TaxTMI 
TaxTMI 
TaxTMI 
2021 (7) TMI 1459
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.... (for short, hereinafter referred to as 'KPCL') was allocated a long term coal linkage from the Ministry of Coal from the Western Coalfields Limited, (for short, hereinafter referred to as 'WCL') a subsidiary of Coal India Limited. The said linkage essentially ensured allotment of coal in favour of KPCL since coal being a regulated commodity could be acquired only pursuant to an allotment by the Ministry of Coal. 4. In order to generate power, the essential requirement of KPCL is Coal of certain specifications and the raw coal available for supply by WCL was primarily unsuitable and hence KPCL required the raw coal to be processed i.e., washed and brought within the specified parameters. The Coal required by KPCL for generation of power was that the Coal should have less than 34% of ash content. For ensuring an assured supply of washed coal to their plant, KPCL had invited tenders from entities who were interested in supplying washed coal and in the said tender, the plaintiffs were the successful tenderers. Pursuant to the said tender, an agreement dated 29.11.2002 was also entered into. 5. The basic requirement of the agreement was that plaintiffs would secure ra....
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....dispose of the coal rejects for a monetary value to which they were not entitled to at all. It was the case of the KPCL that Plaintiffs were bound to adjust the value of the coal rejects in the bills submitted by the plaintiffs towards supply of washed coal and since that was not done, they were entitled to deduct the said value and plaintiffs, as a consequence, were not entitled to amounts claimed in their bills. 12. KPCL contended that the act of contracting with the plaintiffs for supply of washed coal was essentially a Bailment since the plaintiffs by themselves would not have been able to secure the raw coal and the raw coal was supplied to them only because of the linkage that they had secured from the Union. It was contended that were basically Bailees and a Bailee, in law, had no title of the goods which had been the subject matter of bailment. 13. KPCL contended that a large quantity of raw coal was lifted from the colliery and as a result of the washing, only a proportion of the said quantity of raw coal became available as washed coal. It was stated that if the quantity of washed coal supplied to them was deducted from the quantity of raw coal secured by the plaintiffs....
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....ntiffs and plaintiffs were thus entitled for refund the same: Sl. No. SUIT WRONGFUL DEDUCTIONS 1 O.S. No. 4332/2012 Rs. 13,00,000/- 2 O.S. No. 4333/2012 Rs. 1,97,12,271/- 3 O.S. No. 25577/2012 Rs. 13,20,343/- 4 O.S. No. 25444/2012 Rs. 2,54,57,982/- 21. The Commercial Court also came to the conclusion that KPCL was liable to pay the following sums as interest on the delayed payments of the bills in the respective suits: Sl. No. SUIT INTEREST 1 O.S. No. 4332/2012 Rs. 33,44,107/- 2 O.S. No. 4333/2012 Rs. 13,06,879/- 3 O.S. No. 25577/2012 Rs. 6,20,37,831/- 4 O.S. No. 25444/2012 Rs. 14,81,356/- 22. It is to be stated here that the determination of the said sums are not in serious dispute and the main dispute raised in these appeals is regarding the entitlement of KPCL to the value of the coal rejects which were generated during the washing of coal and which were disposed off by the plaintiffs on the assumption that the coal rejects belonged to the. 23. As regards this claim of KPCL regarding the Coal rejects, the Commercial Court took the view that KPCL was not entitled to the value of the coal rejects that were generated during the washing of raw coal a....
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.... washing the raw coal, plaintiffs could not secure an unfair advantage to the detriment of KPCL and appropriate to themselves the value of the coal rejects, which was a substantial sum in itself. 29. He argued that plaintiffs were essentially agents and if the agent in the guise of discharging the business of principal, i.e., KPCL, earned any profit, the law required that the said profit be passed on to the principal. He submitted that since the cost of raw coal was reimbursed by KPCL, it will have to be assumed that KPCL owned the raw coal and any by-product that was generated during processing of raw coal i.e., coal rejects. 30. He submitted that the act of tasking the plaintiffs to wash raw coal and supply them with washed coal was essentially an act of Bailment and the plaintiffs as bailees could not appropriate any value of the bailed goods i.e., the raw coal to themselves and the plaintiffs were therefore required to pay KPCL the value of the coal rejects disposed off by them illegally. 31. He lastly submitted that the award of interest at 18% p.a. was contrary to contractual stipulation and therefore, the same could not be sustained. 32. Sri. KG Raghavan, learned senior ....
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....ld be required to pay the prevailing Prime Lending Rate (PLR) of State Bank India (short term) for the delayed period of payment, which was 13.9% p.a. for the relevant point of time. He also submitted, on instructions, that plaintiffs would be satisfied if interest at 12.5% p.a. was awarded on the sums found to be due to the plaintiffs. 36. We have considered the arguments of learned counsel for both parties and also perused the entire records of the Commercial Court. 37. As stated above, the amounts determined by the Commercial Court regarding the unpaid bills, the interest payable on the bills and the charges incurred for keeping the Bank Guarantees alive are not in serious dispute and the points that arise for consideration in these appeals are as follows:- A. Whether the KPCL was entitled to lay a claim over the value of coal rejects which were generated during the processing of raw coal and claim that value as a set off against the money payable to the plaintiffs and B. If it was found that after adjusting the said value of coal rejects towards the Bills of the plaintiffs, if there remained any further amounts with the plaintiffs as proceeds of the sale of coal rejects, ....
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....were to be removed was of absolutely no value to KPCL and was actually a burden to KPCL since the coal rejects entailed disposal in accordance with environmental regulations. 44. Keeping this objective in mind and in order to ensure that they secured only washed coal of the required specification, which would be of beneficial use in the generation of power in the Thermal Power Plant, they had entered into an Agreement. This agreement basically cast an obligation on the plaintiffs to wash the raw coal and thereby remove the impurities. The plaintiffs were in essence required to supply only washed coal which would be beneficial and suitable for use in Thermal Power Plant. 45. To put it differently, the KPCL was aware that processing of raw coal by washing would result in coal rejects and despite being aware of this fact, the Agreement did not vest any rights over the rejects in KPCL. In fact, the only stipulation in the contract was that coal rejects generated during the process of washing raw coal would be disposed of in a manner which would satisfy the environmental regulations. 46. The relevant Clauses 1.2.2 and 1.2.3 of the Agreement in this regard read as follows: "1.2.2. I....
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....finished product. 51. It is to be kept in mind that KPCL, in the instant case, had specifically stipulated that they would be buying only washed coal at a pre-determined price and they were not under an obligation to take care of coal rejects which were generated during the processing of raw coal. In our view, this generation of coal rejects during the processing of raw coal cannot enure to the benefit of KPCL and they cannot claim the value of coal rejects. We are, therefore, of the view that judgment of the Commercial Court holding that KPCL cannot have a claim over the coal rejects was perfectly justified and we, therefore, affirm the finding of the Commercial Court. 52. The arguments of the learned counsel for the appellant that the plaintiffs were basically the agents of KPCL and since they were operating on account of KPCL-the Principal, they were bound to pass on the profits made by them as provided under Section 216 of the Indian Contract Act, cannot be accepted. 53. Clause 30.0.07 of the Agreement reads as follows: "INDEPENDENT CONTRACTOR/AGENCY: THE AGENCY shall not be construed as an agent of KPCL. KPCL shall not be liable for any acts/omissions of THE AGENCY in p....