Case: M/S Coal India Limited  Vs. Alok Fuels(P) Ltd.Tr.Dir

4. The relevant facts very briefly are that the respondents were granted linkage of different quantities of coal for utilization in the manufacture of quantities of coal for utilization in the manufacture of smokeless fuel in their plants. On 18.10.2007, the government of India, ministry of coal discontinued the traditional linkage system and in its place adopted a new coal distribution policy under which coal was to be supplied to different consumers through a fuel supply agreement (for short FSA) at notified prices to be fixed and declared by coal India limited. In accordance with this new policy, Bharat coking coal limited (for short BCCL), a subsidiary of coal India limited, entered into FSA with the respondents for supply of coal. Clause 4.4 of FSA provided that the total quantity of coal supplied to the respondents under the agreement is meant for use in the plant of the respondents and the respondents shall not sell or divert or transfer the coal for any purpose whatsoever and in the event they engage or plan to engage into any such re-sale or trade, BCCL shall terminate the FSA forthwith without any liabilities or damages whatsoever payable to the respondents. On 07.06.2009, the central Bureau of investigation (for short the CBI) registered first information report (FIR) against 10 consumers including the respondents alleging inter alia that the 10 consumers entered into a criminal conspiracy with Shri Udayan Bhattacharya, the then general manager (S&M) of BCCL and in furtherance thereof, lifted 11,94,940 tonnes of coal and instead of utilizing the same in their respective plants, sold the same in the open market at highter prices and as a result BCCL has suffered a loss of Rs. 4,36,15,300/— approximately and the accused have made corresponding wrongful gain to themselves. In the FIR, the CBI further stated that the facts disclosed the commission of offences punishable under section 120-B read with sections 420, 467, 471 of the Indian penel code (for short IPC) and section 13(2) read with section 13(d) of the prevention of corruption act, 1988 by Shri Udayan Bhattacharya and the proprietors of different consumer firms and, therefore, a criminal case be registered and the investigation be taken up. The chairman of the coal India limited thereafter advised the chairman-cum-managing director of BCCL to suspend supply of coal to the firms named in the FIR including the respondents and accordingly BCCL suspended supply of coal to the respondents by a wireless message dated 13.06.2009.5. Aggrieved, the respondents filed the writ petitions in the high court of Jharkhand at Ranchi praying for quashing the communications suspending the supply of coal to the respondents under FSA and also praying for interim orders directing BCCL to resume supply of coal. On 06.10.2009, the impugned interim orders directing resumption of supply of coal to the respondents on the ground that there was any kind of black marketing done by the respondents or any kind of mis-utilization of the allotted coal by them. The appellants. herein challenged the interim orders dated 06.10.2009 of the learned single judge before the division bench in the LPAs. By order dated 07.01.2010 the division bench dismissed the LPAs with the liberty to the appellants to file applications for vacating the interim orders as soon as the appellants are able to procure adverse material against the respondents and in the alternative passed orders terminating FSA with the respondents.

Court's reasoning:
13. We have considered the submissions of learned counsel for the parties and we find that the only reason why the learned single judge of the high court has by the impugned interim orders directed the appellants to resume supplies of coal under FSA to the respondents is that BCCL has not placed any material the court to show that there was any kind of black-marketing of coal done by the respondents or any kind of mis-utilization of the allotted coal by them and this is also the reason given by the division bench of the high court for dismissing the LPAs filed by the appellants against the impugned interim orders passed by the learned single judge. What the learned single judge and the division bench of the high court failed to appreciate is that the FIR containing the allegations of mis-utilization of the allotted coal and sale of the allocated coal by the respondents in the open market was lodged by the CBI and therefore the CBI and not the BCCL was in possession of information or materials with regard to such mis-utilization of the allotted coal or sale of the coal in the open market by the respondents. As a matter of fact in the charge-sheet which as been filed after investigation in the court of special judge, CBI cases, Dhanbad, it is stated that a search was conducted at the plant premises of the respondents in June 2009 by the CBI officials in presence of independent witnesses during which the plants of the respondents were found to be non-functional and the names of employees/workers as per the attendance register as well as other documents relating to sale of finished goods as produced by the respondents were found to be fake and fabricated as full particulars, addresses etc. were not provided in the records in respect of such employees/workers engaged and purchasers of finished goods and thus the quantity of coal issued to the respondent-companies were not utilized in their plants but sold in black-market. It was thus clear that there were materials with the CBI in support of hte allegations made in the FIR against the respondents that they were not utilizing the allotted coal in their plants but were selling the same in black-market, but these materials could not be placed before that court because the CBI was not impleaded as a respondent in the writ petitions filed by the respondents.14. We further find that in the counter-affidavit filed in the high court in replay to the writ petitions filed by the high court in reply to the writ petitions filed by the respondents, coal India limited and BCCL have pleaded that under clause 4.4 of FSA the respondents were required to utilize the entire quantity of coal allotted to them in their respective plants and had undertaken no to sell / divert / transfer the coal for any purpose whatsoever and as the FIR lodged by the CBI disclosed breach of this clause of FSA, coal India limited and BCCL had to suspend the supplies of coal to prevent further diversion of coal by the respondents and this decision was taken pending a final decision regarding termination of FSA in terms of clause 15 thereof. Thus the case of the appellants herein before the high court was that suspension of supply of coal has been ordered to prevent further diversion fo coal by the respondents. The coal India limited and BCCL are government companies of the government of India, ministry of coal, and since under the new coal distribution policy formulated pursuant to the observations of this court in Ashoka Smokeless coal India (P) Ltd. & Ors. Vs. Union of India & Ors. (supra), mis-utilization of allotted coal and black-marketing of such coal by the respondents was to be checked, the coal India limited and BCCL did not act arbitrarily or unresonably to suspend the supplies of coal under FSA to he respondents, if they entertained a serious doubt on the basis of the FIR lodged by the CBI that the supplies of coal, if made to the respondents, may be mis-utilized by the respondents and may be sold in the openone such relevant consideration which the coal India limited and BCCLas public authorities have to consider is whether continuation of supply of coal to the respondents may no lead to mis-utilization or black-marketing of the coal by the respondents which are prohibited under FSA and the policy decision of the government considering the allegations made by the CBI in the FIR on the basis of the reliable information received. This relevant aspect has not been considered by either the learned single judge or the high court while dismissing the LPAs against the impugned interim orders of the learned single judge.16. It is true as has been contended on behalf of the respondents that clause 13(1) of FSA provides that the event respondents fail to pay any amount including any interest due to, BCCL shall have the right to suspend supplies of coal to the respondents, but clause 13(1) does not stipulate that n no other contingency BCCL can suspend supplies of coal under FSA to the respondents. Moreover, clause 13(1) of FSA enumerates the three options available to BCCL in case the dues towards the price of coal and interest is not paid by the respondents and it does not provide for the different contingencies in which BCCL can suspend the supplies of coal to the respondents. In our considered opinion BCCL will also have the right to suspend supplies of coal to the respondents where it has doubts that he respondents may mis-utilize the allotted coal and divert or sell the same in open market because, as would be clear from clause 4.4 of the FSA and the new coal distribution policy decision dated 18.10.2007, the very object of FSA as well as policy of the government is to allot coal to respondents for utilization in their plants and not for any other purpose. Therefore, if the FIR lodged by the CBI, which is a premier investigation agency of the central government, created serious doubts that the allotted coal may be diverted or sold in the open market instead of being utilized in the plants of respondents, BCCL would be within its rights to suspend the supplies of coal to the respondents till the doubts are cleared in appropriate proceeding.17. We, however, find that BCCL has initiated such proceedings by issuing show cause notices dated 16.07.2009 to the respondents to explain why FSA executed in favour of the respondents should not be cancelled on the basis of the FIR lodged by the CBI containing the allegations that the respondents were involved in a criminal conspiracy leading to the breach of terms and conditions of FSA. If the respondents have furnished their explanations, BCCL may consider the same take a decision whether or not to resume supplies of coal in accordance with law.