(Non-Reportable)

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 8153 OF 2009

M/s. S.K.J. Coke Industries Ltd.& Anr.                 ..….Appellants

Versus

Coal India Ltd. & Ors.                                            …..Respondents

J U D G M E N T

ANIRUDDHA BOSE, J.

The  core  dispute  in  this  appeal  involves  the  question  as  to

whether  the  appellants  were  required  to  pay  the  price  of  coal

consumed in their manufacturing process at a preferential rate, known

in the trade parlance as “linked price”, or the price under a Liberalised

Sales Scheme (LSS). The latter pricing mechanism is similar to open

market price of coal.  The predecessor in title  of the first  appellant

were a firm under the trade name Mahabir Coke Industries.  At the

material  time,  they  were  engaged  in  production  of  low  ash

metallurgical coal at a location close to Guwahati.  They wanted to be

under  the  preferential  pricing  regime  on  the  strength  of  an

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arrangement with the respondent coal companies agreed upon in the

year 1989.  Under such arrangement Mahabir Coke Industries were

permitted to lift 4000 metric tonnes of coal per month.  Traditionally,

the coal  industry has been deeply regulated by the Government  of

India.  The Colliery Control Order, 1945 was one of such regulating

instruments.  This  Control  Order  has  been  replaced  by  Colliery

Control Order, 2000 with effect from 1st January, 2000 but that factor

is not of much significance so far as the present appeal is concerned.

The basic coal mining industry is nationalised and largely controlled

by the Coal India Ltd., a public sector undertaking.  The appellants

were approved linkage of said 4000 metric tonnes of low ash coal

from Tirup and Tikak mines of North Eastern Coalfields (NEC). The

said coal company is a subsidiary of Coal India Limited (CIL). The

linking order was issued on 20th September, 1989.  The respondent

coal  companies  in  course  of  hearing   before  us  have  sought  to

distinguish between “linkage” and “allocation”. Their stand is that in

the case of the appellants, there was monthly allocation of the said

quantity of coal only for which they cannot claim preferential price.

As cokeries, they were allocated coal suitable for use in steel plants

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subject  to  availability.  The  respondents’  case  is  that  linkage  at

preferential price is given to the industries or thermal plants out of

coal not suitable for use in steel plants. For that reason, according to

the respondent coal companies, appellants were not given linkage but

allocated  specified  quantity.  Clause  3  of  the  1945  Control  Order

empowered  categorisation  and  gradation  of  coal  by  the  Central

Government. Clause 4 thereof authorised the Central Government to

fix different prices of coal for different classes, grades, sizes of coal as

also prices of different collieries.

2. On  16th June  1994,  a  notification  was  issued  by  the  Central

Government in pursuance of the aforesaid two Clauses of the 1945

Control Order stipulating the classes and grades in which coal and

coke were to be categorised. That notification also stipulated the sale

prices for such coal, at which they could be sold by the colliery owner

at  pitheads.  Table  I  thereof  provided  gradation  with  grade

specifications of different types of coal.  There was no such grading in

respect of coal produced in the State of Assam and certain other states

in the North Eastern Region in that Table. We shall henceforth refer to

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coal lifted by the appellants as “Assam coal”. The second Table (Table

II) to this notification dealt with sale prices of different types of coal

mainly  on  the  basis  of  “Useful  heat  value  in  kilo  calories  per

kilogram”.  For coal from Assam and that region, price for ungraded

coal with ash content not exceeding 25% was specified to be “not

exceeding Rs.741.00 p.” NEC made provisional declaration of grade

of Assam coal under Clause 3A(1) of the 1945 Control Order on 11 th

June  1997.  By  a  further  notification  dated  26th August  1997  the

revised  prices  thereof  were  notified.  Thereafter,  by  another

notification dated 24th February  1999,  the gradation formalities  for

coal  produced  in  Assam  and  other  States  in  the  said  region  was

completed by effecting suitable amendments to the notification dated

16th June 1994. In Clause 9 (ii) of the 1994 notification, there was

stipulation to  the  following  effect  for  computing  the  price  of  coal

depending upon their ash content:-

“9. (i)…………………..

(ii) In case of coal produced in the State of Assam,  Arunachal  Pradesh,  Meghalaya and  Nagaland  the  price  payable  shall  be increased at the rate of Rs.1/- per tonne for each percentage of ash by which the ash

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content falls below 22 per cent. Similarly when ash content exceeds 25 per cent, the price shall be reduced at the same rate of Rs. 11 per tonne per cent of ash by which the ash content exceeds 25 per cent.”

3. The  first  appellant,  whose  predecessors  were  the  petitioners

before the First Court continued with receiving coal in terms of the

notification dated 16th June, 1994 at the price stipulated therein till

18th January  1996.  Admitted  position  is  that  coal  lifted  by  the

appellants had ash content below 25%. From 19th January 1996, the

price NEC was charging the appellants stood substantially enhanced.

The reason for this, according to the respondent companies, was that a

Liberalised Sales Scheme (LSS) was implemented by the CIL under

authorisation  of  the  Central  Government  to  that  effect.   The  LSS

under which price was enhanced was on the basis of a notification

dated 9th January,  1996.  That  notification was followed by another

notification dated 11th March, 1996. On the latter date, a Liberalised

Sales  Scheme  (Modified)  was  introduced.  The  notification  of  9th

January, 1996 reads:-

“S.O. 21(E). In pursuance of the provisions of clause 18 of the Colliery Control Order, 1945, as  continued  in  force  by  section  16  of  the Essential Commodities Act, 1995 (10 of 1955),

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the  Central  Government,  having regard  to  the stock position of coal, hereby exempts the Coal India  Ltd.,  Subsidiaries  of  Coal  India  Limited and the Singareni Collieries Company Limited in  respect  of  coal  sold  by  them  under  any Liberalized  sale  Scheme  (LSS)  of  the Government  of  India  from  the  provisions  of clauses 4, 4A and 4B of the said order.

This notification shall remain in force on and  from  the  date  of  its  publication  in  the official Gazette and until the 31st day of March, 1996.”

4. As  pleaded  in  paragraph  22  of  the  appellant’s  writ  petition,

clause  2.3 of  that  Scheme  specified  that  the  declaration  of  source

under  “LSS”  was  not  to  affect  rail  loading  for  linked/sponsored

consumers or coal supplies to road linked/sponsored consumers. The

appellants  continued to  lift  coal  under  protest  on payment  of  such

higher  price.  Subsequently  on  16th November  1996,  the  linkage

committee  of  the  Coal  India  Limited  in  its  85th meeting  took  the

following decision under agenda item nos. 23 and 24:

“23.  ‘Linkage’ of coal to SSF units & cokery units –

The  Committee  deliberated  on  the  agenda items  and  decided  that  SSF  units  and  cokery units  which have been allocated  coal  by Coal India Ltd., should be treated as ‘linked unit’, in

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the same manner as other linked industrial units in  the  non-core  sector.  The  committee  also decided that-

(a)  Coal  Clearance  Letter/Coal  Allocation Letters  issued  to  SSF  units  and  Cokery  units should  be  treated  as  ‘Linkage  Advice  Letters’ which are issued to other non-core sector units;

(b)  The  present  system  of  capacity assessment for SSF units by CMPOI and cokery units  by  a  joint  team  of  officers  from  Coal Co/CMPOI/CIL, should continue;

(c)  All  cokery  units  should  be  required  to obtain sponsorship/recommendation letters from the concerned State Govts., in the same manner as sponsorship/recommendation is  required for other non-core sector units.

24. Case  of  M/s  Mahabir  Coke  Industries, Guwahati, Assam-

The  agenda  item  was  discussed  by  the Committee. As already decided in the previous agenda item (i.e. item No.23), all cokery units and SSF units who have been allocated coal by CIL, should be treated as ‘linked’ units.

 Regarding the ‘price’ to be charged for supply of  low  ash  coal  to  M/s.  Mahabir  Coke Industries,  Guwahati,  this  matter  should  be decided  by  NEC-Assam  as  prevalent  at  any point of time.”  

5. On 12th March, 1997, a notification was issued by the Central

Government in substance deleting clause 4 of the Control Order of

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1945  from  the  notification  dated  16th June  1994.  The  relevant

portion of the notification dated 12th March 1997 stipulated:-

“S.O. 190 (E). – In pursuance of clauses 3 and 4 of  the  Colliery  Control  Order,  1945,  as continued in force by Section 16 of the Essential Commodities  Act,  1955  (10  of  1955),  the Central  Government  hereby  makes  the following  further  amendments  to  the notification  of the Government of India in the Ministry of Coal No.S.O.- -453(E) dated the 16th

June, 1994 on and from the date of publication of  this  notification  in  the  Official  Gazette, namely:-

In the said Notification:-

(a) in the preamble:-

(i) for the words and figures “clauses 3 and 4”, the word and figure “clause 3” shall be substituted,  

(ii) the words and figures “and fixes in Tables II, V and VI below the sale price at which coal or coke may be sold by the colliery owners at pit-heads” shall be omitted.

(b) Table II relating to non-cooking coal, Table  V relating to hard coke, Table VI relating to soft coke and the Notes and the Annexure thereunder shall be omitted.”

6. The appellants founded their writ  petition projecting them as

“linked consumer” and contended that they were to pay the price of

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coal not beyond that notified on 16th June 1994. The reliefs asked for

in their petition included a prayer for writ in the nature of mandamus

commanding CIL and NEC to charge the appellants notified price as

applicable to linked or sponsored units.  Prayer was also made for

refund of excess sum realised from them as LSS price.  

7. Before the First Court, the respondents had run a case that till

12th March, 1997, price for NEC coal was fixed by the Government of

India for linked consumers.  It has been submitted before us on behalf

of the coal companies that till 18th January 1996, prices for the linked

consumers  and  for  the  consumers  lifting  coal  on  allocation  had

remained the same. For those other than linked consumers, price was

fixed by the CIL with effect from 19th January, 1996 in accordance

with the LSS as from that point of time, these coal companies were

exempted from Clause 4 of the 1945 Control Order.  

8. The main point argued on behalf of the appellants before the

First  Court  was  that  in  not  charging  the  appellants  coal  price  as

applicable to a linked unit, the authorities had ignored the resolution

adopted in the 85th meeting of the Linkage Committee for non-core

sector consumers. As a corollary, the appellants contended that they

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were not obliged to pay the LSS price as enhanced from 19th January,

1996. The First  Court,  however,  rejected such plea referring to the

second part  of  the  aforesaid  resolution of  the  Linkage Committee.

Under  that  part,  the  appellants  were  required  to  pay  the  “price

prevalent at any point of time”. The case of the appellants that “price”

referred to in that part was “linkage price” was not accepted by the

First Court. The reasoning of the First Court would appear from the

following passage of the judgment:-

       “After taking into consideration all relevant facts and circumstances and having regard to the submission  made  by  learned  counsel  for  the parties, this Court, however, finds it difficult to appreciate the grievance raised herein on behalf of  the  writ  petitioner.  The  very  basis  of  the claim of the writ petitioner, as referred to earlier, is the resolution adopted in the 85th meeting. It was  specifically  mentioned  that  while  the petitioner could be treated as a linked unit, the price was to be charged as decided by the NEC, Assam as prevalent at any point of time.”

9. The stand of the appellants before the Division Bench was that

since  Assam  coal  remained  ungraded  under  the  16th June  1994

notification and the relevant entry in the Table I was removed only on

24th February  1999,  the  coal  companies  did  not  have  authority  to

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grade  the  coal  prior  to  that  date.  Before  the  Division  Bench,

appellants’ case was that since there was no specification as regards

gradation  under  Clause  3  by  the  Central  Government,  the  coal

companies  could  not  have  had  exercised  their  power  for  such

gradation as also price specification in terms of Clause 3A thereof.

The authority cited before the Division Bench of the High Court was

the case of  Ashoka Smokeless Coal India Pvt. Ltd. vs. Union of

India [(2007) 2 SCC 640]. This judgment has been referred to before

us also in support of the argument of the appellants that there could be

no  pricing  discrimination  in  respect  of  two  sets  of  non-core

consumers.  This  was  a  case  where  constitutionality  of  e-auction

system  was  challenged  and  that  was  the  focus  of  that  decision.

Paragraph 161 of the said report was relied upon before us in which it

has been held and observed:

“161.  The  effect  is  that  today,  while  the  core sector  (92%)  on  its  own  and  non-core  non- linked  SSI/tiny  units  (through  NCCF/other agencies) (1%) are being supplied coal at a fixed price,  on  the  other  hand,  the  non-core  linked SSI/tiny  units  (4%)  are  being  subjected  to differential  treatment,  without  any  rational classification, by supplying the coal to the latter on  the  price  to  be  ascertained  by  the  trader-

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controlled  process  of  e-auction  and  thereby putting  the  petitioner  units  on  a  par  with  the trader.  The  scheme  of  e-auction  is,  therefore, ultra  vires  Article  14  of  the  Constitution  of India.”

10. The Division Bench of the High Court in appeal instituted by

the appellants found that the said decision did not have any impact so

far as appellant’s claim was concerned once the dual system of pricing

was  found  to  be  acceptable.  This  is  the  judgment  which  is  under

appeal before us. We also confirm this view of the Appellate Bench as

we find such view to be the correct view so far as applicability of the

ratio  of  the  case  of  Ashoka  Smokeless  Coal  India  (supra) is

concerned.  

11. It has also been urged before us on behalf of the appellants that

in  the  Resolution of  16th November  1996,  the appellants  had been

specifically referred to as “linked consumer” and in that context the

expression “price” as contained in the second part of the Resolution

ought to imply the price for linked consumers only. The case of CCT,

Ranchi and Another Vs. Swarn Rekha Cokes and Coals (P) Ltd.

and  Others  [(2004)  6  SCC  689]  was  relied  upon  by  the  learned

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counsel for the appellants mainly for interpretation of the aforesaid

Resolution (agenda item no.24). The appellants seek to contend that

while interpreting a provision by which a legal fiction is created, the

Court must ascertain the purpose for which the fiction was created

and  having  done  so,  Court  should  assume  those  facts  and

consequences exist, which are incidental to and inevitable corollaries

for giving effect to such fiction. The rationale behind the appellants’

citing this decision is the wording of the aforesaid Resolution of 16 th

November 1996.  It has been specified in agenda items 23 and 24 of

that Resolution that all cokery units which have been allocated coal

by CIL ought to be treated as linked units. The appellants have argued

that once they were treated as a linked unit, the price benefit attached

to  a  linked  unit  should  automatically  follow.  From  the  said

Resolution, however, we find a specific agenda item concerning the

first appellant,  and the Resolution as adopted specifically stipulates

that the price to be charged from the appellants was to be decided by

the NEC Assam as prevalent at  any point  of time.  In view of this

specific treatment of pricing along with reference to the first appellant

as a linked unit, in our opinion, said Resolution has to be construed to

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mean  that  treatment  of  the  appellant  as  a  linked  unit  was  for  the

purpose of regular supply of coal and the pricing factor was separated

from such deemed linking.  This would be apparent from the decision

taken against agenda item no.23, in which reference has been made to

SSF  units  and  cokery  units  which  had  been  allocated (emphasis

supplied)  coal,  and it  was these units  which were to  be treated as

linked  units.  The  distinction  between  “allocation”  and  “linking”

clearly emerges from the said decision of the linking committee. It is

a fact that the first appellant’s treatment as a linked unit was a fiction.

But such fiction was replaced by reality on the basis of a specific

provision in the Resolution (agenda item no.24) so far as pricing is

concerned.   As  the  Resolution  dealt  with  “linking”  and  “pricing”

separately,  the  fictional  linking  could  not  be  extended  to  actual

pricing.  The  respondents  have  taken  consistent  plea  that  the

expression “linked” has been loosely used and for  non-core sector

units,  it  meant  allocation  of  specified  quantity  of  coal  only.  In

paragraphs  16 and 17 of  NEC’s  affidavit-in-opposition  to  the  writ

petition, it has been stated:-

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“16. At the said meeting, the decision was taken to  treat  SSF and cokery units  including Mahabir  Coke  as  a  “linked  units”.   Such treatment as a linked unit do not mean grant of actual linkage.  So, Mahabir Coke cannot claim to  be  a  linked  unit.   The  advantage  of  being treated as a linked unit was that Mahabir Coke will be assured for monthly supply of 4000 MT coal  per  month  by  NEC.   The  said resolution/decision also provides that the price to  be  charged  for  supply  of  low  ash  coal  to Mahabir Coke will be decided by NEC on the basis of price prevalent at any point of time i.e. current price prevailing at the time of supply.

17. There are nearly 200 Cokery units, in India out  of  them only  three  cokery  unit,  including cokery  unit  of  Mahabir  Coke,  are  located  at Assam.  Mahabir  Coke,  along  with  other  two cokery units have been getting low ash Assam coal  which is  of  superior  grade than what the other  cookeries  of  all  over  India  have  been getting  from  their  respective  coal  companies. Normally  all  other  cookeries  are  getting  the higher  ash  content  coal.  The  other  cookeries located  outside  Assam  get  coal  having  ash content  of  25  –  30%,  whereas  the  cookeries located  in  Assam are  getting  low ash  coal  of NEC having ash content of only 7%. The other cookeries located outside Assam take supply of low ash coal from NEC, under LSS for blending the  same  with  higher  ash  content  coal  which they  have  been  getting  from  other  coal companies. All other cookeries including three cookeries of Assam, who are buying the same low ash coal as supplied to Mahabir Coke, have been paying the LSS price as notified from time to time.”

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12. Learned counsel for the appellants has brought to our notice the

following observations of the Division Bench in different parts of the

judgment:-

“At the time the Linkage Committee stipulated that the price payable by the appellant company would be as per the prevailing rate to be decided by the fifth Respondent, no coal company had any authority to supersede the price fixed by the Central  Government  by  a  notification  issued under the Colliery Control Order, 1945. At the highest,  such  conditional  treatment  of  the appellant company as a linked unit, could come into  play  only  if  the  price  of  coal  was deregulated  by  the  Central  Government;  ipso facto by  reason  of  the  Linkage  Committee decision  of  November  16,  1995  the  appellant company  could  not  be  charged  at  a  rate  in derogation  of  what  the  Central  Government notified.”

xx xx xx xx xx xx

“The price of Assam coal at Rs. 741/- per MT (subject  to  the  variation  on  account  of  ash content)  became  inoperative  upon  the notification of March 12, 1997.”

xx xx xx xx xx xx

“The  appellants  remain  liable  to  pay  the difference in price on the basis of price fixed by the respondents subsequent to the notification of March 12, 1997.”

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13. In  our  opinion,  the  exemption  granted  by  the  Central

Government by the notification dated 9th January, 1996 to Coal India

and their subsidiaries from the provisions of Clauses 4, 4A and 4B of

the 1945 Control Order in respect of sale of coal under LSS, the fetter

imposed by the  aforesaid  notification of  June  1994 got  effectively

removed.  Specific stand taken by the respondents is that the linking

of the first appellant was only in respect of the quantum of coal to be

obtained by them and they were not entitled to price benefits of linked

consumers.  For the appellants, it was only a case of allocation. Thus,

the point of time from when the appellants became liable to pay LSS

rate would be the time when LSS price was raised after 9th January

1996.  Prior  to  that  date,  we  have  already  reproduced  the  coal

companies’ submission that the linked price and non-linked price had

remained  the  same.  So  far  as  the  aforesaid  observations  in  the

impugned judgment is concerned, such reasoning does not appear to

us to be correct. But our views on this point would not advance the

case of the appellants. That is so because in our opinion, it was within

the power of the NEC to enhance the price for LSS consumers upon

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CIL and their subsidiaries being exempted from Clause 4 of the 1945

Control Order on and from 9th January 1996.

14.  It appears that a liberalised pricing system has been prevailing

since  the  year  1993.   We  find  no  reason  to  disbelieve  the  coal

companies when they assert that there was only allocation of coal in

favour of the first appellant.  Thus the appellants did not have vested

legal  right  to  preferential  pricing  as  linked  consumers.   The  9th

January  1996  notification  empowered  Coal  India  Ltd.  and  their

subsidiaries to charge price to consumers beyond that notified on 16 th

June 1994 in respect of Assam coal. The appellants were in the non-

core sector. Around that point of time only parity between LSS price

and linked price was broken and the first appellant was required to

pay the LSS price. So far as allocation is concerned, the agenda 24 of

the 85th meeting of the linkage committee retained the supply volume.

But that Resolution is in tune with the NEC’s stand taken before us

that  LSS price  ought  to  be  charged  to  the  appellants.  The  factual

argument of the appellants that the two other cokery units in Assam

were not linked, are of no relevance.  The appellants have not been

able to sustain a case before us that their linking agreement covered

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both allocation and pricing as is the case of other linked consumers.

So far as the other cokery units are concerned, it has been clarified by

the learned counsel for the coal companies that they lift coal of high

ash content between 25-30% which would automatically take them

out  of  the  price  advantage  specified  in  Table  II  of  the  1994

notification. We accordingly do not find any reason to set aside the

judgment of the Division Bench.  

15. The appeal is accordingly dismissed. No order as to costs. The

interim orders, if any, shall stand dissolved.  

…………….………..…..J. (Deepak Gupta)

………………………….J.        (Aniruddha Bose)

New Delhi, Dated: 7th February, 2020.

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