In 1997, the apex court had admitted the petition of the Centre for Indian Trade Union (CITU) that had challenged a Bombay High Court order upholding the PPA and issued a notice to the MSEB
on the government's role and its officials in signing of the PPA.
Enron signed a Memorandum of Understanding (MOU) with the MSEB in June 1992, resulting in the formation of a new project company called Dabhol Power Company (DPC).
(73) The Power Purchasing Agreement (PPA) between Enron and the MSEB was the most critical element of this financial structuring because the PPA was the contract under which Enron, as the owner of the power plant, would supply power to the MSEB electric grid.
The Government of Maharashtra (GOM) subsequently issued a guaranty, dated February 10, 1994, pursuant to which it guaranteed MSEB's payment obligations under the PPA.
With respect to the financing of Phase II, DPC also entered into an Escrow Agreement with the MSEB and a GOI-owned bank called Canara Bank (dated September 19, 1998, and amended March 27, 1999).
Based on the Munde Committee's evaluations and on behalf of the state government, the MSEB directed DPC to cease construction and abandon the project in August 1995.