A High Court has declined to interfere, in writ jurisdiction, with a coal supplier's invocation of shortfall charges against a thermal power generator under a Fuel Supply Agreement (FSA), holding that the dispute, whether the generator's inability to lift its Annual Contracted Quantity of coal was attributable to force majeure or to its own operational failures, was a contractual and factual dispute properly resolved through the arbitration mechanism the parties had themselves agreed to in the FSA.
The generator, referred to here as Konark Power Generation Ltd., had argued that a prolonged plant outage caused by a grid-side fault beyond its control should excuse it from shortfall liability, and sought a writ direction restraining recovery pending resolution of that dispute. The Court held that whether the outage genuinely qualified as force majeure under the FSA's own definition was a mixed question of fact and contractual interpretation entirely unsuited to writ adjudication, and that the generator's proper remedy lay in invoking the FSA's arbitration clause.
The ruling reinforces a now well-settled principle in coal-linkage disputes: courts are reluctant to short-circuit the contractually agreed dispute resolution mechanism in FSAs merely because the amount in dispute, shortfall charges accrue as a percentage of the undelivered quantity's notified price, can be substantial, and treat FSA shortfall disputes as commercial disputes rather than matters of public law susceptible to writ review.
Generators facing shortfall notices should accordingly focus on building a well-documented force majeure record contemporaneously with any outage, since that evidentiary record, not the writ jurisdiction of a High Court, will ultimately determine the outcome before an arbitral tribunal.