TANIR BAVI POWER COMPANY PRIVATE LIMITED Vs. KARNATAKA POWER TRANSMISSION CORPORATION

JUDGEMENT

(1.) THE 1st petitioner is a Company registered under the Companies Act, 1956, engaged in the business of production of power, and the second petitioner is a share holder of the first petitioner-Company. They have sought for a direction to the 1st respondent-Karnataka Power Transmission Corporation Limited (hereinafter referred to as 'the KPTCL') to get a letter of credit and also to open and operationalise the Escrow Account and for a further direction to the State of Karnataka to execute a State support Agreement, in terms of the promises held out by them to the petitioner's Company and to direct the respondents to extend the effective date of the Power Purchase Agreement dated 15-12- 1997 in these petitions.

(2.) IN order to consider the rival contentions of the parties, it is necessary to state a few facts which are as follows. The State of Karnataka initiated measures to establish Power Projects promoted by the private sector to meet the acute power shortage in the State as power sector was liberalised by the Government of India since 1992. The State Government pursuant to its policy decision invited global bids from interested parties to set up Barge Mounted Power plants by its notification published in the daily newspaper dated 8-12-1995. Pursuant to the said notification several bids were received by the kptcl to set up barge mounted power plants. One such bid was submitted by the promoter of the petitioner's Company on 5-1-1996. The bid of the petitioner's Company was accepted and ultimately the State Government issued a Government order authorising the petitioner's Company to set up 220 MW Barge Mounted Power Plant at Tanir Bhavi, mangalore, a copy of which is produced as Annexure-B to the petitions. The notification dated 8-12-1995 specifically stipulates that the Karnataka Electricity Board (hereinafter referred to as the KEB') will purchase the entire energy output of the plant. Pursuant to the acceptance of the bid of petitioner's Company the Power Purchase Agreement (hereinafter referred to as 'the PPA') which is statutorily required to be executed was finalised between the petitioner and the KEB and the same was initiated by both the parties on 5-11-1996. This PPA included the clause regarding opening and operationalisation of the Escrow Account by the KEB and the letter of the Bankers of the KEB to issue letter committing to issue a letter of credit. The said PPA was then sent to the state Government for approval. The State Government by its order dated 16-7-1997 approved the PPA, the copy of which is produced as annexure-C. As there were some minor mistakes in the PPA, a supplementary agreement dated 29-5-1999 was entered into between the petitioner's Company and the KEB. A copy of the said agreement is produced as Annexure-E.

(3.) THE financial institutions headed by the IDBI sent letters to authorise Electricity Boards regarding financing of Independent Power projects (IPPs) along with draft model Escrow agreement. The said letter was examined by the Power Committee constituted by the Government of India consisting of senior officials of the Reserve Bank of India, financial institutions and others including State Governments. Thereafter, the State Government informed the KEB that it should adopt the model Escrow Agreement as required by the IDBI for arriving at the escrow Agreement for IPPs. In furtherance of this, the State Government wrote a letter dated 17-8-1999 to the Chairman of the KEB directing them to give Escrow cover on 'first come first serve' basis. The letter further states that the Project must have debts sanctioned by the financial institutions to enable them to come in the queue and the KEB should examine whether modification is required in the PPA to implement the model agreement and incorporate the changes accordingly. The copy of the said letter is produced as Annexure-F. Pursuant to this direction issued by the State Government the KEB insisted upon the supplementary agreement being entered into between the petitioner and keb in which the Escrow clause modified and accordingly supplementary agreement dated 30-3-1999 came into existence. Clause 6 of the supplementary agreement provides as under.