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DPC assures HC not to take steps on termination notices

Enron's Dabhol Power Company on Wednesday assured the Bombay high court that it will not take any steps until November 9 on the preliminary termination notices and asset transfer notice served on Maharashtra State Electricity Board this year.

The assurance was given by DPC counsel Janak Dwarkadas on a notice of motion taken out in a suit filed by financial institutions led by the Industrial Development Bank of India and others urging for directions to restart the plant and generate power, so that their investments were secured.

Justice J A Patil placed the statement of DPC's counsel on record and adjourned the matter to November 9 as the respondents sought time to argue. The notice of motion will now come up for hearing before Justice D G Deshmukh.

IDBI, ICICI, IFCI and SBI filed a suit claiming that the total exposure in DPC's project as a result of direct lending or way of guarantees was to the extent of Rs 61.99 billion which constituted about 73 per cent of the total debts of the company.

One of the relief sought by the lenders was to restrain DPC and MSEB from taking any steps which will precipitate matters to a point of no return, unless the disputes between them were resolved through appropriate and competent forum.

The plaintiffs also sought a direction to DPC to restart the plant which is lying idle since May 29, after MSEB rescinded the PPA. They have urged for generation of power from the 740 mw phase one of the Dabhol project.

The plaintiffs contended that they needed security for their lendings in the project. The basic security was of course hypothecation of movable and immovable assets, but the surest way to recover their money was proper and continuous operation of the plant, they submitted.

Since January this year, various disputes had arisen between DPC and MSEB and they had taken various steps which have endangered their monies, the plaintiffs said.

On May 19 and September 10 this year, DPC had served MSEB notices for preliminary termination of the PPA and on November 5, the multinational also served a notice for transfer of assets to the board. Now DPC was about to serve final termination notice to MSEB, the plaintiffs submitted.

Once final termination notice was issued, then it will reach an irretrievable position and MSEB will be obliged under PPA to take over assets of the plant and money required for such transactions will be to the order of Rs 200 billion.

In such an event, MSEB will have to undertake repayment of outstanding debts which was impossible looking into its precarious financial condition, the plaintiffs argued.

The plaintiffs apprehended that their security was being jeopardised because DPC and MSEB were locked in disputes. They sought orders from the court to protect their investments in the plant.

If DPC's plant did not restart power generation then it will not only effect country's industrial sector but also its financial sector resulting in national tragedy.

Solicitor General Harish Salve appeared for the plaintiffs and Advocate General Goolam Vahanvati for the state of Maharashtra and MSEB.

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