TANIR BAVI POWER COMPANY PRIVATE LIMITED, BANGALORE AND ANOTHER Vs. KARNATAKA POWER TRANSMISSION CORPORATION LIMITED (FORMERLY KARNATAKA ELECTRICITY BOARD), BANGALORE AND ANOTHER

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 shareholder 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 exe - 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.) ONE of the terms of the PPA imposes an obligation upon the petitioner to furnish a Bank guarantee in favour of the KEB and accordingly the petitioner obtained a Bank guarantee for Rs. 10 crores in favour of the KEB. Thereafter the State Government executed a guarantee agreement dated 3 -4 -1999 in favour of the petitioner guaranteeing payment obligations of the KEB, a copy of which is produced as Annexure -J. The KEB thereafter has written letter to the IDBI reiterating its commitment to provide Escrow Cover as provided in the PPA of the Project and further stated that the Draft Escrow Agreement is under finalisation in consultation with the IDBI and CRISIL. Again the KEB in its letter dated 14 -9 -1999 written to IDBI has stated that the IDBI has already sent the model agreement and that the said Escrow Agreement is ready to be signed and that the agreement cannot be signed till the election process is over and therefore sought for extension regarding the validity of the letters of intent. A copy of the said letter was endorsed to the petitioner.