M/S Coal India Limited & Ors vs Coal Consumers Association & Ors

M/s Coal India Limited & Ors. ...... Petitioners

Versus

Coal Consumers Association & Ors. ...... Respondents

WITH

SPECIAL LEAVE PETITON (C) No. 21972 OF 2010

M/s Coal India Limited & Ors. ...... Petitioners

Versus

M/s Shivam Enterprises & Ors. ...... Respondents

SPECIAL LEAVE PETITON (C) No. 21973 OF 2010

M/s Coal India Limited & Ors. ...... Petitioners

Versus

M/s Ashutosh Industries & Ors. ...... Respondents

AND

SPECIAL LEAVE PETITON (C) No. 21974 OF 2010

M/s Coal India Limited & Ors. ...... Petitioners

Versus

M/s Jaunpur Fuel Udyog & Ors. ...... Respondents 2

ORDER

A. K. PATNAIK, J.

These Special Leave Petitions are directed against the

interim orders dated 26.07.2010 passed by a Division Bench

of the Allahabad High Court in Writ Petition C-Nos.42231,

42760, 42229 and 42708 of 2010 by which the orders dated

01.07.2010 of Bharat Coking Coal Limited (BCCL), the

petitioner No.2, suspending supply of coal to 45 industrial

consumers for their industrial units had been stayed till the

matters were to be taken up for admission/orders by the High

Court.

2. The relevant facts very briefly are that prior to 2007

industrial consumers were granted coal linkages for

utilization in their small scale industries. On 18.10.2007,

the Government of India, Ministry of Coal, formulated a

New Coal Distribution Policy by which coal linkages were

discontinued and instead coal was to be supplied to 3

various consumers including small scale industries

under the terms and conditions of Fuel Supply

Agreement (for short `FSA'). Accordingly, petitioner No.2

entered into FSA with different industrial consumers of

coal. Clause 4.4 of FSA stipulated that the total quantity

of coal supplied pursuant to the agreement is meant for

use in the industry of the purchaser and the purchaser

shall not sell/divert and/or transfer the coal for any

purpose whatsoever and the same shall be treated as

material breach of the agreement and in the event that

the purchaser engages or plans to engage into any such

resale or trade, the seller shall terminate the agreement

forthwith without any liabilities or damages whatsoever

payable to the purchaser. Clause 15.1.5 of FSA further

provided that in the event that the purchaser resells or

diverts the coal purchased pursuant to the agreement,

the seller shall have the right to terminate the agreement

forthwith. On 07.06.2009, however, the Central Bureau

of Investigation (for short `CBI'), on receipt of credible

information, registered an FIR under Section 120B read 4

with 420, 467 and 471 of the Indian Penal Code together

with Section 3(2) read with 13(1)(d) of the Prevention of

Corruption Act, 1988 against Shri Udayan Bhattacharya,

the then General Manager (S&M), BCCL, Dhanbad, and

ten industrial consumers alleging that the coal sold by

BCCL to the ten industrial consumers have been sold in

the open market and not utilized in their respective

plants. On the basis of the allegations in the FIR,

supplies of coal to the ten industrial consumers were

suspended on 13.06.2009, some of whom challenged the

suspension of supply of coal in writ petitions before the

different High Courts. After investigation, the CBI filed

charge sheet on 28.06.2008 against Shri Bhattacharya

and the ten industrial consumers in respect of whom the

FIR had been lodged. Soon thereafter, on 01.07.2010 the

petitioner No.2 issued orders suspending supply of coal

to 45 industrial consumers against whom no FIR had

been lodged by the CBI.

3. Aggrieved, the respondents filed the Writ Petitions in the

Allahabad High Court in July, 2010 praying inter alia for 5

quashing the order dated 01.07.2010 suspending

supplies of the coal to the members of the respondent-

association in Special Leave Petition [C] Nos.21972 of

2010 and to the respondents in Special Leave Petitions

(C) Nos. 21973 and 21974 of 2010 and by the interim

orders dated 26.07.2010 the Division Bench of the High

Court stayed the operation of the order dated 01.07.2010

suspending supplies of coal.

4. Mr. Anupam Lal Das, learned counsel for the petitioners,

submitted that it will be clear from Clause 4.4 of FSA

that the coal supplied to the industrial consumers is

meant for use in their industries and, therefore, the

petitioner No.2 issued notice dated 03.02.2010 to all the

45 industrial consumers to show the end-use of the coal

lifted during the financial year 2009-2010 duly supported

by documentary proof and the industrial consumers

submitted some documents in support of end-use of coal,

but the documents were not sufficient to prove the end-

use of the coal. He submitted that petitioner No.2 issued

another notice dated 08.06.2010 to the industrial 6

consumers to submit documents and details as per

proforma enclosed along with the notice and yet the

industrial consumers could not prove the end-use of the

coal lifted by them from the petitioner No.2 under FSA

and in the circumstances the petitioner No.2 had no

option but to pass the order dated 01.07.2010

suspending the supply of coal to the 45 industrial

consumers. He submitted that by the order dated

01.07.2010 the petitioner No.2 also gave notice to the 45

industrial consumers to prove by documents that the

coal supplied to them were utilized in accordance with

Clause 4.4 of FSA. He submitted that on these facts the

High Court was not at all justified in staying the

suspension-cum-show cause notice dated 01.07.2010

issued by the petitioner No.2 to the 45 industrial

consumers.

5. Mr. Ranjit Kumar, learned counsel appearing for the

respondents in Special Leave Petition [C] No.21959 of

2010, on the other hand, submitted that Clause 13.1 of

FSA is the only provision conferring a right on the 7

petitioner No.2 to suspend supplies of coal in the event

the purchaser fails to pay any amount including any

interest due to the petitioner No.2 under the agreement

and, therefore, the petitioner No.2 had no right to

suspend the supplies of coal on the ground that the

industrial consumers have not been able to produce

proof of the end-use of the coal in their industrial units.

He further submitted that Clause 4.4 of FSA, on which

the petitioners rely, itself confers a right on the petitioner

No. 2 to physically verify the end-use of coal and it was

always open to the petitioners to physically verify the

industrial units of the industrial consumers to find out

whether the industrial unit was genuine and whether the

industrial unit was consuming the coal supplied by the

petitioners. He submitted that surprisingly in the letter

dated 01.07.2010 (Annexure R1/9), the

Chairman/Managing Director of the petitioner No.2 has

proposed to the Chairman of petitioner No.1 that physical

inspection of the industrial units by the coal companies

should be withdrawn from FSA to safeguard the interest 8

of the officials of the coal companies. He vehemently

submitted that all this would show that supplies of coal

to the 45 industrial consumers have been suspended by

the order dated 01.07.2010 only to protect the officers of

petitioner No.2. He further submitted that Para 3.1 of

the New Coal Distribution Policy in the Office

Memorandum dated 18.10.2007 of the Government of

India, Ministry of Coal, makes it clear that the State

Governments are to take appropriate steps to evaluate

the genuine consumption and to monitor the use of coal.

He submitted that accordingly the General Managers of

the District Industries Centres of the State Government

have furnished reports about the end-use of coal for the

year 2009-2010 to petitioner No.2 in respect of different

industrial consumers by various communications, copies

of which were annexed to the Writ Petitions filed in the

High Court and the High Court was, therefore, justified in

passing the impugned interim orders staying the order

dated 01.07.2010 of the petitioner No.2 suspending

supplies of coal to the 45 industrial consumers. 9

6. Mr. Jaideep Gupta, learned counsel appearing for the

respondents in Special Leave Petition (C) 21973 of 2010,

submitted that by the notice dated 03.02.2010 the

respondents were called upon to show the end-use of

coal lifted during the financial year 2009-2010 duly

supported by documentary proof and also to get

corroborative documents authenticated by the concerned

District/State officials along with a certificate from the

officers certifying the working status of the units of the

respondents and by the notice dated 08.06.2010 the

respondents were required to submit documents and

details as per proforma enclosed along with the notice to

show the end-use of coal in their industrial units on

monthly basis. He submitted that in response to the two

notices dated 03.02.2010 and 08.06.2010 the

respondents had furnished the required documents

including the certificates furnished by the District

Industries Centre, as would be evident from the letter

dated 13.02.2010 of the respondents and its enclosures

annexed to the counter of the respondents as Annexure 10

R1/1(Colly) and letter dated 06.03.2010 of the

respondents annexed to the counter of the respondents

as Annexure R1/2(Colly). He submitted that despite the

fact that the respondents produced all the required

documents before the petitioner No.2 as called for in the

notices dated 03.02.2010 and 08.06.2010, the petitioner

No.2 suspended supplies of coal to the respondents by

the impugned order dated 01.07.2010. He submitted

that all these documents were filed by the respondents

along with the Writ Petition and, therefore, the High

Court was justified in staying the order of suspension.

7. The submissions made by Mr. Ranjit Kumar and Mr.

Jaideep Gupta were adopted by Mr. Manish Kumar

Saran appearing for the respondents in Special Leave

Petition (C) Nos. 21972 and 21974 of 2010.

8. We have today delivered judgments in M/s Coal India

Limited & Ors. v. Alok Fuels (P) Ltd. & Ors. and also in

M/s Sushila Chemicals Pvt. Ltd. & Anr. v. Bharat Coking

Coal Ltd. & Ors. in which we have held that the petitioner

No.2 has the right to suspend supplies of coal to the 11

purchaser of coal where it has doubts that the purchaser

may mis-utilize the allotted coal and divert or sell in open

market because, as it was clear from Clause 4.4 of FSA

and the New Coal Distribution Policy dated 18.10.2007,

the very object of FSA as well as policy decision of the

Government is to allot coal to the purchasers for

utilization in their plants and not for any other purpose.

In two judgments delivered today, we have also held that

the FIR lodged by the CBI, which is a premier

investigation agency of the Central Government, created

serious doubts that the allotted coal may have been

diverted or sold in the open market instead of being

utilized in the plants of the purchasers and hence the

petitioner No. 2 was within its rights to suspend the

supplies of coal to the purchasers in these cases till the

doubts were cleared in appropriate proceedings.

9. In the facts of these cases, however, we find that no FIR

as such has been lodged by the CBI alleging that the

supplies of coal made to the 45 industrial consumers

have not been utilized in their respective industrial units. 12

Moreover, Para 3.1 of the New Coal Distribution Policy

dated 18.10.2007 of the Government of India, Ministry of

Coal, clearly states that the State Governments may take

appropriate steps to evaluate the genuine consumption

and monitor the use of coal supplied to units in small

and medium sector like smokeless fuel, brick kiln, coke

oven units, etc. We find that sufficient materials have

been filed before the High Court by the respondents along

with their Writ Petitions to show that the agencies of the

State Government, namely, the District Industries

Centres, have evaluated the genuine consumption and

monitored the use of coal by the industrial consumers in

their respective industries. It also appears that the

petitioner No.2 issued notices dated 03.02.2010 and

08.06.2010 to the 45 industrial consumers to furnish

documents in proof of the end-use of coal allotted to

them for their respective industries for the financial year

2009-2010 and the respondents had furnished some

materials pursuant to the notices dated 03.02.2010 and

08.06.2010 but instead of examining those materials 13

relating to the end-use of coal in the industrial units of

the industrial consumers furnished by the respondents,

petitioner No.2 has suspended the supplies of coal on

01.07.2010 soon after the CBI filed charge sheets on

28.06.2010 against Shri Udayan Bhattacharya, the then

General Manager of the petitioner No.2, and the ten

industrial consumers against whom CBI had lodged the

FIR on 07.06.2010. The materials placed before the High

Court prima facie show that the order dated 01.07.2010

of petitioner No.2 suspending the supplies of coal to the

45 industrial consumers was arbitrary and unfair and

the High Court was justified in staying the order dated

01.07.2010 as an interim measure.

10. We accordingly dismiss the Special Leave Petitions and

vacate the interim orders passed by this Court. We make

it clear that the observations made in this order will not

influence the High Court in deciding the Writ Petitions on

merits. No costs.

14

..........................J. (Altamas Kabir)

..........................J. (A. K. Patnaik) New Delhi, September 15, 2010.