IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA CWP No. 2662 of 2009 Reserved on: 21.6.2010 Decided on: 8.7.2010 Cosmos Hydro Power Private Limited and another …. Petitioners Versus State of H.P. and others ...Respondents Coram: The Hon’ble Mr.Justice V.K.Ahuja, Judge Whether approved for reporting? Yes. For the petitioners: Mr.Ajay Mohan Goel & Mr.Suneet Goel, Advocates. For respondent No.1: Mr.Vikas Rathore, Deputy Advocate General and Mr.J.S. Guleria, Assistant Advocate General. For respondent No.2: Mr.Tarlok Jamwal, Advocate. For respondent No.3: Mr.Rajiv Nayar, Senior Advocate, with Mr.Karan Singh Kanwar and Mr.Kartik Nayar, Advocates. V.K. Ahuja, J.: The present writ petition has been filed by the petitioners under Article 226 of the Constitution of India. The facts of the case, as alleged by the petitioners, are that the State of H.P. (respondent No.1) issued “Global Notice Inviting Proposals” (NIP) from eligible bidders for the implementation of hydro power projects mentioned ______________________________ Whether reporters of local papers may be allowed to see the judgment? Yes. 2 in the said Notice in the State of Himachal Pradesh in private sector on “Build, Own, Operate and Transfer (BOOT)” basis. The said Notice was duly published in various newspapers including the Hindustan Times on 7.1.2006. A copy of the said Notice Inviting Proposal is placed on the record as Annexure P-7. The said Notice Inviting Proposal by respondent No.1 was in three parts. Part-1 of the Notice pertained to the projects for which Pre Feasibility Reports (PFR for short) were ready. Part-2 of the said Notice pertained to the Projects feasibility whereof was to be ascertained by the Independent Power Purchasers (IPPs for short). Part-3 of the Notice pertained to self identified projects, which were to be of above 5MW capacity. The projects listed under Part-1 and Part-2 were divided into category-I and category- II. Under category-I, those projects were mentioned the tentative installed capacity of which were less than 100MW only. Under category- II, those projects were mentioned the tentative installed capacity of which was more than 100MW. 2. Petitioner No.2, being eligible to apply for allotment of hydro electric projects mentioned in the Notice Inviting Proposal, dated 7.1.2006, submitted its proposal for Chanju-I (25MW) hydro electric project in Chamba 3 District of H.P. mentioned at Sl.No.1 and also for Chanju-II (17MW) hydro electric project in Chamba District of Himachal Pradesh mentioned at Sl.No.2, under category-I, Part-I of the said Notice. Similarly, respondent No.3 also applied for Chanju-I (25MW) hydro electric project in Chamba District of H.P. Thus, both petitioner No.2 as well as respondent No.3 applied for the projects in category-I of part-I of the NIP, for which PFRs were ready. Copies of the PFRs of Chanju-I (25 MW) and Chanju-II (17MW) have been appended with the petition as Annexures P-8 and P-9, respectively. The PFRs of the above mentioned projects, which were prepared in March, 2004 and May, 2003, respectively, were, in fact, based on preliminary studies carried out after identifying the sites for diversion and power house on Chanju and Bhararu streams and only reflected “reach”/site for harnessing hydro power potential. The detailed survey and investigation were not undertaken at the time of preparation of the said PFRs. 3. On 26th September, 2007, a decision was taken by the State Cabinet to allot the above mentioned projects by way of entering into Memorandum of Understanding (MoU for short) with the eligible parties. Accordingly, petitioner No.2 was informed by the respondent State that 4 Chanju-II (17 MW) project stood allotted to it vide allotment letter, dated 1.10.2007. The petitioner was called upon to deposit 50% of the upfront premium on or before 15.10.2007. Respondent No.3 was allotted Chanju-I (25 MW) Project by respondent No.1 State vide allotment letter, dated 1.10.2007. 50% of the upfront premium amounting to Rs.8.5 lacs was also paid to respondent No.1 by the petitioners vide bank draft, dated 5.10.2007. 4. It was further averred that even after the issuance of the allotment letter dated 1.10.2007 and submission of the requisite upfront premium, the respondent State did not enter into any MoU, either with the petitioners or with respondent No.3. Both the said parties preferred separate writ petitions before this Court with the prayer that the respondent State be directed to enter into MoU on the basis of the letter of allotment issued to them. This Court, in the writ petition filed by respondent No.3, directed the respondent State to enter into MoU with respondent No.3 on the basis of the letter of allotment issued to them. During the pendency of the writ petition filed by petitioner No.2, a communication was received by the petitioner from respondent No.1 State to sign MoU on 26.12.2007. The writ petition filed by petitioner No.2 was dismissed as 5 withdrawn vide order, dated 18.12.2007. Petitioner No.1 confirmed to respondent No.1 the receipt of the letter, dated 17.12.2007, and informed the State that petitioner No.1 shall be signing the MoU with the respondent State on 26.12.2007. 5. It was further alleged in the writ petition that though respondent No.1 entered into MoU with respondent No.3 on 20.12.2007 with regard to Chanju-I (25 MW) Project, however, when petitioner No.1, on 26.12.2007, approached the respondent State for the purpose of signing of the MoU, as per communication of the respondent State, dated 17.12.2007, the MoU was not signed with petitioner No.1. Petitioner No.2 filed a contempt petition before this Court and during the pendency of the said Contempt Petition, the respondent State invited petitioner No.1 to enter into the MoU on 27.2.2008. Thereafter, the MoU was entered in between petitioner No.1 and respondent No.1 State of H.P. with regard to Chanju-II (17 MW) Project on 26.2.2008. 6. It was further alleged that after the signing of the MoU, petitioner No.1 has been following the conditions laid down in the said MoU and achieved the milestones within the period prescribed therein. The time limit prescribed in the MoU, as per milestone at Sl.No.8, for 6 submission of the Detailed Project Report (DPR for short) qua the project allotted to petitioner No.1, was 18 months from the date of signing of the MoU. It is further averred that the time limit for submission of the DPR had still not expired and cut off date for the submission of the DPR by petitioner Company is 25.8.2009. The DPR of the said project, as alleged by the petitioner, was being prepared by petitioner No.1 as per the guidelines for preparation of DPR. The project report is ready and the same is being finalized for submission to obtain the techno economic clearance. Petitioner No.1 alleged that he will be submitting the DPR before the date i.e. 25.8.2009. 7. It was further alleged that the DPR of Chanju-II Project allotted to the petitioner Company is being prepared by their consultants. According to the assertions made by the petitioners, respondent No.1 has entered into MoU with respondent No.3 on 20.12.2007 for the purpose of implementation of Chanju-I (25 MW) project. As per the PFR of the said Project, Chanju Stage-I hydro electric project was a run of the river scheme on Chanju Nallah, a tributary of Baira Nallah and sub tributary of river Ravi. The proposed project had the “reach”/site well defined with the geographical coordinates i.e. longitude and latitude as under: 7 Components Longitude Latitude Diversion site/ intake site 76°13’55” 32°44’40” Power House site 76°11’ 28” 32°45’57” It was further alleged by the petitioners that the “reach”/site of the said project is also well defined with respect to its physical location on the ground as from the confluence of Chanju Nallah with Bagai Nallah and upstream of Bhaled weir, as shown in the lay out plan given in the pre feasibility report of the said Project. 8. The further averments made in the writ petition are that in July, 2008, it was learnt by petitioner No.1 that respondent No.3 had submitted a DPR in respect of Chanju-I Project with enhanced installed capacity of 36 MW instead of 25 MW, as mentioned in the PFR and the MoU signed between respondent No.3 and respondent No.1. Petitioner further alleged that as per the information available, respondent No.3 submitted two detailed project reports – one initially in the month of May, 2008 with the enhanced installed capacity of 30MW and another in the month of July, 2008 with an enhanced capacity of 36 MW. It was also alleged that the “reach” allotted to respondent No.3, as envisaged in the PFR and on the basis of the MoU so signed between respondent No.1 and 3, also stood arbitrarily and unilaterally enhanced 8 by respondent No.3. Thus, it was submitted that the reach of the allotted Project cannot be altered arbitrarily. Petitioner No.1, vide letter, dated 9.7.2008, wrote to the Chairman of respondent No.2 (Electricity Board) expressing its concern regarding the said change in the installed capacity of the Project allotted to respondent No.3 and requested it to intimate petitioner NO.1 about the full reservoir level taken in the DPR submitted by respondent No.3. The main concern of petitioner NO.1 was that since its Project was upstream to the Project of respondent No.3, any change in the lay out of Chanju-I project of respondent No.3, especially, near the diversion/intake site, the full reservoir level of Chanju-I Project would affect the tail water level of Chanju-II project allotted to petitioner No.1. A request was also made for supplying information regarding the full reservoir level and location of diversion weir/barrage kept in the DPR submitted by respondent No.3 for Chanju-I, so that various alternative lay outs of Chanju-II could be examined by petitioner No.1 for optimizing the capacity of its project. Petitioner No.1 also informed about the achievements of milestones envisaged in the MoU achieved by them. The petitioner also sought other details about the Project of Chanju-I as contained in the DPR 9 submitted to respondent No.1. It was further alleged that when respondent No.3 submitted its DPR with an enhanced installed capacity of 36MW, the Chief Engineer of respondent No.2 wrote to respondent No.1/State regarding the fact that respondent No.3 has submitted the DPR of the Project with an enhanced capacity of 36 MW against the allotted capacity of 25 MW. According to the terms of the Hydro Power Policy, the Project was to be allotted on the basis of tentative installed capacity as mentioned in the NIP. However, in case the capacity of the Project increases/decreases, the Company shall be required to sign a fresh MoU with the Government and the royalty, upfront premium and other charges were to be levied according to the approved norms by the Government for the revised capacity. 9. It was further alleged that the enhanced installed capacity was based on unilateral enhancement of “reach” of the Project of respondent No.3 from the “reach” that was mentioned in the PFR and stood allotted to respondent No.3 as per the MoU. It was also alleged that respondent No.1 took up the issue with respondent No.2 to which respondent No.2 addressed a communication to respondent No.1, dated 4.9.2008, and it was intimated by respondent No.2 that the NIP for implementation of Chanju-I 10 was invited for an installed capacity of 25MW and the Project was allotted to respondent No.3 Company in October, 2007. The Project was being investigated by respondent No.2 and the DPR of the Project was under preparation at the time of bidding. However, it was finalized by respondent No.2 during the allotment of the Project for an enhanced capacity of 30MW. It was further informed that the DPR was supplied to respondent No.3 on their request against the payment of the cost of the DPR as per the conditions stipulated in the NIP. Thereafter, respondent No.3 had submitted the DPR by enhancing the capacity from 25 MW to 36 MW. It was also informed that the capacity of the Project has been enhanced by respondent No.3 by shifting the diversion site from 1380 meter to 1426 meter. The petitioner also challenged that there was no mention in the NIP that the HPSEB was in the process of preparing a DPR or it had prepared a DPR, which would be available on payment of cost or otherwise to the successful IPP. The DPR and the various compendium against milestones No.1 to 5 and 7 were to be submitted by the IPP with which the MoU has been signed after carrying out the detailed survey and investigation within a period of one year after the signing of the MoU. It was further alleged that the capacity of the Project stood 11 enhanced by respondent No.3 by shifting the diversion site from 1380 meter to 1426 meter and by substituting the diversion structure i.e. trench weir proposed in the HPSEB DPR with gated weir/barrage structure having full reservoir level at 1440 meter. Both these acts were done by respondent No.3 unilaterally since there was no MoU in between the State and respondent No.3, which permitted respondent No.3 to prepare its DPR on the basis of DPR prepared by respondent No.2 (HPSEB) or by shifting the diversion site or by substituting the diversion structure. It was further alleged that the Chief Engineer of respondent No.2 also addressed a communication, dated 7.10.2008, to the Director, HIMURJA regarding Chanju-I Project and it was brought to the notice of HIMURJA that Chanju-I Project has been allotted to respondent No.3 on the basis of the PFR of the HPSEB. It was further mentioned in the said letter that the PFR, the intake and the power house of the Project were located between 1380 meter 1180 meter, respectively. However, respondent No.3 had submitted the proposals to enhance the capacity from 25MW to 36 MW and intake and power house had been located between 1426 meter and 1192.65 meter and in this background, the HIMURJA was called upon to confirm as to whether it had allotted any Project between 12 elevations 1426 meter and 1180 meter. The Director HIMURJA confirmed to the Chief Engineer that no Project has been allotted by HIMURJA in the elevation range of revised DPR of 36 MW submitted by respondent No.3. It was also mentioned that the proposed Chanju-I Project also does not interfere with any other Scheme of the HPSEB. In the upstream of this Project, Chanju-II is located between elevations of 1450 meter and 1600 meter. Thus, it was alleged by the petitioner that every effort was made by respondent No.2 to justify the DPR submitted by respondent NO.3 with an enhanced capacity of 36 MW. It was further alleged that the period contained in the MoU for submission of the DPR has not yet expired and petitioner NO.1 Company had not submitted its DPR. The comments of petitioner No.1 were never called in regard to the enhanced capacity of the project of respondent No.3 and the conclusions were arrived at by respondent No.2 unilaterally without associating petitioner No.1. 10. It was further alleged that certain queries were raised by respondent No.1 to respondent No.2 and it was informed that in the PFR, the trench weir of Chanju-I Project was proposed at El.+1380 meter. However, after geological studies in the DPR prepared by respondent No.2 HPSEB, it was recorded that the 13 location of the trench weir at 1380 meter was not found suitable from geological, ecological and economic considerations and, therefore, the HPSEB had proposed the trench weir at EL.+1426 meter, which was found suitable on these very grounds. Respondent No.3 has now proposed gated weir at 1426 meter, which would facilitate storage of water upto 1440 meter full reservoir level. Thus, in the opinion of respondent No.2, the proposal of respondent No.3 was considered geologically a better proposal. It was also mentioned in the said communication that no proposal regarding the enhancement of capacity had been received from petitioner No.1. Moreover, the Project of respondent No.3 has an added benefit of storage/peaking power due to construction of gated weir. Thus, it was communicated that proposal of optimization of potential by respondent No.3 will result in higher generation of energy and more royalty to the State. Thus, it was alleged that it was an attempt to justify the proposed gated weir at 1426 meter by respondent No.3, which was not the “reach” allotted to respondent No.3 and was not even contemplated in the DPR prepared by the HPSEB. Petitioner No.1 had, at no stage, been called upon by respondents No.l and 2 regarding the enhancement of capacity or to submit its proposal with enhanced capacity or to submit its 14 version or its stand on the proposal of respondent No.3 of enhancing its “reach” and capacity from 25MW to 36MW. Thus, it was alleged that the “reach” was changed arbitrarily and respondent No.2 tried to justify the DPR submitted by respondent NO.3 in violation of the PFR and the MoU in between respondent No.1 and respondent No.3. 11. It was further alleged that since respondents No.1 and 2 were not responding to the communications, representative of petitioner NO.1 met the Principal Secretary(Power), to the Government of H.P., and the Chief Engineer of respondent No.2 HPSEB on December, 30 & 31, 2008 and discussed the issues raised by petitioner No.1 in its communication with the said respondents. It was revealed for the first time to petitioner NO.1 that the full reservoir level of Chanju-I Project has been kept at elevation of 1440 meters in the DPR submitted by respondent No.3. Petitioner No.1 was assured that the entire matter shall be got examined after receiving the proposal for Chanju-II project for which petitioner NO.1 was asked to submit the proposed lay out of Chanju-II Project. Petitioner No.1 submitted the desired proposal highlighting the likely adverse effects which the proposed modifications of the Scheme envisaged in the DPR submitted by 15 respondent No.3 with enhanced capacity of 36MW and changed “reach” would have on the project of the petitioner No.1. It was further alleged that on 7.1.2009, the Chief Engineer (Projects-cum- Arbitrator) wrote a letter to the Chief Engineer (PSP) regarding the technical viability of Chanju- I Hydro Power Project (36MW). It was intimated that the DPR of Chanju-I Project (36 MW) submitted by respondent No.3 has been broadly examined and the Project is found technically viable for an installed capacity of 36 MW. It was further submitted that the DPR of Chanju-I is being examined in detail for processing it for techno economic clearance. It was further alleged that though there was no techno economic viability conveyed by respondent No.1 in favour of respondent No.3, a notification was issued by respondent No.1 dated 12.1.2009 that respondent No.3 proposed to implement Chanju-I Project cost of which was Rs.304.08 crores and brief description of the main Project components were also contained and notice was given that any licensee or any other person interested may raise objection/make representation on the above Scheme within two months of the publication of the said notice. It was alleged that petitioner No.1 on 6.3.2009 preferred objections on the modified proposal in respect of Chanju-I Project 16 highlighting its adverse effects on upstream Chanju-II Project allotted to the petitioner. The objections were raised in detail in regard to the raising of full reservoir level at 1440 meter elevation and other points. It was further alleged that the representative of petitioner No.1 also met the Chief Minister and brought to his notice that respondents No.1 and 2 had failed to appreciate that respondent No.3 had submitted a proposal of 36 MW Project by enhancing the “reach” of the Project from initially allotted to it and by totally changing the components of the said Project in violation of the MoU entered into by respondent No.1. It was also requested that the matter be got examined by way of constitution of an independent expert Committee. Thereafter, the respondent State issued an office order, dated 26.3.2009, that in view of the objections of the proponent of Chanju-II Project with regard to the elevation range notified with respect to Chanju-I Project, it was necessary to have the whole issue technically and transparently examined on the spot through a Committee of technical experts. A 3-member Committee was constituted to conduct a spot inquiry on commission basis comprising of Director of HIMURJA, who was to be the Chairman of the Committee, the Senior Executive Engineer and the Geologist, both of whom were to be the members 17 of the said Committee. It was the job assigned to the said Committee to fix and confirm the site of power house of Chanju-II Project in view of the geological and geographical features of the site and to ensure that with the proposed gated weir/barrage of Chanju-I, there was no risk to the power house of Chanju-II Project getting submerged or being adversely affected. The Committee visited the project site on 24.4.2009 and the representatives of petitioner No.1 and respondent No.3 were also present. The proposed site of power house of Chanju-II, the site selected by petitioner No.1 and the site proposed in the PFR were inspected by the said Committee. The Committee also posed five questions to petitioner No.1 as well as to respondent No.3 and called both the parties to submit their response to the said five queries raised by the Committee. The Committee submitted its report to the State on 1.6.2009. It is claimed by the petitioner in the writ petition that the copy of the said report was not made available to petitioner No.1 either by the Committee or by respondent No.1. On the basis of the report of the expert Committee, respondent No.1 issued order, dated 11.6.2009, vide which the objections filed by petitioner No.1 were rejected by respondent No.1 and respondent No.3 had been allowed to construct the gated weir with full 18 reservoir level at El.1440 meter. Thereafter, the Implementation Agreement was signed in between respondent No.1 and respondent No.3 on 12.6.2009 regarding the enhanced capacity of Chanju-I Project for an installed capacity of 36 MW. The petitioners, therefore, were aggrieved by the order, dated 11.6.2009, issued by the respondent State since petitioner No.1 was not apprised about the report of the expert Committee on the basis of which office order dated 11.6.2009 had been passed. It is alleged that petitioner No.1 should have been asked to submit its response to the said report of the expert Committee and has thus filed the writ petition mainly on the following grounds: i) No objections were called by the respondent State from petitioner No.1 on the report of the Expert Committee before passing the impugned order; ii) The report of the Expert Committee was not a unanimous report and had not been signed by the Chairman of the Committee; iii) The Implementation Agreement entered into in between respondent No.1 and respondent No.3, dated 12.6.2009, based on the said DPR and the result of order, dated 11.6.2009, is bad in law and is liable to be quashed and set aside. iv) The respondent State was bound by the terms and conditions contained in the MoU and, therefore, respondents NO.1 and 2 were required to abide by the 19 conditions of Notice Inviting Proposal and the MoU. v) Respondents No.1 and 2 are State within the meaning of Article 12 of the Constitution and the government largesse cannot be permitted to be granted or distributed to any one in an arbitrary manner. vi) The Project capacity has been enhanced by respondents No.1 and 2 based upon the enlarged “reach” that was never allotted to respondent No.3. vii) There was no techno economic viability certificate issued by the competent authority in favour of respondent No.3 as on 12.1.2009. viii) The order, dated 11.6.2009, is bad in law as the same has been issued by respondent No.1 without any application of mind. On the basis of such grounds taken in the writ petition, the petitioners have prayed for quashing of the impugned order, dated 11.6.2009. 12. In the reply filed by respondent No.3, it was pleaded that the writ petition was not maintainable, there was no impropriety in the order passed by respondents