Bombay Refractories (Pvt.) Ltd. and Another vs Coal Indian Ltd. and Others

Altamas Kabir, J.—The petitioner company is a registered Small Scale Industrial unit and is mainly engaged in the Manufacture of various kinds of ceramic goods. Coal is essential for manufacture of such ceramic products. After the nationalisation of all coal mines, the production and distribution of coal is entirely in the hands of agencies of the Central Government, such as Coal Indian Ltd. Different Coalfields are being managed and operated by subsidiary companies of Coal India Ltd. One such subsidiary company is Eastern Coalfields Limited. Since allotment of coal is to be done by the aforesaid agencies, the petitioners applied to Eastern Coalfields Limited for allotment of coal for the petitioners'' manufacturing unit. After necessary enquires were conducted by Eastern Coalfields Limited, the petitioners were allotted a monthly quota of 350 Metric Tonnes of steam coal, initially for a period of 3 months, with effect from the month of February, 1988. Subsequently, on further inspection, the petitioners were allotted a monthly quota of 262 Metric Tonnes of Grade ''B'' steam coal and 88 Matric Tonnes of Grade "C" steam coal with effect from the month of May, 1988, under the linkage guidelines. Both the initial order and subsequent order of allotment were communicated by the Sales Manager, Eastern Coalfields Limited, to the Area Sales Manager, Sitarampur/Kapasara. After such allotment was made, the petitioners appointed a handling agent for lighting the said coal from the respective collieries and transporting the same to factory premises of the petitioners. The name of the handling agent was duly intimated by the petitioners to Eastern. Coalfields Ltd. Each month the petitioners deposited the value of the allotted coal through its handling agent, who lifted and delivered the coal to the petitioners factory premises on the basis of delivery orders and challans issued by Eastern Coalfields Ltd. Such arrangements continued till the month of April, 1990. In May, 1990, despite the arrangements made by the petitoners to lift their quota of coal, no formal order of allotment was issued in the favour of the petitioner company. On enquiry, the petitioners came to learn that the Sales Manager, Eastern Coalfields Ltd. Sanatoria, Dishergarh, Burdwan, had advised the Area Sales Manager, Sitarampur/Kapasara areas by wireless message on 13th June, 1990, to discontinue the supply of coal to the petitioners. A copy of the wireless message has been Annexure "B" to the Writ petition. This writ application has been moved against the aforesaid decision by the respondents to discontinue supply of coal to the petitioners as per their allotted quota. Appearing on behalf of the petitioners, Mr. pradip Ghosh, Learned Counsel, first submitted that the respondents had acted illegally and arbitrarily in taking a unilateral decision to suspend the supply of coal to the petitioner, as per the allotted quota, without even disclosing to the petitioners the reasons for such decision and without even giving the petitioners an opportunity of hearing. Mr. Ghosh submitted that as public authorities, the respondents were bound to act fairly and in keeping with the principles of natural justice and administrative fair-play. In the instant case, the respondents had acted in complete violation of the said principles and the arbitrary and unilateral decision taken by the respondents to suspend the supply of coal to the petitioner, vas liable to be quashed. It vas sought to be emphasised by Mr. Ghosh that the respondents had neither informed the petitioners of their decision, nor were the petitioners called upon to explain as to why the supply of coal should not be discontinued to them.

Mr. Ghosh submitted that the respondents had not even filed any affidavit-in-opposition to the writ petition and there were no materials before the court in justification of the arbitrary decision taken by the respondents to discontinue supply of coal to the petitioner company.

Mr. Ghosh next submitted that it was not open to the respondents to contend that supply of coal to the writ petitioner company being governed under contractual obligations, other alternative remedies, other than the writ jurisdiction, were available to the petitioners. Mr. Ghosh submitted that such an argument was not available to the respondents in view of various recent decisions of the Supreme Court which had broadened the perspective of intervention by the writ courts in matters relating to contractual obligations, where the State was one of the contracting parties. Mr. Ghosh submitted that the law as laid down by the Supreme Court in the case of Radhakrishna Agarwal and Others Vs. State of Bihar and Others, had in the recent past been the subject matter of further reflection in several cases, and the law, as it now stands, contemplates that every action of the executive authority must be subject to rule of law and must be informed by reason. So, whatever be the activity of the public authority, it should meet the test of Article 14. In support of his contention, Mr. Ghosh referred to and relied upon the decision of the Hon''ble Supreme Court in the case of the Central Inland Water Transport Corporation Limited and Another Vs. Brojo Nath Ganguly and Another, , Dwarkadas Marfatia and Sons Vs. Board of Trustees of the Port of Bombay, and Mahabir Auto Stores & Ors. vs. Indian Oil Corporation & Ors., reported in Mahabir Auto Stores and others Vs. Indian Oil Corporation and others,

In the Central Inland Water Transport Corporation Ltd. case, an inroad was made by the Hon''ble Supreme Court into the traditional thinking that contractual obligations were beyond the purview of the writ courts, even if the State was one of the contracting parties. In the said case, a company carrying on the business of maintenance and running of river services entered into a scheme of arrangement with the Central Inland Water Transport Corporation Ltd., which was a Government Company owned by the Central Government and two State Governments. The scheme was approved by this Court and the company was dissolved under an order of this Court. The officers of the company had no real choice but to accept jobs with the Corporation as otherwise they would have receive meagre sums by way of compensation and their services would have been terminated. One of the Rules framed by the Corporation provided for termination of the services of the officers by giving them three months'' notice. The services of two officers of the erstwhile company and subsequently of the Corporation, were terminated in terms of the said Rule. The said two officers challenged the termination of their services as also the validity of the said Rule before this. Court in two separate writ petitions. this Court struck down the said Rule on the ground that considering the irregularity in the bargaining power of the parties, the said Rule was void as being opposed to public policy, besides being ultra vires Article 14 of the Constitution. The decision of this Court was upheld by the Hon''ble Supreme Court with a little modification involving the employees'' right to resign from service. The Hon''ble Supreme Court held that since the Corporation was "the State" within the meaning of Article 12 of the Constitution, it was amenable to the writ jurisdiction of this Court under Article 226 of the Constitution.

In the case of M/s. Dwarkadas Marfatia the position was clarified further. In the said case, the Hon''ble Supreme Court was called upon to consider whether the activities of the Bombay Port Trust in providing accommodation could be subjected to the domain of public law. On behalf of the Bombay Port Trust it was sought to be contended that the dealing of public corporations with tenants was a contractual dealing and was not a matter for public law domain and was not, therefore, subject to judicial review. Negativating such contention, the Hon''ble Supreme Court observed that the Bombay Port Trust being a public body, even in respect of its dealing with its tenants, it must act in public interest, and an infraction of that duty is amenable to examination either in civil suit or in writ jurisdiction. While considering the matter, the Supreme Court had occasion to consider the principles sought to be laid down in Radhakrishna Agarwal''s case and in the case of Life Insurance Corporation of India vs. Escorts Ltd., reported in AIR 1936 SC 1370. The Hon''ble Supreme Court observed that even in the Escorts'' decision it had been reiterated that every action of the State or an instrumentality of the State must be informed by reason. The Supreme Court went on to observe further that where there is arbitrariness in State action, Article 14 springs in and judicial review strikes such action down. Every action of the executive authority must be subject to rule of law and must be informed by reason. So, whatever be the activity of the public authority, it should meet the test of Article 14. The principle sought to be explained in Marfatia''s case, war reiterated by the Supreme Court in the case of Mahabir Auto Stores. Apart from the said two cases, Mr. Ghosh also relied on the case of Nellimarla Jute Mills Co. Ltd. & Anr. vs. Jute Corporation of India Ltd. & Anr., reported in 1939(2) CLJ 252, where a learned Single Judge of this Court had occasion to consider in detail as to whether a controversy arising between the State and a citizen in relation to matters arising out of a concluded contract could be the subject matter of an application under Article 226 of the Constitution. The learned Single Judge had occasion to consider the views expressed by the Hon''ble Supreme Court in various cases, including Radhakrishna Agarwal''s case and Dwarkadas Marfatia''s case. The learned Judge finally concluded that the views expressed by the Hon''ble Supreme Court in the case of Radhakrishna Agarwal and this Court in Orient Longman''s case would not have to be read in the light of the views expressed by the Hon''ble Supreme Court in Dwarkadas Marfatia''s case.

Mr. Ghosh concluded his argument by referring to an unreported judgment of this Court in a writ application filed by M/s. Teesta Valley Ceramics, being Civil Order to. 5705(w) of 1988 and the case of M/s. Om Prakash Periwal and Anr. vs. Union of India & Ors., reported in AIR 1988 Calcutta at page 143. He also referred to a Division Bench decision of this Court in the case of Jugal Kanta Pramanik Vs. State of West Bengal & Ors., reported In 1990(2) CLJ 137. The facts of the writ application in the unreported case are quite similar to the facts of this case. In the said case also, a truck loaded with coal was detained on the ground of illegal transportation of such coal, and a criminal case was started, under Sections 7(1) (a)(ii) of the Essential Commodities Act read with Sections 468/471/120B of the Indian Penal Code and Sections 3/4 of the Prevention of Damage to Public Property Act. In view of the pendency of the said criminal case, the authorities discontinued the supply of coal to the petitioner company, as in the instant case. The learned Single Judge, who decided the writ application, held that the step taken to suspend the supply of coal only because of the pendency of the criminal case, was wholly unwarranted and uncalled for, and such discontinuance of supply could be effected only after giving the concerned party an appropriate opportunity of being heard and by passing a reasoned order in accordance with law. The case of M/s. Omprakash Primal involved the termination of the writ petitioner''s contract of agency by the Food Corporation of India without any reason being given. Following the decision in the Central Inland Water Transport Corporation Limited case, a learned single Judge of this Court held that the contract entered into between the Food Corporation of India and a storing agent contained clauses which were unreasonable, unconsionable and one-sided as the parties ware not on equal terms. In the case of Jugal Kanta Pramanik, an order of suspension of M.R. Dealership, effected in pursuance of a contractual right, was set aside by a Division Bench of this Court on the finding that even in matters of contractual obligation, governmental action must be backed by reason. Mr. Ghosh submitted that keeping in mind the principles of law evolved in several cases after the decision in Radhakrishna Agarwal''s case, the writ application was quite maintainable and the writ petitioners were entitled to challenge the decision to discontinue supply of coal to them in the instant writ application.

Replying to the submissions made on behalf of the petitioners, Mr. P. Mullick, Learned Counsel for the respondents contended that notwithstanding the subsequent decisions of the Supreme Court in the Central Inland Water Transport Corporation Ltd. case, Dwarkadas Marfatia''s case and Mahabir Auto Stores case, the principles sought to be enunciated in Radhikrishna Agrawal''s case still held the field and that the questions involved in this writ application having arisen out of a concluded contract, the writ application was not maintainable and was liable to be dismissed. According to Mr. Mullick, the proposition sought to be introduced in the later cases was still only at a nebulous stage and was yet to take concrete shape. Till then, the Court should follow the principles explained by the Supreme Court in Radhikrishna Agarwal''s case, and by a Division Bench of this Court in the case of Orient Longman Ltd. Vs. Jayati Laila Kabir and Others, . To drive home the point sought to be urged by him, Mr. Mullick also relied on another Division Bench of this Court in the case of Hindusthan petroleum Corporation Ltd. & Ors. vs. Shyam Sunder Ganeriwala, reported in 91 CWN 217, where the principles laid down in Radhakrishna Agarwal''s case were reiterated by this Court. In this connection, Mr. Mullik also referred to and relied upon the decision of the Supreme Court in the case of Life Insurance Corporation of India vs. Escorts Ltd. & Ors., reported in AIR 1936 SC 1370.

The last branch of Mr. Mullick submissions was that, in any event, the writ application involved highly disputed questions of fact, which this Court was not competent to decide and should not attempt to decide. According to Mr. Mullick, on the aforesaid grounds, this Court ought not to interfere with the decision of the concerned authorities regarding stoppage of supply of coal to the writ petitioners and the writ application should be dismissed.

Having considered the facts and circumstances of the case and the submissions of the respective parties, I am inclined to accept the submissions made on behalf of the petitioners. The facts, as revealed, show that the decision to discontinue supply of coal to the petitioners was taken unilaterally, without giving the petitioners any opportunity of showing cause against the action'' proposed to be taken. The authorities no doubt have the right to discontinue the supply of coal in appropriate cases, but as has been repeatedly stressed by the court, every action of the State executive authority must be subject to the rule of law and must be informed by reason. The State and its agencies cannot act arbitrarily. They must act fairly, whatever be their activity, and particularly so, where monopolistic authority is sought to be wielded in respect of a particular commodity. Their actions must safety the test of fair play and reasonableness as envisaged in Article 14 of the Constitution. In the instant case, the supply of coal, which is under the exclusive control of the State and its agencies, was discontinued to the petitioners abruptly and without any reason being given. In such circumstances it cannot but be held that the concerned authorities acted arbitrarily and in colourable exercise of the powers vested in them in stopping the supply of coal to the writ petitioners.

As far as the arguments relating to the powers of the writ court to interfere in matters arising out of a concluded contract is concerned, I am of the view that such question has been laid to rest by the Supreme Court in Dwarkadas Marfatia''s case and The case of Mahabir Auto Stores. It has now been clearly laid down not only by our courts, but the Supreme Court as well, that where the State is one of the contracting parties, its actions, even if such actions emanate from the contract, will be subject to judicial review and be amenable to the writ jurisdiction of the Courts to test the validity of such actions on the touch stone of Article 14 of the Constitution. The principle enunciated in Dwarkadas Marfatia''s case and Mahabir Auto Stores case have been further emphasised by the Supreme Court in yet another recent case, viz. the case of Kumari Shrilekha Vidyarthi and Others Vs. State of U.P. and Others, In the light of the aforesaid discussion, it would not be inappropriate to reproduce one of the passages of the judgment delivered by the Supreme Court in the said case, which as follows:-

In our view, bringing the State activity in contractual matters also within the purview of judicial review is inevitable and is a logical corollary to the stage already reached in the decisions of this Court so far. Having fortunately reached this point, we should not now turn back or take a turn in a different direction or merely stop there. In our opinion, two recent decisions in Dwarkadas Marfatia & Sons and Mahabir Auto Stores also lead in the same direction without saying so in clear terms. This appears to be also the trend of the recent English decisions. It is in consonance with our commitment to openness which implies scrutiny of every State action to provide a check against arbitrariness and abuse of power. We would much rather be wrong in saying so rather than be wrong in not saying so. Non-arbitrariness, being a necessary commitment of the rule of law, it is imperative that all actions of every public functionary, in whatever sphre, must be guided by reason and not humour, whim, caprice or personal predilections of the persons entrusted with the task on behalf of the State and exercise of all power must be for public good instead of being an abuse of the power.

The various cases referred to and discussed above, will go to show that the proposition sought to be explained in Dwahkadas Marfatia''s case and Mahabir Auto Stores case, are no longer in a nebulous stage, as has been sought to be contended on behalf of the respondents. On the other hand, the said propositions have taken a definite shape in the various cases decided both by this Court and the Supreme Court following such propositions-, and it can no longer be contended that the principle''s enunciated in Radhakrishna Agarwal''s case still hold the field in all respect. The breach in this case is not referable to any of the terms of the contest, but involves an arbitrary decision taken by the concerned authorities.

In view of the above, this application succeeds. The decision to stop supply of coal to the petitioner company contained in the wireless message dated 13th June, 1990 of the Sales Manager, Eastern Coalfields Limited, Sanctoria, Dishergarh, Burdwan, being Annexure "B" to the writ petition, is hereby quashed. The concerned respondents are directed to forth with resume supply of coal to the writ petitioners, as per the quota earlier allotted to them. The application is thus disposed of.

There will be no order as to costs.

Let xerox copies of this judgment be made available to the learned advocates of the parties on their usual undertaking to apply for and obtain certified copies of the same.