Holding

A tariff fixed under a PPA is not sacrosanct; the State Electricity Regulatory Commission may review and adjust it under its statutory powers.

Summary

The Supreme Court examined whether a tariff fixed under a Power Purchase Agreement (PPA) is immutable and beyond the review of the State Electricity Regulatory Commission (SERC). The Court held that tariff determination is a statutory function of the SERC under Section 86(1)(b) of the Electricity Act, 2003 and is subject to periodic review and adjustment for uncontrollable factors as per Gujarat Electricity Regulatory Commission (Multi‑Year Tariff) Regulations, 2016. Consequently, the tariff incorporated in a PPA is not sacrosanct; the Commission may modify it in the public interest, guided by Sections 61, 62, 64 and 86 of the Act and the General Clauses Act. The appeals filed by Gujarat Urja Vikas Nigam Limited were dismissed, affirming the Appellate Tribunal’s orders allowing tariff review.

Issues considered

Whether a tariff fixed in a Power Purchase Agreement is inviolable and cannot be reviewed by the State Electricity Regulatory Commission.
Whether Section 86(1)(b) of the Electricity Act, 2003 empowers the SERC to modify tariff despite contractual terms.
Whether Regulations 23 and 31 of the Gujarat Electricity Regulatory Commission (Multi‑Year Tariff) Regulations, 2016 permit periodic review and adjustment for force‑majeure or other uncontrollable factors.
Whether Sections 14 and 21 of the General Clauses Act, 1897 affect the power to amend tariff orders.

Legislation cited

Electricity Act, 2003s. 61, s. 62, s. 64, s. 86
Electricity Regulatory Commissions Act, 1988
Electricity (Supply) Act, 1948s. 49
General Clauses Act, 1897s. 14, s. 21
Gujarat Electricity Regulatory Commission (Multi‑Year Tariff) Regulations, 2016s. Regulation 23, s. Regulation 31

Subjects

tariffPower Purchase Agreementelectricity regulationreview of tariffState Electricity Regulatory Commissionforce majeureGeneral Clauses Actperiodic reviewstatutory function

Judgment

[2016) 5 S.C.R. 990

A GUJARAT URJA VIKAS NIGAM LIMITED
v.
TARIN! INFRASTRUCTURE LTD. & ORS.
(Civil Appeal No. 5875 of2012)
B JULY05,2016
[RANJAN GOGOi AND PRAFULLA C. PANT, JJ.)
Electricity Act, 2003 - ss. 61,62, 6./ and 86 - Tariff under a
Power Purchase Agreement (PPA) - Review of- Whether permissible
by State Electricity Regulatory Commission - Held: Determination
c
and fixation of tariff is a statutory function to be pe1formed by the
Commission, in exercise of its powers u!s. 86(1){b) in consonance
with the principles enuniciated by the Electricity Act - Under
Regulation 31 of Gujarat Electricity Regulatory Commission (Multi
Year Tariff) Regulations, 2016, tariff fixed is subject to periodic
D review - Further under Regulation 23 of 2016 Regulations,
adjustment in tariff is permissible on account of uncontrollable
factors - Thus, in view of s. 86(1){b), the Court must lean in favour
of flexibility and not read inviolability in terms of the agreement -
Court to lean in favour of such a view also in view of ss. U and 21
of General Clauses Act - Gujarat Electricity Regulatory Commission
E
(Multi Year Tariff) Regulations, 2016 - Regulations 23 and 31 -
General Clauses Act, 1897 - ss. U and 21.
Dismissing the appeals, the Court
HELD: 1. A reading of the provisions of the Electricity Act,
F 2003 would go to show that apart from fixation of tariff in a
"situation of open access" or in a situation of competitive bidding
covered by Section 63 of the Act, determination and fixation of
tariff is a statutory function to be performed by the State Regulatory
Commissions constituted under the Electricity Regulatory
Commissions Act, 1988 and exercising powers in consonance
G with the principles enunciated by the Electricity Act 2003. [Para
9) (997-F-G)
2. The principles on which tariff is to be determined by the
commission are set out in Section 61 of Electricity Act. Generation,
transmission, distribution and supply of electricity is required to
H
990
GUJARAT URJA VIKAS NIGAM LIMITED v. TARIN! 991
INFRASTRUCTURE LTD. & ORS.

be conducted on commercial principles; while the consumers' A
interest is to be safeguarded, recovery of cost of electricity in a
reasonable manner has also to be ensured. Under Section 64(6)
a tariff order continues to remain in force for such period as may
be specified. In the State of Gujarat, currently, the Gujarat
Electricity Regulatory Commission (Multi Year Tariff)
B
Regulations, 2016 govern the fixation of tariff by the State
Commission. As per Regulation, the Commission is required to
determine the tariff of a generating company, transmission
licensee, SLDC and distribution licensee for each financial year
during the control period (control period is 5 years). [Para 11]
[1003-C-E] c
3. Not only the tariff fixed is subject to periodic review,
furthermore the above Regulations provide for taking into
consideration the force majeure events. Any force majeure is
considered as an uncontrollable factor. In fact Regulation 23
provides that the approved aggregate gain or loss on account of
D
uncontrollable factor shall be passed through as an adjustment in
the· tariff over such period as inay be specified in the order of the
Commission. [Para 12] [1003-H; 1004-A)
4. 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 E
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 in C.A.Nos. 1973-1974 of 2014.
That apart, modification of the tariff on account of air cooled
condensers and denying the same on account of claimed F
inadequate pricing of biogas fuel is itself contradictory. [Para 14]
[1005-C-D]
5. Section 86(l)(b) of the Electricity Act empowers the State
Commission to regulate the price of sale and purchase of
electricity between the generating companies and distribution
G
licensees through agreements for power produced for distribution
and supply. The power of regulation is indeed of wide import.
[Para 15) [1005-C-E)
Sri Venkata Setaramanjaneya Rice & Oil Mills and Ors.
v. State ofA.P. 1964 SCR 456 : AIR 1964 SC 1781; K.
H
992 SUPREME COURT REPORTS [2016] 5 S.C.R.

A Ramanathan v. State of T.N & Am: 1985 (2) SCR 1028
: (1985) 2 SCC 116 and D.K. Trivedi & Sons '~ State
of Gujarat & Ors. 1986 SCR 479 : (1986) Supp. SCC
20 - relied on.
6. Thus, in view of Section 86(l)(b) the Court must lean in
B favour of flexibility and not read inviolability in terms of the PPA
in so far as the tariff stipulated therein as approved by the
Commission is concerned. It would be a sound principle of
interpretation to confer such a power if public interest dictated
by the surrounding events and circumstances require a review
of the tariff. The facts of the present case would suggest that the
c Court must lean in favour of such a view also having due regard
to the provisions of Sections 14 and 21 of the General Clauses
Act, 1897. [Para 16] [1007-G-H; 1008-A-BJ
D.K. Trivedi & Sons v. State of Gujarat & Ors. 1986
SCR 479 : (1986) Supp. SCC 20; Shree Sidhbali Steels
D Ltd. And others v. State of Uttar Pradesh and Others
2011 (3) SCR 134 : (2011) 3 SCC 193 - relied on.
7. In the present case, admittedly, the tariff incorporated in
the Power Purchase Agreement between the generating company
and the distribution license.e is the tariff fixed by the State
E Regulatory Commission in exercise of its statutory powers. In
such a situation it is n1_>t possible to hold that the tariff agreed by
and between the parties, though finds mention in a contractual
context, is the result of an act of volition of the parties which can,
in no case, be altered except by mutual consent. Rather, it is a
F determination made in the exercise of statutory powers which
got incorporated in a mutual agreement between the two parties
involved. [Para 10] [1003-A-C]
Transmission corporation of Andhra Pradesh v. Sai
Renewable Power Pvt. Ltd. 2010 (8) SCR 636 : (2011)
G 11 SCC 34; Gujarat Urja Vikas Nigam Limited v.
EMCO Ltd. & Am: 2016 SCR 857 : 2016 (2) SCALE
75; Bangalore Electricity Supply Co. v. Konark Power
Projects Ltd. 2015 (5) SCALE 711- distinguished.
Case Law Reference
H 1964 SCR 456 relied on Para 15
GUJARAT URJA VIKAS NIGAM LIMITED v. TARINI 993
INFRASTRUCTURE LTD. & ORS.

1985 (2) SCR 1028 relied on Para 15 A

1986 SCR 479 relied on Paras 15
and 16
2011 (3) SCR 134 relied on Para 17
2010 (8) SCR 636 distinguished Para 10 B
2016 SCR 857 distinguished Para 18
2015 (5) SCALE 711 distinguished Para 18
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 5875 of
2012. c
From the Judgment and Order dated 31.05.2012 passed by the
Appellate Tribunal for Electricity at New Delhi in Appeal No. 29of2011
WITH
C.A. Nos. 1973-1974 of2014.
D
C. A. Sundaram, Sr. Adv., M. G. Ramachandran, Anand Ganesan,
Ms. Ranjitha Ramachandran, Ms. Hemantika Wahi, Advs. for the
Appellant.
Sanjay Sen, Sr. Adv., Matrugupta Mishra, Ms. Shikha Ohri, Santosh
.. ,__
Kumar, Ms. Sharmila Upadhyay, Advs. for the Respondents. E
The Judgment of the Court was delivered by
RANJAN GOGOi, J. I. Is the tariff fixed under.a PPA (Power
Purchase Agreement) sacrosanct and inviolable and beyond review and
correction by the State Electricity Regulatory Commission which is the
statutory authority for fixation of tarlff under the Electricity Act, 2003 F
(hereinafter for short 'the Act'). This is the short question that arises
for determination in the present appeals. The Regulatory Commission
did not'cbnsider it appropriate to confer on itself the said power upon a
construction of the provisions of the Act and the terms of the PPA(s) in
question. The Appellate Tribunal disagreed and held that the power-· G
would be available to the State Regulatory Commission. 1his is how the
matter has come up before us in the present appeals filed at the instance
of the distribution licensee which is common in both the cases, namely,
Gujarat Urja Vikas Nigam Limited.
2. A very brief resume of the relevant facts would be appropriate
H
994 SUPREME COURT REPORTS [2016] 5 S.C.R.

A and would assist a determination of the question arising identified
hereinabove.
The respondent No. I in Civil Appeal No. 5875 of 2012, riamely,
Tarini Infrastructure Ltd., is a power producer which has set up/installed
two small hydro power projects in the State of Gujarat. In January, 2008
B the respondent No. I-power producer entered into a PPA with the
appellant- distribution licensee for sale of electricity from the generating
stations to the extent of the contracted quantity for a period of35 years
at Rs. 3.29 per KWH subject to escalation of 3% per annum till date of
commercial operation. In March, 20 I 0, just before commissioning of
the generating station, the respondent power producer sought an increase
c in the tariff to Rs. 4. 70 per unit on the ground that though under the
Concession Agreement power was to be evacuated at the nearest sub-
station at Rakholi under the jurisdiction of the Gujarat Electricity
Transmission Company (GETCO) which was at a distance of 4 Kms
from its switch yard, it was later realized that Rakholi was in Dadar
D Nagar Haveli. Consequently, the transmission line was required to be
laid up to a point known as Mota Pondha which involved a total distance
of 23 Kms. instead of the originally envisaged 4Kms. The additional
infrastructure, admittedly, cost about Rs. 10 crores which was not
envisaged in the Concession Agreement entered into between the
respondent-power producer and Narmada Water Resources Department
E (respondent No. 2). In these circumstances, the power producer applied
to the State Regulatory Commission for a redetermination of the tariff.
The said request was refused by an order dated 03.09.2010, primarily,
on the ground that once the tariff was determined and thereafter
incorporated in the PPA there was no scope for redetermination of the
F same atthe unilateral request of the power producer.
3. Insofar as Civil Appeal Nos. 1973-1974 of2014 are concerned,
the respondent-power producer, namely, Junagadh Power Projects Pvt.
Ltd., has set up a biomass based power generation plant and had entered
into a PPA with Gujarat Urja Vikas Nigam Limited (distribution licensee)
G on 26.11.2010. The tariff incorporated in the PPA was earlier approved
by the State Regulatory Commission by tariff order dated 17 .05 .20 I 0 on
the basis of cost of biomass at Rs. 1600 per MT with escalation of 5%
per annum for a period of20 years of operation. The Biomass Energy
Developers Association sought revision of the biomass fuel cost to Rs.
30001- per MT and for consequential redetermination of the tariff. The
H
GUJARAT URJA VIKAS NIGAM LIMITED v. TARINI 995
INFRASTRUCTURE LTD. [RANJAN GOGOI, J.]

said review petition was dismissed by the State Commission in November, A
2010. Thereafter, the power producer, on its own, moved the State
Regulatory Commission seeking modification of tariff on account of air
cooled condenser and also seeking increase in the biomass fuel cost and
consequential redetermination of the tariff on that basis. The State
Regulatory Commission by its order dated 05.12.2010, while allowing an
B
increase in tariff on account of air cooled condenser, rejected the request
of the power producer to review the price of biomass fuel cost, primarily,
on the ground that the review of the price of biomass fuel having been
earlier rejected in the case of Biomass Energy Developers Association,
the review of the said price at the request of the power producer cannot
now be allowed. c
4. The learned Appellate Tribunai by the impugned orders
overruled the view taken by the State Regulatory Commission on a
consideration of the provisions of the Act and the terms and conditions
of the PPA(s). The above view of the learned Appellate Tribunal is
primarily based on the reasoning that under the Act it is the State D
Regulatory Commission which has been statutorily vested with the power
to determine the tariff and that the tariff as may be fixed and incorporated
·in the PPA between the distribution licensee and the power producer is
liable to be reviewed in the light of changes in the circumstances of a
given case. In the case of Junagadh Power Projects Pvt. Ltd. the learned
Appellate Tribunal even went to the extent ofholding that if in the changed E
scenario occasioned by a drastic alteration of the facts and circumstances
surrounding the determination of tariff, a review is declined/refused the.
power producer will be left with no option but to shut down its plants.
Therefore, a review of the tariff in exercise of the statutory power vested
in the State Regulatory Commission would be fully justified. It is the F
correctness of the aforesaid view that has been assailed in the present
appeals under Section 125 of the Act.
5. We have heard Shri C.A. Sundaram, learned senior counsel
appearing for the appellant and Shri Sanjay Sen, learned senior counsel
appearing for the respondent-power producers in both sets of appeals. G
6. The arguments on behalf of the appellant-distribution 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 H
996 SUPREME COURT REPORTS [2016] 5 S.C.R.

A 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 Vikas Nigam Limited
Vs: EMCO Ltd. & Anr. 1 and Bangalore Electricity Supply Co. Vs.
B
Konark Power Projects Ltd.~. 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. A somewhat "discordant note" struck by this Court in
Transmission Corporation of Andlira Pradesh Vs. Sai Renewable
c Power Pvt. Ltd. 3 has been sought to be explained by the appellant by
contending that in the PPA involved in that case there was a specific
clause that the tariff would be as revised by orders of the State Regulatory
Commission from time to time.
Specifically in the case of Junagadh Power Projects Pvt. Ltd.
D (respondent No. 1 in Civil Appeal Nos. 1973-1974 of 2914) it is urged
that the demand raised by Biomass Energy Developers Association for
redetennination of the tariff by enhancing the fuel cost to Rs. 3000 per
MT had been dismissed earlier and the issue has attained finality in law.
The PPA stood novated to the extent of modification of tariff allowed on
account of the issue of air cooled condenser is concemed and no further,
E it is urged. For clarity it may be noted that in an earlier proceeding a
higher tariff had been allowed to biomass based power plants with air
cooled condensers.
7. On the other hand, on behalf of the power producers it is argued
that determination and fixation of tariff are instances of the exercise of
F the statutory powers of the State Regulatory Commission under Section
62 read with Section 86(1 )(a) of the Act. The mere incorporation of the
tariff in a PPA between the generating company and the distribution
licensee would not make the tariff a consensual decision by and between
the contracting parties which, can only be altered by the Commission
G with the mutual consent of the parties.
8. The decisions relied upon in Gujarat Urja Vikas Nigam
Limited Vs. EMCO Ltd. & Anr. (supra) and Bangalore Electricity
I 2016 (2) SCALE 75
2 2015(5) SCALE 711
H '(2011) 11 SCC34
GUJARAT URJA VIKAS NIGAM LIMITED v. TARIN! 997
INFRASTRUCTURE LTD. [RANJAN GOGOi, J.]

Supply Co. Vs. Konark Power Projects Ltd. (supra) have sought to be A
distinguished by reference to the facts in the context of which the same
have been rendered. The observations of this Court in Transmission
Corporation ofAndhra Pradesh Vs. Sai Renewable Power Pvt. Ltd.
(supra) (para 64) with regard to the role and authority of the Regulatory
Commission in the matter of fixation of tariff have been relied upon.
B
Furthermore, the language appearing in Section 86( I )(b) of the Act has
been specifically relied upon to contend that the said provision of the Act
confers on the State Regulatory Commission the power "to regulate
the price at which electricity shall be procured from the generating
companies or licensees ........ through agreements for purchase of
power for distribution and supply within the State. " Reliance has c
also been placed on the decisions on this Court in Sri Venkata
Setaramanjaneya Rice & Oil Mills and Ors. Vs. State of A.P. 4 , K.
Ramanathan Vs. State of T.N. & Anr. 5 and D.K. Trivedi & Sons Vs.
State of Guiarat & Ors. 6 with regard to wide meaning of Word
"regulate". It is further pointed out that power production for purposes
D
of supply on the terms envisaged in the PPA is commercially not viable
resulting in closure of the Junagadh Power Projects Ltd. for the past 3
years and the possible loss of the huge investment made.
9. The Electricity Actof2003 has been enacted to consolidate and
upgrade the existing laws relating to generation, transmission, distribution,
trade and use of electricity; for taking measures conducive to development E
of electricity as an industry; to promote competition therein and to protect
the interest of consumers; rationalize tariff and promote efficient and
environment friendly policies besides creating different regulatory and
appellate bodies to deal with highly complex technical issues with regard
to production, distribution and sale of electricity including fixation of tariff. F
A reading of the provisions of the 2003 Act would go to show that apart
from fixation of tariff in a "situation of open access" or in a situation of
competitive bidding covered by Section 63 of the Act, determination and
fixation of tariff is a statutory function to be performed by the State
Regulatory Commissions constituted under the Electricity Regulatory
Commissions Act, 1988 and exercising powers in consonance' with the G
principles enunciated by the Electricity Act, 2003. Insofar as fixation of
tariff is concerned, Part VII of the Act read with the functions or' the
4 AIR 1964 SC 1781
'(1985) 2 sec 116
' ( 1986) Supp. sec 20 H
998 ' SUPREME COURT REPORTS [2016) 5 S.C.R.

A State Commission contained in Section .86 thereof are relevant and would
require to be specifically noticed. Sections 61, 62 64 and Section 86 of
the Act therefore are being extracted herein below.
"61. Tariff regulations:- The Appropriate Commission shall,
·~ subject to the provisions of this Act, specify the terms and conditions
B 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;
c (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
(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;
E
I [(g) that the tariff progressively reflects the cost of supply of
electricity and also reduces cross-subsidies in the manner specified
by the Appropriate Conimission;] ·
(h) the promotion of co-generation and generation of electricity
from renewable sources of energy;
F
(i) the National Electricity Policy and tariff policy:
Provided that the tenns and conditions for determination of tariff
under the Electricity (Supply)Act, 1948 (54 of! 948), the Electricity
Regulatory Commission Act, 1998 ( 14of1998) and the enactments
G specified in the Schedule as they stood immediately before the
appointed date, shal I continueto apply for a period of one year or
until the terms and cemditions for tariff are specified under this
section, whichever is earlier."
"62. Determination of tariff: -(1) The Appropriate Commission
H
GUJARAT URJA VIKAS NIGAM LIMITED v. TARINI 999
INFRASTRUCTURE LTD. [RANJAN GOGOi, J.]

shall determine the tariff in accordance with the provisions of this A
Act for -
(a) supply of electricity by a generating company to a distribution
licensee:
Provided that the Appropriate Commission may, in case of shortage
of supply of electricity, fix the minimum and maximum ceiling of B
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
(c) wheeling of electricity;
(d) retail sale of electricity:
Provided that in case of distribution of electricity in the same area
by two or inore distribution licensees, the Appropriate Commission D
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 ge1ieration, transmission and distribution for E
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 F
any specified period or the time at which the supply is required or
the geographical position of any area, the nature ofsupply 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 G
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
H
1000 SUPREME COURT REPORTS [2016] 5 S.C.R.

A 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
B 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
c 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.
D (3) The Appropriate Commission shall, within one hundred and
tweryty 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
E 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:
F
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
G 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
H
GUJARAT URJA VIKAS NIGAM LIMITED v. TARINI 1001
INFRASTRUCTURE LTD. [RANJAN GOGOI, J.]

supply, transmission or wheeling, be determined under this section A
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." B
"86. Functions of State Commission: - (I) The State
Commission shall discharge the following functions, namely: -
(a) determine the tarifffor generation, supply, transmission and
wheeling of electricity, wholesale, bulk or retail, as the case may
be, within the State: · c
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;
D
(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;
E
( c) facilitate intra-State transmission and wheeling of electricity;
( d) issue licences to persons seeking to act as transmission
licensees, distribution licensees and electricity traders with respect
to their operations within the State;
(e) promote co-generation and generation of electricity from F
renewable sources of energy by providing suitable measures for
connectivity with the grid and sale of electricity to any person,
and also specify, for purchase of electricity from such sources, a
percentage of the total consumption of electricity in the area of a
distribution licensee;
G
(f) adjudicate upon the disputes between the licensees, and
generating companies and to refer any dispute for arbitration;
(g) levy fee for the purposes of this Act;
(h) specify State Grid Code consistent with the Grid Code specified
H
I

1002 SUPREME COURT REPORTS [2016] 5 S.C.R.

A under clause (h) of sub-section (I) of section 79;
(i) specify or enforce standards with respect to quality, continuity
and reliability of service by licensees;
U) fix the trading margin in the intra-State trading of electricity, if
considered, necessary; and
B
(k) discharge such other functions as may be assigned to it under
this Act.
(2) The State Commission shall advise the State Government on
all or any of the following matters, namely:-
C (i) promotion of competition, efficiency and economy in activities
of the electricity industry;
(ii) promotion of investment in electricity industry;
(iii) reorganization and restructuring of electricity industry in the
State;
D
(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
E exercising its powers and discharging its functions,
(4) li1 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
F 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 dete1mination 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
G functions of the Commission which detennination includes, as noticed
above, a regulatory power with regard to purchase and procurement of
electricity from generating companies by entering into PPA(s). The
power of tariff determination/ fixation undoubtedly is statutory and that
has been the yiew of this Court expressed in paragraphs 36 and 64 of
'(rans mission Corporation of Andllra Pradesh Vs. Sai Renewable
H
GUJARAT URJA VIKAS NIGAM LIMITED v. TARJNI 1003
INFRASTRUCTURE LTD. [RANJAN GOGOI, J.]

Power Pvt. Ltd. (supra). This, of course, is subject to determination of A
price of power in open access (Section 42) or in the case of open bidding
(Section 63). ·In the present case, admittedly, the tariff incorporated in
the PPA between the generating company and the distribution licensee
is the tariff fixed by the State Regulatory Commission in exercise of its
statutory powers. In such a situation it is not possible to hold that the
B
tariff agreed by and between the parties, though finds mention in a
contractual context, is the result of an act of volition of the parties which
can, in no case, be altered except by mutual consent. Rather, it is a
determination made in the exercise of statutory powers which got
incorporated in a mutual agreement between the two parties involved.
l I. The principles on which tariff is to be determined by the
c
Commission as set out in Section 61 have already been noticed.
Generation, transmission, distribution and supply of electricity is required
to be conducted on commercial principles; while the consumers' interest
is to be safeguarded, recovery of cost of electricity in a reasonable manner
has also to be ensured. Under Section 64(6) a tariff order continues to D
remain in force for such period as may be specified. In the State of
Gujarat, currently, the Gujarat Electricity Regulatory Commission (multi-
year tariff) Regulations, 2016 govern the fixation of tariff by the State
Commission. As per Regulation 31 the Commission is required to
determine the tariff of a generating company, transmission licensee, SLDC
and distribution licensee for each financial year during the control period E
(control period is 5 years) (financial year 2016 to financial year 2021)
having regard to the following factors:
"(a) The approved forecast of Aggregate Revenue Requirement
and expected revenue from tariff and charges of the
Generating company, Transmission Licensee, SLDC and F
Distribution Licensee for such financial year, including
modification 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 G
previous year.
12. Not only the tariff fixed is subjectto periodic review, furthermore
the above Regulations provide for taking into consideration the force
majeure events. Any force majeure is considered as an uncontrollable
H
1004 SUPREME COURT REPORTS (2016] 5 S.C.R.

A factor. In fact Regulation 23 provides that the approved aggregate gain
or loss on account of uncontrollable factor shall be passed through as an
adjustment in the tariff over such period as may be specified in the
Order of the Commission.
13. Regulations 23 and 31 of the Gujarat Electricity Regulatory
B Commission (multi-year tariff) Regulations, 2016 are reproduced
hereunder.
23. Mecltanismfor pass tltrouglt ofgains or losses on account
of uncontrollable factors
23.J The approved aggregate gain or loss to the Generating
c Company or Transmission Licensee or SLDC or
Distribution Licensee on account of uncontrollable
factors shall be passed through as an adjustment in the
tariff of the Generating Company or Transmission
Licensee or SLDC or Distribution Licensee over such
D period as may be specified in the Order of the
Commission passed under these Regulations.
23.2 The Generating Company or Transmission Licensee or
SLDC or Distribution Licensee shall submit such details
of the variation between expenses incurred qnd revenue
E earned and the figures approved by the Commission, in
the prescribed format to the Commission, along with
the detailed computations and supporting documents
as may be required for verification by the Commission;
23.3 Nothing contained in this Regulation 23shall apply in
respect of any gain or loss arising out of variations in
F
the price of fuel and power purchase, which shall be
dealt with as specified by the Commission from time to
time.
31. Annual determination of tariff
G The Commission shall determine the tariff of a Generating
Company, Transmission Licensee, SLDC and Distribution
Licensee covered under a Multi-Year Tariff framework for
each financial year during the Control Period, at the
ccmmencement of such financial year, having regard to the
following:
H
GUJARAT URJA VIKAS NIGAM LIMITED v. TARIN! 1005
INFRASTRUCTURE LTD. [RANJAN GOGOi, J.]

(a) The approved forecast of Aggregate Revenue A
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
(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 c
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 ofbiogas
fuel is itself contradictory. D

15. As already noticed, Section 86(1)(b) of the Act empowers the
State Commission to regulate the price of sale and purchase of electricity
between the generating companies and distribution licensees through
agreements for power produced for distribution and supply. As held by
this Court in Sri Venkata Setaramanjaneya Rice & Oil Mills and E
Ors. Vs. State of A.P. (supra), K. Ramanatlwn Vs. State of T.N. &
Anr. (supra) and D.K. Trivedi & Sons Vs. State of Gujarat & Ors.
(supra) the power ofregulation 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. F
Vs. State ofA.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. G
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
H
1006 SUPREME COURT REPORTS [2016] 5 S.C.R.

A its availability at fair prices.
"
K. Ramanathan Vs. State of T.N. & Anr. (supra)
"18. The word "regulation" cannot have any rigid or inflexible
meaning as to exclude "prohibition''. The word "regulate" is difficult
B to define as having any precise meaning. It is a word of broad
"lrnport, having a broad meaning, and is very comprehensive in
scope. There is a diversity of opinion as to its meaning and its
application to a particular state of facts, some courts giving to the
term a somewhat restricted, and others giving to it a liberal,
c construction. The different shades of meaning are brought out in
Corpus Juris Secundum, Vol. 76 at p. 611:
'"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
D 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,
E laws, or rules; to rule; to conduct; to fix or establish; to restrain; to
restrict."
See also: Webster '.s Third New International Dictionary, Vol.
II, p. 1913 and Shorter Oxford Dictionary, Vol. JI, 3rd Edn., p.
1784.
1~. 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 subjectto regulation
G
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
H power to check and may imply the power to prohibit under certain
GUJARAT URJA VIKAS NIGAM LIMITED. v. TARIN! 1007
INFRASTRUCTURE LTD. [RANJAN GOGOi, J.)

circumstances, as where the best or only efficacious regulation A
consists of suppression. It would therefore appear that the .word
"regulation" cannot have any inflexible meaJling 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
B
necessarily keep in view the mischief which the legislature seeks
to remedy."
D.K. Trivedi & Sons Vs. State of Gujarat & Ors. (supra)
"30. Bearing t.his in mind, we now tum to examine the nature of
the rule-making power conferred upon the State Governments by c
Section 15(1 ).Although under Section 14, Section 13 is one of the
sections which does not apply to minor minerals, the language of
Section 13(1) is in pari materia with the language of Section 1·5(1 ).
Each of these provisions confers the power to make rules for
"regulating". The Shorter Oxford English Dictionary, 3rd Edn.,
defines the word "regulate" as meaning "to control, govern, or D
direct by rule or regulations; to subject to guidance or restrictions;
to adapt to circumstances or surroundings". Thus, the power to
regulate by rules given by Sections 13( 1) and 15( 1) is a power to
control, govern and direct by rules the grant of prospecting licences
and mining leases in respect of minerals other than minor minerals E
and for purposes connected therewith in the case of Section 13( 1)
and the grant of quarry leases, mining leases and other mineral
concessions in respect of minor minerals and for purposes
connected therewith in the case of Section 15( 1) and to subject
such grant to restrictions and to adapt them to the circumstances
of the case and the surroundings with reference to which such F
power is exercised. It is pertinent to bear in mind that the power
to regulate conferred by Sections 13( 1) and 15(1) is not only with
respect to the grant of licences and leases mentioned in those
sub-sections but is also with respect to "purposes connected
therewith", that is, purposes connected with such grant." ~ G
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 be a sound principle of
interpretation to confer such a power if public; interest dictated by the H
1008 SUPREME COURT REPORTS [2016] 5 S.C.R.

A surrounding events and circumstances. require a review of the tariff.
The facts of the present case, as elaborately noted at the threshold of
the present opinion, would suggest that the Court must lean in favour of
such a view also having due regard to the pr~visions of Sections 14 and
21 of the General Clauses Act, 1898 .. In. this context, the views of this
· ·court on the purport and effect of Sections 14 and 21 of the General
B
Clauses Act may be re-noticed by extracting paragraphs 47, 48 and 49
of the decision of this Court in D.K. Trivedi & Sons Vs. State of Gujarat
& Ors. (supra). ·
"47. The next contention was that though under Section 15( 1)
the State Governments may have the power to make rules providing
c for payment of royalty and dead rent, sub-section (3). showed that
such power did not extend to amending the rules so as to enhance
-the rate of dead rent. The submission in this behalf was that the
power to enhance the rate of royalty by amending the rules was
expressly provided for in sub-section (3) by the use of the words
D "at the rate prescribed for the time being in the rules framed by
the State Government in respect of minor minerals" but there
was no such provision in Section 15 with respect to dead rent. We
are unable to accept this submission. Rules under Section 15( 1),
though, made by the State Governments, are rules made under a
E . Central Act and the provisions of the General Clauses Act, 1897,
apply to such rules. Under Section 21 oftl1e General Clauses Act •
. where by any Central Act, a power. to make rules is conferred.
then that power includes a power, exercisable in the like manner
and subject to the like sanction and conditions if any, to add to,
amend, vary or rescind any rules so made. The power to amend
F . the rules is therefore, comprehended within the power to make
rules and as Section 15(1) confers upon the State Governments
the power to make rules providing for payment of dead rent and
royalty. it also confers upon the State Governments the power to
amend those rules so as to alter the rates of royalty and dead rent
so prescribed, either by enhancing or reducing such rates.
G

48. It was then contended that the very language of sub-section
(1) of Section 15 shows that it does not confer any power upon
the State Governments to enhance the rate of royalty or-dead
rent because the rules which are to be made under that sub-section
H
GUJARAT URJA VIKAS NIGf.M LIMITED v.. TARIN! 1009
INFRASTRUCTURE LTD. [RANJAN GOGOI, J.]

are for regulating the grant of quarry leases, mining leases and A
other mineral concessions in respect of minor minerals and,
therefore, the rules under that su~-section can be made only with
respect to the time when ·such leases or concessions are granted
and not wi.th respect to any point of time subsequent thereto and
there being no provision similar to sub-section (3) of Section 15
B
with respect to dead rent, any rule providing for increase in the
rate of dead rent during the subsistence of a lease would be ultra
vires Section 15. This submission is devoid of substance. As pointed
out earlier, sub-section (3) of Section 15 does not confer any power
to amend the rules made under Section 15(1 ), for the power to
amend the rules is comprehended within the power to make the c
rules conferred by sub-section (I) of Section 15. The construction
sought to be placed upon the word "grant" in Section 15( 1) also
cannot be accepted. While granting a lease it is open to the grantor
to prescribe conditions which are to be observed during the period
of the grant and also to provide for the forfeiture of the lease on
D
breach of any of those conditions. If the grant of a lease were not
to prescribe such conditions, the lessee could with impunity commit ·
breaches of the conditions of the lease. Ordinary leases of
immovable property at times provide for periodic increases of
rent and there is no reason why such increases should not be
made in a mining or quany lease or other mineral concession E
granted under a regulatory statute intended for the benefit of the
public and even less reason why such a statute should not confer
power to make rules providing for increases in the rate of dead
rent during the subsistence of the lease. ................ .. ............ ..

F
49. In support of the above contention it was also submitted that
-in the absence of a provision like the one contained in Section
15(3) the power to enhance the rate of dead rent cannot be so
exercised as to affect subsisting leases and that unless this
construction were placed upon sub-section (!), the power
G
conferred by that sub-section would be bad in law as being an
arbitrary power. It was submitted that a mining lease is the result
of a contract entered into between two parties and dead rent is
part of the consideration for the grant of the lease. and just as in
the case of a contract of sale of goods. it cannot be left to the
H
1010 . SUPREME COURT REPORTS [2016) 5 S.C.R.

A sweet will of the seller to charge what price he liked, in the same
way in the case of leases and concessions granted under Section
15(1), it cannot be left to the State Governments to amend the
rules so as to charge whatever dead rent they like and whenever
they like during the subsistence of the lease. We find no substance
in either of these submissions. A quarry lease, mining lease or
B
otlter mineral concession in respect of a minor mineral does
not stand on tlte same footing as an ordinary contract. Tltese
leases and concessions are granted by tlte State Governments
pursuant to rules made under tlte statutory power conferred
upon tltem by a regulatory Act. Minerals are part of tlte
c material resources wlticlt constitute a nation's natural wealtil
and if tile nation is to advance industrially and if its economy
is to be benefited by tile proper development and exploitation
of tilese resources, tiley cannot be permitted to be frittered
away and exltausted wit/tin a few years by indiscriminate
exploitation witilout any regard to public and national interest.
D
The same view was expressed by the Court in State of Tamil
Nadu v. Hind Stone. . . .... ...... . .......................... The
presumption is that an authority clothed with a statutory power
will exercise such power reasonably, and if in the public interest
and for the efficacious regulation of mines and quarries of minor
E minerals and the proper development of such minerals, a State
Government as the delegate of the Union Government thinks fit
to amend the rules so as to enhance the rate of dead rent, it cannot
be said that it is prevented from doing so by the principles of the
ordinary law of contracts. It may be that in certain cases by
enhancing the rate of dead rent the holders of leases in respect of
E
·certain types of minor minerals may be adversely affected but
private interest cannot be permitted to override public interest.
Conservation of minerals and their proper exploitation result in
securing t,he maximum benefit to the community and it is open to
the State Governments to enhance the rate of dead rent so as to
G ensure the proper conservation and development of minor minerals
even though it may affect a lessee's liability under a subsisting
lease."
17. A similar view expressed in Silree Sidltbali Steels Ltd. and
Otlters Vs. State of Uttar Pradeslt and Otilers 7 may also be noticed.
H 1
c2011i 3 sec 193
GUJARAT URJA VIKAS NIGAM Llt\.fITED v. TARIN! 1011
INFRASTRUCTURE LTD. {RANJAN GOGOi, J.]

"41. By virtue of Sections 14 and 21 of the General Clauses A
Act, when a power is conferred on an authorityto do a particular
·act, such power can be exercised from time to time and carries
with it the power to withdraw, modify, amend or c'ancel the
notifications earlier issued, to be exercised in the like manner and
subject to like conditions, if any, attached with the exercise of the
B
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 Government's
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 c
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 D
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. & E
Anr. (supra) the power purchaser sought the benefit of a second tariff
order made effective to projects commissioned after 29.01.2012 (the
power purchaser had commissioned its project 'on 02.03.2012) though
· under the PPA it was to be governed by the first tariff order of January,
2010. Under the first tariff order for such projects which were not F
commissioned on or before the date fixed under the said order, namely,
31.11.2011 the tariff payable was to be determined by the Gujarat
Electricity Regulatory Commission. The power producer in the above
case did not seek determination of a separate tariff but what was sought
was a declaration that the second tariff order dated 27.01.2012 applicable
to PPA(s) after 29.01.2012 would be applicable. It is in this context that G
this Court had taken the.view that the power producer would not be
relieved of its contractual obligations under the PPA. In the case of
Bangalore Electricity Supply Co. Vs. Konark Power Projects Ltd.
(supra), this Court held that it was beyond the power of State Commission
H
1012 SUPREME COURT REPORTS [2016] 5 S.C.R.

A to vary the tariff fixed ander the approved PPA in view of the specific
provisions. in Regulations 5. I 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
prior to the date ofnotificaticin of the Regulations in question.
B. 19: In vie~ of the above, the appeals ar"e dismissed and the orders·
.dated 3'L05.2012 and 02.12.2013 of the Appellate Tribim~I are affirmed.·
·In the fact~ and:circumstances of the case, the parties are left to bear
their own cost's ..
K.alpana K. Tripathy Appeals dismissed ..
c