Supreme Court of India
SOUTHERN POWER DISTRIBUTION POWER COMPANY LIMITED OF ANDHRA PRADESH (APSPDCL) & ANR.versusM/S HINDUJA NATIONAL POWER CORPORATION LIMITED & ANR
- Citation
- 2022 INSC 136
- Decided
- 2 February 2022
- Disposal
- Dismissed
- Bench
- L NAGESWARA RAO
Holding
The Supreme Court affirmed that the DISCOMS could not withdraw their 2016 application and that the State Commission erred in dismissing HNPCL’s 2015 petition, thereby dismissing the appeal.
Summary
The Supreme Court dismissed the appeal of the Andhra Pradesh distribution companies (DISCOMS) challenging the Appellate Tribunal for Electricity’s (APTEL) order directing the State Electricity Regulatory Commission to decide on two applications: HNPCL’s petition for determination of capital cost (O.P. No.21 of 2015) and the DISCOMS’ petition for approval of a continuation Power Purchase Agreement (O.P. No.19 of 2016). The Court held that the DISCOMS could not withdraw their 2016 application after having assured the state’s purchase of 100% power, and that the State Commission was wrong to dismiss HNPCL’s 2015 petition. The Court emphasized that actions of a State instrumentality must be non‑arbitrary, reasonable and in the public interest, and that the Electricity Act, 2003 governs tariff and PPA approvals. Consequently, the appeal was dismissed with costs and the State Commission was ordered to decide both applications within six months.
Issues considered
- The DISCOMS’ right to withdraw O.P. No.19 of 2016 after having given assurance to purchase 100% power from HNPCL.
- Whether the State Electricity Regulatory Commission was justified in dismissing HNPCL’s O.P. No.21 of 2015 for determination of capital cost.
- Whether the conduct of the DISCOMS was arbitrary, irrational and contrary to public interest under Articles 12 and 14 of the Constitution.
- Interpretation of Sections 61, 62, 64 and 86 of the Electricity Act, 2003 and their application to the PPA and tariff determination.
- Whether the APTEL correctly directed the State Commission to dispose of the two applications on merits.
Legislation cited
- Andhra Pradesh Electricity Reform Act, 1998s. 21
- Andhra Pradesh Electricity Regulatory Commission (Tariff) Regulations, 2008s. 10, s. 5.2, s. 9
- Electricity Act, 2003s. 61, s. 62, s. 64, s. 86
Subjects
Electricity Act 2003Power Purchase AgreementPublic interestState instrumentalityArbitrarinessWithdrawal of applicationTariff determinationRegulatory commissionArticle 12Article 14
Judgment
198 [2022]REPORTS
SUPREME COURT 8 S.C.R. 198 [2022] 8 S.C.R.
A SOUTHERN POWER DISTRIBUTION POWER COMPANY
LIMITED OF ANDHRA PRADESH (APSPDCL) & ANR.
v.
M/S HINDUJA NATIONAL POWER CORPORATION LIMITED
& ANR
B
(Civil Appeal No. 1844 of 2020)
FEBRUARY 02, 2022
[L. NAGESWARA RAO AND B. R. GAVAI, JJ.]
C Electricity Act, 2003 – ss. 61, 62, 64 and 86 – Power Purchase
Agreement(PPA) – Appellants-distribution companies (DISCOMS)
were to purchase 100% power generated by respondent no.1-
HNPCL – O.P. No.21 of 2015 filed by HNPCL for determination of
capital cost and O.P. No.19 of 2016 filed by appellants–DISCOMS
for approval of PPA – However, on 4th January, 2018, appellants-
D DISCOMS filed IAs before the State Electricity Regulatory
Commission for withdrawal of O.P. No.19 of 2016 and disposal of
O.P. No.21 of 2015 – State Commission allowed withdrawal of O.P.
No.19 of 2016 filed by appellants–DISCOMS and consequentially
dismissed O.P. No.21 of 2015 filed by HNPCL – Appeal of respondent
E no.1-HNPCL allowed by Appellate Tribunal for Electricity (APTEL)
which directed the State Electricity Regulatory Commission to dispose
of O.P. No.21 of 2015 and O.P. No.19 of 2016 on merits –
Correctness of – Held: APTEL rightly held that, on account of the
assurance given by the State of Andhra Pradesh/APDISCOMS,
HNPCL had altered its position and as such, it was not permissible
F
for the appellants-DISCOMS to withdraw O.P. No.19 of 2016 –
Conduct of appellants-DISCOMS would disentitle them to withdraw
the application – Argument, that on account of increase of the capital
cost of the project, the appellants–DISCOMS would be required to
purchase power at much higher rate, also does not hold water since
G the State Electricity Regulatory Commission would only approve
the cost as it would feel appropriate, as guided by the provisions u/
s.61 of the Act of 2003 and the Regulations; and merely because,
the cost of the project is estimated by HNPCL at a particular amount,
the State Commission is not bound to accept the same – Further,
perusal of s.64 of the Act of 2003 would reveal that even a
H
198
SOUTHERN POWER DISTRIBUTION POWER COMPANY LTD. OF A.P. 199
(APSPDCL) v. M/S HINDUJA NATIONAL POWER CORP. LTD.
Generating Company is entitled to make an application for A
determination of tariff u/s.62 of the Act of 2003 – As such, the State
Commission was wholly unjustified in dismissing O.P. No.21 of 2015
filed by HNPCL – For reasons unknown, appellants-DISCOMS took
a decision to resile from their earlier stand, due to which, not only
the huge investment made by HNPCL would go in waste, but also
B
valuable resources of the public including thousands of acres of
land would go in waste – Appellants-DISCOMS, which are
instrumentalities of the State, could not be permitted to change their
decision at their whims and fancies and, particularly, when it was
adversarial to the public interest and public good – The record
clearly showed that the change in decision was arbitrary, irrational C
and unreasonable – IAs filed by appellants–DISCOMS, were acts,
affecting public interest and public good, without there being any
rational or reasonable basis for the same – Conduct of appellants–
DISCOMS, deprecated – In any event, the impugned judgment of
APTEL cannot be said to be prejudicial to the interests of any of the
D
parties – What was done by APTEL was only to direct the State
Electricity Regulatory Commission to dispose of the said two O.Ps
on merits – Appeal dismissed with costs, quantified at Rs.5,00,000/
- – State Electricity Regulatory Commission to decide the said two
O.Ps, expeditiously, within six months.
Constitution of India – Arts.12 and 14 – Public Authority – E
State – Instrumentalities of the State – Held: Every action of a State
is required to be guided by the touch-stone of non-arbitrariness,
reasonableness and rationality – Every action of a State is equally
required to be guided by public interest – Every holder of a public
office is a trustee, whose highest duty is to the people of the country F
– The Public Authority is therefore required to exercise the powers
only for the public good.
Dismissing the appeal, the Court
HELD: 1. The Appellate Tribunal for Electricity (APTEL)
rightly held that, on account of the assurance given by the State G
of Andhra Pradesh/APDISCOMS, HNPCL had altered its position
and as such, it was not permissible for the appellants-DISCOMS
to withdraw O.P. No.19 of 2016. The grounds, which are sought
to be urged in I.A. No.1 of 2018 in O.P. No.19 of 2016 and I.A.
No.2 of 2018 in O.P. No.21 of 2015, were very much available H
200 SUPREME COURT REPORTS [2022] 8 S.C.R.
A when the appellants-DISCOMS had entered into MoA on 17th
May, 2013 and the Continuation Agreement dated 28th April,
2016. [Para 79][226-C-E]
2. In any case, the conduct of the appellants–DISCOMS, in
the present case, would disentitle them to withdraw the
B application. [Para 87][230--C-D]
3. Another argument, that on account of increase of the
capital cost of the project, the appellants-DISCOMS would be
required to purchase power at much higher rate, also does not
hold water. The State Electricity Regulatory Commission while
C determining the tariff would be guided by various factors as are
required to be taken into consideration in view of the provisions
of Section 61 of the Electricity Act, 2003. In any event, the
appellants–DISCOMS have themselves reserved their right to
contest the correctness of the cost on every component at an
D appropriate stage before the State Commission. Merely because,
the cost of the project is estimated by HNPCL at a particular
amount, the State Commission is not bound to accept the same.
The State Commission would only approve the cost as it would
feel appropriate, as guided by the provisions under Section 61 of
the Act of 2003 and the Regulations. In that view of the matter,
E the argument in this regard also, is without substance. [Para
88][230-D-H]
4. In any event, the State Commission totally erred in
dismissing O.P. No.21 of 2015 filed by HNPCL. Perusal of Section
64 of the Act of 2003 would reveal that even a Generating
F Company is entitled to make an application for determination of
tariff under Section 62 of the Act of 2003. As such, irrespective
of the question, as to whether an application for withdrawal of
O.P. No.19 of 2016 filed by the appellants-DISCOMS could have
been entertained, the State Commission was wholly unjustified
G in dismissing O.P.No.21 of 2015 filed by HNPCL. In any case, in
the facts of the present case and, particularly, taking into
consideration the conduct of the appellants-DISCOMS, the
APTEL rightly held that the appellants– DISCOMS could not
have been permitted to withdraw O.P. No.19 of 2016. [Para
99][230-A-C]
H
SOUTHERN POWER DISTRIBUTION POWER COMPANY LTD. OF A.P. 201
(APSPDCL) v. M/S HINDUJA NATIONAL POWER CORP. LTD.
5. The appellants–DISCOMS are instrumentalities of the A
State and as such, a State within the meaning of Article 12 of the
Constitution of India. Every action of a State is required to be
guided by the touch-stone of non-arbitrariness, reasonableness
and rationality. Every action of a State is equally required to be
guided by public interest. Every holder of a public office is a B
trustee, whose highest duty is to the people of the country. The
Public Authority is therefore required to exercise the powers
only for the public good. [Para 100][234-C-E]
6. The determination of the capital cost of the project and
the rate of tariff at which the power has to be purchased would C
always be subject to regulatory control of the State Commission.
What has been done by the APTEL is only directing the State
Commission to determine the same. [Para 104][237-F-G]
7. The record would clearly reveal that from the year 2012
onwards till 4th January, 2018, it was the consistent stand of the D
State of Andhra Pradesh as well as the APDISCOMS that it would
be purchasing 100% power generated from the project of HNPCL.
Not only an application being O.P. No.21 of 2015 was filed by
HNPCL for determination of capital cost, but also O.P. No.19 of
2016 was filed by the appellants-DISCOMS for grant of approval
to the Continuation Agreement dated 28th April, 2016 with the E
Amended and Restated PPA of 1998. The matters were heard
finally on 15th May, 2017 and closed for orders. For some
unknown reasons, exclusively within the knowledge of the
appellants–DISCOMS, things turned topsy-turvy between 15th
May, 2017 and 4th January, 2018, on which date, the appellants – F
DISCOMS did a somersault and filed applications for withdrawal
of O.P. No.19 of 2016 and disposal of O.P. No.21 of 2015. Every
decision of the State is required to be guided by public interest
and the power is to be exercised for public good. For reasons
unknown, the appellants– DISCOMS took a decision to resile
G
from their earlier stand, due to which, not only the huge
investment made by HNPCL would go in waste, but also valuable
resources of the public including thousands of acres of land would
go in waste. The reasons /grounds, which are sought to be given
H
202 SUPREME COURT REPORTS [2022] 8 S.C.R.
A in I.A. No. 1 of 2018 in O.P. No.19 of 2016 and I.A. No.2 of 2018
in O.P. No.21 of 2015, filed on 4th January, 2018, were very much
available between 2011 till 15th May, 2017. It is not as if
something new has emerged between 15th May, 2017 and 4th
January, 2018, which would have entitled the appellants–
DISCOMS to resile from their earlier stand. The appellants–
B
DISCOMS could not be permitted to change the decision at their
whims and fancies and, particularly, when it is adversarial to the
public interest and public good. The record would clearly show
that the change in decision is arbitrary, irrational and
unreasonable. [Para 105][237-G-H; 238-A-E]
C
8. I.A. No.1 of 2018 in O.P. No.19 of 2016 and I.A. No.2 of
2018 in O.P. No.21 of 2015 filed by the appellants-DISCOMS,
are acts, which have been done wrongfully and wilfully without
reasonable and probable cause. The act is one, affecting public
interest and public good, without there being any rational or
D reasonable basis for the same. [Para 107][239-D-E]
9. In any case, the impugned judgment of APTEL cannot
be said to be of such a nature, which can be said to be prejudicial
to the interests of any of the parties. What has been done by the
APTEL is only to direct the State Commission to dispose of O.P.
E No.21 of 2015 filed for determination of capital cost and O.P. No.19
of 2016 filed for approval of Amended and Restated PPA
(Continuation Agreement) on merits. On remand, the State
Commission would be bound to take into consideration all the
relevant factors and the contentions to be raised by both the
F parties before deciding the said O.Ps. [Para 109][239-F-G]
Hulas Rai Baij Nath v. Firm K.B. Bass and Co. [1967] 3
SCR 886 – distinguished.
Arjun Singh v. Mohindra Kumar AIR 1964 SC 993 :
[1964] 5 SCR 946; Tata Power Company Limited v.
G Reliance Energy Limited and others (2009) 16 SCC 659
: [2009] 9 SCR 625; Kumari Shrilekha Vidyarthi and
others v. State of U.P. and others (1991) 1 SCC 212 :
H
SOUTHERN POWER DISTRIBUTION POWER COMPANY LTD. OF A.P. 203
(APSPDCL) v. M/S HINDUJA NATIONAL POWER CORP. LTD.
[1990] 1 Suppl. SCR 625; Food Corporation of India A
v. M/s Kamdhenu Cattle Feed Industries (1993) 1 SCC
71 : [1992] 2 Suppl. SCR 322; Indian Oil Corporation
Limited and others v. Shashi Prabha Shukla and another
(2018) 12 SCC 85 : [2017] 13 SCR 268 and Kalabharati
Advertising v. Hemant Vimalnath Narichania and others
B
(2010) 9 SCC 437 : [2010] 10 SCR 971 – referred to.
Boal Quay Wharfingers Ltd. v. King’s Lynn Conservancy
Board (1971) 1 WLR 1558 [Court of Appeal, England]
– referred to.
Case Law Reference C
[1967] 3 SCR 886 distinguished Para 33
[1964] 5 SCR 946 referred to Para 41 (i)
[2009] 9 SCR 625 referred to Para 89
[1990] 1 Suppl. SCR 625 referred to Para 101
D
[1992] 2 Suppl. SCR 322 referred to Para 102
[2017] 13 SCR 268 referred to Para 103
[2010] 10 SCR 971 referred to Para 106
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1844
of 2020. E
From the Judgment and Order dated 07.01.2020 of the Appellate
Tribunal for Electricity at New Delhi in Appeal No. 41 of 2018.
C. S. Vaidyanathan, Sr. Adv., Mahfooz Ahsan Nazki, Polanki
Gowtham, Ms. Rajeswari Mukherjee, Advs. for the Appellants.
F
Dr. Abhishek M. Singhvi, M. G. Ramachandran, Sr. Advs., Atul
Sharma, Abhishek Sharma, Ms. Harshita Agarwal, Shubham Arya, Ms.
L. Nidhiram Sharma, Alok Tripathi, Advs. for the Respondents.
The Judgment of the Court was delivered by
B. R. GAVAI, J. G
1. The present appeal filed by the appellants – Distribution
Companies (hereinafter referred to as “the appellants - DISCOMS”)
challenges the judgment and order dated 7th January, 2020, passed by
the Appellate Tribunal for Electricity, New Delhi (hereinafter referred
to as “the APTEL”) in Appeal No. 41 of 2018, thereby allowing the
H
204 SUPREME COURT REPORTS [2022] 8 S.C.R.
A appeal filed by the respondent No.1 – M/s Hinduja National Power
Corporation Limited (hereinafter referred to as “HNPCL”). By the
impugned judgment and order, the APTEL has directed the Andhra
Pradesh Electricity Regulatory Commission (hereinafter referred to as
“the State Commission”) to dispose of O.P. No.21 of 2015 filed by
HNPCL for determination of capital cost and O.P. No.19 of 2016 filed
B
by the appellants – DISCOMS for approval of amended and restated
Power Purchase Agreement (hereinafter referred to as “PPA”)
(Continuation Agreement) on merits.
2. The facts, in brief, giving rise to the present appeal are as
under:
C
3. The erstwhile Andhra Pradesh State Electricity Board
(hereinafter referred to as “APSEB”) entered into a Memorandum of
Understanding (hereinafter referred to as “MoU”) with HNPCL on 17th
July, 1992. As per the said MoU, APSEB transferred all the licenses,
approvals, clearance and permits, fuel linkage, water required for
D establishment of the power project at Visakhapatnam in the erstwhile
State of Andhra Pradesh, to HNPCL to generate and supply the electricity
to APSEB.
4. An initial PPA was entered into between APSEB and HNPCL
on 9th December, 1994. On 25th July, 1996, the Central Electricity
E Regulatory Commission (CERC) granted a Techno Economic Clearance
for the power project for an estimated cost of Rs.4628.11 crores (Rs.
4.45 crores per MW).
5. Owing to certain change in conditions, the parties agreed to
amend the initial PPA. Accordingly, an Amended and Restated PPA
F dated 15th April, 1998, was entered into between APSEB and HNPCL.
Between the years 1998 and 2007, the Amended and Restated PPA, for
sale of power by HNPCL to APSEB, was not implemented. Subsequently,
in the year 2007, HNPCL approached the Government of Andhra
Pradesh to revive the power project mainly structuring it as a merchant
G plant, offering 25% of the power generated to the State and balance
75% power to third parties. However, it appears that there were
negotiations between the parties, and the State Government had offered
to purchase 100% power generated from the plant of HNPCL and that
HNPCL had agreed to it. The same would be clearly evident from the
material placed on record, to which we will be referring hereinafter.
H
SOUTHERN POWER DISTRIBUTION POWER COMPANY LTD. OF A.P. 205
(APSPDCL) v. M/S HINDUJA NATIONAL POWER CORP. LTD. [B. R. GAVAI, J.]
6. The material placed on record would reveal that in the year A
2011-2012, the Central Power Distribution Company of Andhra Pradesh
Limited (hereinafter referred to as “APCPDCL”) for and on behalf of
four Distribution Companies of Andhra Pradesh (hereinafter referred to
as “APDISCOMS”) had initiated the process for procurement of power
under Case-1 long term bidding route, to meet the base load requirements
B
of APDISCOMS from the years 2014-2015 onwards. In the said bidding
process, HNPCL participated and had successfully emerged as the second
lowest bidder (L-2 bidder). After the completion of the bidding process,
APCPDCL had filed O.P. No.55 of 2013 before the State Commission
for approval of the tariffs emerged in the said bidding process. However,
the State Level Expert Committee for evaluation of Case-1 bidding C
(hereinafter to as “Bid Evaluation Committee”) in its meeting dated 28th
September, 2012, had noted that, the State Government had informed
that the entire capacity of HNPCL was encumbered to the State of
A.P./APDISCOMS and was not available for consideration under the
tender. Accordingly, the Bid Evaluation Committee had discarded HNPCL
from the bidding process. D
7. In the meanwhile, there was a correspondence between
HNPCL and the State Government in the year 2012, with regard to the
steps to be taken for the development of the project and requesting
State support for scheduled commissioning of the project. In this regard,
HNPCL addressed a letter dated 6th August, 2012 to the then Hon’ble E
Chief Minister of the erstwhile State of Andhra Pradesh, thereby
conveying its intention to develop the project and seeking State’s support.
Vide communication dated 26th December, 2012, the State Government
addressed a letter to HNPCL accepting its proposal and agreeing to
purchase 100% power from the project of HNPCL as per the Amended F
and Restated PPA. Vide communication dated 14 th January, 2013,
HNPCL agreed to supply 100% power to the State-Distribution
Companies at the tariff to be determined by the State Commission.
8. The HNPCL vide communication dated 16th May, 2013,
addressed to the appellants – DISCOMS, inter alia, provided therein G
the details with regard to the estimated capital cost of the power project
to the tune of Rs.6098 crores as against Rs.5545 crores that was given
in June, 2010. The appellants – DISCOMS vide communication dated
17th May, 2013, expressed their reservations about the capital cost
furnished by HNPCL and reserved their rights to contest the same before
the State Commission. H
206 SUPREME COURT REPORTS [2022] 8 S.C.R.
A 9. On the same day, i.e., 17th May, 2013, a Memorandum of
Agreement (hereinafter referred to as “MoA”) was entered into between
the APDISCOMS and HNPCL, thereby deciding to continue the
Amended and Restated PPA dated 15th April, 1998, on the terms and
conditions set out therein. In pursuance of the aforesaid MoA, a Fuel
Supply Agreement (“FSA” for short) dated 26 th August, 2013, came to
B
be entered between HNPCL and Mahanadi Coalfield Limited for coal
supply for the said project.
10. On 12th March, 2014, a petition being O.P. No.21 of 2015,
came to be filed by HNPCL before the State Commission for
determination of capital cost for the project and for determination of the
C tariff for such generation and sale of electricity by HNPCL to
APDISCOMS.
11. Thereafter, on 2nd June, 2014, the Andhra Pradesh State
Reorganisation Act, 2014, (hereinafter referred to as “Reorganisation
Act”) came into effect vide which the erstwhile State of Andhra Pradesh
D was bifurcated into two States, i.e., the State of Andhra Pradesh and the
State of Telangana.
12. On 28th July, 2015, HNPCL filed an Addendum Application in
O.P. No.21 of 2015, thereby enhancing the capital cost of the project to
Rs.8,087 crore. This capital cost was disputed by the APDISCOMS.
E 13. On 11th January, 2016, the first unit of the Power project (520
MW) was declared Commercial Operation Date (COD) by HNPCL.
Vide interim order dated 1st March, 2016, the State Commission fixed
the provisional tariff at the rate of Rs.3.61 per unit for supply of electricity
by HNPCL to the APDISCOMS.
F 14. On 30th March, 2016, HNPCL filed I.A. No.5 of 2016 in O.P.
No.21 of 2015, for payment of variable charges and fixed charges at
Rs.1.80 per unit and Rs.2.16 per unit aggregating to Rs.3.96 per unit at
80% availability.
15. On 28th April, 2016, distinct Power Distribution Corporations
G were created including the appellants – DISCOMS i.e. Southern Power
Distribution Power Company Limited of Andhra Pradesh (“APSPDCL”)
and Eastern Power Distribution Company of Andhra Pradesh
(“APEPDCL”). These corporations succeeded the APSEB, which had
entered into the Amended and Restated PPA dated 15th April, 1998 with
H HNPCL. As such, the Continuation Agreement to the Amended and
SOUTHERN POWER DISTRIBUTION POWER COMPANY LTD. OF A.P. 207
(APSPDCL) v. M/S HINDUJA NATIONAL POWER CORP. LTD. [B. R. GAVAI, J.]
Restated PPA was entered into between the appellants – DISCOMS A
and HNPCL on 28th April, 2016.
16. On 11th May, 2016, the appellants – DISCOMS filed a petition
being O.P. No.19 of 2016 before the State Commission for approval of
the Continuation Agreement dated 28th April, 2016, read with the
Amended and Restated PPA dated 15th April, 1998. B
st
17. The State Government vide order dated 1 June, 2016,
accorded approval for purchase of 100% power from HNPCL.
18. On 3rd July, 2016, the second unit of the HNPCL (520 MW)
came to be declared COD by HNPCL.
C
19. Vide order dated 6th August, 2016, the State Commission re-
determined the provisional tariff at the rate of Rs.3.82 per unit, payable
by the appellants – DISCOMS for the power supplied by HNPCL.
20. On 15th May, 2017, the State Commission after hearing the
parties on merits, reserved the judgment in both the petitions, i.e., in O.P.
No.19 of 2016 and O.P. No.21 of 2015. D
21. It is further to be noted that in the appeal arising out of
interlocutory proceedings, the APTEL vide order dated 1st June, 2017,
directed the State Commission to dispose of O.P. No.19 of 2016 and
O.P. No.21 of 2015 on or before 14th August, 2017. The said period
came to be extended from time to time, the last of such extension was E
granted till 31st January, 2018, vide order dated 10th January, 2018.
22. Thereafter, on 4th January, 2018, the appellants – DISCOMS
filed two Interlocutory Applications, viz., (i) I.A. No.1 of 2018 in O.P.
No.19 of 2016 for withdrawal of O.P. No.19 of 2016 together with initial
PPA; and (ii) I.A. No.2 of 2018 in O.P. No.21 of 2015 for disposal of F
O.P. No.21 of 2015.
23. Vide order dated 31st January, 2018, the State Commission
allowed withdrawal of O.P. No.19 of 2016 filed by the appellants –
DISCOMS seeking approval of PPA and consequentially dismissed O.P.
No.21 of 2015 filed by HNPCL seeking determination of tariff. G
24. Aggrieved by the same, an appeal being Appeal No.41 of
2018, came to be filed by HNPCL before the APTEL. The said appeal
came to be admitted by the APTEL vide order dated 26th February,
2018. The APTEL vide order dated 16th March, 2018, passed in I.A.
No.211 of 2018 in the said appeal, as an ad hoc arrangement, directed H
208 SUPREME COURT REPORTS [2022] 8 S.C.R.
A the parties to maintain status quo as prevalent prior to 31st January, 2018.
This was without prejudice to the rights and contentions of the parties in
the main appeal, i.e., Appeal No.41 of 2018.
25. It is also to be noted that the order dated 16th March, 2018,
passed by the APTEL in I.A. No.211 of 2018 in Appeal No.41 of 2018,
B came to be challenged by the appellants – DISCOMS before the High
Court of Andhra Pradesh by filing Writ Petition being Writ Petition
No.10814 of 2018. Another writ petition being Writ Petition No.13689 of
2018 came to be filed by the appellants – DISCOMS challenging the
order of the APTEL dated 26th February, 2018, admitting the appeal
filed by HNPCL. The said writ petitions came to be dismissed by the
C High Court of Andhra Pradesh vide order dated 2nd May, 2018.
26. In the meantime, on 16th April, 2018, HNPCL had filed an
Execution Petition being Execution Petition No.3 of 2018 before the
APTEL seeking execution of the order dated 16th March, 2018, passed
by the APTEL in I.A. No.211 of 2018 in Appeal No.41 of 2018. Certain
D directions were passed by the APTEL in the said Execution Petition
vide order dated 31st May, 2018.
27. The appellants – DISCOMS had also challenged the order
dated 16th March, 2018, passed by the APTEL, by way of Civil Appeal
No.5772 of 2018 before this Court. This Court vide order dated 4 th June,
E 2018, refused to interfere with the said order, since it was an interim
order. However, this Court directed the appeal to be decided expeditiously
without taking into consideration the observations, in the order impugned
before it, as conclusive.
28. Vide impugned judgment and order dated 7th January, 2020,
F the APTEL allowed the appeal filed by HNPCL and directed the State
Commission to dispose of O.P. No.21 of 2015 and O.P. No.19 of 2016.
Being aggrieved thereby, the appellants – DISCOMS have approached
this Court by way of the present appeal.
29. On 14th July, 2020, this Court passed the following order in the
present appeal:
G
The appeal is admitted.
Until further orders, the impugned order passed by the
Appellate Tribunal for Electricity New Delhi in Appeal No. 41/
2019 shall remain stayed.
H List for hearing after four weeks.”
SOUTHERN POWER DISTRIBUTION POWER COMPANY LTD. OF A.P. 209
(APSPDCL) v. M/S HINDUJA NATIONAL POWER CORP. LTD. [B. R. GAVAI, J.]
30. An application being I.A. No.67061 of 2020 for modification A
of the said order dated 14th July, 2020, came to be filed by HNPCL. This
Court vide order dated 21st August, 2020, modified the order as under:
“Heard.
By order dated 14.07.2020, we directed the stay of
impugned order passed by the Appellate Tribunal for Electricity, B
New Delhi, in Appeal No.41/2019.
We clarify that there shall be no stay of the order dated
16.03.2018 passed by the Appellate Tribunal for Electricity, New
Delhi, providing for interim measure. Order accordingly.
The instant interlocutory application stands disposed of C
accordingly”
31. It appears from the record that during the intervening period,
certain Interlocutory Applications have been filed from both the sides,
wherein, the appellants – DISCOMS are seeking vacation of the interim
order dated 21st August, 2020, whereas HNPCL is seeking implementation D
of the order dated 21st August, 2020. The record would show that the
matter has been adjourned from time to time and was finally heard by
this Court on 20th January, 2022.
32. We have heard Shri C.S. Vaidyanathan, learned Senior Counsel
appearing on behalf of the appellants – DISCOMS and Dr. Abhishek E
Manu Singhvi and Shri M.G. Ramachandran, learned Senior Counsel
appearing on behalf of HNPCL.
33. Shri C.S. Vaidyanathan, learned Senior Counsel appearing on
behalf of the appellants – DISCOMS, submitted that the APTEL has
grossly erred in holding that the appellants – DISCOMS were not entitled F
to apply for withdrawal of O.P. No.19 of 2016, filed for grant of approval
of the PPA. It is submitted that unless there was prohibition in law, the
appellants were very much within their right to apply for withdrawal of
the O.P. filed by them. In this regard, Shri Vaidyanathan relied on the
following authorities:
G
(i) Boal Quay Wharfingers Ltd. v. King’s Lynn Conservancy
Board1 and
(ii) Hulas Rai Baij Nath v. Firm K.B. Bass and Co. 2
1
(1971) 1 WLR 1558 [Court of Appeal, England)
2
(1967) 3 SCR 886 H
210 SUPREME COURT REPORTS [2022] 8 S.C.R.
A 34. Shri Vaidyanathan further submitted that the PPA was not a
valid document until it was approved by the State Commission under
Section 86(1)(b) of The Electricity Act, 2003 (hereinafter referred to as
“the Act of 2003”). He further submitted that under Section 21 of The
Andhra Pradesh Electricity Reform Act, 1998 (hereinafter referred to
as “the Reform Act”), any agreement relating to generating, transmitting,
B
distribution or supply of energy without the previous consent in writing
of the Commission was void ab initio. He submitted that by the impugned
judgment, the APTEL has, in effect, granted HNPCL a decree of specific
performance of a contract, which is void ab initio. He further submitted
that MoA dated 17th May, 2013 and the Continuation Agreement dated
C 28th April, 2016 were themselves contrary to the National Tariff Policy
issued under Section 3 of the Act of 2003 and Regulation 5.2(b) of the
Andhra Pradesh Electricity Regulatory Commission (Terms and
conditions for determination of tariff for supply of electricity by a
generating company to a distribution licensee and purchase of electricity
by distribution licensees) Regulation, 2008 (Regulation No.1 of 2008)
D
(hereinafter referred to as ‘the Tariff Regulations’) issued by the State
Commission. As such, the direction by the APTEL, to continue to get
the electricity supply from HNPCL, being contrary to the statutory
provision, would not be tenable in law.
35. Shri Vaidyanathan submitted that the present project does not
E fall under any of the categories mentioned in Regulation 5.2 of the Tariff
Regulations, which aspect has not been taken into consideration by the
APTEL.
36. Shri Vaidyanathan further submitted that the finding of the
APTEL, that HNPCL had made huge investments on the basis of the
F assurance given by the appellants – DISCOMS that they will purchase
100% power from it, is itself erroneous. He submitted that the initial
project of HNPCL was lying in cold storage from 1996 to 2007. He
submitted that in the year 2007, HNPCL had attempted to revive the
project as a Merchant-power plant. He submitted that the project of
HNPCL had also attained financial closure in the year 2010. He further
G submitted that before the acceptance of the proposal of HNPCL by the
State Government, HNPCL had already completed upto 93% of the
project. It is therefore, submitted that the finding that huge investments
made by HNPCL were on the basis of the representation by the State
Government is totally erroneous. In any case, he submits, that the
H appellants – DISCOMS are independent authorities and not bound by
SOUTHERN POWER DISTRIBUTION POWER COMPANY LTD. OF A.P. 211
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the decision of the State. He submitted that under the scheme of the Act A
of 2003, the appellants – DISCOMS cannot purchase the power without
the prior approval of the State Commission. He submits that the State
has no role to play in the said matter. It is submitted that, in any case, the
appellants – DISCOMS could not be bound by the representation made
by the State Government.
B
37. Shri Vaidyanathan further submits that since the re-initiation
of the project in the year 2007 by HNPCL is as a Merchant-power
plant, it can very well sell the power to the third parties in the market.
He submitted that however, the appellants – DISCOMS cannot be
compelled to purchase the power from HNPCL, which will be at a very
high price. He submitted that the capital cost of the project, which was C
initially estimated at Rs.4628.11 crores has now gone up to Rs.8087
crores, which will have a direct effect on the purchase price of the
electricity by the appellants – DISCOMS. He therefore submits that if
the appellants – DISCOMS are directed to purchase the electricity at
such a high price, the loss would be ultimately to the consumers and as D
such, the direction given by the APTEL is also against the public interest.
38. Per contra, Dr. Abhishek Manu Singhvi and Shri M.G.
Ramachandran, learned Senior Counsel appearing on behalf of HNPCL
submitted that the order passed by the APTEL is such, which does not
at all harm the appellants – DISCOMS. Dr. Singhvi submitted that by
the impugned order, the APTEL has only directed the State Commission E
to dispose of O.P. No.21 of 2015 filed by HNPCL for determination of
capital cost and O.P. No.19 of 2016 filed by the appellants – DISCOMS
for approval of Amended and Restated PPA on merits.
39. Dr. Singhvi submits that the APTEL has given sound and
elaborate reasons and as such, no interference is warranted in the present F
appeal.
40. Shri M.G. Ramachandran, learned Senior Counsel, submitted
that when withdrawal of an application is sought, which has the effect
of frustrating the contract and defeating the defendant’s right, the
appellants cannot be said to have the right to withdraw the proceedings. G
He relied on the following authorities in support of this proposition.
(i) Madhu Jajoo v. State of Rajasthan3
(ii) Kiran Girhotra & Ors. v. Raj Kumar & Ors.4
3
AIR 1999 Raj 1
4
(2009) 164 DLT 483 H
212 SUPREME COURT REPORTS [2022] 8 S.C.R.
A (iii) M. Radhakrisna Murthy v. Government of A.P. & Ors.5
(iv) Smt. Ajita Debi v. Musst. Hossenara Begum 6
(v) Mathuralal v. Chiranji Lal7
(vi) The Registrar, Manonmaniam Sundaranar University
B v. Suhura Beevi8
41. Shri Ramachandran has further submitted that a right of
withdrawal is not an absolute right and that once the judgment is reserved
there cannot be any further application seeking withdrawal. In support
of this proposition, he relied on the following authorities:
C (i) Arjun Singh v. Mohindra Kumar9
(ii) Bharati Behera v. Jhili Prava Behera10
(iii) Rabia Bi Qasim v. Countrywide Consumer Financial
Services Limited11
D (iv) Pujya Sindhi Panchayat v. Prof. C.L. Mishra12
(v) Yash Mehra v. Arundhati Mehra13
(vi) Dharani Sugars and Chemicals Limited v. TMN
Engineering Industry14
E 42. Dr. Singhvi, learned Senior Counsel, further submitted that, as
a matter of fact, HNPCL desired to start the project as a Merchant-
power plant. It is however, on the insistence of the State of Andhra
Pradesh that HNPCL was compelled to supply 100% of power
generated to the State. He further submitted that it is evident from the
record that HNPCL had participated in the competitive bidding process
F
conducted by the APCPDCL. It was the decision of the Bid Evaluation
5
(2001) 3 ALD 330 (DB)
6
AIR 1977 Cal 59
7
AIR 1962 Raj 109
8
G AIR 1995 Mad 42
9
AIR 1964 SC 993
10
W.P. No.26254 of 2013 decided by Orissa High Court on 18.04.2014
11
ILR 2004 KAR 2215
12
AIR 2002 Rajasthan 274 (DB)
13
(2006) 132 DLT 166
14
CRP PD No.3309 to 3312 of 2011 and MP No.1 of 2011 decided by the Madras High
H Court on 30.08.2017
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Committee, to not consider the bid submitted by HNPCL on the premise A
that the entire generation capacity of HNPCL’s project was already
encumbered to the State of Andhra Pradesh under the Amended and
Restated PPA of 1998. He further submitted that not only this but the
entire communication placed on record would show that it was the State
Government, which had expressed its interest to purchase 100% power
B
from HNPCL’s project as per the Amended and Restated PPA dated
15th April, 1998.
43. He further submitted that on the reorganisation of the erstwhile
State of Andhra Pradesh and its bifurcation into two States, i.e., the
State of Andhra Pradesh and the State of Telangana; though the State
of Telangana had demanded 54% of the power from HNPCL’s project, C
the Government of Andhra Pradesh insisted HNPCL to supply 100% of
the power to the State of Andhra Pradesh. He therefore submits that
the APTEL has rightly, on appreciation of the material placed on record,
held that it was on the representation of the State Government that the
HNPCL had made huge investments for the project. He submitted that D
the contention of the appellants – DISCOMS, that if the power generated
by the HNPCL is purchased by them, it will be at a very heavy cost, is
totally erroneous. He submitted that, as a matter of fact, when as per
the interim orders passed by the APTEL and this Court, the appellants –
DISCOMS could have purchased the power from HNPCL at the rate
of Rs.3.82 per unit, the appellants – DISCOMS are purchasing the power E
at a much higher rate from the generators, which were ranked much
below HNPCL in the merit order. He further submits that the conduct of
the appellants – DISCOMS is totally mala fide. Whenunder the interim
orders of this Court as well as of the APTEL, they were bound to purchase
the power at much lesser price than compared to the rate at which they F
are purchasing, they continued to purchase power at much higher price.
He therefore submits that such an act, apart from being violative of the
order of this Court, is contrary to the public interest.
44. Dr. Singhvi further submits that on account of mala fide attitude
of the appellants – DISCOMS, it is not only HNPCL, but also the public G
at large, who are the sufferers. He submits that huge investment of
thousands of crores of rupees is lying idle. He further submits that apart
from generating employment for more than 1000 people, the generation
project, which is fully operational, would also provide electricity in the
State of Andhra Pradesh. He submitted that the contention of the
H
214 SUPREME COURT REPORTS [2022] 8 S.C.R.
A appellants – DISCOMS that they had decided to withdraw the application
on account of huge capital cost and the power being available in excess
is also factually incorrect. He submits that recently the appellants have
entered into an MoU with SEMBCORP Energy India in December,
2021 for generation of 625 MW of electricity. He submits that insofar as
the price at which the electricity would be purchased by the appellants –
B
DISCOMS from the generation unit of HNPCL would be determined
by the State Commission, which will have to take into consideration
various aspects while approving the capital cost of the project as well as
while doing the exercise of determination of tariff. The learned Senior
Counsel therefore submits that no interference is warranted in the present
C appeal.
45. The facts in the present case are not much in dispute. It is not
in dispute that on 17th July, 1992, an MoU came to be entered between
APSEB and HNPCL, vide which APSEB had transferred all the licences,
approvals, clearance and permits, fuel linkage, water required for the
D project to HNPCL. It is also not in dispute that on 9th December, 1994,
an initial PPA came to be entered between HNPCL and APSEB. On
25th July, 1996, the CERC granted a Techno Economic Clearance for
the power project for an estimated cost of Rs.4628.11 crores (Rs.4.45
crores per MW). It is also not in dispute that APSEB and HNPCL
mutually agreed to amend 1994 PPA and accordingly, an Amended and
E Restated PPA came to be executed on 15th April, 1998. It is also not in
dispute that from 1996 till 2007, the project remained in cold storage. In
the year 2007, the promoters of HNPCL approached the then Hon’ble
Chief Minister of the erstwhile State of Andhra Pradesh. It appears that
certain discussions took place between the then Hon’ble Chief Minister
F of erstwhile State of Andhra Pradesh and the promoters of HNPCL.
On 5th January, 2007, Mr. G.P. Hinduja addressed a communication to
the then Hon’ble Chief Minister of the erstwhile State of Andhra Pradesh.
It will be relevant to refer to the following excerpt from the said
communication, which reads thus:
G “As per our discussion I am summarizing herein below our
proposal for your ready reference:
1. Vizag Power project will be mainly structured as a Merchant
plant and implemented in a period manner with an initial
capacity of 1040 MW and increasing upto 400 MW in a
H phased manner.
SOUTHERN POWER DISTRIBUTION POWER COMPANY LTD. OF A.P. 215
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2. GoAP will sign a MoU with the Project Sponsors to provide: A
- Title deeds for 1122.38 acres of land against balance
payment of Rs.16.48 cr.
- Transfer of remaining land of 1921.34 acres against
payment of an amount of Rs. 67.63 cr.
B
- Infrastructure support including for construction,
power and water.
- Recommend to GoI mega status for the project.
- Revive the Coal supply and Transportation
C
Agreements.
- Facilitate environment clearance from MOEF.
- Sanction of all other applicable State Approvals.
3. GoAP will have the first right of refusal, in the MoU, to
D
purchase 25% of the power at regulated tariff.”
46. It could thus be seen that when HNPCL proposed to revive
the project in the year 2007, it was mainly structured as a Merchant
plant, wherein the Government of Andhra Pradesh was to have the first
right of refusal, to purchase 25% of the power at regulated tariff.
E
47. It is also not in dispute that APCPDCL on behalf of all the
four APDISCOMS (viz., Central Power Distribution Company of Andhra
Pradesh Limited, Southern Power Distribution Company of Andhra
Pradesh Limited, Northern Power Distribution Company of Andhra
Pradesh Limited and Eastern Power Distribution Company of Andhra
Pradesh Limited) had conducted bidding process for procurement of F
power of 2000 MW +/- 20% under Case-1 to meet the base load
requirements of APDISCOMS from the year 2014-2015 onwards. It is
also not in dispute that in the said bidding process, HNPCL had also
submitted its bid and successfully emerged as L-2 bidder. After completion
of the bidding process, APCPDCL had applied for approval of the tariff G
at which the power was to be purchased from the successful bidders in
the said process. It will be relevant to refer to paragraph 4(u) of the
order dated 13th August, 2013, passed by the State Commission in O.P.
No. 55 of 2013, filed by APCPDCL on behalf of all the four
APDISCOMS, which reads thus:
H
216 SUPREME COURT REPORTS [2022] 8 S.C.R.
A “u) In the minutes of meeting held on 28th September 2012, the
Bid Evaluation Committee noted that “The Principal
Secretary, Energy informed the Evaluation Committee that
the entire capacity of Hinduja National Power Corporation
Limited (HNPCL) is encumbered to the state of A.P. /
DISCOMs of A.P. and hence not available for consideration
B
under this tender. Hence, HNPCL must be taken out of the
bid process and APERC must be informed accordingly.
Hence the Committee took the note of it and decided to
separate HNPCL from the bid process”
48. It could thus be seen that though HNPCL had successfully
C
emerged as the L-2 bidder in the open bidding process, it was at the
instance of the State of Andhra Pradesh that the Bid Evaluation Committee
had discarded the bid of HNPCL, on the ground that the entire capacity
of HNPCL was encumbered to the State of Andhra Pradesh/
APDISCOMS.
D
49. It will also be relevant to refer to the following excerpt from
the letter dated 26th December, 2012, addressed by the Principal Secretary
to Government, Energy Department, to HNPCL:
“This Is to Invite your attention to the above cited letter intimating
the implementation of the coal fired power project (1040 MW) by
E you at Visakhapatnam and supply of power therefrom. In this
regard, HNPCL has sought certain support so as to achieve
scheduled commissioning of the Project commencing in July 2013.
On this matter I am to clarify that Government of Andhra
Pradesh reiterates its Interest in purchasing 100% power
F (through APDISCOMs) from the said project, as already
contemplated in the restated PPA entered into between APSEB
and HNPCL in 1998 based on the MOU in 1992 on the broad
conditions mentioned in the PPA signed in 1998, except to
the extent they may stand modified due to Impact of change
in laws/rules and regulatory standards guiding such power
G
projects post 1998.
2. In this background, the Government of Andhra Pradesh hereby
agrees to facilitate the implementation of the power project to
achieve the timeline for schedule commissioning. The Government
has also decided to direct the APDlSCOMs as the successor
H
SOUTHERN POWER DISTRIBUTION POWER COMPANY LTD. OF A.P. 217
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entities of APSEB to enter into a continuation Agreement to A
the PPA of 1998 With HNPCL to this effect.”
[emphasis supplied]
th
50. A perusal of the said letter dated 26 December, 2012, would
reveal that the Government of Andhra Pradesh has reiterated its interest
in purchasing 100% of power (through APDISCOMS) from the said B
project, as already contemplated in the restated PPA entered into between
APSEB and HNPCL in 1998 based on the MoU of 1992. No doubt that
it mentions that the same shall be except to the extent they may stand
modified due to impact of change in laws/rules and regulatory standards
guiding such power projects post 1998. The said letter would also reveal C
that the Government had decided to direct the APDISCOMS as the
successor entities of APSEB to enter into a continuation agreement to
the PPA of 1998 with HNPCL to the said effect. It will also be relevant
to note that in the said letter it is observed that the State Government will
take necessary steps within three months for execution of PPA and
provision of Transmission System for Start-up Power and Power D
Evacuation. In the said letter, the State had also agreed for providing
assistance in obtaining statutory clearances/approvals from State/local
authorities within the timeline for scheduled commissioning of Project.
51. In response to the aforesaid letter, HNPCL addressed a
communication dated 14th January, 2013, to the State Government, thereby E
expressing its concurrence to the proposal given by the Government of
Andhra Pradesh of procuring entire power from the Project. Vide the
said letter dated 14 th January, 2013, HNPCL requested the State
Government to provide all the necessary support required for taking the
requisite approvals from the State Commission for tariff determination F
based on the actual project cost.
52. A further communication dated 16th May, 2013, was addressed
by HNPCL to the appellants - DISCOMS. By the said letter, HNPCL
had estimated the project cost to the tune of Rs.6098 crores. The said
project cost was worked out on the basis of the order passed by the G
CERC dated 4th June, 2012, providing a Benchmark Capital Cost (Hard
cost) model for Thermal Power Stations with Coal as Fuel for tariff
determined by the Commission under Section 62 of the Act of 2003.
53. The appellants – DISCOMS vide communication dated 17th
May, 2013, recorded that the documents of capital cost of the Project
H
218 SUPREME COURT REPORTS [2022] 8 S.C.R.
A were received without prejudice to the rights of APDISCOMS to contest
the cost of the project on every component before the State Commission
at appropriate stage and that the receiving of the capital cost document
did not constitute that the APDISCOMS had agreed/accepted the same
without demur.
B 54. On the same day, i.e., 17th May, 2013, an MoA for continuation
of the Amended and Restated PPA dated 15th April, 1998, came to be
executed between APDISCOMS and HNPCL. It will be relevant to
refer to clauses E and F of the said MoA dated 17th May, 2013, which
read thus:
C “E. HNPCL shall agree that the entire capacity of the project
and all the units of the power station shall at all times be for
the exclusive benefit of the DISCOMs and the DISCOMs
shall have the exclusive right as well as obligation to purchase
the entire capacity from the project. HNPCL shall not grant
to any third party or allow any third party to obtain any
D entitlement to the Available Capacity and/or scheduled
energy. In case DISCOMs do not avail power up to the
Available Capacity provided by HNPCL, DISCOMs shall
pay to HNPCL the capacity charges for such unavailed
Available Capacity.
E Notwithstanding the above, in case DISCOMS do not avail
power up to the Available Capacity provided by HNPCL,
HNPCL shall have the option to sell such Available Capacity
not availed by DISCOMS to any third party or require the
payment of capacity charges from DISCOMS towards such
F unavailed Available Capacity not sold to third parties.
DISCOMs shall not be required to pay capacity charges
for such capacity sold to third parties.
F. Transmission line/system for start-up power and power
evacuation from the Project will be provided by DISCOMs
G through APTRANSCO in time so as to ensure availability
of power evacuation facility at the time of COD of Unit 1.
DISCOMs assure that power evacuation shall be done
through APTRANSCO without any delay.”
55. It could thus be seen that in the MoA dated 17th May, 2013, it
was agreed that the entire capacity of the project and all the units of the
H
SOUTHERN POWER DISTRIBUTION POWER COMPANY LTD. OF A.P. 219
(APSPDCL) v. M/S HINDUJA NATIONAL POWER CORP. LTD. [B. R. GAVAI, J.]
power station shall at all times be for the exclusive benefit of the A
DISCOMS and the DISCOMS were to have the exclusive right as well
as the obligation to purchase the entire capacity from the project. Vide
the said MoA, HNPCL was restrained from granting to any third party
or allowing any third party to obtain any entitlement to the available
capacity and/or scheduled energy. It was further agreed that in case
B
DISCOMS do not avail power up to the Available Capacity provided by
HNPCL, the DISCOMS were to pay HNPCL, the capacity charges for
such un-availed Available Capacity. No doubt, that in case the DISCOMS
failed to avail power up-to the Available Capacity provided by HNPCL,
an option was available to HNPCL to sell such Available Capacity, not
availed by DISCOMS, to any third party. It was also agreed that the C
DISCOMS were not required to pay capacity charges for such capacity
sold to third parties. As per the said MoA, the Transmission line/system
for start-up power and power evacuation from the project was to be
provided by DISCOMS through Transmission Corporation of Andhra
Pradesh (APTRANSCO) in time so as to ensure availability of power
D
evacuation facility at the time of COD of Unit-1. It is also not in dispute
that in pursuance of the execution of the said MoA, HNPCL entered into
an FSA with Mahanadi Coalfield Limited for supply of coal for the project.
56. Pursuant to the execution of the said MoA, an application
being O.P. No.21 of 2015 came to be filed by HNPCL before the State
Commission on 12th March, 2014, for determination of Capital Cost of E
the coal fired power station of 1040 MW (2 x 520 MW) capacity in the
district of Visakhapatnam.
57. Pursuant to these events, the Reorganisation Act came into
effect on 2nd June, 2014, thereby bifurcating the erstwhile State of Andhra
Pradesh into the State of Andhra Pradesh and the State of Telangana. It F
is the contention of HNPCL that after the bifurcation of the erstwhile
State of Andhra Pradesh, though the State of Telangana demanded 54%
of the power from the project, the Government of Andhra Pradesh insisted
HNPCL to supply 100% of the power to the State of Andhra Pradesh.
58. It is not in dispute that HNPCL filed an Addendum Application G
in O.P. No.21 of 2015 on 28th July, 2015, thereby showing the capital
cost of the project to have increased to Rs.8087 crores.
59. When O.P. No.21 of 2015, was listed before the State
Commission on 26th September, 2015, the State Commission passed the
following order: H
220 SUPREME COURT REPORTS [2022] 8 S.C.R.
A “Sri P. Shiva Rao, learned Standing Counsel for the respondents
filed counter on behalf for the respondents and sought for further
time to respond to the further material filed by the petitioner by
way of addendum before the Commission. Sri P. Shiva Rao, learned
Standing Counsel for the respondents also represented that they
are filing an application to dispense with the earlier Consultant as
B
the respondents appointed their own Consultant. Hence, for further
response of the respondents and rejoinder of the petitioner to the
counter filed by tile respondents and for further hearing on the
question of Consultant including on the application for dispensing
with the earlier Consultant. Posted to 03-10-2015 at 11 AM. Both
C the learned counsel also represented that there is no issue of
jurisdiction involved in the matter.”
60. It is also not in dispute that the first unit of the power project
of HNPCL (520 MW) was declared COD on 11th January, 2016.
D 61. Further, it is not in dispute that the State Commission by an
order dated 1st March, 2016, directed the appellants – DISCOMS to pay
an interim tariff at the rate of Rs.3.61 per unit to HNPCL. By the said
order, the State Commission also clarified that such interim tariff was
without prejudice to the rights and contentions of both parties in the main
petition, i.e., O.P. No.21 of 2015.
E
62. After the bifurcation of the erstwhile State of Andhra Pradesh
into the State of Andhra Pradesh and the State of Telangana, on 28th
April, 2016, a Continuation Agreement came to be signed between the
appellants – DISCOMS and HNPCL. A perusal of the recital in the said
Continuation Agreement dated 28th April, 2016 would reveal that the
F
Government of Andhra Pradesh represented by the erstwhile APSEB
had expressed the desire to establish a coal-based Thermal Power Project
at Visakhapatnam and had selected the consortium of Ashok Leyland
Limited, a company incorporated in India and Mission Energy Company,
a California, USA corporation, to set up a joint venture for establishing a
G thermal power station. The said Continuation Agreement dated 28th April,
2016, also refers to the MoU of 1992 (dated 17th July, 1992), PPA of
1994 (dated 9th December, 1994), the Amended and Restated PPA of
1998 (dated 15th April, 1998), the correspondence between the State of
Andhra Pradesh and HNPCL, and MoA between the erstwhile State of
Andhra Pradesh and HNPCL dated 17th May, 2013. It will be relevant
H
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to refer to the following part of the Continuation Agreement dated 28th A
April, 2016:
“3) The Parties acknowledge and agree that the Procurers have
replaced the APSEB in all respects with regard to the 1998
PPA and shall execute such other or further documents
and/or take such steps, as are necessary and/or incidental, B
in order to give full and complete effect to such transfer of
contracts, deeds, agreements and other instruments of
whatever nature to the Procurers.
4) The Procurers hereby agree that they are jointly and
separately liable for all obligations under the Agreement. C
5) Subject to Clause 3 hereof and pending the execution of
such other or further documents as envisaged under Clause
3 hereof, the Parties hereto are entering into this Continuation
Agreement to the 1998 PPA and confirm, agree to the
following: D
(a) The 1998 PPA shall stand amended as mentioned
hereunder and as indicated in the Annexure attached hereto,
which Annexure shall constitute an integral part of this
Continuation Agreement.
(b) The 1998 PPA and the MoA shall stand modified or E
amended to the extent provided herein. All other terms and
conditions of the 1998 PPA including the obligations of the
Parties as stated thereunder shall continue to be binding on
the Parties. This Continuation Agreement and the 1998 PPA
shall together constitute one and the same agreement and F
the provisions of this Continuation Agreement shall form
an Integral part of the 1998 PPA. However, notwithstanding
the foregoing, should any provisions of this Continuation
Agreement be at variance or in conflict with any of the
provisions of the 1998 PPA or the MoA, the provisions of
this Continuation Agreement shall prevail.” G
63. It could thus clearly be seen that the appellants – DISCOMS
have clearly represented that they had replaced the APSEB in all respects
with regard to the 1998 PPA and had agreed to execute all further
documents and take such steps as are necessary in order to give full and
complete effect to such transfer of contracts, deeds, agreements, etc. H
222 SUPREME COURT REPORTS [2022] 8 S.C.R.
A The appellants – DISCOMS have also clearly agreed that the 1998
PPA (i.e. the Amended and Restated PPA dated 15th April, 1998) shall
stand amended as mentioned in the said Continuation Agreement dated
28th April, 2016. It has been specifically averred that the Continuation
Agreement and the 1998 PPA shall together constitute one and the same
agreement.
B
64. Immediately after the said Continuation Agreement was entered
into between the appellants – DISCOMS and HNPCL, the appellants –
DISCOMS filed an application being O.P. No.19 of 2016 under Section
86(1)(b) of the Act of 2003 for grant of approval of PPA. The said
application contained the entire history narrated herein above leading up
C to the execution of the Continuation Agreement dated 28th April, 2016.
The prayer clause in the said application reads thus:
“PRAYER
32. Therefore, it is prayed that the Hon’ble Commission may be
D pleased to grant approval/consent for the initialed Continuation
Agreement to the PPA dated 15.04.1998 together with Amended
& Restated PPA dated 15.04.1998 of HNPCL.”
65. The State Government vide order dated 1st June, 2016,
accorded approval for purchase of 100% power from HNPCL. On 3 rd
E July, 2016, the second unit of HNPCL (520 MW) was declared COD.
Vide order dated 6th August, 2016, the State Commission, after hearing
the counsel for the parties, directed the appellants – DISCOMS to pay
an interim tariff at the rate of Rs.3.82 per unit to HNPCL from 1st August,
2016 for the power received by them. This was to operate until further
orders passed by the State Commission.
F
66. It is also not in dispute that after elaborate hearing in both the
petitions i.e. O.P. No.21 of 2015 and O.P. No.19 of 2016, the State
Commission reserved the matters for orders on 15th May, 2017. It is also
not in dispute that in an appeal between the parties arising out of
interlocutory proceedings, the APTEL had directed the State Commission
G to decide O.P. No.19 of 2016 and O.P. No.21 of 2015 expeditiously and
on or before 14th August, 2017. The said period came to be extended
from time to time, the last of such extension was granted till 31st January,
2018, vide order dated 10th January, 2018.
67. At this juncture, the appellants – DISCOMS filed two
H Interlocutory Applications on 4th January, 2018, viz., (i) I.A. No.1 of
SOUTHERN POWER DISTRIBUTION POWER COMPANY LTD. OF A.P. 223
(APSPDCL) v. M/S HINDUJA NATIONAL POWER CORP. LTD. [B. R. GAVAI, J.]
2018 in O.P. No.19 of 2016 for withdrawal of O.P. No.19 of 2016 together A
with initial PPA; and (ii) I.A. No.2 of 2018 in O.P. No.21 of 2015 for
disposal of O.P. No.21 of 2015.
68. Vide order dated 31st January, 2018, passed by the State
Commission, which was impugned before the APTEL, the State
Commission allowed withdrawal of O.P. No.19 of 2016 filed by the B
appellants - DISCOMS and consequently dismissed O.P. No.21 of 2015
filed by HNPCL.
69. As discussed herein above, being aggrieved, HNPCL filed
Appeal No.41 of 2018 before the APTEL, which came to be admitted
by the APTEL on 26th February, 2018. It is also not in dispute that the C
APTEL passed an interim order dated 16th March, 2018 in I.A. No.211
of 2018 in Appeal No.41 of 2018, on an ad hoc arrangement basis, thereby
directing the parties to maintain status quo as prevalent prior to 31 st
January, 2018. It is also not in dispute that both the orders passed by the
APTEL, i.e., order dated 16th March, 2018 directing maintenance of
D
status quo as prevalent prior to 31st January, 2018 and order dated 26th
February, 2018, admitting Appeal No.41 of 2018, were assailed before
the High Court of Andhra Pradesh by way of Writ Petitions being Writ
Petition No. 10814 of 2018 and Writ Petition No.13689 of 2018
respectively. However, the same were dismissed by the High Court of
Andhra Pradesh by order dated 2nd May, 2018. E
70. It is also not in dispute that in the meantime, Execution Petition
No. 3 of 2018 was filed by HNPCL before the APTEL seeking execution
of order dated 16th March, 2018, passed by the APTEL in I.A. No.211
of 2018 in Appeal No.41 of 2018.
F
71. The appellants – DISCOMS had also approached this Court
by way of Civil Appeal No.5772 of 2018, challenging the interim order
passed by the APTEL dated 16th March, 2018. However, this Court
refused to interfere with the said order and directed the APTEL to decide
the appeal pending before it expeditiously without taking into consideration
the observation in the impugned order as conclusive. G
72. Vide the impugned judgment and order dated 7th January, 2020,
the Appeal No.41 of 2018, filed by HNPCL has been allowed by the
APTEL, the correctness of which is under challenge in the present
proceedings.
H
224 SUPREME COURT REPORTS [2022] 8 S.C.R.
A 73. It could thus clearly be seen that though HNPCL had initially
proposed to revive its project in the year 2007 as a Merchant-power
plant and had proposed to give the Government of Andhra Pradesh first
right of refusal, in the MoU, to purchase 25% of the power at regulated
tariff, it was at the instance of the State of Andhra Pradesh that it had
agreed to supply 100% power to the State through APDISCOMS. It
B
could clearly be seen from the record that though HNPCL had
participated in the bidding process conducted by the APCPDCL in the
year 2011-2012 and though HNPCL had successfully emerged as L-2
bidder in the said bidding process, it was on account of the decision of
the Bid Evaluation Committee, that HNPCL was discarded from the
C bidding process since the entire generation capacity of HNPCL was
encumbered to the State of Andhra Pradesh/APDISCOMS. The minutes
of the meeting dated 28 th September, 2012 of the Bid Evaluation
Committee, as has been noticed in the order of the State Commission
dated 13th August, 2013, clarify this position.
D 74. It is the State of Andhra Pradesh, which had expressed its
interest in purchasing 100% power from HNPCL, as could be seen
from the various documents placed on record. The communication
addressed by the Principal Secretary to the Government of Andhra
Pradesh, Energy Department, to HNPCL dated 26th December, 2012,
clearly reiterates the intention of the Government of Andhra Pradesh in
E purchasing 100% power (through DISCOMS) from the project of
HNPCL. The said communication would also show that the State has
assured to take all necessary steps for commissioning the project at the
earliest including execution of PPA and for making provision of
Transmission system for start-up power and power evacuation. The said
F communication would clearly show that the parties had agreed to abide
by the conditions mentioned in the Amended and Restated PPA dated
15th April, 1998, except to the extent they may stand modified due to
impact of change in laws/rules and regulated standards guiding such
power projects post 1998.
G 75. No doubt, that the documents placed on record would show
that though HNPCL had given its estimation of project cost on the basis
of the guidelines issued by the CERC, the same was received by the
appellants – DISCOMS without prejudice to their rights to contest the
same on every component before the State Commission. The documents
placed on record would clearly show that the State of Andhra Pradesh
H
SOUTHERN POWER DISTRIBUTION POWER COMPANY LTD. OF A.P. 225
(APSPDCL) v. M/S HINDUJA NATIONAL POWER CORP. LTD. [B. R. GAVAI, J.]
has, on more than one occasion, expressed that it was interested in buying A
100% power from the project of HNPCL. The MoA signed between
the appellants – DISCOMS and HNPCL dated 17 th May, 2013, would
clearly show that it was agreed between the parties that the entire
capacity of HNPCL project and all the units of the power stations shall,
at all times, be for the exclusive benefit of the DISCOMS and the
B
DISCOMS were to have the exclusive right as well as obligation to
purchase the entire capacity from the project. Not only this, but after the
Reorganisation Act came into effect and the erstwhile State of Andhra
Pradesh was bifurcated into the State of Andhra Pradesh and the State
of Telangana, the State of Andhra Pradesh, on more than one occasion,
reiterated its stand of procuring 100% power from the project of HNPCL. C
Perusal of the orders of the State Commission dated 26th September,
2015 and 6th August, 2016, would clearly reveal that the appellants –
DISCOMS also stood by the position that the 100% power generated in
the power plant of HNPCL was to be purchased by them. Not only this,
but after the bifurcation of the erstwhile State of Andhra Pradesh, the
D
appellants – DISCOMS entered into a Continuation Agreement dated
28th April, 2016, reiterating their stand.
76. After the Continuation Agreement was entered into on 28th
April, 2016, the appellants – DISCOMS filed O.P. No.19 of 2016 for
approval of the Continuation Agreement with the Amended and Restated
PPA of 1998 on 11th May, 2016. The State Government again on 1st E
June, 2016, accorded its approval for purchase of 100% power generated
by HNPCL. It could thus be seen that right from the year 2012 till January,
2018, it was the consistent stand of the State of Andhra Pradesh as well
as the appellants – DISCOMS and its predecessors that the appellants -
DISCOMS were to purchase 100% power generated by HNPCL. F
77. It is also not in dispute that in pursuance of the MoA, executed
on 17th May, 2013, HNPCL had also entered into FSA dated 26 th August,
2013 with Mahanadi Coalfield Limited for supply of coal for the project.
78. It is thus clear that the consistent stand of the appellants -
DISCOMS from the year 2012, for the first time, changed on 4 th January, G
2018, when they filed Interlocutory Applications before the State
Commission for withdrawal of O.P. No.19 of 2016 and disposal of O.P.
No.21 of 2015.
79. As already observed hereinabove, in the open bidding process,
conducted in the year 2011-2012, HNPCL emerged as the successful H
226 SUPREME COURT REPORTS [2022] 8 S.C.R.
A L-2 bidder. It is however on account of the stand taken by the Bid
Evaluation Committee, that it was discarded from the bidding process.
As such, the stand of the appellants – DISCOMS, that the revival of the
project of HNPCL was as a Merchant-power plant and therefore, the
appellants – DISCOMS cannot be compelled to purchase power from
it, is self-contradictory. On one hand, HNPCL was discarded from the
B
open bidding process, though it was the successful L-2 bidder, on the
ground that 100% power generated by HNPCL is encumbered to the
State of Andhra Pradesh/APDISCOMS whereas, on the other hand, it
is now sought to be urged that the appellants – DISCOMS cannot be
compelled to purchase the power from HNPCL, since it was a merchant-
C power plant. We have no hesitation to hold that the APTEL has rightly
held that, on account of the assurance given by the State of Andhra
Pradesh/APDISCOMS, HNPCL had altered its position and as such, it
was not permissible for the appellants – DISCOMS to withdraw O.P.
No.19 of 2016. The grounds, which are sought to be urged in I.A. No.1
of 2018 in O.P. No.19 of 2016 and I.A. No.2 of 2018 in O.P. No.21 of
D
2015, were very much available when the appellants – DISCOMS had
entered into MoA on 17th May, 2013 and the Continuation Agreement
dated 28th April, 2016. It is difficult to appreciate how it is permissible
for the appellants – DISCOMS to withdraw the application for grant of
approval of PPA on the ground that it could procure the power only
E through the competitive bidding process, when in the facts of the present
case, it was the State of Andhra Pradesh, which had discarded HNPCL
from the open bidding process of 2011-2012, though it had successfully
emerged as L-2 bidder in the said bidding process.
80. Various authorities have been cited at the Bar in support of
F the proposition that withdrawal of an application could not be permissible
when such a withdrawal amounts to frustration of a contract and thereby
defeats the rights of the defendant and that the right of withdrawal is not
absolute. In this respect, we will refer to the observations made by this
Court in the case of Arjun Singh v. Mohindra Kumar & Ors.15. Though
the issue involved in the said case is distinct than the issue involved in
G the present case, we find that it will be apposite to seek guidance from
the observations made by this Court, while construing the provisions of
Order IX and Order XX of the Code of Civil Procedure, 1908 (CPC).
The relevant extract reads thus:
15
H (1964) 5 SCR 946
SOUTHERN POWER DISTRIBUTION POWER COMPANY LTD. OF A.P. 227
(APSPDCL) v. M/S HINDUJA NATIONAL POWER CORP. LTD. [B. R. GAVAI, J.]
“ ….In the present context when once the hearing starts, the A
Code contemplates only two stages in the trial of the suit: (1)
where the hearing is adjourned or (2) where the hearing is
completed. Where, the hearing is completed the parties have
no further rights or privileges in the matter and it is only for
the convenience of the Court that Order XX. Rule 1 permits
B
judgment to be delivered after interval after the hearing is
completed. It would, therefore, follow that after the stage
contemplated by Order IX. Rule 7 is passed the next stage is
only the passing of a decree which on the terms of Order IX.
Rule 6 the Court is competent to pass. And then follows the
remedy of the party to have that decree set aside by application C
under Order IX. Rule 13. There is thus no hiatus between the
two stages of reservation of judgment and pronouncing the
judgment so as to make it necessary for the Court to afford to
the party the remedy of getting orders passed on the lines of
Order IX. Rule 7. We are, therefore, of the opinion that the Civil
D
Judge was not competent to entertain the application dated May
31, 1958 purporting to be under Order IX. Rule 7 and that
consequently the reasons given in the order passed would not be
res judicata to bar the hearing of the petition undo Order IX. Rule
13 filed by the appellant.”
[emphasis supplied] E
81. It can be seen that this Court has held that CPC contemplates
two stages of the trial in the suit: (1) where the hearing is adjourned; and
(2) where the hearing is completed. It has been held that where the
hearing is completed, the parties have no further rights or privileges in
the matter and it is only for the convenience of the Court that Order XX F
rule 1 permits judgment to be delivered after an interval after the hearing
is completed. It has been held that there is no hiatus between the two
stages of reservation of judgment and pronouncing the judgment so as to
make it necessary for the Court to afford to the party the remedy of
getting orders passed on the lines of Order IX rule 7. G
82. The other judgments of various High Courts relied upon by
Shri Ramachandran, follow the line laid down by this Court in Arjun
Singh (supra).
83. Insofar as the reliance placed by Shri Vaidyanathan, learned
Senior Counsel, on the judgment of Court of Appeal in the case of Boal H
228 SUPREME COURT REPORTS [2022] 8 S.C.R.
A Quay Wharfingers Ltd. (supra) is concerned, the said case arose out
of an application made by the appellant therein to the Licensing Authority
for grant of a license. It was not an application in a quasi-judicial
proceeding where the withdrawal of an application would adversely affect
the rights of the other party. In the said case, it has been observed that if
a person applies for a license, there is no prohibition as to why he is not
B
entitled to withdraw his application, unless, of course, there is some
provision in law, which would prevent him from doing so. The proceedings
in the aforesaid case did not arise from a lis between the two parties, but
arose out of an application made by a party to a licensing authority under
the Docks and Harbours Act, 1966.
C
84. Insofar as the reliance placed on the judgment of this Court in
the case of Hulas Rai Baij Nath (supra) is concerned, the respondent
therein had instituted a suit for rendition of accounts against the appellant-
firm, alleging that the appellant-firm was the commission agent of the
respondent and that the accounts between respondent as the principal
D and appellant as the agent were not settled. The claim of the respondent
was resisted by the appellant therein, stating that the claim of the
respondent was fully settled and that the suit was not fit to proceed in
accordance with law. In the said suit, after a considerable amount of
evidence had been recorded, an application was presented on behalf of
the respondent-plaintiff for withdrawal of the suit. The same was objected
E
to. The trial court overruled the objection of the appellant-defendant,
holding that the plaintiff had a right to withdraw the suit and that right
could be exercised at any time before judgment. The defendant could
only claim an order for costs in his favour. The suit was therefore
dismissed awarding costs of the suit to the appellant-defendant. The
F appellant-defendant filed revision in the High Court. The High Court
dismissed the revision. Being aggrieved, the appellant-defendant had
approached the Apex Court. In this factual background, this Court
observed thus:
“2. The short question that, in these circumstances, falls for
G decision is whether the respondent was entitled to withdraw from
the suit and have it dismissed by the application dated 5th May,
1953 at the stage when issues had been framed and some evidence
had been recorded, but no preliminary decree for rendition of
accounts had yet been passed. The language of order 23 Rule 1
sub-rule (1) CPC, gives an unqualified right to a plaintiff to
H
SOUTHERN POWER DISTRIBUTION POWER COMPANY LTD. OF A.P. 229
(APSPDCL) v. M/S HINDUJA NATIONAL POWER CORP. LTD. [B. R. GAVAI, J.]
withdraw from a suit and, if no permission to file a fresh suit is A
sought under sub-rule (2) of that Rule, the plaintiff becomes liable
for such costs as the Court may award and becomes precluded
from instituting any fresh suit in respect of that subject-matter
under sub-rule (3) of that Rule. There is no provision in the Code
of Civil Procedure which requires the Court to refuse permission
B
to withdraw the suit in such circumstances and to compel the
plaintiff to proceed with it. It is, of course, possible that different
considerations may arise where a set-off may have been claimed
under order 8 CPC, or a counter claim may have been filed, if
permissible by the procedural law applicable to the proceedings
governing the suit. In the present case, the pleadings in paras 8 C
and 11 of the written statement mentioned above, clearly did not
amount to a claim for set-off. Further, there could be no counter-
claim, because no provision is shown under which a counter-claim
could have been filed in the trial court in such a suit. There is also
the circumstance that the application for withdrawal was moved
D
at a stage when no preliminary decree had been passed for
rendition of account and, in fact, the appellant was still contending
that there could be no rendition of accounts in the suit, because
accounts had already been settled. Even in para 11, the only claim
put forward was that, in case the Court found it necessary to
direct rendition of accounts and any amount is found due to the E
appellant, a decree may be passed in favour of the appellant for
that amount. In this paragraph also, the right claimed by the
appellant was a contingent right which did not exist at the time
when the written statement was filed.”
85. It could thus be seen that the facts in the aforesaid case are F
totally different from the facts in the present case. This Court in the
aforesaid case held that there is no provision in the CPC, which requires
the Court to refuse permission to withdraw the suit and compel the plaintiff
to proceed with it. However, this Court itself has clarified that different
considerations could arise where a set-off may have been claimed under
order VIII of CPC, or a counter claim may have been filed, if permissible G
by the procedural law applicable to the proceedings governing the suit.
It was found that from the pleadings in the written statement, it could be
clearly seen that there is no claim for set-off. It was further found that
there could be no counter-claim, since no provision was shown under
which a counter-claim could have been filed in the trial court in such a H
230 SUPREME COURT REPORTS [2022] 8 S.C.R.
A suit. It was further found that the right claimed by the appellant was a
contingent one and did not exist at the time at which the written statement
was filed.
86. The facts in the present case are totally different, wherein,
after execution of various agreements, an application being O.P. No.19
B of 2016 came to be filed for grant of approval of PPA. Not only this, but
the said O.P. No.19 of 2016 was clubbed along with O.P. No.21 of 2015,
which was filed for determination of capital cost of the project as well
as for determination of tariff. It can further be seen that in the aforesaid
case, an application for withdrawal of the suit was filed at the stage of
C leading of evidence. It is not as if the application was filed after the suit
was closed for judgment.
87. In any case, we are of the considered view that the conduct
of the appellants – DISCOMS, in the present case, would disentitle them
to withdraw the application.
D 88. Another argument, that on account of increase of the capital
cost of the project, the appellants – DISCOMS would be required to
purchase power at much higher rate, also does not hold water. The
State Commission while determining the tariff would be guided by various
factors as are required to be taken into consideration in view of the
E provisions of Section 61 of the Act of 2003. In any event, the appellants
– DISCOMS have themselves reserved their right to contest the
correctness of the cost on every component at an appropriate stage
before the State Commission. As already stated hereinabove, the State
Commission, while approving the cost of the project and determining the
tariff at which the electricity would be purchased by the APDISCOMS
F
from HNPCL, would be required to look into various factors as are
stated in Section 61 of the Act of 2003, so also under the Regulations
notified for that purpose. While doing so, the State Commission would
be required to take into consideration the various aspects as well as
submissions to be made by the appellants – DISCOMS and HNPCL.
G Merely because, the cost of the project is estimated by HNPCL at a
particular amount, the State Commission is not bound to accept the same.
The State Commission would only approve the cost as it would feel
appropriate, as guided by the provisions under Section 61 of the Act of
2003 and the Regulations. In that view of the matter, the argument in
this regard also, is without substance.
H
SOUTHERN POWER DISTRIBUTION POWER COMPANY LTD. OF A.P. 231
(APSPDCL) v. M/S HINDUJA NATIONAL POWER CORP. LTD. [B. R. GAVAI, J.]
89. The appellants – DISCOMS have heavily relied on the judgment A
of this Court in the case of Tata Power Company Limited v. Reliance
Energy Limited and others16, and particularly, on paragraph 106 thereof,
which reads thus:
“106. The scheme of the Act, namely, the generation of electricity
is outside the licensing purview and subject to fulfilment of the B
conditions laid down under Section 42 of the Act a generating
company may also supply directly to consumer wherefor no licence
would be required, must be given due consideration. The said
provision has to be read with Regulation 24. In regard to the grant
of approval of PPA the procedures laid down in Regulation 24 are
required to be followed.” C
90. No doubt, that this Court has held that a generating company
may also supply directly to consumer wherefor no licence would be
required, however, this Court itself observed that the said provision has
to be read with Regulation 24 and with regard to the grant of approval of
PPA, the procedures laid down in Regulation 24 are required to be D
followed.
91. It will also be relevant to refer to paragraph 119 of the said
judgment.
“119. The 2003 Act even permits the generating company to supply
electricity to a consumer directly. For the said purpose what is E
necessary is to comply with the provisions of the Act, the Rules
and the Regulations. Section 14 of the Act categorically provides
for grant of licence to any person who is transmitting electricity
or distributing supply or undertaking trading therein, indisputably,
however, the generator of an electrical energy, although is not F
subject to the grant of licence but while supplying electrical energy
to a distributing agency, in turn would be subject to approval and
directions of the Commission.”
92. It can thus clearly be seen that this Court has held that though
the Act of 2003 permits the generating company to supply electricity to
G
a consumer directly, and that the generator of an electrical energy is not
subject to the grant of license, but while supplying electrical energy to a
distributing agency, in turn, it would be subject to approval and directions
of the Commission.
16
(2009) 16 SCC 659 H
232 SUPREME COURT REPORTS [2022] 8 S.C.R.
A 93. We are, therefore, of the view that the said judgment is of no
assistance to the case sought to be advanced by the appellants –
DISCOMS. On the contrary, we find that the view that is being taken by
us is fortified by the following observations of this Court in the case of
Tata Power Company Limited (supra):
B “87. …. The agreement of distribution (PPA) being subject to
approval, indisputably the Commission would have the public
interest in mind. It has power to approve an MoU which subserves
the public interest. It, while granting such approval may also take
into consideration the question as to whether the terms to be agreed
are fair and just.
C
*** *** ***
111. Section 86(1)(b) provides for regulation of electricity purchase
and procurement process of distribution licensees. In respect of
generation its function is to determine the tariff for generation as
D also in relation to supply, transmission and wheeling of electricity.
Clause (b) of sub-section (1) of Section 86 provides to regulate
electricity purchase and procurement process of distribution
licensees including the price at which the electricity shall be
procured from the generating companies or licensees or from other
sources through agreements. As a part of the regulation it can
E also adjudicate upon disputes between the licensees and generating
companies in regard to the implementation, application or
interpretation of the provisions of the said agreement.”
94. It is thus trite that, while considering grant of approval to the
PPA, the State Commission will have to keep in mind the public interest.
F It will have to consider, as to whether the PPA, which is subject to
approval, sub-serves the public interest. It will also be required to take
into consideration, as to whether the terms agreed are fair and just while
granting approval. While exercising power under Section 86(1)(b) of the
Act of 2003, the Commission will have to regulate the price at which the
G electricity would be procured from the generating companies.
Undoubtedly, while doing so, the Commission will be guided by the factors
mentioned in Section 61 of the Act of 2003 and the Regulations
concerning the same. Under Section 86(1)(f) of the Act of 2003, the
Commission is also empowered to adjudicate upon the disputes between
the licensees and generating companies, and to refer any such dispute
H for arbitration.
SOUTHERN POWER DISTRIBUTION POWER COMPANY LTD. OF A.P. 233
(APSPDCL) v. M/S HINDUJA NATIONAL POWER CORP. LTD. [B. R. GAVAI, J.]
95. Another argument made on the basis of Section 21 of the A
Reform Act is also not tenable. Much reliance is placed on sub-section
(5) of Section 21 of the said Act, which reads thus:
“(5) Any agreement relating to any transaction of the nature
described in sub sections (1), (2), (3) or (4) unless made with or
subject to such consent as aforesaid, shall be void.” B
96. It could thus be seen that any of the agreements mentioned in
sub-sections (1), (2), (3) or (4) of Section 21 would be void unless they
are made with the consent of the Commission or subject to such consent.
Undisputedly, understanding this legal position, O.P. No.19 of 2016 came
to be filed by the appellants – DISCOMS, so as to obtain approval of the C
State Commission for the PPA entered into by them with HNPCL.
97. Insofar as the reliance placed on the provision of Regulation
5.2 of the Tariff Regulations is concerned, the same deals with approach
to determination of tariff. It could be seen that, whereas Regulation 5.1
of the Tariff Regulations provides that where tariff has been determined D
through transparent process of bidding in accordance with the guidelines
issued by the Central Government, the Commission shall adopt such
tariff in accordance with the provisions of the Act; Regulation 5.2 of the
Tariff Regulations provides that the provisions specified in Part-II of the
said Regulation shall apply in determining tariff based on capital cost for
supply to a Distribution Licensee. Part-II of the Tariff Regulations deals E
with ‘Filing Details’ and ‘Tariff Determination’. Regulation 9 requires
that each application where tariff is to be determined based on capital
cost shall include various details duly accompanied by supporting data
and documentary and other evidence regarding Fixed Costs, Variable
Costs and Norms of operation, etc. Regulation 10 of the Tariff Regulations F
requires the tariff to be determined in accordance with the norms specified
under the said Regulations, guided by the principles and methodologies
specified in CERC (Terms and Conditions of Tariff) Regulations, 2004,
as amended from time to time. The Regulations contain detailed guidelines,
as to what shall be the component of tariff and as to how the capital cost
and tariff is to be determined. G
98. We find that such an argument at the behest of a party, which
has discarded HNPCL from the bidding process, though it had emerged
as the successful L-2 bidder, does not hold water and we have no
hesitation to say that the appellants – DISCOMS’ approach is of
approbate and reprobate. H
234 SUPREME COURT REPORTS [2022] 8 S.C.R.
A 99. In any event, we find that the State Commission has totally
erred in dismissing O.P. No.21 of 2015 filed by HNPCL. Perusal of
Section 64 of the Act of 2003 would reveal that even a Generating
Company is entitled to make an application for determination of tariff
under Section 62 of the Act of 2003. As such, irrespective of the question,
as to whether an application for withdrawal of O.P. No.19 of 2016 filed
B
by the appellants - DISCOMS could have been entertained, the State
Commission was wholly unjustified in dismissing O.P. No.21 of 2015
filed by HNPCL. In any case, we have held that in the facts of the
present case and, particularly, taking into consideration the conduct of
the appellants – DISCOMS, the APTEL has rightly held that the
C appellants – DISCOMS could not have been permitted to withdraw O.P.
No.19 of 2016.
100. Undisputedly, the appellants – DISCOMS are instrumentalities
of the State and as such, a State within the meaning of Article 12 of the
Constitution of India. Every action of a State is required to be guided by
D the touch-stone of non-arbitrariness, reasonableness and rationality. Every
action of a State is equally required to be guided by public interest. Every
holder of a public office is a trustee, whose highest duty is to the people
of the country. The Public Authority is therefore required to exercise the
powers only for the public good.
E 101. We may gainfully refer to the following observations of this
Court in the case of Kumari Shrilekha Vidyarthi and others v. State
of U.P. and others17:
“27. Unlike a private party whose acts uninformed by reason and
influenced by personal predilections in contractual matters may
F result in adverse consequences to it alone without affecting the
public interest, any such act of the State or a public body even in
this field would adversely affect the public interest. Every holder
of a public office by virtue of which he acts on behalf of the State
or public body is ultimately accountable to the people in whom the
sovereignty vests. As such, all powers so vested in him are meant
G to be exercised for public good and promoting the public interest.
This is equally true of all actions even in the field of contract.
Thus, every holder of a public office is a trustee whose highest
duty is to the people of the country and, therefore, every act of
17
H (1991) 1 SCC 212
SOUTHERN POWER DISTRIBUTION POWER COMPANY LTD. OF A.P. 235
(APSPDCL) v. M/S HINDUJA NATIONAL POWER CORP. LTD. [B. R. GAVAI, J.]
the holder of a public office, irrespective of the label classifying A
that act, is in discharge of public duty meant ultimately for public
good. With the diversification of State activity in a Welfare State
requiring the State to discharge its wide ranging functions even
through its several instrumentalities, which requires entering into
contracts also, it would be unreal and not pragmatic, apart from
B
being unjustified to exclude contractual matters from the sphere
of State actions required to be non-arbitrary and justified on the
touchstone of Article 14.
28. Even assuming that it is necessary to import the concept of
presence of some public element in a State action to attract Article
14 and permit judicial review, we have no hesitation in saying that C
the ultimate impact of all actions of the State or a public body
being undoubtedly on public interest, the requisite public element
for this purpose is present also in contractual matters. We,
therefore, find it difficult and unrealistic to exclude the State actions
in contractual matters, after the contract has been made, from D
the purview of judicial review to test its validity on the anvil of
Article 14.”
102. It will also be apposite to refer to the following observations
of this Court in the case of Food Corporation of India v. M/s Kamdhenu
Cattle Feed Industries18: E
“7. In contractual sphere as in all other State actions, the State
and all its instrumentalities have to conform to Article 14 of the
Constitution of which non-arbitrariness is a significant facet. There
is no unfettered discretion in public law: A public authority
possesses powers only to use them for public good. This imposes F
the duty to act fairly and to adopt a procedure which is ‘fairplay in
action’. Due observance of this obligation as a part of good
administration raises a reasonable or legitimate expectation in every
citizen to be treated fairly in his interaction with the State and its
instrumentalities, with this element forming a necessary component
of the decision-making process in all State actions. To satisfy this G
requirement of non-arbitrariness in a State action, it is, therefore,
necessary to consider and give due weight to the reasonable or
legitimate expectations of the persons likely to be affected by the
18
(1993) 1 SCC 71 H
236 SUPREME COURT REPORTS [2022] 8 S.C.R.
A decision or else that unfairness in the exercise of the power may
amount to an abuse or excess of power apart from affecting the
bona fides of the decision in a given case. The decision so made
would be exposed to challenge on the ground of arbitrariness.
Rule of law does not completely eliminate discretion in the exercise
of power, as it is unrealistic, but provides for control of its exercise
B
by judicial review.
8. The mere reasonable or legitimate expectation of a citizen, in
such a situation, may not by itself be a distinct enforceable right,
but failure to consider and give due weight to it may render the
decision arbitrary, and this is how the requirement of due
C
consideration of a legitimate expectation forms part of the principle
of non-arbitrariness, a necessary concomitant of the rule of law.
Every legitimate expectation is a relevant factor requiring due
consideration in a fair decision-making process. Whether the
expectation of the claimant is reasonable or legitimate in the context
D is a question of fact in each case. Whenever the question arises,
it is to be determined not according to the claimant’s perception
but in larger public interest wherein other more important
considerations may outweigh what would otherwise have been
the legitimate expectation of the claimant. A bona fide decision of
the public authority reached in this manner would satisfy the
E
requirement of non-arbitrariness and withstand judicial scrutiny.
The doctrine of legitimate expectation gets assimilated in the rule
of law and operates in our legal system in this manner and to this
extent.”
103. Recently, this Court in the case of Indian Oil Corporation
F
Limited and others v. Shashi Prabha Shukla and another19, after
referring to earlier judgments of this Court on the present issue has
observed thus:
“33. Jurisprudentially thus, as could be gleaned from the above
legal enunciations, a public authority in its dealings has to be fair,
G
objective, non-arbitrary, transparent and non-discriminatory. The
discretion vested in such an authority, which is a concomitant of
its power is coupled with duty and can never be unregulated or
unbridled. Any decision or action contrary to these functional
19
H (2018) 12 SCC 85
SOUTHERN POWER DISTRIBUTION POWER COMPANY LTD. OF A.P. 237
(APSPDCL) v. M/S HINDUJA NATIONAL POWER CORP. LTD. [B. R. GAVAI, J.]
precepts would be at the pain of invalidation thereof. The State A
and its instrumentalities, be it a public authority, either as an
individual or a collective has to essentially abide by this inalienable
and non-negotiable prescriptions and cannot act in breach of the
trust reposed by the polity and on extraneous considerations. In
exercise of uncontrolled discretion and power, it cannot resort to
B
any act to fritter, squander and emasculate any public property,
be it by way of State largesse or contracts, etc. Such outrages
would clearly be unconstitutional and extinctive of the rule of law
which forms the bedrock of the constitutional order.”
104. In the present case, though initially, HNPCL had revived its
project in the year 2007 as a Merchant-power plant and offered 25% of C
electricity to the State, it was the State, which offered to purchase 100%
power from HNPCL. HNPCL agreed for the said offer of the State
Government. It is clear from the record and, particularly, the letter dated
26 th December, 2012, that the State had given various facilities/
concessions to HNPCL for execution of its power project. The D
documents on record would reveal that the State has also allotted
thousands of acres of land for the project to HNPCL. It is not in dispute
that in pursuance of the MoA of 2013 (dated 17th May, 2013) and the
Continuation Agreement of 2016 (dated 28th April, 2016), the entire
project has been erected and is operational. Not only this, but from the
year 2016 till 14th July, 2020, the power has been purchased by the E
appellants – DISCOMS from HNPCL. It could thus be seen that after
investment of huge resources including the land belonging to the State,
the project is complete and has become operational. The question, at
this juncture, would be, whether to discard such a project is in the public
interest or against it. At the cost of repetition, it may be reiterated, that F
the determination of the capital cost of the project and the rate of tariff
at which the power has to be purchased would always be subject to
regulatory control of the State Commission. What has been done by the
APTEL is only directing the State Commission to determine the same.
105. The record would clearly reveal that from the year 2012 G
onwards till 4th January, 2018, it was the consistent stand of the State of
Andhra Pradesh as well as the APDISCOMS that it would be purchasing
100% power generated from the project of HNPCL. Not only an
application being O.P. No.21 of 2015 was filed by HNPCL for
determination of capital cost, but also O.P. No.19 of 2016 was filed by
H
238 SUPREME COURT REPORTS [2022] 8 S.C.R.
A the appellants – DISCOMS for grant of approval to the Continuation
Agreement dated 28th April, 2016 with the Amended and Restated PPA
of 1998. The matters were heard finally on 15th May, 2017 and closed
for orders. For some unknown reasons, exclusively within the knowledge
of the appellants – DISCOMS, things turned topsy-turvy between 15th
May, 2017 and 4th January, 2018, on which date, the appellants –
B
DISCOMS did a somersault and filed applications for withdrawal of
O.P. No.19 of 2016 and disposal of O.P. No.21 of 2015. As already
discussed hereinabove, every decision of the State is required to be guided
by public interest and the power is to be exercised for public good. For
reasons unknown, the appellants – DISCOMS took a decision to resile
C from their earlier stand, due to which, not only the huge investment made
by HNPCL would go in waste, but also valuable resources of the public
including thousands of acres of land would go in waste. As already
discussed hereinabove, the reasons/grounds, which are sought to be given
in I.A. No. 1 of 2018 in O.P. No.19 of 2016 and I.A. No.2 of 2018 in
O.P. No.21 of 2015, filed on 4th January, 2018, were very much available
D
between 2011 till 15th May, 2017. It is not as if something new has
emerged between 15th May, 2017 and 4th January, 2018, which would
have entitled the appellants – DISCOMS to resile from their earlier
stand. We have no hesitation to hold that the appellants – DISCOMS
could not be permitted to change the decision at their whims and fancies
E and, particularly, when it is adversarial to the public interest and public
good. The record would clearly show that the change in decision is
arbitrary, irrational and unreasonable.
106. We may also gainfully refer to the following observations of
this Court in the case of Kalabharati Advertising v. Hemant Vimalnath
F Narichania and others20:
“25. The State is under obligation to act fairly without ill will or
malice— in fact or in law. “Legal malice” or “malice in law”
means something done without lawful excuse. It is an act done
wrongfully and wilfully without reasonable or probable cause, and
G not necessarily an act done from ill feeling and spite. It is a
deliberate act in disregard to the rights of others. Where malice is
attributed to the State, it can never be a case of personal ill will or
spite on the part of the State. It is an act which is taken with an
oblique or indirect object. It means exercise of statutory power
H 20
(2010) 9 SCC 437
SOUTHERN POWER DISTRIBUTION POWER COMPANY LTD. OF A.P. 239
(APSPDCL) v. M/S HINDUJA NATIONAL POWER CORP. LTD. [B. R. GAVAI, J.]
for “purposes foreign to those for which it is in law intended”. It A
means conscious violation of the law to the prejudice of another, a
depraved inclination on the part of the authority to disregard the
rights of others, which intent is manifested by its injurious acts.
(Vide ADM, Jabalpur v. Shivakant Shukla [(1976) 2 SCC 521
: AIR 1976 SC 1207] , S.R. Venkataraman v. Union of India
B
[(1979) 2 SCC 491 : 1979 SCC (L&S) 216 : AIR 1979 SC 49], State
of A.P. v. Goverdhanlal Pitti [(2003) 4 SCC 739 : AIR 2003 SC
1941], BPL Ltd. v. S.P. Gururaja [(2003) 8 SCC 567] and W.B.
SEB v. Dilip Kumar Ray [(2007) 14 SCC 568 : (2009) 1 SCC
(L&S) 860] .)
26. Passing an order for an unauthorised purpose constitutes C
malice in law. (Vide Punjab SEB Ltd. v. Zora Singh [(2005) 6
SCC 776] and Union of India v. V. Ramakrishnan [(2005) 8 SCC
394 : 2005 SCC (L&S) 1150] .)”
107. We have no hesitation to hold that I.A. No.1 of 2018 in O.P.
No.19 of 2016 and I.A. No.2 of 2018 in O.P. No.21 of 2015 filed by the D
appellants – DISCOMS, are acts, which have been done wrongfully
and wilfully without reasonable and probable cause. It may not necessarily
be an act done out of ill feeling and spite. However, the act is one,
affecting public interest and public good, without there being any rational
or reasonable basis for the same. E
108. Though serious allegations of mala fide have been made by
HNPCL, we do not find it necessary to go in those allegations. However,
in our view, the present case would squarely fit in the realm of ‘legal
malice’ or ‘malice in law’.
109. In any case, we find that the judgment impugned before us F
cannot be said to be of such a nature, which can be said to be prejudicial
to the interests of any of the parties. What has been done by the APTEL
is only to direct the State Commission to dispose of O.P. No.21 of 2015
filed for determination of capital cost and O.P. No.19 of 2016 filed for
approval of Amended and Restated PPA (Continuation Agreement) on G
merits. On remand, the State Commission would be bound to take into
consideration all the relevant factors and the contentions to be raised by
both the parties before deciding the said O.Ps.
110. We therefore find no reason to interfere with the impugned
judgment. However, before parting with the judgment, it is necessary to
H
240 SUPREME COURT REPORTS [2022] 8 S.C.R.
A place on record the conduct of the appellants – DISCOMS. Though
vide order dated 14th July, 2020, this Court had stayed the impugned
judgment passed by the APTEL, vide order dated 21st August, 2020, this
Court had clarified that there shall be no stay of the order dated 16th
March, 2018 passed by the APTEL. It is not in dispute that in pursuance
of the interim order dated 16th March, 2018, passed by the APTEL, the
B
appellants – DISCOMS were purchasing the power at the rate of Rs.3.82
per unit from HNPCL till 14th July, 2020. It is thus clear that in view of
the order passed by this Court on 21st August, 2020, the appellants –
DISCOMS were required to continue to purchase the power from
HNPCL at the rate of Rs.3.82 per unit. Undisputedly, this has not been
C done. The reason given for the same is that the appellants - DISCOMS
had already filed an application for vacation of the order dated 21st August,
2020. By merely filing an application, the appellants – DISCOMS could
not have avoided abiding with the order of the APTEL dated 16 th March,
2018, as maintained by this Court vide order dated 21st August, 2020. It
is brought to our notice that though the appellants – DISCOMS could
D
have purchased the power from HNPCL at the rate of Rs.3.82 per unit
in view of the orders passed by the APTEL and by this Court, they have
chosen to purchase the power at higher rate from various generators
including KSK Mahanadi from whom the power is being purchased at
the rate of Rs.4.33 per unit.
E 111. We ask a question to ourselves, as to whether public interest,
which is so vociferously pressed into service in the present matter by
the appellants – DISCOMS, lies in purchasing the power at the rate of
Rs.3.82 per unit from HNPCL or by purchasing it at the rate of Rs.4.33
per unit from KSK Mahanadi. We strongly deprecate such a conduct of
F the appellants – DISCOMS, which are instrumentalities of the State.
The appellants – DISCOMS, rather than acting in public interest, have
acted contrary to public interest. For defying the orders passed by this
Court, we could very well have initiated the action against the officials
of the appellants – DISCOMS for having committed contempt of this
Court, but we refrain ourselves from doing so.
G
112. In the result, the present appeal is dismissed with costs,
quantified at Rs.5,00,000/- (Rupees Five lakh only). Pending I.As., if
any, shall stand disposed of.
113. Taking into consideration that the issue before the State
H Commission is pending since long, we direct the State Commission to
SOUTHERN POWER DISTRIBUTION POWER COMPANY LTD. OF A.P. 241
(APSPDCL) v. M/S HINDUJA NATIONAL POWER CORP. LTD. [B. R. GAVAI, J.]
decide O.P. No.21 of 2015 and O.P. No.19 of 2016, as expeditiously as A
possible, and in any case, within a period of six months from the date of
this judgment.
114. Needless to say that till O.P. No.21 of 2015 and O.P. No.19
of 2016 are decided by the State Commission, the appellants – DISCOMS
shall forthwith start purchasing the power from HNPCL at the rate of B
Rs.3.82 per unit as per the orders passed by the APTEL dated 16th
March, 2018 and by this Court dated 21st August, 2020.
Bibhuti Bhushan Bose Appeal dismissed.
(Assisted by : Neha Sharma, LCRA)
C
D
E
F
G
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