Delhi High Court
Deepak Fertilizer & Petrochemicals ... vs Union Of India on 1 July, 1996
Equivalent citations: 1996(38)DRJ229
Author: Y.K. Sabharwal
Bench: Y.K. Sabharwal, D.K. Jain
JUDGMENT Y.K. Sabharwal, J.
(1) Under the Essential Commodities Act, the Fertilisers(Control) Order 1985 (earlier it was 'Fertiliser Control Order, 1957) was enacted to ensure that fertilisers are available to the farmers at a subsidised price. A Scheme was notified on 1st November 1977 under which a fertiliser producing unit was to submit data of its cost of production to Fertiliser Industry Co- ordination Committee (for short 'FICC') alongwith other fixed/capital cost related details. Ficc was to work out a retention price which is a combination of norms and actuals in regard to the cost of production plus depreciation plus interest plus 12% post tax return on net worth. If the selling price at which a manufacturer is compelled to sell is less than the retention price fixed for the unit, the difference between the two is payable to the manufacturer under the Scheme.
(2) The petitioners in the year 1978 sought for an industrial licence to set up a plant of Ammonia fertiliser at Taluja. The industrial licence was issued on 5th December 1979. It was agreed between the parties that commercial production in the said plant would commence within a period of 30 months of entering into agreement with effect from 31st December 1979. The said period of 30 months ended on 1st July 1982. The petitioners, however, commenced commercial production of ammonia, which is a fertiliser, from 1st December 1983.
(3) The aforesaid scheme is applicable to the petitioners. The Ficc fixed provisional retention price from time to time and in accordance with the scheme, the petitioners were paid difference between the retention price and the selling price.
(4) The petitioners claim that sometime after 1986, the cost of production of the petitioner's unit escalated due to increase in price of gas by Ongc, increase in electricity tariff, a revised wage settlement with the Union and various other heads of expenses. The petitioners filed its escalation claims from time to time but the same were not considered by FICC.
(5) This petition was filed in February 1992. During the pendency of the writ petition, on 31st March 1992, Ficc declared a final retention price. This fixation was retrospective from 1st December 1983. The petitioners claim that final price so fixed was arbitrary inasmuch as it disallows a part of the project cost and also did not take into account several other costs escalation claims made by the petitioner. On 23rd November 1993 this court directed the petitioners to place their claims alongwith other supporting documents for consideration of FICC. The Ficc was directed to fix a date for appearance of the parties after receipt of documents from the petitioner. The court directed Ficc to afford an opportunity of hearing to the petitioners and expressed the hope that it will take independent decision without being influenced by decisions taken earlier from 1st December 1983 till 24th August 1992. In accordance with the directions of the court, Ficc decided the matter.
(6) After decision of Ficc the only issues which now survive in this petition are:- i) Project cost disallowance. ii) Reimbursement of Taluja-Tromway transport cost. iii) Interest due to delay in making payments by FICC. We will now consider them seriatim. i) Project Cost Disallowance The capital cost as per the project report was Rs.55.35 crores as against the actuals of Rs.64.43 crores as indicated in the published accounts of the petitioner's company for 1983-84. The project was to be completed and commercial production started from 1st July 1982. The commercial production actually started on 1st December 1983. There was thus delay of 14 months. According to petitioners this delay occurred on account of reasons beyond their control such as delay of supply of gas from Ongc, non supply of electricity by Mseb, a crane accident and strike/lockouts in major suppliers' units. The petitioners also claim that it has been discriminated in the matter inasmuch as in the case of Nagarjuna Fertilisers Ltd., delay of more than 9 years has been allowed by FICC. Out of the aforesaid 14 months delay Ficc has allowed cost overrun to the extent of five and a half months which means that delay to the extent of five and a half months has been condoned and project cost worked on that basis. According to the petitioners, the disallowance of remaining eight and a half months by Ficc has affected the retention price in the following manner:- "Depreciation @ 10% and average interest @ 12% is disallowed on approx. Rs.2.28 crores, for a total period of about 9 years which approximately comes to Rs.4.5 crores. Hence, the Retention Price is lower by about Rs.65 per Mt, and therefore, the subsidy amount is also lower by about Rs.65 per Mt which totally aggregates to about Rs.4,5 crores for a total period of about 9 years. After analysing the facts and documents placed before it, the Ficc concluded that while petitioners could be held responsible for delay of 7 months, the Ongc also appears responsible for delay of 4 months. As regards delay of 3 months in the finalisation of the agreement, Ficc concluded that it appears equitable to apportion equally the delay of 3 months between the parlies. In this manner the petitioners were held to be responsible for delay of eight and a half months and Ongc for delay of five and a half months. The contention that the entire delay of 14 months in commencing commercial production ought to have been condoned depends upon examination and analysis of various factual matrix. We find from the report of Ficc dated 31st January 1994 that after examination of all relevant facts it came to the conclusion about the apportionment of 14 months as above. We are afraid that disputed questions of fact sought to be raised by the petitioners cannot be appropriately gone into in exercise of our writ jurisdiction. From the material placed on record it is not possible to hold that Ficc took into consideration any irrelevant facts or failed to take into consideration the relevant facts. The decision of Ficc, on the facts and circumstances of the case, cannot be held to be unfair, unjust or arbitrary. Regarding the plea of discrimination about the time overrun having been allowed to M/s.Nagarjuna Fertilisers Ltd and not to the petitioners, it may first be noticed that according to respondent and as per minutes regarding fixation of retention price of Urea produced by M/s.Nagarjuna, it appears that the time overrun in the implementation of the project was 9 months and not 9 years as contended by the petitioners. The said unit commenced commercial production on 1st August 1992 (47 months from zero date) while the project should have commenced commercial production on 4th November 1991 (i.e. 38 months from the zero date of 5th September 1988). The principal reasons for delay, as accepted by Ficc while fixing the retention price, was about 8 months delay in the receipt of natural gas. The minutes of the meeting fixing retention price in their case show that though the unit had taken prompt action for getting natural gas supplied, Gail could not do so due to natural impediments faced by them in laying the pipeline below the river bid by Horizontal Directional Drilling method for crossing the river Gautami and Vainateyam. On consideration of these and other factors in the case of Nagarjuna Fertilisers Ltd it was held by Ficc that time overrun appeared to be entirely beyond the control of management inasmuch as the supply of natural gas did not commence on the due dale on account of natural impediments. In our view the petitioners have failed to make out any case of discrimination. Learned counsel for the petitioner also placed strong reliance on certain observations made in an award rendered between the parties. The said observations are to the effect that there was no intentional negligence on the part of the petitioners and delay in production within the specified time was beyond their control. The claim of the respondent that the petitioners were liable to pay to them the huge amounts as penalty plus interest on account of delay in commencement of production, were referred to the sole arbitration of Sh.B.S.Hegde, Joint Secretary and Legal Advisor, Ministry of Law, Justice and Company Affairs. The arbitrator held that considering various factors it is just, fair and proper that the claimant should be imposed minimum penalty as there was no intentional negligence on their part and delay in production within the specified period was beyond their control and thus penalty of Rs.8.50 lakhs was imposed on the petitioners as against the huge claims which added with interest would run into crores. Apart from the fact that the observations made in collateral proceedings have no relevance while considering legality of action of Ficc in fixation of retention price, we cannot ignore that the award is under challenge and objections filed by the respondent are pending before the Bombay High Court. Under these circumstances it cannot be held that in view of the observations made in the award the time overrun of entire period of 14 months should have been allowed by FICC. We are,therefore, unable to find fault with the decision of Ficc in allowing cost overrun to the petitioner only for the period of five and a half months. ii) Reimbursement of Transport Cost Since there was no Rail link between the unit of the petitioners at Taluja and Rcf - Tromway, the Department of Fertilisers permitted the transfer of ammonia by road and payment of road transport cost subject to its reasonableness being verified by FICC. The Ficc approved the rate of Rs.l03 per metric tonne for transportation of amonia from Taluja to Tromway which started in 1983-84. Subsequently, on the representation of the petitioners the matter was reconsidered and the number of round trips fixed at 2 per day were revised to 1.25 trips per day. As a result of this revision the transport cost was enhanced to Rs.l21.00 per metric tonne with effect from 1st April 1988. Later it was increased to Rs.l43.00 per metric tonne with effect from 1st December 1983. The transportation cost has been fixed on normative basis and not on actuals. The petitioners claim that they are entitled to reimbursement of actual cost of transportation incurred by them. In this regard reliance is placed by the petitioners on letter dated 2nd June 1984 sent to them by Ministry of Chemicals and Fertilisers. This letter, interalia, clarifies that the cost of transportation of Octroi and taxes w6uld be reimbursed by Ficc in case of supply of ammonia from a unit with planned surplus to a unit with planned deficit provided that the distance between the two units is not more than 700 kms. In the present case the distance is about 150 kms. The case of the petitioners is that it could not find any contractor to undertake transportation as the ammonia is required to be transported under pressure in container trucks and,therefore, petitioners requested its promoter company M/s.Deepak Nitrite Ltd to do so. The said company made investments in 18 trucks. Petitioners say that on cost plus basis the transportation cost was Rs.235.00 per metric tonne in 1983-84. The grievance of the petitioners thus is that it has been under reimbursed for the transportation cost. It may be noticed that despite revision in the number of trips as aforesaid, the petitioners have been representing for reimbursement of actual transportation cost. It appears that in 1983-84 the petitioners had invited and sent to Ficc scaled lenders from independent contractors for transportation which showed the rate of transportation between Rs.250.00 and Rs.280.00 per metric tonne. Nothing has been placed on record to show that the petitioners were ever informed that they would not be reimbursed of the cost of transportation and that the cost of transportation would be fixed on normative basis. It has not been disputed that the cost of transportation claimed by the petitioners was not examined by Ficc to find out and determine the reasonableness of such cost. The petitioners were told that cost of transportation would be 'reimbursed' to them. 'Reimbursement' means in ordinary parlance repayment of what has been spent. According to Black's Law Dictionary, 6th Edition Page 1287 the definition of 'reimburse' is 'to repay that expended'. When the petitioners were informed by letter dated 2nd June 1984 that cost of transportation would be reimbursed, they had legitimate expectation that actual cost of transportation would be reimbursed by Ficc subject to the same being just and reasonable. Nothing has been shown by the respondent justifying the denial of reimbursement of cost of transportation. It was open to respondent to inform the petitioners that the cost of transportation would be fixed on normative basis but that was not done. The petitioners not having been told that the transportation cost would be worked out on normative basis, now, it is too late in the day for the respondents to fix the cost of transportation on normative basis and not even go into the question of reasonableness of the cost of transportation claimed by the petitioners. We are unable to read in the letter dated 2nd June 1984 that the reimbursement in the said letter connotes transportation cost equivalent to normal railway freight. The railway freight, in absence of rail link between Taluja and Tromway, being the basis for fixing the cost of transportation on normative basis would be unreasonable and arbitrary. Under the aforesaid circumstances we direct Ficc to refix the cost of transportation after examining the claim and documents of the petitioners and such documents and material as may be placed by respondent before Ficc, so that Ficc may examine the reasonableness of the cost of transportation claimed by the petitioners. The cost of transportation would be fixed by Ficc within a period of 3 months after giving due and reasonable opportunity to the parties and further amount, if any, on that account shall be reimbursed to the petitioners within one month of date of decision by Ficc failing which petitioners will be paid interest @ 18% per annum. iii) Interest Petitioners submit that the respondent shall also be directed to pay the amount which may become payable to them in 1983 with interest as the respondent has wrongfully withheld the amount due to the petitioners. Petitioners submit that under the Scheme the delay in payment of the excess amount attracts payment of interest at the rate of 16% p.a. by the unit whose retention price is lower than the ex-factory price. That may be so but it has to be borne in mind that Scheme does not provide for payment of interest to the units whose retention price under the Scheme is higher than the ex-factory price and who are entitled to receive difference from the Fund Account on submission of claim. The Scheme thus does not contemplate payment of interest by FICC. The fixation of price is a time consuming process and that may be the reason that Scheme does not postulate payment of interest from the Fund. Reference may also be made to the decision of one of us ( D.K.Jain,J.) in Ram Ganga Fertiliser etc Vs.Union of India and others, C.W.2062/93 decided on 30th July 1993 holding that where a specific stipulation for payment of interest by petitioners to respondent exists in the Scheme and such a stipulation for payment of interest to the petitioner is absent, there have to be compelling reasons to award interest for which facts of each case have to be seen. The position is similar in the present case. Having regard to the facts and circumstances of the case, in our view, the petitioners are not entitled to payment of any interest. We find no compelling reasons to award interest in favour of the petitioners. For the aforesaid reasons we allow the petition to the extent indicated hereinbefore and to that extent make the rule absolute leaving the parties to bear their own costs.