The end of crony capitalism in the black diamond sector

The Supreme Court through its recent judgments in Manohar Lal Sharma v The Principal Secretary & Ors has delivered a severe blow to private sector entities which had invested heavily in various captive coal blocks across the country. A bench comprising Chief Justice RM Lodha, Justice Madan B Lokur and Justice Kurian Joseph passed these judgments on 25 August and 24 September.

While the first judgment considered the legality of the process of allocation of coal blocks by the government’s screening committee and also by the dispensation route from 1993 to 2010, the second judgment dealt with consequences of first judgment, namely, cancellation of the allocation to various private sector entities of 214 out of the 218 coal blocks allotted. The affected entities face major financial turmoil on account of losing the coal blocks which belonged to them.

The first judgment is reminiscent of the Supreme Court’s order in the 2G telecom spectrum allocation case, where the court annulled all 122 licences awarded to telecom companies in 2008 and denounced the “first come-first served” allotment process.

Vivek Vashi is the mainstay of the litigation team at Bharucha & Partners, where Aditya Deolekar is an associate.