IMPORTANT POINT
The court held that the respondent's demand for compensation was unjustified as no loss was incurred due to short lifting of coal. The court restrained the respondent from invoking the bank guarantee and from terminating the agreement.

JUDGMENT

1. The petitioner company is engaged in the business of manufacturing cement and for this purpose had entered into an agreement with the respondent No. 3/North Eastern Coalfields for purchase of coal. In furtherance of this purpose, the parties have entered into a Coal Supply Agreement (CSA) (also referred to as Fuel Supply Agreement in this petition, which term may be used interchangeably) on 18.07.2008 under the terms and conditions set therein.

2. The petitioner on being asked by the respondent No. 4 to furnish a bank guarantee for an amount equal to 10% of the notified based price of the annual coal requirement for issuance of Letter of Assurance (LOA) has furnished a bank guarantee for an amount of Rs.1,12,00,000/- (Rupees one crore twelve lakhs) only in favour of respondent No. 3 vide guarantee dated 22.05.2008 issued by the State Bank of India, Commercial Branch, Guwahati. Accordingly, the Letter of Assurance (LOA) was issued on 30.05.2008.

3. Vide letter dated 04.11.2008 the respondent No. 4 informed the petitioner that the supply of coal for delivery could not be fulfilled as a result of which import from outside is required. For such an operation, the service charges has to be borne by the petitioner company, who was compelled to agree having no other option.

4. Again, vide letter dated 16.10.2009, the respondent No. 5 informed the petitioner company that if it wants its coal to be delivered against the value paid orders in time, it has to agree to the revised notified price, for which the petitioner company has to agree to the revised price and to pay the differential amount.

5. Yet again, on 01.07.2010, the respondent No. 3 has informed the petitioner about revision of price on introduction of clean Energy Cess charges for which the petitioner company has to deposit the balance deferential amount for further despatch, to which the petitioner having no option has to agree.

6. The respondent No. 5 vide letter dated 13.06.2011 then asked the petitioner to increase the price of security deposit on the basic price of the highest value of coal, failing which the entire Bank Guarantee shall be encashed.

7. Since the prices were increased to almost 55% of the prices agreed, the petitioner was left with no option, but to surrender the Agreement on the import of coal, conveyed to the respondents vide letter dated 27.09.2011.

8. The respondent No. 5 vide letter dated 05.01.2012 has drawn the attention of the petitioner to the Government Notification dated 30.12.2011 whereby the system of grading of coal was discontinued as a result of which the price of coal stands revised.

9. The respondent No. 3 vide invoice dated 11.05.2012 has demanded that the petitioner pay an amount of Rs.57,09,500/- (Rupees fifty-seven lakhs, nine thousand and five hundred) only within 90 days as compensation for short lifting of the coal for the year 2011-12, failing which the amount will be deducted from the current credit balance lying with the respondent company.

10. The respondent No. 3 through its General Manager has issued letter dated 29.05.2012 upon the petitioner which is a notice for termination of the Fuel Supply Agreement (FSA) dated 18.07.2008 on the ground that there was a short lifting of coal by the petitioner for the year 2011-12 which was less than 30% of the Annual Contracted Quantity (ACQ) thus attracting clause No. 15.1.4 of the FSA.

11. In reply to the letter dated 29.05.2012, the petitioner has vide letter dated 30.05.2012 informed the respondent No. 3 that the short lifting of the coal was due to the hefty increase in the price of coal by more than 55% of what was agreed upon and has therefore sought for 30 days' time to reply to the said letter.

12. The respondent No. 3 has also issued a Notice dated 04.09.2012 for extension of the validity of the Bank Guarantee submitted earlier for the amount of Rs.1,37,02,800/- (Rupees one crore, thirty- seven lakhs, two thousand and eight hundred) only.

13. The petitioner being highly aggriev