Document Fragment View

Matching Fragments

8. In view of the contention of Mr. Setalvad that despite the announcement of the Chief Minister of Maharashtra on 3rd August, 1995 on the floor of the Assembly about the decision of the State Government to scrap the PPA, directions of the State Government to MSEB to ask Dabhol to stop work and letter of the State Government dated 7th August, 1995 conveying the above directions to MSEB, in fact, the PPA was never scrapped, we asked Mr. Jethmalani, the learned counsel for the State of Maharashtra, to clarify the stand of the State Government in this regard. In reply, Mr. Jethmalani candidly stated before us that so far as the State of Maharashtra is concerned, it was a total repudiation of all that had been done in the past and it was nothing less than scrapping of the project and the PPA. Mr. Jethmalani also conceded that in the submissions before the arbitrators in London, the State Government had alleged that the PPA was obtained by bribing the officials of the MSEB and hence it was not a binding agreement. He, however, said that he would explain the circumstances in which the above allegations came to be made. We shall deal with this aspect of the matter a little later.

In view of the above findings, the writ petition was dismissed by this Court.

Challenge to PPA before The Delhi High Court (Siddha Raj Dhadda's case)

34. The Memorandum of Understanding ("MOU") for setting up the power generating plant at Dabhol, which preceded the PPA, was also challenged by one Siddha Raj Dhadda, a social worker associated with Sarvodaya Movement and others before the Delhi High Court by a writ petition filed by way of public interest litigation which was numbered as Civil Writ Petition No. 4362 of 1994. Besides Union of India, State of Maharashtra and CEA, the Federation of BHEL Executives Association was also arrayed as one of the respondents (respondent No. 10). In the said writ petition, the petitioners prayed for a writ of certiorari or any other appropriate writ, order or direction (1) to quash the concurrence, if any, granted by the Central Electricity Authority to the schemes of seven projects (including Dabhol) of foreign firms for establishment of power plants without following the procedure as prescribed under the Electricity Supply Act, 1948; (2) for quashing the guarantees, if any, given by the State Governments concerned in favour of the foreign companies sponsoring the said projects in the five States (including Maharashtra) being violative of S. 66 of the Act as well as being repugnant to the provisions of the Constitution; and (3) for quashing the guarantee and/or counter guarantee if already given. It was also prayed that the term contained in the agreements entered into with foreign companies which oust the jurisdiction of the Indian Courts be quashed. A specific reference was made in this connection to the agreement with Enron. Though the challenge was to seven power projects in different States, in course of arguments, the petitioners concentrated their attack only on the MOU entered into between MSEB and Dabhol. It was contended that the MOU was entered into through close door negotiations for the power project of 2015 M.W. and that the terms, conditions and other vital facts relating to the said deal were shrouded in complete secrecy when the project was to cost US dollars 2650 million. It was also contended that no global tenders were invited and the contract was awarded to Enron on extraordinary terms and having consequences of far reaching nature; that the terms were contrary to the provisions of the Act; that the terms were such as would destroy the viability of existing companies like Bharat Heavy Electricals Limited and National Thermal Power Corporation, both Government of India Companies, and that there was clear discrimination against the Indian companies, both in public and private sector. It was also submitted that the Government of India could not give counter guarantee which was against the provisions of the Constitution. The Delhi High Court took note of the writ petition filed in this Court by Ramdas Nayak and others questioning the wisdom of setting up the power plant at Dabhol by Enron, the PPA between Enron and MSEB and the guarantee and the counter guarantee by the State of Maharashtra and the Central Government respectively and also the fact that the said petition was dismissed by the Division Bench of this Court by a detailed order on 19th August 1994. On examination of the challenge before this Court in Ramdas Nayak's case , the Division Bench of the Delhi High Court comprising of D. P. Wadhwa, J. (as he then was) and N. G. Nandi, J. observed as follows:

The Chief Minister summed up the decision of his government thus:
"1) Since we are empowered to cancel stage-2 of the project, the Cabinet has decided to cancel the same and this decision shall be informed to Energy Department and MSEB.
2) The Cabinet has decided to abrogate the agreement for stage-1 and to stop work of Enron project and orders for stoppage of work shall be given, immediately."

Accordingly, the MSEB served a stop work notice on Dabhol.

Filing of suit by the State Government before this Court seeking a declaration that the PPA was null and void

"In the proceedings in the High Court of Bombay, it is alleged that payments etc. were made by the claimant in these arbitrations by way of illegal bribes. A contract which involves the bribery of a public official or officer is a contract procured by the commission of a criminal offence. Not only is the making of a bribe a criminal offence, it also means that the officers and agents of the Maharashtra State Electricity Board (MSEB) who purported to contract on bahalf of the Board were exceeding their authority. An employee or agent has no authority to bind his principal to a fraudulent transaction. The consequence of this is that the MSEB were not contractually bound by the actions of their employees or agents purportedly on their behalf. This means that the MSEB never entered into the PPA. It was an agreement made by Officers without authority to act. It therefore does not bind the MSEB."