Karnataka High Court
Pulakeshi Power Company Private ... vs State Of Karnataka And Others on 11 January, 2000
Equivalent citations: AIR2000KANT256, ILR2000KAR1232, 2000(2)KARLJ314, AIR 2000 KARNATAKA 256, (2000) ILR (KANT) 1232 (2000) 2 KANT LJ 314, (2000) 2 KANT LJ 314
Author: V. Gopala Gowda
Bench: V. Gopala Gowda
ORDER
1. The petitioner-Company, which is incorporated with the sole object of undertaking a power project in the Karnataka State, has filed this writ petition seeking for issuance of a writ of certiorari to quash the letters dated 30-9-1997 and 27-2-1998 at Annexurcs-A and A-1 respectively issued by the first respondent and further sought for a direction to respondents 1 to 3 to allocate the entire quantity of Naphtha required by it for the purpose of its power project to be located in Ramanagaram Taluk, Bangalore District with a capacity of 500 MW and further direction to the 5th respondent to handover 698 acres of land required for the project in Ramanagaram Taluk as per the agreement dated 25-11-1996 between the petitioner and the 5th respondent and further to direct respondents 1, 2 and 4 to grant counter guarantees to the petitioner and other facilities as granted to foreign companies like Cogentrix for setting up power project in India and further sought for direction to respondents 1 to 3 to grant all the requisite permissions required by the petitioner under all applicable laws for the purpose of setting up its power plant and running the same, urging various facts and the legal contentions.
2. The necessary brief facts for the purpose of considering the rival contentions urged by the parties in these writ petitions are briefly stated as hereunder:
(a) The promoters of the company, who are the persons of Indian origin, are settled down in the United States of America ('USA' in short) and both of them hail from the Karnataka State. Sometime in the early 1980's, the Planning Commission of India conceived the idea of privatisation of power sector for the economic growth of the country. To achieve the said concept, Karnataka State extended the invitations to Non-Resident Indians mainly in United States of America to contribute to the national development by participating in the power generation sector in the Karnataka State. The promoters of the Company having been in the United States of America for several years desired to participate and for this purpose set up an entity known as Non-Resident Indian Capital Corporation (in short, 'the NRICC') in the United States of America with the object of establishing its power plant in the State of Karnataka. It is stated that it had a large number of Indians of around 2,500 persons, 75 persons of whom are Karnataka State origin. The then Chief Minister of the State visited USA in the year 1987 extended an invitation to NRICC to set up a power plant in or around the city of Mangalore. What was mooted at that stage was a thermal power plant. The then Chief Minister assured the Company of the governmental support to it. The project could be implemented by the NRICC with active co-operation from the State. In that regard, the Company received a letter on 30-10-1987 from the then Chief Minister communicating the decision of the State Government in that behalf.
(b) Setting up of a power plant envisages huge capital outlay necessarily involving foreign financial institutions and funding agencies. In view of the decision of the Government, the company made serious attempts with a view to explore the ways and means for raising resources. In the month of December 1987, a meeting was held by the Government of Karnataka with representatives of the company and several other functionaries of the Government, where it was decided that the thermal power plant was to be set up by the NRICC at Nandikoor near Mangalore with an initial capacity of 420 MWs. The said decision was conveyed to Sri Babu C. Metgud, the Chief Promoter of NRICC vide its letter dated 31-12-1987. Thereafter, several steps have been taken involving Karnataka Electricity Board, Karnataka Power Corporation Limited, the 10th respondent herein and a high power committee was constituted to undertake techno-economic steps. The said committee met and proposed to set up a thermal power plant with initial capacity of 420 MWs ultimately reaching a capacity of 2,400 MWs. The first respondent appointed a committee and invited global tenders and also prepared project report, agreement and legal documentation. On 30-4-1988, the joint sector agreement was executed by the parties concerned. The said agreement was considered at various levels, the same was approved by the cabinet and forwarded to the Government of India with the recommendation of the first respondent. The letter of intent issued to the NRICC dated 12-5-1988 conveying the approval of the State Government for the seting-up of the power project referred to above. The State Government-the first respondent herein had also taken up follow-up action vide its letter dated 20-6-1988 addressed to the Government of India seeking requisite clearances.
(c) It is stated that, the 10th respondent is wholly owned by the first respondent-State which has engaged in the business of power generation. It was also associated with the Mangalore Power Project and by letter dated 26-10-1988 addressed to the company assuring it that steps were being taken to go ahead with the project. It is further stated that, no steps appeared to have been taken by the Government of India to process the proposal given by the State of Karnataka regarding the project to be set up at Mangalore by the company. Due to political upheavel in the USSR in the early 1990s, the protocol could not be pursued and ultimately on account of political factors it was never implemented. On account of political scenario in the USSR, Government of India had given up the idea of associating with it for the power project. In the year 1991, Government of India in its budget, the new economic policy was adopted. Several measures have been taken up to encourage rapid growth of economy. In that direction, the State Government associated with the company of NRIs and foreign investors with a view to further pursue the private power project. In that connection, in the month of July 1992, the then Chief Minister of the State visited USA, at that time, another foreign company known as M/s. Cogentrix had evinced interest in the power project to be set up at Mangalore. He had addressed a meeting of NRIs on 26-7-1992 in New Brunswick, New Jersey and announced publicly that the Mangalore Power Project would be given to NRICC after getting it back from NTPC. The said announcement was made keeping in view the agreement which had already been entered into by the first respondent with the petitioner on 30-4-1988. The proceedings of the speeches of the then Chief Minister, Energy Secretary, Principal Secretary and other officers was video taped.
(d) On 8-11-1993, the meeting was held with the Deputy Chief Minister and Power Minister, instructions were given to take steps and measures to allow NRICC to proceed with 1,420 MWs on the same terms and conditions offered to Cogentrix. Again on 11-11-1993, representations of the company met the then Chief Minister along with the Power Minister. Again, instructions were given to implement the NRICC project with identical terms and conditions offered to Cogentrix. The then Chief Minister had also instructed the Managing Director of the 10th respondent-Corporation and the Energy Secretary to take measures enabling the NRICC to undertake the Project of 1,400 MW capacity power plant at Mangalore. In spite of the said measures, power project could not fructify as the State Government was vasilating in its stand. The company gave several representations to the Government of Karnataka to update the earlier Memorandum of Understanding ('MOU' in short) and approached the Government of India for its requisite approvals vide its representations at Annexures-H and J.
(e) In the month of March 1995, Government of Karnataka sent a list to the Government of India of its proposed power projects where it had signed MOU with the company wherein the name NRICC was not included in the said list. A letter dated 30-1-1995 was sent by the President of NRICC to the then Deputy Chief Minister and Power Minister. Pursuant to thereto, the then Deputy Chief Minister addressed a letter dated 4-3-1995 to the Minister for Power, Government of India indicating that the claim of the NRICC also should be considered as they had initiated steps to set up the power plant as early as 1987. The then Chief Minister also issued instructions to the Principal Secretary, Department of Energy, Government of India on 10-3-1995 to enter into MOU with NRICC. Thereafter, steps were not taken expeditiously for sometime. The letter dated 6-9-1995 was addressed by the then Deputy Chief Minister. Pursuant to the" above said correspondance, the first respondent issued Government Order dated 15-11-1995 according permission to NRICC to set up the 500 MW coal-based thermal power plant near Bangalore. For the first time in the said Government order, the concept of establishing a thermal power plant was considered based on coal to be located near Bangalore. NRICC then promoted and got incorporated its company as a company limited by shares under the Companies Act, 1956 with its registered office in Bangalore in the month of 1996. In the Government order, the background in which the sanction was accorded in favour of the company are set out indicating the role of NRICC and its efforts from 1987.
(f) During the year 1995-96, Government of India and State Government encouraged Indian power producers to use liquid fuel like Naphtha for generation of power since their gestation period was much shorter compared to coal and Naphtha was available with a view to ensure quick power supply to power starved States. Therefore, the Company addressed a letter on 29-1-1996 to the first respondent seeking permission to use the alternative fuel such as Naphtha. Thereafter, meeting was held on 3-2-1996 between the petitioner and the Secretary to the Government, Department of Energy, Government of Karnataka. Pursuant to it, by another letter dated 7-2-1996 it was brought to the notice to the Government that it would be more feasible to use liquid fuel for the plant to be located at Bangalore. This was considered by the Government of Karnataka by its letter dated 5-3-1996 for the substitution of the fuel by Naphtha in place of coal. The Ministry of Power, Government of India had also considered the question of permitting the petitioner to set up 500 MW Thermal Power Plant near Bangalore and advised the Central Electricity Authority, as seen from their Memo letter dated 14-11-1996. It is stated by the petitioner that, the demand for Naphtha was found to be very great in the country and the Government of India imposed certain restrictions on the use of liquid fuel for generation of power and therefore, regulated the extent of Naphtha which could be allocated to the different States. As per the allocation the Naphtha required for 1,160 MW of power was permissible for the State of Karnataka.
(g) The petitioner had also identified the required land in and around Vajrahalli Village of Ramanagaram Taluk in Bangalore District and entered into an agreement on 25-11-1996 with the 5th respondent and it had paid a sum of Rs. 25 lakhs on 29-11-1996 and had taken steps by issuing the public notice announcing its project at Vajrahalli Village. The statutory notification under Section 29(2) of the Electricity (Supply) Act, 1948 was published in the Karnataka Gazette on 13-12-1996. It had also approached the Government of India, FIPB, Ministry of Industry to set up power plant in the place referred to above and secured the approval of the Government of India vide its approval letter dated 30-5-1997. It had also secured consent from the Karnataka State Pollution Control Board for the plant on 24-3-1997. It had entered into MOU on 23-6-1997 with the BWSSB and requisite clearance was also secured from the Airport Authority of India on 4-7-1997. It had invited international competitive bids for turnkey job of engineering, supply, installation and commissioning of power plant. The first respondent recommended many projects totalling upto 1,592 MW, of which, the Government of India approved 1,392 MW and the Ministry of Power, Government of India, recommended to the Ministry of Petroleum to make arrangement for allocation of liquid fuel by letter dated 18-3-1997, a copy of which was enclosed to the letter dated 31-3-1997 addrassed to the petitioner by the first respondent. The allocation of Naphtha by the Government appears to have been classified the projects under different three heads viz., competitive bidding projects, captive power projects and MOU route projects. Among each of these categories, the projects were ranked in priority on the basis of seniority and petitioner was placed in fifth in this category though petitioner's was the oldest project proposal approved by the Government. The basis for allocation of liquid fuel for each of the projects is also not specified.
h) The grievance of the petitioner is that the allocation of Naphtha for only 100 MW production having regard to the fact of approval to the petitioner's project of 500 MW capacity is wholly arbitrary and unreasonable. It is alleged that the said action of the first respondent when compared to various other undertakings which have undertaken similar projects were allotted full extent of required fuel. Though 9th respondent has been ranked lower in seniority, even that company was allocated its full requirement of fuel.
(i) The petitioner requested the Government to permit it to set up 400 MW coal fired power project near Bangalore, so that the plant will be feasible. The above said request was made in view of the non-aliocation of sufficient liquid fuel, for which, by letter dated 17-6-1996, the first respondent had advised the petitioner to select a site outside the Bangalore District for setting up the 400 MW coal fired power project.
(j) It is further stated that the petitioner had addressed letter dated 26-9-1997 to the then Chief Minister stating the various steps taken by the company and the 5th respondent agreeing to acquire the land and to transfer the same to it. Therefore, Company requested the Government to take measures in that regard. Further the petitioner addressed another letter dated 5-7-1997 to the Government pointing out again that the site having been allotted and the land being available and the petitioner could undertake the project at Vajrahalli Village. In that regard, it has submitted Memorandum in the year 1997 to the then Chief Minister in USA.
(k) The Government of India decided to cut back the extent of liquid fuel allocated to the State Government. Consequent thereto, the first respondent revised the allocation the Naphtha to the various other power companies. The 10th respondent was allotted fuel though it was not initially an applicant. In the month of July 1997, the petitioner was orally informed by the Energy Secretary to the Government of Karnataka stating that no Naphtha was allocated to it. Therefore, the Promoter-Director of the petitioner-company met the then Chief Minister requested for a fair treatment. It was confirmed that no Naphtha was allotted to the petitioner unless the 10th respondent could not implement its project, the petitioner could not be allotted any Naphtha. Such action of the 1st respondent is not only whimsical, but, also untenable in law. Therefore, it had submitted a representation on 10-9-1997 protesting the action of the 1st respondent and further requested for fair treatment. Instead of considering the petitioner's case, the petitioner received a letter dated 30-9-1997 informing that the power plant may be set up outside Bangalore District. Therefore, it had taken exception to the said letter and pointed out in its letter dated 6-11-1997 regarding several steps which had been taken by it to set up project at Vajrahalli Village. In spite of the said letter, the 1st respondent had reiterated its instructions to re-locate the power project of the petitioner away from Bangalore District vide its letter dated 27-2-1998.
(l) This action of the 1st respondent has been challenged, urging various legal grounds. It is stated that the 1st respondent entered into MOD to set up a project of power generation and it had secured necessary clearances to implement the project after following the necessary steps in that regard which are referred to above.
(m) The petitioner had expended time and money for pursuing the project and it had maintained the project development office in USA incurring employee costs and administrative and overhead costs. In addition to that it had incurred expenses on liaison with the Government, State and its officials apart from travel costs and have also availed the services of consultants and technical experts and consulting engineers and investment bankers and legal personnel. After its incorporation, the petitioner-company has maintained its office in India and has expended money on Environment Study, legal fees, costs of land acquisition, administration expenses, travelling, salaries etc., to the extent of Rs. 50 lakhs. All these have involved a total expenditure of US $ 10 million, over the last eleven years.
(n) It is contended that the action is arbitrary, unreasonable and unfair based on considerations which are not germane to the decision as extraneous factors have influenced the decision of the Government. After having approved the Power Project for the petitioner, the Government has renegade and has given a go-by to its commitment in regard to the size of the project, in regard to the technology and the fuel to be used and the location of the project. The actions of the respondents would have a serious repercussions on public interest as the project could not be commenced and power could not be developed to supply the same to the State which is starving on account of power shortage, which action of the Government is arbitrary, violative of Article 14 of the Constitution of India.
(o) Further, it is contended that the decisions of the first respondent by issuing the impugned letters to the petitioner which has promoted a power project for power generation long prior to other entrants and the respondents are bound to honour the commitments made in the past and allocate sufficient fuel to the petitioner for its project. The basis on which fuel had been allocated to several power companies is wholly arbitrary, whimsical and without reason. Such allocation has brought about serious discrimination in the matter of distribution of largesse by the State. It is urged that, the petitioner had paid substantial sums of money and took several other measures and approvals from various statutory authorities. The Government allowed the petitioner to change its position irreversibly. On account of later contract entered into by the Government a very secretive manner for the development of Bangalore-Mysore Expressway (in W.P. No. 29221 of 1997), the Government is insisting the petitioner for relocating its project which action is unfair and the Government is estopped from resiling from its commitment made with the petitioner while entering into the agreement for expressway project ignoring its prior commitment with the petitioner upon which steps were being taken and clearances have been obtained by incurring the huge amount of money, therefore, the petitioner submits that the action of the respondent is arbitrary, unreasonable and is required to be quashed.
3, A detailed statement of objections is filed on behalf of the first respondent-State Government traversing the petition averments and justifying the impugned letters at Annexures-A and A-1. It is stated that Naphtha is a imported commodity and it is under the control of Government of India. It is stated that only 1,160 MW capacity naphtha is being allotted to the State of Karnataka and therefore, the prayer made by the petitioner for allocating 500 MW capacity cannot be done. However, it is stated that in compliance with the interim order passed by this Court, provision has been made for allocating 100 MW capacity Naphtha to the petitioner subject to petitioner satisfying all other statutory requirements. It is categorically stated that the Government will not permit the petitioner to set-up coal-based power plant in Bangalore District but the same would be permitted in any other suitable place outside Bangalore where all the requisite infrastructure is available. It is stated that since the Government has treated all projects equally in just and fair manner, the petitioner is not entitled for the reliefs against the State Government. It is stated that the petitioner has no vested right in the matter and it is for the Government to consider the request in the light of its policy and subject to fulfilment of such claim to the satisfication of the Government. In relation to the letter at Annexure-B, it is stated that it does not refer to any power projects but it is an acknowledgement for having received petitioner's brief out-line and expressing the earnestness of Government to take up projects of this nature. In respect of Annexure-D, it is stated that it is only a proposal of the petitioner-company which is acceptable subject to various approvals being accorded by the Government of India. It is stated that at the relevant point of time generation of electricity was a monopoly of the State under the Electricity (Supply) Act, 1948 and unless suitable amendments brought, it would not have been possible for the State Government to consider the proposal. In 1992 suitable amendments were made providing for participation of private sector in the power sector for generation of electricity. It is admitted that the letter at Annexure-E, dated 12-5-1988 conveying the Government's agreement" to the proposal of the petitioner-company subject to the approval of Government of India. It is further admitted that clearances were given to the petitioner subject to the approval of Government of India and the financing patterns is to be decided by the Government of Karnataka. While referring to 2,400 MW Super Thermal Power Plant proposed by NTPG, it is stated that position has been referred to in the Government Order dated 15-11-1995 by which permission was sanctioned to the petitioner. The agreement dated 30-4-1998 referred to by the petitioner in the writ petition is denied. Reference is made to the other proposal of the petitioner in relation to 210 MW thermal power station and we are not concerned with the same. There is also reference to the MOU signed between the Government of Karnataka and M/s. Cogentrix and the same is also unnecessary to decide the matter. It is stated that in response to the State Government's request to treat the project in question on par with other projects, vide Annexure R-2, dated 8-2-1998 the Government of India informed that since no MOU was signed before 18-2-1995, it had been decided that the project cannot be set-up. Therefore, it is stated that the petitioner-company cannot be given the same status as claimed. It is also admitted that steps had been taken to recommend to the Government of India to treat this project as a MOU route project even though MOU was not signed before the deadline 18-2-1995 fixed. It is asserted that the first respondent is not responsible for the delay in commencing the project by the petitioner. Eventhough the petitioner has commenced the discussions much earlier to others, the possibility of setting-up a liquid fuel project was not raised. Permission was accorded to set up a coal-based plant on 5-11-1995 but as per the request of the petitioner, the fuel has been changed from coal to Naphtha on 5-3-1996. It is stated that in the meantime several Naphtha-based power projects had been permitted and the petitioner cannot dispute the fuel allocation on the ground that its proposal was the oldest one. It is further stated that Naphtha is a scarce imported commodity. The allocation of it made by the Government of India has to be judiciously reallocated to the eligible projects. As a result of which, the petitioner-company could not be allocated 500 MW capacity Naphtha. It is stated that the Government of Karnataka has to submit fresh recommendations to the Government of India in relation to fuel allocation to meet the demand. It has reviewed the fuel linkages already provided to various projects and while making fresh recommendations, priority had been given to the projects which have achieved progress based on the parameters laid down and a list had been prepared. In view of the dismal progress made by the petitioner, it is stated that it was not possible for the State Government to recommend for allocation of Naphtha to the petitioner-company. On receipt of the revised fuel allocation policy in 1998, the Government has recommended for allocation of 100 MW Naphtha to this project. The recommendation made to Government of India in the matter of allocation of Naphtha is just and fair. It has been made clear that it is not possible to permit coal based power plant in Bangalore District but at the same time such a plant will be permitted in any other place. With the above stand, the first respondent has prayed for dismissal of the writ petitions.
4. The 5th respondent-KIAD Board has filed stating that the petitioner is not entitled to the relief sought for against it. It is stated that an extent of 684 acres 35 guntas of land of the villages mentioned therein in Ramanagaram Taluk was proposed for acquisition. The said extent comprise of 307.24 acres of Government land, 200 acres forest land and the remaining extent of 177.11 acres belong to private parties. After declaration of the lands as Industrial Area under Section 3(1) of Karnataka Industrial Areas Development Act, notification was published in the Gazette on 31-12-1996 proposing acquisition of 177.11 acres of land. It is stated that after enquiry, the Special Land Acquisition Officer could not proceed with the matter for the reasons stated therein. The reasons are, the Government of Karnataka sanctioned implementation of Bangalore-Mysore Infrastructure Corridor on 20-11-1995 to construct express highway between Bangalore and Mysore. It is stated that the lands proposed for the project of the petitioner overlap the proposed Bangalore-Mysore highway to an extent of 150.26 acres of Vajarahalli and 80.17 acres of Bannikuppe Villages. It is stated that in respect of the 200 acres of forest land identified for petitioner's project, the Chief Conservator of Forests (C), Government of India, has communicated the Government of Karnataka that the declaration of the said extent of land as industrial area is inconsistent with the provisions of Forest (Conservation) Act, 1980 and the guidelines issued thereunder from time to time. It has further been informed that in case a forest land is required for any particular project, prior approval of Government of India should be obtained. The forest land had been asked to be excluded from the declared industrial area. It is stated that it will be very difficult to clear the major portion of forest land and from the express highway project. The lands of private parties would not be sufficient for locating 500 MW power plant. It is stated that on account of non-availability of required land, the Government has decided to drop the acquisition proceedings. It has been suggested to acquire the required land in the other area away from the express highway. It is stated that the agreement produced as Annexure-T had been obtained from the petitioner for the limited purpose of obtaining commitment to bear the expenses of acquisition. It is stated that since the Government has decided to drop the acquisition proceedings, the Board would take steps to refund the amount deposited by the petitioner in terms of Clause 13 of the said agreement. In the circumstances, the 5th respondent also sought for the dismissal of the writ petitions.
5. Even though no relief is claimed against 10th respondent-Karnataka Power Corporation, counter is filed on its behalf meeting the allegations made against it in the writ petition. It is stated that the Government of Karnataka had accorded permission to the 10th respondent to set-up a Combined Cycle Power Plant at Bidadi with a capacity of 300 MW on joint venture basis with a private developer. It is stated that the Government of India has allocated only 125 TMTPA of Naphtha against the requisition of 300 MW. (This has been further clarified in the counter affidavit stating that though the initial allocation of Naphtha was only 125 TMTPA to it, the capacity of the project was raised to 400 MW and consequently revised allocation of Naphtha of 500 TMTPA has been made. Annexures R-4 and R-5 are produced in proof of the same). It is pointed out that while the 10th respondent made application for fuel supply on 23-1-1996, such a request from the petitioner emanated subsequently on 7-2-1996. Touching the averment in the petition that if Naphtha will not be allocated to the petitioner if the 10th respondent does not implement its project, it is stated that 10th respondent has no knowledge of it. It is stated that the work of its project is progressing satisfactorily. It is also stated that another company has been constituted exclusively for the implementation of Bidadi CPPP. M/s. Unocal, USA, has been selected for the joint venture through international competitive bidding and an agreement has been signed in that regard. Narration is made about the progress of works and it is claimed that the project is scheduled to be completed within 22 months after awarding the tender. It is stated that the required quantity of Naphtha has not been allocated to 10th respondent and the prayer made by the petitioner to allocate to it the entire quantity allotted to various other power projects, is unjustified. Consequently, it has been prayed for the dismissal of the writ petitions.
6. Reply is filed on behalf of the petitioner traversing the statements made in the objection statements filed on behalf of respondents 1, 5 and 10. Certain documents have been produced to reiterate and justify its claim. It is asserted that more than adequate quantity of Naphtha is available for allocating to the petitioner. The letter dated 2-6-1999 addressed by the Indian Oil Corporation Limited to the Principal Secretary of first respondent is produced as Annexure-ZQ. Another letter of the same Corporation is produced as Annexure-ZR informing the first respondent to recommend for linkage for 500 MW to the petitioner. It is stated that the State Government has no role to play in the allotment of Naphtha. It is also stated that Government of India has no control over Naphtha but it acts just on the recommendations made by the State Government. The decision of the first respondent in the matter of allotment of Naphtha is stated to be arbitrary. It is stated that full capacity Naphtha has been allocated to the new entrants but only 20% allocation is made to the petitioner. It is categorically stated that question of setting-up of coal based plant does not arise and the reference made to it is totally misconceived. With regard to participation of private sector in power generation, the statements made in the counter has been denied and certain private companies have been named which are in the field of power generation much earlier to the amendments effected to the Electricity (Supply) Act. The decision taken to encourage setting up of private power generation plant way back in 1988 and recommendation made in Annexure-F, dated 20-6-1988 is referred to. It is stated that the Government investment is only 11% while that of the petitioner is 89% in the project. It is asserted that the delay in implementing the project was entirely on account of the oscillating stand of the first respondent in the location of project. The shortage of Naphtha is denied and it is stated that if the first respondent recommends for more quantity of Naphtha, the oil companies are ready to supply to the petitioner. It is stated that Bangalore is the biggest load centre and it has a load demand of nearly 1,000 MW but except 100 MW supply at Yelahanka, there is no other source. The first respondent is transmitting the required power from North Karnataka with a transmission loss of about 21%. Petitioner claims that 500 MW plant allocated to the petitioner would be justified and this aspect has been totally lost sight of by the first respondent. It is claimed that first respondent is bound to ensure sufficient land is made available for the project of the petitioner through the 5th respondent. It is stated that there is no rational basis in allocating Naphtha to respondents 6 to 9. Allocation of 189 MW Naphtha to Hassan Power Company is also termed as disregard to all norms of fair play and equity. The preference shown to Bidadi Power Corporation is stated to be discriminatory. The recommendation made by the first respondent for allocating 100 MW Naphtha to the petitioner is stated to be wholly insufficient to set-up a viable and economical power project. It is asserted that first respondent has entered into MOU with non-existent companies, which is null and void. It is stated that the Cabinet approval of May 1992 and the Government Order dated 24-7-1992 are illegal. In the matter of acquisition of land, it is stated that the project of the petitioner and acquisition of land for it was conceived much earlier to Bangalore-Mysore highway. It is stated that the land proposed to be acquired for the high way is highly disproportionate and examples have been quoted with regard to the extent of land required for highways. It is stated that the proposed highway is 15 Kms away from the petitioner's site. It is stated that none of the Naphtha power plants has materialised.
7. Heard the learned Counsels for the parties and perused the voluminous documents and files. Without adverting into various aspects stated both in the writ petitions and the statement of objections, this Court straightaway proceeds to examine the crux of the matter on merits.
8. The admitted position is that Government of Karnataka accorded permission for setting up 500 MW coal-based thermal power plant at Bangalore by its order at Annexure-O, dated 15-11-1995. Subsequently, usage of Naphtha as alternative fuel was suggested and the petitioner proposed different technology known as "Combined Cycle Combustion Turbine Technology". The same was considered by the Government of Karnataka and vide letter at Annexure-R, dated 5-3-1996 agreed for the same. The Government of India by letter at Annexure-S, dated 14-11-1996 has decided to treat the proposal with other MOU cases and advised the Government of Karnataka to consider the project report that would be submitted by the petitioner-company. Thereafter the petitioner-company entered into agreement with the 5th respondent for acquisition of land required for the project and deposited Rs. 25,00,000 vide receipt at Annexure-U, dated 29-11-1996. Acquisition proceedings have been initiated and notification was also issued in that regard as referred to above. The petitioner also obtained clearances from several authorities for the project. Approval of Government of India had been obtained under Annexure-W for setting-up the plant. In the matter of allocation of Naphtha, the petitioner-company was placed at Sl. No. 5 in the list. Though approval was given for 500 MW capacity of petitioner's project, Naphtha was allocated for only 100 MW capacity. Consequent upon reduction in the allocation of Naphtha by the Government of India to the Government of Karnataka, even the allocated 100 MW capacity Naphtha was also denied to the petitioner. Thereafter, the petitioner was informed to set-up the plant outside Bangalore District by the impugned letters at Annexures-A and A-l. When the things stood thus, the proposal of Bangalore-Mysore express highway was mooted. It was informed to the petitioner that the land identified for it's project overlaps the proposed express highway. The petitioner has been suggested to shift its project outside Bangalore District and to set-up a coal-based plant.
9. The need of setting-up of power generation plant has to be considered bearing in mind the acute shortage of power generation in the State of Karnataka. It is a fact that Government of Karnataka is not supplying electricity to its citizens to the full extent. There has been power shutdowns frequently and this position is worst during summer seasons. The State is borrowing electricity from its neighbouring States and in spite of that it is unable to meet the requirement. As a result of which, the citizens are facing lot of difficulties. Borrowing of electricity from outside is not only costlier but there will be loss of energy in the transmission. The consumers are forced to pay higher rate than the normal charges. If power is generated within the State, these problems can be prevented and power can be supplied at a cheaper rate to the consumers. There will be no need for begging the other States for the supply of electricity and transmission loss will not be there. Keeping in mind these factors, setting-up of power generation projects within the State shall be encouraged.
10. In the instant case, the project of the petitioner has been approved for Naphtha-based plant. Once that has been considered feasible and effective, the petitioner company ought not to have been asked to go again for a coal-based power generation plant. The action of the first respondent in this regard is wholly unwarranted and the suggestion is untenable as the same is arbitrary, unjustifiable and unreasonable in view of the fact that the first respondent has already permitted the petitioner to establish Naphtha-based liquid power generation plant.
11. The petitioner has been asked to shift its project outside Bangalore District. It is an undisputed fact that coal-based power plant is environmentally risky and consume water. Since the project of the petitioner has been permitted to Naphtha-based plant, the ground on which shifting of the project outside Bangalore District is extinguished and petitioner cannot be asked to do so on that ground as the 5th respondent has already declared the area in question as Industrial Area by issuing notification under Section 3 of the KIADB Act, 1964 and acquisition proceedings were initiated by issuing the preliminary notification after the State Government granting its approval for acquisition of the land to the extent referred to earlier.
12. So far as the stand taken that Naphtha is a scarce commodity and full allocation cannot be made to the petitioner is concerned, the petitioner has produced the letters Annexures-ZQ and ZR of the Indian Oil Corporation in which it is stated that petitioner-company may easily be granted linkage for 500 MW fuel and the first respondent has been asked to increase the linkage from 100 MW to 500 MW. These letters demonstrate that there will be no problem for securing the requisite quantity of Naphtha to petitioner's project. Apart from the above said important aspect of the case, the revocation of sanctioned quantity of Naphtha to the petitioner is most unfair and unreasonable for the reason that the petitioner has been treated as MOU company and all the necessary permissions have beer, obtained by it from various statutory authorities and the State Government has sanctioned more quantity of Naphtha to other parties who have approached the Government much later. One of the company N.R.I.C.C. has evinced interest to establish its plant in the State at its instance and furthermore quantity of Naphtha has been allotted to 10th respondent, which is a State owned public sector undertaking for running its joint sector plant but it has given its allotted quantity of Naphtha in favour of a private company which has got 89% of shares and only 11% of shares is held by the State Government. It has no character of joint sector. Further, the State Government has not made recommendation to the Central Government for allocation of full quantity of 500 MW capacity Naphtha to the petitioner-company to establish its plant.
13. The allotment of Naphtha in favour of the petitioner is without any rational basis or guidelines. The State Government has exhibited discrimination by arbitrarily allowing the sanctioned Naphtha in favour of other companies who approached the Government much later. The Government has not considered this relevant aspect, namely, it has given approval for establishing 500 MW capacity of power generation plant at Bangalore District, thereby it has gone back from its earlier commitment made to the petitioner-company without any valid reason. The allocation of Naphtha by the State Government in favour of the petitioner out of the total quantity allocated to it by the Central Government is not only unfair, arbitrary, unjustifiable but it is an inequitable allocation. Though the petitioner-company was listed as one of the MOU company with the State Government, the legitimate expectation of the company is deprived of without any valid and cogent reasons. The same is contrary to the law laid down by the Apex Court in a catena of decisions.
14. This Court, after going through the files maintained by the first respondent-Government in respect of the petitioner and other companies, has to record its findings that the allocation of Naphtha in favour of the petitioner and others is not based on any rational basis or guidelines or norms required to be followed. Having regard to various facts of this case, particularly the petitioner-company being an MOU company and it has incorporated itself at the instance of the State Government and it has made concrete commitments and efforts to establish 500 MW capacity power generation plant, has obtained the approval from various statutory authorities as required in law and expended huge sums for this purpose and the State Government without taking all the relevant facts of this case in an arbitrary and unreasonable way it has allotted 100 MW quantity of Naphtha and asked its consent vide impugned letter at Annexure-A, otherwise the company is directed to establish its, coal-based plant beyond Bangalore Rural District by issuing contrary impugned letter Annexure-Al, which is contrary to the earlier orders and approval and granted in favour of the company to establish its 500 MW capacity of Naphtha-based liquid fuel based power generation plant at Vajarahalli at Ramanagaram Town. This Court also has to record its finding after careful perusal of the undisputed facts of this case and the records and files of the Government, this Court is of the firm view that the action of the first respondent-State apart from suffering from arbitrariness and unreasonableness, its action is also clear case of treating the petitioner with the other companies, who are unequals and in their favour larger quantity of Naphtha allotted for which they are not entitled in law. Therefore the impugned letter Annexures-A and A1 are liable to be quashed. Further this Court has to record its finding that the action of the State Government in giving a go by to its earlier MOU and commitment and asking the petitioner to establish its coal-based power generation plant vide Annexure-Al, is not for valid reason, but the same is a colourable exercise of its power which cannot be allowed to sustain for the reason the fifth respondent-KIADB has proceeded with the acquisition of the required extent of land after obtaining the necessary clearance from the Government and it has received Rs. 25,00,000/-towards initial deposit towards land cost for acquisition of the land in favour of the petitioner.
15. As regards the land identified and notified for acquisition for the project in question, before taking up acquisition proceedings all aspects have been considered and only after being satisfied that the land is suitable for the project, the notification for acquisition of the land was been issued. In respect of the forest land, the first respondent shall approach the Government of India for approval of the said land to the project in question as indicated in the counter filed on behalf of 5th respondent as public interest is involved and there is dire need for more power generation to supply to the consumers to the requisite demand. If that is not feasible, acquisition of other land in the vicinity may be taken up in order to see that the power plant of the petitioner is materialised. But, the reasons assigned by the 5th respondent in not proceeding further with the acquisition of the land are not legal and valid. Neither the 5th respondent-Board nor the State Government produced any order for withdrawing either the industrial area notification issued under Section 3 of the KIADB Act or the acquisition proceedings or calling upon the Board not to proceed with further proceedings in the matter.
16. The plea put forward by the first respondent that a portion of the land proposed for the petitioner's project overlaps the Bangalore-Mysore express highway cannot be accepted for two reasons. In the first place, the express highway proposal is a subsequent proposal. In the second place, the petitioner has produced the plan of the lands notified for the project in question. A perusal of the game reveals that the proposed express highway is not passing on any portion of the land in question but it is passing by the side of the land. None of the respondents disputed the plan produced by the petitioner nor any other plan is produced to show that the plan produced by the petitioner is not correct. The petitioner has stated that the proposed express highway is 15 Kms away from its lands. Therefore, the land in question cannot be denied to the petitioner on this ground.
17. From the facts narrated supra, it is clear that petitioner has fulfilled all the formalities and has obtained approvals from several authorities. Huge amount has been deposited for acquisition of land. It is all along exhibiting its eagerness to go on with the project as early as possible but the same could not be established expeditiously on account of delay caused by the first respondent-State. The petitioner was denied substantive legitimate expectation by the State Government and 5th respondent-Board and the same is contrary to the law laid down by the Apex Court in the case of Punjab Communications Limited v Union of India and Others. In that case, after referring to various decisions in paragraph 36, at paragraph 37 it has been laid down as under:--
"37. The above survey of cases shows that the doctrine of legitimate expectation in the substantive sense has been accepted as part of our law and that the decision maker can normally be compelled to give effect to his representation in regard to the expectation based on previous practice or past conduct unless some over-riding public interest comes in the way. . . .".
Totally discarding the power crisis in the State, the first respondent has delayed the setting-up of the project on one pretext or the other.
18. The petitioner is rightly questioning the arbitrary and unfair treatment meted out to it in the matter of allocating requisite Naphtha as could be noticed from the undisputed facts narrated in the preceding paragraphs of this order. The files and records of the Government unequivocally establish the fact of arbitrary, unreasonable unfair and inequitable allotment of Naphtha in favour of the petitioner and others and also procuring the land for the project resiling from its commitments without any valid and convincing reasons. The impugned action of respondents 1 and 5 is arbitrary and violative of Articles 14 and 19 of the Constitution of India. Therefore, the impugned letters and the stand taken by the respondents needs judicial review in this case in view of the law laid down by the Supreme Court in the case of Union of India and Another v G. Ganayutham (dead) by L.Rs, wherein the passage from Professor Wade's Administrative Law has been extracted at paragraph 85, which is as under:--
"The doctrine that powers must be exercised reasonably has to be reconciled with the no less important doctrine that the Court must not usurp the discretion of the public authority which Parliament appointed to take the decision. Within the bounds of legal reasonableness is the area in which the deciding authority has genuinely free discretion. If it passes those bounds, it acts ultra vires. The Court must therefore resist the temptation to draw the bounds too tightly, merely according to its own opinion. It must strive to apply an objective standard which leaves to the deciding authority the full range of choices which legislature is presumed to have intended".
In Tata Cellular v Union of India, in relation to judicial review, after considering several decisions on the law, it has been held at paragraph 86 as under:--
"86. Judicial quest in administrative matters has been to find the right balance between the administrative discretion to decide matters whether contractual or political in nature or issue of social policy thus they are not essentially justiciable and the need to remedy any unfairness. Such an unfairness is set right by judicial review".
19. For the reasons stated above, these writ petitions are allowed. The impugned letters at Annexures-A and A1 are quashed. The first respondent is hereby directed to allot to the petitioner Naphtha for 500 MW capacity after making recommendation to the Central Government. If the Central Government fails to raise the quantum of allocation to the first respondent-State, then the first respondent shall procure Naphtha from the Indian Oil Corporation on the basis of the letters at Annexures-ZQ and ZR or re-allocate the quantity allotted to it by the Central Government so that the quantity required for the petitioner is made available.
In the matter of procuring the land required for commissioning the project in question, the first respondent is further directed to correspond with the Central Government in respect of the forest land in the manner indicated in the statement of objections filed on behalf of the 5th respondent. The 5th respondent is also directed to proceed with the acquisition proceedings, complete the same and handover the possession thereof to the petitioner to enable them to start and complete its plant for generating the power expeditiously. The respondents are directed to give all necessary permissions, clearances, approvals etc., to the petitioner bearing in mind the power crisis in the State, the demand and the need for generation of more power within the State.
20. Before parting with the matter, I feel that it is necessary to observe that having regard to the acute power crisis in the State and the admitted facts of this case, the Government of Karnataka in their wisdom shall not come in the way or cause delay in encouraging petitioner-company in the matter of setting-up of power generation plants in the State on account of the acute shortage of power, the increasing demand for power and to avoid its exploitation by other power supplying States and to ease the power demand. It has to exploit the abundant resources available in the State to supply the requisite quantity of electricity to the domestic and commercial consumers and not only to meet the industrial demand but to pave way for rapid industrialisation.
After pronouncing the order Mr. Naganand, learned Counsel for the petitioner submits that an application had been filed under Order 6, Rule 17 of the CPC read with Article 226 of the Constitution of India after the matter was reserved to add additional prayer to the main writ petition to direct the first respondent to consider and approve setting-up of 1,000 KW power plant by the petitioner by using Liquefied Natural Gas instead of 500 KW capacity Naphtha-based power generation plant at the originally designated project. The said application is found in the file.
2. Learned Additional Government Advocate Mr. Ashwathanarayana strongly objects the application.
3. The relief sought for by the petitioner in the petition had been granted by this Court. There was no occasion for it to consider the prayer sought for in the application. This Court cannot give such a direction at this juncture. However, it is open for the first respondent-Government to consider the said prayer and take a suitable decision in that regard. The application is accordingly disposed of.
4. Learned Counsel for the 10th respondent has requested this Court to return the two documents produced as per the directions of this Court. Office is directed to return the same after securing xerox copies of the same and kept in the file for reference.
5. The files and other records produced by the Additional Government Advocate are directed to be returned under acknowledgement in the order sheet.