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Important clauses of the guarantees

Information compiled by Enron Action group

Guarantee of MSEB Payment Obligations: The Guarantor hereby irrevocably and unconditionally Guarantees to the Company (as a secondary obligor) to pay to the Company, within 7 calendar days following submission by the company of a demand in accordance with Clause 1 (B), any and every sum of money which MSEB is liable to pay to the Company under or pursuant to the PPA and shall fail to pay in accordance with the terms of the PPA (the operative parts are any and every)

Indemnity: The Guarantor undertakes, as primary obligor, to indemnify and keep indemnified the company against any loss sustained or incurred by the Company by reason of the invalidity, illegality or unenforceablity of any of this Guarantee or the provisions of this Guarantee or the PPA and the amount of such loss shall be the amount which, but for such invalidity, illegality or unenforceablity, the company would otherwise have been entitled to recover here under or thereunder.

Governing law: The rights and obligations of the parties under or pursuant to this Guarantee shall be governed by and construed according to English Law.

Sovereign immunity: The Guarantor unconditionally and irrevocably: agrees that the execution, delivery and performance by it of this Guarantee constitute private and commercial act rather than public or governmental acts; agrees that, should any proceedings be brought against it or its assets in any jurisdiction in relation to this Guarantee or any transaction contemplated by this Guarantee, no immunity from such proceedings shall, to the extent that it would otherwise be entitled to do so under the laws of India, be claimed by or on behalf of itself or with respect to assets....waives any right of immunity which it or any of its assets now has or may acquire in the future in any jurisdiction.

That is, The guarantee promises that the state government would be liable for all of MSEB's dues to the DPC under the PPA. The state government for reasons best known to itself, has promised to be obligated even in the case that the PPA and other ancillary agreements were found to be illegal or unenforceable. The agreement and its interpretation would be under the provisions of English law The government has waived its sovereign immunity as well as claims on all assets that may be covered if an action was brought under the provisions of the guarantee.

Of the central gurantees: Some clauses that we think should have been better known include:

The GoI "waives any right of immunity which it or any of its assets now has or may acquire in the future in any jurisdiction". The GoI further "consents generally in respect of the enforcement of any judgment or award against it in any such proceedings to the giving of any relief or the issue of any process in any jurisdiction in connection with such proceedings (including, without limitation, the making, enforcement or execution against or in respect of any assets whatsoever irrespective of their use or intended use of any order or judgment that may be made or given in connection therewith)";.... "assets shall be taken as excluding present or future premises of the mission .....and ...military property or military assets...".

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