NAR BAHADUR BHANDARI Vs. STATE OF SIKKIM,
LAWS(SIK)-2010-10-10
HIGH COURT OF SIKKIM
Decided on October 14,2010

NAR BAHADUR BHANDARI Appellant
VERSUS
State Of Sikkim, Respondents

JUDGEMENT

DINAKARAN, CJ. - (1.) I . The core issue 1. The core issue that arises for consideration in this Writ Petition is: Whether the Agreement dated 18.07.2005 entered into between the State of Sikkim and M/s. Teesta Urja Ltd. (respondent No.3), for setting up a Hydro Electric Project ­ Teesta Stage III based on the policy of State/Letter of Intent dated 26.02.2005, is contrary to law, guidelines, and mandatory instructions of the Ministry of Power, Government of India and opposed to public interest? II. Public Interest Litigation
(2.) THIS is a Public Interest Litigation. The first petitioner was the former Chief Minister of the State of Sikkim during the period 1979 to 1984. He was subsequently elected as a Member of Parliament and then again was the Chief Minister until 1994; the second petitioner is an active member and office bearer of the Sikkim Pradesh Congress Committee; and the third petitioner is the Treasurer of the Sikkim Pradesh Congress Committee and was also the former Mayor of Gangtok and former Member of the Legislative Assembly of Sikkim. Heard Mr. M. Z. Ahmed, learned Senior Counsel for the petitioners, Mr. A. Mariarputham, learned Advocate General for respondents No. 1 and 2, Mr. Jayanta Mitra, learned Senior Counsel for respondent No. 3 and Mr. Karma Thinlay Namgyal, learned Central Government Counsel for respondents No. 4, 5 and 6. III. The Case of the Petitioners
(3.) THE relevant and undisputed factual matrix of the case is stated as follows: - (i) The proposal for carrying out Hydro Electric Projects in the State of Sikkim originated in the year 1974. The Sikkim State became part of the Indian Union in the year 1975 by the 36th Amendment of the Constitution of India. An expert team was constituted by Central Water Commission (CWC) to formulate the proposal and make suggestions for carrying out such investigations for establishing Hydro Electric Generation Schemes in Sikkim particularly in Teesta and Rangit Valleys of Sikkim. (ii) CWC prepared a detailed Project Report for the 1200 MW Teesta Stage-III Hydro Electric Project in the year 1987. The Ministry of Power, Government of India requested the Government of Sikkim's concurrence to carry out the execution of the Project under the Central Sector with National Hydroelectric Power Corporation Ltd. (NHPC) as the implementing agency in October 1987 by a letter dated 12.10.1987. The State Government forwarded its concurrence to the said proposal on 14.03.1988. (iii) The Detailed Project Report was drawn by NHPC for the purpose of obtaining Techno Economic Clearance in December 1990. (iv) In the year 1991, the Government of India announced a new liberalized policy whereby, the Government of India permitted entry of private parties in the field of power generation and consequently, certain private parties expressed their interest in executing Teesta Stage-III Hydro Electric Project for generating 1200 MW electricity. (v) The Government of Sikkim, to secure its interest in a better manner, invited interested parties for implementation of the aforesaid project. (vi) The State Government without taking any policy decision or carefully examining the proposals of the private parties in detail, arbitrarily withdrew its original proposal to execute the project with NHPC. (vii) Government of Sikkim thus proposed to invite bidding from the interested developers across the globe, to develop the said Power Project on 'Build, Own, Operate and Transfer' (BOOT) basis in the year 1993, and also sought permission from the Central Government to execute the above project on BOOT basis. Based on such invitation several interested parties came forward to execute the Teesta Stage-III Hydro Electric Power Project for generating 1200 MW electricity. Of them seven private parties were short listed. For taking further decision in the matter, a High Level Committee was formed to evaluate the bids and offers. (viii) The Ministry of Power, Government of India in their letters dated 18.01.1995 and 15.02.1995, stipulated a mandate that after 18.02.1995, private power projects whose total estimated cost exceeded Rs.100 crores, would have to be awarded only through process of competitive bidding. (ix) Thereafter, by letter dated 02.08.1996, the Government of India clarified that competitive bidding will not be necessary for selection of the private company partner in joint venture projects, where the State Electricity Board/Public Sector Undertakings hold the major share in the joint venture company, i.e. a minimum of 51% equity share. By the said letter dated 02.08.1996, the Government of India also invited attention to their earlier letter dated 28.06.1996, which contemplates that International Competitive Bidding (ICB) be followed for award of Engineering, Procurement and Construction (EPC) contracts for projects awarded through the MOU/LOI route, and that, in case of joint venture projects between State Electricity Board/Public Sector Undertaking and a private company, International Competitive Bidding may be followed, only in cases where the private project developer has not been selected through competitive bidding. (x) By letter dated 10.01.1997, Ministry of Power, Government of India made it clear that MOU/LOI signed on or before 18.02.1995 by the State Government/State Electricity Boards with independent power producers for implementation of the project by the latter, would alone be considered by the Central Electricity Authority (CEA) for accord of their clearance and 31.03.1996 would be the deadline for such 'in-principle' clearance; and that where the project cost is more than Rs.100 crores, the techno- economic clearance by CEA is mandatory. (xi) Out of seven parties, only three parties submitted their bids and in view of repeated requests by other parties, the final date was fixed as 24.12.1997. The bidding process continued for a long period of time but none of the bids submitted were attractive and beneficial for the State. (xii) The State, therefore, once again proposed to allot the Teesta ­III along with Teesta I and II to NHPC in November, 2002. NHPC was willing to execute the project on Build, Own and Operate (BOO) basis, as per the guidelines of the Government of India. But the State- respondents wanted the project to be developed on Build, Own, Operate and Transfer (BOOT) basis. Hence, the matter was referred to a Negotiation Committee which was constituted in January, 2003 for carrying out negotiation with NHPC. But no settlement could be arrived before the Negotiation Committee. (xiii) In the year 2003, the new Electricity Act, 2003 came into force, which facilitated development of Hydro- power Projects liberally. Government of India announced the 50,000 MW Hydro Power Initiative to harness the untapped hydro potential in the country. (xiv) In October, 2003, the Ministry of Power clarified that in case NHPC is unable to meet the requests of the State Government, the State would be well within its right to either allot the projects to Independent Power Producers or to develop the projects under joint sector in partnership with developers. (xv) Based on the new liberal policy, the Cabinet of the State met on 25.05.2004 and decided to speed up the efforts to tap the hydro power potential in the State. Accordingly, a High Powered Hydro Power Committee was constituted on 15.06.2004 to expedite development of the Hydroelectric projects in the State of Sikkim. (xvi) The Government of Sikkim, thereafter, announced the Power Policy, which proposed that the projects above 25 MW capacity would be developed on BOOT basis under joint sector with Government of Sikkim holding 25% of equity share in the projects and the partners would have to arrange the funds for equity participation by Government and Government shall repay the loan from the revenues accruing from the free power. (xvii) The High Power Committee constituted by Notification dated 15.06.2004 recommended 13 projects in the State of Sikkim, one of them being Teesta Stage-III Hydro Electric Project and the same was recommended to the consortium led by M/s. Athena Projects Private Limited. (xviii) The Cabinet Note dated 21.02.2005 proposing award of 13 projects to various developers as recommended by the High Powered Hydro Power Committee was considered and approved by the Cabinet in its meeting held on 22.02.2005. (xix) On 26.02.2005 the Cabinet approved the Policy of the State Government in the matter of awarding contract to Athena Projects Private Ltd. ­ a Consortium for the development of Teesta Stage-III Hydro Electric Power Project, 1200 MW electricity production, one of the major power projects in the country, on BOOT arrangement. (xx) On 06.04.2005, M/s. Athena Projects Private Limited informed the Government that it has incorporated the Company, Teesta Urja Limited, respondent No.3 herein, as a Special Purpose Vehicle for implementation of the project. (xxi) The Government of Sikkim by its letter dated 20.04.2005 approved the formation of the Company, whereunder, M/s. Athena Projects Private Limited along with its consortium partners would hold 74% of the equity of Teesta Urja Limited and the Government of Sikkim would hold 26% of the equity of Teesta Urja Limited. (xxii) The Government of Sikkim, thereafter, entered into an Agreement with Teesta Urja Ltd. (respondent No.3 ) on 18.07.2005, for the development of Teesta Stage-III Hydro Electric Power Project, for production of 1200 MW electricity, one of the major power projects in the country. 5.1 Mr. M.Z. Ahmed, learned Senior Counsel for the petitioners, with the above backdrop of the case, contends that the very policy of the State Government, as chalked out by the Cabinet in the Letter of Intent dated 26.02.2005, is contrary to public interest and also various guidelines issued by the Ministry of Power, Government of India dated 18..01.1995, 28.06.1996, 02.08.1996, 09.01.1997 and 10.01.1997, which mandate: (i) that after 18.02.1995, private power projects whose total estimated cost exceeded Rs.100 crores, would have to be awarded only through International Competitive Bidding (ICB); (ii) that International Competitive Bidding (ICB) would have to be followed for award of Engineering, Procurement and Construction (EPC) contract for projects routed through the Memorandum of Understanding/Letter of Intent route after 18.02.1995. In the case of joint venture projects, between the State Electricity Boards/Public Sector Undertakings and a private company, ICB may be followed only where the private project developer has not been selected through competitive bidding; (iii) that projects routed through Memorandum of Understanding /Letter of Intent signed on or before 18.02.1995 by the State Governments/State Electricity Boards with Independent Power Producers (IPPs) for implementation of projects by the latter, would be considered by Central Electricity Authority (CEA) for accord of their clearance and that, where project cost exceeding Rs.100 crores, Central Electricity Authority's techno- economic clearance would be required; (iv) that International Competitive Bidding (ICB) is not necessary for selection of private company partner in joint venture projects between the State Electricity Boards / Public Sector Undertakings and a private company, where State Electricity Board/Public Sector Undertaking holds the majority share in the joint venture company, i.e. a minimum of 51 % of equity shares of the joint venture company. In the instant case, the State Government holds only 26 % of the equity shares and, therefore, International Competitive Bidding (in the matter of EPC contract/turnkey contract) could not be dispensed with; (v) that the Central Electricity Authority's techno- economic clearance is also mandatory as per Section 29 of the Electricity (Supply) Act, 1948 and Section 8 of the Electricity Act, 2003, but the same has not been complied with in the instant case; (vi) that the impugned Agreement dated 18.07.2005 is contrary to the recommendations of the Carrying Capacity Study of Teesta Basin in Sikkim by the Centre for Inter-Disciplinary Studies of Mountain & Hill Environment (CISMHE), University of Delhi, an Expert Body constituted by the Ministry of Environment and Forests, Government of India, which thoroughly weighed the impacts of the impugned project on ecology and environment as well as biodiversity in Teesta Basin in Sikkim.;


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