1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY NAGPUR BENCH : NAGPUR WRIT PETITION NO.1222 OF 2011 Hind Steel and others ... Petitioners - Versus - Union of India and others … Respondents ------ WITH WRIT PETITION NO.1223 OF 2011 Vidarbha Industries Association and others ... Petitioners - Versus - Union of India and others … Respondents ------- S/Shri A.S. Jaiswal and S.N. Kumar, Advocates for petitioners. Shri S.C. Mehadia, Advocate for respondent nos. 2 and 3. Smt. B.H. Dangre, Additional Government Pleader for respondent nos. 4 and 5. -------- 2 CORAM : D.D. SINHA AND A.P. BHANGALE, JJ. DATED : MARCH 24, 2011 ORAL ORDER (PER D.D. SINHA, J.) : Heard Shri Jaiswal, learned Counsel for the petitioners, Shri Mehadia, learned Counsel for the respondent nos. 2 and 3, and Mrs. Dangre, learned Additional Government Pleader for the respondent nos. 4 and 5. 2) Shri Jaiswal, learned Counsel for the petitioners, states that the petitioners are consumers of coal. It is submitted that coal supply agreement was executed between petitioners and respondent Western Coalfields Limited. The quantity of coal required to be supplied by the respondent Western Coalfields Limited to the petitioners every month is mentioned in the coal supply agreement. It is submitted that Clause 4.4 of 3 the coal supply agreement entitles respondent Western Coalfields Limited to reserve the right to verify including the right to inspect/call for any document from the purchaser and physically verify the end use of the coal and satisfy itself of its authenticity. This Clause further stipulates that purchaser shall be under obligation to comply with the seller's directions and extend full cooperation in carrying out verification/ inspection. 3) It is contended by Shri Jaiswal that respondent Western Coalfields Limited wanted petitioners to submit documents along with specific format certified by the District Industries Centre. The format is annexed as Annexure `VI' to the petition. It is submitted that the petitioners were ready and willing to obtain the said document from the District Industries Centre, however, when they approached the District Industries Centre, it flatly refused to issue certificate in the prescribed format on the ground that 4 it is not under any obligation to do so. It is further submitted that for want of submission of the said document, the respondent Western Coalfields Limited has stopped supply of coal, which has affected the interest of the petitioners adversely and, therefore, the petitioners have approached this Court. 4) Shri Jaiswal further states that the document, which the respondent Western Coalfields Limited wants petitioners to submit is beyond the control and capacity of the petitioners since the Authority, i.e. District Industries Centre, which needs to issue the said document in the specific format prescribed by the respondent Western Coalfields Limited, has refused to do so on the ground that it is not under any statutory or other obligation to issue the same to the petitioners. It is, therefore, contended that direction of the respondent Western Coalfields Limited to the petitioners to supply the above referred document is bad in law and cannot be sustained in law and, 5 therefore, action of stoppage of supply of coal is also not sustainable in law. It is, therefore, prayed that direction may be given to the respondent Western Coalfields Limited to supply the coal as per the coal supply agreement executed between the petitioners and respondent Western Coalfields Limited. 5) Mrs. Dangre, learned Additional Government Pleader for respondent nos. 4 and 5, states that the respondent Western Coalfields Limited is a Company, which supplies coal to the petitioners and, therefore, it is for the Western Coalfields Limited to evolve the modalities and procedure in order to ensure that coal, which is supplied to its customers is being used for the purpose for which it is supplied and there is no misuse of coal by the consumers. It is submitted that it is not the duty – statutory or otherwise of the Industries Department to ensure this aspect nor there is any legal obligation to issue such certificate in the format as required by the Western Coalfields Limited. It is 6 further submitted that observations of the Apex Court in paras 188, 189 and 190 of the judgment in Ashoka Smokeless Coal India (P) Ltd. and others vs. Union of India and others (2007) 2 SCC 640) are relevant. It is contended that the Apex Court has observed that documents submitted by the consumers must be scrutinized by the Authorities of Coal Companies and in the event, they have any suspicion, inspection should be carried out by the Officers appointed by the Chairman-cum-Managing Director of the Company concerned within whose jurisdiction the Unit is situated. It is, therefore, submitted that neither Western Coalfields Limited nor consumers can force the Industries Department to issue document in a particular format prescribed by the respondent Western Coalfields Limited and it is for the respondent Western Coalfieds Limited to regulate supply of coal and end use thereof. 6) Shri Mehadia, learned Counsel for respondent 7 nos. 2 and 3, states that in view of Clause 4.4 of the coal supply agreement, right is reserved by the respondent Western Coalfields Limited to call for any document from the purchaser apart from the right of physical verification to ensure end use of the coal. It is submitted that in view of the specific right reserved by the respondent Western Coalfields Limited to call for the documents, the respondent Western Coalfields Limited has asked the petitioners to get the document in a particular format from the District Industries Centre in order to ensure that the coal is being used by the consumers for the purpose for which it is supplied to them. It is further submitted that this practice was in vogue for a long time and, therefore, there is no reason for the District Industries Centre to deviate from this practice. It is contended that the same practice is in existence in other States, such as Madhya Pradesh and Gujarat. It is submitted that the procedure evolved by the respondent Western Coalfields Limited whereby consumers are required to 8 obtain certificate in the specific format from the Industries Department is only to ensure proper use of the coal for the purpose for which it is supplied to the consumers and, therefore, it is in the interest of respondent Company as well as customers that the practice, which is evolved and continued for a long time, be followed. However, without there being any reason, the Directorate of Industries discontinued the said practice for no apparent reason, though that by itself does not take away the right of respondent Western Coalfields Limited to ask for the said document in view of Clause 4.4 of the coal supply agreement. 7) We have given anxious thought to the contentions canvassed by the learned Counsel for the parties and perused Clause 4.4 of the coal supply agreement and the decision of the Apex Court in Ashoka Smokeless Coal India (P) Ltd. (cited supra). Before we consider the issue on merits, it will be 9 appropriate to consider the requirement under Clause 4.4 of the coal supply agreement, which reads thus : “4.4 - The total quantity of Coal supplied pursuant to this Agreement is meant for use at the M/s. Hind Steel, Works : N-73, MIDC, Hingna Road, Nagpur {name and location of the Plant(s)} as listed in Schedule I. 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 that the purchaser engages or plans to engage into any such resale or trade, the seller shall terminate this agreement forthwith without any liabilities or damages, whatsoever, payable to the purchaser. It is expressly clarified that the seller shall reserve the right to verify including the right to inspect/call for any document from the purchaser and physically verify the end use of coal and satisfy itself of its authenticity. The purchaser shall have the obligation to comply with the seller's directions/extend full cooperation in carrying out such verification/ inspection.” Plain reading of the above referred Clause shows that the purchaser is not permitted to sell/deviate and/or transfer the coal for any other purpose whatsoever than the purpose for which the quantity of coal is 10 released in favour of the purchaser and if he does so, it shall be treated as material breach of the agreement and seller shall have a right to terminate the agreement on this count forthwith without any liability. The Clause further expressly clarifies that the respondent Western Coalfields Limited shall reserve the right to verify including the right to inspect/call for any document from the purchaser. It is no doubt true that the respondent Western Coalfields Limited in view of Clause 4.4 of the coal supply agreement has a right to call for any document from the purchaser and it is also necessary for the purchaser to supply such document. However, the said requirement will have to be considered in the context of the facts and circumstances of the present case. In the present case, respondent Western Coalfields Limited requires petitioners to submit a document to be issued by the District Industries Centre in a specific format prescribed by the respondent Western Coalfields Limited. The said format reads thus : 11 “In terms of Clause 4.4 of Coal Supply Agreement, you are hereby advised to furnish the following information along with the supporting documents (photo copies duly authenticated, signed and sealed by the officials of District/State Industries Dept.) in the following format along with a certificate from the officer of District/State Govt. certifying the working status of the Unit. STATEMENT SHOWING MONTHLY END USE OF COAL REGARDING M/S A B Opening stock as on first date of month (in tonnes) Quantity received during the month (in tonnes) Total (A+B) Quantity of finished product produced (in tonnes) Balance quantity of Raw coal (in tonnes) Details of finished products sold to various consumers during the month Satisfaction with end use* Sl. No. Name & Address Quantity (in tonnes) Amount received (Rs.) Details of payment in DD/Cheque Photo copy of gate pass & challan No.,if any Yes No *To be got filled up by official from District/State Industry” 12 8) It is not in dispute that the petitioners were ready and willing to supply the said document provided the District Industries Centre is ready to issue the same. Mrs. Dangre, learned Additional Government Pleader, has specifically submitted that the Department of Industries is under no statutory obligation to issue the said document in a format specified by the Western Coalfields Limited. The Western Coalfields Limited has also not shown to us any statute or rule, which casts obligation on the District Industries Centre to issue such document after following due procedure. In the instant case, the District Industries Centre refused to issue such document and, therefore, it is evident that it is beyond the capacity and control of the petitioners to submit the said document to the Western Coalfields Limited as asked by it, since the District Industries Centre refused to oblige the petitioners in this regard. 13 At this stage, it will be appropriate to consider the observations made by the Apex Court in paras 188 and 189 of the judgment in the case of Ashoka Smokeless Coal India (P) Ltd. and others (cited supra), which read thus : “188. Coal being a scarce commodity, its utility for the purpose for which it is needed is essential. Although, technically, in view of the fact that no price is fixed for coal, there may not be any black marketing in the technical sense of the terms; but, this Court cannot also encourage black marketing in general sense. Nobody should be allowed to take undue advantage while dealing with a scarce commodity. The very fact that despite best efforts of the Central Government, the coal companies failed to curb the menace of a section of people and to deal in coal excluding other general people therefrom or the linked consumers misusing their position of obtaining allotment of coal either wholly or in part, it is absolutely necessary that some mechanism should be found out for plugging the loopholes. The Union of India or the coal companies appear to have lost confidence in the State Governments. They had carried out joint inspection and in that process, they must have arrived at a satisfaction about the genuineness of the claims of industrial units for which the linkage system was meant for. 189. Before us most of the consumers, with a view to obtain supply of coal had filed documents to prove their genuineness. The 14 said documents must be scrutinized by the authorities of the coal companies. In the event, they have any suspicion, inspection should be carried out by Officers appointed by the Chairman-cum-Managing Director of the company concerned within whose jurisdiction the Unit is situated.” The plain reading of the observations made by the Apex Court in the above referred paras demonstrate that in order to verify genuineness of the documents supplied by the customers, it is the duty of the Authorities of the Companies supplying coal to scrutinize those documents and in the event, they have any suspicion, inspection should be carried out by the Officers appointed by the Chairman-cum-Managing Director of the Company concerned within whose jurisdiction the Unit is situated. It is for the Coal Companies to evolve modalities and ensure proper use of coal and eliminate misuse thereof, by formulating such policy, which they think fit and proper, rather than shifting the burden on the District Industries Centre to do so without authority of law. 15 9) After taking overall view of the matter as well as considering the observations made by the Apex Court in the case of Ashoka Smokeless Coal India (P) Ltd. and others (cited supra), we have no hesitation to hold that though respondent Western Coalfields Limited in view of Clause 4.4 of coal supply agreement has a right to call for documents, however, such documents should be only those documents, which the consumers can produce and not such documents, which are beyond the control or capacity of the consumers. In the instant case, the document, which is asked to be produced, is beyond the capacity and control of the petitioners since District Industries Centre has flatly refused to oblige the petitioners on the ground that it has no obligation in law to do so. It is in these circumstances, we hold that action of discontinuation of supply of coal by the respondent Western Coalfields Limited for want of submission of the said document, is not only bad in law, but the same is also unsustainable in law. 16 10) For the reasons stated hereinabove, we direct the respondent Western Coalfields Ltd. to supply coal to the petitioners as per the coal supply agreement forthwith and ensure by evolving modalities and policy that the coal, which is supplied to the customers including the petitioners, must be used for the purpose for which it is supplied. With these observations and directions, the petition is disposed of. 11) At this stage, Shri Mehadia, learned Counsel for respondent nos. 2 and 3, prays for stay of this order for a period of four weeks. Since Western Coalfeilds Limited does not have legal authority to compel the District Industries Centre to issue the document, which Western Coalfields Limited wants petitioners to submit and this order is partly based on the observations of the Apex Court, we see no reason to stay the same. Hence, 17 request of learned Counsel Shri Mehadia is rejected. JUDGE JUDGE khj