P.P. Naolekar, C.J.

1. The facts necessary to indicate the back ground in which the dispute arose and the question raised in the appeal filed by the State and in the writ petition filed by the State of Assam and the Assam State Electricity Board (for short 'the Board') in brief are-that in the year 1979 the Planning Commission sanctioned a project for production of 100 MW electricity. The project is known as "Karbi Langpi (Lower Barapani) Hydro Electric Project" in the State of Assam. At that time the approved cost of the project was Rs. 34.15 Crores. The Board was entrusted with the responsibility of setting up and commissioning of the said project. The Board commenced the work of the project to complete it within the targeted period i.e. by 1985. The Board procured 1.7 million Yen loan from the Overseas Economic Cooperative Fund and the Government of Assam procured a loan of Rs. 58 crores in 1993 from Japan through Government of India for purchase of Turbo Generator and other equipments at a very low rate of interest. But in spite of such financial assistance taken in the form of loan, for a long time the project work could not be completed, the Board virtually abandoned the project. The project work is entrusted to different contractors, including Rastriya Pariyojna Nirman Nigam Ltd, from time to time by the Board. Though efforts were made by the Board to complete the work within the time stipulated the work could not be completed within the targeted time and only 50% of the work was completed. Consequently further construction work of the project came to a standstill till the end of year 1982 due to non availability of fund and the project was practically abandoned. At the end of 1992 a policy decision was taken by the State of Assam and the Board commensurate with the Central Government policy declaration that in order to speedy completion of the project private participation and capitals should be introduced. The Government of India changed the policy regarding private participation in power project and the State Government decided to transfer the project to an assisted Sector company. At this time, the Bharat Hydro Power Corporation Ltd. (hereinafter referred to as "the Company") came forward to undertake the project with participation of the Board and or the State Government. The State Government after negotiation approved the policy and gave its approval in the matter entering into a Memorandum of Understanding. The Memorandum of Understanding dated March 25,1993 was drawn with the consent of three parties, viz., the State of Assam, the Board and M/s Subhas Project & Marketing Ltd (for short "M/s SPML")and the same was signed by three parties. In accordance with the provisions of said Memorandum of Understanding (MoU) a Deed of Assignment was executed and accordingly all assets and properties of the said project were transferred in favour of the company.

2. The relevant portions of the Memorandum of Understanding are as under:

A. Assam State Electricity Board has undertaken construction of 100 M W capacity Karbi Langpi (Lower Borpani) Hydro Electric Power Generation Project' in the State of Assam. The contour Map of the entire project area thereof showing all the project features is annexed hereto and marked with the letter 'Z' and the location map of the Project site thereof is annexed hereto and marked with the letter 'Z-1' (hereinafter collectively referred to as the 'said Electric Power Generation Project") and that the construction activities of the said Electric Power Generation Project had started in the year 1980, but the said Electric Power Generation Project could not be completed till today due to various reasons.

B. The Government of Assam is desirous to complete the said Electric Power Generation Project as speedily as possible and in line with present liberalised policy of the Government of India, is desirous to complete the project with private participation.

C. M/s SPML in the meantime approached th