Supreme Court affirms interim coal pricing power of coal companies and denies refund to non-core linked consumers

A bench of Justices J.B. Pardiwala and R. Mahadevan heard an appeal by Coal India Ltd. and its subsidiaries against a Division Bench of the Calcutta High Court which had upheld a Single Judge’s order setting aside the Interim Coal Policy dated 15.12.2006 and directing refund of an additional 20% charged to linked non‑core consumers. The litigation raised the validity of the appellant’s authority to notify interim prices after this Court struck down the e‑auction mechanism in Ashoka Smokeless Coal India Ltd. v. Union of India, and tested whether the 20% hike offended Article 14.

The Court allowed the appeal, held that the coal companies were competent to notify interim prices under the post‑2000 statutory framework, and found that the 20% increase for linked non‑core consumers did not amount to unconstitutional discrimination. The Court observed that price fixation of coal must answer to constitutional obligations but that the Colliery Control Order, 2000 had delegated price determination to coal companies and therefore did not preclude CIL from notifying interim prices. It rejected the High Court’s conclusion that the Interim Coal Policy was framed solely for profit‑making and held that the measure aimed to sustain operations and ensure supply. The Court, in its reasoning, observed: The Court therefore held the policy valid and dismissed the respondents’ claim for refund.

Background The dispute arose after this Court in Ashoka Smokeless (2006) struck down the e‑auction methodology for coal sales and directed constitution of an expert committee to evolve a viable distribution policy. Coal India notified an Interim Coal Policy on 15.12.2006 to govern the interregnum before the New Coal Distribution Policy of 2007, fixing notified prices for linked non‑core consumers at 20% above the earlier 2004 notified price and 30% higher for non‑linked non‑core buyers. An association of smokeless fuel manufacturers challenged the interim measure in the Calcutta High Court, contending that the appellant had no authority to unilaterally alter prices after Ashoka Smokeless, that the 20% hike was arbitrary and discriminatory in violation of Article 14, and that it amounted to profiteering inconsistent with Articles 14 and 39(b).

A Single Judge allowed the writ and ordered refund of the excess 20% with interest; the Division Bench affirmed, finding the hike unsupported by cogent reasons and motivated by financial considerations of the coal companies. Coal India appealed to this Court, which had earlier granted limited leave confined to unjust enrichment but later expanded the scope to decide validity of the Interim Coal Policy in view of subsequent authority including the presidential reference on Natural Resources Allocation. The majority examined the statutory scheme created by the Colliery Control Order, 2000, and prior precedents (including Pallavi Refractories and Cynamide/Sitaram Sugar principles on judicial review of pricing policy). The Court reiterated that “e‑auction is not a mode to fix price. It is only a mode to obtain maximum price” when profit motive dominated, but found that the Interim Coal Policy’s purpose to maintain sustainable operations and supply was legitimate. Applying the rational‑nexus test to classificatory challenges, the Court held that differential treatment between core and non‑core linked consumers was rationally connected to the avowed aim of protecting broader public interest in supply and avoiding cascading price effects on essential industries. On the refund plea the Court observed that respondents had not furnished complete, verifiable evidence that they had not passed the cost on to end consumers, and that unjust enrichment concerns weighed against ordering a refund in the public interest.

Case Details: Case No.: Civil Appeal No. 11793 of 2025 (Arising from SLP (C) No. 21888 of 2012) Case Title: Coal India Ltd. and Ors. …Appellant(s) Versus M/s Rahul Industries and Ors. …Respondent(s) Appearances: For the Petitioner(s): [Not indicated in the reported judgment] For the Respondent(s): [Not indicated in the reported judgment]