Case: M/s Ashoka Smokeless Coal Industries Pvt. Ltd. &amp; Others Vs. Union of India &amp; Others

The Coal India Ltd. and its subsidiaries introduced a new scheme for sale of coal through E-auction. This meant that the industrial concerns which had linkage with Coal India Ltd and its subsidiaries for the supply of coal to them had to pay more for the coal compared to what they were paying earlier or what was known as the notified price. This led to the various Undertakings approaching different High Courts challenging the E-auction scheme and seeking interim protection of their right to get coal at notified prices on the basis of the linkage with Coal India Ltd and its subsidiaries. The various High Courts entertained the writ petitions and passed interim orders in regard to supply of coal at the price payable, pending the disposal of writ petitions filed by the concerned Undertakings. Some of the High Courts directed the linked Undertakings to furnish bank guarantees for the difference in prices or to pay cash or to furnish security for the difference while seeking supply of coal, based on linkage. Being aggrieved by the directions to furnish bank guarantee or pay the price of coal in cash, these petitions for special leave to appeal have been filed by the petitioners herein taking the stand that they are entitled to have the coal supplied at the notified price instead of the E-auction average price. This Court while entertaining the petitions for special leave to appeal had passed orders as interim measure directing that the coal would be supplied to the petitioners by Coal India Ltd and its subsidiaries on the basis of linkage at the notified price on the concerned undertaking executing indemnity bonds and in addition, filing an undertaking by the concerned Managing Director or Managing Partner of the Company or the Firm, undertaking to pay the difference, in case the petitions fail. Subsequently, a further order was passed directing the petitioners before this Court to file certificate/statement/chart showing the net worth of their respective undertaking/firm/company as on 30th October, 2005 and also work out the difference in the amount involved by working out the difference between the E-auction and the notified prices.2. Two conflicting judgments have been passed; one by the Gauhati High Court and another by the M.P. High Court. Whereas the Gauhati High Court held the scheme of selling coal through E- auction as invalid, its validity has been upheld by the M.P. High Court.3. Meanwhile, petitions for transfer have been filed by Union of India, the respondent in these petitions for special leave, praying that the various writ petitions pending in the various High Courts be withdrawn to this Court to be heard and finally disposed of so that conflicting decisions and protracted litigation could be averted especially considering that the commodity involved is coal and what is involved is its regular supply to those Undertakings which have linkage with the Coal India Ltd. and its subsidiaries. Notices have been ordered on the petitions for transfer and the petitions for special leave to appeal and a connected appeal in this Court are being posted in the month of January for final disposal.

Court's reasoning:
6. We have given our anxious thought to the rival submissions. Most of the High Courts have passed orders directing the furnishing of bank guarantee and some of the High Courts have passed orders directing the furnishing of security for the difference in prices before claiming the supply of coal based on the coal linkage. Learned counsel for the petitioners pointed out that as the price of the commodity is paid in advance, substantial amounts belonging to the petitioners herein remain in the hands of Coal India Ltd. and its subsidiaries to be adjusted against the price payable by the petitioners for the coal to be lifted and there was no risk involved in continuing to supply coal to the petitioners on the basis of the individual coal linkage. It is pointed out on behalf of the Coal India Ltd. that the amount paid is to be adjusted towards the supply of coal to be made and it gets dwindled every time when a supply is made and that would be inadequate security or protection to Coal India Ltd. and its subsidiaries.7. Keeping in mind the interests of both sides and taking note of the facts and circumstances as a whole, we think that it would be appropriate to direct the petitioners to pay a part of the enhanced price while at the same time furnish security for the balance that might become payable in case their challenge to the E-auction scheme is repelled. The rights of the petitioners claiming themselves to be small scale industries can be protected by directing them to furnish security for a major part of the enhanced price and accepting the undertaking given on behalf of Coal India Ltd. and its subsidiaries to refund whatever had been paid in excess with interest thereon in case the petitioners succeed in their challenge to the E-auction system introduced by the Coal Companies. Since there is substance in the argument that mere furnishing of security or bank guarantee would not enable Coal India Ltd. and its subsidiaries to carry on their business which it was necessary to do in the interests of the whole Nation, we feel that a direction to pay at least a part of the enhanced price by the petitioners could be justified in the circumstances.8. It is pointed out that in respect of some entities, coal was being supplied at the notified price enhanced by 20% thereof and this would be a guide for fixing the percentage of the excess price to be paid by the petitioners. It is pointed out that enhancement of the notified price only by 20% was in respect of very small consumers and in respect of Central and State Agencies and that cannot form the basis for supply of coal to the petitioners herein having a coal linkage with the coal companies. Taking note of the circumstances as a whole we feel that it would be just and proper to direct the petitioner companies/firms, having coal linkage, to pay in addition to the notified price, 33 1/3 % of the enhanced price, each time they claim supply of coal to them based on the linkage and by furnishing security for the balance 66 2/3% of the enhanced price with an undertaking filed in this Court that the said part of the price will also be paid within 6 weeks of the decision of this Court in the writ petitions in case the writ petitions are decided against the petitioners. To protect the interest of the petitioners and to ensure that no permanent harm is caused to them we also think it proper to record the undertaking given on behalf of the Coal India Ltd. and its subsidiaries that in case this Court upholds the challenge made by the petitioners and allows the writ petitions filed by them, the enhanced price of 33 1/3% now to be paid by the petitioners will be refunded to the petitioners within 6 weeks of the judgment of this Court with interest thereon at 12% per annum from the date of payment till the date of return to the concerned petitioner.9. There is a complaint on behalf of the petitioners that coal was not being supplied in spite of interim orders passed by this Court earlier. Of course, this submission is disputed by counsel for the respondents.