SHAREHOLDERS AGREEMENT
Between
DELHI POWER SUPPLY COMPANY LTD.
and

SOUTH WEST DELHI ELECTRICITY
DISTRIBUTION COMPANY LIMITED

(1)

BSES LIMITED, a company incorporated under the provisions of the Companies Act, 1913 and having its registered office at NAGIN Mahal, 6" floor, 82 Veer Nariman Road, Mumbai 400 020 (hereinafter referred to as BSES, which expression shall, unless, repugnant to the context or meaning thereof, include its successors and permitted assigns ) of the first part.

(2)

DELHI POWER COMPANY LIMITED a company incorporated under the provisions of the Companies Act, 1956 with registered ;office at Shakti Sadan ,Kotla Marg New Delhi -110002 (hereinafter referred to as Holding Company which expression shall, unless repugnant to the context or meaning thereof, include its successors and permitted assigns) of the second part, and

(3)

South-West Delhi Electricity Distribution Company Limited, a company incorporated under the provision of the Companies Act 1956 and having its registered office at Shakti Bhawan Nehru Place New ;Delhi -110002 (hereinafter referred to as "COMPANY" which expression shall, unless repugnant to the context or meaning thereof, include its successors and permitted assigns) of the last part.

A.

Delhi Vidyut Boar (hereinafter referred to as the 'Board') is a statutory body constituted under section 5 of the Electricity (Supply) Act,1948 and has been engaged in the electricity generation, transmission land distribution in the National Capital Territory of Delhi.

B.

The Government of National Capital Territory of Delhi (hereinafter referred to as the 'GNCTD') by Notification No. F. 11(28)/98-EB/341 dated March 3 1999 issued in exercise of the powers under section 17 of the Electricity Regulatory Commission (hereinafter referred to as the Commission') and vested in the Commission various functions as provided I section 22 of the said Act.

C.

The Delhi Electricity Reform Act,. 2000 (hereinafter referred to as the 'Reform Act') has been enacted by the Legislature of the state of Delhi containing provisions amongst others, enabling restructuring of the Board and the Reform Act has been in force with effect from November 3, 2000.

D.

After the coming into force of the Reform act, the Commission stands recognised under section 3 of the Reform act and is entitled to exercise all powers and functions as set out in the reform Act.

E.

In exercise of powers under the Reform Act, GNTCD has published the Delhi Electricity Reform (Transfer scheme) Rules, 2001(hereinafter referred to as the 'Transfer Scheme') and GNCTD will issue a notification making the transfer Scheme effective as on Completion Date(hereinafter referred to as the date of the transfer);

F.

Holding Company was incorporated as a limited company under the Companies Act, 1956 in the National Capital Territory of Delhi, the Certificate of incorporation was granted by the Registrar of Companies, NCT of Delhi on July 4th 2001 and the certificate of Commencement of Business was granted on December 31st, 2001.

G.

The COMPANY has been incorporated as a limited company under the Companies Act 1956 to undertake the business of distribution and retail supply of electricity in the listed in Part 11 of Schedule 'H' of the Transfer Scheme (hereinafter called the 'Specified Area'); the Certificate of incorporation was ;granted by the Registrar of Companies NCT of Delhi on July 4th ,m2001 and the Certificate of Commencement of Business was granted on December 31st, 2001.

H.

The COMPANY will undertake the business of distribution and supply of electricity n the specified Area from the date of the transfer as per the authorised contained in the Transfer Scheme and the Licence to be granted by the Commission;

I.

In terms of the provisions of the reform Act and the Transfer Scheme which will come into force on the date of the transfer the distribution land retail supply activities of the Board pertaining to the specified Area along with specified assets, specified liabilities specified personnel and specified proceedings shall be transferred to the COMPANY.

J.

The COMPANY shall be duly authorized and empowered to undertake the business of electricity distribution land retail supply in the Specified Area to all consumers from the date of the transfer.

K.

Presently, the authorised share capital of the COMPANY is 460,00,000 (Rupees Four Hundred and Sixty crores only) comprising of 46,00,00,000(Forty sic crores) equity shares of Rs 10/- each and the entire share capital is held by the Holding Company. The equity shares of the COMPANY are in dematerialized form;

L.

GNCTD and the Holding Company initiated a competitive bidding process for selecting a participant from the private sector to purchase from Holding Company the majority interest in COMPANY COMPRISING OF 23, 46, 00,000 (Twenty three crores forty six lacs) equity shares of Rs 10/- each (in respect of 51 percent of the shares) and manage the business of distribution and retail supply of electricity in the Specified Areas and for the said purpose the Registration request for qualification and the finalised draft of these shares acquisition agreement , Shareholders Agreement Bulk supply Agreement Escrow Agreement Loan Agreement and other relevant documents were made available to the bidders.

M.

Pursuant to the above Request for Qualification, six (6) companies were short-listed for submission of financial bids. As per the Request for Proposal Document dated November 22nd, 2001 two bids were submitted by the bidders and BSES is one of the companies/consortium which submitted a bid. Based on further negotiations, BSES submitted revised. Bid on May 14th, 2002 GNCTD accorded approval to the bids as per their letter Nos. F.11(118)/2001-Power/180 dated May 29th, 2002 and F.11(118)/2001-Power/181 Dated May 29th 2002 which shall prevail in the event of any conflict with any of the Bid Documents and/or the agreements entered hereinafter which shall prevail in the event of any conflict with any of the Bid Documents and/or the agreements entered hereinafter;

N.

BSES has been selected as the preferred bidder for sale of the said 23,46,00,000 (Twenty three crores forty six lacs) equity shares (51) percent held by Holding Company in COMPANY and for vesting of the management and control of COMPANY'S business, namely, distribution and retail supply electricity in the Specified Area.

O.

BSES had complied with the terms of then Bid Documents which were necessary to execute the Share Acquisition Agreement and consequently, BSES and Holding Company entered into a Share Acquisition Agreement dated 31st May 2002. Under the said Share Acquisition Agreement, the Holding Company had agreed to sell and transfer to BSES and BSES had agreed to purchase from Holding Company 23,46,00,000 (Twenty three crores forty six lacs) equity shares on the terms and conditions contained in the Bid Documents and in the Share Acquisition Agreement.

P.

In terms of the share Acquisition agreement,. BSES has arranged for the payment of consideration to Holding Company for the shares agreed to be purchased, and the same has been paid contemporaneously with the execution of this Agreement.

Q.

The parties have complied with the conditions specified in the Share acquisition Agreement and are in a position to execute this Shareholders Agreement As envisaged in the Bid Documents and the Share Acquisition Agreement.

NOW THEREFORE FOR AND IN CONSIDERATION OF MUTUAL PROMISES MADE AND CONTAINED HEREIN IT IS AGREED AS FOLLOWS: