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Coal India Ltd. and Ors. vs M/s Rahul Industries and Ors.

Not available · 2025 INSC 1103Decided 12 Sept 2025
Not available
Justice J.B. Pardiwala · Justice R. Mahadevan

Background

Coal India Ltd (CIL), a public sector coal-mining undertaking, notified an "Interim Coal Policy" in 2006 that raised coal prices by 20% for "linked" consumers in the non-core sector (private companies, including the respondent, that manufacture smokeless fuel using coal as raw material), following an earlier Supreme Court judgment (Ashoka Smokeless) that had struck down CIL's e-auction pricing system. The respondents challenged this 20% increase as arbitrary and violative of Article 14, and both the Calcutta High Court's single judge and division bench ruled that CIL had no authority to notify the policy, ordering the excess amount refunded. CIL appealed to the Supreme Court, along with several connected transfer cases raising the same issue.

Decision Breakdown

The Supreme Court allowed CIL's appeal and set aside the High Court's judgment, holding the Interim Coal Policy valid. It found that the Coal Controller's Order, 2000 had already deregulated coal pricing power in favour of coal companies, and nothing in the Ashoka Smokeless judgment restricted CIL's authority to set interim prices while an expert committee's recommendations were pending. On the discrimination challenge, the Court held that the core and non-core sector classification was reasonable and rationally connected to the legitimate goal of sustaining CIL's operations and coal supply: the 20% increase (which offset only about 1.2% of CIL's actual cost increase) was not profiteering but a policy decision serving the "common good" under Article 39(b), so only the rational-nexus test (not the stricter proportionality test) applied. The Court also held that even had the policy been invalid, no refund would have been due, since the respondents had shown no evidence they bore the cost themselves rather than passing it on to their own customers (which would have caused unjust enrichment), and their earlier undertaking regarding refunds became moot once they challenged the policy itself.

Lesson Learnt

Courts will not second-guess a public sector undertaking's economic pricing policy under Article 14 so long as the classification between consumer groups is rationally connected to a legitimate objective like sustainable operations, and a claimant seeking a refund of an allegedly excess charge must show they actually bore that cost rather than passing it downstream, or risk being denied relief on grounds of unjust enrichment.

Official source (sci.gov.in)View Judgment (PDF)

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