IMPORTANT POINT
The demand for compensation for short lifting of coal was impermissible as no loss was incurred by the respondent. The court restrained the respondent from encashing the bank guarantee, as it would result in irretrievable harm to the petitioner.

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) (termed as Fuel Supply Agreement in this petition, which term shall be used interchangeably herein) 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.1,03,86,000/- (Rupees one crore, three lakhs, eighty-six thousand) only in favour of respondent No. 3 vide guarantee dated 27.03.2012 issued by the State Bank of India, Commercial Branch, Kolkata.

3. Vide letter dated 27.02.2011 the respondent No. 5 informed the petitioner of the notification dated 26.02.2011 issued by the Coal India Limited notifying to the effect that the coal produced by the respondent No. 3 has increased in value and if the petitioner wants its coal to be delivered, it has to agree to the revised price and to pay the differential amount. It is stated that such increase in price was more than 60% than what was agreed upon at the time when the CSA was executed.

4. The petitioner vide its letter dated 16.03.2011 has requested the respondents to consider the said revision of price and not to resort to the increase of almost 60% of price in a single day which is disadvantageous to the petitioner, but the same was not accepted by the respondents.

5. The petitioner then informed the respondent No. 3 to sell the allotted quantity of coal through E-Auction route till the petitioner was in need of coal which shall be intimated to the respondents by giving 30 days' notice in advance. The respondent No. 3 was also requested to keep the CSA in abeyance and no penalty on account of the same to be charged on the petitioner. However, the respondent No. 3 issued letter dated 18.07.2011 refusing to keep the CSA in abeyance and further stated that coal price matters do not relieve the petitioner from any obligations under the said CSA.

6. The respondent No. 3 vide invoice dated 18.08.2011 has demanded that the petitioner pay an amount of Rs.54,05,390/- (Rupees fifty-four lakhs, five thousand, three hundred ninety) only as compensation for short lifting of the coal by the petitioner to which the petitioner vide letter dated 27.03.2012 has requested the respondent No. 3 to withdraw the same. However, the respondent No. 5 vide letter dated 11.05.2012 has raised another invoice dated 10.05.2012 on the petitioner for compensation for short lifting of coal for the period 2011-12, the amount being Rs.74,24,699.91 (Rupees seventy-four lakhs, twenty-four thousand, six hundred ninety-nine and ninety-one paise) only.

7. 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 Coal Supply Agreement (CSA) 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 CSA.

8. The petitioner then preferred an appeal before the respondent No. 3 dated 26.06.2012 stating that the short lifting of coal was due to the hefty increase in the price of coal by more than 60% of what was agreed to by the parties and that the price of coal has been paid in full by the petitioner to the respondent company and as such, charging invoice on the coal not lifted in the name of compensation is completely illegal. The petitioner has also filed appeal against the invoice dated 18.08.2011, 10.05.2012 as well as the Termination Notice dated 29.05.2012 to which the respondent company threatened to invoke the Bank Guarantee furnished by the petitioner duri