2G, CoalÃ¢â‚¬Â¦The Clean-Up Has Begun?

Published on Mon, Aug 25,2014 | 20:53, Updated at Mon, Aug 25 at 21:12Source : Moneycontrol.com

Spectrum, Coal…The Clean-Up Has Begun?

By: Menaka Doshi, CNBC-TV18

Maybe it began with the 2G order. But I found that judgment made some wild leaps. And was vaguely worded…finally requiring a Presidential Reference to decode it. Laws may sometimes be ambiguous or seem that way in particular circumstances but judgments ought to be crystal clear. Or else they serve less than the full purpose of a justice system. In that aspect I was a bit disappointed with the 2G scam order, with due respect to the judges that delivered it.

The cancellation of over 100 telecom licenses handed out in that round of allocation, seemed extreme to many. Especially companies like Idea that claimed to be innocent victims of collateral damage. While courts must look at matters of legality objectively, some consideration of commercial consequences is welcome.

In that the Supreme Court decision on the coal block allocations matter differs from the decision on the 2G telecom licenses & spectrum matter.

Make no mistake, this time too the Supreme Court has not minced any words…

154. "To sum up, the entire allocation of coal block as per recommendations made by the Screening Committee from 14.07.1993 in 36 meetings and the allocation through the
Government dispensation route suffers from the vice of arbitrariness and legal flaws. The Screening Committee has never been consistent, it has not been transparent, there is no proper application of mind, it has acted on no material in many cases, relevant factors have seldom been its guiding factors, there was no transparency and guidelines have seldom guided it. On many occasions, guidelines have been honoured more in their breach. There was no objective criteria, nay, no criteria for evaluation of comparative merits. The approach had been ad-hoc and casual. There was no fair and transparent procedure, all resulting in unfair distribution of the national wealth. Common good and public interest have, thus, suffered heavily. Hence, the allocation of coal blocks based on the recommendations made in all the 36 meetings of the Screening Committee is illegal."

But having said that, the Supreme Court has not also rushed to de-allocate any of these illegally granted coal block…yet. Instead it will hear further arguments on the same, giving affected companies a chance to make their commercial arguments.

157. "As we have already found that the allocations made, both under the Screening Committee route and the Government dispensation route, are arbitrary and illegal, what should be the consequences, is the issue which remains to be tackled. We are of the view that, to this limited extent, the matter requires further hearing."

So if the 2G order started the clean up in national resource allocation, the coal order is yet another important step forward. But it has maybe (I can only speculate) learned from the tumult following the 2G order and not rushed into 'consequences' yet.

So 5 quick takeaways at this point…

1. The Supreme Court order on coal allocation includes no punitive measures attached to the determination of illegality of allocations. Consequences will be determined here on. That means the SC has left the door open for affected companies to argue why the blocks must not be de-allocated, hence it has left the door open for commercial wisdom to also prevail in some measure?

2. In the interim will affected companies be certain on whether they can continue using coal from the illegally allocated blocks? As of yet I have found nothing in the SC order that stops them from doing so. Will be interesting to see how corporate lawyers interpret this.

3. The SC sends out a powerful message - no matter how far back we have to go - if a process was illegal it was illegal. And doesn't matter how much time has lapsed, how many Governments have come and gone..one can always attempt to correct it.

4. The stock market may crib and moan, corporate profits will probably be hurt (depending on the 'consequences') and that fragile thing called economic sentiment may wilt for a while…but in the long term this can only be good news for a more fair, objective and equitable national resource allocation policy.

5. This is a big win for prolific PIL filer ML Sharma - wonder if this will make him more prolific? Is that even possible?

More once I finish reading it…and on The Firm on Friday! Stay tuned…

(Here's the link to the SC judgment: http://supremecourtofindia.nic.in/outtoday/wpcrl120.pdf )