Delhi HC sets aside orders by MoC where it invoked bank guarantees of TSIL

The court has ordered that MoC shall provide TSIL the comments received from the concerned State Government(s) on the aspect whether the delay in achieving the milestones is attributable to TSIL

The Delhi High Court on Wednesday set aside orders passed in 2012 and 2015 by Ministry of Coal (MoC) whereby the MoC accepted the recommendations made by the Inter Ministerial Group (IMG), and decided to invoke the bank guarantee submitted by Tata Sponge Iron Private (TSIL) to the extent of ₹32.50 crore and remanded the matter to MoC to consider it afresh.

The court has ordered that MoC shall provide TSIL the comments received from the concerned State Government(s) on the aspect whether the delay in achieving the milestones is attributable to TSIL.

“The concerned authority shall afford TSIL an opportunity to be heard; it would take an informed decision and pass a speaking order. In the meanwhile, TSIL shall ensure that the bank guarantee furnished by it is kept alive till the said decision is rendered by the MoC." The court ordered.

The judgment comes a petition by TSIL raising a grievance against by the decision of the MoC to invoke its bank guarantee furnished pursuant to the Allocation Letter. TSIL has contended that since the said allocation has been declared to be illegal by the Supreme Court in a 2014 case, the bank guarantee furnished by TSIL pursuant to the said allocation also does not stand and cannot be encashed by the MoC.

The Supreme Court in 2014 had held that allocation of coal blocks as per the recommendations made by the Screening Committee in 36 meetings from 4 July 1993 and the allocation through government dispensation route, were illegal.

It was further submitted on behalf of TSIL that the delay in meeting the milestones for development of mine in question and production of coal was for reasons solely attributable to the Government of India, State Government or other Government Agencies and, therefore, TSIL could not be penalized for the same.

“This Court is of the view that the explanations furnished by TSIL for the delay in achieving the milestones and its contention that the same is on account of Government agencies, is required to be considered by the MoC and it is required to take an informed view before seeking to invoke the bank guarantee. The decision made by the MoC must be informed by reason. It must conclude either way whether TSIL’s contention that the delay is attributable to Government/its agencies has any merit. Although TSIL has been afforded an opportunity to be heard but the said opportunity is meaningless if TSIL’s contentions have not been specifically dealt with." The court order reads.

“Providing a hearing cannot be a mere formality. It is an opportunity for a party to present its explanation and it must necessarily follow that the said explanation must be considered. If the explanations are found to be unmerited, the reasons for finding so must be communicated." It added.

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