SC observed allocation illegal, not mining: Amit Kapur

Below is the verbatim transcript of the interview:

Q: What are your expectations from the Supreme Court verdict today, most of the analysts and the experts who we have spoken to believe that a blanket deallocation is highly unlikely, what do you reckon could happen?

A: They are right in their assessment that the blanket de-allocation won’t take place. The reason is large in the judgement. Chief justice and his brother judges have, with a lot of deliberation pointed out while going into defects, the fact that the coal is a natural resource that is of vital importance to the economy at large. They have given due consideration of at least four-five paragraphs at some length on the potential of collateral damage and how the pricing and the non availability of coal can impact the economy.

Ultimately, this judgement has proceeded on three basic principles – (1) whether the government followed the statutory framework in the coal Nationalisation Act and the Mines And Minerals Development Regulation Act and if not, was it illegal that they held its illegal (2) they have gone on article 14, reasonable as doctrine where there is arbitrariness in terms of various screening committee meetings and allocations and (3) trusteeship principle, which is article 39 of the constitution where natural resources must always be allocated not to permit monopolisation but to enhance welfare for the economy. This principle will be a critical component of the discussion today, where we expect that the honourable Supreme Court will consider what should be the fallout because those who are in clear culpability on a criminality will have to lose the licenses and face consequences of law, but if people have fallen foul because of due process not being followed or screening committee have not been very consistent in their decision making but they are not culpable directly then what has to be consider is whether you can shutdown the mines, stop the coal manufacture when money has been invested, banks have invested funds, there are end projects which are either already implemented and producing or in serious advance stage of preparation because the last thing you want to do is to have a collateral damage on the economy in the name of trusteeship because that goes against the very doctrine of trusteeship. So that’s where the debate will be.

Q: In the past the Supreme Court has been merciless when the law has not been adhere to and it has even punished people who have applied for instance in the 2G case. The policy itself was flawed and flawed seriously but companies were also punished although they were not the makers of that policy but rather the victims. So what should the market await today – a blanket deallocation is out, do you think today would be just another day of hearing and nothing will come out and that what we will hear hereafter will be a case by case redressal?

A: One of two options could emerge. It is clear that Supreme Court, if they wanted to deallocate, they would have done it on August 25. They have chosen not to. They want to hear and understand the implications. It is not that the questions have been framed so either the honourable Supreme Court may today lay out guidelines and refer it to expert body to come back with a report and an evaluation and that would happen in context of certain guidelines or guiding principles – those principles could take into account two doctrines that we know were established – one is the doctrine of proportionality, which means that the punishment meted out for violation should be proportionate to the violation itself.

The second is the principle of prospective overruling. So, in case it is not a blatant illegality or culpability of the particular mine owner, whoever the mine owner be whether government or central government, state government, private sector, joint venture, whatever it maybe and if it is not culpability in the natural sense of the word but only a technical default then the treatment might be different, so there they might be recovery of some penalties, there might be imposition of some royalty or revenue share, there might be a simple recourse of trying to ensure that the objective of the statute which was coal should not be utilised for trading and profiteering but should be used as an input for value add to the economy.

There might be guiding principles to evaluate those and to find out but I do not think there will be a finality of the nature where they will simply identify that 218 coal blocks and say this is what happens to each of them. It will be a step in the direction. I am hoping that they would clarify by guidelines as to how the different mines have to be classified and treated in accordance with law.