Supreme Court Rejects Rs. 106 Crore Compensation Claim; Directs SECL to Supply Coal to Prakash Industries at 2014 or 2019 Prices for Wrongfully Suspended Period

"By No Stretch of Construction Can the Orders Be Understood as a Direction to Pay Monetary Compensation Towards the Difference in Coal Price", In a significant ruling settling a decade-and-a-half of litigation between Prakash Industries Limited and the Union of India, the Supreme Court on March 17, 2026 rejected the company's claim of approximately Rs. 106 Crore as compensation for the price difference paid during a period when coal supplies were wrongfully suspended by South Eastern Coal Fields Limited (SECL).

A bench of Justice Pankaj Mithal and Justice S.V.N. Bhatti, while disposing of Miscellaneous Applications arising from dismissed Special Leave Petitions, directed SECL to supply coal for the suspended period on a normal linkage basis — giving Prakash Industries the choice of whether to operate the Fuel Supply Agreement at prices prevailing on 09.04.2014 or 17.05.2019.

"Both Sides Are Interpreting the Orders of This Court to Suit Their Convenience"

Background of the Case

The dispute traces its origins to January 2006, when the Ministry of Coal allocated the Madanpur (North) Coal Block to Prakash Industries Limited for use in its Sponge Iron Plant and Captive Power Plant. On 09.11.2011, SECL abruptly suspended coal supplies to the company, citing an Inter-Ministerial Committee finding that Prakash Industries had diverted coal from its Chotia Block — meant for the Sponge Iron Plant — to its Captive Power Plants. Prakash Industries challenged the suspension before the High Court of Chhattisgarh, which quashed the suspension order on 13.02.2012. A Division Bench of the High Court confirmed that decision on 31.01.2013, additionally directing SECL to compensate the company for the price difference between coal purchased through E-auction and the contracted price during the suspension period. The Union of India and SECL carried the matter to the Supreme Court, which on 09.04.2014 modified the compensation direction — permitting SECL to supply coal at the current rate for the suspended period instead of paying monetary compensation, with a fresh Fuel Supply Agreement to be executed within four weeks.

Legal Issues and Court's Observations

The central questions before the Court were: whether the prior orders of the High Court and Supreme Court could be read as a direction to pay Rs. 106 Crore as monetary compensation for the price difference incurred during the suspended period; whether SECL's offer to supply coal through a fresh MoU at current E-auction rates constituted compliance with the 09.04.2014 order; what the reference date for "current price" should be under the Fuel Supply Agreement; and whether the supply should be on normal linkage or tapering linkage.

Prakash Industries pressed hard for monetary compensation, arguing that SECL's offers had been non-compliant — including a 2014 letter offering only 25 per cent of the annual contracted quantity on a tapering basis, and a 2017 order similarly imposing tapering linkage, both of which the Chhattisgarh High Court quashed on 17.05.2019. That quashing order was upheld when the Supreme Court dismissed SECL's Special Leave Petition on 19.08.2025. The company further contended that accepting physical coal now served no purpose, as it already possessed Fuel Supply Agreements valid until 2027 adequate for its Captive Power Plant, and any additional coal under a fresh MoU could not be utilised given its operations.

SECL, for its part, maintained through its Compliance Affidavit that it had issued necessary directions through Coal India Limited and conveyed readiness to supply coal, and that no order could be construed as a direction to pay monetary compensation.

The Court found no merit in either side's attempt to read the orders selectively. "Both sides are interpreting the Orders of this Court to suit their convenience or prayers," the bench observed, rejecting that approach as incorrect.

On the question of monetary compensation, the Court was unequivocal. A combined reading of the orders from both rounds of litigation, the bench held, established beyond doubt that the direction was solely one of physical supply of coal — not payment of money. "By no stretch of construction can the orders of the High Court or this Court be understood as a direction to the Union of India/SECL to pay compensation towards the difference in coal price which the Respondent has paid during the said period," the Court said, squarely rejecting the Rs. 106 Crore claim.

The Court traced the history of compliance failures by SECL with care. The 09.04.2014 Supreme Court order had directed SECL to supply coal "at the current rate, in lieu of the compensation granted, for the period during which the supply of coal was suspended," and required a fresh Fuel Supply Agreement to be executed within four weeks "in accordance with the prevalent policy." Instead, SECL issued a letter offering only tapering linkage at 25 per cent of contracted quantity — a direct deviation. The Secretary of Coal's 2017 order similarly restricted supply to a tapering basis. Both were quashed by the High Court in 2019, a position confirmed by the Supreme Court in 2025.

On the question of reference date for "current price," the Court noted that the expression raised a genuine ambiguity — whether it meant current as of 09.04.2014 or 17.05.2019. Critically, rather than resolve this against the company, the Court used SECL's own non-compliance as reason to give the benefit of choice to Prakash Industries. The Learned Additional Solicitor General, Mr. S.D. Sanjay, placed on record before the Court that Coal India Limited and SECL were willing to supply coal at the current price treating 09.04.2014 as the reference date. The Court declined to restate the "current price" on its own since that would require reviewing the 2014, 2019, and 2025 orders, but gave the Respondent the liberty to choose either date. "The Union of India and SECL are obligated to supply coal at the current price/prevalent policy either on 09.04.2014 or on 17.05.2019," the bench declared, adding that since SECL had not complied with earlier directions, "in line with commercial prudence," the choice of date was to vest in Prakash Industries.

On the question of tapering versus normal linkage — a dispute that had persisted since SECL's non-compliant 2014 letter — the Court settled the matter decisively: the supply shall be on a normal coal linkage basis, not on a tapering basis.

Decision

The Supreme Court disposed of all Miscellaneous Applications, rejecting both Prakash Industries' prayer for Rs. 106 Crore compensation and SECL's attempt to characterise its MoU offer as full compliance. The Court directed the Union of India and SECL to formally call upon Prakash Industries to choose its preferred reference date — 09.04.2014 or 17.05.2019 — for determining the current price and prevalent policy under the proposed Fuel Supply Agreement. Within two weeks of that communication, a Fuel Supply Agreement is to be executed between SECL and Prakash Industries for the suspended period on normal linkage basis. The entire exercise, including execution of the agreement, is to be completed within four weeks from the date of the order. All pending applications, including I.A. No. 250465 of 2025, were also disposed of.

Date of Decision: March 17, 2026