THE BHARAT COKING COAL LIMITED A SUBSIDIARY OF COAL INDIA LTD., KOYLA v. M/S. SUSHILA CHEMICLS PVT. LTD., A COMPANY

Versus M/S. SUSHILA CHEMICLS PVT. LTD., A COMPANY INCORPORATED UNDER THE INDIAN COMPANIES ACT, 1956, HAVING ITS FACTORY AT INDUSTRIAL AREA, HAJIPUR, THROUGH ONE OF ITS DIRECTOR, SRI RABINDRA SINGH, SON OF LATE D.P. SINGH, RESIDENT OF JF-15, ARYA KUMAR ROAD, RAJENDRA NAGAR, PATNA-16. M/S MITHILA COAL INDUSTRIES PVT. LTD., A COMPANY INCORPORATED UNDER THE INDIAN COMPANIES ACT, 1956, HAVING INDUSTRIAL AREA, MUZAFFARPUR, THROUGH ONE OF ITS DIRECTOR SRI RABINDRA SINGH, SON OF LATE D. P. SINGH, RESIDENT OF JF-15, ARYA KUMAR ROAD, RAJENDRA NAGAR, PATNA-16. ITS FACTORY AT BELA WITH LPA No.1266 of 2009 BHARAT COKING COAL LIMITED A SUBSIDIARY OF COAL INDIA LTD., KOYLA BHAWAN, DHANBAD THROUGH ITS CHAIRMAN-CUM-MANAGING DIRECTOR THE COAL INDIA LTD., COAL BHAWAN, 10 NETAJI SUBHASH ROAD, KOLKATA THROUGH ITS CHAIRMAN THE GENERAL MANAGER (SALES AND MARKETING), BHARAT COKING LOAL LIMITED, KOYLA BHAWAN, DHANBAD DEPUTY CHIEF SALES MANAGER (LEGAL), BHARAT COKING COAL LIMITED, 6 LYONS RANGE, 5TH FLOOR, KOLKATA DEPUTY CHIEF SALES MANAGER (ROAD SALE), BHARAT COKING COAL LIMITED, KOYLA BHAWAN, DHANBAD Versus MAGADH SMOKELESS COKING COAL INDUSTRIES PVT. LTD. A COMPANY INCORPORATED UNDER THE INDIAN COMPANIES ACT, 1956, HAVING ITS FACTORY AT NAWADIH AURANGABAD, AURANGABAD THROUGH ITS MANAGING DIRECTOR, MD. ALIMUDDIN ANSARI, SON OF LATE SAHADAT HUSSAIN, RESIDENT OF MOHALLA-KOIRIBIGHA, NAWADIH, P.S., TOWN THANA, DISTRICT- AURANGABAD (BIHAR) ************* 2 For the Appellants For the Respondents :- :- Mr. R. B. Mahto, Sr. Advocate Mr. V. M. K. Sinha, Advocate Mr. Y. V. Giri, Sr. Advocate Mr. Raj Kishore Pd. Advocate Mr. Tej Bahadur Roy, Advocate (in LPA No. 1265 of 2009) Mr. Abhay Kumar Singh, Sr. Advocate (in LPA No. 1266 of 2009) 2 27/10/2009 Heard learned counsel for the appellants in both ********************* these appeals as well as learned senior counsels appearing for the respondents. Both letters patent appeals arise out of a common judgment of the writ court dated 26.8.2009 whereby writ petitions filed by M/s Shushila Chemicals Pvt. Limited (CWJC No. 8144 of 2009) and by M/s Magadh Smokeless Coking Company (CWJC No. 8311 of 2009) have been allowed on a finding that the institution of criminal case or allegation of misuse of coal is no ground for suspension of coal supply as per agreement existing between the parties. The Writ Court has held that the suspension clause in the agreement contemplates suspension of supply only if the purchaser fails to pay the due amount including any interest. The Writ Court has found that misuse of coal supply as per agreement would be germane as per clause 15 of the agreement only for terminating the agreement itself. It has also noticed that the General Manager of the Coal Company vide his letter dated 16.7.2009 has already issued show cause notices to various units against whom the CBI has 3 lodged First Information Report alleging criminal acts, including the units of the writ petitioners for cancellation of their agreements on grounds of misuse of coal and lodging of FIR. It has been observed by the writ court that it would be open to the respondents to proceed further in the matter pursuant to the show cause notice in accordance with law. The appellants are aggrieved by the view taken by the writ court that the allegation of misuse of coal and lodging of a criminal case cannot be a ground to suspend the supply of coal because it is not a ground for suspension of supply as enumerated in clause 13 of the agreement. On behalf of appellants reliance was placed on judgment of the Apex Court in the case of Ashoka Smokeless Coal India (P) Ltd & Ors. Vs. Union Of India & Ors. reported in 2007 (2) SCC 640 to highlight that the Supreme Court directed for evolving a policy for supply of coal to industries like the writ petitioners, with due regard to public interest and it was emphasized by the Apex Court that if norms for supply of coal are violated then such violations should be dealt with stringently. Reliance was also placed on a Division Bench judgment of this Court dated 5.7.2002 passed in M/s Central Coal Field Limited Vrs. M/s Aman Lime Works (LPA No. 701 of 2002 and another analogous case) for highlighting the view taken by the Division Bench, (in the context of the earlier prevailing linkage policy) that 4 once it has been found prima facie that the unit concerned has not fulfilled the conditions for which the coal was supplied and an inquiry is pending with regard deregistration of the unit, the direction to suspend the supply of coal is reasonable and serves public purpose. To support the same view, reliance was also placed upon another Division Bench order dated 24.4.2008 passed in LPA No. 174 of 2008 (Bharat Coking Coal Limited Vs. M/s. Shushila Chemical Private Limited) in which the aforesaid Division Bench judgment was noticed and in that view of the matter no direction was given for resuming the supply of coal till the proceeding was finally determined. Of course a period of two months was indicated for taking a final decision in the pending proceeding. On behalf of the appellants it has been further submitted that although pursuant to Supreme Court judgment in the case of Ashoka Smokeless (Supra) a new policy was evolved for supply of coal in place of old linkage system, the agreement in terms of the new policy has been entered into between the parties and from clause 4.4 and

15.1.5 it is abundantly clear that in the event the purchaser re-sells or diverts the coal purchased, seller shall have the right to terminate the agreement forth with. Emphasize has been laid down over these clauses of the agreement to claim a right in the appellant to terminate the agreement 5 forth with in view of lodging of the criminal case and allegation of misuse of the coal purchased and on that basis it has been suggested that if there is a power to terminate the agreement forth with then the power to suspend the supply of coal would be an ancillary power available to the appellants once it is in possession of the materials leading to prima facie satisfaction that there has been misuse of the purchased coal. On behalf of the writ petitioners/respondents it was submitted that the writ court has taken a proper view on the basis of clause 13 of the agreement and otherwise also rules of natural justice and fairness required that supply of coal should have been continued till a final decision could be taken by the appellants on receipt of show cause from the writ petitioners. Attempt was made on behalf of the writ petitioners to take us to various facts with a view to demonstrate that the allegations made in the FIR lodged by the CBI are general in nature and the writ petitioners have not received any substantial amount of coal supplied during the relevant period and the financial impact as assessed by the CBI is also not accurate. Keeping in mind the stage of the criminal case and also the fact that show cause notice has already issued the writ petitioners vide letter dated

16.7.2009, we are not persuaded to enter into issues of 6 facts. The only material issue is whether suspension of supply of coal requires interference in exercise of writ jurisdiction or not. We have no hesitation in following the earlier two Division Bench judgments and orders relied upon by the learned senior counsel appearing for the appellants. In larger public interest we are not inclined to order for resumption of supply of coal so long as the appellants do not consider the show cause of the writ petitioners and take a final view on merits. In larger public interest, the requirement of hearing and fairness can be ensured even by post facto hearing. This view is in accordance with the earlier views taken by the two Division Benches of this Court primarily on the ground of public interest. Enforcement of a commercial agreement exercise of writ jurisdiction is generally not warranted, specially when damages will suffice and can be claimed through ordinary civil action by establishing unjustified breach of contract. In view of aforesaid discussion we have no option but to set aside that part of finding of the writ court wherein it has been held that the appellants cannot suspend the supply of coal on the basis of First Information Report because the same is de hors the grounds for suspension in clause 13 of the agreement. As a result, the decision of the authorities for 7 suspension of supply of coal to the writ petitioners, in our view requires no interference. Both the appeals are allowed accordingly. Following earlier Division Bench orders/judgments we are of the view that appellants must take a final decision pursuant to show cause notice dated

16.7.2009 at an early date preferably within two months from the date of receipt of show cause from the writ petitioners. It may be indicated here that as per submissions at bar, show cause replies have not been filed by the writ petitioners as yet. It is expected that they shall file their replies at an early date so that final decision may be taken by the appellants expeditiously. In the facts of these cases there shall be no order as to costs. (Shiva Kirti Singh, ACJ.) (Shyam Kishore Sharma, J.)