Case: State of Bihar Vs. Tata Iron Steel Company Limited

1. The Tata Iron and Steel Company Limited (the Company), respondent in the appeal herein, is primarily engaged in the manufacture of iron and steel/iron and steel materials. According to the Company, it own s captive coking coal mineshas also installed coke ovenplants within the factory premises and as such it comes within the definition of colliery under the Colliery Control Order, 1945 (the Order) promulgated by the Government of India. The State of Bihar, with the prior concurrence of the Central Government, and in exercise of the powers conferred by Section 3 of the Essential Commodities Act, 1955, has issued an order called the Bihar Trade Articles (Licenses Unification) Order, 198 4 (the Unification Order). The question for consideration in this appeal is whether the Company is a dealer within the Unification Order, and as such is governed by the provisions thereunder. A Division Bench of the Patna High Court has answered the question in the negative and in favour of the Company. This appeal by the State of Bihar is against the judgment of the Patna High Court dated April 14, 19882.The Company has its registered office at Bombay and its integrated steel plant at Jamshedpur. The captive coking coal mines of the Company arc in the Jharia Coal Fields and at West Bokaro in the State of Bihar. The coking coal extracted and raised from the mines is beneficiated in the coal washing plants, sterilised at Jamad uba and West Bokaro and thereafter the entire production is transferred to the Companys coke oven plants at Jamshedpur for converting the same into Hard Coke meant for use in the blast furnaces. According to the Company about 85 per cent of its coal requirement is received from the captive coal mines and the remaining 15 per cent is procured indigenously or by import from abroad. It is asserted by the Company that for the purpose of steel manufacturing only metallurgical quality of cok e is used and for that purpose the coking coal, whether received from the captive coal mines or otherwise, is converted into metallurgical coke through the process of coke ovenplants. According to the Company inferior quality of coke such as middlings, and coal rejects produced at the Companys collieries and some of the coke fractions such as coke breeze, pearl coke, etc. produced at its oven plants which are not of metallurgical quality and not capable of being used in its steel plant that arc sold and disposed of by the Company. It is stated that the disposal of such unwanted and unusable material arising in the continuous process of the integrated manufacturing operation becomes a necessity for preventing congestion in the steel plant3.The Supply Inspector of the State of Bihar seized six truck, % loaded with coke breeze which were sold by the company without obtaining licence as envisaged under the Unification Order. Criminal proceedings under Section 7 of the Essential Commodities Act, 1955 for violation of the Unification Order were also initiate against the Company, which was challenged by way of a writ petition before the Patna High Court. The primary contention of the Comp any before the High Co was that it being a colliery under the Order which was Central Government promulgation, the Unification Order issued the State Government was not applicable The High Court by the judgment dated November 12, 1986 dismissed the writ petition. The Company challenged the judgment of the High Court by way of special leave petition before this Court. This Court in Civil Appeal 576 of 1986 decided on December 3, 1987 set aside the judgment of the High Court and remanded the matter for fresh decision. The operative part of the order is as under:We are of the view that very contentious issues were involved in the matter. The aspects that required examination could not have been disposed of in the matter in which the Division Bench has dealt with it. The question as to whether the appellants are dealers, has to be examined as without the appellants being a dealer within the meaning of the 1984 Order, no liability to comply with the impugned requirements of the Order, would arise. Even Mr. Jainarain found it difficult to ask for sustaining the impugned order as relevant aspects have not been examined. Taking all these aspects into consideration, we set aside the order of the High Court and remit the matter to it for fresh disposal on merits after hearing the parties. Full opportunity should be given to the parties to place their arguments and the case should be disposed of in accordance with law. We did not intend to express any opinion on merit and if anything has been said it should be taken by way of justification for the remit. *4. On remand, the High Courtheard the parties afresh and by the impugned judgment dated April 14, 1988 allowed the writ petition. The High Court came to the conclusion that the Company was a colliery and as such was governed by the provisions of the Order. The High Court reached the said conclusion on the following reasoning:8. As noticed above, the Company is the owner of coal mines as well as coke oven plantColliery within the meaning of die definition of the Central Order not only any mine or open working where the getting of coal is the principal object of the mining, quarrying or other operations earned on therein but includes a plant for the production of coke or for the washing of coal. In view of the inclusive definition, coke oven plant and coal washeries are also collieries within the meaning of that Order.

Reasoning: 7. A plain reading of the above quoted definition makes it clear that it specifically includes a plant for the production of coke or for the washing of coal. The inclusive definition has been given with a purposeOrdinarily, the coke oven plant is at a place where coking coal is converted into Hard Coke for the purposes of using the same in the industry. Coke oven plants are, therefore, set up at various places where Hard Coke is needed for the industry, Since hard coke also comes within the definition of coal under die Order and is subject to control by the Central Government authorities, the coke oven plants which produce hard coke have been rightly included in the definition of colliery. We agree with the above quoted reasoning given by the High Court in reaching the conclusion that the Company is a colliery under the OrderWe may, therefore, briefly examine the provisions of the Order and the Unification Or9. Clause 4 of the Order provides that the Central Government may fix the price at which or the maximum or the minimum price, or both, subject to which coal may be sold by colliery owners. Under Clause 5 no colliery owner or his agent can sell and no person can purchase, coal at a price which is in excess of the price or the maximum price or below the price or the minimum price fixed under clause 4. Clause 7 lays down that every colliery owner or an allottee of coal under the Order shall, on being requested to do so, submit returns and other information in such form and within such time as may be specified in the notice or direction. Clause 8 provides that the Central Government may from time to time issue such directions as it thinks fit to any colliery owner regulating the disposal of his stocks of coal or of the expected output of coal in the colliery, during any period. Under clause 10A the Coal Controller may by order direct that any coal dispatched by any colliery owner which is in transit shall subject to such terms and conditions, if any, as the Coal Controller deems fit, be diverted and delivered to another person specified in the order. Clause 11 provides that the Central Government may issue such directions as it thinks fit to any colliery owner prohibiting or limiting the mining or production of any grade of coal. Clause 28 prohibits any person from using coal so allotted otherwise than in accordance with the conditions contained or incorporated in the order of allotment. Clause 12E provides that no person shall acquire or purchase any coal from a colliery and no colliery owner or his agent shall despatch coal from the colliery except under the authority and in accordance with the conditions contained in a general or special authority from the Central Government. Clause 12G provides that notwithstanding anything contained in Clause 12A, 1 2B and 12E, any person may from September 15, 1975 without any order of allotment or authority acquire or purchase despatch or transfer hard coke produced from beehive ovens, country ovens andt ovens, provided that nothing in this clau se shall apply to hard coke in respect of which direction is issued by the Central Government under Clause 8 of the Order. It may be mentioned that by the notification dated July 24, 1967 the Central Government has authorized any person to ac quire despatch or transfer without any order of allotment or written authority noncoking coals of all grades produced in all coal fields, coking coals not required for metallurgical consumers and coal produced in Assam provided that such coal shall be consumed within India10.It is obvious from the provisions of the Order that it tends to regulate coal from the stage of production to the stage of consumption including price control and inspection. Under the scheme of the Order, the coking coal from various coal mines is allotted to various persons, The provisions of the Order give wide powers to the Central Government to ensure that the coal extracted from the mines is properly utilised for the benefit of the industry and other purposesApart from that, the provisions of the Order give wide powers to the Central Government to keep a track on the allotted coal so that the same is not misutilised11. The Unification order defines the coal to mean coal, coke and other derivatives including soft and hard cokes of various grades. Dealer has been defined under Clause 2(e). Retail dealer has been defined to mean a person engaged in the business of purchase, sale, or storage of any article specified in Schedule 1 for the purpose other than personal consumption within the storage limit fixed by the Government from time to time. Wholesale dealer has been defined to mean a person engaged in business of purchase, sale or storage of any article specified in Schedule 1 for the purpose other than personal consumption within the storage limit fixed by the Government from time to timeCoal dump holder means a person or firm appointed by or on behalf of the Government as such who is engaged in the business of storing coal from collieries on the basis of allocation made by the Government or by any authority empowered by the State Government for sale to retail dealersPart 11 of the Unification Order provides for issuance of licence and prohibits dealer to carry on business of purchase, sale or storage for sale of any of the trade articles mentioned in Schedule. 1, without a licence issued under the Order. Part 11 of the Unification Order imposes restrictions relating to price, stock, etc. It provides that the retail price of any trade article displayed in compliance with the provisions of the Display Order shall not exceed the retail price fixed or recommended by the Central Government or the State Government or manufacturer or distributor from time to time for that trade article. It further provides that no dealer shall sell to any person any trade article at a price higher than that specified in respect of such article in the list of prices and stocks and no dealer shall refuse to sell such article to any person at the price specified. No dealer shall sell any trade article to any person without issuing a cash memo or bill and without keeping a duplicate copy of such memo or bill. Clause 19 of the Unification Order requires every person holding stock of trade articles mentioned in Schedule 1 and Schedule 11 to sell to the State Government or to any person or class of persons the whole or specified p art of the stock at such price and in such manner as may be specified in the order. Clause 20 provides that every dealer shall furnish a return to the prescribed authority from time to time as notified. It is laid down in Clause 21 that the licensing authority may by general or special order in writing require a dealer holding stock of trade article to sell article on permits issued by the licensing authority. In Part IV there are usual powers to call for information and issue directions to the dealers12. The various provisions of the Unification Order show that the purpose of the said order is to make available scheduled articles to the public at fair price and without any holding of stock by the dealers The object of the Unification Order in a nutshell is to make available the essential commodities to the public at large13. Having minutely examined the provisions of the Order and the Unification Order, we have no hesitation in concurring with the finding of the Patna High Court in Black Diamonds case that the two operate in different fields. There is hardly any overlapping between the two. The learned counsel for the Company has however invited our attention to clause 15 (display of price), clause 20 (furnishing of returns) clause 21 (sale on permits) and clause 25 (power to issue directions to the dealer) of the Unification Order which according to the learned counsel are covered by the provisions of the Order. We do not agree with the learned counsel. As mentioned above, the provisions of the Order issued by the Central Government are directed for the protection of the allotted/ allocated coal. The Order operates from the stage when the coal is extracted from the mines and continues to regulate its journey till it leaves the colliery and is brought in the open market for sale. The Unification Order, on the other hand, starts operating at a stage when the coal is exposed for open sale in the market. The two operates in entirely different fields. The display of prices, furnishing of returns, sale on permits, power to issue directions to dealers, under the two Control Orders are for entirely different purposes and they operate in different fields. We, therefore, do not agree with the judgment of the Patna High Court in Black Diamonds case that the two Control Orders are likely to conflict witheach other in their operation. Examined from another angle, the Central Government by the Notification dated July 27, 1967 has permitted free sale of non metallurgical coal provided it is consumed in India. When the said coal is sold in open market in the State of Bihar the provisions of the Unification Order, which are meant to protect the interest of the consumers, are squarely attracted and are to be followed even by a colliery which falls within the definition of Dealer under the said Order14.We may mention that the Control Orders emanate from the same source. The Order has been issued by the Central Government, whereas the Unification Order has been issued by the State Government of Bihar as a delegate of the Central Government under the Essential Commodities Act, 1955 and further, the Unification Order has been issued with the prior approval of the Central Government15. We, therefore, see no justification for the respondentCompany for not complying with the provisions of the Unification Order. They despite being a colliery is bound by the provisions of the Unification Order if it is found to be a dealer under the said Order16.The expression dealer has been defined under clause 2(e) of the Unification Order which is as under:dealer means a person, a firm, an association of persons or ae society other than a National and State level Cooperative Society, engage in the business of purchase, sale or storage for sale of any trade article whether or not in conjunction with any other business and includes his representative or agent but does not in clude(i)a person who holds or is in possession of agriculture land under any tenure or any capacity and on which he raises or has raised crop of foodgrains. oilseeds or whole pulses; (ii) a manufacturer of sugar; (iii) a producer of pulses and edible oil.Patna High Court in Black Diamonds case came to the conclusion that the colliery being a producer of coal cannot come within the definition of dealer under the Unification Order. We do not agree with the conclusion of the High Court which is based on no reasoning. It is the admitted case of the Company that they sell coal in the open market which has no metallurgical quality. In the written submissions filed on behalf of the Company by M/s. J.B. Dadachanji &Co., in paragraph 18 the percentage of clean coal and non metallurgical coal has been given as under:% of the product to the total input Jamadoba West Bokaro Clean Coal 62/65% 38/40% Middlings 19/13% 38/40% Rejects 12/14% 8/10% Slurry 7/8% 10/12% Tailings Clean coal, the only prime quality product of metallurgical quality is meant for manufacture of BP hard coke, All the remaining three are secondary products of the Washeries which areThere is thus no doubt that the quantity of nonmetallurgical coal sold by the Company is not negligibleIn any case, the Company is regularly sellinglurgical coal in the open market and as such it cannot be said that it is not engaged in the business of sale or storage for sale of non metallurgical coal. We have no hesitation in holding that the Company is a dealer under the Unification Order.