The main legal point established in the judgment is that the allocation and cancellation of the allocation of the site for Hydro Power Projects must adhere to the principles of natural justice and the equality clause of the Constitution.

G.S.SINGHVI, J.

1. hether allocation made in favour of the petitioner by the Haryana State Energy Development Agency (HAREDA) for development of small Hydro Power Projects on canal drops of Dadupur Western Yamuna Canal (Lower) on Build, Operate and Own basis could be cancelled without giving opportunity of hearing and whether the said site could be allocated to Haryana Power Generation Company Ltd. (respondent No. 3) even though it was not entitled to submit proposal in terms of the advertisement issued by HAREDA are the questions which arise for determination in this petition filed under Article 226 of the Constitution of India.The background

2. For the purpose of seeking financial assistance from the World Bank to support its efforts to reform and develop the power sector, the Government of Haryana took the following steps :(i) In the year 1997, the State Government introduced the Haryana State Electricity Reform Bill which was passed by the Legislature on 22-7-1997 leading to the bifurcation of the Haryana State Electricity Board into four Corporations, two of which were to exclusively deal with the generation and transmission of the electricity.(ii) In May, 1997, HAREDA was set up as an autonomous body to implement Non-conventional Energy Projects under the Haryana State Department of Non-conventional Energy Sources.(iii) On 12-11-1997, the Government issued detailed policy statement relating to various aspects of Power Sector Restructuring and Development Program. Paragraphs 10 to 14 of the said policy statement read as under:-

"The New Structure of the Power Sector 10.The power sector will be restructured to encourage functional specialisation, decentralisation, autonomy and accountability in decision-making to facilitate private sector participation; to promote competition in generation and distribution; and to ensure an effective, efficient and independent regulation of the sector. The new power companies will operate within an incentive framework which promotes efficiency and makes the companies and their staff accountable for the quality of the service provided to the consumers. 12.The functions presently being performed by the vertically integrated HSEB will be segregated into separate generation, transmission and distribution companies. The existing generating stations of HSEB will be grouped under a separate power generation company (GENCO). Transmission of power will be entrusted to a separate transmission company (TRANSCO). Power distribution will be assigned to a number of independent power distribution companies. A State Electricity Regulatory Commission will be created to regulate the operation of the power utilities with the primary objective of ensuring the long term viability of the sector for the benefit of consumers.Power Generation. 13.The existing Panipat and Faridabad Thermal Power Stations, and the Western Yamuna Canal Hydro-Electric Project (including Stage-II which is under construction) will be transferred to a new generation company called Haryana Power Generation Company Ltd. (HPGCL). This Company will start its operations as a State owned Company. At a later stage, the State Government may invite private sector participation in this Company. This Company will operate on commercial principles. The Company will sell power to the transmission company for further sale to the distribution companies. This Company has already been registered under the Indian Companies Act. 14.The Government of Haryana has decided not to make any major new investment in power generation. In future, new power generation project in Harayana will be developed either by Independent Power Producers (IPPs), selected through International Competitive Bidding (ICB), by Central Generating Corporations or by Joint Venture Companies with private parties, other States or central undertaking as equity partners. All generating companies will operate in a competitive environment without discrimination based on ownership struc