LANCO AMARKANTAK POWER PRIVATE LTD Vs. SOUTH EASTERN COALFIELDS LTD

JUDGEMENT

(1.) THE petitioner is a company registered under the Companies Act, 1956. It proposed to establish a coal based power plant of 1200 MW capacity, in phases, near Korba in Chhattisgarh. Since in a coal based power plant, requirement of coal is a must, therefore, the petitioner approached the South Eastern Coal Fields Ltd. (for short 'SECL'), which is a subsidiary of Coal India Limited, and finally the petitioner and the SECL entered into a coal supply agreement dated 31-12-2005. The petitioner pleaded that as per condition given in clause 2.4 of the agreement it achieved financial closure for the first 300 MW Unit on 20-9-2005 and the same was informed to the respondents / SECL vide letter dated 4-2-2006. In further compliance of the conditions of the agreement, the petitioner gave bank guarantees of Rs. 5,87,50,000/- and Rs. 1,77,50,000/- on account of earnest money (EM) deposit as required by SECL and work of the establishment of the power plant was going on. The petitioner further pleaded that all of a sudden, vide letter dated 27/28-2-2007, the SECL informed the petitioner that the agreement has become liable for termination on certain grounds, which are : (a) The SECL has not received information of financial closing of the plant within one year of the signature date / within one week after it occurs (Refer clause 2.3 and 2.4); (b) It has not received intimation of all necessary requisite sanctions, approvals, licenses, consents including environmental clearance in respect of the plaint within one year of signature date (Refer clause 2.3 B). (c) It has not received the bank guarantee towards commitment advance within one year from the signature date (Refer clause 2.6 B) and (d) It has not received intimation about "Four Month Window" within 30 days of the financial closing (Refer clause 4.3 B), (it may be added that financial closing itself was necessary latest by 31-12-2006). The petitioner replied to the same vide a letter dated 28-2-2007, wherein the petitioner apprised the respondent that entire information sought from the petitioner was already given to the respondent but once again the copies of the same are being appended with the letter. The case of the petitioner is that the reply filed against the notice was kept for consideration and in the meantime, the petitioner also asked about the exact amount of the bank guarantee to be submitted towards the commitment advance. The SECL vide its letter dated 7-3-2007 directed the petitioner to furnish the bank guarantee of Rs. 15,30,000,00/- towards the commitment advance, which the petitioner fulfilled on 8-3-2007. Thereafter, vide a letter dated 8-1-2008, the petitioner requested the SECL to commence supply of coal from June, 2008 onwards but the respondents (SECL) abruptly issued an order dated 29-2-2008 to the petitioner, by which, it was informed that the agreement dated 31-12-2005 was terminated and the BGs towards EMD / Security deposit / Commitment Advance are invoked. It is at this stage the writ petition was filed and the order dated 29-2-2008 terminating the agreement dated 31-12-2005 was challenged in the writ petition.

(2.) MR . Shanti Bhushan, learned Senior Advocate, appearing for the petitioner, referring to the letter dated 28-2-2007 (Annexure - P / 9), argued that all the grounds raised by the SECL in its letter dated 27 / 28-2-2007 were fully explained to them, but the SECL did not pay any attention to the contents of the letter. He would submit that it was informed to the SECL that the petitioner has achieved the financial closure for the 300 MW Unit on 20-9-2005, which was informed to the SECL on 4-2-2006. The petitioner had also obtained all necessary approvals for the project and the bank guarantee of Rs. 7,65,00,000/- was also furnished at the time of signing coal supply agreement. The petitioner company has also expressed that the company had written a letter dated 4-2-2006 requesting for waiver of Payment Advance and the company is awaiting for a favourable response. However the company is ready to furnish the bank guarantee towards commitment advance at nthe earliest. With regard to Four Month Window, the petitioner had informed that the project construction had made substantial progress and would be requiring coal dispatches during the Four month Window commencing from 1st April, 2008 to 31st July, 2008. He also argued that the termination of the agreement amounts to an arbitrary order passed by the authority of public undertaking which is 'State' within the meaning of Art.12 of the Constitution and is therefore in contravention of Art.14 of the Constitution.

(3.) THE first question raised before us is whether in the facts and circumstances of the case, a writ petition under Art.226 of the Constitution would lie or the petitioner's remedy lies elsewhere in terms of the arbitration clause admittedly present in the agreement between the parties?