NTPC terminates coal mining contract with BGR over allegations of corruption

NTPC, India’s largest electricity producer, has terminated contracts it had awarded to BGR Mining & Infra Ltd for development of its coal mines in Jharkhand and Chhattisgarh over allegations of corruption against senior officials of the private mining company. NTPC has terminated contracts for development and operation of Chatti-Bariatu coal mine in Jharkhand and Talaipalli coal mine in Chhattisgarh, according to two separate letters dated July 4, 2019 sent by the state-owned company.

An e-mail sent for comments to BGR Mining on the address for media queries mentioned on its website did not elicit a response. Calls made to its senior director I Sudhakara Reddy too went unanswered. The state-owned firm had awarded mine and development contract of the Chatti-Bariatu mine to BGR in November 2017.

In the same month, it had awarded a similar contract for the Talaipalli mine to a consortium of NCC Ltd and BGR Mining. Chatti-Bariatu mine was supposed to produce 7 million tonne of coal a year for use at NTPC’s 1,320 MW Barh power plant for generation of electricity. Talaipalli coal mine was to produce 18 million tonne of coal per annum for use at NTPC’s 4,000 MW Lara Power Project.

“Subsequent to the award of subject contract, an FIR (on December 7, 2017) has been registered by CBI for criminal conspiracy, public servant obtaining valuable thing without consideration from person concerned in proceeding or business transacted by such public servant and abetting public servant for obtaining illegal gratification,” NTPC wrote to BGR in the two similarly worded letters.

The FIR has been filed against Kulamani Biswal, Director (Finance), NTPC, Rohit Reddy, one of the Directors of BGR Mining and Infra and his associate Prabhat Kumar, who handles his tasks in Delhi. “According to CBI, the information disclosed, prima facie, commission of an offence under Sections 11 and 12 of the Prevention of Corruption Act, 1988 r/w Section 120-B of the Indian Penal Code, 1860,” NTPC said.

Biswal, who was suspended following the case, was in November last year reinstated after Delhi High Court quashed and set aside Ministry of Power’s suspension order. CBI had alleged that Biswal had asked Reddy to arrange US dollars of about Rs 5 lakh to be spent by him during his trip abroad. NTPC said Clause 24.3(b)(xi) of the project agreement stipulated that ‘Mine Operator’s Events of Default’ will be considered “if it was found to have been engaged in corrupt or fraudulent practices in competing for or in executing the agreement.”

“Accordingly, the act of abetting a public servant for obtaining illegal gratification, by one of the directors, Rohit Reddy and his associate Prabhat Kumar of M/s BGR Mining & Infra, is Mine Operator’s Events of Default,” NTPC said adding it had issued a show cause notice on December 29, 2017, confirming its intent to terminate the agreement.

Following orders of the Delhi High Court and the Supreme Court, NTPC invited BGR for “Good Faith Discussions” on May 6, 2019, which continued in May and June 2019. “Based on the Good Faith Discussions held under Clause 24.4(c) of Project Agreement, it is evident that circumstances constituting the termination event have neither been remedied to the satisfaction of NTPC nor have ceased to apply,” the state-owned firm said in the letters. NTPC said it is through the letter intimating BGR of its decision to terminate the project agreement.

“Accordingly, the Project Agreement shall stand terminated on the expiry of the notice period of 45 days from the date of this letter, i.e July 4, 2019. This letter is without prejudice to NTPC’s other rights, which NPTC is entitled to under the Project Agreement and/or under any applicable law.”

It asked BGR to give it a notice of at least 72 hours prior to taking any legal action against NTPC and to refrain from obtaining any orders against the company without disclosing the entire termination letter to such judicial forum and/or authority. NCC held 51 per cent interest in the special purpose vehicle it created for Talaipalli coal mine operation. BGR was to hold the remaining 49 per cent. The value of the project was estimated to be Rs 25,071 crore to be executed over 25 years.