IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 19.04.2007 CORAM THE HONOURABLE MR.JUSTICE K.RAVIRAJA PANDIAN Writ Petition Nos.23422, 23734 and 24322 of 2006 and M.P.NOs.1 of 2006 W.P.NO.23422 of 2006: M/s.Grasim Industries Limited (Cement Division South) Reddipalayam Ariyalur Taluk Ariyalur District Tamil Nadu PIN: 621 704. ... Petitioner v. 1. Tamil Nadu Electricity Board represented by its Chief Engineer Civil Designs, 3rd Floor, NPKRR Maligai, 800, Anna Salai Chennai - 2. 2. Chief Engineer Mettur Thermal Power Station Mettur Dlam - 6 3. The Superintending Engineer Mechanical - II Mettur Thermal Power Station Mettur Dam - 6. 4. M/s.The India Cements Limited represented by its General Manager Legal Affairs, having its office at "Dhun Building" NO.827, Anna Salai Chennai - 600 002 ... Respondents https://hcservices.ecourts.gov.in/hcservices/ W.P.NO.23734 of 2006: Associated Cement Companies Limited rep.by its Vice President Madukkarai Cement Works Madukkarai - 641 105. ... Petitioner Versus 1. The Chief Engineer/Civil Designs-TNEP 3rd Floor, NPKRR Maaligai 800, Anna salai, Chennai - 600 002 2. The Chief Engineer Tamil Nadu Electricity Board Mettur Thermal Power Station Chennai - 636 406 3. Tamil Nadu Electricity Board rep.by its Chairman 800, Anna Salai, Chennai - 600 002 4. Member (Generation) Tamil Nadu Electricity Board, 800, Anna Salai Chennai - 600 002. 5. M/s.The India Cements Limited represented by its General Manager Legal Affairs, having its office at "Dhun Building" NO.827, Anna Salai Chennai - 600 002 ... Respondents. W.P.No.24322 of 2006: Ashtech (India) Private Limited rep.by its Chief Executive Officer Sri Sharad Marda No.152, 8th street, Jeevanlal Nagar Thiruvottiyur, Chennai - 600 019. ... Petitioner Versus 1. The Chief Engineer/Civil Designs-TNEP 3rd Floor, NPKRR Maaligai 800, Anna salai, Chennai - 600 002 https://hcservices.ecourts.gov.in/hcservices/ 2. The Chief Engineer Tamil Nadu Electricity Board Ennore Thermal Power Station Chennai - 636 406 3. Tamil Nadu Electricity Board rep.by its Chairman 800, Anna Salai, Chennai - 600 002 4. Member (Generation) Tamil Nadu Electricity Board, 800, Anna Salai Chennai - 600 002. 5. M/s.The India Cements Limited represented by its General Manager Legal Affairs, having its office at "Dhun Building" NO.827, Anna Salai Chennai - 600 002 ... Respondents. Respondent No.4 in W.P. No.23422 of 2006, who is respondent NO.5 in W.P.Nos.23734 and 24322 of 2006 is impleaded as a party in these writ petitions as per order of this Court dated 22.3.2007 in W.P.M.P.Nos.2 of 2006. Writ Petition in W.P.No.23422 of 2006 is filed under Article 226 of the Constitution of India for issuance of a Writ of Certiorarified Mandamus to call for the records of the first respondent culminating in the impugned order letter NO.CE/CD/SE/CD/AEE/FAM/SDM/F.PDFACS/D 535 dated 14.7.2006 and quash the same and consequently forbear the respondents from acting in breach of the Memorandum of Understanding dated 15.5.2002 entered into between the petitioner and the first respondent. Writ Petition in W.P.No.23734 of 2006 is filed under Article 226 of the Constitution of India for issuance of a Writ of Certiorarified Mandamus to call for the records of the first respondent comprised in its letter NO.CE/CD/SE/CD/AEE/FAM/SDM II/F.PDFACS/D 536 dated 14.7.2006 and quash the same and consequently direct the respondents to forbear from in any manner interfering with the petitioner's right to collect fly ash from the Dry Fly Ash Collection System at Unit-II of Mettur Thermal Power Station in terms of the Memorandum of Understanding dated 5.12.2001 entered into between the petitioner and the respondents. Writ Petition in W.P.No.24322 of 2006 is filed under Article 226 of the Constitution of India for issuance of a Writ of Certiorarified Mandamus to call for the records of the first respondent comprised in its https://hcservices.ecourts.gov.in/hcservices/ letter NO.CE/CD/SE/CD/AEE/FAM/SDM II/F.PDFACS/D 537 dated 14.7.2006 and quash the same and consequently direct the respondents to forbear from in any manner interfering with the petitioner's right to collect fly ash from the Dry Fly Ash Collection System at Ennore Thermal Power Station in terms of the Memorandum of Understanding dated 11.11.2005 entered into between the petitioner and the respondents. For Petitioner in : Mr.R.Krishnamurthy,Sr.Counsel W.P.No.23422 of 2006 for Mr.S.Ramasubramaniam For Petitioner : Mr.T.R.Andhyarujina, Sr.Counsel in W.P.Nos.23734 and and Mr.V.A.Rana for 24322 of 2006 M/s.Sampathkumar Associates For Respondents : Mr.P.S.Raman 1 to 3 WP.23422 and Additional Advocate General Respondents 1 to 4 for Mr.N.Muthusami in WA.Nos.23734 and 24322/06 respectively. For Respondent 4 in WP.23422/06, For Respondent 5 in WP.23734/06,24322/06. : Mr.G.Lakshmanan. ORDER The petitioner in the first two writ petitions in W.P.Nos.23422 and 23734 of 2006 are cement companies and the petitioner in the third writ petition in W.P.No.24322 of 2006 is a Company engaged in installation and collection of fly ash collection system. In all the three writ petitions, the orders of the first respondent reducing the percentage of collection of fly ash allotted to the respective petitioners by the impugned orders are assailed. Except minor variations in respect of the period for which and the percentage of fly ash they were allowed to collect originally and the reduction in percentage by reason of the impugned orders, in all other respects, the facts are one and the same. As the grounds of attack, the arguments advanced to assail the orders and the defence put forth to sustain the impugned orders are one and the same, all the writ petitions are taken up together for disposal. For the sake of narration of facts, the first of the writ petition in W.P.No.23422 of 2006 is taken up as a typical case. 2. The facts of the case as culled out from the pleadings are as follows: The petitioner in the course of their business entered into a memorandum of understanding (hereinafter called "MOU" for brevity) with the respondent Electricity Board on 15.5.2002 for collection of fly ash generated by Mettur Thermal Power Station at Mettur dam. The material terms and conditions of the Memorandum of Understanding are to the https://hcservices.ecourts.gov.in/hcservices/ following effect: 1. The petitioner has to install collection system for collection of fly ash at its cost in unit No.1 allotted to it in the Mettur Thermal Power Station; that the system would become the property of the respondent and the petitioner would have no right over all electrical, mechanical and civil structures and equipments so installed. 2. The petitioner has to pay service charges determined by the respondent - Tamil Nadu Electricity Board from time to time for collection of fly ash (Rs.60/- per tonne was the rate at the time of MOU) 3. The petitioner should pay security deposit in a sum of Rs.5 lakhs to the respondent Board. In addition to that, they should deposit in advance one month's proceeds of fly ash that would be issued to it. 4. The memorandum of understanding would be valid for a period of nine years. 5. The petitioners should collect 100 percent of the fly ash generated from the allotted units, out of which 20 percent of the fly ash should be spared to the respondent Board for allotting the same to other Industries. 6. The petitioner Company has to pay 80 percent of the charge towards the water and current consumption since it was allowed only 80% of collection. 7. The petitioner should arrange for collection and transfer of fly ash in closed tankers. 8. Dry fly ash choke collected in the ESP hoppers and chutes and released during choke releasing in the lines have to be cleared immediately. 9. In the event of overhauling/shutdown of any of the units, the allottee companies should mutually accept to spare fly ash to the Company to which the unit allotted is under overhauling/shutdown in consultation with the respondent. 10. The performance of the Company in collection of 100 percent of fly ash would be reviewed for a period of one year and the penalty deemed fit would be imposed for short collection of fly ash due to the fault of the companies after one year of the review period. 11. In case the company is not able to lift fly ash, the company should give 21 days advance notice to enable Chief Engineer/MTPs to allot it to others. Two spells of 15 days each in a year would be permitted on this account. 3. The petitioner, pursuant to the memorandum of understanding, invested huge sum of more than Rs.4 crores and put up necessary collection system in the allotted units to collect fly ash. From the date of commission of the system, they have been strictly adhering to the terms of the memorandum of understanding and collecting fly ash. The proportionate electricity, water and other charges payable for collection of 80 percent of the fly ash was also being paid promptly. The collection https://hcservices.ecourts.gov.in/hcservices/ of fly ash from time to time has been recorded and communicated by the respondent to the petitioner on monthly basis from the date of commencement till date. The petitioner has also been supplying a portion of the fly ash collected by it to some other cement companies owned by the Government of Tamil Nadu. 4. While that being so, the petitioner was issued with the impugned order of the respondent dated 14.7.2006 informing the petitioner that the quantity of the fly ash to be collected by the petitioner has been revised from 80 percent to 40 percent. The petitioner was further directed to contact a Committee under the Chairmanship of the Chief Engineer, Mettur Thermal Power Station, Mettur Dam to finalise the operation/maintenance cost to be reimbursed to the petitioner. 5. The said order is assailed by the petitioner on the ground that the impugned order is passed in violation of the terms and conditions of the MOU, which permits the petitioner to collect 80 percent of fly ash for a period of nine years. There is no clause in the MOU for reducing the quantum of collection of fly ash. The impugned order is a non-speaking order and passed in violation of the principles of natural justice. No prior notice was given to the petitioners. The reason stated in the order is that the off-take of fly ash by the petitioner is less than the target is not correct and not supported by materials. The impugned order is arbitrary, unilateral and malafide, in the sense, it was passed only to accommodate the third party - impleaded respondent in this writ petition, which is manifest from the order dated 17.7.2006 allotting 25 percent of the fly ash from each unit in favour of the impleaded respondent. The order is hit by the principle of promissory estoppal and in violation of the doctrine of legitimate expectation. 6. The respondent refuted the contentions by contending inter alia that as the MOU between the petitioner and the respondent is not a statutory one, the breach of which is not amenable to writ jurisdiction under Article 226 of the Constitution of India. The petitioner's collection of dry fly ash has always been far less than that of contemplated under the MOU. The MOU was entered into to dispose of the fly ash to protect from the environmental hazard caused in making the dry fly ash into a form of slurry and depositing it in an ash dyke. Owning to non- collection of required amount of fly ash as contemplated in the MOU by the petitioner, the respondent Board was constrained to make the fly ash into slurry which has resulted in considerable inconvenience and expenditure to the respondent apart from environmental hazard. For the period from October 2003 to March 2004 the petitioner's average collection was 45 percent and the respondent was constrained to find other takers for collecting the balance 35 percent of the fly ash required to be collected by the petitioner. The petitioner has collected as low as 19 percent of the fly ash in some months. However, the highest average collection of the petitioner was only 53 percent as against the 80 percent provided under the MOU. The petitioner sold a portion of collected fly ash to other companies, which proves that the petitioner's need is for less than the allotted 80 percent. The petitioner having consistently removed less https://hcservices.ecourts.gov.in/hcservices/ amount of fly ash than contemplated for last few years, the respondent was at liberty to make alternative arrangement for disbursement of fly ash to the needy parties. The petitioner would be reimbursed the expenses of the operation and maintenance cost in proportion to the quantity reduced. The order passed by the respondent on 17.7.2006 in favour of the impleaded respondent for collection of 25 percent of the dry fly ash cannot be considered as malafide on the part of the respondent, as the same was issued by reason of the short collection by the petitioner and honour the bona fide requirement of other parties similarly placed like that of the petitioner. 7. The learned Senior Counsel appearing for the petitioner argued that the MOU has to be regarded as a statutory one as it was entered into pursuant to a notification issued by the Ministry of Environment and Forests, Central Government. He relied upon INDIAN THERMAL POWER LIMITED VS. STATE OF MADHYA PRADESH reported in (2000) 3 SCC 379 and VERIGAMTO NAVEEN VS. GOVERNMENT OF A.P. AND OTHERS reported in (2001) 8 SCC 344 in support of the above contention. In support of his argument that as the petitioner has invested huge amount by way of installation of collection machineries and construction in support thereof in view of the promise held out by the respondent for fixed percentage of fly ash and thus altered his position to its detriment, the impugned order is hit by the principle of promissory estoppal and in violation of the doctrine of legitimate expectation, he relied on PAWAN ALLOYS & CASTING PRIVATE LIMITED, MEERUT VS. U.P.STATE ELECTRICITY BOARD AND OTHERS reported in (1997) 7 SCC 251. He further argued that the impugned order passed by the respondent by arbitrary exercise of the powers and in violation of principles of natural justice, for which he relied on GUJARAT STATE FINANCIAL CORPORATION VS. M/S.LOTUS HOTELS PRIVATE LIMITED reported in (1983) 3 SCC 379, DWARKADAS MARFATIA AND SONS VS. BOARD OF TRUSTEES OF THE PORT OF BOMBAY reported in (1989) 3 SCC 293, MAHABIR AUTO STORES AND OTHERS VS. INDIA OIL CORPORATION & OTHERS reported in (1990) 3 SCC 752 and KUMARAI SHRILEKHA VIDYARTHI AND OTHERS VS. STATE OF UTTAR PARADESH AND OTHERS reported in (1991) 1 SCC 212. He further contends that the impugned is a non-speaking order and that has to be tested on the reason stated therein and cannot be improved by means of counter affidavit by relying on a decision of MOHINDER SINGH GILL AND ANOTHER VS. THE CHIEF ELECTION COMMISSIONER, NEW DELHI AND OTHERS reported in (1978) 1 SCC 405 and COMMISSIONER OF POLICE VS. GORDHANDAS BHANJI reported in AIR 1952 SUPREME COURT 16. He further contends that the impugned order is malafide, in the sense, even before the order dated 14.7.2006 reached the petitioner on 17.7.2006, an order has been passed allotting 25 percent of the fly ash in favour of the impleaded respondent. 8. Per contra, the Additional Advocate General in order to sustain the case of the respondents contends that the writ petition is not maintainable as the memorandum of understanding is not a statutory https://hcservices.ecourts.gov.in/hcservices/ contract based on any statutory provisions and the remedy of the petitioner is not by way of writ petition. The principles of promissory estoppal and legitimate expectation do not apply to the facts of the present case. The contention of malafide raised by the petitioner is raised without any factual basis. The grant order of 25 percent to a similarly situated cement company cannot be regarded as malafide having regard to the peculiar facts an circumstances of the present case. He relied on KERALA SEB V. KURIEN E. KALATHIL, (2000) 6 SCC 293 at 298. He further contends that when there is a dispute relating to terms of contract, proper course would be reference to arbitration or institution of civil suit and not a writ petition by relying on STATE OF U.P. VS. BRIDGE & ROOF CO. (INDIA) LIMITED reported in (1996) 6 SCC 22 at page NO.29. It is further contended that in respect of issues involving civil rights of parties flowing from a contract, Writ Petition under Article 226 is not maintainable by relying on STATE OF U.P. VS. MAHARAJA DHARMANDER PRASAD SINGH reported in(1989) 2 SCC 505. 9. From the above, the points to be resolved in these writ petitions are as follows: (1)Whether in the facts and circumstances of the case the petitioner can maintain a writ petition under Article 226 of the Constitution of India? (2) Whether the disputed questions could be resolved under Article 226 of Constitution of India? (3) Whether the impugned order is hit by the principle of promissory estoppal and legitimate expectation (4) Whether the impugned order could be attributed as a one passed malafide and with ulterior motive and hit by the principles of natural justice. 10. Points No.1 to 4: As all the points are interrelated, they are considered together. The contention that the MOU entered into between the petitioner and the respondent is a statutory one as contended by the learned Senior Counsel for the petitioner is based upon the notification issued by the Ministry of Environment and Forest Department dated 14.9.1999. Under the notification, the Ministry of Environment and forest issued directions for use of fly ash, bottom ash or pond ash in the manufacture of brick and other construction activities, utilization of ash by Thermal Power Plants. One of the directions is that every coal or lignite based power plant Commissioned subject to environmental clearance conditions stipulating the submission of an action plan for utilization of fly ash shall within a period of nine years from the publication of the notification phase out the dumping and disposal of fly ash on land in accordance with the plan. Such an action plan shall provide for 30 percent of the fly ash utilization within three years from the publication of the notification with further increase in utilization by at least ten percent points every year progressively for the next six years to enable utilisation of the entire fly ash generated in the power plan atleast by https://hcservices.ecourts.gov.in/hcservices/ the end of the 9th year. It further provides that every coal or lignite based thermal power plant not covered by the above said direction shall within a period of fifteen years from the date of publication of the notification, phase out the utilisation of fly ash in accordance with an action plan to be drawn up by the power plants. Such action plan shall provide for twenty percent of fly ash utilisation within three years from the date of publication of the notification, with further increase in utilsiation every year progressively for the next twelve years to enable the utilisation of the entire fly ash generated in the power plant. 11. It is pertinent to state here that the above said notification has been issued to protect the Environment, conserve top soil and prevent the dumping and disposal of fly ash discharged from coal or lignite based Thermal Power Plants on land with the further reasoning to restrict the excavation of top soil for manufacture of brick and promoting utilisation of fly ash in the manufacture of building materials and in construction activities, having regard to the environmental hazard caused by the fly ash produced by thermal power plant. 12. In the above stated circumstances of the case, if we consider the MOU entered into by the petitioner with the respondent Electricity Board which determines the terms and conditions under which the petitioner should clear the fly ash with the penalty clause, it can only be regarded as independent MOU of any statute and as such it cannot be elevated to a position either of a statute or an enabling provision in a statute, which enable the respondent to enter into an agreement. Under the notification issued by the Environment and Forest Department, the Central Government has only directed the Thermal Power Stations to dispose of the fly ash, but never directed any of the modes by which it has to be disposed of. The respondent Board is not obliged to allot the fly ash to a particular person even after allotment it is not obliged to maintain the percentage in the same standard. The percentage is depending upon the generation. Hence, I am of the view that though the MOU has been entered into to clear the environmental hazard, that cannot be regarded as a statutory one. 13. The Supreme Court in the case of INDIA THERMAL POWER LIMITED VS. STATE OF MADHYA PRADESH reported in (2000) 3 SCC 379, while considering the power purchase agreement entered into by the Madhya Pradesh Electricity Board with the independent power producers, having regard to Sections 43 and 43-A of the Electricity Supply Act, has held thus: "... The provisions of Sections 43 and 43-A of the Electricity Supply Act indicate that the agreement can be on such terms as may be agreed by the parties except that the tariff is to be determined in accordance with the provision contained in section 43-A(2) and notifications issued thereunder. Merely because a contract is entered into in exercise of an enabling power conferred by a statute that by itself cannot render the contract a statutory contract. If entering into a contract containing the prescribed terms and conditions is a must under the statute then that contract becomes a statutory contract. If a contract incorporates certain terms and conditions in it which are statutory then the said https://hcservices.ecourts.gov.in/hcservices/ contract to that extent is statutory. A contract may contain certain other terms and conditions which may not be of a statutory character and which have been incorporated therein as a result of mutual agreement between the parties. Therefore, the PPAs can be regarded as statutory only to the extent that they contain provisions regarding determination of tariff and other statutory requirements of Section 43-A(2). Opening and maintaining of an escrow account or an escrow agreement are not the statutory requirements and, therefore, merely because PPAs contemplate maintaining escrow accounts that obligation cannot be regarded as statutory." 14. In the case of VERIGAMTO NAVEEN VS. GOVERNMENT OF A.P. AND OTHERS reported in (2001) 8 SCC 344, the Government of Andhra Pradesh invoking power under the Mines and Minerals (Regulation and Development) Act, 1957 and the Mineral Concession Rules, 1959 reserved two villages for exclusive exploitation of minerals by public sector unit and by two Government Orders granted different areas in favour of the Andhra Pradesh Mineral Development Corporation. Thereafter, the Government of Andhra Pradesh accorded permission to the Corporation for grant of sub-lease of the areas subject to certain terms and conditions. However, the Government subsequently took a decision to put an end to all the existing sub-leases in order to enable the Corporation to carry on the mining operations directly and withdrew permission granted earlier to the Corporation to grant sub-leases. The validity of the notification withdrawing the permission granted earlier to sub-lease the mining lease in question was challenged. The grant of prospecting mining or direct mining and execution of contract pursuant thereto are governed by the statutory provisions of the MMRD Act, 1957 and the Rules made thereunder i.e., Mineral Concession Rules, 1956. While considering the issue with reference to the statutory provision contained in the MMRD Act, 1957 and Mineral Concession Rules, 1956, which governed the conditions of lease for quarrying, the Supreme Court held that in cases where the decision-making authority exceeded its statutory power or committed breach of rules or principles of natural justice in exercise of such power or its decision is perverse or passed an irrational order, the Court could intercede even after the contract was entered into between the parties and the Government and its agencies. 15. The other decision of GUJARAT STATE FINANCIAL CORPORATION VS. M/S.LOTUS HOTELS PRIVATE LIMITED reported in (1983) 3 SCC 379 was a case in which the Gujarat State Financial Corporation entered into an agreement to