M-S ASHOKA SMOKELESS COAL IND. P. LTD. AND ORS. v. UNION OF INDIA AND ORS

Citation: [2006] SUPP. 9 S.C.R. 954

Court: Supreme Court of India

Bench: S.B. SINHA, P.P. NAOLEKAR

Case summary

M-S ASHOKA SMOKELESS COAL IND. P. LTD. AND ORS. v. UNION OF INDIA AND ORS.pdf

Judgment text

M/S ASHOKA SMOKELESS COAL IND. P. LTD. AND ORS. v. UNION OF INDIA AND ORS. DECEMBER 1, 2006 [S. B. SINHA AND P. P. NAOLEKAR, JJ.

] Coal-Pricefi:xation-Ofessential commodity (coal)-Coking coal mines and coal mines subjectedto nationalisation-Subsequntly price and distribution thereof deregulated by Government-Price fixation left to coal companies- Introduction of Scheme of £-Auction-Agencies of the Central Government and the State Governments kept out ofthe purview ofE-Auction-Forpromotion ofmanufacture ofspecial smokeless fuel, advertisements inviting entrepreneurs to manufacture the same, assuring them to provide them coal and the manufacturing technology-Pursuant thereto, plants for manufacturing smokeless coal set up-Validity of the scheme of £-Auction-Held: The methodology for allocation ofcoal to a bidder of£-Auction is in equitable, irrational andfortuitous-Central Government while exercising its power under Colliery Central Order, could not have issued any direction in the garb of disposal of coal by wcry of £-Auction-The Coal Companies were under a constitutional obligation to fix a reasonable price-While fi:xing a fair and reasonable price in terms ofEssential Commodities Act, it is necessary that price is actually fixed and not kept viable-Price fixation of an essential commodity is determined on the touch stone ofpublic interest-While adopting a policy decision as regards mode of determination ofprice of coal either fixed on variable, the coal companies were bound to keep in mind social and .

economic aspect of the matter-Although a reasonable profit is permissible, but profiteering would not be-Scheme of£-Auction is also ultra vires Article 14-Central Government in collaboration with the coal companies would be at liberty to evolve a policy which would meet the requirements ofpublic interest vis-a-vis the interest ofconsumers ofcoal-Central Government also advised to widen definition of coal so as to include the smokeless coal- Colliery Control Order, 1945-Colliery Control Order, 2000-Essential Commodities Act, 1955-Coking Coal Mines (Nationalization) Act, 1972- Coal Mines (Nationalization) Act, 1973-Constitution ofIndia, 1950-Part IV and Articles 14 and I9(6). ASHOKA SMOKELESS COAL IND. P. LTD. v. U. 0. 1.

955 Constitution of India, 1950: Part JV-Article 39 (b)--Directive Principles-Violation-Effect of-- On pricefixation ofessential commodities-Held: Though violation ofDirective Principles would not be ultra vires, but they would from a relevant consideration for determining a question of price fixation of essential commodity. Directive Principles-Role of-Held: They provide for a guidance to interpretation ofFundamental Rights ofa citizen as also the statut01y rights. ' Judicial Review-Permissibility of--ln cases ofpolicy decision-Held: Policy decision is a subject matter ofjudicial review-But such policy on the part ofexecutive of Central Government must be strictly construed in terms ofArticle 77--C_onstitution ofIndia, 1950-Article 77.

Doctrines: Doctrine oflegitimate expectation-Applicability of Doctrine ofreasonableness-Applicability of Doctrine of Promissory Estoppel--Applicability of Doctrine ofpublic necessity-Applicability of Words and Phrases: 'Business'--Meaning of Production, distribution, supply and price of coal were controlled and regulated under the Colliery Control Order, 1945 framed under Defence of India Rules. The Order was continued under the Essential Commodities Act, 1955. Coking Coal Mines and Coal Mines were subjected to nationalization in terms of Coking Coal Mines (Nationalization) Act, 1972 and Coal Mines (Nationalization) Act, 1973 with a view to give effect to the provisions of Article 39 (b) of the Constitution of India. After the nationalization, consumers of coal were categorized as Core Sector and Non-core Sector. Linkage system was evolved initially for Core Sector and then also for Non-Core consumers.

The linkage was to be determined on the basis of availability of coal, requirements thereof in respect of each industry as certified by the State, and the capacity of the railways to transport coal. Government issued several Notifications from time to time leading to deregulation as regard price and distribution of coal. By Colliery Control Order, 2000, Order of 1945 was repealed and thereby control and regulation over coal as was prevailing under the 1945 Order, was done away with. By reason of 2000 Order, Central Government, apart from certain other statutory functions to be performed by coal controller, retained the power to issue directions for regulating disposal of stocks of coal. Coal India became entitled to determine the 'I price. Coal India discontinued grant of fresh linkages to Non-core Sector consumers due to mismatch in respect of demand and availability ofcoal. Thus the consumers having no linkages were constrained to purchase coal from black market at a higher price.

A resolution was passed to remove the difference between Open Sales Scheme price and the price of the linked consumers. To prevent misuse of linkage, verification of the units of the linked consumer was undertaken. The Standing committee on coal and Steel found that there were bogus companies not using coal and black marketing it. A new scheme known as E-Auction was made purportedly to meet the liberalization policy of the Central Government in regard to import of coal and opening of private coal mines and to provide pragmatic and transparent system of distribution of coal. The agencies of the Central Government and the State Governments were kept out of the purview of E-Auction. Central Government asked Coal India Ltd.

to take urgent necessary actions to popularize the technology given by CFRI by giving more linkages to the intending entrepreneurs and also encourage stepping up of production of SSR and Briquetts in order to ensure availability of alternate fuel for domestic consumption. Advertisements were published inviting entrepreneurs to manufacture special smokeless fuel and assuring to provide them coal and the manufacturing technology. Pursuant to such invitation the entrepreneurs set up plants for manufacturing smokeless coal. The scheme of E-Auction was challenged before Guahati and Madhya Pradesh High Courts. Guahati High Court set aside the scheme holding that the method adopted for the same was arbitrary in nature; and that the Chairman of Coal India Ltd. had no authority to issue such direction or to frame such a Scheme. Madhya Pradesh High Court held the Scheme to be valid and legal. ASHOKA SMOKELESS COAL IND. P. LTD. v. U. 0. 1.

957 Writ Petition was also filed before Calcutta High Court questioning the validity of sponsorship Scheme and the same was allowed holding that mini classification on the basis of sponsorship system was ultra vires the Constitution of India. Appeals were filed before this Court against the judgments of the three High Courts. In the meantime several Writ Petitions were filed before different , 1 High Courts questioning the validity of E-Auction. Those Writ Petitions were transferred to this Court. Disposing of the appeals and transferred cases, the Court HELD: 1. 1. The methodology for allocation of coal to a bidder of E-Auction is inequitable, irrational and fortuitous. (1010-B-C} 1. 2. The coal companies which are public authorities when seeking to give effect to the constitutional scheme as contained in the preamble of the Nationalization Acts of 1972 and 1973 were acting at the behest of the Central Government and not entirely on their own.

In relation to fixation of price or other related matters, the Central Government, therefore, had no say. Under the Colliery Control Order 2000, the power of the Central Government is merely to regulate supply and not to regulate price, the price of coal, it will bear to state, having been deregulated. E-Auction is not related to policy for supply of coal. It is essentially the price therefor. The Central Government in that view of the matter either directly or indirectly while purportedly exercising its power under clause 6 read with clause 9 of the Colliery Control Order could not have issued any direction in the garb of disposal of coal by way of E-Auction. (1020-A-B; G-H; 1021-A-B) Hindustan Petroleum Corpn. Ltd. v. Darius Shapur Chenai and Ors. , (2005) 7 SCC 627; Commr. ofPolice v. Gordhandas Bhanji, (1952) SCR 135 and Mohinder Singh Gill v. Chief Election Commnr. , (1978] 1 SCC 405, referred to. 1. 3.

Coal is an essential commodity in terms of Section 3(1) of the Essential Commodities Act. Colliery Control Order was made, inter alia, for securing equitable distribution and availability of higher price of essential commodity. The coal companies as also the Central Government, ,... therefore, have a constitutional and statutory obligation to fulfill. Coal companies exercising monopolistic power, thus, were required to distribute coal equitably and at a fair price. [1006-F-G) 1. 4. By reason of E-Auction no price is fixed as it would vary from bids to bids. The only price which is fixed for E-Auction is the reserved . price which is 25% above the notified price. [1007-D; Fl 1. 5. While fixing a fair and reasonable price in terms of the provisions of the Essential Commodities Act (although the price is not dual), it is essential that price is actually fixed. Such price fixation is necessary in view of the fact that coal is an essential commodity.

Fixation I of price of coal is of utmost necessity as it is a mineral of grave national importance. Non-availability of coal and consequently the other products may lead to hardship to a section of citizens. It may entail closure of factories and other industries which in turn would lead to loss to State exchequer, as they would be deprived of its taxes. It will lead to loss of employment of a large number of employees and would be detrimental to '· l. the avowed object of the Central Government to encourage small scale industries. [1007-F-H) 1. 6. E-Auction has effect, both on price of coal as also the availability thereof to the Non-core Sector consumers. Their availability would depend upon successful bids of the consumers. It was introduced for a definite ' phrpose viz. to confine the same to the Non-core Sector and traders. A deviation to a great extent has been made therefrom. Even now the core sectors are taking part in E-Auction, but no step rias been taken in this behalf.

[1008-C-DJ ' I. 7. E-Auction is not a mode to fix price. It is only a mode to obtain maximum price. While doing so State does not have to follow the principles .... of fi~ation of price. It is not required to apply its mind as to its effect. It '1 . treat. s coal like any other commodity. It treats itself like a private trader. "( ) ,, (Jistinction must be borne in mind when a State intends to part with a qi pfWilege or a largess as a competitor in the market and when it is expected to fulfill its constitutional goal enshrined under Article 39(b) of the Cons~itution. [1004-D-F] 1~8. 'Business' is a word of wide import. It, in the context of application of a statute governing a monopoly concern and also with an • ~ . • ·•{1 !. i'"; l , ~ ASHOKA SMOKELESS COAL IND. P. LTD. v. U. 0. 1. 959 essential commodity, would indisputably stand on a different footing from the business concern or a private person.

The Central Government as also the coal companies having regard to the provisions of the Nationalisation Acts must be visualized not as profit earning concerns but as an extended arm of a welfare State. They are expected to harmonize the business potential of a country to benefit the common man. The power of the Central Government to carry on trade on business activities ·emanates from the constitutional provisions contained in Article 298 of the Constitution of India. The coal companies, therefore, were under constitutional obligation to fix a reasonable price. They must differentiate themselves from the private sectors which thrive only on a profit motive. As public sector undertakings, the coal companies, thus, would have a duty to fix the price of an essential commodity in such a manner so as to subserve the common good.

Although the provisions of Section 3(2)(c) of the Essential Commodities Act are not attracted in relation to coal in view of the deregulation of price by the Central Government under the 2000 Order, the reasonable attributes for the purpose of fixing the price of coal should be borne in mind. 1996-G-H; 997-A-C) Oil and Natural Gas Commission andAnr. v. Association ofNatural Gas Consuming Industries ofGujarat and Ors. , (1990) Supp. SCC 397; Hindustan Zinc ltd. etc. v. Andhra Pradesh State Electricity Board and Ors. , 11991) 3 SCC 299; Dr. P. Na/la Thampy Thera v. Union ofIndia, (1983) 4 SCC 598 and Kera/a State Electricity Board v. Mis S. N. Govinda Prabhu and Bros. and Ors. etc. , 11986) 4 SCC 198, referred to. 1. 9. Recourse to E-Auction had been taken primarily by way of profit motive. No public opinion was sought for and no expert committee was appointed. The statutory and constitutional duties had not been kept in view.

Conveniently, while making the said policy decision, the coal companies did not remind themselves that as they are instrumentalities. of the State, they are bound to adhere to the Directive Principles of the State and the prime object for which the Nationalization Acts were enacted. Good governance and good corporate governance are distinct and separate. Whereas good governance would mean protection of the weaker sections of the people; so far as good corporate governance is concerned, the- same may not be of much relevance. The coal companies in taking recourse to E-Auction did not give effect to the concept of corporate social responsibility. Although a reasonable profit may be permissible, profiteering would not be. [1019-B-GI ; T. MA. Pai Foundation v. State ofKarnataka, (2002J 8 SCC 481; Islamic Academy of Education v. State of Karnataka, 12003) 6 SCC 697 and P. A. lnamdar v. State ofMaharashtra, [20051 6 SCC 537, relied on. 1. 10.

The State when exercises its power of price fixation in relation to an essential commodity, has a different role to play. Object ofsuch price fixation is to see that the ultimate consumers obtain the essential commodity at a fair price and for achieving the said purpose the profit margin of the manufacturer/producer may be kept at a bare minim_um. ,. _ The question as to how such fair price is to be determined stricto sensu does not arise in this case as here the Central Government has not fixed any price. It left the matter to the coal companies. The coal companies in taking recourse to E-Auction also did not fix a price. They only took recourse to a methodology by which the price of coal became variable. Its only object was to see that maximum possible price of coal is obtained. (1003-F-HI 1. 11. The modality of price fixation will depend upon the nature of the commodity, the provisions of the concerned statute governing the same and other relevant factors.

When price is fixed in terms of the provisions of the Essential Commodities Act, the State would be governed by the doctrine of public necessity. It may in terms of its statutory power and having regard to the penal provisions engrafted therein compel a manufacturer or a dealer of an essential commodity to sell it to the public at a reasonable price or at no profit. Price fixation by the State for its own benefit, however, have an element of profit. Whenever a dual price is resorted to, the same must be rational. The formula for fixing the dual price may be reasonable only under certain circumstances. (994-F-H; 995-AI Union ofIndia and Ors. etc. v. Hindustan Development Corpn. and Ors. , [199311 SCC 467; Gujarat Ambuja Cement Ltd and Anr. v. Union ofIndia '! --and Ors. , rt99818SCC208 and Kera/a State Electricity Boardv. Mis. S. N. Govinda Prabhu Bros. and Ors. etc. , [19861 4 SCC 198, relied on. Hindustan Zinc Ltd. etc. v. Andhra Pradesh State Electricity Board and Ors.

, 11991) 3 SCC 299; Oil and Natural Gas Commission and Anr. v. Association ofNatural Gas Consuming Industries ofGujarat and Ors. , (1990) Supp. SCC 397 and Dr. P. Na/la Thamphy Thera v. Union ofIndia and Ors. , (1983) 4 sec 598, referred to. 1. 12. However, dual pricing having regard to a distinct classification ~ ... ASHOKA SMOKELESS COAL IND. P. LTD. v. U. 0. 1. 961 between a core sector and non-core sector is permissible. The State, however, while distributing its largess at a price, if involved in distribution of a commodity, which would attract the provision of Article 39(b) of the Constitution of India, would stand on a different footing. (996-F-GI Pallavi Refractories and Ors. v. SCCL and Ors. , (20051 2 SCC 227, relied on. 1. 13. While fixing the price of an essential commodiiy like coal, t. he capacity to bid of small manufacturers may also be taken into account.

The court exercising a power of judicial review in a given situation may determine the question on the basis of the material brought on records. (996-D-E] 1. 14. While adopting a policy decision as regards the mode of determining the price of coal either fixed or variable, the coal companies were bound to keep in mind social and economic aspect of the matter. They could not take any step which would defeat the constitutional goal. (1012-E-Fl Mahabir Auto Stores and Ors, v. Indian Oil Corporation and Ors. , [19901 3 sec 752, relied on. Kera/a State Electricity Board v. S. N. Govinda Prabhu Bros. and Ors. etc. (19861 4 SCC 198 and Oil and Natural Gas Commission and Anr. v. Association ofNatural Gas Consuming Industries ofGujarat and Ors. [1990} Sup. SCC 397, referred to. 1. 15. Article 39(b) was incorporated in the Constitution to indicate the necessity for ensuring equitable distribution of resources.

Coal, being such a vital product to the Indian industries and the common man, nationalization ofcoal was necessary for realization of the ideals contained in Article 39(b) of the Constitution. (999-D; 1000-B-C) State ofKarnataka and Anr. v. Shri Ranganatha Reddy and Anr. (19771 4 SCC 471; Samatha v. State of A. P. (1997) 8 SCC 191; Sanjeev Coke Manufacturing Company etc. v. Mis Bharat Coking Coal limited and Anr. etc. (1983) 1SCC147 and l. Abu Kavur Bai v. State ofT. N. , (1984( 1 SCC 515, referred to. 1. 16. Whenever an action is taken by a State in consonance with the provisions laid down in the Directive Principles of State Policy as envisaged under Part IV of the Constitution of India, the same is considered to be a .. ~ reasonable action. [1001-C-D) MR. F Ltd v. Inspector Kera/a Govt. andOrs. (199818 SCC 227, relied on. B. P. Sharma v. Union of India (20031 7 SCC 309: AIR (2003) SC 3863; State ofPunjab v. Devans Modern Breweries Ltd. (20041 11 SCC 26 and State ofGujarat v.

Mirzapur Moti Kureshi Kassab Jamat (20051 8 SCC 534, referred to. , ~ 1. 17. It may not be correct to say that any action which is l'lot in consonance with the provisions of Part IV of the Constitution would be ultra vires but there cannot be any doubt whatsoever that the principles contained therein would form a relevant consideration for determining a question in regard to price fixation of an essential commodity. Directive Principles of State Policy provides for a guidance to interpretation of Fundamental Rights of a citizen as also the statutory rights. (1002-C-E) Tara Prasad Singh and Ors. v. Union ofIndia and Ors. (1980( 4 SCC 179, referred to. 1. 18. The State or a public sector undertaking plays an important ~ role in the society. It is expected of them that they would act fairly and reasonably in all fields. (1004-C-D) Baburao Shantaram More v. The Bombay Housing Board and Anr. [1954) SCR 572; Dwarkadas Marfatia and Sons v.

Board ofTrustees ofthe Port ofBombay (1989) 2 SCR 751 and Pathumma and Ors. v. State ofKera/a and Ors. (1978) 2 SCR 537, referred to. 1. 19. Coal companies are monopolies within the meaning ting uncertainties besides hardship. It was submitted that in view of Section 2(ii), Section 3(1) and 3(2)(c) of the Essential Commodities Act, it was incumbent upon the Central Government to fulfill the object thereof, namely, making a scarce commodity available to the people at an affordable price. Mr. V. A. Bobde, the learned Senior Counsel appearing on behalf of the sixteen petitioners who have set up their industries in the Vidarbha region of Maharashtra which is industrial backward region, submitted that they had also been assured supply of coal for meeting the demand of the rural people and in that view of the matter by reason of taking recourse to E-Auction, unreasonable burden had been put on them, which must be held to be bad in law.

Mini classification in the non-core sector into tiny and small units and SSI Units and the dual pricing policy within the non-core sector itself, so far as the same relates to small and genuine coal units, is plainly arbitrary, unfair and inequitable and only because some units are not genuine consumers, the same would not mean that all the consumers would be deprived of a valuable national assets. Hard Coke: Some of the appellants before us are manufacturers of hard coke. It is liot in dispute that hard coke although does not come within the purview of 'core sector', for the purpose of distribution of coal, recommendations have been made by the Ministry of Steel that it should be included in the said category: The said move, however, has been opposed by the Ministry ofCoal and Energy, We would, therefore, proceed on the basis that hard coke comes within the purview of non-core sector. Mr.

Dipankar Gupta, the learned Senior Counsel appearing on behalf of the Hard Coke Oven Plants, submitted : (i) that as the hard coke manufactured by the hard coke owners having been recommended to be brought within the purview of core sector by the Ministry of Steel, certain attributes to their being belonging to a special category within the non-core sector must be held to have been made out and,. thus, aU . the I06 hard coke ovens manufacturing hard coke form a special'class and in that view of the matter their right to obtain. coal . of a particular grade cannot be. denied as linkage system continues to be operative despite the introduction ofthe scheme of E-Auction; (ii) hard coke manufacturing units could not, thus, have been clubbed together with the traders as a result' whereof unequals are being treated on equal footing, which is ultra vires Article 14 of the Constitution of India.

Drawing our attention to a chart showing supply of coal to the hard coke manufacturers before and after introduction ofthe scheme for E-Auction, it was contended that for a few months in. a year, there had been no supply of coal at all. It was submitted that coal of choice is not a concern of hard coke owners although they may be relevan~ for traders as linkage still continues, in view of the letter dated 19. 05. 2005. Traders: Mr. Altaf Ahmad, the learned Senior Counsel appearing on behalf of the traders, drew our attention to various clauses of the E-Auction scheme and submitted that whereas under the Open Sales Scheme (OSS) rights of the traders were safeguarded and in particulaihavlng ·regard'to the fact that from each colliery not more 33% per cent could be·purchased by one trader, now aU lots having been made open. to all consumers irrespective of the fact as to whether they belong to the linked core s.

ector or linked non-core sector or others have been allowed to bjdin E-Auction along with traders, as a result whereof traders are put to a great disadvantage. bi this behalf our attentfon has beer. drawn to the fact that both manufacturers of core sector and noncore sectors have been offering their bid in the auctions which is against the ·"' concept of fair distribution of an essential commodity. According to the learned counsel participation ofall categories ofconsumers would be unlawful, being contrary to the professed policy of the coal companies in view of the oss Scheme. Submissions on behalf of Union of India Mr. Gopal Subramanyam, the learned Additional Solicitor General appearing on behalf of the Union of India, would raise the following contentions : (i) Keeping in view the fact situation that it was found that there had been gross abuse of the process both in respect of the linkage scheme as also open. sales scheme, . the coal companies .

had to resort to E~Auction which satisfies the test ofpublic interest; (ii) Materials have been brought on r~cords to show justification of E-Auction; the same is sustainable in ! aw; o· (iii) Taking recourse to E-Auction by way afan experiment was made to overcome a difficult situation; (iv) As there had been no complaint about functioning of the said scheme in view of the fact that 12000 out 16000 non-consumers are satisfied therewith; no grievance can be raised that by reason thereof the coal companies had taken recourse to any arbitrary measure; (v) E-Auction had to be introduced in view of the fact that linkage and sponsorship as also open sales schemes were found to be defective and furthermore in view of the fact that both linkage and sponsorship schemes had come to an end; • (vi) The C~nt~al Government took recourse to the deregulation of coal as it was found·that by taking recourse to the linkage, obstritcti6ns have been created to free and fair distribution of coal .

as also the movement thereof. Moreover each consumer must be given equal access thereto; ( (vii) Only because the linked consumers would have to pay a higher price; the same by . itseff. cannot be said. to be unfair and . unreasonable in. view ·of the fact. that even. in terms of the. linked . scheme the price ofc. oal was not fixed nor any representation had been made as regards obligations on th~ p~rt of C~al India Ltd. to supply coal of a specified quantity at a specified price.

(viii) Linkage system came into being merely out of a practice and by reason thereof the linked consumers have not derived any vested right either in law or under contract; (ix) The concept of E-Auction was visualized by the coal companies who were even otherwise free to take such a decision and it received the imprimatur of the Central Government which would be deemed to be a direction in terms of clause 6 of the Colliery Control Order; (x) Classification between core and non-core sector being valid, dual pricing is permissible in law; (xi) Although the coal companies are monopolies, the demand and supply situation as also the market forces should be given a free play, which, thus, would not come within the purview of clause 6 of Article 19 of the Constitution of India. Submissions on behalf MSTC : Mr. T. R. Adhiyarjuna, the learned Senior counsel would submit that .

the Gauhati High Court has committed a manifest error in holding that E- Auction is not possible in North Eastern Region ii) India. The learned counsel submitted that the procedure which is adopted for conducting E-Auction is absolutely transparent and fair. Policy Decision as regards Pricing : Reasonableness ofdual pricing : Price fixation has a direct relationship with the fiscal health of the country. Finance is one ofthe most important catalysts. The modality of price fixation will depend upon the nature of the commodity, the provisions of the concerned statute governing the same and· other relevant factors. When price is fixed in terms of the provisions of the Essential Commodities Act, the State would be governed by the doctrine of public necessity. It may in terms of its statutory power and having regard to the penal provisions engrafted therein compel a manufacturer or a·dealer of an essential commodity to sell it to the public at a reasonable price or at no profit.

Price fixation by the State for its own benefit, however, have an element of profit. Whenever a dual ,H price is resorted to, the same must be rational. The formula for fixing the dual price may be reason®le only under certain circumstances. [See Union of India and Ors etc. v. Hindustan Development Corpn. and Ors. , (1993] l sec 467]. In Gujarat Ambuja Cement Ltd. and Anr. v. Union ofIndia and Ors. , (1998] 8 SCC 208, this Court had the occasion to consider the matter relating to fixation of price of coal wherein in terms of the Colliery Control Order, 1945, the quotas thereof were allotted by the Central Government to the consumers. A Government company having regard to the constitutional scheme, therefore, cannot forsake its public duty [See Hindustan Zinc Ltd. etc. v. Andhra Pradesh State Electricity Board and Ors. , (1991] 3 SCC 299]. It can neither have a private thrust nor aggrandizement of the wealth at the cost of the ·common man. In Kera/a State Electricity Board v. Mis. S. N.

Govinda Prabhu Bros. and Ors. etc. , [1986] 4 sec 198, the law was laid down in the following terms: "... It is a public utility monopoly undertaking which may not be driven by pure profit motive - not that profit is to be shunned but that service and not profit should inform its actions. It is not the function of the Board to so manage its affairs as to earn the maximum profit; even as a private corporate body may be inspired to earn huge profits with a view to paying large dividends to its shareholders. But it does not follow that the Board may not and need not earn profits for the purpose ofperforming its duties and discharging its obligations under the statute. It stands to common sense that the Board must manage its affairs on sound economic principles. Having ventured into the field of commerce, no public service under taking can afford to say it will ignore business principles which are as essential to public service undertakings as to commercial ventures...

" It was, however, observed : "... The Board is not expected to run on a bare year-to-year survival basis. It must have its feet firmly planted on the earth. It must be able to pay the interest on the loans taken by it; it must be able to discharge its debts; it must be able to give efficient and economic service; it must be able to continue the due performance of its servi~es·'by- H. providing for depreciation etc. ; it must provide for the expansion of its services, for no one can pretend the country is already well supplied with electricity. Sufficient surplus has to be generated for this purpose. That. we take it is what the Board would necessarily do if it was an ordinary corrimerCial undertaking properly and prudently managed on sound commercial lines. Is the position any different because the Board is a public . utility undertaking or because of the provisions of the ElectriCity Supply Act?... " [See Oil and Natural Gas Commission and Anr. v.

Association ofNatural Gas Consuming Industries of Gujarat and Ors. , [1990] Supp. ,SCC 397. ] In Gujarat Ambuja Cement (supra) the question arose as· to whether charging of 10% premium over the price given in Table II of the Notification which was issued under the Colliery Control Order was so unreasonable and arbitrary so as to attract Article· 14 of the Constitution of India. In that case, the parties adduced evidences, but the High Court did not consider the same in the perspective thereof, and on that premise the matter had been remitted to the High Court for consideration of the grievances of the petitioner therein having regard to the materials brought on record. [See also Dr: P. Nalla · Thamphy Thero v. Union oflndia and Ors. , [1983] 4 SCC 598] While fixing the price of an essential commodity like coal, the capacity to bid of small manufacturers rriay also be taken into account.

The•court· exercising a power of judicial review in a given situation may determine the question on the basis ofthe material brought on records. [See Gujarat Ambuja Cement Ltd (supra)] · However, dual pricing having regard to a distinct classification between a core sector and non-core sector is permissible. _ [See Pal/avi Refractories (supra)] · The State, however, while distributing its largess at a price,-if involved in distribution of a commodity, which would attract the provision of Article 39(b) of the Constitution. of India, would stand on a different footing. 'Business' is a word of wide import. It, in the context of application of a statute governing a monopoly concern and also with an essential commodity, would indisputably stand on a different footing from the business concern or a private person. The Central Government as also the coal companies having regard to the provisions of the Nationalisation Acts must be visualized not as ..

profit earning concerns but as an extended arm of a welfare State. They are expected to harmonize the business potential of a country to benefit the common man. The power of the Central Government to carry on trade on business activities emanates from the constitutional provisions contained in Article 298 of the Constitution of India. The coal companies, therefore, were under a constitutional obligation to fix a reasonable price. They must differentiate themselves from the private sectors which thrive only on a profit motive. Afr public sector undertakings, the coal companies, thus, would have a duty to fix the price of an essential commodity in such a manner so as to subserve the common good. Although the provisions of Section 3(2)(c) of the Essential Commodities Act are not attracted in relation to coal in view of the deregulation of price by the Central Government under the 2000 Order, the reasonable attributes for the purpose of fixing the price of coal should be borne in mind..

.. While fixing such price, ordinarily the State act in the same manner that apublic utility would conduct itself in this regard. This Court in Oil and Natural Gas Commission and Anr. v. Association ofNatural Gas Consuming Industries ofGujarat and Ors. (Supra), opined that the price fixed should be the minimum possible as the customer or consumer must have the commodity for his survival and cannot afford more than the minimum. Therein this Court further noticed : "34. In another article on "The Public Sector in India", quoted in Issues in Public Enterprise by Sri K. R. Gupta, Dr Rao is quoted as saying (at p. 84): "... the pricing policy should be such as to promote the growth of natiOnal income and the rate of this growth ... public enterprises must make profits and the larger the share of public enterprises in all enterprises, the greater is their need for making profits.

I Profits constitute the surplus available for savings and investment on the one hand and contribution to national social welfare programme on the other; and if public enterprises do not make profits the national surplus available for stepping up the rate of .. investinent and the increase of social welfare will suffer ·a corresponding reduction;.... Hence the need for giving up the irrational belief that public enterprise should, by definition, be run on a no-profit basis. " In dealing with the fixation of tariff under the Electricity (Supply) Act, •' 1948, this Court in Hindustan Zinc Ltd. (supra), opined that the tariff cannot be fixed in such a mann. er by the Board while acting as a private trader and shedding its public utility character. It was observed : "...

In other words, if the profit is made not merely for the sake of profit, but for the purpose of better discharge of its obligations by the Board, it cannot be said that the public enterprise has acted beyond its authority... " In Dr. P. Nalla Thampy Thera v. Union of India, [1983] 4 SCC 598, this Court observeJ : "25. We have said earlier that the Railways are a public utility service run on monopoly basis. Since it is a public utility, there is no justification to run it merely as a commercial venture with a view to making profits. We do not know - at any rate it does not fall for consideration • here if a monopoly based public utility should ever be a commercial venture geared to support the general revenue of the State but there is not an iota of hesitation in us to say that the common man's mode of transport closely connected with the free play of his fundamental right should not be. " In. Mis S. N.

Govinda Prabhu and Bros (supra), this Court observed that profit is not to be shunned but that service and not profit should inform actions of a Board. It was further observed : "... We do not think that either the character of Electricity Board as a Public Utility Undertaking or the provisions of the Electricity Supply Act preclude the Board from managing its affairs on sound commercial lines though not with a profit-thirst... " As regard limitation ofjudicial review of price fixation after referring to the decision of the Constitution Bench of this Court in Shri Sitaram Sugar Company Ltd. v. Union of India, [1990] 3 SCC 223, this Court in Oi/ and Natural Gas Commission and Anr. v. Association ofNatural Gas Consuming Industries of Gujarat and Ors. , [1990] Supp SCC 397 observed: "...

It is, however, not necessary here to enter into a discussion of this and the earlier cases because those cases were primarily concerned with the question whether the price fixation had been made in consonance with the requirements of the relevant legislation fixing prices of essential commodities in the interests of the general public ~ ... - ·- and also because ONGC does not deny that, as a State instrumentality, its price fixation should be based on relevant material and should be fair and reasonable. None of these decisions hold that the cost plus method is the only relevant method for fixation of prices. On the contrary, there are indications in some judgments to indicate that not a minimum but a reasonable profit margin is permissible. Even in relation to a public utility undertaking like the State Electricity Boards where the duty not to make undue profits by abusing its monopoly position is clear....

" The action on the part of the State even in the matter of fixation of price of an essential commodity, thus, must be viewed from different angles, some of which we shall advert to hereinafter. Article 39(b) - Concept: Article 39(b) was incorporated in the Constitution to indicate the necessity for ensuring equitable distribution of resources. In State of Karnataka and Anr. v. Shri Ranganatha Reddy and Anr. , [1977) 4 SCC 471, this Court analyzed the constitutional provisions contained in Article 39(b) of the Constitution, stating : "... The key word is "distribute" and the genius of the Article, if we may say so, cannot but be given full play as it fulfils the basic purpose of restructuring the economic order. Each word in the article has a strategic role and the whole article a social mission. It embraces the entire material resources of the community. Its task is to distribute such resources. Its goal is so to undertake distribution as best to subserve the common good.

lt re-organizes by such distribution the ownership and control. f- "Resources" is a sweeping expression and covers not only cash resources but even ability to borrow (credit resources). Its meaning given in Black's Legal Dictiona1y is: "Money or any property that can be converted into supplies; means of raising money or supplies; capabilities of raising wealth or to supply necessary wants; available means or capability of any kind. " And material resources of the community in the context ofre-ordering the national economy embraces all the national wealth, not merely \. .. natural resources, all the private and public sources of meeting material needs, not merely public possessions. Every thing of value or use in the material world is material resource and the individual being a member of the community his resources are part of those of the community.... " [Also see Samatha v. State ofA. P.

, [1997] 8 SCC 191] Coal, being such a vital product to the Indian industries and the common man, nationalization of coal was necessary for realization of the ideals contained in Article 39(b) of the Constitution. In Sanjeev Coke Manufacturing Company etc. v. Mis Bharat Coking Coal Limited and Anr. etc. , [1983] 1 SCC 147, this Court observed: .! "... Coal is, of course, one of the most important known sources of energy, and, therefore, a vital national resource. While coal is necessary as a source of energy for very many industries, coking coal is indispensable for the country's crucial iron and steel industry. So, Parliament gave the first priority to coking coal. First there was legislation in regard to the coking coal mines and then there was legislation in regard to all coal mines, coking as well as non-coking. .. By the Coking Coal Mines (Nationalisation) Act all coking coal mines known to exist in the country were nationalised.

Coke oven plants which were part of the coking coal mines so nationalised being in or belonging to the owners of the mines also stood automatically nationalised. Other coke oven plants which did not belong to the owners ofthe mines but which were located near about the nationalised coking coal mines were also identified and nationalised by express provision to that effect. At that stage of the rationalisation and nationalisation of the coal mining industry, it was apparently thought necessary and sufficient to nationalise such coke oven plants as were "' in or belonged to the nationalised coking coal mines or as were identified as located near the nationalised coking coal mines, ! eaving out all other coke oven plants.

The nationalisation of the coking coal mines and the coke oven plants was "with a view to reorganising and reconstructing such mines and plants for the purpose of protecting, conserving and promoting scientific development ofthe resources of coking coal needed ~o meet the growing requirements ofthe iron and steel industry and for matters +.. , { connected therewith or incidental thereto". We do not entertain the slightest doubt that the nationalisation of the coking coal mines and the specified coke oven plants for the above purpose was towards securing that "the ownership and control of the material resources of the community are so distributed as best to subserve the common good". " [Also see l. Abu Kavur Bai - State of T. N. , [1984] 1 SCC 515] Article 37 of the Constitution of India provides that the provisions contained in Part IV of the Constitution of India shall not be enforceable by any court and it enjoins upon the State to apply the provisions of this Part in making laws.

It is of some interest to note that whenever an action is taken by a State in consonance with the provisions laid down in the Directive Principles of State Policy as envisaged under Part IV of the Constitution of India, the same is considered to be a reasonable action. In MR. F. Ltd. v. Inspector Kera/a Govt. and Ors. , [1998] 8 SCC 227, a question arose as to whether the rights of industrial concerns under Article 19(1)(g) are said to be affected having regard to the provisions of the Kerala Industrial Establishments (National and Festival Holidays) (Amendment) Act, 1990 whereby the number of national holidays were increased. In view of Article 43 of the Constitution of India, the restriction imposed were held to be reasonable restrictions stating: "The plea under Article 14 also cannot be entertained.

The decision by legislative amendment to raise the national and festival holidays is based upon relevant material considered by the Government, including the fact that the holidays allowed by the Central Government and other public sector undertakings were far greater in number than those prescribed under the Act. As pointed out earlier, the Act is social legislation to give effect to the Directive PrirtCiples of State Policy contained in Article 43 of the Constitution. The law so· made cannot be said to be arbitrary nor can it be struck down for being violative of Article 14 of the Constitution. " Therein it was afso observed : "In examining the reasonableness of a statutory provision, whether it is violative of the Fundamental Right guaranteed under Article 19, ·"' ':' one cannot lose sight of the Directive Principles of State Policy contained in Chapter IV of the Constitution as was laid down by this Court in Saghir Ahmad v. State of U. P. as also in Mohd. Hanif Quareshi v.

State of Bihar. 12. This principle was also followed in Laxmi Khandsari case in which the reasonableness ofrestrictions imposed upon the Fundamental Rights available under Article 19 was examined on the grounds, amongst uthers, that they were not violative ofthe Directive Principles of State Policy. " . - [Also see B. P. Sharma v. Union of India, [2003] 7 SCC 309: AIR 2003 SC 3863; State ofPur. jab v. Devans Modern Breweries Ltd. , (2004] 11 SCC 26; State ofGujarat v. Mirzapur Moti Kureshi Kassab Jamat, [2005] 8 sec 534] It may not be correct to say that any action which is not in consonance with the provisions of Part IV of the Constitution would be ultra vires but there cannot be any doubt whatsoever that the principles contained therein would form a relevant consideration for determining a question in regard to price fixation of an essential commodity.

Directive Principles of State Policy provides for a guidance to interpretation of Fundamental Rights of a citizen as also the statutory rights. We have noticed hereinbefore that coal was nationalized under Coking Coal Mines (Nationalization) Act, 1972 and Coal Mines (Nationalization) Act, 1973. We have also noticed that the said Acts were enacted so as to fulfill the constitutional object contained in Article 39(b) of the Constitution of India. In terms of the Nationalization Acts indisputably the coal companies as / also the Union of India were bound to take action in furtherance of the task -\ of achieving the purport and object for which the coking coal mines and the coal mines were nationalized. The Parliament also enacted Coal Mines (Nationalisation) Amendment Act, 1976. In the year 1976, even mining lease of all the coal mines were rescinded. The constitutionality of the 1976 Amendment Act was upheld by this Court in Tara Prasad Singh and Ors. v. Union ofIndia and Ors.

, [1980) 4 SCC 179 stating that the Nationalization Act was enacted in furtherance of Article 39(b) in the following t_erms: . > "35. The Nationalisation Amendment Act needs no preamble, f-. ( .. ASHOKA SMOKELESS COAL IND. P. LTD. v. U. 0. 1. [S. B. SINHA, J. ] l003 especially when it is backed up by a Statement of Objects and Reasons. Generaliy, an Amendment Act is passed in order to advance the purpose of the parent Act as reflected in the preamble to that Act. Acquisition of coal mines, be it remembered, is not an end in itself but is only a means to an end. The fundamental object of the Nationalisation Act as also ofthe Nationalisation Amendment Act is to bring into existence a state ofaffairs which will be congenial for regulating mines and for mineral development. " It may be true that prices are required to be fixed having regard to the market forces. Demand and supply is a relevant factor as regards fixation of the price.

In a market governed by free economy where competition is the buzzword, producers may fix their own price. It is, however, difficult to give effect to the constitutional obligations of a State and the principles leading to a free economy at the same time. A level playing field is the key factor for invoking the new economy. Such a level playing field can be achieved when there are a number of suppliers and when there are competitors in the market enabling the consumer to exercise choices for the purpose of procurement of goods. If the policy of the open market is to be achieved the benefit of the consumer must be kept uppermost in mind by the State. Can the consumer be expected to derive any such benefit from monopoly concern? Would a situation ofthis nature lead to a hybrid situation where a coal company is allowed to fix its own price which may not be a fair price?

These are some of the questions which were required to be kept in mind by the coal companies before formulating a policy of fixing price of an essential commodity. The State when exercises its power of price fixation in relation to an essential commodity, has a different role to play. Object of such price fixation is to see that the ultimate consumers obtain the essential commodity at a fair price and for achieving the said purpose the profit margin ofthe manufacturer/ producer may be kept at a bare minimum. The question as to how such fair price is to be determined stricto. sensu does not arise in this case, as would appear from the discussions made hereinafter, as here the Central Government has not fixed any price. It left the matter to the coal companies. The coal companies in taking recourse to E-Auction also did not fix a price. They only took recourse to a methodology by which the price of coal became variable.

Its only object was to see that maximum possible price of coal is obtained. The Appellants do not question the right of the coal companies to fix the -· ""::'. price of coal. Such prices had been fixed on earlier occasions also wherefor legally or otherwise the Central Government used to give its nod ofapproval. The process of price fixation by the Central Government in exercise of its powers under the 1945 Order continued from 1996 to 2004. Does E-Auction ultimately lead to fixation of a price ? The answer to the said question must be rendered is a big emphatic 'No', as by reason thereof even the coal companies would not know what would be the price of different varieties ofcoal. The issue must be determined from the perspective "{as to whether the coal companies can be allowed to say that despite their monopolistic character and they being a 'State' can fix a price which would otherwise be unfair or unreasonable.

The State or a public sector undertaking plays an important role in the society. It is expected of them that they would act fairly and reasonably in all fields; even as a landlord of a tenanted premises or in any any other capacity. [See Baburao Shantaram More v. The Bombay Housing Board and Anr. , [1954] SCR 572 at 577, Dwarkadas Marfatia & Sons v. Board of Trustees_ ofthe Port ofBombay, [1989] 2 SCR 751 at 760, 762 and Pathumma and Ors v. State of Kera/a and Ors. , [1978] 2 SCR 537 at 545] ~ E-Auction is not a mode to fix price. It is only a mode to obtain maximum price. In other words, deriving the optimum benefit by sale of coal is the goal. While doing so State does not have to follow the principles of fixation of price. It is not required to apply its mind as to its effect. It treats coal like any other commodity. It treats itself like a private trader.

A distinction must be borne in mind when a State intends to part with a privilege or a largess as a competitor in the market and when it is expected to fuifill its constitutional goal enshrined under Article 39(b) of the Constitution. ,,. , Monopoly . " Coal companies are monopolies within the meaning of the provisons of the Nationalization Act. They would be deemed to be monopolies within the provisions ofclause (6) ofArticle 19 ofthe Constitution ofIndia. Our attention has been drawn to two decisions of this Court in Akadasi Pradhan v. State ofOrissa, [1963] Supp 2 SCR 691at715, and State ofRajasthan v. Mohan Lal Vyas, [1971] 3 SCC 705]. In Akadsi Pradhan (supra), it has been held that when a monopoly is created in terms of sub-clause (6) of Article 19, no agency can be appointed f-. , 1 ,. ~ ASHOKA SMOKELESS COAL IND. P. LTD. v. U. O. I. [S. B. SINHA, J. ] 1005 who would not answer the description of principal and agent.

An agent of monopoly organization, it was held, cannot be appointed or act on its own. In Mohan Lal Vyas (supra), it was held that there cannot be any law in violation of the Constitution of India and no monopoly right can be conferred on a citizen under the Constitution, nor can it be justified thereunder. Constitutionality of £-Auction : - ' Coal is an essential commodity. Coal India Limited and its subsidiary companies enjoyed the monopoly of production, distribution and sale thereof. The question which arises for consideration is whether in the aforementioned situation a State within the meaning of Article 12 of the Constitution of India can be permitted to take recourse to E-Auction which is not commensurate with the constitutional scheme of this country. Some of the coal companies admittedly were reeling under financial problems. Three of them became sick industrial undertakings and a reference was made to BIFR.

The Union of India in its counter-affidavit states that a decision was taken to take recourse to E-Auction such that sick coal companies could turn around. Union of India and the coal companies do not deny that they have a . monopoly. They do not deny or dispute that they are 'State' within the meaning of Article 12 of the Constitution of India. They have also not raised any contention that the constitutional obligations in terms of Article 39(b) are not required to be complied with. It is not in dispute that approximately 94 to 95% of the coal is made available to the core sector at a notified price. We have also noticed that NCCF as also various Central Government and State Government agencies ).. were to get coal at the base price + 25% thereof. It is of some significance r to note by way of an example that whereas the core sector gets coal at a price of Rs. 1155/- per metric tonne, NCCF, BCCL and Jharkhand State Minerals Development Corporation would get the same at a price of Rs.

I 386/- per metric tonne, but the price payable by other non-core linked consumers and traders having regard to the flexibility of the price in E-Auction, would be a sum of Rs. 1660/- to Rs. 1900/- per metric tonne. The linked consumers constitute about I% of the total production. The linkage system so far as non-core sector consumers are concerned, has been \ ~ prevailing since 1973. The beneficiaries of the system primarily are manufacturers of hard coke, smokeless fuel and other products for which the coal is essential raw material. The Open Sales Scheme which was meant for traders, in view of the 1Jriginal policy decision of the coal companies, E- Auction was to be applied to the traders for whom the Open Sales Scheme was applicable.

It is, however, not in dispute that having regard to the directions issued by the Central Government to the coal companies, all consumers irrespective of the fact that whether they are linked consumers of core sector or non-core sector, were entitled to take part in E-Auction. Ordinarily traders who are outside the scheme of linkage are entitled to take part in E-Auction. E-Auction was resorted to allegedly on the ground that various method tried by the coal companies including the Open Sales Schemes and MPQ failed for one reason or the other. The Central Vigilance Commissionalso recommended, having regard to the irregularities committed in the matter of sale of coal through OSS, that publicity of tender should be done through website, in terms of the letter dated 18. 12. 2003 with a view to bring about greater transparency and to curb malpractice. The coal companies state that such a direction was made in terms of Section 8(l)(h) of the CVC Act, 2003.

It was recommended that wherever it is feasible and practical the organization should eventually switch over to the process of e-procurement/e-sale. It is, however, found that the directions are general in nature and no particular direction was issued to the coal companies in terms of Section 8(l)(h) of the CVC 2003 Act which is otherwise permissible in law. It may be that the practice ofE-Marketing and/or E-Advertisement and/ or E-Contract is prevailing in various parts of the world but E-Auction, which has a different concept, cannot be equated therewith. Coal is an essential commodity in terms of Section 3( I) ofthe Essential Commodities Act. Colliery Control Order was made, inter a/ia, for securing equitable distribution and availability of higher price of essential commodity. The coal companies as also the Central Government, therefore, have a constitutional and statutory obligation to fulfill.

Coal companies exercising monopolistic power, thus, were required to distribute coal equitably and at a fair price. In Tara Prasad Singh (supra), this Court has categorically considered as to why the Parliament thought it fit to enact the Nationalisation Act i. e. to distribute the resources vested in the State to subserve the common good. The State, it is trite, while fixing the price for the purpose of equitable .. distribution or otherwise cannot be actuated purely by a profit motive. It should not discharge its functions in such a way as to aspire to earn huge profit specially at the cost of those who are fully dependent upon them for supply of a monopoly item like coal. It cannot be the law that the public sector undertakings while selling essential commodities must suffer loss.

It is also not the law that public sector undertakings must distribute subsidy, but what is required in terms of the constitutional scheme adumbrated under Article 39(b) and Article 14 of the Constitution of India is to make the said essential commodity available at a fair price. However, for the purpose of this case, it may not be necessary for us to dilate on the principle of fixation of price, of coal as an essential commodity or otherwise. Before us the learned counsel for the parties relied upon various decisions of this Court as regard the mode and manner in which deliberations were made on fixation of price of essential commodities over which the monopoly _, right is exercised. We have also been taken through a recent decision of this Court in Pallavi Refractories (supra). By reason of E-Auction no price is fixed as it would vary from bids to bids. The coal is sold through E-Auction at least twice a month.

There will be various places where E-Auction would be conducted simultaneously. In E-Auction, the quantity and quality of coal depending upon its grade, size, colliery from which the same has been extracted, are specified. In such a situation invariably the price for same quality of coal would greatly vary as the bidders would bid having regard to their own requirement. By allowing repeated bids, a person who may be requiring the essential commodity would not be able to prove the same and its non-availability may result in stoppage ofproduction which would lead to various complications. He would, therefore, be driven to a desperate situation. The only price which is fixed for E-Auction is the reserved price which is 25% above the notified price. .... While fixing a fair and reasonable price in terms of the provisions of the Essential Commodities Act (although the price is not dual), it is essential that price is actually fixed.

Such price fixation is necessary in view of the fact that coal is an essential commodity. It is, therefore, vital that price is actually fixed and not kept variable. Fixation of price of coal is of utmost necessity as it is a mineral of grave national importance. Non-availability of coal and consequently the other products may lead to hardship to a section of citizens. It may entail closure of factories and other industries which in tum would lead to Joss to State exchequer; as they would be deprived of its taxes. It will lead to loss of employment of a large number of employees and would be I.... ( detrimental to the avowed object of the Central Government to encourage small scale industries. Coal itself is considered to be a core sector.

In terms of the provisions of the Industrial (Development and Regulation) Act, 1951, the Parliament requires the Central Government to take such steps which would enable the SSl units to maintain their viability and strength so as to be effective in : (i) promoting. in a harmonious manner the industrial economy of the country and easing the problem ofemployment; (ii) securing the ownership and control .. of the material resources of the community such that the same are distributed to subserve the common good. E-Auction has effect both on price ofcoal as also the availability thereof to the non-core sector consumers. Their availability would depend upon successful bids of the consumers. It was introduced for a definite purpose viz. to confine the same to the non-core sector and traders. A deviation to a great extent has been made therefrom. Even now the core sectors are taking part in E-Auction, but no step has been taken in this behalf.

The Central Government, however, recently ensured availability of coal to the linked consumers but they have to pay average weighted price. By its letter dated 08. 04. 2005, the Central Government informed the Chairman, Coal India Ltd. , that supply of coal to non-core sector linked consumers would continue on the basis of MPQ. However, the price for such supplies is to be computed on the basis of average E-Auction, stating : "The coal supplied to non-core linked consumer on the basis of MPQ would continue. However, the price for such supplies would be computed on the basis of average e-auction rate during the month. Sale of two million tones of coal to small consumers through NCCP would also continue. However, the price for coal supplies to NCCP would also be governed on the basis ofe-auction prices, as mentioned above. " Advantages or Disadvantages of £-Auction : We may at this juncture notice the purported advantages of E-Auction as submitted on behalf of the Union of India.

(i) The system of E-Auction is simple, easily accessible, transparent also offers equal opportunity to all coal customers/intending buyers. ASHOKASMOKELESS COAL IND. P. LTD. v. U. 0. 1. [S. B. SINHA, J. ] 1009 (ii) Any citizen of India can participate and purchase coal through E-Auction by sitting in his home/office from any part of the country. (iii) A bidder need not require to meet any formalities such as obtaining licence/quota/sponsorship/linkage etc. and is not required to meet any such formalities. (iv) Even a buyer located in the remote part of India without electridty/computer is free to reach the nearest village/town with a cyber cafe and can participate in the E-Auction without requiring to come to the coal company/coalfield as earlier under OSS (v) A bidder is free to choose the source/quality/quantity and purch~se coal at a price determined by him on the basis of demand and supply.

(vi) To purchase coal the buyer need not depend on intermediaries/ middlemen and can directly purchase through E-Auction. This will reduce the chances of black marketing, ,if not totally eliminate it. (vii) The buyer saves on middleman's commissions and other incidental charges. (viii) The incidental benefit is also shared by coal company in the form of improved returns i. e. by diverting intermediary's share to coal companies. (ix) There are a large number of outlets for small consumers which enable them to draw their coal supplies from any of the companies/sources instead of limited outlets/coal companies as was the case in earlier schemes. (x) The sale on the auction is held even in remote areas therefore is not subject to any manipulation/influence of antisocial elements.

(xi) The system provides for official channel of supplies to all categories of buyers without classification who were otherwise dependent on secondary market (black market) (xii) The premium under the old system being appropriated by unscrupulous elements got checked/restricted. (xiii) Any buyer of coal under non core-sector including SSI units is able to avail of this opportunity by payment of a little more than the notified price. The system of E-Auction is not aimed at obtaining higher price but endeavours to create an equal opportunity amongst the buyers of non core sector. However, we may notice that the said claim of the Union of India or the coal companies is not justified. The aforementioned claim of the Central Government is refuted by the consumers stating that the figures given by the Union of India are misleading. Price range of all the subsidiaries have been taken cumulatively instead of taking subsidiary-wise figures.

The consumers belonging to core sectors, like power, steel, iron and chemical etc. are big companies like Grasim, Hindalco, Jindal and Haldia Steel who are taking part in the E-Auction as a result whereof the price of coal has shot at the cost of SSI units. Thus, even the linked consumers ofcore and non-core sectors have been participating therein. Participation of core sector in E-Auction is destructive of its own policy as would appear from the letter of the Ministry of Coal dated 08. 04. 2005 and, thus, it cannot be justified on the ground of profiteering wherewith the survival of SSI units is involved. Although claim has been made by the companies that more and more persons are taking part therein, it is difficult for us to accept that out of 16000 ( consumers 12000 have taken part; as E-Auctions are more frequently done, the possibility of the same persons taking part again and again cannot be ruled out.

It is difficult to comprehend the stand of the Union of India that E- Auction is being taken recourse to by more and more persons and, if that be so, there was no reason as to why the price ofcoal by E-Auction has declined. Before us a chart has been filed with a view of show that after introduction of the scheme of E-Auction, supply of coal to many of the coke ovens has decreased affecting their ultimate production. Apprehensions have been raised that ultimately many of the units may have to be closed. We think that the coal companies should see to it that such a situation is avoided. However, it is not in dispute that auction price being online, no other bidder is aware of the contents of the bid submitted by the bidder. No bidder will have access to the records pertaining to E-Ai.

tction so as to ascertain who is the highest bidder or what is the highest bid price; or no bidder would have knowledge or access to the various bids submitted by the bidders against the Ir- I ASHOKA SMOKELESS COAL IND. P. LTD. v. U. O. I. [S. B. SINHA, J. ] 1011 particular grade of coal so as to arrive at an average E-Auction price of particular grade of coal. Only MSTC and MJCPL and the companies who are conducting the E-Auction, would have access to the details of the bids submitted by the bidders. No eligibility criteria having been fixed, any person including traders can participate and bid in the E-Auction. Highest price and highest quantity are the only factors for sale/allocation of coal to a bidder in terms ofthe said scheme; as E-Auction results in traders buying large quantities ofcoal. Consequently, the manufacturers of hard coke and smokeless coal as also other small units have to buy coal at prohibitive rates from traders .

The methodology for allocation of coal to a bidder of E-Auction is, thus, inequitable, irrational and fortuitous. The methodology for allocation of coal at this juncture also may be noticed by us : Allocation is carried out by E-sale software on the following basis: a. First preference is given to highest bid price. b. If two or more parties bid the same price, then preference for allocation is given to party that placed the bid for higher quantity. c. In case two or more parties bid the same price and quantity, then preference is given to the party that placed the bid earlier. Since a particular grade is allocated/sold at different prices to different bidders, E-Auction ultimately leads to sale of a particular grade of coal at variable prices in the market. In spite ofGovernment ofIndia's office memorandum promising sale of coal to the linked consumers at average E-Auction rate, sale to linked consumers is being made at the highest bid price and not at the average bid price.

It is accepted that coal is a scarce commodity and the Government companies are not in a position to supply coal as per demand of the same, which may be enormous, despite the fact that a certain level of import of coal is also permitted. However, the advantages of E-Auction per se or disadvantages thereof may not be decisive as this Court is concerned with the constitutionality thereof. It has not been denied or disputed that by reason of E-Auction price ". t - ··A of coal is not fixed. The . concept ofprice fixation is that all persons who are in requirement of. the commodity should know the basis or criteria thereof. If a price is fixed, they would be. able to lay down their own business policy in such a manner so that they can have a level playing field in the market of competition . and such competition is not only between the persons whose end-project is similar or otherwise based on coal but who produce other products not based completely on coal.

Variability in the price of coal would affect all who have to depend on coal e. g. we may notice that hard coke is considered to be vital in the manufacturing process of steel. If the price of ~ coal is not fixed, the price of·hard coke cannot be fixed, which may give rise to uncertainty in the price of steel or smokeless coal which caters tO'the needs of the small consumer~ both for domestic use also for use in the small hotels and/or use in rural areas. It was, therefore, necessary :that the price of coal be made known. The contention of the coal companies is that having regard to the availability of LPG, smokeless coal is no longer in use. Ex facie, the said plea is unacceptable. Moreover, even fixation of price of LPG in tum would depend upon the fixation of oil products in other countries. The Central Government, it is well known, having regard to the effect that may be caused to the people in general, takes all precautions before fixing the price thereof.

The Central Government has never increased the LPG price exorbitantly. While adopting a policy decision as regards the mode of determining the price of coal either fixed or variable, the coal companies were bound to keep in mind social and economic aspect of the matter. They . could not take any step which would defeat the constitutional goal [See Mahabir Auto Stores and Ors. v. Indian Oil Corporation and Ors. , [1990] 3 SCC 752] Even while fixation of tariff for the supply of electric energy in terms of the provisions of Section 49 of the Electricity (Supply) Act, l 948, only a reasonable profit is contemplated and not profiteering [See S. N. Govinda Prabhu (supra) and ONGC (supra). It may be true as has been held in the aforementioned cases that cost alone did not determine the prices and the same has to be determined upon taking into consideration many complex factors but no decision of this Court .

, says that any arbitrary fixation of price and arbitrary mode of fixation would satisfy the test ofreasonableness as contained in Article 14 ofthe Constitution of India. r-4 . JI . , ' • ', ASHOKA SMOKELESS COAL IND. P. LTD. v. U. O. I. [S. B. SINHA, J. ] 1013 The learned Additional Solicitor General placed strong reliance on a decision of this Court in State ofOrissa and Ors. v. Hari Narain Jaiswal & Ors. , (1972] 2 SCC 36, wherein this Court held : "Even apart from the power conferred on the Government under Sections 22 and 29, we fail to see how the power retained by the Government under clause (6) of its order, dated January 6, 1971, can be considered as unconstitutional. As held by this Court in Cooverjee B. Bharucha case, one ofthe important purpose ofselling the exclusive right to sell liquor in wholesale or retail is to raise revenue. Excise revenue forms an important part of every State's revenue. The Government is the guardian of the finances of the State.

It is expected to protect the financial interest ofthe State. Hence quite naturally, the Legislature has empowered the Government to see that there is no leakage in its revenue. It is for the Government to decide whether the price offered in an auction sale is adequate. While accepting or rejecting a bid, it is merely performing an executive function. The correctness of its conclusion is not open to judicial review. We fail to see how the plea of contravention of Article 19(1)(g) or Article 14 can arise in these cases. The Government's power to sell the exclusive privileges ~ . set out in Section 22 was not denied. It was also not disputed that those privileges could be sold by public auction. Public auctions are held to get the best possible price.

Once these aspects are recognised, there appears to be no basis for contending that the owner of the privileges in question who had offered to sell them cannot decline to accept the highest bid if he thinks that the price offered is inadequate. There is no concluded contract till the bid is accepted. Before there was a concluded contract, it was open to the bidders to withdraw their bids - see Union ofIndia v. Bhimsen Walaiti Ram. By merely giving bids, the bidders had not acquired any vested rights. The fact that the '-• Government was the seller does not change the legal position once its exclusive right to deal with those privileges is conceded. If the Government is the exclusive owner of those privileges, reliance on Article 19( l )(g) or Article 14 becomes irrelevant.

Citizens cannot have any fundamental right to trade or carry on business in the properties or rights belonging to the Government-nor can there be any infringement of Article 14, if the Government tries to get the best available price for its valuable rights. The High Court was wholly wrong in thinking that purpose of Sections 22 and 29 of the Act was not to raise revenue. Raising revenue as held by this Court in ~- -'( - ,. f Cooverjee B. Bharucha case was one of the important purposes of such provisions. The fact that the price fetched by the sale of country liquor is an excise revenue does not change the nature of the right. The sale in question is but a mode of raising revenue. Assuming that the question of arbitrary or unguided power can arise in a case of this nature, it should not be forgotten that the power to accept or reject the highest bid is given to the highest authority in the State i. e. the Government which is expected to safeguard the finances of the State.

Such a power cannot be considered as an arbitrary power. If that y power is exercised for any collateral purposes, the exercise of the power will be struck down. It may also be remembered that herein we t are not dealing with a delegated power but with' a power conferred by the Legislature. The High Court erroneously thought that the Government was bound to satisfy the Court that . there was collusion between the bidders. The High Court was not sitting on appeal against the order made by the Government. The inference of the Government that there was a collusion among the bidders may be right or wrong. But that was not open to judicial review so long as it is not proved that it was a make-believe one. The real opinion formed by the Government was that the price fetched was not adequate. That . ( conclusion is taken on the basis of Government expectations. The conclusion reached by the Government does not affect any one's rights.

Hence, in our opinion, the High Court misapplied the ratio of the decision of this Court in Barium Chemicals ltd. v. Company Law Board and Rohtas Industries Ltd v. S. T Agarwal. " Citizens may not have any fundamental right to carry on trade or business in a commodity belonging to the Government. But therein, the court was concerned with liquor which was considered to be res extra commercium. We may, however, notice that this Court in State ofMadhya Pradesh of v. Nandlal Jaiswal. (1986) 4 SCC 566, as also Khoday Distilleries ltd and 9rs. v. State ofKarnataka and Ors. , (1995) I SCC 574, has clearly held that even in respect of trade of liquor, Article 14 would be applicable. In Ramana Dayaram Shetty v. International Airport of India and Ors [1979] 3 SCC 489 =AIR (1979) SC 1628, this Court held: "... the democratic form of Government demands equality and absence ofarbitrariness and discrimination in such transactions... The activities )" -I r -- . J!

' of the Government have a public element and, therefore, there should be fairness and equality. The State need not enter into any contract with anyone, but if it does so, it must do so fairly without discrimination and without unfair procedure". This proposition would hold good in all cases of dealing by the Government with the public, where . the interest sought to be protected is a privilege. It must, therefore, be taken to be the law that where the Government is dealing with the public, whether by way of giving jobs or entering into contracts or issuing quotas or licences or granting other forms of largesse, the ... Government cannot act arbitrarily at its sweet will and, like a private individual, deal with any person it pleases, but its action must be in ·conformity with standard or nonns which is not arbitrary, irrational or irrelevant.... " It is furthennore not a case like Kasturi Lal Lakshmi Reddy, represented by its Partner Shri Kasturi Lal, Ward No.

4, Palace Bar, Poonch, Jammu and Ors. v. State ofJammu & Kashmir and Ors. , [1980] 4 SCC 1, whereupon again the learned Additional Solicitor General relied that the Government cannot act in a manner which would benefit a party but then the said decision would not apply when the State as a monopoly is dealing with an essential commodity. A monopoly concern is meant to cater to the need of all sections of the people. Whereas the demand of the core sector must be given priority, the Central Government as also the Coal Controller in terms of 1945 Order thought of giving some preference to those industries which produce smokeless coal as well. Smokeless coal producers started manufacture the same on the basis of invention ofnew technology invented by the Central Fuel Research Institute, an unit of Council of Scientific and Industrial Research Institute as also the Coal Mining and Planning Development of India; which is a subsidiary of Coal India Ltd. ...

, We have noticed hereinbefore that when the coal companies themselves manufactured coke for domestic consumers, the same used to cause health hazards. They intended to outsource production of manufacturing soft coke; wherefor they had asked the Governments of Bihar and West Bengal to encourage setting up of smokeless coal units assuring supply of coal. Such 'linkage system has, therefore, been developed under which the consumers are linked to specify mines from which they received specified quantities and specified grades of coal on a monthly basis. ~ -( . ,, "! :- Coke oven units, in particular, are linked in the W-II, W-III & W-IV of the non-core sector. The importance of the linkage system despite resort to E-Auction has since been recognized by the Government of India, as would appear from its letter dated 19. 04. 2005. Whereas manufacturers of hard coke would require coking coal, others would require only non-coking coal.

The necessity of having a fixed price of coal is supported by subsection (3) of Section 9 of the MMRD Act, 1957 wherein it was provided that the rate of royalty shall not be revised within three years. (See AIR ( 1996) SC 2560). The period of three years has since been altered to a period of four years. Prior thereto a period of five years was fixed therefor. Even the Central Government emphasized the requirement of having a fixed price of coal in a meeting held on 13. 10. 2001 and took note of the fact that the price increase would cause undue hardship which might be suffered by the small scale industries and which might concern their growth and in that view of the matter, it was decided that the price increase for the non-core sector should not be done more than once in a period of one year.

The court while considering such a question cannot also lose sight of the fact that apart from the Essential Commodities Act, 1955, the entire control and regulation of coal has been taken over by the Central Government in • f terms of Entry 54 of List I as also Entry 52 of List I of the Seventh Schedule ofthe Constitution of India. In exercise ofsuch power, the Parliament enacted the Industrial (Development and Regula