IN THE HIGH COURT OF JUDICATURE AT PATNA CWJC No.6530 of 2009 M/S MAA MUNDESHWARI CARBON PVT LTD.A COMPANY INCORPORATED UNDER THE PROVISIONS OF THE COMPANIES ACT,1956 HAVING ITS PLACE OF BUSINESS SITUATED AT BHAIROPUR,PO-PAHARIA, PS-BHAGWANPUR DISTT-KAIMUR AT BHABHUA THROUGH ONE OF ITS DIRECTORS, MANOJ KUMAR SINGH S/O SHRI RAJESHWAR PRASAD SINGH, R/O BHAIROPUR,PO-PAHARIA,PS- BHAGWANPUR,DISTT-KAIMUR AT BHABHUA--PETITIONER Versus 1. THE CENTRAL COALFIELDS LTD. A SUBSIDIARY OF COAL INDIA LTD,( SALES & MARKETING DEPARTMENT) DARBHANGA HOUSE, RANCHI THROUGH ITS CHAIRMAN-CUM-MANAGING DIRECTOR 2. THE COAL INDIA LTD. HAVING ITS HEAD OFFICE SITUATED AT 10 NETAJI SUBHAS ROAD, KOLKOTA 700001 THROUGH ITS CHAIRMAN 3. THE GENERAL MANAGER (SALES & MARKETING) CENTRAL COALFIELDS LTD. DARBHANGA HOUSE RANCHI---RESPONDENTS ----------- For the Petitioner: Mr. S.D.Sanjay, Advocate Mr.Gautam Kejriwal, Advocate For the Coal India Ltd. Mr.V.M.K. Sinha, Advocate ---------- 11 27.4.2010 Petitioner is a registered company under the provisions of the Indian Companies Act 1956 and is engaged in manufacture of special smokeless fuel. The Company was provided technology for production of smokeless fuel by subsidiary of Coal India Limited such as Central Mines Planning & Design Institute limited (CMPDI) or the Central Fuel Research Institute (CFRI). The decision to set up such an industry was an advertisement issued by Coal India Limited with the object of producing pollution free alternative fuel for use as domestic fuel with the larger object of protecting the environment. The unit was set up, inspected by all concerned authorities and it was decided in principle to supply coal as per the requirement and capacity of the unit. A linkage was provided for supply of coal after an agreement was entered in this regard by the - 2 - petitioner and the respondents. Initially the linkage was granted on an ad hoc basis for six months and thereafter on a joint inspection carried out by a team constituted by Coal India Ltd., recommendation for 4692 M.T. per month allocation of coal was decided in favour of the petitioner. The earliest letter granting linkage is dated 10.5.1999 and is annexure-1 to the writ application. It is the stand of the petitioner that the smokeless fuel manufacturing unit was set up upon the assurance and promise of the Coal India Ltd. to supply coal and large scale investment was made on that assurance. Coal India Ltd. is the main source of supply and the survival of the unit is dependent upon regular supply of coal to the petitioner from time to time. Earlier the distribution and regulation of coal and its price was controlled by what is known as Colliery Control Order 1945 but subsequently the same was replaced by Colliery Control Order 2000 which was duly notified in the Gazette on 1.1.2000. Coal India Ltd. in order to regulate the distribution of coal categorized the consumers into Core Sector Consumers, Non-Core Sector (linked) Consumers, traders and non-linked consumers. Core sector consumers consisted of big Power Plant, Steel Plant, Railway, Fertilizer, Cement Factory etc. the non-core sector consumers consists of industries like Textile, Rayon, Chemical, Re-rolling Mills etc. etc. Non-core sector consumers (non-linked) have not been granted any linkage by the coal company. In otherwords they have no assured supply of coal from any of the companies of Coal India - 3 - Limited. The company was being run well on the basis of the coal released in their favour by the respondents till a kind of change in allocation policy was brought about. The Coal company decided to allocate coal by a methodology known as E-auction scheme. After the E-auction scheme was brought into effect the linkage scheme was given a go-by. E-auction policy or scheme became subject matter of challenge in different High Courts. The matter finally travelled to the Hon’ble Supreme and a decision came to be rendered by the Apex Court declaring the E-auction policy to be ultravires or unconstitutional. The decision of the Hon’ble Apex Court is the case of Ashoka Smokeless Coal India Private Limited & others vrs. Union of India and others reported in (2007) 2 SCC 640. There were many observations which the Hon’ble Supreme Court had to make in the said decision. One of those observations has reflection on the present dispute. Observation that the smokeless coal operators have set up their units at the behest of the Coal India Ltd. and those who have set up their units in the erstwhile State of Bihar and West Bengal evidently did so at the behest of the company having been encouraged therefor. It was done to share the burden of the coal companies to supply soft coal to the small consumers and doctrine of promissory estoppel would therefore be applicable. It was also observed by the Apex Court that the coal companies having regard to the provisions of Nationalisation Act are - 4 - not profit earning concerns but an extended arm of a welfare State. The coal companies have a duty to fix the price of coal in such a manner so as to sub serve the common good etc. After the E-auction policy was declared to be unconstitutional the Court directed constitution of a high powered committee to remorse the policy and set out a new scheme keeping in view the observation of the Apex Court in this regard. A new coal distribution policy dated 18.10.2007 came to be notified. One of the salient features of the new coal distribution policy is that the classification of consumers into Core and Non-Core Sector have been done away with and the linkage system has been replaced with more transparent bilateral commercial arrangement which is known as Fuel Supply Agreement. All the existing valid linked consumers whose linkage/MPQ during the year 2006 and 2007was 4200 tons or more have to enter into Fuel Supply Agreement with the Coal Companies not later than six months from the date notified by the Coal India Ltd. Failure to enter into agreement would result in discontinuation of supplies at fixed price. Another aspect which must be noted is that 75% of the quantity of normative requirement of the consumers would be considered for supply through Fuel Supply Agreement at a notified price to be fixed or declared by the Coal India Ltd. and the balance 25% would be sourced by units through E-Auction or import of coal. Government of India, Ministry of Coal has been notifying the price of coal from time to time and the Coal Companies - 5 - have been charging price of those coals from various consumers on the basis of notified price. This was the position prior to the decision of Hon’ble Apex Court in Ashoka Smokeless (supra) which was rendered on 1st December, 2006 as well as after. The respondents Coal India Ltd. have been charging price of coal at the notified price after the policy was declared to be unconstitutional but for the petitioner or the likes the new coal distribution policy came into effect only on 18.10.2007 and it was sought to be enforced or implemented from 1st April, 2008. It is also required to be noticed that while the Hon’ble Apex Court was hearing the batch cases of Ashoka Smokeless and others an interim prayer was made by linked consumers for stay of payment of difference between notified price of coal and the E- auction weighted price. After much contest the Hon’ble Apex Court directed linked consumers to deposit 33.3% of the difference of the price in cash with the coal companies and for the balance 66.7%, indemnity bond was to be furnished. It was also the observation of the Hon’ble Supreme Court that in the event of a decision against the coal companies on E-auction policy they will be liable to refund the 33.3% cash deposit with interest. The detailed order in this regard dated 12.12.2005 is annexure-3 to the writ application. It is the contention of the petitioner that after the judgment of the Hon’ble Supreme Court in Ashoka Smokeless (Supra) the respondent Coal companies did not honour the undertaking given to the Court with regard to refund of 33.3% of the - 6 - price with interest which led to filing of contempt applications by the linked consumers. Only when the Hon’ble Supreme Court took a very strong view that the coal companies fell in line. The Court can well understand the reluctance on the part of the coal companies to refund the money since most of the Public Undertaking Sectors, even if they have monopoly, are concerned about their balance sheet and the colour of the bottom line of the said balance sheet. As noticed above though the coal companies have refunded the deposit of 33.3% with interest to the linked consumers but they also decided to realize an additional amount of 20% on the notified price of coal from the linked consumers only. Those 20% extra amount which was charged from the linked consumers including the present petitioner was incorporated in the sale order itself and was done unilaterally without any notice or information to the linked consumers. Some of the sale orders which have been annexed as annexure-4 to the writ application reflect that position. It is the charging of 20% over and above of notified price that has brought the present petitioner before this Court challenging the said act of the respondents. The first contention of the petitioner with regard to 20% extra price being charged from the petitioner is that it has no legal basis or foundation for doing so. The action of the respondent is discriminatory and violative of Article 14 of the Constitution of India because of all the consumers only the linked consumers have been targeted by the Coal Companies to charge 20% extra price over and - 7 - above the notified price. There is no separate notification either by Government of India or the Coal Companies themselves. According to the petitioner the object and purpose of realizing this 20% extra price from the linked consumers is with the purpose of compensating the Coal Companies for the refunds which they were compelled to make in terms of the direction of the Hon’ble Supreme Court. Charging of 20% extra price over and above the notified price is in the teeth of the Hon’ble Supreme Court decision and observation that the object of nationalisation of the Coal Companies was not for earning profit but for expanding the object and the arm of welfare State. It is also urged on behalf of the petitioner that the Hon’ble Supreme Court at no point of time in the decision of Ashoka Smokeless(supra) has authorized charging of 20% extra price over and above the notified price and that too only from the linked consumers. In absence of any observation or authorization by the Apex Court the action of the respondent Coal Companies of realizing excess price, only from the linked consumers is creating a class amongst the class which is not permissible under law. Another significant part which emerges from the conduct of the respondent Coal Companies is the fact that 20% extra charged is only for the period January, 2007 to March, 2008. After March 2008 the Coal Company/Companies have gone back to charging only the notified price from even the linked consumers. In absence of any cogent and valid explanation for charging 20% excess - 8 - amount over and above the notified price for the period January, 2007 to March 2008 the same deserves to be interfered with and appropriate refund and adjustment is called for. The respondent Coal India Ltd. has filed their counter affidavit. They have tried to justify their action under the garb of policy decision of the Company and it is their stand that fixation of price or charging thereof is the sole prerogative of the Coal Companies and the Courts have no role to play with regard to such policy or decision. It is also their stand that the petitioner or such companies have been lifting coal from month to month basis and even for the period 1.1.2007 to March 2008 and they have been paying 20% extra price without any protest. It is not open for them now to turn around or challenge the same in the present writ application. The charging of extra price was an interim arrangement after the E- auction policy was declared unconstitutional and before the new policy came into picture. It is also claimed in the counter affidavit that the so called interim sale policy was formed on the basis of the opinion given by the then Additional Solicitor General which had approval of the Government of India. The interim coal sale policy has been annexed as annexure-R/1 to the counter affidavit. The respondent Coal Company has also brought on record the so called opinion of the Additional Solicitor General of India as a proof of justification for charging 20% extra price over and above the notified price from the linked consumers. - 9 - The stand of the respondents or their justification is not understood by this Court because on meticulously going through the coal policy as well as the opinion of learned Additional Solicitor General there is no reflection whatsoever that any advise was given or any provision was made in the interim coal policy to charge 20% extra price over and above the notified price from the linked consumers. The issue of charging of excess price only from the linked consumers in absence of any recommendation or approval of Government of India as well as in absence of any notification having been brought to the notice of the Court the act and conduct of the respondent Coal Companies obviously seems to be an innovation of the Coal Companies itself. Even in the supplementary affidavit filed by the respondents they have not brought on record any decision or deliberation of the kind on record to show the circumstances, authority or justification under which they were authorized to charge 20% extra price over and above the notified price only from linked consumers. They have not satisfactorily explained as to why notified price had been charged from all the consumers prior to the E-action policy being declared unconstitutional as also again after the new policy was notified in the year 2007. Obviously there is an interregnum period between the two policies where only a set of consumers were identified and targeted for realization of such price from the linked consumers. The Court gets an impression that it is an innovation - 10 - on the part of the Coal India Ltd. to illegally compensate themselves for the out lay which they had to make by refunding 33.3% of the price, which was deposited by the linked consumers at the behest of the Hon’ble Apex Court. Obviously they did not want to refund the money collected by them on the order of the Hon’ble Supreme Court and that too with interest. Since they were compelled to refund the money to those litigants only after the Hon’ble Supreme Court took a harsh view this innovation of replenishing the fund seems to have been worked out by the Company at their own level, by charging 20% extra price over and above the notified price from the linked consumers alone. The Court therefore has no hesitation in declaring that charging of extra 20% over and above the notified price in the sale orders of the petitioner for the period January 2007 to March 2008 is violative of Article 14 of the Constitution of India and may be even in the teeth of the declaration made by the Hon’ble Supreme Court in the case of Ashoka Smokeless (Supra). This writ application is allowed. The respondent Coal India Limited is hereby directed either to refund 20% extra price which have been charged over and above the notified price for January 2007 to March 2008 or adjust the same in future supply made to the petitioner. The Court expects the above refund or adjustment to be made in the next eight weeks from the date of production or communication of this order. If the refund is not made or money - 11 - adjusted then the petitioner would be entitled to payment of interest on the amounts from the date it was charged till the date of adjustment or refund at the rate of 6% per annum. This writ application stands allowed. RPS (Ajay Kumar Tripathi,J.)