A price-fall clause applies only to suppliers holding parallel contracts under the same tender.

Coal India Limited entered into a Running Contract (RC) with Orissa Explosive for supplying explosives and accessories to Coal India and its subsidiaries from 15 April 2015 to 31 March 2017.

Coal India informed the supplier that other companies were supplying similar explosives to Singareni Collieries Company Limited (SCCL) at lower prices, and stated that the price-fall clause would be invoked.

Orissa Explosive refused to accept SCCL’s prices, but continued supplying at the RC rates; Coal India continued accepting those supplies and proposed a provisional extension of the RC at the existing terms.

On 31 March 2017, Coal India invoked the clause and amended the prices applicable to Orissa Explosive.

The supplier challenged that action under Article 226. The Single Judge directed Coal India to pay for supplies at the RC rates and release other amounts, including the bank guarantee; Coal India appealed.

1. Whether Coal India could invoke the RC’s price-fall clause based on lower prices charged by suppliers to SCCL, where those suppliers did not hold parallel RCs with Coal India or its subsidiaries for the relevant item.

2. Whether the dispute was unsuitable for determination under Article 226 because it concerned contractual interpretation, disputed facts, and a money claim.

3. Whether Coal India’s amended prices and withholding of payment were arbitrary and contrary to Article 14.

Article 14 requires the State and its instrumentalities to act fairly, justly, reasonably, and without arbitrariness, including in contractual matters; the contractual character of a dispute does not, by itself, exclude judicial review where State action is challenged as arbitrary or unfair (*ABL International Ltd. v. Export Credit Guarantee Corporation of India Ltd.*, as quoted at para. 35).

A contract’s terms may be established through the parties’ conduct as well as their express words; silence accompanied by conduct amounting to a positive act may constitute acceptance (*Bharat Petroleum Corpn. Ltd. v. Great Eastern Shipping Co. Ltd.*, discussed at paras. 33, 36).

A writ court may examine a contractual decision where the issue can be resolved on the plain meaning of the contract and the material facts, without detailed evidence; the availability of a civil remedy is not an absolute bar in such circumstances.

The RC’s clause 7.2 permitted a lower price to apply to other suppliers having parallel RCs for the item, and, if a supplier did not accept that price, permitted Coal India to delete the item from that supplier’s RC—not to deduct the differential from bills.

The Court read clause 7.2 according to its plain terms and found that the lower SCCL prices did not trigger it: the relevant suppliers had no parallel RCs with Coal India or its subsidiaries for the item, and the record did not establish otherwise.

Further, the clause’s stated consequence for a supplier’s refusal was deletion of the item from its RC, not deduction of the price difference from amounts payable.

The supplier had clearly rejected SCCL’s rates, yet Coal India continued accepting supplies

The Single Judge directed Coal India to pay for supplies at the RC rates and release other amounts, including the bank guarantee; Coal India appealed.