2021 INSC 0550
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION 
CIVIL APPEAL NOS. 5823­5824  OF 2021
[Arising out of SLP(C) Nos. 9924­9925 of 2019]
PUNJAB STATE POWER CORPORATION
LIMITED AND ANOTHER       ...APPELLANT(S)
VERSUS
EMTA COAL LIMITED    ...RESPONDENT(S)
WITH
CIVIL APPEAL NOS. 5825­5826  OF 2021
[Arising out of SLP(C) Nos.14384­14385 of 2021]
DBL­VPR CONSORTIUM THROUGH 
AUTHORISED REPRESENTATIVE        ...APPELLANT(S)
VERSUS
EMTA COAL LIMITED
AND OTHERS    ...RESPONDENT(S)
J U D G M E N T
B.R. GAVAI, J.
1

1. Leave granted.
2. A short question relating to interpretation of Section 11 of
the   Coal   Mines   (Special   Provisions)   Act,   2015   (hereinafter
referred   to   as   the   “said   Act”)   which   is   an   outcome   of   the
judgment of this Court in the case of  Manohar Lal Sharma v.
Principal   Secretary   and   Others 1
  (hereinafter   referred   to   as
“ Manohar Lal Sharma­I”)  and an ancillary question pertaining
to   scope   of   judicial   review   of   an   administrative   action   of   the
State Authority arise for consideration in these appeals.
3. These   appeals   challenge   the   judgment   and   order   passed
by the Division Bench of the High Court of Punjab and Haryana
dated   25 th
  January   2019,   thereby   allowing   the   civil   writ
petitions   being   CWP   Nos.   10055   and   16245   of   2018,   filed   by
the   respondent   herein­EMTA  Coal  Limited (hereinafter  referred
to as “EMTA”) and holding that the respondent herein will have
the   first   right   of   refusal   in   the   matter   of   lending   of   Mining
Lease.
1 (2014) 9 SCC 516
2

4. The facts in the present case are  not in dispute,   which are
taken from appeals arising out of SLP(C) Nos. 9924­25 of 2019.
5. The Punjab State Electricity Board (hereinafter referred to
as   the   “PSEB”)   which   is   now   known   as   Punjab   State   Power
Corporation   Limited   (hereinafter   referred   to   as   the   “PSPCL”),
was proposed to be allotted Captive Coal Mines by the Union of
India.   On   16 th
  February   1999,   PSEB   issued   a   tender,   thereby
inviting   bids   for   the   purpose   of   development   of   Captive   Coal
Mines.   In   the   said   bid,   opened   on   9 th
  February   2000,   the
respondent­EMTA   emerged   successful.   Accordingly,   an
agreement   was   entered   into   between   PSEB   and   EMTA   on   5 th
May   2000,   thereby   creating   a   Joint   Venture   Company   called
Panem Coal Mines Limited (hereinafter referred to as “Panem”).
The said agreement provided the rights for mining of coal from
the   Coal   Mines,   transporting   and   delivery   of   it,   wholly   and
exclusively   to   PSEB.     Since   EMTA   being   a   partnership   firm
could   not   have   been   a   shareholder   of   the   Joint   Venture
Company,   a   follow   up   Joint   Venture   Agreement   was   entered
into   on   21 st
  March   2001   between   PSEB,   EMTA   and   the   three
3

partners of EMTA, incorporating the same terms and conditions
as were found in the earlier agreement dated 5 th
 May 2000. The
same was intimated to the Union of India by PSEB. Thereafter
on 26 th
  December  2001, Union  of India  allotted a Captive Coal
Block   being   Pachhwara   (Central   Block)   Coal   Mine   (hereinafter
referred   to   as   “Pachhwara   Coal   Block”)   in   the   State   of
Jharkhand   to   PSEB.     On   22 nd
  February   2002,   Union   of   India
notified   the   supply   of   coal   from   the   Pachhwara   Coal   Block   by
the   Joint   Venture   Company   (Panem)   to   the   power   stations   of
PSEB on an exclusive basis as an end use under Section 3(3)(a)
(iii) of the Coal Mines (Nationalization) Act, 1973, in the official
gazette.   On 25 th
 November 2004, a Mining Lease was executed
between   the   Government   of   Jharkhand   and   Panem   for   mining
coal   from   the   non­forest   areas   of   Pachhwara   Coal   Block.
Subsequently on 30 th
 August 2006, a Coal Purchase Agreement
was   executed   between   Panem   and   PSEB,   for   the   purpose   of
supply   and   delivery   of   the   coal   from   Pachhwara   Coal   Block   to
the   power   stations   of   PSEB.     On   6 th
  January   2007,   Mining
Lease was issued by the Government of Jharkhand in favour of
4

Panem,   for   mining   coal   even   from   the   forest   areas   of   the   Coal
Block.
6. Till 2014, there was no problem.  However, on 25 th
 August
2014,   this   Court   in   the   case   of   Manohar   Lal   Sharma­I,   held
that   the   entire   allocation   of   Coal   Blocks   made   between   1993
and   2011,   except   those   which   were   made   through   competitive
bidding,   were   invalid,   unfair,   arbitrary   and   violative   of   Article
14 of the Constitution of India.   On 24 th
  September  2014, vide
further  orders  passed in  the  case  of   Manohar  Lal  Sharma  v.
Principal Secretary and Others 2
,  this Court quashed all Coal
Block   allocations   made   by   the   Central   Government   between
1993   and   2011.     This   Court   also   accepted   the   submission   of
the   learned   Attorney   General   that   the   allottees   of   the   Coal
Blocks other  than those covered by the judgment and the four
Coal   Blocks   covered   by   the   subsequent   order,   must   pay   an
amount   of   Rs.295/­   per   metric   ton   of   coal   extracted   as   an
additional levy.   In pursuance of the judgment of this Court in
the   case   of   Manohar   Lal   Sharma­I,   the   Coal   Mines   (Special
2   (2014) 9 SCC 614
5

Provisions)   Ordinance,   2014   (“First   Ordinance”)   came   to   be
promulgated   on   21 st
  October   2014.     The   Second   Ordinance
came to be promulgated on 26 th
  December  2014.   Vide further
orders   passed   by   this   Court   in   February   2015   in   contempt
proceedings   in   the   case   of   Manohar   Lal   Sharma­I,   an
additional   levy   at   the   rate   of   Rs.295/­   per   metric   ton   was
directed to be paid by the prior allottees.  Subsequently on 30 th
March   2015,   the   said   Act   was   notified,   repealing   the   Second
Ordinance. 
7. The   Central   Government   vide   Allotment   Order   dated   31 st
March  2015,  again   allocated  Pachhwara  Captive  Coal   Block   in
favour   of   PSPCL.     As   PSPCL   was   facing   acute   shortage   of   coal
for   paddy   season,   and   closure   of   Coal   Block   had   resulted   in
sudden   loss   of   employment,   it   entered   into   a   Transitory
Agreement with EMTA on 30 th
 June 2015.  As per Clause 1.1.20
of the Transitory Agreement, the said contract was for a period
of   nine   months   or   till   Mine   Developer­cum­Operator   was
appointed by PSPCL through competitive bidding.  On 23 rd
 July
2015,   PSPCL   informed   Union   of   India   about   the   Transitory
6

Agreement.   On   31 st
  August   2015,   PSPCL   published   Notice
inviting   Global   Tender   (hereinafter   referred   to   as   the   “NIT”),
inviting   bids   for   the   appointment   of   Mine   Developer­cum­
Operator, for supply of coal.  
8. EMTA   filed   a   civil   writ   petition   being   CWP   No.   26180   of
2015   before   the   High   Court   of   Punjab   and   Haryana,   thereby
challenging   the   said   NIT.     On   10 th
  February   2016,   the   High
Court   passed   a   direction   restraining   PSPCL   from   opening   the
financial   bids   till   29 th
  February   2016.     On   1 st
  February   2018,
CWP   No.   26180   of   2015   was   dismissed   as   withdrawn   by   the
High Court on the basis of the statement made by PSPCL that it
shall   consider   the   representation­cum­claims   made   by   EMTA
and   it   shall   take   a   decision   thereon   before   finalizing   the   fresh
tender   process   for   allotment   of   Coal   Mines   at   Pachhwara.
Accordingly,   a   representation   was   made   by   EMTA   on   20 th
February 2018, which came to be rejected by PSPCL on 6 th
 April
2018.   The same was challenged by EMTA by  filing  a civil writ
petition being CWP No. 10055 of 2018 before the High Court of
Punjab and Haryana.
7

9. It   is   to   be   noted   that   in   the   meantime,   since   the   tender
process   was   held   up   due   to   various   writ   petitions,   PSPCL
passed   a   Resolution   on   30 th
  June   2017,   to   drop   the   Global
Tender   dated   31 st
  August   2015.     During   the   pendency   of   CWP
No.   10055   of   2018,   on   30 th
  April   2018,   PSPCL   issued   a   fresh
Request   For   Proposal   (RFP),   to   invite   Global   Bids   for   the
selection   of   Mine   Developer­cum­Operator   for   Pachhwara   Coal
Block through competitive reverse bidding process.     The same
was   challenged   by   EMTA   by   filing   another   civil   writ   petition
being CWP No. 16245 of 2018 before the High Court of Punjab
and   Haryana.     PSPCL   contested   the   same   by   filing   a   written
statement.     Pursuant   to   RFP   dated   30 th
  April   2018,   the   bids
were   opened   on   10 th
  August   2018.     The   lowest   bid   was
submitted   by   DBL­VPR   Consortium   who   is   the   appellant   in
appeal arising out of SLP(C) Nos. 14384­14385 of 2021.   Letter
of Award was issued in favour of the said DBL­VPR Consortium
and   a   Coal   Mining   Agreement   was   signed   on   11 th
  September
2018.     By   the   impugned   judgment   and   order   dated   25 th
8

January 2019, the High Court allowed the civil writ petitions as
aforesaid.   Being aggrieved thereby, the present appeals.
10. Shri K.V. Viswanathan, learned Senior Counsel appearing
on   behalf   of   appellant­PSPCL   submitted   that   the   High   Court
has   grossly   erred   in   holding   that   EMTA   had   a   first   right   of
refusal.     The   learned   Senior   Counsel   submitted   that   the   prior
allotment   of   the   Coal   Blocks   between   1993   and   2011   was
cancelled, since this Court had held in   Manohar Lal Sharma­
I,  that the said allotments were arbitrary, illegal and violative of
Article 14 of the Constitution.  He submitted that Section 11 of
the said Act clearly provides that it was the discretion of PSPCL
to allow a successful allottee to continue or not to continue with
the   existing   contracts,   which   were   in   existence   prior   to   the
fresh   allotment   in   relation   to   coal   mining   operation.     Shri
Viswanathan   submitted   that   only   when   the   allottee   decides   to
continue with the old contracts, the question of constitution of
novation   for   residual   term   would   arise.     The   learned   Senior
Counsel submitted that in view of sub­section (2) of Section 11
of   the   said   Act,   when   an   allottee   decides   not   to   continue   with
9

the   existing   contracts   entered   into   by   the   prior   allottees   with
third   parties,   all   such   contracts   shall   cease   to   be   enforceable
against the successful bidder or allottee in relation to Schedule
I   coal   mines   and   the   remedy   of   such   contracting   parties   shall
be   against   the   prior   allottees.     The   learned   Senior   Counsel
submitted   that   Section   16   of   the   said   Act   provides   for
compensation for land as well as for mining infrastructure.  
11. The   learned   Senior   Counsel   further   submitted   that   in
pursuance of the directions issued by this Court for payment of
Rs.295/­   per   metric   ton,   it   was   the   liability   of   EMTA   to   make
the   said   payment   amounting   to   Rs.1400   crore.     He   submitted
that   however,   EMTA   had   failed   to   make   the   said   payment
resulting   in   a   huge   loss   to   the   public   exchequer.     The   learned
Senior Counsel further submitted that the findings of the High
Court   with   regard   to   the   legitimate   expectation   of   EMTA,   are
totally   unsustainable.     The   learned   Senior   Counsel   submitted
that the legitimate expectation would not be applicable against
the   Statute.     He   further   submitted   that   PSPCL   has   taken   a
policy   decision   to   appoint   Mine   Developer­cum­Operator   by
10

competitive   bidding   process.     He   submitted   that   the   policy   is
reasonable   and   as   such,   the   legitimate   expectation   would   not
be applicable as against such a reasonable policy.  The learned
Senior Counsel relied on the judgment of this Court in the case
of  Kerala State Beverages (M and M) Corporation Limited v.
P.P. Suresh and Others 3
.
12. Shri Viswanathan further submitted that in view of Clause
12.4 of the Allotment Agreement, PSPCL was bound to appoint
a   Mine   Developer­cum­Operator   only   through   a   competitive
bidding   process.   He   submitted   that   due   to   certain   exigencies,
PSPCL   had   entered   into   a   transitory   arrangement   with   EMTA
for   a   limited   period   of   nine   months.     However,   the   same   was
disapproved  by  Union  of  India and  a Show­Cause  Notice  came
to   be   issued   to   PSPCL.   He   therefore   submitted   that
understanding   the   Clause   12.4   of   the   Allotment   Agreement   in
correct   perspective,   PSPCL   had   decided   to   issue   RFP,   inviting
Global Tenders for appointing Mine Developer­cum­Operator. 
3 (2019) 9 SCC 710
11

13. Dr.   A.M.   Singhvi,   learned   Senior   Counsel   appearing   on
behalf   of   appellant­DBL­VPR   Consortium,   also   supports   the
submissions   made   by   Shri   Viswanathan.     He   submitted   that
DBL­VPR   Consortium   had   participated   in   the   Global   Tender
and is the lowest bidder. He submitted that the High Court has
grossly   erred   in   holding   that   EMTA   had   a   right   of   first   refusal
after   the   bidding   process   was   complete   and   DBL­VPR’s   offer
was   known   to   all.     He   therefore   submitted   that   the   impugned
judgment   and   order   passed  by   the   High   Court  needs  to   be  set
aside.
14. Shri Mukul Rohatgi, learned Senior Counsel appearing on
behalf   of   respondent­EMTA   vehemently   opposed   the
submissions   made   on   behalf   of   PSPCL.     The   learned   Senior
Counsel   submitted   that   EMTA   has   made   huge   investment   by
deploying   specialized   machinery   for   the   purpose   of   mining,
construction   of   roads   to   the   Mining   Blocks   and   other
infrastructural   developments.     He   submitted   that   since   the
contract was entered into for a period of   30 years , EMTA has a
legitimate   expectation   to   continue   till   completion   of   the   said
12

period of 30 years.  He therefore submitted that the High Court
has   rightly   held   that   EMTA   had   a   legitimate   right   of   first
refusal.
15. Shri   Rohatgi   submitted   that   the   legislative   intent   behind
Section 11(1) of the said Act is to permit an existing contractor
to   continue   if  his   performance   is   found  to   be  satisfactory,   and
nothing   adverse   against   EMTA   has   been   found.     The   learned
Senior Counsel submitted that however, PSPCL, in an arbitrary
and   irrational   manner,   has   denied   the   claim   of   EMTA.     He
submitted   that   only   when   the   performance   of   the   existing
contractor   is   found   to   be   unsatisfactory   or   there   is   something
against   him,   the   allottee   would   be   entitled   to   take   recourse   to
the competitive bidding.
16. Shri Rohatgi would further submit that a similar view has
been taken by the Karnataka High Court in the case of  KPCL v.
EMTA Coal Limited and Others 4
. He submitted that aggrieved
by   the   judgment   of   the   Karnataka   High   Court,   KPCL   had
approached   this   Court.     This   Court   appointed   a   Committee   of
4 ILR 2016 Kar 4301
13

Experts to determine the price and EMTA, who was also a Mine
Developer   in   the   said   matter,   was   permitted   to   continue   with
the operations at the rates fixed by the Experts Committee.  He
further   submitted   that   from   the   letter   dated   9 th
  June   2020,
addressed by the Joint Secretary, Ministry of Coal, Government
of   India,  it   would  be  clear   that  it   is  also   the   stand  of   Union   of
India that Section 11 of the said Act prevails over Clause 12 of
the   Allotment   Agreement.   The   learned   Senior   Counsel
submitted   that   the   contention   on   behalf   of   PSPCL   that   on
account of Clause 12.4 of the Allotment Agreement, PSPCL was
bound   to   appoint   a   Mine   Developer­cum­Operator   by
competitive bidding, is unsustainable.  
17. He further submitted that no prejudice is caused to PSPCL
by   the   impugned   judgment   and   order.     He   submitted   that   the
price is now known and what has been done by the High Court
is only granting  a right of first refusal.   If EMTA is desirous to
continue,   it   will   have   to   continue   at   the   same   rate   and
therefore, no financial loss would be caused to PSPCL.  
14

18. Shri Rohatgi further submitted that in the earlier round of
litigation, the High Court had recorded the statement of PSPCL
that   if   a   representation   is   made   by   EMTA,   the   same   would   be
considered by PSPCL and a decision would be taken on merits.
He   however   submitted   that,   a   perusal   of   the   order   passed   by
PSPCL dated 6 th
 April 2018, would show that the representation
of   EMTA   has   been   decided   in   a   perfunctory   manner   without
giving any valid reasons.
19. For appreciating the rival submissions, it will be necessary
to refer to Section 11 of the said Act:­
“ 11.   Discharge   or   adoption   of   third   party
contracts   with   prior   allottees . —(1)
Notwithstanding   anything   contained   in   any   other
law   for   the   time   being   in   force,   a   successful   bidder
or   allottee,   as   the   case   may   be,   in   respect   of
Schedule   I   coal   mines,   may   elect,   to   adopt   and
continue such contracts which may be existing with
any   of   the   prior   allottees   in   relation   to   coal   mining
operations and the same shall constitute a novation
for   the   residual   term   or   residual   performance   of
such contract:
Provided   that   in   such   an   event,   the   successful
bidder or allottee or the prior allottee shall notify the
nominated   authority   to   include   the   vesting   of   any
contracts adopted by the successful bidder.
15

(2)   In   the   event   that   a   successful   bidder   or   allottee
elects   not   to   adopt   or   continue   with   existing
contracts which  had  been  entered into by  the  prior
allottees   with   third   parties,   in   that   case   all   such
contracts   which   have   not   been   adopted   or
continued   shall  cease  to   be  enforceable  against   the
successful   bidder   or   allottee   in   relation   to   the
Schedule   I   coal   mine   and   the   remedy   of   such
contracting   parties   shall   be   against   the   prior
allottees.”
20. It   will   not   be   out   of   place   to   mention   that   the   said   Act
came  to   be  enacted  in   pursuance  of   the   decision   of   this  Court
in the case of  Manohar Lal Sharma­I,  wherein this Court held
that the allotment of Coal Blocks between 1993 and 2011 was
arbitrary,   illegal   and   violative  of  Article   14  of  the   Constitution.
A plain reading of Section 11 of the said Act would reveal that it
begins with a non­obstante clause. It provides that a successful
bidder or allottee, as the case may be, in respect of Schedule I
coal   mines,   may   elect,   to   adopt   and   continue   such   contracts
which may be existing with any of the prior allottees in relation
to   coal   mining   operations   and   the   same   shall   constitute   a
novation for the residual term or residual performance of such
contract.  
16

21. The   words   “may   elect”   would   clearly   show   that   the
legislature has given complete discretion to a successful bidder
or   allottee   to   elect.     The   words   “may   elect”   would   also   mean   a
discretion not to elect.  Only in the event, a successful bidder or
allottee   decides   to   adopt   and   continue   such   contract,   which
may be existing with any of the prior allottees in relation to coal
mining   operations,   the   same   shall   constitute   a   novation   for
residual term or residual performance of such contract.   In the
event, the successful allottee does not elect to adopt or continue
such contract, there is no question of novation for residual term
or   residual   performance   of   such   contract.     Perusal   of   sub­
section (2) of Section 11 of the said Act would also make it clear
that, it provides that in the event a successful bidder or allottee
elects not to adopt or continue with the existing contract which
had   been  entered  into  by   the  prior  allottees with  third  parties,
all   such   contracts   which   have   not   been   adopted   or   continued
shall   cease   to   be   enforceable   against   the   successful   bidder   or
allottee in relation to Schedule I  coal mines and the remedy of
such contracting parties shall be against the prior allottees.   It
17

could   thus   be   seen   that   on   a   plain   reading   of   sub­sections   (1)
and   (2)   of   Section   11   of   the   said   Act,   it   is   clear   that   the
successful allottee or bidder has complete freedom to decide as
to   whether   he   desires   to   continue   or   adopt   any   such   existing
contracts in relation to coal mining operation. Only in the event
he   elects   to   adopt   or   continue   with   existing   contracts,   it   shall
constitute novation for residual term or residual performance of
such   contracts.     In   the   event   the   successful   bidder   or   allottee
elects   not   to   adopt   or   continue   with   the   existing   contracts,   all
such   contracts   shall   cease   to   be   enforceable   against   the
successful   bidder   or   allottee   in   relation   to   Schedule   I   coal
mines.     The   only   remedy   of   such   contracting   parties   shall   be
against the prior allottees.  
22. The   principle   of   giving   a   plain   and   literal   meaning   to   the
words in a Statute is well recognized for ages.  Though there are
a number of judgments, we may gainfully refer to the judgment
of this Court delivered by Das, J. as early as 1955 in the case of
Jugalkishore Saraf v. Raw Cotton Company Limited 5
:­
5   [1955] 1 SCR 1369
18

“The   cardinal   rule   of   construction   of   statutes   is   to
read   the   statute   literally,   that   is   by   giving   to   the
words used by the legislature their ordinary, natural
and   grammatical   meaning.     If,   however,   such   a
reading   leads   to   absurdity   and   the   words   are
susceptible   of   another   meaning   the   Court   may
adopt   the   same.     But   if   no   such   alternative
construction   is   possible,   the   Court   must   adopt   the
ordinary rule of literal interpretation.”
  
Though  there  are  various  authorities   on  the  said subject ,
we do not wish to burden the present judgment by reproducing
those.   In our considered view, if the words used in Section 11
of the said Act are construed in plain and literal term, they do
not   lead   to   an   absurdity   and   as   such,   the   rule   of   plain   and
literal   interpretation   will   have   to   be   followed.     We   find   that   in
case  the  interpretation  as  sought   to  be  placed  by  Shri Rohatgi
is to be accepted, it will do complete violence to the language of
Section 11 of the said Act.  If it is held that under Section 11 of
the   said   Act,   a   prior   contractor   is   entitled   to   continue   if   his
performance  is  found  to   be  satisfactory   and  if there  is  nothing
against him, then it will be providing something in Section 11 of
the said Act which the Statute has not provided for.  It will also
lead   to   making   the   words   “may   elect,   to   adopt   and   continue”
19

redundant and otiose.  It is a settled principle of law that when,
upon   a   plain   and   literal   interpretation   of   the   words   used   in   a
Statute,   the   legislative   intent   could   be   gathered,   it   is   not
permissible   to   add   words   to   the   Statute.   Equally,   such   an
interpretation which would make some terms used in a Statute
otiose or meaningless, has to be avoided.  We therefore find that
if   an   interpretation   as   sought   to   be   placed   by   EMTA   is   to   be
accepted, the same would be wholly contrary to the principle of
literal   interpretation.   There   are   number   of   authorities   in
support   of   the   said   proposition.   However,   we   refrain   from
referring to them in view of the following observations made by
this Court in a recent judgment in the case of  Ajit Mohan and
Others   v.   Legislative   Assembly   National   Capital   Territory
of Delhi and Others 6
:­
“ 239 . …..In our view if the proposition of law is not
doubted by the Court, it does not need a precedent
unless   asked   for.   If   a   question   is   raised   about   a
legal proposition, the judgment must be relatable to
that proposition ­ and not multiple judgments…..”  
6   2021 SCC OnLine SC 456
20

As   such,   the   contention   in   that   regard   is   found   to   be
without merit.
23. We   find   that   the   High   Court   has   also   clearly   understood
the said legal position with regard to language used in Section
11   of   the   said   Act.     When   considering   Section   62   of   the
Contract Act, 1872 read with Section 11 of the said Act, it has
observed   that   the   parties   to   a   contract   may   willingly   agree   to
substitute   a   new   contract   or   to   rescind   it   or   alter   it.     Having
observed this, the High Court has, however, erred in observing
that   EMTA   had   a   legitimate   expectation.     The   High   Court   has
observed thus:­
“It   could   not   therefore,   have   been   left   in   the   lurch
particularly when the same mine was re­allocated to
the   Corporation   suggestive   of   continuity.     Indeed,
the respondents were very well within their rights to
reject   the   arrangement   while   granting   a
consideration   under   Section   11   if   the   performance
of   the   petitioner   was   unsatisfactory   or   if   there   was
any   other   factor   which   the   Corporation   found
relevant   enough   to   discard   the   arrangement
altogether.”
24. We   find   that   the   reasoning   adopted   by   the   High   Court   is
totally wrong.  Merely because the Coal Mine Block was allotted
21

to PSPCL, the same could not give any vested right in favour of
EMTA,   particularly   in   view  of   the   language   used   in   Section   11
of   the   said   Act.     The   reasoning   given   by   the   High   Court   that
PSPCL   was   within   its   right   to   reject   the   arrangement   if   the
performance   of   EMTA   was   unsatisfactory   or   if   there   was   any
other   factor   which   the   Corporation   found   relevant   enough   to
discard   the   arrangement   altogether,   in   our   view,   are   totally
erroneous.
25. Having observed in earlier para that in view of Section 11
of the said Act read with Section 62 of the Contract Act, 1872,
the parties to a contract may willingly agree to substitute a new
contract or to rescind it or alter it, the High Court has erred in
forcing PSPCL to continue with the contract with EMTA, though
it was not willing to do so.
26. The   issue   with   regard   to   legitimate   expectation   has   been
recently considered by a bench of this Court to which one of us
(L.   Nageswara   Rao,   J.)   was   a   member.     After   considering
various   authorities   on   the   issue,   in   the   case   of   Kerala   State
22

Beverages   (M   and   M)   Corporation   Limtied   (supra) ,   it   was
observed thus:­
“20.   The   decision­makers'   freedom   to   change   the
policy   in   public   interest   cannot   be   fettered   by
applying   the   principle   of   substantive   legitimate
expectation. [ Findlay, In re , 1985 AC 318 : (1984) 3
WLR 1159 : (1984) 3 All ER 801 (HL)] So long as the
Government   does   not   act   in   an   arbitrary   or   in   an
unreasonable manner, the change in policy does not
call for interference by judicial review on the ground
of   a   legitimate   expectation   of   an   individual   or   a
group of individuals being defeated.”
27. Shri   Viswanathan   has   relied   on   the   judgment   of   the
Calcutta   High   Court   in   the   case   of   EMTA   Coal   Limited   and
Another   v.   West   Bengal   Power   Development   Corporation 7
.
Per   contra,   Shri   Rohatgi   has   relied   on   the   judgment   of   the
Karnataka High Court in  KPCL v. EMTA Coal Limited (supra).
W e do not desire to go into the issue of correctness of either of
the   judgments   inasmuch   as   we   are   independently   considering
the   issue   and   examining   the   correctness   of   the   judgment
impugned before us.
28. Insofar as the reliance placed by Shri Rohatgi on the letter
of   Union   of   India   dated   9 th
  January   2020   is   concerned,   there
7   (2016) 2 Cal LJ 424
23

can   be   no   doubt   that   between   Section   11   of   the   said   Act   and
Clause   12.4.1   of   the   Allotment   Agreement,   Section   11   of   the
said Act would prevail.  The question is, whether, Section 11 of
the   said  Act  mandates  the  successful  allottee  to  continue  with
the   existing   contract.       The   answer,   obviously,   is   no.     In   any
case, the claim of EMTA is not rejected by PSPCL solely on the
ground of Clause 12.4.1 of the Allotment Agreement.
29. That leaves us with the last submission of Shri Rohatgi.  It
is   his   submission   that   as   per   the   statement   made   by   PSPCL
before   the   High   Court   in   first   round   of   litigation,   it   was   to
consider   the   representation   of   EMTA   in   a   reasonable   and   just
manner.     He   however   submitted   that   the   order   dated   6 th
  April
2018, was passed by PSPCL in a totally arbitrary and irrational
manner.  
30. The   order   passed   by   PSPCL   dated   6 th
  April   2018,   is   an
order   passed   by   an   authority   of   the   State   in   exercise   of   its
executive   functions.   The   scope   of   judicial   review   of
administrative action has been well crystalised by this Court in
24

the   judgment   of   Tata   Cellular   v.   Union   of   India 8
.   The
judgment   in   the   case   of   Tata   Cellular   (supra),   has   been
subsequently followed in a number of judgments of this Court.
This   Court   in   the   case   of   Rashmi   Metaliks   Limited   and
Another   v.   Kolkata   Metropolitan   Development   Authority
and   Others 9
,   has   observed   that   the   decision   which   holds   the
field with regard to issue of judicial review of an administrative
action, is the judgment in the case of  Tata Cellular (supra),  by
a   three­Judge   Bench.     The   Court   has   held   that   the   rule   of
precedent mandates that this exposition of law be followed and
applied by  coordinate  or  co­equal  Benches and  certainly  by  all
smaller   Benches   and   subordinate   courts.     This   Court   has
further   deprecated   the   practice   of   referring   to   catena   of
judgments   following   the   said   pronouncement   of   law.     We
therefore   refrain   from   referring   to   the   subsequent   judgment,
and   reproduce   the   relevant   observations   in   Tata   Cellular
(supra),  which read thus:­
8 (1994) 6 SCC 651
9   (2013) 10 SCC 95
25

“70.   It   cannot   be   denied   that   the   principles   of
judicial   review   would   apply   to   the   exercise   of
contractual   powers   by   Government   bodies   in   order
to   prevent   arbitrariness   or   favouritism.   However,   it
must   be   clearly   stated   that   there   are   inherent
limitations   in   exercise   of   that   power   of   judicial
review.   Government is the guardian of the finances of
the   State.   It   is   expected   to   protect   the   financial
interest of the State . The right to refuse the lowest or
any   other   tender   is   always   available   to   the
Government. But, the principles laid down in Article
14 of the Constitution have to be kept in view while
accepting   or   refusing   a   tender.   There   can   be   no
question   of   infringement   of   Article   14   if   the
Government tries to get the best person or the best
quotation. The right to choose cannot be considered
to   be   an   arbitrary   power.   Of   course,   if   the   said
power   is   exercised   for   any   collateral   purpose   the
exercise of that power will be struck down.
71.   Judicial   quest   in   administrative   matters   has
been   to   find   the   right   balance   between   the
administrative discretion to decide matters whether
contractual or  political in nature or issues of social
policy;   thus   they   are   not   essentially   justiciable   and
the   need   to   remedy   any   unfairness.   Such   an
unfairness is set right by judicial review.
72.   Lord   Scarman   in   Nottinghamshire   County
Council   v.   Secretary   of   State   for   the
Environment   [1986   AC   240,   251   :   (1986)   1   All   ER
199] proclaimed:
“   ‘Judicial   review’   is   a   great   weapon   in   the
hands   of   the   judges;   but   the   judges   must
observe   the   constitutional   limits   set   by   our
parliamentary system upon the exercise of this
beneficial power.”
26

Commenting   upon   this   Michael   Supperstone   and
James   Goudie   in   their   work   Judicial   Review   (1992
Edn.) at p. 16 say:
“If anyone were prompted to dismiss this sage
warning as a mere obiter dictum from the most
radical   member   of   the   higher   judiciary   of
recent times, and therefore to be treated as an
idiosyncratic   aberration,   it   has   received   the
endorsement   of   the   Law   Lords   generally.   The
words   of   Lord   Scarman   were   echoed   by   Lord
Bridge   of   Harwich,   speaking   on   behalf   of   the
Board   when   reversing   an   interventionist
decision   of   the   New   Zealand   Court   of   Appeal
in   Butcher   v.   Petrocorp   Exploration   Ltd.   18­3­
1991.”
73.   Observance of judicial restraint is currently the
mood   in   England.   The   judicial   power   of   review   is
exercised   to   rein   in   any   unbridled   executive
functioning.   The   restraint   has   two   contemporary
manifestations.   One   is   the   ambit   of   judicial
intervention;   the   other   covers   the   scope   of
the   court's   ability   to   quash   an   administrative
decision   on   its   merits.   These   restraints   bear   the
hallmarks   of   judicial   control   over   administrative
action.
74.   Judicial   review   is  concerned   with   reviewing   not
the   merits   of   the   decision   in   support   of   which   the
application   for   judicial   review   is   made,   but   the
decision­making process itself.
75.   In   Chief   Constable   of   the   North   Wales
Police   v.   Evans   [(1982)   3   All   ER   141,   154]   Lord
Brightman said:
“Judicial review, as the words imply, is not an
appeal   from   a   decision,   but   a   review   of   the
manner in which the decision was made.
***
27

Judicial   review   is   concerned,   not   with   the
decision,   but   with   the   decision­making
process.   Unless   that   restriction   on   the   power
of   the   court   is   observed,   the   court   will   in   my
view,   under   the   guise   of   preventing   the   abuse
of power, be itself guilty of usurping power.”
In the same case Lord Hailsham commented on the
purpose   of   the   remedy   by   way   of   judicial   review
under RSC, Ord. 53 in the following terms:
“This   remedy,   vastly   increased   in   extent,   and
rendered, over a long period in recent years, of
infinitely   more   convenient   access   than   that
provided   by   the   old   prerogative   writs   and
actions for a declaration, is intended to protect
the individual against the abuse of power by a
wide   range   of   authorities,   judicial,   quasi­
judicial,   and,   as   would   originally   have   been
thought   when   I   first   practised   at   the   Bar,
administrative. It is not intended to take away
from   those   authorities   the   powers   and
discretions properly vested in them by law and
to   substitute   the   courts   as   the   bodies   making
the   decisions.   It   is   intended   to   see   that   the
relevant   authorities   use   their   powers   in   a
proper manner (p. 1160).”
In   R.   v.   Panel   on   Take­overs   and   Mergers,   ex   p
Datafin   plc   [(1987)   1   All   ER   564]   ,   Sir   John
Donaldson, M.R. commented:
“An   application   for   judicial   review   is   not   an
appeal.”
In   Lonrho   plc   v.   Secretary   of   State   for   Trade   and
Industry   [(1989) 2 All ER 609], Lord Keith said:
“Judicial   review   is   a   protection   and   not   a
weapon.”
It is thus different from an appeal. When hearing an
appeal the Court is concerned with the merits of the
decision   under   appeal.   In   Amin,   Re   [ Amin   v.   Entry
28

Clearance Officer , (1983) 2 All ER 864] , Lord Fraser
observed that:
“Judicial   review   is   concerned   not   with   the
merits   of   a   decision   but   with   the   manner   in
which   the   decision   was   made….   Judicial
review   is   entirely   different   from   an   ordinary
appeal.   It   is   made   effective   by   the   court
quashing   the   administrative   decision   without
substituting   its   own   decision,   and   is   to   be
contrasted with an appeal where the appellate
tribunal   substitutes   its   own   decision   on   the
merits for that of the administrative officer.”
76.   In   R.   v.   Panel on Take­overs and Mergers, ex p in
Guinness plc   [(1990) 1 QB 146 : (1989) 1 All ER 509]
,   Lord   Donaldson,   M.R.   referred   to   the   judicial
review jurisdiction as being supervisory or ‘longstop’
jurisdiction. Unless that restriction on the power  of
the court is observed, the court will, under the guise
of   preventing   the   abuse   of   power,   be   itself   guilty   of
usurping power.
77.   The   duty   of   the   court   is   to   confine   itself   to   the
question of legality. Its concern should be:
1.   Whether   a   decision­making   authority
exceeded its powers?
2. Committed an error of law,
3.   committed   a   breach   of   the   rules   of   natural
justice,
4.   reached   a   decision   which   no   reasonable
tribunal would have reached or,
5. abused its powers.
Therefore,   it   is   not   for   the   court   to   determine
whether   a   particular   policy   or   particular   decision
taken in the fulfilment of that policy is fair. It is only
concerned   with   the   manner   in   which   those
decisions have been taken. The extent of the duty to
act   fairly   will   vary   from   case   to   case.   Shortly   put,
the grounds upon which an administrative action is
29

subject to control by judicial review can be classified
as under:
( i )   Illegality   :   This   means   the   decision­maker
must   understand   correctly   the   law   that
regulates his decision­making power and must
give effect to it.
( ii )   Irrationality,   namely,   Wednesbury
unreasonableness.
( iii ) Procedural impropriety.
The   above   are   only   the   broad   grounds   but   it   does
not rule out addition of further grounds in course of
time.   As  a  matter   of   fact,  in   R.   v.   Secretary   of   State
for   the   Home   Department,   ex   Brind   [(1991)   1   AC
696],   Lord   Diplock   refers   specifically   to   one
development, namely, the possible recognition of the
principle   of   proportionality.   In   all   these   cases   the
test   to   be   adopted   is   that   the   court   should,
“consider   whether   something   has   gone   wrong   of   a
nature and degree which requires its intervention”.
78.   What   is  this  charming   principle   of  Wednesbury
unreasonableness?   Is   it   a   magical   formula?
In   R.   v.   Askew   [(1768)   4   Burr   2186   :   98   ER   139]   ,
Lord   Mansfield   considered   the   question   whether
mandamus should be granted against the College of
Physicians.   He   expressed   the   relevant   principles   in
two   eloquent   sentences.   They   gained   greater   value
two centuries later:
“It is true, that the judgment and discretion of
determining   upon   this   skill,   ability,   learning
and   sufficiency   to   exercise   and   practise   this
profession   is   trusted   to   the   College   of
Physicians and this Court will not take it from
them,   nor   interrupt   them   in   the   due   and
proper   exercise   of   it.   But   their   conduct   in   the
exercise   of   this   trust   thus   committed   to   them
ought to be fair, candid and unprejudiced; not
30

arbitrary,   capricious,   or   biased;   much   less,
warped by resentment, or personal dislike.”
79.   To   quote   again,   Michael   Supperstone   and
James   Goudie;   in   their   work   Judicial   Review   (1992
Edn.) it is observed at pp. 119 to 121 as under:
“The   assertion   of   a   claim   to   examine   the
reasonableness   been   done   by   a   public
authority   inevitably   led   to   differences   of
judicial   opinion   as   to   the   circumstances   in
which   the   court   should   intervene.   These
differences   of   opinion   were   resolved   in   two
landmark   cases   which   confined   the
circumstances   for   intervention   to   narrow
limits.   In   Kruse   v.   Johnson   [(1898)   2   QB   91   :
(1895­9)   All   ER   Rep   105]   a   specially
constituted   divisional   court   had   to   consider
the   validity   of   a   bye­law   made   by   a   local
authority.   In   the   leading   judgment   of   Lord
Russell   of   Killowen,   C.J.,   the   approach   to   be
adopted   by   the   court   was   set   out.   Such   bye­
laws ought to be ‘benevolently’ interpreted, and
credit   ought   to   be   given   to   those   who   have   to
administer   them   that   they   would   be
reasonably   administered.   They   could   be   held
invalid   if   unreasonable   :   Where   for   instance
bye­laws were found to be partial and unequal
in their operation as between different classes,
if they were manifestly unjust, if they disclosed
bad   faith,   or   if   they   involved   such   oppressive
or   gratuitous   interference   with   the   rights   of
citizens   as   could   find   no   justification   in   the
minds   of   reasonable   men.   Lord   Russell
emphasised that a bye­law is not unreasonable
just   because   particular   judges   might   think   it
went further than was prudent or necessary or
convenient.
31

In   1947   the   Court   of   Appeal   confirmed   a   similar
approach   for   the   review   of   executive   discretion
generally   in   Associated   Provincial   Picture   Houses
Ltd.   v.   Wednesbury Corpn   [(1948) 1 KB 223 : (1947)
2   All   ER   680]   .   This   case   was   concerned   with   a
complaint by the owners of a cinema in Wednesbury
that   it   was   unreasonable   of   the   local   authority   to
licence   performances   on   Sunday   only   subject   to   a
condition   that   ‘no   children   under   the   age   of   15
years   shall   be   admitted   to   any   entertainment
whether   accompanied   by   an   adult   or   not’.   In   an
extempore   judgment,   Lord   Greene,   M.R.   drew
attention   to   the   fact   that   the   word   ‘unreasonable’
had   often   been   used   in   a   sense   which
comprehended   different   grounds   of   review.   (At   p.
229,   where   it   was   said   that   the   dismissal   of   a
teacher   for   having   red   hair   (cited   by   Warrington,
L.J.   in   Short   v.   Poole   Corpn.   [(1926)   1   Ch   66,   91   :
1925 All ER Rep 74] , as an example of a ‘frivolous
and   foolish   reason’)   was,   in   another   sense,   taking
into   consideration   extraneous   matters,   and   might
be   so   unreasonable   that   it   could   almost   be
described   as   being   done   in   bad   faith;   see
also   R.   v.   Tower   Hamlets   London   Borough   Council,
ex p Chetnik Developments Ltd.   [1988 AC 858, 873 :
(1988) 2 WLR 654 : (1988) 1 All ER 961] (Chapter 4,
p.   73,   supra).   He   summarised   the   principles   as
follows:
‘The   Court   is   entitled   to   investigate   the   action
of   the   local   authority   with   a   view   to   seeing
whether   or   not   they   have   taken   into   account
matters   which   they   ought   not   to   have   taken
into   account,   or,   conversely,   have   refused   to
take   into   account   or   neglected   to   take   into
account   matter   which   they   ought   to   take   into
account.   Once   that   question   is   answered   in
favour   of   the   local   authority,   it   may   still   be
possible   to   say   that,   although   the   local
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authority   had   kept   within   the   four   corners   of
the matters which they ought to consider, they
have   nevertheless   come   to   a   conclusion   so
unreasonable   that   no   reasonable   authority
could   ever   have   come   to   it.   In   such   a   case,
again,   I   think   the   court   can   interfere.   The
power   of   the   court   to   interfere   in   each   case   is
not   as   an   appellate   authority   to   override   a
decision of the local authority, but as a judicial
authority   which   is   concerned,   and   concerned
only,   to   see   whether   the   local   authority   has
contravened the law by acting in excess of the
power which Parliament has confided in them.’
This   summary   by   Lord   Greene   has   been   applied   in
countless subsequent cases.
“The   modern   statement   of   the   principle   is
found   in   a   passage   in   the   speech   of   Lord
Diplock   in   Council   of   Civil   Service
Unions   v.   Minister for Civil Service   [(1985) 1 AC
374 : (1984) 3 All ER 935 : (1984) 3 WLR 1174]
:
‘By   “irrationality”   I   mean   what   can   now   be
succinctly   referred   to   as   “Wednesbury
unreasonableness”.   ( Associated   Provincial
Picture   Houses   Ltd.   v.   Wednesbury
Corpn.   [(1948) 1 KB 223 : (1947) 2 All ER 680])
It applies to a decision which is so outrageous
in   its   defiance   of   logic   or   of   accepted   moral
standards   that   no   sensible   person   who   had
applied his mind to the question to be decided
could have arrived at.’ ”
80.   At this stage,   The Supreme Court Practice , 1993,
Vol. 1, pp. 849­850, may be quoted:
“4.   Wednesbury   principle .—   A   decision   of   a
public authority will be liable to be quashed or
otherwise dealt with by an appropriate order in
judicial   review   proceedings   where   the   court
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concludes   that   the   decision   is   such   that   no
authority   properly   directing   itself   on   the
relevant law and acting  reasonably could have
reached   it.   ( Associated   Provincial   Picture
Houses   Ltd.   v.   Wednesbury   Corpn.   [(1948)   1
KB   223   :   (1947)   2   All   ER   680]   ,   per   Lord
Greene, M.R.)”
81.   Two   other   facets   of   irrationality   may   be
mentioned.
(1)   It   is   open   to   the   court   to   review   the
decision­maker's   evaluation   of   the   facts.   The
court will intervene where the facts taken as a
whole   could   not   logically   warrant   the
conclusion of the decision­maker. If the weight
of   facts   pointing   to   one   course   of   action   is
overwhelming,   then   a   decision   the   other   way,
cannot   be   upheld.   Thus,   in   Emma   Hotels
Ltd.   v.   Secretary   of   State   for
Environment   [(1980)   41   P   &   CR   255]   ,   the
Secretary   of   State   referred   to   a   number   of
factors which led him to the conclusion that a
non­resident's   bar   in   a   hotel   was   operated   in
such a way that the bar was not an incident of
the   hotel   use   for   planning   purposes,   but
constituted   a   separate   use.   The   Divisional
Court   analysed   the   factors   which   led   the
Secretary   of   State   to   that   conclusion   and,
having   done   so,   set   it   aside.   Donaldson,   L.J.
said   that   he   could   not   see   on   what   basis   the
Secretary of State had reached his conclusion.
(2)   A   decision   would   be   regarded   as
unreasonable   if   it   is   impartial   and   unequal   in
its   operation   as   between   different   classes.   On
this   basis   in   R.   v.   Barnet   London   Borough
Council,   ex   p   Johnson   [(1989)   88   LGR   73]   the
condition   imposed   by   a   local   authority
prohibiting   participation   by   those   affiliated
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with political parties at events to be held in the
authority's parks was struck down.”
31. It   could   thus   be   seen   that   while   exercising   powers   of
judicial   review,   the   Court   is   not   concerned   with   the   ultimate
decision but the decision­making process.  The limited areas in
which   the   court   can   enquire   are   as   to   whether   a   decision­
making authority has exceeded its powers, committed an error
of   law   or   committed   breach   of   principle   of   natural   justice.     It
can examine as to whether an authority has reached a decision
which   no   reasonable   Tribunal   would   have   reached   or   has
abused its powers. It is not for the court to determine whether a
particular policy or a particular decision taken in the fulfilment
of that policy is fair.   The court will examine as to whether the
decision   of   an   authority   is   vitiated   by   illegality,   irrationality   or
procedural   impropriety.     While   examining   the   question   of
irrationality,   the   court   will   be   guided   by   the   principle   of
Wednesbury.   While   applying   the   Wednesbury   principle,   the
court will examine as to whether the decision of an authority is
35

such   that   no   authority   properly   directing   itself  on   the   relevant
law and acting reasonably could have reached it.
32. Applying the aforesaid principle, it can clearly be seen that
the   decision   of   PSPCL   dated   6 th
  April   2018,   cannot   be
questioned   on   the   ground   of   illegality   or   procedural
impropriety.   The decision is taken in accordance with  Section
11   of   the   said   Act   and   after   following   the   principle   of   Natural
Justice.    The limited  area  that  would  be available for   attack is
as  to  whether  the  decision  is  hit  by  the  Wednesbury   principle.
Can it be said that the decision taken by the authority is such
that no reasonable person would have taken it?  No doubt, that
the authority has also relied on Clause 12.4.1 of the Allotment
Agreement,  however,  that  is  not  the  only  ground  on  which   the
representation   of   EMTA   is   rejected.     No   doubt,   that   while
considering   EMTA’s   representation,   PSPCL   has   referred   to
Clause   12.4.1   of   the   Allotment   Agreement   which   requires   the
coal   mines   to   be   developed   through   contractors   who   were
selected through a competitive bidding process, however, that is
not   the   only   ground   on   which   the   representation   of   EMTA   is
36

rejected.  It will be relevant to refer to the following observations
in the order passed by PSPCL dated 6 th
 April 2018:­
“Moreover,   there   is   no   reason   why   competitive
bidding process for the purposes of eliciting the best
operator be not preferred.  Needless to mention that
as   the   composition   with   respect   to   capital/revenue
investment is altogether different, hence the bidding
parameters have entirely changed.”
33. It could thus be seen that PSPCL has decided to go in for
competitive bidding process for the purpose of eliciting the best
operator.     It   has   further   noticed   that   the   composition   with
respect   to   capital/revenue   investment   is   altogether   different.
Hence,   the   bidding   parameters   have   entirely   changed.     It   has
further   referred   to   the   decision   of   this   Court   wherein   it   has
been   held   that   the   allotment   should   be   through   competitive
bidding process.  We ask a question to ourselves, as to whether
the   said  reasoning  can   be  said  to  be  irrational  or   arbitrary.    A
policy decision to get the best operator at the best price, cannot
be said to be a decision which no reasonable person would take
in   his   affairs.   In   that   view   of   the   matter,   the   attack   on   the
order/letter dated 6 th
 April 2018, is without merit.
37

34. Insofar   as   the   contention   of   Shri   Rohatgi   with   regard   to
the   huge   investment   being   made   by   EMTA   is   concerned,   the
said Act itself provides remedy for  seeking compensation apart
from the other remedies that are available in law.   In that view
of   the   matter,   we   are   not   impressed   with   the   arguments
advanced in that behalf.
35. In the result, the impugned judgment and order passed by
the High Court of Punjab and Haryana is unsustainable in law.
The appeals are therefore allowed and the judgment and order
passed   by   the   High   Court   of   Punjab   and   Haryana   dated   25 th
January 2019, is quashed and set aside.  Pending I.A (s), if any,
shall stand disposed of accordingly.
…..…..….......................J.
   [L. NAGESWARA RAO]
         …….........................J.       
   [B.R. GAVAI]
…..…..….......................J.
     [B.V. NAGARATHNA]
NEW DELHI;
SEPTEMBER 21, 2021.
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