Allahabad High Court
M/S Reliance Power Limited Thru … vs State Of U.P Thru Prin Secy Energy … on 15 April, 2019Bench: Devendra Kumar Arora, Alok Mathur HIGH COURT OF JUDICATURE AT ALLAHABAD, LUCKNOW BENCH AFR Reserve Court No. – 5 Case :- MISC. BENCH No. – 5024 of 2018 Petitioner :- M/S Reliance Power Limited Thru Authorized Signatory Respondent :- State Of U.P Thru Prin Secy Energy Lko & Anr Counsel for Petitioner :- Akshat Srivastava Counsel for Respondent :- C.S.C,Altaf Mansoor,Ashok Kumar Pandey Hon’ble Dr. Devendra Kumar Arora,J.
Hon’ble Alok Mathur,J.
(Delivered by Hon’ble Alok Mathur, J.) 1. Heard Sri Prashant Chandra, Senior Advocate assisted by Sri Akshat Srivastava, learned counsel for the petitioner as well as Sri Raghvendra Kumar Singh learned Advocate General assisted by Sri Altaf Mansoor, learned counsel for the respondents.
2. The petitioner has invoked the writ jurisdiction of this Court being aggrieved by the orders dated 26/02/18 and 27/02/2018 passed by the respondent no.2 thereby rejecting the request of the petitioner to return the bid bond of Rs. 73.86 crores and also invoking the bank guarantee given by the petitioner along with submission of the bid to set up a power plant and to supply power to the State of UP.
3. Uttar Pradesh Power Corporation Limited (hereinafter referred to as “the UPPCL”) had issued notices inviting tenders on 10/05/2010 which was widely circulated by uploading it on the Internet and publishing it in the national newspapers. The respondents had also uploaded “Request for Proposal” (hereinafter referred to as “the RFP”) document on 10/05/2010, however, on account of amendment, the amended RFP was uploaded on 26/08/2010. The RFP was issued by the UPPCL on Behalf of the distribution licensees of the state of UP and the time period for which power was to be supplied was prescribed as 25 years.
4. The RFP which was part of the standard document mentions that the bidders will have to furnish an irrevocable and unconditional bank guarantee along with the bid. The bank guarantee was to be calculated @3 lakhs/MW of the bid. The petitioner on 09/10/2010 submitted its bid for power supply of 2456 MW to the respondent.
5. The petitioner being ‘L-2’ had quoted levelised tariff of Rs. 3.702/unit was declared successful, and a Letter of Intent for procurement of 2456 MW power from 3960 MW Chitrangi Thermal Power Project was issued on 06/05/2011. The said letter of intent indicated that it was in accordance with Clause 3.5.8 of the RFP document. The petitioner unconditionally accepted the letter of intent on 13/05/2011. The bank guarantees submitted by the petitioner along with the bid were valid till 10/03/2011 with additional claim period of 30 days, as within the said period ‘LOI’ had to be issued and a formal contract had to be entered into between respondent no.2 and the petitioner. The petitioner being the successful bidder, was required to provide a valid Contract Performance Guarantee and to execute the ”Power Purchase Agreement’ (hereinafter referred to as PPA) which was to be completed within a period of thirty days. The respondent no.2 requested the petitioner vide letters dated 31/01/2011, 26/02/2011, and 26/04/2011 to extend the validity of the bid as well as the bid bond and the petitioner willingly extended the validity of the bid bond.
6. The petitioner had proposed to set up Chitrangi Power Plant in the State of Madhya Pradesh within a period of four years from the date of signing the papers prescribed as per RFP .
7. The petitioner thereafter by means of letter dated 29/09/2011 requested for removal of the period of supply from the alternate generation source. The time period for supplying the power from the date of generation source was provided under Clause 4.6 and 4.8.1 of the PPA and therefore approval was required to be taken from the Regulatory Commission for any change to be made in the PPA, and therefore the respondent no.2 moved the Uttar Pradesh Electricity Regulatory Commission (hereinafter referred to as “the UPERC”). On 24/02/2012 the UPERC, passed an order in Petition No. 759 of 2011, finally rejecting the plea to permit the petitioner to supply power form alternative sources to respondent no.2. The UPERC observed that the petitioner had unconditionally accepted the letter of intent and the bidding process has been completed and now only adoption of tariff as per Section 63 of the Act remains to be done. Hence such plea of UPPCL cannot be accepted and therefore the petition was dismissed.
8. In September 2012, a PIL was filed before the Hon’ble Supreme Court being Writ Petition (Civil) No. 120 of 2012, challenging the various aspects of implementation of the Mines and Minerals (Development and Regulation) Act, 1957.
9. On 25/08/2014 the Hon’ble Supreme Court passed judgement and order in the aforesaid writ petition followed by order dated 24/09/2014, reported in (2014) 9 SCC 516 whereby the Hon’ble Apex Court cancelled allocation of coal blocks which were based on recommendations made by the screening committee from 14/07/1993 and the allocation made through Government dispensation route.
10. Counsel for petitioner contends that on account of the aforesaid judgment, the petitioner was unable to use surplus coal, from Moher, Moher-Amlohri Extension and Chhatrasal Coal Blocks for Chitrangi Power Project. It has also been pointed out that in compliance of the orders passed by the Hon’ble Supreme Court, the Government of India vide notification dated 07/05/2015 cancelled its earlier notification dated 17/02/2010 which permitted use of surplus coal from Moher-Amlohri Extension and Chhatrasal Coal blocks to Sasan Ultra Mega Power Project for Chitrangi Power Project. It is due to the consequence of the aforesaid judgement of the Apex Court, petitioner was unable to fulfill the conditions of the tender and the Letter of Intent issued by respondent no.2 stands frustrated. In the background of the aforesaid development, the petitioner vide letters dated 19/06/2017 and 06/02/2018 informed the respondents that in context of the bid dated 09/10/2010 and Letter of Intent dated 06/05/2011 that the respondents need to return the bond furnished by him.
11. W hen no action was taken on the aforesaid representation, the petitioner preferred a writ petition being Writ Petition No.16742 of 2017 before this court, which was disposed of by means of order dated 27/07/2017, on the statement of the Counsel for the respondent Corporation that the matter has been sent for approval to the State government, and if the decision taken by the Board/State Government is adverse to the petitioners, they shall communicate the same to them immediately thereafter and, till its communicated, they would not take any further steps including invoking of bank guarantee.
12. It has been submitted that respondents by the impugned orders dated 26/02/2018 and 27/02/2018, rejected the representation made by the petitioner and invoked the bank guarantee in an arbitrary manner causing serious prejudice to them. Aggrieved by the aforesaid order of rejecting their representation and invoking the bank guarantee, the petitioner has approached this Court by means of instant writ petition.
13. Rejection of representation by the respondents has been challenged by the petitioner on the following grounds :
A. The availability of coal constituted the fundamental and underlying premise of the petitioner’s bid, which stood frustrated by operation of the order of the Hon’ble Supreme Court and the notification of surplus coal and therefore the intention expressed in the said LOI was not possible to be given effect to.
B. There was no concluded contract between the petitioner and the respondent’s, and there was no provision in the LOI for damages, and the petitioner was entitled to withdraw from the bid, and therefore the respondents could not invoke the bid security and retain the same as a measure of penalty.
C. The bid money could not have been retained by the respondents as there was no breach of any clause of the contract; and D. The validity of the bid period was 120 days and time being the essence of the contract, the bid security could not be invoked after the said period.
14. Rebutting the allegations of the petitioner, Sri Raghvendra Singh, Senior Advocate appearing for the respondents raised a preliminary objection regarding maintainability of the writ petition and submitted that the dispute raised by the petitioner is purely contractual in nature and as such the writ petition is not maintainable under Article 226 of the Constitution of India.
15. As regard to the contention raised by the petitioner regarding frustration of contract. It was submitted that the petitioner had the choice of fuel which would run the power plant, and just because one of the sources i.e coal was not available to them subsequent to the judgement of the Hon’ble Supreme Court, the contract could not be said to have been frustrated, it was further contended that the petitioners themselves had indicated that they would also be using imported coal from Indonesia, and admittedly there was no restriction on availability of the said coal and therefore in the facts and circumstances of the case the petitioners could not plead frustration of the contract to escape the liability of performing their terms under the contract. They further contended that the bank guarantee was a separate and independent contract from the PPA and the respondents have rightly encashed bank guarantees as the petitioner has resiled from signing the PPA and submitting the Contract Performance Guarantee as per conditions laid down in the Letter of Intent and the RFP document.
16. On the basis of pleadings, the following issues emerge for consideration by this Court:-
1. Whether the writ petition under Article 226 of the Constitution of India is maintainable against invocation of the Bank Guarantee, with regard to the bid security given by the petitioner to the respondent?
2. Whether the notification by the Government of India, in pursuance of the judgment of the Hon’ble Apex Court In the Case of Manohar Lal Sharma (supra) made it impossible for the petitioner to comply with the terms of the contract, and can doctrine of frustration be invoked by them so as to prevent the respondents from encashing the bank guarantees, and to that extent the impugned letters dated 26/02/2018 and 27/02/2018 deserve to be quashed?
3. Whether time was the main essence the contract, and the extension of the bid bond and the bank guarantee by the petitioner on the request of the respondent for more than five years, dis-entitled the respondent from invoking the bank guarantee?
17. Elaborating the assertions with regard to maintainability of the writ petition. It has been argued that the present dispute would fall within the realm of private law, as it relates to a contractual dispute, as the rights and obligations between the petitioner and the respondents flow from the various agreements entered into between them and therefore, the writ petition under article 226 of the Constitution of India, cannot be maintained. To consider this issue, we will have to determine the nature of the agreements as to whether same was in relation to personal interest of the parties or the Corporation, being an instrumentality of the State, has entered into such agreement in public interest. 18. The Ministry of Power, Government of India issued guidelines for procurement of power through competitive bidding under section 63 of the Electricity Act, 2003. Section 63 provides that notwithstanding anything contained in Section 62, the appropriate commission shall adopt the tariff if such tariff has been determined through transparent process of bidding in accordance with the guidelines issued by the Central government. The Central Government has issued guidelines for determination of tariff by bidding process for procurement of power by distribution licensees. The aforesaid guidelines, have provided, in detail about the procedure for invitation of the bid, the tariff structure, capacity charges, energy charges, the bidding process, bid submission and evaluation, contract award in conclusion. The respondent no.2 issued a “Request For Proposal” notification for supply of power in accordance with the aforesaid guidelines. The entire procedure has been set out in accordance with the provisions contained in the Electricity Act, 2003. Clause 16 of the guidelines provides that in case of any deviation from same shall be subject to the prior approval of the Appropriate Commission. The Appropriate Commission shall decide on modification to the bid document within a reasonable time not exceeding 90 days.
19. In these circumstances, it is clear that the request for proposal, Power purchase agreements and all the contracts entered into between the Power Corporation and the licensee should be in consonance with Section 63 of the Electricity Act, 2003, and the tariff has to be determined through transparent process of bidding in accordance with the guidelines. Therefore, it can be safely concluded that the entire process is guided and controlled by the guidelines framed by the Central Government, and the contract entered into between the licensor and the licensee is more akin to a standard form of contract which has to pass the test laid down under Section 63 of the Electricity Act. In our considered opinion, the said contract is a formal contract which is strictly based on the guidelines issued by the Central Government, and no party can deviate from the said guidelines unless such deviation is approved by the appropriate Commission.
20. In view of the aforesaid position, we are of the view that the agreement entered between the Power Corporation and the licensee, cannot be said to be a purely private contract. Even the enormity of the project and the cost involved in building a power plant would have a public character element, looking into the fact that the contract was for supply of 2456 MW of power to the State of Uttar Pradesh, would be a project in public interest. 21. Our above view is fortified by the decision rendered by the Apex Court in the case of Shrilekha Vidyarthi (Kumari) v. State of U.P., (1991) 1 SCC 212 : 1991 SCC (L&S) 742, wherein the Court observed as follows:-
“21.The Preamble of the Constitution of India resolves to secure to all its citizens justice, social, economic and political; and Equality of status and opportunity. Every State action must be aimed at achieving this goal. Part IV of the Constitution contains ”Directives Principles of State Policy’ which are fundamental in the governance of the country and are aimed at securing social and economic freedoms by appropriate State action which is complementary to individual fundamental rights guaranteed in Part III for protection against excesses of State action, to realise the vision in the Preamble. This being the philosophy of the Constitution, can it be said that it contemplates exclusion of Article 14 — non-arbitrariness which is basic to rule of law — from State actions in contractual field when all actions of the State are meant for public good and expected to be fair and just? We have no doubt that the Constitution does not envisage or permit unfairness or unreasonableness in State actions in any sphere of its activity contrary to the professed ideals in the Preamble. In our opinion, it would be alien to the constitutional scheme to accept the argument of exclusion of Article 14 in contractual matters. The scope and permissible grounds of judicial review in such matters and the relief which may be available are different matters but that does not justify the view of its total exclusion. This is more so when the modern trend is also to examine the unreasonableness of a term in such contracts where the bargaining power is unequal so that these are not negotiated contracts but standard form contracts between unequals.
22.There is an obvious difference in the contracts between private parties and contracts to which the State is a party. Private parties are concerned only with their personal interest whereas the State while exercising its powers and discharging its functions, acts indubitably, as is expected of it, for public good and in public interest. The impact of every State action is also on public interest. This factor alone is sufficient to import at least the minimal requirements of public law obligations and impress with this character the contracts made by the State or its instrumentality. It is a different matter that the scope of judicial review in respect of disputes falling within the domain of contractual obligations may be more limited and in doubtful cases the parties may be relegated to adjudication of their rights by resort to remedies provided for adjudication of purely contractual disputes. However, to the extent, challenge is made on the ground of violation of Article 14 by alleging that the impugned act is arbitrary, unfair or unreasonable, the fact that the dispute also falls within the domain of contractual obligations would not relieve the State of its obligation to comply with the basic requirements of Article 14. To this extent, the obligation is of a public character invariably in every case irrespective of there being any other right or obligation in addition thereto. An additional contractual obligation cannot divest the claimant of the guarantee under Article 14 of non-arbitrariness at the hands of the State in any of its actions.”
21. The respondent no.2 Uttar Pradesh Power Corporation Ltd is a Government Company, and is fully controlled by the State of U.P. and is therefore an instrumentality of the State as per Article 12 of the Constitution of India, and hence is amenable to the writ jurisdiction of this Court, and the impugned orders have been passed by Respondent no. 2, who is the officer of the Government Company and for this reason the writ petition would also be maintainable.
22. In the case of ABL International Ltd vs Export Credit Guarantee Corporation of India (2004) 3 SCC 553 the apex court dealt with the question relating to matters of purely contractual nature in para 22 & 23 in the following manner:
“22.We do not think the above judgment in VST Industries Ltd. (supra) supports the argument of the learned counsel on the question of maintainability of the present writ petition. It is to be noted that VST Industries Ltd. against whom the writ petition was filed was not a State or an instrumentality of a State as contemplated under Article 12 of the Constitution, hence, in the normal course, no writ could have been issued against the said industry. But it was the contention of the writ petitioner in that case that the said industry was obligated under the concerned statute to perform certain public functions, failure to do so would give rise to a complaint under Article 226 against a private body. While considering such argument, this Court held that when an authority has to perform a public function or a public duty if there is a failure a writ petition under Article 226 of the Constitution is maintainable. In the instant case, as to the fact that the respondent is an instrumentality of a State, there is no dispute but the question is: Was first respondent discharging a public duty or a public function while repudiating the claim of the appellants arising out of a contract ? Answer to this question, in our opinion, is found in the judgment of this Court in the case of Kumari ShriLekha Vidyarthi & Ors. vs. State of U.P.& Ors. [1991 (1) SCC 212] wherein this Court held :
“The impact of every State action is also on public interest. It is really the nature of its personality as State which is significant and must characterize all its actions, in whatever field, and not the nature of function, contractual or otherwise which is decisive of the nature of scrutiny permitted for examining the validity of its act. The requirement of Article 14 being the duty to act fairly, justly and reasonably, there is nothing which militates against the concept of requiring the State always to so act, even in contractual matters.”
23. It is clear from the above observations of this Court, once State or an instrumentality of State is a party to the contract, it has an obligation in law to act fairly, justly and reasonably which is the requirement of Article 14of the Constitution of India. Therefore, if by the impugned repudiation of the claim of the appellants the first respondent as an instrumentality of the State has acted in contravention of the above said requirement of Article 14 then we have no hesitation that a writ court can issue suitable directions to set right the arbitrary actions of the first respondent. In this context, we may note that though the first respondent is a company registered under the Companies Act, it is wholly owned by the Government of India. The total subscribed share capital of this company is 2,50,000 shares out of which 2,49,998 shares are held by the President of India while one each share is held by the Joint Secretary, Ministry of Commerce and Industry and Officer on Special Duty, Ministry of Commerce and Industry respectively.”
23. The Apex court in the aforesaid case of ABL International Ltd. (supra) summarised the discussion as follows:-
“27.From the above discussion of ours, the following legal principles emerge as to the maintainability of a writ petition:
(a) In an appropriate case, a writ petition as against a State or an instrumentality of a State arising out of a contractual obligation is maintainable.
(b) Merely because some disputed questions of fact arise for consideration, same cannot be a ground to refuse to entertain a writ petition in all cases as a matter of rule.
(c) A writ petition involving a consequential relief of monetary claim is also maintainable.
28.However, while entertaining an objection as to the maintainability of a writ petition under Article 226 of the Constitution of India, the court should bear in mind the fact that the power to issue prerogative writs under Article 226 of the Constitution is plenary in nature and is not limited by any other provisions of the Constitution. The High Court having regard to the facts of the case, has a discretion to entertain or not to entertain a writ petition. The Court has imposed upon itself certain restrictions in the exercise of this power. (SeeWhirlpool Corpn.v.Registrar of Trade Marks [(1998) 8 SCC 1] .) And this plenary right of the High Court to issue a prerogative writ will not normally be exercised by the Court to the exclusion of other available remedies unless such action of the State or its instrumentality is arbitrary and unreasonable so as to violate the constitutional mandate of Article 14 or for other valid and legitimate reasons, for which the Court thinks it necessary to exercise the said jurisdiction.”
24. In recent past the Hon’ble Supreme Court had an occasion to consider the issue in detail in the case of Joshi Technologies International Inc vs Union of India and Others (2015) 7 SCC 728, in which the Court held :
“70. Further, the legal position which emerges from various judgments of this Court dealing with different situations/aspects relating to contracts entered into by the State/public authority with private parties, can be summarised as under:
70.1. At the stage of entering into a contract, the State acts purely in its executive capacity and is bound by the obligations of fairness.
70.2. State in its executive capacity, even in the contractual field, is under obligation to act fairly and cannot practise some discriminations.
70.4. Writ jurisdiction of the High Court under Article 226 of the Constitution was not intended to facilitate avoidance of obligation voluntarily incurred.
70.5. Writ petition was not maintainable to avoid contractual obligation. Occurrence of commercial difficulty, inconvenience or hardship in performance of the conditions agreed to in the contract can provide no justification in not complying with the terms of contract which the parties had accepted with open eyes. It cannot ever be that a licensee can work out the licence if he finds it profitable to do so: and he can challenge the conditions under which he agreed to take the licence, if he finds it commercially inexpedient to conduct his business.
70.6. Ordinarily, where a breach of contract is complained of, the party complaining of such breach may sue for specific performance of the contract, if contract is capable of being specifically performed. Otherwise, the party may sue for damages.
70.7. Writ can be issued where there is executive action unsupported by law or even in respect of a corporation there is denial of equality before law or equal protection of law or if it can be shown that action of the public authorities was without giving any hearing and violation of principles of natural justice after holding that action could not have been taken without observing principles of natural justice.
70.8. If the contract between private party and the State/instrumentality and/or agency of the State is under the realm of a private law and there is no element of public law, the normal course for the aggrieved party, is to invoke the remedies provided under ordinary civil law rather than approaching the High Court under Article 226 of the Constitution of India and invoking its extraordinary jurisdiction.
70.9. The distinction between public law and private law element in the contract with the State is getting blurred. However, it has not been totally obliterated and where the matter falls purely in private field of contract, this Court has maintained the position that writ petition is not maintainable. The dichotomy between public law and private law rights and remedies would depend on the factual matrix of each case and the distinction between the public law remedies and private law field, cannot be demarcated with precision. In fact, each case has to be examined, on its facts whether the contractual relations between the parties bear insignia of public element. Once on the facts of a particular case it is found that nature of the activity or controversy involves public law element, then the matter can be examined by the High Court in writ petitions under Article 226 of the Constitution of India to see whether action of the State and/or instrumentality or agency of the State is fair, just and equitable or that relevant factors are taken into consideration and irrelevant factors have not gone into the decision-making process or that the decision is not arbitrary.
70.10. Mere reasonable or legitimate expectation of a citizen, in such a situation, may not by itself be a distinct enforceable right, but failure to consider and give due weight to it may render the decision arbitrary, and this is how the requirements of due consideration of a legitimate expectation forms part of the principle of non-arbitrariness.
70.11. The scope of judicial review in respect of disputes falling within the domain of contractual obligations may be more limited and in doubtful cases the parties may be relegated to adjudication of their rights by resort to remedies provided for adjudication of purely contractual disputes.”
25. Here it would be relevant to refer the observations made by the Apex Court in the case of Pradeep Kumar Biswas v. Indian Institute of Chemical Biology, (2002) 5 SCC 111 : 2002 SCC (L&S) 633 at page 129, wherein the Court held :
“23.From this perspective, the logical sequitur is that it really does not matter what guise the State adopts for this purpose, whether by a corporation established by statute or incorporated under a law such as the Companies Act or formed under the Societies Registration Act, 1860. Neither the form of the corporation, nor its ostensible autonomy would take away from its character as “State” and its constitutional accountability under Part III vis-à-vis the individual if it were in fact acting as an instrumentality or agency of the Government.”.
26. In a recent judgment in the case of M/S Surya Constructions vs The State Of Uttar Pradesh and others – CIVIL APPEAL NO. 2610 of 2019 (decided on 8 March, 2019), the Hon’ble Supreme Court observed that it is well settled where the State behaves arbitrarily, even in the realm of contract, the High Court could interfere under Article 226 of the Constitution of India, thereby clearly holding that a writ petition would be maintainable in certain cases relating to contractual disputes.
27. Applying the principles enunciated by the Apex Court to the facts of the present case, it emerges that the contract for power supply of 2456 MW which entailed setting up of a power plant, and for the said purpose the entire proceedings have been conducted in accordance with the provision of The Electricity Act 2003,including the detailed guidelines framed by the Central Government. From the perusal of the guidelines, it also emerges that the licensee also does not have any freedom of changing the terms and conditions of the contract which may deviate from the RFP document, In the event a deviation is proposed, the same has to be approved by the appropriate Commission, and to that extent even the freedom of contract is extremely limited. The contract which is under consideration, entails supply of nearly 3000 MW power to the State of Uttar Pradesh, and also setting up of a power plant. The agreement between the instrumentality of State and the licensee in this regard cannot be considered to be just a contract between two private independent contracting parties and therefore, in light of the aforesaid, we have no hesitation in holding that contract of such a nature would have a public law element which is controlled and guided by the relevant statutory provisions and a dispute pertaining to the interpretation or otherwise of such a contract would be amenable to the writ jurisdiction of the High Court under Article 226 of the Constitution of India and hence writ petition would be maintainable at the instance of the petitioner.
28. The 2nd issue raised by the petitioner relates to the frustration of contract, claiming that subsequent to the judgement of the Hon’ble Supreme Court in the case of Manahor Lal Sharma (supra), it was impossible to perform the contract due to lack of availability of coal. In the impugned letter dated 26/02/2018 it is mentioned that the request of the petitioner to withdraw bid for the power supply of 2456 MW without any liability to any other parties and a further request to return the bid bond of Rs. 73.86 crores in original being impermissible under the terms of contract, cannot be acceded to and has been rejected. In the letter dated 27/02/2018, the respondent no.2 has indicated that despite repeated requests made to the petitioner for submission of CPG (Contract Performance Guarantee) and execution of PPA and other RFP documents along with the extended duration provided thereof by the respondent, the petitioner has neither submitted the CPG or executed the PPA and, therefore, it has been decided to cancel the Letter of Intent and invoke the bid bond of Rs. 73.86 crores. Both the aforesaid orders have been challenged by the petitioner.
29. Before proceeding any further it would be relevant to point out that in the year 2006, M/s Power Finance Corporation Ltd, a nodal agency of Government of India, for implementation of Ultra Mega Power Projects (UMPP) had incorporated special purpose vehicle by the name of SASAN Power Ltd which was to set up the Sasan Ultra Mega Power Project the stumbling captive coal mines. The Moher, Moher Amlohri extension and Chhatarasal coal blocks were allocated to SASAN power Ltd for the purpose of development and implementation of the coalfield Ultra Mega Power Project in the state of Madhya Pradesh. The petitioner was successful bidder for SASAN Ultra Mega Power Project to be developed and implemented by SASAN Power Ltd, a special purpose vehicle incorporated by Power Finance Corporation Ltd. Therefore, the entire shareholding of SASAN Power Ltd was transferred to the petitioner by a share purchase agreement dated 07/08/2007. It is that Moher Amlohri extension and Chhatarasal coal blocks were specifically allocated for the SASAN Power Ltd having an installed capacity of 4000 MW.
30. Chitrangi Power Private Limited was a Company incorporated by the petitioner for setting up a thermal power plant in the state of Madhya Pradesh. The said power plant was to be set up by the petitioner solely on its own initiative and the petitioner had submitted its bid for supply of 2456 MW of power on the basis of the said power plant proposed to be set up by the petitioner.
31. The Request for Proposal issued by the respondent no.2 in August 2010 through its Chief Engineer (Planning), inviting interested companies to participate in the bidding process for selection of successful bidder for procurement of power for long term through tariff-based competitive bidding in accordance with the “guidelines for determination of tariff by bidding process for procurement of power by distribution licenses”, issued by Government of India, Ministry of Power, under Section 63 of the Electricity Act, 2003, as amended from time to time.
32. The petitioner while submitting the bid bond had indicated his intentions for supply of coal-based power, generated through use of surplus coal from captive coal mines of SASAN Power Ltd in Chitrangi power project to be developed by Chitrangi Power Projects Ltd. The petitioner had necessary approvals in place to use surplus coal from the captive coal mines of SASAN Power Ltd in Chitrangi Power Project. On 17/02/2010, the Ministry of Coal, Government of India issued a notification under Section 3 of the Coal Mines (Nationalization) Act, 1973 and allowed supply of surplus quantity of coal up to a maximum of 9 million tonnes per annum (MTPA) from the coal mines of Moher, Moher-Amlohri Extension and Chhatrasal allocated to SASAN UMPP. Much emphasis was laid to the definition of “Fuel” as provided in the Clause 5 of the RFP document which reads as under:
“Fuel: the choice of fuel, including, but not limited to coal or gas, its sourcing and transportation is left entirely to the discretion of the bidder. The successful bidder (s) shall bear a complete responsibility to tie up the fuel linkage and infrastructure requirements of your transportation, handling and storage.”
33. Further, it is necessary to refer Clause 18.104.22.168 of the RFP document which provides for Consensus, Clearances and Permits, and in sub-Clause (b) the following is provided:
I. in case of domestic coal, the Bidder shall have made firm arrangements for fuel tie-up either by way of mine allocation or fuel linkage. Such arrangements shall be for the quantity of fuel, required up to the phase of power station from which the power is proposed to be supplied, at Normative Availability for the term of the PPA.
In case the bidder proposes use of blended coal, the Bidder shall be required to meet the criteria separately for domestic & imported coal as provided in the Qualifying Requirements in the ratio of the blending proposal.
II. In case of imported coal, the petitioner shall have either acquired mines having proven reserves for at least fifty percent (50%) of the quantity of coal required to generate the power from the power station at Normative Availability for the total installed capacity OR shall have fuel supply agreement for at least fifty percent (50%) of the quantity of fuel required for a term of at least five (5) years or the term of the PPA ( whichever is less) to generate power from the generation source for the total installed capacity for the term of the PPA.”
34. The petitioner on the strength of the notification dated 17/02/2010 of Government of India, whereby they had been allowed to supply surplus quantity of coal from Moher, Moher-Amlohri Extension and Chhatrasal to the Chitrangi Power Project, had submitted their bid. They had identified coal as their source of fuel with blend ratio of 60.47% domestic coal to 39.53% of imported coal.
35. The main plank of the petitioner’s argument regarding impossibility to perform the contract stems from the judgment of the Hon’ble Apex Court in Writ Petition (Civil) No. 120 of 2012 in the case of Manohar Lal Sharma versus Union of India and others reported in (2014) 9 SCC 516. In the said judgement the Hon’ble Apex Court had cancelled allocation of coal blocks which are based on recommendations made by the screening committee from 14/07/1993 and allocation made through Government Dispensation Route.
36. Clause 2.6.1 of the RFP document provides that:-
“The bidder shall make independent enquiry and satisfy itself with respect to all the requirements information inputs, conditions, and circumstances and factors that may have any effect on its bid. Once the bidder has submitted the bid, the bidder shall be deemed to have examined the laws and regulations in force in India, the grid conditions, and fixed its price taking into account all such relevant conditions and also the risk, contingencies and other circumstances which may influence or affect the supply of power. Accordingly, the Bidder acknowledges that, on being selected as successful bidder, it shall not be relieved from any of its obligations under the RFP document nor shall be entitled to any extension of time for commencement of supply or financial compensation for any reason whatsoever.”
37. From perusal of the aforesaid provisions contained in the RFP document, it was the bidder who was responsible for taking a decision on the choice of fuel for the power plant in order to supply electricity. The petitioner after taking into consideration all the relevant facts, as well as the allocation of coal to its other power plants it sought for and was granted approval to utilise the surplus coal from Moher, Moher-Amlohri Extension and Chhatrasal allocated to SASAN UMPP to the Chitrangi Power Plant. The petitioner had full discretion in the matter of choice of fuel, and taking into account all the factors they had given a proposal for utilisation of surplus coal from the captive mines allocated to Sasan Power Plant and also imported coal. However, pursuant to the judgement of the Hon’ble Apex Court in the case of Manohar Lal Sharma by means of notification dated 07/05/2015, the Chattarsal coal block was also de-allocated from Sasan UMPP. In the letter dated 27/10/2009, petitioners themselves had submitted the details with regard to meeting of the qualification requirements described in clause 22.214.171.124 of the RFP document and had submitted that blended coal in the proportion of 60.47% as domestic coal, and 39.53% as imported coal would be utilised by them for the power station. Be that as it may, but no satisfactory answer was given by the petitioner when it was queried that the said judgment did not have any impact on the import of coal which was also choice of fuel stated by the petitioner in its bid document. The petitioner has not pleaded or submitted that it was not open for them to utilise the imported coal for the power plant in order to supply electricity to the state of Uttar Pradesh, and also that they could not use any other source of fuel. Further as per the RFP, the source of fuel is not specific and it is the discretion of the bidder, who is only required to inform and mention the source of fuel and he is free to procure fuel from any source and in this regard it is the complete responsibility of the bidder himself. In the case of Energy Watchdog vs Central Electricity Regulatory Commission and others reported in (2017) 14 SCC 80, the Supreme Court had an occasion to consider similar controversy wherein in paragraph number 38 and 40, the Court held :-
“38.This view of the law has been echoed in Chitty on Contracts, 31st Edn. In Para 14-151 a rise in cost or expense has been stated not to frustrate a contract. Similarly, in Treitel on Frustration and Force Majeure, 3rd Edn., the learned author has opined, at Para 12-034, that the cases provide many illustrations of the principle that a force majeure clause will not normally be construed to apply where the contract provides for an alternative mode of performance. It is clear that a more onerous method of performance by itself would not amount to a frustrating event. The same learned author also states that a mere rise in price rendering the contract more expensive to perform does not constitute frustration.”
“40.It is clear from the above that the doctrine of frustration cannot apply to these cases as the fundamental basis of the PPAs remains unaltered. Nowhere do the PPAs state that coal is to be procured only from Indonesia at a particular price. In fact, it is clear on a reading of the PPA as a whole that the price payable for the supply of coal is entirely for the person who sets up the power plant to bear. The fact that the fuel supply agreement has to be appended to the PPA is only to indicate that the raw material for the working of the plant is there and is in order. It is clear that an unexpected rise in the price of coal will not absolve the generating companies from performing their part of the contract for the very good reason that when they submitted their bids, this was a risk they knowingly took. We are of the view that the mere fact that the bid may be non-escalable does not mean that the respondents are precluded from raising the plea of frustration, if otherwise it is available in law and can be pleaded by them. But the fact that a non-escalable tariff has been paid for, for example, in the Adani case, is a factor which may be taken into account only to show that the risk of supplying electricity at the tariff indicated was upon the generating company.”
38. It may be added that the respondents in their short counter affidavit have also brought on record a similar instance for procurement of 6000 MW of power wherein M/s RKM Power Gen Ltd, had submitted the bid to supply 350 MW of power and specified primary fuel source as domestic captive coal mine located at Fatehpur East, Mond-Raigarh area, have commenced supplying the power despite the fact that the coal linkages were affected by the judgement of the Hon’ble Supreme Court dated 25/08/14 as coal blocks were being sourced by both the aforesaid generators were cancelled.
39. Applying the aforesaid principles to the facts of the instant case, we find that the RFP document provides for alternative choices of fuel, any of which could have been used by the petitioner. We have already observed earlier that the petitioner had an option to utilise imported coal and the choice of the fuel was not limited only to coal from certain blocks which had become unavailable due to the intervention of the judgment passed by the Hon’ble Apex Court. We are satisfied that in the light of the circumstances narrated by the petitioner regarding the consequences of the judgement of the Hon’ble Apex Court and also looking at the various provisions of the guidelines and the RFP documents, the case of the petitioner regarding frustration is not made out as the setting of the power plant had not become impossible due to non-availability of the coal from the proposed source and therefore, the doctrine of frustration is not available to the petitioner in the present case.
40. It is therefore borne out from the record that the petitioner would not be entitled to escape from their liability to enter into the Power Purchase Agreement and submit the amount fixed for performance guarantee, consequent to their being selected as the successful bidder. In the backdrop of the aforesaid discussions, we are not satisfied with the plea raised by the petitioner that it had become impossible for them to perform the contract and same being misconceived is hereby rejected.
41. Further, a perusal of the RFP document clearly indicates that the bidders were required to furnish an irrevocable and unconditional bank guarantee along with the bid. The bank guarantee was calculated at the rate of 3 lakhs/MW of that bid. Bid bond has been described in the RFP as “shall mean the unconditional and irrevocable bank guarantee” to be submitted along with the bid by the bidder under clause 2.12 of this RFP, as per the prescribed format. Clause 2.12 .1 provides:-
“2.12.1 Each bidder shall submit the bid accompanied by the bid bond, as per format issued by any of the banks listed in format 5.8. In the case of a consortium, the Lead Member shall furnish the bid bond as stipulated in the RFP, on behalf of the consortium members as per the consortium agreement. In case the bidder is offering capacity from more than one generation source, the Bid Bond shall be submitted separately for each capacity. The bid bond shall be valid for a period of thirty (30) days beyond the validity of the bid.
2.12.2 The bid bond , may be invoked by the Procurer/Authorised Representative or its authorised representative, without any notice, demure or any other legal process upon occurrence of any of the following:
* In case the successful bidder is a bidding company choosing to incorporate a project company and in case of a bidding consortium: Failure to incorporate the project company as a legal entity within fifteen (15) days of the issue of letter of intent, or, * Failure to furnish the Contract Performance Guarantee as per clause 2.13: or * Failure to execute RFP document is subject to the provision of clause 2.2 .11 or * Bidder submitting any wrong information or making any misrepresentation in bid as mentioned in clause 2.5”
42. Clause 2.13 which provides for Contract Performance Guarantee (CPG) is as follows:-
“Within thirty (30) days of issue of letter of intent, the successful bidder(s) either on his/their own behalf or on behalf of the seller, shall provide separately to each of the procurers, the contract performance guarantee calculated on the basis of Rs. 30 lakhs/MW of the total contracted capacity of the successful bidder as prescribed in format 5.7. The CPG provided to the procurer shall be allocated in proportion to their respective contracted capacity. In case of successful bidder being a bidding consortium, the lead member shall be responsible for ensuring the submission of the CPG on behalf of all the consortium members. The contract performance guarantee shall be initially valid for a period of 3 months after the scheduled delivery date and thereafter shall be dealt with in accordance with provisions of the PPA. The contract performance guarantee shall be issued by any of the banks listed in format 5.8.”
43. As per the terms and conditions of the RFP document the petitioner submitted a bank guarantee dated 30/07/2011 of Canara Bank, Mumbai. The stand of the respondent is that the bank guarantee is independent of contract and not subject to the PPA and the same was likely to be invoked as per the terms and conditions mentioned in the bank guarantee itself. It has also been urged that the letter of intent dated 06/05/2011 also provides for invocation of the bid bond. For the sake of convenience the said letter is quoted below:-
“Dear Sir, With cited reference we are pleased to inform you that you have been declared a successful bidder and UPPCL has accepted the offer submitted to us for supply of 2456 MW from 3960 MW Chitrangi thermal power generation source in state of Madhya Pradesh.
It is also informed that we should this letter of intent (LOI) in accordance with clause 3.5.8 of RFP document. Clause 3.5.8 is reproduced below-
“the letter of intent shall be issued to all such successful bidder selected as a provisions of this clause 3.5”
Please submit contract performance guarantee (CPG) and convey a suitable date for signing of PPA in accordance with the clause 2.13 and clause 2.2.9 of the RFP document respectively.
As per clause 3.5.11 if any of the conditions mentioned in clause 2.2.8 and 2.2.9 has not been fulfilled, authorised representative shall be entitled to invoke the bid bond.
As a token of acceptance please record on one copy of the LOI, “Accepted Unconditionally” under the signature of the authorised signatory of your company and return it to UPPCL as mentioned in clause 3.5 .10.”
44. Cause 3.5 .11 of the RFP document further provides:-
“3.5.11-if the successful bidder, to whom letter of intent has been issued does not fulfil any of the conditions specified in clause 2.2.8 and 2.2.9 the procurer/authorised representative reserves the right to annul the award of the letter of intent of such successful bidder. Further, in such a case the provisions of clause 2.5 (b) shall apply.”
45. A bare reading of the aforesaid provisions and letter would indicate that by means of letter dated 6th May 2011, the respondent no.2 communicated to the petitioner that he has been declared as the successful bidder for power supply of 2456 MW from the Chitrangi Power Plant. This letter further states that the Contract Performance Guarantee (CPG) has to be signed within the time period prescribed in the RFP documents, which according to clause 2.13 is 30 days of issue of Letter of Intent, failing which the bid bond would be invoked as per clause 3.5 .11 and would also lead to annulling of the letter of intent of such successful bidder. Admittedly, the RFP documents were not signed nor the CPG was submitted within the prescribed time schedule. The petitioner instead of submitting the contract performance guarantee and signing the PPA sought flexibility in the Supplying of Power from Alternative Generation Source and as the said condition was a deviation from the bidding condition, the application was made by UPPCL to the regulatory Commission which was ultimately rejected.
46. The bank guarantee submitted by the petitioner was repeatedly extended at the request of the respondent no.2 and one of such letters dated 23/01/2012 submitted that the bank guarantee is going to expire on 31/01/2012 and the request is made for the extension up to 30/04/2012 with a claim period of one month as matter was under consideration with UPERC and will take some more time. By means of letter dated 30/01/2012, the petitioner duly extended the validity of the bid up to 30/04/2012 with a claim period of one month. The bank guarantees were continuously extended by the petitioner at the request of the respondent without raising any objection.
47. By means of letter dated 3rd November 2015 the petitioner’s while extending the bank guarantee, informed the respondent that by means of notification dated 7th May, 2015, the Government of India, Ministry of Coal has cancelled the enabling notification, and as such the bid stands fundamentally altered for reasons beyond control and hence, the project has been rendered impossible. It is further submitted that in view of the above force majeure events, effects on the feasibility of the project, a request was made to withdraw the bid for supply of 2456 MW power, without any liability to the parties and also requested to return the bid of Rs. 73.86/-crores, in original.
48. The respondents on the other hand have submitted that the petitioners have not made any construction of the power plant as proposed by them at Chitrangi and they were not serious with the bid, also the purpose of submission of the bid bond was only to stop such adventurism and speculation with the bid process. The petitioner having backed out from the bid, have deliberately delayed the whole process which has deprived the respondents from getting electricity and therefore, the fresh bid process had to be initiated and the respondents have been compelled to accept bids with weightage levelised tariff of Rs. 5.344 per unit and they have been compelled to pay an additional amount of Rs 8 crores per day which is an additional burden on the state of U.P for a period of 25 years.
49. Taking into consideration the entire bid process and the various conditions contained in the bank guarantee, Letter of Intent and the various provisions of the RFP document it is clear that the purpose of the bank guarantee was to ensure that the successful bidder enters into the Power Purchase Agreement and submits Contract Performance Guarantee within 30 days. The consequences of failure have also been provided for in the Letter of Intent dated 6/05/2011 and it has been provided that failure to furnish Contract Performance Guarantee and execute the RFP documents would lead to invocation of the bid bond. Clause 3.5.11 further provides that in any of the 2 aforesaid contingencies the letter of intent is also liable to be annulled. By means of the impugned order dated 26/02/2018 the request for permission to withdraw bid and return the bid bond has been rejected, and by means of subsequent letter dated 27/02/2018 it has been stated that despite repeated requests for submission of the CPG and execution of PPA and other RFP documents, the petitioner has neither submitted CPG or executed PPA and RFP documents and therefore, the respondents have decided to cancel the LOI issued to the petitioner and invoked the bid bond of 73.86 crores as per the rights available to them under clause 2.2 .11 and 2.1 22.
50. We have considered the arguments raised by the parties in detail and peruse the documents. In our view, the bank guarantee forms a separate agreement and is a complete contract in itself, which is fortified by the decision rendered by the Apex Court in the case of National Highways Authority of India v. Ganga Enterprises, (2003) 7 SCC 410, held:-
“9.In our view, the High Court fell in error in so holding. By invoking the bank guarantee and/or enforcing the bid security, there is no statutory right, exercise of which was being fettered. There is no term in the contract which is contrary to the provisions of the Indian Contract Act. The Indian Contract Act merely provides that a person can withdraw his offer before its acceptance. But withdrawal of an offer, before it is accepted, is a completely different aspect from forfeiture of earnest/security money which has been given for a particular purpose. A person may have a right to withdraw his offer but if he has made his offer on a condition that some earnest money will be forfeited for not entering into contract or if some act is not performed, then even though he may have a right to withdraw his offer, he has no right to claim that the earnest/security be returned to him. Forfeiture of such earnest/security, in no way, affects any statutory right under the Indian Contract Act. Such earnest/security is given and taken to ensure that a contract comes into existence. It would be an anomalous situation that a person who, by his own conduct, precludes the coming into existence of the contract is then given advantage or benefit of his own wrong by not allowing forfeiture. It must be remembered that, particularly in government contracts, such a term is always included in order to ensure that only a genuine party makes a bid. If such a term was not there even a person who does not have the capacity or a person who has no intention of entering into the contract will make a bid. The whole purpose of such a clause i.e. to see that only genuine bids are received would be lost if forfeiture was not permitted.
10.There is another reason why the impugned judgment cannot be sustained. It is settled law that a contract of guarantee is a complete and separate contract by itself. The law regarding enforcement of an “on-demand bank guarantee” is very clear. If the enforcement is in terms of the guarantee, then courts must not interfere with the enforcement of bank guarantee. The court can only interfere if the invocation is against the terms of the guarantee or if there is any fraud. Courts cannot restrain invocation of an “on-demand guarantee” in accordance with its terms by looking at terms of the underlying contract. The existence or non-existence of an underlying contract becomes irrelevant when the invocation is in terms of the bank guarantee. The bank guarantee stipulated that if the bid was withdrawn within 120 days or if the performance security was not given or if an agreement was not signed, the guarantee could be enforced. The bank guarantee was enforced because the bid was withdrawn within 120 days. Therefore, it could not be said that the invocation of the bank guarantee was against the terms of the bank guarantee. If it was in terms of the bank guarantee, one fails to understand as to how the High Court could say that the guarantee could not have been invoked. If the guarantee was rightly invoked, there was no question of directing refund as has been done by the High Court.”
51. Here, it would be useful to mention that the petitioner by its letter dated 3/11/2015 informed the respondents that the bid had become infructuous and the performance of the bid under the LOI had been rendered impossible for reasons beyond control and therefore, sought permission for withdrawal from the bid. Taking into consideration the totality of the circumstances, it appears that by the impugned order dated 26/02/2018, the respondents have rejected the request and thereafter vide letter dated 27/02/2018 invoked the bid bond. It may be pointed out here that the purpose of submitting the bank guarantee along with the bid was to ensure that the successful bidder enters into the Power Purchase Agreement and submits the Contract Performance Guarantee which is a further step towards execution of the contract for supply of power. The letter of intent and the RFP document clearly provides that in case the successful bidder does not sign the PPA documents or submit CPG then the respondents would be at liberty to annul the letter of intent and invoke the bank guarantee. In the present case the respondents have acted totally within the four corners of the provisions of the Letter of Intent and also in terms of the RFP document. The grounds of challenge for invocation of the bank guarantee are also extremely limited and it is not the case of the petitioner that the respondents have acted in any fraudulent manner in invoking the bank guarantee and the petitioner has not been able to show any provision in the contract by which the respondents would have been restrained from invoking the said bank guarantee or have acted in an arbitrary manner so that in exercise of power under Article 226 this court would proceed to restrain the respondents. The bank guarantee submitted by the petitioner was enforceable on demand by the respondent as per the terms agreed upon by the parties, and and as such the petitioner has failed to make out any good ground for interference.
52. It may be added that the assertion of the petitioners that there was no concluded contract between the parties in as much as the PPA agreement was not signed by them, and the letter of intent did not provide for any damages and therefore, they are entitled to recover the amount of bank guarantee invoked by respondent. This assertion of the petitioner is unconvincing, in view of the fact that the bank guarantee is a complete contract by itself and separate from the underlying contract and therefore, the enforcement of “on demand bank guarantee” has to be looked into in light of the terms contained therein and the provisions contained in the underlying contract would not be the basis of adjudicating the rights between the parties. We are satisfied that the bank guarantee was invoked by the respondents in terms of the agreement agreed to between the parties as contained in the bank guarantee itself, the letter of intent, which was unqualifiedly accepted by the petitioner and the relevant provisions of the RFP document referred to in the Letter of Intent. In this view of the matter neither any judicial interference is required nor any infirmity is noticed in invocation of the bank guarantee by the respondents.
53. Another ground which was vehemently argued by the counsel for petitioner was with regard to the fact that the respondents have not adhered to the time schedule as prescribed in the RFP document more specifically in clause 2.8 and 2.9 and the fact that the time was the essence of the contract. Therefore, they out not have invoked the bank guarantee for the reason that the petitioner did not sign the PPA documents within the time prescribed in the schedule.
54. In this regard, we would like to mention that a perusal of the RFP document specially clause 2.8 would indicate that the bids were to be submitted by 11/10/10, and the letter of intent was to be issued on 4th November 2010. It was further provided that the duration of the bid shall not exceed a maximum duration of 195 days, and in the event of the bid process not been completed within the time limit, the recorder/authorised representative had to obtain an approval from the appropriate Commission for the extension or the cancellation of the same. The bid was also to remain valid for a period of 120 days after the bid deadline and there was a provision for extension of the period of validity of the bid. Clause 9.2 also provids that in the event of any bidder refusing to extend its bid validity as requested by the authorised representative, the procurer/authorized representative shall not be entitled to invoke the bid bond. From the perusal of the record, it is imminently clear that the respondents had requested the petitioner vide letters dated 31/01/2011, 26/02/2011, and 26/04/2011 to extend the validity of the bid and the bid bond and the petitioner willingly extended the same. It is further admitted that such extension was without any demur and no objections were raised at the relevant point of time. The conduct of the parties and the provision of the RFP document clearly indicates that the time was not the primary essence to the contract, and clause 2.8 and 2.9 clearly provides for extension of the time. The petitioner at the request of the respondent no.2, had duly extended the bid bond, and now it is not open for them to plead that the time was the main essence of the contract and therefore, the bid bond cannot be invoked after the prescribed period as provided in the RFP document. It is further noticed that the time schedule has been given for completion of the bidding process which states that the same shall not exceed the maximum duration of 195 days. The RFP documents had to be signed till 24th November 2010, which was not done by the petitioner despite requests having been made by the respondent. But with regard to the extension of the bid, it has been clearly provided in clause 2.9 of the RFP document that the same is liable to be extended with the consent of the parties. Therefore, signing of the RFP documents and the validity of the bid are two different issues dealt separately in the RFP, providing for separate time schedule . In light of the above, the assertion of the petitioner that the bid bond cannot be invoked after the expiry of the time period as stated in clause 2.8.2 is not acceptable. We find no infirmity in invoking the bank guarantee by the respondents when the petitioner had expressed his inability to complete the contract and wanted to withdraw the bid.
55. Here, it would not be out of place to mention that the petitioner has also made a reference of the judgement of the Hon’ble Supreme Court rendered in the case of PSA Mumbai Investment PTE Ltd vs Board of Trustees of the Jawaharlal Nehru Port Trust and Another (2018) 10 SCC 525 and submitted that in as much as no agreement was entered into between the petitioner and the respondent and that the petitioner did not sign the PPA documents, he could not be saddled with any penalty by way of forfeiture of the bid security. On the contrary, the respondents have submitted that the said case is distinguishable on the facts inasmuch as in the said case the arbitration clause was invoked as per clause 19 of the draft concession agreement which had not been signed by the parties. The Hon’ble Supreme Court held that there is no agreement between the parties at all as per the facts of the present case, therefore, making it clear that the arbitration clause contained in the draft concession agreement would not apply.
56. The aforesaid judgement in PSA Mumbai Investment PTE Ltd (supra) would not apply to the fact of the present case, in as much as admittedly, in the above the PPA and the RFP documents were not signed whereas in the case at hand, we have already held that the bank guarantee formed a distinct and a separate agreement which could have been invoked by the respondents in the event the petitioner fails to sign the PPA and the RFP documents or to submit the Contract Performance Guarantee.
57. Here, it may be added that the respondents in their Supplementary Short Counter Affidavit have indicated that Ministry of Coal, Government of India has introduced a scheme known as Shakti Scheme on 22.5.2017 wherein Coal India Limited/South Eastern Coalfields may grant future coal linkages on auction basis for power producers/ Independent Power Producers without PPA that are either commissioned or to be commissioned and also Coal India Limited/South Easter Coalfields may grant coal linkages on notified price on auction basis for power producers/Independent Power Producers having already conducted long terms PPAs ( both under Section 62 and 63 of the Electricity Act, 2003) based on domestic coal. It is said that the plants which were facing coal shortage are fulfilling their commitment for supplying the power by arranging the fuel through market/e-auction/Shakti Scheme but the petitioner was not serious with the bid. The averments so made by the respondents have not been denied by the petitioner. Moreover, the said scheme was introduced prior to the filing of the present writ petition.
58. In view of the above detailed discussion and legal position enunciated hereinabove, the petitioner is not entitled for any relief as sought for in the writ petition and and the writ petition is liable to be dismissed, which is hereby dismissed. Parties to bear their own costs. Order Date :-15.04.2019 A.Verma
Allahabad High Court