MSEB seeks clarification over HC order

Sanjay Jog

Mumbai, Sept 17: The Maharashtra State Electricity Board (MSEB) on Monday, filed an application before the Supreme Court seeking a clarification on the Bombay High Court’s order on the invocation of the Rs 136 crore letter of credit (L/C) by the Dabhol Power Company towards the April power purchase bill with the Canara Bank.

MSEB has prayed for a status-quo on the basis of a Supreme Court order delivered by a bench comprising SP Bharucha on August 6. The Supreme Court in its order though has directed the Bombay High Court to decide the issue of jurisdiction of Maharashtra Electricity Regulatory Commission (MERC) to adjudicate dispute and difference between MSEB and DPC, it has restrained the DPC from proceeding on arbitration process and reactivation of escrow arrangement against MSEB.

MSEB sources told The Financial Express that the matter is likely to come up before the apex court bench led by Mr Bharucha on Friday. The Bombay High Court has stayed its order until September 21, to enable the MSEB to approach various alternative fora to pursue its case.

MSEB sources said that the SC order provides a standstill arrangement whereby neither MSEB nor DPC were entitled to proceed against each other until the Bombay High Court finally decides the issue of MERC jurisdiction. “The DPC’s move of invocation of letter of credit through the Bank of America, which is a trustee bank of all offshore lenders of DPC, has disturbed an equilibrium and thereby a status quo. Thus, the appeal has been made to the apex court to clarify the position,” sources said.

According to MSEB, if the DPC would be allowed to invoke the letter of credit, the apex court’s order of maintenance of status quo would become “meaningless.”

Furthermore, MSEB was of the view that the Bank of America would repeatedly draw upon the replenished letter of credit and all disputed bills would be settled in favour of DPC even before the dispute was settled. “This will make the interim order of the apex court meaningless,” sources said. It must be mentioned here that the Bombay High Court division bench comprising justices AP Shah and SA Bobde in its order said that the apex court had asked the high court only to decide whether MERC had the jurisdiction to decide the ongoing dispute between MSEB and DPC. All other issues were therefore to be decided by an appropriate forum.

Justifying the decision to invoke the letter of credit, the DPC had said that care and preservation of the entire project during ensuing months would be jeopardised, as DPC was unable to access and utilise funds available under the letter of credit.

MSEB had sought the court’s directive to restrain DPC from invoking the letter of credit and argued that it was part of the escrow agreement between the parties.

Before approaching MERC in May this year, MSEB had offered the amount of April bill to DPC under protest. However, the DPC refused to accept the bill. Even before the April bill, DPC had accepted MSEB dues under protest.