[Cites 7, Cited by 0]
Jharkhand High Court
The Coal India Limited Through Its ... vs M/S Kunj Iron Products (Formerly ... on 28 November, 2025
Author: Sujit Narayan Prasad
Bench: Sujit Narayan Prasad
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IN THE HIGH COURT OF JHARKHAND AT RANCHI
L.P.A. No. 328 of 2015
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1. The Coal India Limited through its Chairman, a
Government Company incorporated under Section 617 of
the Companies Act, 1956 and having its Office situated at
10, Netaji Subhas Road, Post Office-GPO, Police Station-
Hare Street, Kolkata-700001, through its Chairman.
2. The Chairman, Coal India Limited, 10, Netaji Subhas
Road, Post Office-GPO, Police Station-Hare Street,
Kolkata, District Kolkata-700001.
3. The Eastern Coalfields Ltd. Through its Chairman-cum-
Managing Director, a subsidiary of Coal India Limited
"Coal House", 13, R.N. Mukherjee Road, Post Office-GPO,
Police Station - Hare Street, Kolkata-700001 and
registered office at Sanctoria, P.O. Disergarh, Police
Station-Kulti, District Burdwan, West Bengal.
4. The Chairman-cum-Managing Director, Eastern
Coalfields Ltd. a Subsidiary of Coal India Ltd., "Coal
House", 13, R.N. Mukherjee Road, Post Office-GPO, Police
Station - Hare Street, Kolkata-700001 and registered
office at Sanctoria, P.O. Disergarh, Police Station-Kulti,
District Burdwan, West Bengal, The Chief General
Manager (S&M), Eastern Coal India Ltd., a Subsidiary of
Coal India Ltd., "Coal House" 13, R.N. Mukherjee Road,
Post Office-GPO, Police Station - Hare Street, Kolkata-
700001.
5. The Chief Sales Manager, Eastern Coalfields Ltd. a
Subsidiary of Coal India Ltd., "Coal House", 13, R.N.
Mukherjee Road, Post Office-GPO, Police Station - Hare
Street, Kolkata-700001.
6. The General Manager (S&M), Eastern Coalfields Ltd.,
Sanctoria, P.O. Disergarh, Police Station-Kulti, District
Burdwan, West Bengal.
7. The Deputy Chief Sales Manager (R.S.), Eastern Coalfields
Ltd., Sanctoria, P.O. Disergarh, Police Station-Kulti,
District Burdwan, West Bengal.
8. The Deputy Sales Manager (R.S.), Computer Center,
Eastern Coalfields Ltd., "Coal House", 13, R.N. Mukherjee
Road, Post Office-GPO, Police Station - Hare Street,
Kolkata-700001.
9. The Finance Executive, Eastern Coalfields Ltd., "Coal
House", 13, R.N. Mukherjee Road, Post Office-GPO, Police
Station - Hare Street, Kolkata-700001.
10. The Senior Manager (Finance), Eastern Coalfields Ltd.,
"Coal House", 13, R.N. Mukherjee Road, Post Office-GPO,
Police Station - Hare Street, Kolkata-700001.
11. The Chief General Manager (S&M), Eastern Coalfields
Ltd., a Subsidiary of Coal India Limited, "Coal House", 13,
1
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R.N. Mukherjee Road, Post Office-GPO, Police Station -
Hare Street, District- Kolkata-700001 (West Bengal).
All through Dy. Manager (Personnel) namely, Rohan
Aswal, son of Lal Chand Aswal, resident of Coal House,
13, R.N. Mukherjee Road, Kolkata, P.O. Kolkata, P.S.
Kolkata, District Kolkata. ... ... Appellants
Versus
M/s Kunj Iron Products (Formerly Calcinor India Ltd.)
having its unit situated at P.O. Chirkunda, P.S.
Chirkunda, District Dhanbad (Jharkhand), through its
Director, Shhakti Aggarwal son of Sri Bajranj Prasad
Aggarwal, resident of Chirkunda, P.O. & P.S. Chirkunda,
District Dhanbad (Jharkhand).
... ... Respondent
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CORAM: HON'BLE MR. JUSTICE SUJIT NARAYAN PRASAD
HON'BLE MR. JUSTICE ARUN KUMAR RAI
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For the Appellants : Mr. Rajesh Lala, Advocate
For the Respondents : Mr. Ajit Kumar, Sr. Advocate
: Ms. Aparjita Bhardwaj, Advocate
: Ms. Satakchhi Priya Verma, Advocate
: Mr. Akash Ajit Kumar, Advocate
------
C.A.V. on 06.11.2025 Pronounced on 28/11/2025
Per Sujit Narayan Prasad, J.
Prayer
1. The instant appeal under Clause 10 of the Letters
Patent is directed against the order dated 25.03.2015 passed
by learned Single Judge in W.P.(C) No. 6545 of 2011,
whereby and whereunder the learned Single Judge has
allowed the writ petition and held that the termination of FSA
dated 30.04.2008 by the respondent-ECL vide letter dated
25.07.2011 was illegal and arbitrary and subsequent
forfeiture of bank-guarantee vide order dated 08.08.2011 is
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therefore, also quashed. Further, it has been held that since
supply of coal was suspended from 21.07.2010, the
respondent-ECL cannot demand payment of compensation
from the petitioner on account of non-lifting of coal and
accordingly, demand notices issued for compensation after
21.07.2010 are also quashed.
Factual Matrix
2. The brief facts of the case as per the pleading made
in the writ petition, which are required to be enumerated,
read as under: -
The petitioner company registered under Companies
Act, 1956 is a manufacturer of high-quality sponge iron
having its plant situated at Chirkunda, Dist. Dhanbad,
Jharkhand was having valid coal linkage/allocation of coal
from Coal India Ltd. with ECL as a source subsidiary
company.
3. It is relevant to mention that both coking coal mines
and coal mines were subjected to nationalization in terms of
Coking Coal Mines (Nationalization) Act, 1972 and the Coal
Mines (Nationalization) Act, 1973.
4. After nationalization, the coal consumers were
categorized into two main sectors namely, Core Sector and
None Core Sector. The Core Sector Consumers include the
vital sectors of economy related to infrastructural
development as for example power, steel, sponge iron,
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cement, defence, fertilized, railway, paper, aluminum,
export, central public sector undertakings etc. and all other
remaining industry including consumers constituted non-
core sector and in the non-core sectors, the purchasers are
divided in three categories namely those who manufactures
smokeless fuel, soft coke or briquettes those who
manufacture commodities like glass etc. and those who
manufacture hard coke.
5. The system of linkage at the first stage had been
evolved for only core sector, however having regard to the
huge demand of coal by non-core sector, the linkage system
was introduced for non-core consumers also and Coal India
Limited evolved such a system in November, 1978.
6. In the end of year 2004, the Coal India Ltd. and its
subsidiary companies came out with a new policy i.e. selling
of coal through "E-auction".
7. The said E-auction policy was challenged across the
country before different high courts including this Hon'ble
Court and finally by the order of the Hon'ble Supreme Court
all the matters relating to E-auction got transferred before
the Hon'ble Supreme Court and the Hon'ble Supreme Court
in December, 2006 held the policy to be unconstitutional and
directed the Ministry as well as the Coal Company to frame
a viable Coal Distribution Policy.
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8. In compliance of the order of the Hon'ble Supreme
Court, the Ministry of Coal in consultation with the Coal
India Ltd. announced a New Coal Distribution Policy, 2007
as contained in office memorandum dated 18.10.07. It is
stipulated in the said policy that the same is being issued in
terms of the direction of the Hon'ble Apex Court. The Policy
clearly stipulates that this policy is being issued in
supersession of existing Coal Distribution Policy for core and
non-core sector and other instructions issued in this regard
from time to time.
9. As per the new sales policy, 2007 as contained in
office memorandum dated 18.10.07 all the valid coal
consumers including the Petitioner have been asked to
furnish bank guarantee to the extent of 6% of the value of
the annual coal requirement and thereafter to enter into a
Fuel Supply Agreement(FSA) for a period of five years. It has
also been provided that only 75% of the normative
requirement of coal of a linked consumer will be supplied
under the Fuel Supply Agreement and balance 25% may be
sourced through E-auction or other sources.
10. As per the new Coal Distribution Policy, the
Petitioner was also asked by the Respondents to execute FSA
and the Petitioner accordingly vide FSA dated 30.04.2008
entered into agreement with the Respondents, a copy of
which was sent to the Petitioner vide letter dated 17.07.2008.
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11. The Petitioner on the strength of the FSA started
drawing coal, however, with regard to Petitioner's Coal
consumption report for the period May' 09 to Oct' 09, the
Sales Manager, ECL vide letter no. 074 dated 18.12.09
drawn the Petitioner's attention towards non consumption of
lifted quantity of coal and utilization of meager quantity of
coal during Sep' 09 to Oct' 09 for kiln testing purpose and
thus sought clarification from the Petitioner regarding non-
utilization of coal drawn from ECL during the relevant period
for the purpose it was drawn. The Petitioner was further
asked through the said letter to arrange survey of the entire
stock of coal by any Government agency to be forwarded
alongwith the clarification as per Clause 4.4 of the FSA to
facilitate uninterrupted supply of coal to the Petitioner's unit.
12. The Petitioner, in response to the letter dated
18.12.2009 informed the H.O.D., Sales, ECL, Kolkata vide
letter dated 04.01.2010 regarding the steps being taken in
arranging Govt's surveyors for conducting the said job.
13. The Petitioner vide letter dated 23.02.2010 addressed
to Sales Manager, ECL, Kolkata furnished the survey
certificate of coal stock dated 22.02.2010 wherein the Dy.
Managing Director of the survey company certified about the
availability of entire coal stock inside the plant to the tune of
approx. 13550 МТ.
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14. The Respondents who were aware about the ongoing
repairing works in the plant and were also aware about the
stocks of coal being maintained by the Petitioner for utilizing
the same after completion of the repairing /maintenance
works informed the Respondents vide letter dated
17.05.2010 addressed to G.M (S&M), ECL that there shall
not be any booking of coal for the month of May, 2010 on
account of ongoing repairing works in the plant.
15. Upon receipt of the Petitioners letter dated
17.05.2010, the Sales Manager vide letter dated 03.06.2010
informed the Petitioner that as per the Fuel Supply
Agreement there is no provision for non-booking of coal on
repairing ground or any other ground except the Force
Majeur clause(s). Repairing etc. does not fall under the
purview of Force Majeure Clause and hence non-booking of
coal against regular monthly allocation by ECL shall be
treated as DDQ (Deemed Delivered Quantity) which may
attract Compensation under FSA during previous as well as
in the current year. Also, if the level of lifting fails below 30%
against allocation, then this below lifting status gives right
to the Either Party to terminate Agreement as per Clause
15.1.4.
16. Despite being satisfied that the Petitioner has not
diverted the coal lifted during the period May' 09 to Oct 09
save and except using a meager quantity for kiln testing
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which is part of the maintenance exercise, the General
Manager (S&M), ECL vide letter dated 21.07.2010 kept
further allocation of coal in favour of the Petitioner under
suspension.
17. After two days from the date of suspension of further
allocation of coal, the Dy. Finance Manager (Roads), ECL vide
letter dated 23.07.2010 asked the Petitioner to arrange the
payment of compensation amount to the tune of Rs.
15,37,268.18 as contained in compensation bill for the
financial year 2009-10.
18. The Petitioner in response to the letter dated
23.07.2010 submitted detailed reply to the HOD vide letter
dated 04.10.2010 explaining therein as to how and under
what circumstance the further coal could not be booked after
October, 2009 and why a booking between the period May,
2009 - October, 2009 had been done and stocks build up
and further why compensation as levied on the Petitioner
cannot be realized for the period of booking after 18.12.2009.
The Petitioner clarified that it was the Respondents who were
aware about the ongoing repairing works and vide letter
dated 18.12.09 had asked the Petitioner to furnish the
survey report in reference to clause 4.4 of the F.S.A. and
further clarified the purpose behind booking of coal from
May, 2009 to October, 2009 since it was Petitioner's
obligation to lift a minimum of 60% of the quantity so that
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no compensation is levied and more so the lifted quantity has
neither been sold nor mis-utilized. The Petitioner also
clarified about the impression having given by the
Respondents in their letter dated 18.12.2009 and
subsequent ones that till the factory resumes normal
functioning no coal shall be released, therefore no
compensation should have been levied for the period of
booking after 18.12.2009 as the agreement practically stood
terminated/suspended w.e.f. 18.12.2009 from the
Respondents side.
19. Thereafter, the Dy. Finance Manager (RS) vide letter
dated 11.11.2010 informed the Petitioner regarding
realization of compensation amount and the interest for non-
payment for the A/C period 2009-10 by operating financial
coverage i.e. BG/Security deposit in the event compensation
amount is not paid.
20. The Petitioner after receiving the Respondents letter
dated 11.11.2010 again vide letter dated 16.11.2010
explained all bonafide reasons which prevented them from
making any further booking and secondly apprised them
about the impression having given by the Respondents at the
time of submission of the survey certificate and issuance of
suspension letter together with the faults having committed
on the part of the Respondents in violation of the FSA and
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the manner in which the compensation bill has been
calculated and raised.
21. The Petitioner vide letter dated 01.12.2010 addressed
to HOD informed regarding the payment of balance
compensation amount of Rs.3,94,000.00 vide cheque no.
014858 dated 30.11.2010, however, requested for
reconsidering the claim and for crediting the amount
received by them to Petitioners account.
22. The Respondents who were aware about the entire
affairs of the Petitioner and their bonafide difficulties in
utilizing and drawing coal vide letter dated 21.01.2011 show
caused the Petitioner for non-booking of coal during the
period 2010-11 and sought their reply.
23. The Petitioner in response to the aforesaid show
cause notice submitted detailed reply dated 10.02.2011
along with documents explaining therein about the
credential of the company, renovations having done and the
bonafide utilization of the allotted coal and thus requested
to keep the FSA alive.
24. It is the case of the petitioner that on the one hand
the Respondents vide letter dated 21.01.2011 issued show
cause upon the Petitioner for termination of the FSA,
however, the Respondents vide letter dated 29.04.2011
asked the Petitioner to deposit additional security on
account of price rise of coal w.e.f. 27.02.2011.
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25. The Petitioner in response to the said letter sent a
letter dated 25.05.2011 giving undertaking that the
additional security deposit shall be paid once the operation
of the plant is resumed and thus requested for a favourable
action.
26. The Dy. GM/ Head of the Department vide letter no.
1562 dated 25.07.2011 without appreciating the bonafide of
the Petitioner terminated the FSA for alleged breach of
Clause 3.4, 3.5 and 15.1.4 of the FSA and further forfeited
the security deposit bearing B.G No.
BG/08/09/01/DT26/04/2008-1500000.00, BG/08/09/
01/DT24/07/2008 -1420000.00 and BG/08/09/01
/DT24/11/2009-421520.00, Total Rs.43,41,520.00 which
would be evident from the letter of the Respondent's dated
08.08.2011 by which the Manager of the Bank has been
asked to arrange and pay the above amount by invocation of
B.G and transfer through RTGS in favour of ECL.
27. The Respondents after suspending further allocation
of coal, terminating FSA, charging compensation and
forfeiting the security deposit, further served another letter
upon the Petitioner dated 07.09.2011, whereby Rs.
50,07,600/- has been calculated in the name of
compensation for the financial year 2010-11 and asked the
Petitioner to deposit the same.
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28. It is evident from the aforesaid facts that the
petitioner Company, registered under Companies Act, 1956,
is a manufacturer of high-quality sponge iron. In terms of
New Coal Distribution Policy, 2007, the petitioner furnished
bank guarantee to the extent of 6% to the value of annual
coal requirement and Fuel Supply Agreement (FSA) was
accordingly, entered on 30.04.2008. Under the Fuel Supply
Agreement, only 75% of the normative requirement of coal of
a linked consumer is supplied and the consumer is required
to source the remaining 25% through E-auction or other
sources. The Sales Manager, ECL vide letter dated
18.12.2009 sought clarification from the petitioner for non-
utilization of coal during September, 2009-October, 2009
and asked the petitioner to arrange survey of the entire stock
of coal. The survey certificate of coal stock was submitted to
the Sales Manager, ECL vide letter dated 23.02.2010 in
which the Survey Company certified the availability of entire
coal stock to the tune of approx. 13550 MT. In view of the
repairing work and rectification as directed by the
Jharkhand Pollution Control Board, the petitioner vide letter
dated 17.05.2010 informed the General Manager (S&M), ECL
that it would not lift coal for the month of May, 2010.
However, vide letter dated 03.06.2010, the Sales Manager
informed that there is no provision for non-booking of coal
on repairing ground or any other ground except, the "Force
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Majeure" clause. Vide letter dated 21.07.2010 further
allocation of coal to the petitioner was put under suspension.
Immediately thereafter, vide letter dated 23.07.2010, the
petitioner was directed to arrange payment of Rs.
15,37,268.18 as compensation for the financial year, 2009-
10.
The petitioner submitted its reply dated 04.10.2010
explaining the reason for not lifting coal between the period
May, 2009 and October, 2009 and though, compensation
clause is not attracted in the case of petitioner, the
respondent Deputy Finance Manager (R.S.) vide letter dated
11.11.2010 directed the petitioner to arrange payment of
compensation amount. Though, the petitioner made further
request for reconsideration of the plea for not lifting the coal
on the ground of heavy maintenance and modernisation of
plant taken by the petitioner. A show cause notice dated
21.01.2011 was issued to the petitioner for non-booking of
coal during 2010-11, which was replied by the petitioner on
10.02.2011. However, the FSA dated 30.04.2008 was
terminated on 25.07.2011 for breach of Clause 3.4, 3.5 and
15.1.4 of FSA and the security deposit amounting to Rs.
43,41,520/-was forfeited. The petitioner has been directed to
make further payment of Rs. 50,07,600/on account of
compensation for the financial year, 2010-11.
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29. The petitioner (respondent herein) being aggrieved
with the order of suspension of the Fuel Supply Agreement,
vide order dated 21.07.2010(Annexure-5) and the order of
termination of the agreement dated 25.07.2011(Annexure-
13), has approached to this Court by filing writ petition by
taking the ground that the case was not either of suspending
the Fuel Supply Agreement (FSA) or even the termination of
the agreement, since none of the conditions as has been
referred in the order of termination alleging breach of Clause
3.4, 3.5 or 15.1.4 of the FSA, are available.
30. The learned Single Judge, on consideration of the
aforesaid argument, has come to the conclusive finding by
negating the ground taken on behalf of the respondents that
the purchaser failed to furnish the additional security
deposit to suitably match the increase in the base price and
thus, violated Clause 3.4 as also by holding that the
reference of Clause 3.5 in the termination letter dated
25.07.2011 is irrelevant.
31. The conclusion has been arrived at that so far as the
applicability of Clause 3.4 is concerned, the allocation of coal
to the petitioner was put under suspension vide order dated
21.07.2010 and before issuing the letter dated 21.07.2010,
no notice was issued to the petitioner, rather, the petitioner
was directed to furnish survey report regarding the quantity
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of coal lifted by the petitioner which the writ petitioner
furnished on 23.02.2010.
32. The basis of coming to the aforesaid conclusion by
the learned Single Judge is the specific case as has been
made out on behalf of the petitioner in the letter dated
17.05.2010 that due to repairing work in the Sponge Iron
Plant it would not book the coal for May, 2010.
33. The learned Single Judge, therefore, has arrived at
the conclusion that referring the condition as stipulated in
Clause 3.4 has not been considered to be proper since the
requirement which was to be meted out, as referred in
Clause 3.4 has not been taken into consideration.
34. So far as Clause 15.1.4 of the Agreement is
concerned, the learned Single Judge has come to the
conclusion that the purchaser or the seller has right to
terminate the Agreement with 30 days' notice, if the level of
delivery or level of lifting falls below 30%. But simultaneously
it has been observed that since the supply of coal was
suspended from 21.07.2010, the respondent ECL (appellant
herein) cannot contend that, as a matter of fact, level of
lifting has fallen below 30% and therefore, Clause 15.1.4 is
attracted.
35. The appellant-ECL, being aggrieved with the said
order, is before this Court by filing the present appeal.
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Issue of maintainability on the ground of lack of
jurisdiction
36. Learned counsel appearing for the appellant ECL has
taken the ground of maintainability on the ground of lack of
territorial jurisdiction.
37. It has been contended that the agreement has been
signed in West Bengal at Dishergarh and the mines are in
the Ranigunj, as such, none of the cause of action said to be
fraction also, arisen within the territorial jurisdiction of this
Court.
38. The learned counsel has referred Clause 4.1 and 4.4
of the FSA in order to substantiate the fact that none of the
cause of action has accrued within the territorial jurisdiction
of this Court.
39. It has been contended that as per the Agreement, it
is not agreed in between the parties that the coal is to be
supplied by the appellant, rather, it is the respondent-writ
petitioner who was to lift the coal from the colliery. As such,
none of the cause of action since has accrued within the
territorial jurisdiction of this Court, hence, the present writ
petition is not maintainable in the territorial jurisdiction of
this Court.
40. Mr. Ajit Kumar, learned senior counsel appearing for
the respondent-writ petitioner, has submitted that the issue
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of territorial jurisdiction has not been agitated before the
learned writ court.
41. The further ground has been taken that the unit is
situated within the territorial jurisdiction of this Court and
due to the action having been taken of termination of the
agreement, the unit which is situated within the district of
Dhanbad, under the jurisdiction of this Court, has been
closed, hence, it is incorrect on the part of the appellant to
take the ground that none of the cause of action has accrued
within the territorial jurisdiction of this Court.
42. This Court, before entering into the issue on merit,
needs to consider the issue of maintainability on the ground
of lack of territorial jurisdiction.
43. This Court, in order to decide the said issue, needs
to refer herein the relevant clause, i.e., Clause 4.1 and 4.4 of
the FSA, which is being quoted herein :-
4.1 The quantity of Coal agreed to be supplied by the Seller
and undertaken to be purchased by the Purchaser, shall be
23,400 tonnes per Year from the Seller's mines in the
RANIGUNJ coal field and/or from international sources
("Annual Contracted Quantities" of "ACQ") For part of Year,
the ACQ shall be protected accordingly.
4.4 The total quantity of Coal supplied pursuant to this
Agreement is meant for use at the Sponge Iron Plant of M/s
Kunj Iron Products Ltd. at Chirkunda, Dist. Dhanbad (JKD)
as listed in Schedule-1, the purchaser shall not sell/divert
and/or transfer the Coal for any purpose whatsoever and the
same shall be treated as material breach of Agreement. In the
event that the Purchaser engages or plans to engage into any
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such resale or trade, the Seller shall terminate this Agreement
forthwith without any liabilities or damages, whatsoever,
payable to the purchaser. It is expressly clarified 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. The Purchaser shall have the obligation to
comply with the Seller's directions/ extend full cooperation in
carrying out such verification / inspection.
44. It is evident from the agreement that the unit in
question is situated in the district of Dhanbad which falls
under the territorial jurisdiction of this Court. Admittedly,
the agreement was signed by the parties outside the
territorial jurisdiction of this Court and it is also admitted
fact that the coal was to be lifted by the purchaser/unit itself.
45. It is also admitted fact that the lifting of coal once has
been undertaken, the cause of action will be said to be
accrued where the colliery is located but even on existence
of all these facts, the issue of cause of action requires
consideration that the coal which was to be lifted in
pursuance to the Fuel Supply Agreement is for the purpose
of use of the unit in question or not?
46. If the coal was being used for the unit in question
which falls within the territorial jurisdiction of this Court,
then whether it will be proper to say that the fraction of the
cause of action has not been accrued within the territorial
jurisdiction of this Court so as to exercise the jurisdiction
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conferred under Article 226 of the Constitution of India,
relying upon Sub-clause (2) thereof.
47. It is admitted fact that the aforesaid issue of
territorial jurisdiction has not been agitated before the
learned Single Judge but the same being the legal issue, is
required consideration by this Court.
48. It needs to refer herein the law is well-settled that the
intra-court appeal is in furtherance of the writ proceeding
and it is not to be taken up as a regular appeal. Reference in
this regard may be made to the judgment rendered by the
Hon'ble Apex Court in the case of Baddula Lakshmaiah v.
Sri. Anjaneya Swami Temple, (1996) 3 SCC 52. Relevant
paragraph of the said judgment reads as under:
"2. ... A letters patent appeal, as permitted under the
Letters Patent, is normally an intra-court appeal
whereunder the Letters Patent Bench, sitting as a Court of
Correction, corrects its own orders in execise of the same
jurisdiction as was vested in the Single Bench. ...
49. This Court, therefore, is of the view that since the
court of intra-court appeal is in furtherance of the writ
proceeding, as has been held by Hon'ble Apex Court in the
case of Baddula Lakshmaiah v. Sri. Anjaneya Swami
Temple (supra), the aforesaid issue needs to be decided on
merit.
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50. Further it is settled position of law that issue of the
territorial jurisdiction can be raised at any time. The Hon'ble
Supreme Court in Jagmittar Sain Bhagat vs. Dir., Health
Services, Haryana & Others reported in (2013) 10 SCC
136 held that the issue of jurisdiction can be raised at any
stage and doctrine of waiver does not apply.
51. It is not in dispute that the writ petition is amenable
under Article 226 of the Constitution of India if part of cause
of action arises within the territorial jurisdiction of the High
Court.
52. Article 226 of the Constitution of India confers power
upon the High Court to issue certain writ. This Court further
is of the view that in order to decide the issue of
maintainability, the provision of Article 226 of the
Constitution of India needs to be referred herein which reads
as under :-
"226. (2) The power conferred by clause (1) to issue
directions, orders or writs to any Government, authority
or person may also be exercised by any High Court
exercising jurisdiction in relation to the territories
within which the cause of action, wholly or in part,
arises for the exercise of such power, notwithstanding
that the seat of such Government or authority or the
residence of such person is not within those territories."
53. The Constitution Bench of the apex Court in
Election Commission, India -vs- Saka Venkata Rao, AIR
1953 SC 210 held that the writ court would not run beyond
the territories subject to its jurisdiction and that the
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petitioner or the authority affected by the writ must be
amenable to court's jurisdiction either by residence or
location within those territories.
54. In K.S.Rashid and son -vs- Income Tax
Investigation Commission and others, AIR 1954 SC 207
the Hon'ble Apex Court took similar view and held that the
writ court cannot exercise its power under Article 226
beyond its territorial jurisdiction. It is also held that the
exercise of power conferred by Article 226 was subject to two-
fold limitations, firstly, the power is to be exercised in
relation to which it exercises jurisdiction and secondly, the
person or authority on whom the High Court is empowered
to issue writ must be within those territories.
55. Both the aforesaid judgments rendered by the Apex
Court in the case of Election Commission, India -vs- Saka
Venkata Rao(supra) and K.S.Rashid and son -vs- Income
Tax Investigation Commission and others(supra) fell for
consideration before the Larger Bench of Hon'ble Apex Court
in Lt. Col.Khajoor Singh -vs- Union of India and another,
AIR 1961 SC 532 and the view taken by the Hon'ble Apex
Court in the earlier two judgments has been confirmed by
the larger Bench of the Apex Court which stated that unless
there are clear and compelling reasons, which cannot be
denied, writ court cannot exercise jurisdiction under Article
226 of the Constitution beyond its territorial jurisdiction.
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56. Thereafter, the Hon'ble Apex Court in the case of Oil
and Natural Gas Commission - vs- Utpal Kumar Basu
and others, [(1994) 4 SCC 711] wherein it has been held
that High Court can exercise the power to issue directions,
orders or writs for the enforcement of any of the fundamental
rights conferred by Part-III of the Constitution or for any
other purpose if the cause of action, wholly or in part, had
arisen within the territories in relation to which it exercises
jurisdiction, notwithstanding that the seat of the
Government or authority or the residence of the person
against whom the direction, order or writ is issued is not
within the said territories. The expression "cause of action"
means that bundle of facts which the petitioner must prove,
if traversed, to entitle him to a judgment in his favour by the
Court. Therefore, in determining the objection of lack of
territorial jurisdiction the court must take all the facts
pleaded in support of the cause of action into consideration
albeit without embarking upon an enquiry as to the
correctness or otherwise of the said facts. Thus, the question
of territorial jurisdiction must be decided on the facts
pleaded in the petition, the truth or otherwise of the
averments made in the petition being immaterial.
57. Same view has been taken by the Hon'ble Apex Court
while dealing with the matter in the case of Union of India
and others -vs- Adani Exports Ltd. and another, [(2002)1
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SCC 567], it has been held that in order to confer jurisdiction
on a High Court to entertain a writ petition it must disclose
that the integral facts pleaded in support of the cause of
action do constitute a cause so as to empower the court to
decide the dispute and the entire or a part of it arose within
its jurisdiction.
58. In the judgment rendered by the Hon'ble Apex Court
in the case of Kusum Ingots and Alloys Ltd.-vs- Union of
India and another, [(2004) 6 SCC 254], it has been held
that keeping in view the expression used in Clause (2) of
Article 226 of the Constitution of India, indisputably even if
a small fraction of cause of action occurs within the
jurisdiction of the Court, the Court will have jurisdiction in
the matter. However, even if a small part of cause of action
arises within territorial jurisdiction of the High Court, the
same by itself may not be considered to be a determinative
factor compelling the High Court to decide the matter on
merit. In appropriate cases, the Court may refuse to exercise
its discretionary jurisdiction by invoking the doctrine of
forum convenient, that a part of cause of action arise of one
or the other forums, it will be for the petitioner to choose its
forum.
59. It is, thus, evident from the above referred judicial
pronouncements of the Hon'ble Apex Court that the High
Court can well exercise the jurisdiction conferred under
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Article 226 of the Constitution of India if the part of cause of
action has accrued within the territorial jurisdiction of that
particular High Court conferring the concurrent jurisdiction
upon it.
60. This Court is proceeding to examine the issue of
maintainability on the ground of territorial jurisdiction on
the pretext of the aforesaid legal position.
61. This Court, in order to consider the aforesaid issue,
has again gone into the terms and conditions of the
Agreement and it is evident from the very first page of the
Agreement that the coal which was agreed to be supplied is
to the unit in the name and style of Kunj Iron Products Ltd.,
the writ petitioner herein, situated in the district of Dhanbad
falls under the jurisdiction of the High Court of Jharkhand.
62. Admitted fact herein is that the Fuel Supply
Agreement has been suspended followed by termination
leading to closure of the unit, meaning thereby, the interest
of the writ petitioner has been jeopardized due to closure of
the unit then will it be proper to say that none of the cause
of action has been accrued within the territorial jurisdiction
of this Court.
63. This Court is of the view that it will not be proper for
this Court to come to the conclusion that no cause of action
has accrued within the territorial jurisdiction of this Court,
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rather, due to closure of unit, the part of cause of action has
also accrued within the territorial jurisdiction of this Court.
64. Hence, in the light of the discussion made
hereinabove, the issue of maintainability on the ground of
lack of territorial jurisdiction as has been raised on behalf of
appellant-ECL, is not sustainable. Accordingly, rejected.
65. The writ petition is held to be maintainable within the
territorial jurisdiction of this Court.
Argument advanced on behalf of appellant-ECL on merit
66. Learned counsel appearing for the appellant ECL has
taken the following grounds in assailing the impugned
judgment passed by the learned Single Judge :-
(i) The learned Single Judge has not taken into
consideration the specific condition stipulated in the
terms and conditions as contained in the Fuel Supply
Agreement (annexure- 14 of supplementary affidavit by
appellant) wherein the decision to suspend the
agreement is independent to that of the termination of
the agreement since the suspension of coal supply is to
be taken recourse of as per the condition stipulated in
Clause 13 wherein it has been provided that in the
event the purchaser fails to pay any amount including
any interest, due to the seller under this agreement
within a period of thirty days of the same falling due,
the seller shall have the right to resort to any one or
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more of the following and one of the clauses is to
suspend supplies of coal to the purchaser.
(ii) It has been contended that even though the writ
petitioner has failed to lift the coal which has fallen to
below 30% and the said aspect of the matter has been
admitted on the ground that the renovation work was
being carried out under the instruction of Jharkhand
State Pollution Control Board that led the writ
petitioner not to lift the coal.
(iii) It has been contended that the reason for the fall in
lifting of the coal invited such a situation as
contemplated under Clause 13 of the FSA and since the
writ petitioner has failed to lift the coal, as such, after
giving a notice to that effect, as is communicated in the
communication dated 10.02.2010, the decision was
communicated that non- booking of coal will be treated
as DDQ( Deemed Delivered Quantity) vide order dated
03.06.2010 and thereafter the order of suspension was
passed on 21.07.2010, as such, the finding recorded to
the effect that the order of suspension was passed by
invoking the power conferred under Clause 13 of the
FSA and the same has been passed without issuance of
notice hence, has not been considered and contrary to
the fact as available on record, the learned Single Judge
has come to the conclusion that the order of
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suspension has been passed by taking recourse of
Clause 13 of the FSA without issuance of notice.
(iv) It has been contended that once the writ petitioner has
admitted the fact of non-lifting of coal due to the reason
of renovation work, meaning thereby, the terms and
conditions of the contract has been flouted and in that
view of the matter if the reason for not lifting is not
coming under the fold of force majeure, as referred in
Clause 16 of the FSA and in that view of the matter if
the decision to terminate the agreement has been taken
on the substantive ground of non-lifting the coal as per
the terms and conditions of the agreement and if the
same has led in terminating the agreement, the same
cannot be said to suffer from an error.
(v) It has been contended that the order of suspension was
passed on 21.07.2010 but the said order of suspension
has never been challenged prior to issuance of
termination in order to show bona fide that actually the
writ petitioner unit was in requirement of the coal and
due to effect of the suspension the coal is not being
supplied then in that eventuality it was incumbent
upon the writ petitioner to challenge the order of
suspension but no such endeavour has been taken and
the reason is obvious that the order of suspension has
been taken as an aid to make out a case by citing the
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instance of suspension as a reason for non-lifting the
coal.
(vi) Learned counsel has further submitted that the
conditions stipulated in the FSA and if there is any
breach and in that view of the matter if decision has
been taken to terminate the agreement, the same
cannot be said to suffer from an error.
67. Learned counsel appearing for the appellant-ECL,
based upon the aforesaid grounds, has submitted that the
order passed by the learned Single Judge, therefore, needs
interference.
Argument advanced on behalf of respondent-writ
petitioner
68. Per contra, Mr. Ajit Kumar, learned senior counsel
appearing for the respondent-writ petitioner, has taken the
following grounds in defending the impugned judgment :-
(i) Learned Single Judge has not committed any error in
passing the impugned judgment reason being that the
specific condition as provided under Clause 3.4 of
issuance of notice before passing the order of
suspension has not been followed. Learned Single
Judge has taken into consideration the aforesaid fact
which led the learned Single Judge in interfering with
the impugned order passed by the appellant, hence, the
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impugned judgment cannot be said to suffer from an
error.
(ii) The petitioner has not acted by suppressing the fact,
rather, the bona fide reason has been shown for not
lifting the coal, i.e., renovation work in the unit at the
behest of the instruction received by the unit from the
Jharkhand State Pollution Control Board and in that
view of the matter, for the purpose of not diverting it to
other units, if the coal has not been lifted, the same
cannot be said to be in the breach of the terms and
conditions of the agreement.
(iii) So far as the decision to suspend the Fuel Supply
Agreement is concerned, the coal since has not been
lifted and, as such, it is not proper on the part of the
appellant to saddle the writ petitioner with the
additional security amount even though knowing the
reason that the unit was not functioning due to the
ongoing renovation work.
(iv) Learned senior counsel has further submitted by
referring to Annexure 2/1 that the said letter, based
upon the survey, as instructed by the appellant, itself
clarifies that the quantity of coal was available to the
extent of 13550 MT, as such, the allegation of diversion
of coal is not sustainable.
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(v) Learned senior counsel has further submitted that even
if there is fall in lifting of coal then at best compensation
is to be taken for which the condition has been
stipulated in Clause No.4 of the FSA.
(vi) Learned senior counsel, based upon the aforesaid
ground, has submitted that if on the aforesaid pretext,
the learned Single Judge has passed the order, the
same cannot be said to suffer from an error and, as
such, the present appeal is fit to be dismissed.
Consideration
69. We have heard learned counsel for the parties and
gone through the pleading made in the memo of appeal as
also the finding recorded by the learned Single Judge in the
impugned judgment.
70. This Court, before considering the legality and
propriety of the impugned judgment, needs to refer herein
the issue which falls for consideration.
71. The issue which requires consideration in the
present case is as to whether the decision so taken by the
appellant for suspending the agreement followed by the
termination of agreement is just and proper or not?
72. But before considering the said issue, certain terms
and conditions of the Fuel Supply Agreement needs to be
referred herein along with its background.
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73. The appellant-ECL has entered into an agreement on
30.04.2008 based upon the request made by the purchaser,
the respondent-writ petitioner herein, making request to the
seller for supply of coal to M/s Kunj Iron Products Ltd.-the
writ petitioner, and the seller has agreed to make supply on
the terms and conditions set out hereinafter.
74. The agreement also contains the condition of deposit
of security amount, for ready reference the same is being
referred herein: -
3. Security Deposit (SD)
3.1 The Purchaser shall deposit with the Seller a sum of
[Rs.29,13,300/-.] (Indian Rupees Twenty Nine
Lakhs, Thirteen Thousand Three Hundred)
equivalent to six percent (6%) of the Base Price of such
Grade of Coal, as described in Schedule-II to this
Agreement, prevalent on the date of deposit multiplied
by ACQ, as Security Deposit (SD), in cash / Bank
Guarantee on or before the signing of this Agreement.
In case of multiple Grades indicated in Schedule-II, the
highest Grade shall be considered for the purpose of
calculation of SD without any commitment whatsoever
to supply such Grade of Coal. Such Security Deposit
shall be non-interest bearing. [In case the SD is in the
form of a bank guarantee, the same shall be provided in
the format enclosed format with this Agreement at
Schedule- III. ("SD Bank Guarantee")'].
3.2 The purchaser shall deposit at least one half of the
amount of Security Deposit before the Effective Date
and the balance amount shall be deposited within three
(3) months of the Effective Date. Failure to submit the
balance amount within three (3) months of the Effective
Date, as aforementioned, shall entitle the Seller to
adjust the ACQ such that it is commensurate with the
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Security Deposit submitted by the Purchaser.
Accordingly, the Purchaser has furnished
Rs.15,00,000/- (Indian Rupees Fifteen Lakhs only)
towards fifty percent 50% of the Security Deposit
stipulated in Clause 3.1 above.
3.3 The SD submitted by the Purchaser, as per Clause 3.2
above, shall remain valid till three (3) months from the
expiry of this Agreement.
3.4 The value of the Security Deposit shall be suitably
increased/decreased to match the changes in the Base
Price notified by the Seller from time to time. In the
event of failure of the Purchaser to provide such
increased value within thirty (30) days from the date of
notification of such change in Base Price, the Seller
shall have the right to suspend the Coal supplies. If
additional SD due to such increase in the Base Price of
Coal is submitted by way of additional bank guarantee,
the period of validity of such bank guarantee shall be
the same as that of the initial SD Bank Guarantee
furnished in terms of Clauses 3.1 to 3.3 above.
Alternatively, the amount of the initial SD Bank
Guarantee may be increased by an amendment so as to
cover the increased value of SD resulting from the
change in the Base Price.
3.5 The Purchaser shall ensure that the Security Deposit
stands replenished within seven (7) days of drawl of
funds by the Seller in accordance with the provisions of
this Agreement. Failure to replenish the Security
Deposit within such stipulated period shall entitle the
Seller to suspend its Coal supplies without absolving
the Purchaser of its obligations under this Agreement.
3.6 In the event of termination of the Agreement by the
Seller in accordance with Clause 15.1.4 to 15.1.8, the
Seller shall be entitled to forfeit the Security Deposit of
the Purchaser in addition to any other rights vested with
the Seller upon such termination."
75. It is evident from the condition stipulated in Clause
3 above that the Purchaser shall deposit with the Seller a
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sum equivalent to six percent (6%) of the Base Price of such
Grade of Coal, as Security Deposit (SD), in cash / Bank
Guarantee on or before the signing of this Agreement. In case
of multiple Grades indicated in Schedule, the highest Grade
shall be considered for the purpose of calculation of SD.
76. The relevant is Clause 3.4 wherein it has been
provided that the value of the Security Deposit shall be
suitably increased/decreased to match the changes in the
Base Price notified by the Seller from time to time. In the
event of failure of the Purchaser to provide such increased
value within thirty (30) days from the date of notification of
such change in Base Price, the Seller shall have the right to
suspend the Coal supplies. If additional SD due to such
increase in the Base Price of Coal is submitted by way of
additional bank guarantee, the period of validity of such
bank guarantee shall be the same as that of the initial SD
Bank Guarantee furnished in terms of Clauses 3.1 to 3.3
above. Alternatively, the amount of the initial SD Bank
Guarantee may be increased by an amendment so as to cover
the increased value of SD resulting from the change in the
Base Price.
77. The condition stipulated in Clause 3.5 provides that
the Purchaser shall ensure that the Security Deposit stands
replenished within seven (7) days of drawl of funds by the
Seller in accordance with the provisions of this Agreement.
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Failure to replenish the Security Deposit within such
stipulated period shall entitle the Seller to suspend its Coal
supplies without absolving the Purchaser of its obligations
under this Agreement.
78. Another limb of argument is that even if there is fall
in lifting of coal then at best compensation is to be taken for
which the condition has been stipulated in Clause No.4 of
the FSA, which is being referred herein: -
4. QUANTITY, SOURCE AND END-USE:
4.1 The quantity of Coal agreed to be supplied by the Seller
and undertaken to be purchased by the Purchaser, shall be
23,400 tonnes per Year from the Seller's mines in the
RANIGUNJ coal field and/or from international sources
("Annual Contracted Quantities" of "ACQ") For part of Year,
the ACQ shall be protected accordingly.
4.2 The ACQ shall be delivered in equal trimonthly
quantities during the Year, which shall be calculated as
ACQ/12 ("Scheduled Quantity or "SQ"). In case of supply by
Rail, the Parties agree that if the quantity to be lifted by the
Purchaser in a month within the SQ is insufficient to form a
rake, formation of take would be allowed by clubbing with the
quantity of the next month and so on within the quarter. If at
the end of the Quarter, any residual quantity is left being
fraction of rake it would be camed over to the next Quarter
and so on till the end of 4th Quarter. If at the end of 4th
quarter, residual quantity is Insufficient to form a full rake,
the same would be treated as lapsed.
4.3 Seller shall supply Coal from sources as mentioned in
Schedule I. In case the Seller is not in a position io supply the
Scheduled Quantity from such sources, the Seller shall have
the option to supply the balance quantity from alternate
source, including Imported Coal Further, in case of alternate
sources, Purchaser shall accept Coal directly from such
alternate source through Indian railway system and / or by
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alternate modes of transport depending upon operational
flexibility and at such Delivery Point as decided by the Seller
Additional cost due to supply through alternate source
including the inland logistics cost of Imported Coal shall be
borne by the Purchaser.
4.4 The total quantity of Coal supplied pursuant to this
Agreement is meant for use at the Sponge Iron Plant of M/s
Kunj Iron Products Ltd. at Chirkunda, Dist. Dhanbad (JKD)
as listed in Schedule-1, the purchaser shall not sell/divert
and/or transfer the Coal for any purpose whatsoever and the
same shall be treated as material breach of Agreement. In the
event that the Purchase engages or plans to engage into any
such resale or trade, the Seller shall terminate this Agreement
forthwith without any liabilities or damages, whatsoever,
payable to the purchaser. It is expressly clarified 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. The Purchaser shall have the obligation to
comply with the Seller's directions/ extend full cooperation in
carrying out such verification / inspection.
4.5 Compensation for short delivery/lifting
4.5.1 If for a Year, the Level of Delivery by the Seller, or the
Level of Lifting by the Purchaser falls below 100% with
respect to that Year, the defaulting Party shall be liable
to pay compensation to the other Party for such
shortfall in the Level of Delivery or Level of Lifting, as
the case may be, (Failed Quantify) in terms of the
following :-
S Level of Delivery / Rate of compensation
No. Lifting of Coal in a for the Failed Quantity
Year in terms of Base Price
of the highest Grade, as
shown in Schedule II
1 Less than 100% but Nil
upto 60% of ACQ
2 Below 60% of ACQ 10%
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79. It is evident from the condition as stipulated in
Clause No.4.1 of the FSA that the quantity of coal agreed to
be supplied by the Seller and undertaken to be purchased
by the Purchaser, shall be 23,400 tonnes per Year from the
Seller's mines in the Ranigunj coal field and/or from
international sources.
80. The condition as contained in Clause 4.5 of the FSA
stipulates the compensation for short delivery/lifting
wherein it has been provided that if for a year the Level of
Delivery by the Seller, or the Level of Lifting by the Purchaser
falls below 100% with respect to that Year, the defaulting
Party shall be liable to pay compensation to the other Party
for such shortfall in the Level of Delivery or Level of Lifting,
as the case may be, (Failed Quantify) in terms of the
following:-
S No. Level of Delivery / Rate of compensation for the
Lifting of Coal in a Year Failed Quantity in terms of
Base Price of the highest
Grade, as shown in Schedule
II
1 Less than 100% but upto Nil
60% of ACQ
2 Below 60% of ACQ 10%
81. The condition that the agreement can also be
suspended is provided under Clause 13 which is being
referred herein :-
13 SUSPENSION OF COAL SUPPLIES
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13.1 Notwithstanding other provisions of this Agreement, in
the event the Purchaser fails to pay any amount
including any interest, due to the Seller under this
Agreement within a period of thirty (30) days of the same
falling due, the Seller shall have the right to resort to
any one or more of the following:
(a) Adjust the outstanding amount against the
Security Deposit or by invoking the Security
Deposit BG maintained in terms of Clause 3 or
such portion of it as available; and/or
(b) Invoke the Financial Coverage Bank Guarantee or
any cash deposit towards Financial Coverage to
the extent available and necessary to meet the
outstanding dues; and/or
(c) Suspend supplies of Coal to the Purchaser.
13.2 During the period of suspension of supplies in terms of
Clause 13.1, the Seller shall be relieved of his
obligations to supply Coal. However, the obligations of
the Purchaser under this Agreement shall be deemed to
remain in full force.
13.3 In the event of suspension of Coal supplies pursuant to
this Clause, the "Seller shall have the right to continue
the suspension for as long as the Interest-free Security
Deposit or the Financial Coverage, as the case may be,
has not been fully replenished. The Seller shall resume
the Coal supplies within three (3) days of payment of the
outstanding amount together with interest as also full
replenishment of Security Deposit and/or the Financial
Coverage.
82. Hence,the Clause 13.1 provides that in the event the
Purchaser fails to pay any amount including any interest,
due to the Seller under this Agreement within a period of
thirty days of the same falling due, the Seller shall have the
right to resort to any one or more of the following:-
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(a) Adjust the outstanding amount against the Security
Deposit or by invoking the Security Deposit BG
maintained in terms of Clause 3 or such portion of
it as available; and/or
(b) Invoke the Financial Coverage Bank Guarantee or
any cash deposit towards Financial Coverage to the
extent available and necessary to meet the
outstanding dues; and/or
(c) Suspend supplies of Coal to the Purchaser
83. Here, the reference has been taken to suspend the
supply of coal to the purchaser based upon the reason that
the purchaser fails to pay amount including any interest,
due to fall in lifting of coal, as would be evident from the
order of suspension of agreement dated 21.07.2010 as
appended as Annexure-5 to the memo of appeal.
84. The termination of the agreement is under Clause 15
under which the following conditions have been made :-
15 TERMINATION OF AGREEMENT
15.1 Notwithstanding the provisions of Clause 2, this
Agreement may be terminated in the following
events and in the manner specified hereunder:
15.1.1 In the event that either Party is rendered wholly or
partially unable to perform its obligations under this
Agreement ("Affected Party") because of a Force
Majeure Act, as described in Clause 16 below, and
such inability to perform lasts for not less than a
total of ninety (90) days in any continuous period of
one hundred eighty (180) days, and in the
considered assessment of the other Party ("Non-
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Affected Party) there is no reasonable likelihood of
the Force Majeure Act coming to an end in the near
future, such Party shall have the right to terminate
this Agreement, by giving at least ninety (90) days
prior written notice to the Affected Party of the
intention to so terminate this Agreement. In such
event, the termination shall take effect on expiry of
the notice period or ninety (90) days whichever is
later, and the Parties shall be absolved of all
rights/obligations under this Agreement, save those
that had already accrued as on the effective date of
termination.
15 1.2. In the event that the Purchaser is prevented /disabled
under law from using Coal, for reasons beyond their
control, owing to changes in applicable
environmental and/or statutory norms, howsoever
brought into force; the Purchaser shall have the
right to terminate this Agreement, subject to a prior
written Notice to the Seller of not less than thirty
(30) days.
15.1.3. In the event of any material change in the Coal
distribution system of Seller due to a Government
directive/ notification, at any time after the
execution of this Agreement, the Seller may
terminate this Agreement without any
obligation/liability after providing the Purchaser
with prior written notice to the Purchaser of not less
than thirty (30) days.
15. 1.4 In the event that the Level of Delivery (LD) falls below
thirty percent (30%) or the Level of Lifting (LL) falls
below thirty percent (30%); the Purchaser or the
Seller as 'may be the case, shall have the right to
terminate this Agreement, within sixty (60) days of
the end of the relevant Year after providing the other
Party with prior written notice of not less than thirty
(30) days.
15 1.5. In the event that the Purchaser resells or diverts the
Coal purchased pursuant to this Agreement, the
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Seller shall have the right to terminate this
Agreement forthwith
15 1.6. In the event of encashment of Security Deposit or
the Financial Coverage or suspension of Coal
supplies pursuant to Clause 13.1, the Seller shall
have the right to terminate this Agreement by
providing prior written notice of thirty (30) days
provided the Purchaser has not replenished the
Security Deposit/ Financial Coverage within the
aforesaid said notice period of thirty (30) days.
15.1.7. In the event that either Party suffers insolvency,
appointment of liquidator (provisional or final),
appointment of receiver of any of material assets,
levy of any order of attachment of the material
assets, or any order or Injunction restraining the
Party from dealing with or disposing of its assets and
such order having been passed is not vacated within
sixty (60) days, the other Party shall be entitled to
terminate this Agreement
15.1.8. In the event that any Party commits a breach of term
or condition of this Agreement ('Defaulting Party) not
otherwise specified under this clause 15.1, the other
Party ("Non-Defaulting Party), shall have the right to
terminate this Agreement after providing the
Defaulting Party thirty (30) days prior notice and the
breach has not been cured or rectified to the
satisfaction of the Non-Defaulting Party within the
said period of thirty (30) day."
85. It is evident from Clause 15.1.4 that in the event that
the Level of Delivery falls below 30% or the Level of Lifting
falls below 30%, the Purchaser or the Seller as the case may
be, shall have the right to terminate this Agreement, within
60 days of the end of the relevant Year after providing the
other Party with prior written notice of not less than 30 days.
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86. Now adverting to the factual aspect of the present
case, as would be evident from the various applications
written by the writ petitioner, particularly, the
communication dated 04.10.2010(Annexure-6) wherein
while referring the letter dated 18.12.2009, it has been
pointed out that from May '09 to October' 09 there was no
consumption of coal except a meager quantity consumed for
testing purpose during September, 2009 and October, 2009.
The response thereto has been given by referring to Clause
4.4 of the FSA in totality since there was less End Use of Coal
and the balance quantity was lying in our premises as stock,
you had every reason not to offer us coal in subsequent
months and could terminate our Agreement, for ready
reference, the content of the said letter, which is relevant for
the purpose of adjudication of the lis, is being referred herein
:-
"The HOD Date:04/10/10
Eastern Coalfields Limited
13, R.N.Mukharjee Road
Kolkata-700 001
(West Bengal)
Subject : Realisation of Compensation amount for
the period 2009-2010
Dear Sir,
Please refer to your letter Ref No. ECL/KOL/Road
sales/Accts/23/07/01 Dtd.23.07.2010 vide which we have
surprisingly received a compensation bill of Rs. 15,37,268.18
for the period 2009-10 for less lifting.
In this connection kindly refer your letter no.ECL/KOL/Non-
perf a/c FSA/FSA units/071 dtd. 18.12.09 (copy enclosed)
vide which you had already noticed that from May '09 to
October' 09 there was no consumption of coal except a meager
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quantity consumed for testing purpose (as the plant had been
under heavy maintenance) during Scpt'09 and Oct 09.
Further you had asked us about the Survey Report of the coal
lying in our premises as on 1" Nov'09 in ref. to clause 4.4 of
the FSA.
Sir, our submission is that you please go through the clause
4.4 in totality. Since there was less End Use of Coal and the
balance quantity was lying in our premises as stock, you had
every reason not to offer us coal in subsequent months and
could terminate our Agreement.
The very purpose of booking coal from you from May '09 to
Oct'09 was our obligation to lift a minimum of 60% of the
quantity so that no compensation is levied on us. Hence since
we have neither sold nor misutilised the coal.
As our factory was under repairing / renovation we were
simply lifting coal to build the stock for consuming in our
plant.
Vide your letter dtd. 18.12.09, you had raised objection on our
lifting of coal as the same was adding to our stock, and not
being consumed due to repairing & renovation. It gave us an
impression that till the factory resumes normal functioning no
coal will be released to us. Infact we also enquired in your
office and got an impression that our booking will not be
accepted due to no consumption of coal. So, we did not book
the coal. Therefore, no compensation should be levied on us
for the period of booking after 18.12.09.
Moreover, we had submitted you the Survey Report vide letter
dtd. 23.02.10 against your reminder dtd. 10.02.10 (copy of
both lotter coclosed). In your letter dtd. 10.02.10 you had
again given an impression that booking will not be allowed to
our unit.
After submission of the Survey report on 23.02.10, there was
no communication from your side about acceptance of
booking of coal due to non-utilization / consumption of coal
in our unit thus it tantamount to termination/suspension of
Agreement from your side since 18.12.09.
Since our renovation / repairing is still going on we couldn't
consume the coal in our factory and the entire quantity lifted
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is lying as stock minus the coal used for testing purpose,
hence no compensation should be levied on us.
We understand that you had suspended our Agreement since
13.12.09 as no clear-cut instruction had ever been issued for
booking since 18.12.09.
Thus, we agree to pay any compensation for the period before
18.12.09 if arises.
So as per clause 4.4 we have every reason to believe that our
FSA has been suspended since 18.12.09 and you are
requested to raise us a revised bill, if any, for the period
April'09 to Oct'09 because from Dec. '09 no booking has been,
inter alia, allowed to our unit by your acts of omission.
Looking forward for a positive response.
Thanking-You,
Yours Faithfully
For Kunj Iron Products Limited
Director"
87. It is evident from the aforesaid letter dated
04.10.2010(Annexure-6) of the writ petitioner that the
implied meaning of the same is that the writ petitioner itself
has admitted that the non-lifting of the coal as per the terms
and conditions tantamount to termination/suspension of
Agreement.
88. It has further been referred in the said
communication by the writ petitioner that the very purpose
of booking the coal from May, 2009 to October, 2009 was our
obligation to lift a minimum of 60% of the quantity so that
no compensation is levied on us. But, the said quantity of
coal was neither sold nor mutualized. The other reason has
been assigned that the factory was under
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repairing/renovation and, as such, the coal was being lifted
to build the stock for consuming in our plant.
89. The content of the said letter, therefore, clarifies that
the writ petitioner is admitting the fact of less lifting of the
coal, however, stating the reason that the unit was under
repairing.
90. The same has again been reiterated in the
communication dated 16.11.20109 (Annexure-8) wherein by
referring Clause 15.1.5 of FSA, writ petitioner has stated
about trying to correct technical/operational problems.
91. Thereafter, a show cause notice was issued on
21.01.2011(Annexure-9) on the ground of non-lifting of the
coal from the month of May, 2009 to October, 2009 and also
in November, 2009 asking the reason as to why the
agreement be not terminated.
92. The writ petitioner has responded vide
communication dated 10.02.2011(Annexure-10) wherein
also the fact has been admitted that on the instruction of the
Pollution Control Department, the renovation work was
going on and hence the unit was closed, for ready reference,
the content of the said letter is being referred herein:-
Date: 10-02-2011
To
The DYGM/HOD, Kolkata
Eastern Coalfields Limited,
Coal House
13, R.N.Mukherjee Road,
Kolkata - 700 001
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Respected Sir,
Sub: Regarding your letter in connection with non-lifting of
coal.
We are thankful to get a latest status regarding FSA vide your
letter No. ECL/KOL/FSA-VIOLATION/KUNJ IRON
PRODT/074 Dated 21.01.2011 together with ECL's thinking.
Sir, we have carefully read contents of your letter and like to
submit the following fact for your kind knowledge and
necessary sympathetic consideration.
Sir, you have very correctly pointed out non lifting of coal from
ECL by our industry Kunj Iron Products Limited during 2010-
11 till December 2010/ January 2011.
Initially we would like to clear it that our industry has always
utilized coal for the purpose of regular production and never
disposed off the lifted coal in any other manner because Kunj
Iron is an industry which is in regular operation for Decades
and is very familiar in this region also.
Our industry was frequently used to be inspected by the
Factory Inspectors as well as Jharkhand state pollution
Control Department and advice frequently to do this, do that
and would not allow coal drawl unless instructions are
followed etc. Copies of communication and last advice
received from Factory License issued Department, Pollution
Control Board, Govt. of Jharkhand, are enclosed for ready
reference.
In view of frequent advices and such disturbances getting
irritated we under compulsion decided to renovate our plant
thoroughly for its continuous process of working and it is
almost completed to the entire satisfaction of all and others
and has become a model industry worth seeing. As of today
the plant has new sheds for raw material storage, a pollution
control system, dust catchers, new electrical overhead wiring
of the entire plant, new store house, new administrative
building etc. We invite ECL authorities also to come once and
see what renovation has ultimately been made after spending
crores of rupees (supporting bills are enclosed). The only thing
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is that we have already lost our valued old customers mostly
due to non production and supply to them for quite some time.
Reason behind such renovation and thereby non booking,
thereby no scope of lifting, hope, could be cleared to your
good-self. Plan programme/lay out of the plant etc are also
enclosed for kind information.
Sir, in connection with your show cause letter we simply tried
to tell and convince that there had been no other motive
behind non booking and non lifting of coal other than the
renovation job which we boldly took up with meager
estimation but got trapped and borrowed crores, as said
above, to complete the renovation finding no chance to back
out. It is 100% true and fact for which we have made loss of
lacs and lacs of money by paying idle wages to the permanent
employees for months and in other allied jobs to keep the
industry alive.
Our renovation is almost under final stage and shape and
hopefully we are trying to utilize the 13000 ton coal lying in
our depot first which may take at least three months time to
consume and hopefully expect to start booking of coal again
from June'11 quarter against our FSA.
Sir, you will please definitely appreciate that how we could
book-lift coal when the same was not in situation to use due
starting of renovation? Our intention as a good FSA consumer
deserves appreciation from all corners.
We, therefore, request you & ECL with humble submission to
bear with us for the mentioned time keeping our FSA live. We
ourselves are perturbed and at a loss for closure of production
for more than a year for which we have already faced damage
to the infinity. Sir, question of discontinuation of Agreement
does not arise because spending of so much amount in
renovation will be for nothing. Purpose of renovation has been
to plug all the loopholes pointed out by the Govt. Inspectors.
It is now an industry with full concrete floor lay out which may
be seen from the enclosed photographs.
Thanking you with the anticipation and prayer to keep FSA
alive till its validity and to consider no further damage to us
by claiming any compensation or suspension etc as we are
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already on the border line of collapse & simply trying to get
ourselves rescued but definitely shall collapse unless ECL's
consideration with sympathy is rendered to Kunj Iron
Products Limited.
Thank your again.
Yours Faithfully
For Kunj Iron Products Limited
Director"
93. The same thing has been reiterated by the writ
petitioner in the communication dated
25.05.2011(Annexure-12) which is being referred herein: -
Date: 25.05.2011
To
The DYGM/HOD, Kolkata
Eastern Coalfields Limited,
Coal House
13, R.N.Mukherjee Road,
Kolkata - 700 001
Respected Sir,
Sub: Regarding your letter in connection with requirement of
additional security amount
We are in receipt of your letter regarding additional security
deposit arising out of price rise vide your letter No.
ECL/KOL/FSA/116, dated 29.04.2011.
Sir, we have carefully read contents of your letter and like to
submit the following fact for your kind knowledge and
necessary sympathetic consideration.
Sir, we agree to comply with the requirement of additional
security deposit clause as per provision of FSA.
Sir, we are aware coal supply to our unit has been suspended
by ECL with effect from July, 2010 vide letter no.
ECL/KOL/Non-Perf.a/c FSA/FSA unit/ 074 dated
21.07.2010.
The above suspension has been caused because of stoppage
of production in view of directive of Pollution Control Board,
Factory Inspection Department, regular heavy breakdowns,
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leading us to undertake modification of the entire plant. In
this connection you may refer our previous letter dated
10.02.2011 wherein further details was provided.
Sir, you will appreciate this has result in non-utilization of the
coal lifted prior to discontinuance of production and stoppage
of booking/lifting of fresh coal thereafter in spite of your
allocation offer.
From the above facts, it is evident that we have no intention
of procuring any coal which cannot be utilized in our plant at
this point of time.
It may also be recorded that we have already for the period
April 2009-March 2010 paid the compensation amount of Rs.
15, 37, 268 for shortfall in lifting of coal as required by your
letter no. ECL/KOL/Road Sales/Accts/23/07/01 date
23.07.2010, although our plant is not operating under Force
Majeure since October, 2009. This clearly indicates our
intention of continuing with coal supply agreement which is
valid till 2013.
In view of the above stated facts, as operations of our plant is
suspended since Force Majeure, we request you to kindly bear
with us in terms of the agreement under clause no: 16.1
We further confirm to meet all the financial coverage on our
account including security deposit, once operations of our
plant are resumed.
We look forward to for a favorable action on your part on this
matter.
Thank you again.
Yours faithfully.
For Kunj Iron products Limited
Director"
94. It is, thus, evident from the content of the
communications dated 04.10.2010 (Annexure-
6),16.11.2010 (Annexure-8) and 10.02.2011(Annexure-10)
that the respondent-writ petitioner has admitted the fact of
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non-lifting of coal although on the ground of renovation of
the unit on the instruction of the Pollution Control
Department.
95. The aforesaid admission thus clarifies that the coal
was not lifted as has been agreed in the Fuel Supply
Agreement and if in such an admitted situation, the
authorities have exercised the power as referred in Clause 13
of FSA of making demand of compensation, after
communicating the same to the writ petitioner vide
communication dated 03.06.2010(Annexure-4) and,
thereafter, having no response and when the amount was
not deposited even though the lifting falls below 30%, which
led the appellant in suspending the Agreement vide order
dated 21.07.2010(Annexure-5).
96. Hence,the reason which has been explained and
accepted by the learned Single Judge that the notice has not
been given and, as such, the order of suspension dated
21.07.2010 is per se illegal, is not fit to be accepted.
97. Further, the order of suspension dated 21.07.2010
has not been challenged by the writ petitioner and obvious
reason is that the writ petitioner has admitted the fact of
non-utilization of the coal due to ongoing renovation work in
the unit and, as such, less lifting of coal was the reason
which is breach of the terms and conditions of the FSA.
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98. Although the writ petitioner has challenged the order
of suspension of further allocation of coal dated 21.07.2010
in the present writ petition but very surprisingly, even
though the Agreement was suspended on 21.07.2010 but
the same has been challenged by filing writ petition
sometime in the year 2011 that too after the termination of
the FSA.
99. The question of force majeure is to be taken into
consideration in order to come to the conclusion as to
whether the decision to terminate the Fuel Supply
Agreement can be said to suffer from an error since
exemption to terminate the Agreement is Clause 16 of the
FSA if one of the parties is being able to show the force
majeure, therefore, the reference of Clause 16 also needs to
be made herein: -
16 FORCE MAJEURE:
16.1 Force Majeure Act" means any act, circumstance or
event or a combination of acts, circumstances and
events which wholly or partially prevents or delays the
performance of obligations arising under this
Agreement by any Party ("Affected Party) and if such act,
circumstance or event is not reasonably within the
control of and not caused by the fault or negligence of
the affected Party, and provided that such act,
circumstance or event is in one or more of the following
categories:
(a) Flood, inundation of mine, drought, lightening, cyclone,
storm, earthquake or geological disturbances, eruption
of gases, subsidence and such natural occurrences
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(b) Explosion, Mine fire and other fire, contamination of
atmosphere by radio active or hazardous substances
(c) Civil disturbance such as riot, terrorism
(d) Industry wise /nation wide strikes.
(e) Any law, ordinance or order of the Central or State
Government, or any direction of a statutory regulatory
authority that restricts performance of the obligations
hereunder,
(f) Epidemic;
(g) The enactment, promulgation, amendment, suspension
or repeal of any Applicable Laws after the date hereof;
(h) Any delay or direction or order on the part of the
Government of India or relevant State Government or
denial or refusal to grant or renew, or any revocation, or
modification of any required permit or mining lease or
governmental approvals including those related to land
acquisition or environment/ forest clearance provided
that such delay, modification, denial, refusal or
revocation was not due to a cause attributable to the
Affected Party;
(i) Global shortage of Imported Coal, or logistical
constraints in transportation of Imported Coal,
Provided that a Force Majeure Act shall not
include economic hardship, equipment failure or
breakdown other than as specifically set forth above."
100. It is evident from the aforesaid Clause that the
following conditions have been considered to be force
majeure :-
(a) Flood, inundation of mine, drought, lightening, cyclone,
storm, earthquake or geological disturbances, eruption
of gases, subsidence and such natural occurrences
(b) Explosion, Mine fire and other fire, contamination of
atmosphere by radio active or hazardous substances
(c) Civil disturbance such as riot, terrorism
(d) Industry wise /nation wide strikes.
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(e) Any law, ordinance or order of the Central or State
Government, or any direction of a statutory regulatory
authority that restricts performance of the obligations
hereunder,
(f) Epidemic;
(g) The enactment, promulgation, amendment,
suspension or repeal of any Applicable Laws after the
date hereof;
(h) Any delay or direction or order on the part of the
Government of India or relevant State Government or
denial or refusal to grant or renew, or any revocation,
or modification of any required permit or mining lease
or governmental approvals including those related to
land acquisition or environment/ forest clearance
provided that such delay, modification, denial, refusal
or revocation was not due to a cause attributable to the
Affected Party;
(i) Global shortage of Imported Coal, or logistical
constraints in transportation of Imported Coal.
101. The relevant herein is Clause (h) which provides any
delay or direction or order on the part of the Government of
India or relevant State Government or denial or refusal to
grant or renew, or any revocation, or modification of any
required permit or mining lease or governmental approvals
including those related to land acquisition or environment/
forest clearance provided that such delay, modification,
denial, refusal or revocation was not due to a cause
attributable to the Affected Party.
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102. It has also been provided that a Force Majeure act
shall not include economic hardship, equipment failure or
breakdown other than as specifically set forth above.
103. The reference of ongoing renovation work has been
made in the due communications as per letter dated
04.10.2010 and 10.02.2011, as referred hereinabove, but
there is no pleading to the effect that the said ongoing
renovation work will come under the force majeure. However,
the plea of force majeure has been taken in the third
communication dated 25.05.2011 (Annexure-12) which was
not taken in earlier communications dated 04.10.2010 and
10.02.2011.
104. The said ground as has been taken regarding the
ongoing renovation work, according to our considered view,
will not come under the force majeure, since, if any person
is going to set up a business, then it is the primary duty to
have all the clearances as statutorily required, i.e., clearance
from the Factory Department, from the State Pollution
Control Board etc.
105. It is the specific case as has been made out on behalf
of the writ petitioner-Respondent, as referred in different
representations quoted hereinabove, that the Pollution
Control Board has made objection and issued instructions
and for compliance of the said instructions the production of
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the said unit has been closed and the renovation work has
been undertaken.
106. This Court, therefore, is of the view that the said
default on the part of the writ petitioner cannot be said to be
not attributable to the affected party, rather, it is attributable
specifically to the petitioner since the unit has been
established and the Agreement has been entered for supply
of coal for the purpose of running the unit without taking
proper recourse of the clearance or no objection from the
Factory Department and the State Pollution Control Board,
as such, the ground which has been taken, will not come
under the force majeure.
107. This Court, having discussed the aforesaid fact and
adverting to the finding recorded by the learned Single Judge
in the impugned judgment wherefrom we have found that
the learned Single Judge has allowed the writ petition by
formulating the question for consideration as to whether
after 21.07.2010 when supply of coal to the petitioner
company was suspended, can the respondent-ECL insist
upon furnishing additional security deposit and whether the
respondent-ECL can realize compensation for non-booking
of coal after 21.07.2010?
108. The said issue has been answered by taking aid of
Clause 15 of the Fuel Supply Agreement which deals with
the termination of agreement.
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109. The Fuel Supply Agreement was terminated by order
dated 25.07.2011(Annexure-13) on the alleged breach of
Clause 3.4, 3.5 and 15.1.4. The learned Single Judge has
come to the conclusive finding that as per Clause 3.5 the
purchaser is required to replenish the security deposit within
7 days of drawl of funds by the seller and in the present
case, the specific case of the respondent(Appellant herein) is
that the purchaser failed to furnish the suitable additional
security deposit to suitably match the increase in the base
price and, thus, violated Clause 3.4 of the FSA.
110. The learned Single Judge has not accepted the
contention of the respondent regarding the applicability of
Clause 3.4, since, vide order dated 21.07.2010 the allocation
of coal to the petitioner was put under suspension. Further,
before issuing the letter dated 21.07.2010, no notice was
issued to the petitioner (Respondent herein).
111. We, on consideration of the aforesaid finding, are of
the view that while coming to such conclusion, the learned
Single Judge has not considered the admission on the part
of the respondent-writ petitioner in not lifting the coal as
agreed due to ongoing renovation work in the unit accepting
the fact that the unit was not running.
112. The question of coal consumption, even though
accepting due to the closure of the unit but non-lifting and
the lifting found to be below 30% and the same has also been
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communicated to the writ petitioner - Respondent, by the
communication dated 18.12.2009 (Annexure-1) and, as
such, it cannot be said, in view of such admission on the part
of the writ petitioner, that there was no less lifting of coal
and in that view of the matter, the seller is entitled for
compensation in view of clause 4.5.1,which, deals with
compensation for short delivery/lifting, and when the
purchaser fails to pay any amount and if in that eventuality
the decision to suspend the Agreement has been taken, as
provided under Clause 13.1(c) of the Agreement, the same
cannot be said to suffer from an error.
113. The learned Single Judge has further not accepted
the plea of the respondent/appellant by taking aid of the
condition stipulated under Clause 15.1.4 which provides
that the purchaser or the seller has the right to terminate
the Agreement with 30 days' notice if the level of delivery or
level of lifting falls below 30%.
114. The learned Single Judge has come to the conclusion
that since the supply of coal was suspended from
21.07.2010, the respondent-ECL cannot contend that, as a
matter of fact, level of lifting has fallen below 30%.
115. This Court is of the view that without considering the
terms and conditions of the Fuel Supply Agreement dated
30.04.2008, particularly, of the clause wherein it has been
agreed in between the parties that the effect of non-lifting of
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the coal, as agreed, will lead to suspension due to non-
payment of additional compensation amount followed by the
termination, if the exemption as provided under Clause 16
of the FSA is not there, if the judgment has been passed, the
same cannot be said to be sustainable in the eyes of law.
116. Accordingly, the instant appeal is allowed and in
consequence thereof, the impugned order is hereby quashed
and set aside.
117. In the result, the writ petition also stands dismissed.
118. Interlocutory application, if any, also stands
disposed of.
I agree (Sujit Narayan Prasad, J.)
(Arun Kumar Rai, J.) (Arun Kumar Rai, J.)
Date : 28/11/2025
A.F.R.
Birendra/
Uploaded on 28.11.2025
