IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA CWP No.1184 of 2007 Judgment reserved on: 30.12.2008 Date of decision: 24.02.2009. M/s DSC-Himal Hydro JV (“Consortium”) and Ors. …Petitioners Versus State of H.P. and Ors. ….Respondents ________________________________________________________________ Coram The Hon’ble Mr. Justice Jagdish Bhalla, Chief Justice. The Hon’ble Mr. Justice Kuldip Singh, Judge. Whether approved for reporting? For the Petitioners : Mr. R.L. Sood, Senior Advocate with Mr.Ashish Dholkia & Mr.Arjun Lall, Advocates. For the Respondents : Mr.R.K.Bawa, Senior Advocate with Mr.Lovneesh Kanwar, Advocate, for respondent No.1. Mr.Baldev Singh, Advocate for respondents No.2 and 3. Mr.Rajiv Nayyar, Sr.Advocate with Mr.Manu Nair, Mr.Sunil Mohan Goel, Mr.Arun Mohan and Mr.Kirath Nagra, Advocates for respondent No.4. Kuldip Singh, Judge 1. This judgment shall dispose of CWP No.1184 of 2008 in which the petitioners, besides other reliefs, have prayed for quashing of Annexure P-25, order dated 26.7.2007, canceling the allotment of petitioners of Kutehr Hydroelectric Project, Annexure P-27 dated 28.7.2007 allotting Kutehr Hydroelectric ____________________________________________________ Whether reporters of Local Papers may be allowed to see the judgment? 2 Project to respondent No.4, Annexure P-30 Pre-Implementation Agreement dated 1.3.2008 between respondents No.1 and 4. It has also been prayed that respondents be directed to allow the petitioners to implement and complete the Kutehr Hydroelectric Project as per the agreed terms. 2. The facts in brief are that petitioner No.1 is a joint venture between DS Construction Ltd., a Company established in India and Himal Hydro and General Constructions Ltd., a Company established in Nepal with DS Constructions Company Ltd. the lead partner of the joint venture. It has been alleged that the respondent No.1 issued notice for private sector participation in Hydroelectric Projects in the State of Himachal Pradesh for category-II projects in the month of November, 2005. The proposals were invited from eligible bidders for implementation of Hydroelectric Projects in private sector on Build, Own, Operate and Transfer (BOOT) basis. In category II proposals were also invited for Kutehr Hydroelectric project (260 MW) (for short project) in District Chamba on river Ravi. The petitioners in response to notice submitted the pre- qualification bid for the project on 14/16.3.2006. The respondent No.3 informed the petitioners being pre-qualified vide letter dated 14.9.2006 and asked the petitioners to offer the price bid by quoting the upfront premium charges per Mega Watt capacity over and above a minimum upfront premium of Rs.10 lacs per Mega Watt of the project. 3 3. The respondent No.1. vide communication dated 1.11.2006 informed that petitioner No.1 had secured the highest bid for the execution of the project and had requested to attend a meeting in the office of the Chief Secretary on 6.11.2006 and to make a presentation about the project and equity participation of the State. The petitioners vide communication dated 1.12.2006 were informed by respondent No.1 their decision to allot project to petitioners on BOOT basis, subject to certain conditions, including 50% upfront premium to be paid at the time of allotment of project, 25% at the time of implementation agreement and remaining 25% immediately at the time of financial closure. The equity participation of the Government upto 49% shall be decided at the time of financial closure. The respondent No.1 along with letter dated 1.12.2006 enclosed a copy of draft Pre-Implementation Agreement (PIA). 4. The petitioners vide communication dated 15.12.2006 wrote to the respondent No.1 that certain conditions in the PIA were in variance with the bid documents. On 10.1.2007 respondent No.1 wrote to petitioners about the queries raised by the petitioners regarding PIA . The petitioners were asked to send their consent for signing the PIA and deposit the amount of upfront premium i.e. 50% of the total payable upfront premium before 15.1.2007, failing which interest on that amount shall start accruing at the rate of 18% per annum. In the letter dated 10.1.2007 it was also stated that conditions to 4 be incorporated in the PIA are in terms of the hydropower policy of the State of Himachal Pradesh. The petitioners have alleged that the hydropower policy was notified on 11.12.2006, whereas the press note inviting proposals for implementation of project was issued during October, 2005 and the document of request for qualification is dated November, 2005. The provisions of the hydropower policy adversely affecting the proposals were not indicated in the request of qualification, therefore, the petitioners requested to respondent No.1 to review the matter. 5. The respondents vide communication dated 23rd January / 1st February, 2007 without taking into consideration the letter dated 19.1.2007 of the petitioners accorded extension to petitioner up to 31.1.2007, subject to the condition that the upfront premium be deposited by the petitioners. On receipt of letter dated 23rd January/Ist February, 2007, the petitioners wrote to respondents that they were keen to deposit the Ist installment of the upfront premium and the petitioners would be obliged if favourable resolution of the issues raised by the petitioners was communicated to them by the respondents. On 20.2.2007 respondents informed the petitioners that the Government has waived of equity participation for the project and the PIA be signed before 15.3.2007 after depositing the requisite amount of upfront premium. The respondents vide communication dated 6.3.2007 again asked the petitioners to 5 send their consent on the draft PIA and other relevant documents by 10.3.2007. 6. The respondents did not respond to the repeated requests, representations of the petitioners, therefore, petitioners communicated with respondents on 10.3.2007, 12.3.2007, 14.3.2007. On 17.3.2007 respondents wrote to petitioners to take necessary steps for signing the PIA, failing which it would be presumed that company was not interested in the project. 7. The respondent No.1 along with the project had also invited the proposal for another project namely Jangi Thopan 480 MW on the Satluj river which was allotted to M/s. Brakel Corporation on the same terms. The controversy had arisen regarding the upfront premium and PIA of Jangi Thopan Project also. The correspondence was exchanged between M/s. Barakel Corporation and respondents almost on similar grounds as that of petitioners. 8. On 4.4.2007 respondents informed the petitioners that PIA on Jangi Thopan project and the Thopan Pawari project allotted to M/s.Brakel Corporation was to be signed on 23.4.2007. The petitioners were informed that the Government has taken a uniform policy for petitioners and M/s.Brakel Corporation, opportunity was given to the petitioners to send their consent for signing the PIA along with M/s.Brakel Corporation. In response, the petitioners wrote to the 6 respondents that opportunity be provided to the petitioners to discuss the issue across the table. 9. It has been alleged that from April 2007 to June 2007, the petitioners and respondents had several meetings. The petitioners and respondents had agreed for certain amendments in the PIA and the date of signing the PIA was to be fixed. The petitioners were waiting for the final draft of the PIA, but Principal Secretary ( MPP & Power) to the Govt. of Himachal Pradesh issued notice dated 5.6.2007 to petitioners to sign PIA in 10 days, failing which action would be taken. The petitioners vide communication dated 13.6.2007 contacted respondents and had shown their willingness to sign the PIA but their request on certain issues was not acceded. The petitioners on 14.7.2007 made representation to respondents and agreed to sign the mutually agreed PIA to the entire satisfaction of the respondents and to pay upfront premium as per terms of allotment letter and PIA. The respondents did not cancel the allotment within the stipulated period which was given in the notice dated 5.6.2007. The respondents on 5.6.2007 had also issued notice to M/s.Brakel Corporation almost on similar lines. The respondents without considering the representations of the petitioners and the consent as given by the petitioners cancelled the allotment of the project of the petitioners vide communication dated 26.7.2007. 10. The petitioners have assailed the cancellation of the 7 project on the grounds that order of cancellation has been passed without application of mind and without considering the representations of the petitioners wherein the petitioners had agreed to sign the mutually agreed PIA on the settled terms and for the payment of upfront premium. The order dated 26.7.2007 for canceling the project is arbitrary, discriminatory, illegal and has been passed with a motive and for extraneous considerations. M/s.Brakel Corporation was also issued a notice on similar grounds on 5.6.2007. The respondents have not initiated or taken any action against M/s.Brakel Corporation though M/s.Brakel Corporation had not deposited the upfront premium nor signed the PIA. The respondents have discriminated against the petitioners for malafide and extraneous considerations. 11. It has also been alleged that conditions incorporated by the respondents through PIA were nowhere in the bid documents or otherwise at the time of notice inviting proposals. After allotment of the project to the petitioners the respondents came out with new conditions including signing of PIA. In view of the investment made by the petitioners for processing the case and being the allottee the petitioners acceded to the terms as made by the respondents and settled between the parties, the petitioners agreed to sign the mutually agreed PIA and pay the upfront premium amounting to more than Rs.67 crores, but despite that project of the petitioners was wrongly, illegally 8 cancelled vide communication dated 26.7.2007. 12. It has also been alleged that respondents have not acted bonafide. There were certain issues which were to be settled between petitioners and respondents and those were settled prior to the issuance of cancellation order dated 26.7.2007. The project involved a total investment of more than Rs.1500/- crores and therefore, those issues were necessarily to be settled before signing of PIA. 13. It has been alleged that at the time of bid there was no such condition that upfront premium would not be included in the project cost, in other words the total upfront premium amounting to Rs.135.20 crores was to be counted in the total cost of the project. Now after the allotment and at the signing of the PIA, the respondents came out with the condition that the total upfront premium would not be counted in the total project cost. The stipulation that after 40 years the project should give the rated output for next 30 years to the State in the same conditions is arbitrary and impossible due to the general wear and tear that would happen on the project. In these circumstances the signing of PIA and payment of first installment of upfront premium of Rs.67.60 crores to respondents as per the mutually agreed terms was delayed. 14. The action of respondent No.1 in canceling the allotment of project of the petitioners is malafide and smacks of favouritism. The respondent No.1 has allotted the project to 9 respondent No.4 without following the settled procedure of law in terms of notice inviting tender. There is no condition in the bid document that in case of default of allottee, the next tenderer would be allotted the project. The allotment of project was made in favour of respondent No.4 on 28.7.2007 for extraneous considerations and is liable to be quashed. 15. The cancellation of project allotted to the petitioner was undertaken to benefit respondent No.4 who was lower than the petitioners in terms of the bid. The respondent No.1 without further advertising the project and inviting the proposals has allotted the project in favour of respondent No.4 in an illegal manner. The entire process of cancellation of allotment of the project of the petitioners and allotment of project to respondent No.4 is vitiated in the eyes of law. The petitioners were always ready and willing to abide by the conditions as agreed upon between the parties and to pay first installment of upfront premium amounting to Rs.67.60 crores. The respondent No.1 and respondent No.4 have illegally executed and entered into PIA on 1.3.2008 in a highly arbitrary, unfair and discriminatory manner. 16. The respondent No.1 contested the petition by filing reply in which, several preliminary objections have been taken, such as, the petitioners vide letter dated 14.1.2007 had agreed to sign PIA and to deposit the upfront premium but despite that the petitioners had not signed the PIA and deposited the 10 upfront premium, hence are not entitled to file the petition. As per clause-3 of the joint venture agreement, petitioners No.1 and 2 were to form a core group to take all decisions in respect of the project. In the joint venture agreement it was also provided that the petitioners 1, 2 shall nominate the members to the core group in the ratio of their share holding. As per clause 4 of the joint venture agreement after allotment of the project to the consortium, the parties shall incorporate a special purpose vehicle (spv) for the implementation and management of the project, no steps have been taken by petitioners in terms of the joint venture agreement, no such company has been registered nor its articles of association have been framed. In absence of any spv, the petitioners are not entitled to file and maintain the writ petition. 17. The petitioners have failed to comply with express conditions in the bid documents for the deposit of 50% quoted upfront premium immediately upon allotment of the project, despite having been granted several opportunities. Therefore, the decision of the Govt. to cancel the allotment of project of petitioners and re-allotting the same to respondent No.4 the second highest bidder of the project, is valid, justified and legal and in public interest. The respondent No.1 invited global bids for the implementation of some hydroelectric projects in the State including 260 MW category-II project at Kutehr. As per bid document successful bidders for each project were required 11 to deposit the entire premium/other amount due within a reasonable period of receiving intimation regarding successful bid in three installments, 50% amount immediately after the allotment of project, 25% at the time of signing of implementation agreement and 25% immediately after financial closure. Therefore, 50% upfront premium had to be paid immediately after allotment of the project. The petitioners being highest bidder amounting to Rs.135,20,25,740/- for the project were required to deposit 50% upfront premium i.e. Rs.67,60,12,870/- immediately on allotment, but the petitioners did not deposit the said amount at the time of allotment. 18. The petitioners started raising frivolous disputes regarding the terms of the PIA. In this connection correspondence was exchanged between petitioners and respondent No.1. On 19.1.2007 the petitioners again raised the same dispute regarding the terms of the PIA. The respondent No.1 granted time to the petitioners till 31.1.2007 to sign PIA subject to deposit of the upfront premium immediately, but petitioners again failed to deposit the upfront premium. The petitioners on 9.3.2007 again raised the same dispute regarding the PIA and stated that they would pay the upfront premium if the amendments in the PIA were carried out as demanded by them. The respondent No.1 on 17.3.2007 informed the petitioners that proposed amendments were not 12 acceptable and since 15.3.2007 deadline for payment of upfront premium was over, necessary steps should be taken immediately, failing which the allotment would be cancelled. The petitioners again failed to deposit upfront premium and sign PIA. 19. On 4.4.2007 the respondent No.1 informed the petitioners that on 23.4.2007 M/s.Brakel Corporation would be signing PIA and depositing the upfront premium of Jangi Thopan Powari project and therefore, respondent No.1 permitted the petitioners to take necessary steps accordingly. The petitioners were directed to indicate their acceptance of the offer immediately, failing which the allotment would be cancelled. The petitioners instead of indicating acceptance of the offer on 20.4.2007 had written to respondent No.1 and reiterated their stand to discuss proposed amendments to PIA, which were already considered and rejected. 20. On 23.4.2007 respondent No.4 the second highest bidder of the project had shown its keenness to undertake the project in view of failure of the petitioners to deposit upfront premium. The petitioners even after 23.4.2007 stuck to their stand on their terms for payment of upfront premium and signing of PIA. The respondent No.4 on 9.5.2007 again wrote to respondent No.1 reiterating its stand to offer 50% upfront premium. The respondent No.1 finally served the notice dated 5.6.2007 on petitioners to show cause why the allotment of the 13 project should not be cancelled. In the meantime keeping in view of public interest, delay, additional costs that would be caused, respondent No.1 vide letter dated 5.6.2007 asked respondent No.4 to make a presentation on 13.6.2007 on Kutehr project. The petitioners responded to show cause notice vide their reply dated 13.6.2007 and again reiterated their stand, but failed to deposit upfront premium. On 14.7.2007 petitioners again wrote to respondent No.1 that it would only sign a mutually agreed PIA and thereafter pay the upfront premium. There was no mutually agreed PIA and the petitioner did not deposit the upfront premium. The respondent No.4 after its presentation on 23.7.2007 agreed to match the petitioners bid. In view of availability of a suitable replacement on equivalent terms and in the light of the petitioners continued failure to deposit the upfront premium on 26.7.2007, respondent No.1 cancelled the allotment of Kutehr project of petitioners. On 28.7.2007 the respondent No.1 allotted the project to respondent No.4 subject to the condition that it would deposit the 50% upfront premium Rs.67,60,12,870/- before 30.8.2007. The respondent No.4 accepted these terms and had in fact deposited the upfront premium amounting to Rs.67,60,12,870/- on 24.8.2007, therefore, allotment in favour of respondent No.4 was confirmed. In these circumstances petition is liable to be dismissed. 21. On merits respondent No.1 has denied the stand of the 14 petitioners and reiterated the stand which has been taken in preliminary objections. It has been pleaded that there is no connection of upfront premium with PIA and the petitioners were bound to deposit the upfront premium. The hydro power policy, 2006 was notified on 11.12.2006 which is applicable to all the power producers, the petitioners were also required to fulfill the obligations assigned under the hydro power policy in as much as PIA is part of the hydro power policy. The petitioner No.1 prior to communication dated 19.1.2007 had made a request to respondent No.1 on 14.1.2007 to grant extension upto 31.1.2007 for signing of the PIA and for depositing the upfront premium which was granted by respondent No.1 on 23.1.2007/1.2.2007. The request dated 14.1.2007 of petitioner No.1 was without any further enquiry with regard to PIA, but surprisingly on 19.1.2007 petitioner No.1 again raised same queries. The petitioner No.1 did not adhere to the time stipulated for deposit of the upfront premium and signing of PIA. 22. Jangi Thopan (480 MW) and Thopan Powari (480 MW) Hydroelectric Projects were allotted to M/s.Brakel Corporation while Kutehr (260 MW) Hydroelectric Project was allotted to petitioner No.1 on same terms and conditions. The draft PIA was also sent to M/s.Brakel Corporation who was ready to sign PIA and deposit upfront premium. M/s.Brakel Corporation made arrangement and fixed date for signing PIA, but later on 15 entire arrangements had to be cancelled because there was involvement of transaction of money from foreign country and they had received letter from Reserve Bank of India (RBI). In these circumstances, time was given to M/s.Brakel Corporation for taking clearance from RBI. The circumstances with the petitioner No.1 were entirely different from those of M/s.Brakel Corporation. 23. M/s.JSW Energy Ltd., who was the second highest bidder for Kutehr project vide letter dated 9.5.2007 had represented that since the petitioner No.1 had not deposited the upfront money and had not shown interest, therefore, M/s. JSW Energy Ltd. had shown its interest to execute the project. The respondent No.1 considered the whole matter on merits and only thereafter allotment of petitioner No.1 company of Kutehr project was cancelled and allotment of said project was made in favour of M/s. JSW Energy Ltd., who matched the highest bid amount and deposited 50% upfront premium Rs.67,60,12,870/- on 24.8.2007. 24. The notice was issued to M/s.Brakel Corporation on 5.6.2007 for delaying the payment of upfront premium. M/s.Brakel Corporation required clearance from RBI for foreign money transaction as it is mainly a Netherland based company. The respondent No.1 considered each and every representation made by petitioner No.1 company with regard to PIA to resolve the issues on merits, but petitioner No.1 had not shown interest 16 towards the execution of the project by repeating the same queries again and again. The respondent No.1 gave more than eight months time to petitioner No.1 to deposit the upfront premium. 25. The respondent No.1 has denied that allotment of the project was cancelled with revengeful intention but it was due to inefficiency shown by petitioner No.1 for not depositing the upfront premium. The payment of upfront premium has no concern with the signing of PIA. The decision was taken by respondent No.1 to cancel the allotment of the project on 11.7.2007, the petitioner No.1 sent its consent on 14.7.2007, the cancellation order was issued on 26.7.2007 after completing codal formalities. 26. The clause 3 of Chapter-2 (General Conditions) of the bid document provides right to amend/modify or impose additional conditions as may deem fit at any stage. In these circumstances, respondent No.1 was fully competent to impose any condition at any stage. The hydro power policy was under preparation at the time of advertisement of the project. On approval of policy, it became mandatory to all the power producers of the State to adhere with the policy. The other similarly situated companies, such as M/s.Malana Power Corporation Ltd. M/s. DCM, Siri Ram Ind. Ltd., GMD Energy Ltd., have signed the PIA and deposited the upfront premium. The respondent No.1 vide letter dated 10.1.2007 (Annexure P- 17 12) had made clear to petitioner No.1 that total amount payable on account of upfront premium shall not form part of the project cost. The inclusion of the upfront premium in the project cost solely lies within the purview of HP Electricity Regulatory Commission / Central Electricity Regulatory Commission, but hydro power policy of respondent No.1 does not permit. The respondent No.1 allotted the project to respondent No.4 vide letter dated 28.7.2007 in accordance with law. The re-advertisement of the project was unwarranted and unnecessary to avoid delay. The respondent No.1 and respondent No.4 have signed the PIA on 1.3.2008. 27. The respondents No.2 and 3 in their counter affidavits have opposed the writ petition. It has been submitted that respondent No.1 had issued letter of award for project to petitioner No.1 along with a copy of draft PIA which was based on the draft policy of Govt. of H.P. which was later on approved and notified on 11.12.2006 (Annexure-X) which has superseded all the previous provisions, notification etc. in this regard. The policy was made applicable with immediate effect to the prospective power producers and retrospectively to the present power producers. The Clause-3 of Chapter-2 of the bid document authorizes the Govt. to amend/modify or impose additional conditions at any stage. 28. The respondent No.4 has also contested the petition by filing counter affidavit. It has been submitted that Govt. of 18 Himachal Pradesh vide advertisement No.327 dated 28.10.2005 issued a global invitation for bids for the implementation of certain Hydroelectric projects in the State of Himachal Pradesh, including a 260 MW project to be set up at Kutehr. In continuation of the advertisement, the Govt. issued a Bid Document for investigation/implementation for Hydroelectric Projects in Himachal Pradesh (for category-II projects) in November 2005. The Clause 7.5 of the bid document provides that the projects will be allotted to the bidders making the highest bid. The successful bidder would be required to deposit the premium / other amount due within a reasonable period of receiving intimation regarding his bid being successful. The successful bidders would be required to deposit quoted upfront premium amount in three installments i.e. 50% amount immediately after the allotment of project, 25% at the time of signing of Implementation Agreement and remaining 25% immediately after financial closure. The respondent No.4 submitted its bid and was short listed, the respondent