(WRIT PETITION UNDER ARTICLE 226 OF THE CONSTITUTION OF INDIA)
1. Challenge in this petition is to the order dated 09.11.2011 (Annexure P/1) whereby the Coal Supply Agreement (FSAs) dated 31.07.2008 and further transactions between the South Eastern Coalfields Ltd / respondent No. 2 and 3 (for short `the SECL), and the petitioner company has been kept in abeyance till further advice with immediate effect. Further, the petitioner seeks a direction to the SECL to resume coal supply to the petitioner and continue with further transactions with the petitioner.
2. The facts, in brief, as projected by the petitioner are that the petitioner is a company registered under the provisions of the Companies Act, 1956 carrying on business of manufacture of sponge iron. The petitioner has also set up a captive power plant (for short `the CPP') for use in the sponge iron plant. The petitioner, in order to expand its business, is taking continuous steps for expansion of its power generation units and for the said purpose, the petitioner entered into a Memorandum of Understanding (for short `the MOU') with the Government of Chhattisgarh on 07.01.2005 and another on 18.06.2007. On 06.11.2006 (Annexure P/3), the Government of India, through respondent No. 1, advertised a list of 38 coal blocks for captive coal mining for allocation to companies engaged in generation of power, production of iron and steel and production of cements. Pursuant thereto, the petitioner made two applications for allocation for captive coal block in Hasdeo Arand Coal Field in Chhattisgarh, namely Kesla North Captive Coal Block and Vijay Central Captive Coal Block for meeting its requirement for the integrated steel plant, situated at Champa. In order to meet the coal requirement for its 50 MW and 15 MW CPP, the petitioner had entered into two fuel supply agreements (for short ‘the FSAs') with the SECL on 31.07.2008 (Annexure P/4 colly.). Under the terms of the agreement, the SECL was required to supply coal to the petitioner without any interruptions to be consumed at the aforestated CPPs, situated at Champa. The coal supplied by the SECL was being used by the petitioner-company purely for the above two CPPs.
3. The Screening Committee recommended allocation of 2.7 MT coal in Vijay Central Coal Block to the petitioner jointly, with another company. However, the petitioner was aggrieved when it came to know that the allocation of coal made to it was less than the actual requirement. Thus, the petitioner filed a petition being W.P.(C) No. 6446/2008 before the High Court of Delhi, which was disposed of vide order dated 23.02.2011 (Annexure P/5) directing the respondent No. 1 and the Screening Committee to reconsider allocation of balance coal in the said Vijay Central Coal Block to the petitioner. A communication was sent to the Coal Controller dated 23.03.2009 (Annexure P/6) on the basis of a complaint received in the Ministry, alleging that Chotia coal block allocated to Prakash Industries Limited (for short `the PIL') was much more than the requirement and the company was openly selling 150 to 200 trucks coal daily to various parties paying high cost to them. The Coal Controller was directed to monitor and submit a progress report. The Coal Controller responded by letter dated 08.10.2009 holding that the OSD, CCO, SECL Field Office has personally checked, the weighment data and dispatch data from record of Chotia mine and SIP, Champa. There is minor discrepancy of quantity of coal of day to day dispatch due to transport loss. On 09.11.2011 (Annexure P/10), a show cause notice was issued to the PIL in respect of Chotia Coal Block allocated to it, stating that there was misrepresentation of the facts and also allegation of diversion of coal in contravention of the terms of the allocation of Chotia Coal Block, and why allocation of the Chotia Coal Block be not de-allocated. According to the petitioner, the same was responded to, but till date no order has been passed as the allocation is to be done by the Government of India, Ministry of Coal. Thus, this petition.
4. Shri Vijay Hansariya, learned Senior Counsel appearing with Shri Sanjay K. Agrawal and Shri Alok Singh, learned Advocates for the petitioner would submit that the entire action of the respondent authorities are biased and are under the influence of the business competitor of the petitioner-company. The impugned letter dated 09.11.2011 (Annexure P/1) is purportedly based on the findings of the Inter Ministerial Committee's (for short `the IMC') report dated 08.09.2011 and the observations of the respondent No. 1 made in the order dated 14.10.2011. However, neither of the two documents dealt with or considered supply of coal to the petitioner by the SECL under the FSAs dated 31.07.2008. The IMC was constituted mainly to submit a report on the installed capacity (existing, expansion and ultimate capacities separately) of sponge iron units of M/s. PIL at all the places from the date of inception of the company, till kiln wise, in sequence alongwith the requirement of coal for such plants and on production data of sponge iron from the associated end use plant linked to the coal blocks allocated to M/s. PIL and also on any other matter which may deem fit by the IMC. However, there is no whisper with regard to enquiry or investigation with regard to supply of coal by the SECL to the petitioner under the FSAs dated 31.07.2008. The IMC, in its report dated 08.09.2011, nowhere stated that the supply of the coal by the SECL was in any way utilized by the petitioner, contrary to the purpose for which it was supplied. There was no recommendation to stop the supply of the coal by the SECL, thus, reliance of the SECL on the said report for suspending the FSAs is wholly misconceived.
5. Shri Hansaria would further submit that the Government of India, in its order dated 14.10.2011 also has nowhere stated that the supply of coal by the SECL to the petitioner was in any way utilized by the petitioner for other purpose than it was provided in FSAs. The said order only recommended that no further allocation of coal would be made from Vijay Central Coal Block to M/s. PIL. Thus, reliance on the said order for passing the impugned order, is also totally misconceived. The SECL is bound to supply coal under the FSAs dated 31.07.2008 on regular basis to the petitioner in terms of clause 4 of the agreement. Under clause 14 of the agreement, the SECL can suspend the supply of the coal only in the event, the petitioner fails to pay any amount including interest due to the seller under this agreement within a period of 30 days of the same falling due. There is no whisper or allegation that the petitioner has committed any default in payment of any amount. Even if the impugned order was to be passed, the petitioner ought to have been given proper opportunity. The SECL has at no stage, inspected or verified or has come to any conclusion that there is any resale or diversion in the end use of the coal.
6. Shri Hansaria would next contend that the effect and operation of the recommendation of the IMC has already been stayed by this Court and as such, the SECL cannot take shelter of the said recommendation for passing the impugned order. The action of the respondent authorities is violative of Article 19(1)(g) of the Constitution of India. The impugned action of the respondent authorities would cause closure of the steel plant as well as the CPPs thereby affecting the thousands of employees employed therein.
7. Shri Hansaria would next contend that the impugned order dated 09.11.2011 is without authority of law as the order is passed under the FSAs and there is no provision of suspension of coal supply under any other condition, except as aforestated in the agreement. Thus, the impugned order dated 09.11.2011 deserves to be quashed.
8. In rejoinder, Shri Hansaria would submit that the contention of Shri Koshy is baseless in reference of sale/diversion or transfer of coal for any other purpose would be treated as material breach of agreement and if there is breach of agreement, the only course open to the SECL would be to take steps for cancellation of the agreement, not for suspension of the coal supply under the FSAs. Clause 16, dealing with the termination of contract clearly provides that if there is any breach of agreement, the purchase would be entitled to 30 days prior notice to explain or put forward its case. The same has not been done in this case as this not the case of termination, but a case of suspension. In respect of Force Majuere clause, if within occurrence of any Force Majuere clause, the affected party is entitled to written notice by the other party of the particulars of the occurrence, including an estimation of its expected duration and probable impact on the performance of its obligations and the same may not continue for more than 7 days. Force Majuere clause can be invoked only in case of a specific order of the Central Government or the State Government or any direction of a statutory regulatory authority to restrict performance of the obligations. This is not the issue in the petition.
9. Ms. Fouzia Mirza, Assistant Solicitor General appearing for the Union of India/respondent No. 1 would submit that the Ministry of Steel reported that the complaint submitted by M/s. SKS Ispat and Power Ltd. regarding the installed capacity of the petitioner has been verified by them and as per the excise returns furnished by the company, the existing capacity of the Company works out to be 200 TPD, which comes to 0.6 MTP and therefore, the complaint about the false representation of the capacity by the petitioner is not substantiated. Thereafter, the recommendations of the Screening Committee recommending joint allocation of Vijay Central Block to the petitioner and M/s. SKS Ispat and Power Ltd. were finalized. Again, some fresh complaints were received against the petitioner alleging that the documents furnished to the Ministry of Steel regarding their capacity are fabricated/forged and they were wrongly relied upon by the Ministry to conclude that the allegations about the capacities were not substantiated. In the meantime, the petitioner filed two cases before the High Court of Delhi being W.P.(C) No. 7135/2008 and 6449/2008 challenging the coal reserves and the criteria adopted in the allocation of Fatehpur coal block and recommendation of the Screening Committee for Vijay Central Coal Block. In W.P.(C) No. 6449/2008, the Delhi High Court, vide order dated 03.09.2008 ordered that till the next date of hearing, the respondents were directed to maintain status quo with respect to allocation of coal blocks with respect to the petitioners therein. The recommendations of the Screening Committee were submitted to the competent authority for approval. While considering the above proposal, the Competent Authority has directed that the matter about allocation of Vijay Central and Urtan Coal Blocks may be referred back to the Ministry for further examination in the light of the orders of the High Court. A meeting was held between the Secretary (Coal) and the Secretary (Steel) alongwith the concerned officers of both the ministries on 25.07.2008 to re-examine the issues regarding allocation of Urtan, Behraband North and Vijay Central Coal Blocks. In the meeting, it was decided that the Ministry of Steel will undertake a spot verification of the issue related to capacity of the petitioner company. A Joint Plant Committee (for short, `the JPC') was constituted which concluded that the annual installed capacity of production of sponge iron of the petitioner company is 7.3 Lakh Ton per annum. Further some complaints were received alleging that the report is wrong as only two kilns are working whereas the report shows 4 kilns working and the capacity was worked out accordingly. The Ministry of Steel clarified that the petitioner has been submitting different sets of information to different authorities at various points of time. The Ministry of Steel suggested constituting an IMC to look into the allegations against the petitioner. Accordingly, IMC was constituted on 7.3.2011 under supervision of the Ministry of Steel. The Ministry of Steel, vide its letter dated 23.09.2011 furnished the report of the IMC, comprising of Industrial Advisor, Ministry of Steel, Director (Technical) Ministry of Coal, and Coal Controller, Ministry of Coal, observing that already allotted reserves to the petitioner is adequate in two cases and marginally falls short in the third case. Pursuant to the order dated 28.09.2011 passed by the High Court of Delhi in CMA No. 16391/2011, filed by the petitioner, a meeting of the Screening Committee was convened on 04.10.2011 to take further action in the matter. In the meeting, it was observed that the Committee have limited mandate for consideration of the matter in respect of allocation of coal blocks including Vijay Central Coal Block for captive mining under the Coal Mines (Nationalization) Act, 1973. The Screening Committee reiterated the observations made in its last meeting held on 29.06.2011 that there is no question of reviewing the earlier decisions taken by the Screening Committee. This meeting of the Committee was convened on the direction of the High Court of Delhi and would restrict and limit its scope to only that reference.
10. Ms. Mirza would next contend that the Central Bureau of Investigation (for short, `the CBI') has registered an FIR being No. RC AC2 2010 A 001 dated 07.04.2010 under section 13(2) read with 13(1)(d) of the Prevention of Corruption Act, 1988 against the officials of the JPC alongwith the petitioner and M/s. Hind Energy and Coal Benefication (India) Pvt. Ltd. and other unknown officials of Government of India, regarding criminal conspiracy, cheating, using forged documents as genuine and forgery of documents in relation to application/allocation of coal blocks and issues related thereto. In this regard, all the original documents/files dealing with Chotia, Vijay Central and Urtan Coal blocks have been requisitioned by the CBI. The action of the respondent No. 1 is strictly in accordance with law and as per the decision taken by the Government on the recommendation of the Screening Committee. No assurance was given to the petitioner by the answering respondent that the coal blocks would be allocated on the basis of capacity mentioned in the application form or the capacity mentioned in the MOU signed with the State Government. In view of the above, it would be evident that the petitioner has not come before this Court with clean hands and has suppressed material facts. Hence, this petition be dismissed with cost.
11. On the other hand, Shri Koshy, learned counsel appearing for the SECL would submit that the action of the respondent authorities is perfectly in accordance with law. He would submit that the petitioner has concealed material facts relating to various earlier orders passed by the High Court of Delhi. The petitioner ought not have filed this petition since the impugned order dated 09.11.2011 was passed in light of the decision of the Government of India's order dated 14.10.2011 without challenging the same. The said order was passed on the basis of the orders passed by the High Court of Delhi in Contempt Case (C) No. 420/2011, CMA No. 16391/2011 and W.P.(C) No. 6449/2008. The petitioner himself consented to give a representation to the respondent authorities. Both the Screening Committee as well as the Government of India gave ample opportunity of hearing to the petitioner and there was proper compliance of the principles of natural justice. The SECL is under the administrative control of the Ministry of Coal and once a detailed enquiry has been conducted by the IMC followed by the Screening Committee, thereafter the Government of India has given its decision dated 14.10.2011 (Annexure P/11), the SECL is bound to follow the decision of the Government of India. The CBI has also lodged an FIR against the petitioner-company on 07.04.2010 for forgery, cheating, misuse, diversion and illegal sale of the coal. The allegations of diversion of use of coal has been found true by the Government of India in the order dated 14.10.2011 and in that view of the matter, the petitioner is not entitled to get any relief from this Court. Thus, this petition is not maintainable on this count also. Shri Koshy would further contend that so far as staying of the IMC's report dated 08.09.2011 (Annexure P/14) by this Hon'ble Court vide order dated 22.11.2011 is concerned, the impugned order dated 09.11.2011 was passed prior to passing of the stay order by this Court in W.P.(C) No. 6056/201. Thus, it reveals that the petitioner has mislead this Court. This Court has stayed the recommendation dated 08.09.2011 which was subsequently made enforceable vide order dated 14.10.2011 (Annexure P/11) and the same has not been challenged as yet. Clause 4.2 of the FSAs dated 31.07.2008 provides absolute right to terminate the agreement forthwith in case of any of the default, as contained therein, is committed by the petitioner. The allegation of the petitioner that the suspension of coal supply under FSAs by the SECL was not the subject matter in the IMC's report dated 08.09.2011 (Annexure P/14) as the same was for non-allotment of coal from Vijay Central Coal Block is categorically denied because the primary reason for cancellation of the Coal Block was due to the reasons as mentioned in para 27 of the order dated 14.10.2011 which was relating to diversion of the coal from Chotia Coal block to the 15 MW and 50 MW CPPs of the petitioner. The SECL was already supplying full quantity of coal required to the petitioner under the FSAs dated 31.07.2008. Therefore, it is very clear that the petitioner was diverting coal supplied to him by the SECL which is material breach of the agreement dated 31.07.2008. Thus, there is ample relationship between cancellation of Vijay Central Coal Block and the impugned order dated 09.11.2011.
12. Shri Koshy would further contend that under the FSAs, the SECL has inherent power to suspend the coal supply in case there is diversion of coal. 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 that event, before termination of the agreement, the SECL can take steps to suspend the coal supply forthwith. It would be further contended that the order of the Central Government or the State Government or any direction of the statutory regulatory authority that restricts performance of the obligation under the FSAs comes within the definition of Force Majueure and that may lead to suspension of coal supply for such time. The petitioner, without waiting for the subsequent steps and final order to be passed under the FSAs, has proceeded and filed this petition. Thus, this petition is premature at this stage and deserves to be dismissed. He would next contend that the observations in para 25, 26 and the directions passed in para 27 in the order dated 14.10.2011 by the Director, Government of India, Ministry of Coal, empowers the SECL to take appropriate action of suspension of coal supply even if the same is not provided under the FSAs as the power of SECL is inherent in the agreement itself.
13. Heard learned counsel appearing for the parties, perused the pleadings and documents appended thereto.
14. Indisputably, the two coal supply agreements (also called as Fuel Supply Agreement) (FSAs) dated 31.07.2008 (Annexure P/4 colly.) were executed between the SECL and PIL for supply of 293796 tonnes per year from the mines in the Korba/Raigarh and/or from international sources for use at PIL (CPP 50 MW (19X2 MW + 6X2) Hathneora, Champa, as listed in Schedule I, and 81720 tonnes per year from the sellers mines in the Korba coal field and/or from international sources for the use at PIL (CPP 15 MW) Hathneora, Champa, as listed in Schedule I, respectively. Clause 4.2 of the FSAs provides for end use of the coal wherein it was stated that 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, the purchase engages or plans to engage into such resale or trade, the seller shall terminate this Agreement forthwith without any liabilities or damages, whatsoever payable to the purchase. Clause 14 of FSA deals with suspension of coal supplies.
15. Clause 14 of the FSAs, as quoted below provides for suspension of coal supply.
"14.) SUSPENSION OF COAL SUPPLIES
14.1) Notwithstanding other provisions of this Agreement, in the even 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 of 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.
14.2) During the period of suspension in terms of Clause
14.1) 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.
14.3) 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 have resume the Coal supplies within three (3) days of repayment of the outstanding amount together with interest as also full replenishment of Security Deposit and/or the Financial Coverage.
14.4) In the event rail movement is declared/considered not feasible by Railways, review will be made jointly in the matter of mode of transport."
This being a non-obstante clause, provides that if 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 or more of the provisions mentioned at sub clause (a) to (c). Clause 14.1(c) provides for suspension of supplies of coal to the purchaser. Clause 14.2 further provides that the SECL would be relieved of his obligation to supply coal. It is further provided that the suspension shall continue as long as the interest from the security deposit or the financial coverage as the case may be, has not been fully replenished. This is not relevant in the instant case.
16. Clause 16 of the FSAs provides for termination of contract/agreement, which reads as under:
"16.) TERMINATION OF CONTRACT/ AGREEMENT "
16.1) Notwithstanding the provisions of Clause 2, this Agreement may be terminated in the following events and in the manner specified hereunder:
16.1.1) 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 17 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 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.
16.1.2) 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 Purchase shall have the right to terminate this Agreement, subject to prior written Notice to the Seller of not less than thirty (30) days.
16.1.3) In the event of any material change in 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.
16.1.4) 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 the case may be, 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.
16.1.5) In the event that the Purchaser resells or diverts the Coal purchased pursuant to this Agreement, the Seller shall have the right to terminate this Agreement forthwith.
16.1.6) In the event of encashment of Security Deposit or the Financial Coverage or suspension of Coal Supplies pursuant to Clause 14.1, 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.
16.1.7) 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 of 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.
16.1.8) In the event that any Party commits a breach of term or condition of this Agreement ("Defaulting Party") not otherwise specified under this clause 16.1, 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) days.
16.2) Accrued rights to survive termination.
Termination of this Agreement shall be without prejudice to the accrued rights and obligations of either Party as at immediately prior to the termination.
In the event, either party is wholly or partially unable to perform its obligation under this agreement, because of Force Majuere Act as defined hereunder, shall be applicable.
"17.) FORCE MAJEURE
17.1 "Force Majueure Act means any act, circumstances 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, circumstances or event is not reasonably within the control of and not cause by the fault or negligence of the affected party, and provided that such act, circumstances or event is in one or more of the following categories:
xxx xxx xxx
(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;
xxx xxx xxx"
In the instant case, the SECL, on account of alleged direction of the Central Government, which amounted to an Act of Force Majuere, has passed the impugned order.
17. On perusal of the provisions, as aforestated, it appears that if there is a Force Majuere Act and either party is unable to perform its obligation under this Agreement for not less than a total of 90 days, in any continuous period of 180 days and 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.
18. Clause 16.1.3 provides that 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 30 days.
19. Clause 16.1.5 provides that in the event the purchaser reselles or diverts the coal purchased pursuant to the FSAs, the seller shall have the right to terminate the agreement forthwith. Clause 16.1.8 contemplates 30 days prior notice to the defaulting party before curing or rectifying the breach, and thereafter, taking of the action.
20. It appears that the termination clause can be invoked in case of resale or diversion of coal purchased under the FSAs. However, having regard to the basic principles of natural justice, the purchaser is required to be informed, if there is an allegation of resale or diversion and thereafter, on consideration of the case of the purchaser, in the instant case, the PIL, steps for termination could be taken. This is not a case of termination of FSA under clause 4.2 of the FSA wherein diversion or transfer of coal has been treated as material breach of agreement or there is established diversion of coal or there is a any direction of the statutory regulatory authority or the Central Government or the State government.
21. Grievance of the petitioner in the instant case is suspension of coal supply without any authority of law. Contention of Shri Koshy that the impugned order was passed pursuant to the directions made by the Central Government does not merit acceptance as IMC was constituted to consider the following terms of reference:
"i) To submit a report on the installed capacity (existing, expansion and ultimate capacities separately) of sponge iron units of M/s. Prakash Industries Ltd (PIL) at all the places from the date of inception of the company till date, kiln-wise, in sequence alongwith the requirement of coal for such plants.
ii) To submit a report on production data of sponge iron from the associated end use plant linked to the coal blocks allocated to M/s. PIL.
iii) To submit a report on any other matter deemed fit by the inter-ministerial Committee in view of para 2 of the OM No. 21(1)/2006-IDW/RM-1(Vol.VI) dtd. 7th March, 2011."
22. The IMC, in its report dated 08.09.2011 observed in para 7.3.1 observed as under:
"It is observed that about 29-45% of coal from Chotia mine is being used in captive power plant for which there is no clear permission in the letter of allotment to use coal from Chotia mine in the CPP. In fact, PIL should have regulated their production from Chotia mine in line with the requirement of the sponge iron production as per the condition laid down in the letter of allotment which specifies that there should be complete synchronization between the captive coal mining operation and the development of end use plant (DRI) so that no situation arises where the company is left with surplus coal extracted from captive block when the end use plant is yet to be operational. This clearly brings out that PIL has been diverting coal for the purposes other than sponge iron from the Chotia coal block. This also gets confirmed from the table 14 below which indicates that procurement of coal from linkage got drastically reduced from 2007-08 onwards as the production from the captive coal block ramped up.
23. On this basis, it was observed that the PIL has been diverting coal for the purpose other than for the sponge iron plant from Chotia Coal Block. In conclusion and recommendation, it was observed as under:
"8.) CONCLUSION and RECOMMENDATION v PIL has its DR-IF based steel plant, called as Steel and Power Complex, located at Hathneora, Dist. Champa- Janjgir, Chhattisgarh. AT present 3 no. of DR rotary kilns based on Lurgi's SL/RN technology are in operation whereas Kiln no. 4 and 5 are under construction. PIL has proposed addition of 5 more Kilns (6 to 10) as part of future expansion within the same plant boundary. If BF unit comes up, the number of DR kilns under expansion will be limited to 4 i.e. Kiln no. 5 to 9. All the kilns are of identical capacity. v The Inter-Ministerial Committee visited the works of Prakash Industries Ltd. at Champa, Distt: Janjgir in the State of Chhattisgarh as well as its captive coalChotia mine in Hasdeo- Arand Coalfield on 7-8th July,2011.
v PIL has furnished requisite data/documents from Fin. Yr. 2006-07 onwards only and no data/document prior to this year i.e. (from 1993 to 2006) has been submitted despite the written requirement sent by IMC. Further important supporting document from Lurgi, the original designer of the plant, on the design basis for capacity calculation, has not been submitted by PIL despite request made by IMC.
v After examining the PIL's reply and various documents submitted in response to the questionnaire sent and various points raised by IMC, the following has been arrived at
o The installed capacity of each kiln of PIL shall be 150,000 tpa as it is the standard module of the original designer of the plant i.e. Lurgi, Germany which is also reflected from the actual average production of DRI, over the years of each DR kiln in PIL works.
o Though, the details of entire spectrum of raw material properties are not available, however, from the raw material chemical analysis, it appears that the quality of raw materials being used by PIL on an average match with the specified quality of Lurgi within the permissible variations to attain the rated capacity of production.
v The installed capacity of the rotary kilns presently operating, after on-going expansion (under construction) and after future expansion shall be as under:
o Existing capacity (with 3 kilns operating) : 3 X 150,000 = 450,000 tpa
o Existing capacity + on-going expansion (kiln no. 4 and 5) : 5 X 150,000 = 750,000 tpa
o Ultimate capacity (Alt-I) i.e. existing capacity + on-going expansion + proposed future expansion (kiln no. 6 to 10) : 10 X 150,000 = 1,500,000 tpa
o Ultimate capacity (Alt-II) i.e. existing capacity + on-going expansion + proposed future expansion (kiln no. 6 to 9) : 9 X 150,000 = 1350,000 tpa.
v The PIL claim of higher installed capacity of each kiln i.e. 200,000 tpa is not found justifiable by IMC as the design basis and the modification/ improvement stated to be carried out by them for increase in capacity has not been substantiated by facts or by actual performance of kilns over the years.
v However, in case of use of very high quality raw materials, particularly non-coking coal (say, 14% ash) as in the case of Mittal South Africa (Formerly ISCOR, South Africa) the productive capacity can increase as high as 20% over the installed or rated capacity. However, in all such cases, such increase is invariably associated with consequent decrease in carbon requirement / t of DRI which in fact, lowers down the sp. Coal requirement/t of DRI.
v Keeping in view the iron ore quality and proximate analysis of Chotia coal mine being used in PIL kilns, various losses as well as a margin of 10% on account of fluctuations in raw material quality, operational inconsistencies due to various uncontrolled factors, the gross total (ROM) requirement per ton of DRI shall be approx. 1.36 t.
v Hence requirement of coal for existing capacity (3 kilns in operation) after on-going expansion (kiln no. 4 and 5 under construction) and after future expansion (adition of kiln no. 6 to 9/10) shall be as under:
o Existing capacity (with 3 kilns operating) : 612,000 tpa
o Existing capacity + on-going expansion (kiln no. 4 and 5) : 1,020,000 tpa
o Ultimate capacity (Alt-I) i.e. existing capacity + on-going expansion + proposed future expansion (kiln no. 6 to 10) : 2,040,000 tpa
o Ultimate capacity (Alt-II) i.e. existing capacity + on-going expansion + proposed future expansion (kiln no. 6 to 9) : 1,836,000 tpa
v IMC observed that though Chotia coal block was allotted exclusively for meeting DR plant requirement, a significant part of Chotia coal production is being utilized in captive power plant within the same complex at Champa.
v No washery has been established for beneficiation of coal by PIL.
v As per the CPCB guidelines, PIL is required to utilize char generated from the DR kilns in AFBC boilers for captive power generation. However, at present, no char is being utilized for the said purpose.
v Though PIL was to commission expansion kilns 3 and 4 by September 2004 as per the condition of allotment of Chotia coal block, the 3rd could be commissioned only in December, 2004 and kiln 4 is yet to be commissioned.
v Based on the analysis of allotted coal reserves from different coal blocks (comprising of Chotia coal block, Madanpur North and Vijay Central non-coking coal blocks) and the end use DR capacities, the ultimate requirement of non-coking coal as per IMC for the projected DR capacities works out to be 48.96 Mt with capping of the end-use capacity being 1.2 Mtpa at 61.20/55.08 Mt without capping depending on the availability of Urtan coking coal block against the allotted reserves of 57.60 Mt. This indicates that the already allotted reserves to PIL is adequate in two cases and marginally falls short in the 3rd case. "
24. As aforestated, IMC observed that though Chotia coal block was allocated exclusively for meeting DR Plant requirement, a significant part of Chotia Coal production is being utilized in the captive power plant within the same complex at Champa. Ultimately, it was observed that the already allocated reserve to PIL was adequate in two cases and marginally falls short in the third case.
25. It is indisputable as pleaded by the Union of India that the Screening Committee have limited mandate for consideration of the matter in respect of allocation of coal blocks including Vijay Central Coal Block for captive mining under the Coal Mines (Nationalization) Act, 1973.
26. On the basis of the report of the IMC, the Ministry of Coal, by order dated 14.10.2011 (Annexure P/11), while dealing with the directions of the High Court of Delhi regarding the allocation of Vijay Central Coal Block to PIL, observed in para 25, 26 (i), (iv) and (v) as under:
"25.) The Central Bureau of Investigation (CBI) has lodged an FIR No. RC AC2 2010 A 001 dated 07.04.2010 under section 13(2) r/w 13(1)(d) of the P.C. Act 1988 against the officials of Joint Plant Committee alongwith M/s. PIL and M/s. Hind Energy and Coal Benefication (India) Pvt. Ltd and other unknown officials of Government of India regarding Criminal conspiracy, cheating, using forged documents as genuine and forgery of documents in relation to application/allocation of coal blocks and issues related thereto. In this regard all the original documents/files dealing with Chotia, Vijay Central and Urtan coal blocks, are requisitioned by CBI.
26 (i) M/s. PIL has applied for Vijay Central coal block for requirement of the coal for their expansion of Sponge Iron Plants of capacity 1.2 MTPA with 0.6 MTPA in phase-1 by March 2009 and 0.6 MTPA in phase-II by April 2010. They have claimed existing capacity of 0.8 MTPA in January 2007. However, during the examination of the capacity by IMC, it was found that existing capacity in July 2011 is only 0.45 MTPA (claimed to be 0.6 MTPA without evidence). Page No. 9 of IMC report refers. This clearly shows that the existing capacity as shown in the application for the Coal Block is incorrect.
xxx xxx xxx
(iv) At the time of allotment of Chotia Coal Block, it was stipulated that `there should be complete synchronization between the captive coal mining operation and development of end use plant so that no situation arises where the company is left with surplus coal. However, the same has not been complied with.
(v) No washery has been established by PIL for benefication of coal.
xxx xxx xxx"
27. The conclusion, as arrived at para 27 and 28 and 29 in the order dated 14.10.2011 (Annexure P/11) issued by the Ministry of Coal, Government of India, reads as under:
"27.) Apart from the fact that adequate coal has already been allocated, the other facts as brought out in the IMC report and noted above need consideration. Misrepresentation of facts, misrepresentation of capacities and diversion of coal in contravention of terms of allotment by PIL have been taken on record for taking action as deemed appropriate.
28.) In view of the above, no further allocation of coal is made from the Vijay Central Coal Block to M/s. Prakash Industries Ltd.
29.) This issues with the approval of Minster of Coal."
28. It appears that the Government of India, Ministry of Coal issued a show cause notice dated 09.11.2011 (Annexure P/10) in respect of Chotia mines allocated to PIL seeking explanation of PIL asto why Chotia Coal Block should not be deallocated. Since the said show cause notice is neither under challenge nor any order has been passed in respect of the said show cause notice, it is not necessary to deal with the same and express any opinion on the merits of the case.
29. On the basis of the aforesaid order, as is evident from the impugned order dated 09.11.2011 (Annexure P/1) supply of coal from Chotia Coal Block for the use in CPP of 50 MW and 15 MW under the FSAs dated 13.07.2008 was kept in abeyance with immediate effect. The observation in para 25 with regard to registration of the FIR is not the subject matter of this petition as the case of petitioner is that the CBI may continue with the enquiry on the allegation made by the rival party. Even otherwise, I do not propose to express any opinion or make any observation in respect of the enquiry/investigation initiated by the CBI by lodging F.I.R. on 07.04.2010. The CBI may proceed with the same uninfluenced by any observations, if any made by this Court.
30. In para 27 of the report of the IMC, it has been stated that the misrepresentation of facts, misrepresentation of capacities and diversion of coal in contravention of terms of allotment by PIL have been taken on record for taking action as deemed appropriate. No action has been initiated and on this, the Force Majuere Act cannot be invoked as there is no direction from the statutory regulartory authority to restrict the performance of the obligation. There is no such direction in the order dated 14.10.2011 (Annexure P/11). Clause 16.1.3 of the FSAs also provides that 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 the agreement, but the same is only applicable for termination of the agreement, and not for suspension of coal supply under the FSAs. Even if the SECL has invoked clause 17.3 to suspend the performance of his obligation, there should be 7 days prior notice before taking recourse to Force Majuere clause and that cannot be done for a long period without prior intimation to the purchaser. The order of the Screening Committee is that no further allocation of in respect of Vijay Central Coal Block shall be made to the PIL.
31. Thus, it appears that the SECL has no authority to pass the impugned order on the basis of recommendation dated 08.09.2011 and the observations made in 14.10.2011 (Annexure P/11) as the provisions of FSA did not provide for suspension on the aforestated reasons pleaded by the SECL. The reason, even if accepted for the sake of argument, may be available only to invoke clause 16 of the FSA dealing with termination of the agreement, and not for suspension of the coal supplies.
32. A communication was sent to the Coal Controller dated 23.03.2009 (Annexure P/6) on the basis of a complaint received in the Ministry, alleging that Chotia coal block allocated to PIL was much more than the requirement and the company was openly selling 150 to 200 trucks coal daily to various parties paying high cost to them. The Coal Controller was directed to monitor and submit a progress report. The Coal Controller responded by letter dated 08.10.2009, as under
"OSD, CCO, SECL Field Office has personally checked the weighment data and dispatch data from record of Chotia mine and SIP, Champa. There is minor discrepancy of quantity of coal of day today dispatch due to transport loss.
6.) From the above, it is found that coal produced in Chotia mine, dispatched from the mine as per concerned records, receipt at Champa EUPs are more or less tallying. As regards utilization of coal, it is comparable with standard norm of SIP and CPP. No irregularity noticed."
33. The next question is asto whether the impugned order was passed on the basis of directions/orders issued/passed by the High Court of Delhi in Writ Petition (C) No. 6449/2008, Contempt Case (C) No. 420/2011, CMA No. 16391/2011. The High Court of Delhi, in Writ Petition (C) No. 6449/2008, by order dated 23.03.2011 (Annexure P/5) after considering all the aspects of the matter in respect of the allocation of coal block from Vijay Central Coal Block, ordered as under:
"16.) In the circumstances, PIL is permitted to make a comprehensive representation to the Ministry of Coal within a period of two weeks from today as regards the allocation to it of the coal requirement in the Vijay Central coal Block on the lines of the above submissions made by it before this Court. The said representation will then be considered by the Screening Committee of the Ministry of Coal and a decision taken by it within a further period of eight weeks thereafter. The said decision will be communicated to the petitioner within a further period of two weeks thereafter. If the petitioner is still aggrieved by such decision, it will be open to the petitioner to seek appropriate remedies in accordance with law."
34. On 02.06.2011, in Contempt Case (C) No. 420/2011, the High Court of Delhi, ordered as under:
"3.) It is made clear that in case the order is not complied with, this Court will take a serious view of the matter. IN view of the stand taken by counsel for the respondent, petitioner does not press the contempt petition. However, liberty as prayed, is granted to the petitioner to review this petition in case the order is not complied with within the time allowed."
35. Thereafter, on 28.09.2011, the High Court of Delhi, in W.P.(C) No. 6449/2008, observed as under:
"8.) In the circumstances, the Secretary (Coal) is made personally responsible for ensuring that the meeting of the Screening Committee is held at the earliest. If the presence of the petitioner and / or the need for hearing the petitioner is felt, the petitioner be also notified of the same at the earliest. If the decision is directed to be taken is not taken on or before 31.10.2011, the Secretary (Coal) to furnish explanation before this Court on 04.11.2011 as to why he should not be proceeded against for defiance of the order of this Court."
36. It appears that before the High Court of Delhi, the issue was not with regard to diversion of coal from Chotia Block under FSA but for allocation of coal from Vijay Central Coal Block having regard to the installed or expansion capacity. Thus, contention of Shri Koshy that the impugned order was passed pursuant to the orders, as aforestated, of the High Court of Delhi, is baseless and unsubstantiated.
37. The next contention of Shri Koshy that PIL ought to have approached the High Court of Delhi alone, as the orders were passed by the High Court of Delhi, is rejected on the aforesaid ground and further, the impugned order was passed by SECL at Bilaspur, which falls within the territorial jurisdiction of the High Court of Chhattisgarh.
38. In Commissioner of Police, Bombay v. Gordhandas Bhanji, the Supreme Court held that the only person vested with authority to grant or refuse a license for the erection of a building to be used for purpose of public amusement is the Commissioner of Police, and not the State Government.
39. In Tarlochan Dev Sharma v. State of Punjab and Others, the Supreme Court observed as under:
"13.) The present one is a case where the impugned order is vitiated by perversity. A conclusion of abuse of powers has been drawn from such facts wherefrom such conclusion does not even prima facie flow. The impugned order is based on non-existent grounds. It is vitiated by colourable exercise of power and hence liable to be struck down within the well-settled parameters of judicial review of administrative action."
40. In HEC Voluntary Retd. Employees Welfare Society and Another v. Heavy Engineering Corpn. Ltd. and Others3, the Supreme Court, referring its earlier judgment in State of U.P. v. Neeraj Awasthi and Others4, observed that any company wherein the entire shareholding of the company is held by the President of India or his nominee but in law, it is a separate juristic entity and thus, in the absence of any statutory provision, the Company was not bound by any such clarification issued by the Central Government. Even where the statute confers such jurisdiction on the Central Government, the same must be held to be confined only to the provisions contained therein.
41. The Supreme Court, in Automotive Manufacturers Association v. Designated Authority and Others5, with regard to following the principles of natural justice, observed as under:
"77.) It is trite that rules of "natural justice" are not embodied rules. The phrase "natural justice" is also not capable of a precise definition. The underlying principle of natural justice, evolved under the common law, is to check arbitrary exercise of power by the State or its functionaries. Therefore, the principle implies a duty to act fairly i.e. fair play in action. In A.K. Kraipak, it was observed that the aim of rules of natural justice is to secure justice or to put it negatively to prevent miscarriage of justice."
42. It is well settled principle of law that where a power is required to be exercised by an authority and there is a statutory provision for the same, the same should be exercised in the manner in which it is prescribed. In the case on hand, all the powers of termination, suspension, cancellation are derived from the terms and conditions of the FSAs. Thus, the power ought to have been exercised only in the manner prescribed under the provisions of the FSAs. Even if the entire share holding is held by the President of India or his nominee, the SECL is a separate juristic entity and in absence of any provision to suspend the coal supplies, the SECL was not bound by any such clarification issued by the Central Government. (See: HEC Voluntary REtd. Employees Welfare Society and Neeraj Awasthy and Others).
43. The Privy Council, in Nazir Ahmed v. King Emperor, observed as under:
"The rule which applies is a different and not less well recognized rule, namely, that where a power is given to do a certain thing in a certain way the thing must be done in that way or not at all. Other methods of performance are necessarily forbidden."
44. The Supreme Court, in Hukum Chand Shyam Lal v. Union of India and Others7, observed as under:
"18.) It is well-settled that where a power is required to be exercised by a certain authority in a certain way, it should be exercised in that manner or not at all, and all other amodes of performance are necessarily forbidden. It is all the more necessary to observe this rule where power is of a drastic nature and its exercise in a mode other than the one provided will be violative of the fundamental principles of natural justice."
45. A Constitution Bench of the Supreme Court, in Commissioner of Income Tax, Mumbai v. Anjum M.H.Ghaswala and Others, held as under:
"27.) It is a normal rule of construction that when a statute vests certain power in an authority to be exercised in a particular manner then the said authority has to exercise it only in the manner provided in the statute itself.."
46. In Captain Sube Singh and Others v. Lt. Governor of Delhi and Others9, the Supreme Court observed as under:
"29.) In Anjum M.H. Ghaswala a Constitution Bench of this Court reaffirmed the general rule that when a statute vests certain power in an authority to be exercised in a particular manner then the said authority has to exercise it only in the manner provided in the statute itself. (See also in this connection Dhanajaya Reddy v. State of Karnataka5.) The statute in question requires the authority to act in accordance with the rules for variation of the conditions attached to the permit. In our view, it is not permissible to the State Government to purport to alter these conditions by issuing a notification under Section 67(1)(d) read with sub-clause (i) thereof."
47. In J and K Housing Board and Another v. Kunwar Sanjay Krishan Kaul and Others10, the Supreme Court reiterated the settled position, as aforestated and observed as under:
"32.) It is settled law that when any statutory provision provides a particular manner for doing a particular act, the said thing or act must be done in accordance with the manner prescribed therefor in the Act. Merely because the parties concerned were aware of the acquisition proceedings or served with individual notices does not make the position alter when the statute makes it very clear that all the procedures/modes have to be strictly complied with in the manner provided therein."
48. A Constitution Bench of the Supreme Court, in Delhi Transport Corporation v. D.T.C. Mazdoor Congress and Others laid down the principle of natural justice succinctly as under:
"202.) It is now well settled that the `audi alteram partem' rule which in essence, enforces the equality clause in Article 14 of the Constitution is applicable not only to quasi-judicial orders but to administrative orders affecting prejudicially the party-in-question unless the application of the rule has been expressly excluded by the Act or Regulation or Rule which is not the case here. Rules of natural justice do not supplant but supplement the Rules and Regulations. Moreover, the Rule of Law which permeates our Constitution demands that it has to be observed both substantially and procedurally. Considering from all aspects Regulation 9(b) is illegal and void as it is arbitrary, discriminatory and without any guidelines for exercise of the power. Rule of law posits that the power is to be exercised in a manner which is just, fair and reasonable and not in an unreasonable, capricious or arbitrary manner leaving room for discrimination.."
The same has been explained further by the Supreme Court in Central Inland Water Transport Corpn. v. Brojo Nath Ganguly, Union of India v. Tulsiram Patel, D.K.Yadav v. J.M.A. Industries Ltd., Jaswantsingh Mathurasingh v. Ahmedabad Municipal Corpn., Sahara India Firm Lucknow v. Commissioner of Income Tax, Central I and another, Devdutt v. Union of India, Joint Action Committee of Airlines Pilots Association of India and Others v. Director General of Civil Aviation.
49. It is not in dispute that before the impugned order was passed in regard to suspension of the coal supply under the FSAs, no opportunity of hearing or to put forward its case was afforded to the petitioner. The opportunity, if any provided by the IMC and the Screening Committee were in respect of existing, expansion and ultimate capacities separately, while considering the allocation of more coal from Vijay Central Coal Block.
50. For the reasons mentioned hereinabove, the impugned order dated 09.11.2011 (Annexure P/1), being not in accordance with the provisions of FSAs and also without any authority of law, is quashed, with consequential relief.
51. Resultantly, the writ petition is allowed.
52. There shall be no order asto costs.