Judgment:
The Court : In this writ application the petitioners have, inter alia, challenged an order No.CCL-HQ-C-4-590 informing the petitioners that as per the directive of the competent authority, dispatches of coal to the unit of the petitioners had been suspended with immediate effect, until further orders. Suspension of supply of coal entails civil consequences.
An order of suspension of supply of coal is required to be in compliance with principles of natural justice. The impugned order does not disclose any reasons, and is therefore, ex facie in violation of principles of natural justice.
Furthermore, it appears that the writ petitioners had earlier moved a writ application in this Court being WP No.13802(W) of 2008 which is still pending. In the aforesaid case, an interim order was passed by a Single Bench of this Court restraining the respondents from implementing the termination clause or the provisions for gradual reduction of supply contained in clauses 2 & 3 of the Fuel Supply Agreement, without leave of the Court.
Mr. Mukherjee, learned Sr. Advocate appearing on behalf of the respondents, submits that supply had to be suspended in consequence of a raid by the Central Bureau of Investigation. Upon such raid, it was found that the unit was non-existent.
The petitioners were obviously diverting the coal elsewhere and/or selling the same in open market. It is, however, difficult to appreciate what prevented the respondents from obtaining leave of this Court for action against the petitioner. Although the petitioners were not expressly restrained from suspending supply without leave of Court, leave would be in line with the spirit of the order in the pending writ petition. It is true, that there is an application for transfer of the writ application to the Honble Supreme Court, in which notices have been issued.
However, the proceedings before this Court have not been stayed by the Honble Supreme Court. On behalf of the petitioners, emphasis was placed on Clause 13 of the Fuel Supply Agreement, which is set out hereinafter.
13. SUSPENSION OF COAL SUPPLIES 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. 13.4 In the event rail movement is declared / considered not feasible by Railways, review will be made jointly in the matter of mode of transport.
The aforesaid clause expressly enables the Coal Company to suspend supply of coal to the purchaser in case of default in payment. The aforesaid clause cannot be construed to restrict the power to suspend, only to cases of default. Supply can be suspended upon detection of fraud. Unlike the case of suspension of an employee, where the employee can be reinstated with full back wages, suspension of supply can cause irretrievable prejudice. The suspension order ought to have been reasoned and issued with leave of Court.
There will, therefore, be stay of operation of the impugned order of suspension. It is, however, made clear that this order will not prevent the respondents from obtaining leave of Court to take appropriate action against the petitioners or from recalling the order impugned and issuing a reasoned order with leave of Court. The petitioners may apply to the respondents for extension of time to submit the draft towards payment and such application if made shall be considered in accordance with law. Affidavit-in-opposition be filed by August 24, 2010.
Affidavit-inreply thereto, if any, by September 1, 2010. Matter be fixed for hearing on September 2, 2010.
All parties are to act on a signed Photostat copy of this order on the usual undertakings.