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Tata Sponge Iron Ltd and Anr. Vs. Coal India Ltd. and Ors. - Court Judgment

LegalCrystal Citation
CourtKolkata High Court
Decided On
Judge
AppellantTata Sponge Iron Ltd and Anr.
RespondentCoal India Ltd. and Ors.
Excerpt:
.....writ jurisdiction original side w.p.no.545 of 2002 tata sponge iron ltd & anr. versus coal india ltd.& ors.w.p.no.1525 of 2003 tata sponge iron ltd & anr. versus coal india ltd.& ors.for the petitioners:- for the respondent no.2: - judgement on: - mr.debashish kundu, sr.adv.mr.joydev gharai, adv.ms.pratiti das, adv.mr.raja basu chowdhury, adv.mr.s.m.obaidullah, adv.mr.nikhil roy, adv.mr.partha basu, adv.6th september, 2016 i.p.mukerji, j tata sponge iron ltd., (“the writ petitioner”) is engaged in the business of manufacture sponge iron. it has a manufacturing unit at joda. for this manufacturing process they need a steady supply of coal. at the material point of time, in or around 1997 they used to obtain a particular quantity of coal from eastern coalfields ltd.(ecl).a.....
Judgment:

IN THE HIGH COURT AT CALCUTTA Constitutional Writ Jurisdiction Original Side W.P.No.545 of 2002 Tata Sponge Iron Ltd & Anr.

versus Coal India LTD.& ORS.W.P.No.1525 of 2003 Tata Sponge Iron Ltd & Anr.

versus Coal India LTD.& ORS.For the petitioners:- For the Respondent No.2: - Judgement On: - Mr.Debashish Kundu, Sr.Adv.Mr.Joydev Gharai, Adv.Ms.Pratiti Das, Adv.Mr.Raja Basu Chowdhury, Adv.Mr.S.M.Obaidullah, Adv.Mr.Nikhil Roy, Adv.Mr.Partha Basu, Adv.6th September, 2016 I.P.MUKERJI, J Tata Sponge Iron Ltd., (“the writ petitioner”) is engaged in the business of manufacture sponge iron.

It has a manufacturing unit at Joda.

For this manufacturing process they need a steady supply of coal.

At the material point of time, in or around 1997 they used to obtain a particular quantity of coal from Eastern Coalfields LTD.(ECL).a subsidiary of Coal India Limited, the respondent No.1.

This was referred to as their ‘linkage’.

This word ‘linkage’ refers to the source from where the coal is obtained.

It is identified by the mine or mines of a particular organisation which supply this coal.

In early 1997 the writ petitioner wanted to change this source of coal.

For this purpose they wrote to the respondent no.1 the holding company on 23rd February, 1997.

On 5th March, 1997 Coal India replied.

It said that according to the “previous linkage”, the writ petitioner was to obtain a quantity of 1.70 lakh tonnes of a particular grade of coal from the source, ECL.

They would now receive the same quantity from three sources, ECL, HCL/Talcher, CCL/Raibachra @ 14,000 tonnes per month.

This letter constituted a contract between the parties and was acted upon by them.

On and from 1st April, 2001 CCL decided to charge a premium on 10% from the writ petitioner on this contracted quantity of coal.

A document, described as an “undertaking”, given by the petitioner to Central Coalfields LTD.(CCL) and dated 10th April, 2001 is most interesting.

The petitioner stated that they would enter into a fuel supply agreement or a Memorandum of Understanding with CCL.

They would pay the additional amount as premium over and above the basic coal price from 1st April, 2001 which would be adjustable in the final decision taken in the Memorandum of Understanding.

This undertaking was signed on behalf of the writ petitioner by their General Manager.

On 22nd September, 2001 there was a meeting between various sponge iron units and CCL.

The minutes were signed on behalf of the writ petitioner.

In the list of participants annexed to these minutes another officer was said to be also present, as a participant.

It was recorded that 30% source specific charges would be made for Churi and Raibachra mines of CCL with effect from 1st September, 2001.

On 10th October, 2001 the writ petitioner wrote to CCL, adding a condition to their earlier decision to pay 30% premium on coal from the above mines.

They said that they were paying this amount under protest.

In case, in future, any one was getting coal from this source at a lower rate they should also be supplied coal at the same rate.

On 10th October, 2001 they signed another undertaking similar to the 10th April, 2001 undertaking.

The letter of the writ petitioner dated 23rd October, 2001 to CCL is very poignant.

It refers to a discussion between the parties and that as a result of it they agreed to pay 30% premium for 8700 mt.

of coal per month from Churi coal mine and 3300 mt.

per month from Raibachra coal mine.

Charging of this premium would only be stopped when a contrary decision was taken by the concerned Ministry or CCL.

If they decided that the premium was not payable then the money collected should be refunded to the petitioner.

In fact, I find a letter dated 26th November, 2001 of Naresh Kumar and Co.the agent of the writ petitioner to CCL enclosing another “undertaking” by the petitioner to pay this 30% premium.

Examination of the words of this undertaking reveals that this premium was decided to be paid by the writ petitioner subject to the conditions in the Memorandum of Understanding or fuel supply agreement to be entered into between the parties.

In those circumstances, the fiRs.writ application (WP545of 2002) was filed by the writ petitioner in this court against Coal India Limited and Central Coalfields Limited asking for an order restraining them from charging any premium on the supply of coal from specific sources.

In this writ on 22nd March, 2002 an interim order was passed that the writ petitioner could obtain supply of coal against payment of premium without prejudice to its rights and contentions in that writ application.

This 30% premium was charged between 1st September, 2001 to 17th August, 2002.

Thereafter, the premium was withdrawn.

The letter of Coal India Limited dated 4th October, 2002 shows that the allocation of coal was duly made to the writ petitioner from the said coal mines.

Furthermore, coal was despatched to them from these mines by railway.

They consumed this coal, without any complaint.

On 30th May, 2003 CCL wrote to the writ petitioner that Coal India Limited and the Ministry of Coal had directed all subsidiary companies to execute fuel agreements with sponge iron companies before 30th June, 2003 and that a meeting for this purpose had been fixed on 16th June, 2003 in their office.

On 16 and 17th June, 2003 meetings were held between inter alia the writ petitioner and CCL.

A record of the discussion was kept.

Participants were informed that a Memorandum of Understanding (MOU) as per the format enclosed with the record of discussion had to be executed by them along with other sponge iron companies.

The writ petitioner should pay the 10% premium on coal between 1st April, 2001 and 31st August, 2001 and 30% premium paid between1st September 2001 to 17th August, 2002.

If this agreement (MOU) was not signed, the fuel supply agreement would not be entered into by CCL.

I must point out that in this discussion all the sponge iron companies including the writ petitioner pointed out that 10% premium from 1st April, 2001 to 31st August, 2001 and 30% premium from 1st September 2001 to 17th August, 2002 were paid subject to adjustment in the fuel supply agreement.

On 18th July, 2003 the Chief General Manager (S&M) CCL informed the writ petitioner that execution of the fuel supply agreement was being delayed and that it should be done positively before 31st July, 2003.

In those circumstances, the second writ application was filed by the writ petitioner (WP1525of 2003) against the same respondent asking for an order restraining CCL and Coal India Limited from insisting that the writ petitioner should execute a Memorandum of Understanding with them with a clause that the premium paid on coal would be forfeited.

They also asked this court to pass an order compelling these companies to execute the fuel supply agreement, without insisting that the Memorandum of Understanding be signed by the writ petitioner.

In this second writ on 30th July, 2003 an interim order was passed by this court directing the Memorandum of Understanding and the fuel supply agreement to be signed by 4th August, 2003 without prejudice to the rights and contentions of the parties in that writ application.

The position on the passing of the interim order dated 22nd March, 2002 in the fiRs.writ and interim order dated 30th July, 2003, in the second writ was that the writ petitioner continued to pay premium on coal received by them from CCL upto 17th August, 2002.

The fuel supply agreement was also executed between the parties.

The writ petitioners started receiving coal under the fuel supply agreement and at the rate mentioned therein.

The disputed period is between 1st April, 2001 and 17th August, 2002.

Both the writs came up before me for hearing after filing of affidavits.

There was extensive hearing spanning several days.

Mr.D.Kundu, learned senior Advocate for the writ petitioner submitted that the letter dated 5th March, 1997 constituted a contract between the parties.

Under this contract Coal India Limited and its subsidiaries would supply coal at fixed rates for a fixed period.

Amongst the sources of coal mentioned in the document was Raibachra.

When the rate for such supply was mentioned in the contract document, the rate could only be altered bilaterally.

The respondents could not unilaterally charge 10% premium over the price with effect from 1st April, 2001 to 31st August, 2001 and 30% premium between 1st September 2001 to 17th August, 2002.

The writ petitioner was not bound by this unilateral action on the part of the respondent coal company.

Novation of a contract is conceived of in Section 62 of the Indian Contract Act, 1862.

It is a new or altered contract in place of the original contract.

It is so made by consent of the contracting parties.

Novation could not be achieved by a unilateral act of one of the parties to the contract.

He cited The State of Andhra Pradesh and other v.

M/s The Pioneer Construction Co.reported in AIR1978AP281paras 5 and 6, M/s Magnum Films v.

Golcha Properties PVT.LTD.Delhi 162, M/s Allahabad reported in AIR1984Jal Sansthan v.

State of U.P.and others reported in AIR2004Allahabad 366 and Dayal Singh and others v.

Union of India and others reported in AIR2003SC1140para 32.

Mr.Kundu added that a person could not dispense with or alter performance of a contract by unilateral acts.

Learned counsel cited Alopi Parshad & Sons.

Ltd.v.Union of India & ORS.reported in AIR1960SC588(para 21-22).He also brought in the public law element in the matter of contracts entered into between a party and a state functionary.

In the realm of contracts the action of the government or its agency had to be fair and transparent and not violative of Article 14 of the Constitution.

Mr.Kundu cited Sushil Chemicals Private Limited and Another v.

Bharat Coking Coal Limited and others reported in (2010) 10 SCC388 Sterling Computers Limited v.

M/S.M & N Publications Limited and others reported in (1993) 1 SCC445and ABL International LTD.and another v.

Export Credit Guarantee Corporation of India LTD.and others reported in (2004) 3 SCC553 Mr.Raja Basu Chowdhury appearing for CCL took me through all the letteRs.minutes, records of discussion, contract documents annexed to the two writ petitions and to his client’s affidavit-in-opposition.

He submitted on the basis of these documents that the original contract had been novated by the act of the parties.

The writ petitioner insisted that they would take coal only from Raybachra and Churi mines.

The CCL put-forth their condition that they would charge 10% premium for the supply of coal between 1st April, 2001 to 31st August, 2001 and 30% premium between 1st September 2001 to 17th August, 2002.

The writ petitioner wanted coal very desperately and agreed to take supply on the said condition.

They only said by their letter dated 10th October, 2001 that if any consumer was sold coal at a lesser price then they should also be charged that amount and no more.

All the sponge iron companies agreed with CCL that this premium would be adjusted against any future agreement that may be reached with regard to the price of coal supplied during the above period and afterwards, i.e.the Memorandum of Understanding and the fuel supply agreement.

It is true that a party to a contract cannot unilaterally change its terMs.The government is bound by the terms and conditions including rates which are agreed upon (see The State of Andhra Pradesh and other v.

M/s The Pioneer Construction Co.reported in AIR1978AP281paras 5 and 6 and also M/s Allahabad Jal Sansthan v.

State of U.P.and others reported in AIR2004Allahabad 366 ).When a contract is superseded by another contract or is altered or modified it is called novation of the contract.

It is akin to a new contract (see Dayal Singh and others v.

Union of India and others para 32).reported in AIR2003SC1140Even if the attending circumstances change so that performance of the contract becomes onerous, in normal circumstances, a party will be obliged to perform his obligations under the contract (see Alopi Parshad & Sons.

Ltd.v.Union of India & ORS.reported in AIR1960SC588para 21-22 ).The increase in premium by the respondent coal companies can also be viewed in the background of Article 14 of the Constitution of India.

An argument is very much tenable that CCL being a government company had the obligation not to increase the price of coal arbitrarily, without obtaining the consent of a party to the contract.

If it did the court had the power to undo the wrong (see Gujarat Ambuja Cement LTD.and Another v.

Union of India and Others reported in (1998) 8 SCC208 Sushila Chemicals Private Limited and Another v.

Bharat Coking Coal Limited and Others reported in (2010) 10 SCC388 Sterling Computers Limited v.

M/S.M & N Publications Limited and others reported in (1993) 1 SCC445and ABL International LTD.and another v.

Export Credit Guarantee Corporation of India LTD.and others reported in (2004) 3 SCC553.

In my opinion, the writ petitioner agreed to the proposal of CCL to buy coal with effect from 1st April, 2001 from its sources at Raybachra and Churi coal mines at 10% premium.

They agreed to do so without any condition.

This had the effect of superseding the 1997 agreement by a new agreement between the parties to buy and sell coal from two specific sources at 10% premium.

On 22nd September, 2001, at a meeting between CCL and the sponge iron enterprises, the writ petitioner agreed to pay 30% premium on coal from 1st September, 2001, without any condition.

On 10th October, 2001 the writ petitioner only tried to say that if any other buyer was supplied coal at a lower rate they should be supplied at that rate.

On the same day they signed an undertaking stating they were paying the premium subject to adjustment in the Memorandum of Understanding and /or fuel supply agreement.

The matter was left so much in the hands of CCL that by the letter dated 23rd October, 2001 the writ petitioner reiterated that they would continue to pay 30% premium until the ministry or CCL decided otherwise.

Now, this reservation made by the writ petitioner, subsequently that they were paying premium subject to what was to be agreed in the Memorandum of Understanding and fuel supply agreement had no effect or value in the eye of law.

The original contract had already been superseded by new contracts at two different points of time, charging premium at 10% of the price and subsequently at 30%.

Their conduct showed that they agreed to this increase unconditionally.

In my opinion, price was the most essential term of the contract.

It could not have been left to any future agreement between the parties.

If that were so, then, the contract would be void for uncertainty.

Apart from this there are other legal difficulties.

If for example, the writ petitioner agreed during signing of the MOU or fuel supply agreement that the premium charge was legitimate then there would be no problem at all.

But if the writ petitioner did not agree, what would be the effect?.

They had already consumed the coal.

They could not force CCL to agree to a price without premium.

On consideration of the entire documents of this case I am of the opinion that the writ petitioner took coal at a premium from CCL agreeing to pay the premium, unconditionally, in variation of the original contract.

Later conditions set by the writ petitioner had no legal effect.

They were unilateral.

The respondent coal companies never accepted them.

The interim orders are of no benefit to the writ petitioner.

The original contract had been novated, by the agreement to take coal from specific mines at a premium.

This right and the corresponding obligations had crystallised at the time of signing of the Memorandum of Understanding and the fuel supply agreement.

The writ petitioner had willingly paid the premium and cannot claim any refund.

They were trying to keep a door open by which they could escape the liability to pay the premium, at a subsequent point of time, by making a refund claim.

This is unacceptable.

Therefore what the petitioner paid was final and conclusive.

I hold so.

Both the writ applications are dismissed.

Certified photocopy of this Judgment and order, if applied for, be supplied to the parties upon compliance with all requisite formalities.

(I.P.MUKERJI, J.)


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