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Information compiled by Enron Action group

Civil Suit No. 3392 0f 1995, filed by the State of Maharashtra Versus DPC and the MSEB

The plaintiffs above named state as follows:

• 1. The Plaintiffs are the State of Maharashtra
• 2. The 1^st Defendant is an Indian Company incorporated (with unlimited liability) and registered under the provisions of the companies Act, 1956 as a private company and having its registered office at 161, Maker Chambers VI, 15^th Floor, Nariman Point, Bombay 400 021. The 2^nd Defendant is the Maharashtra State Electricity Board, a statutory body constituted by the State Government of Maharashtra as a State Electricity Board under the name of Maharashtra State Electricity Board under Section 5 read with Section 12 of The Electricity (Supply) Act 1948 (hereinafter referred to as the "ESA").
• 3. The present suit raises vital Constitutional questions, including questions relating to the rights and powers of a continuing State Government after the calling of elections and after the dissolution by efflux of time of the State Legislative Assembly under the Constitution. The suit also raises vital questions pertaining to the law of contract as hereinafter stated:

  a) Under a Memorandum of Understanding dated 20^th June, 1992 signed between the 2^nd Defendant herein, Enron Power Corporation (hereinafter referred to as the ‘said Enron’) and General Electric Company (GEC) (prior to the incorporation of the 1^st Defendant), general outlines of the Power Project - ENRON & GEC voluntarily stated that they would form a joint venture company known as Dabhol Power Company. The Memorandum of Understanding recorded that it was " not intended to represent legally binding obligations which shall only be incurred in future written agreements between the parties". Hereto annexed and marked as Exhibit ‘A’ is a copy of the said Memorandum of Understanding.

  Exhibit A

  b) M/s. Linklaters & Paines (at all material times Solicitors of the said Enron and later of the 1^st Defendant) prepared a draft document headed ‘Power Purchase Agreement (PPA)", "Heads of Terms - Dabhol Power Project" dated 29^th August, 1992 as forming the basis for negotiation and definitive terms of contract to be entered into between the 2^nd Defendant and the 1^st Defendant for purchase of electricity/power from the proposed Dabhol Power Station Again the said document stipulated that though it would form the basis for the power project agreement, it would not create any legal binding obligations. One of the "Heads of terms" stipulated in the said draft, inter alia, included a term (Clause 15.2) "Further Assurances" stating that in addition to the terms of the PPA set out therein and as a adjunct to the obligation of Maharashtra State Electricity Board (MSEB), under the Power Purchase Agreement (hereinafter for the sake of brevity referred to as "PPA") there will be a need for inter alia, guarantees by the State of Maharashtra of the obligations of MSEB under the PPA. The said document headed PPA, "Heads of Terms" was initialed by M/s. Linklaters and Paines as dated 29/08/1992 and also initialed by the then Advocates & Solicitors of the 2^nd Defendant M/s. Little & Co. the Plaintiffs crave leave to refer to the said "Heads of Terms" when produced.

  c) As more particularly mentioned hereinafter, documentation envisaged in the head of agreement were entered into namely, interalia, (i) Power Purchase Agreement (PPA) between DPC (1^st Defendant) and MSEB (2^nd Defendant) dated 8/12/1993; (ii) The Government of Maharashtra Guarantee dated 10.2.1994; (iii) State Support Agreement dated 24/6/1994; (iv) Fuel Management Agreement between 1^st Defendant, 2^nd Defendant and US Subsidiary of the said Enron namely, Enron Fuel International; (v) Agreement dated 2/2/1995 between 1^st Defendant and 2^nd Defendant providing for an amendment to the PPA in accordance with its terms. the aforesaid documents are relevant for the purpose of this suit and relief claimed herein. The Plaintiffs will refer to the said documents when produced. Hereto annexed and marked Exhibits ‘B’, ‘C’, ‘D’ and ‘E’ are copies of:

  i) The PPA (without annexures and amendments) dated 8.12.1993.

  ii) The Government of Maharashtra Guarantee dated 10/2/1994.

  iii) State Support Agreement dated 24/4/1994

  iv) Amendment to PPA dated 2.2.1995.

  d) After the calling of elections in the State of Maharashtra and the knowledge of impending dissolution of Maharashtra State Assembly under Article 172 of the Constitution, after expiry of its full term, the following documents came to be executed namely, (I) Amendment to PPA dated 2/2/1995, (ii) Consent Agreement dated 23/24.2.1995 and (iii) Fuel Management Agreement dated 25.2.1995. the Plaintiffs crave leave to refer to the aforesaid documents. As mentioned above, all the aforesaid documents were in aid of and supportive of the PPA dated 08.12.1993 (later amended as mentioned above).

   

  e) Thus several documents constituting one transaction which envisaged the setting up of a Power Project at Dabhol in District Ratnagiri in the state of Maharashtra were executed, inter alia, by and between the parties hereto.

   

  f) Right upto 25/2/1995 i.e., after the calling of general elections by notification dated 10.1.1995, pursuant to the press note dated 8.12.1994 and after holding of elections pursuant thereto on 9-12 February, 1995 (before the declaration of results on 11.3.1995) the conditions precedent (both for Phase-I and Phase-II) had neither been satisfied in full nor waived as provided by Clause 2 (Conditions Precedent) of PPA. However, as more particularly mentioned hereinbelow the 1^st Defendant precipitately and being fully aware of the Limitation of the executive power of then State Government consequent upon holding the election and dissolution of the assembly purported to accelerate the coming into legal force of PPA dated 08.12.1993 and purported to fraudulently get waived the Conditions Precedent; thus, deliberately denying to the successor government and its agencies the right to review the PPA and supporting documentation and if so advised, exercise unilateral right of termination under Clause 2.5 of the PPA. As a result of any such termination the entire edifice of the documentation including Guarantee Agreement and State support Agreement would necessarily and inevitably have come to an end without incurring any liability or obligation. As more particularly stated herein after in the amended PPA (dated 2.2.1995) after the calling of the election and/or date of dissolution of the State Legislative Assembly the pre-closing clearances (Conditions Precedent) were reduced to their advantage by the Ist Defendant. Even after this date i.e. 2.2.1995, the remaining pre-closing clearances (Conditions Precedent) though not satisfied were sought to be waived so as to accelerate bringing into force/in effect the PPA - thus depriving the 2^nd Defendant from exercising its unilateral right of termination (without consequences) under Clause 2.5 which was available till after May 1995. By reason of Clause 2 of PPA the status of the PPA was that of an agreement not enforceable by law until all Conditions Precedent had been fully satisfied and/or bonafide waived as provided in PPA itself. Thus, by a letter dated 25.2.1995 1^st Defendant have purported to bring into fact contractual obligations which before the date were in the return of an agreement not amounting to contract which was not a legal enforceable contract . That the so called waiver was not bonafide but was deceptive and fraudulent is fortified by the last 2 paragraphs of the letter dated 25.2. 1995

  "All the conditions precedent set out in paragraphs (a) to (I) inclusive of Clause 2.1 of the PPA have therefore been either satisfied or waived in accordance with the terms of the PPA as of the date of its letter. Therefore, al the obligations of the parties to the PPA in connection with Phase I, including those relating to the calculation and payment of the tariff for the supply of electricity, will become binding and effective upon Financial Close of Phase I as required by Clause 2.1 (m).

  Please confirm your agreement to the matters set out in this letter by signing and returning to us the attached copy."

  Hereto annexed and marked Exhibit ‘F’ is a copy of the said letter dated 25.2.1995. Ex.’F’

  (g) This was purported to be complied with despite the fact that there was no confirmation by 2^nd Defendant purported to specify the mode of confirmation namely, "by signing and returning to us the attached copy". No confirmation has been recorded by the 2^nd Defendant on the letter save and except the cryptic word "Received" (undated) and signed by the then Chairman of the 2^nd Defendant. Receipt of the letter is not and cannot be equated to the requirement of the agreement in writing between the 1^st and 2^nd Defendant as specifically provided in PPA. The 1^st Defendant addressed two further letters to the 2^nd Defendant dated 2^nd march 1995 and 4^th March 1995 purporting to record that the Financial Closing Date was as of 1^st March 1995. Hereto annexed and marked Exhibit ‘G’ and Exhibit ‘H’ respectively are copies of the said letters dated 2^nd March 1995 and 4^th March 1995. Ex.’G’ and Ex.’H’

   

  (h) In the circumstances, even the purported invocation of the State Support Agreement against the Plaintiffs is not bonafide, is fraudulent and ineffective in law.

  (I) The unilateral mutual power if termination of the agreement without adverse legal or financial consequences, which power extended at least up to 15th May, 1995, was attempted and/or purported to be prematurely determined and/or extinguished so as to effectuate a fait accompli and expose a successor Government to huge financial liabilities if it undertook a review of the agreements and on a review decided that the agreements were onerous, contrary to public interest, contrary to public policy, contrary to consumer interest and contrary to the interest of the State. The actions on the part of the 1^st Defendant were a clear attempt to purport to foreclose any review by or on behalf of the successor Government of the Plaintiffs. That this was done under the guidance of and with the active connivance of the previous Government and at express and/or tacit imprimatur of the previous Government is clear and apparent.

  (j) It is submitted that in law, after the date of the notification of the General Election and particularly after the date on which the Election/Polling were held (though the counting and results were deferred), it was unlawful and/or impermissible as a matter of Constitutional law for the Government to exercise the purported executive power either directly or through any of its instrumentalities by taking major policy decisions particularly when there was constant opposition to such a decision and a possible likelihood of its not being implemented and/or if sought to be implemented, to be reviewed. It is clear that the said purported waiver and the various other actions taken after the declaration of Elections were clearly with a malafide objective and contrary to accepted norms and standards as to the exercise of such powers. A conscious attempt was made to pre-empt and prevent the exercise of a simple termination permissible before satisfaction of the pre-closing clearances by fraudulently and malafide waiving the outstanding preconditions so abruptly which, if required to be complied with, would have taken the possible Closing Date beyond the installation of the new Shiv Sena/BJP Government, an event by which time was anticipated and would have resulted in a possible review.

  (k) Apart from the Constitutional obligations of a Caretaker or pro-tem Government, it is submitted that assuming whilst denying that full executive power vested with a Caretaker Government right up to the time which the new elected Government was installed in office, the aforesaid sequence of events clearly shows that the action on the part of the 1^st Defendant in unilaterally waiving compliance with various Conditions Precedent (by letter dated 25.2.1995) were effectuated and conceived in fraud and were not bonafide and this act alone (altogether apart from the principal and other agreements being void for violation of laws and public policy on the grounds stated hereinbelow) renders the agreement as void. The unholy haste with which the purported Financial Closure was sought to be achieved was clearly in order to reap the benefit of the huge sum of US$ 20 Million admittedly already spent by the principal shareholder of the 1^st Defendant (ENRON) described by them euphemistically as "educational expenses", the alleged facts pertaining to the educational expenses, were brought to the attention of the Plaintiffs by the 1^st Defendant by their letter dated 18.8.1995 addressed to the Secretary (Energy) of the Plaintiffs by stating.

  "Considerable criticism and allegations of impropriety are being leveled against the Dabhol Power Company and its sponsors on the basis of the statement made by Ms Linda Powers in a testimony in front of the US House of Representatives in January 1995.

  The fact about this statement and the complete testimony are being sent to you for your perusal !".

  The alleged facts and the complete testimony of Ms Linda Powers before the US House of Representatives, Committee on Appropriations, Sub-Committee on foreign operation appended to the said letter, are self-contradictory. In the testimony of Ms. Linda Powers enclosed with the said letter it is specifically stated as follows.

  "Moreover, our company spent an enormous amount of its own money approx. US$ 20 Million-on this education and project development process alone not including any project costs."

  "Why do we, and other developers include such things in our project? To win local support and support of the authorities, and contribute to the general improvement of conditions, and contribute to the general improvement of conditions in the area".

  (l) According to the testimony of the said Ms. Linda Powers (vice-president of the said ENRON) 20 Million US Dollars spent (of its own money) was "win local support and the support of the authorities and for the general improvement of conditions in the area". In the purported refutation also enclosed to the letter dated 18.8.1995 of the 1^st Defendant it is stated that 20 Million US Dollars included "engineering, financing, legal, travel and administrative costs actually totaling a sum in excess of 20 Million US Dollars as of 29.3.1995". and it was stated that 20 Million US Dollars has nothing to do with education of any Indian. The factual position stands as it was when the testimony of Ms. Linda Powers was given and drew attention of media worldwide and the subsequent explanation (the incorrect one) only compounds the initial frank admission (in sworn testimony) that 20 Million US Dollars. "on this education and project development process alone not including any project cost" was as was stated "to win local support and support of authorities and to contribute to the general improvement of conditions in area." It is significant that while statement was given on behalf of ENRON to the US House of Representatives the statement was sought to be contradicted and/or purportedly explained by the President of the 1^st Defendant company i.e. the self serving statement that there was full compliance and that all Indian and US Laws including US Foreign Corrupt Practices Act in the conduct of business activities in India had been complied which does not accord the sworn testimony of Ms. Linda Powers. The Plaintiffs crave leave to refer to and rely upon the letter of the 1^st Defendant dated 18.8.1995 along with its annexures when produced.

   

  4.(I) Apart from the aforesaid important Constitutional issues on which ground alone the agreement is void and/or inoperative in law and/or incapable of being performed, it is submitted that the said Agreement is null and void ab initio, inter-alia, on account of its being violative of several statutory provisions, public policy, consumer interest, public interest and interest of the state, suffers from the vice of misrepresentation by the 1^st Defendant and/or its principal shareholder ENRON and is conceived in fraud.

  (ii) It is submitted that under Indian Law, the consideration or object of an agreement is unlawful if the Court regards it as opposed to public policy. This applies also to contracts executed by the Government in the exercise of its executive power under the Constitution. Accordingly every party (particularly an Indian Company) which negotiates and enters into a contract with a Government or a corporation entrusting to it with full knowledge that if it is shown to the satisfaction of a Court that the agreement is opposed to public policy, it is void and the only consequences would be to make restitution under Section 65 of the Contract Act.

  (iii) It is submitted that for reasons stated hereinbelow, the unconscionable of the object of the principal agreement was opposed to public policy would cause a huge loss to the public exchequer or imposed unconscionable burden on consumers of electricity and consequently the 1^st Defendant would not be entitled to claim any restitution from the Plaintiffs before the Financial Closing Date (precipitately purported to be advanced to 1^st March, 1995) and not before the said date. This is entirely without prejudice to the contention of the Plaintiffs that the purported closing was wrongly and illegally achieved and in any event is no closing at all as the conditions of Clause 2 have not been complied with.

  (iv) The Plaintiffs submit that all the agreements, including the State Support Agreement and the State Guarantee are executed pursuant to the PPA and are a part of one single transaction and if the Power Purchase Agreement is void the subsequent agreements on that ground alone are void, apart from the independent grounds on which they can be voided.

  5. A narrative of the facts relevant for the purposes of the present suit is set out hereinbelow:

  (I) It appears that in May/June, 1992 a delegation led by the Cabinet Secretary of the Union Cabinet visited inter alia the USA Thereafter some of relevant dates and the quick succession of events that took place are set our hereinbelow:

  15.6.1992 - Arrival of ENRON Team at New Delhi and discussions with various officials of the Government of India.

  17.6.1992 - (Just 2 days after arrival in India) The ENRON Team arrived in Bombay.

  18/19.6.1992 - (The very next day after the arrival of the ENRON Team) The said Team visited Dabhol, Nagothane and other sites in Maharashtra and held a meeting Prakashgad in Bombay.

  20.6.1992 - The ENRON Team met Secretary (Power), Government of India, Minister for Energy and Hon’ble Chief Minister, State of Maharashtra.

  20.6.1992 - (On the very same day above, within 5 days of arrival in India and within 3 days of arrival in Bombay) Memorandum of Understanding signed between the 2^nd Defendant represented by Mr. Ajit M. Nimbalkar, the then Chairman of the 2^nd Defendant, Ms. Rebecca Mark describing herself as the Vice-Chairman of the said Enron and Mr. Douglas Mcfadden describing himself as Manager of Global Developer Sales of General Electric Corporation.

  The term sheet annexed to the MOU opens with the following.

  "Electrical Power Purchase Contract"

  • Contract for 20 years term between Power Venture and MSEB.
  • Contract to be structured to achieve an all in price of
  • US$ 0.073/kwh, comprised of a fixed monthly capacity payment calculating at the Indian rate of inflation each year and a per-kwh energy payment equal to the per-kwh operating cost (as defined below). The capacity payment will escalate at the Indian rate of inflation, other than the portion of the capacity payment representing debt service of the project, which will not escalate.

  (ii) Thus, the purported decision to set up a huge power generation project in the private sector with a foreclosed obligation on a statutory corporation to buy power from the private sector at a predetermined unprecedently high rate was taken in a great hurry without there being any public debate on the said issue apart from there being any detailed consideration of the matter.

  (iii) Before the PPA was executed in December 1993, the following events occurred:

  (a) The World Bank expressed its opposition to the said Project and advised that the Project was not viable, not in the interest of the State of Maharashtra in particular and the country, the public and the consumers in general. That this objection was treated with scant respect and was brushed aside by the said Enron is clear from the correspondence wherein the said Enron and/or the 1^st Defendant stated that "The World Bank opinion can be changed", that "we (ENRON) will engage a PR Firm and hopefully manage the media from here on" (June 1993).

  (b) The Central Electricity Authority had drawn attention to several aspects of the MOU one of which aspect is detailed below:-

  "Price:

  (I) The all-in-price is a departure from the existing norms and parameters notified by the Government under Section 43 A(2) of the Electricity (Supply) Act, 1948.

  (ii) Denominating the price in US dollars is also a departure from the existing norms.

  (iii) We take it that that the price of US$ 0.073 kwh will be applicable from 1996 when power would be available. We also take it that the escalation of this price at the Indian rate of inflation each year will also commence from 1996 or the date from which power is made available.

  (iv) If the price is denominated in US currency, why should there be a need top adjust for escalation at the rate of inflation in India particularly as Indian Rupee is allowed to float. The exchange rate floated would take care of this escalation.

  (v) The current equivalent of US $ 0.073 in Indian Rupees works out to Rs. 2.19 paise/kwh which is considered high.

  (vi) It is not clear if the price is agreed for the entire period of power purchase agreement."

  A copy of the CEA’s comments on the said MOU is annexed hereto and marked as Exhibit H-1’. Ex.’H-1’

  (c) A notification dated 22.9.93 was issued purportedly under Section 29 of ESA by the 1st Defendant as the "Generating Company". It did not contain relevant features of the scheme as required by Section 29. In response to this cryptic notification as many as 34 letters of objection to the scheme were sent to 1^st Defendant, but as appears from the letter dated 21.11.1993 written by the 1^st Defendant to the Central Electricity Authority, the said letters (representations) were not forwarded to the Central Electricity Authority although required by law. The 1^st Defendant as generating company had made itself fully conversant with the statutory provisions of the ESA. The Plaintiffs crave leave to refer to and rely upon the said notification dated 22.9.1993 and the said letter dated 21.11.1993 when produced. The Central Electricity Authority gave leave to refer to and rely upon the said notification dated 22.9.1993 and the said letter dated 21.11.1993 when produced. The Central Electricity Authority gave its clearance to the project by its letter dated 26.11.1993 by recording that the power project proposal had already been considered by the Central Electricity Authority in its prior meeting held on 12.11.1993 and approved the same. This was even before the expiry of the statutory period for representation and even though these representations were mentioned in 1^st Defendant’s letter dated 21.11.1993 addressed to the Central Electricity Authority. Moreover, the project for which clearance was obtained was a Project Report dated April 1993 which was different from the final project envisaged in the PPA. The Plaintiffs crave leave to refer to and relay upon the said Project Report and the said letter dated 26.11.1993 when produced.

   

  6. On 8^th December, 1993 after obtaining the approval of the then Maharashtra Government, the Power Purchase Agreement was signed by and between the Defendants.

   

  7. On 10^th February 1994, in purported pursuance of the provisions of the PPA, a Guarantee was signed by the then Government of Maharashtra. By the said Guarantee in consideration of the 1^st Defendant undertaking to develop/procure finance to construct, own, operate and maintain an electric power generating facility of 2015 MW capacity at Dabhol in the State of Maharashtra and to make sales of capacity and net electrical output from the Project to the 2^nd Defendant under a PPA and in order to induce financial institutions to finance the Project, the State of Maharashtra irrevocably and unconditionally guaranteed to the 1^st Defendant to pay to the 1^st Defendant any and every sum of money which 2^nd Defendant is liable to pay to the 1^st Defendant under the PPA. The relevant clauses of the said Guarantee are as follows:

  "This GUARANTEE is made at Bombay on 10 day of February 1994 by THE GOVERNOR OF MAHARASHTRA on behalf of THE STATE OF MAHARASHTRA (hereinafter referred to as the "Guarantor").

  In consideration of Dabhol Power Company, a company organized and existing under the laws of India (the "Company"), undertaking to develop, procure finance for, construct, own, operate and maintain an electric power generating facility of 2015 MW capacity (approximately) at Dabhol in the State of Maharashtra, India (hereinafter referred to as the "Project") and to make sales of capacity and net electrical output from the Project to Maharashtra State Electricity Board (hereinafter referred to as "MSEB") under a Power Purchase Agreement (hereinafter referred to as the "PPA") dated as of 8^th December 1993 and made between the company (1) and MSEB (2), and in order to induce financial institution to finance the project, the guarantor hereby covenants and agrees as follows:

  1. GOM GUARANTEE

  (A) Guarantee of MSEB Payment Obligations: The Guarantor hereby irrevocably and unconditionally Guarantees to the Company (as a secondary obligor) to pay to the Company, within 7 calendar days following submission by the company of a demand in accordance with Clause 1 (B), any and every sum of money which MSEB is liable to pay to the Company under or pursuant to the PPA and shall fail to pay in accordance with the terms of the PPA.

  (B) Conditions relating to demand: The Company shall be entitled to make a demand for payment upon the Guarantor pursuant to this Guarantee if MSEB has failed to pay, within 7 days of the due date for payment thereof, any sum of money which it is liable to pay to the Company under or pursuant to the Power Purchase Agreement".

  (E) Indemnity: The Guarantor undertakes, as primary obligor, to indemnify and keep indemnified the company against any loss sustained or incurred by the Company by reason of the invalidity illegality or unenforceablity of any of this Guarantee or the provisions of this Guarantee or the PPA and the amount of such loss shall be the amount which, but for such invalidity, illegality or unenforceability, the company would otherwise have been entitled to recover hereunder or thereunder".

  (C) Governing Law : The rights and obligations of the parties under or pursuant to this Guarantee shall be governed by and construed according to English Law".

  (D) Arbitration: Reference to arbitration:

  (1) Any dispute or difference arising out of or in connection with this Guarantee shall (regards of the nature of this dispute or difference) be referred to arbitration under a specified system of international arbitration rules to be agreed (the Rules) by one or more arbitrators appointed in accordance with the Rules.

  (2) As from the date on which no amount is owned or capable of being owed to the Lenders under the relevant Financing Agreements, then the dispute shall be finally settled by arbitration under the Arbitration Acts of India.

  (3) Arbitration proceedings pursuant to paragraph (1) shall be held in Singapore. Arbitration proceedings conducted pursuant to paragraph (2) shall be held in New Delhi, India.

  (4) No arbitrator appointed pursuant to this Clause 6 (D) shall be a national of India or of the United States.

  (5) The language of any arbitration under this Clause 6 (D) shall be English.

  (E) Sovereign Immunity: The Guarantor unconditionally and irrevocably:

  (1) agrees that the execution, delivery and performance by it of this Guarantee constitute private and commercial act rather than public or governmental acts;

  (2) agrees that, should any proceedings be brought against it or its assets in any jurisdiction in relation to this Guarantee or any transaction contemplated by this Guarantee, no immunity from such proceedings shall, to the extent that it would otherwise be entitled to do so under the laws of India, be claimed by or on behalf of itself or with respect to assets:

  (3) waives any right of immunity which it or any of its assets now has or may acquire in the future in any jurisdiction; and

  (4) consents generally in respect of the enforcement of any judgment against it in any such proceedings in any jurisdiction to the giving of any relief or the issue of any process in connection with such proceedings (including, without limitation, the making, enforcement or execution against or in respect of any property whatsoever irrespective of its use or intended use)".

  8. The next significant event that took place thereafter was the execution of what is described as "The State Support Agreement" by the then Government of the Plaintiffs in favour of the 1^st Defendant dated 24.6.1994. Some of the relevant clauses of the State Support Agreement are as under:

  9. TERMINATION OF THE POWER PURCHASE AGREEMENT

  Upon termination of the Power Purchase Agreement, DPC and GOM shall both be released from further performance of the obligations under this Agreement.

  10. GOVERNING LAW

  The rights and obligations of the parties under or pursuant to this Agreement shall be governed by and construed according to English Law.

  11. ARBITRATION

  11.1 Reference to arbitration:

  (a) Any dispute or difference (each a "dispute") arising out of or in connection with this Agreement shall (regardless of the nature of the dispute) be referred to arbitration in accordance with the provisions of the UNCITRAL Arbitration Rules (i.e. the Arbitration Rules of the United Nations Commission on International Trade Law set out in Resolution 31/98 adopted by the General Assembly on 15 December 1976 and referred to herein as "the Rules") as at present in force by a panel of three arbitrators (or such lesser number as the parties may agree) appointed in accordance with the Rules.

  (b) Where the Rules do not deal with any issue arising in connection with the conduct and/or procedure of the arbitration such issue shall be resolved in accordance with the law of the place in which the arbitration is held.

  (c) The New York convention on the Recognition and Enforcement of Foreign Arbitral Awards ("the Convention") shall apply to any award resulting from an arbitration pursuant to this clause and any such award shall for the purposes of the Convention, the laws of India and the laws of any other country in which the recognition and/or enforcement of the award may be sought, be treated as relating to a dispute or disputes arising out of a commercial legal relationship and not as domestic award.

  (d) Any dispute arising after the date on which no amount is owed or capable or being owed to the Lenders under the relevant Financing Agreement, shall be finally settled by arbitration under the Arbitration Acts of India.

  (e) Arbitration proceedings pursuant to paragraph (a) shall be held in London Arbitration proceedings conducted pursuant to paragraph (d) shall be held in New Delhi, India.

  11.2 Nationality of arbitrator

  No arbitrator appointed pursuant to Clause 11.1 shall be a national of India or of the United States.

  11.3 Language

  The language of any arbitration under this Clause shall be English.

  11.4 GOM Guarantee

  The parties hereby agree that any arbitration conducted pursuant to Clause 8(d) (I) of the GOM Guarantee dated 10th February 1994 will be conducted in accordance with the provisions of Clauses 11.1 to 11.3 above.

  Sovereign immunity, etc: copy of the civil suit continued

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