The Supreme Court today passed an interim order which in effect restrains Dabhol Power Corporation from invoking the Rs 136 crore letter of credit given by the Maharashtra State Electricity Board drawn on Canara Bank.
The bank will not make payment under the letter of credit pending further orders.
The court asked both parties to file their affidavits in the dispute within a month, after which the case will be heard again.
The bench headed by Justice SP Bharucha passed the order on the appeal of the electricity board, which had lost its case in the Bombay High Court last Friday. The high court had dismissed its petition to stop the Enron-promoted corporation from invoking the letter of credit.
Its argument was that the corporation had violated the status quo order passed earlier by the Supreme Court while examining the question of the jurisdiction of the State Electricity Regulatory Commission.
The high court is yet to decide whether the commission has jurisdiction in disputes between Dabhol and the board.
According to Dabhol, the letter of credit was an independent contract, which was invoked through Bank of America to make payments to its lenders. It was proposed to be invoked for the April 2001 bills.
This was not connected to the disputes over other bills. It also argued that Bank of America was the holder in due course and therefore, the beneficiary was not important.
The high court had observed that the board had the option to move a civil court, or go to the regulatory commission with a fresh petition or seek a clarification from the Supreme Court.
Dabhol counsel PH Parekh submitted that the interim order of the commission had nothing to do with the letter of credit for April and the amount was admitted by the board.
The Supreme Court did not pass any order on the application of Dabhol seeking clarification of its August 6 order restraining both parties from altering the status quo pending the decision of the high court on the jurisdiction of the regulatory commission.
