The beleaguered Dabhol Power Company (DPC) on Monday received a major jolt when the Supreme Court restrained it from reinvoking the letter of credit of Rs 136 crore, reopening of escrow account and initiating arbitration proceedings in the London arbitration tribunal against the Maharashtra State Electricity Board (MSEB) and the Maharashtra government for recovery of its dues. The apex court, in its order on a petition filed by DPC through its long-serving director Donald S. Sturmer, has continued its stay granted in a similar matter on August 6, 2001. Senior counsel Fali Nariman, along with T. Andhyarujina and Shyam Diwan appeared for MSEB on the instructions of Little & Co, while DPC was represented by P. Chidambaram. The division bench comprising Justice Y. Sabarwal and Justice H. K. Sema has stayed DPC’s proceedings in this regard till the disposal of the matter. The apex court has slated DPC’s appeal for admission in the last week of July. Meanwhile, DPC and MSEB on Monday agreed to freeze their disputes before MERC and foreign arbitrators till the Supreme Court delivers its verdict on the jurisdiction issue. Both DPC and MSEB gave their consent in writing to passing of a common order to this effect. It was agreed by both the parties that till the apex court decides on the jurisdiction issue, MERC would not pass any further orders on the application filed by MSEB. However, all interim orders passed by MERC would continue to operate, the agreement said. “Equally, during that time, the arbitration proceedings, which have been initiated by DPC against MSEB, shall not proceed,” it said. Reacting to the move, MSEB chairman Asoke Basak said, “It is a major relief for MSEB, though it is interim in nature. The apex court has continued its stay granted in August 2001.” DPC had argued that the Bombay High Court’s order of March 5, 2002, saying that MERC can adjudicate disputes between MSEB and DPC, be quashed. According to DPC, MSEB had appointed an arbitrator pursuant to the arbitration agreement. However, MSEB did a volte-face and filed a petition before MERC on April 25, 2001, pleading that MERC has jurisdiction under section 22 (2) (n) of the Electricity Regulatory Commission Act to adjudicate all disputes and differences between MSEB and DPC. DPC contended that MERC was not an expert body nor a competent body for adjudicating disputes involving the common law rights and obligations of parties to a contract. It submitted that an arbitration agreement was a substantive independent contract which has an existence separate or independent from any commercial contract in which it may be contained.
