The Supreme Court of India on Friday, September 12, 2025, upheld the validity of the Interim Coal Policy notified by Coal India Ltd. (CIL) on December 15, 2006, which had introduced a 20% price increase for linked consumers in the non-core sector. A bench comprising Justice J.B. Pardiwala and Justice R. Mahadevan ruled that the policy was a valid exercise of CIL’s authority and did not violate Article 14 of the Constitution.
The judgment sets aside a 2012 ruling of the Calcutta High Court, which had declared the policy invalid and ordered a refund of the excess amount collected. The Supreme Court concluded that CIL was empowered to fix prices and that the differential pricing between core and non-core sectors was a reasonable classification intended to subserve the common good.
Background of the Case
The legal dispute stemmed from the pricing mechanism for coal following the deregulation of its prices under the Colliery Control Order, 2000 (CCO, 2000). Prior to this, coal distribution was managed through a linkage system, categorizing consumers into “core” (power, steel, cement, etc.) and “non-core” (smokeless fuel manufacturers, glass manufacturers, etc.) sectors.
After CIL introduced an “e-auction” system for the non-core sector, it was challenged and subsequently struck down by the Supreme Court in its 2006 judgment in Ashoka Smokeless Coal India (P) Ltd. v. Union of India. This created a policy vacuum.
To manage the interim period until a new national policy was formulated, CIL notified the Interim Coal Policy on December 15, 2006. This policy stipulated that linked consumers in the non-core sector would be charged 20% over and above the notified price that existed before the e-auction system.
This interim policy was challenged by M/s Rahul Industries and other smokeless fuel manufacturers before the Calcutta High Court. A learned Single Judge, in an order affirmed by a Division Bench, held that CIL lacked the authority to frame such a policy in light of the Ashoka Smokeless judgment and directed CIL to refund the 20% additional amount collected. CIL subsequently appealed this decision to the Supreme Court.
Arguments of the Parties
Coal India Ltd. (Appellant) argued that price fixation is an economic policy decision within the executive’s domain, and courts should exercise restraint. It contended that under the CCO, 2000, it was fully empowered to fix coal prices. CIL justified the dual pricing by stating it was a “reasonable classification” to protect core sector industries, vital for the national economy, from a price hike that would have a cascading inflationary effect. The 20% increase for the much smaller non-core sector was aimed at mitigating rising operational costs to ensure the sustainable functioning of coal mines. Finally, CIL argued that ordering a refund would result in the “unjust enrichment” of the respondent companies, who had likely passed the additional cost on to their consumers.
M/s Rahul Industries & Ors. (Respondents) countered that the Interim Coal Policy was a direct contravention of the Supreme Court’s directions in Ashoka Smokeless, which had mandated the formation of an expert committee to devise a new policy. They argued that CIL had no authority to unilaterally notify an interim price hike. They characterized the 20% increase as arbitrary, discriminatory, violative of Article 14, and driven by a profit motive. On the question of a refund, they submitted that the doctrine of unjust enrichment does not apply to the refund of an excess price illegally collected in a commercial transaction.
Supreme Court’s Analysis and Findings
The Supreme Court conducted a detailed analysis of its previous judgments and the statutory framework governing coal pricing.
1. On CIL’s Authority to Notify the Policy: The Court found that the Calcutta High Court had erred in its interpretation of the Ashoka Smokeless judgment. The bench clarified that while the 2006 judgment struck down the method of price determination (e-auction), it did not strip CIL of its fundamental power to notify prices, which was granted to it by the CCO, 2000. The Court observed that the direction to form an expert committee was primarily to evolve a viable supply policy, not to usurp the price-fixing function from the coal companies. Holding otherwise, the Court noted, “would tantamount to an egregious case of breaching the doctrine of separation of powers.”
2. On the Validity of the 20% Price Increase under Article 14: The Court found the classification between core and non-core sectors to be reasonable and non-discriminatory. It affirmed its earlier decision in Pallavi Refractories v. Singareni Collieries Co. Ltd., which had upheld dual pricing for coal. The Court accepted CIL’s objective for the price hike, stating:
“The avowed object of the 20% price increase was to mitigate the increase in operational costs of the appellant company such that it was able to sustainably operate, maintain and develop the coal mines. In our view, these activities were essential to the maintenance of an adequate supply of coal in the market and thus were in conformity with the constitutional requirement of ‘common good’ enshrined in Article 39(b).”
The Court concluded that the action was not solely actuated by a profit motive but was a considered policy decision to ensure fair prices for the majority of consumers without jeopardizing CIL’s financial ability to maintain coal supply. Applying the “rational nexus test,” the Court found the policy valid.
3. On the Issue of Refund and Unjust Enrichment: Although the question became moot after the policy was held valid, the Court addressed the argument on refunds. It held that even if the policy had been invalid, the respondents would not have been entitled to a refund. The bench distinguished this case from earlier precedents, noting that the 20% additional cost was paid in the normal course of business, making it “most likely that the respondents might have passed the same onto the end consumers.”
The Court found that the respondents had failed to produce “complete and irrefutable evidence” to prove they had borne the financial burden themselves. Relying on the principles laid down in Mafatlal Industries Ltd. v. Union of India, the Court stated that granting a refund in such circumstances would be a “windfall” for the claimant. It observed:
“Where the petitioner-plaintiff has not himself suffered any loss or prejudice (having passed on the burden of the duty to others), there is no justice or equity in refunding the tax (collected without the authority of law) to him… By any standard of reasonableness, it is difficult to prefer the petitioner-plaintiff over the State.”
Final Decision
The Supreme Court allowed the appeal by Coal India Ltd., setting aside the impugned judgment of the Calcutta High Court. The Court declared the Interim Coal Policy dated December 15, 2006, to be valid and, as a consequence, dismissed the respondents’ request for a refund of the 20% additional amount collected.
