Healthcare Limited & Anr vs Eastern Coalfields Limited & Anr
2023 Latest Caselaw 2521 Cal

   15
13.04.2023
    mb




                  W.P.A. No. 25287 of 2014

                GlaxoSmithKline Consumer
                 Healthcare Limited & Anr.
                             Vs.
              Eastern Coalfields Limited & Anr.




               Mr. Suddhasatva Banerjee,
               Mr. Snehashis Sen,
               Mr. Abhishek Banerjee
                           ...for the petitioners

               Mr. Shaunak Sengupta,
               Mr. Sudhakar Prasadd,
               Mr. Pradipta Basu
                            ...for the respondents

The conspectus of the present issue is

extremely limited.

The primary argument of the petitioners is that

the respondents, prior to terminating the fuel

supply agreement with the petitioners vide

termination letter dated July 28, 2014, did not

comply with the appropriate clauses of the said

agreement, which were mandatory prerequisites for

terminating the contract.

It is submitted that none of the grounds

stipulated in the agreement for termination has

occurred or has been alleged, let alone established,

by the respondents at any point of time.

The plinth of the argument of the respondents

is on the premise of the show cause notice dated

March 5/6, 2014, annexed at page 67 of the writ

petition. It transpires from the said document that

the petitioners were requested to "show cause" why

the documents enumerated thereinabove were not

submitted by the petitioners in terms of a notice

dated September 09, 2013, wherein the

respondents had asked for submission of the

requisite documents in the prescribed format.

It is seen from the list of documents, which

finds place in a short two-column chart in the said

notice, that it pertains primarily to production

licence, constitution status, factory running

affidavit, factory licence and so on and so forth.

The deficiency in the submitted documents, as

indicated in the chart, was that critical machinery

had apparently been authenticated by "CA" in place

of "CE". It also transpires from the said notice that

the annual documents had been submitted by the

petitioners for the period 2012-13.

However, the respondents, in the said notice,

specifically rely on two particular clauses of the

agreement, being Clause 4.4 and Clause 15.1.8.

Hence, the cause required to be shown by the

petitioners, even as per the said show cause notice,

was merely for non-production of the requisite

documents, which, according to the respondents,

were not properly authenticated.

However, Clause 4.4 stipulates that the total

quantity of coal supplied pursuant to the

agreement is meant for use at a particular location

as listed in Schedule-I and the purchaser shall not

sell/divert and/or transfer the coal for any purpose

whatsoever and the same, if done, shall be treated

as material breach of the agreement. In the event

the purchaser engages or plans to engage in any

such resale or trade, it was mentioned that the

seller shall terminate the agreement forthwith

without any liabilities or damages whatsoever

payable to the purchaser. It was also stipulated

therein that the seller shall reserve the right to

verify, including the right to inspect/call for any

document from the purchaser and physically verify

the end-use of coal and satisfy itself of its

authenticity.

Clause 15.1.8, on the other hand, stipulates

that in the event any party commits a breach of

term or condition of the agreement, not otherwise

specified in Clause 15.1 preceding the said clause,

the other party shall have the right to terminate the

agreement after providing the defaulting party thirty

(30) days' prior notice and if the breach has not been

cured or rectified to the satisfaction of the non-

defaulting party within the said period of thirty (30)

days (emphasis supplied).

However, it appears from the termination

notice dated July 28, 2014, which has been

impugned herein, that the respondents merely

indicated that certain deficiencies were noticed by

the Verification Committee in the submitted annual

documents of the petitioners. It was next stated

that, "therefore", the petitioners had failed to abide

by the terms and conditions of the fuel supply

agreement as stated therein and, therefore,

breached the provisions of Clause 4.4 of the said

agreement. In the last paragraph of the purported

termination notice, the respondents indicated that

in terms of clause 4.4 of the agreement, the same

stood terminated with immediate effect. In terms of

Clause 3.6 of the said agreement, it was further

mentioned, security money deposited by the

petitioners while executing the agreement stood

forfeited.

Obviously, the alleged forfeiture would only

follow in the event there was a valid termination of

the agreement itself.

It is clearly seen from the purported show

cause notice dated March 5/6, 2014 that the cause

directed to be shown by the petitioners thereby was

entirely pertaining to the alleged non-submission of

the documents by the petitioners.

However, such mere non-submission of

documents, although might arguably have created

an adverse inference against the petitioners, could

not be a justified ground within the four corners of

the agreement for termination of the contract

and/or forfeiture of the security deposit.

Clause 4.4 of the agreement, cited by the

respondents in such termination notice, merely

contemplates sale, diversion and/or transfer of the

coal for any purpose whatsoever by the purchaser,

which would be treated as material breach of

agreement. Clause 15.1.8, at best, would mandate

the respondents to give a prior show cause notice

thirty days in advance and also to give an

opportunity to the petitioners, if in default, to cure

or rectify such default, to the satisfaction of the

respondents, within such period of thirty days.

In the present case, no such period or

opportunity has at all been given to the petitioners.

Moreover, the purported show cause notice does

not even allege that the petitioners are guilty of any

of the breaches as indicated in Clause 4.4 of the

agreement.

In absence of even any allegation regarding the

sale/diversion and/or transfer of coal for any

purpose whatsoever, let alone giving the petitioners

an opportunity to show cause on the same, it was

beyond the scope of the agreement to terminate the

petitioners' agreement.

Hence, the termination notice dated July 28,

2014 (Annexure P-3 at page-66 of the writ petition)

is palpably de hors the law as well as beyond the

scope of the agreement itself. Being thus vitiated,

the same is required to be set aside.

Accordingly, WPA No. 25287 of 2014 is

allowed, thereby setting aside the termination

notice dated July 28, 2014 (Annexure P-3 at page-

66 of the writ petition). Threats given in the said

notice with regard to the termination of the

petitioners' agreement as well as the forfeiture of

the security deposit of the petitioners stand

recalled.

It is, however, made clear that nothing in this

order shall prevent the respondents from

proceeding against the petitioners in accordance

with law and in consonance with the agreement in

the event the respondents are of the opinion in

future that any breach of such agreement has been

committed by the petitioners.

The respondents shall refund the entire

amount of security money, which was forfeited by

the respondents by invocation of bank guarantee

against the petitioners, to the petitioners by May

13, 2023.

However, the interest on such amount, prayed

on behalf of the petitioners, is not granted, since

the writ petition relied on an arguable point, as is

established by the fact that the writ petition had

initially been entertained and affidavits had been

directed to be exchanged between the parties.

Giving such benefit of doubt to the respondents, it

cannot be held beyond doubt that the non-payment

of the said sum and/or the forfeiture was ex facie

mala fide on the part of the respondents and/or

that the respondents could be held guilty therefor.

At this juncture, learned counsel for the

respondents seeks a stay of the operation of the

judgment rendered above.

However, in view of the period of about one

month being given to the respondents to refund the

amount-in-question, which is co-terminus with the

appeal period, such stay is refused.

There will be no order as to costs.

Urgent photostat certified copies of this order,

if applied for, be made available to the parties upon

compliance of all necessary formalities.

(Sabyasachi Bhattacharyya, J.)