IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 2926 of 2006
Transmission Corporation of
Andhra Pradesh Ltd. & Anr. ...Appellants
Versus
Sai Renewable Power Pvt. Ltd. & Ors. ...Respondents
WITH
CIVIL APPEAL NO.5940 OF 2006
A.P. Transco ...Appellant
Versus
1
M.S. Biomass Energy Developers
Association & Ors. ...Respondents
WITH
CIVIL APPEAL NO. 5941 OF 2006
Transmission Corporation of
Andhra Pradesh Ltd. & Ors. ...Appellants
Versus
Small Hydro Power Developers
Association & Ors. ...Respondents
WITH
CIVIL APPEAL NO. 5942 OF 2006
Transmission Corporation of
Andhra Pradesh Ltd. & Ors. ...Appellants
2
Versus
K.M. Power Pvt. Ltd. & Ors. ...Respondents
WITH
CIVIL APPEAL NO. 5943 OF 2006
Transmission Corporation of
Andhra Pradesh Ltd. & Ors. ...Appellants
Versus
Manihamsa Power Projects Ltd. & Ors. ...Respondents
WITH
CIVIL APPEAL NO. 5944 OF 2006
Transmission Corporation of
Andhra Pradesh Ltd. & Ors. ...Appellants
3
Versus
PMC Power Pvt. Ltd. & Ors. ...Respondents
WITH
CIVIL APPEAL NO. 5945 OF 2006
Transmission Corporation of
Andhra Pradesh Ltd. & Ors. ...Appellants
Versus
Bhavani Hydro Power Projects
Pvt. Ltd. & Ors. ...Respondents
WITH
CIVIL APPEAL NO. 5946 OF 2006
Transmission Corporation of
Andhra Pradesh Ltd. & Ors. ...Appellants
4
Versus
NCL Energy Ltd. & Ors. ...Respondents
WITH
CIVIL APPEAL NO. 5947 OF 2006
A.P. Transmission Corporation Ltd. ...Appellant
Versus
M/s Active Power Corporation
Pvt. Ltd. & Ors. ...Respondents
WITH
CIVIL APPEAL NO. 5948 OF 2006
A.P. Transmission Corporation Ltd. ...Appellant
5
Versus
Kakatiya Cement Sugars &
Industries Ltd. & Ors. ...Respondents
WITH
CIVIL APPEAL NO. 5949 OF 2006
Transmission Corporation of
Andhra Pradesh Ltd. & Ors. ...Appellants
Versus
Kallam Spinning Mills Ltd. & Ors. ...Respondents
WITH
CIVIL APPEAL NO. 5950 OF 2006
6
Transmission Corporation of
Andhra Pradesh Ltd. & Ors. ...Appellants
Versus
Fivess Power Projects Pvt. Ltd. & Ors. ...Respondents
WITH
CIVIL APPEAL NO. 5951 OF 2006
Transmission Corporation of
Andhra Pradesh Ltd. & Ors. ...Appellants
Versus
Srinivasa Power Projects Pvt.
Ltd. & Ors. ...Respondents
WITH
7
CIVIL APPEAL NO. 5952 OF 2006
Transmission Corporation of
Andhra Pradesh Ltd. & Ors. ...Appellants
Versus
Janapadu Hydro Projects Pvt.
Ltd. & Ors. ...Respondents
WITH
CIVIL APPEAL NO. 5953 OF 2006
Transmission Corporation of
8
Andhra Pradesh Ltd. & Ors. ...Appellants
Versus
The South Indian Sugar Mills
Association & Ors. Respondents
WITH
CIVIL APPEAL NO. 5954OF 2006
Transmission Corporation of
Andhra Pradesh Ltd. & Ors. ...Appellants
Versus
The South Indian Sugar Mills
Association & Ors. ...Respondents
WITH
9
CIVIL APPEAL NO. 5955 OF 2006
The A.P. Transmission Corporation Ltd. ...Appellant
Versus
M/s.Vensa Bio-Tek Ltd. & Ors. ...Respondents
WITH
CIVIL APPEAL NO. 5956 OF 2006
The A.P. Transmission Corporation Ltd. ...Appellant
Versus
Sagar Sugars & Allied Products
Ltd. & Ors. ...Respondents
10
WITH
CIVIL APPEAL NO. 5957 OF 2006
The A.P. Transmission Corporation Ltd. ...Appellant
Versus
M/s Raus Power Ltd. & Ors. ...Respondents
WITH
CIVIL APPEAL NO. 5958 OF 2006
Transmission Corporation of
Andhra Pradesh Ltd. & Ors. ...Appellants
Versus
M/s Balaji Energy Pvt. Ltd. & Ors. ...Respondents
WITH
11
CIVIL APPEAL NO. 5959 OF 2006
Transmission Corporation of
Andhra Pradesh Ltd. & Ors. ...Appellants
Versus
Saraswati Power & Industries Pvt. Ltd & Ors. ...Respondents
WITH
CIVIL APPEAL NO. 5960 OF 2006
Transmission Corporation of
Andhra Pradesh Ltd. & Ors. ...Appellants
Versus
M/s Gayatri Sugars Limited & Ors. ...Respondents
WITH
12
CIVIL APPEAL NO. 5961 OF 2006
A.P. Transco ...Appellants
Versus
Roshini Powertech Ltd. & Ors. ...Respondents
WITH
CIVIL APPEAL NO. 3091 OF 2006
Central Power Distribution Company of
Andhra Pradesh & Anr. ...Appellants
13
Versus
M/s Gayatri Agro Industrial Power Ltd. & Ors. ...Respondents
WITH
CIVIL APPEAL NO. 5962 OF 2006
Eastern Power Distribution Company
of Andhra Pradesh Ltd. & Anr. ...Appellants
Versus
M/s Vamshi Industries Ltd. & Ors. ...Respondents
WITH
CIVIL APPEAL NO. 5963 OF 2006
Southern Power Distribution Company
of Andhra Pradesh Ltd. & Anr. ...Appellants
14
Versus
M/s Matrix Power Pvt. Ltd. & Ors. ...Respondents
WITH
CIVIL APPEAL NO. 5964 OF 2006
Northern Power Distribution Company of
Andhra Pradesh & Anr. ...
Appellants
Versus
15
M/s Gowthami Bio-Energies Ltd. & Ors. ...Respondents
WITH
CIVIL APPEAL NO. 3884 OF 2006
A P. Electricity Regulatory Commission ...Appellant
Versus
M/s Sia Renewable Power Pvt. Ltd. & Ors. ...Respondents
WITH
CIVIL APPEAL NO. 5966 OF 2006
A P Electricity Regulatory Commission ...Appellant
Versus
M/s Biomas Energy Developers Association & Ors. ...Respondents
16
WITH
CIVIL APPEAL NO. 5967 OF 2006
A P Electricity Regulatory Commission ...Appellant
Versus
Small Hydro Developers Association & Ors. ...Respondents
WITH
CIVIL APPEAL NO. 5968 OF 2006
A P Electricity Regulatory Commission ...Appellant
Versus
K.M. Power Pvt. Ltd. & Ors. ...Respondents
WITH
17
CIVIL APPEAL NO. 5969 OF 2006
A P Electricity Regulatory Commission ...Appellant
Versus
Manihamsa Power Projects Ltd. & Ors. ...Respondents
WITH
CIVIL APPEAL NO. 5970 OF 2006
A P Electricity Regulatory Commission ...Appellant
Versus
PMC Power Pvt. Ltd. & Ors. ...Respondents
WITH
CIVIL APPEAL NO. 5971 OF 2006
18
A P Electricity Regulatory Commission ...Appellant
Versus
Bhavani Hydro Power Projects Pvt. Ltd. & Ors. ...Respondents
WITH
CIVIL APPEAL NO. 5972 OF 2006
A P Electricity Regulatory Commission ...Appellant
Versus
NCL Energy Limited & Ors. ...Respondents
WITH
CIVIL APPEAL NO. 5973 OF 2006
A P Electricity Regulatory Commission ...Appellant
19
Versus
M/s Active Power Corporation Pvt. Ltd. & Anr. ...Respondents
WITH
CIVIL APPEAL NO. 5974 OF 2006
A P Electricity Regulatory Commission ...Appellant
Versus
Kakatiya Cement Sugars & Industries Ltd. & Anr. ...Respondents
WITH
20
CIVIL APPEAL NO. 5975 OF 2006
A P Electricity Regulatory Commission ...Appellant
Versus
Kallam Spinning Mills Ltd. & Ors. ...Respondents
WITH
CIVIL APPEAL NO. 5976 OF 2006
A P Electricity Regulatory Commission ...Appellant
Versus
Fivess Power Projects Pvt. Ltd. & Ors. ...Respondents
21
WITH
CIVIL APPEAL NO. 5977 OF 2006
A P Electricity Regulatory Commission ...Appellant
Versus
Srinivasa Power Projects Pvt. Ltd. & Ors. ...Respondents
WITH
CIVIL APPEAL NO. 5978 OF 2006
A P Electricity Regulatory Commission ...Appellant
Versus
Janapadu Hydro Power Projects Pvt. Ltd. & Ors. ...Respondents
WITH
22
CIVIL APPEAL NO. 5979 OF 2006
A P Electricity Regulatory Commission ...Appellant
Versus
The South Indian Sugar Mills Association & Ors. ...Respondents
WITH
CIVIL APPEAL NO. 5980 OF 2006
A P Electricity Regulatory Commission ...Appellant
Versus
The South Indian Sugar Mills Association & Ors. ...Respondents
WITH
23
CIVIL APPEAL NO. 5981 OF 2006
A P Electricity Regulatory Commission ...Appellant
Versus
M/s Vensa Bio-Tec Limited & Ors. ...Respondents
WITH
CIVIL APPEAL NO. 5982 OF 2006
A P Electricity Regulatory Commission ...Appellant
Versus
Sagar Sugars & Allied Products Ltd. & Anr. ...Respondents
WITH
CIVIL APPEAL NO. 5983 OF 2006
24
A P Electricity Regulatory Commission ...Appellant
Versus
M/s Raus Power Ltd. & Anr. ...Respondents
WITH
CIVIL APPEAL NO. 5984 OF 2006
A P Electricity Regulatory Commission ...Appellant
Versus
M/s Balaji Energy Pvt. Ltd. & Ors. ...Respondents
WITH
CIVIL APPEAL NO. 5985 OF 2006
A P Electricity Regulatory Commission Appellant
25
Versus
Saraswati Power & Industries Pvt. Ltd. & Ors. ...Respondents
WITH
CIVIL APPEAL NO. 5986 OF 2006
A P Electricity Regulatory Commission ...Appellant
Versus
M/s Gayatri Sugars Ltd. & Ors. ...Respondents
WITH
CIVIL APPEAL NO. 5987 OF 2006
A P Electricity Regulatory Commission ...Appellant
26
Versus
Roshni Power Tech Ltd. & Ors. ...Respondents
WITH
CIVIL APPEAL NO. 3910 OF 2006
Transmission Corp of A.P. Ltd. & Ors. ...Appellants
Versus
Jeypore Sugar Company Ltd. & Anr. ...Respondents
WITH
CIVIL APPEAL NO. 5988 OF 2006
27
Transmission Corporation of A.P. Ltd. & Ors. ...Appellants
Versus
M/s GMR Industries Ltd. & Anr. ...Respondents
WITH
CIVIL APPEAL NO. 5989 OF 2006
Transmission Corporation of A.P. Ltd. & Ors. ...Appellants
Versus
South Indian Sugar Mills Association & Anr. ...Respondents
28
WITH
CIVIL APPEAL NO. 5991 OF 2006
Transmission Corporation of A.P. Ltd. ...Appellants
Versus
M/s. Kaktiya Alloys (P) Ltd. & Ors. ...Respondents
WITH
CIVIL APPEAL NO. 4106 OF 2006
Transmission Corporation of A.P. Ltd. ...Appellant
29
Versus
Chodavaram Coop Sugar Ltd. & Ors. ...Respondents
JUDGMENT
Swatanter Kumar, J.
1. Andhra Pradesh Electricity Regulatory Commission (for short
`Regulatory Commission’) was created in furtherance to the
provisions of the Andhra Pradesh Electricity Reform Act, 1998
(hereinafter referred to as the `Reform Act, 1998′) enacted by the
30
State legislature which received the assent of the President on 21 st
December, 1998 and became effective w.e.f. 1st February, 1999.
The Commission initiated suo motu proceedings for determination of
tariff applicable to the Non-Conventional Energy generation projects
of Andhra Pradesh, which was to take effect from 1st April, 2004
onwards. After hearing the Non-Conventional Power Project
Developers, the Non-Conventional Energy Development Corporation
of Andhra Pradesh Ltd. and Transmission Corporation of Andhra
Pradesh Ltd. (for short referred to as `NEDCAP’ and `APTRANSCO’
respectively), the Regulatory Commission, vide its detailed order
dated 20th March, 2004, arrived at certain conclusions and fixed the
energy purchase rates at base unit price of Rs. 2.25 as on 1st
31
April,1994 and the escalation index of 5% p.a., but the escalation
would be simple and not to be compounded every year. In other
words, the base price as on 1st April, 2004 will be Rs.3.37 per kwh.
As these projects have no variable expenses and negligible increase
in maintenance cost, the tariff will be frozen for a period of five year,
which however, is to be reviewed thereafter. The Regulatory
Commission also issued certain instructions to restrict and regulate
various operations and other aspects. It restricted the sale,
procurement and distribution of electricity by the Developers to any
other party except APTRANSCO. After passing of the order dated
20th March, 2004 an application for review was filed by the
Developers before the Regulatory Commission. The order was
32
clarified to some extent on this review application vide order dated 7 th
July, 2004. Aggrieved from both these orders the Developers filed
independent appeals under Section 111(1) of the Electricity Act,
2003 collectively against the order dated 20th March, 2004 as
modified by order dated 7th July, 2004. These appeals came up for
hearing before the Appellate Tribunal for Electricity (for short the
`Tribunal’) which decided all these appeals by a common order dated
2nd June, 2006. The Tribunal granted certain relief to the appellants
before it, who are the respondents in the present appeals, holding
that there was some element of duress in execution of the purchase
price agreements. The Power Purchase Agreement (for short `PPA’)
was a statutory document and the Regulatory Commission had no
33
authority to interfere with the same. It could not even be altered by
the Regulatory Commission. One of the most important finding
recorded by the Tribunal was that the Regulatory Commission has
neither the power nor jurisdiction to compel the Developers to sell the
power generated by them to APTRANSCO and/or DISCOM. Feeling
seriously aggrieved from the order of the Tribunal the Transmission
Corporation of Andhra Pradesh Ltd. as well as Eastern Power
Distribution Company of Andhra Pradesh Ltd. have come up in
appeal before this Court under Section 125 of the Electricity Act,
2003. Though the controversy, in the present case, appears to be a
narrow one but on examination it is clear that there are various
ancillary questions, which need to be decided by the Court, prior to
34
answering the main controversy relating to the jurisdiction and
fixation of tariff by the Regulatory Commission. Arguments at great
length were addressed by different learned counsel appearing for the
parties. Before we notice the facts in detail or even refer to the
contentions raised, it will be appropriate to refer to the issues
involved in the case as the entire matter revolves around these
questions and answers thereto and the relief granted. For better
understanding of the same, let us refer to these questions and
answers. The comparative table of the points at issue, that were
raised, and the answers thereto are as under:
A. Whether a Regulatory On the point `A’, we hold that the
Commission has the power,Regulatory Commission has neither the
authority and jurisdiction eitherpower nor the authority nor jurisdiction to
35
under the Electricity Act, 2003compel the Developers to sell the power
or under the A Electricitygenerated by them TO APTRANSCO or
Reform Act, 1998 to compelDISCOMS.
the Developers to sell the
power generated by them to
the State Transmission Utility
or Distribution Company?
B. Whether the A.P.On the point `B’. we hold that the
Regulatory Commission havingRegulatory Commission having approved
approved and regulated thethe regulated the purchase price agreed
purchase price of power into between the Developer and the
terms of arrangement andTRANSCO in terms of Section 21 (4)(b)
PPA entered betweenand 11 (1)(e) of the Andhra Pradesh
APTRANSCO and DevelopersElectricity Reform Act, 1998 read with
in terms of Sec. 21 (4)(B) andSection 86 (1)(b) of 2003 Act cannot re-
11 (1)(e) of A.P. Reform Actfix the regulatory purchase price by
read with Sec. 86(1)(b) of 2003resorting to tariff fixation under Section
Act could re-fix the regulatory62; 64 read with Section 86(1)(a) of 2003
purchase price by resorting toAct, as Section 86(1)(b) being a special
tariff fixation under Section 62;provision excludes the applicability of
64 read with Sec. 86(1)(a) ofSection 86(1)(a) of the 2003 Act to
2003 Act? private Generators.
36
C. Whether the A.P.On the point `C’ and `F’, we hold that the
Regulatory Commission hasAndhra Pradesh Regulatory Commission
the power or authority to alterhas no power or authority to alter the
the policy directions issued bypolicy direction issued by the State
the State Government withGovernment and the said Commission
respect to NCE Developers?has no executive power nor a plenary
Whether the Commissionpower as claimed by it.
could claim executive power with respect to NCE Developers and fixation of price for power generated by NCE Developers and sold to APTRANSCO/DISCOM? D. Whether the plea ofThe points `D' & `E' are answered in estoppel advanced byfavour of the appellants and they are
Developers is sustainable onsubstantiated by the appellants.
facts and law?
37
E. Whether the plea ofThe points `D’ & `E’ are answered in
legitimate expectationfavour of the appellants and they are
advanced by Developers issubstantiated by the appellants
sustainable?
F. Whether the A.P. ElectricityOn the point `C’ and `F’, we hold that the
Regulatory Commission isAndhra Pradesh Regulatory Commission
possessed of Executivehas no power or authority to alter the
Powers to issue policy andpolicy direction issued by the State
executive directions in respectGovernment and the said Commission
of NCE Developers in thehas no executive power nor a plenary
State? power as claimed by it.
G. Is not the CommissionOn the point `G’, we hold that the Andhra
bound by directions alreadyPradesh Electricity Regulatory
issued by the State in respectCommission is bound by policy directions
of NCE Developers as well asalready issued by the State Government
incentives directed by theso long as they are not modified or
given to encourage them? altered.
H. Whether RegulatoryOn the point `H’, we hold that the
Commission could alter orRegulatory Commission has no authority
change the PPAs enteredto alter or change the PPAs entered
between the NCE Developersbetween the NCE Developers and
and ElectricityElectricity Board/ APTRANSCO
38
Board/APTRANSCO?
I. Whether the procurement On the point `I’, we hold that the
arrangement / PPA entered isprocurement arrangement/PPA is
a statutory contract and if so,statutory and the Commission has no
whether it could be interferedauthority to interfere with the same.
by the Commission?
J. Whether the Commission isOn the point `J’, we hold that the
just a regulator to approve theCommission is just a regulator or
PPA entered or whether itapprove the PPA entered between the
could determine tariff withappellant generator and the
respect to NCE Developers? APTRANSCO by examining as to
whether the purchase is economical and
it is in terms of State Policy.
K. Having approved PPA byIn the result on the `K’, we hold that the
exercise of Regulatory Power,appeals preferred by the NCE
is it open to commission toDevelopers-Appellants in appeal Nos.
undertake determination of1,2,5,6,7,8,9,10,12,15,16,17,18,19,20,21,
tariff in respect of private22,34,46,47,52,58, 67 & 80 of 2005 are
generation by NCEallowed and the impugned proceedings
Developers? of the Regulatory Commission are set
aside and there will be a direction to the
39
APTRANSCO, the Transmission
Corporation of AP, the Central Power
Distributing Company of AP Ltd., the
Southern Power Distributing Company of
AP Ltd., the Northern Power Distributing
Company of AP Ltd. and the Eastern
Power Distributing Company Limited of
AP Ltd. to continue the Power Purchase
and at the same rate at which the power
generated by NCE Developers supplied
to them are being paid before passing of
the impugned order of the Commission
dated 20.03.2004 and 07.07.2004 made
in R.P. No.84/2003 and O.P.
No.1075/2000 with all differences and
arrears thereof, up to date and continue
to pay at the same rate, until a new PPA
is entered by agreement between them in
terms of State Government Policy
direction, that may be made hereafter
and approved by the Regulatory
Commission. This Judgment shall be
40
given effect from the date of
communication. For payment of tariff
difference and arrears, the respondents
shall have six weeks from the date of this
Judgment, failing which the respondents
shall be liable to pay interest at 9% per
annum with effect from the month on
which the difference in tariff rate remains
to be paid ant till date of payment.
L. To what relief, if any? Consequently, the Appeal Nos. 46,48,49
and 50 of 2005 preferred by the AP
Transmission Corporation and the four
Discoms will stand dismissed as there
are no merits in them. The parties shall
bear the respective cost throughout.
2. The above conclusions arrived at by the Tribunal on the factual
matrix that the Government of Andhra Pradesh on 18th January, 1997
by GO Ms. No. 93, with the object of encouraging generation of
41
electricity from renewable sources of energy, allowed uniform
charges to all such projects. After issuance of the above GO Ms. 93
certain ambiguities were noticed by the concerned parties. This
resulted in issuance of GO Ms. No. 112 dated 22nd December, 1998
and vide this GO clarifications were issued to the earlier Government
order and it clearly provided for uniform implementation of the
proposed scheme to all non-conventional energy
developers/generators of power. The Andhra Pradesh Electricity
Regulatory Commission was constituted under the said Reform Act,
1998 vide notification dated 3rd April, 1999 and the same Commission
performing the duties and functions under the above Act continued to
be a Commission under and within the meaning of Electricity Act,
42
2003 as well. This was done by virtue of Section 185 of the
Electricity Act, 2003. State Government of Andhra Pradesh notified
the Transmission Corporation of Andhra Pradesh to be the State
Transmission utility. We may also notice here that the Electricity
Regulatory Commissions Act, 1998 also contemplated under Section
3, constitution of a Central Electricity Regulatory Commission to
exercise the powers conferred and functions assigned to it under the
Act. In terms of Section 17 of this Act the State Government was
also to notify in the official gazette and establish, for the purposes of
this Act a Commission for the State to be known as the State
Electricity Regulatory Commission. In terms of Section 22 of this Act
the functions of the State Commission were defined, which included
43
determination of tariff for electricity, wholesale, bulk, grid or retail, as
the case may be. Under Section 11 of the Reform Act, 1998 it has
been spelt out as to what are the functions of the Regulatory
Commission, inter alia, it provides to aid and advise to the State
Government, in matters concerning electricity generation,
transmission, distribution and supply in the State, to issue licences in
accordance with the provisions of this Act and determine the
conditions to be included in the licences, to regulate the purchase,
distribution, supply and utilization of electricity, the quality of service,
the tariff and charges payable keeping in view both the interest of the
consumer as well as the consideration that the supply and
distribution cannot be maintained unless the charges for the
44
electricity supplied are adequately levied and duly collected, to
require licensees to formulate prospective plans and schemes in
cooperation with others for the promotion of generation,
transmission, distribution and supply of electricity. Besides these
powers, which have been noticed by us, inter alia, the residue clause
has been worded very widely to permit the Regulatory Commission to
undertake all incidental or ancillary things. Under Section 15, the
Regulatory Commission is vested with the power to issue licences
and to enter into agreements on specified terms and also to
determine the charges and establish tariff in terms of clause (5) of
Section 15 of the Reform Act, 1998. It needs to be noticed that the
State of Andhra Pradesh was vested with the powers and infact the
45
duty to constitute the Regulatory Commission in terms of Section 11
afore noticed.
3. The Regulatory Commission was constituted as per the
provisions of Reform Act, 1998 vide notification dated 3rd April, 1999
and it was to perform all regulatory functions pertaining to the
electricity industry in the State of Andhra Pradesh. It was commonly
agreed before us during the course of argument that it is the
Electricity Regulatory Commission for the State of Andhra Pradesh
for all intent and purposes under the Reform Act, 1998 as well as the
Electricity Act, 2003. We must notice, at this stage itself, that the
Tribunal has entertained the doubt that since no independent
46
notification was issued under Section 17 of Electricity Regulatory
Commission Act, 1998, therefore, it could not exercise the powers
vested in the Regulatory Commission under that Act. This may not
be the correct position in law. The Regulatory Commission was
constituted under the Reform Act, 1998 and an appropriate
notification in that behalf was issued. The Electricity Regulatory
Commission Act, 1998 stood repealed by the Electricity Act, 2003.
The Electricity Act, 2003 specifically recognized and accepted the
Commissions constituted under the enactments specified in the
schedule to the Act as appropriate Commission. In entry 3 of the said
schedule, Reform Act, 1998 has been specifically noticed. In other
words, the Regulatory Commission constituted under the Reform Act,
47
1998 became the appropriate commission under the Electricity Act,
2003 as well.
4. In exercise of its powers, the Regulatory Commission claims to
have issued licences to Transmission Corporation as well as
DISCOM for bulk and retail supply of electricity w.e.f. 1st April, 2001.
Vide order dated 20th June, 2001 made in OP No. 1075 of 2000, the
Regulatory Commission directed generators of Non-Conventional
Energy to supply power exclusively to APTRANSCO. The Non-
Conventional Energy Developers were not permitted to sell the
energy generated by them to 3rd parties. By the same order the
Regulatory Commission also approved the rate which was prevailing
48
earlier for such supply at Rs. 2.25 per unit with 5% escalation per
annum from 1994-95 being the base year. After coming into force of
the Electricity Act, 2003, Regulatory Commission issued notice on
23rd October, 2003 inviting objections from various Developers and
Generators to the proposals of APTRANSCO and NEDCAP in
regard to fixation of price to be paid by APTRANSCO for the
quantum of electricity purchased from non-conventional energy
projects w.e.f. 1st April, 2004. The objections, if any, were to be filed
on or before 5th November, 2003. NEDCAP and DISCOM were to
submit proposals for review of incentives. The proposal had been
received for review by the Regulatory Commission from
APTRANSCO. Within the extended time the Developers, individually
49
as well as acting through their Association, filed various objections in
response to the notice dated 23rd October, 2003. All the parties were
granted hearing by the Regulatory Commission which, then, passed
the order dated 20th March, 2004, reducing the price payable by
APTRANSCO to Non-Conventional Energy Developers towards the
supply of electricity. Some of the Developers moved to the Andhra
Pradesh High Court by filing a Writ Petition No. 7222 of 2004 in
which interim order dated 15th April, 2004 came to be passed
directing APTRANSCO to continue to pay to NCE Developers for the
power that may be supplied by them as per the earlier rates prevalent
on 1st April, 2004. By order dated 27th April, 2004, the High Court
disposed of the batch of the Writ Petitions while issuing the direction
50
to the Developers to approach the Regulatory Commission and seek
review of its order dated 20th March, 2004. The Regulatory
Commission was also directed to take up the review petition and
dispose of the same within 8 weeks. Till then, the interim order dated
15th April, 2004 was to remain in force. This resulted in filing of the
Review Petitions before the Regulatory Commission. In the
meanwhile the Govt. of Andhra Pradesh ordered that APTRANSCO
shall cease to engage in trading relating functions and that the PPAs
entered with the Developers shall vest in DISCOM(s) w.e.f. 10th
June, 2004 in terms of Section 39 read with Section 172(b) of the
Electricity Act, 2003. The Review Petitions filed by the Developers
before the Regulatory Commission came to be dismissed by different
51
orders passed on 5th July, 2004 and 10th July, 2004 respectively. The
Review Petition filed by APTRANSCO also came to be dismissed on
11th July, 2004. This resulted in approaching the High Court again, by
nine of the developers, filing Writ Petition No. 16621 of 2004. The
High Court, vide its order dated 16th September, 2004, permitted the
implementation of the revised tariff by APTRANSCO. It further
directed that 50% of the differential amount between the old and the
revised tariff shall also be paid for the actual power supplied. By GO
58 dated 7th June, 2005, an approval scheme came to be framed
under the Reform Act, 1998 to transfer and distribute the assets and
contracts of bulk supply and trading business of APTRANSCO to
DISCOM which was in furtherance to the earlier decision of the State
52
of Andhra Pradesh. Ultimately these Writ Petitions came to be
disposed of with the direction that the Developers shall approach the
Tribunal and the interim order shall continue to be in force for a
period of 8 weeks from 15th June, 2005 or till the Tribunal passes
order on the interim application, whichever is earlier. Same interim
order was passed by the Tribunal during the pendency of the appeal
which, were filed before it.
5. As is obvious from the above narrated facts and again, it is not
in dispute that the Regulatory Commission passed an order dated
20th June, 2001 which, in fact, attained finality and its correctness
was never been questioned by any of the parties including the
53
present appellants. Thus, the order dated 20th June, 2001 is of some
significance and certainly of some definite relevancy. The
proceedings were initiated suo motu by the Regulatory Commission
against all the Developers of Non-Conventional Energy including mini
hydro projects. The Regulatory Commission noticed, in its order
dated 20th June, 2001 that Govt. of India issued guidelines regarding
promotional and fiscal incentives to be given by the State
Governments for power generation through Non-Conventional
Energy sources. The Govt. of Andhra Pradesh issued order No. 19
dated 16th March, 1996 under which it accorded certain incentives in
respect of the Developers with whom NEDCAP had entered into the
memorandum of understanding. A review of these incentives was
54
taken after which GO Ms. 93 dated 18th November, 1997 was issued,
as already noticed and it was decided to provide uniformity to all the
projects based on renewable sources of energy like Waste, Wind,
Bio-mass, Co-generation, Municipal Waste and Mini Hydro projects.
6. The Regulatory Commission had passed an order dated 6th
March, 2000 giving certain directions including that the Developers
could sell the power generated by them to third party upto 17th
November, 2000. The rates were indicated, as we have already
noticed, and that there would be reviewed with regard to purchase
price with reference to each Developer on completion of 10 years
from the date of the commission of the project. After noticing various
55
objections that had been raised by the Developers it was stated that
the Regulatory Commission was not attempting to stop any incentive
while referring to the statistics and the market conditions. It was
specifically noticed that permitting Non-Conventional Energy
Developers to make third party sales would not, at all, be in the
interest of organized growth of electricity industry and it would create
discrimination between the industrial consumer drawing power from
Non-Conventional Energy Developers and the industrial consumers
drawing power from APTRANSCO and these two would have to pay
two different rates. It also noticed that there will be undue
enrichment of the Developers as they were permitted to establish
their generation plants with definite benefits which were carried out
56
for years together. While holding that the Regulatory Commission
had jurisdiction, it also noticed that the rate approved by the
Regulatory Commission on the basis of guidelines issued by the
Ministry of Non-Conventional Energy Sources are much higher than
the rate permitted by the State Government and in comparison to
other States they were favourable to the NCE developers. This
reasoning persuaded the Regulatory Commission to pass the
following directions:
“29. The existing incentives under G.O. Ms. No.
93, dated 18.11.1997, which are continued under
the orders of the Commission from time to time till
24.06.2001 under our letter No. 2473, Dated 24-04-
2001 are extended for the time being till 24-07-2001. The temporary extension has been given to
enable the developers to finalise57
agreements’/arrangements relating to supply of
power to APTRANSCO prior to 24-07-2001). With
effect from the billing month of August 2001, all
generators of non-conventional energy shall supply
power to APTRANSCO only as per the following
terms:(i) Power generated by non-conventional energy
developers is not permitted for sale to third
parties.(i) Developers of non-conventional energy shall
supply power generated to
APTRANSCO/DISCOMS of A.P. only.(i) Price applicable for the purchase by the
supply licensee should be Rs. 2.25 per unit
with 5% escalation per annum with 1994-95
as the base year.APTRANSCO is simultaneously directed to arrange
payment for the supply of power purchased from58
developers of non-conventional energy by opening
a Letter of Credit in favour of the suppliers of power.30. A suo motu review of the incentives to take
effect from 1st April, 2004, will be undertaken by the
Commission after discussions with all the
concerned parties. There will also be a review of
the purchase price with specific reference to each
developer on completion of 10 years from the date
of commissioning of the project (by which time the
loans from financial institutions would have beenrepaid) when the purchase price will be reworked
on the basis of return on enquity. O&M expenses
and the variable cost.31. However, if any developer wishes to raise any
specific issue with reference to this order, he will be
entitled to apply to the Commission in the manner
provided in the regulations.”59
7. After passing of this order by the Regulatory Commission the
parties executed PPAs. These agreements were signed on the lines
of the directives given in the order of Regulatory Commission. In
fact, it was stated that the agreements were required to be and were
actually approved by the Regulatory Commission. In terms of Clause
5 of the PPA these agreements were enforceable subject to
obtaining consent of the Regulatory Commission as per Section 21 of
the Reform Act, 1998. Obviously, the rates and conditions specified
in the earlier proceedings of 11th November,1999, 1st April, 2000, 27th
January, 2001 and 13th July, 2001 were accepted by the parties.
Some of the clauses of the PPA, which have also been heavily relied
upon by the learned counsel for the parties, read as under:
60
“ARTICLE 2
PURCHASE OF DELIVERED ENERGY AND TARIFF2 All the Delivered Energy at the interconnection point for
sale to APTRANSCO will be purchased at the
tariff provided for in Article 2.2 from and after the
date of Commercial Operation of the Project.Title to Delivered Energy purchased shall pass
from the Company to the APTRANSCO at the
Interconnection Point.3 The Company shall be paid the tariff for the energy
delivered at the interconnection point for sale to
APTRANSCO at Rs. 2.25 paise per unit with escalation at
5% per annum with 1994-95 as base year and to be
revised on 1st April of every year upto the year 2003-
2004. Beyond the year 2003-2004, the purchase price by
APTRANSCO will be decided by Andhra Pradesh
Electricity Regulatory Commission. There will be further61
review of purchase price on completion of ten years from
the date of commissioning of the project, when the
purchase price will be reworked on the basis of Return on
Equity, O & M expenses and the Variable Cost.”8. Besides the above clauses it also provided other terms and
conditions under different articles, which are not necessary for us to
be noticed at this stage. It required to be noticed with some
significance that no disputes of any kind were raised by the
Developers till and after passing of the order dated 20th March, 2004.
The order of 20th June, 2001 read in conjunction with the PPAs
executed by the parties controlled the entire field and all the persons
including the Regulatory Commission as well as the State therein.
62
9. This period of nearly three years, thus, was free of grievances
and objections and the order of 2001 appears to have been
implemented willingly by the parties. There was execution of the
PPAs completely bringing the matter between the parties into the
realm of contract. Thereafter, the Regulatory Commission in terms of
its 2001 order appears to have initiated suo motu proceedings for
determination of tariff for non-conventional energy projects of Andhra
Pradesh with effect from 1st April, 2004. The Regulatory
Commission, in its order dated 20th March, 2004 has also noticed the
background facts of the case and the determination of rates earlier.
It had given notice to all the developers and other shareholders to
submit their views and objections on the above issues. After hearing
63
the parties, the Regulatory Commission considered the proposal fortariff. The proposal submitted by APTRANSCO and NEDCAP were
as under :
“APTRANSCO’s Tariff Proposals
Particulars Unit Tariff (Levelised Tariff Year-on-year escalation
over the life of the project)
Existing New Plants Existing NewPlants Rs/kWhr.
Rs/kWhr.
Mini Hydel 2.42 2.31 --- --- Bagasse 2.23 2.25 2% 2% Biomass 2.27 2.27 2% 2% Waste to Nil 2.66 --- 1% Energy Wind 2.52 2.55 --- --- NEDCAP Tariff proposals: 64 Bagasse Rs. 2.62 - Ist year Rs. 2.48 - 10th year Biomass Rs. 3.27 - Ist year Rs. 3.77 - 10th year Mini Hydel Rs. 2.96 - Ist year Rs. 2.26 - 10th year Wind Farm Rs. 4.54 - Ist year Rs. 3.19 - 10th year Waste to Energy Rs. 2.99 - Ist year Rs. 3.19 - 10th year10. Objections to the above proposals were also received.
Interestingly and rightly so, the Regulatory Commission before
analyzing the proposal and objections, noticed:
“20….as mentioned herein above, the
Commission, in this order is not examining
any issues concerning the direction contained
in the order dated 20.6.2001 that the NCE65
Developers shall not sell electricity to third
parties and they are required to sell electricity
only to APTRANSCO. The Commission, in
this order, is dealing with only those NCE
Developers who had accepted the order
dated 20.6.2001 and voluntarily agreed to sell
electricity to APTRANSCO on the terms and
conditions contained in the order dated
20.6.2001″11. While the Regulatory Commission undertook the review of
prices in relation to sale of electricity by Non-Conventional Energy
developers, it specifically referred to order in O.P. No. 1075 of 2000,
which, in turn, provided for review of sale price and incentives given
earlier to the said developers with effect from 1st April, 2004. It also
noticed that the PPAs signed by the APTRANSCO and NCE
Developers include provisions for such review by the Regulatory
66
Commission with effect from 1st April, 2004. It took the view thatreview of the price at which APTRANSCO shall purchase power from
the NCE developers is within the jurisdiction of the Regulatory
Commission under Section 21(4) of the Reform Act, 1998 and also
under Section 86(1) of the Electricity Act, 2003. Referring to Section
61 of the Electricity Act, 2003 which cast obligation upon the
Regulatory Commission to frame tariff regulations specifying the
terms and conditions for determination of tariff, in para 21 of that
order, the Regulatory Commission framed the following issues:
“Issues for consideration on merits:
The Commission has considered inter alia, the
following issues:67
(i) Whether the tariffs and incentives should be
uniform for all the categories of NCE projects
as provided earlier in MNES guidelines, GoAP
orders and APERC’s order OP. No.
1075/2000 dated 20.6.2001 or should they be
different for different categories of NCE
projects.(i) Whether the tariff should be a single part tariff
or a two part tariff.(i) Whether the tariff should be project specific or
uniform for all project falling in a category.(i) Whether there should be a cap on tariff when
a project exceeds the expected minimum
performance.(i) Social and environmental considerations.
(i) Control period.”
68
12. The Regulatory Commission decided tariff fixation in relation to
Bagasse based co-generation plants, Bio-mass power generation
and Mini hydel projects separately. The specific issue raised by the
objectors was that the benchmarking of capital cost should be based
on market trends, confirmed through competitive bidding from time to
time. Though APTRANSCO accepted this in principle, but stated
that they expect a detailed procedure from the Regulatory
Commission for an effective competent bidding. The tariff basis was
questioned as well as it was submitted that tariff beyond threshold
limit should be limited to the variable cost and incentives only and not
the full tariff. This was opposed by APTRANSCO which preferred a
single time tariff in entire energy purchase. While taking into
69
consideration the applicability of depreciation and its extent the tariffwas fixed and the Regulatory Commission drew the following
conclusion:
“81. The tariffs arrived at along with
escalation under each category will be
applicable as detailed in the respective
paragraphs under each category. The
aforementioned tariffs are, however, alsosubject to the following:
“i. In regard to tariff for Bagasse based co-
generation projects, where the Plant
Load Factor during a settlement period
exceeds 55% (the level at which the
fixed cost is expected to be recovered),
only incentive of 21.5 paise/unit and
variable cost as indicated in para (47)
above shall be paid for every unit
delivered in excess of the 55% PLF.70
ii. As regards to tariff for Biomass based
power projects, where the Plant Load
Factor during a settlement period
exceeds 80% (the level at which the
fixed cost is expected to be recovered),
only incentive of 21.5 paise/unit and
variable cost as indicated in para (63)
above shall be paid for every unit
delivered in excess of 80% PLF.ii. The tariff for mini-hydel power projects
is exclusive of Royalty.ii. In the case of tariff for mini-hydel power
projects, where the PLF during
settlement period exceeds 35%, only an
incentive of 21.5 paise/kwh shall be paid
for every unit delivered in excess of
35%.71
ii. The tariffs authorized above will be
applicable w.e.f. 1.4.2004 to all NCE
power plants of respective categories
for sale to APTRANSCO.ii. The above tariff structure is valid for
control period of five years with effect
from 1.4.2004. Thereafter, the
Commission will review the prices and
incentives after consultation with the
Developers and licensees.ii. A further review of the individual
projects will be undertaken on
completion of 10 years from the date of
commissioning of the project, by which
time the loan is expected to have been
substantially repaid, and the purchase
price will be based on O & M
expenditure, return on equity, variable
cost and residual depreciation, if any.72
ii. For those developers’ having captive
consumption who supply excess energy
to APTRANSCO after meeting their
internal consumption, the current
practice of meter reading at the
interconnection point and grossing up
for auxiliary consumption in order to
arrive at PLF will be misleading as it will
not take into consideration the captive
consumption. The incentive payments
begin after threshold PLF. In order toascertain the PLF levels, APTRANSCO
should make arrangements for
authenticated meter reading at the
generator terminals so that the two-tier
tariff is properly implemented.ii. Developers will be entitled to dispatch
100% of the available capacity without
reference to Merit Order Dispatch
subject, however, to any system
constrains.”73
13. After arriving at this conclusion the Regulatory Commission
also specifically clarified that as and when, however, trading function
of APTRANSCO is segregated and vested in new entity pursuant to
the Electricity Act, 2003, the terms and conditions contained therein
shall be binding on the new entity in the same manner as was
applicable to APTRANSCO.
14. As is clear from the order itself that it dealt with, primarily, the
question of refund/fixation of tariff in relation to various generation
projects. It decided no other matter and even these findings were
subsequently questioned by the Developers before the High Court
74
and in furtherance to the order of the High Court dated 15 th July,2004, Review Petitions were filed, which finally resulted in filing of the
appeals before the Tribunal.
15. We may notice here that vide notification dated 28th May, 2004,
the State Government ordered that APTRANSCO shall cease to
engage in trading relating functions and that the PPAs entered with
the Developers shall vest in DISCOM w.e.f. 10th June, 2004 in terms
of Section 39 read with Section 172(b) of the Electricity Act, 2003.
On 9th June, 2004, the Central Government also authorized the State
Transmission Utility to engage in bulk purchase and sell it to
DISCOM for a period of one year from 10th June, 2004. With this
75
background, the appeals which were filed before the AppellateTribunal came up for hearing and some appeals were also filed by
DISCOM with APTRANSCO as a party. Appeals from both sides
came up, heard and decided by the order dated 2nd June, 2006
impugned in the present case.
16. Now with this factual background, we shall proceed to examine
the issues of law raised in the present appeals before this Court. As
already noticed, in paragraph 40 of the impugned judgment, the
Tribunal had framed as many as 12 points for determination which
76
were answered by it in paragraph 114. The points formulated by theTribunal, in fact, can be categorized in the following principal heads:
(i) Matters relating to jurisdiction of the Commission for fixation
of tariff and sale of generated electricity to third party;(i) Correctness of tariff fixation on merits of the case;
(ii) Is the principle of estoppel attracted in the present case, if
so, to what extent?(i) Does the plea of duress need to be accepted as per settled
principles and with reference to the facts of the case?(i) What is the effect of order dated 20.6.2001 having attained
finality and even not being questioned in the present
proceedings?(i) What orders can be made by this Court to deal with these
appeals to do complete justice between the parties?77
17. Fixation of tariff is, primarily, a function to be performed by the
statutory authority in furtherance to the provisions of the relevant
laws. We have already noticed that fixation of tariff is a statutory
function as specified under the provisions of the Reform Act, 1998,
Electricity Regulatory Commissions Act, 1998 and the Electricity Act,
2003. These functions are required to be performed by the expert
bodies to whom the job is assigned under the law. For example,
Section 62 of the Electricity Act, 2003 requires an appropriate
Commission to determine the tariff in accordance with the provisions
of the Act. The Regulatory Commission has been constituted and
notified under the provisions of Section 3 read with Section 11 of the
78
Reform Act, 1998 which in terms of Section 11(1)(c)&(e) is expectedto fix the tariff as well as the terms of licence. There are three
different legislations in course and the Regulatory Commission has
been constituted under the Reform Act, 1998 which in turn would be
the Commission as contemplated under the Electricity Regulatory
Commission Act, 1998 and the Electricity Act, 2003. In terms of first
proviso to Section 82(1) of the Electricity Act, 2003 the State
Electricity Regulatory Commission established by the State
Government under Section 17 of the Electricity Regulatory
Commission Act, 1998 and the enactment specified in the schedule
shall be the State Commission for the purposes of this Act. Even in
terms of Section 185(3) of the Electricity Act, 2003 the said authority
79
would be deemed to be an appropriate Commission for all purposesand intent as the Reform Act, 1998 has been specifically mentioned
in entry 3 of the Schedule to the Electricity Act, 2003. In other words,
as already noticed the Regulatory Commission constituted by the
said notification would be the appropriate Commission under all
these Acts and is required to perform the functions as contemplated
under Sections 11, 17 and 82 of the respective Acts. The functions
assigned to the Regulatory Commission are wide enough to
specifically impose an obligation on the Regulatory Commission to
determine the tariff. The specialized performance of functions that
are assigned to Regulatory Commission can hardly be assumed by
any other authority and particularly, the Courts in exercise of their
80
judicial discretion. The Tribunal constituted under the provisions ofthe Electricity Act, 2003, again being a specialized body, is expected
to examine such issues, but this Court in exercise of its powers under
Article 136 of the Constitution would not sit as an appellate authority
over the formation of opinion and determination of tariff by the
specialized bodies. We would prefer to leave this question open to
be considered by the appropriate authority at the appropriate stage.
We do not consider it appropriate to go into the merit or de-merit of
determination of tariff rates in the appeals. Determination of tariff is a
function assigned legislatively to a competent forum/authority.
Whether it is by exercise of legislative or subordinate legislative
power or a policy decision, if the Act so requires, but it generally falls
81
in the domain of legislative activity and the Courts refrain fromadverting into this arena.
18. We have to further examine the legality of this issue in the light
of the findings that we have recorded on the issues in relation to
jurisdiction of the Regulatory Commission to determine/review the
tariff. The jurisdiction of this Court is limited in this aspect. This
Court has consistently taken the view that it would not be proper for
the Court to examine the fixation of tariff rates or its revision as these
matters are policy matters outside the preview of judicial intervention.
The only explanation for judicial intervention in tariff fixation/revision
is where the person aggrieved can show that the tariff fixation was
82
illegal, arbitrary or ultra virus the Act. It would be termed as illegal ifstatutorily prescribed procedure is not followed or it is so perverse
and arbitrary that it hurts the judicial conscious of the Court making it
necessary for the Court to intervene. Even in these cases the scope
of jurisdiction is a very limited one. This Court in the case of
Association of Industrial Electricity Users v. State of Andhra Pradesh
[(2002) 3 SCC 711], while dealing with the provisions of tariff
fixation in terms of the provisions of the Reform Act, 1998, observed
that even where the Act did not envisage classification of consumers
according to the purpose for which electricity is used, Sub-Section(9)
of Section 26 of that Act does state that the tariff rate relatable to
classification of consumers would be permissible, of course,
83
depending upon various factors stipulated in Section 26(7) of the Act.The Court finally held as under:
“11. We also agree with the High Court that
the judicial review in a matter with regard to
fixation of tariff has not to be as that of an
Appellate Authority in exercise of its
jurisdiction under Article 226 of the
Constitution. All that the High Court has to be
satisfied with is that the Commission hasfollowed the proper procedure and unless it
can be demonstrated that its decision is on
the face of it arbitrary or illegal or contrary to
the Act, the court will not interfere. Fixing a
tariff and providing for cross-subsidy is
essentially a matter of policy and normally a
court would refrain from interfering with a
policy decision unless the power exercised is
arbitrary or ex facie bad in law.”84
19. Similarly, in the case of West Bengal Electricity Regulatory
Commission v. CESC Ltd. [(2002) 8 SCC 715], this Court was
concerned with determination of tariff by the State Commission, the
applicability of principles of natural justice and the scope of
interference by the High Court in distinction to the power exercisable
by the appellate authority. Stating it to be a function in the nature of
legislative power, the Court felt that the principles of natural justice
were not attracted and the power of judicial review could hardly be
invoked. The Court held as under:
“39. Having considered the finding of the High
Court, we are of the opinion that though
generally it is true that the price fixation is in
the nature of a legislative action and no rule of
natural justice is applicable (see Shri Sitaram85
Sugar Co. Ltd. v. Union of India SCC, para45), the said principle cannot be applied
where the statute itself has provided a right of
representation to the party concerned.Therefore, it will be our endeavour to find out
whether, as contended by learned counsel for
the appellants, the statute has provided such
a right to the consumers or not.xxx xxx xxx xxx
44. Having held on merits that the
Regulations are not arbitrary and are in
conformity with the provisions of the Act, we
will now consider whether the High Court
could have gone into this issue at all in an
appeal filed by the respondent Company. First
of all, we notice that the High Court has
proceeded to declare the Regulations
contrary to the Act in a proceeding which was
initiated before it in its appellate power under
Section 27 of the Act. The appellate power of
the High Court in the instant case is derived
from the 1998 Act. The Regulations framed by86
the Commission are under the authority of
subordinate legislation conferred on the
Commission in Section 58 of the 1998 Act.The Regulations so framed have been placed
before the West Bengal Legislature, therefore
they have become a part of the statute. That
being so, in our opinion the High Court sitting
as an appellate court under the 1998 Act
could not have gone into the validity of the
said Regulations in exercise of its appellate
power.”20. In view of the above settled position of law we are of the
considered opinion that the present case is one where this Court
should examine determination of tariff on merits and particularly, in
view of the directions that we propose to pass finally in this case.
87
21. The issue relating to jurisdiction, again, would have to be
divided into two different parts. Firstly, whether the Regulatory
Commission could exercise the powers for determination and/or re-
fixing the price by resorting to tariff fixation powers under the Act and
secondly, with regard to sale of generated electricity by the
Generators to parties other than State Transmission Utility or
Distribution Company. In regard to first part of this issue the Tribunal
in its order, while answering issue B, held that Regulatory
Commission has no jurisdiction to re-fix the regulatory purchase price
by resorting to tariff fixation methods specified under the provisions
of law. Similarly, it also answered issue A in the negative and
against the Regulatory Commission. The primary reason recorded
88
by the Tribunal is that the original fixation of purchase price forenergy generated by NCE Developers is in terms of the policy
directions issued by the State and it was not within the jurisdiction
and scope of the powers conferred upon the Regulatory Commission
under the Reform Act, 1998. It was considered by the Tribunal that
policy decision of the State could not have been set at naught on the
assumption that the Regulatory Commission is vested with executive
powers. Also that Regulatory Commission had proceeded on the
basis that it has power to review the rate/incentives given to
developers or it has power to issue executive directions. The
Tribunal also felt that PPAs are final and binding and there is
assumption of power on the part of the Regulatory Commission that
89
they have authority to fix tariff with respect to power generators bytaking recourse to provisions of Sections 62, 64 read with Section
86(1) of Electricity Act, 2003.
22. Before we proceed to examine the various provisions under
different Acts afore referred, let us once again refer, in precise form,
the necessary facts. From the record it appears that on 7th
September, 1993 the Ministry of Non-Conventional Energy Sources,
New Delhi had written a letter to the Chief Secretary of the different
States informing them that under the new strategy and action plan of
the ministry special emphasis is sought to be given to generation of
grid quality power from non-conventional energy sources, noticing
that the average cost of power generation from non-conventional
90
energy sources compares quite favourably with new coal thermal/gasbased projects and captive diesel generating sets. While in future
the costs of the former are expected to drop, costs of conventional
electricity generation will only increase. Referring to the fact that
Central Government has introduced several fiscal and other
promotional incentives to attract private sector participation in the
generation and supply of energy from non-conventional energy
sources and consequently the States had also introduced measures
such as wheeling and banking, buy back, third party sale, capital
subsidies, industry status, sales tax exemption etc., it had also been
noticed that they were to vary in operation from State to State. In this
background the Ministry had drawn up guidelines which was
91
enclosed to that letter and asked all States to work towards a uniformpolicy pertaining to the non-conventional energy sources. A
minimum buy back price of Rs. 2.25 per unit had been proposed and
it required the States to consider that these guidelines were not
exhaustive. Other matters, including additional incentives, attractive
packages could be formulated by the State and accordingly the
States were required to take further steps. The very opening part of
the guidelines dealt with the operative period and it was stated that
“The Scheme of promotional and fiscal incentives will come into
operation with immediate effect and will remain in force for a period
of five years.” Besides this eligibility, facilities and tax relief etc. were
also indicated. The transmission of Electricity was to be undertaken
92
by the State Electricity Board and even the third party must be HTconsumer of the Board unless the stipulation was specifically
relaxed. SEB was to purchase the electricity from the producer at
the minimum specified rate without any restriction on time or
quantum of electricity. Importantly, Clause 3(iii) of the policy
guidelines suggested that the producer will have the option to sell the
electricity generated by him to a third party at mutually agreed rates
but within the State as per clause 1(i). On or before 14 th February
1994 two projects, namely wind farm and mini hydel projects were
transferred from Andhra Pradesh State Electricity Board to NEDCAP
by the Government of Andhra Pradesh. Later, vide letter dated 25th
November, 1994 the guidelines as indicated in the letter of 7th
93
September, 1993 were further clarified by the Government of India, inrelation to fixation of purchase price for power produced from non-
conventional energy. As per the guidelines commenting or clarifying
the earlier guidelines it was stated that the base price applicable to
non-conventional energy based power projects based on solar, wind
small hydro, biomass etc. shall be equal to the base price of the year
in which the PPAs are signed, clause 2 of the guidelines reads as
under:
“A promoter / developer shall be entitled to
receive the base price set out in PPA for all
electrical energy delivered from his project to
the State grid for the duration of the Power
Purchase Agreement. The rate shall be equal
to base price in the year of signing of PPA,
escalated at a rate of 5% per year for a period94
of 10 years, from the date of signing of the
Power Purchase Agreement. From the end of
the 10 years, and for the remaining duration
of the Power Purchase Agreement, the new
purchase price shall be equal to the purchase
price at the end of the 10th year, or the High
Tension (HT) tariff prevalent in the State at
that time which is higher.”23. In furtherance of the decision of the Govt. of India and the
guidelines published, the Govt. of Andhra Pradesh issued two
different GOs on which, the Tribunal as well as all the parties before
us have placed heavy reliance. They read as under:
95 ENERGY (RES) DEPARTMENT G.O.MS. NO: 93 DATED: 18-11-1997 ORDER:-“In the reference 1st read above, the Ministry
of Non-Conventional Energy Sources,
Government of India have issued guidelinesfor promotional and Fiscal incentives to be
given by State Government for power
generation from Non-Conventional Energy
Sources. The incentives are envisaged to
encourage power generation in the Non-Conventional Sector which are renewable and
encouragement from the Government for this
Sector is necessary in view of the fact
depletion of fossilfuels. Further, the
Renewable/ Non-Conventional Energy
Sources are least pollution-effecting.96
In the G.O. third read above, the Government
have accorded certain revised incentives in
respect of the Developers with whom Non-Conventional Energy Development
Corporation of Andhra Pradesh had already
entered into Memoranda of Understanding
based on the guidelines existing prior to 15th
November, 1995.While reviewing the incentives made available
to the sectors, certain representations were
received from some of the Non-Conventional
Energy Developers, and they have requested
for extending the benefits available to other
sectors.A review of the incentives made available to
various sectors of non-conventional energy
was made in the presence of official from
Non-Conventional Energy Development
Corporation of Andhra Pradesh and Andhra97
Pradesh State Electricity Board, duly keeping
in view the guidelines of Ministry of Non-Conventional Energy Sources, Government of
India, dated: 13-9-1993, a view was taken to
make available the incentives to all the Non-Conventional Energy Sources uniformly.
The Government after careful examination of
the recommendations and with a view to
encourage generation of electricity from
renewable sources of energy hereby allow thefollowing uniform incentives to all the projects
based on renewable sources of energy viz.Wind, Biomass, Co-generation, Municipal
Waste and Mini Hydel :S.No. Description 1. Power PurchaseRs. 2.25 price 2. Escalation 5% per annum with 1997-98 as 98 base year and to be revised on 1st April of every year upto the year 2000 A.D. 3. Wheeling Charges 2% 4. Third party sales Allowed at a tariff not lower than H.T. tariff of A.P.S.E. Board. 5. Banking Allowed upto 12 months (a) Captive consumption Allowed throughout the year on 2% banking charges. (b) Third party sale Allowed on 2% banking charges from August to March. 99 This order issues with the concurrence of Finance & Planning (Fin.) Department vide their U.O. No. 46291/351/EBS-EFES&T/97, dated: 18.11.1997. (BY ORDER AND IN THE NAME OF THE GOVERNOR OF ANDHRA PRADESH) V.S. SAMPATH SECRETARY TO GOVERNMENT ENERGY (RES) DEPARTMENT G.O. Ms. No. 112 Dated: 22.12.1998 ORDER: 100 "In the Government Order cited, certain uniform incentives were extended to the Developers of Power Projects using wind,biomass co-generation, Municipal wastes and
mini hydel for promotion of and to encourage
generation of electricity from renewable
sources of energy. In order to remove certain
ambiguities in the implementation of uniform
incentives scheme and also to ensure that the
incentives contemplated are channelled for
promotion and development of non-conventional energy sources, in keeping with
the spirit of Government Order cited, the
following amendments are issued:In the Government Order cited, certain
uniform incentives were extended to the
Developers of Power Projects using wind,
biomass co-generation, Municipal wastes and
mini hydel for promotion of and to encourage
generation of electricity from renewable
sources of energy. In order to remove certain101
ambiguities in the implementation of uniform
incentives scheme and also to ensure that the
incentives contemplated are channelled for
promotion and development of non-conventional energy sources, in keeping with
the spirit of Government Order cited, the
following amendments are issued:1. The uniform incentives specified in G.O. Ms.
No.93, dated 18.11.1997 shall be available
only to the power projects where fuel used isfrom non-conventional energy sources which
are on the nature of renewable sources of
energy.1. The operation of the incentives scheme shall
be watched for a period of 3 years and at the
end of 3 years period from the date of G.O.Ms. No.93 the Andhra Pradesh State
Electricity Board shall come up with suitable
proposals for review for further continuance of
the incentives in the present form or in a102
suitable modified manner to achieve the
objectives of promotion of power generation
through non-conventional sources.1. Though there is a provision for banking and
third party sale, in the absence of conferring
the status of licences under Section 3 of the
Indian Electricity Act, the Entrepreneurs/
Developers of non-conventional energy power
may be handicapped in effecting third party
sales to the needy and contracted consumers.Therefore, it is hereby ordered that the
Entrepreneurs/Developers covered by
G.O.Ms. No.93, dated 18.11.1997 who made
the third party sale of energy shall be deemed
to be licencees for the purpose under Section
3 of the Electricity Duty Act, 1930 read with
Section 28 of Indian Electricity Act.”(BY ORDER AND IN THE NAME OF
GOVERNOR OF ANDHRA PRADESH)103
S. SAMPATH
SECRETARY TO GOVERNMENT24. These were the declarations or representations stated to have
been made by the State to the Developers. The PPAs between
Transmission Corporation of Andhra Pradesh Ltd. and the
Developers were executed somewhere in May 1999 and some of the
agreements even prior thereto. However, despite all the above
guidelines and GOs, the Regulatory Commission passed an order on
20th June, 2001 determining the tariff as well as defining other rights
and obligations between the parties including that the generators
were not permitted to make sale in favour of third party. After the
104
passing of this order the Developers entered into PPAs between theperiod August 2001 to 2002 and confirmed the acceptance and
implementation of the order of 20th June, 2001. While providing
different clauses relating to various facets of sale and distribution of
generated power, PPAs under Articles 2.1 and 2.2, which we have
already reproduced, contemplate specifically that the purchase of
energy by APTRANSCO will be at the tariff provided under Article
2.2. Article 2.2 determines the rate at Rs. 2.25 per unit with
escalation at 5% per annum with 1994-1995 as base year which is to
be revised on 1st April of every year upto the year 2003-2004, beyond
which the purchase price by APTRANSCO will be decided by the
Regulatory Commission. Still a further review of purchase price is
105
contemplated on completion of 10 years from the date ofcommissioning of the project when it will be reworked. In other
words, there are specific stipulations provided under the PPAs, as
well as in the order dated 20th June, 2001, for revision/review of
purchase price. Clause 2.3 further clearly says that tariff is inclusive
of all taxes, duties and levies. In other words, all the documents
afore stated provide for a review including the guidelines issued by
the Govt. of India.
25. At this stage, we may notice that these guidelines are general
guidelines and every State was required to act as per its own needs,
convenience and by taking a general view, as to, which are the most
106
practical and affordable projects and how they should be carried onby the State. To give meaning to the guidelines that they were
`absolutely mandatory’, will not be in conformity with the law relating
to interpretation of documents as well as according to the canons of
exercise of executive and administrative powers. These guidelines
were certainly required to be moulded by the State to meet their
requirements depending on various factors prevailing in the State.
26. Now we will proceed to refer to the various legal provisions
relating to purchase price and/or tariff regulations. The principal
central legislation in this regard is the Indian Electricity Act, 2003.
Under Section 3, a national electricity policy and plan has to be
107
prepared by the Central Government which has to be notified. Thisplan itself can be reviewed or revised by the appropriate authority
under the Act. Section 8 of the Electricity Act, 2003 requires every
State to notify and constitute, for the purposes of this Act, a
Commission for the State to be known as Electricity Regulatory
Commission of that State. Section 86 of this Act spells out the
functions of the State Commission. Under Section 86(1)(a) it is to
determine the tariff for generation, supply, transmission and wheeling
of electricity, wholesale, bulk and retail, as the case may be. It is
also to regulate electricity purchase and procurement process of
distribution licencees including the price at which electricity shall be
procured from the generating companies or licensees or from other
108
sources through agreements for purchase of power for distributionand supply within the State as per Section 86(1)(b). Section 86(1)(d)
empowers this Commission to issue licences to persons seeking to
act as transmission licensees, distribution licensees and electricity
traders with respect to their operations within the State. Besides its
advisory functions it has also been given the general /residue powers
to do all other functions in terms of Section 86(1)(k). Sections 61 to
64 of the Electricity Act, 2003 place an obligation upon the
appropriate Commission to determine the tariff in accordance with
the provisions of this Act. An application for determination of tariff
shall be made by the generating company under Section 64 and the
tariff has to be determined by the appropriate Commission and it is
109
also required to specify the terms and conditions for determination ofthe tariff as per the factors and the guidelines specified under
Section 61 of the Act.
27. The Reform Act, 1998 was enacted, primarily, with the object of
constituting two separate corporations; one for generation and other
for transmission and distribution of electrical energy. The essence
was restructuring, so as to achieve the balance required to be
maintained in regard to competitiveness and efficiency on the one
part and the social objective of ensuring a fair deal to the consumer
on the other. This Act is also intended for creation of a statutory
regulatory authority. Section 3 of the Act requires the State Govt. to
110
establish by notification a Commission to be known as AndhraPradesh Electricity Regulatory Commission. This was done by
notification dated 3rd April, 1999. As already noticed, section 11
detailed the functions of the Regulatory Commission and primarily it
had advisory as well as regulatory functions. In terms of Section
11(1)(c) it was required to issue licenses in accordance with the
provisions of the Act and determine the conditions to be included in
the license. However, 11(1)(e) gave it much wider power and duty to
regulate the purchase, distribution, supply and utilization of
electricity, the quality of service, the tariff and charges payable
keeping in view both the interest of the consumer as well as the
consideration that the supply and distribution cannot be maintained
111
unless the charges for the electricity supplied are adequately leviedand duly collected. In terms of Section 11(1)(l) it was to undertake
all incidental or ancillary things to the functions assigned to it under
the provisions of the Act. Section 12 of the Act vests the State Govt.
with the power to issue policy directions on matters concerning
electricity in the State including the overall planning and co-
ordination. All policy directions shall be issued by the State Govt.
consistent with the objects sought to be achieved by this Act and,
accordingly, shall not adversely affect or interfere with the functions
and powers of the Regulatory Commission including, but not limited
to, determination of the structure of tariffs for supply of electricity to
various classes of consumers. The State Govt. is further expected to
112
consult the Regulatory Commission in regard to the proposedlegislation or rules concerning any policy direction and shall duly take
into account the recommendation by the Regulatory Commission on
all such matters. Thus the scheme of these provisions is to grant
supremacy to the Regulatory Commission and the State is not
expected to take any policy decision or planning which would
adversely affect the functioning of the Regulatory Commission or
interfere with its functions. This provision also clearly implies that
fixation of tariff is the function of the Regulatory Commission and the
State Govt. has a minimum role in that regard. Chapter VII of this
Act deals with tariff. In terms of Section 26(2), the Regulatory
Commission, in addition to its power of issuing licence, is entitled to
113
fix terms and conditions for determination of the licensee’srevenue and tariffs by regulations which are to be duly published.
The expression `tariff’ has not been defined in any of the Acts, with
which we are concerned in the present appeals, despite the fact that
the expression `tariff’ has been used repeatedly in both the Acts.
Under the Electricity Act, 2003 `tariff’ has neither been defined nor
explained in any of the provisions of the Act. Explanation (b) to
Section 26 of the Reform Act, 1998 states what is meant by `tariff’.
This provision states that `tariff’ means a schedule of standard price
or charges or specified services which are applicable to all such
specified services provided to the type or types of customers
specified in the `tariff’ notification. This is an explanation to Section
114
26 which deals with licenses, revenues and tariffs. In other words,this explanation may not be of greater help to the Court in dealing
with the case of generating companies. Similarly, the expression
`purchase price’ has neither been defined nor explained in any of the
afore-stated Acts.
28. Therefore, in the absence of any specific definition in any of
these Acts we will have to depend upon the meaning attached to
these expressions under the general law or in common parlance.
The expression `tariff’ has been explained in the Law Lexicon with
legal Maxims, Latin terms and Words & Phrases (Second Edition
115
1997) as “determination, ascertainment, a table of rates of export andimport duties, in which sense the word has been adopted in English
and other European languages and as defined by the law dictionaries
the word `tariff’ is a cartel of commerce; a book of rates; a table or
catalogue, drawn usually in alphabetical order, containing the names
of several kind of merchandise, with the duties or customs to be paid
for the same as settled by the authority or agreed between the
several princes and States that hold commerce together.”
29. It has also been explained as a schedule, system, or scheme of
duties imposed by the Government of a country upon goods imported
or exported; published volume of rate schedules and general terms
116
and conditions under which a product or service will be supplied; adocument approved by the responsible regulatory agency listing the
terms and conditions including a schedule of prices, under which
utility services will be provided. The expression `purchase price’ has
to be given its limited meaning, i.e. the price paid for purchasing a
good and in the context of the present case, price at which
generated electricity will be sold to the specified agencies. The term
`purchase price’ indicated in the PPAs, as such, would be a matter
within the realm of contract but this is subject to the changes which
are contractually and/or even statutorily permissible. Purchase price
ultimately would form part of the tariff, as tariff relatable to a licensee
or a consumer would have essentially taken into account, the
117
purchase price. The purchase price may not include tariff but tariffwould always or is expected to include purchase price.
30. The Regulatory Commission is vested with very vast powers
and functions. Section 11 of the Reform Act, 1998 declares fixation
of tariff as one of the primary functions of the Regulatory Commission
in general more particularly, to the specified consumers under
Section 26 of the Reform Act, 1998. While under the Electricity Act,
2003, Sections 61 and 62 read with Section 86 (1)(a)(b) deal with
fixation of tariffs in relation to production, distribution and sale of
generated power to the end consumer. These provisions clearly
demonstrate that the Regulatory Commission is vested with the
118
function for determining the tariff for generation, supply, transmissionand billing of electricity etc., as well as regulation of electricity
purchase and procurement process of distribution licensees,
including price at which electricity shall be procured from the
generating companies. With these specific powers in the statute
book itself, it cannot be said that procurement of power from the
generating companies will not fall within the ambit of powers and
functions of the Regulatory Commission. It, as already noted, is a
common body performing functions, duties and exercising powers
under all these three Acts. This Court had the occasion to deal with
somewhat similar issues in the case of PTC India Ltd. v. Central
Electricity Regulatory Commission [(2010) 4 SCC 603]. The Court
119
was, amongst others, dealing with the provisions of Sections 61 to 63of the Electricity Act, 2003 and regulation making power of the
Regulatory Commission. The Court was concerned with other issues
as well including the powers of the Tribunal in relation to judicial
review etc. but it will be of assistance to us to notice that the Court
referred to different kinds of delegated legislations under the
provisions of Electricity Act, 2003 and with regard to the power of the
Regulatory Commission and the scope of the term `tariff’ the Court
held as under:
“23. Section 52 of the 2003 Act deals with
trading of electricity activity. Under Section
52(1), the appropriate Commission may
specify the technical requirement, capital
adequacy requirement and creditworthiness120
for being an electricity trader. Under Section
52(2), every trader is required to discharge its
duties, in relation to supply and trading in
electricity, as may be specified by the
appropriate Commission.24. The standards of performance of
licensee(s) may be specified by the
appropriate Commission under Section 57 of
the Act.25. The 2003 Act contains separate
provisions for the performance of dual
functions by the Commission. Section 61 is
the enabling provision for framing of
regulations by the Central Commission; the
determination of terms and conditions of tariff
has been left to the domain of the Regulatory
Commissions under Section 61 of the Act
whereas actual tariff determination by the
Regulatory Commissions is covered by
Section 62 of the Act. This aspect is very121
important for deciding the present case.Specifying the terms and conditions for
determination of tariff is an exercise which is
different and distinct from actual tariff
determination in accordance with the
provisions of the Act for supply of electricity
by a generating company to a distribution
licensee or for transmission of electricity or for
wheeling of electricity or for retail sale of
electricity.26. The term “tariff” is not defined in the 2003
Act. The term “tariff” includes within its ambit
not only the fixation of rates but also the rules
and regulations relating to it. If one reads
Section 61 with Section 62 of the 2003 Act, it
becomes clear that the appropriate
Commission shall determine the actual tariff in
accordance with the provisions of the Act,
including the terms and conditions which may
be specified by the appropriate Commission
under Section 61 of the said Act. Under the
2003 Act, if one reads Section 62 with Section122
64, it becomes clear that although tariff
fixation like price fixation is legislative in
character, the same under the Act is made
appealable vide Section 111. These
provisions, namely, Section 61, 62 and 64
indicate the dual nature of functions
performed by the Regulatory Commissions
viz. decision-making and specifying terms and
conditions for tariff determination.27. Section 66 confers substantial powers on
the appropriate Commission to develop the
relevant market in accordance with the
principles of competition, fair participation as
well as protection of consumers’ interests.Under Sections 111(1) and 111(6)
respectively, the Tribunal has appellate and
revisional powers. In addition, there are
powers given to the Tribunal under Section
121 of the 2003 Act to issue orders,
instructions or directions, as it may deem fit,
to the appropriate Commission for the123
performance of statutory functions under the
2003 Act.”31. Similarly, another Bench of this Court in the case of Tata Power
Company Ltd. v. Reliance Energy Ltd., [2009 (7) SCALE 513], was
primarily, concerned with the role of the generating companies and
their right to make choice to sell power to any person or licensee and
while referring to the concept of open access, the Court in para 59 of
the judgment referred to the issues arising in the case which read as
under:
“Although before us a large number of
contentions had been raised, the core
questions, which arise for our consideration,
are:-124
(A) Whether recourse to Section 23 of the Act can be taken for issuance of any direction to the generating company? (B) Whether the Commission while applying the provisions of Section 86(1)(b) of the Act could also take recourse to Sections 23 and 60 thereof? (C) Whether equitable allocation of power generated by a generating company is permissible?"32. In the present case we are, primarily, concerned with the
answers given by the Court to questions (A) and (B) framed therein,
the discussion on the subject and finally the relevant conclusions
125
drawn by the Court in para 140 to 142. The Court elaboratelydiscussed the matter including the fact that some generating
companies had entered into PPAs while other had not. The Court,
amongst others, declare the following conclusions (of which we refer
only the relevant portions):
“7) if regulatory clause is sought to be applied
in relation to allocation of power, the same
would defeat the de-licensing provisions.
Generating companies have the freedom to
enter into contract and in particular long term
contracts with a distribution company subject
to the regulatory provisions contained in the
2003 Act.
8) PPA for a long term is essential for
increasing and decreasing the capacity of126
generation of electricity by the generating
company, which purpose by the 2003 Act
must be allowed to achieve.
13) Section 86(1)(b) of the 2003 Act clearly
shows that the generating company indirectly
comes within the purview of regulatory
jurisdiction as and when directions are issued
to the distributing companies by the
appropriate Commission but the same wouldnot mean that while exercising the said
jurisdiction, the Commission will bring within
its umbrage the generating company also for
the purpose of issuance separate direction.”
33. In addition to the statutory provisions and the judgments afore
referred, we must notice that all the PPAs entered into by the
generating companies with the appropriate body, as well as the
127
orders issued by the State in GO Ms. Nos. 93 and 112, in turn, had
provided for review of tariff and the conditions. The Tribunal appears
to have fallen in error of law in coming to the conclusion that the
Regulatory Commission had no powers either in law or otherwise of
reviewing the tariff and so called incentives. Every document on
record refers to the power of the authority/Commission to take a
review on all aspects including that of the tariff. One of the relevant
consideration for determining the question in controversy is to
examine whether the matter falls within the statutory or contractual
domain. From various provisions and the documents on record it is
clear that Regulatory Commission is vested with the power to revise
tariff and conditions in relation to procurement of power from
128
generating companies. It is also clear from the record that in terms
of the contract between the parties, the APTRANSCO had reserved
the right to revise tariff etc. with the approval of the Regulatory
Commission.
34. With some emphasis, the parties had argued the question
relating to `estoppel’ and `legitimate expectation’ with reference to the
facts of the present case. The contention is raised that by the GOs
issued by the State Government as well as the letters of the ministry
a representation was made by the Government to the generating
companies and they, having altered their positions, have a right to
compel the State Government and the Regulatory Commission to
129
abide by those terms for ever and it is their legitimate expectation
that State is required to comply with those conditions and no other.
35. For proper analysis of the submissions made by the parties, it
is necessary for us to examine on what premises the appellants had
claimed and the Tribunal has accepted the plea of estoppel.
Admittedly, this all begins with the letter dated 7th September, 1993
issued by the Government of India, Ministry of Non-Conventional
Energy Sources, New Delhi to the Chief Secretary of the respective
States. In this letter, the new strategy action plan of the Ministry in
relation to generation of grid quality power from non-conventional
energy sources was mentioned in some elaboration and the Ministry
130
had referred to the fact that it had drawn certain guidelines and also
indicated the minimum buy-back price of Rs. 2.25 per unit which was
proposed by the Ministry and it was based upon the average cost of
generation, as noticed by the authorities, at the relevant point of time.
These guidelines were to constitute an attractive package to
encourage private sector and the respective States were required to
examine and alter or amend the same as conducive to a particular
State. Hereafter, a letter dated 25th November, 1994 was again
issued by the Ministry to the Managing Director of the Non-
Conventional Energy Development Corporation, Andhra Pradesh
annexing the guidelines which were subject to be amended. These
guidelines itself showed that Electricity Board, which was the
131
competent authority at that relevant point of time, to announce a
`base purchase price’ every year for electrical energy purchased by
the Board from the non-conventional energy based projects. These
guidelines contemplated that the base price shall be escalated at a
minimum rate of 5% every year. Clause 2 of the Guidelines
stipulated that the promoter or a developer shall be entitled to receive
the base price set out in the PPA for all electrical energy delivered for
the duration of the PPA. The rate shall be equal to the base price in
the year of signing of PPA, escalated at the rate of 5% per year for a
period of ten years from the date of signing. Thereafter new
purchase price will be fixed as per the tariff prevalent in the State at
the relevant time. Thereafter, the Andhra Pradesh Government has
132
issued GO Ms. No. 93 dated 18th November, 1997 referring to certain
incentives required to be given to the projects. These incentives only
referred to the power purchase price, escalation of 5% with base
year 1997-98, wheeling charges, third party sales allowed to a limited
extent. These, again, were the guidelines which, in fact, we have
referred to in great detail above and were primarily intended to guide
the States in taking the respective decisions in that behalf. Again
vide GO. Ms. No. 112 dated 22nd December, 1998 referring to the
extension of all these uniform incentives, certain amendments were
carried out to GO Ms. No. 93 dated 18 th November, 1997. Clause 2
of this order referred that the operation of the incentive scheme shall
be watched for a period of three years and at the end of three years
133
the Electricity Board shall come up with suitable proposals for review
for further continuance of the incentives in that form, or to be
modified suitably. Keeping these guidelines in mind, the State of
Andhra Pradesh vide GO Ms. No. 93 dated 18th November, 1997,
while referring to the guidelines issued by the Government of India
for promotional and fiscal incentives, noticed the various
representations which were received from Non-conventional Energy
Developers for extension of benefits as afore-referred in relation to all
non-conventional energy resources uniformly. Thereafter, the parties
took up the matter for annual consideration, which exercise was
undertaken by them in terms of the guidelines issued by the State
and the Central Government. State of Andhra Pradesh reiterated the
134
incentives and directed that the same would continue for a period of
three years in terms of GO Ms. No. 93, whereafter it will be reviewed.
The incentives relied upon, on the basis of the guidelines and the
issued Government orders are primarily, related to fixation of
purchase price of the generated power from Non-Conventional
developer/generators and sale of such energy to third parties. In the
meanwhile, Regulatory Commission had been established under the
provisions of the Reform Act, 1998. This Regulatory Commission
was to take over all the functions of the said Electricity Board as well
as other authorities for generation, distribution and other matters
relating to electricity in the State. This resulted in initiation of suo
motu proceedings by the Regulatory Commission for determination
135
and fixation of tariff, which after hearing the parties finally passed the
order dated 20th June, 2001. This order as we have already noticed
was accepted by all the parties and has not been questioned till date.
This order provided for certain variations in the incentives, which as
already noticed, are related to the fixation of tariff or purchase price
and as stipulated, the Commission considered all objections at some
length and ordered that power generated by Non-conventional
Energy Developers is not permitted to be sold to third parties and
price was kept at Rs. 2.25 per unit price with 5% escalation per
annum with 1994-95 as the base year. The parties had entered into
agreements i.e. PPAs at different times after passing of this order
between June, 2001 to August, 2001 and even thereafter. Thus, at
136
that time, the entire matter between the parties was controlled by the
PPAs which fully contemplated that all the delivered energy at the
interconnection point for sale to TRANSCO will be purchased at the
tariff provided under Article 2.2 which in turn confirmed the order of
20th June, 2001 in that regard and it was stated that the matter will be
reviewed in April, 2004 and it could also be reviewed after 10 years
from the date of commissioning of the project. This PPA as well as
the order passed by the Regulatory Commission in the year 2001
remained in force without being questioned in any manner
whatsoever before any competent forum and in any case, not to any
benefit of respondents. Then came the order dated 20th March, 2004
passed by the Regulatory Commission again, by initiating suo motu
137
proceedings. In this order, the Commission had retained the basic
unit price of 2.25 as on 1st April, 1994 and the escalation index of 5%
per annum which was to be simple and not compounded every year.
In other words, on 1st April, 2001 the price was 3.37/kwh in relation to
Wind Power Purchasers. Except varying this price, the order of
2004, in turn, had reiterated the contents of the order of 2001 which,
as already noticed, has attained finality. Another factor which we
may notice is that in its order dated 7th July, 2004, while clarifying its
order dated 20th March 2004, the Commission has clearly observed:
“12. It is relevant to clarify that by the
order dated 20-03-2004, the Commission is
not mandating in any manner those NCE
developers who have not accepted the earlier
order dated 20-06-2001 passed by the138
Commission, while their challenge to the
order is pending the decision by the High
Court. However, such of the NCE developers
who had accepted the earlier order dated 20-
06-2001 and have been selling electricity
generated by them to APTRANSCO cannot
challenge the jurisdiction of the Commission
to review the terms as per the stipulation
contained in the order dated 20-6-2001.”
36. On the basis of this factual matrix, the respondents claimed
that the State Government and the Regulatory Commission both
were bound to continue the incentives as were provided to them in
furtherance to the letters and orders of Central as well as the State
Governments discussed above. They have a legitimate right to
139
expect that these incentives were to be continued indefinitely in the
same manner and the authorities concerned are estopped from
altering the rates and/or imposing the condition of no sale to third
parties. We are unable to find any merit in this contention. In our
view, the Tribunal has erred in law in treating these inter-se letters
and guidelines between the Government of India, State Government
and the Commission/the State Electricity Board as unequivocal
commitments to the respondent/purchasers/generators/developers
so as to bind the State for all times to come. For the principle of
estoppel to be attracted, there has to be a definite and unambiguous
representation to a party which then should act thereupon and then
alone the consequences in law can follow. In the present case, the
140
policy guidelines issued by the Central Government were the
proposals sent to the State Government, which the State
Government accepted to consider, amend or alter as per their needs
and conditions and then make efforts to achieve the objects of
encouraging Non-conventional Energy Generator and Purchasers to
enter into this field. These are the matters, which will squarely fall
within the competence of the Regulatory Commission/the State
Electricity Board at the relevant points of time. Besides that, there
was no definite and clear promise made by the authorities to the
developers that would invoke the principle of promissory estoppel.
Undoubtedly, to encourage participation in the field of generation of
energy through non-conventional methods, some incentives were
141
provided but these incentives under the guidelines as well as under
the PPAs signed between the parties from time to time were subject
to review. In any case, the matter was completely put at rest by the
order of 20th June, 2001 and the PPAs voluntarily signed by the
parties at that time, which had also provided such stipulations. If
such stipulations were not acceptable to the parties they ought to
have raised objections at that time or at least within a reasonable
time thereafter. The agreements have not only been signed by the
parties but they have been fully acted upon for a substantial period.
We have already referred to various statutory provisions where the
Regulatory Commission is entitled to determine the tariff. In this
situation we are unable to agree with the view taken by the Tribunal
142
that Regulatory Commission had no jurisdiction and that fixation of
tariff does not include purchase price for buy back of the generated
power.
37. The principle of promissory estoppel, even if, it was applicable
as such, the Government can still show that equity lies in favour of
the Government and can discharge the heavy burden placed on it. In
such circumstances, the principle of promissory estoppel would not
be enforced against the Government as it is primarily a principle of
equity. Once the ingredients of promissory estoppel are satisfied
then it could be enforced against the authorities including the State
with very few extra ordinary exceptions to such enforcement. In the
United States the doctrine of Promissory Estoppel displayed
143
remarkable vigor and vitality but it is still developing and expanding.
In India, the law is more or less settled that where the Government
makes a promise knowing or intending that it would be acted upon by
the promissory and in fact the promissory has acted in reliance of it,
the Government may be held to be bound by such promise. It is a
settled canon of law that doctrine of promissory estoppel is not really
based on principle of estoppel but is a doctrine evolved by equity in
order to prevent injustice. There is no reason why it should be given
only a limited application by way of defence. It can also be the basis
of a cause of action. Even if we assume that there was a kind of
unequivocal promise or representation to the respondents, the
reviews have taken place only after the period specified under the
144
guidelines and/or in the PPAs was over. This is a matter which,
primarily, falls in the realm of contract and the parties would be
governed by the agreements that they have signed. Once these
agreements are singed and are enforceable in law then the
contractual obligations cannot be frustrated by the aid of promissory
estoppel.
38. Following the judgment of this Court in the case of Union of
India v. M/s. Indo-Afghan Agencies Ltd. [(1968) 2 SCR 366], this
Court in the case of Century Spinning and Manufacturing Company
Ltd. v. The Ulhasnagar Municipal Council [(1970) 1 SCC 582] held
that if the promise is made in regard to a present or existing fact, the
145
principle of estoppel can be enforced against the Government. But a
promise in relation to a future transaction or act may not fall within
the ambit of promissory estoppel. This law was further discussed
with some elaboration by the Court in the case of Motilal Padampat
Sugar Mills. Co. Ltd. v. State of Uttar Pradesh [(1979) 2 SCC 409],
where the Court after considering the position of law in England and
United States and comparing the same to the Indian Law, laid down
the basic concept of promissory estoppel that would determine its
enforceability. In the case of Pawan Alloys v. UPSEB [(1997) 7 SCC
251], the Court, though had enforced the principle of promissory
estoppel against the Board, but certain basic facts of that case needs
to be noticed by us. The appellants in that case had neither
146
expressly nor impliedly stated that it has the power to withdraw the
incentives and rebate at a time prior to the expiry of three years for
which it was granted. Secondly, none of the private parties had
voluntarily or even by remotest choice agreed to give up the benefits
given to them by clear representation held out by the Board. As is
obvious, the power of the Board to increase the general tariff was
accepted, but the incentive of rebate was de horse the tariff and thus,
promissory estoppel was enforceable against the Board.
39. Another very important dictum of the Court in this judgment
was that the power of the Board to fix general tariff as well as
discharge of other related functions was held to be quasi-judicial in
character. This power of the Board is exercised under the statute as
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a power-cum-duty and is independent of granting or declining any
rebate. In the present case the order dated 20th June, 2001 was fully
accepted by the parties without any reservation. After the lapse of
more than reasonable time of their own accord they voluntarily
signed the PPA which contained a specific stipulation prohibiting sale
of generated power by them to third parties. The agreement also
had renewal clause empowering TRANSCO/APTRANSCO/Board to
revise the tariff. Thus, the documents executed by these parties and
their conduct of acting upon such agreements over a long period, in
our view, bind them to the rights and obligations stated in the
contract. The parties can hardly deny the facts as they existed at the
relevant time, just because it may not be convenient now to adhere
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to those terms. Conditions of a contract cannot be altered/avoided
on presumptions or assumptions or the parties having a second
thought that a term of contract may not be beneficial to them at a
subsequent stage. They would have to abide by the existing facts,
correctness of which, they can hardly deny. Such conduct, would be
hit by allegans contraria non est audiendus.
40. Lastly, we may refer to a more recent judgment of this Court.
In the case of Kusumam Hotels (P) Ltd. v. Kerala Seb [(2008) 13
SCC 213], where the Court discussed in some elaboration the
different judgments of this Court on the subject and then declined to
enforce the principle of promissory estoppel as there was no
149
foundational facts and also indicated that the Government can alter,
amend or rescind its policy decision in public interest, the Court held
as under:
“27. Yet again in U.P. Power Corpn. Ltd. v.
Sant Steels & Alloys (P) Ltd., it was held:
(SCC p.800, para 27)“27. In this background, in view of various
decisions noticed above, it will appear that the
Court’s approach in the matter of invoking the
principle of promissory estoppel depends on
the facts of each case. But the general
principle that emerges is that once a
representation has been made by one party
and the other party acts on that
representation and makes investment and
thereafter the other party resiles, such act
cannot be stated to be fair and reasonable.
When the State Government makes a
representation and invites the entrepreneurs
by showing various benefits for encouraging
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to make investment by way of industrial
development of the backward areas or the hill
areas, and thereafter the entrepreneurs on
the representations so made bona fide make
investment and thereafter if the State
Government resiles from such benefits, then it
certainly is an act of unfairness and
arbitrariness. Consideration of public interest
and the fact that there cannot be any estoppel
against a statute are exceptions.”
xxx xxx xxx
36. The law which emerges from the above
discussion is that the doctrine of promissory
estoppel would not be applicable as no
foundational fact therefor has been laid down
in a case of this nature. The State, however,
would be entitled to alter, amend or rescind its
policy decision. Such a policy decision, if
taken in public interest, should be given effect
to. In certain situations, it may have an impact
from a retrospective effect but the same by
itself would not be sufficient to be struck down
on the ground of unreasonableness if the
source of power is referable to a statute or
statutory provisions. In our constitutional
scheme, however, the statute and/or any
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direction issued thereunder must be
presumed to be prospective unless the
retrospectivity is indicated either expressly or
by necessary implication. It is a principle of
the rule of law. A presumption can be raised
that a statute or statutory rule has prospective
operation only.”
41. In our country, the law of promissory estoppel has attained
certainty. It is only an unambiguous and definite promise, which is
otherwise enforceable in law upon which, the parties have acted,
comes within the ambit and scope of enforcement of this principle
and binding on the parties for their promise and representation. It will
be difficult for the Court to hold that the guidelines can take the
colour of a definite promise which in the letters of the Central
Government itself were proposals to the State Government. Besides
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that, if for the sake of argument, we treat the State letters/circulars as
promise or representations to the private parties like the
respondents, even then, they led to the execution of a definite
contract between the parties which will purely fall in the domain of
contractual law. These contracts specifically provided for review and
when reviewed in the year 2001 parties not only accepted the order
but executed contracts (PPAs) in furtherance of it. In these
circumstances, we are unable to accept the argument that the State
or the Regulatory Commission or erstwhile State Electricity Board
were bound to allow same tariff and permit third party sales for an
indefinite period. To this extent, authorities, in any case, would not
be bound by the principle of estoppel.
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42. Now, we will proceed to examine the merits or otherwise of the
findings recorded by the Tribunal that the PPAs executed by the
parties, were result of some duress and thus, it will not vest the
authorities with the power to review the tariff and other granted
incentives. PPAs were executed prior and subsequent to the
issuance of the order dated 20th June, 2001. Different persons
executed the contracts at different times in full awareness of the
terms and conditions of such PPA. To frustrate a contract on the
ground of duress or coercion, there has to be definite pleadings
which have to be substantiated normally by leading cogent and
proper evidence. However, in the case where summary procedure is
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adopted like the present one, at least some documentary evidence or
affidavit ought to have been filed raising this plea of duress
specifically. From the record before us, nothing was brought to our
notice to state the plea of duress and to prove the alleged facts
which constituted duress, so as to vitiate and/or even partially
reduce, the effect of the PPAs. On the one hand, the Tribunal
appears to have doubted the binding nature of the contracts stating
that it contained unilateral conditions introduced by virtue of Order
and approval of the Regulatory Commission, while on the other hand,
in para 53 of the Order, it proceeded on the presumption that PPAs
are final and binding and still drew the conclusion that the Regulatory
Commission could not revise the tariff. Even in the order, no facts
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have been pointed out which, in the opinion of the Tribunal,
constituted duress within the meaning of the Contract Act so as to
render the contract voidable. Another aspect of the entire
controversy is that none of the generators had challenged the
agreements and in fact, except in arguments before the Tribunal no
case was made out for the purposes of vitality of the contract or any
part thereof. On the contrary, all the generators under all the
branches of Non-Conventional Energies, have accepted the contract
and proceeded on the basis that the said contracts are binding and
still the Regulatory Commission does not have any power or
jurisdiction to revise the tariff or deal with the concessions. If the
contracts are a result of duress and cannot be given effect, the
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results could be disastrous for both the sides. If a contract suffers
from the defect of undue influence or duress, as the case may be
then the consequences in law should follow. It is a settled canon of
law that when the consent to agreement is caused by undue
influence the agreement is a contract voidable at the option of the
parties whose consent was so caused. Even if such party had
received any benefit under the terms of the contract the Court could
still pass orders as to the voidability or otherwise of the contract but
upon such terms and conditions as the Court may deem just. Undue
influence or duress is said to be subtle of the fraud whereby
mysteries burden over the mind of a victim by insidious approaches.
Firstly, there are no facts on record, much less, supported by any
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documentary or any other evidence to sustain the plea that the
contracts (PPAs) are a result of undue influence or duress by the
State or its agencies upon the generators. Secondly, the generators
have already taken benefit of that contract which was based on the
policy of the State as well as the order of the Regulatory
Commission. Having attained those benefits, it will hardly be of any
help to the appellants, particularly, in the facts and circumstances of
the case, to substantiate, justify or argue the plea of duress.
43. In the case of Birla Jute Manufacturing Co. v. State of M.P.
[(2002) 9 SCC 667], the Supreme Court was concerned with a case
where validity of undertaking given under duress was the plea taken
158
by the appellant. This pleading on the same merits and noticing the
material, like the present case, the Court held as under:
“2. Learned counsel, appearing for the
appellant urged that the undertaking given by
the appellant Company was under duress
and, therefore, it is not an undertaking in the
eyes of law and the appellant is not liable to
pay the water charges under such
circumstances. There is no material beforeus to come to this conclusion that the
undertaking given by the appellant was under
duress. On the contrary we find that the
appellant had given the solemn undertaking
voluntarily. We, therefore, find no merit in the
appeal.”
44. The Tribunal in paras 45-47 of its order has used the
expression “out of compulsion some of the developers entered into
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Power Purchase Agreement with APTRANSCO accepting the terms
and conditions set out in order dated 20th June, 2001″. We are afraid
that there is hardly any material on record to substantiate such a
finding. What was the compulsion and what were the facts which
persuaded the Tribunal to take such a view are conspicuous by their
very absence. A compulsion leading to execution of a contract is a
matter entirely based upon facts. It is difficult for this Court,
originally, to infer duress or compulsion in absence of specific
pleadings and materials in that behalf. It may also be noticed at the
cost of repetition that the order dated 20th June, 2001 was never
questioned by any of the parties to any favourable results. Even in
these proceedings there is no challenge to the said order which,
160
admittedly, has been acted upon and has attained finality. The
power generators/Non-Conventional Energy developers have
executed the PPAs without any protest and, in fact, did nothing to
challenge such agreements or any part thereof, till passing of the
impugned order of 2004. There were some proceedings, without
questioning the validity and effectiveness of the order dated 20th
June, 2001, carried out by some of the generators before the Andhra
Pradesh High Court. Certain interim directions were passed in those
proceedings, as already noticed, but finally all proceedings
culminated into dismissal of the Writ Petitions and/or reference back
to the Regulatory Commission for grant of a hearing as per the
directions contained in the order of the High Court.
161
45. Another important aspect of the case is that the learned
counsel appearing for the respondents, particularly, in Appeal No.
2926 of 2006 had stated that they are not arguing in support of the
plea of estoppel and duress as decided by the Tribunal in their
favour. They had mainly concentrated their submissions on
jurisdiction of the Regulatory Commission with respect to withdrawal
of incentives and fixation of tariff. These are the contracts which
have been executed prior and after the issuance of the order dated
20th June, 2001 and have been acted upon by the parties without any
reservation. In view of the fact that no challenge was made to the
order dated 20th June, 2001, execution of PPAs and the conduct of
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the respondents over the long period and particularly, while keeping
in mind the statutory provisions we are unable to sustain the plea of
duress in favour of the respondents.
46. The main emphasis of the judgment of the Tribunal is that the
Government had framed the policy under which, incentives were
given and as such, the Regulatory Commission had no power and
authority to fix tariffs or amend or alter the policy decision of the
State. We have already held that in law and in face of the contract
between the parties the Regulatory Commission is the Authority to fix
the tariff which includes within its ambit the purchase price of the
Non-conventional Energy under the policy of the State. It appears
163
that the Tribunal has taken a narrower view of the jurisdiction vested
in the Regulatory Commission which is discharging its statutory
functions under all the three Acts in accordance with law. In terms of
Section 12 of the Reform Act, 1998, which has been referred to by
the Tribunal, the power of the Government had been stated. The
power available to the Government to issue policy directions has two
restrictions. Firstly, the policy direction has to be on the matters
related to electricity in State including overall planning and
coordination. Secondly, all such policy directions have to be issued
by the State Government in consonance with the object sought to be
achieved by this Act and accordingly shall not adversely affect or
interfere with the functions and powers of the Regulatory
164
Commission including, but not limited to, determination of the
structure of tariff for supply of electricity to the consumers. Powers
vested in the Regulatory Commission to frame regulations under
Section 54 also intend that regulations are to be framed with an
object to ensure proper performance of its functions under the Act.
In other words, both the State and the Regulatory Commission, are
supposed to exercise their respective powers only for the purposes
of furthering the cause of the Act. The Commission discharging its
statutory functions within the ambit of Sections 11, 12 and 26 of the
Reform Act, 1998 as well as Sections 61, 62 and 86(1)(b) of the
Electricity Act, 2003 renders advisory functions to the State. All
these provisions, examined and analyzed cumulatively, do not
165
support the approach adopted by the Tribunal that the functions of
the Regulatory Commission in fixing tariff/purchase price was
contrary to or distinctive of the said policy. This cannot be supported
either on the basis of the statutory provisions of the various Acts as
well as with reference to the various documents on record including
the order dated 20th June, 2001 and the PPAs signed by the parties
at different stages. We are also unable to contribute to the view of
the Tribunal that the Regulatory Commission has acted in
contradiction or conflict with the State policy. The State was certainly
not intending to provide incentives and concessions with assurance
of buy-back to enable the Non-Conventional Energy
developers/generators to sell generated powers to third parties. It
166
must be kept in mind that the policy of the Government of India as
well as the State of Andhra Pradesh was for encouraging the
developers/generators of Non-conventional Energy to generate
electricity for the benefit of public at large with buy back of power
being one of the basic features of this policy. Such parameters are
obviously subject to change in larger public interest. All these issues,
in fact, loose much significance because of the fact that parties have,
by and large, entered into the field of contract simpliciter and their
rights are controlled by the contracts executed between them. There
is no challenge to these contracts and, therefore, it may be hardly
permissible for the Court to go behind these contracts and permit
167
questioning of the statutory jurisdiction vested in the Regulatory
Commission.
47. In the case of BSES Ltd. v. Tata Power Co. Ltd. [(2004) 1 SCC
195], the Court clearly held that after creation of the Regulatory
Commissions under the provisions of the Electricity Regulatory
Commission Act, 1998, the Commission has clear power and
jurisdiction to fix tariff. The Court should not adopt an interpretation
which should neither be strict nor narrower so as to oust the
jurisdiction of the Regulatory Commission, as it would defeat the very
object of enacting the said Act. The reliance placed by the
168
respondents upon the judgment of this Court in the case of Andhra
Pradesh Electricity Regulatory Commission v. R.V.K. Energy Private
Limited [(2008) 17 SCC 769] is, again, of not much help to them. In
that case also, the Court had upheld the exercise of statutory power
by the Regulatory Commission. Of course, the Court held that the
regulatory power u/s 11(1)(e) of the Reform Act, 1998 does not
ordinarily extend to prohibition or positive direction for entire supply to
APTRANSCO alone. Such prohibition may be resorted to in
exceptional situations. It reiterated the principle that the Government
policy as well as the Regulatory Commission should act in
consonance with the object of the Act.
169
48. The appellants have referred and relied upon the policy
directions and guidelines framed by the Central Government while
the respondents have relied upon these documents as well as the
circulars issued by the State of Andhra Pradesh. The respondents
have raised the plea of estoppel against the Regulatory Commission
on the basis of the averment that the State had framed policies,
which the Regulatory Commission instead of implementing, has
acted contrary thereto. There is no doubt that before the formation of
the Regulatory Commission it was the State Electricity Board which
was performing all the functions in relation to generation as well as
distribution of electricity. The Board was directly under the control of
170
the State and the State, in exercise of its general executive powers,
had framed policies to encourage Non-conventional Energy
developers and producers to come into the field of generation of
electricity and had issued the Government orders which we have
discussed in some detail above. Strange enough, the State of
Andhra Pradesh was neither impleaded as a party to the proceedings
before the Regulatory Commission nor before the Tribunal. In fact,
the Tribunal has referred to various acts and deeds of the State and
consequences thereof, but did not consider it appropriate to implead
the State Government as a party to the proceedings. We are of the
considered view that presence of the State Government before the
Tribunal could have certainly been appropriate, inasmuch as the
171
State would have placed before the Appellate Authority and the
Regulatory authorities, its views in regard to revision of incentives as
well as the purchase price. We are also constrained to observe that
the State of Andhra Pradesh was a necessary, in any case, a proper
party in these proceedings. This itself would be a ground for this
Court to remit the matter to the Competent Authority, in addition to
the other reasons recorded in this judgment.
49. In the present case, the restriction with regard to third party
sales was not only creation of a directive issued or approval granted
by the Regulatory Commission, but was actually in furtherance to the
contract entered into between the parties. Rights and liabilities
172
arising from a binding contract cannot be escaped on the basis of
some presumptions or inferences in relation to the facts leading to
the execution of the contract between the parties. The jurisdiction of
the Regulatory Commission, in the facts of the case, arises not only
from the statutory provisions under the different Acts but also in
terms of the contract executed between the parties which has binding
force. Lastly, but with great emphasis, it was argued on behalf of the
respondents that enforcement of the purchase price at the rate
determined by the Regulatory Commission along with complete
prohibition on the right of the Non-conventional Energy
Generator/Developers to sell generated power to the third parties
would compel them to shut down their projects. The rates are so
173
unfair that it would result in extinguishment of the power generating
units from the State of Andhra Pradesh on the one hand, while on the
other, it is bound to prejudicially affect the larger public interest.
According to the respondents they have invested large sums of
money in developing these generating units and it will be unfair to
compel their closure, particularly, when for all these years they have
supplied electricity generated by them solely to APTRANSCO or its
predecessors.
50. We find some substance in this submission and are of the view
that it is a matter of some concern, even for the State Government.
All these projects, admittedly, were established in furtherance to the
174
scheme and the guidelines provided by the Central Government
which, in turn, were adopted with some modification by the State
Government. The State Electricity Board implemented the said
scheme and initially had permitted sale of generated electricity to
third parties, however, subsequently and after formation of the
Regulatory Commission which, in turn, took over the functions of the
State Electricity Board, the incentives were modified and certain
restrictions were placed. The reasons for these restrictions have
been stated in the affidavit filed on behalf of the appellants which, as
already noticed by us, is not a matter to be examined by this Court in
exercise of its extra-ordinary jurisdiction. These matters, essentially,
175
must be examined by expert bodies particularly, when such bodies
are constituted under the provisions of a special statute.
51. The basic policy of both the Central as well as the State
Government was to encourage private sector participation in
generation, transmission and distribution of electricity on the one
hand and to further the objective of distancing the regulatory
responsibilities of the Regulatory Commission from the Government
and of harmonizing and rationalizing the provisions of the existing
laws relating to electricity in India, on the other hand. The object and
reasons of Electricity Act, 2003 as well as the Reform Act, 1998 are
definite indicators of such legislative intent. The basic objects of
176
these enactments were that the said Regulatory Commission may
permit open access in distribution of energy as well as to
decentralize management of power distribution through different
bodies. The Reform Act, 1998 stated in its objects and reasons that
the set-up of power sector in force, at that time, was virtually
integrated and functional priorities were getting distorted due to
resource-crunch. This has resulted in inadequate investment in
transmission and distribution which has adversely affected the quality
and reliability of supply. The two corporations proposed thereunder
were to be constituted to perform various functions and to ensure
efficiency and social object of ensuring a fair deal to the customer.
These objects and reasons clearly postulated the need for
177
introduction of private sector into the field of generation and
distribution of energy in the State. Efficiency in performance and
economic utilization of resources to ensure satisfactory supply to the
public at large is the paramount concern of the State as well as the
Regulatory Commission. The policy decisions of these constituents
are to be in conformity with the object of the Act. Thus, it is
necessary that the Regulatory Commission, in view of this object,
take practical decisions which would help in ensuring existence of
these units rather than their extinguishment as alleged.
52. In view of our above detailed discussion, we dispose of these
appeals with the following order:
178
(a) The order of the Tribunal dated 2nd June, 2006 is hereby set
aside.
(a) We hold that the Andhra Pradesh Electricity Regulatory
Commission has the jurisdiction to determine tariff which
takes within its ambit the `purchase price’ for
procurement of the electricity generated by the Non-
conventional energy developers/ generators, in the facts
and circumstances of these cases.
(b) We hereby remand the matters to the Andhra Pradesh
Electricity Regulatory Commission with a direction that it
shall hear the Non-conventional energy generators
179
afresh and fix/ determine the tariff for purchase of
electricity in accordance with law, expeditiously.
(c) It shall also re-examine that in addition to the above or in the
alternative, whether it would be in the larger interest of
the public and the State, to permit sale of generated
electricity to third parties, if otherwise feasible.
(d) The Andhra Pradesh Electricity Regulatory Commission shall
consider and pronounce upon all the objections that may
be raised by the parties appearing before it, except
objections in relation to its jurisdiction, plea of estoppel
and legitimate expectancy against the State and/or
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APTRANSCO and the plea in regard to PPAs being
result of duress as these issues stand concluded by this
judgment.
(e) We make it clear that the order dated 20th June, 2001 passed
by the Andhra Pradesh Electricity Regulatory
Commission has attained finality and was not challenged
in any proceedings so far. This judgment shall not,
therefore, be in detriment to that order which will operate
independently and in accordance with law.
(f) We also hereby direct that State of Andhra Pradesh shall be
added as a party respondent in the proceedings and the
Andhra Pradesh Electricity Regulatory Commission shall
181
grant hearing to the State during pendency of proceeding
before it.
53. In the facts and circumstances of the case parties are left
to bear their own costs.
………………………………….J.
[DR. B.S. CHAUHAN ]
………………………………….J.
[ SWATANTER KUMAR ]
182
New Delhi
July 8, 2010
183