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TMI Blog2016 (3) TMI 1423X X X X Extracts X X X X X X X X Extracts X X X X ..... hing should be necessarily water-washing nor it was provided that dry-washed coal could not be accepted as washed coal - there are no stipulation in the joint venture agreement or the letter of award, which mandates that coal should, necessarily, be washed through the process of water-washing at washeries. Our understanding of the coal defined in those documents is that the coal would mean washed coal that meets certain stipulated parameters irrespective of the process that may be adopted in mining and washing such coal. It is the settled law that when an action of the State is arbitrary or discriminatory and, thus, is violative of Article 14 of the Constitution of India, a writ petition is certainly maintainable, although ordinarily in the writ jurisdiction the High Court does not enforce the terms of a contract qua contract. The Supreme Court of India in DWARKADAS MARFATIA SONS VERSUS BOARD OF TRUSTEES OF THE PORT OF BOMBAY [ 1989 (4) TMI 315 - SUPREME COURT] held that every action of the authority must be subject to rule of law and must be informed by reason. If the State action, even in contractual matters, fails to satisfy the tests of reasonableness, it would be unco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oal in its thermal power projects in the State of Karnataka. (b) By virtue of a tender process in the year 2002, KPCL selected EMTA Coal Limited ('EMTA' in short) for formation of joint venture for the development of the captive mines and, also, for supply of coal from the said captive mines to its thermal power projects in the State. (c) On September 13, 2002, a joint venture agreement was executed by and between KPCL and EMTA, with a special purpose of mining of coal from the coal mines. Thus, Karnataka EMTA Coal Mines Limited ('KEMTA' in short) was formed. (d) Subsequent to the allotment of the captive coal blocks to KPCL in the year 2003 and upon obtaining various clearances, a fuel supply agreement was executed by and between KPCL and KEMTA on May 9, 2007. (e) The purpose of entering into such fuel supply agreement was for supply and delivery of coal from the captive coal blocks to the thermal power stations of KPCL in the State. (f) On the said May 9, 2007, yet another agreement was executed between EMTA and KEMTA to implement the provisions of the joint venture agreement dated September 13, 2002, as aforesaid. (g) Consequently, a tripa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut, also, demonstrated that quantification of 8.28 lakh MTS was erroneous. KPCL maintained that the rejects generated in the mining operations were only stones and boulders. The rejects were not consistent with the size of coal, which could be used in the thermal power stations. There has been an admission by the KPCL that all rejects were used for levelling and piling works within the mines to facilitate better mining operations. (o) The audit report was, therefore, challenged as arbitrary and not based on the ground of geological realities and, further, that transporting such rejects to any other location would have only imposed an additional burden on KPCL. Therefore, it was contended that the rejects were abandoned or used for levelling and piling activities in the mines. (p) In spite of such audit objection, CAG generated the report and it was made available to KPCL. (q) The Board of Directors of KPCL unilaterally decided to demand reimbursement of cost of rejects from KEMTA. The first demand was made by the letter dated July 31, 2014, which was followed by another demand on December 24, 2014. KPCL, therefore, demanded reimbursement of ₹ 52,37,00,000/- (Rupee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nly, per MT towards washing charges. The writ petitioners contend that such actions of the KPCL are unilateral, arbitrary and illegal. 12. The writ petitioners contend that about ₹ 59,78,00,000/-(Rupees fifty nine crore seventy eight lakh) only, has been arbitrarily deducted by KPCL. 13. The letter of award in favour of EMTA specify that washing of coal would mean beneficiated coal, which satisfies the quantity parameters laid down in Annexure-II to the said letter of award. The fuel supply agreement, as aforesaid, also, indicated that coal would mean washed coal, which satisfy the parameters laid down in Annexure-I. The parameters in both the annexures are identical. 14. The fuel supply agreement does not stipulate a particular process for washing of coal. It was neither suggested that coal washing should be necessarily water-washing nor it was provided that dry-washed coal could not be accepted as washed coal. 15. We do no find any stipulation in the joint venture agreement or the letter of award, which mandates that coal should, necessarily, be washed through the process of water-washing at washeries. Our understanding of the coal defined in those documents is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts instrumentalities have to conform to the requirements of Article 14 of the Constitution of which non-arbitrariness has a significant facet. 24. In ABL International Limited (supra), it was held that a writ petition involving consequential relief of monetary claim was, also, maintainable. Therefore, the writ petitioners are entitled to recover the sums that have been arbitrarily deducted. 25. We, therefore, hold that these writ petitions are maintainable. 26. It appears to us that the agreement between the KPCL, EMTA and KEMTA is tripartite and an agreement of multiple contracts in the form of the joint venture agreement, the fuel supply agreement and the mining operation agreement. 27. With regard to the merits of the claim of recovery regarding unilateral deduction of ₹ 90/- (Rupees ninety) only, per MT, we find no material from the side of KPCL to substantiate their action to such deductions. The quantum is not available either in the joint venture agreement or the fuel supply agreement. There is no stipulation that the activity of washing coal should, necessarily, be the traditional process of washing through water. 28. The fuel supply agreement stipulate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntification of rejects was erroneous. In their response KPCL stated that the rejects consisted of only stones and boulders used for levelling and other improvements in the mine. 33. In Arun Kumar Agrawal v. Union of India reported in (2013) 7 SCC 1, the Supreme Court of India observed that reliefs could not be granted merely placing reliance on the report of CAG. Such report is, always, subject to parliamentary debates and it is possible that Public Audit Committee may accept the objection to the report of CAG and reject such report. The report of the CAG of 2013 was based on a third party contract that was executed with Gupta Coalfields and Washeries Limited. The report of CAG has not yet been accepted either by the Public Accounts Committee or by the Committee of Public Undertakings. 34. In Pathan Mohammed Suleman Rehmatkhan v. State of Gujarat reported in (2014) 4 SCC 156, the Supreme Court of India held that it would not be proper to refer to the findings and conclusions contained in the report of CAG, when such report has been subject to scrutiny by the Parliament. 35. The learned advocate for the respondents informs us that the Central Bureau of Investigation ('C ..... 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