Gautam Coal Works Private Limited Through Its Managing Director Manendra Kumar Singh vs. The Central Coalfields LTD Through Its Chairman Cum Managing Director

Held

The Court held that the termination of the Fuel Supply Agreement (FSA) by CCL was not arbitrary, illogical, or perverse and was a probable view. The Court found that the impugned order was well-reasoned and supported by documentary evidence. Specific discrepancies noted included vehicles used for dispatch being identified as cars and motorcycles when they were trucks, the same vehicle number being used for different types of vehicles on different dates, multiple dispatches to various firms on the same date by one vehicle, and mismatches between GST invoices and sale register vehicle numbers. Variations in electricity consumption and billed units were also considered, along with the lack of documentary proof for protests to the electricity department. Irregularities in worker engagement and statutory forms, with discrepancies between attendance sheets and PF/ESI challans, further supported the conclusion that coal was being diverted. The Court also noted that physical inspection was not mandatory and, in this case, would have served no useful purpose as the factory had been closed for four years. As the termination order was upheld, the Court found no occasion to direct the refund of the security deposit. The writ petition was dismissed.

Facts

The petitioner, Gautam Coal Works Private Limited, challenged an office order dated 28.5.2022 by Central Coalfields Limited (CCL) terminating their Fuel Supply Agreement (FSA) dated 30.4.2008 and forfeiting the security deposit. The FSA was entered into pursuant to Coal India Limited's 2007 policy. Following a survey by the Income Tax Department alleging the petitioner could only process 0.05% of the coal supplied, CCL suspended supply. After several representations, clarifications, and resolutions by the Regional Economic Intelligence Council (REIC), the Income Tax Department directed CCL to suspend supply, leading to termination of the FSA. Previous writ petitions resulted in directions for independent inquiries and physical verification. The impugned order reiterated the termination and forfeiture, citing diversion of coal.

Key Issues

1. Whether the termination of the Fuel Supply Agreement (FSA) by CCL is arbitrary and mala fide, ignoring the terms of the FSA and previous court directions, particularly Clause 4.4 of the FSA? (Petitioner's contention: Yes, CCL acted arbitrarily and malafide, ignoring previous court orders and the functional status of the unit certified by the Directorate of Industries. They argued that discrepancies in vehicle numbers were human error and that electricity consumption variations were due to using private generators. The reasons for rejection were non-existent. Revenue/State (CCL) contention: Not recorded explicitly, but implied by their defense of the termination order. The judgment indicates CCL argued that the petitioner was diverting coal based on analysis of documents and discrepancies found.) 2. Whether the petitioner is entitled to the refund of the security deposit if the termination of the FSA is found to be unjust? (Petitioner's contention: Yes, if termination is unjust, the security deposit should be refunded. Revenue/State (CCL) contention: Not recorded explicitly, but their defense of the termination implies they are entitled to forfeit the deposit.)