In the case of Mahabir Coke Industries vs. Coal India Limited, the appellants challenged the coal allocation and pricing mechanism. The dispute centered around preferential pricing for coal consumed in manufacturing. The court distinguished between ‘allocation’ and ‘linkage’ for pricing. The Division Bench upheld the judgment and dismissed the appeal. Find out more about this significant legal case in the coal industry.
Facts
- The coal company operating as a subsidiary of Coal India Limited (CIL) was issued a linking order on 20 September, 1989.
- As cokeries, they were allocated coal suitable for use in steel plants based on availability.
- The appellants were approved a linkage of 4000 metric tonnes of low ash coal from Tirup and Tikak mines of North Eastern Coalfields (NEC).
- The core dispute in this appeal concerns the pricing mechanism for the coal consumed in manufacturing – linked price vs. Liberalised Sales Scheme (LSS).
- The predecessor firm of the first appellant, known as Mahabir Coke Industries, was engaged in producing low ash metallurgical coal near Guwahati.
- The coal industry has traditionally been heavily regulated by the Government of India, with the Colliery Control Order, 1945 being one such regulating instrument.
- The Colliery Control Order, 2000 has replaced the 1945 Order from 1 January, 2000, but this change is not significant in the current appeal.
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Arguments
- The respondents argue that linkage at preferential price is given to industries or thermal plants using coal not suitable for steel plants.
- Coal companies state that appellants were not given linkage but allocated a specified quantity due to the type of coal they required for steel plants.
- The appellants challenged the constitutionality of the e-auction system in relation to the supply of coal to non-core linked SSI/tiny units.
- The Division Bench of the High Court found that a dual system of pricing was acceptable, thereby negating the impact of a previous decision cited by the appellants.
- The appellants argued that without specification by the Central Government, coal companies could not exercise power for gradation and price specification for non-core consumers.
- Case law including Ashoka Smokeless Coal India Pvt. Ltd. vs Union of India and CCT, Ranchi Vs. Swarn Rekha Cokes and Coals (P) Ltd. were cited to support the argument against pricing discrimination.
- The Court confirmed the view of the Appellate Bench regarding the applicability of the Ashoka Smokeless Coal India case.
- The appellants argued that in a 1996 Resolution, they were referred to as ‘linked consumers’ and therefore the price mentioned should apply specifically to linked consumers.
- It was contended that since Assam coal remained ungraded until 1999, coal companies did not have the authority to grade the coal prior to that date.
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Analysis
- The case revolves around the Coal Allocation and Pricing for Mahabir Coke Industries located in Assam.
- The contention is that the appellants cannot claim preferential price as they were allocated coal monthly, not linked.
- The price of coal for non-linked consumers was fixed by CIL from 19 January 1996 onwards.
- A Liberalised Sales Scheme (LSS) was implemented, leading to a price increase from 19 January 1996.
- The judgment distinguishes between ‘allocation’ and ‘linkage’ for coal pricing.
- The appellants argued they were entitled to linked unit benefits in pricing, but the court disagreed.
- The Resolution treated the appellants as linked units for coal supply, not for pricing benefits.
- The notification of 9 January 1996 exempted CIL from certain Control Order provisions for coal sale.
- The Coal Control Order empowered categorisation and pricing of coal by the government.
- The notification of 9 January 1996 exempted coal companies from specific Control Order clauses for coal sold under LSS.
- The appellants continued receiving coal under protest at the higher LSS price, as per the resolution.
- The judgment refers to a specific case where it was relied upon in the past
- This case has been held as relevant and observed by the court
- The case number is mentioned as ‘161’ in the judgment
- The argument that the two other cokery units in Assam were not linked is deemed irrelevant.
- The appellants failed to prove that their linking agreement covered both allocation and pricing, unlike other linked consumers.
- Other cokery units lift coal of high ash content (25-30%), which removes them from the price advantage specified in the 1994 notification.
- The judgment of the Division Bench is upheld and the appeal is dismissed.
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Decision
- Interim orders, if any, shall stand dissolved
- No order as to costs
Case Title: M/S. SKJ COKE INDUSTRIES LTD. Vs. COAL INDIA LTD AND ORS. (2020 INSC 145)
Case Number: C.A. No.-008153-008153 / 2009
