NTPC LIMITED Vs. RELIANCE INDUSTRIES LIMITED

JUDGEMENT

(1.) The National Thermal Power Corporation Limited (for short "NTPC") claims that it is the largest thermal electricity generating company of India and it intends to enhance the capacity of its existing combined cycle power stations in the State of Gujarat. Thus it invited International competitive bids for supplying natural gas to its Power Plants. As per the terms inviting the tender, the NTPC issued RFP documents to the qualifying bidders and after financial evolution of techno-commercially acceptable bids, the NTPC was to issue Letter of Intent (for short "LOI") to the preferred bidder. Reliance Industries Limited (for short "RIL") was also one of the bidders. The terms were amended vide letter dated 15th March 2004. According to the NTPC, RIL confirmed unconditional acceptance of all provisions of RFP documents read together with amendments. As the Letter of Intent was issued and as required RIL vide its letter dated 17th June 2004 acknowledged receipt of the LOI dated 16th June 2004 and sent the duplicate copy thereof duly signed. The Coordinating Committee of the NTPC along with representatives of RIL was constituted. A meeting was held on 20th October 2004 where it was proposed that a master network of various activities to be undertaken by the parties be drawn and key milestone dates be identified to be used as the basis for monitoring the progress. Vide letter dated 6th May 2005, certain changes were suggested by RIL. Though NTPC was not required to even consider the same but certain amendments were made as suggested in letters dated 19th May 2005 and 17th June 2005 as RIL further wanted some changes in the project. This was carried on and according to NTPC, RIL's action and conduct clearly spelt out their intention not to perform their contract and it constituted an anticipatory breach/ repudiation of the contract. In addition to this, there were certain disputes on quantum pricing and finalisation of GSPA. This compelled the NTPC to file a Suit on the Original Side of this Court for declaration and specific performance. The prayers made in the Suit were as under:

(2.) Written Statement had been filed on behalf of RIL. Various objections were taken including that the Plaint does not disclose cause of action, there was suppression of material facts, Natural Gas is a traded commodity and a Suit for specific performance for sale thereof is not maintainable in law. On merits, the stand taken is that correct facts have not been stated. According to the Defendant, as per case made out by Plaintiff there were discussions between the parties and in furtherance thereto letters dated 12th August 2004 and 15th July 2004 were issued and accordingly 30 days time to sign the GSPA from the date of acceptance of LOI was reckoned. According to the Defendant, case made out by the Plaintiff is inconsistent as Plaintiff alleges several different dates and events by which concluded and binding contract came into existence. Whereas Defendant specifically denied that there was complete, and concluded contract between the Plaintiff and the Defendant. Defendant denied that it had attempted to renegotiate the terms. The Defendant denied that all terms of draft GSPA had been agreed upon or were finalized. According to Defendant, no LOI was accepted resulting into concluded contract. The Defendant specifically denied that in May 2004 it had made an offer which was accepted by the Plaintiff and communicated the acceptance by letter dated 16th June 2004. Defendant denies having made any offer capable of being accepted. Defendant denies that any act on its part amounts to anticipated breach/repudiation of any contract. Defendant has specifically denied that Plaintiff is entitled to specific performance of any contract pertaining to supply of natural gas as there is no valid and subsisting agreement.

(3.) As is evident from the pleadings of the Defendant that it had taken a plea of there being no concluded contract between the parties and thus prayed that the Suit of the Plaintiff be dismissed. During pendency of the Suit, RIL filed Chamber Summons No. 218 of 2009 under Order VI Rule 17 of the Code of Civil Procedure seeking to amend its written statement. In the affidavit in support of the said Chamber Summons, it was averred that the amendments prayed for were material and necessary for appropriate adjudication of the suit. The main ground for seeking amendment was that certain events which had transpired after filing of the written statement, which was filed on 31st October, 2007, and the submission as an alternative to the plea already taken was that there was no valid, subsisting, binding and concluded agreement between the parties. The Defendant wanted to take up the plea that even if there was an agreement, it had been frustrated or had become incapable of performance in view of the subsequent events. These subsequent events included declaration of New Exploration and Licensing Policy of 1999. The Government of India had constituted an Empowered Group of Ministers (EGOM) to take decisions in relation to NELP Contract. On 12th September, 2007, the said EGOM had taken a decision in regard to commercial utilization and pricing of gas under NELP and had approved the formula for valuation and sale of natural gas under the Production Sharing Contract. The Defendant had submitted the formula under which the price discovered by the Defendant was US$ 4.32 per MMBTU. However, the EGOM modified the same by which the said price had been reduced and fixed at US$ 4.20 per MMBTU. This decision had been communicated to the Plaintiff by the letter dated 10th October, 2007. Another ground taken was that, on 28th May, 2008 and 27th October, 2008, NGOP took decisions in regard to commercial utilization of natural gas under NELP and framed the guidelines for sale of natural gas by NELP contractors which are to be binding and the same relates to the allocation of gas. A reference is also made to the affidavit filed by the Union of India during the course of hearing of the appeal in a company matter where it intended to improve on certain facts which have bearing on the contract in question were disclosed in those affidavits and they were not known to the Defendants earlier. This affidavit was filed on 13th January, 2009 and it also stated the decision which had been taken in regard to the commercial utilization of gas. With particular reference to Article 21.6.2(b) of these decisions, the matter with regard to the scope and interpretation for Production Sharing Contract which is subject matter of the present suit was also covered and referred to by these different decisions. The Applicants pray that the price to be determined under Article 21.6.2(b) is not different from the price fixed pursuant to Article 21.6.2(c). Thus, the entire matter is interconnected.