Posco moves Delhi HC against SAIL

Posco E&C, a part of South Korean steel giant Posco, today moved the Delhi High Court against steel maker Steel Authority of India (SAIL) alleging "illegal and discriminatory" termination of a Rs 2,000-crore order by the PSU despite it being the lowest bidder.

Admitting Posco's petition, a division bench comprising Justice B D Ahmed and Justice Veena Birbal suggested the company to participate in the retendering process invited by the SAIL.

Posco E&C in its petition alleged that despite being the lowest bidder and getting the contract offer after signing the letter of assurance, SAIL cancelled the bid and invited fresh tenders on July 13, 2009.

In further alleged that SAIL in an "arbitrary, illegally and discriminatory" manner terminated the contract for installation of blast furnace complex at the Bhilai Steel Plant, which is working to double its annual production to capacity to 7 million tonnes by 2011-12.

During the proceedings, senior advocate Mukul Rohatgi appearing for South Korean firm said that SAIL terminated the contract citing delay in signing the agreement offered to it.

"We have even offered a discount of Rs 70 crore on account of falling equipment prices but the SAIL board did not approve it and cancelled the tender," he said.

"The parent company (Posco) is commissioning a Rs 50,000-crore project in Orissa and there also it is facing so many problems... This is the approach of the government. How could such big companies come to India," Rohtagi added.

The bench observed that even after the cancellation of the Rs 2,000 crore tender, the companies were negotiating over the terms and conditions of the final agreement.

On this Rohatgi remarked, "Yes, negotiation is going on but ultimately when it comes to money, everything goes wrong."

The bench observed, "There is a question of money in this contract. It is only about that."

The counsel appearing for SAIL submitted that the delay in signing the agreement was not by the steel major but Posco E&C itself delayed the process.

"Earlier, the stipulated time was August 15, then it was extended to September 15. Later, it went to October 4. It was Posco which every time extended the period," the SAIL's counsel submitted.

The court suggested Posco E&C, "Best thing is that you participate in the fresh tender. You may get a chance once again. Else this legal option is open to you."

The court directed the South Korean firm to give its view by Friday.