2018 (3) TMI 1935 - HC - Indian Laws

Agreement for Supply of Coal - Non-execution of Fuel Supply Agreement (FSA) - direction to CIL to supply coal to the writ petitioner of the requisite grade - LOA issued to the petitioner as GCPP cannot be transferred only by reason of the fact that it stands converted to an IPP - HELD THAT - 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. 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. Also 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. Since 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 - the interlocutory application and the review application for vacation and/ or recall of order are dismissed.

Summary

Issues Involved:
1. Interlocutory application and review application seeking to vacate/review interim order dated 31.01.2018.
2. Execution of Fuel Supply Agreement (FSA) under SHAKTI Policy.
3. Validity of the Letter of Assurance (LOA) issued to the petitioner as a Group Captive Power Plant (GCPP) and its conversion to Independent Power Plant (IPP).
4. Compliance with the SHAKTI Policy and the criteria for coal supply.
5. Impact of the competent authority’s decision dated 15.02.2018 on the petitioner’s rights.

Issue-wise Detailed Analysis:

1. Interlocutory Application and Review Application:
The interlocutory application (C.M. No.7039/2018) and review application (R.A. No.102/2018) were filed by Coal India Limited (CIL) and Union of India (UOI), respectively, seeking to vacate/review the interim order dated 31.01.2018. The court had directed CIL to supply coal to the petitioner’s power plant (Unit-I) based on the SHAKTI Policy. The applications argued that the competent authority’s decision dated 15.02.2018, which did not allow the LOA issued to the petitioner as a GCPP to be transferred to an IPP, necessitated recalling the interim order.

2. Execution of Fuel Supply Agreement (FSA) under SHAKTI Policy:
The petitioner argued that it fulfilled the criteria under clause A(i) of the SHAKTI Policy, which mandates the execution of an FSA with pending LOA holders whose plants are commissioned and meet specified milestones. The petitioner’s plant (Unit-I) was commissioned, and it had met all milestones. The court found that the petitioner had a prima facie case for the execution of an FSA under the SHAKTI Policy.

3. Validity of LOA and Conversion from GCPP to IPP:
The petitioner was initially issued an LOA as a GCPP and later permitted to convert to an IPP. The respondents contended that the LOA issued as a GCPP could not be used to seek coal supplies as an IPP. However, the court noted that various documents, including letters from Western Coalfields Limited (WCL) and the Central Electricity Authority (CEA), indicated that the petitioner continued to hold the LOA even after conversion to an IPP. The court found that the petitioner had been treated as an LOA holder throughout.

4. Compliance with SHAKTI Policy:
The court examined the SHAKTI Policy clauses and found that the petitioner met the criteria under clause A(i) for the execution of an FSA. The court also considered the petitioner’s argument that it was not allowed to participate in coal linkage e-auctions under the SHAKTI Policy because it was already an LOA holder.

5. Impact of Competent Authority’s Decision:
The competent authority’s decision dated 15.02.2018, based on the recommendations of the Standing Linkage Committee (Long Term) for Power (SLC (LT)), stated that the LOA issued to the petitioner as a GCPP could not be transferred to an IPP. The court found this decision to be based on the premise that the petitioner had bypassed the queue of IPPs awaiting LOAs. However, the court noted that the conversion from GCPP to IPP was approved by the SLC (LT) and the Ministry of Power, with the rationale that the lower cost of fuel would benefit consumers. The court found no merit in the respondents’ contention that the LOA could not be transferred upon conversion to an IPP.

Conclusion:
The court dismissed both the interlocutory application and the review application, holding that the petitioner fulfilled the conditions for the execution of an FSA under the SHAKTI Policy. The court directed CIL to supply coal to the petitioner at the notified price, subject to standard conditions and the petitioner furnishing the required security deposit and bank guarantee.