Coal news and updates

Govt not to release bank guarantees of all coal block allottees

The inter-ministerial group (IMG) on coal has refused to release the bank guarantees (BGs) of coal block allottees, whose allocations were cancelled by the Supreme Court (SC). It has decided to issue show cause notices to all the allottees and then take a decision on case by case basis. The companies would be asked to state the milestones that were not achieved and the agency responsible for the same. The decision on BGs would be taken on the basis of the replies.

After their allocations were cancelled by the SC, a large number of companies had approached the Delhi high court (HC) praying that coal ministry should release their BGs.

The companies contended that the BGs were in nature of performance guarantees and after de-allocation these guarantees had become infructuous. The ministry of coal said the release of BGs were under consideration of the government.

The HC disposed of the petition with some directives, including that the block allottees should keep the BGs alive for a further period of three months. The coal ministry should take a decision on the BGs within a period of eight weeks. The decision should be communicated to the concerned allottee within a week. In case the ministry decides to invoke the BG, then it should not do so for two weeks so that the concerned company gets an opportunity to take appropriate action as per provisions of law.

The matter was then referred to the department of legal affairs (DLA). The department said that the terms of allocation letter, including BG terms agreed to by the parties, is a contract providing for mutual obligations. Performance of the obligations on part of both parties is essential. Deduction or forfeiture of the BG depends on the conditions of contract agreed to by the parties.

The IMG reached a conclusion that subsequent de-allocation of the block did not have any bearing on the performance of the allottee earlier. The matter has to be decided on the basis of whether there have been delays and lapses attributable to the allottee in achieving the set milestones. It has also to be taken in consideration that there was delay on the part of the government in doing its part of the job.

Guaranteed penalty

* SC deallocated 214 coal blocks

* Block allottees approached Delhi HC seeking release of bank guarantees

* Delhi HC did not give them any relief

* Govt says deallocation of coal block will not have bearing on BG decision

* If an allottee was unable to achieve set milestones, it will fined

* Govt will issue show cause notice to all allottees

* They will have to explain reasons for delay

* Decision on BG of an allottee will be taken on basis of reply

Source: The Times of India