HC allows 3 power cos to withdraw bid for coal mines

The Delhi High Court today allowed three power companies to withdraw their bids for coal blocks and asked the Centre to refund their bid security without any penalty.

The court gave the direction saying the companies had not been informed about the cap on fixed charge component of electricity rate prior to the auction.

A bench of justices Badar Durrez Ahmed and Sanjeev Sachdeva said that had the government informed the companies about the cap on fixed charge prior to the auction, it would have impacted the bidding and the viability of the coal mines as the economics would have changed.
 

The fixed charge component includes depreciation, return on equity, interest on loan, operation and management costs and interest on working capital.

The companies, Monnet Power, Mandakini Exploration and Jaiprakash Power Ventures, had challenged the Ministry of Power's April 15, 2015, decision to put a cap on the fixed charge component of electricity tariff generated by companies which were declared as the successful bidders for the coal mines earmarked for the power sector.

The companies had also sought an alternative relief, that they be allowed to withdraw their bids and their bid security be refunded.

The bench said that the tender conditions for the auction of the mines made clear stipulations with regard to energy charges and what could be passed through and what could not.

"But, the tender conditions were silent on fixed charges. Therefore, it would not be unreasonable to assume that when the petitioners made their bids in the auction, they would not have contemplated that the fixed charges/capacity charges would be subjected to a ceiling or a cap.

"It would, therefore, not be wrong to observe that had the tender condition clearly indicated that there would be or could be a ceiling on fixed charges/capacity charges, the bids might have been entirely different as the economics would have changed," the court said.

The bench said that in its view the companies were not aware, prior to placing of the bid, that there would be a cap on the fixed charge component, so they "would be entitled to the alternative prayer of withdrawing from the bids and for refund of the bid security without any penalty".