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Business News/ Politics / Policy/  Decision to invoke bank guarantees only preliminary, government tells HC
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Decision to invoke bank guarantees only preliminary, government tells HC

The decision to invoke bank guarantees of companies whose coal fields had been de-allocated is not final, govt tells HC

The high court had on 29 January granted an extension of three months to the government to take a decision on bank guarantees deposited by owners of deallocated blocks. Photo: HT Premium
The high court had on 29 January granted an extension of three months to the government to take a decision on bank guarantees deposited by owners of deallocated blocks. Photo: HT

Delhi: The coal ministry told the Delhi high court on Friday that the decision of an inter-ministerial group (IMG) that the ministry is entitled to invoke bank guarantees of companies whose coal fields had been de-allocated after the Supreme Court’s 25 August and 24 September judgements is not final.

The clarification came from additional solicitor general Sanjay Jain on a petition by JSW Steel Ltd against a show-cause notice issued to the company by the coal ministry asking why its bank guarantee should not be invoked for not developing its coal mines as per the milestones laid down at the time of allotment.

JSW Steel’s lawyer Kapil Sibal told the court that the group’s decision at its 28th meeting violated established principles of law.

Sibal argued that when the Supreme Court held that the government had no power to enter into contracts for allocation of the blocks in the first place, it could not invoke the bank guarantees deposited by the companies to whom the mines had been allotted.

While disposing of JSW Steel’s petition, justice Rajiv Shakdher has kept the issue open and directed the government to decide the issue of bank guarantees within three months. JSW Steel has also been given the liberty to approach the court in case an adverse decision is taken by the government.

The high court had on 29 January granted an extension of three months to the government to take a decision on bank guarantees deposited by owners of deallocated blocks while directing the companies to keep the bank guarantees alive for another four months.

The decision of the inter-ministerial group had created quite a flurry among the companies since, along with losing the blocks allocated to them, they were also slated to lose the bank guarantees if the government found that they had defaulted on their obligations to develop the coal fields.

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Published: 30 Jan 2015, 02:22 PM IST
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