The Supreme Court on Tuesday said the allocation of coal blocks prima facie seemed to be arbitrary and the procedure adopted by the government does not appear to be legal. It warned of cancelling the blocks if procedures were not followed.
The court directed the CBI not to share information of its probe into the scam with the "political executive" (central government). The Comptroller and Auditor General (CAG) has estimated a loss of Rs.1.86 lakh crore to the exchequer in the controversial allocation of coal blocks by the government.
"If even among them (applicants for the coal blocks)... they (government) have not followed any guidelines or procedures and a, b, c was allocated and d, e, f, was excluded then the whole allocation has to go," said an apex court bench of Justice R.M. Lodha, Justice J. Chelameswar and Justice Madan B. Lokur.
The court said this while hearing a public interest litigation by advocate Manohar Lal Sharma and NGO Common Cause, seeking cancellation of all the coal blocks which have been negatively commented upon by the CAG.
"The procedure the government is talking about prima facie does not seem to be proper and legal," said Justice Lodha.
Pointing out that from 2006-09 the government received 2,100 applications out of which 160 applicants were allocated 368 coal blocks, the court asked "in what circumstances 950 were not found to be eligible".
The court inquired if a "well-defined and well-structured policy was there on the basis of which applications were scrutinised".
"Even in small selections there are guidelines, short listing and the scrutiny of the application before a decision is made," the court said inquiring if the same were followed by the government in the allocation of coal blocks.
The court pointed out that the Central Bureau of Investigation (CBI) report said that there was no system to verify the credentials of the companies that had applied for coal blocks including their financial standing.
The apex court said it will first examine the legality of the allocation of coal blocks and the CBI will look into the criminality, if any, in the allocation.
The court directed the CBI director that the agency will not share information of its probe into the scam with the political executive (central government). It said that all the status reports submitted to the court would be vetted by the CBI Director.
Defending the allocation of the coal blocks and holding them legal, Attorney General G.E. Vahanvati said all norms were followed and the government did not want any large-scale cancellation. He said that every allocation was examined by the screening committee.
The statement by the attorney general assumes significance in the back-drop of the apex court cancelling 122 2G licences that jolted the telecom sector.
Vahanvati told the court that private players were brought in because power sector was in a pathetic state and government was short of resources to support new projects.
He took exception to the allegation of criminal conspiracy levelled by Prashant Bhushan, who appeared for Common Cause.
Justice Lodha cautioned him saying: "Any of your comment must not prejudice the ongoing inquiry by the CBI. If you are challenging the criminal conspiracy charge that is begin examined by the CBI then that would directly or indirectly influence the investigation."
"I just want to know how were you dealing with applications which you were getting pursuant to your advertisement," Justice Lodha told the attorney general.
Prashant Bhushan told the court that the allocation of coal blocks was contrary to what the apex court said in the 2G verdict and while answering the presidential reference on the methods of allocating natural resources. He told the court that when scarce resources are allocated to private players for commercial exploitation then the criterion of allocation must be maximization of revenue.