Coal India Ltd. vs Rahul Industries 2025 INSC 1103. Interim Coal Policy

Interim Coal Policy - Interim Coal Policy made a reasonable classification between the linked industries of the core and non-core sectors and was introduced with the legitimate aim of ensuring an adequate supply of coal in the market by reinforcing the financial capabilities of the appellant company to sustainably operate and invest in the production of coal - Interim Coal Policy fulfilled the test of reasonable classification and hence, was not contrary to Article 14 to this extent. (Para 107)

Constitution of India - Article 226 - The courts must exercise judicial restraint and only consider the legality of the decision-making process in terms of the provisions of the Constitution and relevant statutes. In respect of price fixation of a natural resource like coal, the courts must confine themselves to the question whether the basis adopted for reaching a particular price is reasonable or not. (Para 86)

Constitution of India - Article 136 - Even in a matter wherein notice was issued on a limited question, Supreme Court is not denuded of the jurisdiction to decide the whole conspectus of legal and valid points. (Para 87)

Constitution of India - Article 14,39(b) -a policy decision or price fixation exercise must have an underlying objective that subserves the common good as per Articles 14 and 39(b) respectively - Only the executive actions that are actuated solely by profit motive at the cost of the public, fall foul of the constitutional and statutory principles enshrined in Articles 14 and 39(b)-Reasonable profits when necessary to subserve the ‘common good’ including maintenance of or increase in supply of an essential commodity, do not infringe on the rights of the citizens. (Para 88-92)

Constitution of India - Part III- In situations where a legislative or executive action has prescribed a restriction on fundamental rights, the courts are required to bear in mind the following observations: a) First, the instances of both classificatory and non-classificatory arbitrariness infringe on the equality mandate of the Constitution  enshrined in Article 14 though the tests to determine the same may be different. However, non-classificatory arbitrariness is tested on a stricter anvil of legitimacy as it has the potential to disrupt the rights of a larger section of the population. b) Secondly, when the restriction is placed on the public at large without establishing the intelligible differentia between sections of the society on whom such restriction may be applicable, it would be a nonclassificatory limitation. Where a challenge is posed to such kinds of restrictions on fundamental rights of the people, the courts are required to employ the proportionality test and ensure that the measures adopted to implement such restrictions are not disproportionate or excessive in achieving the objective or aim identified. c) Thirdly, in a case where the legislative or executive restricts the fundamental rights of a specific class of persons, it would be an instance of classificatory limitation. To examine whether such restriction is in contravention of the constitutional mandate of equality, the courts are required to ensure that the classification is made on reasonable grounds and use the rational nexus test in order to determine whether the said restriction is an appropriate measure to achieve the objective identified.d) Fourthly, it was recognised by this Court that the twin test or the rational nexus test may suffer from the problem of elevating form over substance if it concerns itself only with the aspect of ‘rational nexus’ between the classification and the avowed objective. It was held that the rational nexus test must take into account the legitimacy of the objective sought to be achieved and determine if the same affects the classes of persons whose rights would be impeded in a manner that may fall foul of the reasonableness requirement of Article 14. What has been conveyed by this Court in so many words is that the objective identified by the legislature or executive cannot be taken at face value without any examination of the effects of the same, similar to the requirement of the first sub-component of the proportionality test. e) Lastly, the degree of scrutiny into the legitimacy of the objectives sought to be achieved by a restrictive measure would differ on the basis of the nature of the restriction and the test being used to examine the issue of arbitrariness. This Court, speaking through D.Y Chandrachud, J., described the tests of ‘proportionality’ and ‘rational nexus’ as those that determine the relationship between the measure being implemented and the objective sought to be achieved. When utilising the proportionality test, the degree of scrutiny of the perceived effects of the identified objective would be greater than the probing required  when the rational nexus test is employed. This is because the courts show a greater degree of deference to classification. This is because the legislature or executive can classify based on the degrees of harm to further the principle of substantive equality, and such classification does not require mathematical precision. (Para 98)