SHIVA CEMENT LIMITED Vs. MAHANADI COALFIELDS LIMITED

JUDGEMENT

(1.) AS per the writ petition, petitioner No. 1 was incorporated in 1985 under the Companies Act, 1956. In the year 1997 it took over a sick cement unit established at Teleghana in the district of Sundargarh which was being run earlier by IPI -SP Cement Company Limited, a joint sector unit under the State Government. To run the cement unit, petitioner No. 1 applied to opp. party No. 4 for supply of coal by way of coal linkage, in response to which the General Manager (Marketing) of the said opp. party intimated vide letter dated 22.7.1988 (Annexure -1) that it was decided to fix up final linkage for the petitioner No. 1's unit at maximum permissible quantity of 2500 M.T. coal per month and that opp. party No. 1 would supply it coal on the basis of annual recommendation of concerned sponsoring authority i.e. Director, Industry of Orissa. Accordingly, on basis of the recommendation of the Sponsoring Authority, coal was being supplied to the petitioner by opp. party No. 1 from time to time within the maximum permissible quantity of 2500 M.T., per month.

(2.) OPP . party No. 4 has got a comprehensive policy of coal marketing system supply plan (Annexure -2) in terms of which, it classifies consumers of coal into two categories namely 'Core Sector Consumers' and 'Non -Core Sector Consumer'. Cement industry is covered under the category of Core Sector Consumers. Despite the fact that cement industries come under the category of Core Sector Consumers, treating it as a Non -Core Sector Consumer, opp. party No. 3 vide letter dated 26.9.2001 (Annexure -3) sent a proposal to petitioner No. 1 to enter into an agreement with it so as to ensure uninterrupted supply of coal. At that time the petitioners had no idea that cement industries were covered under Core Sector Consumers. So, petitioner No. 1 entered into an agreement (Annexure -4) with opp. party No. 4 on 7.1.2004 which was described as Coal Supply Agreement to be linked as Non -Core Sector Consumer, Clause 5 of which reads as follows:

(3.) ON 25.4.2005, opp. party No. 2 vide letter Annexure -6 intimated petitioner No. 1 that a new scheme for sale of coal to Non -Core Sector through Electronic Auction (E -Auction in short) had been introduced from April 2005. In that system coal price is to be determined by bidding and not by price notification system. As such, the existing coal supply agreement (Annexure -4) stood modified in respect of coal price, even though there was no such clause for modification. Admittedly the petitioners did not take part in the E - Auction, but from reliable sources they came to know that E -Auction price in respect of the coal used by petitioner No. 1 came up to Rs. 1823/ - per MT. Petitioner No. 1 made a representation before opp. party No. 1 on 25.4.2005 (Annexure -7) stating that the E -Auction system of sale of coal would not be applicable to it, since it falls within the category of 'Core Sector Consumer' and in view of the agreement (Annexure -4) and requested to continue coal supply to it as per the system of price notification to Core Sector Consumers, but, there was no response. According to the petitioners, the documents under Annexures -1, 3, 4 and 6 are to be treated as illegal, since the same were products of misrepresentation of facts and unfair conduct of opposite parties 1 to 3. Otherwise also, when the agreement (Annexure -4) is in force, opposite parties 1 to 3 are estopped to adopt the new system of determining the base price of coal in respect of petitioner No. 1 unit, particularly when the agreement does not contain any clause enabling either of the parties to change the terms and conditions. Hence, the writ petition, to declare petitioner No. 1 as a Core -Sector Consumer, to quash Annexures -3, 4 and 6 and to direct opposite parties to continue coal supply to petitioner No. 1 as per the system of price notification at the price which is being paid by O.C.L. (India) Ltd., (Cement Division), Rajgangpur A.C.C. Cement Ltd. Bargarh etc.