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M/S. Vidarbha Industries Power ... vs Ministry Of Coal, Govt. Of India & ...
2018 Latest Caselaw 1536 Del

Citation : 2018 Latest Caselaw 1536 Del
Judgement Date : 7 March, 2018

Delhi High Court
M/S. Vidarbha Industries Power ... vs Ministry Of Coal, Govt. Of India & ... on 7 March, 2018
$~1
*      IN THE HIGH COURT OF DELHI AT NEW DELHI

                                            Judgment pronounced on: 07.03.2018

+              R.A. No.102/2018 IN W.P.(C) 10614/2017

M/S. VIDARBHA INDUSTRIES POWER LTD.               ..... Petitioner
                   Through: Mr. Akhil Sibal, Sr. Advocate with
                             Mr. Rishi Agarwal, Ms. Aanchal
                             Mullick and Mr. Pradeep Chhindra,
                             Advocates.
                   versus
MINISTRY OF COAL, GOVT. OF INDIA & ORS.        .....Respondents
                   Through: Ms. Maninder Acharya, ASG with
                             Mr. Kirtiman Singh, CGSC, Mr.
                             Waize Ali Noor, Mr. Viplav, Mr.
                             Prateek Dhanda and Mr. Saeed
                             Badri, Advocates for respondent
                             No.1.
                             Mr. Jagdeep Dhankar, Sr. Advocate
                             with Group Captain Karan Singh
                             Bhati and Mr. Srehatosh Majumder,
                             Advocates.

CORAM:
HON'BLE MR. JUSTICE RAJIV SHAKDHER

RAJIV SHAKDHER, J. (ORAL)

C.M. APPL. No.7040/2018 (Exemption)

1. Allowed, subject to all just exceptions.

R.A. No.102/2018 & C.M. APPL. No.7039/2018

2. I have been called upon to deal with an interlocutory application and a review application. The interlocutory application has been filed by respondent no.2/ Coal India Limited (hereafter referred to as "CIL") while, the review application i.e., R.A. No.102/2018 has been filed on behalf of respondent no.1/ Union of India (hereafter referred to as "UOI").

3. In C.M. No.7039/2018, the relief sought is to vacate the interim order dated 31.01.2018. In R.A. No.102/2018, more or less, the same relief is sought, though, worded differently. The UOI seeks review/ recall of order dated 31.01.2018.

4. Therefore, it would be necessary to briefly recapitulate the direction that was issued by me, on 31.01.2018. After hearing the counsels for contesting parties, I had directed CIL to supply coal to the writ petitioner of the requisite grade as referred to in prayer clause (b) of C.M. No.46291/2017 via its subsidiary Southern Eastern Coalfields Limited (hereafter referred to as "SECL"). Attendant observations were also made, which form part of order dated 31.01.2018.

4.1 Since, in essence, the arguments advanced, albeit, at some length by the counsels for the parties are primarily rooted in the order dated 31.01.2018 (as corrected for typographical errors via dated 21.2.2018), the relevant part of the said order is set forth hereafter: -

"...3) The immediate grievance of the petitioner is that even though it has been issued a Letter of Assurance (LOA) as far back 24/25.6.2008 and its plant stands commissioned since April 2014, respondent No.2 has not executed a Fuel Supply Agreement (FSA) with it.

3.1) It is, therefore, the submission of the petitioner that out of two units which are run and managed by it, Unit-I is deprived of fuel for its operation.

3.2) The petitioner also avers, it has entered into Power Supply Agreements with Discoms and that the present situation is leading to a circumstance which will result in it being in breach of its obligations to the Discoms with resultant import (sic. impact) on the ultimate consumers. 3.3) The petitioner seeks to place reliance, inter alia, on the new coal policy framed by the respondents. The new policy, which bears the acronym, SHAKTI (Scheme for Harnessing and Allocating Koyala (Coal) Transparently in India) ("SHAKTI Policy"), which was formalised on 22.5.2007,

allows for supply of coal to the petitioner as it would fall either under clause A(i) or, in the alternative, under clause B(ii) of the said policy.

3.4) The petitioner submits and there is no dispute about the said fact that, initially, the LOA was granted to it in its capacity as a GCPP (Group Captive Power Plant). It is also not in dispute that the respondents permitted the petitioner to convert itself from GCPP to an Independent Power Plant (IPP). The point of inflection and/or dispute as it appears is that according to the respondents the category of the petitioner though altered from GCPP to IPP did not result in the conversion of LOA issued to the petitioner.

4) Mr. Jain, learned senior counsel, who appears on behalf of respondents in this behalf relies upon minutes of the meeting of Standing Linkage Committee (Long Term) Power held on 19.1.2018. The copy of the minutes which were produced before me are dated 29.1.2018. I must record that those minutes were shown only to the Court and not to the petitioner's counsel.

5) Mr. Sethi, learned senior counsel, who appears for the petitioner, says that what is recorded in the minutes was contrary to SHAKTI Policy formulated by the respondents and that the minutes could not trump the provisions of the said policy which were in public domain.

6) Mr. Sethi, in nutshell contends that, since, the petitioner has fulfilled every criteria as stipulated in clause A(i) of the SHAKTI Policy, the respondents should have executed either an FSA with the petitioner or in the very least allowed the petitioner to participate in auctions envisaged under clause B(ii) of the very same policy.

7) Having heard learned counsel for the parties, it would be relevant for the purpose of dealing with the interlocutory application to extract the clauses of the SHAKTI Policy on which reliance has been placed by the petitioner:

(A) Under the old regime of LoA-FSA:

i. FSA may be signed with the pending LoA holders after ensuring that the plants are commissioned, respective milestones met, all specified conditions of the LoA fulfilled within

specified timeframe and where nothing adverse is detected against the LoA holders. The outer time limit within which the power plant of LoA holders must be commissioned for consideration of FSA shall be 31.03.2022, failing which LoA would stand cancelled. Coal supply to these capacities may be at 75% of ACQ. The coal supply to these capacities may be increased in future based on coal availability.

ii. The 583 pending applications for LoA need not be considered and may be closed.

(B) The following shall be considered under a New More Transparent Coal Allocation Policy for Power Sector, 2017-SHAKTI (Scheme for Harnessing and Allocating Koyala (Coal) Transparently in India):

(i) ............................

(ii) CIL/SCCL may grant coal linkages on notified price on auction basis for power producers/ IPPs having already concluded long term PPAs (both under section 62 and section 63 of The Electricity Act, 2003) based on domestic coal. Power producers/ IPPs, participating in auction will bid for discount on the tariff (in paise/ unit). Bid Evaluation Criteria shall be the non-zero Levellised Value of the discount (applying a pre-notified discount rate) quoted by the bidders on the existing tariff for each year of the balance period of the PPA. Ministry of Coal may, in consultation with Ministry of Power, work out a methodology on normative basis to be used in the bidding process for allocation of coal linkages to IPPs with PPAs.

8) A perusal of the clause A(i) of the SHAKTI Policy would show that it exhorts the respondents to sign an FSA

with all pending LoA holders if their plants are commissioned and respective milestones have been made. There is a further condition stipulated which is that nothing adverse should have be detected against LoA holder. As a matter of fact, perusal of clause A(i) would show that the outer time limit for commissioning the Power Plant by an LoA holder has been pegged at 31.03.2022.

9) The underlying theme, is that, if plants are not commissioned by 31.3.2022 LoA holder cannot hope to be considered for execution of a FSA in its favour. In so far as pending applications for issuance of LoAs were concerned, which at relevant point in time were 583 in number they were closed.

10) There is no dispute, as indicated above, that the petitioner has commissioned Unit-I. The only point of difference is that the LoA was issued to the petitioner when it was classified as a GCPP as against IPP and, therefore, according to the respondents, the petitioner cannot claim as a matter of right, the benefits of the SHAKTI Policy.

11) Given this contention I asked Mr. Jain, as to whether any formal communication was issued to the petitioner, which is, that the LoA issued to it did not automatically allow it to have access to assured coal supply just because approval had been given for its classification from GCPP to IPP. 11.1) Mr. Jain was unable to demonstrate that any such communication was sent to the petitioner.

12) In these circumstances, according to me, prima facie, the petitioner appears to fulfil the pre-requisites of clause A (i) of the SHAKTI Policy.

13) Besides this, I had also asked Mr. Jain whether the petitioner could be given coal in pursuance of provisions of clause B(ii).

13.1) Mr. Jain, on instructions, informs me that the auction envisaged under clause B(ii) was a onetime auction and, therefore, the petitioner cannot get coal at the "notified price" via auction route postulated under clause B(ii) of the SHAKTI Policy.

14) Given these circumstances, the petitioner is placed in a rather peculiar position. While its power plant (Unit-I) is up and about it is I am told hurtling towards a shut down, if not

already shut down, because of lack of assured fuel supply.

15) Before I conclude, I may also advert to another submission made by Mr. Jain, which is that the petitioner has been presently running Unit-I by buying coal in spot auctions. Mr. Jain's submission in effect is that the petitioner could continue to obtain coal from such spot auctions.

16) To my mind while that may be so, however, viability of any Power Plant would depend upon the price at which it obtains the fuel necessary to make it opprable (sic. operable). Since, auction as envisaged under clause B(ii) of the SHAKTI Policy, I am told by Mr. Jain was one time auction which is not going to be held in the near future a via media has to be found. This is more so, as indicated above, which is that the petitioner has a, prima facie, case in its favour for having an an FSA executed in its favour. Thus, this submission cannot be sustained.

17) Thus, having regard to the overall circumstances, including the balance of convenience and the damage (that) may it (sic.) be caused to the petitioner if interim relief is denied, I am inclined to direct the respondent no.2 to supply coal to the petitioner of requisite grade referred to in prayer via the clause (b) of C.M. Application No.46291/2017 via its subsidiary i.e., the Southern Eastern Coalfield Limited.

17) At this stage, Mr. Jain says that situation such as that which has arisen in the instant case is being considered by an Inter-Ministerial Committee and, therefore, there is likelihood of long term solution being found qua the problem at hand.

18) It is, therefore, made clear that the directions that I have issued hereinabove shall obtain only till such time the Inter- Ministerial Committee takes a final decision qua the matter in issue.

5. Given this background, what emerges from the record is as follows:-

(i) The petitioner has set up two units. The petitioner has confined its grievance qua non-supply of fuel vis-a-vis Unit-I.

(ii) Unit-I stands commissioned.

(iii) The petitioner was granted a Letter of Assurance (in short "LOA"), initially, in its capacity as Group Captive Power

Plant (GCPP).

(iv) The petitioner was permitted to convert itself from GCPP to an Independent Power Plant (IPP).

(v) When the matter was heard on 31.01.2018, on behalf of UOI, the contents of Minutes of Meeting of Standing Linkage Committee (Long Term) for Power (hereafter referred to as "SLC (LT)"), which was convened on 19.1.2018, were disclosed only to the Court. Since, these Minutes had to be placed before the competent authority, they were not shown to the petitioner's counsel.

(vi) Since, then, that is, on 15.2.2018, the competent authority has approved the decision taken qua the petitioner, by SLC (LT), at its meeting held on 19.1.2018.

6. Thus, in effect, the interlocutory application and the review application have been filed, in substance, to recall the order dated 31.01.2018 on the ground that the competent authority has accepted the recommendation of SLC (LT), which is, that the LOA issued to the petitioner as GCPP cannot be transferred only by reason of the fact that it stands converted to an IPP. In other words, what is sought to be emphasized is that since there is no LOA in existence, based on which supplies could be sought by the petitioner vis-a-vis Unit-I, the order dated 31.01.2018 as a logical sequitur needed to be recalled.

7. As a matter of fact, both Ms. Maninder Acharya, learned ASG and Mr. Jagdeep Dhankar, Senior Advocate who appeared for CIL, in sum, made a somewhat identical submission, though paraphrased differently, which was that with the issuance of order dated 15.2.2018 by the competent authority, the circumstances which obtained on 31.01.2018 had undergone a significant change. As a matter of fact, it was contended both

on behalf of UOI as well as CIL that the petitioner would have to, if it hopes to succeed in the main petition, challenge the order dated 15.2.2018, passed by the competent authority.

8. Mr. Sibal, on the other hand contended that the grievance of the petitioner remains the same inasmuch as what was shown to the Court on 31.1.2018 were the Minutes of Meeting held by SLC (LT) on 19.1.2018. Learned counsel went on to say that the Minutes of Meeting dated 19.1.2018 made a recommendation which was adverse to the interest of the petitioner and, it was only this recommendation, which has received affirmation of the competent authority, albeit, after order dated 31.1.2018 had been passed by this Court.

8.1 Mr. Sibal, thus, submitted that interim relief was granted by this Court despite the decision of SLC (LT), taken, at its meeting held on 19.1.2018, being brought to its notice, for good and cogent reasons. According to Mr. Sibal, all that this Court did on that date was to ascertain from UOI as to whether it had communicated to the petitioner the fact that the LOA issued in its favour did not automatically allow for access to coal supplies just because approval had been given for its conversion from a GCPP to IPP.

9. Therefore, what emerges upon a close scrutiny of the stands taken by UOI and CIL, is that, the LOA issued to the petitioner cannot, according to them, be used to seek coal supplies only because it now stands classified as IPP.

10. In this behalf, what is required to be noted, in the first instance, is the recommendations made by the competent authority in its order dated 15.2.2018 qua the petitioner as it is the main bulwark of the respondents' submission.

RECOMMENDATIONS OF THE COMMITTEE Following facts emerged after the discussion:

a. The PP bypassed the queue of IPPs which were awaiting recommendations for issuance of LoA at that point of time. This denied level playing field for the IPPs who were waiting in the queue and awaiting LoA.

b. The tangible and intangible benefits of a LoA had accrued to PP while it never functioned as a CPP.

c. The intentions of PP were never to operate as CPP, but only to gain benefits by switching from one category to another i.e. from CPP to IPP.

d. The comparison with preceding case of AMNEPL, as quoted by PP, does not hold as the nature of PPAs was different in these two cases. In AMNEPL, PPA was to be based on tariff-based bidding where the rates are market- discovered.

e. In the cases of conversion of category after the case of PP, the entities have been denied transfer of linkage upon change in the category from PP to CPP or vice-versa. In view of the above facts, this Committee recommends that LoA issued to PP as GCPP cannot be transferred upon its conversion to IPP. However, in the backdrop of adequate coal availability scenario and to further the objective of SHAKTI Scheme, MoC may explore the feasibility so that the PP may obtain coal linkage as an IPP under provisions of the SHAKTI Scheme.

11. In the context of the aforesaid, Mr. Sibal, in my view, has correctly brought to my notice the following documents which would show that the LOA issued to the petitioner continued to hold good even after it was categorised as an IPP. The documents, which were referred in this behalf are as follows: -

(i) Letter dated 1.4.2014, issued by Western Coalfields Limited (WCL) to the petitioner;

(ii) Letter dated 11.11.2014 issued by WCL to SECL.

(ii)(a) In this letter, it is clearly indicated that the petitioner, that is, the LOA holder had achieved the prescribed milestones stipulated under LOA, consequent upon the change of

category from GCPP to IPP;

(iii) The communication dated 3.12.2015, addressed by Central Electricity Authority (CEA) to Ministry of Power, wherein, inter alia, the following is stated: -

".....In addition to above Butibori Unit 1 was changed from CPP to IPP by Standing Linkage Committee (Long term). The plant has already been commissioned but coal supply has not been commenced so far, being not covered in 78000 MW list. Therefore, this unit is also covered in firm IOA holders by MoC and accordingly same is covered in balance 30000 MW capacity. List of 108000 MW capacity is enclosed....."

(emphasis is mine)

12. As a matter of fact, since the petitioner, according to the CEA, had been issued an LOA, it was not allowed to participate in coal linkage e-

auction conducted under the SHAKTI Policy. This aspect is borne out upon perusal of e-mail dated 6.9.2017 addressed by CEA to, one, Mr. Yogesh. Since, the e-mail is brief, the relevant extract is set forth hereafter:

Dear Sir In response to your query for Application of Coal Linkage for Vidarbha Industries Power Ltd. this is to say that CIL has informed that this plant has FSA of 1.111.MTPA and LoA for 1.3 MTPA against total capacity 2x300MW. Since the plant has LoA/FSA for its entire capacity (MW) the eligible quantity has been shown as zero. Regards N S Mondal Director, TPP&D Div.

CEA (emphasis is mine)

13. A somewhat similar observation was made by Maharashtra Electricity Regulatory Commission (MERC) upon an application preferred

by the petitioner for "final truing up" in respect of financial year 2014-15 and revised aggregate revenue requirement and tariff for financial year 2015-16. MERC in its order dated 20.6.2016, inter alia, made the following observations in paragraph 2.10.27. These observations for the sake of convenience are set out below:

"2.10.27 The Commission is of the view that, since a basic premise of approval of the PPA was the availability of linkage coal from CIL and its facilitation, and VIPL-G in all its Petitions had also projected the Energy Charge based on utilisation of domestic coal, deviating from this underlying principle while approving the Energy Charge in the Truing up for FY 2014-15 cannot be justified."

14. Pertinently for the sake of completion of narration, it may be relevant to note that an appeal was preferred against the aforementioned order of MERC to the Appellate Tribunal, which was disposed of via order dated 3.11.2016. By this order, the order dated 20.6.2016, passed by the MERC was partially modified, albeit, to the extent indicated therein.

15. It is in the background of these circumstances that the petitioner had approached this Court with a grievance that even though it fulfilled every criteria stipulated under the SHAKTI Policy for execution of a Fuel Supply Agreement (FSA), the respondents had not moved forward and, thus, deprived it of the opportunity of accessing fuel at the notified price.

16. The respondents, do not, as indicated above, dispute that the petitioner has commissioned Unit-I and, as adverted to above, according to WCL and/ or SECL met all milestones and conditions specified in the LOA. The objection taken by UOI and CIL that the LOA issued to the petitioner as GCPP would not enable it to gain access to fuel in its new avatar as an IPP, cannot be sustained as the documents placed on record demonstrate quite clearly that the petitioner has been treated all along as an LOA holder, a position which obtained even after it got converted from

GCPP to IPP.

16.1 An attempt, though, was made by SLC (LT) to change this position at its meeting held on 19.1.2018. As alluded to above SLC (LT)'s recommendation of 19.1.2018 received the competent authorities' imprimatur on 15.02.2018.

16.2. The only logic/rationale supplied in support of its decision both by SLC (LT) and the competent authority, is that, the petitioner had bypassed the queue of IPPs, who were awaiting recommendations for issuance of LOA in their favour. According to both authorities this had resulted in the petitioner acquiring tangible and intangible benefits of an LOA holder even though it never functioned as a GCPP. The switch over, according to both UOI and CIL, was made only to fast track its fuel supply.

17. In my view this contention, prima facie, is bereft of merit as at the point in time when permission was accorded for conversion, by SLC (LT), it had taken into account several factors including the fact that the supply of fuel at a lower cost would benefit the ultimate consumer, that is, the public at large.

17.1 This aspect comes through upon a bare perusal of communication dated 4.3.2014 addressed by UOI (Ministry of Coal) to CIL. Pertinently, with this communication the UOI appended the minutes of SLC (LT)'s meeting held on 21.2.2014, as approved by the competent authority, whereat a decision was taken to allow the petitioner to convert from GCPP to IPP.

17.2 A close scrutiny of the Minutes would reveal that SLC (LT) had taken the decision based on the recommendation made by Ministry of Power, with the support and backing of Maharashtra Industrial Development Corporation and MERC. As to the rationale which was employed, to which I have alluded to above, was clearly that the lowering of cost of fuel would benefit the consumer; an aspect which emanates upon

a plain reading of the following extract culled out from the aforementioned Minutes: -

"....As regards conversion from Group CPP to IPP, MoP vide its letter dated 22.11.2013 has recommended to MOC the change in category from GCPP to IPP subject to the condition that the entire power produced from the unit is sold to DISCOMs by way of long term PPAs through tariff based bidding. MOP vide OM dated 12.12.2013 has further conveyed that CEA has clarified that as per PPA signed on 14.08.2013 with Reliance Infrastructure Ltd. the benefit of lower cost fuel will be pass through to the consumers....."

(emphasis is mine)

18. I may also indicate that it has been contended by Ms. Acharya that an FSA cannot be executed vis-à-vis LOA holders qua whom adverse aspects are noted. Pertinently, this argument is made in the context of clause A(a)(i) of the SHAKTI Policy. To buttress this submission, learned ASG also relied on paragraph 17 of the order dated 15.2.2018, issued by the competent authority.

19. A careful perusal of paragraph 17 of the said order would show that the Ministry of Coal had informed the competent authority that a complaint had been received against the petitioner via letter dated 3.2.2014 which, apparently, was also addressed to CBI and CVC.

19.1 This complaint raised the very same issue which has been dealt with above, that is, the petitioner had bypassed the queue of IPPs by having its category changed from GCPP to IPP. Therefore, clearly, the complaint received by the aforementioned three authorities made a grievance qua the petitioner only in respect of this aspect of the matter. There was, even according to the ASG, on record, no allegation of corruption or of a practice of like nature. Nothing adverse had been found or noted by any of the three authorities. As a matter of fact, this complaint, as rightly contended by Mr. Sibal, was not forwarded to the petitioner to seek its

response. Importantly, the submission made by Mr. Sibal that the complaint was not put to the petitioner, was not contradicted either by learned ASG or Mr. Jagdeep Dhankar, learned senior Advocate.

20. Besides the foregoing, Ms. Acharya also indicated to me that all doors for the petitioner had not been closed and that the decision taken by the competent authority on 15.2.2018 would be deliberated upon by the Inter-Ministerial Committee. I may only indicate that this aspect of the matter has already been noticed by me in the order dated 31.1.2018, albeit, based on the submissions made by the, then, ASG, Mr. Sanjay Jain.

21. Before I conclude, I must also indicate that the learned ASG in rejoinder had sought to buttress her case by seeking to place reliance on letter dated 6.10.2014 addressed by UOI to the petitioner. According to me, the submission made based on contents of letter dated 6.10.2014 is, prima facie, not sustainable for the reason that at the given point in time when UOI indicated to the petitioner that even though its category had changed, an FSA could not be executed in its favour since its name was not included in the list of 78000 MW coal based thermal power plants, subsequently underwent a change; a fact which is discernable upon perusal of CEA communication dated 3.12.2015. The communication dated 6.10.2014 was based on an earlier decision of CEA of 21.6.2013. This position stood altered, which was, as indicated above, clarified by CEA on 3.12.2015. CEA, to put it pithily, clarified that the petitioner, amongst others, was covered in balance 30000 MW capacity. A perusal of the list appended to the communication dated 3.12.2015 would show that the petitioner's name stands included, therein, at serial no.34. Reference in this behalf be made to the extract set forth in paragraph 11 (iii) above.

22. Thus, for the aforestated reasons I find no merit either in C.M. No.7039/2018 or in the review application No.102/2018. The circumstances set forth above only fortify my view that the direction

contained in order dated 31.01.2018 need not be recalled. Therefore, both, the interlocutory application and the review application for vacation and/ or recall of order dated 31.01.2018 are dismissed.

23. Before I conclude, I may also indicate that the learned senior counsel appearing for CIL had alluded to the fact that the petitioner could have access to coal via the Special Forward e-Auction mechanism. In this behalf, learned counsel drew my attention to status report filed on behalf of CIL. A perusal of the status report would show that CIL had offered to supply coal to the petitioner pursuant to order dated 31.01.2018 at the notified price stipulated for the power sector, with an added premium pegged at the rate of 50.74%. Clearly, the attempt of CIL was to render the direction issued by this Court inefficacious.

24. As indicated above, since, according to me the petitioner, prima facie, fulfils the conditions for execution of an FSA in its favour, the direction to issue coal could only be at the notified price subject to other standard and usual conditions being fulfilled by it. In this behalf Mr. Sibal, on instructions has clearly indicated that the petitioner would furnish the required security deposit and also furnish, if asked for, a bank guarantee. I was informed by Mr. Jagdeep Dhankar that the bank guarantee would have to be furnished equivalent to 6% of the value of the coal, which I was told, would be equivalent to Rs.14.40 crores. Mr. Sibal, stated unequivocally, that the petitioner would have no difficulty in agreeing to this condition as well.

25. Thus, for the moment, CIL will supply coal bearing in mind the aforesaid and the other usual terms and conditions contained in the model FSA.

RAJIV SHAKDHER (JUDGE) MARCH 07, 2018/hs/

 
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