• PAGE ONE
• INDEX
• HOME

`Unpaid' bills: DPC invokes sovereign guarantees

Archana Chaudhary

MUMBAI, Sept. 17

DABHOL Power Company has invoked Government of India counter-guarantees for the April, May and June 2001 bills totaling Rs 381 crore.

The Government of India has to respond to the counter-guarantee claim by October 7, 2001, thirty days from the invocation, a DPC official told Business Line.

The company has invoked three separate sovereign guarantees for its April (Rs 136 crore), May (Rs 143 crore) and June (Rs 102 crore) bills on a case-to-case basis.

DPC had earlier drawn on the Maharashtra State guarantee for the same amounts.

According to the DPC spokesperson, MSEB failed to meet its contractual obligations towards payment of the April, May and June 2001 bills as a result of which the company had to draw upon the Government of Maharashtra guarantee on August 29.

``As the Government of Maharashtra also failed to honour their obligations, DPC was forced to draw upon the Government of India's counter-guarantee towards these dues on September 7,'' the spokesperson said.

For April 2001, DPC has simultaneously issued a preliminary termination notice to the MSEB apart from invoking the State and subsequently the sovereign guarantees.

Apart from the above measures, the company had already invoked the letter of credit for the Rs 136-crore April bill through its assignee, Bank of America, which the board had opposed in Mumbai High Court. The HC had stayed the invocation till September 2 1, 2001.

MSEB seeks SC clarification: MSEB has now moved the Supreme Court seeking clarification on its earlier judgment in which it had suspended the arbitration proceedings initiated by DPC and the use of escrow. The board had claimed that letter of credit is a form of escrow cover and DPC should not be allowed access till the dispute between DPC and MSEB is settled.

The three counter-guarantees which have been invoked were issued as per the power purchase agreement between DPC and MSEB. According to senior MSEB officials, the question of the board paying these bills did not arise as it had already rescinded the PPA on May 23, 2001.

The board suspended power purchases from DPC in May. Hence, the June 2001 bill includes the fixed charges of Rs 95 crore and interest payments due amounting to Rs 7 crore.