on the relevant law and acting reasonably could

have reached it. (Associated Provincial Picture HousesLtd. v. Wednesbury Corpn. [(1948) 1 KB 223 : (1947) 2 AllER 680] , per Lord Greene, M.R.)”

81. Two other facets of irrationality may be mentioned.

(1) It is open to the court to review the decision-maker’sevaluation of the facts. The court will intervene where thefacts taken as whole could not logically warrant the conclusionof the decision-maker. If the weight of facts pointing to onecourse of action is overwhelming, then decision the otherway, cannot be upheld. Thus, in Emma Hotels Ltd. v. Secretaryof State for Environment [(1980) 41 P & CR 255] , theSecretary of State referred to number of factors which ledhim to the conclusion that non-resident’s bar in hotel wasoperated in such way that the bar was not an incident of thehotel use for planning purposes, but constituted separate use.The Divisional Court analysed the factors which led theSecretary of State to that conclusion and, having done so, set itaside. Donaldson, L.J. said that he could not see on what basisthe Secretary of State had reached his conclusion.

(2) decision would be regarded as unreasonable if it isimpartial and unequal in its operation as between differentclasses. On this basis in R. v. Barnet London BoroughCouncil, ex p Johnson [(1989) 88 LGR 73] the conditionimposed by local authority prohibiting participation by thoseaffiliated with political parties at events to be held in theauthority’s parks was struck down.”

31. It could thus be seen that while exercising powers of judicialreview, the Court is not concerned with the ultimate decision but thedecision-making process. The limited areas in which the court can enquireare as to whether decision-making authority has exceeded its powers,committed an error of law or committed breach of principle of naturaljustice. It can examine as to whether an authority has reached decisionwhich no reasonable Tribunal would have reached or has abused itspowers. It is not for the court to determine whether particular policy ora particular decision taken in the fulfilment of that policy is fair. Thecourt will examine as to whether the decision of an authority is vitiatedby illegality, irrationality or procedural impropriety. While examining thequestion of irrationality, the court will be guided by the principle of

AWednesbury. While applying the Wednesbury principle, the court willexamine as to whether the decision of an authority is such that no authorityproperly directing itself on the relevant law and acting reasonably couldhave reached it.

32. Applying the aforesaid principle, it can clearly be seen that theBdecision of PSPCL dated 6[th] April 2018, cannot be questioned on theground of illegality or procedural impropriety. The decision is taken inaccordance with Section 11 of the said Act and after following theprinciple of Natural Justice. The limited area that would be available forattack is as to whether the decision is hit by the Wednesbury principle.Can it be said that the decision taken by the authority is such that noCreasonable person would have taken it? No doubt, that the authority hasalso relied on Clause 12.4.1 of the Allotment Agreement, however, thatis not the only ground on which the representation of EMTA is rejected.No doubt, that while considering EMTA’s representation, PSPCL hasreferred to Clause 12.4.1 of the Allotment Agreement which requires

Dthe coal mines to be developed through contractors who were selectedthrough competitive bidding process, however, that is not the only groundon which the representation of EMTA is rejected. It will be relevant torefer to the following observations in the order passed by PSPCL dated6[th] April 2018:-

E“Moreover, there is no reason why competitive bidding processfor the purposes of eliciting the best operator be not preferred.Needless to mention that as the composition with respect to capital/revenue investment is altogether different, hence the biddingparameters have entirely changed.”

F33. It could thus be seen that PSPCL has decided to go in forcompetitive bidding process for the purpose of eliciting the best operator.It has further noticed that the composition with respect to capital/revenueinvestment is altogether different. Hence, the bidding parameters haveentirely changed. It has further referred to the decision of this Courtwherein it has been held that the allotment should be through competitiveGbidding process. We ask question to ourselves, as to whether the saidreasoning can be said to be irrational or arbitrary. policy decision toget the best operator at the best price, cannot be said to be decisionwhich no reasonable person would take in his affairs. In that view of thematter, the attack on the order/letter dated 6[th] April 2018, is withoutmerit.H

34. Insofar as the contention of Shri Rohatgi with regard to thehuge investment being made by EMTA is concerned, the said Act itselfprovides remedy for seeking compensation apart from the other remediesthat are available in law. In that view of the matter, we are not impressedwith the arguments advanced in that behalf.

35. In the result, the impugned judgment and order passed by theHigh Court of Punjab and Haryana is unsustainable in law. The appealsare therefore allowed and the judgment and order passed by the HighCourt of Punjab and Haryana dated 25[th] January 2019, is quashed andset aside. Pending I.A (s), if any, shall stand disposed of accordingly.

Divya Pandey

Appeals allowed.