India Limited & Ors Vs. Domco Smokeless Fuels (P) Ltd  Insc 570 (15 May
S.B. SINHA & MARKANDEY KATJU
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
SPECIAL SMOKELESS FUELS (SSF) 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
CIL will provide additional coal requirements for expansion of SSF units and
coal linkages for the new entrepreneurs. Write to us through State Sponsored
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
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
6. The said Writ Petition was allowed by a learned Single Judge of the High
Court inter-alia directing;
"..Now the respondent 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 C.I.L. may not take decision in
favour of the petitioner, 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
9. Application of the respondent, was thus, rejected. On the aforementioned
premise, a review application was filed by the appellant which was also
"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
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
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 dated 29.1.2004
"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
(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.
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
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).
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
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 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
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
(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 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
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.