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Aug 26, 2014, 10.16 PM IST | Source: CNBC-TV18

'Coal block deallocation may have devastating consequences'

Former Solicitor General Mohan Parasaran said that the court will slap some harsh penalties to recover losses incurred by the exchequer.

The coal block allocation may not go the 2G way is the word coming in from former Solicitor General Mohan Parasaran.

Speaking to CNBC-TV18's Ashmit Kumar Parasaran said that the court will slap some harsh penalties to recover losses incurred by the exchequer.

RS Sodhi, former Judge, Delhi HC also joined in the conversation on the coal block allocation and according to him SC should not cross "lakshman rekha" by watering down coal ruling.

Below is the transcript of Mohan Parasaran and RS Sodhi's interview with CNBC-TV18's Ashmit Kumar.

Ashmit: The coal block allocation since 1993 has been deemed as illegal. The big question that now follows is what next; that is what everyone is watching out for. So, in your assessment do you see the coal block allocation case going down the 2G route? We have seen the apex court in the 2G matter scrap licenses, is that something we can expect?

Parasaran: Now the matter has been posted for further arguments on September 1. I don’t think this will go exactly the 2G way because there have been many companies which have in fact commissioned the mines over the years and there are also many other companies which have invested and have made all arrangements to commence.

The court might categorise those companies and possibly could also impose penalties on those persons who had got these largesse in a manner which the court calls it as illegal and arbitrary instead of a wholesale cancellation of licenses and only in cases where people have not taken any steps at all possibly the court will resort to cancellations. Otherwise this may have a devastating effect on the economy.

Q: What is your assessment with such comments coming in that nothing less than de-allocation would suffice to meet the standards that have been set by the Supreme Court order?

Parasaran: We have to also see larger public interest. If something is held as illegal and certain things have happened; for instance, suppose a judge has been appointed and after 10 years his appointment has been found to be illegal then the courts have actually applied the de facto doctrine which means that whatever judgements that have been rendered by him during that period they will still be valid but he will only cease to hold the office in the future.

Therefore that principle may apply to some extent in cases where the companies have commenced operations where third parties rights have not crept in, and possibly they can be penalised to the extent of the losses which the state would have secured had the blocks been auctioned. The differences can possibly notionally be calculated.

Q: As you had pointed out this is one issue that will have far reaching implications, the magnitude is very large as far as coal is concerned. You had spoken on the need for the via media solutions, as per your assessment which would be the ideal way of addressing this issue. As you had pointed out there are a number of stakeholders and that the need for a via media solution is pressing at this point?

A: Actually, I said we will have to come out transparently and inform the Court, give a chart and say that which are the companies which are actually implementing the projects and how were they given the coal blocks. What was the amount which were collected from them, what could have been the market rate and that should be assessed in a proper manner, possibly the companies can be asked to shell out the difference. And in respect of companies who have done substantial progress also the same exercise can be done.

In respect of applicants or companies who have not carried out any work at all then in those cases the government can go ahead for cancellation and inform the Court to approve that scheme.

Q: Moving forward of course the Supreme Court at this point has chosen to deliberate on the issue of the idea way forward but in your assessment on whom does the onus now lie to take remedial measures; is it the Supreme Court alone or is it time for the executive as well as the legislature to come forth and take ownership and take responsibility for this issue?

Sodhi: As far as I feel on the issue now is that the Supreme Court has already held that the allocation of these blocks within those years was illegal. Now once it is held to be illegal now it is not for the Supreme Court to show how it can be legalise it or how it can soften the blow of this judgement or how it can circumvent its own judgement, it is not for the Supreme Court to make any further suggestions. It is actually for the executive to see what the fallouts are and how to deal with these fallouts.

It is pointless saying that I strike down the coal allocation as being illegal but I give you here an option of doing act A, B, C, D and that would regularise or water down the impact of my judgement. This is again overstepping judicial ‘laxman rekha’ which now is left – it should be with the executive to deal with how it wishes to in view of the judgment and the consequences that the judgment has caused.

Q: But one has to take into account the massive expected impact of any de-allocation that is of course is something that has to be kept in mind. One understands that that could have repercussions across the economy, across various sectors and the industry, so in that context would you advice for a more measured approach perhaps moving forward keeping in mind the context we are talking about a countrywide, economy-wide impact as far as de-allocation is concerned?

Sodhi: Once the court holds that a particular allocation is illegal then the question of making it legal because of the importance to the industry, to the nation to whatever it is, all this should have been taken into consideration before striking it down as illegal. It could have very well said in its own judgement that all these massive investments that have already been made and where coal has already been extracted or mines are being operated, those should not be disturbed or should be disturbed with these penalties or whatsoever.

However, once you hold it is illegal then to legalise this is not for the court to give suggestions, it is for the executives to find out ways and means of legalising it or to go behind the judgement or to go over the judgement or to go for the review of the judgement and take other directions.

The court has to my mind no business really to suggest ways of watering down its own judgement merely because coal is king and paramount.

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