Judges differ on liability over recovery of ₹300 crore as levy for coal mining

KPCL escapes probe, for now, into its coal purchase deal with mining company

The State-owned Karnataka Power Corporation Ltd. (KPCL) has escaped, for now, from facing a probe into its affairs over its joint-venture with a private coal mining company as two judges of a Division Bench of the High Court of Karnataka differed in their views on a plea made by the mining company against recovery of around ₹300 crore as additional levy.

The matter will now be decided by a third judge owing to divergent views by the Division Bench comprising Chief Justice Subhro Kamal Mukherjee (now retired) and Justice P.S. Dinesh Kumar in their verdict, delivered on October 4, on a petition filed by Kolkata-based Eastern Mineral and Trading Agency (EMTA), the mining company, and Karnataka EMTA Coal Mines Ltd. (KECML), the joint venture company.

While Mr. Justice Mukherjee held that the KECML and the EMTA are not liable to pay the additional levy as the coal block was originally allotted to the KPCL, and quashed notices demanding payment of levy from these two companies, Mr. Justice Kumar did not agree with the view of the then Chief Justice.

Mr. Justice Kumar held that the KPCL acted only as a name lender and the entire business was handled by and for the benefit of EMTA, and the lessee should be liable to pay the additional levy.

He also imposed a cost of ₹10 lakh on the EMTA, to be payable to the Prime Minister’s National Relief Fund.

Pointing out that the stand taken by the KPCL, if implemented, would result in the entire additional levy to be borne by the KPCL from public fund, contrary to the apex court’s verdict, Mr. Justice Kumar observed that, “The conspectus of mutual attitude between the KPCL and the KECML, speaks volumes about their unholy nexus. This, prima facie, appears to be a scam by itself …”

Mr. Justice Kumar directed the Chief Secretary to hold an inquiry into the KPCL’s joint venture with the EMTA, and conduct of the KPCL nominees in the KECML, and initiate both disciplinary and criminal actions against KPCL officers based on the outcome of the inquiry.


The KPCL, in September 2002, formed a joint venture company, KECML, along with the EMTA to supply coal for its power generation projects. The KPCL had 26% shares and the EMTA 49% shares in the JV. In November 2003, the Union Ministry of Coal allotted some coal blocks in Maharashtra, exclusively for the KPCL, which later requested the Ministry to grant mining lease on these blocks in the name of the KECML. However, the Supreme Court in its 2014 verdict declared allotment of 42 coal blocks as illegal, including allotment in favour KPCL/KECML, and ordered recovery of ₹295 per tonne from the allottees of coal blocks as additional levy.

Later, the Union government enacted the Coal Mines (Special Provisions) Act, 2015 to implement the apex court verdict and this law allowed recovery of additional levy at ₹295 per tonne from those in whose name mining leases were executed.

Based on this law, Maharashtra demanded ₹417.95 crore as additional levy from the KECML, which refused to pay saying that the coal blocks were allotted to the KPCL. However, the KPCL said its liability was to pay only ₹110.43 crore as it holds only 26% shares in the KECML.

This stand resulted in both the KECML and the EMTA approaching the High Court against notices issued for recovery of additional levy.

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Printable version | Apr 1, 2020 4:22:43 AM |

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