The Supreme Court opened here on Tuesday the hearings into two appeals to resolve the conflict in judgements of the Sindh and Lahore high courts about the encashment of the power companies' bank guarantees amounting to millions of rupees. Attorney General Mohammad Makhdoom Ali Khan opened the government's case in the appeal against Rupali Power Limited (that had won an order from the Lahore High Court (LHC) for issue of a writ of mandamus), saying the judgement was without justifiable application of Doctrine of Estoppel. The Rupali Power had lost a bank guarantee of Rs 90 million to the Private Power and Infrastructure Board (PPIB) in 1996.
He was still on his feet before the First Bench presided over by Chief Justice Nazim Hussain Siddiqui, when the judge rose for the day, saying the hearing will be resumed on Wednesday, with the Attorney General at the rostrum. The other two judges on the Bench were Justice Javed Iqbal and Justice Abdul Hameed Dogar.
Before Makhdoom Ali Khan picked up the threads of his arguments after the tea break at 11.30 am, the Chief Justice intervened to say that he wondered if his bench was properly constituted under the Supreme Court rules to hear the cases.
He said neither the Attorney General nor the counsel for the parties had pointed out that in cases of this nature listed before him and his colleagues, a larger bench was required for resolution of a conflict in judgements.
Citing from Rules, Makhdoom Ali Khan as well as the other counsel said that the composition of a bench was the discretion of the Chief Justice. A petition, they said in unison, could be heard by a Division Bench of two judges, while an appeal required a full bench of three judges. The cases of the Rupali Power and the Spencer Powergen Companies, they said, were appeals and were being addressed to a proper bench.
The Chief Justice said, in case the parties had no objection, the Bench having heard -almost half the case, could proceed.
Syed Ali Zafar representing the Rupali Private Power Company is to follow the Attorney General, after which Muhammad Akram Shaikh will stand to argue the appeal of the Spencer Powergen against the judgement of the Sindh High Court (SHC).
The SHC has taken a different view of the circumstances that are identical to the Rupali Power Limited's case, and upheld the confiscation of its bank guarantee of Rs 33 million for failure to install a 330 MW power plant near Karachi.
Arguing the case for the Federation, as well as PPIB, the Attorney General narrated the history of the emergence of private power companies and the events leading to the award of contract to the Rupali Power Limited for setting up a power plant for 450 MW. The contractor had left the net power capacity at site 'unfilled.'
Later, it gave a bank guarantee for 450 MW, based on residual furnace oil or diesel, but later requested for the increase in its capacity to 484 MW, saying that such capacity plants were available with Canadian, American or Swiss manufacturers. In the alternative, it requested for an extension of six months in the financial close deadline if the capacity was to be retained at 450 MW.
The PPIB, the Attorney General said, agreed to the suggestion, provided a processing fees and an increased bank guarantee was provided to them.
The offer was, however, withdrawn after the Rupali Power did not respond to the demand in the stipulated timeframe. However, in October 1995, he said, another agreement, laying down five conditions and setting a new schedule for financial close, was signed between the parties. It called for a quadrupled performance guarantee and at the same time warned the company that future failures would entail cancellation of the Letter of Support and also encashment of the guarantee.
The Board also extended the time limit in the hope that the Rupali Power would meet its commitments, but it did not happen. The government as well the PPIB waited "for a reasonable period and finally were constrained to call for encashment of those ,guarantees just before their expiry."
Makhdoom Ali regretted that the LHC had not referred to the "factual aspects of the case and also documents produced" and it had just decided the case as a trial court with going into the evidence produced by the other party.
He also contested the observation that the PPIB's action was a case of promissory estoppel without a justifiable application of the Doctrine of Estoppel.
The Attorney General will resume his case before the judges when they re-assemble here on Wednesday.
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