An Insight On Coalgate Scam | India’s Largest Scam
Keywords – Coalgate Scam, UPA Government, Coal Block Scam, Scams, CAG, Indian Exchequer
Abstract
The Coalgate scam or the Coal block scam is one of the largest scam in history of India which was uncovered by a draft report of the CAG which revealed irregularities in coal allocation. The allocation was carried out by the UPA government which was arbitrarily done without a competitive bidding process not giving a fair chance to general public to take part in the allocation process. What usually happens is that the coal blocks are auctioned and the highest bidder gets the mining rights but in this case the UPA government had completely skipped the bidding process and had favoured few public and private companies.
This incident had taken place between the years 2004 and 2009 and had caused a loss of RS 1.86 lakh crore to the Indian Exchequer. This scam played an important role in uncovering the arbitrariness and corrupt motives of the government and in turn led to a very important amendment by the Supreme Court in the Coal Mines (Nationalization) Act, 1973 in 2010 making the process of competitive bidding mandatory in allocation of coal in the coming future.
Introduction
In The Coalgate scam which is known to be one of the largest scam in India the UPA government was accused of allocating coal blocks without competitive bidding procedure which is required to be carried out by the concerned government authorities. This had taken place between the years 2004 and 2009. In this procedure the coal blocks are opened for auctioning and the highest bidder gets the possession for these blocks. The revenue acquired by these sales goes to the government.
The question that was raised is whether the coal block allocation done by the government was within the legal frame work? It came into assessment in the year 2012 after the then comptroller and auditor general’s (CAG) allegation against the then government for wrongful allocation of coal blocks to private and public enterprises. From total of 216 coal blocks that were allocated between the year 1993-2010, 194 coal blocks were allocated to those public and private enterprises for captive use.
Questions were raised to the government authorities in the CAG’s report regarding arbitrary administrative decisions while allocations of the coal blocks and on not following the particular procedure of competitive bidding.
Allegations Of The CAG
The CAG argued that the national treasury suffered great losses and few public and private enterprises enjoyed some enormous gains as the government’s policy of allocation of these coal blocks was non transparent. The democracy of a country functions on the transparency of the government in power and its foundation trembles when the general public is kept under the veil of non-transparency. Transparency is established when the general population is made aware of every action of the government authorities and have the means to criticize the actions in case there is an aggravation by those actions.
CAG alleged that despite there being opportunity to bring in transparency the government did not follow the process of competitive bidding. It was also alleged that a few politicians made provision for allotment to certain private enterprises raising questions about capitalism. According to the report some private entities got more coal blocks than required for their captive operations and many companies were reported to be selling coal meant for internal use in the open market due to surplus stock to earn some profit. Many enterprises were found to be hoarding on these coal blocks for several years.
Estimation Of The Loss of The Exchequer
The CAG contended in its report an approximate loss of Rs. 10.6 lakh crores suffered by the exchequer whereas the final report tabled in Parliament displayed that the figure was around Rs. 1.86 lakh crore.
Legal Aspects Of The Coalgate Scam Case
The Coalgate Scam Had Certain Legal Aspects Attcahed To It Which Are as Follows –
1. Ultra vires authority from Government
The government of India in the coal block case was questioned for going beyond their powers as given by the statutes which govern the coal and natural resources mining in India. The government wrongly took initiative of allocation of coal blocks without any auction. Neither of the three Acts namely, Mines and Minerals (Development and Regulation) Act, 1957, Mineral Concession Rules, 1960 and the Coal Mines (Nationalization) Act, 1973 gave the government in office the power to allocate the coal blocks which were contended by the counsel of the petitioner in the apex court. The Supreme Court accepted the contention while observing that any of these statutes do not provide a proper procedure for the allocation of coal blocks.
2. Invalidity but non-cancellation of allocations
In the case of Manohar Lal Sharma v. The Principle Secretary & Others it was decided by the Supreme Court where the petitioner was successful in proving that the government in action wrongfully allocated coal blocks without auction as a mode of biasness. Those accused were charged under the provisions of the Prevention of Corruption Act, 1988. The Supreme Court gave a verdict that the allocations were contrary to fairness and objected to the government actions to favoring companies in this process. Eventually the allegations were declared illegal by the Apex court but the contracts of the companies could not be cancelled as some of those companies had already began working on those blocks. The cancellation would have caused a loss to companies who initiated the operations.
3. Administrative decision making
There is a special field in law of India known as administrative decision making which does not associate itself with any of the exclusive statutes but has been developed through the evolution of other statutes and judicial pronouncements. The committee of screening was constituted for taking decisions regarding allocation of coal blocks. This whole process was supposed to be an administrative process which needed to be dispensed under provisions of concerned statutes while following the competitive bidding procedure as part of the administrative arrangements. This whole process of allocation began to be monitored from the year 2010 at the time when the Amendment Bill of Mines and Minerals (Development and Regulation) Act, 1957 came into force while giving provisions of framework to allocate coal blocks through the process of competitive bidding.
4. Transparency improvement through administrative backing
The law usually govern those rules and regulation which are sanctioned by a statutory provision but on the other hand does not deal with any non-existent rules and regulations. It is non-functional on presumed rules unless and until it is exclusively stated in the statute governing orders. The process of coal allocation was completely non-transparent with absence of competitive bidding to provide a fair chance to every enterprise and to make them aware of the availability. The presence of administrative backing through a statute would lead to improvement in transparency with the committee’s obligation in dispensing of administrative decisions according to the authority as stated in the statute. Any action which surpasses its authority would lead to imposition of legal sanctions on the concerned authority which would prevent them from diverting from assigned functions.
5. Arbitrariness
The whole process of allocation of coal blocks has been a huge example of arbitrary action from the governments’ side. Arbitrariness is defined as the practice of decision taking without any reasonability and exclusively on personal pleasure. The doctrine of arbitrariness as stated under Article 14 of the Constitution of India has been violated here by the government authorities. There not being a statutory law in favour of competitive bidding is immaterial as Article 14 does not give support to arbitrary administrative action as it is a violation of the rule of law.
Every act of administration is subjected to an arbitrariness test where the concerned authority is supposed to give a proof of its action within the reasonableness sanctioned by the Constitution of India and must not be supporting of any form of biases in the process of decision making. In this case the government has very evidently favoured some private and public enterprises over others which is a clear indication of arbitrary action on their behalf.
Coal Block Case Judgement
- Delhi court had convicted the former secretary of coal named HC Gupta and former joint secretary in the ministry of coal (MoC) named KS Kropha in charge of cheating, criminal conspiracy as well as corruption in the coal scam case which is related to the irregular allocation of Lohara East coal block in Maharashtra. A special judge Arun Bhardawaj had also convicted Grace Industries limited (GIL) along with the director Mukesh Gupta in charge of cheating and criminal conspiracy. Then the matter had been poster for 4th of August when the court had heard the arguments on the duration of sentence to be awarded to the 4 people who were convicted.
- HC Gupta had previously been convicted in three other coal scam cases and those appeals were yet pending before the Delhi High Court and he was on bail during that period.
- What the CBI had to say was that during the years between 2005-2011 the accused person had hatched a criminal conspiracy and had cheated the Ministry of Coal and the Indian Government by fraudulently and dishonestly inducing the MoC to allocate the Lohara East Coal Block favouring GIL on the basis of false information regarding net worth, equipment, capacity and regarding status of procurement and installation of plant.
- It was stated by the CBI that’s the company in its application had claimed that its net worth was ₹ 120 crore whereas the actual net worth was only ₹3.3 crore and the company has also falsified its existing capacity as 1, 20,000 TPA while it being only 30,000 TPA.
- The Supreme Court off India on 25th of August 2014 had cancelled the entire coal block allocation.
LEGAL CHANGES POST SCAM
Amendment to Coal Mines (Nationalization) Act, 1973
The main purpose to open tenders for any project by the government is to invite a private or public authority to invest in the business of the government making sure that maximum output is provided in order to carter the needs of the entire population. Every action of the government is said to be directed towards public good. The amendment to the Coal Mines (Nationalization) Act, 1973 would give invitation to domestic as well as international companies to take part in the coal allocation process.
The amendment to the statute would make auction compulsory for coal block allocations from 2010 and would leave no scope for bias or arbitrary action from administrative authorities. This would create a competitive spirit in domestic as well as international companies in acquiring the blocks this would in turn benefit the country as the bidding would be done on the factor as to who can extract more from the particular mine. The coal which is extracted could be sold while competing with other monopoly bases companies in India.
Conclusion
The Coalgate Scam has clearly been a negative mark for UPA government in India from 2004-2014 by showing various wrong doings of the ruling party. This scam shows the scandal of the government during the allocation of coal blocks during its tenure and how fraudulently without any bidding process the government had allocated the coal blocks to various public and private entities.
In this case the arbitrariness and partiality of the government along with their actual authority was put to question by the Auditor and Comptroller General of India in his report. This had led to an amendment in 2010 in the Coal Mines (Nationalization) Act, 1973 making competitive bidding a norm in the process of allocation. The Supreme Court had observed the legal implications of the scam and had decided the matter in favour of the petitioner. What the takeaway is that there will continue to be a major impact on government action framework and fair treatment will be served to all people.
Author – Aleze K
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