IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

SPECIAL LEAVE PETITON (C) No. 21959 OF 2010

M/s Coal India Limited & Ors.                          …… Petitioners

Versus

Coal Consumers Association & Ors.              …… Respondents

WITH

SPECIAL LEAVE PETITON (C) No. 21972 OF 2010

M/s Coal India Limited & Ors.                          …… Petitioners

Versus

M/s Shivam Enterprises & Ors.                     …… Respondents

SPECIAL LEAVE PETITON (C) No. 21973 OF 2010

M/s Coal India Limited & Ors.                          …… Petitioners

Versus

M/s Ashutosh Industries & Ors.                    …… Respondents

AND

SPECIAL LEAVE PETITON (C) No. 21974 OF 2010

M/s Coal India Limited & Ors.                          …… Petitioners

Versus

M/s Jaunpur Fuel Udyog & Ors.                   …… Respondents

O R D E R

A. K. PATNAIK, J.

These  Special  Leave  Petitions  are  directed  against  the  

interim orders dated 26.07.2010 passed by a Division Bench  

of  the  Allahabad  High  Court  in  Writ  Petition  C-Nos.42231,  

42760, 42229 and 42708 of 2010 by which the orders dated  

01.07.2010  of  Bharat  Coking  Coal  Limited  (BCCL),  the  

petitioner  No.2,  suspending  supply  of  coal  to  45  industrial  

consumers for their industrial units had been stayed till the  

matters were to be taken up for admission/orders by the High  

Court.

2. The  relevant  facts  very  briefly  are  that  prior  to  2007  

industrial  consumers  were  granted  coal  linkages  for  

utilization in their small scale industries. On 18.10.2007,  

the Government of India, Ministry of Coal, formulated a  

New Coal Distribution Policy by which coal linkages were  

discontinued  and  instead  coal  was  to  be  supplied  to  

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various  consumers  including  small  scale  industries  

under  the  terms  and  conditions  of  Fuel  Supply  

Agreement (for short ‘FSA’).  Accordingly, petitioner No.2  

entered into FSA with different industrial consumers of  

coal.  Clause 4.4 of FSA stipulated that the total quantity  

of coal supplied pursuant to the agreement is meant for  

use in the industry of the purchaser and the purchaser  

shall  not  sell/divert  and/or  transfer  the  coal  for  any  

purpose  whatsoever  and  the  same  shall  be  treated  as  

material breach of the agreement and in the event that  

the purchaser engages or plans to engage into any such  

resale or trade, the seller shall terminate the agreement  

forthwith without any liabilities or damages whatsoever  

payable to the purchaser.  Clause 15.1.5 of FSA further  

provided that in the event that the purchaser resells or  

diverts the coal  purchased pursuant to the agreement,  

the seller shall have the right to terminate the agreement  

forthwith.  On 07.06.2009, however, the Central Bureau  

of  Investigation  (for  short  ‘CBI’),  on  receipt  of  credible  

information, registered an FIR under Section 120B read  

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with 420, 467 and 471 of the Indian Penal Code together  

with Section 3(2) read with 13(1)(d) of the Prevention of  

Corruption Act, 1988 against Shri Udayan Bhattacharya,  

the then General Manager (S&M), BCCL, Dhanbad, and  

ten industrial  consumers alleging that the coal sold by  

BCCL to the ten industrial consumers have been sold in  

the  open  market  and  not  utilized  in  their  respective  

plants.   On  the  basis  of  the  allegations  in  the  FIR,  

supplies  of  coal  to  the  ten  industrial  consumers  were  

suspended on 13.06.2009, some of whom challenged the  

suspension of supply of coal in writ petitions before the  

different High Courts.  After investigation, the CBI filed  

charge sheet on 28.06.2008 against  Shri  Bhattacharya  

and the ten industrial consumers in respect of whom the  

FIR had been lodged.  Soon thereafter, on 01.07.2010 the  

petitioner No.2 issued orders suspending supply of coal  

to  45  industrial  consumers  against  whom no FIR had  

been lodged by the CBI.   

3. Aggrieved, the respondents filed the Writ Petitions in the  

Allahabad High Court in July, 2010 praying inter alia for  

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quashing  the  order  dated  01.07.2010  suspending  

supplies of the coal to the members of the respondent-

association  in  Special  Leave  Petition  [C]  Nos.21972  of  

2010 and to the respondents in Special Leave Petitions  

(C) Nos. 21973 and 21974 of 2010 and by the interim  

orders dated 26.07.2010 the Division Bench of the High  

Court stayed the operation of the order dated 01.07.2010  

suspending supplies of coal.

4. Mr. Anupam Lal Das, learned counsel for the petitioners,  

submitted that it  will  be clear from Clause 4.4 of  FSA  

that  the  coal  supplied  to  the  industrial  consumers  is  

meant  for  use  in  their  industries  and,  therefore,  the  

petitioner No.2 issued notice dated 03.02.2010 to all the  

45 industrial consumers to show the end-use of the coal  

lifted during the financial year 2009-2010 duly supported  

by  documentary  proof  and  the  industrial  consumers  

submitted some documents in support of end-use of coal,  

but the documents were not sufficient to prove the end-

use of the coal.  He submitted that petitioner No.2 issued  

another  notice  dated  08.06.2010  to  the  industrial  

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consumers  to  submit  documents  and  details  as  per  

proforma  enclosed  along  with  the  notice  and  yet  the  

industrial consumers could not prove the end-use of the  

coal lifted by them from the petitioner No.2 under FSA  

and  in  the  circumstances  the  petitioner  No.2  had  no  

option  but  to  pass  the  order  dated  01.07.2010  

suspending  the  supply  of  coal  to  the  45  industrial  

consumers.    He  submitted  that  by  the  order  dated  

01.07.2010 the petitioner No.2 also gave notice to the 45  

industrial  consumers  to  prove  by  documents  that  the  

coal supplied to them were utilized in accordance with  

Clause 4.4 of FSA.  He submitted that on these facts the  

High  Court  was  not  at  all  justified  in  staying  the  

suspension-cum-show  cause  notice  dated  01.07.2010  

issued  by  the  petitioner  No.2  to  the  45  industrial  

consumers.   

5. Mr.  Ranjit  Kumar,  learned  counsel  appearing  for  the  

respondents  in  Special  Leave  Petition  [C]  No.21959  of  

2010, on the other hand, submitted that Clause 13.1 of  

FSA  is  the  only  provision  conferring  a  right  on  the  

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petitioner No.2 to suspend supplies of coal in the event  

the  purchaser  fails  to  pay  any  amount  including  any  

interest due to the petitioner No.2 under the agreement  

and,  therefore,  the  petitioner  No.2  had  no  right  to  

suspend  the  supplies  of  coal  on  the  ground  that  the  

industrial  consumers  have  not  been  able  to  produce  

proof of the end-use of the coal in their industrial units.  

He further submitted that Clause 4.4 of FSA, on which  

the petitioners rely, itself confers a right on the petitioner  

No. 2 to physically verify the end-use of coal and it was  

always  open  to  the  petitioners  to  physically  verify  the  

industrial units of the industrial consumers to find out  

whether the industrial unit was genuine and whether the  

industrial unit was consuming the coal supplied by the  

petitioners.  He submitted that surprisingly in the letter  

dated  01.07.2010  (Annexure  R1/9),  the  

Chairman/Managing Director of the petitioner No.2 has  

proposed to the Chairman of petitioner No.1 that physical  

inspection of the industrial units by the coal companies  

should be withdrawn from FSA to safeguard the interest  

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of  the  officials  of  the  coal  companies.   He  vehemently  

submitted that all this would show that supplies of coal  

to the 45 industrial consumers have been suspended by  

the order dated 01.07.2010 only to protect the officers of  

petitioner No.2.  He further submitted that Para 3.1 of  

the  New  Coal  Distribution  Policy  in  the  Office  

Memorandum  dated  18.10.2007  of  the  Government  of  

India,  Ministry  of  Coal,  makes  it  clear  that  the  State  

Governments  are  to  take  appropriate  steps to  evaluate  

the genuine consumption and to monitor the use of coal.  

He submitted that accordingly the General Managers of  

the District Industries Centres of the State Government  

have furnished reports about the end-use of coal for the  

year 2009-2010 to petitioner No.2 in respect of different  

industrial consumers by various communications, copies  

of which were annexed to the Writ Petitions filed in the  

High Court and the High Court was, therefore, justified in  

passing the impugned interim orders staying the order  

dated  01.07.2010  of  the  petitioner  No.2  suspending  

supplies of coal to the 45 industrial consumers.    

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6. Mr.  Jaideep  Gupta,  learned  counsel  appearing  for  the  

respondents in Special Leave Petition (C) 21973 of 2010,  

submitted  that  by  the  notice  dated  03.02.2010  the  

respondents  were  called  upon  to  show the  end-use  of  

coal  lifted  during  the  financial  year  2009-2010  duly  

supported  by  documentary  proof  and  also  to  get  

corroborative documents authenticated by the concerned  

District/State  officials  along with a certificate  from the  

officers certifying the working status of the units of the  

respondents  and  by  the  notice  dated  08.06.2010  the  

respondents  were  required  to  submit  documents  and  

details as per proforma enclosed along with the notice to  

show  the  end-use  of  coal  in  their  industrial  units  on  

monthly basis.  He submitted that in response to the two  

notices  dated  03.02.2010  and  08.06.2010  the  

respondents  had  furnished  the  required  documents  

including  the  certificates  furnished  by  the  District  

Industries  Centre,  as  would be  evident  from the  letter  

dated 13.02.2010 of the respondents and its enclosures  

annexed to the counter of the respondents as Annexure  

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R1/1(Colly)  and  letter  dated  06.03.2010  of  the  

respondents annexed to the counter of the respondents  

as Annexure R1/2(Colly).  He submitted that despite the  

fact  that  the  respondents  produced  all  the  required  

documents before the petitioner No.2 as called for in the  

notices dated 03.02.2010 and 08.06.2010, the petitioner  

No.2 suspended supplies of coal to the respondents by  

the  impugned  order  dated  01.07.2010.   He  submitted  

that all these documents were filed by the respondents  

along  with  the  Writ  Petition  and,  therefore,  the  High  

Court was justified in staying the order of suspension.   

7. The  submissions  made  by  Mr.  Ranjit  Kumar  and  Mr.  

Jaideep  Gupta  were  adopted  by  Mr.  Manish  Kumar  

Saran  appearing  for  the  respondents  in  Special  Leave  

Petition (C) Nos. 21972 and 21974 of 2010.

8. We have  today  delivered judgments  in  M/s Coal  India  

Limited & Ors.  v. Alok Fuels (P) Ltd. & Ors. and also in  

M/s Sushila Chemicals Pvt. Ltd. & Anr. v. Bharat Coking  

Coal Ltd. & Ors. in which we have held that the petitioner  

No.2  has  the  right  to  suspend supplies  of  coal  to  the  

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purchaser of coal where it has doubts that the purchaser  

may mis-utilize the allotted coal and divert or sell in open  

market because, as it was clear from Clause 4.4 of FSA  

and the New Coal Distribution Policy dated 18.10.2007,  

the very object of FSA as well  as policy decision of the  

Government  is  to  allot  coal  to  the  purchasers  for  

utilization in their plants and not for any other purpose.  

In two judgments delivered today, we have also held that  

the  FIR  lodged  by  the  CBI,  which  is  a  premier  

investigation agency of the Central Government, created  

serious  doubts  that  the  allotted  coal  may  have  been  

diverted  or  sold  in  the  open  market  instead  of  being  

utilized in the plants of  the purchasers and hence the  

petitioner  No.  2  was  within  its  rights  to  suspend  the  

supplies of coal to the purchasers in these cases till the  

doubts were cleared in appropriate proceedings.  

9. In the facts of these cases, however, we find that no FIR  

as  such has been lodged by the  CBI  alleging that  the  

supplies  of  coal  made  to  the  45  industrial  consumers  

have not been utilized in their respective industrial units.  

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Moreover, Para 3.1 of the New Coal Distribution Policy  

dated 18.10.2007 of the Government of India, Ministry of  

Coal, clearly states that the State Governments may take  

appropriate steps to evaluate the genuine consumption  

and monitor the use of coal supplied to units in small  

and medium sector like smokeless fuel, brick kiln, coke  

oven units, etc.  We find that sufficient materials have  

been filed before the High Court by the respondents along  

with their Writ Petitions to show that the agencies of the  

State  Government,  namely,  the  District  Industries  

Centres,  have  evaluated  the  genuine  consumption  and  

monitored the use of coal by the industrial consumers in  

their  respective  industries.  It  also  appears  that  the  

petitioner  No.2  issued  notices  dated  03.02.2010  and  

08.06.2010  to  the  45  industrial  consumers  to  furnish  

documents  in  proof  of  the  end-use  of  coal  allotted  to  

them for their respective industries for the financial year  

2009-2010  and  the  respondents  had  furnished  some  

materials pursuant to the notices dated 03.02.2010 and  

08.06.2010  but  instead  of  examining  those  materials  

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relating to the end-use of coal in the industrial units of  

the industrial consumers furnished by the respondents,  

petitioner  No.2  has suspended the  supplies  of  coal  on  

01.07.2010  soon  after  the  CBI  filed  charge  sheets  on  

28.06.2010 against Shri Udayan Bhattacharya, the then  

General  Manager  of  the  petitioner  No.2,  and  the  ten  

industrial consumers against whom CBI had lodged the  

FIR on 07.06.2010.  The materials placed before the High  

Court prima facie show that the order dated 01.07.2010  

of petitioner No.2 suspending the supplies of coal to the  

45 industrial  consumers  was arbitrary  and unfair  and  

the High Court was justified in staying the order dated  

01.07.2010 as an interim measure.  

10. We accordingly dismiss the Special Leave Petitions and  

vacate the interim orders passed by this Court.  We make  

it clear that the observations made in this order will not  

influence the High Court in deciding the Writ Petitions on  

merits.  No costs.

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……………………..J.                                                                   (Altamas Kabir)

……………………..J.                                                                   (A. K. Patnaik) New Delhi, September 15, 2010.    

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