Rashmi Cement Limited & Anr vs Union Of India & Ors
2022 Latest Caselaw 806 Cal

                                         1


                    IN THE HIGH COURT AT CALCUTTA

                     (Constitutional Writ Jurisdiction)

                               APPELLATE SIDE

Present:

The Hon'ble Justice Krishna Rao

                               WPA 9647 of 2013

                      Rashmi Cement Limited & Anr.

                                     Versus

                            Union of India & Ors.



            Mr. Saptansu Basu, Senior Counsel
            Mr. Debjit Mukherjee
            Mr. Rajesh Gupta
            Mr. Meghajit Mukherjee
            Ms. Mrinalini Majumdar
            Ms. R. Goyal
                                       .....For the Petitioners
            Mrs. Ashima Roy Chowdhury
                                       .....For the Union of India



Heard on                : 17.02.2022

Judgment on             : 24.02.2022

      Krishna Rao, J.: The petitioners have filed the instant writ application

praying for a direction for refund of the amount of Rs. 1,34,46,000/- forfeited

by the respondent no. 4 on 20.07.2010. The petitioners further prayed for a

direction upon the respondent for execution of Fuel Supply Agreement in

respect of 6th, 7th & 8th Kilns of Unit-III of the petitioner's plant without

insisting for bank guarantee prior to refund of the forfeited proportionate bank

guarantee amounting to Rs. 1,34,46,000/-.

The respondent no. 1 has introduced a coal distribution policy to ensure

long term coal supply to certain categories of industries for the development of

such industries. Under the coal distribution policy, the coal companies under

the Central Government required to enter into Fuel Supply Agreement (in

sought hereinafter referred as FSA) with such industries.

The petitioner Company applied to the Central Government for the Coal

Linkage for its Unit No. III, Kiln No. 4, 5, 6 & 7 having the capacity of

2x30,000 and 2x45,000 per annum respectively being the total capacity of

1,50,000 TPA.

The Standing Linkage Committee (Long Term) on Sponge Iron Unit in its

meeting held on 06.09.2007 conveyed authorization to Coal India Limited/

Singerani Colliery Company Limited to issue Letter of Assurance on normative

basis.

The name of the petitioner Company was also figured in the list of the

units which have been approved for the issuance of Letter of Assurance. The

decision of the Standing Committee on Sponge Iron was duly communicated to

the petitioner Company as well as the Eastern Coal Fields Limited by the

Ministry on 21.01.2008. The Eastern Cold Fields Limited vide their letter dt.

04.04.2008 intimated the petitioner Company to furnish a bank guarantee

prior to issuance of Letter of Assurance and accordingly, the petitioner

Company furnished bank guarantee of Rs. 2,24,10,000/- in favour of the Coal

India Limited. The Eastern Coalfields Limited issued Letter of Assurance dt.

28.08.2008 wherein Eastern Coalfields Limited assured for supply of

1,80,000/- tones of D/E Grade Coal per annum to the Petitioner Company

subject to fulfillment of other conditions including achievements of mile stones

as stipulated in the Letter of Assurance.

The petitioner company duly fulfilled all mile stones/ requirement as

stipulated in the Letter of Assurance and requested the Eastern Coalfields

Limited to execute Fuel Supply Agreement. Initially the petitioner Company

envisaged construction of kiln nos. 4, 5, 6 & 7 having capacity of 2x30,000 and

2x45,000 per annum (TPA) respectively being total capacity of 1,50,000 TPA

due to technical compulsion. The Petitioner Company vide letter dt.

30.03.2010 intimated to the Eastern Coalfields Limited that the petitioner

Company had been issued the Letter of Assurance by the Eastern Coalfields

Limited dt. 28.06.2008 for 1,80,000/- tones of D/E Grade Coal per annum for

the petitioner's Plant against 4 kilns, out of which two of the capacity was

initially proposed to be 30,000 TPA each and for the other 2, the capacity was

proposed to be 45,000 TPA each. The petitioner for the technical reasons made

modification by adding one (1) kiln i.e. total 5 kilns each having capacity of

30,000 TPA by keeping the same total capacity. The petitioner requested the

Eastern Coalfields Limited to take note of such modification.

An inspection was conducted by the Eastern Coalfields Limited at the

Plant of the petitioner Company and a show cause notice was to the petitioner

company on 03.05.2010, as to why the proportionate commitment guarantee

for the 6th and 7th kilns should not be invoked. On receipt of the show cause

notice, the petitioner had submitted reply to the same on 05.05.2010 by

explaining the details the reason for modification of the capacity of two kilns

though maintaining the total capacity and requested for not to forfeit the

performance guarantee for the 6 th and 7th kilns and to allow the petitioner

Company to operate all kilns with the same capacity i.e. 1,50,000 TPA in terms

of the Letter of Assurance. The Eastern Coalfields Limited vide letter dt.

18.06.2010 informed the petitioner Company that since capacity and quantity

has been approved by the Ministry, Eastern Coalfields Limited had no

authority to accept such modification as requested by the petitioner. The

Eastern Coalfields Limited further advice the petitioner to approach the

respondent Ministry for approval of such modification. As per the advice of the

Eastern Coalfields Limited, the petitioner Company approached the Ministry for

said modification.

The Petitioner Company vide letter dt. 25.06.2010 requested the Eastern

Coalfields Limited to extend the time for getting approval from the Ministry

regarding modification of 4th, 5th, 6th and 7th kiln of its Sponge Iron Plant Unit-

III and also informed that the bank guarantee has been extended for another 6

months.

The Eastern Coalfields Limited without waiting for the approval from the

Ministry invoked proportionate bank guarantee and forfeited Rs. 1,34,46,000/-

on 20.07.2010 from the State Bank of India, Commercial Branch, Park Street,

Kolkata.

The Government of India, Ministry of Coal vide letter dt. 06.09.2010

informed the petitioner that the proposal submitted by the petitioner dt.

16.06.2010 has been examined by the Ministry and the competent authority

had decided to place the proposal before the Standing Linkage Committee

(Long Term) for Sponge Iron for its view in the matter.

The Eastern Coalfields Limited vide letter dt. 16.12.2011 informed the

petitioner Company about the approval for extension of SSA for the kiln 4 th and

5th of the Unit-III of the petitioner plant. The petitioner Company by letter dt.

14.02.2011 intimated the Eastern Coalfields Limited about the readiness and

willingness for execution of FSA at the earliest and accordingly, the FSA was

duly executed by and between Eastern Coalfields Limited and the Petitioner

Company with respect of Kilns No. 4th and 5th but supply of coal was not

commenced by the Eastern Coalfields Limited.

Due to delay on the part of the authorities in holding meeting, the

petitioner vide letter dt. 24.06.2012 requested the Ministry for taking

appropriate action for conducting meeting of the SLC (LT) immediately and

further to advice Eastern Coalfields Limited to make interim arrangement to

supply normative quantity of Coal to the petitioner company till the next

meeting of the SLC (LT) is held. As no action was taken by the Ministry as per

the request made by the petitioner Company and accordingly, the petitioner

Company again made a detailed representation on 17.11.2011 to the Chairman

of SLC (LT) informing the difficulties facing by the Company due to severe

shortage of Coal and requesting for consideration of the request of the

petitioner but inspite of the same no access action has been taken on the

request of the petitioner.

Being aggrieved with the said Act of the authorities, the petitioner

Company had preferred a writ application before this Court being WP No. 305

(w) of 2012 and the said writ petition was disposed of by the Coordinate Bench

on 02.02.2012 by directing the Ministry to consider and disposed of the

proposal made by the petitioner for modification of configuration of kilns. In

terms of the order passed by Coordinate Bench of this Court, the Ministry had

issued a letter dt. 10.05.2012 wherein it was informed to the petitioner that the

change of configuration as 3x30,000 TPA has been approved by the respondent

Ministry and in the said letter Eastern Coalfields Limited and Coal India

Limited where advice to take necessary action. On receipt of the letter dt.

10.05.2012 issued by the Ministry, a letter was sent to the Eastern Coalfields

Limited on 06.06.2012 requesting for taking necessary action in terms of the

letter dt. 10.05.2012 wherein it is mentioned that the petitioner Company has

fulfilled all the mile stones condition for the revise capacity of 3x30,000 TPA.

In the said letter, the petitioner Company also informed the Eastern Coalfields

Limited that the kiln nos. 6th, 7th and 8th are in running condition and

producing Sponge Iron and the petitioner Company requested the Eastern

Coalfields Limited to execute FSA and refund or adjust the forfeited amount of

Rs. 1,34,46,000/- at the time of execution of FSA with respect of Kiln nos. 6, 7

and 8. The Eastern Coalfields Limited has not taken any action for execution

of FSA with respect of 3 Kiln nos. 6, 7 and 8 in Unit-III of the petitioner's Plant,

the petitioner Company had sent reminder to the Eastern Coalfields Limited on

13.08.2012 requesting for expedite the execution of FSA in terms of approval of

the respondent Ministry. In spite of the same the Eastern Coalfields Limited

(ECL) did not take any action for execution of FSA.

A meeting was held between the representative of the Petitioner Company

and the concern authority of Eastern Coalfields Limited (ECL) wherein the

Petitioner's Company was advised by Eastern Coalfields Limited (ECL) to

submit the project report, copies of the letter dt. 10.10.2012, 30.12.2011,

01.08.2011 and 24.09.2009 of the West Bengal Pollution Control Board

regarding consent to operate and renewal of the factory license indicating

operational status of Plant and copy of the resolution of the Board of Directors

of the Petitioner Company. The Petitioner Company had supplied all the

documents to the Eastern Coalfields Limited (ECL) but inspite of the receipt of

the same the Eastern Coalfields Limited (ECL) had not come forward for

execution of FSA.

Vide Letter dt. 28.08.2008, the Eastern Coalfields Limited had informed

the petitioner that as per the request made by the petitioner Company issuance

of Letter of Assurance requiring 1,80,000 per annum (TPA) of D/E Grade Coal

for its 30,000 TPA (4th kiln) + 30,000 TPA, (5th Kiln) + 45,000 TPA, (6th kiln) +

45,000 TPA, (7th kiln) Sponge Iron units located at Gajasimul, Jitusole,

Jhargram, District West Medinipore is provisionally assured to Endeavour of

coal supply subject to the conditions made in the said letter. Clause 3.2 of the

said letter reads as follows:-

"The Commitment Guarantee (CG) shall be initially valid till four (4) months after the expiry of the LOA period of twelve (12) months. Thereafter, the CG shall stand converted into the Contract Performance Guarantee (CPG) that would be the condition precedent to signing of the FSA, in which case validity of the CG shall be extended in accordance with the terms of the FSA. For the avoidance of any doubt, the Assured shall be liable to submit the extra guarantee that may result from the difference between the CPG under FSA and the CG under the LOA."

Clause 3.4.2 of the said letter reads as follows:-

"The Assurer shall have the right to encash the CG in the event of failure by the Assured to sign the FSA within three (3) months of the expiry of validity of the LOA or of satisfactory achievement of all the milestones, as shown in Annexure 1, whichever is earlier."

The Petitioner Company vide letter dt. 30.03.2010 had informed the

Eastern Coalfields Limited with regard to the modification to facilitate the

operation of the 4th, 5th, 6th and 7th kiln by keeping the total capacity same as

mentioned in the Letter of Assurance. The Eastern Coalfields Limited instead

of considering the request made by the petitioner company had issued the

show cause notice dt. 03.05.2010 on the ground that the Company failed to

install 5th/6th kiln for the capacities for which the Letter of Assurance was

issued and also informed the Petitioner Company that the same is violation of

the Provisions of Clause 3.4 of the Letter of Assurance and as such the bank

guarantee is liable to be forfeited. In reply to the show cause notice the

petitioner has submitted that only to facilitate the operation of the kilns, the

petitioner Company has modified the capacities slightly keeping the total

capacity same as be mentioned in the Letter of Assurance. The company in the

reply further stated that the Company has added one kiln i.e. kiln no. 8 which

the Company is not claiming any additional Coal. The petitioner requested the

Eastern Coalfields Limited not to forfeit the bank guarantee for 6 th and 7th kiln

and allow the petitioner to operate the kiln with the same capacity of 1,50,000

TPA as per letter of assurance capacity. The Eastern Coalfields Limited vide

their letter dt. 18.06.2010 requested the Company to arrange for approval from

the appropriate authority i.e. the Ministry of Coal within 15 days from the date

of receipt of the letter. The Ministry vide letter dt. 06.09.2010 informed the

petitioner, the proposal of the Petitioner Company was examined by the

Ministry and the competent authority has to decide the proposal and the same

is to be placed before the SLC (LT) for Sponge Iron. Vide letter dt. 10.05.2012,

the Government of India Ministry of Coal inform the petitioner that the Ministry

and the competent authority has approved to take on record the change in

configuration subject to the following condition;

(i) The Letter of Assurance holder has to be fulfilled all the mile stones

conditions for revise capacity of 3x30,000 TPA.

(ii) No additional coal will be allowed on the change in configuration.

(iii) It will be a onetime exercise and no further request for

enhancement/reduction/change in configuration will be expected.

Vide letter dt. 24.09.2012, the General Manager, Coal India Limited

requested the Eastern Coalfields Limited for taking appropriate action as per

the direction given by the Ministry of Coal dt. 10.05.2012 but inspite of the

direction of the Ministry and the request made by the Coal India Limited, the

Eastern Coalfields Limited has not taken any steps and had forfeited the bank

guarantee of Rs. 1,34,46,000/-.

Inspite of the notice served upon the respondents none had appeared

only the Counsel for the Union of India had appeared and submitted that

Ministry has already approved the request made by the petitioner, and the

Eastern Coalfields Limited is required to take appropriate steps in terms of the

letter issued by the Ministry.

Considered the submission made by the Counsel for the petitioner,

documents available on record and the submission made on behalf of the

Union of India.

The Petitioner had immediately informed the Eastern Coalfields Limited

with regard to the modification. The Eastern Coalfields Limited requested the

petitioner to take appropriate approval from the Ministry. As per the request

made by the petitioner, the Ministry has also approved the same with the

conditions as referred above. After the approval of the Ministry, the petitioner

had requested the Eastern Coalfields Limited for modification but the Eastern

Coal Fields Limited failed to consider the request of the petitioner and before

taking decision by the Ministry, forfeited the bank guarantee of the petitioner.

The Ministry has approved the request made by the petitioner for modification

but the Eastern Coalfields Limited failed to modify the condition and as such

this Court is of the view that the Eastern Coalfields Limited has illegally

forfeited the bank guarantee of Rs. 1,34,46000/- without waiting the decision

of the Ministry. The Respondent no. 4 is directed to return the amount of Rs.

1,34,46000/- in the form of bank guarantee in the account of the petitioner

and to take appropriate steps for execution of Fuel Supply Agreement in

respect of 6th, 7th and 8th kiln as per the approval of the Ministry dt.

10.05.2012 within the period of 6 weeks from the date of communication of the

order.

WPA No. 9647 (W) of 2013 is disposed of.

Parties shall be entitled to act on the basis of a server copy of the

Judgment and Order placed on the official website of the Court.

Urgent Xerox certified photocopies of this judgment, if applied for, be

given to the parties upon compliance of the requisite formalities.

(Krishna Rao, J.)