Decided on April 07,2006

Trehan Industries Pvt Ltd Appellant
State Through Power Development Department Respondents


- (1.) THIS is second round of litigation initiated at the instance of petitioner. It would be relevant to briefly notice the facts relating to the filing of proceedings before the court. Pursuant to the policy of the State Government to encourage the privatization of the power sector in the State for generation of power, petitioners herein approached the State with the proposal for renovation and modernization of Canal Power House. It has come on record that the eagerness of the State to involve private entrepreneurs for investment in power sector was forcefully propagated through news items and also through the Chamber of Commerce and Industries by no less than a person like the Chief Minister of the State. Petitioners proposal for renovation and modernization of the Canal Power House was favourably considered by the State and vide communication dated 29 -8 -2001, petitioners were asked by the Managing Director, J&K State Power Development Corporation Limited to prepare a detailed project report of Canal Power House on the basis of residual life and I.F. Studies to be got conducted through any of the consultants enlisted by Power Finance Corporation of India. Petitioners were given six months time for submission of the report failing which the State Government could make alternate arrangement. Petitioners got detailed project report prepared from the enlisted consultants of Power Finance Corporation of India and submitted the same to the Managing Director, PDC, Jammu on 18 -9 -2001. It appears that petitioners were asked to obtain a revised detailed project report on the basis of some suggestions which advise was accepted and necessary revision in the detailed project report was carried out and submitted to the Managing Director, PDC. It appears that after the matter was considered by the Government at various levels, the Government issued Government Order No. 34 -PDD of 2002 dated 30 -1 -2002 and handed over the project to the petitioners for renovation and modernization. This Government order however, contains stipulation that the terms and conditions for the transfer of assets and liabilities of Canal Power House shall be finalized by the committee consisting of the Chief Secretary, Financial Commissioner, Planning and Development, Financial Commissioner, Finance, Principal Secretary PDD and Managing Director, Power Development Corporation. On the same date, vide Government Order No. 35 - PDD of 2002 dated 30 -1 -2002, committee referred to in the above said Government Order, came to be constituted. Terms and conditions of reference of this committee appears to be, to formulate/negotiate the terms and conditions for the transfer of Canal Power House, Jammu to petitioner -1. On the basis of aforesaid Government order, project handed over to the petitioner -1, who commenced the renovation of the project. The committee took the following decision: "(i) Five Kanals of land (to be reverified/properly demarcated) appurtenant, to the hydel project will be transferred to M/s Trehan Industries Corporation of lease of 40 years, extendable after expiry of said period. While transferring the land on lease basis, all terms and conditions shall be clearly spelled out including the one that the land shall not be put on any other use except for power generation and other related activities. Violation will result in cancellation of the agreement and land will automatically revert back to the State Government. Other terms and condition as are applicable to industrialists -granted land on lease would be applicable in the said case & incorporated in the lease deed. (ii) As far as the machinery/equipment available in the said power project is concerned, the Book value would be get evaluated after drawing a proper inventory and then further negotiations will be held with the entrepreneur about its transfer, which could be either by way of its outright sale or on lease basis. MD JKPDC will have this evaluated by a competent evaluator. (iii) The entrepreneur will supply power to the PDD @ Rs. 3.00 per unit to start with, which will be subject to reviewed governed by the award of the State (Electricity) Regulatory Commission -as and when constitute mandated to tariff. (iv) The PDD will clear all dues on account of sale of power within a period of one month which will be backed up by an L.C. In case of default 1% penal interest will be payable, if the payment is not made within a period of one month. (v) P.P.A. shall be signed between M/s Trehan Industries Corporation and Development Commissioner Power accordingly. (vi) It was also decided that policy guidelines will be formulated by the PDD, regarding involvement of private sector in taking up mini/micro hydel projects for generation. The draft guidelines will be discussed by the Committee before they are formally put up to the Cabinet for approval."
(2.) THE Power Development Department also entered into formal agreement with the petitioner. At the time of handing over the possession of Canal Power House, detailed inventory was prepared on 10 -7 -2003. It is alleged that petitioner had almost completed the project when the State Government issued Government Order No. 97 - PDD of 2003 dated 21 -5 -2003 pursuant to Cabinet Decision No. 19/6 dated 19 -5 -2003 for taking over of Canal Power House from the petitioner. This Government Order became subject matter of challenge in OWP No. 467/2003 filed by the petitioner herein. While allowing the writ petition, writ court framed following five questions for consideration: "(a) Whether the writ petition is not maintainable in view of the fact that the petitioners have raised disputed questions of facts? (b) Whether there has been any policy decision taken by the Government at any stage with regard to Canal Power House regarding its revival, renovation, modernization and generation of electricity ? (c) Whether there has been any formal agreement with the petitioners? (d) Whether in the absence d of the formal agreement executed between the petitioners and respondents, the petitioners have rebuilt the Power House/executed minor repairs at their own risk and cost? And (e) Whether the Power House has been handed over to the petitioners without observing proper procedures and codal formalities. -
(3.) ON consideration of the factual legal aspects, the writ court issued the following directions: "I am, thus, inclined to allow the writ petition and quash the impugned Cabinet Decision No. 90/6 dated 19 -5 -2003 followed by order dated 21 -5 -2005 and all other consequential orders based upon the aforesaid decision. Respondents are further commanded and directed to give effect to orders 34 -PDD of 2002 dated 30 -1 -2002 and No. 35 -PDD of 2002 dated 30 -1 -2002 and consequent decision of the designated committee on negotiated terms and conditions in this behalf, based upon the aforesaid orders, reflected in communication dated 15 -3 -2002 addressed to the Development Commissioner, Power, J&K, by the Special Secretary to Government, Power Development Department, pertaining to taking steps for the execution and signing of the P.P. A. with the petitioners on the terms and conditions finalized and settled in this behalf by the High Power Committee." The State and the Power Development Corporation, a State owned Corporation who were parties to the handing over of Canal Power House to the petitioner, challenged the judgment of the learned Single Judge before the Division Bench in LPA(W) No. 21/2004. The Division Bench of this Court dismissed the appeal with slight modification of the final direction and thus, held: "In these circumstances, we are of the view that it would be appropriate that the respondents are given opportunity of hearing by an Independent Committee of Experts constituted by the State Government to go into the entire gamut of the dispute. On receipt of the report, fresh decision shall be taken by the Government. In case of disagreement, it shall briefly spell out the reasons. This exercise should be completed within three months. In the meanwhile, status quo shall be maintained. In the result, direction of the learned Single Judge to implement the earlier decision is modified to this extent. With this modification, the appeal is dismissed and the writ petition is accordingly disposed of. There will no order as to costs.";

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