Chhattisgarh High Court Dismisses Sutlej Textiles ' Writ Petition Over Coal Supply Dispute

Bilaspur, Chhattisgarh – The Chhattisgarh High Court has dismissed a writ petition filed by Sutlej Taxtiles And Industries Limited against South Eastern Coalfields Limited (SECL), a subsidiary of Coal India Limited, in a judgment delivered on January 15, 2025. The court, comprising Chief Justice Ramesh Sinha and Justice Ravindra Kumar Agrawal , ruled that writ jurisdiction is not an appropriate avenue for resolving purely contractual disputes, especially when they involve disputed questions of fact.

Background of the Dispute

Sutlej Textiles , a Rajasthan-based textile manufacturer, had approached the High Court challenging an order by SECL dated October 13, 2023. This order had rejected Sutlej's representations concerning the refund of bank guarantees, advance payments, and the alleged illegal retrospective termination of Fuel Supply Agreements (FSAs). Sutlej had entered into two FSAs with SECL in 2017 and 2019 to secure coal for its captive power plant.

The core of the dispute stemmed from alleged delays and failures by SECL in supplying the contracted coal despite advance payments from Sutlej. Sutlej claimed that these supply issues forced it to seek cancellation of the FSAs and ultimately led to the closure of its captive power plant. The company contended that SECL’s retrospective termination of one FSA and subsequent forfeiture of security deposits were unlawful.

Petitioner's Arguments

Represented by Advocate Ankit Singhal , Sutlej Textiles argued that the retrospective termination of the FSA was illegal and arbitrary. They asserted that their letter dated March 3, 2020, was a request for permission to cancel the FSAs without penalties due to SECL's defaults, not a termination notice. Singhal contended that SECL wrongly interpreted this letter to facilitate retrospective termination, violating the principles of natural justice and contractual law. He emphasized that Clause 17.2 of the FSA, outlining proper termination procedures, was not followed. Furthermore, it was argued that SECL was in default of coal supply, therefore forfeiture of the security deposit was contrary to Clause 17.1 of the FSA.

Respondents' Submissions

Ms. Astha Shukla , representing SECL (Respondents No. 1 to 6), argued that the writ petition was not maintainable due to the presence of disputed facts and the purely contractual nature of the dispute. She stated that Sutlej was aware that termination could lead to forfeiture of the security deposit, as per Clause 17.1 of the FSA. Shukla argued that transportation and timely lifting of coal after rake allotment was the responsibility of Sutlej, and delays were not attributable to SECL. She maintained that SECL had acted within the terms of the FSA and had issued a reasoned order on October 13, 2023, after considering Sutlej’s representations. Mr. Ramakant Mishra, Deputy Solicitor General, appeared for Respondent No. 7 (South Eastern Central Railway) and adopted the submissions of SECL's counsel.

Court's Observations and Decision

The High Court referenced several Supreme Court judgments, including Joshi Technologies International Inc. vs. Union of India and Union of India vs. Puna Hinda , to underscore the limited scope of writ jurisdiction in contractual disputes. The bench highlighted that writ petitions are generally not entertained when contractual disputes involve disputed questions of fact or when alternative remedies are available.

The court observed:

> "It is a well settled law that the writ Court will not normally entertain a petition with regard to contractual disputes, particularly if there are disputed questions of fact… the circumstances in which such a writ petition can be entertained have been elucidated by the Supreme Court… 'normally', the Court would not exercise such a discretion… The Court may not examine the issue unless the action has some public law character attached to it… If there are very serious disputed questions of fact which are of complex nature and require oral evidence for their determination. Money claims per se particularly arising out of contractual obligations are normally not to be entertained except in exceptional circumstances."

Referring to Andhra Pradesh Pollution Control Board vs. CCL Products (India) Limited , the court also reiterated the independent nature of bank guarantees and the limited grounds for judicial interference in their encashment, absent fraud, irretrievable injustice, or special equities.

The court concluded that SECL had not committed any illegality in passing the impugned order and that Sutlej had failed to demonstrate arbitrariness, unfairness, illegality, irrationality, or unreasonableness in SECL's actions.

> "Concludingly, in our considered opinion, the petitioner has miserably failed to make out a case for interference in exercise of extraordinary jurisdiction under Article 226 of the Constitution of India within the four corners of law and yardsticks set out by Their Lordships of the Supreme Court in the above-quoted judgments. We accordingly, hold that there is no reason to exercise the power of judicial review in this instant matter, as the petitioner has not been able to demonstrate arbitrariness, unfairness, illegality, irrationality or unreasonableness in the impugned order dated 13.10.2023."

Ultimately, the Chhattisgarh High Court dismissed the writ petition, directing parties to bear their own costs, thus reaffirming the principle that contractual disputes, especially those with factual complexities, are generally not suitable for resolution under writ jurisdiction. Parties are typically expected to pursue remedies available under civil law or through dispute resolution mechanisms stipulated in their contracts.