Karnataka Power Corporation Ltd. vs Emta Coal Ltd. on 20 May, 2022

Try out our Premium Member services: Virtual Legal Assistant, Query Alert Service and an ad-free experience. Free for one month and pay only if you like it.

Supreme Court of India

Karnataka Power Corporation Ltd. vs Emta Coal Ltd. on 20 May, 2022

Author: Hon’Ble The Justice

Bench: Hon’Ble The Justice, Hon’Ble Ms. Kohli


                                    IN THE SUPREME COURT OF INDIA
                                     CIVIL APPELLATE JURISDICTION

                                 CIVIL APPEAL NOS. 5401­5404 OF 2017

      KARNATAKA POWER CORPORATION                                      …APPELLANT


      EMTA COAL LIMITED & ANR.                                        …RESPONDENTS



1 The present Civil Appeals, by way of Special Leave, arise out

of the impugned common judgment dated 24.03.2016 passed by

the High Court of Karnataka, at Bengaluru, whereby the High

Court allowed the writ petitions filed by the respondents herein.

By way of the writ petitions, the respondents had challenged the

adverse decisions taken by the appellant with respect to the

arrangement regarding coal procurement entered into by the

parties for the purposes of the appellant’s thermal power projects
Signature Not Verified

Digitally signed by
Rajni Mukhi

in the State of Karnataka.

Date: 2022.05.20
18:28:09 IST

2 A conspectus of the facts necessary for the disposal of the

present appeal is as follows: the appellant was allotted coal mines

by the Union of India for captive consumption for their thermal

power projects in the State of Karnataka. In 2002, M/s EMTA

Coal Limited (hereinafter, “EMTA”) was selected to form a joint

venture with the appellant for the development of the mines, and

the supply of coal to the said power projects. After setting up of

the joint venture­ Karnataka EMTA Coal Mines Limited (in short,

“KEMTA”) by the appellant and EMTA, all three companies

entered into various contracts for development of the coal mines

and supply and delivery of coal.

3 The above arrangement progressed without any dispute,

until the Comptroller and Auditor General of India (in short,

“CAG”) submitted a report for the year ending March 2013,

wherein it was observed that minimum quantity of coal rejects

should be 10% per centum of the total production, valuing Rs.

52,37,00,000 (Rupees fifty two crore thirty seven lakh). At the

first instance, the appellant raised objections to the CAG report

stating that quantification of the coal rejects should be based on

actuals, i.e., the quantity of coal actually sent to the washery and

the quantity of coal dispatched thereafter to the thermal power

stations, after processing. The appellant specifically indicated

that quantification of the coal rejects in the CAG report was

erroneous. However, despite the said objections raised by the

appellant, the CAG finalized its report which was made available

to the appellant.

4 It was only after receipt of this report that the appellant

demanded reimbursement of Rs. 52,37,00,000 (Rupees fifty two

crore thirty seven lakh) from KEMTA by demand letters dated

July 31, 2014 and December 24, 2014. These two demand letters

were impugned by the respondents in Writ Petition Nos. 2995­

2996 of 2016 before the High Court of Karnataka.
5 Parallelly, it appears that a dispute subsisted between the

respondents and the appellant regarding certain deductions

made by the appellant on bills payable to KEMTA on account of

washing charges which was based on the quantification by the

CAG. The said deductions were challenged by the respondents

vide Writ Petition Nos. 2997 and 2998 of 2016 before the High

Court of Karnataka whereby the respondents additionally sought

refund of Rs 59.78 crores (Rupees Fifty Nine Crores Seventy Eight

Lakhs) with interest at the rate of 18% p.a. from 30.06.2012.
6 The above writ petitions were heard together by the High

Court of Karnataka. Vide the impugned judgment, the High Court

of Karnataka allowed the said writ petitions and, inter alia,

directed the appellant to not initiate recovery from the

respondents solely on the basis of the CAG report dated March

2013 and held that the respondents would be entitled to receive

reimbursements for deductions made by the appellant from the


7 Aggrieved by the above, the appellant has filed the present

appeal by way of special leave under Article 136 of the


8 The primary submission of the learned senior counsel

appearing on behalf of the appellant is that the High Court

granted the relief without adjudicating the disputes between the

parties or properly appreciating the facts in issue.
9 On the other hand, learned counsel for the respondents

supports the impugned judgment and submits that no grounds

are made out by the appellant for this Court to interfere in the

present matter in exercise of its powers under Article 136 of the


10 Heard the counsel for the parties, and perused the material

on record.

11 It appears that one of the grounds raised by the appellant in

the present case relates to whether the High Court has correctly

exercised its discretion in entertaining the subject writ petitions.

Although this ground was initially raised by the appellant before

the High Court, it appears that it was not pressed at the time of

final hearing, as recorded in the impugned judgment.
12 It is worth noting that this Court has already held that in

matters pertaining to a state instrumentality, a writ may be

maintainable in matters concerning contractual disputes in

certain circumstances. While there is no bar on the

maintainability of such writ petitions, the discretion lies with the

High Courts as to whether to exercise the said jurisdiction or not.

This Court has elaborately discussed the principles that must

guide the High Courts while deciding whether to exercise their

writ jurisdiction in contractual disputes between a State and a

private party in a catena of judgments. [See ABL International

Ltd. v. Export Credit Guarantee Corpn. of India Ltd., (2004)

3 SCC 553; Joshi Technologies International Inc. v. Union of

India, (2015) 7 SCC 728]
13 However, we are not inclined to delve into the issue of

whether the High Court’s exercise of writ jurisdiction was

appropriate, due to the peculiar facts and circumstances of the

present case. The present matter pertains to a tender that was

awarded by the appellant to EMTA nearly twenty years ago, in the

year 2002. The CAG report that appears to have been the starting

point for the entire dispute between the parties is dated March,

2013, close to a decade back. In such circumstances, to even

advert to arguments on the maintainability of the writ petitions

would be unjust to the parties involved.

14 Coming to the merits of the appeal, from the facts, it

appears that in the first instance, when the CAG report was first

submitted, the appellant itself had raised objections to the

quantification of coal rejects arrived at by the CAG. However,

when the audit objections were rejected by the CAG, and the final

report was made available, the appellant demanded

reimbursement from KEMTA based on the same CAG report to

which it had filed objections. Such a change of stand by the

appellant has not been sufficiently explained.
15 Additionally, a bare perusal of the clauses contained in the

various agreements entered into between the parties does not

indicate that such deductions could be made for the purposes of

washing charges. There does not appear to be any specification

laid down as to the method required to be adopted for washing of


16 No material has been placed on record by the appellant to

suggest that there was ever any problem with respect to the

quality of coal being supplied by KEMTA to the appellant. Rather,

the impugned order suggests that coal supplied by KEMTA was

utilized by the appellant in its thermal power plants in order to

generate electricity.

17 Taking into consideration the above facts and

circumstances, we are of the opinion that no material has been

brought to the notice of this Court that would compel us to

interfere with the impugned common judgment passed by the

High Court in exercise of our jurisdiction under Article 136 of the


18 Accordingly, the Civil Appeals filed by the appellant are


19 Pending applications, if any, are accordingly disposed of.








MAY 20, 2022.


Source link