HC rejects Visa Steel's plea on coal supply

The Delhi High Court has dismissed a petition filed by Visa Steel seeking quashing of State Trading Corporation of India Ltd's tender notice for supply of 1.9 million tonne of imported coal worth Rs 800 crore to NTPC from November 2005 to February 2006.

The international coal trading company had alleged that the impugned tender notice was arbitrary and tailor-made to suit one private coal supplier, Adani Exports Ltd.

The tender required a supply expertise of 1.90 million MT in the past three years, bidders' net worth of Rs 250 crore, submission of original mine owner's exclusive commitment certificate and minimum previous history of pre-payment of railway freight for 1.9 million MT.

While observing that Visa Steel and others had failed to prove malafides, the court held that the tender conditions were not violative of Article 14 of the Constitution and that the stringent conditions were set down to ensure power generation remained unaffected throughout the nation.

According to the court, the required asset value of Rs 250 crore, given the large size of the contract, was not arbitrary. "The condition has been made to ensure that the successful bidder should have a financial capacity to complete the contract and it is not for the court to decide what should be the net worth of a party in this connection," the judges said.

Visa Steel had alleged that one of the ports where the delivery of coal was to be made was the Adani-owned Mundra Port and all private players except Adani and MMTC did not have a net worth of Rs 250 crore. Only a player with non-coal ancillary business would possess a pre-qualification net worth of Rs 250 crore and Adani possessed it on account of its non-coal activities, the petitioner contended.

Besides, none of the parties other than Adani and MMTC possessed the desired qualification of having made pre-payment of railway freight, it alleged.

Contending that no party had any right to dictate the tender conditions, the STC said a requirement of prepayment of railway receipt was only to ensure that the party had experience in domestic handling of such material.

Further, the requirement of the original mine owner's commitment certificate had been made because forged documents were submitted in some cases in the past, it said.

According to the NTPC, the STC had accepted the letter of intent and made necessary arrangements to execute the order. Besides, it had put in extraordinary efforts for timely delivery so that there was no shortage of coal leading to a breakdown in power generation, which adversely affected the public at large.