IN THE HIGH COURT OF JUDICATURE AT PATNA CWJC No.766 of 2008 ADITYA GLASS INDUSTRIES PVT.LTD. Versus THE STATE OF BIHAR & ORS For the Petitioner: (1) Mr. Y.V. Giri, Sr. Advocate (2) Mr. Raju Giri, Advocate For the Respondents: (1) Mr. V.M.K. Sinha, Advocate (2) Mr. P.K. Singh, Advocate ----------------- 03 23.07.2008 The petitioner is aggrieved by the wireless message dated 02.02.2007 (Annexure-4), by which coal supply to its unit by the Respondent-Coal Fields Ltd. was first suspended and then by communication dated 16.08.2007 (Annexure-7), by which the coal supply has been totally stopped snapping the linkage. The Central Coal Fields Ltd. has appeared and filed a counter affidavit. Similarly, a counter affidavit has been filed on behalf of State of Bihar. Heard the parties and with their consent this writ petition is being disposed of at the stage of admission itself. Petitioner is a registered small scale industry manufacturing glass wares at its factory at Aditya Nagar, P.O. Sundrikarya, District- Aurangabad in Bihar. For the purpose of manufacturing glass coal is the basic raw material, which is used in firing the furnace, without which the factory cannot function. This unit has been linked to Central Coal Fields Ltd. for supply of coal. The dispute is with regard to stoppage of supply of the sole raw material to the petitioner. It appears that Director of Industries, Bihar on his own - 2 - enquiry and on his own motion wrote to the Respondent-Coal Company Vide letter dated 06.12.2006 (Annexure-1), that he had got the matter of coal consuming industry enquired into and from the report of District Industry Centre, Aurangabad, it appears, inter alia, that the petitioner’s industry was found close, as such, it was requested that the Coal Company should stop supply of coal to the said unit. It appears, pursuant, thereto, a show cause was issued by letter dated 30.12.2006 to the petitioner as contained in Annexure-2, directing the petitioner to show cause as per the report of Director of Industries based on inspection conducted by General Manager, District Industry Centre, Aurangabd, petitioner’s unit was found closed. It was pointed out that in terms of the linkage, the petitioner was bound to inform the Coal Company within 24 hours of any closure and no such information having been given, yet coal supply is taken. The petitioner was required to show cause why supply be not suspended. It appears during pendency of those proceedings that the Director of Industry sought for certain reports from the General Manager, District Industry Centre, Aurangabd, which was responded by the District Industry Centre. By letter dated 25.01.2007 (Annexure- 3) stating that certain industries were reported by its earlier communication but with regard to some industries including the petitioner report would be forwarded after detail enquiry. Notwithstanding, the aforesaid by the impugned wireless message dated 02.02.2007, Annexure-4, referring to the same old letter of the - 3 - Director of Industries the Coal supplies to the petitioner was suspended. Petitioner, thereafter, filed a detailed reply, which is Annexure-5, in the writ petition. In the show cause reply as filed, petitioner has clearly pleaded that previously, in view of E-auction policy adopted by the Coal Companies, petitioner was unable to lift coal at exorbitant prices. This policy was challenged before the Hon’ble Supreme Court and ultimately Hon’ble Supreme Court struck down the E-auction. Thereafter, petitioner started lifting coal but as allotments were always made in heavily naxalite affected area he had practical difficulties in lifting the coal. The coal allotment was itself far less than its requirement and lifting was even less, as such, in absence of full quantity of coal for large periods the furnace had to remain shut and the factory closes. Along with the show cause petitioner filed copies of various returns including the sales tax returns to show that the factory was in commercial production. It appears that copies of the show cause were also forwarded to the Director of Industries and the General Manager, District Industry Centre, Aurangbad. It appears that this show cause was got enquired into by General Manager, District Industry Centre and report sent to the Director of Industries which is dated 28th of April 2007, and is contained in Annexure-6. This report of the District Industry Centre clearly mentions that the unit was found duly established with all machineries in place. The unit was found not working because of lack of adequate coal supply. It is for that reason that often the factory remains close. The report does not say that the factory is either non- - 4 - existent or totally non-functional. The petitioner is visited by the impugned order as contained in letter no. 5828-31, Annexure-7, wherein without referring to the show cause or what is stated therein the coal supply are ordered to be totally stopped and linkage cancelled. Learned Senior counsel, Mr. Y.V. Giri submits that the solitary ground for cancellation of coal supply and linkage that the reports of the District Industry Centre, as got conducted by the Director of Industries established that the unit was closed and that being so no supply could be made. Thus, on a conjoint reading of the show cause issued and the order passed, it would be seen that the gravaman of charge is non-reporting of closure and finding of closure of the unit. In order to appreciate the contentions, it is relevant to quote condition no. 5 of conditions of linkage :- “In case the factory is closed for any reason or does not consume coal supplied to them, the same should be informed in writing within 24 hours to the Contact Office of Coal India Limited.” On behalf of Coal Company, it is submitted that the said Clause predicates that whenever a unit is closed even for the shortest time it must immediately inform the Coal Company, failing which would amount to violation of the conditions of linkage. It was, then, submitted that the reports as received showed that the factory was - 5 - closed. These two things were enough for the Coal Company to cancel the linkage and stop supply. Learned senior counsel, Mr. Giri submits that on true interpretations of the conditions of the conditions of linkage it would be seen that closure of a unit as contemplated therein is closure permanently, where coal stocks were not being required or those with the unit could not be consumed, it is not temporary closure. For any reason of closure, he submits is closure as akin total cessation of activity. He submits that the reports of the Director of Industries and in particular, Annexure-6, categorically states that the unit becomes non-functional when coal supply exhaust and remains closed. Reports clearly indicate that the unit was well established and otherwise functional, thus, he submits that the action is per se arbitrary and wrong. In my view, condition no. 5 of the conditions of linkage is clear, if it is read as a whole. It would be clear that closure contemplated therein is not any temporary or short term closures but means closure where it does not require coal or is unable to consume coal. That means closure on a permanent basis. That means total cessation of industrial activity. The chart as appended to the impugned order as a part of Annexure-7, itself would show that lifting of coal in varies quantities in various months with such small quantity the unit cannot function on regular basis. Even a days closure on a particular day or for a short period for lack of raw material for the sake of coal is not a closure as contemplated under condition 5 aforesaid. Thus, this - 6 - approach of the respondents and understanding is absolutely incorrect. If the interpretation being sought to be given by the Coal Company is to be accepted then every weekly closure has to be reported, then every closure for whatever reason because of climate, weather, any incident or other, when it is closed everyday, every time intimation has to be sent to them that in my view, is not the purpose. The purpose is that once the unit closes it may not be allotted coal thereafter which would happen only if closure information was given. Thus, the interpretation put by the Coal Company cannot be sustained and that could not have formed the basis of initiating the proceedings, as the proceedings has been initiated only on that solitary ground. Further, with regard to the reports, suffice to say Annexure- 6, is the detail report of the General Manager of District Industry Centre based on the show cause filed by the petitioner that itself makes it abundantly clear that the unit exist. It is a bona fide unit. It is a functional unit but is closed, intermittently, because of lack of raw material. That surely cannot be interpreted as permanent closure not requiring coal permanently. This is sufficient to vitiate the orders, in question. Lastly, petitioner had filed his detail show cause Annexure- A, sales returns to show that he was a functional unit. There is not a single line of consideration in the impugned communication of the facts mentioned in the show cause. As has been held recently by the Apex Court in the Case of Bhikhubhai Vithlabhai Patel and Ors. Vs. State of Gujarat and Anr. (2008) 4 Supreme Court Cases 144, - 7 - even where an authority is to form an opinion it must form an opinion on basis of relevant material. The formation of opinion must clearly disclose application of mind to all materials including material particulars and if that is not apparent then even if it is a subjective opinion that would stand vitiated. Here an order which is virtually a death blow to an industry has been passed, firstly, on a wrong premise of closure and then without even reference to the show cause filed. This in my view renders the order, unsustainable. The order and is thus arbitrary and perverse and cannot be sustained. It is accordingly quashed. Respondents are directed to restore supplies of coal forthwith. (Navaniti Prasad Singh,J.) Trivedi/