IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE K.M.JOSEPH WEDNESDAY, THE 8TH JULY 2009 / 17TH ASHADHA 1931 WP(C).No. 15167 of 2006(E) ------------------------------------------------- PETITIONER(S): ---------------------- INDSIL ELECTROSMELTS LTD., HAVING ITS REGISTERED OFFICE AT 49, AVANASHI ROAD, COIMBATORE, REP. BY ITS FINANCIAL ADVISOR V.NATARAJAN. BY ADV. SHRI JOSEPH VELLAPPALLY, SR. ADV. SRI.JOSEPH KODIANTHARA SRI.MATHEWS K.UTHUPPACHAN SRI.T.R.RAJAN RESPONDENT(S): --------------- 1. STATE OF KERALA, REP. BY THE SECRETARY, POWER DEPARTMENT, GOVT. OF KERALA, SECRETARIAT, THIRUVANANTHAPURAM. 2. KERALA STATE ELECTRICITY BOARD, REP. BY ITS SECRETARY, VYDYUTHIBHAVANAM, PATTOM PALACE P.O., THIRUVANANTHAPURAM. 3. THE DY. TAHASILDAR (RR), UDUMBANCHOLA, IDUKKI. R1 & R3 BY GOVERNMENT PLEADER SHRI T.B. HOOD & SHRI BEJOY CHANDRAN. SRI.C.K.KARUNAKARAN, SC FOR KSEB FOR R2 THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 18.9.2008, THE COURT ON 08/07/2009 DELIVERED THE FOLLOWING: W.P.(C).NO.15167/06 E APPENDIX IN W.P.(C). NO.15167 OF 2006 E PETITIONER'S EXHIBITS: EXT.P1TRUE COPY OF THE GOVERNMENT ORDER GO (MS).NO.23/90/PD DATED 7.12.1990. EXT.P2TRUE COPY OF THE GOVERNMENT ORDER GO.MS.NO.5/92/PD DATED 12.3.1992. EXT.P3TRUE COPY OF THE MEMORANDUM OF UNDERSTANDING BETWEEN INDSIL ELECTROSMELTS LIMITED AND ELECTRICITY BOARD. EXT.P4TRUE COPY OF THE MINUTES OF MEETING DATED 8.4.1994 HELD AT THE OFFICE OF MINISTER (ELECTRICITY). EXT.P5TRUE COPY OF THE AGREEMENT ENTERED INTO BETWEEN THE PETITIONER AND KSEB DATED 30.12.1994. EXT.P6TRUE COPY OF THE AGREEMENT ENTERED INTO BETWEEN KSEB AND SILCAL METALLURGIC LIMITED DATED 30.12.1994. EXT.P7TRUE COPY OF THE AGREEMENT ENTERED INTO BETWEEN KSEB AND TRAVANCORE ELECTRO CHEMICAL INDUSTRIES DATD 30.12.1994. EXT.P8TRUE COPY OF THE LETTER DATED 25.7.1998 FROM CHIEF ENGINEER TO INDSIL ELECTROSMELTS LIMITED. EXT.P9TRUE COPY OF THE LETTER DATED OCTOBER 5, 1998 ADDRESSED TO DY. CHIEF ENGINEER, KSEB ALONG WITH COPY OF THE DEMAND DRAFT. EXT.P10 TRUE COPY OF THE LETTER DATED 3.5.1999 FROM CHIEF ENGINEER TO PETITIONER. EXT.P11 TRUE COPY OF THE LETTER DATED 5.5.1999 FROM PETITIONER TO MEMBER TRANSMISSION WITH COPY TO DY. CHIEF ENGINEER ALONG WITH COPY OF THE DD FOR RS.20,55,075/=. EXT.P12 TRUE COPY OF THE LETTER DATED 27.6.2001 ADDRESSED BY CHIEF ENGINEER KSEB TO PETITIONER. EXT.P13 TRUE COPY OF THE LETTER FROM PETITIONER TO CHIEF ENGINEER TRANSMISSION SOUTH OF KSEB DATED 4.7.2001. EXT.P14 TRUE COPY OF THE LETTER FROM CHIEF ENGINEER TRANSMISSION SOUTH DATE 22.11.2001. EXT.P15 TRUE COPY OF THE COMMUNICATION DATED 28.11.2001 ALONG WITH COPIES OF THE LETTER DATED 28.11.2001 ADDRESSED TO DY. CHIEF ENGINEER ALONG WITH COPY OF A DD ENCLOSED THEREWITH. EXT.P16 TRUE COPY OF THE LETTER NO.TC2-9311/678 DATED 6.9.2005 FROM SECRETARY, KSEB TO PETITIONER. W.P.(C).NO.15167/2006 E EXT.P17 TRUE COPY OF THE REPRESENTATION SUBMITTED BY PETITIONER DATED 26.9.2005 TO THE SECRETARY, KSEB. EXT.P18 TRUE COPY OF THE REVENUE RECOVERY NOTICE DATED 6.6.2006 IN FORM 1 U/S.7 OF REVENUE RECOVERY ACT. EXT.P19 TRUE COPY OF THE REVENUE RECOVERY NOTICE DATED 6.6.2006 IN FORM NO.10 UNDER REVENUE RECOVERY ACT. ADDITIONAL DOCUMENTS: 1) TRUE COPY OF LETTER DATED 4.6.1999 ISSUED BY THE SECRETARY, KSEB. 2) TRUE COPY OF LETTER DATED 25.6.2005 ISSUED BY THE PRINCIPAL SECRETARY TO GOVERNMENT. RESPONDENTS' EXHIBITS: EXT.R2(A) TRUE COPY OF LETTER NO.TC2-9311/99/2257 FROM THE SECRETARY, KSEB TO THE PRINCIPAL SECRETARY TO THE GOVERNMENT DATED 04.06.1999. EXT.R2(B) LETTER NO.5560/B1/99/PD FROM THE PRINCIPAL SECRETARY TO THE GOVERNMENT TO THE SECRETARY, KSE BOARD DATED 25.6.2005. EXT.R2(C) TRUE COPY OF THE EXTRACT OF THE REPORT OF THE C & AG. // True Copy // PS to Judge K.M.JOSEPH, J. - - - - - - - - - - - - - - - - - - - - - - - - - WP.(C) No.15167 of 2006 - - - - - - - - - - - - - - - - - - - - - - - - - Dated this the 8th day of July, 2009 JUDGMENT Ext.P1 is a Government Order dated 7.12.1990, by which the Government of Kerala purported to enunciate its policy to encourage private participation in the generation of power. Ext.P2 dated 12.3.1992 is produced as guidelines in this direction. It is the case of the petitioner that several entrepreneurs including the petitioner responded to Ext.P1 notification. They felt that there was need for some clarification. Clause 7 of Ext.P1 order reads as follows: “The transmission line required for transferring power from the captive plant of the agency to the nearest grid sub- station will be built at the cost of the agency by K.S.E.Board, as a deposit work and after construction it shall be transferred to the Board without any compensation. Land required for construction of such transmission line will be considered as part of land required for the scheme. The metering equipment shall be provided by the agency at their cost at a point decided by the Board and handed over to the Board along with the transmission line, without any compensation.” Objections were raised to the same. Petitioner entered into Ext.P3 memorandum of understanding with the Kerala State Electricity Board, WPC.15167/2006. 2 hereinafter referred to as the Board. It is the further case of the petitioner that on the strength of the objections raised by the persons who have responded to Ext.P1, a meeting was called by the then Minister for Electricity. It was attended by the Chairman of the Board, Member (Technical), Chief Engineer (Civil)(Plg. & R), representative of the petitioner and two other agencies. Ext.P4 is produced as the minutes of the meeting. In Ext.P4, clause 3 reads as follows: “iii) Charges to be levied for transmission line to be erected for evacuation of power. It was felt that the earlier decision modified asking the private entrepreneur to construct the line upto 4 kms. The balance may be constructed at the cost of Electricity Board as promotional measure.” Petitioner entered into Ext.P5 agreement with the Board. Clause 9 of Ext.P5 being crucial is extracted hereunder: “The transmission line required for transferring power from the power house to the nearest grid substation and/or other locations as suggested by the KSEB upto a length of 4 (four) Km shall be built by the KSEB at the cost of company, as a deposit work and the balance constructed by the KSEB at its cost as a promotional measure for encouraging the private entrepreneurs for generation of power. After construction of the line for the company by KSEB it shall be transferred to the KSEB without any compensation. Land required for WPC.15167/2006. 3 construction of such transmission line will be considered as part of land required for the project as per conditions as elaborated under clause (6) above and the metering equipment as per the specifications of KSEB shall be provided by the company at their cost at a point in the generating station as approved by the KSEB and handed over to the KSEB along with transmission line; without any compensation.” It is the case of the petitioner that once it was decided that the major portion of the cost of construction of the line was to be met by the Board itself, then the Board had also insisted that they must be given the liberty to choose the place to which the transmission line must be erected. That is, whereas the Government Order originally contemplated transmission line to be constructed from the project to the nearest sub station, in the agreement the Board insisted that it should be given liberty to choose the place to which the transmission line is to be drawn, and that is how clause 9 came to be incorporated, is the case of the petitioner. Exts.P6 and P7 are the agreements executed with other agencies. It is stated that both these agreements provide that the transmission line is to be constructed by the Board and the agencies would be required to meet the cost of transmission line for the first 4 km. Petitioner contends it set up Hydro Electric Project at Kuthungal incurring an investment of more than Rs.55 Crores. It is pointed WPC.15167/2006. 4 out that the nearest sub station to Kuthungal was at Sengulam and that the transmission line if drawn from Kuthungal to Sengulam would be traversing 6 - 7 kms. But the department decided, it is stated, that the power evacuated from Kuthungal must be received at Neriyamangalam. Ext.P8 dated 25.7.1998 is produced as the communication from the Chief Engineer to the petitioner referring to clause 9 and requesting petitioner to remit Rs.213.8 Lakhs as work deposit amount, which was stated to be preliminary estimation cost of 4 km line. Petitioner remitted the amount. It is further stated that the tender for the construction of the 110 DC line from Kuthungal to Neriyamangalam was floated and finalized at 136% above the PAC. Petitioner was called upon pay Rs.20,55,075/- as proportionate tender excess for construction of 4 km vide Ext.P10, which also the petitioner remitted. It is stated that the transmission line was completed by the end of May, 2001. Transmission of power commenced on 1.6.2001. By Ext.P12 dated 27.6.2001 petitioner was called upon to remit the additional amount of Rs.21.94 Lakhs towards the proportionate cost payable by the petitioner for the transmission line for the first 4 kms. Petitioner pointed out vide Ext.P13 that the petitioner was not liable to pay the said sum. The Department persisted with the demand vide Ext.P14. Petitioner points out that petitioner paid the said sum on 28.11.2001 and has produced Ext.P15 in WPC.15167/2006. 5 support thereof. It is while so petitioner received Ext.P16 communication from the Secretary of the Board. In Ext.P16, after referring to Ext.P1 Government Order and Ext.P5 agreement, it is stated as follows: “The Board vide letter dated 4.6.1999 had requested the Government to approve the proposal of recovery of the cost of the transmission line and interest thereon. The Government vide letter dated 25.6.2005 had conveyed Government's concurrence to the proposal of KSE Board to recover the cost of12.477 Km of transmission line constructed for the evacuation of power generated at Kuthungal HE Project and interest thereon from your company.” Petitioner was asked to remit a sum of more than Rs.22 Crores and the break up of the aforesaid sum is given as follows: “Rs. _____________________________________________________________ Labour cost 3,49,27,137 Material cost 1,97,80,849 Storage charges 31,64,936 Tree-cutting compensation paid so far 1,54,82,202 Land acquisition cases so far 97,69,753 Anticipated future payment of Tree-cutting and Land Acquisition 1,50,00,000 Development charges 1,96,24,975 Departmental charges 2,47,27,469 WPC.15167/2006. 6 Total 14,24,77,321 Less amount remitted by M/s.Indsll 2,56,29,075 Balance amount due 11,68,48,246 Calculation of total amount due Balance amount due 11,68,48,246 Less anticipated future payment of Tree-cutting and Land Acquisition 1,50,00,000 Balance 10,18,48,246 Interest @ 18.5% per annum on the balance amount from 17.7.1999 to 16.7.2005. 11,30,51,553 Sub Total 21,48,99,799 Add future payment of Tree-cutting and Land Acquisition 1,50,00,000 GRAND TOTAL 22,98,99,799” Petitioner requested vide Ext.P17 letter dated 26.9.2005 to withdraw the letter. Exts.P18 and P19 notices under the Revenue Recovery Act are issued demanding a sum of Rs.22,98,99,799/-. Petitioner challenges Exts.P16, P18 and P19. 2. First respondent, State has filed a counter affidavit, wherein it is inter alia stated as follows: 3. The Board had incurred a huge loss iin constructing 110 KV double circuit line for the evacuation of power from Kuthungal Hydro Electric Project. It is stated that Ext.P1 Government order is made part of WPC.15167/2006. 7 Ext.P5 agreement and hence Clause 7 is to be read as part of the agreement of the parties. Reference is made to Clause 6 of Ext.P5 agreement. It is stated that compensation amounting to Rs.2,52,51,955/- was already paid by the Board towards tree cutting and land acquisition cases and so many cases for tree cutting compensation are pending in various courts. It is stated that other projects were not materialised though agreement was executed with other agencies. It is stated that original proposal was to construct 15 kms of transmission line for evacuation of power. On actual execution of the work, length of line was 16.477 kms, that is the Board had constructed 12.477 kms of line. It is stated that in the report of the Comptroller and Auditor General of India for the year ended 31st March, 2003 it was observed that the decision to incorporate a provision in the agreement deviating from the prescribed guidelines resulted in undue benefit of Rs.8.79 Crores to the private entrepreneurs. It is further stated that since the Board has to bear the cost of transmission line for the balance as per the agreement, the Board has requested Government sanction to recover the cost borne by Board and its interest thereon. The Government vide letter dated 25.6.2005 conveyed concurrence for the proposal. The Board is borrowing money for its capital expenditure from the financial institutions and incurring huge amount towards interest, and it has invested Rs.11,68,48,246/- for the construction WPC.15167/2006. 8 of the balance portion of the said line during 2000-2001. Reference is made to Clause 23 of the agreement providing for recovery of the amount in any manner including under the Revenue Recovery Act. It is stated that the recovery is based on the approval granted by the Government. The Board has not agreed for the construction of transmission line required for a private entrepreneur at Board's expenditure. It is stated that when there is a contract between parties, demand made in terms of the contract need not be sourced to any statutory provision. It is stated that law of limitation is not applicable. 4. A counter affidavit is filed on behalf of the second respondent inter alia stating as follows: Reference is made to Clause 9 of Ext.P1 order besides other provisions. It is stated that Ext.P1 order is made part of Ext.P5 agreement and therefore Clause 7 of Ext.P1 is to be read as part of the agreement. Ext.P4 minutes is stated to be only a minutes and not a part of Ext.P1 order by amending the same and it is also stated that it is not part of the agreement. Reference is made to Clause 6 of Ext.P5 agreement. It is stated that the Board has already paid compensation towards tree cutting and land acquisition expenses in a sum of Rs.25251955/- and several other cases are pending in various other courts claiming compensation for tree cutting. WPC.15167/2006. 9 The original proposal was for 15 kms. Reference is made to the report of the Comptroller and Auditor General of India. It is stated that the Board has not agreed for the construction of the transmission line required for a private entrepreneur at Board's cost. It is stated that the agreement was executed based on clause 21 of the Government order and that Government Order forms part of Ext.P5 agreement and the parties are bound to obey and act in accordance with the terms and conditions stipulated in the Government Order. Reliance is placed on Clause 23. There is also reference made to the Board borrowing money from financial institutions and incurring huge amount towards interest. It is stated that the principle of transferring the line to the Board without any compensation is adopted for all deposit works. 5. Thereafter an additional counter affidavit is filed inter alia stating as follows: There is a denial of the allegation of the petitioner that the claim is barred since the work of transmission line was over on 27.5.2001. It is stated that for the purpose of laying the transmission line vast areas of land were acquired and trees were cut. Disputes relating to compensation are pending in various courts. Reference is made to Clauses 6 and 9 of Ext.P5 agreement to contend that all lands acquired for the project are to be paid for by the petitioner. Tree cutting compensation is stated to be WPC.15167/2006. 10 incidental to acquisition of land and the right to draw the line. It is stated that the final determination of the dues is not complete and various claims under these heads are still pending before various courts. Separate clauses cannot be taken in isolation for determining limitation. It is stated that the petitioner has not performed the requirements at paragraph 7.3.2 (Power tunnel). It is stated that the petitioner has been seeking extension for doing the above work and payments and settlement of accounts under various clauses of the agreement are on going and will subsist through out the duration of the agreement. The limitation cannot decided without detailed examination of the underlying facts, which is normally not contemplated under Article 226, it is stated. It is also stated that there is no question, which cannot be decided by the Arbitrator contemplated under clause 25 of the agreement. It is stated that the period of limitation will start only with the contractual obligation is broken, which commenced on 26.9.2005, when the petitioner for the first time communicated its refusal to pay and the breach being continuing, the period of limitation has not set in. It is stated therefore that Exts.P18 and P19 revenue recovery action is well within the period of limitation. It is stated that any charges, which are due towards the construction of the line is a continuing liability. Demand is purely in terms of the contract and dues to the Board include all plausible overhead and WPC.15167/2006. 11 ancillary amounts incurred for laying the transmission line. It is stated that the provisions of the Electricity (Supply) Act are incorporated into the agreement by reference. Any clause in Ext.P5 agreement at variance with the public policy cannot take precedence over public policy. There is no public interest in giving any concession to the petitioner at the cost of public revenue. It is stated that the entire generation is for the use of the petitioner. Entering into Ext.P3 before Ext.P4 minutes is stated to be relevant. The non-translation of Ext.P4 into a Government Order also evidences the fact that Ext.P1 governs the field. Clause 9 has to be read in the context of the Government Orders. The agreement has to be incorporated harmoniously and therefore the terms of the Government Order regarding the petitioner having to bear the entire cost of setting up the transmission line is to be read as an essential part of the condition of the agreement. It is stated that the petition under Article 226 may not be allowed to be converted into adjudication on merits. It is stated that Government Order (Ext.P1) must be read as part of the agreement as the said document is referred to in the agreement. It is stated that the petitioner has neither resorted to the alternate remedy or any remedy under the Revenue Recovery Act and that it has rushed to this court when efficacious alternate remedies are available. WPC.15167/2006. 12 6. Under a memo by the learned counsel, letter dated 4.6.1999 issued by the Board and letter dated 25.6.2005 issued by the Government are produced. The Board has also produced Exts.R2(a) and R2(b)letters. Ext.R2(c) produced is the extract of the report of the Comptroller and Auditor General for the year ended 31.3.2003. 7. I heard learned Senior Counsel for the petitioner Sri. Joseph Vellappally and Sri.C.K.Karunakaran for the Board besides the learned Government Pleader. 8. Learned Senior counsel reiterates the facts. He would submit that the action of the Board is unsustainable. He would point out that the impugned demand is based neither on a statute nor does it have any support from a contractual provision. He pointed out that Clause 7 in Ext.P1 order was expressly modified by the tripartite minutes dated 8.4.1994 and it was the amended clause which was incorporated as clause 9 in Ext.P5, standard form agreement. It is contended that the action of the Board and the Government of Kerala is illegal and unreasonable. Reliance is placed on the decision of the Apex Court in Mahabir Auto Stores v. Indian Oil Corporation ((1990) 3 SCC 752). Support is sought to be derived from the decision of the Supreme Court in ABL International Ltd. WPC.15167/2006. 13 v. Export Credit Guarantee Corporation of India Ltd. ((2004) 3 SCC 553) for the proposition that a writ petition is indeed maintainable to resolve the dispute in this case. He would refer me to the various documents which I have already referred to to contend that the understanding between the parties with reference to the documents including Ext.P5 agreement was that the petitioner would be liable to pay the amounts in respect of 4 kms. He pointed out that Clause 7 of Ext.P1 provides that the transmission line to the nearest grid sub station is to be built at the cost of the agency as a deposit work by the Board and the land required for the construction of such transmission line will be considered as part of the land required for the scheme. He would therefore contend that if the matter is decided with reference to Clause 7, petitioner would have been liable only for the cost of the line upto the nearest grid station. It is pointed out that even the Government or the Board are not seeking to go by the terms of the contract but are relying on the report of the Comptroller and Auditor General. The demand is neither based on the agreement nor even on Ext.P1 policy. The action is arbitrary. It is pointed out that the writ will lie as the revenue recovery proceedings are barred as the civil suit would patently not lie on account of limitation (State of Kerala v. V.R. Kalliyanikutty ((1999) 3 SCC 657)). It is pointed out that the final payment was demanded vide WPC.15167/2006. 14 Ext.P12 dated 27.6.2001 and paid vide Ext.P15 dated 28.11.2001. It is also contended that the State and the Board have sought to supplement the reasons for raising the demand in the additional counter affidavit and in oral arguments and which is impermissible in law. Reliance is placed on the decision of the Apex Court in Mohinder Singh Gill v. Chief Election Commissioner ((1978) 1 SCC 405), (wherein the Apex Court referred to the following observations of Bose, J., in Gorghandas Bhanji) “Public orders, publicly made, in exercise of a statutory authority cannot be construed in the light of explanations subsequently given by the officer making the order of what he meant, or of what was in his mind, or what he intended to do. Public orders made by public authorities are meant to have public effect and are intended to affect the actings and conduct of those to whom they are addressed and must be construed objectively with reference to the language used in the order itself.” Reliance is also placed on the principle of Contra Preferentem. Learned Senior Counsel relies on the decision of Privy Council in Pallikelagatha Marcar v. John Gothfried Sigg, (1880 Vol.VII Indian Appeals 83) wherein the court dealing with the question of construction of an ambiguous stipulation in a deed held inter alia as follows: WPC.15167/2006. 15 “The construction of an ambiguous stipulation in a deed may undoubtedly be governed or qualified by a recital; but on the other hand if the intention of the parties is clearly to be collected from the operative part of the instrument, that intention is not to be defeated or controlled because it may go beyond what is expressed in the recital.” 9. Per contra, Sri. C.K.Karunakaran would contend that any dispute between the parties has to be referred to arbitration by the Government. Reliance is placed on the decision of this court in O.P.No.32432 of 2002 between the same parties. In the said judgment a learned Single Judge of this court dealing with the claim for compensation by the petitioner itself took the view that when the parties have agreed for resolution of the dispute, they are bound by such clause contained in the agreement and cannot approach this court under Article 226 for resolving such remedies in the agreement and it was directed that it is for the petitioner to seek reference of the matter to the Government in terms of Clause 25 of the agreement. It is pointed out that the said judgment was confirmed in W.A. 2920 of 2002 and the petitioner has to avail the remedy provided in Ext.P5. It is further contended that this case does not come within