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2025 DIGILAW 2005 (JHR)

Varahi Associates v. Central Coalfields Limited

2025-10-09

RAJESH KUMAR, SUJIT NARAYAN PRASAD

body2025
Order : 1. The present writ petition has been filed under Article 226 of the Constitution of India seeking following relief(s): “(i) For issuance of an appropriate writ/order/direction for quashing and setting aside of the communication dated 15.6.2020 (Annexure-15) made by the respondents whereby a penalty of Rs. 28,87,262/- has been imposed upon the petitioner for alleged non-execution of works between 29.10.2017 to 26.2.2018 without considering the fact that it was the respondents itself who had directed the petitioner to stop the execution of the works during the said period. (ii) In consequence thereof, direct the respondents to refund the said amount of Rs. 28,87,262/- to the petitioner as the same has been recovered by the respondents arbitrarily and illegally under the pretext of foreclosure of Contract and consequential release of the Bank Guarantee of Rs. 1,02,91,520/- furnished by the petitioner as Performance Security at the commencement of the Contract. 2. The brief facts of the case, as per the pleading made in the writ petition, required to be enumerated, which read as under: (i) It is the case of the writ petitioner that petitioner was granted work of loading and transportation of coal from Karma OCP coal stock heap no. 2 to Ara Feeder Breaker for a period of three years. The estimated cost of work was Rs. 1709.16 lakhs. Letter of intent dated 6.11.2015 was issued to the petitioner by which the value of the works at which the contract was awarded to the petitioner was Rs. 1311.24 lakhs. The petitioner deposited performance security of Rs. 1,02,91,520/- by way of four bank guarantees. The petitioner was to load and transport a total quantity of coal to the tune of12 lakh tones. (ii) It is stated that the petitioner commenced the execution of works under the contract at its earnest by mobilizing its men and machinery but he was unable to load and transport its daily target of coal on account of non-availability of coal at the heap and the respondents were also well aware of this fact. (iii) It is stated that making coal available was the sole responsibility of the respondents and the petitioner had no control over the same. (iii) It is stated that making coal available was the sole responsibility of the respondents and the petitioner had no control over the same. The petitioner was suffering huge financial losses on account of overheads and idleness of men and machinery because of non- availability of coal at the heap and since there was no coal at the heap, the respondents vide letter dated 11.8.2017 directed the petitioner to discontinue the works of loading and transportation temporarily till further orders since the stock position at the heap had become ‘nil’. (iv) It is stated that after receipt of the written communication, the petitioner de-mobilized its machinery from the site. Since the order to discontinue the work was for an indefinite period until further orders, it became imperative for the petitioner to mitigate its losses by mobilizing its machinery elsewhere since Clause 8 of the Special Conditions of Contract prevented the petitioner from claiming damages on account of idleness of machinery. (v) It is submitted that thereafter the respondents vide letter-dated 28.10.2017, i.e., after more than two and half months, directed the petitioner to resume the execution of the works without taking into consideration the fact that the petitioner had already demobilized its machinery from the site. (vi) It is stated that in order to resume the works, the petitioner required a formal order from the respondents for allowing its machinery back at the site. It is stated that without a formal order, the petitioner could not have resumed the works. The petitioner requested the respondents for the same but to no avail. In the meanwhile, the respondent again vide letter-dated 01.12.2017 directed the petitioner to resume the works. It is stated that upon another request by the petitioner to allow the machinery of the petitioner at the site, the respondents eventually vide letter-dated 20.01.2018 allowed the machinery of the petitioner at the site. (vii) It is stated that this delay was on the part of the respondents in allowing the machinery of the petitioner at the site. However, a bare perusal of the conduct of the petitioner reveals that it was acting in good faith all along and was ready and willing to perform its obligations under the Contract in spite of the fact that it had to suffer huge financial losses on account of idleness of men and machinery because of insufficiency of coal at the heap. It is stated that thereafter the petitioner mobilized its machinery at the site; however, it was disappointed to note that sufficient coal was not available at the heap for transportation. Therefore, the petitioner requested the respondents for resumption of transportation. (viii) In response thereto, the respondents vide letter-dated 27.02.2018 directed the petitioner not to re-start the execution of the works until clarification regarding foreclosure of the Contract is obtained. As such, it is clear that since 11.08.2017 to 27.02.2018, the petitioner was not allowed to re-start the works on account of respondents own shortcomings, even though, the petitioner has been ready and willing to perform its obligations under the Contract. Thereafter, the petitioner was awaiting further instructions from the respondents regarding resumption of works, however, it was shocked to receive the communication dated 30.03.2018 by the respondents where they admitted that coal, which the petitioner was contracted to transport, had become 'nil', and therefore, the petitioner should give its consent to transport a different grade of coal at a lower price. (ix) In response thereto, the petitioner refused to provide its consent to transport the coal at a lower rate vide letter-dated 09.04.2018. Thereafter, vide letter-dated 13.08.2018, the respondents sought consent of the petitioner for foreclosure of Contract. It is pertinent at this juncture to go through the contents of this letter wherein the respondents have stated that foreclosure of Contract is being sought for due to completion of Contract of coal crushing at the heap, meaning thereby, since there was no works of coal crushing being done, no works of coal transportation was possible; and therefore, it was imperative to foreclose the Contract of the petitioner. (x) The petitioner gave its consent for foreclosure of Contract vides letter-dated 25.08.2018. The petitioner was then awaiting further instructions from the respondents for foreclosure. Since the petitioner did not hear anything from the respondents afterwards regarding foreclosure; it wrote several letters to the respondents being letters-dated 29.12.2018, 05.02.2019, and 18.02.2020 for foreclosure of Contract but to no avail. It is pertinent to mention here that all this while the Petitioner's Performance Security of Rs. 1,02,91,520/- was stuck with the respondents and the petitioner was going through a financial crunch. It is pertinent to mention here that all this while the Petitioner's Performance Security of Rs. 1,02,91,520/- was stuck with the respondents and the petitioner was going through a financial crunch. (xi) It is stated that ultimately, to the shock and dismay of the petitioner, it received a letter-dated 28.05.2020 from the respondents after a period of 2 years directing the petitioner to deposit a sum of Rs. 13, 48, 789/- as penalty and recovery under the Contract, so that, the Contract could be foreclosed and the Performance Security of the petitioner may be released. (xii) Since there was no basis for such recovery, the petitioner vide letter-dated 09.06.2020 wrote to the respondents stating that it had already suffered losses due to insufficiency of coal at the heap, and therefore, there was no basis for such penalty and recovery after 2 years of stoppage of works. The petitioner requested the respondents to provide the basis of the said penalty and recovery. (xiii) The respondents then vide letter-dated 15.06.2020 provided a detailed statement for recovery wherein they mentioned that a sum of Rs. 28,87,262/ was imposed as penalty on account of non-execution of works from 29.10.2017 to 26.02.2018. It is stated that this is the same period when the work was stopped on account of instructions from the respondents themselves to discontinue the works because the stock at the heap was 'nil'. There were other recoveries also made in the said letter and the amounts were adjusted from the Security Money of the petitioner and the final amount to be paid by the petitioner came to Rs. 13,48,789/-. (xiv) It is stated that since the petitioner had no bargaining power with the respondents and it was in urgent need of the Performance Security of Rs. 1,02,91,520/-, it agreed to pay the alleged penalty of Rs. 13,48,789/- and paid the same vide letter-dated 23.06.2020 for the sole purpose of refund of Bank Guarantee, as stated in the said letter. As such, the penalty was paid under protest for the sole purpose of refund of Performance Security. The penalty imposed by the respondents was illegal and arbitrary as non-execution of works was on account of the instructions from the respondents themselves. It is stated that thereafter the respondents released the Performance Security of the petitioner vide Sanction Order dated 31.07.2020. As such, the penalty was paid under protest for the sole purpose of refund of Performance Security. The penalty imposed by the respondents was illegal and arbitrary as non-execution of works was on account of the instructions from the respondents themselves. It is stated that thereafter the respondents released the Performance Security of the petitioner vide Sanction Order dated 31.07.2020. (xv) It is stated that a bare perusal of the aforesaid events make it amply clear that the action of the respondents has been arbitrary and illegal in as much as they have imposed penalty upon the petitioner without any fault on the part of the petitioner; and the petitioner has been compelled to pay the same in order to get its Performance Security released. The respondents have taken undue benefit of their bargaining power and made the petitioner pay the penalty. 3. The learned counsel for the respondents has raised their objection by filing counter-affidavit stating therein that the relief sought for by the writ petitioner is not fit to be granted by this Court as the penalty was deducted for non execution of the work by the contractor for the period 29/10/2017 to 26/02/2018. It is stated that coal from heap No.2 of Karma OCP has been transported by M/s Varahi Associates upto 11.08.2017 till the stock of Heap No. 2 became Nil and as such the transportation of coal was suspended vide letter No. PO/Karma/17/1341 dated 11.08.2017 (Annexure 4 to the writ petition). Later on, a letter was issued to re-start the work of transportation of coal from Heap No.2 Karma OCP. However, the contractor did not commence the execution of the work. Written communication to M/s Varahi Associate vide letter No. PO/Karma/20/17-18/1704 dated 28-10-2017 and again letter No. PO/Karma/20/17-18/1905 dated 01-12-2017 regarding Karma OCP having sufficient coal in coal stock Heap No.2 and to continue the coal transportation from Karma OCP. It is stated that there was sufficient coal available in Heap No. 2 of Karma OCP for transportation but the contractor did not start the transportation work. However, it is admitted to the extent that letter dated 11.08.2017 was issued to the petitioner. It is stated that transportation was discontinued for a period 12.08.2017 to 28.10.2017 and thereafter the contractor was asked to restart the transportation work vide letter No. PO/Karma/20/17-18/1704 dated 28.10.2017 and letter No. PO/Karma/20/17-18/1905 dated 01.12.2017. However, it is admitted to the extent that letter dated 11.08.2017 was issued to the petitioner. It is stated that transportation was discontinued for a period 12.08.2017 to 28.10.2017 and thereafter the contractor was asked to restart the transportation work vide letter No. PO/Karma/20/17-18/1704 dated 28.10.2017 and letter No. PO/Karma/20/17-18/1905 dated 01.12.2017. It is stated that the request letter for allowing the vehicles was given by the transporter vide letter No. NIL dated NIL. It is stated that on the basis of such letter the management allowed the list of vehicles given by M/s Varahi Associates for transportation of coal from heap No. 2 of Karma Project vide letter No. PO/Karma/20/17-18/06 dated 20.01.2018 but still the contractor did not start transportation and, therefore, an amount of Rs. 28,87,262/- has been deducted as penalty for non execution of the work by the contractor for the period 29-10-2017 to 26-02- 2018. It is stated that sufficient coal was present in Heap No.2 for transportation. It is stated that all deductions have been made as per the terms and conditions of the agreement. 4. A rejoinder has been filed by the learned counsel for the petitioner in response to the counter-affidavit wherein it is stated that the petitioner is entitled to all the reliefs as has been prayed for by the petitioner for the reasons that the answering deponent has filed an evasive reply and has tried its best to mislead this Court by not bringing the original facts before this Court and on the contrary, has made an attempt that it is the petitioner who is at fault, although not a single word has been whispered by the answering deponent, with regard to letter dated 30.03.2018 which is an offer given by the coal company to the petitioner and in the absence of any consent by the petitioner, termination of contract for the reason of supervening impossibility cannot be attributed to the conduct of the petitioner and as such no penalty could have been imposed on the petitioner. The grade of coal for which the work was awarded to the petitioner had become Nil in August 2017 and an offer was made by the coal company to the petitioner to reduce its price for transportation of a different article which was not agreed upon by the petitioner, as a result of which after August 2017, the work could not commence in terms of chart itself and the same cannot be said to have been any conduct inviting penalty upon the petitioner. The respondents never had sufficient quantity of Grade 5 coal at Heap 2, so that transportation of the targeted quantity of the coal could be carried out. The coal stock became nil and thereafter there was Grade-7 coal available at Heap No. 2 whereas the contract was for transportation of Grade-5 coal available at Heap No. 2 only. However, the petitioner never claimed any damages on account of idleness of machinery and men and is very well aware of Clause 8 of the Special Conditions of the Contract. Clause 8 of the Special Conditions of the Contract states that the Petitioner is restricted from claiming damages on account of idleness of machinery and as such it mobilized its machinery elsewhere in order to mitigate the losses, which was well within the knowledge of the respondents. Moreover, when the petitioner was directed to start the works, the petitioner approached the respondents to issue a formal order, so that the petitioner could re-mobilize the machinery as the same would not be allowed to enter into the site for transportation of coal, but the same was given to the petitioner after much delay. Undisputedly and undeniably, the petitioner was awarded to carry out transportation of G5 grade of coal which became not available w.e.f. 11.08.2017 and the work was stopped. Thereafter, G7 grade of coal was made available to the petitioner with a counter offer to reduce its rates which the petitioner was not bound to accept and as such, for such non consent, no penalty was invokable. ARGUMENTS ADVANCED ON BEHALF OF THE PETITIONER 5. Learned counsel for the petitioner has taken the following grounds: (i) That the penalty which has been imposed to the tune of Rs. ARGUMENTS ADVANCED ON BEHALF OF THE PETITIONER 5. Learned counsel for the petitioner has taken the following grounds: (i) That the penalty which has been imposed to the tune of Rs. 28,87,262/- is not fit to be inflicted, reason being, that it is the respondent- Central Coalfields who has put restriction upon lifting or transportation of coal from Karma Project till further order as per the communication dated 11.8.2017 issued under the signature of Project Officer , Karma Project. It has been contended that when there is restriction imposed by the respondent CCL, in compliance to the said restriction, the transportation has not been carried out then inflicting punishment for the said period, cannot be said to be justified. (ii) The permission has been accorded by the respondent- Central Coalfields Limited by the office order dated 14/20.1.2018 appended as Annexure-6. Thereafter, the transportation work has been carried out as such, it is not the case where the writ petitioner has committed any illegal act, even then, penalty has been imposed. (iii) It is further stated that permission was granted to transport Grade-7 coal available at Heap No.2 in place of Grade-5 coal. The learned counsel for the petitioner based upon the aforesaid grounds has submitted that inflicting penalty to the tune of Rs. 28,87,262/-is fit to be quashed and set-aside. ARGUMENTS ADVANCED ON BEHALF OF THE RESPONDENTS 6. The learned counsel for the respondents has taken the following grounds by taking stand inter alia in the counter-affidavit: (i) It is the petitioner who has not transported the coal and it is incorrect to say that due to non-availability of coal, the transportation was asked to be discontinued rather when the petitioner granted permission to lift the coal and transport it, even thereafter, the details of the vehicles have not been furnished and, for the first time, the details of the transport for the purpose of granting permission to enter into the coal field area have been provided and, immediately thereafter on 14/20.1.2018 the said permission was accorded. It has been contended that it was accountability of the petitioner to furnish the detail of the vehicles, so that due permission ought to have been accorded for entering of the vehicles in the premises of the coalfield area but the petitioner has not submitted the details of the vehicles and, as such, it is the laches on the part of the writ petitioner for which the respondents have sustained loss and, hence, in order to compensate, the penalty to the tune of Rs. 28, 87,262/- has been assessed and thus it is imposed. (ii) The learned counsel for the respondent-Central Coalfields Limited has further submitted in response to the contention of the writ petitioner that the petitioner was allowed to transport Grade-7 coal in place of Grade-5 coal is not the factual aspect as is being pleaded by placing the Annexure-8 dated 30th March, 2018 rather even accepting the same to be true then the petitioner would have made an objection to that but instead of doing so the petitioner was silent by not supplying details of vehicles. The learned counsel for the respondents based upon the aforesaid grounds has submitted that it is not a case where the impugned decision taken by the respondent-Central Coalfields Limited for recovery of amount to the tune of Rs.28,87,262/- is to be quashed and set-aside. ANALYSIS: 7. We have heard the learned counsel for the parties and gone through the pleadings made in the writ petition as also the counter-affidavit and the rejoinder as referred herein above. The question which requires consideration in the present case is as to whether the petitioner is at fault in not transporting the coal from Karma Project or it is due to the laches committed by the respondent-Central Coalfields Limited. 8. This court in order to answer the aforesaid question again needs to refer herein the factual aspect in brief. The petitioner has entered into the contract for transportation of coal from Karma project. The work order was issued and the petitioner has furnished the details of the vehicles for grant of permission to enter into the coalfield area. The petitioner has started carrying out the transportation but after some time, due to non-availability of the stock in the area, the transportation was discontinued as would be evident from communication dated 11.8.2017 as contained in Annexure-4. The petitioner has started carrying out the transportation but after some time, due to non-availability of the stock in the area, the transportation was discontinued as would be evident from communication dated 11.8.2017 as contained in Annexure-4. It needs to refer herein that prior to issuance of the communication dated 11.8.2017, the petitioner has furnished the details of the vehicles for the purpose of getting permission to enter into the premises of coalfield area. It is further evident from the communication dated 1.12.2017 that the petitioner was asked to continue the coal transportation from Karma Project by informing that there is sufficient coal available in the Heap no. 5 of Karma Project as would be evident from Annexure-5. The said communication was earlier issued on 01.12.2017 but there is no averment made in the entire pleadings as to when the details of the vehicles along with its number has been furnished to the respondent- Central Coalfields Limited for the purpose of granting permission to enter into the coalfields area. However, it is evident from Annexure-6 dated 14/20.01.2018 that such permission was accorded to the various vehicles, 25 in numbers, as referred in the said annexure. There is no reference of any date as to when the application was made furnishing the details of the vehicles along with its registration number. The petitioner even after 14/20.01.2018 has not transported the coal in between 29.10.2017 to 26.2.2018 although the petitioner was communicated to carry out the coal transportation vide communication dated 1.12.2017 as per Annexure-5. For ready reference contents of Annexure-5 is quoted herein under: “…..please refer our earlier letter No. PO/Karma/20/17-18/1704 dtd. 28/10/2017 to continue the coal transportation from Karma Project. We are having sufficient coal in our stock, heap No.2. You are therefore again requested to continue the coal transportation work immediately from Karma Project.” 9. The amount which has been permitted to be recovered to the tune of Rs. 28,87,262/- is pertains to the period from 29.10.2017 to 26.2.2018 but in-spite of communication for continuation of mining operation vide letter no. PO/Karma/20/17-18/1704 dated 28.10.2017 (Annexure-A of the counter-affidavit) and further vide letter no.PO/Karma/20/17- 18/1905 dated 01.12.2017 (Annexure-5 of the petition which is quoted above), no endeavour has been taken by the petitioner to transport the coal. 28,87,262/- is pertains to the period from 29.10.2017 to 26.2.2018 but in-spite of communication for continuation of mining operation vide letter no. PO/Karma/20/17-18/1704 dated 28.10.2017 (Annexure-A of the counter-affidavit) and further vide letter no.PO/Karma/20/17- 18/1905 dated 01.12.2017 (Annexure-5 of the petition which is quoted above), no endeavour has been taken by the petitioner to transport the coal. Even no reference of any date as to when the details of vehicle was furnished by the petitioner has finds place in the entire pleadings. However, the respondent-Central Coalfields Limited has issued an office order dated 14/20.01.2018 permitting the vehicles to enter into the coalfields area for transportation of coal even thereafter the coal was not lifted up to 26.2.2018. The reason has been given by the learned counsel for the petitioner by making reference to Annexure-8 dated 30.3.2018 that in place of transportation of Grade-5 coal from Heap No.02 of Karma Project the coal of Grade-7 was allowed to be transported. 10. We, after going through the communication dated 30.3.2018 have found that the consent was sought for by the Project Officer, Karma Project with respect to issue as to whether the petitioner is agreeing to continue the work of transportation at the lower rate. The petitioner, in response to the said letter, has informed that the aforesaid request is not acceptable. It further appears from Annexure-10 dated 13.8.2018 that the respondents have made a request to the petitioner for foreclosure of the contract. The petitioner has given his consent as per communication dated 25.8.2018 appended as Annexure-11. 11. Thereafter the respondent-Central Coalfields Limited has come out with the communication dated 15.6.2020 for making recovery of the amount of Rs. 28,87,262/-. The ground which has been taken on behalf of the petitioner by relying upon the communication dated 30.3.2018 by which the consent was sought for to transport Grade-5 coal from Heap No.02 of Karma Project in place of coal of Grade-7 which is after 26.2.2018. 12. We have gone through the entire pleadings of the writ petition and found no pleading to the effect that what was the reason for not transporting the coal prior to 30.3.2018 when the such communication to continue the transportation from Karma Project was already communicated on 28.10.2017 as per Annexure-A to the counter-affidavit and further reminder on 1.12.2017 as per Annexure-5 to the petition. Even after issuance of office order dated 14/20.01.2018 permission has been accorded to transport the coal from the specific vehicles, details of which have been referred in the said office order, even though the coal was not transported. 13. This Court, therefore, of the view that the grounds which have been taken for seeking consent to transport Grade-7 coal in place of Grade-5 coal, as per communication dated 30.3.2018 cannot be said to be an acceptable ground for non transportation of coal. The question of recovery of the said amount will be said to be not applicable so far as the petitioner is concerned, if the petitioner would have started the transportation work immediately after communication dated 28.10.2017 as referred in the communication dated 1.12.2017 as per Annexure-5. Even after 14/20.1.2018 the coal was not transported and even seeking option for transportation of Grade-7 coal in place of Grade-5 is dated 30.3.2018, i.e., subsequent to 26.2.2018. 14. The position of law even settled that if the liability is upon a party then the said party is liable to compensate the other party. Herein, the respondent-Central Coalfields Limited is not at fault rather the petitioner is at fault by not transporting the coal. However, for the temporary period the transportation was discontinued due to non-availability of the coal in the Heap but even after due communication made to the petitioner vide communication dated 28.10.2017 followed by 1.12.2017, the coal was not transported and also even after 14/20.01.2018 (Annexure-6). The conduct of the petitioner based upon the aforesaid documents therefore clarifies that it is the writ petitioner who has not chosen to transport the coal and in that pretext the respondent-Central Coalfields Limited has come out with the impugned decision of recovery of Rs. 28,87,262/- which cannot be said to be suffer from illegality, since it is due to the conduct of the writ petitioner, who has failed to discharge his obligation and, therefore, he is liable to pay the aforesaid amount, i.e., Rs. 28,87,262/-. 15. Accordingly, the instant writ petition fails and is, therefore, dismissed. 16. In consequence thereof, pending interlocutory application(s), if any, stands disposed of.