NTPC drags RIL to Supreme Court

Close on the heels of the government withdrawing its insistence on the National Thermal Power Corp (NTPC) paying a higher gas price to Reliance Industries (RIL), the power company moved to consolidate its legal advantage.

On Saturday, it challenged RIL's move to incorporate the now-withdrawn government petition into its defence pleadings, by filing an appeal in the Supreme Court.

NTPC and RIL have been fighting for three years after the former dragged the latter into the Bombay High Court claiming that RIL is refusing to honour a 2004 agreement to supply gas at $2.34.

RIL had initially-based its defence on what it called onerous liability claims contained in the NTPC tender, but modified it earlier this year after the government came out with a statement that RIL could not sell gas at less than $4.2.

However, under attack for causing losses to a public sector company, the government withdrew the controversial affidavit three days ago.

NTPC said RIL was misleading the Court with its new pleading that the government is not allowing it to supply gas at the price it had bid -- $2.34. It challenged the Bombay High Court's decision to allow RIL to amend its plea.

"It is submitted that the amendment in effect seeks to portray the Central government as the chief architect of the inability of RIL in being able to perform GSPA (Gas Sale & Purchase Agreement) and having impliedly taken away the foundational basis of a very carefully structured bid. It suggests that on this basis the GSPA is incapable of performance. This is an entirely new case and ought not to have been permitted to be urged for the first time by way of a written statement", said NTPC in its Special Leave Petition (SLP).

It also added that the preliminary supply agreement (Letter of Intent) was awarded after a global tender and had to be honored as a commercial obligation and "was not as per any directive of the Central government".

NPTC had, in 2003, invited bids through a global competitive tendering process for supply of natural gas to its proposed plant expansions at its existing gas based power generating plants at Kawas and Gandhar in Gujarat by approximately 2600 MW.

RIL had arrived at an agreement with the NTPC to supply 12 million standard cubic metres per day (mmscmd) gas at US$ 2.34 per million British thermal unit (mmBtu) pursuant to the global competitive bidding.

NTPC alleged that RIL sought to wrigle out and avoid the agreement on the one pretext or the other, even though Mukesh Ambani, the Chairman of RIL had thanked the then chairman of NTPC for selecting RIL.

RIL had filed its written statement on Jan 31, 2007 before the high court in the case. The issues were framed on Oct 6, 2008 and the evidence has been commenced. But on July 30, the Bombay High Court allowed RIL to amend its plea.

"Grave prejudice and irreparable harm and injury would be caused to the petitioner if the Respondent [RIL] is allowed to amend its written statement," NTPC urged.

It reiterated that RIL cannot use the government decision to arrive at a valuation of $4.2 for the gas as the group of ministers had expressly stated that "the decision taken in this EGoM meeting will be without prejudice to the NTPC vs RIL and RNRL vs RIL case which are separately subjudice".

"The third EGoM decision dated Oct 23, 2008 reiterated the decision taken in the first in the first EGoM dated Sep 12, 2007 that regarding NTPC-RIL sale price the verdict of the court (Bombay high court) should be awaited", NPTC said. "As regards the fourth EGoM dated Jan 8, 2009 though referred to in the proposed amendment by RIL, the same is not on record," it pointed out.

NTPC also reiterated that the production sharing contract (PSC) between RIL and the government did not prevent RIL from going ahead with the bid to supply gas at $2.34.

RIL has been insisting that the PSC had provisions which made government approval of the final sale price mandatory for all its bids and contracts. "Had the PSC disabled RIL from marketing gas there was no way the RIL would have even offered to supply the gas and submitted its bid," NTPC pointed out in its appeal.

Legal experts pointed out that the Court is unlikely to club the petition with the Ambani brothers' gas fight going on the Supreme Court as NTPC's petition is limited to the issue of allowing RIL to bring in an already-withdrawn government affidavit.

The RIL-NTPC case is likely to be allowed to be heard by the Bombay High Court itself, a Delhi-based lawyer pointed out.

(With inputs from PTI)