Maa Shakambari Steel LTD. vs. South Eastern Coalfield LTD

Facts

The petitioner, Maa Shakambari Steel Ltd., a sponge iron and MS ingot manufacturer, challenged an order dated 16.06.2021 by South Eastern Coalfields Ltd. (SECL). This order terminated their existing Fuel Supply Agreement (FSA) and disqualified them from future coal linkage auctions. The petitioner had secured an FSA in 2018 for five years. In 2019, they participated in a new auction (Tranche V) where technical glitches on the bidding platform led to the creation of a new bidder ID for the same end-use plant. The petitioner disclosed their existing FSA and normative coal requirement. They were issued new Letters of Intent (LOIs) and subsequently an FSA in December 2020. SECL sought clarification regarding the two bidder IDs for the same plant. The petitioner explained the technical issue. Subsequently, SECL terminated both FSAs and appropriated the performance security, also disqualifying the petitioner from future auctions.

Held

The Court held that the termination of the existing Coal/Fuel Supply Agreement (FSA) by SECL vide order dated 16.06.2021 was not merited and refused to quash it. The reasoning was that the petitioner registered twice for the same end-use plant, violating Clause 3.1.1 of the Scheme Document, which requires bidders to use the same registration for the same end-use plant. This was considered misrepresentation and non-compliance, leading to the petitioner being allowed to participate for a higher quantity of coal than entitled. However, the Court quashed the impugned order dated 16.06.2021 concerning the disqualification of the petitioner from participating in subsequent tranches of NRS Linkage Auction conducted by CIL. The Court reasoned that this disqualification amounted to blacklisting, which, according to Supreme Court judgments in Gorkha Security Services and UMC Technologies, must be preceded by a show-cause notice and an opportunity to be heard, as it carries severe civil consequences and is stigmatizing. The communication seeking clarification from SECL did not mention any proposed disqualification, making the subsequent blacklisting unjust and unfair without a proper show-cause notice. The Court found no merit in the petitioner's contention to quash the termination of the FSA but found merit in their contention regarding the disqualification.

Key Issues

1. Whether the termination of the existing Coal/Fuel Supply Agreement (FSA) by SECL vide order dated 16.06.2021 is legal and valid? The petitioner argued that the termination was arbitrary, without prior notice, and that they had not concealed or misrepresented any facts. They contended that the generation of two bidder IDs was due to technical glitches on the service provider's platform and that they had disclosed all relevant information, including their existing FSA and normative coal requirement. The petitioner also argued that the termination of the FSA dated 03.11.2018 and the FSA dated 23.12.2020 was done without any notice. The respondents argued that the petitioner registered twice for the same end-use plant, violating Clause 3.1.1 of the Scheme Document, which mandates using the same registration for the same end-use plant. They contended this amounted to misrepresentation and non-compliance, leading to the petitioner being allowed to participate for a higher quantity of coal than entitled. 2. Whether the disqualification of the petitioner from participating in subsequent tranches of NRS Linkage Auction conducted by CIL is legal and valid? The petitioner argued that this disqualification, amounting to blacklisting, was unjust, unfair, and imposed without a show-cause notice, violating principles of natural justice. The respondents' contention regarding this issue is not explicitly recorded in the provided text, but their actions imply they believed it was justified due to the alleged misrepresentation.