A party failing to fulfill its contractual obligations may not have standing to challenge actions taken by the other party in response to the failure.

Headnote:
Fly Ash Movers - Challenge to Notice for Expression of Interest - Arbitration and Conciliation Act 1996 - Section 9
Fact of the Case:

M/s. Fly Ash Movers (India) Pvt. Ltd. challenged a notice for expression of interest for the purchase of dry fly ash published by NTPC. Fly Ash Movers had been awarded a contract to lift 5.90 lakh metric tons of fly ash per year, but they failed to lift the contractual quantity, leading NTPC to issue a notice for expression of interest for the purchase of additional fly ash. Fly Ash Movers filed an original application under Section 9 of the Arbitration and Conciliation Act 1996 to challenge the notice.
Finding of the Court:

The court found that Fly Ash Movers failed to lift the contractual quantity of fly ash and therefore had no standing to challenge the notice for expression of interest. The court also noted that NTPC had a statutory obligation to clear off extra fly ash and that the impugned notice was in line with the policy decisions of the Government of India. The court held that Fly Ash Movers had not made out a case to interfere with the impugned notification.
Issues: The main issue was whether Fly Ash Movers, having failed to lift the contractual quantity of fly ash, had standing to challenge the notice for expression of interest issued by NTPC.
Ratio Decidendi: The court held that since Fly Ash Movers failed to lift the contractual quantity, they could not claim a preemptive right to lift extra fly ash. The court also emphasized NTPC's statutory obligation to clear off extra fly ash and the policy decisions of the Government of India in this regard.
Final Decision: The court vacated the interim order of injunction and allowed NTPC's application to vacate the injunction order. The original application filed by Fly Ash Movers was dismissed.

ORDER :

O.A.No.1032 of 2018 was filed by M/s. Fly Ash Movers (India) Pvt. Ltd., challenging the notice for expression of interest for purchase of dry fly ash, dated 24.10.2018, published by the respondents 1 and 2 in the Newspaper “Daily Thandhi”, dated 24.10.2018, where, the National Thermal Power Corporation, Tamil Nadu Energy Company Limited, Vallur Thermal Power Project, Chennai – 103, through its General Manager, Additional General Manager and Senior Manager had been arrayed as party respondents.

2. In the said Original Application, this Court, by order, dated 15.11.2018, has granted interim order of injunction restraining the respondents from selling the dry fly ash to outsiders as per the notification dated 24.10.2018. In order to vacate the said interim order dated 15.11.2018, the respondents, ie., NTPC has filed Application No.1380/2019 with a prayer to vacate the interim order of injunction granted on 15.11.2018 in O.A.No.1032/2018. That is how, both the Original Application No.1032/2018 and Application No.1380/2019 came to be filed before this Court.

3. Both O.A. as well as the application were heard together and are disposed of by this common order.

4. The petitioner in main O.A. ie., Fly Ash Movers India Pvt. Ltd., hereinafter be referred to as “Fly Ash Movers” for the sake of brevity. Like that, the respondents in the main O.A. ie., General Manager, NTPC Tamil Nadu Energy Company Limited and two others are called as NTPC for the sake of brevity.

5. The case of the Fly Ash Movers is that, NTPC floated a tender, for supply of dry Fly Ash from the NTPC Vallur Thermal Power Project, on 13.11.2017 inviting bids for sale of fly ash to the interested eligible users for 10 lakh metric ton as available basis for a period of one year.

6. The applicant/petitioner was one of the participant in the tender. There had been no sufficient bidders for the said tender. Subsequently, NTPC has reduced the quantity from 10 lakh metric ton to 5.90 lakh metric ton of fly ash.

7. Accordingly, the petitioner was awarded the contract by giving the LoA dated 02.04.2018, wherein, the contract was awarded to the Fly Ash Movers for lifting of fly ash to the extent of 5.90 lakh metric ton for one year period from 05.04.2018 at the rate of Rs.75/- per metric ton. Accordingly, on 05.04.2018, the LoA was issued to the Fly Ash Movers.

8. It is the further case of Fly ash movers that, though the contract has been concluded by awarding the contract to the Fly Ash Movers to lift the fly ash with total quantity of 5.90 lakh metric ton per year, the daily average to the extent of 1616 metric ton could not be achieved for unforeseen reasons and this has been informed/intimated duly to the NTPC by various communications of the Fly Ash Movers. Despite this factor, the NTPC had come forward to issue further notice for expression of interest for purchase of dry fly ash for the quantity of 4.5 lakh metric ton as available basis, by notification dated 24.10.2018, thereby, the NTPC intended to give the contract to some third party for lifting of fly ash to the extent of 4.5 lakh metric ton per year with the result the interest of the Fly Ash Movers being the existing contractor was getting affected.

9. It is the further case of the Fly Ash Movers that, as per Clause 1.6 of the Letter of Award ie., LoA dated 05.04.2018, on NTPC awarding contract originally to the Fly Ash Movers, the Fly Ash Movers is entitled to get extra ash quantity and the relevant portion of said Clause 1.6 reads thus:

“In case NTECL has extra ash on any day due to generation above contracted quantity or backing out by some buyer etc., NTECL will offer the extra ash quantity to the buyers, pro rata to the contracted quantity, at the same discovered price. If still extra ash is available for distribution, NTECL reserves the right to offer it to any other party (other than the contracted parties) at

Click Here to Read the rest of this document

Judicial Analysis