Coal India Ltd vs M/S Rahul Industries . And Ors

2025 INSC 1103 REPORTABLE

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. 11793 OF 2025 (Arising from SLP (C) No. 21888 of 2012)

COAL INDIA LTD. AND ORS. ...APPELLANT(S)

Versus

M/S RAHUL INDUSTRIES AND ORS. ...RESPONDENT(S)

WITH

T.C.(C) No. 10/2016 T.C.(C) No. 9/2016 T.C.(C) No. 11/2016 T.C.(C) No. 27/2016 T.C.(C) No. 28/2016 T.C.(C) No. 26/2016 T.C.(C) No. 33/2016 T.C.(C) No. 35/2016 T.C.(C) No. 36/2016 T.C.(C) No. 34/2016 T.C.(C) No. 39/2016 T.C.(C) No. 37/2016 T.C.(C) No. 40/2016 Signature Not Verified T.C.(C) No. 41/2016 Digitally signed by VISHAL ANAND Date: 2025.09.12 16:31:08 IST Reason:

JUDGMENT

J.B. PARDIWALA, J.

For the convenience of exposition, this judgment is divided into the following

parts:

INDEX

A. FACTUAL MATRIX ............................................................................. 3 B. SUBMISSIONS OF THE PARTIES................................................... 21

(a) Submissions of the appellant in its petition under Article 136, I.A. No. 1 of 2015 and additional affidavits ............................................... 21

(b) Written submissions of the respondents ............................................. 26 C. ISSUES FOR DETERMINATION ..................................................... 31 D. ANALYSIS ............................................................................................ 31

(i) Analysis of the observations of this Court in Ashoka Smokeless (supra)..................................................................................................... 32 a. Objective of the e-auction system ...................................................... 32 b. Submissions of the petitioners in Ashoka Smokeless (supra) ........... 33 c. Reasonableness of dual pricing of coal .............................................. 34 d. E-auction system is unconstitutional .................................................. 43 e. Coal companies empowered to notify price of coal ........................... 48 f. Conclusions reached in Ashoka Smokeless (supra) .......................... 53

(ii) Analysis of the observations of this Court in Pallavi Refractories (supra)..................................................................................................... 55

(iii)The general rule as regards the scope of enquiry by courts into the economic policy of the State ................................................................. 65

(iv) Objective of the Interim Coal Policy subserved the ‘common good’ ...................................................................................... 76

(v) Balancing between the respondents’ fundamental rights and the interests of the public at large.............................................................. 82 a. Applicability of the Proportionality test vis-à-vis the Reasonable classification test ................................................................................. 82

SLP (C) No. 21888 of 2012 Page 1 of 127 b. Applicability of the rational nexus test to the case on hand ............... 91

(vi) Determination of the issues framed .................................................... 96 Whether the appellant had the authority to notify the Interim Coal Policy, in terms of the dictum of this Court in Ashoka Smokeless (supra)? ............................................................................................... 96 Whether the increase of 20% over and above the notified price introduced in the Interim Coal Policy for the linked consumers of the non-core sector was valid in terms of Article 14? .............................. 98 Whether the respondents are entitled to refund of the 20% additional cost? .................................................................................................. 101

E. CONCLUSION ................................................................................... 126

SLP (C) No. 21888 of 2012 Page 2 of 127

1. Leave granted in Special Leave Petition (C) No. 21888 of 2012.

2. Since the issues raised in the captioned appeal and the transferred cases are

the same, those were taken up for hearing analogously and are being

disposed by this common judgment and order.

3. This appeal arises from the Judgment and Order passed by the High Court

at Calcutta dated 04.04.2012, in A.P.O. No. 10 of 2011 (the “impugned

judgment”), by which the division bench of the High Court dismissed the

appeal filed by the appellant herein and thereby affirmed the order passed

by a learned Single Judge dated 25.11.2010 in the Writ Petition No. 44 of

2007, holding that the appellant herein had no authority to frame and notify

the Interim Coal Policy dated 15.12.2006 and thereby collect an excess of

20% amount over and above the notified price of coal from the linked

consumers falling in the non-core sector, in light of this Court’s dictum in

Ashoka Smokeless Coal India (P) Ltd. v. Union of India, reported in (2007)

2 SCC 640.

A. FACTUAL MATRIX

4. The appellant herein is a public sector undertaking involved in the mining,

production and marketing of coal and its products. It falls under the

administrative control of the Ministry of Coal, Government of India. The

SLP (C) No. 21888 of 2012 Page 3 of 127 respondents herein (original writ petitioners) are private limited companies

engaged in the business of manufacturing of smokeless fuel for which coal

is the raw material.

5. The respondents had challenged the Interim Coal Policy notified by the

appellant on 15.12.2006, increasing the notified price of coal by 20% for the

non-core linked sector. The Interim Coal Policy was introduced after this

Court struck down the e-auction methodology of pricing in Ashoka

Smokeless (supra).

6. For a better understanding of the pivotal issue involved in the case in hand,

we find it apposite to provide a background of the coal sector.

7. The coal sector was primarily a private sector entity post-independence till

the early 1970s. In 1972-73, the industry was nationalized in terms of the

Coking Coal Mines (Nationalization) Act, 1972 (the “Act, 1972”) and the

Coal Mines (Nationalization) Act, 1973 (the “Act, 1973”), whereby all

privately held coal assets were acquired by the Government of India.

Thereafter, a state-owned enterprise Coal India Limited (CIL), the appellant

herein, was formed to manage almost all of India’s coal mining operations.

To this effect, the Central Government issued appropriate notifications by

and under which, the coal mines both in terms of the Act, 1972 and the Act,

1973 were vested in the public sector undertakings, namely the appellant

SLP (C) No. 21888 of 2012 Page 4 of 127 herein and its various subsidiaries. Even after the rapid liberalization phase

in the early 1990s, the appellant stayed a largely government owned entity

and the coal sector retained its monopolistic characteristic.

8. After the nationalization of the sector, the consumers of coal were broadly

categorized into two sectors – core and non-core sectors. The classification

was solely based on their role in the economic development of the country.

The core sector consumers include the vital sectors imperative for the

economic and industrial development of the country like the power, steel,

cement, defence, fertilizer, railways, paper, aluminium, export, etc. These

sectors occupy more than 95% share of the consumer base for coal. All other

remaining industries or consumers comprise the non-core sector like the

manufacturers of smokeless fuel or briquettes, glass manufacturers, etc.

9. Historically, the Government of India did not allow the market forces to

shape the prices of coal whereby the sellers could negotiate prices and

volumes with independent buyers. Instead, the coal in India was distributed

through a linkage system by way of which individual coal consumers were

linked with particular mines.

10. The power of price fixation by way of notification by the Central

Government flowed from the pre-independence era enactment of the

Colliery Control Order, 1945 (the “CCO, 1945”) under the Defence of India

SLP (C) No. 21888 of 2012 Page 5 of 127 Rules. Section 4 of the CCO, 1945 empowered the Central Government to

notify the sale price of coal or fix a maximum or minimum price threshold

for the same, subject to which the coal was to be sold by the colliery owners.

Similarly, Section 8 of the CCO, 1945 empowered the Central Government

to also regulate the disposal of coal stocks of any colliery including the

quantity to be sold and to whom the coal stocks were to be sold to.

11. The linkage committees were composed of stakeholders from a variety of

areas, including the appellant, railways and the erstwhile planning

commission, etc. Initially, the linkage system was extended only to the core

sector, however, after noticing huge demand of coal by the non-core sector,

the same was introduced for the consumers falling under the said category.

It is noted that a “linkage” did not vest any right in the linked unit to claim

coal from a particular company, coalfield or source. The system was

introduced for logistical ease, and “linkage” acted only as a clearance to the

linked coal company (either the appellant or one of its subsidiaries) to supply

coal to a unit subject to availability of the commodity as well as regulatory

directives given in respect of such unit or linked coal mine.

12. It is pertinent to note that the classification of core and non-core sectors as

well as the linkage system is now dispensed with after the introduction of

the New Coal Distribution Policy, 2007. However, for the purpose of

SLP (C) No. 21888 of 2012 Page 6 of 127 answering the issues arising in this litigation, it is necessary for us to bear in

mind the modalities of the aforesaid mechanisms.

13. After about two decades of following the linkage system, it was observed in

1998 that linkages were being granted by the authorities indiscriminately

without due regard to the availability of coal, transport capacity and actual

consumption. This led to a mismatch with the demand being several times

higher than the actual availability. The appellant, therefore, introduced the

Open Sales Scheme for the class of consumers not covered by the linkage

scheme with a view to curb the purchase of coal in the black market.

However, even the said scheme was unable to ensure adequate supply in

comparison to the demand received for the commodity.

14. A partial deregulation of coal came to be done by the Central Government

by enactment of the Colliery Control Order, 2000 (the “CCO, 2000”) on

01.01.2000 under Section 3 of the Act, 1955 (the “Act, 1955”). Though the

CCO, 2000 replaced the CCO, 1945, yet it preserved the Central

Government’s power to categorise classes, grades and sizes of coal and to

regulate the disposal of coal stocks of any colliery by issuing directions.

However, the enactment made a significant departure from the CCO, 1945

and deregulated the price fixation mechanism adopted under the CCO, 1945

and the Central Government was no longer the authority to notify prices for

SLP (C) No. 21888 of 2012 Page 7 of 127 various grades and sizes of coal. After the CCO, 2000 came into force, it

was the appellant that issued the notified price of coal for both core and non-

core sectors. Thereafter, in 2001, the appellant further decentralized the

process of notification of prices and authorized its subsidiaries to decide

their own policy of sale of coal to the non-core sector.

15. When it was noticed that the schemes of linkage, sponsorship or open sales

scheme were unable to meet the demand which was majorly artificial and

man-made, a new policy of e-auction scheme was introduced in 2003-04 to

liberalize the sector as well as to provide a pragmatic and transparent system

of distribution of coal to the non-core sector. The e-auction system made

coal accessible for the consumers in the non-core sector at a market price for

the variety of coal that they required as per the quantity earmarked for them

by the Government.

16. The e-auction scheme was introduced to increase the accessibility of coal to

the consumers however, it was observed that the prices of the same, as

determined by the market rates, were significantly higher than the prices

notified by the appellant and its subsidiaries. This affected the linked

consumers of the non-core sector disproportionately. Therefore, the e-

auction system was challenged before several High Courts and was

ultimately challenged before this Court in Ashoka Smokeless (supra)

SLP (C) No. 21888 of 2012 Page 8 of 127 wherein the system of sale by way of e-auction was struck down on

01.12.2006. This Court also directed for the formation of a committee

comprising of the Secretary, Ministry of Coal and technical experts, with a

view to evolve a viable policy for sale of coal.

17. The said expert committee gave its recommendations on the coal policy of

the country pursuant to which, the New Coal Distribution Policy was

introduced in October, 2007. In the meantime, the appellant notified an

Interim Coal Policy on 15.12.2006 to govern the period between 01.12.2006

and October 2007 as no policy was in place for this period and this Court in

Ashoka Smokeless (supra) remained silent on this aspect. In the Interim

Coal Policy, the appellant issued the price of coal for the linked consumers

of the non-core sector at a rate 20% higher than the price notified on

15.06.2004 i.e., before the e-auction system was brought into place, and at a

rate 30% higher than the previously notified price for the non-linked

consumers of the non-core sector.

18. It is pertinent to note that coal was omitted from the list of essential

commodities under the Essential Commodities (Amendment) Act, 2006 on

26.12.2006 and was therefore, no longer subject to the restrictions envisaged

by the Act, 1955.

SLP (C) No. 21888 of 2012 Page 9 of 127

19. Aggrieved by the price increase, an association of 22 manufacturers of

smokeless fuel and soft coke filed a writ petition bearing no. 44 of 2007

before the High Court at Calcutta on 12.01.2007 challenging the Interim

Coal Policy on the following grounds:

i) The Interim Coal Policy was in contravention of this Court’s dictum

in Ashoka Smokeless (supra) as the procedure prescribed in the

judgment for formulating a policy for the sale of coal was not

followed by the appellant. This Court in the said judgment directed

the formation of an expert technical committee to decide on a viable

policy, and the appellant did not have any authority to notify an

interim measure in this regard.

ii) The natural corollary of this Court’s judgment in Ashoka Smokeless

(supra) was that the regime of notified prices existing prior to the e-

auction system would be revived. Thus, the Interim Coal Policy had

no legal sanctity.

iii) The 20% hike in price of coal for the linked non-core sector

consumers was a measure of profit-making for the appellant and in

light of the Act, 1972 and Act, 1973 respectively, the Central

Government as well as the coal companies were duty bound to act as

a welfare state and not as a profit earning concern.

SLP (C) No. 21888 of 2012 Page 10 of 127

iv) The coal companies including the appellant herein, were under a

constitutional mandate to fix fair and reasonable prices under Article

298 of the Constitution, to subserve the common good, especially

because coal was an essential commodity listed in the Act, 1955.

However, the Interim Coal Policy neither subserved the common

good nor ensured equitable distribution of resources as mandated by

Article 39(b) of the Constitution.

v) The 20% price increase merely permitted the appellant to enhance its

profit margins at the cost of linked consumers of the non-core sector

which constituted about 1% of the entire consumer base of coal.

vi) The price increase of 20% was not based on any market study or

consumer pattern. The hike overlooked the effects on the end

consumers of the coal. The action of the appellant in notifying the

Interim Coal Policy, without conducting a study of the impact of the

sudden increase of price was liable to be struck down on the

touchstone of Article 14 for being arbitrary and unreasonable.

vii) The appellant failed to assign any cogent reasons in the Interim Coal

Policy for the price increase of 20% only for the linked consumers of

the non-core sector as no such measure was adopted in respect of the

linked consumers of the core sector. There was no rational basis for

such classification between the consumers of the core and non-core

SLP (C) No. 21888 of 2012 Page 11 of 127 sectors, therefore, such classification was arbitrary, discriminatory

and in violation of Article 14 of the Constitution.

viii) Linkage was granted to the respondents herein to share the burden of

the coal companies in manufacturing and supplying smokeless fuel

and were, as a consequence of such linkage, being charged the same

notified price as for the core sector industries. The appellant could not

have discriminated between the core and non-core linked consumers

after providing the same benefit to both for a significant period of

time. Therefore, the action of the appellant was hit by promissory

estoppel.

20. A learned Single Judge of the High Court allowed the writ petition filed by

the respondents herein and set aside the Interim Coal Policy. The learned

Single Judge framed the following questions to answer the issues raised by

the respondents:

i. Whether the appellant and its subsidiaries were competent to

notify the Interim Coal Policy?

ii. Whether the price increase of 20% over and above the price

notified in 2004 was a reasonable exercise of power for the

purpose of price fixation?

SLP (C) No. 21888 of 2012 Page 12 of 127 iii. Whether this Court’s dictum in Pallavi Refractories v. Singareni

Collieries Co. Ltd., reported in (2005) 2 SCC 227, was applicable

to the present litigation?

21. The aforesaid questions were answered by the learned Single Judge as

follows:

a) On the first issue, the learned Single Judge observed that this Court in

its judgment in Ashoka Smokeless (supra) had issued clear directions

for the constitution of a committee comprising of the Secretary,

Ministry of Coal and other technical experts for the purpose of

evolving a viable policy for sale of coal. In terms of this direction, the

appellant herein could not have imposed a price different from the one

prevailing before the e-auction system without adhering to the

deliberations of the expert committee. It was observed that this Court

did not necessarily imply that for the interim period, price fixation

was supposed to be done by the appellant unilaterally and without

following the principles laid down in Ashoka Smokeless (supra).

Therefore, the Interim Coal Policy could not have been framed by the

appellant alone.

SLP (C) No. 21888 of 2012 Page 13 of 127

b) It was held that the only price that could have been charged for the

coal distributed by the appellant and its subsidiaries, was the one

notified on 16.06.2004 i.e., prior to the e-auction system.

c) The learned Single Judge, while addressing himself on the second

issue, observed that the reasonableness of the 20% price increase was

in question because the appellant stated that such an increase was

necessary to neutralize the overall increase in the input costs by

23.84% to make the operation, maintenance and development of the

appellant company and its coal mines sustainable. It was the

appellant’s assertions that by charging an increased price from the

linked consumers of the non-core sector, it could mitigate 1.2% of the

overall increase of 23.84% in the input costs. The respondents herein

had impugned the increase in prices by contending that the same

would lead to an appreciable increase in the cost of the end product

causing undue hardship to the small consumers which was

impermissible in terms of the Act, 1955. The learned Single Judge

was of the view that the appellant had introduced the Interim Coal

Policy with a view to earn profits which was impermissible in terms

of this Court’s decision in Ashoka Smokeless (supra) and that the

appellant’s attempt to compensate its input costs at the expense of

only 6% of the consumer base of coal was unreasonable. It was held

SLP (C) No. 21888 of 2012 Page 14 of 127 that the appellant had failed to strike a balance between its financial

interests, the interests of the respondents herein and the ultimate

consumers of the end product, that is the rural population.

d) On the third issue of whether the decision rendered in Pallavi

Refractories (supra) was applicable to the present case, the single

judge held that though the observations therein permitted dual pricing

and allowed for classification between the core sector and unlinked

non-core sector, yet the same was not an issue in the present set of

facts and the decision was distinguishable on this count itself.

e) The learned Single Judge also ordered a refund of the additional 20%

paid by the respondents herein along with interest @ 10% per annum

in case of delay in payment of the same.

22. Aggrieved by the judgment and order passed by the learned Single Judge,

the appellant preferred a writ appeal before the Division Bench of the High

Court. The Division Bench dismissed the appeal and passed the impugned

judgment on the following counts:

a) The 20% price hike by the appellant was not in consonance with the

principles enunciated in Ashoka Smokeless (supra). It was observed

that this Court in Ashoka Smokeless (supra) had held that the coal

companies had a duty to fix the price of essential commodities in a

SLP (C) No. 21888 of 2012 Page 15 of 127 manner that would subserve the common good in terms of the

constitutional scheme adumbrated under Articles 14 and 39(b)

respectively. The appellant herein and its subsidiaries could not have

taken any steps that would defeat constitutional obligations. The

introduction of the e-auction system was not in conformity with the

constitutional goal of equitable distribution of essential natural

resources as the object of the said system was to obtain the maximum

price of coal with a view to earn profits. Thus, the e-auction system

was declared to be ultra vires and invalid.

b) The Division Bench also observed that Ashoka Smokeless (supra)

had directed the Central Government for the constitution of an expert

committee comprising of the Secretary, Ministry of Coal and

technical experts with a view to evolve a viable policy for the

distribution of coal, especially to the manufacturers of hard coke and

smokeless fuel. However, it was clarified that the Central Government

in collaboration with the coal companies would be at liberty to evolve

a policy that would meet the requirements of public interest vis-à-vis

the interest of consumers of coal. The judgment expressly stated that

the Central Government along with the coal companies would be

entitled to lay down such norms as may be found fit and proper.

SLP (C) No. 21888 of 2012 Page 16 of 127 c) However, it was observed that Ashoka Smokeless (supra) did not

empower the appellants to formulate an interim sales policy till a

viable policy was evolved by the formation of the committee.

d) It was further held that the 20% price hike was not supported by any

rationale or legal basis as the same was a measure taken by the

appellant to protect its financial interests. Such justification could not

have been the sole basis for introducing the Interim Coal Policy as the

object of nationalization of the coal companies was not to enable them

to earn profit but to expand the object of a welfare State.

e) The Division Bench rejected the appellant’s contention that the

increase in price was to mitigate the increase of 23.84% in input costs

of the appellant to the extent of 1.2%. It was held that such

justification had not been established before the court by way of

documentary evidence and the appellants had not pleaded anywhere

that they were suffering losses. It was concluded that the 20% increase

over and above the previously notified prices was done by the

appellant only with a view to protect its financial interests and make

profits at the cost of the welfare of the State.

f) It was further held that coal was deleted from the list of goods

mentioned under the Act, 1955 with effect from 24.12.2006 whereas

the Interim Coal Policy was notified on 15.12.2006. Therefore, the

SLP (C) No. 21888 of 2012 Page 17 of 127 Interim Coal Policy was passed when the coal was governed by the

Act, 1955 and the price fixation of the same was supposed to be done

keeping in mind the welfare of the consumers.

g) As regards the judgment delivered in Pallavi Refractories (supra), the

division bench was of the opinion that though differential pricing for

the core and non-core sector was permissible, yet it had no application

in the case on hand. This is because charging an additional 20% over

and above the notified price upon the non-core sector community for

the distribution of an essential commodity like coal did not find any

support from the spirit and ratio of the decision in Pallavi Refractories

(supra).

h) It was further held that the appellant’s reliance on Duncan Industries

Ltd. v. Union of India, reported in (2006) 3 SCC 129 was misplaced

as judicial review could be extended to pricing policy if it was found

that such policy did not reflect any reasonable basis and justification.

i) The division bench relied on the Patna High Court’s judgment in Maa

Mundeshwari Carbon Pvt. Ltd. v. Central Coalfields Ltd. reported in

2010 SCC OnLine Pat 2674 wherein it was held that the 20%

increase in price of coal for the linked non-core sector consumers by

virtue of the Interim Coal Policy was arbitrary and discriminatory, as

the same was introduced without any observation and authorization

SLP (C) No. 21888 of 2012 Page 18 of 127 by this Court in Ashoka Smokeless (supra). Therefore, realization of

excess price only from linked consumers of the non-core sector was

equivalent to creation of a class within a class, which was not

permissible.

j) As regards the question of refund of the 20% additional amount

charged by the appellant to the respondents, the bench relied upon

Patna High Court’s judgment in Maa Mundeshwari (supra) and this

Court’s order in Domco Smokeless Fuels Pvt. Ltd. v. Bharat Coking

Coal Ltd., reported in 2010 SCC OnLine Jhar 847 to say that

charging a 20% increase over and above the notified price was illegal

and liable to be refunded to the parties (the respondents herein). The

bench also relied upon this Court’s judgment in Eastern Coalfields

Ltd. v. Tetulia Coke Plant (P) Ltd., reported in (2011) 14 SCC 624

wherein the refund of an extra 20% over and above the notified price

was upheld.

k) The appellant had also contended that the refund of the impugned

amount would unjustly enrich the respondents as they had not proved

in any way that they had not transferred the burden of this increment

to the consumers and were operating at a loss during the time period

for which the Interim Coal Policy was notified. The Division Bench

declined to accept such contention on the ground that the burden was

SLP (C) No. 21888 of 2012 Page 19 of 127 upon the appellants to prove that the respondents were benefitted by

the doctrine of unjust enrichment by establishing that the price burden

was passed to the end consumers of the product manufactured by the

respondents.

23. In such circumstances referred to above, the appellants are here before this

Court with their present appeals.

24. This Court vide its order dated 09.08.2012, had issued notice confined to the

plea of unjust enrichment thereby confining the lis to the issue of refund.

The appellant filed an application for the modification of the said order by

way of the I.A. No. 1 of 2015 and prayed that the order dated 09.08.2012 be

modified to include the question of validity of the Interim Coal Policy. The

appellant submitted in the said I.A. that modification of the order was

necessary as the legal contours of the controversy on hand came to be settled

by a Constitution Bench of this Court while answering the presidential

reference in Natural Resources Allocation, In re, Special Reference No. 1

of 2012, reported in (2012) 10 SCC 1. This Court vide the orders dated

12.10.2015 and 24.09.2024 respectively directed for the listing of the said

I.A. along with the main matter. Therefore, the I.A. No. 1 of 2015 shall also

stand decided by this judgment.

SLP (C) No. 21888 of 2012 Page 20 of 127 B. SUBMISSIONS OF THE PARTIES

(a) Submissions of the appellant in its petition under Article 136, I.A. No. 1 of 2015 and additional affidavits

25. The learned counsel appearing on behalf of the appellant addressed himself

on the following four issues:

i. Price fixation is a legislative act and the courts are not empowered to

replace the economic policy introduced by the Government or the coal

controller as the same is in the domain of the executive.

ii. The appellant company was empowered to introduce the Interim Coal

Policy.

iii. The differential pricing adopted for linked industries of the core and

non-core sector was an instance of reasonable classification with a

legitimate objective.

iv. The respondents herein are not entitled to a refund of the 20% increase

in prices notified by the Interim Coal Policy as the same will amount

to unjust enrichment.

26. At the outset, it was submitted that the impugned judgment of the High Court

fell in error by not considering the dictum of this Court in Union of India v.

Cynamide India Ltd. reported in (1987) 2 SCC 720 and Shri Sitaram Sugar

Co. Ltd. v. Union of India reported in (1990) 3 SCC 223 wherein it was

held that price fixation is neither the function nor forte of the courts. The

SLP (C) No. 21888 of 2012 Page 21 of 127 courts ought not to interfere in policy decisions as well as the fixation of

rates. The courts are empowered to make a limited inquiry into the question

whether the considerations that underlie a policy decision are relevant or not.

In this respect, the courts have to only examine whether the price determined

was with due regard to the provisions of the relevant statute, regulations or

guidelines enacted.

27. In continuation to this argument, the appellant also submitted in its I.A. No.

1 of 2015 that the judgment of this Court in the presidential reference

Natural Resources Allocation, In re, Special Reference No. 1 of 2012,

reported in (2012) 10 SCC 1, settles the contours of law on the issue of the

extent to which the courts can make an inquiry into an economic policy

decision of the executive. It was submitted that it is incumbent upon the

courts to respect the mandate and wisdom of the executive branch of the

government as regards the formulation of economic policies and therefore,

not endeavour to evaluate the efficacy of one policy compared to another.

The courts are empowered to look into a policy decision only if the same

perpetuates hostile discrimination against a particular section of society or

when it is not backed by a social or welfare purpose.

28. Further, the power of judicial review stands exhausted once the courts come

to the conclusion that the authority fixing the prices determined the same on

SLP (C) No. 21888 of 2012 Page 22 of 127 a rational basis. Thereafter, no re-evaluation of the prices and the

considerations underlying it is possible even if the prices are found to be

demonstrably injurious to some manufacturers and producers.

29. As regards the question whether the appellant company was authorized to

fix the interim price of coal, it was submitted that the coal ceased to be a

controlled commodity by virtue of the CCO, 2000. As a result, the appellant

was empowered thereunder to fix the price of coal and it could not be

precluded from fixing appropriate prices including, dual pricing, if deemed

necessary. Therefore, a writ of mandamus could not be issued to the

appellant to charge lesser prices or adopt a uniform price for all classes of

industries/consumers.

30. It is the case of the appellant that a number of economic factors such as the

financial health of the PSU, operational costs and the relative importance of

certain industries in the larger national interest, go into the decision of price

fixation. Therefore, there is no bar on the appellant to adopt dual prices and

charge a higher price from the non-core sector.

31. The learned counsel also submitted that merely because an industrial

company was completely owned by the Government cannot mean that it can

be deprived of the right to conduct its functions in a commercially expedient

manner.

SLP (C) No. 21888 of 2012 Page 23 of 127

32. As regards the issue of whether the different prices adopted for the core and

non-core sector industries were correct in the eyes of the law, it was

submitted that such dual pricing was an instance of reasonable classification

bearing a rational nexus to the objective sought to be achieved.

33. We were informed that the core sector industries constituted nearly 90% of

the total consumer base of the appellant company and other coal companies.

These industries catered to the public at large by providing goods and

services essential to the common man in everyday use viz. electricity, steel,

cement industries, etc. Coal, being an essential raw material for these

industries, constitutes a significant amount of the costs incurred in

production activities of these core-sector industries. Therefore, any increase

in the price of coal for the core sector would surely lead to a cascading effect

on a huge section of the population of the country. On the other hand, since

the goods manufactured by the non-core sector industries which constituted

a small percentage of the consumer base of the appellant, were not for

everyday use, the impact of increased cost would not be felt as acutely by

the end consumers of such goods.

34. It was submitted that it was while keeping the inherent difference between

the two sectors in consideration, that the appellant company made a policy

SLP (C) No. 21888 of 2012 Page 24 of 127 decision to keep price levels intact for the core sector industries and to

increase the notified prices for the linked non-core sector industries by 20%.

35. The learned counsel submitted that the objective of dual pricing was to

ensure that the core sector industries are not unduly burdened with higher

prices but at the same time, the appellant company also receives adequate

return for its products in order to cover the mounting financial deficit. The

appellant has submitted that the object of increasing the price of coal for the

non-core linked sector by 20% was to mitigate the increase in operational

costs so as to maintain an adequate supply of coal in the market.

36. On the question of whether a refund of the additional 20% amount charged

over and above the notified prices could be granted to the linked industries

of the non-core sector, it was submitted by the appellant that such

entitlement to refund arises only in the event the respondents prove that they

have not passed the burden of the increased price onto the consumers. The

subsidiaries of CIL who are also the appellants herein placed reliance on this

Court’s judgments in Union of India v. Solar Pesticides (P) Ltd., reported

in (2000) 2 SCC 705 and Union of India v. ITC Ltd., reported in 1993 Supp

(4) SCC 326 to submit that when a refund is claimed from the State, the

burden of proof is on the person claiming the refund to establish that they

SLP (C) No. 21888 of 2012 Page 25 of 127 have paid the amount in question to the State but the loss or impact caused

by the same has not been transferred to a third party (consumers in this case).

37. If an order for refund is granted without examining and establishing the

same, it would amount to unjust enrichment of the respondents. The learned

counsel submitted that the plea of unjust enrichment is required to be kept

in mind especially in the present case, as the respondents have failed to

disclose the selling price of the smokeless fuel after the Interim Coal Policy

was introduced.

38. The appellant submitted that it is a public sector undertaking and a

government company which has graduated to the status of State as

understood under Article 12 of the Constitution. The monies that it deals

with is public money, not to be used for the profit motive of the select few

in the company but rather to be used for the social and welfare purpose for

which the PSU was established. Having regard to the fact that the money to

be refunded is public money, the plea of unjust enrichment cannot be

rejected on perfunctory grounds.

(b) Written submissions of the respondents

39. The learned senior counsel appearing on behalf of the respondents submitted

that the Interim Coal Policy was introduced on 15.12.2006 and remained

SLP (C) No. 21888 of 2012 Page 26 of 127 operational till 31.03.2008. In the said policy, the appellant had fixed the

price for the linked industries of the non-core sector at 120% of the notified

prices to the extent of their Maximum Permissible Quantity (MPQ) for

linked units and allocations for NCCF and State agencies.

40. It was submitted that the policy was formulated by the appellant company

in teeth of the directions issued by this Court in paragraphs 190 and 193 of

Ashoka Smokeless (supra). It was directed by the Court that the Central

Government should constitute an expert committee with Secretary, Ministry

of Coal at its helm along with technical experts and coal companies to evolve

a viable policy for distribution of coal. Therefore, the appellant had no

authority to issue the Interim Coal Policy.

41. Further, the sole objective behind formulating the Interim Coal Policy was

to illegally recoup the amounts refunded by the appellant to the smokeless

fuel industries in compliance of the directions of this Court in Ashoka

Smokeless (supra), Tetulia Coke (supra), SJ Coke Industries Private Ltd v

Central Coalfields Ltd., reported in (2015) 8 SCC 72 and Horra Coke

Industries v. Central Coalfields Limited & Ors. bearing Civil Appeal No.

9615/2024.

42. As regards the prayer for modification of the order dated 09.08.2012

wherein a limited notice was issued confined only to the question of unjust

SLP (C) No. 21888 of 2012 Page 27 of 127 enrichment, it was submitted by the learned senior counsel that the I.A. No.

1 of 2015 was solely based on the dictum of this Court in the presidential

reference Natural Resources Allocation (supra). It was submitted that the

appellant had misread the said judgment. The presidential reference, instead

of diluting the opinion of this Court in Ashoka Smokeless (supra), further

strengthens the proposition that coal, as a natural resource, need not

necessarily be sold only by auction. There can be other methods for sale of

coal.

43. Additionally, the learned senior counsel submitted that the judgment

rendered in the presidential reference had no relevance to the issue of

validity of the Interim Coal Policy. Therefore, the observations in Natural

Resources Allocation (supra) cannot be treated as a valid ground to reopen

the challenge to the Interim Coal Policy, in respect of the legality thereof.

44. In this regard, the learned senior counsel placed reliance on this Court’s

judgment in Biswajit Das v. CBI, reported in 2025 SCC OnLine SC 124

wherein it was observed that when a limited notice is issued by a bench on

an appeal/petition, more often than not, the view taken is tentative. There

could be occasions when the claim of the party succeeding before the court

below is demonstrated to be untenable because of a patent infirmity in the

findings recorded in the impugned judgment, or a glaring error in the

SLP (C) No. 21888 of 2012 Page 28 of 127 procedure followed having the effect of vitiating the proceedings is shown

to exist, at any subsequent stage of the proceedings, which might have been

overlooked by the Bench when it issued limited notice.

45. Therefore, for the order issuing limited notice to be modified, it was

incumbent on the appellant company to show that there was a ‘patent

infirmity’ in the impugned judgment or a ‘glaring error’ that would warrant

re-opening of the whole conspectus of issues. This was not shown by the

appellant. In such circumstances, the I.A. No. 1 of 2015 deserves to be

dismissed.

46. As regards the question whether the doctrine of unjust enrichment was

applicable to the case on hand or not, it was submitted that this Court has

consistently held that the doctrine of unjust enrichment will not apply in

cases relating to refund of excess price illegally collected in a contract for

sale of goods. This has been distinguished from cases where a refund is

sought on account of illegal collection of tax, excise, custom duty etc. in this

Court’s judgments in Tetulia Coke (supra), SJ Coke (supra), Horra Coke

(supra) and Maa Mundeshwari (supra).

47. The respondents also placed reliance on this Court’s judgment in Domco

Smokeless Fuels (P) Ltd. v. State of Jharkhand, reported in 2024 SCC

OnLine SC 181 to submit that though the coal companies had taken the

SLP (C) No. 21888 of 2012 Page 29 of 127 argument during the hearing of the said matter that the benefit of refund

should be denied to the petitioner therein on account of the pendency of the

present case, yet the Court rejected the said plea. Therefore, the question of

refund stood determined in terms of the said judgment.

48. It was submitted that the coal companies had also not taken the plea of unjust

enrichment when contesting the refund sought for in respect of the excess

price collected under the e-auction policy. The entirety of the excess price

therein has already been refunded. Thus, the question of refund of excess

monies collected under the Interim Coal Policy ought to be treated at parity.

49. Without prejudice to the aforesaid arguments, it was submitted by the

respondents that they had not enhanced the sale price of their goods to

include the interim increase of 20% over the notified price and therefore,

had not passed on the burden of the additional cost onto the end consumers.

In this regard, the respondents had filed additional documents on record

including CA certifications therefor.

50. Accordingly, the learned senior counsel prayed that the petition by the

appellant be dismissed by holding that the respondents are entitled for refund

of the excess price collected under the Interim Coal Policy along with an

interest of 10% per annum thereupon.

SLP (C) No. 21888 of 2012 Page 30 of 127 C. ISSUES FOR DETERMINATION

51. Having heard the learned counsel appearing for the parties and having gone

through the materials on record, the following questions fall for our

consideration:

i. Whether the appellant had the authority to notify the Interim Coal

Policy, in terms of the dictum of this Court in Ashoka Smokeless

(supra)?

ii. Whether the increase of 20% over and above the notified price

introduced in the Interim Coal Policy for the linked consumers of the

non-core sector was valid in terms of Article 14?

iii. If the answer to the second question is in the negative, then whether the

respondents are entitled to refund of the 20% additional cost?

D. ANALYSIS

52. Before adverting to the rival submissions canvassed on either side, we must

look into few judgments of this Court to better understand the legal backdrop

in which the present dispute has arisen.

SLP (C) No. 21888 of 2012 Page 31 of 127

(i) Analysis of the observations of this Court in Ashoka Smokeless

(supra)

53. This Court in Ashoka Smokeless (supra) was faced with the question

whether the e-auction system introduced by the appellant and other coal

companies for the consumers of the non-core sector, was valid on the

touchstone of Article 14 of the Constitution.

a. Objective of the e-auction system

54. It was argued by the coal companies that the linkage system operating with

the notified price mechanism was being manipulated for procurement of coal

by consumers who were not in requirement of the same. Such coal was then

being sold in the open market in black at a significant premium because of

an artificial gap between the demand and supply. Therefore, the e-auction

scheme was introduced purportedly to meet the liberalisation policy of the

Central Government in respect of the import of coal and to provide a

pragmatic and transparent system of distribution of coal. The objective of

the said scheme is reproduced below:

“Objectives The present system of sale of coal to non-core sector consumers needs to be made more pragmatic and transparent by accommodating the following changes:

(a) A consumer having requirement of specified quality of coal from a particular colliery/source and siding/pilot

SLP (C) No. 21888 of 2012 Page 32 of 127 should have an access to buy coal by paying the market determined price for the same.

(b) This approach would enable the non-core sector consumers to receive coal of their choice, on payment of market price, determined through auction confined to non-core sector consumers.”

55. Certain consumers of the non-core sector were exempted from paying the

price of coal at the weighted average of the e-auction price. These included

tiny units and the National Cooperative Consumers’ Federation (NCCF)

who were to be supplied coal at the floor price of 20% above the notified

price. A similar benefit was extended to the agencies of the Central and State

Governments.

b. Submissions of the petitioners in Ashoka Smokeless (supra)

56. The petitioners therein had submitted that the introduction of the e-auction

system was an arbitrary exercise of power of price fixation for the following

reasons:

a) The e-auction system was not in consonance with Article 14 read with

Article 39(b). Coal, being an essential commodity as well as raw material

for several manufacturing units, was required to be distributed at a fair

and reasonable price. Fixation of an arbitrary price of a scarce commodity

like coal would give rise to unhealthy competition amongst various

SLP (C) No. 21888 of 2012 Page 33 of 127 manufacturers, which would be contrary to the object and spirit of Article

39(b) of the Constitution as the end consumers would be highly

prejudiced.

b) The classification between NCCF and other non-core sector consumers

was unreasonable, hence, the dual pricing done in this regard could not

be said to be a proper exercise of price fixation.

c) The price decided through the e-auction system was an artificially

inflated price and the same had caused uncertainty as a result of which,

the manufacturers were unable to fix a price for their products.

d) The coal companies, being “State” within the meaning of Article 12 of

the Constitution, could not have resorted to high profiteering at the cost

of the public at large. The government companies could not be permitted

to forsake their public duty and their dealings with the consumers must

be fair and non-discriminatory.

c. Reasonableness of dual pricing of coal

57. As regards the issue of reasonableness of dual pricing, this Court observed

that though dual pricing, having regard to a distinct classification between

core sector and non-core sector, would be permissible in terms the dictum

in Pallavi Refractories (supra), yet the State, when it is involved in the

distribution of a commodity which would attract Article 39(b), would stand

SLP (C) No. 21888 of 2012 Page 34 of 127 on a different footing. This is because the Central Government as well as the

coal companies were visualised not as profit-earning concerns but as an

extended arm of a welfare State. The Act, 1972 and the Act, 1973

respectively, mandated the coal companies to harmonise the business

potential of the country to benefit the public at large and therefore, a

constitutional obligation was placed on them to fix a reasonable price for

coal. The relevant paragraphs of Ashoka Smokeless (supra) are extracted

below:

“89. While fixing the price of an essential commodity like coal, the 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 record. (See Gujarat Ambuja Cement Ltd. [(1998) 8 SCC 208] )

90. However, dual pricing having regard to a distinct classification between a core sector and non-core sector is permissible. (See Pallavi Refractories [(2005) 2 SCC 227] .)

91. The State, however, while distributing its largesse 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.

92. “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

SLP (C) No. 21888 of 2012 Page 35 of 127 must be visualised not as profit-earning concerns but as an extended arm of a welfare State. They are expected to harmonise the business potential of a country to benefit the common man. The power of the Central Government to carry on trade or 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. 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.

93. While fixing such price, ordinarily the State acts in the same manner as a public utility would conduct itself in this regard. This Court in ONGC v. Assn. of Natural Gas Consuming Industries of Gujarat [1990 Supp SCC 397] 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: (SCC p. 430, para 34) “34. In another article on ‘The Public Sector in India’, quoted in Issues in Public Enterprise by Shri 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. Profits constitute the surplus available for savings and investment on the one

SLP (C) No. 21888 of 2012 Page 36 of 127 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 investment 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.’ ”

94. In dealing with the fixation of tariff under the Electricity (Supply) Act, 1948, this Court in Hindustan Zinc Ltd. [(1991) 3 SCC 299] opined that the tariff cannot be fixed in such a manner by the Board while acting as a private trader and shedding its public utility character. It was observed: (SCC p. 319, para 26) “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.”

95. In Dr. P. Nalla Thampy Thera v. Union of India [(1983) 4 SCC 598] this Court observed: (SCC p. 609, para 25) “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.”

96. In S.N. Govinda Prabhu and Bros. [(1986) 4 SCC 198] this Court observed that profit is not to be shunned but that

SLP (C) No. 21888 of 2012 Page 37 of 127 service and not profit should inform actions of a Board. It was further observed: (SCC p. 208, para 5) “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.”

97. As regards limitation of judicial review of price fixation after referring to the decision of the Constitution Bench of this Court in Shri Sitaram Sugar Co. Ltd. v. Union of India [(1990) 3 SCC 223] this Court in ONGC v. Assn. of Natural Gas Consuming Industries of Gujarat [1990 Supp SCC 397] observed: (SCC p. 431, para 36) “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….”

98. 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.” (Emphasis supplied)

SLP (C) No. 21888 of 2012 Page 38 of 127

58. This Court also relied upon Sanjeev Coke Mfg. Co. v. Bharat Coking Coal

Ltd., reported in (1983) 1 SCC 147 to observe that the nationalisation of

coking coal mines and coke oven plants was done with a view to secure the

object of Article 39(b) of the Constitution that is, to ensure that the

ownership and control of the material resources of the community are so

distributed as best to subserve the common good. Though it was recognised

by this Court that an action which was not in consonance with Part IV of the

Constitution cannot be held to be ultra vires on only that count, yet there

was no doubt that the principles contained therein would form a relevant

consideration for determining a question regarding price fixation of an

essential commodity. It was held that when the State exercises its power of

price fixation in relation to an essential commodity, it has to see that the

ultimate consumers obtain such commodity at a fair price. It was recognised

that the principle of distributive justice enshrined in Article 39(b) acted as

an interpretative guide for construing fundamental rights and statutory rights

of a citizen. The relevant portion of the judgment in Ashoka Smokeless

(supra) is reproduced below:

“109. 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

SLP (C) No. 21888 of 2012 Page 39 of 127 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.

110. Can the consumer be expected to derive any such benefit from a monopoly concern? Would a situation of this 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.

111. The State when it 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 of the 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 of approval. The process of price fixation by the Central Government in

SLP (C) No. 21888 of 2012 Page 40 of 127 exercise of its powers under the 1945 Order continued from 1996 to 2004.

112. Does e-auction ultimately lead to fixation of a price? The answer to the said question that 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 of coal. 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 “State” can fix a price which would otherwise be unfair or unreasonable.

113. 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 other capacity. (See Baburao Shantaram More v. Bombay Housing Board [(1953) 2 SCC 845 : AIR 1954 SC 153 : 1954 SCR 572] SCR at p. 577, Dwarkadas Marfatia & Sons v. Board of Trustees of the Port of Bombay [(1989) 3 SCC 293 : (1989) 2 SCR 751] SCR at pp. 760, 762 and Pathumma v. State of Kerala [(1978) 2 SCC 1 : (1978) 2 SCR 537] SCR at p. 545.)

114. 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 the 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 largesse as a competitor in the market and when it is expected to fulfil its constitutional goal enshrined under Article 39(b) of the Constitution.” (Emphasis supplied)

SLP (C) No. 21888 of 2012 Page 41 of 127

59. Having discussed the constitutional requirement of reasonable pricing of

essential commodities like coal, this Court in Ashoka Smokeless (supra)

observed that:

a) First, coal was an essential commodity in terms of Section 3(1) of the

Act, 1955. This occasioned the introduction of the Colliery Control

Orders for regulating the price fixation of the said commodity. The

Colliery Control Orders read with Article 39(b) of the Constitution

placed a constitutional as well as a statutory mandate on the coal

companies to distribute coal equitably and at a fair price.

b) Secondly, the coal companies, being “State” under Article 12 of the

Constitution, could not be actuated purely by a profit motive in fixing

the price of coal. However, it was also observed that it could not be the

law that the public sector undertakings must suffer loss while selling

essential commodities. The principle adumbrated under Article 39(b)

read with Article 14 is that the essential commodities ought to be made

available to the public at a fair price.

c) Thirdly, while fixing a fair and reasonable price in terms of the Act,

1955, it was imperative that the price was actually fixed. Therefore, it

was vital that the price of coal was actually fixed and not kept variable.

SLP (C) No. 21888 of 2012 Page 42 of 127 d. E-auction system is unconstitutional

60. This Court was apprised of several advantages and disadvantages of the e-

auction system by the parties, however, it was held that such enumerations

of the merits/demerits of the system may not be decisive, as the courts were

concerned only with the constitutionality of the new price fixation process.

Thus, what was in contention was not the e-auction system itself but rather

how the system would operate. A perusal of this Court’s dictum in Ashoka

Smokeless (supra) indicates that the price fixation mechanism for an

essential commodity must be based on a determinable criteria or basis and

must be such so as to allow consumers or manufacturers an opportunity to

take an informed decision as regards the purchase strategy or business

policy. The relevant paragraphs of the judgment are reproduced below:

“141. 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.

142. 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 of coal is not fixed. The concept of price 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

SLP (C) No. 21888 of 2012 Page 43 of 127 persons whose end-product 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 consumers 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.

143. Moreover, even fixation of price of LPG in turn 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.

144. 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 v. Indian Oil Corpn. [(1990) 3 SCC 752] )

145. Even while fixation of tariff for the supply of electric energy in terms of the provisions of Section 49 of the Electricity (Supply) Act, 1948, only a reasonable profit is contemplated and not profiteering. (See S.N. Govinda Prabhu [(1986) 4 SCC 198] and ONGC [1990 Supp SCC 397] .)

SLP (C) No. 21888 of 2012 Page 44 of 127

---xxx---

163. E-auction is not a policy decision of the Central Government. Such a policy decision on the part of the executive of the Central Government must be strictly construed in terms of Article 77 of the Constitution of India. Its exercise of such powers has nothing to do with the price fixation by a policy. The State while exercising its power under the Essential Commodities Act, fixes the price keeping in mind several factors, in particular the larger interest of the people. Price fixation of an essential commodity, therefore, is determined on the touchstone of public interest. While doing so the State is expected to follow a rational and fair procedure and for the said purpose may collect data, obtain public opinion, and may appoint an Expert Committee.

164. In the facts and circumstances of the case, however, the approach of the coal companies, who according to the Union of India had been given a free hand to determine its price for coal, is only earning profit. It has been accepted that three subsidiary companies and Coal India Ltd. who were sick companies, like Bharat Coking Coal Ltd. (BCCL), have started e-auction. It has succeeded in its attempt to a great extent as the said coal companies are no longer sick companies. They have proceeded only to safeguard their own interests, as dealer and not as a State. Recourse to e-auction had been taken primarily by way of a 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 Policy and the prime object for which the Nationalisation Acts were enacted.

SLP (C) No. 21888 of 2012 Page 45 of 127

165. 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. Even the coal companies in taking recourse to e-auction did not give effect to the concept of corporate social responsibility.

166. What would be profiteering has been noticed in T.M.A. Pai Foundation v. State of Karnataka [(2002) 8 SCC 481] ; Islamic Academy of Education v. State of Karnataka [(2003) 6 SCC 697] and P.A. Inamdar v. State of Maharashtra [(2005) 6 SCC 537] . In these decisions, it has been held that although education is an industry, and those who impart education do so as a part of their fundamental right in terms of Article 19(1)(g) of the Constitution of India, profiteering should not be taken recourse to.

167. In fact the decisions of this Court on price fixation also point out that although a reasonable profit may be permissible, profiteering would not be.” (Emphasis supplied)

61. What is discernible from the aforesaid is that the e-auction policy was held

to be violative of Articles 14 and 39(b) respectively, on the ground that the

coal companies had abdicated their responsibility of price fixation to a

process that used market forces of demand and supply to arrive at the most

profitable price. Such a system introduced an element of variability for an

essential commodity like coal which was used regularly by smokeless fuel

manufacturers and rural consumers. This Court observed that the lack of

SLP (C) No. 21888 of 2012 Page 46 of 127 determinability in coal prices would be contrary to the provisions of the Act,

1955 read with Article 39(b). Since such variability was not accompanied

by an objective that would subserve the common good and was only being

introduced by the coal companies with the intention to earn profits, this

Court was of the view that such a mechanism of price fixation was arbitrary

and not in consonance with Article 14 of the Constitution.

62. While holding the e-auction system to be untenable on the touchstone of the

constitutional values enshrined in Article 39(b), this Court, by placing

reliance on Kerala SEB v. S.N. Govinda Prabhu and Bros. reported in

(1986) 4 SCC 198 and Sitaram Sugar (supra), clarified with a view to

obviate any confusion, that a prohibition on profiteering cannot be taken to

mean that even reasonable profits are not allowed. Further, it was observed

that it cannot be the law that public sector undertakings must suffer losses

or distribute subsidies to make an essential commodity available to the

public at the least price possible. A perusal of this Court’s dictum in the

aforesaid judgments indicates that what is envisaged by the principles

contained in Articles 14 and 39(b) read with the provisions of the Act, 1955

is that the consumers should be able to purchase a commodity at a fair price

and not at the least possible price fixed at the cost of the financial health of

a PSU.

SLP (C) No. 21888 of 2012 Page 47 of 127 e. Coal companies empowered to notify the price of coal

63. This Court, in Ashoka Smokeless (supra) laid down the contours of the

powers delineated in favour of the Central Government and the coal

companies in respect of regulation of supply of coal and regulation of price

thereof respectively. It was held that any action of the Central Government

was required to be within the four corners of the CCO, 2000. Since, the

CCO, 2000 had deregulated the power to fix price and delegated the same

to the coal companies, the Central Government could not have introduced

the e-auction policy which was essentially a policy for price determination

of coal in the garb of supply regulation thereof.

64. In order to understand the distinct regulatory powers of the Central

Government and the coal companies, we find it apposite to refer to Clauses

4 and 8 of the CCO, 1945 respectively as well as Clause 6 of the CCO, 2000.

Relevant clauses under Corresponding clauses Remarks CCO, 1945 in CCO, 2000

Clause 4: – The omission of the power to regulate “4. The Central price of coal from Government may by the powers assigned notification in the to the Central official Gazette, fix the Government in the sale price at which, or CCO, 2000 is the maximum or the indicative of the fact minimum sale price or that though coal was

SLP (C) No. 21888 of 2012 Page 48 of 127 both, subject to which still an essential coal may be sold by commodity, yet the colliery owners and any operations and such notification may fix decisions pertaining different prices – thereto were sought to be delegated to i) for different grades the coal companies and sizes of coal and so as to ensure that ii) for different pricing of coal is collieries.” based on ground realities of mining and production of coal.

Therefore, the power to regulate prices of coal ceased to remain with the Central Government and vested in the coal companies after the enactment of the CCO, 2000.

Clause 8: Clause 6: As regards the power to regulate “8. The Central “6. Directions to the supply and Government may from regulate the disposal of disposal of coal time to time, issue such coal stocks.– The stocks, the Central direction as it thinks fit Central Government Government to any colliery owner may, from time to time, retained the same regulating the disposal issue such directions as under CCO, 2000 of his stocks of coal or of it may deem fit to any albeit in an altered the expected output of owner of a colliery manner. coal in the colliery regulating the disposal during any period of stocks of coal or of the including direction as to expected output of coal

SLP (C) No. 21888 of 2012 Page 49 of 127 the class, grade, size and in the colliery during quantity of coal which any period.” may be disposed of and person or class or description of persons to whom coal shall or shall not be disposed of, the order of priority to be observed in such disposal and the stacking of coal on Government account.”

65. This Court, cognizant of the changes introduced in the CCO, 2000, observed

that the Central Government had no say in the introduction of the e-auction

system as the same was a measure of price regulation. The relevant

paragraphs of Ashoka Smokeless (supra) are reproduced below:

“168. The coal companies evolve price fixation but admittedly, they have been doing so at the instance of the Central Government. The Central Government seeks to exercise its statutory power. Such a power, however, is confined to four corners of the 2000 Order. When there is no control over price, the Central Government is forbidden to issue any direction which will have an impact thereover.

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170. 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

SLP (C) No. 21888 of 2012 Page 50 of 127 price, the price of coal, it will bear to state, having been deregulated.

171. Supply and/or disposal of coal which would come within the purview of the Colliery Control Order, 2000, would, thus, take within its sweep only: to whom the supply would be made, what would be the quantity, the mode, period or the source of supply. Such a power to issue directions would not include fixation of price. 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. The Central Government itself says that it allowed the coal companies to fix their own price; if that be so in terms of the statute it could not issue any direction which would have direct or indirect impact on price of coal. It, as indicated hereinbefore, directed that 10 lakhs MT coal be sold through e-auction; but while doing so stricto sensu, its power and control to regulate supply of coal could not be exercised in that sense. Apart from the fact that it also does not satisfy the attributes of supply, as noticed hereinbefore, the supply of coal itself has not been brought within the purview thereof. Furthermore no notification has been issued by the Central Government regulating supply of coal.” (Emphasis supplied)

66. It is in the aforesaid context that the conclusion drawn by this Court in

Ashoka Smokeless (supra) must be construed. It was concluded therein that

an expert committee should be constituted by the Union of India with the

SLP (C) No. 21888 of 2012 Page 51 of 127 Secretary, Ministry of Coal at its helm, to evolve a viable policy for

distribution of coal. However, it was also clarified in the same breath that

the Central Government along with the coal companies would be at liberty

to evolve a policy that would balance public interest and the interest of coal

consumers. The relevant portion of the judgment is reproduced below:

“190. With a view to evolve a viable policy, a committee should be constituted by the Union of India with the Secretary of Coal being the Chairman. In such a committee, a technical expert in coal should also be associated as most of the projects involve consumers of coal, particularly manufacturers of hard coke and smokeless fuel. In our opinion, it may not be difficult to find out, having regard to the technologies used therein as regards the ratio of the input vis-à-vis the output, with a balance and 10% margin. On the basis of such finding alone, apart from the requirements of five years, supply should form the basis of MPQ. We may, however, hasten to add that the Central Government in collaboration with the coal companies would be at liberty to evolve a policy which would meet the requirements of public interest vis-à-vis the interest of consumers of coal. They would be entitled to lay down such norms as may be found fit and proper. They would be entitled to fix appropriate norms therefor. In the event, any industrial unit is found to violate the norms, it should be stringently dealt with.”

(Emphasis supplied)

67. What is forthcoming from the above exposition is that the coal companies

were not barred from evolving a policy that, in their opinion, would meet

the requirements of public interest but at the same time, would balance the

SLP (C) No. 21888 of 2012 Page 52 of 127 interest of consumers of coal. Though the recommendations provided by the

expert committee in respect of the maximum permissible quantity of coal

for which sale could be made to a particular consumer, were required to be

followed, yet the other aspects of the supply of coal including price thereof

were to be decided as per the statutory mandate prescribed in the CCO, 2000.

Thus, the coal companies were still empowered to regulate the pricing of

coal in terms of the CCO, 2000.

f. Conclusions reached in Ashoka Smokeless (supra)

68. A comprehensive reading of the decision rendered by this Court in Ashoka

Smokeless (supra) indicates the following:

i. Though dual pricing is permissible in terms of this Court’s dictum in

Pallavi Refractories (supra), yet the principles of price fixation of

essential commodities are required to be kept in mind to ensure that

the constitutional and statutory goals enshrined in Article 39(b) and

Act, 1955 respectively, are met.

ii. It was clarified that the concept of distributive justice contained in

Article 39(b) and the Act, 1955 placed an obligation on the State to

ensure a fair price for the consumers. Such fair price cannot be taken

to mean the least possible price without due regard for operational and

production costs incurred by the State or the PSUs. While the State

SLP (C) No. 21888 of 2012 Page 53 of 127 and its authorities cannot be actuated by profit motive, they are not

barred from earning reasonable profit.

iii. While exercising the power of price fixation, the State and its

authorities must fix the price in such a manner that the consumers are

able to plan their purchase strategy or business policy. The State

cannot abdicate the responsibility of price fixation in favour of a

mechanism that is actuated by profit motive and does not subserve the

common good. The e-auction system was considered to be arbitrary

for the reason that it made the prices of coal determinable on the basis

of market forces so as to enable the State to receive the maximum

possible price of coal and, introduced variability in the said prices,

thereby hindering the consumers from evolving a suitable business

policy.

iv. The e-auction system, though introduced as a mechanism to regulate

the supply of coal, was in actuality a regulation of the price of coal.

Thus, it could not have been introduced by the Central Government

in light of the de-regulation of prices effected by the CCO, 2000. The

expert committee was to be formed with a view to evolve a viable

policy for distribution of coal, more particularly the supply aspect.

This Court was, however, circumspect in precluding the coal

companies from regulating the price of coal. In our considered view,

SLP (C) No. 21888 of 2012 Page 54 of 127 the dictum in Ashoka Smokeless (supra) can, in no way, be taken to

mean that this Court disempowered the coal companies from

regulating the price of coal by way of a judicial pronouncement, in

contravention to the statutory scheme of CCO, 2000.

(ii) Analysis of the observations of this Court in Pallavi Refractories

(supra)

69. This Court’s decision in Pallavi Refractories (supra) pre-dates the judgment

rendered in Ashoka Smokeless (supra). It is, however, relevant for the

purposes of understanding the pricing distinctions made by the coal

companies between the core and non-core sector consumers.

70. The limited issue before this Court in Pallavi Refractories (supra) was the

challenge posed to the differential prices notified by the appellant herein for

the consumers of core and non-core sectors respectively.

71. The Government of India, by its notification dated 22.03.1996 issued under

Clause 3(2) of the CCO, 1945 deregulated the price and distribution of non-

coking coal of Grades ‘A’, ‘B’ and ‘C’ respectively. It was also clarified by

the Central Government that the Board of the appellant company herein

would determine the economic price to be charged for the coal produced

from time to time. Thereafter, the appellant herein issued the price

SLP (C) No. 21888 of 2012 Page 55 of 127 notification dated 13.03.1997 wherein it was provided that the unlinked

consumers and industries of the non-core sector were required to pay 20%

additional price over and above the prices previously notified.

72. The petitioners therein had contended that the levy of an additional amount

only on the unlinked consumers of the non-core sector was discriminatory

and violative of Article 14 of the Constitution as the differentiation between

linked and unlinked industries for the purpose of pricing was irrational and

did not constitute intelligible differentia. It was also averred that such

substantial price variation under the guise of an additional levy amounted to

dual pricing which was arbitrary and excessive.

73. The High Court of Andhra Pradesh rejected these arguments and found no

infirmity in the differential pricing adopted by the coal companies on the

ground that the extent of bulk consumption of coal by the core/linked sector

industries called for special treatment. It was observed that the core sector

consumers were afforded the benefit of lower prices due to their intrinsic

importance in nation-building activities and provision of services in the

capacity of public utilities. Therefore, any substantial increase in the price

of coal would have a ripple effect and adversely impact the end consumers’

purchasing power, especially for goods and services that are consumed in

bulk all over the country viz. electricity, cement, etc. On the other hand, since

SLP (C) No. 21888 of 2012 Page 56 of 127 consumption of coal by the non-core sector was minimal as compared to the

core sector industries, it would not result in an appreciable increase in the

cost of the goods and services manufactured by the unlinked industries in

the non-core sector. Thus, dual pricing could not be said to be irrational and

hence, arbitrary.

74. Resultantly, this Court, at the instance of the aggrieved writ petitioners, was

faced with the controversy of whether the dual price fixation by classifying

customers into core sector/linked sector and non-core sector/unlinked sector

industries was irrational and was an instance of hostile discrimination.

75. This Court prefaced its judgment with the observations given in Cynamide

India (supra) and Sitaram Sugar (supra) wherein it was held that price

fixation is neither the function nor the forte of courts and that the courts

should not be concerned with pricing policy and rates fixed. The only

situation in which the courts can enquire into the price fixation process and

the result thereof is when the legislature has laid down the pricing policy and

prescribed the factors that should guide the determination of the price of a

commodity. The relevant paragraphs of the judgment in Pallavi Refractories

(supra) is reproduced below:

“13. This Court in Union of India v. Cynamide India Ltd. [(1987) 2 SCC 720 : AIR 1987 SC 1802] has held that price fixation is generally a legislative activity. It may

SLP (C) No. 21888 of 2012 Page 57 of 127 occasionally assume an administrative or quasi-judicial character when it relates to acquisition or requisition of goods or property from individuals and it becomes necessary to fix the price separately in relation to such individuals. Such situations may arise when the owner of the goods is compelled to sell goods to the Government or its nominee and the price is to be determined according to the statutory guidelines laid down by the legislature. In such situations, the determination of price may acquire a quasi-judicial character but, otherwise, price fixation is generally a legislative activity. After observing thus, the Court held that price fixation is neither the function nor the forte of the court. The court is neither concerned with the policy nor with the rates. But in appropriate proceedings it may enquire into the question, whether relevant considerations have gone in and irrelevant considerations kept out while determining the price. In case the legislature has laid down the pricing policy and prescribed the factors which should guide the determination of the price then the court will, if necessary, enquire into the question whether policy and factors were present to the mind of the authorities specifying the price. The assembling of raw materials and mechanics of price fixation are the concern of the executive and it should be left to the executive to do so and the courts would not revaluate the consideration even if the prices are demonstrably injurious to some manufacturers and producers. The court will however examine if there is any hostile discrimination. It was observed as under: (SCC p. 734, para 4) “4. We start with the observation, ‘price fixation is neither the function nor the forte of the court’. We concern ourselves neither with the policy nor with the rates. But we do not totally deny ourselves the jurisdiction to enquire into the question, in appropriate proceedings, whether relevant considerations have gone in and irrelevant considerations kept out of the determination of the price. For example, if the legislature has decreed the

SLP (C) No. 21888 of 2012 Page 58 of 127 pricing policy and prescribed the factors which should guide the determination of the price, we will, if necessary, enquire into the question whether the policy and the factors are present to the mind of the authorities specifying the price. But our examination will stop there. We will go no further. We will not deluge ourselves with more facts and figures. The assembling of the raw materials and the mechanics of price fixation are the concern of the executive and we leave it to them. And, we will not re-evaluate the considerations even if the prices are demonstrably injurious to some manufacturers or producers. The court will, of course, examine if there is any hostile discrimination. That is a different ‘cup of tea’ altogether.” (emphasis supplied)

14. A Constitution Bench of this Court in Shri Sitaram Sugar Co. Ltd. v. Union of India [(1990) 3 SCC 223 : AIR 1990 SC 1277] (in paras 57 & 58) has held that in judicial review the court is not concerned with the matters of economic policy.

The court does not substitute its judgment for that of the legislature or its agent as to the matters within the province of either. The legislature while delegating the powers to its agent may empower the agent to make findings of fact which are conclusive provided, such findings satisfy the test of reasonableness. In all such cases, the judicial enquiry is confined to the question whether the findings of facts are reasonably based on evidence and whether such findings are consistent with the laws of the land. The court only examines whether the prices determined were with due regard to the provisions of the statute and whether extraneous matters have been excluded while making such determination. It was further observed that price fixation is not within the province of the courts. Judicial function in respect of such matters stands exhausted once it is found that the authority

SLP (C) No. 21888 of 2012 Page 59 of 127 empowered to fix the price has reached the conclusion on a rational basis.” (Emphasis supplied)

76. What has been conveyed by this Court in so many words is that the matters

of economic policy and price fixation are in the domain of executive action

and the courts ought not to interfere in such decision-making unless it is

shown that such policy does not conform to pre-existing legislative mandate

or causes hostile discrimination.

77. In Pallavi Refractories (supra), the petitioners had argued that dual pricing

caused hostile discrimination to the detriment of the non-core/unlinked

sector. Therefore, this Court examined whether the imposition of the 20%

additional price on the non-core/unlinked sector was discriminatory in terms

of Article 14 of the Constitution. It was observed therein that:

a) First, the core sector industries constituted nearly 90% of the entire

consumer base of the appellant company herein and their usage of coal

was of paramount importance to nation-building activities. Since, the

industries belonging to the core sector produced and provided essential

goods and services, any increase in the price of coal which was used as

a raw material or energy source for such industries would lead to a

cascading effect on every category of consumer. An increase in price

of coal which in itself was an essential commodity at that point of time

SLP (C) No. 21888 of 2012 Page 60 of 127 would result in higher prices for majority of goods and services and

thus, increase the basic cost of living for a large section of the

population. On the other hand, increasing the price of coal for industries

in the non-core/unlinked sector that were involved in the production of

goods such as paint, lime, etc. would not result in an adverse cost

impact on the end consumers, as such products are not of everyday

concern for the common man.

b) Secondly, the consumption of coal in the core sector industries such as

electricity, cement, steel, etc. was quite high whereas, in the case of

unlinked industries, the coal consumption was minimal. Therefore, an

increase in the price of coal for the unlinked/non-core sector would not

result in any appreciable increase in the cost of products manufactured

by the industries therein.

c) Thirdly, the avowed objective of dual pricing was to ensure that the

appellant company herein could get an adequate return for its products

and cover its financial deficit without placing an undue burden of price

increase on a large section of the public.

d) Lastly, it could not be said that dual pricing was an exercise inherently

at loggerheads with any law. The only test to ensure that there was no

arbitrariness or unfair discriminatory practices at play, was to see

SLP (C) No. 21888 of 2012 Page 61 of 127 whether such dual price fixation was based on reasonable classification

in terms of Article 14 of the Constitution.

The relevant paragraphs of the judgment in Pallavi Refractories (supra) are

reproduced below:

“17. Core sector industries are of intrinsic importance to the economy of the country. They are given assured supply of coal by the Standing Linkage Committee which is a committee formed as per the guidelines of the Ministry of Coal, Government of India. The core sector industries consume nearly 90% of the entire production of the respondent Company. In fact, the power sector consumes nearly 75% and the other industries consume nearly 15% of the entire production and only 10% or less is being drawn by other medium/small-scale industries. As per the averments made in the counter-affidavit, for electricity, which is being generated by the power sector, the quantity of coal consumed amounts to 75% of the product cost. To generate one unit of electricity, 0.5 kg to 1 kg quantity of coal is consumed. In case of cement, steel and fertilisers, the percentage of cost of coal in the entire cost of production is ranging from 15% to 25%. Keeping in view the several factors, the Board of Directors after due deliberations felt that the core sector industries are of intrinsic importance to the building of the nation and to the common man in general. It was thought fit to keep the price increase at particular levels for the core industries and charge a bit extra from other industries. This was a policy decision taken by the respondent Company with regard to price fixation. Any increase in prices for the core sector industries will automatically affect market economy. Taking an instance, increase in the price of coal, to the Electricity Board, will have a serious impact on every institution or an individual consuming electricity. Electricity has become an essential commodity and is required for running industry,

SLP (C) No. 21888 of 2012 Page 62 of 127 commercial activity, locomotives, agriculture and for domestic use. Every category of consumer shall have to pay more resulting in cascading effect of increasing the price of every commodity. This is not the case of industries like paints, lime, etc. which are used once in a while. By any increase in the price of coal supply to them, the common man would not be affected much. Even otherwise, the increase in the price is passed on the consumers by the appellants. Their end product does not have a national bearing. The products of these industries are not of everyday concern for the common man.

18. The primary consideration for placing the seven industries in the core sector is their intrinsic importance to the economy of the country and the role which they play in the nation-building activities. The same consideration will hold good for charging lesser price from them. The requirement of coal in the core sector is on the higher side either for captive power generation or for other uses for the manufacturing operations. Any substantial increase in the price of coal shall have a substantial effect on the cost of finished products of vital importance and the cost of services to the public. Counsel for the respondent has submitted before us that 70% of the cement manufactured by the country is utilised by the Central or State Governments for the construction of projects, bridges, roads, etc. Any increase in the price of coal supplied to the core industries would result in the increase of cost of essential commodities such as electricity, cement, and steel. The consumption of coal is quite high and is a major input of these industries. In the case of non-linked industries the coal consumption is minimal and the increase in the price will not result in any appreciable increase in the cost of products manufactured by non-linked sector industries.

19. Keeping in view the intrinsic importance of the core sector consumers and their importance in the nation-building activities and the extent of consumption of coal either for

SLP (C) No. 21888 of 2012 Page 63 of 127 captive power generation or for use in manufacturing operations legitimately calls for a special treatment as far as these industries are concerned. For charging lesser prices or evolving a dual price policy, it cannot be said that equals are treated unequally or that the classification does not rest on rational basis. The objective of dual pricing purportedly is to ensure that core sector industries or customers are not unduly burdened with price increase while at the same time the respondent gets adequate return for its products so as to cover the financial deficit. There is no such law that a particular commodity cannot have a dual fixation of price.

Dual fixation of price based on reasonable classification from different types of customers has met with approval from the courts. Monopolistic organisations like Electricity Boards and Petroleum Corporations are having dual price fixation. It is a common feature that Electricity Boards which generate power sell the power at different rates to different types of customers such as domestic, agricultural and industrial consumers. Even different types of industries are charged different rates.

20. Keeping in view the law laid down by this Court in Union of India v. Cynamide India Ltd. [(1987) 2 SCC 720 : AIR 1987 SC 1802] and Shri Sitaram Sugar Co. Ltd. v. Union of India [(1990) 3 SCC 223 : AIR 1990 SC 1277] in our opinion, the High Court did not fall into an error in upholding clause 10 of the price notification dated 14-3-1997. The High Court rightly came to the conclusion that clause 10 of the price notification did not violate the equality clause of Article 14 of the Constitution. By evolving the dual price policy and charging lesser price from the core sector industries the respondent has not treated equals as unequals; nor could it be said that the classification made was not rational.” (Emphasis supplied) SLP (C) No. 21888 of 2012 Page 64 of 127

78. On a plain reading of the observations of this Court in Pallavi Refractories

(supra), it is limpid that the classification of the consumer base of the

appellant company herein, into core and non-core sector industries, was not

an instance of treating equals unequally. Therefore, the plea of hostile

discrimination by the petitioners therein was of no avail to them.

(iii) The general rule as regards the scope of enquiry by courts into

the economic policy of the State

79. Having discussed the observations and findings rendered in Ashoka

Smokeless (supra) and Pallavi Refractories (supra) in detail, we now

consider it apposite to address ourselves on the issue whether the courts are

empowered to enquire into the economic policy of the State.

80. The appellant, in I.A. No. 1 of 2015, has submitted that the validity of the

Interim Coal Policy must be answered by this Court in view of the judgment

delivered in the presidential reference, Natural Resources Allocation

(supra). In the said reference, the President invoked the advisory jurisdiction

of this Court under Article 143 of the Constitution seeking to clarify inter

alia, what would be the permissible scope of interference by courts with

policymaking by the Government, including the disposal of natural

resources. This Court, while answering the issue, made certain observations

SLP (C) No. 21888 of 2012 Page 65 of 127 in respect of Articles 14 and 39(b) respectively. The relevant paragraphs

containing such observations are reproduced below:

“107. From a scrutiny of the trend of decisions it is clearly perceivable that the action of the State, whether it relates to distribution of largesse, grant of contracts or allotment of land, is to be tested on the touchstone of Article 14 of the Constitution. A law may not be struck down for being arbitrary without the pointing out of a constitutional infirmity as McDowell case [(1996) 3 SCC 709] has said. Therefore, a State action has to be tested for constitutional infirmities qua Article 14 of the Constitution. The action has to be fair, reasonable, non-discriminatory, transparent, non- capricious, unbiased, without favouritism or nepotism, in pursuit of promotion of healthy competition and equitable treatment. It should conform to the norms which are rational, informed with reasons and guided by public interest, etc. All these principles are inherent in the fundamental conception of Article 14. This is the mandate of Article 14 of the Constitution of India.

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116. The learned counsel for CPIL argued that revenue maximisation during the sale or alienation of a natural resource for commercial exploitation is the only way of achieving public good since the revenue collected can be channelised to welfare policies and controlling the burgeoning deficit. According to the learned counsel, since the best way to maximise revenue is through the route of auction, it becomes a constitutional principle even under Article 39(b). However, we are not persuaded to hold so.

Auctions may be the best way of maximising revenue but revenue maximisation may not always be the best way to subserve public good. “Common good” is the sole guiding factor under Article 39(b) for distribution of natural resources. It is the touchstone of testing whether any policy

SLP (C) No. 21888 of 2012 Page 66 of 127 subserves the “common good” and if it does, irrespective of the means adopted, it is clearly in accordance with the principle enshrined in Article 39(b).

118. In Bennett Coleman & Co. v. Union of India [(1972) 2 SCC 788] , it has been held by this Court that : (SCC p. 845, para 162) “162. … The only norm which the Constitution furnishes for distribution of the material resources of the community is the elastic norm of the common good.” Thus “common good” is a norm in Article 39(b) whose applicability was considered by this Court on the facts of the case. Even in that case, this Court did not evolve economic criteria of its own to achieve the goal of “common good” in Article 39(b), which is part of the directive principles.

119. The norm of “common good” has to be understood and appreciated in a holistic manner. It is obvious that the manner in which the common good is best subserved is not a matter that can be measured by any constitutional yardstick—it would depend on the economic and political philosophy of the Government. Revenue maximisation is not the only way in which the common good can be subserved. Where revenue maximisation is the object of a policy, being considered qua that resource at that point of time to be the best way to subserve the common good, auction would be one of the preferable methods, though not the only method. Where revenue maximisation is not the object of a policy of distribution, the question of auction would not arise. Revenue considerations may assume secondary consideration to developmental considerations.” (Emphasis supplied)

81. What can be discerned from the aforesaid exposition of law is that the State

is bound by Article 39(b) to ensure that common good is subserved

SLP (C) No. 21888 of 2012 Page 67 of 127 whenever it distributes or allots natural resources including coal. Further,

such distribution must be in conformity to the principles of fairness,

reasonableness and non-arbitrariness in terms of Article 14 of the

Constitution. The principles expounded in the aforesaid are in consonance

with the law settled in Pallavi Refractories (supra) and Ashoka Smokeless

(supra).

82. We find it apposite to note that while discussing the concept of ‘common

good’ as per Article 39(b), this Court observed that there cannot be a

constitutional yardstick for ensuring the same. Rather, it is the economic and

political philosophy of the Government that would enable the courts to

determine whether an executive action was fulfilling the objective of

subserving the common good in terms of the economic and political

philosophy of the Government. At this stage, we may, with a view to obviate

any confusion, reiterate the dictum of this Court in Cynamide India (supra)

and Sitaram Sugar (supra) that as a general rule, the courts ought not to

interfere with the prices fixed by the State provided that such prices are

determined in conformity with the principles enshrined in Articles 14 and

39(b).

83. This Court in Natural Resources Allocation (supra), observed that the

alienation of natural resources is the prerogative of the executive as it

SLP (C) No. 21888 of 2012 Page 68 of 127 involves making intricate economic choices for which the courts do not have

the necessary expertise. Therefore, the courts should not endeavour to

determine whether an instance of distribution of natural resources is

economically or factually reasonable. The domain of the courts is limited to

adjudging the reasonability of an economic policy decision to situations

when such action is patently unreasonable in terms of the Constitution

and/or the statute or regulations that are enacted to guide executive action in

that regard.

“146. To summarise in the context of the present Reference, it needs to be emphasised that this Court cannot conduct a comparative study of the various methods of distribution of natural resources and suggest the most efficacious mode, if there is one universal efficacious method in the first place. It respects the mandate and wisdom of the executive for such matters. The methodology pertaining to disposal of natural resources is clearly an economic policy. It entails intricate economic choices and the Court lacks the necessary expertise to make them. As has been repeatedly said, it cannot, and shall not, be the endeavour of this Court to evaluate the efficacy of auction vis-à-vis other methods of disposal of natural resources. The Court cannot mandate one method to be followed in all facts and circumstances. Therefore, auction, an economic choice of disposal of natural resources, is not a constitutional mandate. We may, however, hasten to add that the Court can test the legality and constitutionality of these methods. When questioned, the courts are entitled to analyse the legal validity of different means of distribution and give a constitutional answer as to which methods are ultra vires and intra vires the provisions of the Constitution. Nevertheless, it cannot and will not compare which policy is

SLP (C) No. 21888 of 2012 Page 69 of 127 fairer than the other, but, if a policy or law is patently unfair to the extent that it falls foul of the fairness requirement of Article 14 of the Constitution, the Court would not hesitate in striking it down.

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149. Regard being had to the aforesaid precepts, we have opined that auction as a mode cannot be conferred the status of a constitutional principle. Alienation of natural resources is a policy decision, and the means adopted for the same are thus, executive prerogatives. However, when such a policy decision is not backed by a social or welfare purpose, and precious and scarce natural resources are alienated for commercial pursuits of profit maximising private entrepreneurs, adoption of means other than those that are competitive and maximise revenue may be arbitrary and face the wrath of Article 14 of the Constitution. Hence, rather than prescribing or proscribing a method, we believe, a judicial scrutiny of methods of disposal of natural resources should depend on the facts and circumstances of each case, in consonance with the principles which we have culled out above. Failing which, the Court, in exercise of power of judicial review, shall term the executive action as arbitrary, unfair, unreasonable and capricious due to its antimony with Article 14 of the Constitution.” (Emphasis supplied)

84. This Court in Balco Employees’ Union v. Union of India reported in (2002)

2 SCC 333 observed that the courts are not empowered to consider the

merits of different economic policies and adjudge the relative efficacy

thereof. Further, the courts must be circumspect in disturbing the

conclusions reached by the executive in formulating an economic policy or

SLP (C) No. 21888 of 2012 Page 70 of 127 fixing of prices unless and until there is an illegality in the decision-making

process itself. The relevant observations are reproduced below:

“93. Wisdom and advisability of economic policies are ordinarily not amenable to judicial review unless it can be demonstrated that the policy is contrary to any statutory provision or the Constitution. In other words, it is not for the Courts to consider relative merits of different economic policies and consider whether a wiser or better one can be evolved. For testing the correctness of a policy, the appropriate forum is the Parliament and not the Courts.

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98. In the case of a policy decision on economic matters, the Courts should be very circumspect in conducting any enquiry or investigation and must be most reluctant to impugn the judgement of the experts who may have arrived at a conclusion unless the Court is satisfied that there is illegality in the decision itself.” (Emphasis supplied)

85. In a recent decision, Kirloskar Ferrous Industries Ltd. v. Union of India,

reported in (2025) 1 SCC 695, a three-judge bench of this Court wherein

one of us (J.B. Pardiwala J.) was a part of the bench, observed that the courts

should exercise caution while adjudicating issues pertaining to economic

policies formulated by the executive. The realm of the courts’ exercise of

judicial review is circumscribed to ensuring that such policies do not

infringe upon citizens’ rights or exceed the authority granted by law. The

courts cannot extend their role to evaluating the wisdom of a particular

SLP (C) No. 21888 of 2012 Page 71 of 127 policy decision and the conclusions arrived at based on the same as such a

task has been enjoined upon the legislature and executive wings of the State

in terms of the scheme of governance envisaged by the Constitution. The

relevant paragraphs of the said judgment are reproduced below:

“56. Policy decisions often require the expertise of professionals and specialists in fields such as economics, public health, national security, and environmental science. These domains involve specialised knowledge that Judges, as generalists in legal matters, may lack. For instance, in economic policy, the executive may decide on trade tariffs or subsidies based on extensive data and projections that aim to balance domestic industry support with global trade commitments. The courts, lacking the same level of economic expertise and without the authority to make trade-offs among competing policy objectives, are typically not equipped to second-guess these kinds of decisions.

57. While courts have the power of judicial review to ensure that executive actions and legislative enactments comply with the Constitution, this power is not absolute. Judicial review is meant to act as a safeguard against actions that overstep legal boundaries or infringe on fundamental rights, but it does not entail a comprehensive re-evaluation of the policy's wisdom. The judicial review of policy decisions is limited to assessing the legality of the decision-making process rather than the substantive merits of the policy itself. For example, if a government policy infringes on fundamental rights or discriminates against a particular group, the courts have a duty to strike down such policies. However, in the absence of constitutional or legal violations, the courts should respect the policy choices made by the executive or legislature.

SLP (C) No. 21888 of 2012 Page 72 of 127 58. The duty of the court in policy-related cases is primarily to determine whether the policy falls within the scope of the authority granted to the relevant body. If the policy decision is within the executive's legal authority and has been made following proper procedures, the courts should defer to the expertise and discretion of the policy-makers, even if the policy appears unwise or imprudent. This restraint ensures that the courts do not impose its own perspective on policy matters that are rightly the responsibility of other branches.

59. Economic and social policies often involve significant redistribution of resources, prioritisation of interests, and balancing of public needs, which requires careful consideration by those with specialised knowledge and broad perspectives. In the realm of economic policy, for instance, questions regarding the allocation of subsidies, fiscal deficits, or budget allocations are best managed by the executive, which has access to economic data and is accountable to the public for its financial management.

Judicial interference in such areas risks creating disruptions in the economic balance that policy-makers are trying to achieve.

60. The courts should assume that policy-makers act in good faith unless there is clear evidence to the contrary. As long as the policy does not contravene the Constitution or violate statutory provisions, it is not the role of the courts to question the wisdom or fairness of such policy.

61. While judicial restraint is essential in respecting the boundaries of each branch of Government, it does not mean that courts abdicate their responsibility to protect constitutional rights. The courts must still intervene if a policy infringes on fundamental rights, discriminates unfairly, or breaches statutory provisions. The role of the court in such instances is to protect individuals and groups from unlawful actions while maintaining the overall integrity

SLP (C) No. 21888 of 2012 Page 73 of 127 of the policy-making process. This balance ensures that while courts do not interfere in matters of policy wisdom, they remain vigilant guardians of constitutional rights.” (Emphasis supplied)

86. The aforesaid exposition of law leaves no manner of doubt in our minds that

the brightline rule as regards the adjudicating of a policy decision by the

Government, especially an economic one, is that the courts must exercise

judicial restraint and only consider the legality of the decision-making

process in terms of the provisions of the Constitution and relevant statutes.

In respect of price fixation of a natural resource, coal in the case on hand,

the courts must confine themselves to the question whether the basis adopted

for reaching a particular price is reasonable or not.

87. For the reasons in the aforesaid, we are inclined to decide the I.A. No. 1 of

2015 in favour of the appellant company and proceed to consider the validity

of the Interim Coal Policy. Additionally, we may refer to a recent judgment

of this Court in Biswajit Das (supra) with profit. It was held therein that

even in a matter wherein notice was issued on a limited question, this Court

is not denuded of the jurisdiction to decide the whole conspectus of legal

and valid points. The relevant paragraph of the said judgment is extracted

below:

“16. We may now summarize the principles in view of the precedents noticed above. When a limited notice is issued by

SLP (C) No. 21888 of 2012 Page 74 of 127 a bench on an appeal/petition, more often than not, the view taken is tentative. There could be occasions when the claim of the party succeeding before the court below is demonstrated to be untenable because of a patent infirmity in the findings recorded in the impugned judgment, or a glaring error in the procedure followed having the effect of vitiating the proceedings is shown to exist, at any subsequent stage of the proceedings, which might have been overlooked by the Bench when it issued limited notice. Justice could be a real casualty if the same or the subsequent Bench, in all situations of limited notice having been issued initially, is held to be denuded of its jurisdiction to rule on the merits of the contentions relatable to points not referred to in the notice issuing order. As it is, since exercise of jurisdiction under Article 136 is discretionary, notices on appeals/petitions are not frequently issued by this Court. Nonetheless, if in a given case, notice is issued which is limited on terms but the party approaching the Court is otherwise persuasive in pointing out that the case does involve a substantial question of law deserving consideration and the Bench is so satisfied, we see no reason why the case may not be heard on such or other points. In such a case, the jurisdiction to decide all legal and valid points, as raised, does always exist and would not get diminished or curtailed by a limited notice issuing order. However, whether or not to exercise the power of enlarging the scope of the petition/appeal is essentially a matter in the realm of discretion of the Bench and the discretion is available to be exercised when a satisfaction is reached that the justice of the case so demands. If this position is not accepted, Order LV Rule 6 of the Supreme Court Rules, 2013 read with Article 142 of the Constitution will lose much of its significance.” (Emphasis supplied)

SLP (C) No. 21888 of 2012 Page 75 of 127

(iv) Objective of the Interim Coal Policy subserved the ‘common

good’

88. Before we proceed further, we deem it fit to reiterate the dictum of the

decisions of this Court referred to hereinabove in respect of the

constitutional requisite that a policy decision or price fixation exercise must

have an underlying objective that subserves the common good as per

Articles 14 and 39(b) respectively. At this stage, it is imperative to identify

the objective underlying the decision of the appellant herein to levy 20%

additional amount over and above the price notified prior to the introduction

of the e-auction system.

89. The appellant had submitted before the learned Single Judge of the High

Court that the need to impose 20% additional amount over and above the

notified price for the linked non-core sector industries, arose due to the

increase in operational costs of the coal companies to the tune of 23.84%. It

appears from the case from the appellant’s pleadings that though the

company was not running in losses considering that there had been a huge

investment in the coal industry, yet the fixation of price 20% higher than the

previously notified price was still necessary so as to ensure the sustainable

operation, maintenance and development of the coal mines and production

framework. It is pertinent to note that the impugned price hike for the linked

SLP (C) No. 21888 of 2012 Page 76 of 127 non-core sector industries mitigated the increase in operational costs only to

the extent of 1.2%.

90. This conspectus of facts makes it necessary for us to look into the

proposition of whether financial sustainability of operations of a PSU can be

a reasonable basis for a price increase for a specific class of consumers. This

Court in Shree Meenakshi Mills Ltd. v. Union of India, reported in (1974)

1 SCC 468 and Prag Ice & Oil Mills v. Union of India, reported in (1978)

3 SCC 459 had the occasion to address the issue of whether the price control

measures adopted by the Government were in conflict with the fundamental

rights i.e., Articles 19(1)(f) and 19(1)(g) respectively of the cotton textile

mills and mustard oil producers respectively. We wish to clarify at the outset

that the nature of price control was different in the Meenakshi Mills (supra)

and Prag Ice (supra) from the nature of price increase in the case on hand.

However, in our considered opinion, the principles expounded in these

judgments are of common application. It was observed by this Court therein

as follows:

a) First, the dominant purpose of the Act, 1955, more particularly Section

3 thereof is to ensure equitable distribution of an essential commodity

at fair price. The object of equitable distribution includes within its fold

not only fair prices but also maintenance or increase of supplies of an

SLP (C) No. 21888 of 2012 Page 77 of 127 essential commodity. Such purpose would be defeated if a producer’s

profit or return are kept in the forefront. Therefore, price regulation

should not be actuated by profit motive unless and until the objective

of a particular policy clearly stipulates so. The relevant paragraph of

Prag Ice (supra) is reproduced below:

“39. We may also mention that the view we have taken of the dominant purpose of Section 3(1) of the Act is in accordance with the following elucidation of its purpose in Meenakshi Mills case: (SCC p. 490, para 65) “The question of fair price to the consumer with reference to the dominant object and purpose of the legislation claiming equitable distribution and availability at fair price is completely lost sight of if profit and the producer's return are kept in the forefront. The maintenance or increase of supplies of the commodity or the equitable distribution and availability at fair prices are the fundamental purposes of the Act.”” (Emphasis supplied)

b) Secondly, price control or fixation cannot be with a motive to safeguard

the interests of industries engaged in the production of the essential

commodity. Such price regulation must be based on economic factors

with fair prices and availability of the commodity for the end

consumers as the predominant considerations. The reasonableness of

the exercise of price regulation cannot be determined on the grounds

that a section of the population engaged in the industry, trade or

SLP (C) No. 21888 of 2012 Page 78 of 127 commerce of such essential commodity are facing losses. The relevant

portion of the judgment in Prag Ice (supra) is reproduced below:

“64. This discussion will not be complete without reference to the decision of a Constitution Bench of this Court in Shree Meenakshi Mills Ltd. v. Union of India [(1974) 1 SCC 468 : (1974) 2 SCR 398] . The question which arose in that case was as regards the validity of a notification fixing fair prices of cotton yarn. It was contended on behalf of the petitioners therein that the price fixed was arbitrary because the fluctuation in the price of cotton was not taken into consideration, the price of raw materials, the liability for wages and the necessity for ensuring reasonable profit to the trader are not taken into accounts; and above everything else, the industry was not ensured a reasonable return on its investment. These contentions were rejected by this Court on the ground that, just as the industry cannot complain of rise and fall of prices due to economic factors in an open market, it cannot similarly complain of some increase in or reduction of prices as a result of a notification issued under Section 3(1) of the Essential Commodities Act because, such increase or reduction is also based on economic factors. Dealing with the contention that a reasonable profit must be assured to the manufacturers, the Court held that ensuring a fair price to the consumer was the dominant object and purpose of the Essential Commodities Act and that object would be completely lost sight of, if the producer's profit was kept in the forefront. Ray, C.J., speaking for the Court, observed:

(SCC p. 490, para 66) “In determining the reasonableness of a restriction imposed by law in the field of industry, trade or commerce, it has to be remembered that the mere fact that some of those who are engaged in these are alleging loss after the imposition of law will not render the law unreasonable. By its very nature, industry or trade or

SLP (C) No. 21888 of 2012 Page 79 of 127 commerce goes through periods of prosperity and adversity on account of economic and sometimes social and political factors. In a largely free economy when controls have to be introduced to ensure availability of consumer goods like foodstuff, cloth and the like at a fair price, it is an impracticable proposition to require the Government to go through the exercise like that of a Commission to fix the prices.” Another passage from the judgment of the learned Chief Justice which has an important bearing on the instant case is to the following effect: (SCC p. 491 para 67) “When available stocks go underground and the Government has to step into control distribution and availability in public interest, fixing of price cannot be only empirical. Market prices at a time when the goods did not go underground and were freely available, the general rise in prices, the capacity of the consumer specially in case of consumer goods like foodstuff, cloth etc. the amount of loss which the industry is able to absorb after having made huge profits in prosperous years, all these enter into the calculation of a fair price in an emergency created by artificial shortages.”” (Emphasis supplied)

91. The requirement of equitable distribution and the consequent necessity of

fair pricing and sustainable availability of a commodity is echoed in the

judgments discussed in the aforesaid. However, could it be said that ‘fair

pricing’ by itself, excludes reasonable profits for the producer? In other

words, are the two mutually exclusive? The answer in our opinion must be

an emphatic ‘No’. This Court has painstakingly clarified that only the

executive actions that are actuated solely by profit motive at the cost of the

SLP (C) No. 21888 of 2012 Page 80 of 127 public, fall foul of the constitutional and statutory principles enshrined in

Articles 14 and 39(b) as well as the Act, 1955 [See: Natural Resources

Allocation (supra)].

92. A conjoint reading of the observations of this Court in Meenakshi Mills

(supra) and Natural Resources Allocation (supra) indicates that reasonable

profits when necessary to subserve the ‘common good’ including

maintenance of or increase in supply of an essential commodity, do not

infringe on the rights of the citizens.

93. In the case on hand, the appellant company had submitted that the 20%

increase in prices for the linked consumers of the non-core sector was

reasonable for the sustainable operation, maintenance and development of

the coal mines in light of the increase in operational costs of the appellant

company. Further, it is imperative to consider the Interim Coal Policy in the

context in which it was introduced. Though the e-auction system was held

to be a price regulation mechanism in the garb of a supply regulation, yet it

cannot be denied that one of the objectives of the said policy was to ensure

supply to a common man and curb the black market sale of coal. While we

are in agreement with the decision in Ashoka Smokeless (supra) that the e-

auction system was in contravention of Articles 14 and 39(b) respectively

for want of reasonableness, we find it apposite to consider the situation

SLP (C) No. 21888 of 2012 Page 81 of 127 prevailing at the relevant point of time that necessitated the introduction of

such a system. Once this Court struck down the e-auction system, the

objective of maintenance of supply of coal remained unfulfilled and it

became all the more important for the appellant company to ensure adequate

production of coal.

94. In such view of the matter, we are of the considered opinion that the 20%

increase over and above the notified prices was associated with the objective

of maintaining the supply of coal and ensuring its availability in the market

for all categories of consumers. Thus, it cannot be said that the action of the

appellant in notifying price for the linked consumers of the non-core sector

with an increase of 20% in the Interim Coal Policy, was actuated solely by

a profit motive.

(v) Balancing between the respondents’ fundamental rights and the

interests of the public at large

a. Applicability of the Proportionality test vis-à-vis the Reasonable classification test

95. In Modern Dental College & Research Centre v. State of M.P., (2016) 7

SCC 353, this Court laid down the four-pronged test of proportionality to

balance between the fundamental rights of a class of citizens and the

SLP (C) No. 21888 of 2012 Page 82 of 127 interests of the general public. The relevant paragraph of the said judgment

is reproduced below:

“60. […] Thus, while examining as to whether the impugned provisions of the statute and rules amount to reasonable restrictions and are brought out in the interest of the general public, the exercise that is required to be undertaken is the balancing of fundamental right to carry on occupation on the one hand and the restrictions imposed on the other hand. This is what is known as “doctrine of proportionality”. Jurisprudentially, “proportionality” can be defined as the set of rules determining the necessary and sufficient conditions for limitation of a constitutionally protected right by a law to be constitutionally permissible. According to Aharon Barak (former Chief Justice, Supreme Court of Israel), there are four sub-components of proportionality which need to be satisfied [ Aharon Barak, Proportionality : Constitutional Rights and Their Limitation (Cambridge University Press 2012).], a limitation of a constitutional right will be constitutionally permissible if:

(i) it is designated for a proper purpose;

(ii) the measures undertaken to effectuate such a limitation are rationally connected to the fulfilment of that purpose;

(iii) the measures undertaken are necessary in that there are no alternative measures that may similarly achieve that same purpose with a lesser degree of limitation; and finally

(iv) there needs to be a proper relation (“proportionality stricto sensu” or “balancing”) between the importance of achieving the proper purpose and the social importance of preventing the limitation on the constitutional right.” (Emphasis supplied)

SLP (C) No. 21888 of 2012 Page 83 of 127

96. A perusal of the dictum in Modern Dental (supra) shows that for an action

which is in contravention to a fundamental right(s), to be constitutional and

proper, it must fulfil the test of proportionality. In balancing the rights and

interests of two sections of the population, the courts must be mindful of the

four sub-components of ‘proportionality’:

(i) The action must be for a proper purpose that is, it should serve a

legitimate aim;

(ii) Such action must have a rational nexus with the fulfilment of such aim

or object;

(iii) Such action must be a ‘necessity’ insofar as it should be the best

available measure with no other alternatives that may achieve the same

purpose with a lesser degree of restrictions; and

(iv) The action should not have a disproportionate impact and the benefits

must be balanced against the harm caused by the restrictive measure.

97. However, the employment of the test of proportionality is not to be done

mechanically, rather, it has to be seen by the courts whether a legislative or

executive action is of such a nature that it warrants the applicability of the

said test. In this regard, we may refer to this Court’s judgment in State of

T.N. v. National South Indian River Interlinking Agriculturist Assn.,

reported in (2021) 15 SCC 534 wherein the provision of loan waivers to

SLP (C) No. 21888 of 2012 Page 84 of 127 small and marginal farmers in the State of Tamil Nadu on the basis of land

holding size was challenged as being violative of Article 14. It was observed

therein that while non-classification arbitrariness is tested based on the

proportionality test, classification arbitrariness is supposed to be tested on

the basis of the rational nexus test. In other words, in case of the former, the

courts must examine whether the means employed to achieve the stated

objective are proportional to the same and are not arbitrarily excessive.

Whereas, in the latter situation, it is sufficient for the courts to test if the

means share a ‘nexus’ with the avowed objective. The relevant portions of

the said judgment are reproduced below:

“20. The purpose of providing a waiver of agricultural loans for farmers is to uplift the distressed farmers, who have been facing the brunt of the erratic weather conditions, low produce, and fall in the prices because of the market conditions. The objective of promoting the welfare of the farmers as a class to secure economic and social justice is well recognised by Article 38. It needs to be determined if the classification based on the extent of landholding has a rational nexus to the object sought to be achieved.

21. One of us (Dr D.Y. Chandrachud, J.) in Navtej Singh Johar v. Union of India [Navtej Singh Johar v. Union of India, (2018) 10 SCC 1 : (2019) 1 SCC (Cri) 1] accentuated the inadequacies of the two-pronged test which seeks to elevate form over substance. The over-emphasis on the “objective” of the law, instead of its “effect”—particularly when the objective is ostensible—was observed not to further the true meaning of the equality clauses under the Indian

SLP (C) No. 21888 of 2012 Page 85 of 127 Constitution. The traditional two-pronged classification test needs to be expanded for the Courts to undertake a substantive review of Article 14 violations, away from the formalistic tendency that the twin test leans towards. Within the broad parameters of the two-pronged test, we find it imperative to undertake a much more substantive review by focusing on the multi axle operation of equality and non-

discrimination.

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29. The determination of whether the classification is under- inclusive is closely related to the test that is undertaken by the Court while determining the relationship of the means to the end. This Court follows the two-pronged test to determine if there has been a violation of Article 14. The test requires the Court to determine if there is a rational nexus with the object sought to be achieved. P.N. Bhagwati, J. (as the learned Chief Justice then was) in E.P. Royappa v. State of T.N. [E.P. Royappa v. State of T.N., (1974) 4 SCC 3 : 1974 SCC (L&S) 165] held that arbitrariness of State action is sufficient to constitute a violation of Article 14. Thus, it came to be recognised that the equality doctrine as envisaged in the Constitution not only guarantees against comparative unreasonableness but also non-comparative unreasonableness. [See Tarunabh Khaitan, “Equality :

Legislative Review under Article 14” in Sujit Choudhry, Madhav Khosla, Pratap Bhanu Mehta (Eds.), The Oxford Handbook of the Indian Constitution (Oxford University Press, 2016).] This Court in Modern Dental College & Research Centre v. State of M.P. [Modern Dental College & Research Centre v. State of M.P., (2016) 7 SCC 353 : 7 SCEC 1] , invoked the proportionality test while testing the validity of the statute and rules that sought to regulate admission, fees and provided reservations for postgraduate courses in private educational institutions. In Subramanian Swamy v. Union of India [Subramanian Swamy v. Union of

SLP (C) No. 21888 of 2012 Page 86 of 127 India, (2016) 7 SCC 221 : (2016) 3 SCC (Cri) 1] , the Court used the proportionality test to determine if the offence of criminal defamation prescribed under Sections 499 and 500IPC violates the freedom of speech and expression under Section 19(1)(a). In K.S. Puttaswamy (Privacy-9J.) v. Union of India [K.S. Puttaswamy (Privacy-9J.) v. Union of India, (2017) 10 SCC 1] , a nine-Judge Bench of this Court held that the right to privacy is a fundamental right. The proportionality standard was used in the context of determining the limits that could be imposed on the right to privacy. The Constitution Bench then dealt with the proportionality test in K.S. Puttaswamy (Aadhaar-

5J.) v. Union of India [K.S. Puttaswamy (Aadhaar-

5J.) v. Union of India, (2019) 1 SCC 1] , to determine if the Aadhar scheme violated the right to privacy of an individual. Our Courts have used the proportionality standard to determine non-classificatory arbitrariness, and have used the twin test to determine if the classification is arbitrary.

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32. While non-classification arbitrariness is tested based on the proportionality test, where the means are required to be proportional to the object, classification arbitrariness is tested on the rational nexus test, where it is sufficient if the means share a “nexus” with the object. The degree of proof under the test would impact the judgment of this Court on whether the law is under-inclusive or over-inclusive. A statute is “under-inclusive” if it fails to regulate all actors who are part of the problem. It is “over-inclusive” if it regulates actors who are not a part of the problem that the statute seeks to address. The determination of under- inclusiveness and over-inclusiveness, and degree of deference to it is dependent on the relationship prong (“rational nexus” or “proportional”) of the test.

SLP (C) No. 21888 of 2012 Page 87 of 127

33. The nexus test, unlike the proportionality test, is not tailored to narrow down the means or to find the best means to achieve the object. It is sufficient if the means have a “rational nexus” to the object. Therefore, the courts show a greater degree of deference to cases where the rational nexus test is applied. A greater degree of deference is shown to classification because the legislature can classify based on the degrees of harm to further the principle of substantive equality, and such classification does not require mathematical precision. The Indian courts do not apply the proportionality standard to classificatory provisions. Though the two-Judge Bench in Anuj Garg [Anuj Garg v. Hotel Assn. of India, (2008) 3 SCC 1] articulated the proportionality standard for protective discrimination on the grounds in Article 15; and Malhotra, J. in Navtej Singh Johar [Navtej Singh Johar v. Union of India, (2018) 10 SCC 1 : (2019) 1 SCC (Cri) 1] held that less deference must be allowed when the classification is based on the “innate and core trait” of an individual, this is not the case to delve into it. Since the classification in the impugned scheme is based neither on the grounds in Article 15 nor on the “innate and core trait” of an individual, it cannot be struck down on the alleged grounds of under-inclusiveness and over-inclusiveness.” (Emphasis supplied)

98. What is discernible from the judgment in River Interlinking (supra) is that

in situations where a legislative or executive action has prescribed a

restriction on fundamental rights, the courts are required to bear in mind the

following observations:

a) First, the instances of both classificatory and non-classificatory

arbitrariness infringe on the equality mandate of the Constitution

SLP (C) No. 21888 of 2012 Page 88 of 127 enshrined in Article 14 though the tests to determine the same may be

different. However, non-classificatory arbitrariness is tested on a

stricter anvil of legitimacy as it has the potential to disrupt the rights of

a larger section of the population.

b) Secondly, when the restriction is placed on the public at large without

establishing the intelligible differentia between sections of the society

on whom such restriction may be applicable, it would be a non-

classificatory limitation. Where a challenge is posed to such kinds of

restrictions on fundamental rights of the people, the courts are required

to employ the proportionality test and ensure that the measures adopted

to implement such restrictions are not disproportionate or excessive in

achieving the objective or aim identified.

c) Thirdly, in a case where the legislative or executive restricts the

fundamental rights of a specific class of persons, it would be an

instance of classificatory limitation. To examine whether such

restriction is in contravention of the constitutional mandate of equality,

the courts are required to ensure that the classification is made on

reasonable grounds and use the rational nexus test in order to determine

whether the said restriction is an appropriate measure to achieve the

objective identified.

SLP (C) No. 21888 of 2012 Page 89 of 127

d) Fourthly, it was recognised by this Court that the twin test or the

rational nexus test may suffer from the problem of elevating form over

substance if it concerns itself only with the aspect of ‘rational nexus’

between the classification and the avowed objective. It was held that

the rational nexus test must take into account the legitimacy of the

objective sought to be achieved and determine if the same affects the

classes of persons whose rights would be impeded in a manner that may

fall foul of the reasonableness requirement of Article 14. What has been

conveyed by this Court in so many words is that the objective identified

by the legislature or executive cannot be taken at face value without

any examination of the effects of the same, similar to the requirement

of the first sub-component of the proportionality test.

e) Lastly, the degree of scrutiny into the legitimacy of the objectives

sought to be achieved by a restrictive measure would differ on the basis

of the nature of the restriction and the test being used to examine the

issue of arbitrariness. This Court, speaking through D.Y Chandrachud,

J., described the tests of ‘proportionality’ and ‘rational nexus’ as those

that determine the relationship between the measure being

implemented and the objective sought to be achieved. When utilising

the proportionality test, the degree of scrutiny of the perceived effects

of the identified objective would be greater than the probing required

SLP (C) No. 21888 of 2012 Page 90 of 127 when the rational nexus test is employed. This is because the courts

show a greater degree of deference to classification. This is because the

legislature or executive can classify based on the degrees of harm to

further the principle of substantive equality, and such classification

does not require mathematical precision.

99. From a perusal of the observations of this Court in River Interlinking

(supra) read with the judgments rendered in Ashoka Smokeless (supra) and

Pallavi Refractories (supra) respectively, it is as clear as a noon day that we

are required to employ only the rational nexus test while answering the issue

whether the Interim Coal Policy created a reasonable classification between

the linked consumers of the core and non-core sectors.

b. Applicability of the rational nexus test to the case on hand

100. The respondents herein have argued that the distinction between the linked

consumers of the core and non-core sectors for the purpose of pricing of coal

cannot be termed as a reasonable classification on the anvil of Article 14. It

was the submission of the respondents who are linked industries of non-core

sector that they were at par with the linked industries of the core sector. A

single, fixed notified price was levied upon both till the time e-auction

system was brought into existence. Though a different price might have been

charged from the non-linked consumers of the non-core sector, yet the linked

SLP (C) No. 21888 of 2012 Page 91 of 127 consumers/industries of the non-core sector and the core-sector industries

were considered to be part of the same class for the purpose of pricing of

coal. Therefore, the Interim Coal Policy could not have discriminated

against the linked non-core sector industries without any rational basis or

objective.

101. The aforesaid submission is not appealing to us for the reason that the

respondents have not clarified the modalities of how the linked consumers

of the core and non-core sectors can be treated on the same footing. Except

for the solitary ground that the notified prices for the two classes of

industries have ordinarily remained the same, no other submission was

canvassed in this regard. In such a view of the matter, we are compelled to

deduce that the respondents considered the linkage system to be the common

thread between the two classes of consumers and on the strength of the same,

contended that they should be treated similarly to the linked core sector

industries.

102. We are, however, not inclined to accept the allegations of discriminatory

pricing made by the respondents on the ground that all linked

industries/consumers must be treated alike. The linkage system as described

in the aforesaid was a purely administrative decision and had no

constitutional or statutory backing. It was introduced by the Government and

SLP (C) No. 21888 of 2012 Page 92 of 127 the appellant company to ensure a steady supply of coal reserves to the core

sector and to certain industries or manufacturers of the non-core sector. The

factum of linkage vested no right in a particular industry, manufacturer or

consumer to receive a definite quantity of coal from a specific mine or

company. “Linkage” acted only as a clearance to the linked coal company

(either the appellant or one of its subsidiaries) to supply coal to a unit, subject

to the availability of the commodity as well as regulatory directives given in

respect of such unit or linked coal mine. Therefore, such system was a purely

policy decision with logistical ease as its sole objective. Such policy was

subject to the discretion of the Government and could be reversed at any

point in time. It is noteworthy that the said system was in fact rolled back by

the Government upon the introduction of the new Coal Distribution Policy,

2007. Thus, the factum of linkage cannot serve as the basis for treating the

industries of the core and non-core sectors alike.

103. In such view of the matter, we are of the considered opinion that the dictum

of this Court in Pallavi Refractories (supra) is squarely applicable to the

case in hand and we need not reiterate our observations as regards the

distinctions drawn between the core and non-core sector industries which

have been recorded in Paragraphs 77 and 78 respectively of this judgment. SLP (C) No. 21888 of 2012 Page 93 of 127

104. Further, we do not find any force in the submission of the respondent that

the 20% price increase for the linked non-core sector industries was actuated

by profit motive. The respondents had relied on Ashoka Smokeless (supra)

to argue that pricing measures taken with the motive of profiteering were

not permissible under Article 14 of the Constitution. However, the reliance

on Ashoka Smokeless (supra) is of no avail to them as the measure

impugned therein was the price determination mechanism and not the prices

itself. It was held that by adopting the e-auction process, the State had not

only abdicated its duty to ensure fair pricing but also brought into existence

a measure that ensured maximum possible price available for the coal

companies.

105. We are in agreement with the respondents to the limited extent that the

natural corollary of the e-auction system being struck down was that the

notified price system was brought back into existence. In other words, the

striking down of the e-auction system left a vacuum in respect of the process

by which prices were to be determined. This vacuum was occupied by the

notified price system at least till the time a viable policy was being evolved

by the committee formed in compliance with Ashoka Smokeless (supra).

However, we must stop here. We cannot proceed to agree with the

respondents that the effect of the judgment in Ashoka Smokeless (supra)

was that the notified prices of 2004 replaced the e-auction prices. This Court

SLP (C) No. 21888 of 2012 Page 94 of 127 is not empowered to stipulate either explicitly or implicitly, specific prices

of a particular commodity as such a decision is purely an economic one and

therefore, the prerogative of the legislature or the executive.

106. In such circumstances referred to above, we must see if the objective of the

20% price increase was legitimate or not. We have already discussed in the

aforesaid parts of this judgment that reasonable profits for the purpose of

ensuring maintenance or increase of supply of a commodity are considered

to be an object subserving the common good. According to the appellant,

the object of the Interim Coal Policy was to ensure sustainable operation,

maintenance and development of the coal mines. We find the said objective

to be legitimate in light of the increase in operational costs of the appellant

company, and one that subserves the ‘common good’ of maintaining an

adequate supply of coal in the market.

107. In view of the aforesaid reasons, we observe that the Interim Coal Policy

made a reasonable classification between the linked industries of the core

and non-core sectors and was introduced with the legitimate aim of ensuring

an adequate supply of coal in the market by reinforcing the financial

capabilities of the appellant company to sustainably operate and invest in

the production of coal. Therefore, it can be no gainsaying that the Interim

SLP (C) No. 21888 of 2012 Page 95 of 127 Coal Policy fulfilled the test of reasonable classification and hence, was not

contrary to Article 14 to this extent.

(vi) Determination of the issues framed

108. Having discussed the historical backdrop in which the Interim Coal Policy

was introduced and the constitutional and legal principles necessary to

address the issues arising in the matter on hand, we now proceed to decide

the questions framed in the foregoing.

▪ Whether the appellant had the authority to notify the Interim Coal

Policy, in terms of the dictum of this Court in Ashoka Smokeless

(supra)?

109. In Ashoka Smokeless (supra), it was held that the e-auction system, despite

having the aim of regulating the supply of coal, was in effect a price

regulation mechanism that enabled the coal companies to obtain the

maximum possible price for coal based on the market forces. This Court,

inter alia, held that the e-auction policy was illegal as the Central

Government was not empowered to regulate the prices of coal in view of the

deregulation of prices by virtue of the CCO, 2000. The said control order

brought the regulation of prices into the realm of the powers enjoyed by the

coal companies.

SLP (C) No. 21888 of 2012 Page 96 of 127

110. The respondents have only relied on the direction to the Central Government

and the coal companies in Ashoka Smokeless (supra) to constitute an expert

committee to evolve a viable policy for distribution of coal, to argue that the

appellant was not empowered to decide interim prices till the time such a

committee gave its recommendations. We find no force in the said

submission as the dictum in Ashoka Smokeless (supra) is limpid insofar as

the powers of the Central Government and coal companies respectively are

concerned. Nowhere in the judgment was any restriction placed on the

appellant company to notify prices. Even the direction for creation of an

expert committee was made to provide suggestions in respect of a viable

supply policy primarily. In continuation, the Court also granted liberty to the

Central Government along with the coal companies to evolve a viable

policy. This is evident from paragraphs 190 and 193 respectively of Ashoka

Smokeless (supra).

111. We may also look at this issue from one another angle. If we are to accept

the respondents’ contention that the appellant was not empowered to notify

interim prices in light of the direction of this Court to constitute an expert

committee, it would amount to this Court replacing the intention of the

legislature and executive to deregulate prices by way of the CCO, 2000 with

a policy decision of its own. In our considered opinion, it could not have

been the intention of this Court to override a statutory enactment as the same

SLP (C) No. 21888 of 2012 Page 97 of 127 would tantamount to an egregious case of breaching the doctrine of

separation of powers. It is a settled position of law that the courts are not

expected to substitute themselves with the appropriate decision-making

authority while finding fault with a specific process or policy along with the

reasons assigned [See: South Indian Bank Ltd. v. Naveen Mathew Philip,

reported in (2023) 17 SCC 311].

112. Thus, we have no qualms observing that this Court placed no restriction on

the appellant’s powers to regulate prices through the process of price

notification as the same was already governed by the CCO, 2000 and the

appellant was competent to notify interim prices by way of the Interim Coal

Policy.

▪ Whether the increase of 20% over and above the notified price

introduced in the Interim Coal Policy for the linked consumers of the

non-core sector was valid in terms of Article 14?

113. This issue has been discussed by us at length in the earlier parts of this

judgment. We summarise our conclusions in this regard as follows:

a) We affirm the classification made by this Court between the core sector

and non-core sector in Pallavi Refractories (supra).

b) The respondents’ submission that the factum of linkage put the linked

non-core sector industries on the same footing as the core sector

SLP (C) No. 21888 of 2012 Page 98 of 127 industries is of no avail. The linkage system was merely an

administrative policy introduced for logistical ease and steady supply.

It did not vest any rights of receipt of coal in the linked industries and

was dependent on the availability of coal and therefore, could not be a

criteria for treating industries of the core and non-core sector at par.

c) A perusal of the objective of increasing the notified prices for the linked

non-core sector consumers by 20% indicated that the appellant’s action

was not actuated by profit motive. It was a considered policy decision

to ensure fair prices for the majority of the end consumers but not at

the cost of the appellant’s financial capability to maintain an adequate

supply of coal. This Court in Sitaram Sugar (supra) had observed that

not minimum but reasonable profits were permissible provided that

such profits were associated with the objective of subserving the

common good. The avowed object of the 20% price increase was to

mitigate the increase in operational costs of the appellant company such

that it was able to sustainably operate, maintain and develop the coal

mines. In our view, these activities were essential to the maintenance

of an adequate supply of coal in the market and thus were in conformity

with the constitutional requirement of ‘common good’ enshrined in

Article 39(b).

SLP (C) No. 21888 of 2012 Page 99 of 127

d) Since the challenge to the increase in interim price was on the ground

of classificatory arbitrariness, the application of the proportionality test

was not mandated and only the test of rational nexus was sufficient to

reach a conclusion on whether the policy was arbitrary and

discriminatory. Consequently, we need not probe into the necessity and

effect of the restrictive pricing promulgated by the appellant in as much

depth as would be required by the test of proportionality. We are of the

considered view that the increase of 20% in the notified prices for the

non-core linked sector which mitigated the increase in operational costs

to the extent of 1.2% of the total increase, was a measure that fulfilled

the objective of sustainable operation, maintenance and development

of coal mines by the appellant without engaging in excessive

profiteering.

e) The respondents’ reliance on Ashoka Smokeless (supra) in this regard

is misplaced as the classification in the said judgment was held to be

unreasonable because different pricing processes were adopted for the

core and non-core sectors. The notified price system in which a fixed

price was prescribed, was continued for the core sector, however, the

non-core sector was subjected to the e-auction system in which the

price remained variable thereby making it difficult for the non-core

sector industries to form viable business strategies. It was found that

SLP (C) No. 21888 of 2012 Page 100 of 127 such drastic difference between the treatment of the two classes bore

no rational nexus with the objective of regulating the supply of coal. While we are in agreement with the application of the test of reasonable

classification in Ashoka Smokeless (supra), it is not lost upon us that

the factual backdrop of the said matter and the case on hand are very

different. Therefore, Ashoka Smokeless (supra) does not have any

applicability to the instant set of facts for the purposes of employing

the test of reasonable classification or rational nexus.

▪ Whether the respondents are entitled to refund of the 20% additional

cost?

114. Since, we have answered the questions on the issue of validity of the Interim

Coal Policy in affirmative, the issue of whether the respondents are entitled

to receive a refund of the 20% additional cost is now moot. However, we

find it apposite to observe that even if we would have found the Interim Coal

Policy to be invalid, we would have declined to order for refund of the 20%

additional amount to the respondents herein.

115. It is the case of the appellant company that the respondents herein would be

unjustly enriched if the refund of 20% additional amount is granted to them

as the respondents have not placed on record any evidence of whether they

bore the adverse cost impact or passed the same onto the end consumers of

SLP (C) No. 21888 of 2012 Page 101 of 127 their products. On the other hand, the respondents have vociferously argued

that such contention could not have been taken by the appellant during the

stage of appeal.

116. The respondents have also have relied on a plethora of judgments to argue

that the appellant was liable to refund the 20% additional amount. However,

most of these decisions pertain to the refund of the excess price levied by

the appellant under the e-auction system, which was granted by various High

Courts and this Court. In Eastern Coalfields Limited v. Tetulia Coke Plant

Private Limited and Ors., reported in (2011) 14 SCC 624, this Court

observed the following:

a) The writ petition bearing Writ Petition No. 1279 of 2005 was filed by

several industries including Ashoka Smokeless Coal India (P) Ltd. to

challenge the legality of the e-auction system introduced by the Union

of India and adopted by the appellant herein.

b) During the pendency of the said writ petition in the High Court as well

as some other writ petitions involving the same issue, the same were

transferred to this Court. Before finally disposing of the matter in

Ashoka Smokeless (supra), this Court had the occasion to decide the

interim application filed by the petitioners therein praying for a stay on

the payment of the price differential between the notified prices as they

SLP (C) No. 21888 of 2012 Page 102 of 127 stood in 2004 and the prices determined by the e-auction process

whenever they drew coal from the coal companies.

c) This Court was pleased to partially allow the same vide the interim

order dated 12.12.2005 wherein the petitioners were directed to pay

33.33% of the total price differential and furnish security/bank

guarantee for the remaining 66.66%. This was done to ensure that no

permanent harm was caused to the appellant herein provided that the e-

auction system was found to be constitutional and legal. It was also

observed that in case the writ petition is decided by this Court in favour

of the petitioners therein then the appellant herein would be liable to

refund the said 33.33% amount forthwith. The relevant paragraph of

the judgment in Domco Smokeless (supra) that states the said

directions provided in the order dated 12.12.2005 is reproduced

hereinbelow:

“15. Learned senior counsel representing the appellant drew our attention to the order dated 12th December, 2005 passed by this Court in a matter involving same controversy in the case of Ashoka Smokeless Coal Industries(P) Ltd. v. Union of India, to be specific, para 8 wherein following observations/directions were passed:— “8. It is pointed out that in respect of some entities, coal was being supplied at the notified price enhanced by 20% thereof and this would be a guide for fixing the percentage of the excess price to be paid by the petitioners. It is pointed out that enhancement of the

SLP (C) No. 21888 of 2012 Page 103 of 127 notified price only by 20% was in respect of very small consumers and in respect of Central and State Agencies and that cannot form the basis for supply of coal to the petitioners herein having a coal linkage with the coal companies. Taking note of the circumstances as a whole we feel that it would be just and proper to direct the petitioner companies/firms, having coal linkage, to pay in addition to the notified price, 33 1/3% of the enhanced price, each time they claim supply of coal to them based on the linkage and by furnishing security for the balance 66 2/3% of the enhanced price with an undertaking filed in this Court that the said part of the price will also be paid within 6 weeks of the decision of this Court in the writ petitions in case the writ petitions are decided against the petitioners. To protect the interest of the petitioners and to ensure that no permanent harm is caused to them we also think it proper to record the undertaking given on behalf of Coal India Ltd. and its subsidiaries that in case this Court upholds the challenge made by the petitioners and allows the writ petitions filed by them, the enhanced price of 33 1/3% now to be paid by the petitioners will be refunded to the petitioners within 6 weeks of the judgment of this Court with interest thereon at 12% per annum from the date of payment till the date of return to the petitioner concerned.”” (Emphasis supplied)

d) This Court took up the matter relating to the legality of e-auction

system for final hearing and disposed of the matter in Ashoka

Smokeless (supra) by declaring the e-auction system unconstitutional

on 01.12.2006. Therefore, on this date, the liability of the appellant to

refund the 33% amount of the price differential materialised. However,

SLP (C) No. 21888 of 2012 Page 104 of 127 it is apparent from the several writ petitions filed all across the country

that the appellant had not done so promptly and it was only after the

intervention of the courts that the appellant refunded the said amount.

e) In Tetulia Coke (supra), this Court held that the principle of unjust

enrichment raised by the appellant had no application to the case of

refund of 33.33% amount on two accounts:

o First, the coal company had not raised the argument of unjust

enrichment before the court of first instance, that is the single

judge of the High Court. Further, the said argument was not even

pleaded in the memorandum of appeal before this Court and was

introduced only at the argument stage.

o Secondly, the refund prayed for was for excess price paid by the

petitioners therein and not in the nature of a tax or duty refund.

Therefore, principally, a plea of unjust enrichment could not be

held to be maintainable. It was also held that the plea of unjust

enrichment could not override the requirement of law to refund

monies to the parties from whom the excess amount has been

realised if it is found that the law, in consequence of which such

monies were collected, is invalid.

SLP (C) No. 21888 of 2012 Page 105 of 127 117. For the aforesaid reasons, this Court in Tetulia Coke (supra) granted the

request for refund of the 33% amount collected in excess during the

operation of the e-auction system. A similar line of reasoning was followed

in several other judgments referred to by the respondent before this Court,

to argue that the refund of 20% additional price collected by virtue of the

Interim Coal Policy ought to be granted.

118. In this regard, the respondents relied on a judgment of the High Court at

Patna in Maa Mundeshwari Carbon (P) Ltd. v. Central Coalfields Ltd.,

reported in 2010 SCC OnLine Pat 2674 wherein it was held that there was

no cogent or valid explanation for charging the 20% excess amount over and

above the prices notified in 2004, for the period prior to the introduction of

the New Coal Distribution Policy. It was further observed that the 20% price

hike was an innovation on part of the appellant herein to illegally

compensate themselves for the outlay which they had to make by refunding

33.33% of the price differential paid by the private industries during the e-

auction era.

119. We find ourselves not in agreement with the reasoning assigned by the High

Court in Maa Mundeshwari (supra) as the same was not substantiated by

the single judge therein. In our opinion, the single judge mechanically stated

that there was a lack of valid explanation without properly considering the

SLP (C) No. 21888 of 2012 Page 106 of 127 objective of the Interim Coal Policy, the context in which it was introduced

and the dictum of this Court in Ashoka Smokless (supra) and Pallavi

Refractories (supra). It is due to a superficial study of the policy objectives

and its effects that perhaps the argument of mala fide off-setting of

compensation impressed upon the bench. Therefore, the respondents’

reliance on Maa Mundeshwari (supra) is of no avail to them in the case on

hand.

120. In Domco Smokeless (supra), this Court was seized with the issue of

whether the coal company therein was in contempt of the High Court’s order

dated 22.09.2008 in Writ Petition (C) No. 3040 of 2005 which directed the

coal company to refund the excess price charged during the period running

from January, 2005 till October, 2007. It was also the case of the petitioner

therein that the refund for the period between 01.01.2007 to March 2008

remained pending. It is pertinent to note that this period comprises the

interim period before the introduction of the New Coal Distribution Policy

for which the Interim Coal Policy was applicable.

121. The factual and legal findings in Domco Smokeless (supra) are summarised

as follows for better exposition of law:

a) Admittedly, the Writ Petition (C) No. 3040 of 2005 was filed by the

petitioner therein to pray for grant of refund of the excess price

SLP (C) No. 21888 of 2012 Page 107 of 127 collected by the M/s. Bharat Coking Coal Ltd. under the e-auction

policy, in terms of the interim order dated 12.12.2005 in Ashoka

Smokeless (supra). The relevant findings in the said order are

reproduced in paragraph 15 of Domco Smokeless (supra) and

paragraph 116(c) of this judgment.

b) In the Writ Petition (C) No. 3040 of 2005, the petitioner therein filed

the Interlocutory Application No. 4 of 2008 seeking a direction to

refund the excess price paid over and above the notified price for the

period between January, 2005 to October, 2007 along with 12% interest

per annum. It is worth noting that this period includes the interim period

after the striking down of the e-auction system on 01.12.2006 and prior

to the introduction of the New Coal Distribution Policy (finally brought

into effect from March 2008).

c) Interestingly, the single judge of the High Court of Jharkhand allowed

the Interlocutory Application No. 4 of 2008 vide the order dated

22.08.2008, without going into the merits of the validity of the Interim

Coal Policy and relied only on the undertaking provided by the learned

Solicitor General of India in Somal Pipes (P) Ltd. v. Coal India Ltd.,

reported in (2009) 16 SCC 721 wherein this Court vide the order dated

30.10.2007 directed for refund on the basis of the said undertaking of

the Solicitor General. A perusal of the order dated 30.10.2007 indicates

SLP (C) No. 21888 of 2012 Page 108 of 127 that no period was stipulated by this Court while directing for refund,

nor was any period mentioned by the Solicitor General according to the

undertaking as recorded by the Court therein. The order dated

30.10.2007 in Somal Pipes (supra) is reproduced below:

“1. Let the amount deposited by Coal India Ltd. be invested on a short-term fixed deposit for sixty days.

2. It is stated by the learned Solicitor General that Mr A.P. Singh, General Manager (Sales), CCL, has not been able to appear in Court today as his father has expired. His personal appearance is exempted. The learned Solicitor General appearing on behalf of the alleged contemnors tenders an unqualified apology on their behalf. The learned Solicitor General does not press the other IAs. He also does not press the other contentions raised in the affidavits of the respective alleged contemnors. It is submitted by the learned Solicitor General that the amount paid by the petitioners, in excess of the notified price shall be refunded to them upon verification of the documents which may be submitted in that behalf.

3. We, while accepting the apology tendered by the alleged contemnors, direct as under:

(i) The petitioners shall furnish all documents to the learned Advocates-on-Record of the respondents, showing the actual payments made to any of the subsidiaries of Coal India Ltd. and the difference between the amount paid and the amount notified by 12-11-2007.

(ii) The documents furnished by the petitioners shall be verified by the officers of the coal companies concerned within four weeks thereafter.

SLP (C) No. 21888 of 2012 Page 109 of 127 (iii) In case of any difference, the learned counsel would deliberate upon the matter so as to enable them to come out with an accepted solution.

(iv) The bank guarantee furnished by the petitioners shall stand discharged.

In view of the aforementioned directions, personal appearance of the alleged contemnors is dispensed with till further orders.

4. Post this matter for further orders, if any, on 8-1-2008.” (Emphasis supplied)

d) Despite the absence of the period for which the undertaking was

provided, the single judge proceeded to grant refund to the petitioner in

Writ Petition (C) No. 3040 of 2005 for the period covered by the

Interim Coal Policy. When M/s Bharat Coking Coal Ltd. did not make

payments towards the refund granted in the order dated 22.08.2008, the

petitioner therein filed the Cont. Case (Civil) No. 247 of 2010 before

the High Court.

e) While adjudicating the said contempt case, the High Court of

Jharkhand vide order dated 29.05.2010 directed the coal companies to

refund the excess amount charged during the period mentioned in the

order dated 22.08.2008 including the period covered by the Interim

Coal Policy on the ground that a similar issue was addressed by the

High Court at Patna in Maa Mundeshwari (supra) by granting refund

of the 20% excess price collected by the coal companies. SLP (C) No. 21888 of 2012 Page 110 of 127

f) The order dated 29.05.2010 was challenged by the concerned coal

company before this Court in SLP (Civil) No. 21019 of 2010 with the

cause title M/s. Bharat Coking Coal Ltd. v. M/s. Domco Smokeless

Fuels Pvt. Ltd. In the order dated 09.09.2010, this Court gave a short

order wherein it found fit to not interfere with the proceedings before

the High Court. The said order is reproduced below:

“In the order passed, the High Court had held that in the facts and circumstances of the present case, a prima facie case was made out for initiation of the contempt proceeding but instead of proceeding further, the High Court thought it appropriate to issue a direction to the petitioners herein to refund the amount collected in excess of the notified price together with interest. Having heard the learned counsel appearing for the parties and in the peculiar facts and circumstances of the present case, we do not find any reason to interfere with the impugned order and dispose of the Special Leave Petition without expressing any opinion on the merit of the case. The Special Leave Petition, is accordingly, dismissed.”

g) Shortly thereafter, the petitioners therein filed another Cont. Case

(Civil) No. 403 of 2011 to remedy the non-compliance by the coal

companies of the orders dated 22.08.2008 and 29.05.2010. This

contempt case was dismissed by the High Court. As a result, the

petitioners filed an appeal before this Court in Domco Smokeless

(supra).

SLP (C) No. 21888 of 2012 Page 111 of 127 h) This Court noted that for the period between 12.12.2005 to 01.12.2006,

the excess amount had been refunded by the coal companies and only

the issue as regards the interest payable on the refunded amount

survived in respect of the said period.

i) As regards the question of refund for the remaining period till March

2008, the learned Bench in Domco Smokeless (supra) was not inclined

to agree with the submission canvassed by the coal companies that the

validity of the 20% increase over and above the notified price was

under challenge before a different Bench of this Court in SLP (Civil)

No. 21888 of 2012. It was held that the claim of the petitioner therein

for refund of excess amounts charged during the period between

01.01.2007 and March 2008 stood concluded with the rejection of the

SLP (Civil) No. 21019 of 2010 as the issue inter se the parties came to

be decided by this Court’s order dated 09.09.2010.

j) We find ourselves to be in agreement with the findings of the learned

Bench in respect of the dispute regarding the interest component.

Therefore, we need not go into the discussion as regards the percentage

of interest to be charged.

122. However, with all due deference and humility at our command, we find it

difficult to agree with the grant of refund for the period covering the Interim

SLP (C) No. 21888 of 2012 Page 112 of 127 Coal Policy because another court that is, another bench was already in

seisin of the larger question regarding validity of the said policy and had

passed the order dated 09.08.2012 in favour of the appellants herein wherein

a stay had been granted in respect of the directions of the High Court for

payment of refund.

123. As regards the argument of unjust enrichment raised by the appellant herein,

we are conscious of the fact that this Court in Tetulia Coke (supra), SJ Coke

(supra) and Horra Coke (supra) respectively has rejected the same on the

basis of the reasons provided in Tetulia Coke (supra) which have been

discussed in paragraph 116(e) of this judgment. However, a bare perusal of

the factual background in which the argument of unjust enrichment was

rejected in the aforesaid decisions indicates that there is a significant

difference between the circumstances prevailing in those cases and the case

in hand.

124. In Tetulia Coke (supra), SJ Coke (supra) and Horra Coke (supra) and other

similar judgments, the petitioners therein were demanding a refund of the

33.33% of the excess amount paid by them for drawing coal under the e-

auction system. However, it is worth noting that this excess amount was not

paid by them to the coal companies in the normal course of transaction,

rather it was paid in compliance of the direction of this Court in its interim

SLP (C) No. 21888 of 2012 Page 113 of 127 order dated 12.12.2005 during the pendency of Ashoka Smokeless (supra)

along with an undertaking that the remaining 66.66% amount would be paid

by them in the event the e-auction system was held to be constitutional. In

such circumstances, we are of the opinion that the possibility of passing on

the adverse cost impact to the consumers from the date on which coal was

purchased by the e-auction process, seems unlikely, though not impossible.

125. On the other hand, the excess amount to the tune of 20% of the notified price

has been paid by the respondents herein to the coal companies in the normal

course of transaction and from the date on which they purchased coal under

the Interim Coal Policy. Since the cost impact was in the nature of normal

course of business, it is most likely that the respondents might have passed

the same onto the end consumers. Such apprehension could have very well

been addressed by the respondents by providing verified documents of sales

made during the time period in which the Interim Coal Policy was in

existence. However, the same was not done for reasons best known to them.

In such a case, we do not find the appellant’s apprehensions of unjust

enrichment to be misplaced.

126. This Court in Tetulia Coke (supra), SJ Coke (supra) and Horra Coke

(supra) respectively also rejected the argument of unjust enrichment on the

ground that it was not raised before the court of first instance and was not

SLP (C) No. 21888 of 2012 Page 114 of 127 pleaded even in the memorandum of appeal. This reasoning has been used

by the respondents herein to argue that the plea of unjust enrichment was

taken at a belated stage even in the case at hand and therefore, deserves to

be dismissed.

127. However, we do not agree with the respondents’ submission in this regard.

We are in fact dismayed to see that the division bench of the High Court

dealt with the issue of refund at great length but chose to dismiss the plea of

unjust enrichment raised by the appellant with absolutely no reasoning,

despite the fact that both the submissions were made by the parties at a

belated stage, that is during the stage of appeal. If we are to agree with the

reasons of rejection of a plea given in Tetulia Coke (supra), SJ Coke (supra)

and Horra Coke (supra) to only dismiss the belated plea of unjust

enrichment, then analogously, we must also reject the request of refund

made by the respondents herein. If we reject only one out of the two

submissions made belatedly, then it would be a travesty of procedural

justice. Considering that we are already in seisin of the issue of refund, we

find ourselves compelled to give the argument of unjust enrichment equal

weightage.

128. In this regard, we may refer to the judgment delivered in Mafatlal Industries

Ltd. v. Union of India, reported in (1997) 5 SCC 536 wherein the concept

SLP (C) No. 21888 of 2012 Page 115 of 127 of ‘unjust enrichment’ in relation to transactions between the State and

private parties or levies imposed by the State, was discussed by this Court.

129. The High Court, while dealing with Mafatlal (supra) made no observations

as regards the applicability of the concept of unjust enrichment and

dismissed the argument of the appellant in a mechanical and non-speaking

manner. Therefore, we find it apposite to refer to the same in great detail to

determine whether the plea of unjust enrichment holds any water.

130. The observations made in paragraph 83 and 308 of Mafatlal (supra) are

summarized below:

a) The general principle of unjust enrichment requires a three-pronged

determination: first, that a party has been enriched upon receipt of a

benefit; secondly, such enrichment is at the expense of the other party;

and lastly, that the retention of enrichment is unjust. Only when these

three requisites are satisfied that a case for restitution of benefit is made

out.

b) In the context of a refund, the party who is seeking the refund has to

establish that it has not passed on the burden of the duty or similarly,

the adverse cost impact to a third party. The burden of proof in this

regard is necessarily on the person demanding the refund. If it is

SLP (C) No. 21888 of 2012 Page 116 of 127 established that the burden of a levy or an adverse cost impact was

already transferred to a third party, then the refund cannot be granted.

c) It was recognized that if the burden of a duty is passed onto a third

party, then the monies in possession of the State which are sought to be

reclaimed by the person seeking refund, do not belong to either the

State or such person asking for refund. It is the third party who is

suffering the loss caused by the burden of duty or adverse cost impact.

However, it may not always be possible to restore such third parties to

the position in which they were prior to the shifting of burden on them.

d) In such cases also, it cannot be said that the State, by retaining the

monies and not refunding the same to the person seeking refund, is

getting enriched unjustly. It was held by this Court that the concept of

unjust enrichment is not applicable on the State which is in position

of parens patrea. In the event that the monies in question are unable to

be restored to the third party that actually suffered the loss, it would be

better for the State to retain the same even if it does not belong to it.

This is because the State is obligated to use such monies for public

purposes as against the party seeking refund, for whom such monies

would only be a windfall. Therefore, in no circumstance was it possible

to prefer the party seeking refund over the State for the purpose of

retaining the monies lawfully belonging to a third party.

SLP (C) No. 21888 of 2012 Page 117 of 127 The relevant portion of the judgment in Mafatlal (supra) is reproduced

below:

“83. We are also of the respectful opinion that Kanhaiya Lal [1959 SCR 1350 : AIR 1959 SC 135 : (1958) 9 STC 747] is not right in saying that the defence of spending away the amount of tax collected under an unconstitutional law is not a good defence to a claim for refund. We think it is, subject to this rider : Where the petitioner-plaintiff alleges and establishes that he has not passed on the burden of the duty to others, his claim for refund may not be refused. In other words, if he is not able to allege and establish that he has not passed on the burden to others, his claim for refund will be rejected whether such a claim is made in a suit or a writ petition. It is a case of balancing public interest vis-à-vis private interest. Where the petitioner-plaintiff has not himself suffered any loss or prejudice (having passed on the burden of the duty to others), there is no justice or equity in refunding the tax (collected without the authority of law) to him merely because he paid it to the State. It would be a windfall to him. As against it, by refusing refund, the monies would continue to be with the State and available for public purposes. The money really belongs to a third party — neither to the petitioner/plaintiff nor to the State — and to such third party it must go. But where it cannot be so done, it is better that it is retained by the State. By any standard of reasonableness, it is difficult to prefer the petitioner-plaintiff over the State. Taxes are necessary for running the State and for various public purposes and this is the view taken in all jurisdictions. It has also been emphasised by this Court in D. Cawasji [(1975) 1 SCC 636 : 1975 SCC (Tax) 172 : (1975) 2 SCR 511] wherein Mathew, J. not only pointed out the irrational and unjust consequences flowing from the holding in Bhailal Bhai [(1964) 6 SCR 261 : AIR 1964 SC 1006 :

(1964) 15 STC 450] and Aluminium Industries [(1965) 16 STC 689 : 1965 Ker LT 517 (SC)] but also pointed out the

SLP (C) No. 21888 of 2012 Page 118 of 127 adverse impact on public interest resulting from the holding that expending the taxes collected by the State is not a valid defence. (See paras 48 and 49). This would not be a case of unjust enrichment of the State, as suggested by the petitioners-appellants. The very idea of “unjust enrichment” is inappropriate in the case of the State, which is in position of parens patrea, as held in Charan Lal Sahu v. Union of India [(1990) 1 SCC 613] (SCC at p. 649). And even if such a concept is tenable, even then, it should be noticed that the State is not being enriched at the expense of the petitioner-

plaintiff but at someone else's expense who is not the petitioner-plaintiff. As rightly explained by Saikia, J. in Mahabir Kishore v. State of M.P. [(1989) 4 SCC 1, 8 (para

11) : (1989) 3 SCR 596] , “the principle of unjust enrichment requires — first that the defendant has been ‘enriched’ by the receipt of a ‘benefit’; secondly, that this enrichment is ‘at the expense of the plaintiff’; and thirdly, that the retention of the enrichment be unjust. This justifies restitution.” We agree with the holding in Air Canada [(1989) 59 DLR (4th) 161, Can SC] (quoting Professor George C. Palmer) that in such a case, “it seems preferable to leave the enrichment with the tax authority instead of putting the judicial machinery in motion for the purpose of shifting the same enrichment to the taxpayer”. […]”

---xxx---

308. It is open to the court to deny the equitable remedy of refund (restitution) in such cases. The attempt of persons who have passed on the liability in claiming refund is only to strike at a bargain — to make a fortune at the expense of innumerable unidentifiable consumers. Such persons have suffered no loss. On the other hand, if the State is allowed to retain the amount, it will be available to the community at large and could be made use of for public purposes. On this basis as well, the denial of refund or restitution is valid. There is nothing abhorrent or against public policy if refund or restitution is withheld in such a situation. It should also be

SLP (C) No. 21888 of 2012 Page 119 of 127 stated that in cases of indirect levy of tax which was passed on, this Court has negatived the claim for refund in a few cases, mentioned in para 300 (supra) […].

(Emphasis supplied)

131. What is discernible from the aforesaid exposition of law is that where there

is an apprehension that the party who is seeking refund may have passed the

adverse cost impact or burden of loss onto a third party, then in such cases,

no refund ought to be granted. In such cases, the onus is on the State to retain

such monies and use the same for public purposes in its role as parens

patrea.

132. However, before we reach a conclusion as regards the plea of unjust

enrichment, we must satisfy ourselves whether the understanding of the said

plea in Tetulia Coke (supra), SJ Coke (supra) and Horra Coke (supra)

respectively is correct or not. It was held in Tetulia Coke (supra) that the

plea of unjust enrichment was not maintainable in cases of refund of excess

price charged and that the same was applicable only in cases where the

refund sought was of a wrongful levy of tax, duty or cess.

133. With all humility at our command, we disagree with the aforesaid reason.

While we are conscious of the fact that the question of unjust enrichment

due to refund was discussed in Mafatlal (supra) in the context of the levy of

a duty, yet such difference of fact does not incapacitate the courts from

SLP (C) No. 21888 of 2012 Page 120 of 127 applying the principles expounded in the said judgment to other cases of

retaining of monies by the State.

134. The principles of unjust enrichment are of general application and it is

incumbent upon the courts to not to allow someone a benefit that is not due

to them. This is evident from the this Court’s judgment in State of M.P. v.

Vyankatlal, reported in (1985) 2 SCC 544, wherein the State of Madhya

Pradesh had fixed the supply price of sugar higher than the ex-factory price.

The difference between the two prices was supposed to be routed to the

Madhya Bharat Government Sugar Fund with the purported purpose of

augmenting the production of sugar. The refund of such difference between

the two prices was claimed by sugar factories on the ground that the recovery

of additional price was done to augment general revenues of the State and

that the State had no legislative competence to fix additional prices for the

purposes of a Sugar Fund. This Court agreed with the sugar factories and

held the fixation of the additional price to be invalid. However, on the

question of refund, it was observed by the Court that since the burden of the

additional price was shifted to the end consumer, no refund was required to

be granted to the sugar factories.

The relevant paragraphs of the said judgment are reproduced below:

“14. The principles laid down in the aforesaid cases were based on the specific provisions in those Acts but the same

SLP (C) No. 21888 of 2012 Page 121 of 127 principles can safely be applied to the facts of the present case inasmuch as in the present case also the respondents had not to pay the amount from their coffers. The burden of paying the amount in question was transferred by the respondents to the purchasers and, therefore, they were not entitled to get a refund. Only the persons on whom lay the ultimate burden to pay the amount would be entitled to get a refund of the same. The amount deposited towards the Fund was to be utilised for the development of sugarcane. If it is not possible to identify the persons on whom had the burden been placed for payment towards the Fund, the amount of the Fund can be utilised by the Government for the purpose for which the Fund was created, namely, development of sugarcane. There is no question of refunding the amount to the respondents who had not eventually paid the amount towards the Fund. Doing so would virtually amount to allow the respondents unjust enrichment.” (Emphasis supplied)

135. In the case on hand, the respondents did not provide any evidence,

declaration or undertaking that they had not passed the burden of loss onto

the end consumers before either the learned Single Judge or the Division

Bench of the High Court. It is only at the stage of second appeal that they

have sought to rebut the burden of proof in this regard despite raising the

said plea before the Division Bench. It is trite law that generally, parties are

not allowed to introduce new documents in a second appeal because at this

stage, the focus is on questions of law rather than on new evidence. While

we do not approve of the conduct of the respondents in not adducing relevant

evidence before the High Court when they first prayed for the relief of

SLP (C) No. 21888 of 2012 Page 122 of 127 refund, yet we may exercise our discretion and allow such additional

documents for the purpose of properly addressing this issue.

136. The appellant company in its rejoinder, has further submitted that the

additional documents brought on the record do not show the complete set of

accounts with all relevant bills for the period annexed thereto. It is the case

of the appellant that even the incomplete documents so submitted are not

valid as the bills enclosed have not been certified by any authorised person

and they do not carry printed serial numbers to justify their genuineness.

137. Upon a perusal of the additional documents provided by the respondents, we

find that the CA certificates have been provided only in respect of the

respondent nos. 1, 8, 9, 10, 11, 13, 14 and 16. As regards the bills attached,

they have been provided only by respondent nos. 11 and 13, that too only

nine and ten bills respectively. In our considered opinion, we cannot rely

upon CA certificates of the balance sheets from the relevant period of time

unless the same are bolstered by complete and irrefutable evidence. The

burden of proof for showing that the excess amount has not been passed onto

the end consumers, could have been satisfied only when the respondents

brought on the record, a detailed description of all the transactions against

which they wanted refund. Such demand ought to have been supported by

the bills of all the transactions for which refund was sought.

SLP (C) No. 21888 of 2012 Page 123 of 127

138. When adjudicating questions of refunds to be made by the State or its

instrumentalities, we must bear in mind that such refund will be granted

from public money. Therefore, the relief of refund must be provided only

when the same is corroborated by complete and irrefutable evidence. In the

present case, only eight out of twenty-three respondents have placed

additional documents before us. Unfortunately, such documents are also

incomplete and do not evoke confidence in their veracity. In such

circumstances, we are unable to place reliance on the additional documents

put forth by the respondents.

139. Therefore, in view of the dictum of this Court in Mafatlal (supra), we find

merit in the submission canvassed by the appellant company.

140. We may, with a view to obviate any confusion, also reiterate that since the

refund in terms of this Court’s judgments in Tetulia Coke (supra), SJ Coke

(supra) and Horra Coke (supra) is not applicable to the case at hand, there

is no occasion for us to deal with the issue of interest to be charged

thereupon. Therefore, we do not touch upon the observations made by this

Court in Domco (supra) at this point in that respect.

141. Before we part with the judgment, we must address a short but important

fact brought to our notice by the respondents. It was brought to our attention

that the learned Solicitor General had given an undertaking to this Court

SLP (C) No. 21888 of 2012 Page 124 of 127 when it was hearing the matter in Somal Pipes (supra) wherein he had stated

that the refund of the excess amount charged for sale of coal prior to the

notification of prices on 12.11.2007 would be granted provided that the

parties seeking refund furnished the documents required by the appellant

company for verification of purchase. As the period during which the

Interim Coal Policy was in existence, that is 15.12.2006 to 31.03.2008, was

included in such undertaking, the respondents herein have requested for

refund.

142. We are of the view that such undertaking would hold good in the scenario

where the validity of the Interim Coal Policy was not brought into dispute.

Once the respondents herein filed the writ petition impugning the interim

price determined by the appellant, the whole policy became sub-judice and

the question of refund became contingent on the result of the litigation. Due

to these developments, the undertaking of the learned Solicitor General

paled into insignificance for the period between 15.12.2006 to 31.03.2008.

Such undertaking, therefore, vests no right in the respondents to receive

refund.

143. In such view of the matter, we are of the considered opinion that no refund

could have been granted to the respondents herein even if we had declared

SLP (C) No. 21888 of 2012 Page 125 of 127 the Interim Coal Policy to be invalid. However, the said question is now

moot.

E. CONCLUSION

144. For all the foregoing reasons, we have reached the conclusion that the High

Court committed an egregious error in passing the impugned judgment. We

are left with no other option but to set aside the impugned judgment and

order dated 04.04.2012 passed by the High Court. In the result, the appeal

succeeds and is hereby allowed.

145. We find that the question of validity of the Interim Coal Policy was

important to be addressed, therefore, we allow the I.A. No. 1 of 2015.

146. For the reasons discussed in the foregoing, we find the Interim Coal Policy

to be valid. As a consequence, the request of refund by the respondents’ is

dismissed.

147. The transfer cases tagged herewith are disposed of in terms of this judgment.

SLP (C) No. 21888 of 2012 Page 126 of 127

148. Pending application(s), if any, are disposed of.

…………………………………J. (J.B. PARDIWALA)

………………………………….J. (R. MAHADEVAN)

New Delhi.

12th September, 2025.

SLP (C) No. 21888 of 2012 Page 127 of 127