Case: Murli Industries Limited Company Registered Under The Companies Act Having &amp; Another Vs. M/S. Western Coalfields Limited &amp; Others

3. Petitioner No.1 is a company duly registered under the Companies Act, 1956 and petitioner No.2 is its ChairmancumManaging Director and share holder. Respondent No.3 is government of India undertaking under the Ministry of Coal and respondent No.1 also a Government of India undertaking, is a subsidiary of respondent No.3. Respondent No.2 is Officer of respondent No.1, whose communications dated 27/11/2013 and 23/12/2013 have been impugned in these petitions. Respondents No. 1 and 3 being a State within the meaning of Article 12 of the Constitution of India and respondent No.2 being an officer of respondent No.1, are amenable to writ jurisdiction of this court.4. Petitioner No.1company manufactures cement, paper and allied products for the purpose of which it has set up cement and paper plants together with ancillary plants necessary for running of these plants. For manufacturing of cement, a kiln is necessary and it runs on coal as well as power. For manufacture of paper, steam and power are necessary. The power used by petitioner No.1company for running of its plants is generated through its own captive power plants. For all these activities, petitioner No.1company requires constant supply of coal for a long period of time. Therefore, petitioner No.1company, under the new National Coal Distribution Policy, applied to the Ministry of Coal, Government of India for long term linkage for supply of coal. Under the new Coal Distribution Policy, an applicant is required to achieve several milestones as a precondition to have coal supply agreements (for short, CSAs) in its favour. Petitioner No.1company submits that it had achieved all the milestones as required under the new policy and, therefore, its applications made for supply of coal by way of long term linkages were granted by the Coal Ministry through the respondent No.1.5. Accordingly, CSAs by way of long term coal linkages were executed by respondent No.1 in favour of the petitioner No.1company on 24/4/2008, 24/11/2010, 31/10/2009 and 31/10/2009. By these agreements, respondent no.1 undertook to supply coal to petitioner No.1company on long term basis for running of its captive power plants, cement plant and steam generation plants.

Court's reasoning:
16. In the present petitions it is not in dispute that even though respondent No.1 had made an enquiry into the complaints received against the petitionercompany alleging diversion of coal for earning black money and had also demanded various documents and information from time to time during the course of the enquiry from the petitionercompany, a formal show cause notice, calling upon the petitionercompany to show cause as to why the CSAs be not terminated and bank guarantee invoked, was never issued. It is also not in dispute that the petitionercompany was not heard by respondent No.1 before issuing the impugned orders.17. The impugned orders terminating the CSAs as well as invoking the bank guarantees have civil consequences not only adverse to the interest of the petitionercompany but also of its employees, who depend for their livelihood on the salary that they get from the petitionercompany. The power and cement plants of the petitionercompany require continuous supply of coal on long term basis for their smooth running and in the event of any interruption or stoppage of supply of coal and that too abruptly without giving any opportunity to the company to explain its stand in the matter and may be even to make necessary alternate arrangements for procuring coal, if, in case, there is any termination of CSAs by the respondents, the operation of these plants would come to a grinding halt thereby affecting adversely the interests of the company and its employees, not to speak of the consumers of the company, who may have booked orders for supply of cement, paper and allied products manufactured by the company. Therefore, respondent No.1 and 2 were under a duty as seen from the case law discussed earlier, to follow the mandate of Article 14 of the Constitution. Before issuing impugned communications, these respondents ought to have issued a show cause notice and afforded a reasonable opportunity of being heard to the petitioner No.1Company. Having not done so, on this count alone, the impugned orders are liable to be struck down as violative of the mandate of Article 14 of theare not inclined to accept this argument for the reason that it is a fact that no formal notice calling upon the petitionercompany to show cause as to why the CSAs be not terminated was issued at any point of time. Similarly, no hearing on this aspect of the matter was ever afforded to the petitionercompany. The argument, therefore, deserves to be rejected outrightly.In the instant matter, action has been taken against the petitionercompany under Clause4.2 of the CSAs entered with the petitionercompany and this Clause has been not denied to be not in pari materia to Clause4.4 of the CSAs executed in favour of Digganath Steel Industries and Engineering Works. If respondents No. 1 and 2, in similar fact situation, could issue show cause notice and also give hearing to other consumers and if subsidiary of respondent No.3, BCCL, could also adopt the same procedure, which is fair and reasonable and consistent with the principles of rule of law, it is unfathomable to understand as to why respondent No. 1, also could not adopt the same procedure. By not following the same procedure, respondents No. 1 and 2 can be said to have been selective and discriminatory in their approach while dealing with their different consumers and this approach, we must say, is unfair. The concepts of equaility, fairness and nonarbitrariness run through the entire fabric of Part3 and Part4 of the Constitution. Article 21 of the Constitution guarantees the right to live, which includes right of livelihood. If the company like the petitioner No.1 is made to stop its operation due to sudden stoppage of supply of essential raw materials, the right to livelihood of the employees of the company would also be denied or deprived, which cannot be done except in accordance with the procedure established by law, which procedure must be fair, reasonable and nonarbitrary, in consonance with the mandates of Articles 14 and 21 of the Constitution. The deprivation of such a right must not be the product of an oppressive or discriminatory or capricious action. It must be based upon some known principles and sound reasons. That being not the case here, the impugned orders are liable to be quashed and set aside and these petitions deserve to be allowed accordingly.