Writ Petition No.2456 of 1996,Writ Petition No.2912 of 1996

2nd December, 1996

Petitioner Counsel: Shri SHANTI BHUSHAN, Senior Advocate with Shri SUNIP SEN, Shri VISHWAJIT SAWANT and Ms. DIPTI BHUTTA, Shri ARVIND BOBADE with Shri S.G.DESHMUKH
Respondent Counsel: Shri K.S. COOPER with Shri SATISH SHAH and Shri H.D. RATHOD, Shri RAM JETHMALANI, Senior Advocate with Shri C.J.SAWANT, Advocate General, Shri M.N.ZAMBRE, Asst. Govt. Pleader, Shri NITIN PRADHAN and Shri MILIND SATHE, Shri J.J. BHAT with Shri P.A. SAWANT, Shri V.B.AGARWALA, Ms. RASHMI CHANDRACHUD and Shri VISHAL PHAL instructed by M/s. GAGRAT & COMPANY, Shri ATUL SETALVAD, Senior Advocate with Shri ATUL RAJADHYAKSHA and Shri G.R.JOSHI instructed by M/s. BHAISHANKAR KANGA & GIRDHARLAL, Shri K.K. VENUGOPAL, Senior Advocate with Shri ATUL RAJADHYAKSHA and Ms. AMBIKA NAIR

Cases Cited:
AIR 1995 SC 235 [Para 2,33]
AIR 1963 SC 1128 [Para 20]
AIR 1957 SC 38 [Para 26]
AIR 1961 SC 1457 [Para 26]
AIR 1977 SC 1680 [Para 26]
AIR 1986 SC 391 [Para 26]
W.P. No. 640 OF 1995 dt. 8.3.1995 (Bom) [Para 27]
AIR 1965 SC 1578 [Para 27]
AIR 1955 SC 549 [Para 28]
AIR 1974 SC 1232 [Para 28]
AIR 1967 SC 341 [Para 29]
(1994)4 JT (SC) 532 [Para 33]
AIR 1980 SC 1992 [Para 33]
(1993) AIR SCW 683 [Para 33]
AIR 1987 SC 25 [Para 33]
AIR 1991 SC 1153 [Para 33]
AIR 1987 SC 1109 [Para 33]
AIR 1977 SC 789 [Para 42]
AIR 1961 SC 1457 [Para 42]
AIR 1978 SC 1283 [Para 42]
AIR 1974 SC 2271 [Para 42]

JUDGMENT

DR. B.P.SARAF, J. - By these writ petitions, the petitioners seek to challenge the power purchase agreement entered into between the Maharashtra State electricity Board and the Dabhol Power Company on 8th November 1993 as amended from time to time. Writ Petition No.2456 of 1996 has been filed by the Center of Indian Trade Unions, a federation of registered trade unions, and Shri Abhay Mehta, a resident of Mumbai and a citizen of India. This writ petition has been filed by way of public interest litigation. The Union of India, the State of Maharashtra, the Maharashtra State Electricity board, the Central electricity Authority, Mr. Nizamuddin Patel (Deputy Secretary, Department of Energy, Government of Maharashtra), the Dabhol Power Company with which the Maharashtra State electricity Board has entered into the power project agreement and the Enron Power Development Corporation have been arrayed as respondent Nos. 1 to 7 respectively. Writ Petition No.2912 of 1996 has been filed by Shri B.P. Samant and two others. The subject matter of challenge in both these writ petitions being the same, both the petitions were heard together and are being disposed of by this common judgment. However, for the sake of convenience, reference to petitioners and respondents hereinafter would be as per Writ Petition No.2456 of 1996.

2. The challenge to the power project agreement ("PPA") is on various grounds. One of the main grounds of challenge is that it was concluded without proper clearance under the Indian Electricity (Supply) Act, 1948 in particular, Section 29 read with section 31 thereof. The petitioners contend that the requisite clearance was not granted by the Central Electricity Authority ("CEA") and if granted was not validly granted after full compliance with the requirements of the Act. It is also contended that even if concurrence or clearance was granted to the original PPA, there was no fresh clearance or concurrence obtained from the CEA under section 31 of the Act to the amended or supplementary scheme. The petitioners also contend that the above PPA should be declared as void as the same was induced by corruption, bribery, fraud and misrepresentation. In support of the allegation of corruption, bribery, fraud and misrepresentation, the petitioners rely on (i) the statement of Shri Manohar Joshi, Chief Minister of the State of Maharashtra, made on the floor of the Assembly on 3rd August 1995, (ii) report dated 3rd May 1995 of the Cabinet Sub-Committee headed by the Deputy Chief Minister Shri Gopinath Munde constituted to review the Dabhol Power Project, (iii) statements made in the public and the press by the government and the leaders of the Shiv Sena - BJP combine from time to time in regard to the legitimacy of the PPA entered into by the previous Government, (iv) the suit filed by the State of Maharashtra in this court seeking a declaration that the PPA entered into by the previous Government was illegal, null and void and grave and serious allegations of corruption, bribery, fraud and misrepresentation made in the plaint in the said suit and (v) the "Outline Submissions on Jurisdiction" submitted by the Government of Maharshtra before the arbitrators in London in the arbitration proceedings initiated by the 6th respondent, Dabhol Power Company. The PPA has also been challenged on the ground of absence of competitive bidding and lack of transparency. The contention of the petitioners is that despite (i) the decision of this Court in Ramdas Shriniwas Nayak v. Union of India, AIR 1995 SC 235 to the effect that the PPA could not be faulted with on the ground that it was negotiated and was not a result of invitation of tenders and competitive bidding, (ii) the consistent stance of the present Shiv Sena - BJP combine Government that such deals could not have been finalised without competitive bidding and (iii) the PPA having been scrapped on that ground, it was not open to them to enter into the modified PPA for a project of much bigger magnitude having far reaching ramifications without tenders, competitive bidding and transparency and that too on the face of charges of corruption, bribery, fraud and misrepresentation levelled by none else but the very same Government in the suit filed by them in this Court and in their submissions before the arbitrators. The petitioners, therefore, contend that the State of Maharashtra and the Maharashtra State electricity board have acted most illegally and against public interest in entering into a modified PPA with the very same party without even clearing them of the grave charges of corruption, bribery, fraud and misrepresentation. The petitioners also seek to challenge the guarantee and the counter-guarantee furnished by the State of Maharashtra on the Union of India respectively. According to the petitioners, the modified PPA has in no way improved the original PPA but in this process, much more has been conceded by the State of Maharashtra in favour of the 6th and 7th respondents, Dabhol and Enron, than what was stipulated in the original PPA.

3. When Writ Petition No.2456 of 1996 came up for admission before the learned single Judge on 26th April 1996, it was opposed by the respondents on the ground, inter-alia, that it was barred by principles of res judicata. The learned single Judge, on hearing the learned counsel for the parties and on consideration of the previous judgments of this Court and the affidavits filed therein, was of the prima facie view that the writ petition could not be dismissed on the ground of res judicata as the issues raised therein had neither been considered nor answered in any of the previous decision. the learned single Judge also observed that the contentions raised in the writ Petition were similar to the contentions of State Government in the suit filed by them in this court to avoid the PPA. Considering the nature of the issues raised in the writ petition, the learned single Judge admitted the same and issued rule. The writ petition was thereafter assigned to this Bench for hearing.

4. On the commencement of hearing of the writ petition, a preliminary objection was again raised by Mr. Venugopal, learned counsel for respondent No.7, Enron Power Development Corporation ("Enron") on the ground that it was barred by the principles of res judicata. Mr. Shanti Bhushan, learned counsel for the petitioners, vehemently opposed the above preliminary objection on the ground, inter-alia, that the entire fact scenerio has changed since the disposal of the earlier writ petitions because of the scrapping of the original PPA by the State Government, despite the dismissal of the Writ petitions challenging the same by this Court and the Delhi High Court and the rejection of the Special leave petitions by the Supreme Court against the said decisions, on the basis of the Munde Committee report and the finding of the Government that the PPA was induced by bribery, corruption, fraud and misrepresentation and was against the interests of the people of Maharashtra. The contention of Mr. Shanti Bhushan was that the petitioners were challenging the original PPA as also the re-negotiated PPA on the very same grounds on which the State Government had itself scrapped the original PPA and filed the suit in this Court seeking a declaration that it was null and void. Our attention was drawn to the allegations made by State Government in the plaint in the said suit and the "Submissions on Jurisdiction" submitted before the arbitrators in London in the arbitration proceedings initiated by respondent No.6, Dabhol Power Company ("Dabhol"). It was submitted that on the face of the factual statements of the State Government itself on various counts in regard to the original PPA, which by themselves were sufficient to invalidate the same, it was not open to the State Government to justify the original PPA as also the modified PPA entered into with Dabhol by one-to-one negotiation without following any of the procedures like tenders, competitive bidding, transparency, etc., which they themselves had claimed to be a must for such agreements. According to the learned counsel , in view of the material now made available and brought on record by the State Government itself, which were not available and could not have been available to the petitioners with all due diligence at the time of the hearing and disposal of the earlier writ petitions by this Court, the respondents cannot be permitted to escape judicial scrutiny of their actions, which were not only patently illegal but against public interest, by taking shelter behind the principles of res judicata.

5. At this stage, we pointed out to the counsel for the parties that in view of the developments that have taken place after the disposal of the earlier writ petitions, which have an important bearing on the challenge to the original PPA as also the re-negotiated PPA, we are not inclined to dismiss the writ petition in its entirety on the ground of principles of res judicata. It was made clear to the learned counsel for the parties that we would like to go through the materials which induced the State Government to scrap the original PPA entered into by the previous Government and to make serious and grave allegations of corruption, bribery, fraud and misrepresentation in the suit filed in this Court and in the submissions before the arbitrators" in London and the circumstances which impelled the Shiv Sena - B.J.P. Combine government to have a complete turn round in total disregard to their own consistent stand after coming to power in the State in March 1995 after the elections to the State Assembly and earlier as an opposition party in the State Assembly. The prayer of Mr. Shanti Bhushan, learned counsel for the petitioners, to amend the writ petition was granted and liberty was given to the respondents to file further reply to the allegations levelled by the petitioners if they so desired. The State Government was also directed to place all the materials which formed the basis of its conclusion that "the original PPA was induced by corruption, bribery, fraud and misrepresentation" and that it was necessary" to scrap the same to maintain the self-respect of Maharashtra and to tear apart those who had entered into such agreement, even if its repudiation entailed economic burden on the State". The Writ petition was amended by the petitioners thereafter. the respondents also filed elaborate reply which were taken on record. We shall deal with the same at appropriate stage.

6. We have heard Mr. Shanti Bhushan, learned counsel for the petitioners. One of the major challenges of Mr. Shanti Bhushan to the PPA was on the ground of lack of clearance from the CEA. It was submitted that the PPA entered into between Dabhol and the Maharashtra State Electricity Board ("MSEB") was concluded without proper clearance from the CEA and hence, illegal. According to him, the provisions of the Indian electricity (Supply) Act were not complied with which rendered the clearance granted by the CEA irregular. It was contended that the notification of the original PPA was deficient and misleading in-as-much as the scheme was not published along with the notification and proper particulars including particulars of prospective tariff and generation cost, which vitally affect the public, were not notified. It was further contended that the concurrence given by CEA on 26th November 1993 was not a proper techno-economic clearance. Our attention was drawn to the fact that the respondents themselves later realised that the concurrence of CEA communicated vide its letter dated 26th November 1993 was only a technical concurrence and not a techno-economic clearance as contemplated by section 29 of the Electricity (Supply) Act. The techno-economic clearance was in fact granted only on 14th July 1994 and that too, according to the petitioners, is not in accordance with the requirements of section 29 of the Act.

7. At this stage, Mr. Setalvad, learned counsel for Dabhol, the respondent No.6, submitted that the question of validity of the concurrence of the CEA under the Electricity (Supply) Act was directly and substantially in issue before this Court in Ramdas Nayak's case (supra) and in P.B.Samant's case (Writ Petition No.640 of 1995 decided by this Court on 8th March 1995) and the very same issue cannot be raised again in this petition. Such a challenge, according to Mr.Setalvad, was barred by the principles of res judicata. Mr. Shanti Bhushan, learned counsel for the petitioners, however, submitted that principles of res judicata do not apply when corruption is alleged. According to him, the circumstances have changed with the Government itself scrapping the PPA on specific allegation of corruption and bribery. In reply, Mr. Setalvad submitted that the original PPA was never scrapped. It was merely intended to be scrapped. By re-negotiation, the original PPA was merely modified.

8. In view of the contention of Mr. Setalvad that despite the announcement of the Chief Minister of Maharashtra on 3rd August 1995 on the floor of the Assembly about the decision of the State Government to scrap the PPA, directions of the state Government to MSEB to ask Dabhol to stop work and letter of the State Government dated 7th August 1995 conveying the above directions to MSEB, in fact, the PPA was never scrapped, we asked Mr. Jethmalani, the learned counsel for the State of Maharashtra, to clarify the stand of the State Government in this regard. In reply, Mr. Jethmalani candidly stated before us that so far as the State of Maharashtra is concerned, it was a total repudiation of all that had been done in the past and it was nothing less than scrapping of the project and the PPA. Mr. Jethmalani also conceded that in the submissions before the arbitrators in London, the State Government had alleged that the PPA was obtained by bribing the officials of the MSEB and hence it was not a binding agreement. he, however, said that he would explain the circumstances in which the above allegations came to be made. We shall deal with this aspect of the matter a little later.

9. Continuing the arguments on behalf of the petitioners, Mr. Shanti Bhushan further submitted that while granting clearance the CEA did not follow the Government of India's Notification dated 31st march 1992. According to him, even the concurrence given by the CEA on 14th July 1994 was not in accordance with the government of India's Notification dated 31st March 1992. It was contended that the CEA did not itself examine the economic aspect of the project. It merely inferred from the decision of the Ministry of Finance that the tariff was reasonable. It was submitted that there were a number of deficiencies in the concurrence of the CEA. It was also submitted that after the scrapping of the PPA, it was incumbent on the part of Dabhol to obtain a fresh concurrence from the CEA for the re-negotiated project which was not done. Both the PPA and the re-negotiated PPA, according to the learned counsel were liable to be set aside on that count itself.

10. It was next submitted that after the challenge to the original PPA by way of public interest litigation was rejected from time to time by this Court as well as the Delhi High Court and Special Leave petitions against those decisions were also rejected by the Supreme Court, it was the present State Government itself which was of the opinion that the PPA was induced by corruption, bribery, fraud and misrepresentation and hence null and void and decided to scrap the same. This decision of the State Government, according to the learned counsel, was not an impulsive decision. On the other hand, it was a decision taken after a thorough review of the project by the Cabinet Sub-Committee (Munde Committee) and on being fully satisfied that the PPA entered into by the previous Government was induced by corruption, bribery, fraud and misrepresentation and was against the public interest. It was submitted that on the face of such a finding, it was not open to the State Government to re-negotiate the deal with the very same party and in the very same way as had been done by the previous Government and to re-enter into the modified PPA and that too for a much bigger project than what was originally agreed upon. Our attention was drawn to the serious allegations of corruption, bribery, fraud, etc. made in the plaint filed in this Court which, according to the learned counsel, amounts to admissions of fact by the state Government. It was contended that on the face of such serious allegations, the Government could not have re-negotiated the deal with the very same party nor was it open to it to withdraw the suit because it was based on public policy and public interest and dealt with matters affecting public interest, particularly corruption. Our attention was also drawn to the testimony of Ms. Linda Powers, Vice-President, Global Finance of Enron, before a Committee of U.S. House of Representatives, wherein she had stated that Enron spent an enormous amount of its own money approximately $ 20 million on education and project development process alone, not including any project costs. it was submitted that it was a clear admission of corruption and bribery on the part of Enron. Learned counsel pointed out to us that the Munde Committee had also noted this fact and observed that these remarks needed further clarification. It was contended that it was only on being satisfied about the correctness of the above statement, that the State Government made categorical allegations of corruption and bribery in the suit filed in this Court. In such a situation, it was submitted that the re-negotiation of PPA cannot be sustained. Mr. Shanti Bhushan also challenged the legality of the guarantee and counter guarantee furnished by the State Government and the Central Government respectively.

11. Mr. Bobde, learned counsel for the petitioners in Writ Petition No.2912 of 1996, adopted the above arguments of Mr.Shanti Bhushan and further submitted that furnishing of guarantee and counter-guarantee by the State of Maharashtra and the Union of India respectively was contrary to and violative of Articles 292 and 293 of the Constitution of India.

12. In reply, Mr. Jethmalani, learned counsel for the State of Maharashtra, contended that neither the petitioners has locus standi in this matter nor was it a public interest litigation. The petitioners, according to him, were politically motivated and the writ petition was intended to serve political purposes. It was, therefore, liable to be dismissed on that count itself. The learned counsel further submitted that it was a repetitive litigation because the issues in the writ petition were similar to those in earlier writ petitions which were dismissed by this Court. The writ petition was, therefore, barred by the principles of res judicata. Mr. Jethmalani, however, stated that he would satisfy this Court about the compliance of the requirements of the electricity (Supply) Act, as also about the bonafides of the PPA and the modified PPA.

13. On being questioned by this Court that if that was so, what made the State Government to decide to scrap the original PPA entered into by the previous Government and file a suit in this Court for a declaration that it was null and void as it was induced by corruption, bribery, fraud and misrepresentation, Mr. Jethmalani stated that the decision to scrap the PPA was a political compulsion and the filing of the suit in the Court and the allegations of corruption, bribery, fraud, etc. made in the plaint were the result of wrong legal advice.

14. Elaborating his submissions in this regard, Mr. Jethmalani stated that the PPA was an election issue and a part of the election manifesto of the Shiv Sena - B.J.P. combine in the elections to the State Assembly held in March 1995. The success in the elections was construed by them as a mandate of the people against Enron and the PPA. The constitution of Munde Committee, soon after coming to power, to review the PPA was, in effect, intended to fulfil its commitment to the people during the elections. According to the learned counsel, in its report, the Munde Committee nowhere said that the PPA was induced by corruption, bribery, fraud etc. and that it should be repudiated on that ground. The Committee even did not comment on the alleged statement of the Enron executive Ms. Linda Powers about the expenditure of U.S. $ 20 Million incurred in India on education etc. except saying that it required clarification. The Munde Committee Report, according to the learned counsel, really deals with the economic aspects of the project and its recommendation to scrap the project was only in view of the high cost of power. The decision of the State Government to scrap the project and the statement of the Chief Minister in the Assembly to that effect, according to Mr. Jethmalani, were only to bring home the political point raised by the Shiv Sena - BJP combine in the elections. Mr. Jethmalani fairly stated before us that the decision to scrap the project was the decision of an inefficient Government whereas the acceptance of the offer for negotiation was an act of sober statesmanship. It was further stated that it was an act of wisdom on the part of the State Government not to persist with the folly committed by them by scrapping the project.

15. As regards filing of the suit by the State Government in this Court seeking declaration that the PPA was null and void and the serious and grave allegations of corruption, bribery, fraud and misrepresentation made therein, Mr. Jethmalani stated that all that was a result of wrong legal advice given to the State government by the legal experts engaged by it. Mr. Jethmalani made a categorical statement that there was no material or basis for filing the suit before this Court with the allegations of the type made therein. The suit was, in fact, filed only to get out of the serious legal consequences of its decision to scrap the PPA and to stall the arbitration proceedings initiated in London at the instance of Dabhol and a disastrous award. It was also intended as a bargaining counter to achieve a favourable settlement with Dabhol. In this process, according to the learned counsel, the State Government not only came out of the legal tangle in which it had fallen as a result of scrapping of the project and the financial liabilities which it might have had to incur, but also achieved reduction in the cost of the project. It was submitted that the re-negotiated modified PPA was a better deal than the original PPA and was in the public interest.

16. So far as the statement of Ms. Linda Powers is concerned, Mr. Jethmalani placed the full text of her statement before the Committee of the U.S. House of Representatives to enable us to appreciate the true purport of her statement and to show that a sentence from the said statement had been taken out of the context to attribute to her a statement that Rs.60 crores were spent on bribing Indians. We asked Mr. Jethmalani as to who was responsible for attributing such a construction and whether it was not the State Government itself who attributed such a statement to her. In reply, Mr. Jethmalani stated that the State Government acted on hearsay and press reports without having with it the full text of her statement. It was only on getting the full text of her statement that the Government was satisfied that the statement attributed to her was not correct.

17. So far as the challenge to the guarantee and counter-guarantee is concerned, the learned counsel submitted that it is fully within the scope and ambit of the powers conferred on the State Government and the Central Government under the Constitution.

18. Mr. Jethmalani also submitted that filing of the writ petition to challenge the original PPA on the ground of technical infirmities in the concurrence at such a belated stage is a blatant misuse of the process of law. It was contended that there was no explanation whatsoever for not challenging the PPA years back or at least when it was challenged by Ramdas Nayak and others. It was submitted that this writ petition was liable to be dismissed on that count itself.

19. Mr. K.S.Cooper, learned counsel appearing for the Union of India and the CEA, strenuously opposed the contention of the petitioners that the clearance of CEA to the project was not in accordance with the provisions of section 29 of the Electricity (Supply) Act and that the counter-guarantee furnished by the Central Government was contrary to and in violation of Article 292 of the Constitution of India. So far as the clearance of the CEA is concerned, it was urged that though the clearance given on 26th November 1993 was a technical clearance, the techno-economic clearance contemplated by section 29 of the Electricity (Supply) Act was given by CEA on 14th July, 1994. The said approval, it was contended, was given by the CEA after fully complying with all the relevant requirements of the law by Dabhol, the respondent No.6. The 34 objections and/or suggestions received were duly forwarded to CEA, though none of the said objections or suggestions were of any relevance for considering the grant of concurrence. None of the above objections were from a licensee or a prospective licensee or such other person. All those objections and suggestions were duly considered by CEA. It was only after careful consideration and elaborate and detailed discussions on all aspects of the project, that the CEA gave its concurrence to the project on 14th July 1994. Mr. Cooper further submitted that no fresh concurrence was required for the modified PPA because it did not result in any major change in the scheme. Moreover, any changes which were even remotely considered to be major were dropped by the Generating Company, Dabhol. Hence no fresh concurrence was required.

20. Mr. Cooper also contended that section 29 of the Electricity (Supply) Act confers a right of representation on a scheme only on "licensees and other persons interested", which according to him would mean licensee or a prospective licensee or a person akin to a licensee. The words "other persons" appearing in section 29 cannot be construed to mean a consumer or a person who is in no way connected with the generation of power. Reliance was placed in support of this contention on the decision of the Supreme Court in Mysore State Electricity Board V. Bangalore Woollen, Cotton and Silk Mills Ltd., AIR 1963 SC 1128.

21. It was further submitted by the learned counsel that the PPA had been challenged earlier before this Court on the very same ground in Ramdas Nayak's case and P.B. Samant's case. Furnishing of counter guarantee by the Central Government was also in issue in those petitions. This Court, after a detailed discussion in Ramdas Nayak's case, did not find any merit in the challenge and rejected the same. In the latter case, the writ petition was dismissed as being barred by the principles of res judicata and Special Leave Petition against the same also came to be rejected by the Supreme Court. That being so, it was contended that it was not open to the petitioners to agitate the very same issues again. Mr. Cooper urged that such repetitive litigation was liable to be thrown out of the Court at the threshhold.

22. Mr. Venugopal, learned counsel for the respondent No.7, Enron, submitted that the Enron was a victim of the Government's change of stance. The reckless allegations made against Enron have thrown a cloud over the project which was a result of long drawn discussions and deliberations at all conceivable levels in the State and the Centre and has created a crisis of confidence in the minds of the public regarding the entry of multi-nationals in India. It was further submitted that the allegations against Enron or Dabhol of bribery were totally false and baseless. He pointed out to us the dilemna of the foreign investors like Enron when they are caught in such a tangle. The financial institutions cut themselves off. Every passing day results in enormous losses. Mr. Venugopal, therefore, urged that we should examine the conduct of Enron and the veracity of the allegations of bribery levelled against it by the State Government and should take appropriate steps to ensure that such allegations are not made as a ploy to create a confusion in the minds of the public and the Courts and used as a tool to get out of agreements legally and validly entered into between the Government and foreign investors.

23. Referring to the question of bribe of U.S.$ 20 million alleged to have been paid by Enron to the authorities in India for the purpose of obtaining the Dabhol Power Project contract, the learned counsel stated that the entire case of corruption against the Respondent No.7, Enron, was wholly and exclusively based on the testimony of an officer of Enron, Ms. Linda Powers, before the Committee on Appropriations of the U.S. House of Representatives on 31st January, 1995. This was the basis on which the government of Maharashtra in its plaint in the suit filed in this Court on 6th September, 1995 alleged that the PPA had been obtained by corrupt means and the petitioners in the writ petition have adopted the same to justify their challenge to the PPA and the modified PPA. Our attention was drawn to the relevant portions of the testimony and it was stated that what was referred by her was the expenditure incurred on a process which had given the Indian authorities a real and concrete understanding of the kinds of legal and policy changes needed in India and which had given the Indian banks a real and concrete understanding of the sound project lending practice. It was contended that the argument advanced by the petitioners that the above statement was a confession of bribe was a result of wholly perverse interpretation sought to be placed on the above statement. It was urged that the writ petition was liable to be dismissed on this count itself. It was further urged that the Government of Maharashtra was not justified in scrapping the project or in levelling wild allegations of corruption against Enron and in the circumstances, the revival of the project was wholly legal and valid.

24. Summing up his arguments. Mr. Venugopal submitted that the change in the stand of the Government of Maharashtra cannot have any effect on the legality or validity of the power project or the PPA; the allegations of illegality have to be decided on the facts relating to the sanctioning of the project and the finalisation of the PPA. It was contended that the petitioners have failed to make out any case for interference of this Court on the basis of pleadings, documents and arguments, In such a situation the project or PPA cannot be termed as invalid merely on the basis of changes in the stand of the Government.

25. It was further submitted that those seeking judicial review of administrative actions must approach the Court with utmost expedition and delay and laches on their part was fatal to the litigation. It was further submitted that the challenge to the project and the PPA by way of this writ petition at a stage when respondents 6 and 7 have already invested huge amounts in the project could not be termed as bonafide and such writ petition was liable to be rejected at the threshhold. The petition was also challenged on the ground that it was barred by the principles of res judicata in view of the decisions of this Court in Ramdas Nayak's case and P.B. Samant's case.

26. Mr. setalvad, learned counsel for respondent No.6, Dabhol, vehemently opposed the writ petition on the ground of res judicata, laches and delay. It was submitted that the points in issue in the writ petition were directly and substantially in issue in Ramdas Nayak's case and P.B.Samant's case and this Court having rejected the writ petition in Ramdas Nayak's case by a speaking order and in P.B.Samant's case on the ground of bar of res judicata, it was not open for the petitioners to reagitate the same by filing repetitive writ petitions. It was contended that the rule of res judicata is not a technical rule, it is a rule of public policy embodying the wisdom of all time and it is for that reason that Section 11 of the Code of Civil Procedure ("CPC") provides that no Court shall try a suit or issue barred by res judicata. It was further submitted that the principles of res judicata bar the trial of every issue determined in previous proceedings and also issues which might and ought to have been raised in earlier proceedings. It also applied to subsequent public interest petitions whether Order 1, rule 8 of the CPC is followed or not. Reliance was placed in support of the above submissions on the decisions of the Supreme Court in Burn & Co. V. Their Employees, A.I.R. 1957 SC 38; Daryao V. State of U.P., A.I.R. 1961 SC 1457; State of Uttar Pradesh V. Nawab Hussain. A.I.R. 1977 SC 1680 and Forward Construction Co. V. Prabhat Mandal (Regd.) Andheri, A.I.R. 1986 SC 391.

27. Reliance was also placed on the decision of this Court in P.B.Samant V. The Union of India (Writ Petition No.640 of 1995) where the writ petition challenging the very same PPA was dismissed on the ground of bar of res judicata in view of the earlier decision in Ramdas Nayak's case. It was pointed out that S.L.P. against the above decision was also rejected by the Supreme Court. It was pointed out that the validity of PPA, legality of guarantee etc. were all raised in the earlier case. The contention that there was no valid concurrence was specifically raised by way of rejoinder in Ramdas Nayak's case which tantamounts to have been raised in the writ petition. Reliance was placed in support of this contention on the decision of the Supreme Court in S.D.G. Pandarasannidi V. State of Madras, AIR 1965 SC 1578. Mr. Setalvad, therefore, submitted that all issues raised in the writ petition other than those arising after August 1995 were barred by res judicata as they were or could have been raised in the earlier writ petitions. It was urged that in that view of the matter, this Court should not go into the merits of any of the contentions relating to decisions or actions prior to August 1995.

28. Mr. Setalwad further submitted that there was no infirmity in the concurrence of CEA to the project nor was there any violation of any of the provisions of the Electricity (Supply) Act. He submitted exhaustive written submissions in support of his above submission which were taken on record. It was next submitted that the guarantee and the counter guarantee furnished by the State Government and the Central Government were fully within the bounds of the powers of the State Government and the Central Government and no fault could be found with the same. Reference was made in this connection to the observations of Dr. Ambedkar before the Constituent Assembly. Reliance was also placed on the decision of the Supreme Court in Ram Jawaya v. State of Punjab, AIR 1955 SC 549; and Naraindas v. State of M.P., AIR 1974 SC 1232. Our attention was also drawn to a large number of decisions of the Supreme Court and also of English and American Courts in regard to the scope of the powers of the Court in reviewing administrative decisions.

29. In reply to the arguments of the learned counsel for the respondents, Mr. Shanti Bhushan, learned counsel for the petitioners, reitertated and reaffirmed all his earlier submissions. It was further submitted that it was not open to the State Government to withdraw the suit filed by it before this Court seeking a declaration that the PPA was null and void on the ground of corruption, bribery, fraud and misrepresentation. According to the learned counsel, an admission by a party in a plaint signed and verified by him in a suit is an admission within the meaning of section 17 of the Indian Evidence Act, 1872 which might be proved against him in other litigations. Reliance was placed in support of the above contention on the decision of the Supreme Court in Basant Singh v. Janki Singh, AIR 1967 SC 341. It was contended that if the State Government which had filed the suit wanted to get out of the admissions made by it in that suit, it was for the state Government to show that the statements made by it in the plaint were not true. According to the learned counsel, such admissions must be regarded as a strong piece of evidence against the party making the same.

30. In view of the above submissions of the counsel for the petitioners, we asked the learned Advocate General, Mr. C.J.Sawant, appearing for the State of Maharashtra on that day, whether in a situation like this, it is not necessary for the Chief Minister of the State of Maharashtra to file an affidavit setting out the circumstances which impelled the State Government to scrap the PPA and to file a suit in the Court for a declaration that the said PPA was null and void and make serious allegations in the plaint to the effect that the PPA was induced by corruption, bribery, fraud, etc.. We indicated to the learned Advocate General that in the absence of the factual statement on oath on behalf of respondent No.1 in this regard, it might not be possible for us to accept the submissions of Mr. Jethmalani, the learned counsel for the State Government, that there was no material on record to justify the scrapping of the PPA and that the allegations of corruption, bribery, etc. made in the plaint were a result of wrong legal advice given to the State Government by its legal advisers. The learned Advocate General asked for time to inform the Court about the decision of the Chief Minister in this regard. When the matter was placed on board on the adjourned date, Mr. Jethmalani, appearing for the State of Maharashtra, stated before us that the Chief Minister would file appropriate affidavit setting out the entire facts and circumstances of the case. One week's time was asked for that purpose which was granted by us. Accordingly, on 2nd September 1996, the Chief Minister of Maharashtra, Mr. Manohar Joshi, filed an affidavit setting out the circumstances leading to the scrapping of the project and the PPA and re-negotiation thereof. Regarding filing of the suit, it was stated in the said affidavit that the State was legally advised that if it desired to take proceedings in India to prevent the arbitral proceedings from proceeding further, it was necessary to file a suit before the actual initiation of the arbitration proceedings and in view of such advice, it became necessary for the State to adopt legal proceedings within a short time and to file the suit in this Court on 6th September 1995. It is further stated that the suit was filed as a strategy in the confrontation of the government with Dabhol and that it was aimed not only as a counter to the arbitration proceedings but also as a bargaining counter for any negotiation with Enron. It is next stated in the affidavit that the commercial aspects of the project mentioned in the suit were based on the report of the Cabinet Sub-Committee and the allegations of bribery, corruption and misrepresentation were based on reports appearing in the newspapers. It is further stated that the various steps taken by the Government, viz. review of the project, cancellation of the project and the PPA, filing a suit in the High Court, renegotiating the terms and conditions, revival of the project, entering into a modified PPA, and withdrawal of the suit, were all bonafide and in the larger interest of the consumers and the people of Maharashtra. It is submitted that the renegotiated project, which was the net result of above steps, has not only benefitted the State of Maharashtra but the country as a whole. On perusal of the above affidavit of the Chief Minister, we pointed out to the learned Advocate General that the affidavit was silent as to why the state Government later did not act on the press reports on which it had acted earlier. The learned Advocate General stated that the said press reports later turned out to be baseless and unfounded. The learned Advocate General further stated that his above statement may be treated as a part of the affidavit of the Chief Minister. The statement of the Advocate General is taken on record.

Factual Matrix of the PPA.

31. To appreciate the rival submissions and the merits of the challenge to the PPA as well as the modified PPA in the writ petition, it is expedient to set out briefly the chequered history of the PPA, scrapping of the same by the present Shiv Sena - BJP Government, re-negotiation of the same and entering into the modified PPA.

The power sector in India was the exclusive domain of the Government till the year 1991. Private Sector, except some old licence holders, had no role to play. In the year 1991, new liberalisation policy was formulated by the Government of India. To give effect to the same, the Electricity (Supply) Act, 1948 was amended by the Electricity Laws (Amendment) Act, 1991 to enable private parties to set up generating companies for the establishment, operation and maintenance of generation stations. On 22nd October 1991, a resolution of the Government of India formulating a scheme for encouraging private enterprises to participate in power generation, supply and distribution in India was published in the Gazette of India wherein it was stated, inter alia, that a Generating Company can enter into a contract for the sale of electricity generated by it with the State electricity Board in any State where it owns/operates generating station/stations or in any other State it is carrying on its activities or with any other person with the consent of the competent Government. The method of fixing the tariff for the sale of electricity was also set out therein. On the very same day, by another resolution, the government of India constituted a High Level Board for considering promotion of investment by private units in the electricity sector. Wide publicity was given to this new policy of the Government of India through the media all over India and abroad. On 31st march 1992, the Government of India issued a notification setting out the factors in accordance with which the tariff shall be determined. The said notification, inter-alia, provides that return on equity shall be computed on the paid up and subscribed capital relatable to the generating unit, and shall be 16 per cent of such capital. In April 1992, the Government of India published a brochure setting out therein a new policy for encouraging private sector participation in the field of power generation and supply. The said brochure also lists the major clearances required for taking up of a project in the electricity sector. In may 1992, a High Level delegation of the Government of India led by the Cabinet Secretary, visited U.K. and U.S.A. for inviting foreign enterprises to set up power projects in India. The above brochure was also widely circulated at seminars and meetings and sent to virtually every major power company in the world. Wide publicity was given to the visits by the high level delegation and the discussion they held with prospective private investors. The delegation made highly publicised presentations to audience of investors, project developers, financial institutions, independent power generators and U.S. based companies. One such presentation was made to the Enron Power Corporation in Houston, USA ("Enron") which is one of the world's largest power companies and is the major shareholder of Dabhol Power Company. Enron expressed a desire to negotiate the setting up of a gas-based power project in India. A team of officials from Enron and General electric Corporation visited Bombay in June 1992 and looked for suitable sites in the various districts of Maharashtra. After the site visits, meetings were held with the Maharashtra State Electricity Board and the pros and cons of the different sites were discussed and finally the Enron team decided upon the site in Dabhol. the project formulated by Enron and General electric Corporation was to set up a power plaint at Dabhol which would use liquified natural gas, imported from the Middle East, as the fuel source. All this was necessary because neither the Government nor the State electricity Boards including the M.S.E.B. had any specific projects in mind nor did they have with them any specific particulars such as site, size of the project, fuel to be used, source of fuel, infrastructural parameters, etc. In terms of the discussions with Enron, on 20th June 1992, a Memorandum of Understanding ("MOU") was signed between M.S.E.B. and Enron regarding setting up of the power plant at Dabhol. the signing of this MOU was also given wide publicity. Thereafter, between August 1992 and February 1993, protracted discussions and negotiations took place between the State Government officials, officials of the M.S.E.B. and the project developers regarding the setting up of the project. Various advisors from the government of India as well as international agencies were consulted by M.S.E.B., M.S.E.B. also considered the advice of the World Bank and took services of the World Bank-nominated experts. On 3rd February 1993, the Government of India, in principle, gave its approval for the setting up of the project by Enron. In April 1993, the World Bank sent a memorandum on the proposed project to the government of India, inter-alia, expressing its concern at the size of the project on the basis that there might not be sufficient demand. The project was, accordingly, restructured in the light of the memorandum of the World Bank. On 29th April 1993, Dabhol Power Company ("Dabhol") was incorporated in India and negotiations and discussions continued between M.S.E.B. and Dabhol and various senior officials of the State of Maharashtra. The State of Maharashtra also granted approval to the project in September 1993 and on 14th September, 1993 the then Chief Minister of Maharashtra held a press conference to inform the people of the same. It was stated in the said conference that preliminary work would start by December 1993. On 22nd September 1993, a notification was issued under section 29 of the Electricity (Supply) Act, 1948. It was stated in the said notification that the Dabhol Power Company was proposing to set up a project at Dabhol for the generation of 1905 MW base load plus 110 MW peaking, with natural gas as the fuel. It was also stated in the said notification that the energy generated from the project would be supplied to M.S.E.B. Objections were invited from any licensee or any person interested in taking objections in respect of the above scheme. It was also stated in the notification that if any additional information on the scheme was required by anybody, the same would be supplied to him. Thirty-four objections were received to the notification, none of course, from the petitioners. After considering the various objections, MSEB decided to enter into an agreement with Dabhol for the project in question and accordingly on 8th December 1993, a Power purchase Agreement was executed wherein the terms of contract between MSEB and the Dabhol were set out. A great deal of publicity was given to the signing of the PPA. The project was also approved by the Government of India. The Government of Maharashtra gave a guarantee in respect of payment obligation of MSEB arising under the PPA. On 24th September, 1994, a State-support agreement was entered into between Dabhol and the State of Maharashtra. under said agreement, the Government of Maharashtra agreed to give support for various clearances. Later, the Central Government also gave a counter guarantee for the same.

Public interest litigations challenging the PPA, Guarantee and Counter-Guarantee and rejection of the challenge by the Courts:

Challenge before this Court (Ramdas Nayak's Case)

32. The PPA was challenged before this Court in Writ Petition No.1702 of 1994 which was filed by way of public interest litigation by Shri Ramdas Nayak, a social worker and the Member of Bharatiya Janata Party (BJP), Ex-Member of the Legislative Assembly of Maharashtra and Corporator of Bombay Municipal Corporation and Shri Vinay Sahastrabuddhe, a social worker and Executive Director of Rambhau Mhalgi Prabodhini. The award of the contract by the MSEB to the Dabhol was challenged on the ground, inter-alia, that it was finalised without resorting to competitive bidding by inviting global tenders; it was finalised in complete secrecy and thereafter also continued to remain shrowded by secrecy. It was contended that the entire negotiations had been kept away from the gaze of the public and the whole deal was against public interest. Concurrence of the CEA to the project was also challenged by the petitioners. furnishing of guarantee and counter-guarantee by the State Government and the Central Government respectively were also in issue in the said writ petition.

33. The above writ petition was dismissed by this Court on 19th August 1994 by a speaking order (Ramdas Nayak v. Union of India reported in A.I.R. 1995 Bom. 235). In the above decision, after careful consideration of the facts of the case and decisions of the Supreme Court including the decisions in Tata Cellular v. Union of India, (1994) 4 JT (SC) 532; Kasturi Lal v. State of Jammu and Kashmir, AIR 1980 SC 1992; Sterling Computers Ltd. v. M.N. Publications, (1993) AIR SCW 683; State of M.P. v. Nandlal Jaiswal, AIR 1987 SC 25; G.B. Mahajan v. Jalgaon Municipal Council, AIR 1991 SC 1153; and Sachidanand Pandey v. State of West Bengal, AIR 1987 SC 1109, this Court summed up the legal propositions in regard to powers of judicial review thus :

(i) It is well accepted legal position-today that judicial review is not an appeal from a decision but a review of the manner in which the decision was made. It is concerned with reviewing not the merits of the decision but the decision making process itself. In the guise of judicial review, the Courts cannot substitute their own decisions for the decisions of the executive. The power of judicial review is intended to be exercised to check abuse of power by the executive and to keep the public body within the limits of its authority. Jurisdiction of the Court in this regard is of supervisory nature and should be used with restraint. In the guise of preventing abuse of power by the Executive, the Court itself should not be guilty of usurping power. The duty of the Court in case of judicial review is to confine itself to the question of legality, rationality and propriety of decision-making process.

(ii) It is not for the Courts to determine whether a particular policy or a particular decision taken in the fulfilment of that policy is fair. it is concerned with the manner which those decisions have been taken.

(iii) it is not for the Court to determine whether a particular policy or a particular decision taken in the fulfilment of that policy is fair. The courts should not enter into the merits of Government actions, more so, in economic matters unless the same is unreasonable and is not in public interest.

(iv) The Court cannot lightly assume that the action taken by the Government is unreasonable or without public interest, because, there are a large number of policy considerations which must necessarily weigh with the Government in taking action and therefore the Court would not strike down governmental action as invalid on this ground, unless it is clearly satisfied that the action is unreasonable or not in public interest. There may be an infinite variety of considerations which would weigh with the Government in formulating its actions. In particular, the Court would have to decide whether the government's action is reasonable and in public interest.

(v) It is not possible for the Courts to question and adjudicate every decision taken by an authority. Under some special circumstances a discretion has to be conceded to the authorities who have to enter into contract giving them liberty to assess the overall situation for purpose of taking a decision as to whom the contract be awarded and at what terms. If the decisions have been taken in bona fide manner although not strictly following the norms laid down by the Courts, such decisions are upheld on the principle laid down by Justice Holmes, that Courts while judging the constitutional validity of executive decisions must grant certain measure of freedom of "play in the joints" to the executive.

Applying above principles to the facts of the case, it was held :

" We do not find any impropriety in the Power Purchase Agreement entered into between the MSEB and Respondent No.8, the Dabhol Power Company. finalisation of a deal by negotiations, as has happened in the present case cannot, per se, be termed as illegal."

It was observed :

" the grievance of the petitioners is based on the sole ground of the failure to follow the usual procedure of inviting tenders, which as stated by us earlier, is not an invariable rule. In our opinion, in the present case, it may not be an appropriate mode. Negotiation was the only appropriate mode which has been done in the most reasonable manner. The decision has been arrived at after long deliberations and discussions and consideration of all relevant factors. We do not find any reason to interfere with the same in exercise of our extra-ordinary powers of judicial review under Art.226 of the Constitution of India."

Rejecting the challenge to furnishing of guarantee and counter guarantee, it was held :-

" We have not-fully considered the legal submissions, we have also considered the nature of guarantee given by the State Government and the counter-guarantee proposed to be given by the Government of India. We do not find any illegality, irrationality, impropriety or arbitrariness in the decision of the Government of Maharashtra and the Government of India to do so. We, therefore, do not find any merit in the submission of the learned counsel for the petitioners on this count and reject the same."

This Court also referred to the contention of the respondents in that case that the writ petition was liable to be dismissed on the ground of laches and delay and observed:

"Before parting with the case we feel it also necessary to deal with the objections taken by the learned counsel for the respondents on the ground of laches on the part of the petitioners in approaching this Court for judicial review. It was stated that the project was known to everybody ever since 1992 and it was made clear at every stage that it was being negotiated with Enron. If the petitioners had any objection on that ground they could have come to this Court at that Stage. Having not done so, attempt to challenge the decision on that count at the stage of final agreement is being signed, after long wait of two-and-half years, is abuse of the process of the Court, which would cause great prejudice to the contracting parties. We find force in the above submission. However, in view of the decision we have arrived at on the merits of the challenge itself, we do not find it necessary to deal with this aspect of the matter."

In view of the above findings, the writ petition was dismissed by this Court.

Challenge to 14-A before the Delhi High Court (Siddha Raj Dhadda's case)

34. The Memorandum of Understanding ("MOU") for setting up the power generating plant at Dabhol, which preceded the PPA, was also challenged by one Siddha Raja Dhadda, a social worker associated with Sarvodaya Movement and other before the Delhi High Court by a Writ Petition filed by way of public interest litigation which was numbered as Civil Writ Petition No.4362 of 1994. Besides Union of India State of Maharashtra and CEA, the Federation of BHEL Executives Association was also arrayed as one of the respondents (Respondent No.10). In the said writ petition, the petitioners prayed for a writ of certiorari or any other appropriate writ, order or direction (1) to quash the concurrence, if any, granted by the Central Electricity Authority to the schemes of seven projects (including Dabhol) of foreign firms for establishment of power plants without following the procedure as prescribed under the Electricity Supply Act, 1948; (2) for quashing the guarantees, if any, given by the State Governments concerned in favour of the foreign companies sponsoring the said projects in the five states (including Maharashtra) being violative of section 66 of the Act as well as being repugnant to the provisions of the Constitution; and (3) for quashing the guarantee and/or counter guarantee if already given. It was also prayed that the terms contained in the agreements entered into with foreign companies which oust the jurisdiction of the Indian Courts be quashed. A specific reference was made in this connection to the agreement with Enron. Though the challenge was to seven power projects in different States, in course of arguments, the petitioners concentrated their attack only on the MOU entered into between MSEB and Dabhol. It was contended that the MOU was entered into through close door negotiations for the power project of 2015 M.W. and that the terms, conditions and other vital facts relating to the said deal were shrouded in complete secrecy when the project was to cost us dollars 2650 million. It was also contended that no global tenders were invited and the contract was awarded to Enron on extraordinary terms and having consequences of far reaching nature; that the terms were contrary to the provisions of the Act; that the terms were such as would destroy the viability of existing companies like Bharat Heavy Electricals Limited and National Thermal Power Corporation, both Government of India companies, and that there was clear discrimination against the Indian companies, both in public and private sector. It was also submitted that the Government of India could not give counter guarantee which was against the provisions of the Constitution. The Delhi High Court took note of the writ petition filed in this Court by Ramdas Nayak and others questioning the wisdom of setting up the power plant at Dabhol by Enron, the PPA between Enron and MSEB and the guarantee and the counter guarantee by the State of Maharashtra and the Central Government respectively and also the fact that the said petition was dismissed by the Division bench of this Court by a detailed order on 19th August 1994. On examination of the challenge before this Court in Ramdas Nayak's case, the Division bench of the Delhi High Court comprising of D.P.Wadhwa, J. (as he then was) and N.G.Nandi, J. observed as follows :

"What we find is that the arguments which were addressed there are the same which have been addressed before us. We find it unnecessary to set out all the facts all over again. The Bombay High Court ruled that the contract had been awarded after proper negotiations and in a most reasonable manner. The arguments that the global tender should have been invited was repelled. On the guarantee by the State of Maharashtra and counter guarantee by the Union Government the court did not find any merit in this submission. As regards the counter guarantee given by the Union of India, the court referred to the affidavit of the Union of India wherein it was stated that giving of a guarantee or counter guarantee was not something unusual and that from time to time such guarantees had been given in the past and there was noting wrong or illegal on the part of the Government to give, in appropriate cases, such guarantees in the public interest to induce foreign investors to come to India and invest in fileds like power development. It noted that similar counter guarantees had earlier been given by the Union of India on behalf of the Air India and the Indian Airlines for the purchase of aircrafts by these Government companies. It was also noticed that giving of counter guarantee was not something unusual for the developing countries including China, Indonesia, Philipines, Turkey and Pakistan."

It was held by the Delhi High Court :

"It is not that the petitioners were unaware of the writ petition having been dismissed by the Bombay High Court as they themselves brought to our notice the aforesaid judgment of the Bombay High Court. We will not be surprised if the averments in the writ petition are the same as were in the Bombay High Court. This would amount to shopping for Justice in the garb of public interest litigation which we cannot permit."

The above writ petition was accordingly dismissed by the Delhi High Court on 10th September 1994.

Further challenge to PPA before this Court. (P.B.Samant's case)

35. The PPA and the guarantee and counter guarantee were again challenged before this Court by one Mr. P.B.Samant and four others, three of whom (1) Shri Shreepati Shinde, (2) Shri Parshuram Tavre, and (3) Shri Shankar Dhondi Patil, at the material time, were members and the fourth a former member of the Maharashtra legislative Assembly. The writ petition, which was filed as public interest litigation, was numbered as Writ Petition No.640 of 1995. The PPA was sought to be challenged in the above petition on various grounds, including lack of proper and legal concurrence for the project by the CEA. The guarantee and counter-guarantee were also challenged as being violative of the provisions of Articles 292 and 293 of the Constitution of India. When the above petition came up for admission, preliminary objection was raised on behalf of the respondents including the State of Maharashtra and the Union of India on the ground that it was barred by res judicata in view of the decision of this Court in Ramdas Nayak's case. To get out of the above preliminary objection, it was submitted on behalf of the petitioners that the principles of res judicata had no application to the facts of that case, because a number of grounds raised in that writ petition were neighter raised in the earlier writ petition nor decided by this Court. Attention of the Court was drawn to the prayer clause in the earlier writ petition to show the difference between the two. To appreciate the rival contentions, this Court called for the records of Ramdas Nayak's case and perused the same. The court also perused the decision of the Delhi High Court in Siddha Raj Dhadda (supra) rejecting the writ petition challenging the PPA. On a careful consideration of issues in the earlier petition and in the above petition, this Court observed :

"It is obvious that the issues in that writ petition and the present writ petition are identical, the only difference being that some of the old grounds have been elaborated and highlighted and some new grounds have been added in the present petition. The issue in both the writ petitions, however, remains the same viz. the validity of the Power Purchase Agreement entered into between Maharashtra State Electricity Board and Dabhol Power Company. That being so, it is obvious that the bar of res judicata would operate. Addition of some new grounds of challenge or rephrasing or elaborating the relief cannot take the case out of the bar of res judicata in view of Explanation IV appended to section 11 of the Code of Civil Procedure and the ratio of the decision of the Supreme Court in Forward Construction Co. and Direct Recruit Engineering Association (supra). We are, therefore, of the clear opinion that this writ petition is barred by res judicata."

About the merits of the case, it was observed :

"It may be pertinent to mention at this stage that before arriving at the above conclusion, the learned counsel for the parties were also heard on merits. Though in view of the above conclusion in regard to the maintainability of this writ petition, it is not necessary to deal with the same extensively, we deem it expedient to observe that on a careful perusal of the writ petition and consideration of the rival submissions, we do not find any merit in the same to justify interference."

It was remarked :

"In our opinion, it is a repetitive litigation on the very same issue coming up before the Courts again and again in the garb of public interest litigation. It is high time to put an end to the same. We find that in our decision in the earlier writ petition (Writ Petition No.1702 of 1994), the facts of the case and the issues raised have been discussed exhaustively. No further discussion is necessary. Suffice it to say that there is no merit in this writ Petition."

In view of the above, the writ petition was dismissed by this Court on 8th March 1995.

Special Leave Petition against this decision was also rejected by the Supreme Court.

REVIEW OF PPA AND REPUDIATION OF THE PROJECT BY THE SHIV SENA - BJP GOVERNMENT

36. Though the writ petitions filed by way of public interest litigation challenging the Dabhol Power project and the PPA were dismissed by this Court and the Delhi High Court and the Special Leave petition against the decision of this Court in P.B. Sawant's case dismissing the writ petition as barred by principles of res judicata was also rejected by the Supreme Court, two important political parties in the State, viz., Shiv Sena and BJP, who were opposing the project on the floor of the State Assembly and outside, were not satisfied with the decisions of the High Court and the Supreme Court and continued with their tirade against the State Government which had approved the project and entered into the PPA. When the elections to the State Assembly in Maharashtra were notified to be held in February 1995, it was made an election issue. In fact, the Shiv Sena - BJP alliance made it a part of their election manifesto. After coming to power after the elections and assuming office on 14th March 1995, the Shiv Sena - BJP Government constituted a Cabinet Sub-Committee on 3rd may 1995 headed by the Deputy Chief Minister, Shri Gopinath Munde. The Munde Committee submitted its report to the State Government in July, 1995. In its report, after setting out the chronology of events leading to the PPA, the Munde Committee observed :

"The conduct of the negotiations shows that the sole object was to see that Enron was not displeased - It is as if Enron was doing a favour by this deal to India and to Maharashtra. In fact, the entire negotiation with Enron is an illustration of how not to negotiatiate, how not to take a weak position in negotiations and how not to leave the initiative to the other side."

Dealing with the question of lack of competitive bidding, the Committee remarked :

"By not exploring the possibility of inviting another party capable of setting up such a project, the State Government deprived itself of the advantage of competitive bidding in the evaluation of the project. It is this one to one dealing with Enron and absence of competition that led to secrecy and lack of transparency in the negotiation and handling of Rs.10,000 crore contract. As a result of this, the State Government could not resist successfully the insistence of Enron on confidentiality of negotiations for commercial or other reasons and ultimately this resulted in an uneven agreement. The Sub-Committee is aware that matters relating to lack of competitive bidding and secrecy in negotiations have been agitated before the High Court. While the High Court has said that the course followed by the State Government is not illegal or arbitrary, this does not mean that this is the best method especially in respect of transactions involving public money there transparency is by far the most important criterion so as to bring credibility in Government functioning."

The Munde Committee summed up its opinion on this aspect of the controversy in the following words :

"There was no effort on the part of the then Government to explore the possibility of involving another party interested in making private investment in the new power policy in India out of a number of multi-national parties contacted by government of India during their visit abroad to market the power sector in India. The Sub-Committee has, therefore, no hesitation in concluding that this basic failure of the State Government that led to further problems in the one to one negotiations."

The Committee also referred to the testimony of Ms. Linda Powers, Vice President, Global finance of Enron Development Corporation before the Committee of U.S. House of Representatives, wherein she has stated that Enron spent an enormous amount of its own money - approximately $ 20 million on this education and project development alone, not including any project costs, and observed as follows :

" The Sub-Committee feels that these remarks need further clarification."

The Committee also examined the reasonableness of the capital cost of the project and the question whether any unusual or undue concession had been given for the project.

The findings of the committee on some of the aspects are set out below :

"(i) On the question of competitive bids:

The previous government has committed a grave impropriety by resorting to private negotiations on a one to one basis with Enron and under circumstances which made the Enron/MSEB arrangement on Dabhol to lack transparency ... Therefore, the Sub-Committee strongly disapproves of the one-to-one negotiations with Enron and is clearly of the view that it violates standard and well-tested norms of propriety for public organisations.

(ii) On whether there was any secret or off the record negotiations :

Considering the records available with the State Government and the MSEB we are led to the irrestible conclusion that they are not the only guide to what actually happened. it is reasonably clear that several unseen factors and forces seem to have worked to get Enron what it wanted.

(iii) On whether under favours and concessions have been given for the project :

Several unusual features of the negotiations and final agreement have been pointed out by the Sub-Committee in the report which makes it clear that whatever Enron wanted was granted without demur.

(iv) whether the rate for power from Dabhol plant is reasonable :

The Sub. Committee is of the view that because of the denomination of tariff for power in U S dollars and other reasons the consumer will have to pay a much higher price for power than is justified. This is clearly not reasonable."

The Committee summed up its conclusion and recommendations thus :

"The Sub-Committee having examined the issues and having listed the deficiencies as above is unanimously of the view that the arrangement in force is not tenable because of the infirmities pointed out above in the terms and conditions of the contract. It, therefore, recommends that Phase-II of the project should be cancelled and Phase-I should be repudiated."

On receipt of the Munde Committee report, the Chief Minister of Maharashtra, Shri Manohar Joshi, made a statement on the floor of the Assembly on 3rd August 1995 wherein, after setting out at length the events and circumstances leading to the PPA between the MSEB and Dabhol Power Company, it was observed :

"The speed and urgency with which this agreement was reached, must be categorised as "Enron came, Enron saw and Enron conquered."

It was further observed :

"I am surprised that on one side the Central government declared open policy in economic sphere and prophesized competition amongst indigeneous industries so that commodities and services can be made available for consumers at the lowest rates whereas on the other hand in the energy sector it was not trying to encourage even minimum controlled competition amongst foreign investors. It is not necessary to elaborate reasons behind it for any wise person."

Referring to the various decisions of this Court, the Chief Minister said :

"I am aware that various courts have discussed and ruled that in not inviting the competitive tenders and maintaining secrecy of the deal, no unfair practice was used. The courts have also ruled that not inviting the competitive tenders is not illegal. But it is necessary to invite competitive tenders whereever public finance is to be used for the sake of transparency. The Central Government has also now changed its policy and has emphasised that competitive tenders be invited, since it realised its mistake."

The Chief Minister also referred to the report of the Munde Committee and said that considering the recommendations of the said committee, the PPA should not be allowed to continue as it is. The Chief Minister went on to say :

"We had to bear with loss because the government did not undertake honest negotiation with Enron. I do not know where the share went."

The Chief Minister declared :

"This agreement is anti-Maharashtra agreement. This agreement is mindless and devoid of self-respect and to accept this agreement as it is shall amount to cheating the public. This Agreement can never be called an agreement and therefore it is important to uphold self respect and interest of Maharashtra by cancelling this agreement even if that results in some financial burden. It is equally important to tear apart those who signed such agreement. therefore the State Government has decided that MSEB be informed about the decision of State government and it be asked to take further measures as per law."

The Chief Minister summed up the decision of his government thus :

"1) Since we are empowered to cancel stage-2 of the project, the Cabinet has decided to cancel the same and this decision shall be informed to Energy Department and MSEB.

2) The cabinet has decided to abrogate the agreement for stage-1 and to stop work of Enron project and orders for stoppage of work shall be given immediately."

Accordingly, the MSEB served a stop work notice on Dabhol.

FILING OF SUIT BY THE STATE GOVERNMENT BEFORE THIS COURT SEEKING A DECLARATION THAT THE PPA WAS NULL AND VOID :

37. Therefore, the State Government filed a suit in this Court, being Suit No.3392 of 1995, on 6th September 1995, seeking a declaration that the PPA dated 8-12-1993, the Government of Maharashtra Guarantee dated 10-2-1994 and the State Support Agreement were all invalid and void on the ground of fraud and misrepresentation on the part of Dabhol and being in violation of public policy. In the above suit, serious allegations of corruption, bribery and fraud were made against Dabhol, Enron and various authorities. It may be expedient to set out below some of the allegations from the plaint :-

"(i) The action on the part of the 1st defendant (Dabhol) in unilaterally waiving compliance with various conditions precedent (by letter dt.25-2-1995) were effectuated and conceived in fraud and were not bonafide and this act alone (altogether apart from the principal and other agreements being void for violation of laws and public policy on the grounds stated hereinbelow) renders the agreement as void.

(ii) The unholy haste with which the purported financial closure was sought to be achieved was clearly in order to reap the benefit of the huge sum of US $ 20 million admittedly already spent by the principal share holders of the 1st defendant (ENRON) described by them ephemistically as 'Educational expenses'.

(iii) The PPA is null and void, ab-initio inter alia on account of its being violative of several statutory provisions, public policy, consumer interest, public interest and interest of the State, suffers from the vide of misrepresentation by the 1st defendant (Dabhol) and/or its principal shareholder ENRON and is conceived in fraud.

(iv) The object of the principal agreement was opposed to public policy.

(v) The documents particularly PPA as well as other documents adjunct to PPA are in violation of statutory provisions including the Electricity (Supply) Act and are fradulent in law and/or defeat the provision of law and are opposed to public policy.

(vi) The PPA and adjunct documents inter alia Government's State Support Agreement and Guarantee are also illegal and void because there was active fraud and/or misrepresentation on the part of Dabhol and Enron.

(vii) The PPA, read with other subsidiary contracts and guarantee, insulates Dabhol's profits from every contingency such as change in law, change in tax even income tax as well as such contingencies like fire, earthquake, strikes, lock outs, which would in any way affect the functioning of its plant. For a state agency to assume the consequences of such normal business risks of a private company is also contrary to public policy."

The following prayers were made in the suit :-

"(a) that this Hon'ble Court may be pleased to declare that the transactions covered by the PPA dated 8-12-1993, the government of Maharashtra Guarantee dated 10-2-1994 and the State Support Agreement are invalid and void, inter alia, on the grounds of fraud and misrepresentation on the part of the 1st defendant (Dabhol) and violations of public policy.

(b) That in any event this Hon'ble Court may be pleased to declare that the Government of Maharashtra Guarantee, dated 20-12-1994 and the State Support Agreement dated 24-6-1994 are per se violative of the provisions of the Constitution and/or law and/or are contrary to public policy and as such void;

(c) That this Hon'ble Court may be pleased to declare that the contractual provision with respect to arbitration contained in the amended PPA, the Government of Maharashtra Guarantee and the State Support Agreement are contrary to section 28 of the Contract Act and section 47 of the Arbitration Act, 1940 and are null and void, illegal, inoperative and incapable of being performed."

This plaint was declared and verified by Shri Nimamuddin Patel, Deputy Secretary, Department of Energy, Government of Maharashtra.

INITIATION OF ARBITRATION PROCEEDINGS IN LONDON BY DABHOL AND SUBMISSIONS OF THE STATE GOVERNMENT BEFORE THE ARBITRATORS :

In the meantime, in terms of the provisions of the Arbitration Agreement, Dabhol served two notices dated 4-8-1995 and 14-8-1995 on the State Government. The State Government appointed its arbitrator and filed "outline submissions on Jurisdiction" before the arbitrators. In the said submissions, the state Government referred to the suit filed by it in this Court for a declaration that the PPA was null and void and the allegations made against Dabhol on payment of illegal bribes to the officers of MSEB. In the above submissions, the State Government had stated as follows:

" In the proceedings in the High Court of Bombay, it is alleged that payments etc were made by the claimant in these arbitrations by way of illegal bribes. A contract which involves the bribery of a public official or officer is a contract procured by the commission of a criminal offence. Not only is the making of a bribe a criminal offence, it also means that the officers and agents of the Maharashtra State Electricity Board (MSEB) who purported to contract on behalf of the Board were exceeding their authority. An employee or agent has no authority to bind his principal to a fradulent transactions. The consequence of this is that the MSEB were not contractually bound by the actions of their employees or agents purportedly on their behalf. This means that the MSEB never entered into the PPA. It was an agreement made by Officers without authority to act. It therefore does not bind the MSEB."

The contentions of the State Government before the arbitrators were :

" A contract procured by a bribe is illegal and void both under English and under Indian law. The effect of that is to render the PPA illegal and void. Since the SSA and the GOM Guarantee are ancillary to and supportive of the PPA, they are also tainted by the same illegality. This would be so under both English and Indian law. The arbitration clauses form part of these later two agreements. However they are also tainted by the same illegality. They are in consequence also void."

The submissions of the State Government before the arbitrators were as follows :-

" When these disputes spill over into major issues of public law (as well as involving allegations of bribery of public officials) it is inappropriate for arbitrators to proceed as long as these issues remain pending incourt proceedings. Arbitrator should not regard themselves as no more than the servants of the parties in resolving disputes referred to them by the parties. They should appraise their role and function and its scope and limits in the light of the nature of the issues that have arisen, their implications for the governmental and court process and the likelyhood of the non-arbitrable matter being brought before the appropriate court. Arbitrators should, at all costs avoid proceeding in a manner which might be seen to be or thought to be setting themselves up in opposition to, or in competition with, the appropriate court."

Renegotiation with Enron, Revival of the project and the PPA and execution of the Modified PPA.

38. During the pendency of the suit and the arbitration proceedings, the State Government initiated discussions with the officials of Enron and Dabhol about the terms of revival of the project. A negotiating group was constituted for that purpose on 8th November, 1995. The negotiating group proposed certain terms and conditions to Dabhol which were accepted by it vide its letter dated 15th November, 1995. The negotiating group thereafter submitted its report to the State Government on 19th November, 1995 recommending revival of the project. The State government, to quote the words of the Chief Minister in the affidavit filed before this Court on 2nd November, 1996, "Considered the report and obtained some concessions from the Company (Enron and Dabhol) specifically in tariff, environment protection and absolving the cost of suspension of the project" and arrived at a settlement and in January, 1996 announced its decision to revive the project. The above decision of the Government to revive the entire project including Phase I and Phase II on the terms agreed by Dabhol with the negotiating group was communicated to the President of Dabhol by Shri Ashoke Basak, Secretary (Energy), Government of Maharashtra, vide its letter dated 3rd February, 1996. The PPA was modified accordingly.

The State Government thereafter withdrew the suit filed by it in the Court and Dabhol abandoned the arbitration proceedings initiated by it in London.

Challenge to PPA and modified PPA by the Petitioners.

39. The petitioners have now challenged both the PPA and the modified PPA. The challenge to the original PPA in the writ petition is not only on the basis of the materials which came to light consequent to the scrapping of PPA, revival thereof, filing of the suit and the submissions before the arbitrators, viz., corruption, bribery, fraud and misrepresentation, but also on the same grounds and on the basis of the very same materials on which it had been challenged earlier before this Court in Ramdas Nayak's case and P.B.Samant's case, e.g., non-compliance with the provisions of the Electricity (Supply) Act, absence of competitive bidding and lack of transparency. The furnishing of guarantee and counter guarantee has also been challenged on the same grounds on which it had been challenged earlier.

40. The challenge to the original PPA on the basis of the materials available at the time of the filing and disposal of the earlier writ petitions is opposed by the respondents, inter-alia, on the ground of bar of res judicata and laches and delay. On consideration of the facts and circumstances of the case set out above, we feel that the challenge of the petitioners in the writ petitions has to be dealt in two parts : one, challenge on the basis of materials available at the time when the earlier writ petitions were heard and disposed of; second, on the basis of fresh material regarding corruption, bribery, fraud and misrepresentation brought out by the state Government itself subsequent thereto and scrapping of the project and the PPA on that basis.

Challenge to the PPA, guarantee and counter guarantee on the basis of the materials available at the time of hearing and disposal of earlier writ petitions whether sustainable in view of the principles of res judicata and laches and delay -

41. So far as the challenge to PPA, guarantee and counter guarantee on the basis of materials available at the time of the hearing and disposal of the writ petitions in Ramdas Nayak's case and P.B.Samant's case is concerned, we find merit in the submission of the learned counsel for the respondents that it is barred by principles of res judicata. We also find force in the objection of the respondents to the maintainability of the writ petitions to that extent on the ground of laches and delay. The doctrine of res judicata is based on the need of giving a finality to judicial decisions. What it says is that once a res judicata, it shall not be adjudged again. This doctrine is based on three maxims : (i) Nemo debet his vexari pro una et eadem causa, i.e. no man should be vexed twice over for the same cause; (ii) interest republicae ut sit finis litium, i.e. it is in the interest of the State that there should be an end to a litigation; and (iii) res judicata pro veritate accipitur, i.e. a judicial decision must be accepted as correct. The rule of res judicata is not a technical rule, it is a rule of public policy. As stated in Corpus Juris (Vol 34, p.743), it is rule of universal law pervading every well regulated system of jurisprudence. it is founded on justice, enquity and good conscience.

42. In India, the principle of res judicata is embodied in section 11 of the Code of Civil Procedure, 1908 ("CPC"). Section 11 of the CPC, so far as relevant, reads :

"11. Res judicata. - No court shall try any suit or issue in which the matter directly and substantially in issue has been directly and substantially in issue in a former suit between the same parties, or between parties under whom they or any of them claim, litigating under the same title, in a Court competent to try such subsequent suit or the suit in which such issue has been subsequently raised, and has been heard and finally decided by such Court.

- - - - - -

Explanation IV. - Any matter which might and ought to have been made ground of defence or attack in such former suit shall be deemed to have been a matter directly and subsequentially in issue in such suit.

Explanation VI. - Where persons litigate bona fide in respect of a public right or of a private right claimed in common for themselves and others, all persons interested in such right shall, for the purposes of this section, be deemed to claim under the persons so litigating."

This section thus puts a bar on the trial of any suit on issue in which the matter directly and substantially in issue had been directly and substantially in issue in a former suit between the same parties. Though section 11 applied to civil suits, the doctrine of res judicata embodied therein has been applied to all litigations including writ petitions. As observed by Chandrachud, J. (as he then was) in Lal Chand v. Radhakishan, AIR 1977 SC 789, the principle of res judicata is conceived in the larger public interest which requires that all litigation must, sooner or later, come to an end. It is also well-settled by now that the general principles of res judicata apply even to writ petitions. The following observations of Supreme Court in Dayarao v. State of UP, AIR 1961 SC 1457 are pertinent :

"It is in the interest of the public at large that a finality should attach to the binding decisions pronounced by Courts of competent jurisdiction, and it is also in the public interest that individuals should not be vexed twice over with the same kind of litigation."

Explanation IV appended to section 11 of the CPC contains the rule of constructive res judicata. It provides that any matter which might have and ought to have been made ground of defence or attack in the former suit should be deemed to have been a matter directly and substantially in issue in that suit. This principle of constructive res judicata is equally applicable to writ petitions. As such, pleas which were within the knowledge of the petitioners and could have been taken in the writ petition but were not taken would also be barred by the principle of constructive res judicata. As held by the Supreme Court in Workmen of Cochin Port Trust v. Board of Trustees, (AIR 1978 SC 1283) when any matter which might or ought to have been made a ground of defence or attack in a former proceeding but was not so made, then such a matter in the eye of law, to avoid multiplicity of litigation and to bring about finality in it, is deemed to have been constructively in issue and, therefore, is taken as decided. so far as the applicability of the doctrine of res judicata to public interest litigations is concerned, the principle embodied in explanation VI to section 11 of the CPC would apply. The said explanation provides, inter alia, that for the purposes of applicability of bar of res judicata under section 11 to cases where persons litigate bona fide in respect of a public right for themselves and others, all persons interested in such right shall, for the purposes of section 11, be deemed to claim under the persons so litigating.

43. We may now examine the facts of the case to decide whether the challenge of the PPA and guarantee and counter guarantee is barred by the principles of res judicata in view of the decisions of this Court in Ramdas Nayak's case and P.B. Samant's case and the decision of the Delhi High Court in Siddha Raj Dhadda's case. In Ramdas Nayak's case, the issue was the validity of the PPA which was challenged on various grounds, viz. lack of competitive bidding and settlement of the deal by one-to-one negotiations, lack of transparency violation of the provisions of the Electricity (Supply) Act, and viability of the project. Lack of proper concurrence was also specifically taken as a ground by way of rejoinder. The furnishing of guarantee and counter guarantee was also challenged as being violative of provisions of the Constitution. This Court dismissed the writ petition by a speaking judgment. A fresh writ petition by way of public interest litigation before the Delhi High Court to challenge the PPA by one Saddha Raj Dhadda and others on the ground, inter-alia, of lack of proper and legal concurrence of CEA, and furnishing of guarantee and counter guarantee was dismissed by that Court in view of the decision of this Court in Ramdas Nayak's case. While doing so, the Delhi High Court observed that the act of the petitioners amounted to shopping for justice in the garb of public interest litigation which could not be permitted. The attempt to rake up the very same issue again by filing a fresh writ petition challenging the PPA on the ground of lack of proper concurrence of CEA and the guarantee and counter guarantee by filing a writ petition by way of public interest litigation was also failed by this Court in P.B.Samant's case, by dismissing the petition on the ground, inter-alia, of bar of res judicata in view of the decision of this Court in Ramdas Nayak's case and Delhi High Court in Siddha Raj Dhadda's case. While dismissing the writ petition in P.B.Samant's case this Court observed :

"Addition of some new ground of challenge or rephrasing or elaborating the relief cannot take the case out of the bar of res judicata."

This Court also observed :

" - - - it is a repetitive litigation on the very same issue coming up before the courts again and again in the garb of public interest litigation. It is high time to put an end to the same."

SLP against the above decision was rejected by the Supreme Court. For the same reason, the challenge to the PPA in these writ petitions on the ground of infirmity in the concurrence of the CEA and other grounds which were grounds of attack in the earlier writ petitions, is barred by the principles of res judicata. Even, otherwise, it would have been barred by the principles of constructive res judicata.

44. As regards objection of the respondents to the maintainability of the writ petitions, in so far as it pertains to the challenge to the original PPA, guarantee and counter guarantee on the grounds available before the scrapping of the PPA by the present Government on the ground of laches and delay, we are of the view that the above objection needs serious consideration. As earlier stated, the discussions, deliberations and negotiations about the project were going on for about two and half years to the knowledge of all concerned. the signing of MOU with Enron, selection of site and finalisation of the deal were all widely publicized. Even the original PPA was signed on 8th December 1993. The said PPA was challenged before this Court in Ramdas Nayak and others. Even at that stage, strong objection was taken by the respondents about the maintainability of that writ petition on the ground of laches and delay. though that writ petition was dismissed by this Court by a speaking order, referring to the above objection it was observed that there was considerable force in the said objection. After about two years of the disposal of the said petition and other petitions thereafter, this is another attempt to challenge the same afresh on the very same grounds. There is no explanation for such delay. The question is how far such unexplained delay or laches on the part of the petitioners is fatal to the writ petition. It is well-settled that those who want to invoke the extra-ordinary remedy available under article 226 of the Constitution should come to the Court at the earliest possible opportunity. Laches and unexplained delay on their part is adequate ground for refusing relief under article 226. Similarly, persons or parties challenging government or executive action in the public interest must move the Court before other rights of innocent parties emerge. The Courts cannot be asked to inquire into belated and stale claims and take note of the challenge made by persons or organisations who do not care to do so in time. The High Court may not exercise its discretion and refuse to grant relief if the long unexplained delay on the part of the petitioners to assert their right is likely to cause prejudice to the other side. Utmost expedition is a sine qua non for such claims. It may be appropriate in this connection to refer to the following passage from the decision of the Supreme Court in P.S.Sadasivaswamy v. State of Tamil Nadu, AIR 1974 SC 2271 :

" - - - it would be a sound and wise exercise of discretion for the Courts to refuse to exercise their extraordinary powers under Art.226 in the case of persons who do not approach it expeditiously for relief and who stand by and allow things to happen and then approach the Court to put forward stale claims and try to unsettle settled matters."

This principle would apply with full force to public interest litigation where the challenge is made by persons or organisations claiming themselves to be vigilant and watchful. Such persons are expected to act fast and approach the Court at the earliest possible opportunity. If they don't do so, allow the things to happen, and approach the Court at a belated stage when rights have emerged in favour of third persons pursuant to the impugned executive action, the Court should be extremely slow and circumspect to entertain their claim as otherwise there is every likelihood of misuse of the process of the Court for extraneous purposes.

45. In the instant case, obviously there is a long delay on the part of the petitioners in moving this Court to challenge the original PPA, etc., There is no explanation whatsoever, not to speak of plausible explanation, for the same. The petitioner, Center of Indian Trade Unions, is a well established trade union affiliated to an important political party. They have filed this petition as public interest litigation. The petitioners cannot claim that they were not aware of the PPA. there is no dispute about the fact that they did not challenge it earlier. They even did not bother to intervene when it was a subject matter of challenge before this Court in the year 1994. They were least concerned with the PPA, guarantee and counter guarantee till the original PPA was scrapped and a modified PPA was entered into by the present Shiv Sena - BJP Government. No explanation has been rendered for the same. Entertaining such challenge at such belated stage will cause great injustice to the contracting parties for no fault of their own. In our view, those who purport to work in the public interest and challenge government action, not for personal gain but for the benefit of the people at large, must be vigilant and watchful and have due regard for the rights of innocent parties affected by their action. In that view of the matter, the petitioners cannot be allowed at this stage to challenge the original PPA on the basis of the material that were available before its scrapping and revival. The writ petition, to that extent, is not maintainable on the ground of unexplained delay.

Challenge to (i) the PPA on the basis of fresh materials coming to light after the disposal of earlier writ petitions and (ii) the modified PPA.

So far as the challenge to the PPA on the grounds of corruption, bribery, fraud and misrepresentation is concerned, it is neither barred by res judicata nor there is any delay on the part of the petitioners in approaching this Court which may disentitle them to any relief under article 226 of the Constitution. Admittedly no material was available to the petitioner or the public to make such allegations and to justify the same. It is only from the Munde Committee Report, the testimony of the Enron executive Ms. Linda Powers, the statement of the Chief Minister made on the floor of the Assembly on 3rd August 1996, scrapping of the project and the PPA, the suit filed in this Court by the State Government seeking a declaration that the PPA was null and void and the submissions of the State Government before the arbitrators that people could know that the PPA was induced by corruption, bribery, fraud and misrepresentation. The petitioners filed these writ petitions only when they found that despite such serious allegations the project was revived by the State Government and a modified PPA was entered into. This challenge, therefore, requires careful consideration.

46. There is no dispute about the fact that categorical allegations of corruption, bribery, fraud and misrepresentation were made by the State Government in the plaint in the suit filed in this Court. Equally uncontroverted is the position that the very same allegations were reiterated by the State government before the Arbitrators in London and it was contended that the PPA was void on that count. The allegations are very serious, more so when levelled by the Government of the State, and if found correct, will have a serious effect on the PPA. The PPA in that event may have to be held to be in conflict with the public policy of India. Similarly, if a contract is obtained by a party by bribing the officials of the government or its instrumentality, very many important issues in regard to the validity of such contract would arise. Otherwise also, even under section 19 of the Indian Contract Act, an agreement caused by fraud and misrepresentation is voidable. But all those legal issues would arise only when there is material to justify the charge. In the instant case, the petitioners do not have with them any material as such to justify the charge of corruption, bribery, fraud and misrepresentation. The foundation of their challenge to the PPA and the modified PPA is the charge levelled by the State Government itself in the plaint in the suit filed in this Court which, according to the petitioners, amounts to admissions of the State government under section 17 of the Evidence Act. However, a peculiar and unprecedented situation has arisen in this case. Before this Court, the State Government has totally backtracked on the corruption and bribery issue. The counsel for the State Government, Mr. Jethmalani, made a categorical statement before this court that the allegations of corruption, bribery, fraud and misrepresentation were wholly unfounded and baseless. Those allegations were made by the present Government only with a view to scrapping the project in terms of its promise to the voters during the elections to the State Assembly. It was stated by the learned counsel that there was not an iota of evidence in that regard with the State government which it could place before this Court. The statements made about the project from time to time were merely political rhetoric. The stand of the State Government before this Court is that Enron Issue was an election issue and a part of the election manifesto of the Shiv Sena - BJP alliance in the elections to the State Assembly of Maharashtra held in March 1996. In the manifesto, the Shiv Sena - BJP alliance had promised to review the PPA if it came to power in the State after the election and to scrap the same. After coming to power, it took it as a mandate of the people against Enron and the Dabhol Project, reviewed the project and the PPA and scrapped the same. This exercise, beginning with the review of the project by the Munde Committee and culminating into the scrapping of the project and the PPA, according to the counsel for the State, was a political compulsion. We were told by Mr. Jethmalani, learned counsel for the State Government, that the repudiation of the project and the PPA was the sequel to the course of political controversies in regard to the project which had been going on ever since Enron came into the scene to set up the project. We were further told that the Munde Committee had put its recommendations in the mildest possible terms. It had never alleged corruption, bribery, fraud, etc. The report, in fact, dealt only with the economic aspects of the project and it was in the light of its finding in that regard that it recommended the scrapping of the project and the repudiation of the PPA. Refering to that part of the report which deals with the testimony of Enron Executive Ms. Linda Powers, it was stated that the Committee even refrained from making any comment except saying that her statement required clarification. Similar is the stand of the State Government in regard to the statement of the Chief Minister on the floor of the Assembly on 3rd August, 1996. According to Mr. Jethmalani, the learned counsel for the State, the Chief Minister's statement is also mainly on economic aspect and there is no allegation of corruption, bribery, etc.. The case of the State Government before us is that the whole exercise was motivated with the desire to get some concessions from Enron by way of reduction in the capital cost of the project and the tariff and get out of some of stringent clauses of the agreement. The filing of the suit and the allegations of corruption, bribery, fraud, etc. made therein, according to the State Government, were due to wrong legal advice received by it from its legal advisers. The suit, according to the State Government, was filed by it to get out of the serious legal implications of its decision to scrap the project and the huge damages with which it might have been saddled by the arbitrators. It was a ploy to stall the arbitration proceedings, says the State Government. The allegations, otherwise, were without any basis or material whatsoever. the State Government is trying to get out of its own action by telling us that in this process it could get some concessions from Enron resulting in reduction of the cost of the project and lowering the tariff which is in the interest of the people of Maharashtra in particular and the Country as a whole. Speaking for the State of Maharashtra before us, Mr. Jethmalani tried to give a dignified burial to the controversy by saying that the act of scrapping the project and the PPA was motivated by political consideration and was an act of inefficient Government whereas its decision soon thereafter not to persist with the folly and to accept the offer of renegotiation and enter into a modified PPA was an act of sober statesmanship as otherwise it might have resulted into serious economic consequences and a disastrous arbitration award. The above stand of Mr. Jethmalani, learned counsel for the State of Maharashtra, gets full support from the affidavit of the Chief Minister, wherein he has stated that the suit was filed in this Court merely as a strategy in confrontation of the government with Dabhol and was aimed not only as a counter to the arbitration proceedings but also as a bargaining counter for any renegotiation with Enron. According to the Chief Minister, the economic aspects in the suit were based on the Munde Committee Report and the allegations of corruption, bribery and misrepresentation on reports appearing in the newspapers. The Chief Minister seems to justify his action on the ground that as a result thereof the State Government could obtain some concessions from Enron in tariff, that the renegotiated project has benefitted the people of Maharashtra and the country as a whole. we were also told that the allegations of bribery, corruption, fraud, etc. reported in the press were later found to be baseless and unfounded. The Chief Minister has justified the withdrawal of the suit on the ground that in the facts and circumstances it was in the public interest to do so. We are told that the renegotiation was induced by two considerations : (i) the continuity of the State of Maharashtra as a single corporate entity, and (ii) the effect of the repudiation, even if justified, on international investment climate in the country. Though we appreciate the frank statement of Mr. Jethmalani, learned counsel for the State of Maharashtra that the act of scraping the project and the PPA was an act of an inefficient government motivated by political compulsions and its decision not to persist with the folly and to renegotiate the project and enter into the modified PPA was an act of sober statemanship, we are distressed to note the extent to which political compulsions or motivations could get priority over public interest.

47. We have given our anxious consideration to the effect of the above stand of the State government to the fate of the litigation before us. We are placed in a very peculiar situation which, in our view, is unprecedented. The statement of the State Government is the foundation of the challenge of the petitioners to the PPA and the modified PPA. The State Government has now backtracked. Though the government cannot deny the statements or the allegations made by it because they were made on verification in the suit filed in this Court and before the arbitrators in London, it wants to retract the same on the ground that all those allegations were baseless and unfounded. The Government has gone that far to say that the filing of the suit and the allegations made therein were not bonafide but intended to stall the arbitration proceedings and to open a counter for re-negotiation. We express our grave concern over such conduct of the Government. We are of the clear opinion that it is not only unbecoming on the part of the Government to do so but a reprehensible conduct. The State is a legal entity having a personality of its own, quite different and distinct from the political party in power or the persons in office. The contractual liability of the State under the Constitution of India is the same as that of an individual under the ordinary law of contract. The government of a State may sue or be sued by the name of the State. The contractual obligations of the State are governed by the law of contract and not by the personal whims and fancies of the people in power or the philosophy of the political party to which they belong. The State cannot get out of its contractual obligations unilaterally except in accordance with the laws governing the contracts. In India, under the Indian Contract Act, a party to the contract cannot repudiate the contract merely because it feels that the terms of the contract are onerous or that the deal is tilted in favour of the other contracting party, unless the contract is void or voidable. The circumstances which render a contract void or voidable are clearly set out in that Act.

48. Moreover, we do find the statement of the State Government made before this Court to the effect that corruption was never alleged by it at any time except in the plaint in the suit and in the submissions before the arbitrators is factually not correct. We have once again glanced through the Munde Committee Report and the speech of the Chief Minister to verify the above claim. We find enough indications in the Munde Committee report which suggest corruption by those who were responsible for the deal and the PPA. To wit, the following conclusions of the Munde Committee :

"Considering the records available with the State Government and the MSEB, we are led to the irresistible conclusion that they are not the only guide to what actually happened. It is reasonably clear that several unseen factors and forces seem to have worked to get Enron what it wanted."

To quote further from the Munde Committee report :

"Several unusual features of the negotiations and final agreement have been pointed out by the Sub-Committee in the report which makes it clear that whatever Enron wanted was granted without demur."

In the statement of the Chief Minister on the floor of the Assembly on 3rd August, 1995, the following statements are pertinent in this connection :

"The speed and urgency, with which the agreement was reached, must be categorised as "Enron came, Enron saw and Enron conquered."

The Chief Minister further said :

"We had to bear the loss because the Government did not undertake honest negotiation with Enron. I do not know where the share went."

He went on to say :

"This agreement is an anti-Maharashtra agreement. This agreement is mindless and devoid of self-respect and to accept this agreement as it is shall amount to cheating the public. The agreement can never be called an agreement and, therefore, it is important to uphold self-respect and interest of Maharasthra by cancelling the agreement even if that results in some financial burden. It is equally important to tear apart those who signed such agreement."

The message of corruption, bribery and fraud is eloquent in the above statements. We are really amazed at the bald statements made by the government in support of its actions from time to time. When it wanted to scrap the project and decided to scrap it, it boldly said everything which it felt necessary to support the same. It talked of lack of competitive bidding and transparency, the speed and haste in finalising the project. It also condemned those who were responsible for the deal. It went to the extent of filing the suit in this Court and made all possible statements and allegations it thought necessary to get the PPA declared null and void by the Court. It worked the same way when it wanted to stall the arbitration proceedings. But once it decided to revive the project, it acted in the very same manner in which its predecessors in office had done. It forgot all about competitive bidding and transparency. The only transparency it claims is the constitution of the negotiating group. The speed with which the negotiating group studied the project, made a proposal for renegotiation which was accepted by Dabhol, and submitted its report is unprecedented. The negotiating group was constituted by the Government of Maharashtra on 8th November, 1995. It was asked to submit its report to the State Government by 7th December 1995. The Committee, we are told, examined the project, collected data on various similar other projects as well as internal bids including data on a similar project executed by Enron in the U.K., held considerable negotiations, settled the terms of revival of the project, got the consent of Enron and Dabhol to the same on 15th November 1995, just within a week of its constitution, and submitted its exhaustive report along with data and details to the Government of Maharashtra on 19th November, 1995, just 11 days after its formation, much before the 7th December, 1995 by which date it was required to submit the same. The speed at which the whole thing was done by the negotiating group is unprecedented. What would stop some one to say, as was said by the Chief Minister in the context of the original PPA, "Enron revisited, Enron saw and Enron conquerred - much more than what it did earlier".

49. However, we need not go in all those aspects because that is outside the scope and ambit of the powers of judicial review. for the very same reason, in course of hearing, we had refused to entertain arguments about the economic aspects of the original PPA as also the modified PPA. It was contended before us by the petitioners that much more has been conceded in favour of Enron or Dabhol than what was given them by the original PPA. We were told that by the modified PPA, Dabhol has been allowed to set up a project of a size even bigger than both phases of the original project taken together. The claim of reduction of tariff, it was contended, was based on jugglery of figures and was a mere eye-wash. The modified PPA, it was further contended, was not in the interest of the people of Maharashtra and the country as a whole. As indicated earlier, it is not within the domain of this Court in exercise of its power of judicial review to examine the merits of the decision of the Government. That will amount to sitting in appeal over governmental decision which is not permissible. We have dealt with this aspect of the matter in Ramdas Nayak's case. The legal propositions emerging from the discussions in that decision have been summed up earlier in this judgment. We reiterate and reaffirm the same and in view thereof, express our inability to go into the controversy regarding the comparative merits of the original project and the modified project or the economic viability thereof. In any event, one thing is obvious that at every stage it is the common man who has been taken for a ride during elections by the Shiv Sena - BJP alliance by making Enron an election issue and a part of its election manifesto and after coming into power, by reviewing the project and branding it as an anti-Maharashtra, anti-people, alleging corruption, bribery, fraud, etc., by scrapping the same and telling the people that the promise made to them to scrap the project had been fulfilled. When the Government decided to revive the same, it came out with a different statement that it had succeeded in snatching some concessions from Enron.

50. It is also pertinent to note that though an impression was given by the State Government to the people that the deal with Enron (PPA) had been scrapped, it was, in fact, never scrapped for reasons best known to the State Government. It is clear from the correspondence between Dabhol and the MSEB. Dabhol was told in categorical terms that the PPA had not been scrapped - they had only been asked to stop work. It is as if, from the very beginning, the PPA was never intended to be scrapped.

51. Be that as it may, the factual position that emerges from the above discussion leads to the conclusion that the petitioners have not been able to place on record before this Court any material justifying their allegations as regards corruption, bribery, fraud and misrepresentation. Consequently, we are left with no alternative than to reject the challenge of the petitioners to the PPA and the modified PPA on those grounds.

52. It may be expedient at this stage to refer to the submission of the counsel for the petitioners that if the contention of the State Government that the allegations of corruption,bribery, fraud, etc. made in the plaint filed in the suit were a part of the strategy of the Government in confrontation with Dabhol and were intended merely to stall the arbitration proceedings, it would amount to perjury. We have carefully considered the above submission. We, however, do not propose to enter into this controversy in these writ petitions. We leave that issue open.

53. We have also given our careful consideration to the submissions of Mr. Venugopal that Enron has been victimised for no fault of its own. We are, however, of the opinion that to some extent, 'Enron' is also responsible for vitiating the atmosphere and for the anti-Enron campaign. In our opinion, the multi-nationals who want to invest in developing countries should not indulge in tall-talks about educating the people of those countries. The decision of the multi-nationals to invest in that country is based on the security of its investment and lucrative returns on the same. it is not activated by the desire to help the resource-starved nations. They do not charity. They move out of their country for greener pastures or better returns. They should, therefore, act and behave like an investor or an industrial house and not as a government. In the present case, the statement of Enron executive Ms. Linda Powers lends support to our above opinion. there is no controversy about the fact that her statement caused great furore and misunderstanding in the minds of the people. When questioned about the propriety of the above statement by the Standing Committee on Energy (1995-96), the representative of Dabhol, Ms. Rebecca Mark had to express regret over the same and say :

"We have publicly said that the words used (by the representative) were inappropriate and could be misconstrued. We were apologetic for having used the word 'educated' in any context. The full sentence that was used in the testimony was that this was a learning process for all the parties involved. If there was any offence taken, for that we are extremely sorry."

54. In view of the foregoing discussions and for the reasons set out above, both these Writ Petitions are liable to be dismissed. However, before we do so, we would like to observe that though the petitioners have lost the litigation, they have succeeded in extracting from the State Government a clear statement to the effect that what they said against Enron and did in pursuance thereof was activated by political considerations. This case has highlighted to the people as to how, even after 50 years of independence, political considerations outweigh the public interest and the interest of the State and to what extent the Government can go to justify its actions not only before the public but even before the Courts of law.

55. In the result, both the writ petitions are dismissed. In the facts and circumstances, there shall be no order as to costs.

Petitions dismissed.