Punjab State Power Corporation … vs Emta Coal Limited on 21 September, 2021


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Supreme Court of India

Punjab State Power Corporation … vs Emta Coal Limited on 21 September, 2021

Author: B.R. Gavai

Bench: L. Nageswara Rao, Sanjiv Khanna, B.R. Gavai

                                             REPORTABLE

            IN THE SUPREME COURT OF INDIA
            CIVIL APPELLATE JURISDICTION


         CIVIL APPEAL NOS. 5823­5824 OF 2021
      [Arising out of SLP(C) Nos. 9924­9925 of 2019]

PUNJAB STATE POWER CORPORATION
LIMITED AND ANOTHER                       ...APPELLANT(S)

                        VERSUS


EMTA COAL LIMITED                       ...RESPONDENT(S)

                          WITH

         CIVIL APPEAL NOS. 5825­5826 OF 2021
     [Arising out of SLP(C) Nos.14384­14385 of 2021]


DBL­VPR CONSORTIUM THROUGH
AUTHORISED REPRESENTATIVE                 ...APPELLANT(S)

                        VERSUS


EMTA COAL LIMITED
AND OTHERS                              ...RESPONDENT(S)

                     JUDGMENT

B.R. GAVAI, J.

1

1. Leave granted.

2. A short question relating to interpretation of Section 11 of

the Coal Mines (Special Provisions) Act, 2015 (hereinafter

referred to as the “said Act”) which is an outcome of the

judgment of this Court in the case of Manohar Lal Sharma v.

Principal Secretary and Others1 (hereinafter referred to as

“Manohar Lal Sharma­I”) and an ancillary question pertaining

to scope of judicial review of an administrative action of the

State Authority arise for consideration in these appeals.

3. These appeals challenge the judgment and order passed

by the Division Bench of the High Court of Punjab and Haryana

dated 25th January 2019, thereby allowing the civil writ

petitions being CWP Nos. 10055 and 16245 of 2018, filed by

the respondent herein­EMTA Coal Limited (hereinafter referred

to as “EMTA”) and holding that the respondent herein will have

the first right of refusal in the matter of lending of Mining

Lease.

1(2014) 9 SCC 516

2

4. The facts in the present case are not in dispute, which are

taken from appeals arising out of SLP(C) Nos. 9924­25 of 2019.

5. The Punjab State Electricity Board (hereinafter referred to

as the “PSEB”) which is now known as Punjab State Power

Corporation Limited (hereinafter referred to as the “PSPCL”),

was proposed to be allotted Captive Coal Mines by the Union of

India. On 16th February 1999, PSEB issued a tender, thereby

inviting bids for the purpose of development of Captive Coal

Mines. In the said bid, opened on 9th February 2000, the

respondent­EMTA emerged successful. Accordingly, an

agreement was entered into between PSEB and EMTA on 5 th

May 2000, thereby creating a Joint Venture Company called

Panem Coal Mines Limited (hereinafter referred to as “Panem”).

The said agreement provided the rights for mining of coal from

the Coal Mines, transporting and delivery of it, wholly and

exclusively to PSEB. Since EMTA being a partnership firm

could not have been a shareholder of the Joint Venture

Company, a follow up Joint Venture Agreement was entered

into on 21st March 2001 between PSEB, EMTA and the three

3
partners of EMTA, incorporating the same terms and conditions

as were found in the earlier agreement dated 5 th May 2000. The

same was intimated to the Union of India by PSEB. Thereafter

on 26th December 2001, Union of India allotted a Captive Coal

Block being Pachhwara (Central Block) Coal Mine (hereinafter

referred to as “Pachhwara Coal Block”) in the State of

Jharkhand to PSEB. On 22 nd February 2002, Union of India

notified the supply of coal from the Pachhwara Coal Block by

the Joint Venture Company (Panem) to the power stations of

PSEB on an exclusive basis as an end use under Section 3(3)(a)

(iii) of the Coal Mines (Nationalization) Act, 1973, in the official

gazette. On 25th November 2004, a Mining Lease was executed

between the Government of Jharkhand and Panem for mining

coal from the non­forest areas of Pachhwara Coal Block.

Subsequently on 30th August 2006, a Coal Purchase Agreement

was executed between Panem and PSEB, for the purpose of

supply and delivery of the coal from Pachhwara Coal Block to

the power stations of PSEB. On 6 th January 2007, Mining

Lease was issued by the Government of Jharkhand in favour of

4
Panem, for mining coal even from the forest areas of the Coal

Block.

6. Till 2014, there was no problem. However, on 25 th August

2014, this Court in the case of Manohar Lal Sharma­I, held

that the entire allocation of Coal Blocks made between 1993

and 2011, except those which were made through competitive

bidding, were invalid, unfair, arbitrary and violative of Article

14 of the Constitution of India. On 24th September 2014, vide

further orders passed in the case of Manohar Lal Sharma v.

Principal Secretary and Others2, this Court quashed all Coal

Block allocations made by the Central Government between

1993 and 2011. This Court also accepted the submission of

the learned Attorney General that the allottees of the Coal

Blocks other than those covered by the judgment and the four

Coal Blocks covered by the subsequent order, must pay an

amount of Rs.295/­ per metric ton of coal extracted as an

additional levy. In pursuance of the judgment of this Court in

the case of Manohar Lal Sharma­I, the Coal Mines (Special

2 (2014) 9 SCC 614

5
Provisions) Ordinance, 2014 (“First Ordinance”) came to be

promulgated on 21st October 2014. The Second Ordinance

came to be promulgated on 26 th December 2014. Vide further

orders passed by this Court in February 2015 in contempt

proceedings in the case of Manohar Lal Sharma­I, an

additional levy at the rate of Rs.295/­ per metric ton was

directed to be paid by the prior allottees. Subsequently on 30 th

March 2015, the said Act was notified, repealing the Second

Ordinance.

7. The Central Government vide Allotment Order dated 31 st

March 2015, again allocated Pachhwara Captive Coal Block in

favour of PSPCL. As PSPCL was facing acute shortage of coal

for paddy season, and closure of Coal Block had resulted in

sudden loss of employment, it entered into a Transitory

Agreement with EMTA on 30th June 2015. As per Clause 1.1.20

of the Transitory Agreement, the said contract was for a period

of nine months or till Mine Developer­cum­Operator was

appointed by PSPCL through competitive bidding. On 23 rd July

2015, PSPCL informed Union of India about the Transitory

6
Agreement. On 31st August 2015, PSPCL published Notice

inviting Global Tender (hereinafter referred to as the “NIT”),

inviting bids for the appointment of Mine Developer­cum­

Operator, for supply of coal.

8. EMTA filed a civil writ petition being CWP No. 26180 of

2015 before the High Court of Punjab and Haryana, thereby

challenging the said NIT. On 10 th February 2016, the High

Court passed a direction restraining PSPCL from opening the

financial bids till 29th February 2016. On 1st February 2018,

CWP No. 26180 of 2015 was dismissed as withdrawn by the

High Court on the basis of the statement made by PSPCL that it

shall consider the representation­cum­claims made by EMTA

and it shall take a decision thereon before finalizing the fresh

tender process for allotment of Coal Mines at Pachhwara.

Accordingly, a representation was made by EMTA on 20 th

February 2018, which came to be rejected by PSPCL on 6 th April

2018. The same was challenged by EMTA by filing a civil writ

petition being CWP No. 10055 of 2018 before the High Court of

Punjab and Haryana.

7

9. It is to be noted that in the meantime, since the tender

process was held up due to various writ petitions, PSPCL

passed a Resolution on 30th June 2017, to drop the Global

Tender dated 31st August 2015. During the pendency of CWP

No. 10055 of 2018, on 30 th April 2018, PSPCL issued a fresh

Request For Proposal (RFP), to invite Global Bids for the

selection of Mine Developer­cum­Operator for Pachhwara Coal

Block through competitive reverse bidding process. The same

was challenged by EMTA by filing another civil writ petition

being CWP No. 16245 of 2018 before the High Court of Punjab

and Haryana. PSPCL contested the same by filing a written

statement. Pursuant to RFP dated 30 th April 2018, the bids

were opened on 10th August 2018. The lowest bid was

submitted by DBL­VPR Consortium who is the appellant in

appeal arising out of SLP(C) Nos. 14384­14385 of 2021. Letter

of Award was issued in favour of the said DBL­VPR Consortium

and a Coal Mining Agreement was signed on 11th September

2018. By the impugned judgment and order dated 25 th

8
January 2019, the High Court allowed the civil writ petitions as

aforesaid. Being aggrieved thereby, the present appeals.

10. Shri K.V. Viswanathan, learned Senior Counsel appearing

on behalf of appellant­PSPCL submitted that the High Court

has grossly erred in holding that EMTA had a first right of

refusal. The learned Senior Counsel submitted that the prior

allotment of the Coal Blocks between 1993 and 2011 was

cancelled, since this Court had held in Manohar Lal Sharma­

I, that the said allotments were arbitrary, illegal and violative of

Article 14 of the Constitution. He submitted that Section 11 of

the said Act clearly provides that it was the discretion of PSPCL

to allow a successful allottee to continue or not to continue with

the existing contracts, which were in existence prior to the

fresh allotment in relation to coal mining operation. Shri

Viswanathan submitted that only when the allottee decides to

continue with the old contracts, the question of constitution of

novation for residual term would arise. The learned Senior

Counsel submitted that in view of sub­section (2) of Section 11

of the said Act, when an allottee decides not to continue with

9
the existing contracts entered into by the prior allottees with

third parties, all such contracts shall cease to be enforceable

against the successful bidder or allottee in relation to Schedule

I coal mines and the remedy of such contracting parties shall

be against the prior allottees. The learned Senior Counsel

submitted that Section 16 of the said Act provides for

compensation for land as well as for mining infrastructure.

11. The learned Senior Counsel further submitted that in

pursuance of the directions issued by this Court for payment of

Rs.295/­ per metric ton, it was the liability of EMTA to make

the said payment amounting to Rs.1400 crore. He submitted

that however, EMTA had failed to make the said payment

resulting in a huge loss to the public exchequer. The learned

Senior Counsel further submitted that the findings of the High

Court with regard to the legitimate expectation of EMTA, are

totally unsustainable. The learned Senior Counsel submitted

that the legitimate expectation would not be applicable against

the Statute. He further submitted that PSPCL has taken a

policy decision to appoint Mine Developer­cum­Operator by

10
competitive bidding process. He submitted that the policy is

reasonable and as such, the legitimate expectation would not

be applicable as against such a reasonable policy. The learned

Senior Counsel relied on the judgment of this Court in the case

of Kerala State Beverages (M and M) Corporation Limited v.

P.P. Suresh and Others3.

12. Shri Viswanathan further submitted that in view of Clause

12.4 of the Allotment Agreement, PSPCL was bound to appoint

a Mine Developer­cum­Operator only through a competitive

bidding process. He submitted that due to certain exigencies,

PSPCL had entered into a transitory arrangement with EMTA

for a limited period of nine months. However, the same was

disapproved by Union of India and a Show­Cause Notice came

to be issued to PSPCL. He therefore submitted that

understanding the Clause 12.4 of the Allotment Agreement in

correct perspective, PSPCL had decided to issue RFP, inviting

Global Tenders for appointing Mine Developer­cum­Operator.

3(2019) 9 SCC 710

11

13. Dr. A.M. Singhvi, learned Senior Counsel appearing on

behalf of appellant­DBL­VPR Consortium, also supports the

submissions made by Shri Viswanathan. He submitted that

DBL­VPR Consortium had participated in the Global Tender

and is the lowest bidder. He submitted that the High Court has

grossly erred in holding that EMTA had a right of first refusal

after the bidding process was complete and DBL­VPR’s offer

was known to all. He therefore submitted that the impugned

judgment and order passed by the High Court needs to be set

aside.

14. Shri Mukul Rohatgi, learned Senior Counsel appearing on

behalf of respondent­EMTA vehemently opposed the

submissions made on behalf of PSPCL. The learned Senior

Counsel submitted that EMTA has made huge investment by

deploying specialized machinery for the purpose of mining,

construction of roads to the Mining Blocks and other

infrastructural developments. He submitted that since the

contract was entered into for a period of 30 years, EMTA has a

legitimate expectation to continue till completion of the said

12
period of 30 years. He therefore submitted that the High Court

has rightly held that EMTA had a legitimate right of first

refusal.

15. Shri Rohatgi submitted that the legislative intent behind

Section 11(1) of the said Act is to permit an existing contractor

to continue if his performance is found to be satisfactory, and

nothing adverse against EMTA has been found. The learned

Senior Counsel submitted that however, PSPCL, in an arbitrary

and irrational manner, has denied the claim of EMTA. He

submitted that only when the performance of the existing

contractor is found to be unsatisfactory or there is something

against him, the allottee would be entitled to take recourse to

the competitive bidding.

16. Shri Rohatgi would further submit that a similar view has

been taken by the Karnataka High Court in the case of KPCL v.

EMTA Coal Limited and Others4. He submitted that aggrieved

by the judgment of the Karnataka High Court, KPCL had

approached this Court. This Court appointed a Committee of

4ILR 2016 Kar 4301

13
Experts to determine the price and EMTA, who was also a Mine

Developer in the said matter, was permitted to continue with

the operations at the rates fixed by the Experts Committee. He

further submitted that from the letter dated 9 th June 2020,

addressed by the Joint Secretary, Ministry of Coal, Government

of India, it would be clear that it is also the stand of Union of

India that Section 11 of the said Act prevails over Clause 12 of

the Allotment Agreement. The learned Senior Counsel

submitted that the contention on behalf of PSPCL that on

account of Clause 12.4 of the Allotment Agreement, PSPCL was

bound to appoint a Mine Developer­cum­Operator by

competitive bidding, is unsustainable.

17. He further submitted that no prejudice is caused to PSPCL

by the impugned judgment and order. He submitted that the

price is now known and what has been done by the High Court

is only granting a right of first refusal. If EMTA is desirous to

continue, it will have to continue at the same rate and

therefore, no financial loss would be caused to PSPCL.

14

18. Shri Rohatgi further submitted that in the earlier round of

litigation, the High Court had recorded the statement of PSPCL

that if a representation is made by EMTA, the same would be

considered by PSPCL and a decision would be taken on merits.

He however submitted that, a perusal of the order passed by

PSPCL dated 6th April 2018, would show that the representation

of EMTA has been decided in a perfunctory manner without

giving any valid reasons.

19. For appreciating the rival submissions, it will be necessary

to refer to Section 11 of the said Act:­

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

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

15
(2) In the event that a successful bidder or allottee
elects not to adopt or continue with existing
contracts which had been entered into by the prior
allottees with third parties, in that case all such
contracts which have not been adopted or
continued shall cease to be enforceable against the
successful bidder or allottee in relation to the
Schedule I coal mine and the remedy of such
contracting parties shall be against the prior
allottees.”

20. It will not be out of place to mention that the said Act

came to be enacted in pursuance of the decision of this Court

in the case of Manohar Lal Sharma­I, wherein this Court held

that the allotment of Coal Blocks between 1993 and 2011 was

arbitrary, illegal and violative of Article 14 of the Constitution.

A plain reading of Section 11 of the said Act would reveal that it

begins with a non­obstante clause. It provides that a successful

bidder or allottee, as the case may be, in respect of Schedule I

coal mines, may elect, to adopt and continue such contracts

which may be existing with any of the prior allottees in relation

to coal mining operations and the same shall constitute a

novation for the residual term or residual performance of such

contract.

16

21. The words “may elect” would clearly show that the

legislature has given complete discretion to a successful bidder

or allottee to elect. The words “may elect” would also mean a

discretion not to elect. Only in the event, a successful bidder or

allottee decides to adopt and continue such contract, which

may be existing with any of the prior allottees in relation to coal

mining operations, the same shall constitute a novation for

residual term or residual performance of such contract. In the

event, the successful allottee does not elect to adopt or continue

such contract, there is no question of novation for residual term

or residual performance of such contract. Perusal of sub­

section (2) of Section 11 of the said Act would also make it clear

that, it provides that in the event a successful bidder or allottee

elects not to adopt or continue with the existing contract which

had been entered into by the prior allottees with third parties,

all such contracts which have not been adopted or continued

shall cease to be enforceable against the successful bidder or

allottee in relation to Schedule I coal mines and the remedy of

such contracting parties shall be against the prior allottees. It

17
could thus be seen that on a plain reading of sub­sections (1)

and (2) of Section 11 of the said Act, it is clear that the

successful allottee or bidder has complete freedom to decide as

to whether he desires to continue or adopt any such existing

contracts in relation to coal mining operation. Only in the event

he elects to adopt or continue with existing contracts, it shall

constitute novation for residual term or residual performance of

such contracts. In the event the successful bidder or allottee

elects not to adopt or continue with the existing contracts, all

such contracts shall cease to be enforceable against the

successful bidder or allottee in relation to Schedule I coal

mines. The only remedy of such contracting parties shall be

against the prior allottees.

22. The principle of giving a plain and literal meaning to the

words in a Statute is well recognized for ages. Though there are

a number of judgments, we may gainfully refer to the judgment

of this Court delivered by Das, J. as early as 1955 in the case of

Jugalkishore Saraf v. Raw Cotton Company Limited5:­

5 [1955] 1 SCR 1369

18
“The cardinal rule of construction of statutes is to
read the statute literally, that is by giving to the
words used by the legislature their ordinary, natural
and grammatical meaning. If, however, such a
reading leads to absurdity and the words are
susceptible of another meaning the Court may
adopt the same. But if no such alternative
construction is possible, the Court must adopt the
ordinary rule of literal interpretation.”

Though there are various authorities on the said subject,

we do not wish to burden the present judgment by reproducing

those. In our considered view, if the words used in Section 11

of the said Act are construed in plain and literal term, they do

not lead to an absurdity and as such, the rule of plain and

literal interpretation will have to be followed. We find that in

case the interpretation as sought to be placed by Shri Rohatgi

is to be accepted, it will do complete violence to the language of

Section 11 of the said Act. If it is held that under Section 11 of

the said Act, a prior contractor is entitled to continue if his

performance is found to be satisfactory and if there is nothing

against him, then it will be providing something in Section 11 of

the said Act which the Statute has not provided for. It will also

lead to making the words “may elect, to adopt and continue”

19
redundant and otiose. It is a settled principle of law that when,

upon a plain and literal interpretation of the words used in a

Statute, the legislative intent could be gathered, it is not

permissible to add words to the Statute. Equally, such an

interpretation which would make some terms used in a Statute

otiose or meaningless, has to be avoided. We therefore find that

if an interpretation as sought to be placed by EMTA is to be

accepted, the same would be wholly contrary to the principle of

literal interpretation. There are number of authorities in

support of the said proposition. However, we refrain from

referring to them in view of the following observations made by

this Court in a recent judgment in the case of Ajit Mohan and

Others v. Legislative Assembly National Capital Territory

of Delhi and Others6

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

6 2021 SCC OnLine SC 456

20
As such, the contention in that regard is found to be

without merit.

23. We find that the High Court has also clearly understood

the said legal position with regard to language used in Section

11 of the said Act. When considering Section 62 of the

Contract Act, 1872 read with Section 11 of the said Act, it has

observed that the parties to a contract may willingly agree to

substitute a new contract or to rescind it or alter it. Having

observed this, the High Court has, however, erred in observing

that EMTA had a legitimate expectation. The High Court has

observed thus:­
“It could not therefore, have been left in the lurch
particularly when the same mine was re­allocated to
the Corporation suggestive of continuity. Indeed,
the respondents were very well within their rights to
reject the arrangement while granting a
consideration under Section 11 if the performance
of the petitioner was unsatisfactory or if there was
any other factor which the Corporation found
relevant enough to discard the arrangement
altogether.”

24. We find that the reasoning adopted by the High Court is

totally wrong. Merely because the Coal Mine Block was allotted

21
to PSPCL, the same could not give any vested right in favour of

EMTA, particularly in view of the language used in Section 11

of the said Act. The reasoning given by the High Court that

PSPCL was within its right to reject the arrangement if the

performance of EMTA was unsatisfactory or if there was any

other factor which the Corporation found relevant enough to

discard the arrangement altogether, in our view, are totally

erroneous.

25. Having observed in earlier para that in view of Section 11

of the said Act read with Section 62 of the Contract Act, 1872,

the parties to a contract may willingly agree to substitute a new

contract or to rescind it or alter it, the High Court has erred in

forcing PSPCL to continue with the contract with EMTA, though

it was not willing to do so.

26. The issue with regard to legitimate expectation has been

recently considered by a bench of this Court to which one of us

(L. Nageswara Rao, J.) was a member. After considering

various authorities on the issue, in the case of Kerala State

22
Beverages (M and M) Corporation Limtied (supra), it was

observed thus:­
“20. The decision­makers’ freedom to change the
policy in public interest cannot be fettered by
applying the principle of substantive legitimate
expectation. [Findlay, In re, 1985 AC 318 : (1984) 3
WLR 1159 : (1984) 3 All ER 801 (HL)] So long as the
Government does not act in an arbitrary or in an
unreasonable manner, the change in policy does not
call for interference by judicial review on the ground
of a legitimate expectation of an individual or a
group of individuals being defeated.”

27. Shri Viswanathan has relied on the judgment of the

Calcutta High Court in the case of EMTA Coal Limited and

Another v. West Bengal Power Development Corporation7.

Per contra, Shri Rohatgi has relied on the judgment of the

Karnataka High Court in KPCL v. EMTA Coal Limited (supra).

We do not desire to go into the issue of correctness of either of

the judgments inasmuch as we are independently considering

the issue and examining the correctness of the judgment

impugned before us.

28. Insofar as the reliance placed by Shri Rohatgi on the letter

of Union of India dated 9th January 2020 is concerned, there

7 (2016) 2 Cal LJ 424

23
can be no doubt that between Section 11 of the said Act and

Clause 12.4.1 of the Allotment Agreement, Section 11 of the

said Act would prevail. The question is, whether, Section 11 of

the said Act mandates the successful allottee to continue with

the existing contract. The answer, obviously, is no. In any

case, the claim of EMTA is not rejected by PSPCL solely on the

ground of Clause 12.4.1 of the Allotment Agreement.

29. That leaves us with the last submission of Shri Rohatgi. It

is his submission that as per the statement made by PSPCL

before the High Court in first round of litigation, it was to

consider the representation of EMTA in a reasonable and just

manner. He however submitted that the order dated 6 th April

2018, was passed by PSPCL in a totally arbitrary and irrational

manner.

30. The order passed by PSPCL dated 6th April 2018, is an

order passed by an authority of the State in exercise of its

executive functions. The scope of judicial review of

administrative action has been well crystalised by this Court in

24
the judgment of Tata Cellular v. Union of India8. The

judgment in the case of Tata Cellular (supra), has been

subsequently followed in a number of judgments of this Court.

This Court in the case of Rashmi Metaliks Limited and

Another v. Kolkata Metropolitan Development Authority

and Others9, has observed that the decision which holds the

field with regard to issue of judicial review of an administrative

action, is the judgment in the case of Tata Cellular (supra), by

a three­Judge Bench. The Court has held that the rule of

precedent mandates that this exposition of law be followed and

applied by coordinate or co­equal Benches and certainly by all

smaller Benches and subordinate courts. This Court has

further deprecated the practice of referring to catena of

judgments following the said pronouncement of law. We

therefore refrain from referring to the subsequent judgment,

and reproduce the relevant observations in Tata Cellular

(supra), which read thus:­

8(1994) 6 SCC 651
9 (2013) 10 SCC 95

25
“70. It cannot be denied that the principles of
judicial review would apply to the exercise of
contractual powers by Government bodies in order
to prevent arbitrariness or favouritism. However, it
must be clearly stated that there are inherent
limitations in exercise of that power of judicial
review. Government is the guardian of the finances of
the State. It is expected to protect the financial
interest of the State. The right to refuse the lowest or
any other tender is always available to the
Government. But, the principles laid down in Article
14
of the Constitution have to be kept in view while
accepting or refusing a tender. There can be no
question of infringement of Article 14 if the
Government tries to get the best person or the best
quotation. The right to choose cannot be considered
to be an arbitrary power. Of course, if the said
power is exercised for any collateral purpose the
exercise of that power will be struck down.

71. Judicial quest in administrative matters has
been to find the right balance between the
administrative discretion to decide matters whether
contractual or political in nature or issues of social
policy; thus they are not essentially justiciable and
the need to remedy any unfairness. Such an
unfairness is set right by judicial review.

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

“ ‘Judicial review’ is a great weapon in the
hands of the judges; but the judges must
observe the constitutional limits set by our
parliamentary system upon the exercise of this
beneficial power.”

26
Commenting upon this Michael Supperstone and
James Goudie in their work Judicial Review (1992
Edn.) at p. 16 say:

“If anyone were prompted to dismiss this sage
warning as a mere obiter dictum from the most
radical member of the higher judiciary of
recent times, and therefore to be treated as an
idiosyncratic aberration, it has received the
endorsement of the Law Lords generally. The
words of Lord Scarman were echoed by Lord
Bridge of Harwich, speaking on behalf of the
Board when reversing an interventionist
decision of the New Zealand Court of Appeal
in Butcher v. Petrocorp Exploration Ltd. 18­3­
1991.”

73. Observance of judicial restraint is currently the
mood in England. The judicial power of review is
exercised to rein in any unbridled executive
functioning. The restraint has two contemporary
manifestations. One is the ambit of judicial
intervention; the other covers the scope of
the court’s ability to quash an administrative
decision on its merits. These restraints bear the
hallmarks of judicial control over administrative
action.

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

75. In Chief Constable of the North Wales
Police v. Evans [(1982) 3 All ER 141, 154] Lord
Brightman said:

“Judicial review, as the words imply, is not an
appeal from a decision, but a review of the
manner in which the decision was made.

***

27
Judicial review is concerned, not with the
decision, but with the decision­making
process. Unless that restriction on the power
of the court is observed, the court will in my
view, under the guise of preventing the abuse
of power, be itself guilty of usurping power.”
In the same case Lord Hailsham commented on the
purpose of the remedy by way of judicial review
under RSC, Ord. 53 in the following terms:

“This remedy, vastly increased in extent, and
rendered, over a long period in recent years, of
infinitely more convenient access than that
provided by the old prerogative writs and
actions for a declaration, is intended to protect
the individual against the abuse of power by a
wide range of authorities, judicial, quasi­
judicial, and, as would originally have been
thought when I first practised at the Bar,
administrative. It is not intended to take away
from those authorities the powers and
discretions properly vested in them by law and
to substitute the courts as the bodies making
the decisions. It is intended to see that the
relevant authorities use their powers in a
proper manner (p. 1160).”
In R. v. Panel on Take­overs and Mergers, ex p
Datafin plc [(1987) 1 All ER 564] , Sir John
Donaldson, M.R. commented:

“An application for judicial review is not an
appeal.”
In Lonrho plc v. Secretary of State for Trade and
Industry [(1989) 2 All ER 609], Lord Keith said:

“Judicial review is a protection and not a
weapon.”
It is thus different from an appeal. When hearing an
appeal the Court is concerned with the merits of the
decision under appeal. In Amin, Re [Amin v. Entry

28
Clearance Officer, (1983) 2 All ER 864] , Lord Fraser
observed that:

“Judicial review is concerned not with the
merits of a decision but with the manner in
which the decision was made…. Judicial
review is entirely different from an ordinary
appeal. It is made effective by the court
quashing the administrative decision without
substituting its own decision, and is to be
contrasted with an appeal where the appellate
tribunal substitutes its own decision on the
merits for that of the administrative officer.”

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

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

1. Whether a decision­making authority
exceeded its powers?

2. Committed an error of law,

3. committed a breach of the rules of natural
justice,

4. reached a decision which no reasonable
tribunal would have reached or,

5. abused its powers.

Therefore, it is not for the court to determine
whether a particular policy or particular decision
taken in the fulfilment of that policy is fair. It is only
concerned with the manner in which those
decisions have been taken. The extent of the duty to
act fairly will vary from case to case. Shortly put,
the grounds upon which an administrative action is
29
subject to control by judicial review can be classified
as under:

(i) Illegality : This means the decision­maker
must understand correctly the law that
regulates his decision­making power and must
give effect to it.

(ii) Irrationality, namely, Wednesbury
unreasonableness.

(iii) Procedural impropriety.

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

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

“It is true, that the judgment and discretion of
determining upon this skill, ability, learning
and sufficiency to exercise and practise this
profession is trusted to the College of
Physicians and this Court will not take it from
them, nor interrupt them in the due and
proper exercise of it. But their conduct in the
exercise of this trust thus committed to them
ought to be fair, candid and unprejudiced; not

30
arbitrary, capricious, or biased; much less,
warped by resentment, or personal dislike.”

79. To quote again, Michael Supperstone and
James Goudie; in their work Judicial Review (1992
Edn.) it is observed at pp. 119 to 121 as under:
“The assertion of a claim to examine the
reasonableness been done by a public
authority inevitably led to differences of
judicial opinion as to the circumstances in
which the court should intervene. These
differences of opinion were resolved in two
landmark cases which confined the
circumstances for intervention to narrow
limits. In Kruse v. Johnson [(1898) 2 QB 91 :
(1895­9) All ER Rep 105] a specially
constituted divisional court had to consider
the validity of a bye­law made by a local
authority. In the leading judgment of Lord
Russell of Killowen, C.J., the approach to be
adopted by the court was set out. Such bye­
laws ought to be ‘benevolently’ interpreted, and
credit ought to be given to those who have to
administer them that they would be
reasonably administered. They could be held
invalid if unreasonable : Where for instance
bye­laws were found to be partial and unequal
in their operation as between different classes,
if they were manifestly unjust, if they disclosed
bad faith, or if they involved such oppressive
or gratuitous interference with the rights of
citizens as could find no justification in the
minds of reasonable men. Lord Russell
emphasised that a bye­law is not unreasonable
just because particular judges might think it
went further than was prudent or necessary or
convenient.

31
In 1947 the Court of Appeal confirmed a similar
approach for the review of executive discretion
generally in Associated Provincial Picture Houses
Ltd. v. Wednesbury Corpn [(1948) 1 KB 223 : (1947)
2 All ER 680] . This case was concerned with a
complaint by the owners of a cinema in Wednesbury
that it was unreasonable of the local authority to
licence performances on Sunday only subject to a
condition that ‘no children under the age of 15
years shall be admitted to any entertainment
whether accompanied by an adult or not’. In an
extempore judgment, Lord Greene, M.R. drew
attention to the fact that the word ‘unreasonable’
had often been used in a sense which
comprehended different grounds of review. (At p.
229, where it was said that the dismissal of a
teacher for having red hair (cited by Warrington,
L.J. in Short v. Poole Corpn. [(1926) 1 Ch 66, 91 :
1925 All ER Rep 74] , as an example of a ‘frivolous
and foolish reason’) was, in another sense, taking
into consideration extraneous matters, and might
be so unreasonable that it could almost be
described as being done in bad faith; see
also R. v. Tower Hamlets London Borough Council,
ex p Chetnik Developments Ltd. [1988 AC 858, 873 :
(1988) 2 WLR 654 : (1988) 1 All ER 961] (Chapter 4,
p. 73, supra). He summarised the principles as
follows:

‘The Court is entitled to investigate the action
of the local authority with a view to seeing
whether or not they have taken into account
matters which they ought not to have taken
into account, or, conversely, have refused to
take into account or neglected to take into
account matter which they ought to take into
account. Once that question is answered in
favour of the local authority, it may still be
possible to say that, although the local
32
authority had kept within the four corners of
the matters which they ought to consider, they
have nevertheless come to a conclusion so
unreasonable that no reasonable authority
could ever have come to it. In such a case,
again, I think the court can interfere. The
power of the court to interfere in each case is
not as an appellate authority to override a
decision of the local authority, but as a judicial
authority which is concerned, and concerned
only, to see whether the local authority has
contravened the law by acting in excess of the
power which Parliament has confided in them.’
This summary by Lord Greene has been applied in
countless subsequent cases.

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

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

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

“4. Wednesbury principle.— A decision of a
public authority will be liable to be quashed or
otherwise dealt with by an appropriate order in
judicial review proceedings where the court

33
concludes that the decision is such that no
authority properly directing itself on the
relevant law and acting reasonably could have
reached it. (Associated Provincial Picture
Houses Ltd. v. Wednesbury Corpn. [(1948) 1
KB 223 : (1947) 2 All ER 680] , per Lord
Greene, M.R.)”

81. Two other facets of irrationality may be
mentioned.

(1) It is open to the court to review the
decision­maker’s evaluation of the facts. The
court will intervene where the facts taken as a
whole could not logically warrant the
conclusion of the decision­maker. If the weight
of facts pointing to one course of action is
overwhelming, then a decision the other way,
cannot be upheld. Thus, in Emma Hotels
Ltd. v. Secretary of State for
Environment [(1980) 41 P & CR 255] , the
Secretary of State referred to a number of
factors which led him to the conclusion that a
non­resident’s bar in a hotel was operated in
such a way that the bar was not an incident of
the hotel use for planning purposes, but
constituted a separate use. The Divisional
Court analysed the factors which led the
Secretary of State to that conclusion and,
having done so, set it aside. Donaldson, L.J.
said that he could not see on what basis the
Secretary of State had reached his conclusion.
(2) A decision would be regarded as
unreasonable if it is impartial and unequal in
its operation as between different classes. On
this basis in R. v. Barnet London Borough
Council, ex p Johnson [(1989) 88 LGR 73] the
condition imposed by a local authority
prohibiting participation by those affiliated

34
with political parties at events to be held in the
authority’s parks was struck down.”

31. It could thus be seen that while exercising powers of

judicial review, the Court is not concerned with the ultimate

decision but the decision­making process. The limited areas in

which the court can enquire are as to whether a decision­

making authority has exceeded its powers, committed an error

of law or committed breach of principle of natural justice. It

can examine as to whether an authority has reached a decision

which no reasonable Tribunal would have reached or has

abused its powers. It is not for the court to determine whether a

particular policy or a particular decision taken in the fulfilment

of that policy is fair. The court will examine as to whether the

decision of an authority is vitiated by illegality, irrationality or

procedural impropriety. While examining the question of

irrationality, the court will be guided by the principle of

Wednesbury. While applying the Wednesbury principle, the

court will examine as to whether the decision of an authority is

35
such that no authority properly directing itself on the relevant

law and acting reasonably could have reached it.

32. Applying the aforesaid principle, it can clearly be seen that

the decision of PSPCL dated 6th April 2018, cannot be

questioned on the ground of illegality or procedural

impropriety. The decision is taken in accordance with Section

11 of the said Act and after following the principle of Natural

Justice. The limited area that would be available for attack is

as to whether the decision is hit by the Wednesbury principle.

Can it be said that the decision taken by the authority is such

that no reasonable person would have taken it? No doubt, that

the authority has also relied on Clause 12.4.1 of the Allotment

Agreement, however, that is not the only ground on which the

representation of EMTA is rejected. No doubt, that while

considering EMTA’s representation, PSPCL has referred to

Clause 12.4.1 of the Allotment Agreement which requires the

coal mines to be developed through contractors who were

selected through a competitive bidding process, however, that is

not the only ground on which the representation of EMTA is

36
rejected. It will be relevant to refer to the following observations

in the order passed by PSPCL dated 6 th April 2018:­
“Moreover, there is no reason why competitive
bidding process for the purposes of eliciting the best
operator be not preferred. Needless to mention that
as the composition with respect to capital/revenue
investment is altogether different, hence the bidding
parameters have entirely changed.”

33. It could thus be seen that PSPCL has decided to go in for

competitive bidding process for the purpose of eliciting the best

operator. It has further noticed that the composition with

respect to capital/revenue investment is altogether different.

Hence, the bidding parameters have entirely changed. It has

further referred to the decision of this Court wherein it has

been held that the allotment should be through competitive

bidding process. We ask a question to ourselves, as to whether

the said reasoning can be said to be irrational or arbitrary. A

policy decision to get the best operator at the best price, cannot

be said to be a decision which no reasonable person would take

in his affairs. In that view of the matter, the attack on the

order/letter dated 6th April 2018, is without merit.

37

34. Insofar as the contention of Shri Rohatgi with regard to

the huge investment being made by EMTA is concerned, the

said Act itself provides remedy for seeking compensation apart

from the other remedies that are available in law. In that view

of the matter, we are not impressed with the arguments

advanced in that behalf.

35. In the result, the impugned judgment and order passed by

the High Court of Punjab and Haryana is unsustainable in law.

The appeals are therefore allowed and the judgment and order

passed by the High Court of Punjab and Haryana dated 25 th

January 2019, is quashed and set aside. Pending I.A (s), if any,

shall stand disposed of accordingly.

…..…..……………………..J.

[L. NAGESWARA RAO]

………………………….J.

[B.R. GAVAI]

…..…..……………………..J.

[B.V. NAGARATHNA]

NEW DELHI;

SEPTEMBER 21, 2021.

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