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HC bars DPC from encashing letter of credit

BS Regional Bureau

The Bombay high court on Tuesday granted an injunction to the Maharashtra State Electricity Board, which prevents the Dabhol Power Company from encashing upon the letter of credit issued by Canara Bank.

In a press release, DPC said: "While we respect the Bombay high court's decision to grant an injunction to MSEB, these continuing steps by MSEB to prevent DPC (with both international and domestic stakeholders) from exercising its contractual rights is frustrating the efforts of foreign investors to do business in India."

Being unable to access and utilise the funds available under the letter of credit, the care and preservation of the entire DPC project in the ensuing months would be jeopardised, the release added.

On Monday, DPC had presented the letter of credit for encashment to Canara Bank. Today MSEB moved the Bombay high court and successfully got an injunction preventing DPC access to the funds.

According to the DPC release: "Although we could well have drawn the letter of credit earlier to cover non-payment dues by MSEB, DPC chose not to do so until such time as the funds were needed.

DPC had held the letter of credit in reserve over the last few months for judicious utilisation towards care and preservation of the plant, as well as for repaying principal and interest owing to our lenders including Indian financial institutions.

DPC will now be limited in its ability to continue both debt repayment and asset preservation." MSEB chairman Vinay Bansal was unavailable for comment.

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