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M/s Progressive Industries Pvt. Ltd. v. The State of Bihar

Patna HC4 Sept 2024CWJC/7265/2024

Case brief

AI extract

What is this about?

Coal supply contract - blacklisting for three years and forfeiture of security deposit - Annual Contracted Quantity (ACQ) versus Monthly Scheduled Quantity (MSQ) - no prohibition on monthly utilisation exceeding MSQ - penalty confined to shortlifting against ACQ - irregular coal supply, unit working overtime - Bihar State Mining Corporation - writ petition allowed - CWJC No.7265 of 2024, decided 04-09-2024 by K. Vinod Chandran, CJ and Partha Sarthy, J - follows M/s Bhagwati Coke Industries Pvt. Ltd. v. The State of Bihar and Ors., CWJC No. 1114 of 2024.

What did the court decide?

Writ petition allowed; order of blacklisting set aside, with the clarification that unless the agreement has expired by efflux of time it has to continue until rescinded by either party as per the terms of the agreement. ¶34

M/s Progressive Industries Pvt. Ltd. Vs The State of Bihar — Patna HC (2024) — LawSathi Research

What the court decided

AI extract

Outcome

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Issue for consideration

Whether the petitioner could be blacklisted and its security deposit forfeited on the ground of violation of the coal supply contract where the alleged default concerned monthly utilisation of coal, the agreement requiring only use of 100% of the Annual Contracted Quantity (ACQ) annually and containing no restriction on monthly utilisation of the Monthly Scheduled Quantity (MSQ).

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Court's answer

The ground stated in the present case for blacklisting and forfeiture of the security amount was similar to that considered in CWJC No. 1114 of 2024 (M/s Bhagwati Coke Industries Pvt. Ltd.), where the Court held that the contract was for annual supply, compensation was confined to under-utilisation/shortlifting against 100% of the ACQ, and there was no prohibition on monthly utilisation exceeding the MSQ, especially where irregular coal supply compelled the unit to work overtime when coal was supplied.

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Ratio / Principle

Following the aforesaid judgment in M/s Bhagwati Coke Industries Pvt. Ltd. (CWJC No. 1114 of 2024), the order of blacklisting was set aside.

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Key takeaways

Unless the agreement has expired by reason of efflux of time, it has to continue until rescinded by either party as per the terms of the agreement.ratio¶32

Detailed headnote1 paragraphs

Patna High Court (K. Vinod Chandran, CJ; Partha Sarthy, J) allowed a writ petition by M/s Progressive Industries Pvt. Ltd. challenging orders forfeiting its security deposit and blacklisting it for three years for violation of a coal supply contract. Following its earlier decision in M/s Bhagwati Coke Industries Pvt. Ltd. v. The State of Bihar and Ors. (CWJC No. 1114 of 2024), the Court noted that the agreement specified an Annual Contracted Quantity (ACQ) and a Monthly Scheduled Quantity (MSQ), being 1/12th of the ACQ; that compensation was confined to shortlifting against the ACQ and not the MSQ; and that there was no restriction on monthly utilisation exceeding the MSQ, a purchaser whose coal supply was irregular and who worked overtime when coal was supplied not being at fault. Holding the grounds in the present case to be similar, the Court set aside the order of blacklisting and clarified that unless the agreement has expired by efflux of time, it has to continue until rescinded by either party as per its terms.

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IN THE HIGH COURT OF JUDICATURE AT PATNA Civil Writ Jurisdiction Case No.7265 of 2024

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M/s Progressive Industries Pvt. Ltd. through its Director Mr. Shaquib Ansari, aged about 43 years (Male) S/o Samser Ansari having its Registered Office atMI 220, Lohiya Nagar, Malahi Pakri Chowk, opposite Doctors Colony, Kankarbagh, Patna, Pin-800020, and having its Business address- Tola Mirchaiganj, Village and P.O.-Sarsu, Banganga Tapovan Jetnian Road, Gaya, Pin-805109.

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... ... Petitioner/s

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Versus

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The State of Bihar Through the Principal Secretary, Department of Industries, State of Bihar, Patna.

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The Principal Secretary, Department of Industries, Govt of Bihar Patna

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The Principal Secretary, Department of Mining, Govt of Bihar Patna.

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The Bihar State Mining Corporation Ltd. through its Chief Executive Officer, Vikas Bhawan, New Secretariat, Bailey Road, Patna, Bihar, Pin800015

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The Chief Executive Officer, Bihar State Mining Corporation Ltd., Vikas Bhawan, New Secretariat, Bailey Road, Patna, Bihar, Pin- 800015

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The Managing Director, the Bihar State Mining Corporation Ltd., Vikas Bhawan, New Secretariat, Bailey Road, Patna, Bihar, Pin- 800015

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The General Manager, the Bihar State Mining Corporation Ltd., Vikas Bhawan, New Secretariat, Bailey Road, Patna, Bihar.

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The Administrative Officer, Bihar State Mining Corporation Ltd., Vikas Bhawan, New Secretariat, Bailey Road, Patna, Bihar.

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... ... Respondent/s

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====================================================== Appearance : For the Petitioner/s : Mr. Siddharth Shankar Pandey, Advocate For the Respondent/s : Mr. Ajay Bihari Sinha, GA-8 Mrs. Kalpana, Advocate

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====================================================== CORAM: HONOURABLE THE CHIEF JUSTICE and HONOURABLE MR. JUSTICE PARTHA SARTHY ORAL JUDGMENT (Per: HONOURABLE THE CHIEF JUSTICE)

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Date : 04-09-2024

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The impugned orders forfeited the security deposit and blacklisted the petitioner for three years on the ground of violation of the terms of contract. The contract itself was for

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Patna High Court CWJC No.7265 of 2024 dt.04-09-2024 2/4

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supply of coal, which identical matter was considered by us in CWJC No. 1114 of 2024 and analogous case (M/s Bhagwati Coke Industries Pvt. Ltd. vs. The State of Bihar and Ors.) in which we looked into the agreement and found that there is a specification of an Annual Contracted Quantity (ACQ) and a Monthly Scheduled Quantity (MSQ), the latter of which is 1/12^th of ACQ. The question agitated was whether the agreement stipulated the actual utilisation equivalent to the MSQ in each of the months in a year; especially as to whether there was a prohibition in exceeding the MSQ.

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On facts, it is to be noticed that the supply of coal was not regular and the contention of the petitioner was also that in many months there was no supply and they had to lockdown their manufacturing unit for want of coal. In certain months, the deficiency in supply of the either months were made up; in which months the units functioned overtime for utilisation of the coal supplied. The restriction in the agreement was also that there should not be any shortage in use of the 100% of the ACQ and there was no restriction to the use of MSQ in a month.

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We held so in Paragraph Nos. 9 and 10 of the aforementioned judgment:

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9. The specific contention of the purchaser/ petitioners is that that the petitioners’ Unit had to

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Patna High Court CWJC No.7265 of 2024 dt.04-09-2024

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work overtime during the months in which the supply was made and remained idle when there was no supply of coal. Considering the fact that the requirement was to supply a specified quantity of coal annually and the rigor of compensation falling on the purchaser, as specified in the agreement only on under-utilization of 100 per cent of the ACQ in a whole year; we cannot find the purchaser to be at fault for using coal as and when it was supplied, which resulted in the monthly utilization exceeding the monthly scheduled quantity.

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10. Reading the agreement as a whole, we can only understand that the contract was to supply specified quantity annually. There was also stipulation of a monthly scheduled quantity, the non-supply of which would not prejudice the Corporation since such short supply would always depend on the supply of coal from the Coal Companies. The purchasers also could not have raised a grievance against the non-supply or short supply in any month coming within an year. The penalty of compensation also is confined to shortlifting of coal as per the ACQ and not as per the MSQ. The revision of the ACQ to be supplied to each purchaser would also depend upon the utilization of the purchaser in the preceding year and not of every month. We also have to look at Schedule-1 of the agreement which specifies the ACQ, the mode of transport; being by road and also indicates that the supply will be as per the availability.

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