LexINDIAN THERMAL POWER LTD. ETC. ETC. versus STATE OF M.P. AND ORS.
Open in Lexace · Ask the AI about this caseJudgment (excerpt)
INDIA'I/ THERMAL POWER LTD. ETC. ETC.
A
v.
STATE OF M.P. AND ORS.
FEBRUARY 16, 2000
[G.T. ~A"IAVATI AND S.N. PHUKAN, JJ.j
B
Electricity (Supply) Act, 1948:
Section 43A(2)-Tariff notification-Dwing negotiation of tenns of
various agreements relating to power projects with private investors pursuant C
to Policy Decision of the Government to privatise the power sector--Eff ect of,
on the ongoing negotiations-After the issue of tariff notification, Central
Government suggested to give priority to those projects offering least tariff so
as to ensure benefit of capacity addition from such projects in the 9th Five
Year Plan-Electricity Board decided to prioritise the projects for providing D
escrow protection mainly On the basis of least tariff criterion-Held, decision
of Board not ariJitrary or unreasonable-Board was also entitled to alter the
tenns of escrow agreement as there was no statutory obligation under Section
43 or 43-A of the Act to maintain escrow account-Although Power Purchase
Agreements were concluded contract, but there was no obligation under PPA E
to execute escrow agreement at a date prior to the first unit commercial
operation date-Tariff criteria based on and consistent with the notification
issued under Section 43-A (2) cannot be described as a hoax, unrealistic or
arbitr~onstitution of India, Articles 298, 299-Policy decision Ad-
ministrative Law-Arbitrariness.
Electricity-Board deciding to give priority to those power projects
offering least tariff f1Xed in accordance with the mandate of such notifica-
tion-Held, court would not interfere and substitute a different criterion-<:on-
stitution of India-Articles 226 and 136-lnterference with.
Constitution of India-Articles 226 and 136-Decision of Expert Com-
mittee-Certain assumption made by it for determining the project
costs-Held, if such assumptions based on valid basis and not fanciful or
arbitrary--<:ourt would not invalidate such assumptiom~Practice and Proce-
F
G
dure.
H
925
926
St:PREME COURT Rr.PORTS
(2000] 1 S.C.R.
A
Words and f'hrases-'Statutory contract'~Meaning of-Within the
meaning of Contract Ac~ 1872.
Pursuant to liberalisation of the electricity sector by the Government
of India, MO Us and Power Purchase Agreements (PPAs) were entered into
B by the State Government and Madhya Pradesh Electricity Board (MPEB),
with independent power producers (IPPs) for establishing the power
projects and for sale of entire electricity generated by these projects to
MPEB. Under the PPA, MPEB W'ds supposed to open the letters of credit
in respect of amounts payable by it. According to the escrow agreement,
MPEB was also to maintain escrow account with its ban!t following the
C first commercial operation date o~ the P°'"er projects. Execution of escrow
agreement and opening of escrow account subject to conditions of the
parties agreeing to the terms and conditions of the proposes escrowable
thereof.
D
The IPPs were insisting upon escrow coverage/protection and is·
suance of Letter of Comfort in their favour so as to enable the Financial
Institutions ("Fis') to lend them enough money. MPEB had agreed to
cooperate with and assist lPPs in obtaining financial assistance from the
Fis by making a provision for different types of securities for payment of
its dues to the lPPs. There was no reluctance or refusal on the part of
E MPEB to provide escrow coverage to all or as many as possible, but it was
not possible for it to issue Letters of Comfort and provide escrow coverage
and enter into escrow agreements with all of them as the appellants desired
and the Fis required better escrow coverage than the one which the MPEB
was willing to provide. The IPPs including the appellants could obtain tile
F financial closure because of their inability to persuade the l<'ls to lend them
enough money.
During the course of negotiations between M.P. Government, MPEB
and IPPs, Central Government in exercise of its power under Section
43·A(2) of Electricity (Supply) Act is~ued a notification amending its
G earlier tariff notification. Under the amended tariff notification and sug·
gestion made by the Government of India to give priority to those projects
which offered the least tariff so as to get the benefit of capacity addition
from those projects during the 9th Five Year Plan, :\-JPEB decided to
prioritise the projects for providing escrow protection mainly on the basb
H of least tariff criterion and aftExcerpt shown. Read the full judgment & AI analysis in Lexace.