UNION OF INDIA (UOI) Vs. DABHOL POWER COMPANY

JUDGEMENT

(1.) The plaintiff has filed a suit for permanent injunction with the prayer to restrain the defendant from proceeding with the arbitral proceedings initiated in pursuance of the notices for arbitration dated 4th Sept., 2001 and 13th May, 2003 till the co. clusion and final outcome of the proceedings pending before the Bombay High Court and the Supreme Court of India. The present application under Order 39 Rules 1 and 2 read with Sec. 151 of the Code of Civil Procedure , however, is for interim stay of the arbitral proceedigs before the Arbitral Tribunal at London, till the appeal filed by defendant before Supreme Court of India is disposed of.

(2.) The facts relevant for the disposal of this application, briefly stated, are that the defendant and Maharashtra State Electricity Board (MSEB) had entered into a Power Purchase Agreement (PPA) dated 8.12.1993. The Government of Maharashtra (GOM) execute a guarantee in favor of the defendant on 10th Feb., 1994 guaranteeing payments due to the defendant from MSEB. On 15.9.1994, a counter guarantee was executed by the Government of India (GOI), Plaintiff, also in favor of defendant. Clause (1) of the said counter guarantee stipulated that if and whenever MSEB fails to pay to the defendant company "sum of money validly due" under the agreement and the Government of Maharashtra also upon demand thereof by the defendant company fails to pay such amount to the defendant company, the plaintiff shall, within 30 days following the date of receiving from the defendant-company a demand for payment pay the sum to the company together with interest thereon.

(3.) Certain demands were raised by the defendant company which MSEB did not clear and as such, the defendant invoked guarantee of the Government of Maharashtra. MSEB raised counter claims in regard to its entitlement to rebate. The defendant company referred the disputes to an expert panel in terms of the PPA and thereafter invoked the counter guarantee furnished by the plaintiff claiming Rs. 102 crores in view of non-receipt of payment from MSEB as well as the Government of Maharashtra. Since MSEB and Government of Maharashtra had failed to make payments, the defendant invoked arbitration clause also but MSEB raised a plea of misrepresentation and made counter claim. On 23.5.2001, it rescinded the PPA on grounds of fraud, misrepresentation etc. MSEB approached Maharashtra Electricity Regulatory Commission (MERC) pleading that MERC alone had jurisdiction in regard to disputes between the MSEB and the defendant and submitted that the arbitration agreement contained in Clause 20.3 of PPA was illegal.