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TMI Blog2021 (7) TMI 1459X X X X Extracts X X X X X X X X Extracts X X X X ..... ons, as a principal buyer, it could probably be liable as it was the end user and therefore, it was to safeguard themselves of any liability the above mentioned clauses were stipulated in the Agreement - if a purchaser intends to purchase a finished product from a person, the by products generated by that person who had secured and processed the raw material would essentially be of that person. To put it differently, the waste generated from processing of raw material cannot be said to be the property of purchaser of finished product. It is to be kept in mind that KPCL, in the instant case, had specifically stipulated that they would be buying only washed coal at a pre-determined price and they were not under an obligation to take care of coal rejects which were generated during the processing of raw coal. This generation of coal rejects during the processing of raw coal cannot enure to the benefit of KPCL and they cannot claim the value of coal rejects - the judgment of the Commercial Court holding that KPCL cannot have a claim over the coal rejects was perfectly justified and therefore, the finding of the Commercial Court affirmed. The entitlement of the plaintiffs to secure the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of power was that the Coal should have less than 34% of ash content. For ensuring an assured supply of washed coal to their plant, KPCL had invited tenders from entities who were interested in supplying washed coal and in the said tender, the plaintiffs were the successful tenderers. Pursuant to the said tender, an agreement dated 29.11.2002 was also entered into. 5. The basic requirement of the agreement was that plaintiffs would secure raw coal from WCL, wash the coal in the washery established by them in the land allotted to them by WCL and supply the washed coal to KPCL at predetermined rates. 6. According to the plaint averments, plaintiffs secured raw coal from WCL, washed the coal and delivered the washed coal as stipulated in the agreement at the Raichur Thermal Power Railway Siding (for short, RTPS siding). It was their case that they had discharged all their obligations under the agreement during the period of the agreement, which was initially for a period of five years and subsequently, extended till the end of March 2009. 7. It was the case of plaintiffs that from April 2009, KPCL stopped payments in respect of outstanding invoices and a demand made by the plaintiffs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y Bailees and a Bailee, in law, had no title of the goods which had been the subject matter of bailment. 13. KPCL contended that a large quantity of raw coal was lifted from the colliery and as a result of the washing, only a proportion of the said quantity of raw coal became available as washed coal. It was stated that if the quantity of washed coal supplied to them was deducted from the quantity of raw coal secured by the plaintiffs from WCL, the quantity of coal rejects generated could be ascertained. 14. The value of the said coal rejects, according to the KPCL, was to the tune of following sums: Sl. No. COMMERCIAL APPEAL AMOUNT 1 COMAP. No. 12/2020 Rs. 44,55,64,107.80/- 2 COMAP. No. 13/2020 Rs. 21,88,44,432/- 3 COMAP. No. 14/2020 Rs. 44,85,50,826.90/- 4 COMAP. No. 15/2020 Rs. 25,12,66,724.50/- 15. KPCL contended that they were entitled to all the sums that had been secured by plaintiffs by the sale of coal rejects which was required to be ascertained by calling upon the plaintiffs to render true and accurate accounts of the proceeds secured by them by the sale of the coal rejects. 16. The Commercial Court, on consideration of the pleadings framed several issues, amongst which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e generated during the washing of coal and which were disposed off by the plaintiffs on the assumption that the coal rejects belonged to the. 23. As regards this claim of KPCL regarding the Coal rejects, the Commercial Court took the view that KPCL was not entitled to the value of the coal rejects that were generated during the washing of raw coal and it could not adjust the said value as against the sums payable to the plaintiffs. It opined that the plaintiffs were entitled to the value of the coal rejects and it relied upon the judgment rendered by a learned single judge of this Court in WP 17325/2009 to reinforce its view. 24. The Commercial Court found that KPCL could not lay a claim on the coal rejects and it found that the tender notification indicated that KPCL had sought for only supply of washed coal and the tenderer was required to secure the raw coal, wash the same and thereafter dispose of the coal rejects and therefore, could not lay a claim on coal rejects. 25. The Commercial Court noticed that the contractual stipulation was that plaintiffs were required to dispose of all the coal rejects generated in the processing of raw coal in a manner which satisfied the environ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aw coal to themselves and the plaintiffs were therefore required to pay KPCL the value of the coal rejects disposed off by them illegally. 31. He lastly submitted that the award of interest at 18% p.a. was contrary to contractual stipulation and therefore, the same could not be sustained. 32. Sri. KG Raghavan, learned senior counsel appearing for respondents/plaintiffs, on the other hand, contended that the judgment of the Commercial Court could not be found fault with. He submitted that the contract basically stipulated that plaintiffs were required to procure the required quantity of raw coal, wash the same and ultimately ensure that only washed coal was delivered to KPCL. He argued that the process of washing raw coal required procurement of large quantity of raw coal, which when processed, would yield a smaller quantity of washed coal. He submitted that plaintiffs took the risk of ensuring of securing a huge quantity of raw coal, which when processed would result in a much smaller quantity of washed coal. He submitted that this cost of securing the large quantity of raw coal rested solely on the plaintiff and KPCL took no burden of the procurement price of the quantity of raw c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the processing of raw coal and claim that value as a set off against the money payable to the plaintiffs and B. If it was found that after adjusting the said value of coal rejects towards the Bills of the plaintiffs, if there remained any further amounts with the plaintiffs as proceeds of the sale of coal rejects, whether KPCL was entitled to the same? 38. It is not in dispute that the primary requirement under the Agreement dated 29.11.2002 was that plaintiffs were required to secure raw coal from WCL, wash the said raw coal in a washery established by them on Build Own Operate (BOO) basis and thereafter transport the washed coal with the requisite specifications to the specified destination. 39. Clause 1.0.5 of the said Contract reads as follows: The AGENCY shall ensure that the quantity of Raw coal required quantity of WASHED COAL as per clause no. 9.0.0. shall be obtained from WCL against KPCL's linkage on payment of necessary coal cost to M/s. WCL. Support of FSA with WCL with respect to source and quantity for the contract period will be extended to THE AGENCY for receiving raw coal from WCL. (underlining by us) 40. As could be seen from the said clause, plaintiffs were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In fact, the only stipulation in the contract was that coal rejects generated during the process of washing raw coal would be disposed of in a manner which would satisfy the environmental regulations. 46. The relevant Clauses 1.2.2 and 1.2.3 of the Agreement in this regard read as follows: 1.2.2. It is the responsibility of THE AGENCY to properly dispose off all the coal rejects generated in the processing of raw coal into Washed Coal in any manner satisfying the environmental regulations. If the disposal of the coal rejects is to be done in the area belonging to the Coal Company and the disposal shall also be to the satisfaction of coal company. 1.2.3. THE AGENCY shall furnish the quarterly statement of the disposal of coal rejects to KPCL. In the case of any failure thereof, on the part of THE AGENCY, KPCL may take action to dispose off the rejects and all expenses so incurred shall be to the account of THE AGENCY. 47. As could be seen from the said clauses, the burden to dispose of the coal rejects generated in the processing of raw coal was put entirely on plaintiffs. The condition imposed was that they should be disposed off in a manner which satisfy the environmental regula ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m as provided under Section 216 of the Indian Contract Act, cannot be accepted. 53. Clause 30.0.07 of the Agreement reads as follows: INDEPENDENT CONTRACTOR/AGENCY: THE AGENCY shall not be construed as an agent of KPCL. KPCL shall not be liable for any acts/omissions of THE AGENCY in performing its obligations under this agreement. KPCL shall be indemnified from any claims whatsoever form any third party including the Coal Transporting Agency on WCL. KPCL shall not be liable in any manner whatsoever to any of the employees/agents/workmen of THE AGENCY 54. As could be seen from the said clause, it was expressly stipulated that plaintiffs were not the agents of KPCL and KPCL would not be liable for any omissions by the plaintiffs. In the light of this express declaration that the plaintiffs were not the agents of KPCL, this argument of the learned counsel is liable to be rejected. 55. The other argument that the plaintiffs were tasked only to ensure washing of the coal and this was a case of bailment cannot also be accepted. It is to be stated here that in the case of Bailment, the owner of the goods entrusts the goods to a Braille, who is required to take care of the goods during th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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