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CASE NO.: Appeal (civil)  816 of 2001

PETITIONER: Coal India Limited & Ors

RESPONDENT: Domco Smokeless Fuels (P) Ltd

DATE OF JUDGMENT: 15/05/2007

BENCH: S.B. SINHA & MARKANDEY KATJU

JUDGMENT: J U D G M E N T

WITH CIVIL APPEAL NO. 817 OF 2001 AND CONTEMPT PETITION (C) NO. 547-548 OF 2002 IN CIVIL APPEAL NO. 816-817 OF 2001

S.B. Sinha, J.

1.           These appeals are directed against the Order of a learned Single  Judge of the Jharkhand High Court dated 9.7.1999, an Order dated 9.8.1999,  Order dated September, 1999,  an Order dated 23.9.1999 as also Order of a  Division Bench 14.10.1999 passed in LPA No. 415 of 1999 (R) refusing to  interfere with the order impugned in the writ petition passed by the learned  Single Judge of the said Court allowing the writ petition filed by the  respondent.   The basic fact of the matter is not in dispute.  Respondent  herein has set up a unit for production of smokeless fuel.   The said Industry  was set up by the respondent allegedly on a representation made by the  appellant herein by way of an advertisement inviting new entrepreneurs to  set up new smokeless fuel units wherefor supply of coal to them was  assured, which is to the following effect:

"Say "no" to Smoke Do you know?   The smoke emitting from your chullahs  is causing serious air Pollution endangering the air that  your child breaths.

SPECIAL SMOKELESS FUELS (SSF) \026

an economic substitute for the smokey soft coke and  firewood, generates consistent heat thus enconomizing  fuel consumption.   Its uniform size also ensures  convenient storage.   Use of SSF will reduce widespread  chopping of tree for firewood and present deforestation.   Coal India now on a mission to minimize environmental  pollution and encourage aforestation, invites  entrepreneurs to set up new SSF units and expand  existing ones.   8 SSF units are already on stream.  CIL  has already cleared linkages for 80 units CIL will soon be  finalizing linkages for 25 more units.

CIL will provide additional coal requirements for  expansion of SSF units and coal linkages for the new

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entrepreneurs.  Write to us through State Sponsored  Authorities.

For further details contact : CMPDIL, Ranchi/Technical  Cell, Coal India Ltd. 10 Netaji Subhash Road, Calcutta- 700001, Tel: 206312, 207817   Western Coalfields Ltd.          Bharat Coking Coal Ltd. ----------------------------             -----------------------------

Central Coalfields Ltd.          Eastern Coalfields Ltd. ---------------------------              -----------------------------

South Eastern Coalfields Ltd.     North Eastern Coalfields" -----------------------------------      -----------------------------  

2.      Respondent applied for grant of linkage facility for obtaining supply  of coal in its industrial unit situated in the District of Aurangabad in the  State of Bihar.  It was given coal linkage with the collieries belonging to  Bharat Coking Coal Ltd, (BCCL) a subsidiary of Coal India Ltd.

3.      On or about 17.11.1993 in a meeting wherein the authorities of the  Coal India Ltd., a subsidiary of BICICO and the Secretary of the Assessing  Manufactures Association participated, it was decided. "(a)    SOURCE OF COAL LINKAGE         It was decided that the linkage of the SSF plants  will be reviewed by CIL keeping in view the present  availability of coal suitable for SSF production and  rationalization of linkage would be considered to the  extent possible so that the units get their supplies from  the nearest suitable sources containing SSF grade  coal.

       In this connection, BICICO would submit a  statement to CIL giving their suggestions for linkage  of coal to the new SSF units in Bihar."

        4.      Respondent applied for transfer of his linkage from BCCL to Central  Coalfields Ltd.(CCL) in terms of the said decision taken in the  aforementioned meeting dated 17.11.1993, pointing out that construction of  the factory was taken up only on the basis of the assurances made by the  Coal India Ltd. in that behalf.  Although, some industries allegedly similarly  situated, were given the benefit of transfer of their linkage from BCCL to  Central Coalfields Ltd., by the appellant, the  request of the respondent was  not acceded to despite a "No objection" to the change given by the CCL.   Coal India Ltd. referred  to the purported policy decision in regard to linkage  to the effect that, once it is accorded, the same would be permanent in  nature. However, temporary transfer of linkage to the extent of 50% of the  quantity were given both to the respondent as also one M/s. Pushpanjali Coal  and Coke.

5.      Coal India Ltd., however, issued a direction on or about 9.10.1999  that the respondent would be given 50% of its supply for three months from  BCCL and 50% from CCL.  The legality of the said decision was questioned  by the respondent in a Writ Petition filed before the High Court of Jharkhand  praying therein that the appellant be directed to release full quota of coal by  grant of change of linkage from BCCL to CCL.    Pending Writ Petition,  however, CIL granted permanent change of linkage in favour of M/s.  Pushpanjali Coal and Coke but not to the respondent, despite the fact that  CCL had given "No Objection" to both the units by a common letter dated  17.7.1998. 6.      The said Writ Petition was allowed by a learned Single Judge of the

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High Court inter-alia directing; "..Now the respondent \026 CIL came out with a case in  the counter affidavit that the officers of the CIL in its  meeting held on 3.9.98 took a policy decision that  linkage once granted, cannot be transferred from one  subsidiary to another subsidiary of CIL.

9.   After going through the entire facts of the case and  the documents referred to hereinabove, it is manifest  that non-acceptance of the request of the petitioner by  CIL is arbitrary and not reasonable particularly when  no valid reason has been assigned for not accepting  the request of the petitioner, more so, when the case  of M/s Pushpanjali Coal & Coke Pvt. Ltd. was  considered and his linkage was transferred from  BCCL to CCL.   Nowhere in the counter affidavit the  respondent-CIL has denied the difficulty that the  petitioner-unit is facing and will have to face and the  loss which the petitioner-unit will sustain in procuring  coal from BCCL which is far away from the place  where the Plant has been established.   Moreover,  after considering the recommendation from the State  Government and the BICICO and after obtaining no  objection from the C.C.L., there is no reason for the  respondents to ignore the request of the petitioner.   It  is well settled that when the industries are established  the Central Government or the State Government and  its instrumentalities while framing industrial policies  and taking policy decisions in the matter in the matter  supply of raw materials or granting different  incentives, the objective must be to encourage the  unit."   

7.      It was directed; "11.   Having regard to the facts and circumstances of  the case and the discussions made hereinabove, this  writ application is disposed of with a direction to the  authority of the respondent-C.I.L. to take a liberal and  positive decision in the case of the petitioner also in  the light of the direction and observation made above.    Such decision must be taken within a period of two  weeks from the date of receipt/production of a copy of  this order."          8.      An application for clarification was filed by the respondent inter alia  praying for issuance of a writ of or in the nature of mandamus upon giving a  positive direction to the appellant to supply coal to its unit only from the  collieries belonging to Central Coalifields Ltd.   The said application was  disposed of by an Order dated 9.8.1999 observing; "In my opinion, the application filed by the petitioner is  misconceived inasmuch as there is sufficient indication in  the order that the respondent shall take a positive decision  in the light of the fact that in similar circumstances the  prayer for transfer of linkage made by M/s Pushpanjali  Coal and Coke Pvt. Ltd. has been allowed.   It is also clear  from para. 5 of the judgment that this Court has held that  non-acceptance of the request of the petitioner by C.I.L. is  arbitrary and not reasonable.

       In view of the sufficient indication in the order  directing the respondents to take positive decision in  favour of the petitioner, I am of the view that no further  clarification is needed in this order.   The submission of  Mr. Sinha that if the order is not clarified, the respondents  \026 C.I.L. may not take decision in favour of the petitioner,

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cannot be accepted for the reason that this Court virtually,  in the order dated 9.7.99, directed respondents to transfer  the linkage as prayed for by the petitioner.

       This application is accordingly, disposed of with the  aforesaid observation."

9.      Application of the respondent, was thus, rejected. On the  aforementioned premise, a review application was filed by the appellant  which was also rejected opining: "From reading of the entire facts it appears that there  are many other considerations for granting linkage  of coal to various suppliers which can be brought  into light if the entire documents are called for from  the C.I.L.   But, at this stage, I do not want to make a  roving enquiry into the matter.   Suffice it to say that  Mr. S.M. Sharma should act fairly so that if  anything is brought to the notice of this court in any  other case, then he may not be put in trouble.

       Curiously enough the Director of Industries  Govt. of Bihar, by its letter dated 20.8.99 addressed  to the Sales Manager, CIL, informed that temporary  registration granted to certain firms have been  cancelled but inspite of that respondents have  granted linkage to those firms from CCL vide their  order dated 25.8.99, a copy of which has been  annexed as Annexure 1/A to the rejoinder.

       It is also surprising that the respondents have  taken a negative decision and thereby refused to  comply the direction of this court merely on the  ground that many other consumers will come for  such relief.   In my opinion, that cannot be a ground  for disobeying the order and direction passed by this  court.

       However, in view of very fair stand taken by  Mr. Banerjee appearing for the respondents that the  respondents shall re-consider the case of the  petitioner in the light of the judgment dated 9.7.99  and the subsequent order dated 9.8.99 and will take  a positive decision, I am disposing of the instant  application and its rejoinder by observing that the  respondents must comply the order and direction of  this court within ten days from the date of receipt of  a copy of this order."

10.     A Letters Patent Appeal was filed thereagainst by the appellant which  by reason of the impugned judgment dated 14.10.1999 has been summarily  dismissed.  As no Letters Patent Appeal was filed as against the original  order of the learned Single Judge dated 9.7.1999, an application under  Article 136 of the Constitution has directly been filed in this Court  thereagainst which has been marked as SLP(C) No. 17145/2000.

11.     A Division Bench of this Court while staying the operation of the  impugned judgment, directed the appellant to consider the case of the  respondent in terms of the letter dated 14.2.2000.

12.     Grievances were raised by the respondent from time to time before the  Court that the appellant had not been supplying the requisite quantity of coal  to its unit whereupon various orders have been passed whereto we need not  refer at this stage.    Suffice, however, it to notice that some contempt  petitions were also filed.   Another Division Bench of this Court by an Order

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dated 29.1.2004 observed;         "We have heard the learned counsel for the  parties for sometime.   After some discussion, the  learned counsel for the appellants submitted that he  may be allowed a reasonable time for having  instructions and making a proposal on two points:

(i)    Clearing the arrears of supply of coal to; and  

(ii)   Rationalising policy as to linkage for future.

      Let a statement in that regard be made on an  affidavit under copy to the counsel opposite on or  before 24th February, 2004.

     Response, if any and if needs to be filed in  writing may be done on or before 16th March, 2004.

     The above said statement and response shall be  treated without prejudice to the rights of either  parties.

     List for hearing on 23rd March, 2004."                          13.     When the matter came up for hearing before another Bench of this  Court on 17.8.2006, it was directed;         " The respondent (s) herein shall furnish within  four weeks from date, bank guarantee and security in  regard to the difference in the prices, if any, of coal  which had already been supplied to them by the Coal  India Ltd. in terms of the directions of this Court in  M/s. Ashoka Smokeless Coal Industries Pvt. Ltd &  Ors. vs. Union of India & Ors. (SLP(C) No.  20471/2005).  The appellant shall issue necessary  directions to the Central Coalfields Ltd. for supply of  coal to the respondent’s factory from any of the  collieries situated within its jurisdiction subject, of  course, to the availability as also the guidelines and  the circulars issued by the Central Government, if  any.   Only in the event, it is not possible for the CCL  to supply coal, offer to supply coal may be made from  the collieries belonging to the BCCL.

         Keeping in view the facts and circumstances of  this case, we are of the opinion that Union of India  should be impleaded as party.  On an oral prayer made  by the learned counsel Mr. Sachthey, Union of India  is made a party through the Ministry of Coal.   Mr.  Sachthey assures us that a copy of the paper book of  this case shall be handed over to the Central Agency.

         Counter affidavit by the Central Government  may be filed within four weeks from date.    Liberty to  mention, if any occasion arises therefor.

          We would also direct that an officer of the Coal  India Ltd. shall visit the factory of the respondent so  as to assess the actual present need of coal by it  whereupon the difficulties, if any, in making supply  thereof from any of the collieries belonging to the  Central Coalfields Ltd. may be deliberated upon in a  meeting which may be convened by Coal India Ltd.  with officer(s) of the Bharat Coking Coal Ltd., Cental  Coalfields Ltd. and a representative of the respondent  (s).

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        Put up on 10th October, 2006.

         On the next date of hearing, an officer of the  Coal India Ltd. having full instructions in the matter,  and a representative of the respondent shall remain  present in Court."

14.           Pursuant to the said Order, the unit of the respondent had been  inspected and a report has been filed with an affidavit affirmed by the  General Managers of Coal India Ltd. on 18.10.2006.

15.     Respondent filed an objection to the said report.  A rejoinder thereto  has also been filed by the appellant herein.   In the meantime, the question of  linkage vis-‘-vis, the changed policy decision of Coal India Ltd. to sell coal  on e-auction was considered by a Bench of this Court in M/s. Ashoka  Smokeless Coal Ind. P. Ltd. & Ors. v Union of India & Ors  [2006 (13)  SCALE 102], wherein inter-alia it was observed: " 190.   Coal being a scarce commodity, its utility for  the purpose for which it is needed is essential.    Although, technically, in view of the fact that no price  is fixed for coal, there may not be any black marketing  in the technical sense of the terms; but this Court cannot  also encourage black marketing in general sense.    Nobody should be allowed to take undue advantage  while dealing with a scarce commodity.   The very fact  that despite best efforts of the Central Government, the  coal companies failed to curb the menace of a section of  people and to deal in coal excluding other general  people therefrom or the linked consumers misusing  their position of obtaining allotment of coal either  wholly or in part, it is absolutely necessary that some  mechanism should be found out for plugging the  loopholes.   The Union of India or the coal companies  appear to have lost confidence in the State  Governments.   They had carried out joint inspection  and in that process they must have arrived at a  satisfaction about the genuineness of the claims of  industrial units for which the linkage system was meant  for.

191.    Before us most of the consumers, with a view to  obtain supply of coal had filed documents to prove their  genuineness.   The said documents must be scrutinized  by the authorities of the coal companies.  In the event,  they have an suspicion, inspection should be carried out  by officers appointed by the Chairman-cum-Managing  Director of the concerned company within whose  jurisdiction the unit is situated.

192.  With a view to evolve a viable policy, a  committee should be constituted by the Union of India  with the Secretary of Coal being the Chairman.   In  such a committee, a technical expert in coal should also  be associated as most of the projects involve consumers  of coal, particularly  manufacturers of hard coke and  smokeless fuel.  In our opinion, it may not be difficult  to find out, having regard to the technologies used  therein as regards the ratio of the input vis-‘-vis the  output, with a balance and 10% margin.   On the basis  of such finding alone, apart from the requirements of  five years, supply should form the basis of MPQ.   We  may, however, hasten to add that the Central  Government in collaboration with the coal companies  would be at liberty to evolve a policy which would

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meet the requirements of public interest vis-‘-vis the  interest of consumers of coal.   They would be entitled  to lay down such norms as may be found fit and proper.    They would be entitled to fix appropriate norms  therefor.   In the event, any industrial unit is found to  violate the norms, it should be stringently dealt with."

16.     It is stated by the learned Additional Solicitor General appearing on  behalf of the Union of India that pursuant to the said direction, a Committee  has been constituted and it is expected that a report would be submitted  within a few weeks.    It is, however, not necessary for us to consider that  aspect of the matter.   Mr. Anip Sachthey, learned counsel appearing on  behalf of the appellant inter-alia would submit that the High Court  committed a manifest error in issuing a Writ of Mandamus directing the  appellant to transfer the linkage of coal from BCCL to the CCL   Drawing  our attention to the report of the Committee, it was submitted that keeping in  view the shortage of coal faced  by Central Coalfields Ltd., such a direction  would cause enormous difficulties in working out of the linkage system  itself.   It was further submitted that even on fact, the respondent cannot be  said to have a good case as from Bahri, the distance of the collieries  belonging to Central Coalfields Ltd. and Bharat Coking Coal Ltd. are almost  same. 17.     Mr. P.P. Rao, learned senior counsel appearing on behalf of the  respondent, on the other hand, submitted; (i)In view of the ’No Objection’ granted by CCL, it is not now permissible  for the appellant to suggest that supply of coal from Central Coalfields Ltd.  would cause enormous difficulty to it. (ii) Having regard to the clear representation made by the Coal India Ltd., in  its advertisement of 1987 as also the minutes of meeting held on 17.11.1993  pursuant whereto and in furtherance whereof, the appellant altered its  position by investing a huge amount by setting up its industry of smokeless  fuel, the doctrine of promissory estoppel shall apply in the instant case. (iii)  In the light of the provisional decision taken by CIL in the matter of  grant of supply of coal i.e. 50% from BCCL and 50% from CLL, the High  Court cannot be said to have exceeded its jurisdiction in directing the  appellant to take a final decision in the matter having regard to the immense  difficulties which are being faced by the respondent as also the financial  implication attaching thereto.    (iv)  Appellant being a ’State’ within the meaning of Article 12 of the  Constitution of India was enjoined with a duty to exercise its jurisdiction in a  reasonable manner  (v)  When an opportunity had been granted to a State to correct an error in  the matter of exercise of its discretionary jurisdiction, the High Court in a  given case may issue a Writ of Mandamus also. 18.     In M/s. Ashoka Smokeless (supra), this Court has in details discussed  the validity or otherwise of the linkage scheme vis-‘-vis the changed policy  decision of the Coal India Ltd. for selling coal on e-Auction.  While arriving  at the said decision, this Court has also taken into consideration various  aspects of the matter including applicability of the doctrine of promissory  estoppel in a case of this nature.   

 19.    The question, however, is whether in a case of this nature and  particularly having regard to the subsequent materials which have been  brought on records, the respondent was entitled to the reliefs prayed for by it  or not.    

20.     We have noticed hereinbefore the orders passed by the learned Single  Judge from time to time.  Whereas The entitlement of the entrepreneur must  be traced to the policy decision of the Coal India Ltd. and the directions  issued by the Central Government from time to time in exercise of its power  under Clause 6 of the Coal Control Order, 2000, the respondent also was  required to make necessary averments therefore in its writ petition as to how  it had derived a legal right in regard to transfer of linkage.  The pleadings of  the parties are not before us. We have noticed hereinbefore that certain  subsequent events have also taken place.  Even if the respondent becomes

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entitled to the reliefs prayed for herein, an opportunity in that behalf is  required to be given to the appellant also.  Respondent has raised before us  questions of discrimination which is also required to be gone into.   One of  the questions which would thus, arise for consideration would be as to  whether the CIL’s policy decision would be covered by the earlier policy  decision having regard to the doctrine promissory estoppel. 21.     Several other factors as noticed hereinbefore have been brought on  record in the light of the inspection report submitted before this Court.   It is  not possible for us to go into the said question particularly in view of the fact  that the pleadings of the parties are not before us. 22.     We, therefore, are of the opinion that interest of justice shall be  subserved if the High Court is directed to consider the matter afresh.  The  parties shall be entitled to file additional affidavits in the writ proceeding.   Respondent may in view of the subsequent events amend its writ petition. In  such an event, the High Court would not only consider the matter from the  perspective of the original prayer made in the writ petition, but also the  reliefs which may be found to be available to the respondent in view of the  subsequent events including the Report of the Inspection Committee.  Till an  appropriate order is passed by the High Court, status quo as obtaining today  in regard to supply of coal shall continue. As the matters are being remitted  to the High Court, we do not intend to pass any separate order in the  contempt petition.   The appeals, are therefore, allowed and the matter is  remitted to the High Court upon setting aside the impugned judgment for  consideration of the matter afresh.  However, in the facts and circumstances  of this case, there shall be no order as to costs.