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MERC has jurisdiction to decide MSEB-DPC row: HC

Manthan Mehta in Mumbai

In a landmark judgment, the Bombay High Court on Tuesday ruled that the Maharashtra Electricity Regulatory Commission has the 'exclusive jurisdiction' to adjudicate the payment dispute between the Enron-promoted Dhabol Power Corporation and its partner, the Maharashtra State Electricity Board.

The division bench, comprising Justices Ajit Shah and Vijaya Tahilramani, in its final order contended that "MERC has the exclusive jurisdiction over all disputes arising between/among licensees and utilities.

DPC had earlier sought to challenge the jurisdiction of MERC in its dispute with MSEB. By mentioning licencees the court has preempted any similar disputes that may arise between power utilities like the Tatas and BSES that also have several pending disputes before the MERC.

Rejecting the theory of 'pollutant theory' made by DPC counsel P Chidambaram during his submission when he stated that even the bias of one of the members of the commission could adversely influence other members, the court held that there was not a shred of evidence to substantiate this argument.

"We have perused the May 29, 2001 proceedings that took place before the MERC where there is nothing to show that the other members were influenced," the court held.

This is the first time that the Electricity Regulatory Act has been construed (brought under legal scrutiny) by any court of law in terms of jurisdiction of ERC.

The judges noted that the judgement is irrespective of the fact whether there was an arbitration agreement, the same agreement was invoked, notices served and arbitrators appointed by the two parties to resolve the dispute.

The judges also ruled that the Supreme Court's August 6, 2001 and March 1, 2002 order concerning the Rs 1.36 billion letter of credit would continue.

As a result of this judgement, DPC can neither invoke the letter of credit nor can it activate the escrow account it has with the Canara Bank.

More importantly, the arbitration proceedings initiated in London are also stayed, with the outcome of this order.

The judgment says that MERC has the power to regulation too vary terms and conditions of the contract (power purchase agreement between DPC and MSEB) in the course of such regulation.

MSEB was represented by Maharashtra Advocate General Goolam Vahanvati, while the financial institutions consortium led by IDBI was represented by its counsel Iqbal Chagla.

The division bench also termed as inadmissible the submissions made by Chagla where he said that MSEB could not seek legal recourse when there was an arbitration agreement it had signed with DPC to deal with the issue.

However, the court has granted permission to DPC for filing an appeal in the Supreme Court.

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