Before the MAHARASHTRA ELECTRICITY REGULATORY COMMISSION World Trade Centre, Centre No.1, 13th Floor, Cuffe Parade, Mumbai 400 005 Tel. No. 022 22163964/65/69 Fax. 022 221639761 E-mail: [email protected] Website: www.merc.gov.in
Case No. 247 of 2019 Petition filed by Vidarbha Industries Power Ltd. - Generation Business challenging the Termination Notice dated 20 April, 2019 issued by Adani Electricity Mumbai Limited- Distribution Business for termination of Power Purchase Agreement dated 14 August, 2013.
Coram I.M. Bohari, Member Mukesh Khullar, Member
Vidarbha Industries Power Limited-Generation (VIPL-G) ……..Applicant
V/s
Adani Electricity Mumbai Limited-Distribution (AEML-D) ………Respondent No.1
Axis Bank Ltd. ……….Respondent No. 2
Appearance:
For VIPL-G : Ms. Deepa Chavan ( Counsel ) Shri Venkatesh (Adv.)
For AEML-D : Shri Vikram Nankani (Counsel) Shri Ramanuj Kumar (Adv.)
For Axis Bank : Shri Sitesh Mukherjee (Adv.)
ORDER Date: 16 December, 2019
1. Vidarbha Industries Power Limited- Generation Business (VIPL-G) has filed its Case (Case No. 247 of 2019) dated 30 August, 2019 (Main Petition) under Section 86(1)(f) of
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the Electricity Act 2003 (EA), challenging the legality of the Termination Letter dated 20 April, 2019 (Termination Notice) issued by Adani Electricity Mumbai Limited- Distribution Business (AEML-D) under the Power Purchase Agreement (PPA) dated 14 August 2013 entered into between AEML-D and VIPL-G. VIPL-G has impleaded AEML-D and Axis Bank (one of the Lenders) as Respondents in the matter.
2. On 5 September, 2019, VIPL-G filed an Application (Impleadment Application) seeking impleadment of other Lenders i.e. State Bank of India, Bank of Baroda, Bank of Maharashtra, Oriental Bank of Commerce and Syndicate Bank. Further, on 23 September, 2019, VIPL-G filed another Application (Amendment Application, MA 35 of 2019 in Case No. 247 of 2019) seeking permission to amend the Petition in Case No. 247 of 2019. In the said Amendment Application, VIPL-G has included the details of amendment sought by it and also certain additional grounds for the relief sought in Main Petition.
3. Hearing on Main Petition in the Case No. 247 of 2019 was held on 26 September, 2019. AEML-D sought time to file its response in view of substantial voluminous amendments filed by VIPL-G in the matter. VIPL-G also sought time to file a separate Application confining the grounds for Ad-interim stay sought by it. Same was granted by the Commission. AEML-D was directed to file its reply on VIPL-G’s aforesaid Application.
4. Accordingly, VIPL-G on 27 September, 2019 filed its Interim Application seeking interim relief (Interim Relief Application , MA 36 of 2019 in Case No. 247 of 2019) in the matter.
5. This Interim Relief Application was disposed of by the Commission vide its Order dated 17 October, 2019, inter alia, directing the Parties to maintain the status quo till the Commission decides the Main Petition. For expeditious disposal of the Case No. 247 of 2019 and other Applications therein, all the Parties were directed to complete their pleadings in Main Petition and other applications therein within 15 days. Also, the Commission directed all the Parties to make all efforts/action for protecting the interest of consumers as stipulated below:
“
27. For expeditious disposal of the Case No. 247 of 2019 and other applications therein, all the Parties are directed to complete their pleadings within 15 days. During this status-quo period in the matter, till the Case No. 247 of 2019 is finally taken up by the Commission, the Commission directs the Parties as follows:
a) VIPL-G shall take all necessary actions to execute FSA for Unit-1 under SHAKTI Scheme…..
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b) VIPL-G should file its submission demonstrating its readiness to commence its generation of electricity from the Unit-2 on immediate basis independent of any pending claims/litigation. VIPL-G should also include the steps taken for complying with the provisions of Performance Bank Guarantee of Rs 180 Crore as stipulated under the amended PPA approved by the Commission in Order dated 28 September 2018 in Case No. 224 of 2018.
c) AEML-D shall be at liberty to continue to procure in the short term its shortfall in power due to non-availability of Butibori power station.
d) …..Project Lenders/Axis Bank shall file its preparedness for exercising its rights of substituting the Seller. In addition, Axis Bank can also submit its position as regards financial support to VIPL-G for immediately operationalizing the plant. ”
6. Accordingly, AEML-D submitted status of its compliance on 4 November, 2019 stating that it duly complied with the aforesaid direction issued by the Commission. On 5 November, 2019, the Lenders made their submissions indicating their preparedness for exercising their rights of substituting the Seller and also submitting their inability as regards financial support to VIPL-G for immediately operationalising the plant.
7. On 1 November, 2019, VIPL-G filed another Application (Clarification Application) registered as MA 41 of 2019 in Case No. 247 of 2019, seeking directions to AEML-D in compliance with the Order dated 17 October, 2019 passed by the Commission in M.A. No. 36 of 2019 in Case No. 247 of 2019. Also, on 4 November, 2019, AEML-D filed its submission opposing the VIPL-G’s Application seeking amendment of the main Petition.
8. In the mean-time, on 4 October, 2019, AEML-D filed its replies on the Main Petition and VIPL-G’s Impleadment Application. AEML-D also filed its own Application (AEML- D’s Application) registered as MA 37 of 2019 in Case No. 247 of 2019 seeking deletion of Axis Bank (the Respondent No. 2) from the array of Parties, on the ground of mis- joinder of Parties.
9. At the hearing held on 22 November, 2019, Advocate for AEML-D insisted on disposal of its MA 37 of 2019 before the Main Petition of the VIPL-G was heard. VIPL-G also clarified that it was not pressing its impleadment application. The Advocate for AEML- D confirmed that it was not objecting to VIPL-G’s Amendment Application and stated that VIPL-G may submit a consolidated Amended Main Petition to which AEML-D would reply. The Parties made their extensive arguments on the MA filed by AEML-D seeking deletion of Axis Bank (the Respondent No. 2) from the array of Parties. The written submissions of their arguments were submitted by the Parties thereafter. AEML- D’s Application was dismissed by the Commission vide its Order dated 29 November, 2019 allowing Axis Bank as the necessary responding Party in the Main Petition. In the meantime, VIPL-G filed its Amended Petition on 26 November, 2019.
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The main prayers of VIPL-G in the Amended Petition are as under:- “
a) Admit the present Petition;
b) Set aside Termination Letter dated 20.04.2019 and the Procurers Preliminary Default Notice dated 18.01.2019 issued by AEML;
c) Declare that the Termination Letter dated 20.04.2019 and the Procurers Preliminary Default Notice dated 18.01.2019 issued by AEML to the VIPL is bad in law and against the clauses of the PPA;
(c-1) Declare that Procurers Preliminary Default Notice dated 18.01.2019 issued by AEML to VIPL as bad in law and contrary to the PPA dated 14.08.2013;
d) Declare that the PPA dated 14.08.2013 entered between the AEML and VIPL is valid and subsisting;
e) Pending the hearing and final disposal of the Petition order / direct the continuation of the transaction under the PPA dated 14.08.2013 entered between the AEML and VIPL;
(e-1) pending the hearing and final disposal of this Petition stay the effect, operation and implementation of the Termination Letter dated 20.04.2019 issued by AEML to the VIPL;
(e-2) pending the hearing and final disposal of the Petition stay the effect, operation and implementation of the procurer’s preliminary default notice dated 18.01.2019 issued by AEML to the VIPL
f) Pending the hearing and final disposal of the Petition restrict and restrain AEML to enter into any other Power Purchase Arrangement and / or Agreement for any long term or medium-term period;
(g-1) Pending the hearing and final disposal of the Petition, direct the parties to continue discharge their respective PPA obligations including generation and supply of power by VIPL and payment by AEML towards the same without any set-off.
(g-2) Allow the recovery of actual cost of coal by VIPL in respect of Unit 2 in the event VIPL commences the operation of Unit 2.
(g-3) Allow the recovery of actual cost of coal by VIPL in respect of Unit 1 pursuant to execution of FSA in respect of Unit 1 in the event VIPL commences the operation of Unit 1.
(g-4) Costs of this Petition be provided for.;
i. ;”
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10. VIPL-G’s amended Application avers as under :
11.1 The instant Petition has been filed by VIPL-G challenging the legality of the Termination Letter dated 20 April, 2019 issued by AEML-D by which AEML-D has terminated the PPA executed between VIPL-G and AEML-D. AEML-D has issued the Termination Letter in violation of Article 11.1.1, Article 11.2.1 of the PPA, the Memorandum of Undertaking (MoU) dated 29 August, 2018, Letter dated 3 September, 2018 signed between the Parties concerned in the said transaction.
11.2 Despite continuing discussion between AEML-D and VIPL-G to amicably resolve the matter as latest as 28 August, 2019, the aforesaid Termination Letter was affirmed and reiterated by AEML-D by its Letters dated 29 July, 2019, 1 August, 2019 and 19 August 2019 and has now been pressed into action by AEML-D in the forenoon of 29 August, 2019 when the Petition filed by VIPL-G for approval of the Supplemental PPA in the SHAKTI Scheme was listed before the Commission on 30 August, 2019 in Case No. 225 of 2019.
11.3 The Termination Letter dated 20 April, 2019 has been issued by AEML-D purportedly invoking Clause 11 of the PPA. However, the Termination Notice is premature in nature, inasmuch as the requirements of Article 11.1.1 (iii) have not been fulfilled, i.e. failure to achieve Normative Availability for a period of twelve (12) consecutive or non- consecutive Months within any continuous period of thirty six (36) months. AEML-D has failed to demonstrate non-achievement of Normative Availability by VIPL-G for any continuous or non-continuous period of 12 months after stepping into the shoes of its predecessor namely Reliance Infrastructure Ltd.- Distribution Business (RInfra-D) from 29 August, 2018 onwards. Hence, the Termination Notice is without any basis and therefore, liable to be quashed and set aside in toto.
11.4 Further, the actions of AEML-D and the Termination Notice, are illegal for the following reasons:
a. AEML-D has misguided VIPL-G on the effect of termination, especially during the intervening period between the Termination Letter dated 20 April, 2019 and as latest as 28 August, 2019;
b. Incorrect inclusion of the past period being counted by AEML-D for the purposes of default/lack of availability;
c. Force majeure suffered by VIPL-G has not been taken into consideration while issuing the Termination Notice;
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d. Termination process not followed as per the clauses of the PPA;
e. Contributory breach by AEML-D post acquisition of RInfra-D from 29 August, 2018, which preclude AEML-D from terminating the PPA; and
f. Violation of Office Memorandum dated 8 March, 2019 issued by Ministry of Power, Government of India.
11.5 In issuing such a Termination Notice, AEML-D has failed to also consider its own Procurer’s Default which has existed from the very inception of the PPA and the non- resolution of the said Default by it. Hence, by virtue of the Article 11.1.1, AEML-D is precluded from terminating the PPA. Moreover, the Procurer’s breach perpetuated by AEML-D has directly impacted the Normative Availability of VIPL-G, which it is now seeking to take advantage of, as the basis for issuing the Termination Notice.
11.6 Amended Petition has been filed on the following grounds:
A. Misconduct and mala fide intentions of AEML
11.7 The Parties had initiated dialogue to resolves all issues of concern, to ensure the continued performance /operation of the PPA, AEML-D had equivocally agreed to withdraw the PPDN dated 18 January, 2019, Letter dated 3 April, 2019, as well as the Termination Notice dated 20 April, 2019. VIPL-G had proceeded on the basis of this assurance given by AEML-D on several occasions.
11.8 On one hand, AEML-D sought to negotiate with VIPL-G impairing VIPL-G to take legal action to protect its right and on the other hand AEML-D has proceeded to press its Termination Notice.
11.9 In the subsequent letters dated 29 July, 2019, 1 August, 2019, and 19 August, 2019, AEML-D while affirming the Termination Notice, has also sought to pressurise VIPL-G into submitting a fresh proposal for supply of power. However, as per Article 11.3.4 and 11.3.5 of the PPA, Schedule 12 thereof, upon issuance of a Termination Notice, it would be the exclusive right of the Lenders to decide whether to continue the PPA with a substituted entity or simply let the PPA terminate. The PPA does not vest AEML-D with any power to re-negotiate the terms of the PPA, which evidences the lack of bona fides of AEML-D.
B. Incorrect inclusion of the past period being counted by AEML for the purposes of default/lack of availability
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11.10 In terms of RInfra’s Letter dated 22 August, 2018, RInfra-D specifically granted consent for waiver of Clause 11.1.1 (iii) of the PPA and confirmed that RInfra-D shall remain liable to make the payment towards entire outstanding accumulated till Closing Date i.e. 23.08.2018.
11.11 Based on the request of RInfra-D, VIPL-G issued a revised Letter dated 23.08.2018 to RInfra-D/REGSL confirming and declaring that all outstanding amounts as on the Closing Date whether receivable or payable from and to REGSL (Reliance Electric Generation and Supply Ltd.) and/or RInfra with respect to the PPA shall be paid/ received exclusively by RInfra. Any claims arising from the PPA pertaining to the period prior to the Closing Date shall solely be to the account of RInfra without recourse to REGSL and for the period commencing on and from the date post the Closing Date, REGSL will be liable for all the obligations. The Closing Date was subsequently informed as 28.08.2018.
11.12 Adani Transmission Ltd. (ATL), along with RInfra and REGSL entered into a Share Purchase Agreement on 21.12.2017 (SPA). Pursuant thereto, ATL took over 100% shares of RInfra in REGSL. The name of REGSL was changed to AEML and business of RInfra stood assigned and transferred to AEML-D. The Commission, on 29.09.2018, approved transfer of distribution of electricity in favour of REGSL and noted that pursuant to incorporation of AEML-D, the name REGSL be substituted with that of AEML-D.
11.13 ATL was fully cognizant of the dues and entitlement of REGSL, which were clearly defined in terms of the Letters dated 22.08.2018. As a result thereof, any non- achievement of Normative Availability, prior to the Closing Date, cannot be considered by AEML-D (erstwhile REGSL). Hence, any non-achievement of Normative Availability would have to be calculated from 29.08.2018. As on 18.01.2019, date of issuance of PPDN or even 20.04.2019, 12 consecutive months since 29.08.2018 itself have not completed, let alone 12 non-consecutive months.
11.14 Therefore Article 11.1.1 (iii) cannot be invoked. As on 20.04.2019, since 29.08.2018, approximately only 8 months had elapsed, which prevents AEML-D from invoking Article 11.1.1 (iii) of the PPA.
11.15 A letter dated 03.09.2018 signed by all three Parties namely VIPL-G, RInfra and AEML- D had been issued, by which AEML-D has stepped into the shoes of procurer as per the PPA. The said letter stated that for the period prior to 29.08.2018, R-Infra shall be responsible till 28.08.2018. Moreover, the obligation and entitlement of AEML-D would
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only commence from 29.08.2018. Therefore, AEML-D does not have recourse to actions purportedly committed prior to the said date.
11.16 Further, RInfra being responsible for the prior period (i.e. the period prior to 28.08.2018) was well aware about the default committed by it in its payment responsibilities under the PPA and after duly considering the reciprocal nature of the obligation of a seller and a procurer under the PPA, it has waived any right/claim against VIPL-G for the said prior period vide its letter dated 22.08.2018. Therefore, the period of non-availability prior to 22.08.2018 cannot be counted against VIPL-G for the purpose of ascertaining Seller Event of Default.
11.17 Therefore, the Termination Notice issued by AEML-D taking assistance of the said period is legally unsustainable and is liable to be rejected. If AEML-D’s contention as per the letters captioned above, read along with the Termination Notice is to be accepted then the same would result in a preposterous situation wherein VIPL-G would now be made answerable to two entities for the same period in question. This would run contrary to AEML-D’s own representation made in the letter dated 03.09.2018.
C. Reduction in availability due to Force Majeure reasons, not attributable to VIPL
11.18 The reduction of availability is also due to delay in signing of FSA by Ministry of Coal for Unit 1 of the VIPL-G which is in the nature of Force Majeure condition and for which VIPL-G cannot be held responsible. AEML-D in fact is cognizant of such Force Majeure condition and by a MoU has solemnly agreed to assist VIPL-G in all possible manner to secure such a Fuel Supply.
11.19 VIPL-G right from its inception has met all qualifying requirements to secure Coal linkage from Ministry of Coal, Government of India. However, for reasons not attributable to VIPL-G, the said Linkage has been wrongly denied by the concerned authorities.
11.20 VIPL-G has made its best possible efforts by engaging with the concerned authorities. Moreover, the Hon’ble Appellate Tribunal for Electricity (ATE) as well as the Hon’ble Delhi High Court through various Orders and Judgments have acknowledged the aforestated facts. Hence, the reduction in availability in no manner can be attributed to VIPL-G.
11.21 Moreover, under SHAKTI policy, Letter of Intent (LOI) has been issued to VIPL-G on 11.07.2019 which would then be converted into FSA within 2 months thereof, upon submission of the requisite documents, one of which is the amended PPA duly approved
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by the Commission. Therefore, the entire process of FSA signing is expected to be completed within two months thereafter. Hence, the long pending issue of adequate Fuel Supply is now at the brink of being resolved hence the Termination Notice would render the entire progress made by VIPL-G meaningless.
11.22 Moreover, for the past period VIPL-G has generated power by sourcing coal from alternate sources incurring substantial expenditure. The Change in Law Petition of VIPL- G is pending adjudication before the Commission, however it is an admitted fact that owing to sourcing of coal from alternate sources VIPL-G has suffered an under recovery of around Rs. 1600 Crores. This resulted in tremendous financial hardship upon VIPL-G and has impacted the availability of VIPL-G to sustain its operations. The Change in Law Petition is now reserved for Orders by the Commission and if the Termination Notice is permitted to sustain then the same would have a direct impact on the pending Petitions of VIPL.
11.23 At all points in time, AEML-D was made aware through various communications about the delay in signing of FSA for Unit I.
11.24 Moreover, the ATE in its aforesaid Judgment has already held the said delay in execution of FSA as a Force Majeure event. The said finding of ATE has not been challenged by RInfra or AEML-D, therefore, the said finding is no more res integra between the Parties. The Force Majeure event as conclusively held in the ATE Judgment continues even till date. Hence, AEML-D cannot now question the same. Therefore, in terms of the PPA, VIPL-G cannot be held to be in breach of its obligations if it suffering from a Force Majeure event. Further, the Hon’ble Delhi High Court vide its Order dated 07.03.2018 in WP(C) 10614/2017 has already held that Ministry of Coal had arbitrarily denied FSA to VIPL-G.
11.25 Further, for a termination to be effected under Article 11.1.1 (iii), it is imperative that such default ought not to emanate from any default committed by the Procurer, i.e. AEML-D/RInfra. RInfra has been irregular in making monthly payments to VIPL-G since FY 2016-17. From May 2018, RInfra had made almost no payment to VIPL-G, completely stifling VIPL-G’s ability to procure coal and operate the plant in terms of the PPA. Therefore, the reciprocal obligation of RInfra being breached at the relevant time disqualifies said period to be counted for alleging seller’s event of default. Therefore, on account of Procurer’s default resulting into reduction in availability, the same disentitles/bars the procurer to allege defaults under the PPA.
D. Termination Letter is in contravention to procedure stipulated in the PPA.
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11.26 As per Article 11.3.4 of the PPA, AEML-D was obligated to send the copy of the Termination Notice to the Lenders’ Representative. The said procedure has been prescribed to ensure that the Lenders are able to exercise their substitution and other rights provided under the Financing Agreements. However, AEML-D has acted in complete defiance of the procedure provided in the PPA. As held by the Hon’ble Supreme Court, in its various Judgments, when Parties to a contract have settled on a procedure to be followed, then due importance has to be given to the said contractual procedure. AEML-D was bound to follow the mandatory procedure as mutually agreed in the PPA. Therefore, the Termination Notice issued by AEML-D is illegal as the same is in violation of the terms of the PPA.
E. Contributory Breach by AEML post acquisition of R-Infra.
11.27 In terms of Article 8.3.3 of the PPA, the maximum Set-off permissible against VIPL-G is only Rs. 15 Crores in a Contract Year. AEML-D perpetuated the said Set-Off of Rs. 266 Crores without amending the terms of the PPA and without seeking the regulatory approval of the Commission. Said set-off has financially jeopardised VIPL-G’s ability to procure coal.
11.28 Admittedly, VIPL-G had agreed to a set-off by AEML-D on the monies payable by RInfra vide its letter dated 15.12.2018. However, the same was subject to the PPA signed between the Parties i.e. up to a maximum ceiling limit of Rs. 15 Crores.
11.29 AEML-D, right from inception has not made any payment towards Late Payment Surcharge (LPSC) applicable as per Article 8.3.5 of the PPA upon the power supplied by VIPL-G. Procurer has also perpetuated erratic payments qua regular Energy Payments/ Monthly Bills since May 2018 leading to a shortfall of more than Rs. 400 Crores upto Closing Date.
11.30 AEML-D itself is in breach of its solemn obligations under the PPA and therefore, is barred to invoke the provisions of Article 11.1.1 of the PPA which states that Seller Event of Default may be invoked unless the said event occurs as a result of a default/ breach committed by procurer itself. Since AEML-D itself has breached the terms and conditions of the PPA dated 14.08.2013, it cannot then take advantage of its wrong and terminate the said Agreement.
11.31 Further, AEML-D, through the MoU, had undertaken to extend all possible support to VIPL-G. However, in issuing the Termination Notice, AEML-D has surreptitiously sought to undermine its contractual obligations and violated the terms and conditions of the MoU.
F. Termination contrary to MOP Office Memorandum dated 08.03.2019
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11.32 In terms of Office Memorandum (OM) dated March 08, 2019 of Government of India (GoI), no coercive action can be taken by AEML-D to press alleged defaults and seek to terminate the PPA by disregarding above referred facts and circumstances. Therefore, the Termination perpetuated by AEML-D is illegal and is liable to be set aside.
11.33 Moreover, Termination if not set aside/ injuncted, then the Fuel Supply which VIPL-G has secured after laboring for almost 5 years will be lost, which would run contrary to the object of the PPA and the OM dated 08.03.2019 issued by GOI.
11.34 If the Termination Notice is not injuncted then AEML-D would continue to source power from alternate sources and would create Third Party Rights. Further, if Termination Letter is finally found illegal then the same would lead to further complications between VIPL- G, AEML-D and other Third-Party generators who would be contracted by AEML-D.
11.35 Moreover, the entire investment behind VIPL-G is premised upon the PPA and if the PPA is terminated then VIPL-G and its Lenders/ Shareholders would be severely prejudiced.
G. Impact of the Termination of the PPA
11.36 The termination of the PPA would impact VIPL-G’s ability to procure coal, not just for Unit 2, where the FSA is concluded, but also for Unit 1, where VIPL-G is in the process of executing the FSA.
11.37 As a result of termination of the PPA, VIPL-G would no longer be in a position to generate power, as there would be no end consumer to off-take the same. This will result in a breach of the existing FSA for Unit 2. By not lifting coal as earmarked under the FSA, VIPL-G would be subjected to penalties by WCL.
11.38 AEML-D’s conduct of withholding legitimate dues, and further with the termination of the PPA, has led to a severe cash flow crisis for VIPL-G. This has directly impacted the employees of VIPL-G, leading to a labour unrest. If the Termination is not set aside then VIPL-G would no longer be in a position to restore generation from both of its Units at all, due to lack of a work force.
11.39 VIPL-G has procured substantial debt funding from banks, i.e. the Lenders, including leading public sector banks. As an outcome of illegal actions on the part of AEML-D in violation of PPA, VIPL-G is not able to adhere to its debt servicing commitments and has become the NPA causing grave loss to public funds used for commissioning/ operating project.
11.40 With the cessation of generation on account of illegal actions on the part of AEML-D in violation of PPA and alleged termination of the PPA, VIPL-G has also suffered severe
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losses in recovery of Fixed Charges from AEML-D impairing VIPL-G’s ability to repay the loan and protect lenders’ interest. In fact, VIPL-G has already been identified as a stressed asset. In order to salvage the operations, VIPL-G has entered into an Inter Creditor Agreement dated 06.07.2019 with its six Lenders, whereby a period of 180 days has been granted to VIPL-G by the Lenders to enable VIPL-G to cure all defects and defaults in repayment of loans, with a specific direction to convert its account back to “Current”.
11.41 However, if the Termination Letter is allowed to stand, VIPL-G would be prevented from ensuring any long term and sustainable solution for reviving the Project.
11.42 Moreover, despite the Order dated 03.09.2019 passed by the Commission in Case No. 225 of 2019, the FSA with WCL has till date not been executed due to the arbitrary and illegal Termination Letter dated 20.04.2019. WCL in its letter dated 18.09.2019 has categorically asked VIPL-G to provide a Stay Order of the Termination Letter dated 20.04.2019. Therefore, in the overall interest of the consumers of Mumbai, it is imperative that the illegal Termination Letter is immediately stayed/ injuncted. Moreover, the entire investment made by VIPL-G is premised upon the Long-Term sale of power under the PPA and if the same is terminated then VIPL-G and its Lenders/ Shareholders including the consumers at large would be severely prejudiced.
H. AEML’s malicious conduct
11.43 Pursuant to approval from the Hon’ble High Court of Judicature at Bombay (Bombay High Court), and approval of the Commission vide Order dated 28.06.2018 in Case No. 140 of 2017, the Generation, Transmission and Distribution Business (GTD Business) of RInfra was transferred to REGSL (later renamed as AEML). The Closing Date as recorded between the Parties involved in the transaction was 28.08.2018. It was agreed that RInfra which is a separate legal entity and a juristic personality shall be responsible for all rights and obligations under the PPA pertaining to the period prior to the Closing Date. It was further agreed that for the period commencing on and from the date post the Closing Date i.e. 28.08.2018, AEML-D will be liable for all the obligations. The said understanding between Parties has been extensively recorded by the Commission in its Order dated 28.06.2018 in Case No. 140 of 2017.
11.44 The aforesaid Order in unequivocal terms mandates and specifies that rights and obligations of RInfra up to the Closing date would continue to be retained by RInfra and REGSL/ AEML-D would acquire the said rights on the Appointed date itself. AEML-D has not acquired the Distribution Business of R-Infra as a ‘going concern’ as admittedly the obligations and rights of RInfra have been retained by it upto the Appointed Date.
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11.45 Nearly all power plants in Maharashtra, including Adani Group’s Tiroda Power Plant, have failed to achieve 85% Normative Availability for one or other reason, whether valid or otherwise, however no PPA has been terminated till date in Maharashtra just on the premise of the plant not achieving Normative Availability.
11.46 The Procurer’s Preliminary Default Notice dated 18.01.2019 as well as the Termination Letter dated 20.04.2019 have completely overlooked the Force Majeure and Change in law circumstances that affected the FSA execution by VIPL-G in respect of Unit 1. In fact, AEML-D has failed to demonstrate any financial injury suffered on account of VIPL-G. Hence, the conduct of AEML-D is not only highly prejudicial, but is also writ large with inconsistencies, and therefore wholly untenable and unsustainable in law and on facts.
11.47 In addition to the above, a copy of Letter dated 07.09.2019, had been purportedly issued by Chief Patron of AIPEF, Mr. Padamjit Singh alleging that VIPL-G has indulged into unfair practices for getting the coal linkage. After making an enquiry about legitimacy of the said letter by VIPL-G, on 21.09.2019, Mr. Padamjit Singh was shocked to know about the letter issued by some vested interest with his forged signature and has formally issued a letter to VIPL-G, categorically stating that Letter dated 07.09.2019 is a forged letter, which has neither been issued by him nor his office. Thus, it is seen that an attempt is being made by motivated third parties, through such communications, to undermine the sanctity of the proceedings pending before the Commission, not only in the instant Petition, i.e. Case No. 247 of 2019, but also in the proceedings in Case No. 225 of 2019, which culminated into the Commission’s Order dated 03.09.2019, permitting VIPL-G and AEML- D to execute a Supplementary Agreement under the PPA for execution of the FSA under the SHAKTI Policy. In view of the AIPEF Letter thereof, extreme urgency has arisen necessitating ad-interim orders from the Commission. In view of the above reasons, the Termination Notice dated 20.04.2019 is liable to be set aside.
11. Axis Bank’s reply dated 5 December, 2019 to the Amended Petition of VIPL-G stated that:
12.1 The reply is limited to the factual positions and rights that concern Axis Bank in relation to the issues that are being agitated under the Petition and the rights that emanate out of the PPA. Since the Petition largely focuses on matters concerning the rights between the VIPL-G and AEML-D inter-se, the reply has been restricted to parts that concern Axis Bank and of those issues that have a direct bearing on its rights.
12.2 The legitimate rights under the PPA have been unfairly dealt with by AEML-D. It is imperative that the rights of Axis Bank are protected by the Commission while finally adjudicating the Petition. VIPL-G has inter alia sought quashing of the PPDN and the
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Termination Notice and the continuance of the PPA, which also espouses Axis Bank’s cause.
12.3 The Petition has been premised on the conduct of AEML-D of illegally and unfairly terminating the PPA by the said PPDN and the subsequent Termination Notice. The said termination is in complete contravention of the explicit provisions of Article 11 of the PPA which requires copies of Notices to be served on the Lenders as well. AEML-D has not only put the rights of both VIPL-G and Axis Bank in peril but has jeopardized the public monies that have been invested by Axis Bank and the rest of the lenders under the PPA.
12.4 As per the Article 11 of the PPA, AEML-D is obligated to mandatorily serve copies of both PPDN and the Termination Notice. Further, Schedule 12 additionally provides for a mandatory service of the PPDN on the lenders at the time of the issuance itself, so as to allow Axis Bank to exercise their rights of substitution. 12.5 The rights of Axis Bank stand on an equal footing with those of VIPL-G and AEML-D. The mandatory provision pertaining to service of both PPDN as well as Termination Notice is also to enable Axis Bank and the lenders to exercise their rights of substitution, by notifying the parties to the PPA of their intention to substitute the Seller for the residual term of the PPA. Moreover, in case Lenders choose not to exercise the said substitution rights, the Lenders may choose to demand 20% reduction in the capacity charge for the period of Event of Default. AEML-D has, by its own submissions before the Commission, admitted to not having served the PPDN upon Axis Bank or any of the lenders and neither was the purported Termination Notice ever received by the lenders / Axis Bank.
12.6 Such conduct on the part of AEML-D has unfairly prejudiced the rights of Axis Bank and the rest of the lenders under the PPA. It has also proved to be a stumbling block for the lenders to take recourse to any measures that could possibly safeguard their stake in VIPL-G and the public monies that have been invested in VIPL-G. AEML-D has chosen to deliberately keep the lenders in the dark about its intention to terminate the PPA, so as to escape from fulfilling their obligations.
12.7 The lenders were apprised of the PPDN and the Termination Notice by VIPL-G only during a consortium meeting of all the lenders held on 1 August 2019. In the said meeting, VIPL-G informed that they had started discussions with AEML-D for curing the purported Event of Default. It was only after the filing of the instant Petition that Axis Bank received correspondences and notices issued by AEML-D in relation to termination of the PPA, which ideally ought to have been issued by AEML-D to Lenders at the time of issuance itself. Had AEML-D duly followed the procedure under the PPA, Axis Bank would have had the opportunity to cure the alleged default and ensure the continuity of the PPA. Hence, the said PPDN and the Termination Notice are void, contrary to law and deserve to be struck down.
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12.8 It is a settled legal position that when Parties to a contract have settled on a procedure to be followed, then due importance has to be given to the said contractual procedure. The above said legal position has been upheld by the Hon'ble Apex Court in the case of Datar Switchgears Ltd vs. Tata Finance Ltd., (2000).
12.9 VIPL-G had also applied for participating in the coal auctioning scheme of Coal India Limited (CIL) for stressed thermal power generation assets. The aim for participating in the CIL bid was to secure a long-term fuel supply agreement with Western Coal Limited for Unit 1 of the generating station. It was around the time of the bid, that the Termination Notice was issued by AEML-D. It is pertinent to note that AEML-D had also issued a verification certificate dated 28 March 2019 to enable VIPL-G to participate in the linkage auction under the Shakti Policy.
12.10 However, pursuant to this, the All India Power Engineers Federation (AIPEF) issued two letters, dated 07 September 2019 and 21 September 2019 to Ministry of Coal, Prime Minister’s Office, Ministry of Power, Central Electricity Authority, Cabinet Secretary, Directorate of Revenue Intelligence, WCL and Government of Maharashtra. The latter letter of 21 September 2019 revoked and withdrew the former letter of 7 September 2019. In the letter dated 07 September 2019, AIPEF has alleged that VIPL-G had indulged into unfair practices to secure the long-term coal linkage granted to VIPL-G by WCL. The letter further stated that until a proper enquiry is conducted into the matter, WCL should not execute the FSA with VIPL-G. However, VIPL-G received another letter from AIPEF on 21 September, 2019, written by their Chief Patron, stating that the letter dated 7 September, 2019 has neither been issued by him nor his office. Despite the revocation of the letter of 7 September 2019, by way of the letter of 21 September 2019, and upon being apprised of the termination of the PPA, WCL expressly directed VIPL-G to obtain a stay on the Termination Notice (by way of its letter dated 18 September 2019) before the FSA is signed. Thus, the act of unlawful termination carried out by AEML-D has had a domino effect on all Parties, more so on Axis Bank and rest of the Lenders as the recovery of monies belonging to them also hinges on the operation of the plant under the PPA, which in turn would also depend on the successful signing of the FSA. In view of this as well, the PPDN and Termination Notice ought to be struck down as it poses a threat to the agreed rights of Axis Bank as a lender, which cannot be adequately compensated in terms of money.
12.11 The arrangement / purported memorandum of understanding dated 15 December 2018 between RInfra, VIPL-G and AEML-D, wherein the Parties have entered into a private arrangement by way of Undertaking, giving right to AEML-D to deduct the outstanding dues of RInfra from the bills being raised by VIPL-G cannot be allowed, as the first right of recovery is always with the lenders and cannot be waived without the express consent from the lenders and certainly not unilaterally. It has been held by the Hon’ble
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Supreme Court in All India Power Engineers Federation vs. Sasan Power Limited [2017 (1) SCC 487], that the substantive rights of lenders which had lent public money to the project cannot be waived without the express consent of the lenders. Further, the financing arrangements that have been entered into under/ in relation to the PPA creates a first charge and or security interest in favour of Axis Bank and the lenders, with respect to the rights, title, interest, claims, benefits and demands of VIPL-G, claims and the outstanding amounts emanating out of the PPA cannot be unilaterally waived off or set off without an express consent of the lenders. As such, the said Undertaking of 15 December 2018 deserves to be struck down as Axis Bank was not only kept in the dark, but AEML-D has unlawfully proceeded to withhold monies payable to VIPL-G in the garb of “setting off” where such monies ought to be utilized to pay the legitimate dues of Axis Bank and the rest of the lenders. Since these monies are public monies and the lenders have invested 70 per cent of the total capital cost of the project under the PPA, it is just and proper that the said Undertaking of 15 December 2018 be struck down as void.
12.12 AEML-D has bypassed mandatory PPA provisions. By allowing such a conduct on the part of AEML-D would only set a bad precedent, as lenders and financial institutions in general would be discouraged from investing in power purchase arrangements. Parties such as Axis Bank will have no recourse to recover their monies should the unlawful termination be allowed, since the right of substitution would become redundant. Each day of delay, with the sword of termination of the PPA hanging on Axis Bank implies monetary damage and devaluation of their investment under the PPA – for which AEML-D is wholly responsible for, due to its mala-fide and unlawful conduct. Therefore, the consequence of termination cannot be adequately compensated in terms of money.
12.13 Axis Bank has restricted itself to only those issues that have a direct bearing on its rights and not disputes that are solely between AEML-D and VIPL-G. However, it is prayed that no interpretation prejudicial to the interest of AEML-D be taken, nor anything be deemed as admitted merely due to a want of a specific denial or an absence of averments to that effect.
12.14 In view of the above, the Commission is requested to: i. quash the Procurer’s Preliminary Default Notice dated 18 January 2019 issued by Respondent no.1 to Petitioner on account AEML-D’s failure to duly serve the notice upon Lenders (Respondent No.2) in terms of the provisions contained under Article 11 read with Schedule 12 of the PPA.;
ii. declare that the notice of termination dated 20 April 2019 issued by Respondent no.1 is invalid due to its default in following the procedure given under the PPA mentioned in prayer ‘a’ above;
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iii. Direct AEML to repay the wrongfully deducted monies/ set-off monies that were owed to VIPL;
iv. quash the Undertaking/ letter dated 15 December 2018 executed between Respondent no.1, Petitioner and RInfra;
v. direct that the adjudication of the past dispute between AEML and VIPL will not lead to termination of the PPA so that WCL can be approached for signing the FSA;
12. Axis Bank in its reply to Miscellaneous Application (MA 41 filed by VIPL-G) stated that:
13.1 Pursuant to the directions of the Commission in MA No. 36 of 2019, VIPL-G filed an Application seeking certain directions in compliance of the Order passed in MA No. 36 of 2019. In the Application, VIPL-G has sought certain clarifications in the interim order issued by the Commission. In thisregards, it is submitted that the Commission while passing its interim directions in MA No. 36 of 209 has categorically stated that all the issues raised by the parties are kept open. Therefore, the instant application can be adjudicated, and the submissions placed by VIPL-G are open for consideration of the Commission.
13.2 The instant submissions are being placed to raise certain concerns of the Lenders regarding the ‘agreement’ entered into between RInfra, AEML-D and VIPL-G wherein VIPL-G vide an undertaking dated 15.12.2018 to AEML-D conferred the rights upon AEML-D to deduct certain sums that are payable by RInfra. As per the content of the undertaking, it appears that VIPL-G has consented to set-off the SLDC Charges and the Interest on SLDC Charges payable by RInfra from the monthly bills raised by VIPL-G towards the power supplied to AEML-D.
13.3 The undertaking submitted by VIPL-G giving AEML-D first right to deduct any dues payable by RInfra is void ab initio and contrary to the provisions of the PPA executed between the Parties. Moreover, such undertaking goes against the principles of fundamental arrangement between the Parties and directly affects the rights of the lenders. Any undertaking giving rise to defaults or delay in payments of the loan extended by the lenders cannot be tenable as legal and valid. It is evident from the submissions made by the Parties that the default in payment of the dues to the lenders is on account of the zero recovery against the bills raised by VIPL-G upon AEML-D. Moreover, any such payments deducted by AEML-D in contravention of the provisions of the PPA has to be recovered from and repaid by AEML-D at least to the extent of the pending dues of the lenders.
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13.4 The submissions made by VIPL-G on the issuance of the performance bank guarantee to AEML-D are contrary to the reply submitted by AEML-D pursuant to the Order of the Commission in MA No. 36 of 2019. In the said reply, Axis Bank has submitted that the Resolution Plan proposed by VIPL-G pursuant to the signing of the Inter-Creditor Agreement (ICA) between the lenders was rejected as the lenders were not convinced with the proposal to extend additional loans to VIPL-G. Thereafter, pursuant to the directions of the Commission in MA No. 36 of 2019, the Axis Bank held another meeting of the consortium on 23.10.2019, wherein, it was requested to VIPL-G to submit a revised and viable resolution plan in accordance with the recommendations of the lenders. Further, it was also informed to VIPL-G that such a plan should be submitted by 01.11.2019. As such, no revised resolution plan has been proposed by VIPL-G.
13.5 With regard to the issue raised by AEML-D that the resolution plan is contingent upon the outcome of the instant proceedings pending before the Commission, it is submitted that there cannot be any doubt about the impact of the outcome of the instant Proceedings on the resolution plan that finally gets approved by the Lenders. Since, the issue of termination of the PPA is a material issue for the consideration of the Lenders to opt for a resolution plan proposed by VIPL-G, the contention of AEML-D that there is no bearing on the outcome of the instant proceedings cannot be considered tenable. The issues pertaining to the termination of the PPA cannot be considered in isolation.
13.6 The issues raised on the undertaking issued by VIPL-G requires a deeper analysis of the Orders passed by the Hon’ble Bombay High Court in CA No. 154 of 2017 and the Commission while approving the scheme of arrangement between AEML-D, RInfra and VIPL-G. Axis Bank shall undertake a detailed study of the same and pursuant thereto, shall make detailed submissions on the captioned aspect and any other aspect necessary for adjudication of the rights of the lenders in the captioned Case.
13.7 In view of the above, the Commission is requested to:
i. Direct that the undertaking dated 15.12.2018 given by VIPL to AEML is illegal and contrary to the provisions of the agreements entered between the parties;
ii. Direct VIPL to recover the dues from AEML and clear the outstanding dues of the Lenders;
iii. Grant leave to Respondent No. 2 to make detailed submissions in the instant Application and the main Petition;
iv. quash the Undertaking/ letter dated 15 December 2018 executed between Respondent no.1, Petitioner and RInfra.
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13. AEML-D’s reply to Axis Bank’s reply dated 3 October, 2019 and written submissions dated 5 November, 2019 stated as follows:
14.1 AEML-D was under no obligation to send a copy of the Default Notice to the Lender’s Representative as has been averred repeatedly by VIPL-G and Axis Bank. VIPL-G and Axis Bank have chosen to ignore the language used in Article 11.3.1 and 11.3.4 of the PPA. Article 11.3.1 of the PPA states that the Procurer (AEML-D) shall have the right to deliver to the Seller (VIPL-G) a notice with a copy to the Commission and the Lenders’ Representative. The language of the aforementioned clause of the PPA does not in any manner mandate that the Default Notice ought to have been served upon the Lenders’ Representative (Axis Bank). On the contrary, it gives a right to AEML-D as to whether AEML-D deems it fit for the Default Notice to be served to the Lenders’ Representative.
14.2 Axis Bank (Lenders to VIPL-G) is willing to go to any length to assist a defaulting party (VIPL-G) who has not only miserably failed to comply / fulfill its obligations under the PPA but has also failed to service its debt. Axis Bank not being a party to the PPA has no locus standi or legal right to impugn or challenge the validity of the default notice or the termination notice. The right of Axis Bank, if any, is limited to agitating its claim of substitution and since the issue of termination notice on 20 April, 2019, Axis Bank has not taken any steps to undertake a substitution of VIPL-G. Further, Axis Bank has in its Written Submissions categorically stated that they do not intend to fund VIPL-G’s project any further. In such circumstances, there exists no justifiable reason for the Lenders (represented by Axis Bank) to not proceed for substitution of VIPL-G. On the contrary, Axis Bank ought to support AEML-D in order to protect a valuable asset from turning into an asset which no entity would be interested in taking over. In any event, no prejudice has been caused to VIPL-G due to the alleged non-delivery of the Default Notice or the Termination Notice to the Lenders’ Representative (Axis Bank). It cannot be the case of VIPL-G, which is being sought to be advanced by Axis Bank, that merely because the Lenders’ Representative (Axis Bank) did not receive copy of the Default Notice, the Termination Notice becomes bad or invalid in law. In any event, a copy of the Termination Notice (which includes a copy of the default notice) has been sent to Axis Bank by speed post, a copy of the receipt is annexed with the reply.
14.3 The reference made by Axis Bank to the letters issued by the All India Power Engineers’ Federation was brought to the notice of AEML-D by VIPL-G and AEML-D has absolutely no relation whatsoever with the issuance of the said letter. As for the alleged averment that the Default Notice, the Termination Notice and the aforementioned letter are acting as deterrents for WCL, it is submitted that the matter between WCL and VIPL- G is an independent dispute and AEML-D cannot be made a party or responsible for the acts of WCL. WCL is under administrative control of Ministry of Coal, any attempt to aver that WCL may be affected or influenced by the actions of AEML-D is completely
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untenable. Also, the issue of signing / executing of an FSA between VIPL-G and WCL is not the subject matter of dispute and ought not to be permitted to be agitated in the present proceedings.
14.4 Axis Bank, for reasons best known to them and without application of mind, has chosen to accept VIPL-G’s submissions that AEML-D had allegedly delayed in clearing VIPL- G’s bills. VIPL-G’s invoices when submitted in accordance with the terms of PPA have been paid by AEML-D and there is nothing outstanding against such invoices. It is VIPL- G, as has been mentioned in the Default Notice, that delayed in providing AEML-D with the necessary documents in order for its bills to be processed. VIPL-G’s averments that AEML-D had allegedly illegally withheld the payments of VIPL-G is completely unsubstantiated and Axis Bank, instead of blindly agreeing with VIPL-G’s averments, ought to have applied its mind. The allegation that non-payment of VIPL-G’s invoices led to closure of VIPL-G’s generating station was considered by the Commission and it was, inter alia, held that shut down of VIPL-G’s project was not on account of AEML-D alleged failure to abide by the terms of the PPA. VIPL-G itself has admitted as such in its letter dated 17 April, 2019.
14.5 It was also observed by the Commission in paragraph 21 of its order dated October 17, 2019 as follows:
“21. In this regard, the Commission notes that it is a fact that since 17 January 2019, VIPL has not generated any energy from its power plant at Butibori. This was even after having valid FSA for its Unit No. 2. Therefore, at the time of issuance of PPDN and Termination Notice, VIPL-G was under shutdown and not generating any energy. It is not its case that it was generating electricity as per its obligation under the PPA and due to Termination Notice issued by AEML-D, it has to stop its generation of electricity. Further, as stated by VIPL-G, once the Commission allows interim relief in the present matter, it will require 45 days to commence generating electricity from Unit-2 and for Unit 1, upon commencement of actual coal supply under FSA. Also, the Commission notes that VIPL-G has nowhere stated its financial capacity for immediately starting generation of electricity. VIPL’s obligation of providing a Bank Guarantee of Rs. 180 Crore in favour of AEML-D in spite of the Commission’s directions in Case No. 224 of 2018 is yet to be fulfilled. Therefore, in such circumstances, the Commission is of the opinion that no loss would be caused to VIPL-G if the Commission does not grant an interim stay on the PPDN and Termination Notice pending adjudication in the main matter.”
14.6 As can be seen from the above, VIPL-G failed to generate power not because of any alleged default of AEML-D. Further, as for the averment of Axis Bank in relation to the
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alleged ‘Seller’s Preliminary Default Notice’ is concerned, it is submitted that the same is a blatant lie. VIPL-G has never issued any such notice to AEML-D and no such document has been placed on record either by VIPL-G or Axis Bank. VIPL-G has either furnished a forged document to Axis Bank or Axis Bank has made false statement under oath with respect to the alleged ‘Seller’s Preliminary Default Notice’ issued by VIPL-G. The Commission ought to require Axis Bank to furnish proof of the alleged seller Preliminary Default Notice. If such proof is not forthcoming, both VIPL-G and Axis Bank are liable to be proceeded under Section 340 of Cr.P.C. for perjury.
14.7 The averment that on account of RInfra having waived its right to enforce claims against VIPL-G resulted in AEML-D allegedly waiving its rights to raise a claim for the continuing defaults of VIPL-G is baseless. There is no provision in the PPA to divide the enforcement of defaults against VIPL-G in pre and post-August 29, 2018 period and neither has there been any waiver whatsoever of VIPL-G’s admitted defaults by AEML- D. Further the Scheme of Arrangement approved by the Hon’ble High Court of Bombay and Order dated June 28, 2018 expressly allow AEML-D to enforce the provisions of the PPA against VIPL-G as if it had been a party in place of RInfra since inception. Also, since AEML-D is a successor-in-interest of RInfra under the PPA and not a mere assignee from and after 29 August, 2018, there is no scope for any doubt that AEML-D cannot rely upon VIPL-G’s defaults under the PPA.
14.8 It is an admitted fact that AEML-D, by way of issuing a verification certificate on 28 March 2019, had assisted VIPL-G in order to participate in the auction process to be conducted by CIL. However, while issuing the said certificate, AEML-D had recorded the fact of outstanding Default Notice and stated that the issuance of the verification certificate shall not be constituted or be construed as a waiver of any of its rights under the PPA. Thus, it was solely VIPL-G’s decision to proceed with participation in the auction process. Hence, same cannot be construed as waiver on behalf of AEML-D.
14.9 Axis Bank has attempted to portray that their delay in initiating the process of substitution was on account of AEML-D not providing them with a copy of the Default Notice and it was only on 1 August, 2019 that VIPL-G informed Axis Bank regarding the Default Notice and the Termination Notice. AEML-D served a copy of Termination Notice (which enclosed a copy of the Default Notice) through speed post contemporaneously with the issue of Termination Notice to VIPL-G. Further, the fact that VIPL-G chose not to inform its own Lenders regarding AEML-D having terminated the PPA which it is obligated to do under the Financing Documents suggest that neither VIPL-G nor Axis Bank are serious about their legal rights and obligations and are only looking to assign the blame for their own failures on to someone else . Axis Bank instead of initiating proceedings of fraud and concealing vital information such as the Default Notice and the Termination Notice are attempting to support VIPL-G by advancing the
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alleged theory of not being supplied with a copy of the Default Notice and thereby having allegedly been refrained from initiating the process of substitution. This is nothing more than collusion between Axis Bank and VIPL-G with the ill-intent of restraining AEML- D.
14.10 In any event, Axis Bank has stated that they are ready to substitute VIPL-G but has not stated what steps they intend to take towards effecting such substitution. On the contrary it is submitted that Axis Bank itself is not clear and categorical as to whether they wish to exercise their rights of substitution. In this context it is relevant to mention that the Lenders (represented by Axis Bank) in their Consortium Meeting held on 23 October, 2019 have sought the advice of their counsels on Substitution of the Seller within NCLT vis-à-vis outside NCLT considering the existing share pledge and Impact on FSA and PPA if substitution is done under NCLT. Further, the lenders also agreed that no financial support shall be provided by the lenders to the company till a resolution plan is approved.
14.11 Thus, Axis Bank has vaguely mentioned that they are interested in substituting VIPL-G but has not taken any concrete steps such as issuing a Substitution Notice to exercise their right of substitution since 1 August, 2109. Mere averments that Axis Bank is ready and willing to substitute VIPL-G do not hold good and cannot be permitted to frustrate the rights of AEML-D to terminate the PPA. Axis Bank’s attempt it appears is to unreasonably delay the rights of AEML-D with the sole intention of assisting a defaulting party which ought not be permitted by the Commission. The alleged reliance of Axis Bank on Schedule 12 of the PPA is of no relevance or assistance to either VIPL-G or Axis Bank since Schedule 12 comes into play only when a Substitution Notice has been issued by the Lenders’ Representative (Axis Bank). Since no such notice has been issued till date, Axis Bank’s attempt to take recourse to Schedule 12 of the PPA is impermissible.
14.12 It is also pertinent to note that, as admitted by Axis Bank, VIPL-G’s account with the Axis Bank became NPA with effect from 1 July, 2019. An account becomes NPA after 90 days of default and if the Lenders’ Representative (Axis Bank) had exercised the slightest of due diligence since the start of VIPL-G’s defaults under its financing documents with Axis Bank, they ought to have become aware of the issuance of the Termination Notice. If Axis Bank was so interested in allegedly salvaging VIPL-G’s Project, they ought to have intervened when VIPL-G shut down generation of its plant since 18 January, 2019 despite having a valid FSA for Unit 2 of the plant. Axis Bank’s attempt to impugn the validity of the Termination Notice with a defaulting party cannot and ought not to be permitted.
14.13 Axis Bank has unequivocally declined to lend any further support / funding to operationalize the Plant and has instead directed VIPL-G to infuse funds from its
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promoters. In view of such categorical submissions of Axis Bank and in view of VIPL-G having been declared NPA, the Commission ought not to restrain AEML-D from proceeding with the Termination Notice. The fact that VIPL-G has been declared NPA by the Lenders (represented by Axis Bank) and various recovery / debt resolution measures is under consideration in light of the Inter-Creditor Agreement executed between the Lenders of VIPL-G (including Axis Bank), there is little or no recourse left to AEML-D to recover the differential power purchase cost (in replacement of power contracted under the PPA) if the Termination Notice is kept in abeyance.
14.14 Hence, the Petition is without any merit, discloses no sustainable ground for any relief, and is liable to be dismissed with exemplary costs.
14. AEML-D’s reply to the amended Petition states as follows:
15.1 The contents of AEML-D’s Reply dated 3 October, 2019 should be read as an integral part of the present Reply.
15.2 VIPL-G has failed to achieve Normative Availability for twenty (20) months in a continuous period of thirty six (36) months which constitutes a Seller Event of Default under Article 11.1.1(iii) of the PPA. Further, VIPL-G and its Lenders, have failed to explain as to why they have failed to generate a single unit of electricity since January 17, 2019 till date. The failure to supply power for two continuous months constitutes a separate Seller Event of Default under Article 11.1.1 (iii) of the PPA.
15.3 VIPL-G continues to take evidently self-contradictory stands by way of its amended Petition. On the one hand, it claims that AEML-D is not entitled to rely on events/defaults occurring prior to August 29, 2018 and on the other, it asserts that AEML-D is a ‘successor’ which had acquired RInfra’s Mumbai distribution business. VIPL-G’s assertion that while taking over the business post August 29, 2018, AEML-D had allegedly waived off its right to seek a remedy of the Seller Event of Default under the PPA is contrary to settled law. AEML-D is the successor-in-interest (and not a mere assignee) of RInfra qua the distribution license and distribution business of the licensed areas in Mumbai and hence, AEML-D is entitled to exercise all the rights and interests (which are available to be exercised under law or contract) of its predecessor-in-interest as per the terms of the contract or applicable law. Article 13.1.1 of the PPA expressly provides for the rights and benefits of the parties under the PPA passing on to their successors. However, it is relevant to mention here that in so far as AEML-D’s obligations under the PPA for the past period are concerned, VIPL-G alone has specifically waived its right to claim or receive any payments relating to the period prior to the Closing Date from AEML-D by virtue of its no-dues certificate dated August 23, 2018 issued to REGSL/AEML, which unambiguously states as follows:
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“1. All outstanding amounts as on the Closing Date whether receivable or payable from and to the Company and/or Reliance Infrastructure Limited (“RInfra”) with respect to the existing Power Purchase Agreement dated August 14, 2013, amended from time to time, for supply of power, shall be paid/received exclusively by RInfra. Any claims arising from the aforesaid agreement pertaining to the period prior to the Closing Date shall solely be to the account of RInfra without recourse to the Company.”
15.4 VIPL-G’s averments demonstrate that VIPL-G has been wilfully defaulting on its obligations under the PPA and once it has been called to account for its defaults in terms of the PPA by AEML-D, VIPL-G has sought to blame AEML-D for its singular failure to supply electricity to AEML-D in terms of the provisions of the PPA. The lenders were fully aware of VIPL-G’s defaults but wilfully turned a blind eye to the same. If VIPL-G had any genuine grievances against the alleged non-payment by AEML-D, it ought to have exercised its remedies under the PPA and at law well before AEML-D issued the Termination Notice.
15.5 In any event and without prejudice to the rights of AEML-D, any waiver which may have been granted by RInfra (which VIPL-G seeks to allegedly attribute to AEML-D ) is of no consequence since the alleged waiver was issued without prior approval of the Commission which could not have been granted in view of the settled law laid down by the Hon’ble Supreme Court in the matter of All India Power Engineers Federation v. Sasan Power Ltd. The Hon’ble Supreme Court in the aforementioned case has directed that no waiver which affects the interests of the consumers can be granted by the distribution licensee without prior approval of the concerned State Regulatory Commission. Secondly, the purported waiver through forged and fabricated documents is merely an attempt by two group companies to defeat the lawful rights of AEML-D and thirdly, AEML-D has been vested with the Mumbai GTD business with effect from the Appointed Date, i.e. April 01, 2018 and no alleged waiver could have been granted by RInfra without prior concurrence of AEML-D. Thus, in view of the above, the alleged waiver cannot be given effect to and bind AEML-D since if the same were to be allowed, the interests of the consumers of Mumbai would be severely affected.
15.6 In view of the above, there is no merit in the amended Petition and the same is liable to be dismissed with exemplary costs.
15.7 It is an admitted position and documented in the Order dated 17 October, 2019 passed by the Commission in MA No. 36 of 2019 in Case No. 247 of 2019 that VIPL-G has not generated even a single unit of power since January 17, 2019 from its Project, despite there being an FSA in place for Unit 2. Therefore, VIPL-G has not been generating
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power even prior to termination of the PPA and it is false to assert that because of termination, VIPL-G would not be able to generate power.
15.8 The alleged loss of fixed charges and cash flow problems are of VIPL-G’s own making. A party which has not been able to generate a single unit of power for last 11 (eleven) months cannot claim to have the right to receive fixed charges. Protecting lenders’ dues is not the obligation of AEML-D. VIPL-G and Axis Bank have deliberately withheld production of the Inter-Creditor Agreement dated July 6, 2019 (on which it has placed reliance) and minutes of meeting of the lenders in relation to the alleged resolution plan for VIPL-G’s account. VIPL-G and Axis Bank are called upon to produce a copy of the said Inter-Creditor Agreement to enable AEML-D and the Commission to peruse the same and draw appropriate conclusions therefrom. VIPL-G is suffering from the alleged financial hardship on account of non-payments by its own group company, RInfra. It is a well-known fact that VIPL-G does not have monies to buy fuel for operating the plant on a consistent basis and has also admitted that its own group company has allegedly pushed it into grave financial hardship. Thus, VIPL-G cannot be permitted to accuse AEML-D for any alleged financial hardship. VIPL-G had itself, admittedly, issued a no-dues letter to AEML-D on August 23, 2018 wherein it voluntarily agreed that all outstanding payments as on the Closing Date whether receivable or payable from and to the Company/AEML and/or RInfra with respect to the PPA shall be paid/received exclusively by RInfra. VIPL-G, therefore, having voluntarily agreed to recover all the past liabilities in relation to the PPA from RInfra only, had provided a release to AEML- D in relation to such past period liabilities. Therefore, if any payments have not been made to VIPL-G arising in the period prior to the Closing Date, VIPL-G cannot be allowed to recover such amounts from AEML-D.
15.9 The Lenders (through Axis Bank) have vide their Written Submissions dated November 5, 2019 filed in MA No. 36 of 2019 in Case No. 247 of 2019 stated that the Lenders in their Consortium Meeting held on October 23, 2019 had decided that the preconditions of the proposed resolution plan (as set by the lenders in the last consortium meeting on October 4, 2019) have not yet been complied and hence approval on proposed resolution plan is unlikely.
15.10 Further, the Lenders (Axis Bank) in the aforementioned Written Submissions have unequivocally stated as follows:
“15. …As such, the lenders have asked the Petitioner to operationalize the plant by infusing funds from its promoters till the time a Resolution Plan is approved by the lenders.
16. Therefore, it is also respectfully submitted before Hon’ble Commission that the lenders are not inclined to permit utilization of any banking limits until a
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resolution plan is approved by the lenders. VIPL has not been able to submit a resolution plan to the satisfaction of lenders. Hence, till a resolution plan to the satisfaction of lenders is approved, lenders will not provide any financial support towards operationalizing the plant. …”
15.11 Therefore, the position of the lenders regarding any long-term and sustainable resolution plan for VIPL-G is very clear. The lenders are fully aware that there is very little prospect of reviving this asset on account of gross financial mismanagement by VIPL-G. Mere signing of ICA by the Lenders has not ensured and cannot ensure any resolution plan for VIPL-G and VIPL-G has been unable to submit any resolution plan satisfactory to the lenders.
15.12 Further, the averment that in the event the Termination Notice is not set aside, the consumers of Mumbai would be deprived of the alleged benefits of SHAKTI Coal is completely false. It is submitted that contrary to the averments of VIPL-G, if the Commission were to set aside the operation of the Termination Notice and VIPL-G were to be able to procure coal under SHAKTI FSA, the said procurement will increase the cost of electricity to the consumers of AEML-D by about Rs. 0.34 – 0.37 per unit since VIPL-G has undertaken to pay an add-on price or premium of Rs. 450 per ton over and above the price of linkage coal notified by CIL. The Commission may take a note that the details of the SHAKTI bid have been deliberately suppressed by VIPL-G from the Commission and AEML-D.
15.13 Further, VIPL-G has misinterpreted the directions passed by the Commission in Case No. 140 of 2017. The relevant extract of the Order dated June 28, 2018 is reproduced below:
“d. Scheme of Arrangement between RInfra and REGSL
i. Under the Scheme, RInfra is the Transferor Company and REGSL is the Transferee Company. RInfra proposes to transfer the Mumbai Power Division comprising Generation, Transmission and Distribution, the Samalkot Power Division, the Goa Power Station Division and the Windmill Division, to REGSL on a going concern basis under the provisions of the Companies Act, 2013, as applicable.
ii. With effect from the Appointed Date, the whole of the undertaking and properties of the power generation, transmission and distribution divisions of RInfra, shall pursuant to the applicable provisions of the Companies Act, 1956 or the Companies Act, 2013 and without any further act, deed, matter or thing, stand transferred to and vested in and / or be deemed to be transferred to and vested in REGSL so as to vest all rights, title and interest pertaining to the power generation, transmission and distribution divisions.
…
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12 (e) Upon the Scheme coming into effect and in consideration of the transfer and vesting of the Mumbai Power Division in REGSL on a going concern basis pursuant to provisions of this Scheme and applicable law, REGSL shall pay a lump sum cash consideration of Rs 5,575 crore (Rupees Five Thousand Five Hundred and Seventy-Five Crore) to RInfra.
16 (b) RInfra submitted that REGSL is a 100% subsidiary of RInfra with no activity at present, and provided the copy of the Statutory Auditor Certificate certifying the same. RInfra submitted that Mumbai Generation, Transmission and Distribution Business of RInfra, along with entire regulated asset base, shall be transferred to REGSL on going concern basis as on Appointed Date. REGSL will carry out Mumbai Power Business post the transfer of Licence and approval by the Commission. As the existing licensed business (along with all employees) is being transferred to REGSL on a going concern basis, REGSL will have all the technical expertise as is currently available in RInfra for carrying out the licensed business.
46 RInfra proposes to transfer the Mumbai Power Division comprising Generation, Transmission and Distribution business, but excluding 4 plots of Santacruz land of the Distribution division, to REGSL on a going concern basis under the provisions of the Companies Act, 2013, as applicable. As per the Scheme of Arrangement, with effect from the Appointed Date and upon the Scheme becoming effective:
a. the whole of the undertaking and properties of the power generation, transmission and distribution divisions of RInfra shall stand transferred to and vested in and / or be deemed to be transferred to and vested in REGSL so as to vest all rights, title and interest pertaining to the power generation, transmission and distribution divisions.
…
c. all the past period liabilities and gains, incurred prior to the Appointed Date, shall continue to be to RInfra’s account.
…
e. REGSL will be the successor of RInfra vis-à-vis the Transferred Divisions. Hence, it will be deemed that the benefit of any tax credits whether Central, State or local, availed vis-à-vis the Transferred Divisions and the obligations, if any, for payment of the tax on any assets forming part of Transferred Divisions or their erection and/or installation, etc., shall be deemed to have been availed by REGSL. Consequently, and as the Scheme does not contemplate removal of any
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asset by REGSL from the premises in which it is installed, no reversal of any tax credit needs to be made or is required to be made by RInfra.
48. The Commission has taken note of the various provisions of the Scheme of Arrangement, which are consistent with the proposed framework of transfer of the concerned assets from RInfra to REGSL and are also consistent with the regulatory provisions.
49. The Scheme of Arrangement has been approved by Hon’ble the Bombay High Court vide Order dated 19 January, 2017, read with amendment Order dated 31 January, 2017. Vide Orders dated November 20, 2017 and November 28, 2017, Hon’ble the Bombay High Court has changed the Appointed Date for the Scheme of Arrangement to April 1, 2018.
59. The Scheme of Arrangement, duly approved by Hon’ble the Bombay High Court, provides that the whole of the undertaking and properties of the distribution division of RInfra shall stand transferred to REGSL so as to vest all rights, title and interest pertaining to the distribution division, along with all reserves, debts, liabilities, contingent liabilities, duties and obligations of every kind, nature and description of RInfra pertaining to distribution division, any statutory licenses, permissions or approvals or consents held by RInfra to carry on operations of electricity distribution, any tax credits whether Central, State or local, availed vis-à-vis the distribution division, and all employees of RInfra engaged in or in relation to the distribution Division of RInfra and who are in such employment as on the Effective Date. Thus, the entire Distribution Licence and all associated assets and liabilities are being transferred to REGSL.
61. Hence, it is clear that the assignment of licence and transfer of Distribution assets from RInfra to REGSL is being done on a going concern basis along with entire regulated asset base and employees. As stated earlier, under the going concern basis of accounting, the financial statements are prepared on the assumption that the entity is a going concern and will continue its operations for the foreseeable future. Moreover, while evaluating REGSL’s credentials and capability for assignment of RInfra’s Distribution Licence, it has to be noted that REGSL is a 100% subsidiary of RInfra, and the management and technical expertise of RInfra shall thus continue to be available to RInfra.
Treatment of Dues/Liabilities before Appointed Date
128. The Petitioners submitted that all matters (including claims and liabilities) relating to the aforesaid licensed business upto the Appointed Date, which are under process, initiated or to be initiated in relation to any legal proceedings or regulatory proceedings, or pending with any Government Entity, pertaining to various expenses and/or disallowances and/or liabilities and/or demands and/or receivables all of which are in relation to the period prior to assignment of Licence to REGSL, are to be deemed to have been retained by and belong and accrue to RInfra. All such amounts receivable from consumers or payable to
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consumers, if and when materialized in relation to the period prior to assignment of Licence to REGSL shall be to the account of RInfra. All such amounts receivable and recoverable by REGSL from the consumers and after adjusting the amount payable by RESGL to the consumers, shall be held by REGSL in trust for RInfra and shall be paid/transferred accordingly.
129. Further, the Parties have agreed that the approved Regulatory Assets and past Revenue Gap for FY 2018-19 of Rs. 1,150 crore (adjusted to the extent recovered by RInfra in FY 2018-19 prior to the Appointed Date) as well as the positive or negative impact of Regulatory Assets under approval in various fora and net working capital on closing, will also directly flow to RInfra.
130. The Commission is of the view that the above proposed arrangement in respect of claims and liabilities of the licensed business upto the Appointed Date, and the approved/under-approval Regulatory Assets and past Revenue Gap, is appropriate and reflects the agreement between the Parties, and has no adverse impact on REGSL/ATL. Hence, the Commission approves the proposed arrangement in this regard. It is clarified that after assignment of the Distribution Licence to REGSL, the consumer shall interface only with REGSL even for prior period claims, and REGSL and RInfra shall mutually settle such claims in accordance with the Scheme of Arrangement.
143. As regards the suggestion that ATL should file a fresh MTR Petition after the transaction is completed, the Commission is of the view that the Distribution Business is being transferred as a going concern, and the service to the consumers as well as the tariff approved by the Commission shall continue seamlessly after the transaction is completed. The regulated books for tariff determination will remain unchanged on transfer of licensed businesses from RInfra to REGSL. The Commission has also ruled that no additional impact shall be sought to be passed through to the consumers on account of the transaction. Hence, there is no requirement for filing of a fresh MTR Petition by REGSL after the transaction is completed on the Appointed Date.”
15.14 From above extracts, it is very clear that the transferred divisions/businesses of RInfra as set out in the Scheme of Arrangement approved by the Hon’ble High Court of Bombay were transferred to and acquired by AEML-D on a going concern basis. VIPL-G’s contentions to the contrary are patently false. AEML-D is the successor-in-interest (and not a mere assignee) of RInfra qua the distribution license and distribution business of the licensed areas in Mumbai and as the successor-in-interest of RInfra, AEML is entitled to exercise all the rights and interests (which are available to be exercised under law or contract) of its predecessor-in-interest as per the terms of the contract or applicable law. Further, as mentioned earlier, Article 13.1.1 of the PPA expressly provides for the rights and benefits of the parties under the PPA being passed on to their successors. Therefore, VIPL-G’s averment that AEML-D could not have raised any claims on account of
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defaults prior to the Appointed Date is incorrect on account of misinterpretation of the order dated June 28, 2018 and the Scheme of Arrangement.
15.15 VIPL-G admits that only claims and liabilities of the licensed business upto the closing date i.e. August 29, 2018 has been retained by RInfra. This is not a provision in the Scheme of Arrangement but is a part of a private agreement (i.e. the SPA) among ATL, RInfra and AEML-D and the Commission has merely accepted the private agreement entered into among the parties. The Commission was not called upon to rule upon or adjudicate on any provisions of the SPA and there was no lis. Significantly, VIPL-G is not even a party to the SPA and is not entitled to rely upon the provision of the SPA. Without prejudice to the aforesaid, even the SPA provisions admittedly keep only the claims and liabilities upto the closing date, i.e. the receivables and payables and expenses / disallowances in relation to the period prior to the assignment of license to REGSL/ AEML retained with RInfra (refer para 128 of the June 28 MERC Order). Under the Scheme of Arrangement, all rights and interests pertaining to the distribution business including those arising prior to the Appointed Date have been vested in AEML-D. Issue of Default Notice or Termination Notice is a right exercisable under the PPA which exclusively belongs to AEML-D in its capacity as a procurer under the PPA, it is not a claim or liability retained by RInfra.
15.16 Further, while challenging the PPDN and the Termination Notice, VIPL-G has stated that AEML-D is allegedly barred from relying upon defaults prior to the Appointed Date, however, VIPL-G has nowhere denied that it failed to achieve Normative Availability for twelve months out of thirty six months which indisputably constitutes a Seller Event of Default under Article 11.1.1(iii) of the PPA. Rather it has attempted to justify its ex-facie default under the PPA. It is denied that AEML-D has ever accepted or waived its right to take action against VIPL-G for defaults prior to the Appointed Date.
15.17 The MoU executed on August 29, 2018 with AEML-D contained a confidentiality obligation on both parties with AEML-D reserving its right to seek suitable remedies against VIPL-G for its deliberate breach of the confidentiality obligation.
15.18 Further, the averment that the Undertaking dated December 15, 2018 was entered into between VIPL-G, RInfra and AEML-D with the alleged ill-intent of setting off of Rs. 266 crores is false and baseless. There is no merit in VIPL-G’s contention that AEML-D had allegedly effected an illegal set-off of Rs. 266 crores from the monies payable to VIPL-G. VIPL-G had, at the request of its group company RInfra, submitted the aforesaid Undertaking to AEML-D wherein VIPL-G has unequivocally and voluntarily accepted AEML-D’s right to set-off certain amounts payable by RInfra to AEML-D against equivalent amount of monies payable by AEML-D to VIPL-G under the PPA. The Undertaking thus is a recovery mechanism set up by RInfra, a group company of VIPL-
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G, against amounts due and payable to AEML-D under the terms of the SPA. Most importantly, the Undertaking provides as follows:
“The amount being set off by the Company shall be deemed to have been paid by the Company to the Vidarbha Industries Power Limited (VIPL) against the payments required to be made by the Company under the above said PPA.”
15.19 Therefore, VIPL-G is deemed to have received payment of monies set off by AEML-D against the dues of RInfra. Further, VIPL-G had voluntarily agreed not to make any demands or enforce any payment security provided by the Company in respect of amounts set-off by the Company/AEML-D. The set-off mechanism agreed to by VIPL-G at the request of its group company, RInfra provides a complete discharge of AEML-D’s payment obligations under the PPA since VIPL-G is deemed to have received payment against set-off carried out by AEML-D against the liability of RInfra. Contrary to the averment now sought to be advanced by VIPL-G (evidently an afterthought) in its letter dated July 20, 2019 to AEML-D, VIPL-G had sought as follows:
“2. It is evident from the above that since there is no amount remaining unpaid by RInfra towards SLDC Demand Accounts and/or SLDC Interest, the set off right of AEML from amounts payable AEML to VIPL as per the undertaking dated 15th December 2018 ceases to exist with immediate effect. Relevant extract of the said undertaking is reproduced below:
“We are aware of the terms set out in the Supplemental Agreement and hereby confirm, accept and acknowledge the rights to the Company to set off any amounts remaining unpaid by the Seller towards SLDC Demand Accounts and/or SLDC Interest against any all payments made or required to be made by the Company to us under the Power Purchase Agreement dated 14th August 2013. The amount being set off by the Company shall be deemed to have been paid by the Company to the Vidarbha Industries Power Ltd. (VIPL) against the payments required to be made by the Company under above said PPA.”
3. In view of the above, please note that AEML’s set off right ceases to exist and the undertaking dated 15th December 2018 stands terminated and cancelled forthwith. Further, you are called upon to resume regular payment due and payable by AEML under the said PPA with immediate effect.”
15.20 AEML-D responded to the above letter vide its letter dated July 29, 2019. It is evident from VIPL-G’s letter dated July 20, 2019 that VIPL-G had accepted the set-off carried out by AEML-D as genuine and legitimate and had sought cessation of further set offs only on the basis that SLDC/ FBSM dues payable by RInfra had been settled (which AEML-D denied). In another letter dated August 6, 2019, VIPL-G once again reiterated that since RInfra had stated that its liability towards SLDC demand amounts and SLDC
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interest had been discharged in full, AEML-D’s rights of set-off under the said Undertaking had ceased to exist. Nowhere did VIPL-G either state that the Undertaking was illegal or the set-off carried out by AEML-D (at least prior to July 20, 2019) was illegal, in fact, VIPL-G had happily accepted the set-off carried out to discharge the specified liability of its group company RInfra. AEML-D responded to VIPL-G’s letter dated August 6, 2019 vide its letter dated August 19, 2019. In any event, if VIPL-G had any genuine grievance against the Undertaking that it had voluntarily signed to assist its group company, RInfra, VIPL-G is at liberty to seek appropriate relief before an appropriate forum. The Commission is not the appropriate forum to agitate such grievances of VIPL-G.
15.21 The alleged reliance of VIPL-G that AEML-D had, under the garb of the Undertaking, deliberately withheld payments of VIPL-G resulting in shutdown of the plant is vehemently denied. AEML-D, in due compliance with the terms of the PPA and the Undertaking dated December 15, 2018, has made payments to VIPL-G after deducting the legitimate dues payable to it by RInfra / Petitioner. Further, the reliance of VIPL-G on other power plants to hide and justify its own failure to achieve Normative Availability is a clear admission by VIPL-G of its failures and such other plants have no bearing or relevance to adjudication of the present Petition. VIPL-G in order to hide its failures is attempting to portray that all power stations have failed in fulfilling the obligations set out in their respective PPAs.
15.22 Further, the invoices raised by VIPL-G were not compliant with the provisions of the PPA and therefore, AEML-D was fully entitled to reject the same and demand invoices in compliance with the PPA provisions.
15.23 It is incorrect on the part of the Petitioner to allege that AEML-D had allegedly impaired the ability of VIPL-G to successfully discharge its duties. VIPL-G’s letter dated April 17, 2019 to AEML-D contains a categorical admission that it was unable to operate the plant because it was facing grave financial hardship. Admittedly, it had failed to or deliberately omitted to recover dues under the PPA from its group company, RInfra over a number of years which eventually led to its grave financial hardship and its Lenders continued to ignore or turn a blind eye to the mounting financial hardship of VIPL-G. AEML-D has diligently fulfilled its obligations under the PPA. Most importantly, none of these defences/ contentions were raised when VIPL-G first replied to the Default Notice on April 1, 2019. Prima facie VIPL-G has admitted that its operations were already impaired or had failed even prior to the takeover of business by AEML-D which needed to be revived. However, VIPL-G is seeking to blame AEML-D for all its ills in the present Petition.
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15.24 AEML-D, even though it has appealed against the Commission’s order dated September 3, 2019 passed in Case No. 225 of 2019, in order to support VIPL-G in securing an FSA, had agreed to execute a Supplementary PPA to comply with the Commission’s Order. AEML-D’s compliance, even though a challenge to the Order has been made by AEML- D, is evidently contrary to VIPL-G’s assertions that AEML-D is allegedly thwarting VIPL-G’s efforts to revive its Project. VIPL-G by way of citing judgments of the Hon’ble Supreme Court has attempted to portray that it is for the alleged wrong committed by AEML-D that VIPL-G is being made to suffer. This is completely contrary to averments / submissions made by VIPL-G before the Commission in MA No. 36 of 2019 and the submissions made by Axis Bank. VIPL-G had defaulted in debt servicing to the lenders since January 2019, well before the issue of Procurer Default Notice or Termination Notice by AEML-D.
15.25 The contentions of VIPL-G with respect to the circumstances of force majeure and change in law are totally baseless and lack any merit and have been raised by VIPL-G for the first time. VIPL-G has never issued a notice to AEML-D for occurrence of a force majeure event which is a prerequisite under the PPA. The hindrances cited for executing the FSA is wholly attributable to VIPL-G and it cannot be allowed to cover its own failures and at the same time claim benefits of force majeure and change in law under the PPA.
15.26 VIPL-G has been repeatedly attempting to rely on an alleged letter issued by Chief Patron of AIPEF. It is VIPL-G who has brought this letter to the notice of the Commission, the existence and origin of which is not known to AEML-D. AEML-D has never placed reliance upon such alleged letter before the Commission. AEML-D may be asked to explain the relevance of this letter to the present dispute. It is a clear attempt by VIPL-G to mislead the Commission by introducing facts/ events which have nothing to do with the present dispute.
15.27 VIPL-G’s contention is completely false that AEML-D did not act upon the Termination Notice. The Termination Notice unequivocally stated that the PPA shall stand terminated after the expiry of 30 days from the date of the Termination Notice in terms of the PPA. AEML-D has complied with all the substantive and procedural requirements of Article 11.3.4 of the PPA while issuing the Termination Notice and any allegations on the contrary is wholly denied. Further, the additional grounds raised by VIPL-G in the present amended Petition are baseless and unsubstantiated and merit no consideration by the Commission.
15.28 VIPL-G has been repeatedly attempting to gain sympathy of the Commission by portraying its inability to adhere to its debt service commitments. The debt service commitment of VIPL-G is solely its own responsibility and AEML-D cannot in any way
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be made responsible for the same. The deteriorating financial condition of VIPL-G cannot be attributed to AEML-D and in fact, it is AEML-D’s case that VIPL-G’s defaults under the PPA is due to its gross financial mismanagement and inability to procure sufficient fuel for the plant.
15.29 In view of the above, the Petition is without any merit, discloses no sustainable ground for any relief, whether interim or final, and is liable to be dismissed with exemplary costs.
15. At the hearing dated 6 December, 2019:
16.1 Advocate for VIPL-G stated that:
i. It is the settled principle of law, that the terms and conditions of the contract are binding upon the contracted Parties and Parties are required to follow all the provisions of the contract.
ii. Vide its undertaking dated 15 December, 2018, VIPL-G has permitted AEML-D to set-off the liability of RInfra on account of SLDC amount against the payment payable by AEML-D to VIPL-G under the PPA. However, as per PPA such set-off amount was to be done upto Rs. 15 Crore and AEML-D has set-off an amount of Rs. 266 Cr.
iii. While VIPL-G reserves its right to take legal recourse against such set-off, it is due to such illegal set-off, VIPL-G has been pushed to an adverse financial position.
iv. Also, as per PPA provisions, for any amount to be set-off, AEML-D ought to have raised invoices for the amount to be set-off and set-off was permissible after 30 days period for the undisputed amount. Hence, the process stipulated for set-off is also not followed by AEML-D.
v. The decision of the Hon’ble APTEL in Appeal No. 192 of 2016 clearly holds that delay in signing FSA for Unit 1 is an event in the nature of Force Majeure, while granting relief to VIPL-G. As regards Unit 2, on account of illegal set-off of Rs. 266 Cr. by AEML-D, VIPL-G’s cash flow has been adversely affected.
vi. As per PPA provisions, the default on account of Force Majeure is to be excluded. Also, AEML-D has not challenged the aforesaid Judgment passed by the Hon’ble ATE.
vii. In the discussions held on 23 April, 2019 between AEML-D and RInfra, it was agreed that RInfra will allow substitution of AEML-D in place of RInfra in Civil Appeal before the Hon’ble Supreme Court on the issue of standby charges.
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viii. On the query of the Commission, VIPL-G stated that although the minutes were not confirmed, the Parties acted in accordance with these discussions held on the issue of standby charges. The Hon’ble Supreme Court vide its Order dated 25 April, 2019 has allowed the substitution of RInfra by AEML-D in the Civil Appeal. Further, AEML-D is in receipt of Rs. 512 Cr. from the Tata Power Company in terms of the Judgment passed by the Hon’ble Supreme Court in this matter.
ix. Vide email dated 25 April, 2019, AEML-D agreed that upon request of RInfra, AEML-D will unconditionally withdraw the PPDN and Termination Letter meaning thereby that AEML-D was ready to withdraw all disputed defaults under the PPA as on 25 April, 2019. Thus AEML-D acted upon the Agreed Position among them on the issue of Standby Charges Matter before the Hon’ble Supreme Court but not on the issue of withdrawing the PPDN and Termination Notice.
x. On the assurance given by VIPL-G to achieve the normative availability with effect from 1 October, 2019, vide its letter date 20 May, 2019, AEML-D agreed to suspend the PPDN and Termination Notice.
xi. Vide letter dated 29 July, 2019, AEML-D stated that the undertaking dated 15 December, 2018 given by VIPL-G regarding set-off of payment continues to operate as SLDC amount was to be discharged fully and VIPL-G cannot unilaterally cancel the said Undertaking, meaning thereby that it was AEML-D’s intention to continue PPA so that the receivable from RInfra could be set-off against the amount payable to VIPL-G. Unless there is generation from VIPL-G under the PPA, set-off is not possible and the Undertaking cannot continue. Hence, PPA exists inspite of the Termination Notice dated 20 April, 2019.
xii. Since the PPA could not be amended because of VIPL-G’s Undertaking dated 15 December, 2018, the set-off that could be done by AEML-D was not to exceed Rs. 15 Cr. in terms of the Article 8.3.3 of PPA.
xiii. The amount to be paid to MSLDC by various State Pool Participants is not finalized till date and hence, PPA between VIPL-G and AEML-D continues till date considering the insistence of AEML-D on continuation of Undertaking.
xiv. In response to the No dues Certificate sought by RInfra-D, VIPL-G vide its letter dated 21 August, 2018 (which AEML-D contends to be forged document), stated that No-Dues certificate shall be subject to the condition that RInfra-D shall be liable to make the payments towards the entire outstanding amount till the Closing Date of 23 August, 2018 and RInfra-D’s wavier for clause No. 11.1.1 (iii) which deals with the default related availability. In response, RInfra-D granted its consent
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for waiver of the clause No. 11.1.1 (iii) and RInfra-D agreed to pay the outstanding amount accumulated till the Closing Date.
xv. In the letter dated 3 September, 2018 jointly issued by RInfra-D and AEML-D (informing VIPL-G about vesting of Generation, Transmission and Distribution Business of RInfra with AEML), it was stated that AEML-D shall abide by the terms of PPA from 29 August, 2018 and RInfra shall be responsible till 28 August, 2018 for all aspects of the PPA for the period upto 28 August, 2018.
xvi. The MoU dated 9 August, 2018 signed between REGSL (now ‘AEML’) and VIPL-G, mentioned that the Parties will work together to support each other to secure long term FSA for Unit 1. REGSL shall extend all support to VIPL-G in all ongoing and future Regulatory and Judicial Proceeding in relation to FSA related matters. Thus AEML-D was well aware of the issue of availability and still it intended to go ahead with the PPA.
xvii. As recorded in the Commission’s Order dated 28 June, 2018 in Case No. 140 of 2017, all matters (including claims and liabilities) relating the Licensed Business upto the Appointed Date, which are under process, initiated or to be initiated , in relation to the period prior to the Appointed Date shall be deemed to have been retained with RInfra.
xviii. Even though the same PPA continued after the Appointed Date, two different entities were involved (one prior to the Appointed Date and one after the Appointed date) and the business transfer was not “on going” basis, there was a need for a Tri-Party Agreement.
xix. The Termination Notice is premature in nature considering the fact that after Appointed Date, the requirement of defaults in 12 consecutive/nonconsecutive months is not fulfilled.
xx. If the Business transfer had been on “on going” basis, there would not have been requirement of RInfra to pay the amount to AEML-D towards the FBSM amount.
xxi. VIPL-G has tried to find out records from the Post Offices about Termination Notice purportedly served on the Lenders. However, no such record is found.
xxii. Nearly all power plants in Maharashtra, including Adani Group’s Tiroda Power Plant, have failed to achieve 85% Normative Availability for one or other reason, whether valid or otherwise, however no PPA has been terminated till date in Maharashtra just on the premise of the plant not achieving Normative Availability
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probably because cheaper power is available in the current power surplus scenario in the State.
xxiii. AEML-D, being a revenue neutral entity with all power purchase expenses being pass through, AEML-D’s interest would not be prejudiced if the termination is held invalid. However, if such termination is allowed, VIPL-G would be severely affected. The Commission, having the regulatory jurisdiction, should take into consideration the equity of the matter and balance of convenience.
xxiv. Defects are curable since the PPA provisions allows a period for curing the defects.
xxv. VIPL-G is ready to perform as per PPA, however the payments shall be made by AEML-D without any set-off. Even NTPC would fail to operate its Power Plant if its payments are set-off against other amounts.
16.2 Advocate for Axis Bank stated that:
i. The parties have entered into a private arrangement by way of Undertaking, giving right to AEML-D to deduct the outstanding dues of RInfra from the bills being raised by VIPL-G, which should not be allowed. Such arrangement is not only outside the PPA provision, also same is against the public interest. In its support Axis Bank has provided a copy of the Hon’ble Supreme Court’s Judgment in Sasan Power Ltd. (2017 1 SCC 487) wherein the Hon’ble Supreme Court held that unless there is a clear intention to relinquish a right that is fully known to Party, a Party cannot be said to have waived it, especially when such waiver is contrary to public interest.
ii. AEML-D has contended that as per PPA provision, it was the prerogative of AEML- D to send or not send a copy of the Default Notice to the Lenders’ Representative (Axis Bank). There is no merit in AEML-D’s above contention since in terms of PPA provisions, if AEML-D chooses to issue PPDN, it needs to serve copy of PPDN to Lenders.
iii. Since the PPDN and the Termination Notice have not been served on the Lenders, the Lenders’ right of substitution is affected.
iv. As per PPA provision, if the Lenders decide not to exercise the substitution rights, the capacity charges for the default period are reduced by 20%. In a way, it amounts to penalty to Lenders since revenue to the project is reduced.
v. Further, there is another consequence of non-substitution as per PPA provisions which requires Seller to pay the Procurer the charges equivalent to 12 months capacity charges calculated at Normative Availability.
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vi. PPDN issued by AEML-D does not mention the requirement of curing defaults by VIPL-G.
vii. If termination is allowed by the Commission, the Lenders’ right for substitution will be taken away.
viii. It is an admitted fact that PPDN has not been served by AEML-D and there is a vague assertion by AEML-D that Termination Notice has been served on Lenders. Axis Bank, on affidavit has confirmed that it has not received the copy of Termination Notice from AEML-D.
ix. Lender’s rights of substitution have been incorporated in the bidding guidelines and the standard bidding documents with an objective to give comfort and confidence to Lenders.
x. It is held by the Hon’ble Supreme Court in its Judgment in the Sasan matter that the waiver cannot be permitted if public interest is involved.
xi. The action of VIPL-G of withholding VIPL-G’s payment needs to be struck down by the Commission.
xii. Lenders could not exercise the substitution rights on account of status quo Order of the Commission.
xiii. The Commission is requested to ensure compliance of Schedule 12 of PPA by both the Parties.
xiv. In case the termination is allowed by the Commission, 120 days should be allowed for substitution by Axis Bank without any condition.
16.3 Advocate for AEML-D stated that:
i. The issue of Notice serving is being agitated by VIPL-G and Axis Bank only on legal grounds which are academic in nature, however, the factual position is that neither VIPL-G has financial capability to commence the generation and run the plant nor the Lenders are willing to provide financial support to VIPL-G.
ii. The objective of serving copy of the Termination to Lenders is just to intimate them about the Procurer’s intention of Termination of PPA. Non-serving of any Notice to the Lenders does not vitiate the core issue of termination which is essentially between the two Parties only, namely VIPL-G and AEML-D and Axis Bank has no role whatsoever in the dispute on account of the same.
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iii. VIPL-G and Axis Bank, while making their submissions have relied on the Inter- Creditor Agreement dated July 6, 2019 and minutes of meeting of the lenders in relation to the alleged resolution plan for VIPL-G’s account. However, they have refused to provide copies of these documents.
iv. The Lenders are yet to decide as to whether the Substitution of the Seller is to be made within NCLT or outside NCLT. The Lenders are doing nothing except for challenging the Termination Notice.
v. VIPL-G has made various oral arguments, however, said submissions are not part of the Petition. VIPL-G may file another Petition on such grievances.
vi. The non-issuance of PPDN has no bearing on the Lenders’ rights as the Lenders’ right of substitution are not lost, but same are deferred. The Lenders can exercise the said right now also.
vii. VIPL-G has advanced only legal arguments but has not denied the defaults committed by it on the availability issue.
viii. Neither there is new PPA nor there is a new Distribution Licence post the Appointed Date. Also, the Distribution Licensee has remained the same, only the shareholding of the Licensee has changed.
ix. The Undertaking dated 15 December, 2018 was given by VIPL-G in the interest of RInfra and the onus of informing about the said Undertaking was on VIPL-G.
x. The contentions of VIPL-G with respect to the circumstances of force majeure and change in law are totally baseless and lack any merit and have been raised by VIPL-G for the first time. VIPL-G has never issued a notice to AEML-D for occurrence of a force majeure event which is a prerequisite under the PPA.
xi. The undertaking dated 15 December, 2018 given by VIPL-G has not made reference to the PPA provisions related to set-off of payments.
xii. VIPL-G while replying to the Termination Notice did not attribute the set-off of Rs. 266 Cr. to its defaults. Said argument is being advanced now as an afterthought.
xiii. The negotiations /discussions held between VIPL-G and AEML-D were not formally concluded.
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xiv. It is not the case of VIPL-G that the PPDN did not include the required details such as requirement of curing defaults as agitated by Axis Bank. Axis Bank cannot raise this issue since it is not a proper Party to challenge the Termination.
xv. Compliance by one Party needs to be linked with the exercise of corresponding right of the other Party.
xvi. It was impossible for VIPL-G to cure the defaults committed by it.
xvii. The dispute raised by Axis Bank regarding VIPL-G’s Undertaking dated 15 December, 2018 that permitted AEML-D to set-off cannot be adjudicated by the Commission.
xviii. VIPL-G has not categorically stated that it is ready and willing to perform as per PPA and supply the electricity to AEML-D. Inspite of having a valid PPA for Unit 2, VIPL-G is not able to run its Plant on account of financial difficulties.
xix. The Judgment passed by the Hon’ble Supreme Court in Sasan matter, in fact supports AEML-D’s case since the waiver as allegedly given by AEML-D is not permitted under Law.
xx. The letters dated 29 July, 2018 and 1 August, 2018 have been created now since same were not referred by VIPL-G in its reply to the Termination Notice. These letters were also not referred during the discussions among the Parties.
xxi. Being the dispute adjudication issue, the question of considering the equity of the matter and balance of convenience does not arise.
16.4 The Commission directed the Parties to file their respective written submissions by 11 December, 2019.
16. VIPL-G filed its written submission on 11 December, 2019 re-iterating its earlier submissions and mainly stated as under:
17.1. AEML has issued the PDDN and the subsequent Termination Letter in violation of PPA provisions, the Order dated 28 June, 2018 in Case No. 140 of 2017, MoU dated 29 August, 2018 and letter dated 3 September, 2018 signed by all the Parties.
17.2. The Termination Notice if it was sent to the Lenders through Indian Post would have been the first ground taken by AEML in support of its contention that it has made efforts to serve the same to the Lenders. However, AEML only in its later submissions has affixed the postal stamp of Indian Post to contend that it has indeed served the Notice upon Lenders. This is clearly an afterthought. If the Postal Stamp is sought to be verified
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on the website https://www.indiapost.gov.in., no information on the delivery of the Termination Notice is available. Hence, clearly the entire argument of AEML is a moonshine and an afterthought. Also, Axis Bank, on affidavit, has stated that it has not received both PPDN and the Termination Notice.
17.3. It is a settled legal position that when parties to a contract have settled on a procedure to be followed, then due importance has to be given to the said contractual procedure. Reliance is placed on the following Judgments:
i. Judgment by the Hon'ble Supreme Court in Datar Switchgears Ltd vs. Tata Finance Ltd., (2000)
ii. Judgment by the Hon'ble Supreme Court in Ramachandra Narayan Nayak vs. Karnataka Neeravari Nigam Limited, (2013)
iii. Judgment by the Hon’ble Supreme Court in Export Credit Guarantee Corporation of India Ltd. vs. Garg Sons International, (2014)
17.4. Further, Article 11.3.1 of the PPA contemplates that besides giving a notice to VIPL, a copy was to be furnished by AEML to the Commission and Lenders' Representative. The word “with” used in PPA has to be read with the mandatory requirement thrust on the procurer (AEML) with the use of the word “shall”. The word “with” is a preposition which has been defined by the Hon’ble Supreme Court in the following Judgments:
i. Delhi Development Authority Vs. Durga Chand Kaushish, 1973 (2) SCC 825 at Para 17; and
ii. A. K. Raghumani Singh &Ors. Vs. Gopal Chandra Nath &Ors., – 2000 (4) SCC 30 at Para 7.
17.5. As a result, any non-achievement of Normative Availability, prior to the Closing Date, cannot be considered by AEML for issuing PDDN. As on 20.04.2019, since 29.08.2018, approximately only 8 months had elapsed. Therefore, the alleged default claimed by AEML is premature and the very basis of the PDDN is fallacious and the same ought to be set aside.
17.6. The action of AEML in signing the MoU dated 29.08.2018 constitutes a knowledge of the issues concerning the availability of the generating plant of VIPL and of waiver of any claims in respect of the same, prior to the Appointed Date. It is a settled law that even though a provision of law is mandatory in its operation if such provision is one which deals with the individual rights of the person concerned and is for his benefit, the said person can always waive such a right. The same has been fortified by the Hon’ble
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Supreme Court in Commissioner of Customs, Mumbai Vs. Virgo Steels, Bombay And Another – 2002.
17.7. Reduction of Normative Availability is due to delay in signing of FSA by Coal India Limited/ its subsidiary for Unit 1 of VIPL, which is in the nature of Force Majeure condition and for which VIPL cannot be held responsible. Hence, Article 11.1.1 cannot be invoked at all by AEML. This has already been upheld by the Hon’ble ATE in its Judgment in Appeal No. 192 of 2016.
17.8. On account of PPA termination, VIPL-G would not be able to service its debt obligations. Lenders are insisting for restarting of the plant and clarity on VIPL’s existing PPA with AEML and uninterrupted payment by AEML to VIPL/ without any set off, before considering any Resolution Plan under the aforesaid RBI Circular. In absence of direction of the Commission on the status of PPA, lenders are contemplating to terminate the ICA before expiry and refer the Petitioner’s account before the National Company Law Tribunal under the Insolvency and Bankruptcy Code, 2016.
17.9. Through MoU dated 29.08.2018 and the execution of the Tripartite Agreement/Letter dated 03.09.2018, AEML has revealed a complete support to the subsistence and continuation of the PPA, with overt co-operation and support thereof. The fuel supply situation relating to VIPL’s Unit 1 and the issue of availability was in public domain.
17.10. On 15.12.2018, AEML and VIPL had agreed that the set off claim or amount deducted would have to be within the ambit of the proviso to Article 8.3.3 of the PPA. The Hon’ble Supreme Court, in its Judgment in the matter of S. Sundaram Pillai Versus vs. R. Pattabiraman has elaborated the meaning of “proviso”.
17.11. In its two letters both dated 29.07.2019 and another letter dated 19.08.2019, AEML has emphatically stated that the Undertaking dated 15.12.2018 is valid and subsisting. If that be the case, by AEML’s own admission the PPA dated 14.08.2013 is valid and subsisting.
17.12. AEML has impaired VIPL's ability to generate power as firstly it has set off large sums of monies contrary to Article 8.3.3 and its proviso of the PPA without giving an invoice and secondly as asserted in AEML’s email dated 30.06.2019 it has also set off other alleged dues of RInfra from VIPL which is also contrary to the express language of the Undertaking.
17.13. It is in AEML’s interest to ensure that the PPA does not continue since it claims to be procuring cheaper power from the Power Exchange/Short-term market. AEML is only seeking to wriggle out of its contractual obligations, defeating the entire purpose of the executing a Long-term PPA. The object of entering into Long Term PPAs is to ensure
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supply of power at a sustained price/tariff over a period of 25 years, which is determined either by the Appropriate Commission or through Competitive Bidding. Owing to the volatility of price in short-term power procurement, the same is not the preferred mode for procurement, as it is detrimental to the interests of consumers, who may be subjected to fluctuations and frequent increase in prices.
17.14. While the PPA provides for a Termination Clause, however, from a perusal of the same, it is evident that the PPA does not envisage complete termination of the contract. Whereas, upon invocation of the Termination Clause, the PPA provides a mechanism for either substitution of the Seller, i.e. VIPL, or reduction in capacity charges along with payment of a penalty. Hence, the PPA envisages its continuance, till the end of its term of 25 years, leaving no recourse to the Procurer to substitute long-term power with short- term power.
17.15. If AEML is considered to be successor in interest, then there are a host of instances which constitute a contributory breach on part of AEML affecting the viability of the VIPL's Power Plant, and its ability to achieve Normative Availability. Right from inception, AEML has not made any payment towards Late Payment Surcharge. Moreover, AEML/Procurer has also perpetuated erratic payments qua regular Energy Payments/ Monthly Bills since May 2018 leading to a shortfall of more than Rs. 400 Crores up to Closing Date.
17.16. As per Article 8.3.3 of the PPA, AEML for setting off any sums against VIPL had to give an Invoice and only if the said Invoice was not disputed by VIPL, could AEML proceed to set off sums. Till date it is an admitted fact that AEML has not issued any such invoice to VIPL. VIPL is not aware of the basis and method on which AEML has caused the set off or even whether such money which has been set off has been paid to MSLDC on account of RInfra’s purported FBSM liability.
17.17. The Hon’ble Supreme Court in a catena of Judgments has upheld the legal maxim commodum ex injuria sua nemo habere debet which mandates that party cannot take advantage of its own wrong.
17.18. VIPL had preferred an Application before thisCommission specifically praying that the Order dated 17.10.2019 may be clarified to the extent that AEML may be directed not to illegally set off any amounts from the Monthly Invoices which are payable by AEML to VIPL. Further, it was also prayed that AEML be directed to make timely payments of invoices based on actual cost of fuel.
17.19. The foregoing prayers have been made by VIPL specifically to ensure continued viability of the Butibori Power Plant, failing which the financial stress on VIPL would prevent it from resuming/continuing operations. That while VIPL is ready and willing to perform its
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obligations, the same can only be effectively achieved if AEML is restrained from driving VIPL against the wall and is directed to effectively fulfil its obligations under the PPA.
17.20. The Commission in adjudicating upon the present Petition may pass an order directing both parties to comply with the PPA dated 14.08.2013 in letter and in spirit.
17.21. AEML-D has contended that it is the successor-in-interest of RInfra and the PPA permits AEML to take into consideration a 36-month period while considering Normative Availability. However, AEML had unequivocally agreed that RInfra would be liable to and entitled for dues up till the Appointed Date. The logical sequitur would be that AEML would not be permitted to take advantage of any defaults or benefits which accrue up till the Appointed Date. For AEML, the clock would only begin from 29.08.2018, i.e. the Appointed Date.
17.22. AEML-D contended that primary issue is non-achievement of availability. However, same is due to Force majeure and other events beyond control of VIPL-G.
17.23. AEML-D stated that VIPL did not inform AEML or the Commission about the occurrence of Force Majeure Event. However, AEML has always been cognizant of such Force Majeure condition and in fact by an MoU has solemnly agreed to assist VIPL to secure such a Fuel Supply. Moreover, the Hon’ble APTEL in its Judgment in Appeal No. 192 of 2016 has already held that VIPL is suffering from Force Majeure conditions.
17.24. AEML-D contended that VIPL is now seeking to execute the FSA under SHAKTI Policy purportedly on a discount of 4 paise, but which would actually lead to an increase by 37 paise. However, the averments by AEML qua the increased cost of coal under SHAKTI policy is wholly irrelevant to the instant case, unsubstantiated. Under the SHAKTI Policy, VIPL has secured coal from WCL. WCL is the closest and cheapest source among the sources which were offered under the coal linkage auction. Insofar as the erroneous averment of VIPL committing additional payment of Rs 450/ MT to WCL is concerned, AEML has failed to appreciate that under SHAKTI Policy, coal is required to be supplied at notified price of Coal India Limited and/or its subsidiaries. Accordingly, WCL has issued the coal price Notification vide NGP/WCL/M&S/Linkage Auction/SHAKTI/916 dated 28.08.2019 which only will govern the price of coal chargeable payable by VIPL.
17.25. AEML-D contended that there is no separate PPA which has been executed. AEML has stepped into the shoes of RInfra. If that was not the case, AEML would have renegotiated tariff. Hence, renegotiation of tariff can, by no means, be done by AEML, especially in case of Section 62 PPA such as the PPA in the present case.
17.26. AEML has alleged that Waiver granted by VIPL and RInfra, for the past dues, in Letters dated 21.08.2018 and 22.08.2018, is not permissible, since the same are pursuant to
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forged/ fraudulent letters. However, no proof whatsoever has been produced by AEML proving such allegation.
17.27. In view of the foregoing reasons, and the evident belligerent and flagrant actions of AEML in issuing the PPDN and the Termination Letter, the prayers as sought by VIPL in the Petition deserve to be allowed, in toto.
17. AEML-D filed its written submission on 11 December, 2019 on the following main issues:
i. Alleged non-compliance with the notice procedure prescribed under Article 11.3.1 and 11.3.4 of the PPA;
ii. Whether set-off carried out under the December 15, 2018 Undertaking is in violation of or is limited by Article 8.3.3 of the PPA;
iii. Whether reliance by Respondent No. 1 on defaults committed by the Petitioner prior to August 29, 2018 is barred;
iv. Whether the “without prejudice” discussions held between the parties post the issuance of the Termination Notice amounts to an extension of Consultation Period or waiver of Petitioner’s defaults under the PPA;
v. Whether the Petitioner’s defaults are excused on account of the alleged Force Majeure events; and
vi. Whether the Petitioner is entitled to specific performance of the PPA qua the Respondent No. 1. vii. Whether the Petitioner can claim to have equities in its favour.
AEML-D has also referred the following Judgments passed by the Hon’ble Supreme Court/Hon’ble Bombay High Court/ Hon’ble Gujarat High Court in support of its submissions and requested to dismiss the Petition with exemplary costs:
i. All India Power Engineers Federation Vs. Sasan Power Ltd.
ii. The State of Bihar Vs. Bihar Rajya Bhumi Vikas Bank Samiti
iii. May George Vs. Special Tahsildar and Others
iv. Mahadev Govind Gharge and Others Vs. Spcial Land Acquisition Officer, Upper Krishna Project, Jamkhandi, Karnataka
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v. D.L.F. Universal Limited Vs. Atul limited
vi. Cox and Kings India Limited Vs. Indian Railways Catering and Tourism
vii. Bhagwan Dass Chopra Vs. United Bank of India & Ors.
viii. Sequent Scientific Ltd.
ix. State of Punjab and Others Vs. Dhanjit Singh Sandhu
x. Mangalore Electricity Supply Company Limited Vs. AMR Power Private Limited and Ors.
xi. Energy Watchdog Vs. Central Electricity Regulatory Commission ]
xii. Ravi Setia Vs. Madan Lal & Ors.
xiii. Vijay Kumar & Ors. Vs. Om Prakash
18. Axis Bank has filed its written submissions which stated as under:
19.1 Axis Bank has framed two issues and the submissions are made on these two issues:
A] Whether the rights of Lenders have been violated by the failure of AEML-D to strictly follow the procedure of PPA, if yes, whether such failure of AEML-D would make the PPDN and the Termination Notice invalid?
19.2 Procedures contained in Article 11 and Schedule 12 of the PPA are mandatory which AEML-D has given complete go-by to.
19.3 Lenders’ right under the PPA are inherent and stands on equal footing with the Parties to the PPA. The objective of serving PPDN as well as Termination Notice to Lender is to enable Lenders to exercise their rights of substitution of Seller. In case Lenders choose not to exercise the said right, the Lenders may choose to demand 20% reduction in the capacity charge for the period of event of default. The exercise of substitution right is an elaborate, time consuming process which requires a lot of due diligence and checks.
19.4 The Hon’ble Supreme Court in the matter of Ramchandra Narayan Nayak Vs. Karnataka Neeravari Nigam Ltd. (2013) has held that the act of recession of contract by a Party as invalid because the same was done in violation of mandatory procedure set out in the contract.
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19.5 The Hon’ble Supreme Court in the matter of Rithwik Energy Generation Pvt. Ltd. vs Banglore Electricity Supply Company Ltd. and Ors (2018) while deciding the question of substantial compliance inter alia held that when the clause provides for the manner in which notices have to be given in case of an event of default, the same has to be complied with in a manner that has been provided therein and a deviating party cannot take cover of substantial compliance.
19.6 AEML-D’s reliance in the Judgment of Cox and Kings India Ltd. vs. Indian Railways Catering and Tourism Corp. Ltd. and Anr.(2012 7 SCC 587) substantiating its case is incorrect and misplaced as in the said Judgment, merits of the Termination was an issue and not the procedural compliance or compliance with the relevant contracts.
19.7 Such conduct on part of AEML-D should not be allowed as same would set a bad precedent as Lenders and financial institutions in general would be discouraged from investing in PPAs. Hence, it is necessary to allow the PPA and quash the PPDN and the Termination Notice.
B] Whether the Undertaking dated 15 December, 2018 given by VIPL-G to AEML- D is violative of the provisions of PPA, if yes, whether such Undertaking can be given without the consent of AEML-D and without prior approval of the Commission?
19.8 The Undertaking date 15 December, 2018 should be struck down as same was issued without obtaining consent from Axis Bank and rest of the Lenders. The financing Agreements have created first charge /security interest in favour of Axis Bank. AEML-D has illegally withheld monies to the tune of Rs. 266 Cr. under the garb of setting off. The issue related to the Undertaking was known to Axis Bank during present proceeding only. Said Undertaking must be set aside as it would prove to be a stumbling block for the subsequent entity /selectee. Set-off of Rs. 266 Cr. should be declared as illegal as same is in contravention of PPA. Since approval of the Commission was not sought before issuing the Undertaking, the undertaking and the action pursuant to that become invalid.
19.9 Axis Bank has referred the following Judgments passed by the Hon’ble Supreme Court in support of its submissions:
i. Datar Switchgears Ltd. vs. Tata Finance Ltd. (2000) 8 SCC 151 ii. Ramachandra Narayan Nayak vs. Karnataka Neeavari Nigam Ltd. (2013) 15 SCC 140 iii. Rithwik Energy Generation Pvt. Ltd. vs. Banglore Electricity Supply Co. Ltd. and Ors. (2018 17 SCC 223)
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iv. All India Power Engineers Federation vs. Sasan Power Ltd. [2017 (1) SCC 487]
Commission’s Analysis and Rulings:
19. Under the present Petition, VIPL-G has sought relief against AEML-D’s alleged illegal action of issuing PPDN and Termination Notice under the PPA dated 14 August, 2013 executed between VIPL-G and AEML-D. Several grounds/contentions have been raised by VIPL-G, AEML-D and Axis Bank which have been recorded in the earlier part of this Order. Based on these grounds/contentions, the Commission has framed the following issues for its consideration:
Issue 1:- Whether PPDN and Termination Letter issued by AEML-D as Procurer under the PPA are in contravention of the procedure stipulated in the PPA in terms of non-service of the same to the Lenders?
20. VIPL-G stated that as per Article 11.3.4 of the PPA, AEML-D was obligated to send the copy of the Termination Notice to the Lenders’ Representative. The said procedure has been prescribed to ensure that the Lenders are able to exercise their rights of substitution and other rights provided under the Loan Agreements. However, AEML-D has acted in complete defiance of the procedure provided in the PPA.
21. Axis Bank also raised the same issue and stated that the said termination Notice is in complete contravention of the explicit provisions of Article 11 and Schedule 12 of PPA which requires copies of the PPDN and Termination Notice to be served on the Lenders as well. AEML-D has not only put the rights of both VIPL-G and Axis Bank in peril but has jeopardized the public monies that have been invested by Axis Bank and the other lenders.
22. Both VIPL-G and Axis Bank have referred to various Judgments passed by the Hon’ble Supreme Court which essentially highlighted the need for following the due procedure stipulated in the respective contracts.
23. AEML-D, in reply stated that a copy of the Termination Notice (which includes a copy of the default notice) was sent to Axis Bank by speed post. A copy of the Speed Post receipt has been annexed with the reply. It further stated that the issue of Notice service is being agitated by VIPL-G and Axis Bank only on legal grounds which are academic in nature. However, the factual position is that neither VIPL-G has financial capability to commence the generation and run the plant nor are the Lenders willing to provide financial support to VIPL-G for commencement of generation. Further, the objective of serving copy of the Termination to Lenders is just to intimate them about the Procurer’s intention of Termination of PPA. Non-serving of any Notice to the Lenders does not Order in Case No. 247 of 2019 Page 48
vitiate the core issue of termination which is essentially between the two Parties only, namely VIPL-G and AEML-D and Axis Bank has no role whatsoever in the dispute on account of the same. The non-issuance of PPDN has no bearing on the Lender’s rights as the Lenders’ rights of substitution are not lost, but the same are at best deferred. The Lenders can exercise the said right now also. Further, VIPL-G has not denied the defaults that occurred in reduction of its availability for 20 months.
24. The Commission notes that the relevant provisions of the PPA on the issue of serving Termination Notices are as under:-
“11.3.1 Upon the occurrence and continuation of any Seller Event of Default under Article 11.1, the Procurer shall have the right to deliver to the Seller a notice with a copy to the Commission and the Lender’s representative, of their intention to terminate this Agreement (Procurer Preliminary Default Notice), which shall specify in reasonable detail, the circumstances giving rise to the issue of such notice.
…..
11.3.4 Within a period of seven (7) days following the expiry of the Consultation Period unless the Parties shall have otherwise agreed to the contrary or the Seller Event of Default giving rise to the Consultation Period shall have ceased to exist or shall have been remedied, the Procurer may terminate this Agreement by giving a written Termination Notice of thirty (30) days to the Seller with a copy to the Commission. A copy of the Termination Notice shall be given to the Lenders’ Representative. The Lenders may exercise or the Procurer may require the lenders to exercise their substitution rights and other rights provided to them, if any, under Financing Agreements and the Procurer would have no objection to the lenders exercising their rights if it is in consonance with the provisions of Schedule 12. Alternatively, in case the Lenders do not exercise their rights as mentioned herein above, the Capacity Charge of the Seller shall be reduced by twenty percent (20%) for the period of Seller Event of Default.”
25. The Commission notes that AEML-D has admitted that it has not served the copy of PPDN to Lenders as required under the PPA. As regards the Termination Notice, AEML- D stated that it has served the copy of Termination Notice to Lenders and has also attached the copy of the Speed Post receipt. However, Axis Bank, on affidavit, has stated that it has not received the copy of PPDN and Termination Notice.
26. The Commission would not like to get into the details of why Axis Bank has not received the Termination Notice when the same was sent by speed post as contended by AEML-D. It is an admitted position that AEML-D has not served the copy of the PPDN to Lenders.
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While AEML-D is seeking compliance from VIPL-G on various aspects of PPA and was diligent enough to avail the remedy under the PPA for VIPL-G’s failure to achieve Normative Availability, it has defaulted in not following an important procedure stipulated in the same PPA. The procedures laid down under the PPA are binding on all the concerned Parties, and hence AEML-D should have ensured that due process has been followed by it while issuing the PPDN and the Termination Notice to VIPL-G.
27. Hence, the Commission, prima facie, is of the view that AEML-D in issuing the PPDN and Termination Letter as Procurer under the PPA has not fully followed the due procedure of serving the copy of Notices to the Lenders as stipulated in the PPA.
Issue 2:- Whether AEML-D has incorrectly included the past period of default prior to the Appointed Date of the transfer of Mumbai Power Division from R-Infra to AEML, being counted for the purposes of Seller’s Default/lack of Normative Availability of VIPL-G’s Power Plant and conduct of AEML-D pressing Termination Notice in spite of undergoing negotiations with VIPL-G?
28. VIPL-G has stated that on 29 August, 2018, REGSL was acquired by ATL and the sale transaction of RInfra’s Generation, Transmission and Distribution business in Mumbai stood completed on the said date. Hence, any claims or liabilities arising from the PPA pertaining to the period prior to 29 August, 2018 is solely to be that of RInfra and that for the period commencing from 29 August, 2018, it is REGSL/AEML-D which is liable for all the obligations arising from the PPA. Further, in terms of RInfra’s Letter dated 22.08.2018 to VIPL-G, RInfra specifically granted consent for waiver of Clause 11.1.1 (iii) of the PPA and confirmed that it shall remain liable to make the payments to VIPL-G of entire outstanding dues accumulated till appointed Date when the distribution business got transferred from RInfra to REGSL. Since, ATL was fully aware of the dues and entitlement of REGSL, any non-achievement of Normative Availability, prior to the appointed Date, cannot be considered by AEML-D (erstwhile REGSL). As recorded in the Commission’s Order dated 28 June, 2018 in Case No. 140 of 2017, all matters (including claims and liabilities) relating to the Licensed Business upto the Appointed Date, which are under process, initiated or to be initiated , in relation to the period prior to the Appointed Date shall be deemed to have been retained with RInfra. Hence, any non-achievement of Normative Availability of VIPL-G would have to be calculated from 29.08.2018.
29. The fact that it is only after the Appointed Date of 29.08.2018, the rights accrue in favour of AEML-D was duly accepted by AEML-D vide Letter dated 03.09.2018 counter-signed by all Parties, including AEML-D. In fact, with this mutual understating, AEML-D has elected to waive its right to take any adverse action against VIPL-G for any alleged
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defaults or liabilities prior to the Appointed Date of 29.08.2018. AEML-D was well aware of the defaults in availability when the acquisition was done. AEML-D had accepted the Project on as-is-where-is basis, foregoing and waiving past liabilities.
30. On this issue, AEML-D has stated that neither there is new PPA executed nor there is a new Distribution Licence granted to AEML-D post the Appointed Date. Also, the Distribution Licensee has remained the same, only the shareholding of the Licensee has changed. Although, claims and liabilities of the licensed business upto the closing date i.e. August 29, 2018 has been retained by RInfra, same is not a provision in the Scheme of Arrangement but is a part of a private agreement (i.e. the SPA) among ATL, RInfra and AEML-D and the Commission has merely accepted the private agreement entered into among the parties. The Commission was not called to rule or to adjudicate on any provisions of the SPA. AEML-D is the successor-in-interest (and not a mere assignee) of RInfra qua the distribution license and distribution business of the licensed areas in Mumbai and hence, AEML-D is entitled to exercise all the rights and interests (which are available to be exercised under law or contract) of its predecessor-in-interest as per the terms of the contract or applicable law.
31. The Commission notes that although, it has acknowledged and approved that all matters (including claims and liabilities) relating to Licensed Business upto the Appointed Date, which are under process, initiated or to be initiated , in relation to the period prior to the Appointed Date would be retained with RInfra, the said approval was on the basis of commercial/financial agreement (i.e. Share Purchase Agreement) entered into between RInfra, REGSL and ATL. Also, the said arrangement is in respect of financial claims /liabilities arising out of such matters. Said arrangement does not absolve VIPL-G of performing its PPA obligations regarding achieving and maintaining the Normative availability.
32. Further, under the Scheme of Arrangement between RInfra (the Transferor Company) and REGSL (the Transferee Company), the transfer of Mumbai Power Division comprising Generation, Transmission and Distribution, to REGSL had happened on ‘going concern’ basis under the provisions of the Companies Act, 2013, as applicable. Further, it was held by the Commission in the Order dated 28 June 2018 in Case No. 140 of 2017 that REGSL shall continue with the existing PPA on ‘going concern’ basis. The relevant extract is reproduced as follows:
“The Commission in MYT Order dated October 21, 2016 has approved the power procurement plan for RInfra-D for the Control Period from FY 2016-17 to FY 2019-20. As per the Scheme of Arrangement, the existing Mumbai Distribution business is being transferred on a going concern basis. The transferee will
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continue to meet its obligation of supply of power through existing power procurement contracts.”
33. Further, on an Application filed by AEML-D seeking impleadment in earlier Tariff related Appeals initiated by RInfra-D , the Hon’ble ATE has allowed substitution of RInfra-D by AEML-D as the Appellant and RInfra-D has been allowed to participate as proforma Appellant in the interest of equity and meeting the ends of justice. The relevant extract of the Order passed by the Hon’ble ATE is reproduced below:
“ 24. Findings:
i) The present Appeal have been filed by the Appellant in its capacity as a Distribution Licensee against order passed by the MERC in a case relating to mid-term review.
ii) With the transfer of the Appellant’s assets and its business along with all permits and licenses, suits and legal proceedings relating to the Mumbai power division to REGSL which is now owned by ATL and has been renamed as the Applicant. The Appellant’s business and its distribution license stands transferred to the Applicant. The Applicant AEML is now the new Distribution Licensee in place of the Appellant.
iv) As per Electricity Act, 2003 tariff matters are to be pursued by the Distribution Licensee and the present appeal is of tariff matter and this can be pursued by a Distribution Licensee only. The moment the Applicant stepped into the shoes of Distribution Licensee, the tariff matters will be pursued by him only. In view of this background we do not agree with the submissions made by the Appellant that as per SPA the legal proceedings previously initiated and carried on in the name of the Appellant in its capacity as Distribution Licensee shall continue to be prosecuted in the name of the appellant even now after the transfer of the distribution divisions and license to the Applicant.
viii) The concern of the Appellant regarding prosecution of the issues relating to recovery of all regulatory assets under approval have been very well covered under the provisions of the SPA wherein a detailed procedure/system has been defined regarding management of disputes. However, the Appellant apprehend that the case of the “Seller RAUA Disputes” may not be effectively taken up by the Applicant in the capacity of the present Distribution Licensee. We have considered the submission of the Appellant and we are of the opinion that in the interest of equity and to meet the ends of justice, the Appellant be on record as proforma appellant, but Applicant (Purchaser/licensee) has to effectively prosecute the appeal since Applicant is a necessary and proper party to prosecute the appeal.”
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34. Thus, it is seen that in spite of the commercial/financial agreement between the Parties on the issue of past claims and obligations, the Hon’ble ATE has ruled that past Tariff related litigations were required to be prosecuted by AEML-D and it further held that AEML-D was the proper Party to proceed with these Appeals.
35. The Commission notes that the need for approval of PPA executed between the Generating Company and Distribution Licensee by the Commission arises on account of the fact that the Commission is mandated to regulate the power procurement by the Distribution Licensees under Section 86(1)(b) of EA. The PPA provision puts obligation on the Generating Company to achieve and maintain Normative Availability consistently. This is an important provision and in no way can be diluted for any reason including the circumstance where the cost of alternate power could be lower. It is abundantly clear that if a Generator contracted by a Distribution Licensee under a long term PPA consistently fails to achieve the Normative Availability, there is impact on Tariff payable by the consumers of the said Distribution Licensee as the Distribution Licensee has to arrange power from an alternate source which at times may be a costly power. Hence, the Distribution Licensee needs to be vigilant and needs to take necessary steps in terms of the PPA which was entered for long term procurement and its terms and conditions were approved by the Commission. Thus, the Commission does not find any merits in the contentions of VIPL-G that AEML-D has not been adversely prejudiced on account of lower availability since the cost of alternate power procured during the period of lower availability was less than that of the cost of power for VIPL-G. Hence, the Commission is of opinion that there is nothing wrong in AEML-D availing the remedy available to it under the PPA.
36. The Commission further notes that the defaults committed by VIPL-G although pertain to earlier years, namely FY 2016-17, FY 2017-18 and FY 2018-19, there is corresponding impact on future Tariff to consumers, since the Distribution Business of RInfra-D/AML-D is on ongoing basis during the PPA term with VIPL-G. Also, as per the regulatory practices and the Applicable Tariff Regulations, the gaps/surplus for these earlier years are required to be passed on to consumers in future years’ Tariff determination.
37. The Commission further notes that prior to Appointed Date, RInfra-D was the concerned Licensee and after Appointed Date, AEML-D is the concerned Distribution Licensee, however, post Appointed Date, neither new PPA has been signed nor any modified terms and conditions have been approved by the Commission under provisions of EA. Same PPA continues with change in Distribution Licensee. Also, no new Distribution Licence has been granted by the Commission to AEML-D. The existing Distribution Licence has been assigned to AEML-D under Section 17(3) of EA by the Commission. Hence, from regulatory perspective, the Distribution Licensee (although there is change in ownership)
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has remained the same. Further, under the Scheme of Arrangement, all rights and interests pertaining to the distribution business including those arising prior to the Appointed Date have been vested in AEML-D. Also, Article 13.1.1 of the PPA expressly provides for the rights and benefits of the parties under the PPA passing on to their successors. Hence, AEML-D is entitled to exercise all the rights and interests (which are available to be exercised under PPA) of its predecessor i.e. RInfra-D under the PPA.
38. On VIPL-G’s claim that RInfra-D had granted consent for waiver of Clause 11.1.1 (iii) of the PPA, the Commission notes that Axis Bank contended that Hon’ble Supreme Court in the matter of All India Power Engineers Federation v. Sasan Power Ltd., held that no waiver which affects the interests of the consumers can be granted by the distribution licensee without prior approval of the concerned State Regulatory Commission. Thus, the Commission finds that under the present case, RInfra-D being a Distribution Licensee before Appointed Date, has not sought the prior approval of the Commission for waiver of Clause 11.1.1 (iii) of the PPA and therefore, there is no merit in the VIPL-G’s argument that a waiver has been effected to VIPL-G by RInfra-D.
39. In view of the foregoing discussions, the Commission is of the opinion that there is no merit in the contentions of VIPL-G that AEML-D is barred from relying on the defaults committed by VIPL-G in the period prior to the Appointed Date and that the PPDN and the Termination Notices were pre-mature in terms of Article 11.1.1 (iii) of the PPA. Thus, there is no infirmity in AEML-D’s action wherein it has considered VIPL-G’ reduction in availability in the period prior to the Appointed Date, while issuing the PPDN.
40. As regards the conduct of AEML-D, VIPL-G stated that the Parties were in dialogue to resolves all issues of concern, to ensure the continued performance /operation of the PPA and AEML-D had equivocally agreed to withdraw the PPDN dated 18.01.2019, Letter dated 03.04.2019, as well as the Termination Notice dated 20.04.2019. VIPL had proceeded on the basis of this assurance given by AEML-D on several occasions. On the contrary, AEML-D has proceeded to press its Termination Notice. Further, in the subsequent letters dated 29.07.2019, 01.08.2019, and 19.08.2019, AEML-D while affirming the Termination Letter dated 20.04.2019, has also sought to pressurise VIPL-G into submitting a fresh proposal for supply of power. AEML-D, in reply, has stated that the negotiations /discussions held between VIPL-G and AEML-D were not formally concluded and hence, it has duly acted upon the Termination Notice.
41. The Commission notes that under the PPA provisions, a consultation period of 90 days, has been prescribed for discussion for the steps to be taken for mitigating the consequences of the relevant event of Default. The relevant extract is reproduced below:
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“11.3.2 Following the issue of Procurer Preliminary Default Notice, the Consultation Period of ninety (90) days or such longer period as the Parties may agree, shall apply and it shall be the responsibility of the Parties to discuss as to what steps shall have to be taken with a view to mitigate the consequences of the relevant Event of Default having regard to all the circumstances…..
…
11.3.4 Within a period of seven (7) days following the Consultation Period unless the Parties shall have otherwise agreed to the contrary or the Seller Event of Default giving rise to the Consultation Period shall have ceased to exist or shall have been remedied, the Procurer may terminate this Agreement by giving a written Termination Notice of thirty (30) days to the Seller with a copy to the Commission.
42. Thus, the PPA provides that the consultation needs to be concluded in a time-bound manner and is not allowed to be continued indefinitely. In the instant case, the PPDN was issued by AEML-D on 18 January, 2019 and hence the discussion/consultation could have been held upto 17 April, 2019 only. However, it is seen from the documents submitted by the Parties, the discussions had been going on till August, 2019. In spite of such extended discussions, the Parties could not conclude with a formal agreement. In the absence of common agreed position amongst the Parties, AEML-D has proceeded ahead with the relevant provisions of the PPA.
43. Further, it is settled principle that there are three constituents for establishment of concrete relationship/agreement between the Parties viz. offer from one Party, consideration for the offer and acceptance of the offer by the other party with an intention of the parties to engage into legal/concrete relationship with each other. In the instant case, it is seen that although discussions had been initiated, they did not culminate into binding agreement in terms of the principle stated above. The argument of VIPL- G that the agreement is evident from the subsequent conduct of the Parties, doesn’t hold water merely because even if in one court case AEML-D got substituted in terms of ongoing negotiations/discussions for claiming standby charges. On the lines of SPA or waiver of rights or set off of claims there is no formal document conveying that binding agreement was reached between the parties. In absence of such an agreement, the email exchange that VIPL-G is relying on is showing an ongoing negotiation which as discussed earlier is provided under Article 11.3.2 for a period of 90 days or more in an effort to amicably resolve the issue.
44. Further, the Commission is of the view that in any event just because the Parties had been under discussion, the same does not dilute the defaults of VIPL-G covered under the PPA, i.e. failure to achieve Normative Availability for a period of twelve
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(12) consecutive or non-consecutive months within any continuous period of thirty six (36) months.
Issue 3:- Whether reduction in Normative Availability was due to
a) Force Majeure and hence not attributable to VIPL-G; b) Set-off of SLDC amount payable by RInfra leading to VIPL-G getting into financial difficulties; c) Procurer’s Default in not making legitimate payment under the PPA
45. VIPL-G stated that the Hon’ble APTEL in Appeal No. 192 of 2016 held that delay in signing of FSA for Unit 1 is an event in the nature of Force Majeure and as per PPA provisions, the default on account of Force Majeure event is to be excluded, Also, AEML-D has not challenged the aforesaid Judgment passed by the Hon’ble ATE. Hence, reduction in availability due to Force Majeure event cannot be considered as default by AEML-D.
46. AEML-D in response has stated that VIPL-G has never issued a notice to AEML-D for occurrence of a force majeure event which is a prerequisite under the PPA. The hindrances cited for executing the FSA are wholly attributable to VIPL-G which cannot be allowed to cover its own failures and at the same time claim benefits of force majeure and change in law under the PPA.
47. The Commission notes that Article 9 of the PPA deals with the Force majeure events. In terms of the Article No. 9.5.1 of the PPA, the affected Party (VIPL-G in this case) was required to notify the other Party (AEML-D) for the event of Force Majeure within seven days of the knowledge of Force Majeure event by the affected Party, i.e. VIPL-G. Also, such notice is a pre-condition to the Affected Party’s entitlement to claim relief under PPA. No document is seen from the records placed before the Commission that VIPL-G had notified the Force Majeure event to AEML-D within the stipulated timeframe. Hence, claim for Force Majeure event for justifying the reduction in availability appears to be an afterthought from VIPL-G.
48. Further, the Judgment of Hon’ble ATE referred by VIPL-G was pertaining to FY 2014- 15 and FY 2015-16 since the Commission’s Tariff Order for truing up for FY 2014-15 and provisional Truing up for FY 2015-16 had been the subject matter of the said Appeal, whereas the period of default as presented in the present Petition is from January, 2016 to December, 2018. The Commission finds that the ruling given by the Hon’ble ATE holding non-signing of FSA, a Force Majeure event was in respect of Unit 1 and the same cannot be applied to Unit 2 of VIPL-G for which there is a valid FSA. Hence, the Commission is of the view that VIPL-G cannot rely on the Judgment passed by the Hon’ble ATE to claim that the reduction in availability was due to a Force Majeure event.
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Besides, Civil Appeal (Appeal No. 372 of 2017) has been filed by the Commission before the Hon’ble Supreme Court challenging the aforesaid Judgment of the Hon’ble ATE. The matter is pending before the Hon’ble Supreme Court and hence there is no finality to the aforesaid Judgment passed by the Hon’ble ATE. It would not be out of context to mention here it is an admitted position that during the hearing on the Stay Application of Hon’ble ATE Judgment before the Hon’ble Supreme Court, VIPL-G gave an oral undertaking that it would not press the implementation of the aforesaid Judgement passed by the Hon’ble ATE and hence, no such Tariff recovery for additional expenses incurred by VIPL-G has been pressed for sourcing alternate fuel to maintain Normative Availability. In any case, pending settlement of its claims for the expenses incurred, VIPL-G had been arranging alternate fuel to generate power for RInfra-D. What has suddenly changed for VIPL-G now to take a position that due to Force Majeure event it cannot operate the thermal plant. It has been its own responsibility to maintain normative availability by arranging alternate fuel pending long term FSA as also promised by it to Commission at the time of approval of PPA.
49. In view of the foregoing discussions, the Commission does not find merit in the contention of VIPL-G that its reduction in availability /defaults under the PPA is on account of Force Majeure.
50. As regards the set-off of SLDC amount payable by RInfra which led to financial difficulties to VIPL-G, VIPL-G admitted that it had agreed to a Set-off by AEML on the monies payable by R-Infra vide its Undertaking dated 15.12.2018. However, in terms of Article 8.3.3 of the PPA the maximum Set-off permissible against VIPL-G is only Rs. 15 Crores in a Contract Year. AEML perpetuated the said Set-Off of Rs. 266 Crores without amending the terms of the PPA and without seeking the regulatory approval of the Commission. Said Set-off has financially jeopardised VIPL-G’s ability to procure coal. Further, Procurer right from inception, i.e. from FY 2014-15 itself, has not made any payment towards Late Payment Surcharge (LPS) applicable as per Article 8.3.5 of the PPA upon the power supplied by VIPL-G. Procurer has also perpetuated erratic payments qua regular Energy Payments/Monthly Bills since May 2018 leading to a shortfall of more than Rs. 400 Crores upto Appointed Date. Thus, Procurer AEML-D itself is in breach of its solemn obligations under the PPA and therefore, is barred from invoking the provisions of Article 11.1.1 of the PPA.
51. Axis Bank contended that the Undertaking date 15 December, 2018 should be struck down as the same was against the provisions of PPA, without approval of the Commission or in absence of consent from Axis Bank and rest of the Lenders. The financing Agreements have created first charge /security interest in favour of Axis Bank. AEML-D has illegally withheld monies to the tune of Rs. 266 Cr. under the garb of setting off the liability of RInfra. The issue related to the Undertaking became known to
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Axis Bank during present proceeding only. Said Undertaking must be set aside as it would prove to be a stumbling block for the subsequent entity/selectee. Set-off of Rs. 266 Cr. should be declared as illegal as same is in contravention of PPA. Axis Bank has relied on the Judgment passed by All India Power Engineers Federation vs. Sasan Power Ltd. [2017 (1) SCC 487] wherein the waiver cannot be permitted if public interest is involved.
52. AEML-D stated that the undertaking dated 15 December, 2018 given by VIPL-G has not made any reference to the PPA provisions related to set-off of payments. Further, VIPL- G while replying to the Termination Notice did not attribute the set-off of Rs. 266 Cr. to its defaults on availability. Said argument is being advanced now as an afterthought. VIPL-G had, at the request of its group company RInfra, submitted the aforesaid Undertaking to AEML-D wherein VIPL-G has voluntarily accepted AEML-D’s right to set-off certain amounts payable by RInfra to AEML-D against equivalent amount of monies payable by AEML-D to VIPL-G under the PPA. As per the Undertaking dated 15 December, 2018, VIPL-G is deemed to have received payment of monies set off by AEML-D against the dues of RInfra.
53. The Commission notes that it was VIPL-G which on its own has given an Undertaking dated 15 December, 2018 permitting AEML-D to set-off the amount payable by RInfra to AEML-D against the amount payable by AEML-D to VIPL-G. VIPL-G further stated that such amount to be set-off would be the payment dues under the PPA and the same would be deemed to be received by VIPL-G. Thus, by giving the aforesaid undertaking, VIPL-G has created a third-party interest in favour of RInfra. The Commission has examined the Undertaking dated 15 December, 2018. The relevant extract of the Undertaking reads as follows:
“ We are aware of the terms set out in the Supplemental Agreement and hereby confirm, accept and acknowledge the right of the Company to set off any amounts remaining unpaid by the Seller towards SLDC Demand Amounts and/or SLDC interest against any and all payments made or required to be made by the Company to us under the Power Purchase Agreement dated 14 August, 2013. The amount being set off by the Company shall be deemed to have been paid by the Company to the Vidarbha Industries Power Ltd. (VIPL) against the payments required to be made by the Company under the above said PPA.”
54. Thus, VIPL-G, in its aforesaid Undertaking permitted AEML-D to set off any amounts remained unpaid by RInfra towards SLDC dues. The Undertaking nowhere mentions that AEML-D was permitted to set-off the amount subject to limits stipulated under the PPA. The reference of PPA is made in the aforesaid Undertaking, however, same is with reference to the amount payable by AEML-D to VIPL-G under the PPA.
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55. The Commission further notes that although VIPL-G is now claiming that AEML-D has breached PPA provisions by setting off the amount of Rs. 266 Cr. (which is in excess of Rs. 15 Cr. limit allowed to be set-off as per PPA provisions), VIPL-G has not availed legal remedy against such set-off undertaken by AEML-D.
56. Further, as mentioned in the Undertaking, the amount of Rs. 266 Cr. has been deemed to be received by VIPL-G. Hence, VIPL-G should have no grievance for such set-off.
57. Nevertheless, the Commission also notes that AEML-D has issued the Termination Notice on account of defaults committed by VIPL-G on non-achievement of availability for the period January, 2016 to December, 2018 whereas set-off by AEML-D has been undertaken in the month of January to April, 2019. Thus, even assuming that this set off is not in line with provisions of the PPA, the same cannot be the reason for lower availability.
58. As regards non-payment by procurer right from inception, i.e. from FY 2014-15 itself, for the Late Payment Surcharge (LPS) and erratic payments by procurer, qua regular Monthly Bills since May 2018 leading to a shortfall of more than Rs. 400 Crores upto appointed Date, the Commission notes that it was RInfra-D which has not paid or short- paid the amounts due to VIPL-G. However, nothing is placed before the Commission, which shows that VIPL-G has chosen to avail the remedy available under the PPA. Its failure to take any legal recourse for the legitimate dues cannot be justification for the defaults committed by VIPL-G for non-achievement of the Normative Availability. Therefore, the Commission does not find any merit in the contentions of VIPL-G on this issue.
Issue 4:- Whether Termination of PPA is contrary to Ministry of Power’s Office Memorandum dated 08.03.2019?
59. VIPL-G has also objected to the Termination action initiated by AEML-D citing the Office Memorandum dated 8 March, 2019 issued by the Ministry of Power, Government of India.
60. The Commission notes that the Office Memorandum referred to by VIPL-G reads as follows:
"3.5 Approval with regard to cancellation of PPA/ FSA/ Transmission Connectivity/ EC/ FC/ Water etc.: Discoms, CIL, PGCIL, Ministry of Environment & Forest and appropriate Government may be advised not to cancel the PPA, FSA, transmission connectivity, EC/FC and all other approvals including water, even if the project is referred to NCLT or is acquired by another entity subject to the provisions of the
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contracted PPA and/ or applicable rules. All clearances may be linked to the plant and not to the promoter."
61. The Commission is of the view that the above Office Memorandum addresses the issue with regard to the projects which have been referred to NCLT or in case the project is acquired by another entity. The intention behind the above Office Memorandum is to ensure that all clearances/approvals/PPAs etc. may be continued for the new entity that may come in place of existing promotor. This Office Memorandum does not deal with the concession to be given in case of defaults of the provisions of PPA and hence the aforesaid Memorandum would not absolve VIPL- G for the defaults committed by it in achieving the Normative Availability in terms of the PPA provisions. Hence, the Commission is of the opinion that there is not merit in the argument of VIPL-G on this issue.
Issue 5:- Whether the actions of Issuing PPDN and Termination Notice on part of AEML-D and default on part of VIPL-G in not intimating the same to Lenders have denied substitution rights of Lenders as per PPA?
62. Axis Bank stated that the mandatory provision pertaining to service of both PPDN as well as Termination Notice is to enable Axis Bank and the lenders to exercise their rights of substitution, by notifying the parties to the PPA of their intention to substitute the Seller for the residual term of the PPA. AEML-D has, by its own submissions before the Commission, admitted to not having served the PPDN upon Axis Bank or any of the lenders and neither was the purported Termination Notice ever received by the lenders / Axis Bank.
63. Such conduct on the part of AEML-D has unfairly prejudiced the rights of Axis Bank and the rest of the lenders under the PPA. It has also proved to be a stumbling block for the lenders to take recourse to any measures that could possibly safeguard their stake in VIPL-G and the public monies that have been invested in VIPL-G. AEML-D has chosen to deliberately keep the lenders in the dark about its intention to terminate the PPA, so as to prevent lenders from fulfilling their obligations. Lenders could not exercise the substitution rights on account of status quo Order of the Commission in the instant case. Axis Bank further stated that in case the termination Notice is held to be valid by the Commission, 120 days should be allowed for exercising right of substitution by Axis Bank without any condition.
64. AEML-D stated that the non-issuance of PPDN has no bearing on the Lender’s rights as the Lenders’ rights of substitution are not lost, but the same are at best deferred. The Lenders can exercise the said right now also.
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65. The Commission notes that the copy of PPDN was not served on Lenders and there is no clarity on service of copy of Termination Notice to Lenders. However, the issue of legality of the Termination Notice was sub-judice before the Commission. Hence, the further action stipulated under the PPA post issuance of Termination Notice was not expected to be taken by any of the Party to the PPA. As per PPA, if the Lenders do not exercise their substitution rights by issuing substitution notice, the PPA gets terminated within 30 days of the Termination Notice. The Commission agrees with averments of Axis Bank that since the matter was pending before the Commission for adjudication of dispute on the legality of Termination Notice, Lenders were not in a position to proceed with the substitution process. Further AEML-D also stated that Lenders’ substitution rights are not lost, but are at the best deferred meaning thereby that AEML-D does not have any objection if the Lenders are able to exercise their rights of substitution. Ideally the Lenders could have proceeded with exercising the substitution rights after they were made aware by VIPL-G about PPDN and the Termination Notice during their meeting held on 1 August, 2019 (when the present Petition was yet to be filed by VIPL-G), however, considering the preparatory steps involved for substitution and also considering the circumstances as mentioned above, the Commission rules that substitution rights of the Lenders are not lost due to procedural default on the part of AMEL-D and improper due diligence by VIPL-G in not disclosing the PPDN and Termination notice to lenders in time. Therefore, under the present circumstances, the Commission for protecting the consumers’ interest as well as public monies involved, rules that the substitution rights may be exercised by the Lenders as per provisions of the PPA within 30 days from the date of this Order. Accordingly, the PPDN and the Termination Notice issued by AEML- D is now deemed to have been served on Lenders on the date of this Order.
Issue 6:- Other issues including consequences of PPA termination. a) Loss of FSA b) Impact on public money invested by Lenders c) Financial impact on VIPL-G
66. VIPL-G stated that as a result of termination of the PPA, VIPL-G would no longer be in a position to generate power, as there would be no end consumer to off-take the same. VIPL-G would be prevented from ensuring any long term and sustainable solution for reviving the Project. Also, Lenders/ Shareholders including the consumers at large would be severely prejudiced. This will also result in a breach of the existing FSA for Unit 2. By not lifting coal as earmarked under the FSA, VIPL-G would be subjected to penalties by WCL. Moreover, Termination if not set aside/ injuncted, then the FSA for Unit 1 which VIPL-G is getting secured under SHAKTI policy after laboring for almost 5 years will be lost. VIPL-G has procured substantial debt funding from banks, i.e. the Lenders, including leading public sector banks. As an outcome of illegal actions on the part of
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AEML-D in violation of PPA, VIPL-G has not been able to adhere to its debt servicing commitments and has become the NPA causing grave loss of public funds.
67. Axis Bank stated that the said termination is in complete contravention of the PPA provisions and AEML-D has not only put the rights of both VIPL-G and Axis Bank in peril but has jeopardized the public monies that have been invested by Axis Bank and the other Lenders.
68. AEML-D, in response stated that cash flow problems are of VIPL-G’s own making. Protecting lenders’ dues is not the obligation of AEML-D. VIPL-G is suffering from the alleged financial hardship on account of non-payments by its own group company, RInfra. VIPL-G had itself, admittedly, issued a no-dues letter to AEML-D on August 23, 2018 wherein it voluntarily agreed that all outstanding payments as on the appointed Date whether receivable or payable from and to REGSL/AEML and/or RInfra with respect to the PPA shall be paid/received exclusively by RInfra. VIPL-G, therefore, having voluntarily agreed to recover all the past liabilities in relation to the PPA from RInfra only, had provided a release to AEML-D in relation to such past period liabilities.
69. Commission has already ruled in para 66 above on protecting the Lenders’ interest. About financial difficulties of VIPL-G, it is for VIPL-G to resolve being part of its business. These difficulties seem to be only compounding as the thermal plant is inoperative since January 2019. Under PPA, VIPL-G is obliged to make available and sustain the agreed generation which it has defaulted putting at risk the supply of the assured power to the consumers of procurer. VIPL-G cannot put conditions and point fingers at others without discharging its own obligations.
70. The Commission’s analysis and ruling on the framed issues are summed up as under.
70.1. As analysed and ruled in respect of Issue No. 1, the stipulated procedure in the PPA for issuing the PPDN and the Termination Notice has not been followed by AEML-D in true letter and spirit. The Commission opines that the procedure gives a fair chance to all the stake holders to cure the defects and thus protect the PPA. The provisions serve a purpose but are very specific with timelines specified to the Seller and the Lenders. Having said this, the Commission also notes that there was no response by VIPL-G in curing the defect and Lenders in exercising their rights for substitution even after being made aware of the developments about issuance of the PPDN and Termination Notice to them. Thus, there has been default on part of AEML-D and improper and inadequate response/action on part of VIPL-G and the Lenders as well. Even after being made aware of the Termination Notice on 1st August 2019, the Lenders have chosen not to exercise their rights under PPA and VIPL-G has not been able to demonstrate their operational and financial readiness
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to start the plant. Thus, all the three stake holders are in part default of the provisions of the PPA about which the Commission expresses its displeasure.
70.2. Though it can be concluded that AEML-D has prima facie defaulted in not following the procedure in serving the lenders, it is also seen that there is no prejudice caused to VIPL-G and the Lenders as in spite of their having sufficient time (at least from August 2019) to exercise their rights, they have chosen not to exercise them. The situation has also remained unchanged from the time the PPDN and subsequently the termination notice was issued. Admittedly, for whatever reasons, the Lenders have not been able to substitute the Seller nor commit their financial support to the Seller as also the fact that no satisfactory resolution plan has been submitted by VIPL-G to lenders to clear its outstanding dues.
70.3. In order to protect the FSA for Unit 1 under consideration with Western Coal Fields (WCL), which requires PPA to be kept alive and in the overall interest of the Consumers, the Commission holds that termination notice is valid even if there is procedural defect in not serving the PPDN on lenders. The Commission feels that the fact that the thermal station has been inoperative since January 2019 and VIPL- G was in default of making repayment of loan, it should have been matter of great concern to lenders as well, to investigate the reasons for the same. It was also the duty of VIPL-G to immediately disclose to the lenders that PPDN had been served on VIPL-G by the Procurer. It is only during the routine meeting of the consortium of lenders with VIPL-G that the fact about PPDN and Termination Notice was formally made known to the Lenders. There is no response from Lenders beyond invoking legal remedy on procedural default in the instant case. Considering that the plant had been inoperative for the past six months, Lenders should have shown some urgency by taking precipitative remedial steps to safeguard its lent amount by invoking provisions under PPA, relating to their right of substitution. Be that as it may, their right of substitution as accepted by AEML-D is not extinguished but is only deferred. In the interest of justice and to salvage the situation before it deteriorates any further, the Commission deems it appropriate to protect the rights of the Lenders for exercising their right of Substitution. The termination notice shall be deemed to have been issued to the Seller and the Lenders on the Date of the Order in the present case. The Lenders may take further necessary action as per the provisions of the PPA.
70.4. As analysed and ruled in Issue No. 2, the Transfer of Business from RInfra to AEML-D was on the “going concern’ basis and hence the PPA was also continued without any changes. VIPL-G has not refuted the default about lower Normative Availability. Thus, as per the provisions of the PPA, the Normative availability has been correctly worked out. Hence, the Commission rules that the contention of
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VIPL-G that AEML-D has incorrectly included the past period of Default prior to the Appointed Date cannot be substantiated.
70.5. On the issue of conduct of AEML-D pressing the Termination Notice inspite of ongoing negotiations, the Commission observes that the PPA has specified the time for curing of defect. Further, the negotiations did not conclude with any an agreement and on this aspect, the action of AEML-D cannot be considered to be inconsistent with the provisions of the PPA.
70.6. As analysed and ruled in Issue No. 3, relating to Force Majeure event not attributable to VIPL-G, purportedly wrong Set Off of payment bills of VIPL-G by AEML-D and the own default of AEML-D in not making the legitimate payment to VIPL-G, the Commission notes that the Force Majeure event has never been agitated by VIPL-G with AEML-D, the procurer of their generated power in terms of specific provision in this regard under the PPA and the issue has also not been agitated before the Commission. Hence the same cannot be considered at this stage in the present adjudication. From the documents placed on record, the Set Off of SLDC amounts payable is the issue which have been acted upon by VIPL-G, RInfra and AEML-D on mutual understanding basis without any reference to the Commission and hence it cannot be considered in this Petition. Similarly, about defaults in payments, the same cannot be taken up in this adjudication as the provisions of the PPA have sufficiently addressed this eventuality and the Seller and the Procurer are required to take necessary actions accordingly to protect their respective rights by invoking appropriate forum.
70.7. As analysed and ruled in Issue No. 4, the Office Memorandum dated 08.03.2019 stipulates guidelines with regard to cancellations of approvals in the eventuality of reference to NCLT or in case the project is acquired by another entity. The said Office Memorandum does not deal with the concessions to be given in case of defaults of provisions of the PPA. Thus, there is no contradiction to the MoP’s Office Memorandum and hence the contention of VIPL-G cannot be considered.
70.8. As analysed and ruled in Issue No. 5, though sufficient time was available to the Lenders for exercising their rights of substitution, they have not done so. Hence the Commission opines that in spite of default on part of AEML-D and VIPL-G, the Lenders after becoming aware of the Termination Notice could have exercised their rights for substitution. The Commission is concerned about protecting the consumers’ interest by way of securing the FSA under consideration of WCL. Thus, even though the Commission has ruled about the Termination Notice being valid, alongside it has also directed that the deemed date for the notice would be the
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Date of Order in the present case. Thus, the time of 30 days stipulated in the PPA for substitution is now available to the Lenders for exercising their rights.
70.9. Further to the analysis and rulings covered in Issue No. 6, The Commission in particular is concerned about securing FSA for Unit 1 and hence would like the stake holders to work in true letter and spirit of the provisions of the PPA and the directions given in this order.
71. Hence, the following Order:
ORDER
1. Case No. 247 of 2019 is partly allowed and MA 41 of 2019 in Case No. 247 of 2019 is disposed of.
2. The Termination Notice is held valid and it shall be deemed to have been issued to the Lenders on the Date of the Order in the present case. The Lenders may take further necessary action as per the provisions of the PPA to exercise their right of substituting VIPL-G with an entity for operating the thermal station for recovery of their dues.
3. If lenders default in availing their rights as ordered above, Adani Electricity Mumbai Ltd. -Distribution Business is at liberty to arrange alternate source for its requirement of power and approach the Commission with appropriate Petition within 6 months of the Order.
Sd/- Sd/- (Mukesh Khullar) (I.M. Bohari) Member Member
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