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REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 5875 OF 2012
GUJARAT URJA VIKAS NIGAM LIMITED
...APPELLANT(S)
VERSUS
TARINI INFRASTRUCTURE LTD. & ORS.
...RESPONDENT(S)
WITH
CIVIL APPEAL NOS. 1973-1974 OF 2014
JUDGMENT
RANJAN GOGOI, J.
1.
Is
the
tariff
fixed
under
PPA
(Power
Purchase
Page1
2.
1-power producer entered into a PPA with the appellantdistribution licensee for sale of electricity from the generating
stations to the extent of the contracted quantity for a period of
35 years at Rs. 3.29 per KWH subject to escalation of 3% per
annum till date of commercial operation. In March, 2010, just
before commissioning of the generating station, the respondent
Page2
power
was to
be evacuated at
the
nearest
The additional
Department
(respondent
No.
2).
In
these
Page3
3.
Page4
to
be
reviewed
in
the
light
of
changes
in
the
the
determination
of
tariff,
review
is
Page5
licensee in both the cases are more or less common. In the case
of Tarini Infrastructure Ltd. it is urged that under Clause 5.2 of
the PPA the appellant is required to pay tariff as determined by
the State Commission which is liable to escalation @ 3% per
annum. The tariff order has not been challenged by the power
producer. Therefore, the tariff approved by the State Regulatory
Commission and incorporated in the PPA would remain in force
for the period of time agreed upon and the same cannot be
altered unilaterally. Reliance in this regard is placed on two
recent decisions of this Court in the case of Gujarat Urja
Page6
Vikas Nigam Limited Vs. EMCO Ltd. & Anr.1 and Bangalore
Electricity Supply Co. Vs. Konark Power Projects Ltd.2. It is
contended that in the said cases it has been held that a PPA
duly entered into and otherwise consistent with the tariff order
of the State Regulatory Commission cannot be reopened.
somewhat
in
discordant
note
struck
by
this
Court
The PPA
Page7
parties which,
can
only
be altered by
the
8.
Page8
electricity
shall
be
procured
from
the
generating
The
Electricity
consolidate
4
5
6
and
Act
upgrade
of
2003
the
has
been
enacted
to
existing
laws
relating
to
Page9
10
be
performed
by
the
State
Regulatory
Commissions
Page10
11
61. Tariff regulations:- The Appropriate Commission shall,
subject to the provisions of this Act, specify the terms and
conditions for the determination of tariff, and in doing so,
shall be guided by the following, namely:(a) the principles and methodologies specified by the Central
Commission for determination of the tariff applicable to
generating companies and transmission licensees;
(b) the generation, transmission, distribution and supply of
electricity are conducted on commercial principles;
(c) the factors which would encourage competition, efficiency,
economical use of the resources, good performance and
optimum investments;
(d) safeguarding of consumers' interest and at the same time,
recovery of the cost of electricity in a reasonable manner;
(e) the principles rewarding efficiency in performance;
(f) multi year tariff principles;
1[(g) that the tariff progressively reflects the cost of supply of
electricity and also reduces cross-subsidies in the manner
specified by the Appropriate Commission;]
(h) the promotion of co-generation and
electricity from renewable sources of energy;
generation
of
Page11
12
maximum ceiling of tariff for sale or purchase of electricity in
pursuance of an agreement, entered into between a
generating company and a licensee or between licensees, for a
period not exceeding one year to ensure reasonable prices of
electricity;
(b) transmission of electricity;
(c) wheeling of electricity;
(d) retail sale of electricity:
Provided that in case of distribution of electricity in the same
area by two or more distribution licensees, the Appropriate
Commission may, for promoting competition among
distribution licensees, fix only maximum ceiling of tariff for
retail sale of electricity.
(2) The Appropriate Commission may require a licensee or a
generating company to furnish separate details, as may be
specified in respect of generation, transmission and
distribution for determination of tariff.
(3) The Appropriate Commission shall not, while determining
the tariff under this Act, show undue preference to any
consumer of electricity but may differentiate according to the
consumer's load factor, power factor, voltage, total
consumption of electricity during any specified period or the
time at which the supply is required or the geographical
position of any area, the nature of supply and the purpose for
which the supply is required.
(4) No tariff or part of any tariff may ordinarily be amended,
more frequently than once in any financial year, except in
respect of any changes expressly permitted under the terms
of any fuel surcharge formula as may be specified.
(5) The Commission may require a licensee or a generating
company to comply with such procedures as may be specified
for calculating the expected revenues from the tariff and
charges which he or it is permitted to recover.
(6) If any licensee or a generating company recovers a price or
charge exceeding the tariff determined under this section, the
excess amount shall be recoverable by the person who has
paid such price or charge along with interest equivalent to the
bank rate without prejudice to any other liability incurred by
the licensee.
64. Procedure for tariff order: - (1) An application for
determination of tariff under section 62 shall be made by a
Page12
13
generating company or licensee in such manner and
accompanied by such fee, as may be determined by
regulations.
(2) Every applicant shall publish the application, in such
abridged form and manner, as may be specified by the
Appropriate Commission.
(3) The Appropriate Commission shall, within one hundred
and twenty days from receipt of an application under
sub-section (1) and after considering all suggestions and
objections received from the public,(a) issue a tariff order accepting the application with such
modifications or such conditions as may be specified in that
order;
(b) reject the application for reasons to be recorded in writing
if such application is not in accordance with the provisions of
this Act and the rules and regulations made thereunder or
the provisions of any other law for the time being in force:
Provided that an applicant shall be given a reasonable
opportunity of being heard before rejecting his application.
(4) The Appropriate Commission shall, within seven days of
making the order, send a copy of the order to the Appropriate
Government, the Authority, and the concerned licensees and
to the person concerned.
(5) Notwithstanding anything contained in Part X, the tariff
for any interstate supply, transmission or wheeling of
electricity, as the case may be, involving the territories of two
States may, upon application made to it by the parties
intending to undertake such supply, transmission or
wheeling, be determined under this section by the State
Commission having jurisdiction in respect of the licensee who
intends to distribute electricity and make payment therefor.
(6) A tariff order shall, unless amended or revoked, continue
to be in force for such period as may be specified in the tariff
order.
86. Functions of State Commission: - (1) The State
Commission shall discharge the following functions, namely: (a) determine the tariff for generation, supply, transmission
and wheeling of electricity, wholesale, bulk or retail, as the
Page13
14
case may be, within the State:
Provided that where open access has been permitted to a
category of consumers under section 42, the State
Commission shall determine only the wheeling charges and
surcharge thereon, if any, for the said category of consumers;
(b) regulate electricity purchase and procurement process of
distribution licensees including the price at which electricity
shall be procured from the generating companies or licensees
or from other sources through agreements for purchase of
power for distribution and supply within the State;
(c) facilitate
electricity;
intra-State
transmission
and
wheeling
of
Page14
15
activities of the electricity industry;
(ii) promotion of investment in electricity industry;
(iii) reorganization and restructuring of electricity industry in
the State;
(iv)
matters
concerning
generation,
transmission
,
distribution and trading of electricity or any other matter
referred to the State Commission by that Government.
(3) The State Commission shall ensure transparency while
exercising its powers and discharging its functions.
(4) In discharge of its functions, the State Commission shall
be guided by the National Electricity Policy, National
Electricity Plan and tariff policy published under section 3.
10. While Section 61 of the Act lays down the principles for
determination of tariff, Section 62 of the Act deals with the
different kinds of tariffs/charges to be fixed. Section 64
enumerates the manner in which determination of tariff is
required to be made by the Commission. On the other hand
Section 86 which deals with the functions of the Commission
reiterates determination of tariff to be one of the primary
functions of the Commission which determination includes, as
noticed above, a regulatory power with regard to purchase and
procurement of electricity from generating companies by
entering into PPA(s).
Court
expressed
in
paragraphs
36
and
64
of
Page15
16
is
required
to
be
conducted
on
commercial
Page16
17
In the
company,
transmission
licensee,
SLDC
and
Page17
18
of the Commission.
13.
Page18
19
following:
(a) The approved forecast of Aggregate
Revenue Requirement and expected revenue
from tariff and charges of the Generating
Company, Transmission Licensee, SLDC and
Distribution Licensee for such financial year,
including modifications approved at the time of
mid-term review, if any; and
(b)
Approved gains and losses, including the
incentive available to be passed through in
tariffs, following the Truing Up of previous year.
14. When the tariff order itself is subject to periodic review it
is difficult to see how incorporation of a particular tariff
prevailing on the date of commissioning of the power project
can be understood to bind the power producer for the entire
duration of the plant life (20 years) as has been envisaged by
Clause 4.6 of the PPA in the case of Junagadh. That apart,
modification of the tariff on account of air cooled condensers
and denying the same on account of claimed inadequate
pricing of biogas fuel is itself contradictory.
Page19
20
Sri Venkata Setaramanjaneya Rice & Oil Mills and Ors. Vs.
State of A.P. (supra), K. Ramanathan Vs. State of T.N. &
Anr. (supra) and D.K. Trivedi & Sons Vs. State of Gujarat &
Ors. (supra) the power of regulation is indeed of wide import.
The following extracts from the reports in the above cases
would illuminate the issue.
Sri Venkata Setaramanjaneya Rice & Oil
Mills and Ors. Vs. State of A.P. (supra)
20. Then it was faintly argued by Mr. Setalvad
that the power to regulate conferred on the
respondent by Section 3(1) cannot include the
power to increase the tariff rate; it would include
the power to reduce the rates. This argument is
entirely misconceived. The word regulate is wide
enough to confer power on the respondent to
regulate either by increasing the rate, or
decreasing the rate, the test being what is it that
is necessary or expedient to be done to maintain,
increase, or secure supply of the essential articles
in question and to arrange for its equitable
distribution and its availability at fair prices.
..
Page20
21
Regulate is variously defined as meaning to
adjust; to adjust, order, or govern by rule,
method, or established mode; to adjust or control
by rule, method, or established mode, or
governing principles or laws; to govern; to govern
by rule; to govern by, or subject to, certain rules
or restrictions; to govern or direct according to
rule; to control, govern, or direct by rule or
regulations.
Regulate is also defined as meaning to direct;
to direct by rule or restriction; to direct or
manage according to certain standards, laws, or
rules; to rule; to conduct; to fix or establish; to
restrain; to restrict.
See also: Websters Third New International
Dictionary, Vol. II, p. 1913 and Shorter Oxford
Dictionary, Vol. II, 3rd Edn., p. 1784.
19. It has often been said that the power to
regulate does not necessarily include the power
to prohibit, and ordinarily the word regulate is
not synonymous with the word prohibit. This is
true in a general sense and in the sense that
mere regulation is not the same as absolute
prohibition. At the same time, the power to
regulate carries with it full power over the thing
subject to regulation and in absence of restrictive
words, the power must be regarded as plenary
over the entire subject. It implies the power to
rule, direct and control, and involves the
adoption of a rule or guiding principle to be
followed, or the making of a rule with respect to
the subject to be regulated. The power to regulate
implies the power to check and may imply the
power to prohibit under certain circumstances,
as where the best or only efficacious regulation
consists of suppression. It would therefore
appear that the word regulation cannot have
any
inflexible
meaning
as
to
exclude
prohibition. It has different shades of meaning
and must take its colour from the context in
which it is used having regard to the purpose and
object of the legislation, and the Court must
necessarily keep in view the mischief which the
legislature seeks to remedy.
Page21
22
Vs. State of
16. All the above would suggest that in view of Section 86(1)
(b) the Court must lean in favour of flexibility and not read
inviolability in terms of the PPA insofar as the tariff stipulated
therein as approved by the Commission is concerned. It would
Page22
23
Page23
24
Page24
25
Page25
26
concessions
are
granted
by
the
State
Governments pursuant to rules made under the
statutory power conferred upon them by a
regulatory Act. Minerals are part of the material
resources which constitute a nations natural
wealth and if the nation is to advance
industrially and if its economy is to be benefited
by the proper development and exploitation of
these resources, they cannot be permitted to be
frittered away and exhausted within a few
years by indiscriminate exploitation without
any regard to public and national interest. The
same view was expressed by the Court in State of
Tamil Nadu v. Hind Stone.
Page26
27
also be noticed.
41. By virtue of Sections 14 and 21 of the General
Clauses Act, when a power is conferred on an
authority to do a particular act, such power can be
exercised from time to time and carries with it the
power to withdraw, modify, amend or cancel the
notifications earlier issued, to be exercised in the like
manner and subject to like conditions, if any,
attached with the exercise of the power. It would be
too narrow a view to accept that chargeability once
fixed cannot be altered. Since the charging provision
in the Electricity (Supply) Act, 1948 is subject to the
State Governments power to issue notification under
Section 49 of the Act granting rebate, the State
Government, in view of Section 21 of the General
Clauses Act, can always withdraw, rescind, add to or
modify an exemption notification. No industry can
claim as of right that the Government should
exercise its power under Section 49 and offer rebate
and it is for the Government to decide whether the
conditions are such that rebate should be granted or
not.
18. Before parting, a word about the recent pronouncements
of this Court in Gujarat Urja Vikas Nigam Limited Vs. EMCO
Ltd. & Anr. (supra) and Bangalore Electricity Supply Co.
Vs. Konark Power Projects Ltd. (supra), relied upon by the
appellant. All that would be necessary to note in this regard is
the context in which the bar of a review of the terms of a PPA
was found by this Court in the above cases. In Gujarat Urja
Vikas Nigam Limited Vs. EMCO Ltd. & Anr. (supra) the
power purchaser sought the benefit of a second tariff order
Page27
28
Electricity
Supply
Co.
Vs.
In the case of
Konark
Power
Projects Ltd. (supra), this Court held that it was beyond the
power of State Commission to vary the tariff fixed under the
approved PPA in view of the specific provisions in Regulations
5.1 and 9 of the KERC(Power Procurement from Renewable
Sources by Distribution Licensee) Regulations, 2004 and 2011
respectively as the same specifically excluded a PPA concluded
Page28
29
.......................,J.
[RANJAN GOGOI]
.......................,J.
[PRAFULLA C. PANT]
NEW DELHI;
JULY 05, 2016.
Page29