Madras High Court
M/S.The Chettinad Cement ... vs The Tamil Nadu Electricity Board on 9 December, 2021
W.P.No.25438 of 2010
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED 09.12.2021
CORAM
THE HONOURABLE MR. JUSTICE S.M.SUBRAMANIAM
W.P.No.25438 of 2010
and M.P.Nos.1 and 2 of 2010
M/s.The Chettinad Cement Corporation Ltd.,
Rep. by its Company Secretary,
Kumararajah Muthiah Nagar,
Puliyur Cement Factory PO
Karur – 639 114. .. Petitioner
..Vs..
1.The Tamil Nadu Electricity Board,
Rep. by its Chairman,
No.800, Anna Salai, Chennai 600 002.
2.The Chief Engineer,
Civil Designs,
Tamil Nadu Electricity Board,
3rd Floor, NPKRR Maaligai,
No.144 Anna Salai, Chennai 600 002.
4.The Chief Engineer,
Tamil Nadu Electricity Board,
Mettur Thermal Power Station,
Mettur Dam – 636 406. .. Respondents
1/18
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W.P.No.25438 of 2010
Prayer : Petition filed under Article 226 of the Constitution of India
praying to issue a Writ of Certiorarified Mandamus, calling for the entire
records of the third respondent in Lr.No.CE/SE/MII/EE/O&AHS/MTPS/
F.ShortColle/D.No.957/10 dated 20.10.2010 being the consolidated order
levying a penalty of Rs.73,94,040/- for the alleged short collection of fly ash
for the period between April 2008 and August 2010 as also the prior
demand Lr.No.CE/SE/M.II/EE/O&AHS/MTPS/F.ShortColle/D.No.627/10
dated 12.07.2010 for a sum of Rs.28,59,880/- for the period April 2009 to
June 2010 that was confirmed and formed part of the final impugned
demand dated 20.10.2010 of the 3rd respondent and quash the same as illegal
and arbitrary and consequently direct the 1st respondent to issue appropriate
instructions to the 3rd respondent to strictly comply with the terms of the
agreement between parties and not to levy any penalty for short collection.
For Petitioner : Mr.M.Praveen Kumar
For Respondents : Mr.L.Jaivenkatesh
Standing Counsel
ORDER
The order impugned in this writ petition issued by the third
respondent regarding the short collection of dry fly ash, is under challenge
in this writ petition.
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W.P.No.25438 of 2010
2.The petitioner is a company and the manufacturer of cement. The
petitioner states that they produce cement of high quality and manufacture
of cement involves several raw materials including gypsum and fly ash. In
this regard, admittedly, the contract was signed between the petitioner
company and the respondent TANGEDCO. Based on the Memorandum of
Understanding between the parties, the petitioner was collecting the fly ash
and using the same for manufacturing of cements.
3.The respondents also conducted inspection regarding the
performance of the terms and conditions of the contract periodically and
invoked Clause-5 of the Memorandum of Understanding and issued the
impugned demand notice.
4.The learned counsel for the petitioner strenuously contended that no
opportunity was provided to the petitioner enabling them to submit their
defects in respect of the lapses noticed by the TANGEDCO authorities.
Even the nature of lapses, loss, if any, occurred and its details are absent in
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W.P.No.25438 of 2010
the impugned order. Under those circumstances, the petitioner is
constrained to move the present writ petition.
5.The learned counsel for the petitioner is of an opinion that the
petitioner is entitled for an opportunity of presenting their case and no such
opportunity was offered and the demand notice impugned was issued based
on the unilateral decision taken by the TANGEDCO authorities.
6.In support of the said contention, the learned counsel for the
petitioner relied on the judgment of the Hon'ble Supreme Court of India in
the case of State of Karnataka vs. Shree Rameshwara Rice Mills,
Thiruthahalli reported in (1987) 2 SCC 160, particularly paragraphs 7 and
8, which reads as under:-
'......
7.On a consideration of the matter we find ourselves unable to
accept the contentions of Mr.Iyenger. The terms of Clause 12 do not
afford scope for a liberal construction being made regarding the powers
of the Deputy Commissioner to adjudicate upon a disputed question of
breach as well as to assess the damages arising from the breach. The
crucial words in Clause 12 are “and for any breach of conditions set
forth hereinbefore, the first party shall be liable to pay damages to the
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W.P.No.25438 of 2010
second party as may be assessed by the second party”. On a plain
reading of the words it is clear that the right of the second party to
assess damages would arise only if the breach of conditions is admitted
or if no issue is made of it. If is was the intention of the parties that the
officer acting on behalf of the State was also entitled to adjudicate upon
a dispute regarding the breach of conditions the wording of Clause 12
would have been entirely different. It cannot also be argued that a right
to adjudicate upon an issue relating to a breach of conditions of the
contract would flow from or is inhered in the right conferred to assess
the damages arising from a breach of conditions. The power to assess
damages, as pointed out by the Full Bench, is a subsidiary and
consequential power and not the primary power. Even assuming for
argument's sake that the terms of Clause 12 afford scope for being
construed as empowering the officer of the State to decide upon the
question of breach as well as assess the quantum of damages, we do not
think that adjudication by the officer regarding the breach of the
contract can be sustained under law because a party to the agreement
cannot be an arbiter in his own cause. Interests of justice and equity
require that where a party to a contract disputes the committing of any
breach of conditions the adjudication should be by an independent
person or body and not by the other party to the contract. The position
will, however, be different where there is no dispute or there is
consensus between the contracting parties regarding the breach of
conditions. In such a case the officer of the State, even though a party to
the contract will be well within his rights in assessing the damages
occasioned by the breach in view of the specific terms of Clause 12.
8.We are, therefore, in agreement with the view of the Full
Bench that the powers of the State under an agreement entered into by it
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W.P.No.25438 of 2010
with a private person providing for assessment of damages for breach of
conditions and recovery of the damages will stand confined only to
those cases where the breach of conditions is admitted or it is not
disputed.”
7.In the case of J.G. Engineers Private Limited vs. Union of India
and another reported in (2011) 5 SCC 758 at paragraphs 19 and 20, which
reads as under:-
“........
19.In fact the question whether the other party committed
breach cannot be decided by the party alleging breach. A contract
cannot provide that one party will be the arbiter to decide whether he
committed breach or the other party committed breach. That question
can only be decided by only an adjudicatory forum, that is, a court or
an Arbitral Tribunal.
20.In State of Karnataka v. Shree Rameshwara Rice Mills this
Court held that adjudication upon the issue relating to a breach of
condition of contract and adjudication of assessing damages arising
out of the breach are two different and distinct concepts and the right
to assess damages arising out of a breach would not include a right to
adjudicate upon as to whether there was any breach at all. This Court
held that one of the parties to an agreement cannot reserve to himself
the power to adjudicate whether the other party has committed
breach. This Court held: (SCC p. 164, paras 7-8)
“7. ... Even assuming for argument's sake that the terms
of Clause 12 afford scope for being construed as empowering
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W.P.No.25438 of 2010
the officer of the State to decide upon the question of breach as
well as assess the quantum of damages, we do not think that
adjudication by the officer regarding the breach of the contract
can be sustained under law because a party to the agreement
cannot be an arbiter in his own cause. Interests of justice and
equity require that where a party to a contract disputes the
committing of any breach of conditions the adjudication should
be by an independent person or body and not by the other party
to the contract. The position will, however, be different where
there is no dispute or there is consensus between the
contracting parties regarding the breach of conditions. In such
a case the officer of the State, even though a party to the
contract will be well within his rights in assessing the damages
occasioned by the breach in view of the specific terms of
Clause 12.
8.We are, therefore, in agreement with the view of the
Full Bench that the powers of the State under an agreement
entered into by it with a private person providing for
assessment of damages for breach of conditions and recovery
of the damages will stand confined only to those cases where
the breach of conditions is admitted or it is not disputed.”
8.Relying on the above judgments, the learned counsel for the
petitioner reiterated that the petitioner may be driven to the Civil Court only
in the event of permitting him to present their case. The basis on which a
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W.P.No.25438 of 2010
decision is taken for issuing an order of demand itself is not explained to the
petitioner and under those circumstances, the petitioner has chosen to file
the present writ petition. Thus, the order impugned is directly in violation of
the principles of natural justice and the present writ petition is to be
considered.
9.The learned counsel appearing on behalf of the respondents relying
on the counter affidavit made a submission that admittedly, the dispute
arises based on the contractual obligation between the parties. The
impugned orders are in tune with the contract conditions, specifically
condition No.5. Thus, the writ petition is not maintainable, as such disputes
are to be adjudicated before the competent civil Court of law and not in a
writ proceedings. The respondents filed counter narrating facts and
circumstances to establish that the petitioner has violated certain terms and
conditions and the manner in which the calculations are made and the
impugned demand notices are issued.
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W.P.No.25438 of 2010
10.However, this Court is of the considered opinion that all such
disputed facts cannot be adjudicated in a writ proceedings, as it requires
examination of documents in original and evidences and even oral
evidences. Prima facie, it is raised that no opportunity was provided to the
petitioner, even to present their case, and it is to be considered. In a
contractual obligation between the parties, whether such a show cause
notice or opportunity is required to be given or not is to be considered. No
doubt, it depends on the facts and circumstances and also the terms and
conditions agreed between the parties. However, it cannot be concluded by
holding that in each and every case, a show cause notice and an opportunity
of presenting the case must be provided in contractual obligations. Thus, a
writ cannot be entertained merely on the ground that no opportunity to
present the case is given in the event of the dispute with reference to the
terms and conditions of the contract between the parties.
11.It is needless to state that the terms and conditions agreed are
known to the parties. Once agreed to the terms and conditions are violated,
the question of further opportunity by any one of the parties would not arise.
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W.P.No.25438 of 2010
A dispute arises in the present case, as the petitioner states that an
opportunity is to be given to present their case. This Court is of an opinion
that such a procedure, which is not agreed between the parties need not be
considered, as providing of an opportunity is also a dispute, which is to be
considered with reference to the agreed terms and conditions of the contract.
12.The concept of principles of natural justice can be applied in a
contract only in certain circumstances and the performance of contractual
obligation between the parties cannot be compared with the statutory
functions of the authorities. Though in the present case, the Tamil Nadu
Electricity Board is a State under Article 12 of the Constitution of India.
Thus, a distinction is to be drawn between the contractual obligation
between the parties and the statutory functions and the powers to be
exercised under the statute by such officials of the State. These distinct
factors are to be demarcated when the facts are clear and more so relatable
to the terms and conditions of contract.
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W.P.No.25438 of 2010
13.Presuming that a writ Court examines the terms and conditions of
the contract, a doubt arises whether it is possible to form an opinion with
reference to the factual disputes which is to be adjudicated in an elaborate
manner with reference to the original documents and evidences.
Undoubtedly, there is a possibility of error, omission, commission or
otherwise, if any such opinion is formed. That is the reason why the
Constitutional Courts have taken a consistent view that in the matter of
contractual obligations between the parties, they must approach the Civil
Court of law as it involves trial nature adjudication, which would provide an
opportunity to examine and cross examine the witnesses to cull out the truth
and resolve the issues in the manner known to law.
14.Per contra, based on the mere affidavit in a writ petition and
relying on certain xerox copies of the documents, which is enclosed in the
typed set of papers, such factually disputed issues can never be adjudicated
in a concrete manner so as to give complete justice to the parties, who are
all approaching the writ Court.
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W.P.No.25438 of 2010
15.With reference to the judgment relied upon by the petitioner, the
Hon'ble Apex Court of India in Shree Rameshwara Rice Mills case cited
supra at paragraphs-7 and 8 itself held that “the position will, however, be
different where there is no dispute or there is consensus between the
contracting parties regarding the breach of conditions. In such a case the
officer of the State, even though a party to the contract will be well within
his rights in assessing the damages occasioned by the breach in view of the
specific terms of Clause 12”. Therefore, only in the event of no dispute and
there is a consensus between the contracting parties, the writ Court may be
in a position to take a decision in such nature of issues and not otherwise.
Therefore, the Hon'ble Supreme Court entertained the argument in a
particular case by distinguishing the facts and ruled that the contractual
obligations may be entertained by the writ Court only if there is no dispute
between the contracting parties and there is a consensus. Even in
paragraph-9, the Hon'ble Supreme Court observed that recovery of the
damages will stand confined only to those cases where, the breach of
conditions is admitted or it is not disputed.
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W.P.No.25438 of 2010
16.In the present case, the demand notice is disputed by the
petitioner, the manner in which the TANGEDCO assessed the damages or
otherwise is also questioned by the petitioner, and not providing an
opportunity to present the case is also raised. In this regard, examination in
detail with reference to the terms and conditions of the contract are
imminent and require adjudication. Even in the other case relied on by the
petitioner, the proposition laid down by the Hon'ble Supreme Court in
J.G.Engineers Private Limited case cited supra is referred and in
paragraph-19 the Hon'ble Apex Court observed that “a contract cannot
provide that one party with the arbiter to decide whether he committed
breach or the other party committed breach. That question can only be
decided by only an adjudicatory forum, that is, a Court or an Arbitral
Tribunal”. Admittedly, in the present case, the parties have not agreed for
arbitration, thus, necessarily they have to approach the competent Court of
law for the purpose of adjudicating issues.
17.Let us look into the reliance placed by the petitioner i.e. Clause-5
of the Memorandum of Understanding. Clause-5 reads as under:-
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W.P.No.25438 of 2010
'5.Performance of the cement company in collecting 100% of
Fly Ash will be reviewed for a period of one year and penalty deemed
fit will be imposed for the short collection of Fly Ash due to the fault of
company after one year of the reviewed period.'
18.The above clause reveals that the collection of fly ash will be
reviewed for a period of one year and penalty deemed fit will be imposed
for the short collection of fly ash due to the fault of the company. For
understanding purposes, this Court is of an opinion that the parties agreed
that the performance of the petitioner company will be reviewed and penalty
deemed fit will be imposed. Thus, the petitioner was very much aware and
agreed regarding imposition of penalty by the TANGEDCO. Question arises
whether an opportunity is to be provided prior to issuance of any such
demand notice. In this regard, it is stated in the Clause that penalty deemed
fit will be imposed for short collection of fly ash due to the fault of the
company. This exactly is the dispute to be adjudicated as the short
collection of fly ash and the quantum of short collection and the fault of the
company or there is no fault of the company and the quantum of penalty to
be imposed are disputed facts, which cannot be adjudicated in a writ
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W.P.No.25438 of 2010
proceedings.
19.These issues require an elaborate examination of the records and
evidences. As far as the opportunity is concerned, no doubt if there is a
consensus between the parties or if any doubt arises with reference to the
performance or otherwise, it is open to the parties to the contract to
negotiate and form an opinion and resolve the issues in an amicable manner.
Therefore, it is for the petitioner to approach the competent authorities, if
they agree for such consensus or for a negotiation and settlement of issues.
However, the impugned order is concerned, it is for the petitioner to initiate
appropriate steps for effective adjudication of the disputes for the purpose
of redressing their grievances in the manner known to law.
20.The petitioner if chosen to approach the competent Court of law
for resolving the issues, the Court shall consider the period in which the writ
petition was pending before the High Court for the purpose of condoning
the delay, if any petition to condone the delay is filed by the petitioner.
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W.P.No.25438 of 2010
21.With these observations, the writ petition stands dismissed. No
costs. Consequently, connected miscellaneous petitions are closed.
09.12.2021
cse
Internet : Yes
Index : Yes
Speaking order/Non-Speaking Order
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W.P.No.25438 of 2010
To
1.The Tamil Nadu Electricity Board,
Rep. by its Chairman,
No.800, Anna Salai, Chennai 600 002.
2.The Chief Engineer,
Civil Designs,
Tamil Nadu Electricity Board,
3rd Floor, NPKRR Maaligai,
No.144 Anna Salai, Chennai 600 002.
4.The Chief Engineer,
Tamil Nadu Electricity Board,
Mettur Thermal Power Station,
Mettur Dam – 636 406.
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W.P.No.25438 of 2010
S.M.SUBRAMANIAM, J.
cse
W.P.No.25438 of 2010 and
M.P.Nos.1 and 2 of 2010
09.12.2021
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