MSEDCL Gets Stay Against Invocation Of Letter Of Credit Issued To CGPL

Maharashtra State Electricity Distribution Company Limited (MSEDCL) gets a stay against the invocation of the letter of credit issued by MSEDCL to Coastal Gujarat Power Limited (CGPL).

The issue started after CGPL had stopped supplying power to MSEDCL, against the terms of PPA, on account of which MSEDCL had to purchase costly power from the open market to fulfill the electricity demand of its consumers and thus, incurred an additional financial burden of Rs. 172.38 crores. 

The acute shortage of coal in the domestic market and subsequent non-supply of power from thermal generators led to an acute shortage of power in the state of Maharashtra. Considering the said scenario, the MoP came up with various notifications relating to the purchase of power from thermal generators.

MSEDCL in dire need of power, entered into an arrangement with CGPL in terms of the MoP notifications and started procuring power from CGPL 12th April 2022 onwards till 25.06.2022. CGPL in terms of the said supply of power and MoP notifications regarding tariff rate, CGPL raised its energy bills for the above-mentioned period.

Pertinently, MSEDCL while paying the said bills, adjusted Rs. 172.38 crores after informing CGPL about the said adjustments. However, on 29.08.2022, CGPL sought invocation of MSEDCL’s Letter of Credit issued by Canara Bank. Immediately upon knowing of such invocation, MSEDCL sent a letter to Canara Bank informing them that there are no outstanding dues against CGPL and accordingly, requested the bank not to invoke the said letter of credit. However, MSEDCL in order to safeguard the invocation of said letter of credit, MSEDCL credited a payment of Rs. 19.66 crores (under protest) and again requested the bank not to initiate invocation as requested by CGPL. Despite the said correspondence, CGPL chose not to withdraw the said request.

The High Court, after hearing Mr Mrfique Dada, Senior counsel for a considerable time stayed the invocation of LC till 07.09.2022 enabling MSEDCL to approach CERC on 06.09.2022. After considering the submissions the stay order passed by the High Court has been extended it till 14.09.2022 i.e. when CERC would hear MSEDCL Petition.

A team from DSK Legal assisted in the matter. The DSK Legal team that assisted and advised MSEDCL comprised of Mr Samir Malik (Partner), Mr. Rahul Sinha (Associate Partner), Ms. Rimali Batra (Associate Partner) and Mr. Sahil Sood (Senior Associate).