The Chhattisgarh Mineral Development Corp (CMDC) has warned that it was considering moving court against the Coal Ministry's decision of cancelling the allocation of the Bhatgaon-II and Bhatgaon-II Extension coal blocks.

The Coal Ministry cancelled the blocks allocated to the CMCD, saying it failed to start mining even five years after the allocation. In addition, the ministry ordered the forfeiture of half of the bank guarantee (Rs 1.59 crore) of the company.

The coal blocks were allocated to the CMDC on July 25, 2007.

Bhatgaon-II and Bhatgaon-II Extension coal blocks, which are situated in Chhattisgarh's Surajpur district, became the centre of a controversy after the CMCD created a joint venture (JV) with SMS Infrastructure Ltd - a firm owned by BJP Rajya Sabha MP Ajay S Sancheti - for mining coal from these blocks.

But the CMCD criticized the ministry's de-allocation decision, and claimed that the de-allocation had nothing to do with the corporation's joint venture with a private company.

Prem Kumar, managing director of CMCD, said in a statement, "There is news that the allocation of coal blocks has been de-allocated because of the errors in the formation of joint venture companies. This is unfair and it is also not mentioned in the de-allocation letter."

The statement also justified the delay in starting production at the blocks, saying various clearances consumed all the time. It claimed that the processes of obtaining geological report and initial environmental clearance consumed nearly fourteen months and sixteen months, respectively.