' IJAZ AHMAD, J.---The resume of the facts that oblige the petitioner to institute the instant petition is that the Government of Pakistan announced policy Framework and package of incentives for private sector for power generation in Pakistan in the month of March, 1994. In pursuant of the announcement of the policy, private 'investors were invited for setting up the projects for generation of electricity. As per the policy announced, the power generator had the option to use two fuels, the Furnace Oil and the natural gas. The Furnace Oil was purchasable from the Market, however, the natural gas was owned and controlled by the Government, so, could be purchased from the Government only. The petitioner applied for setting up of gas-powered, power-generation plant with the minimum capacity of generation of 470 Megawatts. According to the proposal made by the petitioner, the project consisted of two Phases. In the first Phase, 220 Megawatts was to be generated. This capacity was later on increased by 230 Megawatts. In. The second Phase, 245 Megawatts electricity was proposed to be generated which was later on decreased to 235 Megawatts corresponding to increase in Phase-I. According to the proposal, the respondent PPI Board was to issue a letter of interest (LOD. Correspondingly, the petitioner was to submit the performance guarantee. The respondent No,2, on its own, was to issue a letter of support for initiation of the project which also included the fixation of period for the petitioner to show the financial close. This period stipulated for this purpose was six weeks.
2. In the case of gas powered generation projects, the lenders were to ensure whether the Government would be providing the required energy in the shape of natural gas. As a final step an agreement was executed between the parties for the construction of the first and the second Phase, Pursuant to the agreement, the petitioner applied for gas powered generation in the month of February, 1995. As was stipulated in the agreement, the petitioner provided performance guarantee to an amount of Rs.4,70,00,000 (forty seven million) on 5-7-1995. On their end, the respondent PPI issued (LOD vide letter dated 6-7-1995. Vide this letter the Government of Pakistan Ministry of Power PPI/confirmed its interest in the proposal made by the petitioner for setting up of 470 Megawatts gross (ISO) private power project using gas provided from Sara (Block-B) and East Kandhkot fields allocated by Ministry of Petroleum and Natural Resources to be located at Dharki, Sindh. The petitioner was to develop 235 Megawatts gross (ISO) in Phase-I power project and achieve financial close for Phase-I within one month from the signing . Of the implementation and the power purchase agreement, but in no case later than December 31, 1995. If additional gas was available from the Sara and (Kandhkot East) Gas fields, the petitioner was to increase project capacity set up-to 470 Megawatts in Phase-II for which the petitioner was to achieve financial close by December, 31, 1996. Entailing the above said letter, the Ministry of Petroleum and Natural Resources vide its letter dated 13-7-1995 informed the petitioner about the discussion made by Private Power Infrastructure Board meeting held on 4-7-1995 to the effect that if after implementation of the exploration, appraisal and development programme of Chachar (Kandhkot East) and Sara (Block-B) gas fields, there proved to be insufficient gas reserves for the Complex, new low BTU gas from these Blocks will be allocated to the sponsor in order to meet the requirements of their 470 Megawatts Complex.
3. As a next step, the LOS was issued by the respondents PPI on-17-7-1995 wherein it was stipulated that after the sponsors had achieved the financial close for Phase-I the above referred Performance Guarantee would be reduced by 50% and the sponsors would increase the project capacity up to 470 Megawatts gross (ISO), in Phase-II. The financial close date for Phase-II would be determined after the exploration, appraisal and development program of East Kandhkot and East Badin (Extension) Block-B; and it was further stipulated, if after implementation of the exploration, appraisal and development program of the Blocks, there proved to be insufficient gas reserves for the Complex, new low BTU gas will be allocated to the Sponsors. After issuance of the LOS, the petitioner obtained land for establishment of Phase-I and II of the Project. The petitioner completed all the required infrastructure for power generation in Phase-I & H. The petitioner achieved the financial close within the stipulated time for Phase-I. It was accomplished within the stipulated and started generating the power and is in operation till today.
4. The financial close for Phase-II was to be achieved by 31-12-1995 subject to supply of gas by respondent PPI Board. The petitioner failed to achieve the financial close for phase-H for the reasons attributable to the respondents Board. It is contended that since the respondents could not guarantee the required supply of the gas, therefore, the lenders being unsatisfied refused to commit for the lending. It is further contended that now respondents on account of alleged failure of the petitioner to achieve the financial close are demanding the encashment of the Performance Guarantee. This demand is being resisted by the petitioner for the reason that any failure occurring in accomplishment of Phase-H is because of the failure of respondent PPI Board in providing the required supply of natural gas. The second, ground pressed by the learned counsel for the petitioner justifying his refusal in the Performance Guarantee is that respondent Board has itself cancelled Phase-II of the Project. In view of this cancellation, they are stopped from demanding the encashment of the Performance Guarantee. It is further contended that even the act of cancellation of Phase-II on the part of the respondent Board is not warranted by law. The respondent is duty bound to ensure the gas supply from whatever the resources. It is further contended that Phase-1 & II are complementary to each other. A major part of infrastructure would be utilized for Phase-I as well as for Phase-II. So, the respondents cannot unilaterally cancel the Phase-II.
5. On the other hand, the learned counsel appearing on behalf , of the respondent No,2 contends that the respondent had been negotiating with Infrastructure Capital Group. The petitioner C Liberty Power is alien to the whole affair. The learned counsel contends that the petitioner has no locus standi. The instant petition should be dismissed on this ground. The work on Phase-II was to be accomplished within the stipulated time. Phase-I is operating without any dispute between the parties. There is no connection between Phase-I and Phase-II. Both the Phases are severable and independent. The cancellation or termination, of Phase-II will not affect the functioning of Phase-I. It is further contended, that as per para "H" of the letter of support dated 17-7-1995, the LOS was to terminate with respect to Phase-II, if the Sponsors fail to achieve financial close for the said Phase by December 31, 1996. On the termination of LOS in either case, neither the Sponsors nor the Company was to claim compensation or damages against the Government of Pakistan or any other governmental agency. It is further contended that the petitioner's plea that he could not arrange the financial close on account of the failure of the respondent PPI Board to supply the natural gas is not acceptable in the circumstances. As per the Policy Framework (Annexure-B), it is provided in Para-I of the said document that private investors would be responsible for arrangements of fuel for their power plants. They would be free to opt either making their own importation and transportation of fuel (oil, LPG and LNG) for their power plants or enter into a Fuel Supply Agreement (FSA) with producing or marketing companies. Thus the respondents Board was not responsible to supply them their required energy. He also draws supports for this argument from the contents of LOS dated 17-7-1995 wherein sub paragraph-1 of paragraph-B, it is stipulated that the Sponsors i,e, the petitioner was to finalize and sign a gas supply agreement with the gas supplier at their own responsibility. Reiterating his arguments, he contends that respondent's Board is absolved of labiality from supplying the required gas/oil supply for the generation of the power.
6. While replying to the question that the Liberty Power Limited is a stranger to the whole affair and the respondents Board negotiated and entered into contract with Infrastructure Capital Group only, the learned counsel for the petitioner contends that Infrastructure Capital Group is only a share- holder and as per para-C of the LOS dated 17-7-1995, the infrastructure capital group was to establish a Public Limited Company in accordance with the Laws of Pakistan which the petitioner is in the instant case.
7. The learned counsel for the respondent No,2 further contends that in order to establish who at fault is, in respect of the supply of the gas, this court will have to embark upon the resolving of factual controversy. The judgments of the apex Court do not warrant this exercise.
' Reliance is placed upon PLD 2002 Supreme Court 1068 titled (Lahore Cantonment Cooperative Housing Society Ltd., Lahore, Cantt., through Secretary v. Dr. Nusrat Ullah Chaudhry and others). It is further contended that the judicial review is not permissible in the case where the terms of contract are involved. Reliance is placed upon PLD 2001 Lahore 426 titled (Bavindir Insaat v. Pakistan through Ministry of Communications and 3 others).
8. I have heard the learned counsel for the parties and have also gone through the record.
9. I would like to take up and dilate first upon the last point raised by the respondent No,2 relating to the maintainability of this petition in case where the interpretation of the terms of contract is involved. In ordinary circumstances this court should not embark upon the interpretation of the terms of contract and its enforcement. Here, it's a different case. In the LOS dated 17-7-1995, Annexure E/I the President of Islamic Republic of Pakistan was pleased to convey his permission to the petitioner to go ahead and thus notionally has opted to stand a guarantor. The nation is zealous in inviting the investment in Rental Power Projects from abroad. The contracts have to be performed, the guarantees have to be enforced. The courts in such circumstances are not devoid of jurisdiction. In this view I am supported by the judgment in case of Dwarkadas Marfatia and Sons v. Board of Trustees of the Port of Bombay (AIR 1989 SC 1642). It has been held that " if a governmental policy or action even in contractual matters fails to satisfy the test of reasonableness, it would be unconstitutional". The chronology of the cases wherein the Hon'ble Courts have exercised their jurisdiction in contractual matters is; Muhammad Ashraf Ali v.
Muhammad Naseer and 2 others (1986 SCMR 1096), Muhammad Ali Butt v. Inspector General of Police, Punjab (PLD 1997 SC 823), Messrs Airport Support Services v. Airport Manager, Quaid-eAzam International Airport (1998 SCMR 2268), Wak Orient Power and Light Ltd. v. Government of Pakistan, Ministry of Water and Power (1998 CLC 1178), Nizamuddin and another v. Civil Aviation Authority (1999 SCMR 467) and Bavindir Insaat v. Pakistan through Ministry of Communications (PLD 2001 Lahore 426).
10. The learned counsel for the respondent No,2 has disputed the right of the petitioner to institute the instant petition. His argument is that the matter is negotiated and the contract was finalized with Infrastructure Capital Group and Liberty Power is alien to the whole affair, is not tenable. As the Infrastructure Capital Group is only a share-holder as para-C of LOS dated 17-7-1995. It was under an obligation to establish a public limited E company in accordance with the laws of Pakistan which resulted in the incorporation and registration of the present petitioner. The respondents did not raise any such question while the contract was being performed and Phase-I was being established. Now the respondents cannot refuse to recognize the petitioners status. The petitioner thus, has a locus standi to institute this petition. The arguments of the learned counsel for the respondent No,2 that it was the obligation and responsibility of the petitioner as per Para-I of the Policy Frame Work (Annexure-B) to arrange for the fuel of their power generation plants, has no foundation and is not acceptable. It is only a package of incentives for private sector. It is only an offer and displays the policy, but does not bind the investors in Power Generation Projects. Similarly sub para-1 of B of LOS, dated 17-7-1995 referred by the learned counsel for the respondent No,2 is also of no avail to him. The contents of this para could have bound down the petitioner, had they opted to finalize and sign the gas supply agreement at own risk. In the instant case, the respondents Board has bound down itself to F supply the natural gas to the petitioner. As per para- 1 of the Policy Frame Work, the power generator/petitioner had two options for fuel; the Furnace Oil or the natural gas. The Furnace oil was purchaseable from the market, however the natural gas was owned and controlled by the Government, so, could be purchased from the Government only.
The President of Pakistan had permitted the petitioner in para B of LOS dated 17-7-1995 to operate and obtain a Thermal Power Generating Plant at Dharki, Sindh, by using local gas from Chachar (Kandhkot East) and Sara (Block-B). This permission in effect is a guarantee by the head of the State and deserves a respect. In the same paragraph, it was assured that in case of insufficiency of gas reserves for the Complex, new low BTU gas will be allocated to the petitioner in order to meet the requirements of 470 MW Complex. Thus, not only the initial supply was assured but alternate supply from other H blocks was also guaranteed. Similarly, the Government of Pakistan Ministry of Petroleum and Natural Resources in its letter dated 13-7-1995 addressed to the Infrastructure Capital Group informed the latter that, after implementation of the exploration, appraisal and development programme of Chacher (Kandhkot East) and Sara (Block-B) gas fields, if there proved to be insufficient gas reserves for the Complex, new low BTU gas from these Blocks will be allocated to the sponsers/ petitioner. The provision contained in the said document make it clear that it was the duty of the Federation of Pakistan and PPI Board to ensure the continuous supply of the natural gas to the petitioner in order to enable him to generate the electricity from Phase-I and Phase-II of the Complex. In case of failure of the respondents to fulfil the stipulation, the petitioner could not be held a defaulter in the agreement. The petitioners have completed the Phase-I meant for the production of 220 Megawatts, later on increased to 235 Megawatts. It's functioning properly and orderly. Since both the Phases Nos.I and II are situated, in the same area, therefore, the petitioner had raised the common Infrastructure that would cater to the needs of the both. In many aspects, both can be termed as complimentary to each other. In the circumstances of the case, the respondents have no authority to restrain the petitioner from implementing and completing Phase-II. Since the petitioner is ready to complete the Phase-II as stipulated in the contract, the respondents have no authority to unilaterally cancel the LOS and resultantly, to have the Performance Guarantee encashed. The respondents are duty bound under the agreement and by virtue of Power Policy to perform the contract. The respondents are directed to let the petitioner complete Phase-II without any hindrance and interference.
11. For what has been discussed above, this petition is accepted with the above mentioned reliefs.