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Petitioner: HABIBULLAH ENERGY LIMITED through General-Manager VS Respondent: WATER AND JUDGMENT
Court Name: Sindh High Court Judge(s): Azizullah M. Memon, Arshad Noor Khan Title:HABIBULLAH ENERGY LIMITED through General-Manager vs WATER AND
JUDGMENT
Reported As: 2008 YLR 2612 Result: Petition dismissed Judgment JUDGMENT ' AZIZULLAH M. MEMON, J.---Petitioner made the following prayers in this petition:-- (a) Declare that the petitioner being the most' responsive and lowest bidder was entitled to the grant of the lease of the plant. (b) Declare that the award of the lease to the respondent No,6 is without lawful authority and of no legal effect or consequence. (c) Grant any other relief as it may deem appropriate and proper in the circumstances of the case. ' Petitioner claims to be a company duly incorporated under the Companies Ordinance, 1984 and Mr. Nasiruddin Khan, its General Manager, Project Coordination has been duly authorized vide Board Resolution, dated 2nd November, 2006 to submit and file this petition. 2. According to the petitioner, the newspaper advertisement published in English Daily Newspaper Dawn, dated 26th July, 2003 invited applications for pre-qualification/expression of interest in privatization of the 150 MW Fluidized Bed Combustion Coal Fired Power Plant situated at Lakhra near Khanot in the District of Jamshoro, Sindh, by further stating that privatization of the said plant would be undertaken through the Sindh Privatization Commission as per the decision of the Federal Government and, therefore,_ the petitioner submitted its statement of qualification along with a covering letter, dated 27th February, 2004, and was duly found to be qualified and thus entitled to participate as a bidder in the privatization of the plant. It was alleged by the petitioner that Sindh Privatization Commission was totally ignored and bypassed and for some reasons, the privatization of the said plant (which had been taken over by the respondent No,1 WAPDA) was
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inordinately delayed but then the petitioner came to know on 12th December, 2005, that the then Prime Minister, issued directions to the respondent No,1, WAPDA, through respondent No,2 to undertake and complete the rehabilitation and increase the available capacity of the "Coal Fired Lakhra Power Plant" of 150 MW capacity consisting of three units of the capacity of 50 MW each, designed on the fluidized Bed Combustion. Technology, having been introduced in Pakistan for the first time by the Chinese using the Indigenous Lignite Coal of the Lakhra Field as fuel. 3. According to the petitioner, respondent No,6 (Associated Group) had already been pre-selected for the award of the contract in question and, therefore, in the first week of January, 2006, respondent No,6 approached respondent No,1, WAPDA, that a draft Memorandum of Undertaking for acquiring the said plant on lease for a period of 20 years, and "as an eye wash, the respondent No,1 approached some other "pre-qualified companies" during the month of March, 2006, asking for to submit their technical and financial evaluation by 22nd May, 2006, for leasing out the Lakhra Plant for rehabilitation and operation; petitioner further contends that since they had been pre- qualified earlier during the year 2003/2004, it was also called upon to submit its aforementioned evaluation, but petitioner was shocked and dismayed to know that the respondent No,1 had concealed and had granted to the respondent No,6 the "Right of First Refusal", viz., the right to match the lowest bid/offer, which came to knowledge of the petitioner when the bids/proposals were opened and the bid document submitted by the respondent No,6 was read out on 21st July, 2006, and further that respondent No,6 submitted its bid/proposal, which, inter alia, was expressly conditional upon "right of first refusal"; however, petitioner submitted its technical and financial proposal on 22nd May, 2006. 4. It is further contended that only two parties submitted their bids/proposals, viz. The petitioner and the respondent No,6; petitioner quoted levelised tariff at US Cents 5.17 per KWH based on an investment of US$ 13 million, whereas the respondent No,6 quoted US Cents 5.89 per KWH based on an investment of US$ 34 million; this was US Cents 0.62 higher than the offer of the petitioner and though respondent No,1 having found the proposals of the petitioner to be lowest than that of the respondent No,6, yet both proposals along with the comparative statements were sent to the respondent No,2 and further that one specified reference was also made in the comparison document in order to give weight to the party with experience in power generation, viz., the petitioner. Respondent No,1 held detailed discussions with both the parties on 19th June, 2006, as a result of which the petitioner offered a reduction in its levelised tariff to US Cents 4.994/KWH at 70 per cent plant factor. In the meanwhile, respondent No,2, vide its Secretary Letter, dated 14th June, 2006, advised the respondent No,1 to submit its analysis and recommendation on the two proposals "for apple to apple comparison" was "NEPRA, respondent No,3, and subject cited in such correspondence was "leasing out of Lakhra Coal Fired Power Station to Associated Group" viz., the respondent No,6; respondent No,1 referred the matter to respondent No,3, who refused to entertain the same on the ground that under the NEPRA Law and the Rules, only the Licensee, viz., the respondent No,5 was competent to make such a reference and that the respondent No,1 did not make any such reference; however, both the parties were summoned on 13th July, 2006 apparently for resolution of the matter, during which the Chairman, WAPDA, General Manager WPPO and General Manager Thermal attended and the petitioner offered a further reduction in its tariff by 0.5 Cents bringing it down to 4.494 Cents/KWH, but the matter could not be finally resolved and the respondent No,1 invited revised bidding from both the petitioner and respondent No,6 on 17th July, 2006, and a categorical representation was made in the said letter that the "decision will be based on the lowest levelised offered tariff"; petitioner submitted its revised bid quoting the levelised tariff at 4.432 Cent/ KHW and its bid was unconditional. However, respondent No,6 submitted two different optional and conditional bids at 5.208 Cents/KWH in the same envelop under Option No,1, and for other option he quoted 5.017 Cents/KWH. By further stating "these proposals are submitted
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without prejudice to our first right of refusal granted by WAPDA vide letter by Chairman WAPDA of May 15, 2006" of which petitioner came to know on 21st July, 2006 when the revised bids were opened and were read out by the General Manager (Thermal) reducing the entire exercise to a farce and nullity. The said General Manager also read out from the bidding papers of the two parties the breakup of the tariff as follows:-- Description of TariffHabibullah GroupAssociated Group Option IAssociated Group Option II Fuel 2.018 2.270 2.270 Var. 0 & M 1.250 1.365 1.001 Return on Equity 0.109 0.138 0.082 Insurance Cost 0.150 0.040 0.023 Fixed O & M 0.717 0.967 0.768 Debt Service 0.188 0.428 0.873 Total Levelized Tariff4.432 5.208 5.017 ' The comparison of the other parameters regarding investment and returns on equity are as under:-- Description Associated Group Option IIHEL Investment (MUSD) 14.604 13 Return on Equity 16% 15% Bonus in excess of 571 GWh 0.25 Cents/KWH Nil WAPDA Labour Cost etc. absorbed90% 100 Custom Duty Pass through Nil 1 US Dollar = Rs. 60 60 Indexation Mechanism Not indicated As per Nepra Guidelines Plant Insurance On AG Assets only Full Plant Taxes Pass through Pass through
5. Petitioner further asserts that the bid offered by him as absolutely clear as well as unconditional, accepting all the parameters as required by WAPDA, and it is also provided standard assumptions sheet made by NEPRA for determination of tariff as allowed by NEPRA which is a Statutory Regulatory Authority for determination of the Tariff to other independent power producers. The standard assumption sheet is as under:-- (a) 5% customs duty on its imports. (b) 100% WAPDA Staff liability regarding salaries, pension, benefits, gratuity, medical care and free electricity. (c) Insurance of the entire plant instead of petitioner own assets only. 6. On the other hand, the respondent No,6 submitted as under:-- (a) Treated customs duty as pass through item. (b) Offered to absorb only 90% staff liability. (c) Undertook Insurance of its own assets only. 7. Petitioner further asserts that in order to make on "apple to apple comparison" between the two bids, the following costs are to be deducted from the petitioner bid reducing its tariff 4.230 Cents/KWH as compared to respondent No,6' s tariff of 5.208 and 5.199 Cents/KWH under Option I and 5.017 and 4.398 Cents/KWH under Option II. Description Habibullah GroupAssociated Group Option-IAssociated Group Option-II
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10% WAPDA Staff 18.65 0.033 0.054 Insurance of Plant46.50 0.081 0.136 Customs Duty(p.a.)3.98 0.007 0.012 Total 0.18 0.202 8. According to the petitioner, after the deduction of above mentioned cost, petitioner bid tariff becomes US Cent 4.230/KWH, which is far below the quoted tariff of the respondent No,6 either 5.208 and 5.199 as per Option-I and 5.017 and 4.398 as per Option No,II. The petitioner further urges that respondent No,1 having already according to respondent No,6 the "first right of refusal" and somehow or the other manipulated the number and the figures, which were at considerable variance with the offer of respondent No,6. However, the General Manager (Thermal) WAPDA prepared an item note recommending respondent No,6 for award/grant of the lease disputed in this petition and respondent N6.1 confirmed and circulated the minutes of its meeting held on 12th August, 2006, whereby it decided to award the lease to respondent No,6, but such a meeting and the decision taken therein were kept as a very closely guarded secret from the petitioner, notwithstanding several letters including those, dated 9-8-2006, 10-8-2006, 17-8-2006, 23-8-2006, 29-8-2006 and 12-9-2006, and, therefore, the petitioner contends that the award of the lease in dispute of Lakhra Coal Power Plant for a period of 20 years by respondent No,1 to respondent No,6 is unlawful, illegal, tainted with mala fides, irrational and in violation of procedural propriety and duty to act fairly. 9. The petitioner has further urged that the award of the lease in dispute practically tantamount privatization of the plant on "build, operate and transfer" basis is not at all transparent and that 'the whole such exercise was an eye-wash and based upon deception and concealment of facts and further that in fact decision had already been taken by December, 2005/ January, 2006 to award the lease to the respondent No,6 without due process of law and the permissible procedure as laid down in the Privatization Ordinance and respondent No,1 had no authority under the law or any principle of equity, good conscience, propriety and fairness to grant of respondent No,6 the "first right of refusal" and that the said "first right of refusal" was without knowledge of the petitioner and permitted respondent No,6 to amend, alter or interpolate his bid and further that the tariff mentioned in the decision of WAPDA, dated 17-8-2006 was not quoted either by the respondent or by any other person. 10. According to the petitioner, the bid offered by him was most responsive and lower as compared to the bid of the respondent No,6, which was not only conditional but also optional and the petitioner has vast experience and qualification in running of a power plant as licensee of the biggest Coal Mines at Lakhra (supplies to the plant in dispute); the respondent No,6 was a rank outrider with no track record in the field. Hence the petitioner was entitled to award of the lease. 11: One of the grounds stated in the memo. Of the petition was that "since NEPRA is a statutory regulatory authority with its own rules and procedures and as the respondent No,5 never applied for termination of the tariff, vis-a-vis the grant of lease, NEPRA cannot embark upon a comparison of the two respective tariffs (of the petitioner and respondent No,6)"; however, that "if at all it was the Privatization Commission of Pakistan, which could undertake the entire exercise and further that by ignoring and not involving the Privatization Commission, the respondent No,1 acted without lawful authority rendering its decision of [2/17 August, 2006 as null and void. Hence, above-quoted prayers were made by the petitioner in the memo. Of petition. 12. In their comments offered by respondents Nos.1 and 5, they admitted that public notice was got published in daily newspaper DAWN, with similar publications in some other newspapers and the petitioner responded to the public notice, dated 26th July, 2006, through its letter, dated 27th February, 2004, and further admitted that the petitioner was pre-qualified but only petitioner and
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respondent No,6 submitted their respective pre-qualification documents by the fixed date, viz. 2nd March, 2004; as the Sindh Privatization Commission had objected to the proposal of rehabilitation, operation, maintenance and management (ROMM) the matter was referred to the Sindh Privatization Commission for privatization of respondent No,5 vide respondent's letter, dated 25-3- 2004 and respondent No,2 conveyed to the other respondents vide, letter, dated 12th December, 2005, as also to the Sindh Privatization Commission about instructions issued by the then Prime Minister that respondent No,1 should complete the rehabilitation of the Lakhra Power General Plant so as to increase its available capacity from 30MW to 84 MW and that respondent No,1 should also facilitate studies by parties, intending to make proposals for lease, rehabilitation and operation of the plant at the risk and cost'of said parties. It is further contended by the said respondent that on 29-6-2006 Sindh Privatization Commission conveyed to respondent No,2 the following decision taken by Sindh Cabinet Committee at its meeting held on 11-5-2006:-- ' "The matter of privatization of Lakhra Power Generation Company (LPGC) and Lakhra Coal Development Company (LCDC) is to be referred back to the Government of Pakistan for privatization through Federal Privatization Commission and Government of Pakistan may request to transfer the share held by Government of Sindh in LCDC put of privatization proceeds." ' And further that on the basis of the said decision, Sindh Privatization Commission referred back to respondent No,2 the matter relating to privatization of respondent No,5. The said respondents Nos.1 and 5 denied any pre-selection of respondent No,6 in the month of January, 2006 or on any later date and that there was no "eyewash", whereas all the parties who had submitted expression of interest in response to public notices issued on 26-7-2006 and 25-3-2006. 13. The said respondents further pleaded that a meeting held to finalize the gas road map on 12th May, 2006, a decision was taken that respondent No,6 should be given the right of first refusal for the lease of the Lakhra Power Generation Company on account of the investment made by respondent No,6 for development the proposals for its rehabilitation, which was informally conveyed by respondent No,1 to respondent No,6 on 13th May, 2006 (and not on 15th May, 2006) vide hand written note, but the final decision in this matter was the one taken at a subsequent meeting held on 13-7-2006, where after both the petitioner and respondent No,6 were asked to give their revised offer on 9 specified technical and financial aspects and both were informed that the decision was to be based on the lowest levelized offered tariff. Further that the comparison made by the petitioner in the memo. Of petition is not of any relevance since it is based on offers made prior to the offers received from both the parties though their respective letters in response to respondent No, l's letter, dated 17-7-2006. 14. With regard to the contents of Para. No,11 of the memo. Of petition, wherein it is alleged that respondent No,1 made a comparison of the two proposals and obviously found the one submitted by the petitioner lower than that of respondent No,6, the respondents have replied that the reference made by respondent No,1 to respondent No,3 is not of any relevance since it was made prior to the aforementioned offers, dated 21-7-2006. With reference to the contents of paras. 10 and 11 of the memo. Of petition, the respondents have pleaded that the reduction in the rates offered by the petitioner vide letter, dated 19-6-2006 were of no relevance because it too was made prior to the offers vide letter, dated 21-7-2006 and further that the tariffs earlier quoted by the both the groups were on the higher side. It is admitted-by the respondent that a meeting was held with both the petitioner and respondent No,6 on 13th July, 2006, in consequence whereof both were asked to give their revised offers based on 9 specified technical and financial aspects vide respondent No, l's letter, dated 17-7-2006, wherein respondent No,1 categorically committed that the "decision will be based on the lowest levelized offered tariff" and this decision was implemented/honoured. It is admitted that in the bid of the respondent No,6, dated 21st July, 2006, they claim the first right of refusal but the said "first right of refusal" was no more available to
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respondent No,6, as stated in respondent No, l's letter, dated 17th September, 2006, acknowledged by the petitioner itself in Para No,16 of the memo. Of the petition. Further that (in reply to contents of para 20 of the memo. Of the petition), apple to apple comparison of the two bids was carried out on the basis of whereof, respondent No,1 took the final decision, dated 12th August, 2006, and no manipulation of any number/figures at any level of the working/functioning of the respondent No,1 was adopted and that the award of the lease to respondent No,6 is not based on the right of first refusal and the lease was awarded to respondent No,6 because, on "apple to apple comparison" of the two bids, the respondent No,1 came to the clear considered conclusion that the levelized tariff offer of respondent No,6 was lower than that of the petitioner. 15. The said respondents (stated in the clear terms) that decision taken by respondent No,1 on 12th, August 2006, was based on a record "apple to apple comparison" of the two offers of the petitioner and respondent No,6 and there was no secret about such a decision of the respondent No,1 taken on 12th August 2006, and acknowledgement to such an effect of the petitioner is reflected through letter, dated 23rd August, 2006, placed on record itself as Annexure `G/4' thereby acknowledge its awareness that the offer of respondent No,6 had been accepted and that the decision, dated 12th August, 2006 of leasing Lakhra Power Generation Plant to respondent No,6 is not unlawful or illegal or mala fide or irrational or in violation of procedural propriety, which decision was subsequently approved by the Board of Directors of respondent No,5 at the Board's meeting held on 19th August, 2006, and the petitioner participated in the entire process right upto the stage of the final offers, dated 21st July, 2006 in response to respondent No,l's, letter, dated 17th September, 2006, and cannot now urge/ argue that such process was not transparent and the petitioner itself acknowledges that it participated in the final meeting held by respondent No,1 with both the parties on 13th July, 2006 prior to issue of respondent No,l's letter, dated 17-7-2006, which were responded to by both the petitioner and respondent No,6 (vide their offer, dated 21st July, 2006) and the lowest levelized tariff offered by the two competing parties was to be accepted and this decision was honoured/implemented. The said respondents have further pleaded that NEPRA is not involved in the grant of lease to respondent No,6. Further that, Privatization Commission is not involved in the grant of lease to respondent No,6, because privatization of Lakhra Power Generation Plant is not included in the Privatization Commission's approved privatization programme. The respondents have specifically further pleaded that extraordinary constitutional jurisdiction of this Court is not available to decide as to which of the two competing parties is entitled to grant of lease and that the decision taken by the respondent No,1 on 12th August, 2006 is correct decision and within respondent No,l's lawful authority. Further that after respondent No,5 also approved the lease in favour of respondent No,6 on 19th August, 2006, NOC of the Government of Sindh was obtained vide their, letter, dated 24th August, 2006 and thereafter lease agreement was executed between respondents Nos.5 and 6 on 11th September, 2006. 16. The respondent No,6 filed their own comments, which are on the same lines, as submitted by respondents Nos.1 and 5 in their comments. According to respondent No,6 the approach to all pre- qualified companies was not en eye-wash but was to award the contract in question in a transparent manner and after comparison between the pre-qualified companies and the petitioner itself had submitted the final bid documents on 21st July, 2006 on 9 specified technical and financial points along with the respondent No,6 and further that the investment of respondent No,6 in the project is higher than that of the petitioner and that the break up comparison by the petitioner has no significance, as the contract was awarded to respondent No,6 on consideration of cumulative effect of all the nine points/aspects of the bid of the petitioner and respondent No, 6, dated 21-7-2006. Further that the bid offered by respondent No,6 is more beneficial as well as reasonable and the lease granted in favour of respondent No,6 was not on the basis of right of first refusal and there was no manipulations of the figures offered by respondent No,6, and
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recommendations for grant of lease are based upon objective consideration and calculation of all the figures and facts and that the petitioner was in the full knowledge of the award of the contract in favour of respondent No,6 and without any secrecy having been maintained for any such purpose. After the petitioner was given full opportunity to compete and had fully participated in all such proceedings till its extreme end and that then contract of lease in favour of respondent No,6 is legal, bona fide, reasonable and transparent. 17. The respondent No,2 filed its comments, admitting therein that public notice was got published in the newspaper of Daily DAWN Karachi, dated 26th July, 2003, and similar notices were got published in other newspapers also. According to respondent No,2, Sindh Privatization Commission informed on June 29, 2006, that Sindh Cabinet Committee on Privatization, and the Sindh Privatization Commission in its meeting held on 11-5-2006, decided that the matter of privatization of Lakhra Power Generation Company and Lakhra Coal Development Company was to be referred back to the Government of Pakistan for privatization through Federal Privatization Commission, Islamabad, and Government of Pakistan may be requested to transfer the shares held by the Government of Sindh in LCDC out of privatization proceeds and the matter was referred to respondent No,2 with the approval of Government of Sindh for further necessary action, and that on a summary moved by respondent No,2, in September, 1993, the Council of Common Interest approved the privatization of the WAPDA Thermal Power Plants in a phased programme, which decision also covers the Lakhra Power Generation Plant owned by the respondent No,5, which is itself a wholly owned subsidiary of WAPDA and further that WAPDA referred the matter to the Sindh Privatization Commission vide letter, dated 25-3-2004 for privatization along with the Lakhra Coal Development Company which is jointly owned by the Government of Sindh, WAPDA and the Pakistan Mineral Development Corporation and in pursuance of the same the Government of Pakistan took a decision on 12-12-2005 for rehabilitation to increase the available capacity of the Lakhra Plant in the public interest. Respondent No,2 has further pleaded in a meeting held to finalize the gas road map on 12-5-2006, a decision was taken by the Federal Government that respondent No,6 should be given the right of first refusal for the lease of the Lakhra Power Generation Company on account of the investment made by respondent No,6 for developing the proposals for its rehabilitation; however, WAPDA on 17-7-2006 gave an opportunity to the petitioner as well as respondent No,6 to submit their revised offers for decision of the competent…
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