I

BEFORE THE HONOURABLEJHARKHAND STATE ELECTRICITY REGULATORY

COMMISSION

IN THE MATTER OF

M/s Ranchi Power House Trading Co. Ltd ….PETITIONER

Vs.

M/s Jai Kumar Agarwal & Bros (C.S.) Ltd ….RESPONDENT

FOR THE KIND ATTENTION OF THE HONOURABLECHAIRPERSON AND OTHER

MEMBERS OF THE OF THE JHARKHAND STATE ELECTRICITY REGULATORY
COMMISSION

MEMORANDUM ON BEHALF OF PETITIONER

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TABLE OF CONTENTS

INDEX OF AUTHORITIES……………………………………………….. II

A. WEBSITES
B. BOOKS
C. ABBREVIATIONS

STATEMENT OF JURISDICTION………………………………………. IV

STATEMENT OF FACTS…………………………………………………. V

STATEMENT OF ISSUES……………………………………………….... VII

SUMMARY OF ARGUMENTS……………………………………………. VIII

ARGUMENTS ADVANCED……………………………………………….. IX

PRAYER OF RELIEF…….........………………............................................ XII

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INDEX OF AUTHORITIES

A. WEBSITES REFERRED
1. www.lexisnexisacademic.com
2. www.vakilno1.com
3. www.indiakanoon.org
4. www.manupatra.com
5. www.wikipedia.org
6. www.legalserviceindia.com
7. www.legalsutra.org

B. BOOKS REFERED
1. Business Law, Avtar Singh 9th Edition
2. Indian Contract Act, Dr. R.K.Bangia 14th Edition
3. Contract I, S.K.Kapoor
4. The Indian Contract Act, 1872
5. The Electricity Act, 2003

C. ABBREVIATIONS
1. LOI- Letter of Intent
2. LOC- Letter of Credit
3. PPA- Power Purchase Agreement
4. Sec.- Section

D. CASES CITED

1. Brogden v. Metropolitan Railway Co. (1877) 2 App Cas. 666

2. Bhagwati Prasad Pawan Kumar v Union of India 2006 (V) SCC 311: (Supra)
3. Food corporation of India vs M/s Arosan Enterprises Ltd AIR 1996 Delhi 126
4. Baldev Alloys Pvt. Ltd. v. Chairman cum managing director

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STATEMENT OF JURISDICTION

This Hon’ble Court has the jurisdiction to hear this case under Sec.4 and Sec.82 of Electricity
Act, 2003.

SEC.4 - "Appropriate Commission” means the Central Regulatory Commission referred to in

sub-Sec (1) of Sec.76 or the State Regulatory Commission referred to in Sec.82 or the Joint
Commission referred to in Sec.83, as the case may be

SEC.82- “Every State Government shall, within six months from the appointed date, by
notification, constitute for the purposes of this Act, a Commission for the State to be known as
the (name of the State) Electricity Regulatory Commission”

SEC. 86(1) (f)- “The State Commission will have the power to adjudicate the following
namely:
(f) adjudicate upon disputes between the licensees, and generating companies and to refer to
any dispute for arbitration”

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STATEMENT OF FACTS

1. M/s Ranchi Power House Trading Co. Ltd., Bijan Bhawan, Maliki Chowk, Ranchi (hereinafter
referred to as the “The Petitioner”) invited tenders on 16.4.2011 for sale of power on firm basis for
the period 16.07.2011 to 30.09.2011. In response to the aforesaid enquiry, an offer was made by
M/s Jai Kumar Agrawal & Bros (C.S.) Ltd., “Mahendra House”, 8, Gt. Road, Kolkata –
700001(hereinafter referred to as the “The Respondent”) vide letter dated 21.04.2011.
Accordingly, Letter of Intent (LOI) was issued in favor of The Respondent on 27.04.2011
requiring his acceptance within 3 days, failing which the Petitioner would be free to take
appropriate action as deemed fit in the matter. Consequently on 30.04.2011 the Respondent sent a
letter to the Petitioner assuring that on the basis of the LOI, it was making all sincere and rigorous
efforts for sale of surplus power. Subsequently, the Petitioner vide letter dated 7.5.2011, requested
the Respondent to explore all the possibilities for scheduling of contracted power and to initiate
early action for obtaining advance booking of transmission corridor in terms of Compensation
Clause under LOI. In this regard, several reminders were sent to the Respondent. In pursuance of
the said reminders, the Respondent vide letter dated 23.5.2011 intimated the Petitioner that, since
there was no probable buyer available to purchase the said power, the Petitioner might look for
alternative arrangements for its sale. However, the Respondent again on its own, wrote a letter
dated 25.05.2011 informing the Petitioner that it was participating in a tender enquiry of
Mahanagar State Electricity Distribution Company Limited (MSEDCL) and was also making
sincere efforts for sale of power in pursuance of LOI dated 27.4.2011.

2. The Petitioner vide its letter dated 20.07.2011, requested the Respondent to open weekly
revolving Letter of Credit (LOC). However, Respondent failed to open the same and hence the
Petitioner raised an invoice dated 06.10.2011, directing the Respondent to pay a compensation of
36, 60,00,000.00, for the period from 1.8.2011 to 31.8.2011 and 1.9.2011 to 30.9.2011. However,
the Respondent vide letter dated 7.10.2011 raised an objection that the compensation bill had been
wrongly raised and hence was not payable. On receipt of the said letter the Petitioner issued a
legal notice dated 19.1.2012 to the Respondent demanding payment of compensation amounting

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to 46,20,00,000.00 along with surcharge @ 1.25% p.m. till date of actual payment. In response to
the said legal notice, the Respondent vide letter dated 06.02.2012, refused to pay the
compensation on the ground that there was no contract between the parties. The Respondent, in
the said letter, stated that as per the tender enquiry the execution of a Power Purchase Agreement
(PPA) was a pre-condition to the sale of power.

3. Aggrieved by the conduct of the Respondent, the Petitioner approached the forum in accordance
with the contract entered by them under Sec.86 (1) (f) of Electricity Act, 2003 for adjudication of
dispute.

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STATEMENT OF ISSUES

I. Whether concluded contract on the basis of correspondence came into existence or

not?

II. Whether the respondent is liable for the breach of contract or not?

III. To what amount of damages the petitioner is entitled?

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SUMMARY OF ARGUMENTS

I. Whether concluded contract on the basis of correspondence came into existence or not?
It is most humbly submitted before this Hon’ble Court that, there was a concluded contract
between parties and as the respondent failed to fulfil its contractual obligation, it was bound to
pay the compensation amount. Respondent’s conduct was that of the acceptance of the offer,
conduct of Respondent to sell the surplus power is sufficient to prove the liability of the
Respondent for the default.

II. Whether the respondent is liable for the breach of contract or not?
It is most humbly submitted before this Hon’ble Court that, Respondent’s acceptance to the
offer of the petitioner was well implied by his conduct, following which his failure to meet the
obligations of the contract, resulted in breach of the contract. Respondent failed to open a
weekly Letter of Credit, after repeated reminders made him liable to breach of the contract.

III. To what amount of damages the petitioner is entitled?

It is most humbly submitted before this Hon’ble Court that, petitioner is entitled to a
compensation amount of INR. 46,20,00,000.00/- as compensation for non-off-take of power
during period from 16.07.2011- 30.09.2011 in terms of LOI dated 27.04.2011, additional
surcharge at the rate of 1.25% per month till the date of actual payment

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ARGUMENTS ADVANCED

I. Whether concluded contract on the basis of correspondence came into existence or not?
It is most humbly submitted before this Hon’ble Court, yes there was a contract which came
into existence between both parties on the basis of correspondence.It was clear from the
conduct of the Respondent to the LOI that he had accepted it and was working in furtherance
of the said LOI. Sec.8 of Indian Contracts Act says, “Performance of the conditions of the
proposal, of the acceptance of any consideration for a reciprocal promise which may be
offered with a proposal, is acceptance of the proposal”.
In general terms it states that conduct of a party is sufficient to prove acceptance of offer on
the side of the Respondent1.In the present case, after the LOI was issue to the respondent via
letter on 27.04.2011, the Respondent within the stipulated 3 days via letter dated 30.04.2011
stated it was making efforts to find a buyer for the purchase of power, as per the LOI issued
earlier.

This clearly shows acceptance of the LOI by the Respondent through conduct of following up
with his obligation to find a buyer as per LOI. The Petitioner sent another letter to the
Respondent on 7.05.2011 stating that it required the Respondent to explore all options for
scheduling of contracted power and to initiate early action for obtaining advanced booking of
transmission corridor in terms of Compensation Clause under LOI. The Respondent to this
letter replied saying he was unable to find any prospective buyers and the petitioner should
look elsewhere. The defence tried to argue that a concluded bargain could not come into force
between the parties under any circumstance. Then on 25.05.2011, the Respondent himself
wrote a letter to the petitioner stating it was in talk with a prospective buyer and was trying its
best to finish up the contract. This letter and his conduct clearly show that the Respondent was
willing to perform his obligations in furtherance of the LOI.

1
Brogden v. Metropolitan Railway Co. (1877) 2 App Cas. 666

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In a letter dated 06.02.2012, the Respondent claimed that the Power Purchase Agreement
(PPA) was a pre-condition to sale of power. Under the circumstances, the offer of the
Petitioner and the subsequent acceptance by the Respondent through letter of intent would
make this contract complete. Subsequent execution of PPA was a mere formality. Failure of
PPA to be executed does not imply that the Respondent would not be liable since the Letter of
Intent was accepted by the Respondent. The relevant provisions of the Contract have already
come into existence when the LOI was issued, received and accepted by the Respondent.

“If the bank in an agreement changes the rate of interest and the other party continues to work
under new terms without giving acceptance, the conduct signifies acceptance”2

Acceptance need not always be expressed it may also be implied or inferred from the conduct
of parties as per Sec.8 of the Indian Contract Act, 1872. The Hon'ble Supreme Court has also
observed “It is well settled that an offer may be accepted by conduct. But conduct would not
amount to acceptance if it is clear that the offeree did the act with the intention (actual or
apparent) of accepting the offer. Each case must rest on its own facts" 3. The intention of the
respondent was clear from the way he was trying his best to find a buyer for the surplus power
that he had every intention of entering into a contract, clearly meeting the requirement for
conduct amounting to acceptance of contract as per the above case.

“Acceptance must be unequivocal, if there is no protest to the offer, it is understood that

acceptance to the offer is unequivocally accepted. An ‘Offeree’ cannot be permitted to change
his mind after this unequivocal acceptance of the offer”4

2
Gaddar Mal v Tata Industrial Bank Ltd. Bombay, AIR 1927 All 407
3
Bhagwati Prasad Pawan Kumar v Union of India 2006 (V) SCC 311: (Supra)
4
Baldev Alloys Pvt. Ltd. v. Chairman cum managing director

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II. Whether the respondent is liable for the breach of contract or not?

It is most humbly submitted before this Hon’ble Court, that as stated in the previous issue, the
parties were both subject to a contract. Once it has been established that it was a contract, both
parties were obligated to perform their functions.

After acceptance of the LOI, the petitioner sent the Respondent a letter dated 20.07.2011,
asking the Respondent to open a weekly revolving Letter of Credit, which would secure the
money of the petitioner. Even after reminders the Respondent failed to set up the same. This
clearly amounts to breach of contract.

“Letter of credit is an independent contract. The only obligation of the bank is to examine with
reasonable care all documents presented in order to ascertain that they appear on face to be
in accordance with the terms and conditions of the credit and if so to pay the seller beneficiary
by whom the documents have been presented the sum stipulated by credit.”5

Once there was failure on the part of the Respondent to open a LOC, it caused the Petitioner to
face a loss of money, which could have been avoided if the Respondent had completed its
obligation towards the petitioner. This clearly amounts of breach of contract, which entitles
the Petitioner to be compensated by Respondent.

III. To what amount of damages the petitioner is entitled?

We humbly request this Hon’ble Court to grant the petitioner the estimated compensation as
provided as follows, caused due to breach of contract and non-completion of same contract by
the respondent.
 INR. 46,20,00,000.00/-
 Surcharge of 1.25% per month till date of actual payment.
 Fees of this court proceeding.

5
Food corporation of India vs M/s Arosan Enterprises Ltd AIR 1996 Delhi 126

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PRAYER FOR RELIEF

Wherefore, in the light of the facts stated, issues raised, authorities cited and arguments advanced, it is
most humbly prayed before this Hon’ble Court that it may be pleased to:

1. To hold that Respondent is liable to pay an amount of INR 46,20,00,000.00 as compensation for
non-off-take of power during the period from 16.07.2011 to 30.09.2011 in terms of the LOI dated
27.4.2011 issued by Ranchi Tradeco.
2. To direct Respondent to pay an amount of INR 46,20,00,000.00 along with surcharge at the rate
of 1.25% per month till the date of actual payment.
3. To direct Respondent to pay the costs and expenses of the present proceedings to Petitioner.

And pass any order that it deems fit, all of which is respectfully submitted.

COUNSEL ON BEHALF OF PETITIONER

MEMORANDUM ON BEHALF OF PETITIONER