Aparna Infraenergy India Pvt. ... vs Union Of India, Through ...
2017 Latest Caselaw 1993 Bom

                                                                                         1                                                                  WP4222-14
                                                        FARAD CONTINUATION SHEET No.
                                                 IN THE HIGH COURT OF JUDICATURE AT BOMBAY
                                                           NAGPUR BENCH AT NAGPUR
                                                       WRIT PETITION NO. 4222/2014 
                (APARNA INFRAENERGY INDIA PVT.LTD.   VERSUS    UNION OF INDIA & OTHERS)
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Office Notes, Office Memoranda of Coram,                                                                                          Court's or Judge's orders
appearances, Court's orders of directions
and Registrar's orders
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                                              Shri  Anand   Jaiswal,   Senior  Counsel  with   Shri   S.   Khedkar,   counsel   for   the
                                              petitioner.
                                              Mrs. M.R. Chandurkar, counsel for the R-1 and 2.
                                              Shri S.P. Dharmadhikari, Senior Counsel with Shri M.Anilkumar, counsel for
                                              the R-3 and 4.

                                              CORAM  : SMT. VASANTI  A   NAIK  AND
                                                          MRS. SWAPNA  JOSHI, JJ. 

                                              DATE      : APRIL   25
                                                                     ,   2017.

By this writ petition, the petitioner-Aparna

Infraenergy India Private Limited, Nagpur seeks a declaration

that the action on the part of the respondent no.3-Western

Coalfields Limited of issuing the communication, dated

07.12.2013 as also the impugned order dated 27.06.2014

cancelling the letter of assurance issued in favour of the

petitioner-Company is arbitrary and violative of the provisions of

Article 14 of the Constitution of India. The petitioner has sought

a direction against the respondents to execute the fuel supply

agreement in favour of the petitioner as per letter of assurance

dated 16/17.07.2010 by holding that the petitioner has achieved

all the milestones as per the letter of assurance.

The petitioner is a private limited company

registered under the Indian Companies Act, 1956. The

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respondent no.1-Union of India/Ministry of Coal had floated a

new coal distribution policy on 18.10.2007 pertaining to the

allocation of coal to be made by the respondent no.3-Western

Coalfields Limited and its other subsidiaries. On 11.07.2008, a

partnership firm in the name of M/s Aparna Infraenergy was

formed wherein Shri Mitesh Bhangadiya, Shri Sanjay Shivankar

and Smt.Kiran Wadettiwar were the partners. The said

partnership firm desired to set up a power plant at Kawathala

and was desirous of securing coal linkage for the said purpose.

The partnership firm, therefore, applied to the Standing Linkage

Committee on 04.08.2008 seeking the allocation of coal. The

Standing Linkage Committee recommended to the Western

Coalfields Limited that a letter of assurance as per the new coal

distribution policy could be granted to the partnership firm. The

Western Coalfields Limited called upon the firm to submit

commitment guarantee for the issuance of the letter of

assurance. The partnership firm applied to the Register of the

Partnership Firm for the registration of the same and was

registered as such on 07.05.2010. On 24.05.2010, admittedly

seven new partners that were the subsidiaries of M/s Gammon

Infrastructure Projects Limited joined as partners in the firm.

The said partnership-deed was also registered and a

commitment guarantee to the tune of Rs.10,09,34,000/- was

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submitted by the said reconstituted firm to the Western

Coalfields Limited on 25.05.2010. A letter of assurance was

issued in favour of the partnership firm M/s Aparna Infraenergy

India Private Limited on 16.07.2010. On 05.01.2011, the three

partners that initially constituted the firm, viz. Shri Mitesh

Bhangadiya, Shri Sanjay Shivankar and Smt.Kiran Wadettiwar

retired from the firm and the firm comprised of only seven

partners that were included in the firm as partners on

24.05.2010. It is the case of the petitioner-Company that steps

were taken by the petitioner-Company for achieving the

milestones as per the letter of assurance issued in favour of the

partnership firm on 16.07.2010. It is stated that several

communications were exchanged between the Western

Coalfields Limited and the company pertaining to the

achievement of the milestones. On 10.08.2012, the Western

Coalfields Limited informed the company that the bank

guarantee submitted by the company would be forfeited as the

milestones were not achieved within the stipulated time.

However, the petitioner-Company wrote to the Western

Coalfields Limited vide several communications that are placed

on record pointing out that the milestones were achieved and

what was not achieved would be complied within the time

frame. Admittedly, the Western Coalfields Limited did not take

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any action against the company in respect of the forfeiture of the

bank guarantee as per its communication, dated 10.08.2012.

The Standing Linkage Committee took a decision on 01.07.2013

that the Western Coalfields Limited should look into the matter

pertaining to the cancellation of letter of assurance to the

petitioner-Company and report to the committee. By an order

dated 07.12.2013, the petitioner was informed by the Western

Coalfields Limited that the partnership firm had breached the

conditions in the letter of assurance, since there is an

assignment of the letter of assurance in favour of the company

in which none of the partners that had originally applied for the

letter of assurance are the partners. It was informed that the

taking over of the original firm by the petitioner-Company could

not be accepted. In pursuance of the said order, the letter of

assurance was cancelled as the original partners of the company

that had applied for the letter of assurance had assigned their

right and interest in the letter of assurance. By the impugned

communication and order dated 07.12.2013 and 27.06.2014

respectively, the letter of assurance awarded in favour of the

partnership firm on 16.07.2010 was cancelled. The action on

the part of the respondent-Western Coalfields Limited in

cancelling the letter of assurance is challenged by the petitioner

in the instant petition.

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Shri Jaiswal, the learned Senior Counsel appearing

for the petitioner-Company, submitted that as per the letter of

assurance, the power or the authority to cancel or withdraw the

letter of assurance could be invoked only under Clause 3.4.1 of

the letter of assurance, which provides that the cancellation

could be effected if the milestones are not achieved within the

specified time. It is stated that only if the milestones were not

achieved within the specified time under clause 3.4.1, there

could have been a cancellation or withdrawal of the letter of

assurance. It is stated that it is apparent from Clause 3.4.1 of

the letter of assurance that only when the letter of assurance is

cancelled due to non-achievement of the milestones, the bank

guarantee could be invoked. It is stated that in the instant case,

the Western Coalfields Limited has cancelled the letter of

assurance by the impugned order dated 24.07.2014 only on the

ground that the original partners had withdrawn from the

partnership firm and a new company with seven other

incorporated entities was formed. It is submitted that the

cancellation of the letter of assurance was permissible only if the

petitioner had failed to achieve the milestones and since the

cancellation of the letter of assurance is not due to non-

achievement of the milestones by the petitioner, the same is

liable to be set aside in view of Clause 3.4.1 of the letter of

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assurance. It is submitted that in any case, the respondent-

Western Coalfields Limited is not entitled to encash the bank

guarantee unless it comes to a conclusion that the petitioner-

Company has not achieved the milestones. It is submitted that

in the circumstances of the case, the impugned orders-

communications are liable to be set aside.

The learned counsel for the respondent no.1-Union

of India has denied the prayers made in the writ petition and

submitted that the respondent no.1 is under an obligation to

ensure that the scarce natural resource, such as coal is

distributed in a just, fair, unbiased and legal manner in order to

exclude any possibility of transfer of the Coal Linkage in an

unauthorized manner to a person or entity, who is not eligible

for the coal linkage or intends to acquire the linkage from the

holder of the linkage under the garb of reconstitution of

partnership firm/ corporate restructuring, etc. It is submitted

that initially an unregistered partnership firm comprising of only

three partners had sought a letter of assurance and it was

decided that the same could be granted to the firm. It is stated

that the commitment guarantee was submitted on 25.05.2010

by a partnership firm that was reconstituted on 24.05.2010,

including therein seven new partners, all of which were the

subsidiaries of M/s Gammon Infrastructure Projects Limited. It

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is submitted that on 05.01.2011, the seven partners that were

included in the partnership firm on 24.05.2010 continued to be

the partners in the newly constituted firm-company after the

removal of the three partners that initially constituted the firm

in the year 2008. It is submitted that the retiring partners, i.e.

the three partners that had initially formed the firm opted out of

the partnership after receiving a sum of Rupees Forty Crores as

consideration. It is stated that the said action is contrary to

Condition No.5 in the letter of assurance. It is stated that apart

from the illegal assignment, the petitioner could not achieve the

milestones within the stipulated time and the letter of assurance

has lapsed on 17.07.2012.

Shri Dharmadhikari, the learned Senior Counsel

appearing for the respondent-Western Coalfields Limited has

opposed the prayers made in the writ petition. It is submitted

that initially, the partnership firm comprised of three partners

Shri Mitesh Bhangdiya, Shri Sanjay Shivankar and Smt.Kiran

Wadettiwar and the partnership comprising of the said partners

had sought for the letter of assurance. It is stated that before

the letter of assurance was issued, the partnership firm inducted

seven more partners in the partnership firm that are the

subsidiaries of M/s Gammon Infrastructure Projects Limited

without informing the Western Coalfields Limited. It is

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submitted that on 24.05.2010, the partnership firm was

reconstituted and the commitment guarantee was tendered by

the said firm to the Western Coalfields Limited on 25.05.2010.

It is stated that thereafter on 05.01.2011, by accepting a sum of

Rupees Forty Crores from the seven subsidiaries of M/s

Gammon Infrastructure Projects Limited, that were inducted in

the partnership firm as partners on 24.05.2010, the three

partners that initially constituted the firm, i.e. Shri Mitesh

Bhangadiya, Shri Sanjay Shivankar and Smt.Kiran Wadettiwar

retired from the partnership firm. It is submitted that the

acceptance of Rupees Forty Crores towards consideration for the

assignment of the letter of assurance in favour of the

subsidiaries of M/s Gammon Infrastructure Projects Limited

would result in profiteering in coal allocation and would be a

fraud on the authority. It is submitted that Clause 5 of the letter

of assurance clearly provides that it would not be permissible for

the assured, i.e. the partnership firm in this case, in whose

favour the letter of assurance was decided to be granted, to

assign to any third person, the letter of assurance or any right,

benefit, obligation or interest therein or thereunder without the

express prior written permission of the Western Coalfields

Limited. It is submitted that it was necessary for the partnership

firm to have secured the prior consent of the Western Coalfields

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Limited before including or removing the partners in the firm. It

is submitted that in view of the minutes of the review meeting of

the Standing Linkage Committee, dated 18.04.2011, and

specially Clause (d) of (XVII), the letter of assurance holders are

required to apply to the Ministry of Coal for seeking change in

the name of the company due to various factors as a result of

change in management, change in shareholding pattern,

approval by the Registrar of Company (ROC), amalgamation,

demerger, court orders, etc. It is submitted that as per the

minutes of the meeting dated 18.04.2011 and Clause 5 of the

letter of assurance, it was necessary for the letter of assurance

holder to seek express prior written consent of the Western

Coalfields Limited as well as the Ministry of Coal before

assigning any right, benefit, obligation or interest under the

letter of assurance. It is submitted that since there is a breach of

Clause 5 of the letter of assurance, the letter of assurance issued

in favour of the firm on 16.07.2010 is rightly cancelled. It is,

however, stated by the learned Senior Counsel on instructions

from Ms Anuradha Mourya, the Deputy Manager (Sales and

Marketing) of the Western Coalfields Limited, who is present in

the Court today, that in respect of the encashment of the bank

guarantee and forfeiture thereof, the Western Coalfields Limited

would issue a notice to the petitioner asking it to show cause as

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to why the guarantee should not be forfeited and encashed. It is

stated that the bank guarantee would be encashed, if necessary,

only after granting an opportunity to the petitioner-Company.

In the circumstances of the case, we do not find that

the Western Coalfields Limited committed any illegality in

cancelling the letter of assurance. Initially, Shri Mitesh

Bhangadiya, Shri Sanjay Shivankar and Smt.Kiran Wadettiwar

had formed a partnership firm with a view to set up a power

plant at Kawathala. With the aforesaid object in view, the said

partnership firm comprising of the aforesaid partners applied for

the coal linkage. The coal linkage committee decided to grant a

letter of assurance in favour of the partnership firm. By the time

the letter of assurance could be granted to the partnership firm,

the partnership firm had inducted seven more partners in the

partnership firm that were the subsidiaries of M/s Gammon

Infrastructure Projects Limited. The partnership firm comprised

of ten partners with its reconstitution on 24.05.2010. The said

partnership firm submitted a commitment guarantee to the

Western Coalfields Limited on 25.05.2010 and the letter of

assurance was issued in favour of the said company on

16.07.2010. Certain milestones were required to be achieved by

the firm after the issuance of the letter of assurance and

communications are exchanged between the said firm and the

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Western Coalfields Limited in regard to the achievement/non-

achievement of the milestones within the specified time.

Though the Western Coalfields Limited had decided to forfeit

the bank guarantee vide communication, dated 10.08.2012 the

said order was not given effect to and we find that several

communications were exchanged between the parties thereafter

in regard to the achievement of the milestones. In the

meanwhile, the Western Coalfields Limited and the Ministry of

Coal realized that the partnership firm to which the letter of

assurance was granted on 16.07.2010 is reconstituted on

05.01.2011. It was noticed by the respondent no.1 and the

Western Coalfields Limited that on 05.01.2011, the original

partners retired from the partnership after accepting a sum of

Rupees Forty Crores from the seven other partners that were the

subsidiaries of M/s Gammon Infrastructure Projects Limited and

the firm, that was subsequently registered under the Companies

Act comprised only of seven partners which did not include any

of the partners that had initially constituted the firm in the year

2008 for the purpose of setting up a power plant at Kawathala.

There is an exchange of communications between the parties in

this regard and by the impugned order-communication, the

Western Coalfields Limited has cancelled the letter of assurance.

We do not find that the action on the part of the respondent-

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Western Coalfields Limited is bad in law, as the said action is in

consonance with the conditions of the letter of assurance.

Condition No.5 of the letter of assurance clearly stipulates that

the assured, i.e. the partnership firm in this case to which the

letter of assurance was issued on 16.07.2010 cannot without the

express prior written consent of the assurer (Western Coalfields

Limited) and the Coal India, assign to any third person the letter

of assurance or any right, benefit, obligation or interest therein.

We find that initially, the Standing Linkage Committee had

decided to grant the letter of assurance in favour of the

partnership firm which comprised of only three partners.

However, when the letter of assurance was granted, there was a

change in the constitution of partnership firm and seven other

partners were inducted. The Standing Linkage Committee had

decided to grant the letter of assurance in favour of the

partnership firm that comprised of three individual partners

only. On 24.05.2010, the partnership firm was reconstituted

and seven more partners were inducted in the firm that were the

subsidiaries of M/s Gammon Infrastructure Projects Limited.

The name of the firm continued to remain the same on

24.05.2010. It is not clear whether the Western Coalfields

Limited had the knowledge about this change in the constitution

of the partnership firm as the commitment guarantee was given

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by the partnership firm to the Western Coalfields Limited on the

immediate next day, i.e. 25.05.2010 and a letter of assurance

was issued in favour of the firm on 16.07.2010. It is surprising

that the three partners that had constituted the partnership firm

with a view to set up the power plant at Kawathala retired from

the firm after the letter of assurance was issued, precisely on

05.01.2011 after accepting a sum of Rupees Forty Crores from

the subsidiaries of M/s Gammon Infrastructure Projects Limited

and there was a re-constitution of the firm to which the

Standing Linkage Committee had decided to issue the letter of

assurance. We find that there is a clear assignment of the

interest, benefit or right in the letter of assurance by the three

original partners in favour of the seven subsidiaries of M/s

Gammon Infrastructure Projects Limited, who remained as

partners after the three original partners retired from the

partnership firm after accepting the said sum. Condition no.5 of

of the letter of assurance was clearly breached by the

partnership firm to which the letter of assurance was sought to

be granted. Not once was the interest or benefit assigned by the

original partners but, that was done twice. It is rightly

submitted on behalf of the respondents that this would be a case

of profiteering in coal allocation and would be a fraud on the

authority. In the circumstances of the case, we do not find any

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error in the action on the part of the respondent-Western

Coalfields Limited in cancelling the letter of assurance, dated

16.07.2010. While holding so, we are not inclined to accept the

submission made on behalf of the petitioner that the letter of

assurance could be cancelled only if the milestones are not

achieved. On a reading of the letter of assurance in its entirety,

it is apparent that the letter of assurance could have been

cancelled on the breach of the conditions in the letter of

assurance, including Clause 5 which clearly prohibits the

assignment of any right, benefit, obligation or interest in the

letter of assurance without the express prior written consent of

the Western Coalfields Limited and the Ministry of Coal.

Admittedly, no prior consent, much less a written consent was

secured by the firm before assignment of the right and interest

in the letter of assurance exclusively in favour of the seven

subsidiaries of M/s Gammon Infrastructure Projects Limited by

the three original partners of the firm.

It would not be necessary to decide whether the

Western Coalfields Limited could encash the bank guarantee on

the cancellation of the letter of assurance as the learned Senior

Counsel, appearing for the Western Coalfields Limited has made

a fair statement that the decision on the forfeiture and

encashment of the bank guarantees would be taken, only after

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granting an opportunity to the petitioner to show cause against

the forfeiture of the Bank guarantee. We have accepted the fair

statement made by the learned Senior Counsel for the Western

Coalfields Limited on instructions and that would be binding on

the Western Coalfields Limited.

With the aforesaid observations, we dispose of the

writ petition with no order as to costs.

                                 JUDGE                          JUDGE
                   APTE