Successful Allottee/ Bidder Free To Decide Whether To Continue Any Existing Contracts In Relation To Coal Mining Operation
Case: Punjab State Power Corporation Limited Vs. Emta Coal Ltd
Coram: Justices L. Nageswara Rao, BR Gavai and BV Nagarathna
Case No: CA 5823-5824 OF 2021
Court Observation: The words “may elect” would clearly show that the legislature has given complete discretion to a successful bidder or allottee to elect. The words “may elect” would also mean a discretion not to elect. Only in the event, a successful bidder or allottee decides to adopt and continue such contract, which may be existing with any of the prior allottees in relation to coal mining operations, the same shall constitute a novation for residual term or residual performance of such contract. In the event, the successful allottee does not elect to adopt or continue such contract, there is no question of novation for residual term or residual performance of such contract. Perusal of subsection (2) of Section 11 of the said Act would also make it clear that, it provides that in the event a successful bidder or allottee elects not to adopt or continue with the existing contract which had been entered into by the prior allottees with third parties, all such contracts which have not been adopted or continued shall cease to be enforceable against the successful bidder or allottee in relation to Schedule I coal mines and the remedy of such contracting parties shall be against the prior allottees. It 17 could thus be seen that on a plain reading of subsections (1) and (2) of Section 11 of the said Act, it is clear that the successful allottee or bidder has complete freedom to decide as to whether he desires to continue or adopt any such existing contracts in relation to coal mining operation. Only in the event he elects to adopt or continue with existing contracts, it shall constitute novation for residual term or residual performance of such contracts. In the event the successful bidder or allottee elects not to adopt or continue with the existing contracts, all such contracts shall cease to be enforceable against the successful bidder or allottee in relation to Schedule I coal mines. The only remedy of such contracting parties shall be against the prior allottees.
“If it is held that under Section 11 of the said Act, a prior contractor is entitled to continue if his performance is found to be satisfactory and if there is nothing against him, then it will be providing something in Section 11 of the said Act which the Statute has not provided for. It will also lead to making the words “may elect, to adopt and continue” redundant and otiose.”
“The limited areas in which the court can enquire are as to whether a decision-making authority has exceeded its powers, committed an error of law or committed breach of principle of natural justice. It can examine as to whether an authority has reached a decision which no reasonable Tribunal would have reached or has abused its powers. It is not for the court to determine whether a particular policy or a particular decision taken in the fulfilment of that policy is fair. The court will examine as to whether the decision of an authority is vitiated by illegality, irrationality or procedural impropriety. While examining the question of irrationality, the court will be guided by the principle of Wednesbury. While applying the Wednesbury principle, the court will examine as to whether the decision of an authority is 35 such that no authority properly directing itself on the relevant law and acting reasonably could have reached it.”
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