Ahmadi’s appointment as arbitrator in power dispute annulled

March 24th, 2008 - 1:29 pm ICT by admin  

By Rana Ajit
New Delhi, March 24 (IANS) The Supreme Court has annulled former chief justice of India (CJI) A.M. Ahmadi’s appointment as an arbitrator to resolve a dispute between the Gujarat government’s power generation company and a private firm. A bench of H.K. Sema and Markandey Katju last week invalidated Ahmadi’s appointment as an arbitrator between the Gujarat Urja Vikas Nigam Ltd and Essar Power Ltd.

The Gujarat High Court had appointed the former chief justice, approving a proposal by Essar Power Ltd.

The Supreme Court bench ruled that his appointment by the high court negated “the rule of the law” under the Gujarat Electricity Industry (Reorganization and Regulation) Act, 2003.

It said that only the Ahmedabad-based Gujarat Electricity Regulatory Commission, formed as per the provisions of the 2003 law, was empowered to resolve the dispute or to appoint an arbitrator to resolve it.

The bench also ruled that the provisions of the special law, aimed at reforms in the power sector, would have an overriding effect over other general laws, including the Arbitration Act.

The dispute between Gujarat Urja Vikas Nigam Limited and Essar Power Ltd arose over the latter’s failure to supply requisite power to the state.

According to a May 1996 agreement, Essar Power was given a licence to set up a power plant at Hazira near Surat in Gujarat with a capacity to generate 515 MW of electricity.

The licence stipulated that Essar Power would supply 300 MW to the state and the remaining 215 MW to its own group of companies.

In the event of Essar Power generating less than 515 MW, it was required to maintain a ratio of 300:215 in power allocation to the state and its own group of companies, the agreement stated.

It added that the state electricity board was to impose a penalty on Essar Power if it failed to allocate power to the state in the requisite proportion.

The agreement also stipulated that the two firms could resolve their disputes by referring it to a mutually agreed arbitrator as per the provisions of the Arbitration Act.

The Gujarat State Electricity Board was subsequently taken over by Gujarat Urja Vikas Nigam Limited, formed for reforming the state’s power sector.

As Essar Power defaulted in maintaining the requisite proportion of power allocation to the state, the state’s power firm imposed a penalty of Rs.5.37 billion ($134.72 million).

But Essar Power disputed the penalty amount and sought resolution of the dispute, proposing Justice Ahmadi’s name as arbitrator.

When Gujarat Urja Vikas Nigam did not accept the proposal, Essar Power went to the high court and sought its order for the appointment of Ahmadi as arbitrator.

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