Full Judgment Text
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO.___8034______________ of 2010
(Arising out of S.L.P. (C) No. 26608 of 2010)
[CC No.5440 of 2010]
M/s Coal India Limited & Ors., Etc. Etc. …… Appellants
Versus
Alok Fuels (P) Ltd., Th. Director, Etc. Etc Respondents
……
WITH
CIVIL APPEAL NO._8035___ of 2010
(Arising out of S.L.P. (C) No. 26612 of 2010)
[CC No.5452 of 2010]
CIVIL APPEAL NO._8036____ of 2010
(Arising out of S.L.P. (C) No. 26615 of 2010)
[CC No.5459 of 2010]
CIVIL APPEAL NO._8040__ of 2010
(Arising out of S.L.P. (C) No.11307 of 2010)
CIVIL APPEAL NO._8041_ of 2010
(Arising out of S.L.P. (C) No.11311 of 2010)
CIVIL APPEAL NO.__8042___ of 2010
(Arising out of S.L.P. (C) No.11343 of 2010)
AND
CIVIL APPEAL NO.__8039____ of 2010
(Arising out of S.L.P. (C) No.11349 of 2010)
J U D G M E N T
2
A. K. PATNAIK, J.
Delay in filing Special Leave Petitions arising out of CC
Nos. 5440, 5452 and 5459 of 2010 is condoned.
2. Leave granted.
3. These appeals are against the interim orders dated
06.10.2009 passed by the learned Single Judge of the High
Court of Jharkhand in W.P.(C) Nos.2948 of 2009, 3536 of
2009 and 3080 of 2009 and the final order dated 07.01.2010
of the Division Bench of the Jharkhand High Court in L.P.A
Nos. 484 of 2009, 485 of 2009, 486 of 2009 and 523 of 2009.
Since common issues of fact and law arise for decision in this
batch of cases, we are disposing of these appeals by this
common judgment.
4. The relevant facts very briefly are that the respondents
were granted linkage of different quantities of coal for
utilization in the manufacture of smokeless fuel in their
plants. On 18.10.2007, the Government of India, Ministry of
Coal discontinued the traditional linkage system and in its
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place adopted a new coal distribution policy under which coal
was to be supplied to different consumers through a Fuel
Supply Agreement (for short ‘FSA’) at notified prices to be fixed
and declared by Coal India Limited. In accordance with this
new policy, Bharat Coking Coal Limited (for short the ‘BCCL’),
a subsidiary of Coal India Limited, entered into FSA with the
respondents for supply of coal. Clause 4.4 of FSA provided
that the total quantity of coal supplied to the respondents
under the agreement is meant for use in the plant of the
respondents and the respondents shall not sell or divert or
transfer the coal for any purpose whatsoever and in the event
they engage or plan to engage into any such re-sale or trade,
BCCL shall terminate the FSA forthwith without any liabilities
or damages whatsoever payable to the respondents. On
07.06.2009, the Central Bureau of Investigation (for short the
‘CBI’) registered First Information Report (FIR) against 10
consumers including the respondents alleging inter alia that
the 10 consumers entered into a criminal conspiracy with Shri
Udayan Bhattacharya, the then General Manager (S&M) of
BCCL and in furtherance thereof, lifted 11,94,940 tonnes of
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coal and instead of utilizing the same in their respective
plants, sold the same in the open market at higher prices and
as a result BCCL has suffered a loss of Rs.4,36,15,300/-
approximately and the accused have made corresponding
wrongful gain to themselves. In the FIR, the CBI further
stated that the facts disclosed the commission of offences
punishable under Section 120-B read with Sections 420, 467,
471 of the Indian Penal Code (for short ‘IPC’) and Section 13(2)
read with Section 13(d) of the Prevention of Corruption Act,
1988 by Shri Udayan Bhattacharya and the proprietors of
different consumer firms and, therefore, a criminal case be
registered and the investigation be taken up. The Chairman of
the Coal India Limited thereafter advised the Chairman-cum-
Managing Director of BCCL to suspend supply of coal to the
firms named in the FIR including the respondents and
accordingly BCCL suspended supply of coal to the
respondents by a wireless message dated 13.06.2009.
5. Aggrieved, the respondents filed the Writ Petitions in the
High Court of Jharkhand at Ranchi praying for quashing the
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communications suspending the supply of coal to the
respondents under FSA and also praying for interim orders
directing BCCL to resume supply of coal. On 06.10.2009, the
learned Single Judge of the Jharkhand High Court passed the
impugned interim orders directing resumption of supply of
coal to the respondents on the ground that there was no
material placed by the BCCL to show that there was any kind
of black marketing done by the respondents or any kind of
mis-utilization of the allotted coal by them. The appellants
herein challenged the interim orders dated 06.10.2009 of the
learned Single Judge before the Division Bench in the LPAs.
By order dated 07.01.2010 the Division Bench dismissed the
LPAs with the liberty to the appellants to file applications for
vacating the interim orders as soon as the appellants are able
to procure adverse material against the respondents and in
the alternative passed orders terminating FSA with the
respondents.
6. Mr. Anupam Lal Das, learned Counsel for the appellants,
submitted that the learned Single Judge of the High Court by
directing resumption of supply of coal to the respondents had
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granted a final relief to the respondents by interlocutory orders
and this was not permissible in law. He further submitted
that the only reason given by the learned Single Judge for
passing the interlocutory order directing resumption of supply
of coal was that there were no materials other than the FIR
lodged by the CBI to show that any kind of black marketing
was done or any kind of mis-utilization of allotted coal was
made by the respondents. He submitted that the FIR lodged
by a premier investigating agency like the CBI and the
chequered history of the respondents before the FIR were
sufficient materials to suspend the supply of coal to the
respondents. He further submitted that in any case
investigation into the allegations made in the FIR has already
been completed by the CBI and charge sheet has been filed
against the respondents which vindicate the stand taken by
the appellants that the respondents were diverting coal meant
for their plants for sale in the open market.
7. Mr. Das further submitted that two of the consumers to
whom the supply of coal was similarly suspended, namely,
M/s Sushila Chemicals Pvt. Ltd. and M/s Magadh Smokeless
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Fuel Co. moved the Patna High Court in two separate Writ
Petitions and the learned Single Judge of the Patna High Court
passed a common order dated 26.08.2009 allowing the Writ
Petitions with a finding that the investigation of criminal case
or allegations of misuse of coal is no ground for suspension of
coal supply under FSA, but the appellants filed LPA Nos.
1265 of 2009 and 1266 of 2009 before the Division Bench of
the Patna High Court and the Division Bench held that in
larger public interest resumption of supply of coal could not be
ordered so long as the appellants do not consider the show
cause of the Writ Petitioners and taken a final view on merits.
He submitted that similarly some other consumers, namely,
M/s Pratap Fuel Industries and M/s National Fuels Industry
moved the Allahabad High Court in Civil Miscellaneous Writ
Petition Nos. 33576 of 2009 and 36430 of 2009 against the
suspension of supply of coal under FSA and the Division
Bench of the Allahabad High Court held that the order
suspending the supply of coal to the two consumers passed by
the appellants herein needed no interference by the Court in
its extraordinary jurisdiction and instead directed the
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appellants herein to consider the explanations of the two
consumers furnished in reply to show cause notices dated
16.07.2008 and take a final decision in the matter. He
submitted that although the orders passed by the Patna High
Court and the Allahabad High Court were cited before the
Division Bench of the Jharkhand High Court, the same had
not been referred to or dealt with in the impugned orders
passed by the Division Bench of the Jharkhand High Court in
the LPAs. He submitted that an anomalous situation now
prevails with regard to supply of coal to the 10 consumers
against whom the CBI has lodged the FIR. Those consumers
who moved the Patna High Court and the Allahabad High
Court are not getting the supply of coal under FSA, whereas
those consumers who moved the Jharkhand High Court and
in whose favour the Jharkhand High Court has passed orders
would be entitled to supply of coal under FSA, though the two
classes of consumers are similarly situated.
8. Mr. Das cited the observations of this Court in Ashoka
Smokeless Coal India (P) Ltd. & Ors. Vs. Union of India & Ors.
[(2007) 2 SCC 640] in Para 188 at Page 703 on the need to
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control black marketing and mis-utilization of coal. He
submitted that it is pursuant to these observations of this
Court that the new coal distribution policy has been framed to
discontinue the Linkage System which could not check the
menace of black marketing and diversion of coal to the open
market and supply of coal on strict terms and conditions
stipulated in FSA to the consumers has been contemplated to
ensure proper utilization of the coal in the plants. He
submitted that this is why in Clause 4.4 of the FSA it is clearly
provided that the total quantity of coal supplied to the
respondents under the agreement is meant for use in the
plants of the respondents and the respondents shall not
sell/divert and/or transfer the coal for any purpose
whatsoever and in the event they engage or plans to engage
into any such resale or trade, the BCCL shall terminate the
FSA forthwith without any liabilities and damages whatsoever
payable to the respondents. He submitted that therefore the
BCCL can suspend supply of coal to the respondents if the
respondents have not been able to establish that the coal
already supplied to the respondents has been used in the
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plants of the respondents. He submitted that Clause 13 of
FSA, which provides that if the respondents fail to pay any
amount including any interest due to the BCCL towards
purchase price of the coal the BCCL can suspend supply of
coal to the respondents, is not exhaustive of the contingencies
in which the BCCL can suspend supply of coal to the
respondents. He submitted that the learned Single Judge and
the Division Bench of the Jharkhand High Court have lost
sight of these provisions of FSA made in the public interest
while passing the impugned orders.
9. Mr. M.L. Varma, learned Senior Counsel appearing for
the respondent M/s Alok Fuels (P) Ltd. submitted that the
case of the respondent before the High Court was that
supplies of coal to the respondent was suspended arbitrarily
and in violation of Article 14. He submitted that the industry
of the respondent was functional as would be evident from the
report of the General Manager, District Industry Centre before
the Punjab & Haryana High Court in Civil Writ Petition No.
9863 of 2008. He further submitted that no materials were
produced by the appellants before the learned Single Judge or
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the Division Bench despite opportunity being given to the
appellants to produce materials against the respondent. He
further submitted that no opportunity has been given to the
respondent to explain and rebut the materials now found and
filed alongwith the charge sheet against the respondents by
the CBI.
10. Mr. Ranjeet Kumar, learned Senior Counsel, appearing for
the respondent M/s Faridabad Industries, on the other hand,
supported the impugned orders passed by the learned Single
Judge and the Division Bench of the High Court and
submitted that besides the FIR lodged by the CBI, no other
material whatsoever was placed by the appellants before the
High Court to show that the respondents M/s Faridabad
Industries diverted coal from its plant and sold the same in
the open market. He submitted that due opportunity was
given by the learned Single Judge of the High Court by the
order dated 15.07.2009 to the appellants about materials
which were in their possession on the date on which supply
was directed to be suspended but despite such opportunity,
the appellants did not produce any material whatsoever before
12
the High Court to show that the respondent M/s Faridabad
Industries has resorted to any black marketing or sale in the
open market or had diverted coal from its plant. He submitted
that supply of coal to the respondent M/s Faridabad
Industries was very essential for its industry and business and
suspension of supply of coal to the industry of the respondent
could not be allowed by the Court for an indefinite period of
time and therefore the learned Single Judge of the High Court
had rightly passed the interlocutory order directing the
appellants to resume supply of coal to the respondents.
11. Mr. U.U. Lalit, learned Senior Counsel appearing for the
respondent M/s Ajay & Company Fuel Product adopted the
submissions of Mr. Ranjeet Kumar and further submitted that
it will be clear from Para 2 of the Additional Affidavit filed on
behalf of the appellant on 10.05.2010 in SLP (C) No. 11307 of
2010 that prior to the new coal distribution policy introduced
w.e.f. 18.10.2007, there were 230 national consumers and 94
Cokeries and Cokery-cum-Washery units drawing coal from
BCCL, but after introduction of this new policy on 18.10.2007,
only five consumers other than private cokery units were
13
found suitable for execution of FSA under the new coal
distribution policy. He submitted that the respondent M/s
Ajay & Company Fuel Product was one of these five consumers
found suitable for execution of FSA and at this stage a stand
cannot be taken by the appellants that M/s Ajay & Company
Fuel Product was not suitable for supply of coal under FSA.
12. Mr. S.B. Upadhyay, learned Senior Counsel, appearing for
the respondent M/s M.G.M. Contrade Pvt. Ltd. adopted the
arguments of Mr. Ranjit Kumar and further submitted that
Clause 13 of the FSA executed by BCCL in favour of M/s.
M.G.M. Contrade Pvt. Ltd., stipulated that BCCL could
suspend supplies of coal to the respondent if the respondent
fails to pay any amount including any interest to BCCL under
FSA. He submitted that the supply of coal to the respondent
therefore could not be suspended on any ground other than
the failure on the part of the respondent to pay any amount or
interest due to the BCCL under FSA. He submitted that
suspension of supply of coal by the petitioner to the
respondent pursuant to the FIR lodged by the CBI is,
therefore, in breach of Clause 13 of the FSA. He referred to
14
the observations of this Court in Para 189 in the case Ashoka
Smokeless Coal India (P) Ltd. & Ors. Vs. Union of India & Ors.
(Supra) that inspection should be carried out by the officers
appointed by the Chairman cum Managing Director of the
company concerned within whose jurisdiction the unit is
located before entering into any agreement for supply of coal to
ensure the genuineness of the unit. According to Mr.
Upadhyay, since FSA has been executed in favour of the
respondent after all such inspection and scrutiny, the
appellants cannot at this stage take the stand that the unit of
the respondent is not genuine.
13. We have considered the submissions of learned counsel
for the parties and we find that the only reason why the
learned Single Judge of the High Court has by the impugned
interim orders directed the appellants to resume supplies of
coal under FSA to the respondents is that BCCL has not
placed any material before the Court to show that there was
any kind of black-marketing of coal done by the respondents
or any kind of mis-utilization of the allotted coal by them and
this is also the reason given by the Division Bench of the High
15
Court for dismissing the LPAs filed by the appellants against
the impugned interim orders passed by the learned Single
Judge. What the learned Single Judge and the Division Bench
of the High Court failed to appreciate is that the FIR
containing the allegations of mis-utilization of the allotted coal
and sale of the allocated coal by the respondents in the open
market was lodged by the CBI and therefore the CBI and not
the BCCL was in possession of information or materials with
regard to such mis-utilization of the allotted coal or sale of the
coal in the open market by the respondents. As a matter of
fact in the charge-sheet which has been filed after
investigation in the Court of Special Judge, CBI cases,
Dhanbad, it is stated that a search was conducted at the plant
premises of the respondents in June 2009 by the CBI officials
in presence of independent witnesses during which the plants
of the respondents were found to be non-functional and the
names of employees / workers as per the Attendance Register
as well as other documents relating to sale of finished goods as
produced by the respondents were found to be fake and
fabricated as full particulars, addresses etc. were not provided
16
in the records in respect of such employees / workers engaged
and purchasers of finished goods and thus the quantity of coal
issued to the respondent-companies were not utilized in their
plants but sold in black-market. It was thus clear that there
were materials with the CBI in support of the allegations made
in the FIR against the respondents that they were not utilizing
the allotted coal in their plants but were selling the same in
black-market, but these materials could not be placed before
the Court because the CBI was not impleaded as a respondent
in the writ petitions filed by the respondents.
14. We further find that in the counter-affidavit filed in the
High Court in reply to the writ petitions filed by the
respondents, Coal India Limited and BCCL have pleaded that
under Clause 4.4 of FSA the respondents were required to
utilize the entire quantity of coal allotted to them in their
respective plants and had undertaken not to sell / divert /
transfer the coal for any purpose whatsoever and as the FIR
lodged by the CBI disclosed breach of this clause of FSA, Coal
India Limited and BCCL had to suspend the supplies of coal to
prevent further diversion of coal by the respondents and this
17
decision was taken pending a final decision regarding
termination of FSA in terms of Clause 15 thereof. Thus the
case of the appellants herein before the High Court was that
suspension of supply of coal has been ordered to prevent
further diversion of coal by the respondents. The Coal India
Limited and BCCL are Government Companies of the
Government of India and are bound by the policy decisions of
the Government of India, Ministry of Coal, and since under the
New Coal Distribution Policy formulated pursuant to the
observations of this Court in Ashoka Smokeless Coal India (P)
Ltd. & Ors. Vs. Union of India & Ors. (Supra), mis-utilization of
allotted coal and black-marketing of such coal by the
respondents was to be checked, the Coal India Limited and
BCCL did not act arbitrarily or unreasonably to suspend the
supplies of coal under FSA to the respondents, if they
entertained a serious doubt on the basis of the FIR lodged by
the CBI that the supplies of coal, if made to the respondents,
may be mis-utilized by the respondents and may be sold in the
open market.
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15. It is settled by a series of decisions of this Court starting
from Kumari Shrilekha Vidyarthi v. State of U.P. [(1991) 1 SCC
537] that even in the domain of contractual matters, the High
Court can entertain a writ petition on the ground of violation
of Article 14 of the Constitution when the impugned act of the
State or its instrumentality is arbitrary, unfair or
unreasonable or in breach of obligations under public law. In
Sterling Computers Ltd. v. M/s M & N Publications Limited and
Others [(1993) 1 SCC 445] in para 28, however, this Court
held:
“Public authorities are essentially different from
those of private persons. Even while taking decision
in respect of commercial transactions a public
authority must be guided by relevant considerations
and not by irrelevant ones.”
Obviously, one such relevant consideration which the Coal
India Limited and BCCL as public authorities have to consider
is whether continuation of supply of coal to the respondents
may not lead to mis-utilization or black-marketing of the coal
by the respondents which are prohibited under FSA and the
policy decision of the Government considering the allegations
made by the CBI in the FIR on the basis of the reliable
19
information received. This relevant aspect has not been
considered by either the learned Single Judge or the High
Court while passing the impugned interim orders or by the
Division Bench of the High Court while dismissing the LPAs
against the impugned interim orders of the learned Single
Judge.
16. It is true as has been contended on behalf of the
respondents that Clause 13(1) of FSA provides that in the
event respondents fail to pay any amount including any
interest due to BCCL under FSA within a period of 30 days of
the same falling due, BCCL shall have the right to suspend
supplies of coal to the respondents, but Clause 13(1) does not
stipulate that in no other contingency BCCL can suspend
supplies of coal under FSA to the respondents. Moreover,
Clause 13(1) of FSA enumerates the three options available to
BCCL in case the dues towards the price of coal and interest is
not paid by the respondents and it does not provide for the
different contingencies in which BCCL can suspend the
supplies of coal to the respondents. In our considered opinion
BCCL will also have the right to suspend supplies of coal to
20
the respondents where it has doubts that the respondents may
mis-utilize the allotted coal and divert or sell the same in open
market because, as would be clear from Clause 4.4 of the FSA
and the new Coal Distribution Policy decision dated
18.10.2007, the very object of FSA as well as policy of the
Government is to allot coal to respondents for utilization in
their plants and not for any other purpose. Therefore, if the
FIR lodged by the CBI, which is a premier investigation agency
of the Central Government, created serious doubts that the
allotted coal may be diverted or sold in the open market
instead of being utilized in the plants of respondents, BCCL
would be within its rights to suspend the supplies of coal to
the respondents till the doubts are cleared in appropriate
proceedings.
17. We, however, find that BCCL has initiated such
proceedings by issuing show cause notices dated 16.07.2009
to the respondents to explain why FSA executed in favour of
the respondents should not be cancelled on the basis of the
FIR lodged by the CBI containing the allegations that the
respondents were involved in a criminal conspiracy leading to
21
the breach of terms and conditions of FSA. If the respondents
have furnished their explanations, BCCL may consider the
same and take a decision whether or not to resume supplies of
coal in accordance with law.
18. We, therefore, hold that the learned Single Judge and the
Division Bench of the High Court were therefore not right in
directing BCCL to resume the supplies of coal to the
respondents and accordingly set-aside the impugned orders
dated 06.10.2009 of the learned Single Judge and dated
07.01.2010 of the Division Bench of the High Court and allow
these appeals with no order as to costs.
……………………..J.
(Altamas Kabir)
……………………..J.
(A. K. Patnaik)
New Delhi,
September 15, 2010.
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