Holding

The Electricity Act, 2003 does not prescribe a single dominant tariff‑determination method; in the absence of notified guidelines or a threshold, MERC may lawfully determine tariff under Section 62, and its decision to grant the licence via the regulated tariff mechanism was a reasonable exercise of its powers.

Summary

The Tata Power Company sought to compel the Maharashtra Electricity Regulatory Commission (MERC) to award a transmission licence for a 1000 MW HVDC project through the tariff‑based competitive bidding (TBCB) route under Section 63 of the Electricity Act, 2003. MERC granted the licence using the regulated tariff mechanism (RTM) under Section 62, arguing that it had not notified any threshold or guidelines to mandate TBCB. The appellant challenged this, contending that Section 63 is the dominant tariff‑determination method, that the National Tariff Policy 2016 and the Government of Maharashtra’s resolution make TBCB compulsory for new projects, and that MERC’s decision violated those policies. The Court examined the interplay of Sections 61, 62, 63, 86 and 181 of the Act, the binding nature of the NTP, and the effect of the state’s resolution, concluding that the Act provides flexibility and does not prescribe a single dominant method; MERC could lawfully use its general regulatory power under Section 86 to determine tariff via RTM. Consequently, the Court held MERC’s decision to grant the licence under Section 62 was a reasonable exercise of its powers. The appeal was dismissed.

Issues considered

The extent to which Section 63 of the Electricity Act, 2003 is a dominant method for tariff determination over Section 62
Whether the National Tariff Policy 2016 is binding on the State Commission in determining tariff for intra‑state transmission projects
Whether MERC was obligated to determine tariff for the HVDC project through the TBCB route in view of the Government of Maharashtra’s resolution and the absence of a notified threshold limit
Whether the Government of Maharashtra’s resolution of 4 January 2019 is a direction under Section 108 of the Act binding on MERC
Whether MSETCL’s decision not to refer the HVDC project to the Empowered Committee for competitive bidding violated the resolution
Whether the grant of a transmission licence without prior competitive bidding is valid under the Act

Legislation cited

Electricity Act, 2003s. 108, s. 125, s. 181, s. 61, s. 62, s. 63, s. 86

Subjects

tariff determinationElectricity Act 2003Regulated Tariff MechanismTariff Based Competitive BiddingHVDC transmission projectMaharashtra Electricity Regulatory Commissiongeneral regulatory powerNational Tariff Policy 2016existing vs new projectthreshold limitgovernment resolution

Judgment

620 [2022]
SUPREME COURT 19 S.C.R. 620
REPORTS [2022] 19 S.C.R.

A THE TATA POWER COMPANY LIMITED TRANSMISSION
v.
MAHARASHTRA ELECTRICITY REGULATORY
COMMISSION AND ORS.
B (Civil Appeal No. 1933 of 2022)
NOVEMBER 23, 2022
[DR. DHANANJAYA Y CHANDRACHUD, CJI,
A. S. BOPANNA AND J. B. PARDIWALA, JJ.]
Electricity Act, 2003 – ss.61-63, 86, 125, 181 – Maharashtra
C Electricity Regulatory Commission (MERC) issued an order granting
Adani Electricity Mumbai Infra Limited (AEMIL) the transmission
licence to develop the Aarey-Kudus transmission project based on
High Voltage Direct Current (HVDC) technology where tariff was
to be determined through the Regulated Tariff Mechanism (RTM)
D approach u/s.62 – Order challenged by appellant before Appellate
Tribunal for Electricity (APTEL) – Appeal dismissed by APTEL –
Held: Provisions of the Electricity Act 2003 do not prescribe one
dominant method to determine tariff – ss.62 and 63 stipulate the
modalities of tariff determination – The non-obstante clause in s.63
cannot be interpreted to mean that s.63 would take precedence over
E s.62 at the stage of choosing the modality to determine tariff – The
criteria or guidelines for the determination of the modality of tariff
determination ought to be notified by the Appropriate State
Commission either through regulations u/s. 181 of the Act or
guidelines u/s. 61 of the Act – In the present case, MERC has neither
F framed regulations nor notified guidelines prescribing the criteria
or guidelines for choosing the modalities to determine tariff – Thus,
MERC shall determine the tariff by exercising its general regulatory
powers u/s. 86(1)(a) of the Act – MERC while exercising its general
regulatory powers u/s.86(1)(a) shall be guided by the National Tariff
Policy 2016, which shall be a material consideration – Further,
G MERC and APTEL have arrived at concurrent findings that the
1000MW HVDC Aarey-Kudus project is an ‘existing project’ for
the purpose of the applicability of the GoM’s GR 2019 – Supreme
Court deciding a statutory appeal u/s.125 of the Act cannot interfere
with the concurrent findings on a question of fact – Nonetheless,
even on an independent assessment of the facts, the HVDC project
H
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TATA POWER CO. v. MAHARASHTRA ELECTRICITY REGULATORY 621
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is an existing project – The Electricity Act, 2003 or the policy A
framework did not make it binding upon MERC to allot the HVDC
project only through the Tariff Based Competitive Bidding (TBCB)
route – Therefore, the Regulatory Commission’s decision to grant
the HVDC project u/s. 62 was within a reasonable exercise of its
powers.
B
Electricity Act, 2003 – ss.61, 181 – Framing of necessary
regulations by Regulatory Commissions to put into effect the
principles prescribed under the Act – All State Regulatory
Commissions directed to frame Regulations u/s.181 of the Act on
the terms and conditions for determination of tariff – Appropriate
Commission shall be guided by the principles prescribed in s.61, C
which also includes the National Electricity Policy (NEP) and
National Tariff Policy (NTP) – The Commissions while being guided
by the principles contained in sec.61 shall effectuate a balance
that would create a sustainable model of electricity regulation in
the States – The Regulatory Commission shall curate to the specific D
needs of the State while framing these regulations – Further, the
regulations framed must be in consonance with the objective of the
Electricity Act 2003, which is to enhance the investment of private
stakeholders in the electricity regulatory sector so as to create a
sustainable and effective system of tariff determination that is cost
efficient so that such benefits percolate to the end consumers. E

Dismissing the appeal, the Court
HELD: 1. The Appropriate Commission is not mandated
to adopt the tariff determined through the bidding process
irrespective of the fulfilment of the statutory requirements. The F
Commission can reject the tariff determined through the bid if
the tariff process is not (i) transparent; and (ii) in accordance
with the guidelines issued by the Central Government. Thus, if
the Commission does not adopt the tariff determined through
bidding, and if the decision is challenged, the bidding process
can be reviewed substantively (on the ground of transparency) G
and procedurally (on the ground of compliance with Central
Government guidelines) to determine if the Commission could
have exercised its discretion to determine the tariff under Section
62 while rejecting the tariff determined under Section 63.
Therefore, Section 63 can only be invoked after the tariff has H
622 SUPREME COURT REPORTS [2022] 19 S.C.R.

A been determined through bidding. The terms and conditions
notified by the Appropriate Commission under Section 61 will
have to be referred for the purpose of choosing the modality of
tariff determination that the Commission should undertake. In
view of the above discussion, the argument of the appellant that
a reading of Section 61, 62 and 63 indicates that the TBCB route
B
is the dominant route of tariff determination does not hold merit.
[Para 77][677-F-H; 678-A-B]
2.1 The value of TBCB Guidelines prescribed under Section
63
C Section 63 of the Act does not prescribe bidding as the
dominant route of tariff determination. The Guidelines framed by
the Central Government under Section 63 prescribe the
mechanism and procedure for bidding. The Guidelines framed
under Section 63 of the Act cannot be used to determine whether
the RTM route or the TBCB route ought to be followed. [Para
D 78][678-B-C]
2.2 On 13 April 2006, the MoP framed the TBCB Guidelines
under Section 63 of the Act. Clause 2.2 of the Guidelines states
that it shall apply for the procurement of transmission services
through competitive bidding according to the mechanism
E described in the notification. [Para 79][678-D]
2.3 A reading of the clauses indicates that the TBCB
Guidelines shall apply for (i) procurement of transmission
services, which would include HVDC links; and (ii) selecting the
transmission provider for a new transmission line. The TBCB
F Guidelines also advert to the appointment of a Bid Process
Coordinator who would be responsible for coordinating the bid
process for procurement of required transmission services. The
TBCB Guidelines prescribe the procedure for conducting bids
for procurement of, among other services, transmission services.
G Clause 3.3 states that for the procurement of transmission
services required for intra-state transmission, the State
Government may notify the organisation or the State Public Sector
Undertaking to be the Bid Process Coordinator. A reading of
clauses 2.2 and 2.4 does not indicate that that the tariff for all

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TATA POWER CO. v. MAHARASHTRA ELECTRICITY REGULATORY 623
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new transmission projects shall be determined by competitive A
bidding. It notifies the procedural mechanism for competitive
bidding. As observed earlier, the reference in Section 63 to the
Guidelines framed by the Central Government is made to the
limited extent of determining whether the procedure of bidding
was in accordance to the Guidelines framed thereunder, which is
B
the TBCB Guidelines. [Para 80][678-G-H; 679-A-C]
3.1 General Regulatory Power of the Appropriate
Commission
In the case of intra-state transmission of electricity, the
State Commission would be bound by the guidelines issued under C
Section 63. In addition to the guidelines under Section 63 of the
Act, the State Commission shall also be bound by the regulations
framed by it under Section 181(zd) read with Section 61 while it
discharges its function of determining the tariff under Section 86
of the Act. However, if the guidelines issued under Section 63 or
the regulations framed under Section 181(zd) of the Act have not D
been notified or if the guidelines do not deal with a given situation,
then the Commission shall exercise its general regulatory power
under Section 86(1)(a) of the Act to regulate tariff. [Para 85][681-
E-F]
3.2 The TBCB Guidelines issued by the Central E
Government under Section 63 of the Act prescribe the mechanism
of the bidding process and do not lay down the criteria or
guidelines for choosing between the alternative routes under
Section 62 and 63 of the Act. MERC has neither notified any
Regulations under Section 181 nor has it notified the terms and F
conditions under Section 61 of the Act. That being the case, the
Commission could choose the modality of tariff determination by
taking recourse to the general regulatory power under Section
86. [Para 87][683-G-H; 684-A]
4.1 The nature of NTP- binding or a material consideration G
Even in the absence of guidelines under Section 61 or
Regulations under Section 181 (zd), the Commission does not
possess unbridled power or discretion while choosing the
modality to determine tariff. Sub-Sections (3) and (4) of Section
86 provide that the State Commission while discharging its
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624 SUPREME COURT REPORTS [2022] 19 S.C.R.

A functions must ensure transparency and ‘shall be guided’ by the
NTP and NEP. [Para 88][684-B-C]
4.2 Both NTP 2006 and NTP 2016 as a general rule prescribe
competitive bidding for determination of tariff for all ‘new
projects’. There are two prominent differences between NTP 2006
B and NTP 2016. Firstly, the projects owned or controlled by the
Government were exempted from bidding under NTP 2006.
However, according to NTP 2016, the tariff for government owned
projects is also to be determined by bidding, unless otherwise
specified. Secondly, NTP 2016 introduced the threshold limit rule.
State Commissions are required to notify the threshold limit. If
C the cost of the project exceeds the threshold limit, then the
Commission is mandated to follow the bidding process for the
determination of tariff. NTP 2016, by providing that state owned
projects are not exempted from the TBCB process, has
implemented the object of the Act, which is to create a fine balance
D between promoting competition and protecting the interests of
the consumers. NTP 2006 was formulated with the objective of
enhancing the participation of private players in the generation,
transmission and distribution of electricity. The Central
Government adopted a policy decision to introduce the bidding
process for the determination of the tariff for all new transmission
E projects in 2006 but excluded its application to State projects.
However, the distinction between State and private parties for
the purpose of tariff determination through bidding was removed
in NTP 2016. This transition between NTP 2006 and NTP 2016
depicts the intention of the Government to rationalise the tariff
F policy and to transfer the benefits of the rationalised tariff to the
consumers. According to NTP 2016, the tariff for all new electricity
transmission projects that cost above the threshold amount
notified by the State Commission shall be determined through
bidding. However, the MERC had not notified the threshold limit
as on the date when it passed the order granting transmission
G licence to AEML-T. MERC notified the Maharashtra Electricity
Regulatory Commission (Multi Year Tariff) Regulations 2019
under Section 181 of the Act. The MERC MYT Regulations does
not provide the guidelines or the criteria for the choosing the
modality of tariff determination. The guidelines for choosing the
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TATA POWER CO. v. MAHARASHTRA ELECTRICITY REGULATORY 625
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modalities are sought to be introduced by the Maharashtra A
Electricity Regulatory Commission (Multi Year Tariff) (First
Amendment) Regulations 2022. MERC circulated the draft of
the MERC MYT Amendment Regulations on 19 August 2022
for comments, suggestions and objections. [Paras 90-92][684-G-
H; 685-A-G]
B
4.3 When the application seeking licence for the HVDC
Kudus- Aarey transmission project was filed, and when it was
granted by MERC, the threshold limit as required to be provided
by NTP 2016 was not notified by MERC. Thus, the question is
whether in the absence of any notification of the threshold by
MERC, would MERC still be mandated to determine tariff for C
the transmission project through the TBCB route in view of NTP
2016. Merely because the threshold limit is not notified, it would
not mean that MERC only had to determine tariff through the
RTM route. It is open to MERC to determine the tariff through
either the Section 63 or the Section 62 route. When MERC is D
exercising its general regulatory power under Section 86 to
determine tariff, the NTP is a material consideration. Thus, the
absence of a threshold limit would not affect the power that MERC
holds to determine tariff (and its modalities). Since MERC has
the power to regulate and determine tariff for the intra-state
transmission of electricity, the guidelines and regulations issued E
by MERC, if any, must be analysed to determine if MERC was
mandated to choose one of the two routes for the determination
of tariff or whether it could exercise its discretion to choose the
modality. [Paras 93, 100][687-D; 691-H; 692-A-C]
Energy Watchdog v. Central Electricity Regulatory F
Commission (2017) 14 SCC 80 : [2017] 3 SCR 153;
PTC India Ltd. v. Central Electricity Regulatory
Commission (2010) 4 SCC 603 : [2010] 3 SCR 609;
Reliance Infrastructure Limited v. State of Maharashtra
(2019) 3 SCC 352 : [2019] 1 SCR 886 – referred to. G
5.1 The New - Old Conundrum
The 1000MW Aarey-Kudus HVDC project by AEMIL is
an ‘existing’ or an ‘old’ project with reference to the
GoM GR for the following reasons: Firstly, the
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626 SUPREME COURT REPORTS [2022] 19 S.C.R.

A GR does not provide or explain the meaning of the phrase ‘new’
projects. Hence, MERC has the discretion to formulate its
understanding of the phrase ‘new’ projects so long as it is
reasonable and does not rely on factors extraneous to the decision
making process. In view of the decisions of this Court discussed
above and the provisions of the Act, MERC has the power to
B
regulate tariff determination. MERC has not defined the phrase
‘new’ projects through the regulations. In this situation, MERC
has the discretion to interpret the phrase ‘new’ projects which it
did in the course of its judgment granting AEMIL the transmission
license. MERC held that generally the cancellation of approval
C would amount to the closure of the project, unless the peculiar
nature of the facts leads to an alternative conclusion (as in this
case); Secondly, on applying the facts to the interpretation of the
phrase ‘new’ project, MERC observed that the HVDC Kudus-
Aarey project is not a new project. APTEL, on appeal, upheld
the observations of MERC that it is an ‘existing project’. The
D
appeal against the judgment of APTEL before this Court under
Section 125 of the Act can only be on the grounds mentioned in
Section 100 of CPC. Section 100 of the Code of Civil Procedure
1908 stipulates that a second appeal shall lie only if the court (in
this case the Supreme Court) is satisfied that the case involves a
E substantial question of law. It is settled law that concurrent
findings of fact recorded by the fora below (MERC and APTEL)
cannot be interfered with by this Court. [Para 106-106.2][695-F-
H; 696-A-C, F-G]
DSR (Steel) Pvt. Ltd. v. State of Rajasthan (2012) 6 SCC
F 782 : [2012] 5 SCR 583 – referred to.
5.2 On 12 November 2007, MSETCL issued a
communication to CEA setting out the steps proposed to meet
the growing demand of power for Mumbai’s load centres. The
communication stated that TPC had proposed the setting up of
G overhead lines and underground cables while REL had proposed
connections to Aarey by using the HVDC (VSC based) technology.
MSETCL notified a five-year plan for 2009-10 to 2013-14
envisaging the use of the HVDC technology. The plan specifically
provided for the ongoing schemes of R-infra together with new
schemes including the HVDC based link between Nagothane and
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TATA POWER CO. v. MAHARASHTRA ELECTRICITY REGULATORY 627
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Aarey. Similar details were provided in relation to TPC’s ongoing A
and new schemes. Both TPC and R-infra were in the fray from
the inception. While TPC was primarily in the overhead
transmission line segment, R-infra had proposed the setting up
of transmission lines on the HVDC technology. The criticality of
the HVDC technology assumes importance after the grid failure
B
which Mumbai experienced in November 2010. The committee
chaired by a Professor of IIT recommended the HVDC
technology as a long-term solution for ensuring reliability of power
supply for Mumbai. MERC granted a transmission licence to R-
infra on 11 August 2011. R-infra submitted a DPR to MERC for
the appointment of a consultant for the transmission line from C
Nagothane to Aarey on 1 February 2013. On 7 March 2013,
MSETCL confirmed that the Nagothane -Aarey project was a part
of the STU five-year plan for FY 2013-14 to 2017-18. MERC
approved the hiring of the consultant on 5 April 2013. The
application for the grant of grid connectivity for the proposed
D
HVDC project was allowed on 21 August 2013. When matters
were thus progressing, in November 2013 MSETCL had in a
meeting with R-Infra proposed that R-Infra can avail of
connectivity from the Kudus sub-station which was closer to the
Aarey sub-station as compared to the sub-station at Nagothane.
R-infra expressed its concern over the proposed revision on the E
point of connectivity. On 10 April 2014, MERC granted an in-
principle clearance for the HVDC Scheme. In January 2015,
MSETCL proposed a revised scheme for where the 400KV
Kudus-Aarey HVAC scheme was proposed by MSETCL. On 2
May 2016, the in-principle clearance granted to the Nagothane-
F
Aarey HVDC Scheme was cancelled by MERC. [Paras 106.2.1,
106.2.2][697-G-H; 698-A-H; 699-A]
5.3 However, since the HVAC scheme of MSETCL did not
take off, AEML-T submitted an application for HVDC Scheme
between Aarey to Kudus on 23 November 2018 where an
amendment to the letter issued by MERC granting grid G
connectivity to the 2 x 500 HVDC (VSC based) scheme from
Nagothane to Aarey was sought. The narration of facts indicates
that AEML-T(or its predecessor in interest) has been involved
in the execution of the HVDC Scheme since the inception of the
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628 SUPREME COURT REPORTS [2022] 19 S.C.R.

A scheme. The cancellation of the in-principle approval accorded
to AEML-T by MERC cannot be held to terminate the project in
view of the peculiar background of this case. It is due to the
indecisiveness of MSETCL on the HVDC and HVAC
technologies that AEML-T’s clearance was cancelled. The HVDC
Scheme was attributed to R-Infra or, as the case may be, AEML-
B
T since 2009. In the electricity regulatory sector, where the State
Regulatory Commissions and STUs’ have been functioning in an
ad-hoc manner running in many loops, the question of whether
the project is an old or a new project must be determined through
a holistic purview of the factual background. In view of the above
C factual narration, it is evident that the HVDC Scheme is an old
project and the change in the location of the injection point from
Nagothane to Kudus would not lead to the closure of the old
project. [Paras 106.2.3, 106.2.4][699-B-F]
6. Relevance of GoM GR for MERC’s Decision
D The fixation of tariff falls within the independent statutory
domain of the Regulatory Commission. The State Government
has the power to issue directions to the State Commission in
matters of ‘policy involving public interest’ under Section 108 of
the Act. While stating that the State Government may issue
E directions in matters of policy involving public interest, Section
108(2) states that if any question arises as to whether such
direction relates to matters of policy involving public interest,
the decision of the State Government on it shall be final. The
provision further states that the State Commission shall be guided
by the directions of the State Government in discharge of its
F functions. Section 108 deals with “directions in matters of policy
involving public interest as the State Government may give to it
in writing.” In the provision, the term ‘it’ refers to the State
Commission. The GoM’s GR does not mention the State
Commission and has not been issued as a direction to the MERC
G as envisaged in Section 108. Therefore, the HVDC Project is,
firstly, an existing project in terms of the GoM GR, and secondly,
the GoM GR has not been issued in terms of Section 108 as a
direction to the State Commission. [Paras 111, 112][701-D-E, G-
H; 702-A]

H 7.1 Relevance of GoM GR vis-à-vis MSETCL’s decision
TATA POWER CO. v. MAHARASHTRA ELECTRICITY REGULATORY 629
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It is clear from a reading of the Development Guidelines A
read with the functions of the State Utility in terms of Section
39(2) of the Act that while the State Transmission Utility shall be
the apex authority for planning of intra-state transmission projects,
the Empowered Committee is to identify projects to be undertaken
under the TBCB route. [Para 120][704-G-H]
B
7.2 It is clear that the MSETCL’s decision regarding the
HVDC Project not being referred under the TBCB route was in
line with the Empowered Committee’s directions which have been
set up in terms of the GoM GR and which has been granted the
power to select projects to be taken up under the TBCB route.
[Para 127][707-D-E] C

8.1 Conclusion
The Electricity Act, 2003 provides the States sufficient
flexibility to regulate the intra-state transmission systems,
wherein the Appropriate State Commissions possess the power D
to determine and regulate tariff. The Electricity Act 2003 seeks
to distance the State Governments from the determination and
Regulation of tariff, placing such power completely within the ambit
of the Appropriate Commissions. The provisions of the Electricity
Act 2003 do not prescribe one dominant method to determine
tariff. Section 63 operates after the bidding process has been E
conducted. Where the tariff has already been determined through
bidding, the Appropriate Commission has to adopt such tariff that
has been determined. The Appropriate Commission cannot
negate such tariff determined through bidding by using its powers
under Section 62. The tariff determined through the bidding F
process may not be adopted by the Appropriate Commission only
if the bidding process was not transparent (undertaking a
substantive review) or the procedure prescribed by the Central
Government guidelines under Section 63 was not followed
(undertaking a procedural review). Sections 62 and 63 stipulate
the modalities of tariff determination. The non-obstante Clause G
in Section 63 cannot be interpreted to mean that Section 63 would
take precedence over Section 62 at the stage of choosing the
modality to determine tariff. The criteria or guidelines for the
determination of the modality of tariff determination ought to be
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630 SUPREME COURT REPORTS [2022] 19 S.C.R.

A notified by the Appropriate State Commission either through
Regulations under Section 181 of the Act or guidelines Under
Section 61 of the Act. MERC has neither framed Regulations
nor notified guidelines prescribing the criteria or guidelines for
choosing the modalities to determine tariff. Thus, MERC shall
determine the tariff by exercising its general regulatory powers
B
under Section 86(1)(a) of the Act. MERC while exercising its
general regulatory powers under Section 86(1)(a) shall be guided
by the NTP 2016, which shall be a material consideration.
Accordingly, while NTP 2016 requires intra-state transmission
projects above the threshold limit to be allotted through the
C TBCB route, this constitutes a material consideration to be taken
into account. The threshold value in the case of Maharashtra has
not yet been notified by MERC. The threshold limit not having
been notified by MERC, it was open to MERC to allot the HVDC
project either under the RTM or the TBCB route. MERC and
APTEL have arrived at concurrent findings that the 1000 MW
D
HVDC Aarey-Kudus project is an ‘existing project’ for the
purpose of the applicability of the GoM’s GR 2019. This Court
deciding a statutory appeal under Section 125 of the Act cannot
interfere with the concurrent findings on a question of fact.
Nonetheless, even on an independent assessment of the facts,
E the HVDC project is an existing project. Even if the HVDC
Project were to be considered a ‘new project’ in terms of the
GoM’s GR, the same not having been issued in terms of Section
108 as a direction to the State Commission, MERC’s decision
cannot be challenged for failing to comply with the same as MERC
is an independent body with statutory powers to determine and
F
regulate tariff. MSETCL has acted in terms of the GoM’s GR as
it has referred the HVDC project to the Empowered Committee
and the decision to not refer the HVDC project under the TBCB
route was in line with the Empowered Committee’s directions.
The Empowered Committee has the power to select projects to
G be taken up under the TBCB route under the GoM’s GR. [Para
128][707-F-H; 708-A-H; 709-A-D]
8.2 The Electricity Act 2003 or the policy framework,
particularly NTP 2016 read with the GoM GR dated 4 January
2019, did not make it binding upon MERC to allot the HVDC
H project only through the TBCB route. The Regulatory
TATA POWER CO. v. MAHARASHTRA ELECTRICITY REGULATORY 631
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Commission’s decision to grant the HVDC project under Section A
62 was within a reasonable exercise of its powers. [Para 129][709-
E]
8.3 This case has brought the ad-hoc nature of the
functioning of the STU to the notice of this Court. MSETCL has
been changing its stance on the HVDC technology without B
following any due procedure. The flip-flops by MSETCL have
led to the loss of time and investment while the demand in the
electricity sector has been increasing exponentially. In matters
dealing with electricity regulation, the regulatory commissions
and the transmission utilities are usually bogged down by factors
such as technological uncertainty, requirement of heavy C
investment and issues of right of way. The ad- hoc functioning of
the transmission utilities is also attributable to the lacunae in the
regulations guiding the exercise of their functions. The Electricity
Act 2003 was enacted with the objective of providing the States
with sufficient flexibility to regulate the intra-state electricity D
system and simultaneously provided the regulatory commissions
with the power to determine tariffs. Though the Government,
both at the Centre and in the States, have framed statutory
policies and guidelines regulating the electricity sector, the
Regulatory Commissions have not framed the necessary
regulations to put into effect the principles prescribed under the E
Act. All State Regulatory Commissions are directed to frame
Regulations under Section 181 of the Act on the terms and
conditions for determination of tariff within three months from
the date of this judgment. While framing these guidelines on
determination of tariff, the Appropriate Commission shall be F
guided by the principles prescribed in Section 61, which also
includes the NEP and NTP. Where the Appropriate
Commission(s) has already framed regulations, they shall be
amended to include provisions on the criteria for choosing the
modalities to determine the tariff, in case they have not been
already included. The Commissions while being guided by the G
principles contained in Section 61 shall effectuate a balance that
would create a sustainable model of electricity regulation in the
States. The Regulatory Commission shall curate to the specific
needs of the State while framing these regulations. Further, the
regulations framed must be in consonance with the objective of H
632 SUPREME COURT REPORTS [2022] 19 S.C.R.

A the Electricity Act 2003, which is to enhance the investment of
private stakeholders in the electricity regulatory sector so as to
create a sustainable and effective system of tariff determination
that is cost efficient so that such benefits percolate to the end
consumers. [Paras 130, 131][709-F-H; 710-A-E]
B Govindaraju v. Mariamman (2005) 2 SCC 500 : [2005]
1 SCR 1100; Hari Singh v. Kanhaiya Lal (1999) 7 SCC
288 : [1999] 2 Suppl. SCR 216; Ramaswamy
Kalingaryar v. Mathayan Padayachi (1992) 1 Supp SCC
712; Kehar Singh v. Yash Pal (2015) 7 SCC 769;
Bismillah Begum v. Rahmatullah Khan (1998) 2 SCC
C 226 : [1998] 1 SCR 284 – referred to.
Case Law Reference
[2017] 3 SCR 153 referred to Para 39
[2010] 3 SCR 609 referred to Para 86
D
[2019] 1 SCR 886 referred to Para 94
[2012] 5 SCR 583 referred to Para 106.2
[2005] 1 SCR 1100 referred to Para 106.2
[1999] 2 Suppl. SCR 216 referred to Para 106.2
E
[1998] 1 SCR 284 referred to Para 106.2
CIVIL APPELLATE JURISDICTION : Civil Appeal No.1933
of 2022.
From the Judgment and Order dated 18.02.2022 of the Appellate
F Tribunal for Electricity in Appeal No.280 of 2021.
Shyam Divan, Sr. Adv., Shri Venkatesh, Ms. Kanika Chugh, Nitin
Saluja, Suhael Buttan, Siddharth Joshi, Vineet Kumar, Anant Singh, Advs.
for the Appellant.
Dr. A.M. Singhvi, Vikas Singh, Sr Advs., Ms. Deepa Chawan,
G
Mahesh Agarwal, Hemant Singh, Arshit Anand, Ms. Geetika Sharma,
Harshit Singh, Mridul Chakravarty, Biju Mattam, Lakshyajit Singh
Bagdwal, Ms. Lavanya Panwar, Ms. Reshma Nathani, E. C. Agrawala,
Ms. Deepieka Kalia, Kapish Seth, Ms. Priyanka Khosla, Buddy
Ranganathan, Ms. Prititi Rungta, Sumit Pargal, Ms. Amita Singh Kalkal,
H Sudhanshu S. Choudhari, Rahul Chitnis, Sachin Patil, Aaditya A. Pande,
TATA POWER CO. v. MAHARASHTRA ELECTRICITY REGULATORY 633
COMMISSION

Geo Joseph, Ms. Shwetal Shepal, Durgesh Gupta, Advs. for the A
Respondents.
The Judgment of the Court was delivered by
DR. DHANANJAYA Y CHANDRACHUD, CJI
A glossary of defined terms used in the judgment has been provided B
below:

C

D

E

F

G

H
634 SUPREME COURT REPORTS [2022] 19 S.C.R.

A RInfra Reliance Infrastructure Limited

RTM Regulated Tariff Mechanism

STU State Transmission Utility

TBCB Tariff Based Competitive Bidding

B TBCB Guidelines Tariff Based Competitive Bidding Guidelines for
Transmission Service issued by the MoP dated
13.04.2006

TPC-T/ appellant Tata Power Company Limited Transmission

VSC Voltage Source Converter
C
This judgment has been divided into the following sections to
facilitate analysis:
A. The Facts ......................................................................... 5*
B. Proceedings before the MERC and APTEL ................. 27*
D
C. The Submissions ............................................................ 34*
D. Regulatory Framework ................................................. 37*
D. 1 Electricity Act 2003 .............................................. 37*
D.2 Policy framework .................................................. 42*
E
D. 2.1 Central Policies ............................................. 42*
D. 2.2 State Policies ................................................. 47*
E. The Analysis .................................................................. 48*

F E. 1 Section 63: The dominant route or the alternative
route............................................................................... 49*
E. 1.1. The value of TBCB Guidelines prescribed
under Section 63 ....................................................... 54*
G E. 2 General Regulatory Power of the Appropriate
Commission ................................................................... 56*
E.2.1 The nature of NTP- binding or a
material consideration............................................... 61*
H *Ed Note : Pegination is as per the original judgment.
TATA POWER CO. v. MAHARASHTRA ELECTRICITY REGULATORY 635
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E. 3 Value of GoM GR .................................................. 72* A
E. 3. 1The New- Old Conundrum ............................ 73*
E. 3. 2 Relevance of GoM GR for MERC’s
Decision .................................................................... 80*
E. 3. 3 Relevance of GoM GR vis-à-vis B
MSETCL’s decision ................................................. 83*
F Conclusion ....................................................................... 89*
1. APTEL, by its judgment dated 18 February 2022, dismissed an
appeal under Section 111 of the Act instituted by the appellant against a C
decision of MERC dated 21 March 2021.
2. On 21 March 2021, MERC granted a transmission licence to
AEMIL under Sections 14 and 15 of the Act for setting up a 1000 MW
HVDC (VSC based) link between 400 kV MSETCL Kudus and 220
kV AEML Aarey EHV Station. D
3. The appellant challenged MERC’s order before APTEL, inter
alia, on the ground that the grant of the licence was not preceded by a
TBCB process. TPC-T contended that the failure to adhere to a TBCB
process pursuant to Section 63 was contrary to public interest and
statutory mandate. APTEL dismissed the appeal. This has given rise to E
a statutory appeal under Section 125 of the Act.
A. The Facts
4. On 12 November 2007, MSETCL issued a communication to
CEA stating, inter alia, that it was difficult to lay overhead AC lines to
bring power from the new 400kV sub-station, which was required to F
meet Mumbai’s growing demand of power, to Mumbai’s load centres
due to constraints. Hence, it was proposed that VSC based HVDC
technology may be utilised to connect the new sub-station with major
load centres in Mumbai through DC cables. In that context, the letter
stated: G
“M/s. Reliance energy (REL) and M/s. TATA Power Co. Ltd.
(TPC) has carried out necessary survey and accordingly M/s.
REL has proposed to connect Mumbai new location to Ghodbunder
partly by overhead line and partly by underground cables. Further,
H
636 SUPREME COURT REPORTS [2022] 19 S.C.R.

A M/s. REL also proposed to connect Mumbai New Location
to Aarey by HVDC (VSC based technology).
M/s. TPC has planned to establish a 220 kV substation at Vikhroli
and have existing Salset, Dharavi and Trombay substations. These
substations will be fed from 400 kV proposed substation at
B Ghatkopar.
Thus the major load centres in Mumbai will be fed as below.
Colaba area will be fed by 220KV Dharavi S/S (Tata)
Andheri area will be fed by 220KV Versova & Aarey S/S (REL)
C Bandra area will be fed by 220KV Aarey S/S
Maharashtra State Transmission Company Ltd. (MSETCL) has
also proposed to connect 400KV Mumbai New Location with
400KV New Mumbai (Panvel) for system strengthening.
State Transmission Utility (STU) office would appoint a Consultant
D
who is having sufficient knowledge in VSC based HVDC
technology for finalizing the scheme, subject to M/s REL agreeing
to bear the cost of the same.”
(emphasis supplied)
E REL envisaged a transmission project by deploying HVDC (VSC)
based technology, where the load/evacuation point for the power to be
received into Mumbai city was at Aarey. Both REL and TPC-T were to
participate in identifiable segments for bringing power to Mumbai’s load
centres.

F 5. On 5 May 2009, MSETCL notified a five-year plan for the
period 2009-10 to 2013-14. The plan included the Nagothane-Aarey
HVDC link. Likewise, details of the on-going and new schemes of TPC-
T were also provided. In terms of the plan, REL was to execute the
Nagothane - Aarey transmission project.

G 6. In November 2010, Mumbai experienced a partial grid
disturbance. A Committee chaired by Professor Dr SA Khaparde of IIT
Mumbai was constituted to study the situation. The Committee
recommended adopting the HVDC technology as a long-term solution
for ensuring the reliability of power supply for Mumbai for the proposed
transmission project with a 2 x 350 MW HVDC voltage source converter
H
TATA POWER CO. v. MAHARASHTRA ELECTRICITY REGULATORY 637
COMMISSION [DR. DHANANJAYA Y CHANDRACHUD, CJI]

based transmission link for Mumbai. This was identified as a critical A
bulk power injection scheme.
7. On 13 May 2011, RInfra submitted an application under the
provisions of Section 14 and 15 of the Act for the grant of a transmission
licence for the entire State of Maharashtra. By an order dated 11 August
2011, MERC observed that R-Infra cannot be granted a transmission B
licence for the entire State of Maharashtra as paragraph 5.1 read with
7.1.6 of NTP 2016 mandated TBCB for transmission services. Instead,
MERC granted RInfra a transmission licence to establish and operate
specific transmission lines for a period of twenty-five years. The
transmission lines in respect of which the licence was granted to R-
Infra were specified in the communication dated 11 August 2011. C

8. On 2 November 2012, the report of the HVDC sub-committee
for finalization of the consultant noted the reasons for adopting HVDC
(VSC) based technology to meet the power demand for Mumbai. The
following extract indicates that after exploring various operations it was
found that connectivity at Nagothane was suitable. On the other hand, D
Aarey being a major load centre was a “suitable sink point for
connection”:
“The First Meeting of the Sub-Committee was held on 28.08.2012,
where in following as discussed and agreed upon
E
Following requirements were discussed & considered:
i. Classic HVDC has limited capability of Active / Reactive Power
control, whereas VSC HVDC has dynamic control of Active &
Reactive Power Control
ii.Classic HVDC has no Blackstart facility; whereas VSC HVDC F
has blackstart facility which can be a major support to revive Grid
failures.
iii. Classic HVDC requires more footprints. VSC HVDC being
compact and modular in design hence it requires only 30% footprint
area to setup a converter station G
iv. Short Circuit levels are increasing, hence HVDC link to Mumbai
shall be ideal
To meet the above, it is concluded that, 2x500 MW HVDC Voltage
Source Converter (VSC) based technology for Mumbai is essential.
H
638 SUPREME COURT REPORTS [2022] 19 S.C.R.

A For connectivity with the grid, various options were explored and
it is concluded that electrical connectivity at Nagothane is suitable.
Similarly Aarey, being the major load centre, it is concluded that
Aarey is the suitable sink point for connection.”
9. On 1 February 2013, RInfra submitted a DPR to MERC for
B the appointment of a consultant for its proposed 2 x 500 MW HVDC
(VSC) based transmission line from MSETCL’s 400 kV Nagothane
station to the 220 kV Aarey sub-station.
10. On 5 April 2013, MERC addressed a letter to R-Infra, granting
it in-principle clearance for hiring a consultant for the Nagothane-Aarey
C HVDC Scheme to study the system and assist in the selection and design
of the technology and bidding process of the DPR. However, it was
noted that the ‘in-principle’ clearance should not be construed as a final
approval for the purposes of the Annual Recurring Revenue and the
scheme would be open to scrutiny during the tariff determination process,
particularly in the context of actual cost incurred, scope and objective
D achieved. MERC approved the hiring of the consultant for the
implementation of R-Infra’s transmission projects. R-Infra was directed
to submit quarterly progress reports on the transmission projects based
on HVDC technology.
11. The five-year plan is submitted by MSETCL in terms of Section
E 39 of the Act and Regulation 8 of the MERC (State Grid Code)
Regulations 2006. On 7 March 2013, MSETCL in a communication to
MERC confirmed that the following scheme was being considered in
the five-year plan for 2013-14 to 2017-18 for the Mumbai Metropolitan
region:
F S. Name of Scheme Year of Remarks

No. Commissioning

1. 2x500 MW HVDC IGBT (VSC) based 2016-17 Implementation

Aarey – Nagothane Link (120 Ckt km) utility RInfra-T
G
with Bays.

12. On 19 March 2013, RInfra submitted an application to MSETCL
seeking grid connectivity for the Nagothane-Aarey HVDC Scheme.
This was allowed on 21 August 2013 by MSETCL. The letter detailed
H
TATA POWER CO. v. MAHARASHTRA ELECTRICITY REGULATORY 639
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out the scope of the work to be carried out by R-Infra and specified the A
conditions for compliance.
13. On 20 November 2013, a meeting was held between MSETCL
and R- Infra to discuss and review the HVDC connectivity to the Aarey
sub-station. In the meeting, MSETCL proposed availing of connectivity
from the 400kV Kudus substation instead of the 400kV substation at B
Nagothane. The reason for the change in the point of connectivity being
sought from Nagothane as originally envisaged to Kudus was as follows:
“
• Director (Operations) suggested that R-Infra can avail
connectivity from 400 KV Kudus (MSETCL) Substation which C
is much near to Aarey Substation (R-Infra) as compared to 400
KV Nagothane (MSETCL) substation (125 km). Proposed 400
KV Kudus (MSETCL) Substation will be commissioned within 2
years. 400 KV Kudus S/S will have strong source of 765 KV
Kudus (PG) and other 400 KV network from Vapl(PG) 400 D
Bubheswar MSETCL), 400 KV Nashik (MSETCL) 400 KV
Padgha (MSETCL) 400 KV Bolsar (PG) compared to 400 KV
Nagothane (MSETCL) S/S. Therefore 400 KV Kudus Substation
is a better option for HVDC connectivity. The route cable linkage
cost will be considerably lower.
E
• Chief Engineer (STU) submitted that when original plan was
made for R-Infra HVDC project, the 400 KV Kudus s/s
(MSETCL) was not in the STU plan but now it has been included
I STU plan. Therefore it should be examined positively for HVDC
connection with Aarey. The cost of the project will be reduced
considerably.” F
Evidently, R-Infra had reservations about revising the point for
HVDC connectivity from Nagothane to Kudus. The Minutes of the
Meeting of 20 November 2013 indicate those concerns:
“R-infra expressed their concern to consider the revision of scope
G
of connectivity which was decided by standing committee. R-
infra already initiated procurement of land near Nagothane
(MSETCL) and detail survey. All required clearance proposals
are initiated by R-Infra for which approvals are in a pipeline and
at this stage it is very difficult to consider the new proposal.”
H
640 SUPREME COURT REPORTS [2022] 19 S.C.R.

A The Director (Operations) of MSETCL advised R-Infra, while
agreeing to its concerns, to nonetheless examine the suggested proposal
and submit its comments.
14. On 14 February 2014, R-Infra submitted a DPR for the
transmission link between Nagothane and Aarey under the HVDC (VSC)
B project. On 10 April 2014, MERC granted in-principle clearance to R-
Infra for the Nagothane-Aarey HVDC Scheme. R-Infra was intimated
that the in-principle approval was subject to it filing a petition for the
amendment of its transmission licence. It was also mentioned that the
in-principle clearance should not be construed as a final approval for
Annual Recurring Revenue purposes and that the scheme will be open
C for scrutiny during tariff determination:
“5. Please note that this in-principle clearance should not be
construed as final approval for ARR purpose and the scheme will
be open for scrutiny during tariff determination process/ARR
review, particularly in the context of actual cost incurred, scope
D and objective achieved etc. ex-post after implementation of the
scheme. RInfra-T will be required to submit the status of
implementation of the scheme with cost incurred till date along
with their ARR Petition or during the tariff determination process
at the appropriate time.
E [..]
7. Immediately after the completion/commissioning of the scheme,
R-Infra-T should communicate to the Commission, the date of
completion of the scheme, actual cost incurred, escalation in cost,
if any with reasons, the scope and objectives of the scheme and
F to what extent they have been achieved, etc. so as to facilitate a
comparison between the in-principle clearance and the actual.”
15. On 5 January 2015, MSETCL proposed a revised scheme for
strengthening Mumbai’s transmission system to MERC. MSETCL
proposed that it would establish a 400kV Kudus – Aarey HVAC scheme.
G The reason for substituting the HVDC project to be executed by R-
Infra with MSETCL’s HVAC transmission link from Kudus to Aarey
was clarified in paragraph 9 of the letter which has been extracted below:
“9) In view of above, the HVDC project of R-Infra T is reviewed
considering uncertainties in source generation and upcoming strong
H source of 400 KV Kudus at much shorter distance (approx. 80km)
TATA POWER CO. v. MAHARASHTRA ELECTRICITY REGULATORY 641
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than 400 KV Nagothane S/s. Therefore, considering the above A
changes in network configuration, it is proposed to establish 400
KV substation in Mumbai for the enhancement of Transmission
corridor capacity to Mumbai system through 400 KV D/C Quad
line from 400 KV Kudus (MSETCL) substation. This will enhance
the transmission capacity by 1500-2000 MW.”
B
The scope of the scheme proposed by MSECTL was delineated
in paragraph 11 of the communication which is extracted below:
“11) The scope of proposed scheme for above purpose is as given
below:
i) 400 KV Kudus (MSETCL)-400 KV Aarey (MSETCL) D/C C
quad line-80 km.
ii) 400/200 KV, 2x500 MVA ICTs.
iii) 200 KV Interconnection between 400/220 KV Aarey and
proposed 200 KV Goregaon Film city with bays. D
iv) 6x200 KV bays for 220 KV interconnection with TPC and R
Infra (T) lines.
v) 400 KV spare bays for interconnection with 400 KV Vikhroli
(TPC).
vi) 400/220 KV, 2x500 MVA ICTS for future expansion. E

The scheme of establishment of 400 KV Aarey (MSETCL)
Mumbai will be included in five year STU Pan 2015-16 to 2019-
20 for commissioning during 2017-18. The HVDC project stands
cancelled for the reasons as mentioned above. Necessary DPR
of the scheme will be submitted to Hon’ble Commission in due F
course of time for in-principle clearance.”
In other words, instead of R-Infra developing a transmission link
between Nagothane and Aarey using the HVDC technology, MSECTL
proposed to establish the link between Kudus and Aarey itself using
HVAC technology by including it in the five-year plan for 2015-16 to G
2019-20.
16. On 23 January 2015, R-Infra addressed a communication to
MSETCL responding to the communication dated 5 January 2015. R-
Infra responded to the proposal of the substitution of the HVDC (VSC
based) scheme from Nagothane to Aarey with an overhead transmission H
642 SUPREME COURT REPORTS [2022] 19 S.C.R.

A line from Kudus to Aarey to be executed by MSETCL. The letter noted
that:
(i) The approved HVDC Scheme had been recommended by
the Standing committee appointed by MERC;
(ii) The HVDC project which was envisaged with VSC based
B technology had significant technological advantages over
the HVAC technology proposed by MSETCL; and
(iii) In the past, Power Grid Corporation of India Limited and
MSETCL had cancelled proposed HVAC transmission lines
for bringing power into Mumbai or terminated them outside
C Mumbai on account of severe right-of-way constraints in
and around Mumbai.
R-Infra therefore reiterated that the HVDC – VSC based scheme
as approved should be continued. However, R-Infra indicated that the
injection point could be relocated to Kudus while retaining the HVDC
D Scheme for bulk power injection to Mumbai.
17. On 2 May 2016, MERC cancelled the in-principle approval
accorded to R-Infra’s HVDC Scheme. The letter of cancellation is
extracted below:
“This has reference to review report of approved capex
E
Schemes submitted by RInfra-T vide letter dated 5 April
2016;
1) RInfra – T has submitted the review of 7 schemes, as inspite
of having been approved by the Commission long back, the
work against the schemes are yet to be initiated for various
F
reasons.
2) R-Infra-T has submitted as follows;
a) 3 Schemes (EHV Scheme for 220KV Golibar S/s,
220 kV Dahisar Housing S/s & 220 kV Airport S/s)
G amounting to Rs.600.51 Crore will be submitted for
revised approval after allocation of land.
b) 2 Schemes (HVDC Consultancy, 2x500 MW
HVDC Scheme) amounting to Rs.7103.99
Crore are kept on hold as the STU reply is
H awaited.
TATA POWER CO. v. MAHARASHTRA ELECTRICITY REGULATORY 643
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c) I Scheme (Land DPR) amounting to Rs.232.55 Crore A
is withdrawn as the approved land cost is already
considered in the respective DPR schemes.
d) Regarding the Scheme of establishment of Nagri-
Niwara substation amounting to Rs.460.59 Crore,
RInfra has submitted that it has executed a part, i.e., B
the cable laying portion between RInfra Aarey and
MSETCL Borivali stations, as MSETCL has proposed
EHV station in the same area catering to RInfra-D
& MSEDCL load and the substation portion is
proposed for withdrawal.
C
3) Due to change in scope of work of RInfra-T (i.e. establishing
cable connectivity between RInfra-T Aarey & MSETCL
Borivali without installing Nagri-Niwara substation), Rinfra-
T is required to take revised approval of the scheme along
with STU recommendation for such change.
D
4) In view of the above, I am directed to communicate that in
principle approvals given to DPRs submitted by R Infra-T
for EHV Scheme for 220 kV Golibar S/s, 220kV Dahisar
Housing S/s, 220 kV Airport S/s, Land DPR, HVDC
consultancy, HVDC Line& substation portion of Nagri-
Niwara scheme stand cancelled.” E

(emphasis supplied)
18. On 22 December 2016, MSETCL submitted its five-year plan
for FY 2016-17 to 2021-22 wherein the HVDC Scheme was removed.
The HVDC Scheme was not included in the 5-year plan submitted for F
the FY 2017-18 to 2022-23. On 29 August 2018, AEML acquired R-
Infra.
19. At this stage, it is material to note that the appellant, TPC-T,
had submitted a DPR for commissioning a 400kV receiving station at
Vikhroli which was approved by MERC on 2 June 2011 with a capital
G
cost of Rs 846.19 crores. In terms of the DPR, the work was to be
completed in March 2015. TPC-T proposed revised timelines for the
completion of the scheme in financial year 2017-18 on the ground that
the approval required for it including clearances from Ministry of
Environment, Forest and Climate Change and the Airport Authority of
India were at various stages and the land required was in the final stage H
644 SUPREME COURT REPORTS [2022] 19 S.C.R.

A of being taken into possession. By its order dated 12 September 2018,
MERC noted that TPC-T has submitted a revised DPR twice, pursuant
to which it had approved the extension of the target plan date to March
2017 and later, March 2019. TPC-T proposed a revised completion date
of March 2022. Noting the absence of any progress in the scheme of
TPC-T, MERC closed the scheme. It observed:
B
“7.12.1 As regards, 400 kV Receiving station at Vikhroli, the
Commission notes that TPC-T had submitted its DPR for
commissioning of 400 kV Receiving Station at Vikhroli and the
Commission has approved the same oa2 June, 2011 with capital
cost of Rs. 846.19 Cr. In the DPR, TPC-T had submitted that the
C work shall be completed in March, 2015.”
“7.12.8 Based on TPC-T’s submissions in the present Petition,
the Commission further notes, TPC-T had envisaged imminent
load requirement and exponential increase in the power
requirement due to large scale development in residential and
D commercial properties (especially in Godrej area) at Vikhroli and
around area. In actual, the predicted load growth has not come up
in the area.”
“7.12.9 Considering above, the Commission noted that STU has
observed that there is an inordinate delay in completion of this
E scheme and suggested to take up this scheme under Tariff Based
Competitive Bidding (TBCB) route. The Commission is concerned
about the approach adopted by TPC-T for execution of the
scheme. This scheme is being treated as deemed closed by the
Commission and the Commission directs STU to take a review of
F such critical schemes and propose a way forward. STU is directed
to submit its report to the Commission on review of TPC-T’s
proposed 400 kV Vikhroli Receiving Station within a month.”
The Vikhroli transmission scheme which envisaged the setting up
of a 400kV receiving station by the appellant was hence deemed to be
G closed by MERC on the ground of TPC-Ts inordinate delay in completion.
The project was instead suggested to be allotted through the TBCB
route.
20. On 23 November 2018, AEML submitted a proposal to
MSETCL indicating that in view of the severe constraints on the
construction of overhead lines in and around Mumbai, the 400kV Aarey
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TATA POWER CO. v. MAHARASHTRA ELECTRICITY REGULATORY 645
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– Kudus overhead transmission scheme of MSETCL “never took off”. A
Hence AEML proposed the development of a 2 x 500 MW HVDC
(VSC) based link between Kudus and Aarey and the inclusion of the
project in the transmission licence of AEML. AEML submitted a revised
‘connection application’ for carrying bulk power from the state grid to
Mumbai; an amendment to the earlier application over which grid
B
connectivity for the Nagothane-Aarey HVDC project was granted by
MSETCL on 21 August 2013; and for the grant of connectivity and
implementation of the 2 x 500 MW HVDC (VSC) link.
21. TPC-T sought a review of the order dated 12 September
2018 by MERC cancelling its licence for the Vikhroli transmission
scheme. On 29 January 2019, the review petition was dismissed by C
MERC reiterating its earlier reasoning that TPC-T had substantially
delayed the project and noting that there was no defect or error apparent
on the face of the record.
22. On 28 May 2019, MSETCL submitted its five-year plan for
2018-19 to 2023-24 to MERC under which the HVDC Scheme was D
included as an additional scheme within the scope of AEML-T. The plan
included the Aarey-Kudus HVDC Scheme by AEML-T and was made
available on the website of MSETCL.
23. AEML-T sought the suggestion of CEA on a VSC based
underground cable system for bulk power injection into the existing E
network of Mumbai. CEA in its communication dated 13 June 2019
stated that it had held meetings on 8 May 2019 and 31 May 2019 with
MSETCL, AEML-T and TPC-T besides the central transmission utility.
The communication noted that in those meetings there was a consensus
for planning a transmission scheme of feeding power to the Mumbai F
region in the time frame of 2025-26 and 2030 based on studies. AEML-
T and TPC-T were requested to provide substation wise load data with
any additional transmission element which was planned in the above
time frames. In response, both AEML-T and TPC-T furnished sub-
station wise load for 2024-25 and details of the transmission schemes
planned during 2024-25. Load flow studies were also carried out for G
2024-25 conditions considering all schemes planned by AEML-T and
TPC-T till 2024-25 and schemes of the STU until 2021-22. The primary
findings which were recorded by the CEA were in the following terms:
“1.0 Transmission elements which are not N-1 compliant
H
646 SUPREME COURT REPORTS [2022] 19 S.C.R.

A i) Borivali – Array 220 kV D/c line ( caters to MMR load)
ii) Kalwa – Mulund 220 kV S/c line (2 ckts) ( caters to load of
Mulund and Bhandup which are outside MMR)
2.0 High loadings on transmission elements ( 400/220 kV ICTs
and 220 kV lines) with N-1 contingency criteria
B
i) 400/220 kV ICTs at Kalwa S/s
ii) 400/220 kV ICTs at boisar (PG) S/s
3.0 Loading above 300 MW on 220 kV substations
i) 220 kV Array S/s
C
ii) 220 kV Dharavi S/s
iii) 220 kV Carnac S/s
iv) 220 kV Varsosa S/s (AEML)
D 4.0 With provision of 1000 MW feed from Kudus to Array it is
observed that
i) All transmission elements are N-I compliant (except for Kalwa-
Mulund 220 kV S/C lines – 2nos. This can be overcome by LILO
of either Kalwa-Trombay 220kV S/C line or Kalwa-Borivali 220
E kV S/C line at Mulund or by shifting of LILO at Bhandup from
Mulund – Borivali 220 kV line to Kalwa-Borivali 220 kV line
ii) The loadings on transmission elements are reduced.”
24. CEA, in view of above findings found that the Kudus-Aarey
1000MW HVDC link will provide ‘in feed’ to Mumbai and increase
F reliability. Moreover, since the link was based on VSC technology it
would help in voltage regulation. Keeping the power requirements in
consideration, CEA proposed that the possibility for another 1000 MW
may be explored along with the Kudus to Aarey HVDC link. Based on
the study report of CEA, MSETCL by a letter dated 27 June 2019
confirmed that the Kudus-Aarey 1000MW HVDC link may be required
G
for pushing additional power into Mumbai as the link creates a separate
and additional transmission corridor.
25. On 28 June 2019, MERC issued a letter to MSETCL directing
it to take necessary steps for the expeditious execution of Kudus-Aarey
1000 MW HVDC link by AEML-T according to the five-year
H
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transmission plan of the STU dated 28 May 2019. MERC’s letter took A
note of the fact that based on the study report of CEA which
recommended the Kudus-Aarey 1000MW HVDC based transmission
project for increasing reliability and voltage regulation, MSETCL would
take necessary steps for expeditious execution of the project in terms of
the five-year transmission plan:
B
“5. Considering the STU Plan of incorporating 2 x 500 MW Kudus-
Aarey HVDC link, CEA’s load flow study recommending 1000
MW Kudus-Aarey HVDC link for Mumbai region, and STU’s
confirmation vide its letter dated 27.06.2019, the Commission
directs MSETCL/STU to take all necessary steps for expeditious
execution of Kudus-Aarey 1000 MW HVDC link by AEML-T as C
per 5 Year Transmission Plan of STU dated 28.05.2019
communicated to Commission. The Commission further directs
MSETCL/STU to take similar steps for expeditious execution of
the other Mumbai Transmission schemes proposed in its STU
plan with the likely modifications as referred in the letter of STU D
dated 27 June 2019 under reference at sl.no. 7 above.”
26. On 23 September 2019, TPC-T instituted an appeal before
APTEL against MERC’s order dated 12 September 2018 providing for
a deemed closure of its Vikhroli scheme. In its order dated 23 September
2019, APTEL noted that there was an inordinate delay of eight years on E
the part of TPC-T as a consequence of which the project was directed
to be placed under the TBCB route. APTEL held that TPC-T had not
taken adequate steps since 2011 to ensure the completion of the project,
which was envisaged in the interest of the consumers of Mumbai:
“77. The contention of the Appellant that if the implementation of F
scheme under TBCB is allowed, it would further delay the scheme
in question is not acceptable to us, since in the TBCB process the
scheme has to be executed on timely basis, which also optimises
the cost of the project thereby reducing the financial burden on
the consumers. The Appellant, right from 2011 till date, has not
taken any active steps to achieve the completion of the project, G
which helps the consumers of Mumbai. Now, at this stage, the
Appellant claims that it has put in lot of efforts and is ready to
complete the project. The Appellant was also permitted to
participate in the TBCB process. Therefore, the observation of
the Commission pertaining to delay in implementing the scheme H
648 SUPREME COURT REPORTS [2022] 19 S.C.R.

A in question by 8 years cannot be found fault with. In the above
paragraphs several observations on facts are made how the
Appellant moved at snail’s pace to start and implement the project.
The TBCB process is in conformity with the tariff policy notified
by the Ministry of Power, Government of India. As far as the so
called efforts and the expenditure made, if any, by the Appellant,
B
the Respondent-Commission has made observations that’ the said
amount spent/claimed by the Appellant has to be refunded to the
Appellant since it is part of conditions of the bid in question.”
27. On 2 December 2019, AEML-T filed a petition seeking to
amend its licence so as to include the HVDC project since the licence
C issued to AEML-T was line specific, which means that it authorized
AEML-T to create, operate and maintain assets that were specifically
identified in the license. TPC-T filed its objections in response to a public
notice issued by AEML-T, on the ground that the HVDC Scheme should
be executed under the TBCB route in terms of GoM’s GR dated 4
D January 2019. On 15 January 2020, MERC sought the recommendations
of the STU on the amendment application made by AEML-T. On 22
January 2020, the STU indicated that the HVDC project was proposed
in the agenda in a forthcoming EC meeting for being considered under
the TBCB route.
E 28. On 30 March 2020, MERC issued its multi-year tariff order in
case No 297 of 2019 filed by AEML-T stating that:
(i) The HVDC project was referred to the EC whose decision
was awaited;
(ii) The decision on implementing the HVDC project was to be
F taken in the amendment application or in any other
proceedings. The relevant observations are extracted below:
“2.1.21 Further, AEML-T has already filed its Petition
in Case No. 195 of 2019 seeking of its Transmission
Licence which also includes the proposed HVDC
G scheme. The Petition for Transmission Licence
amendment is under consideration with the Commission.
2.1.22 As regards the project to be undertaken under
TBCB, the STU vide its letter dated 22 January, 2020
has submitted that the 1000 MW HVDC Kudus-Aarey
H schemes has been referred to the Empowered
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Committee formed by the Govt. of Maharashtra and A
the decision of Empowered Committee is awaited.
2.1.23 In view of the above, the Commission will decide
regarding the HVDC scheme during proposed
Transmission Licence Amendment of AEML-T in Case
No. 195 of 2019 or any other proceedings as deemed B
appropriate.”
29. In paragraph 5.3.12 of its order, MERC noted that the HVDC
Scheme was critical for strengthening the Mumbai transmission corridor
and observed:
“5.3.12 In continuation to the above, the Commission, as discussed C
in Paras 2.1.19 to 2.1.23 of this Order considers the timely
implementation of the schemes pertaining to the strengthening of
the Mumbai transmission corridor viz. Interconnection Point at
Vikhroli and HVDC scheme, as very critical. The HVDC scheme
is already part of the STU Five Year Plan (FY 2018-19 to FY D
2023-24) and as per the plan, the scheme is envisaged to be
executed by AEML-T in the year 2023-24. In this regard, AEML-
T has already approached the Commission with a Petition to amend
its existing Transmission License in Case No. 195 of 2019 to include
the proposed HVDC scheme along with other proposed
amendments which is under consideration with the Commission. E
Also, in order to assess its reasonability of the cost, AEML-T has
recently submitted its DPR for in-principle approval of the
Commission. Considering the critical nature of these schemes and
time required for obtaining the necessary regulatory approvals,
the Commission directs the STU and AEML-T to initiate all the F
necessary steps for implementing the critical schemes within the
timeframe envisaged in the STU Five Year Plan. However, the
implementation of the scheme would be subject to necessary
Regulatory approvals.”
30. On 30 May 2020, the EC of GoM conducted its fourth meeting G
at which it opined that the HVDC Scheme which was a part of the
earlier five-year plan for 2018-19 to 2023-24 was not a part of the plan
for 2019-20 to 2024-25. The members of the EC opined that the HVDC
Scheme, not being a part of the five-year plan, need not be considered
for TBCB at that point and deferred the decision. The STU was directed
to send its plan for 2019-20 to 2024-25 to MERC. H
650 SUPREME COURT REPORTS [2022] 19 S.C.R.

A 31. On 3 September 2020, MSETCL submitted its five-year plan
for financial years 2019-20 to 2024-25 before MERC. The plan included
the HVDC project in FY 2024-25, subject to comments from CEA. The
plan envisaged 1000 MW HDVC terminal stations at Kudus to Aarey
for 2024-25. The note appended to the foot of the tabulated statement is
in the following terms:
B
Note:
** 1000 MW HVDC Terminal Stations at Kudus & Aarey and HVDC Link
Two HVDC schemes were part of STU plan 2018-19 to 2023-24 with a note that
consolidated detail study will be carried out considering all Mumbai related
schemes separately. Subsequent STU study indicated that with inclusion of 400kV
Velgaon, 400 kV Kalwa Switching, 400 kV Kalwa-Padghe M/Cline ect., these
C HVDC schemes will not be required. However, in view of earlier CEA study in
this regard and as HVAS schemes were not referred to CEA, the STU study
including these HVDC schemes has been referred to CEA for their comments.
Hence 1000 MW Kudus-Aarey HVDC link is included in the year 2024-25 of this
STU five year plan (2019-20 to 2024-25) is subject to averse comments if any by
CEA in the matter may lead to deletion of the scheme from STU five year plan.

D 32. On 21 September 2020, AEML-T filed an application in Case
195 of 2019 before MERC proposing to amend its licence and sought
permission to delete the HVDC Scheme in its entirety from the scheme
proposed in the petition on the ground that the scheme is proposed to be
executed by its subsidiary company, AEMIL. On the same day, AEMIL
and AEML-T filed a joint petition bearing Case No 190 of 2020 before
E
MERC for a line specific transmission licence for the proposed HVDC
project in the name of AEMIL. AEMIL and AEML-T stated that in
view of the transmission constraints and time period involved in the
commissioning of bulk power schemes, the need for an HVDC Scheme
was discussed during the first meeting of the Standing Committee chaired
F by the Secretary, Energy, GoM on 29 January 2018 for strengthening
the electricity supply system to Mumbai city. Moreover, the HVAC
scheme which was proposed by MSETCL had not progressed beyond
the stage of a route survey despite the passage of three years. The
above amendment, this Court is informed, was in order to drop the
transmission project which was based on HVDC technology from AEML
G -T’s scope of work. Instead, a fresh transmission licence was sought in
the name of AEML-T’s subsidiary, AEMIL. It was stated that the
amendment was necessitated because:
(i) With a four to five year execution period, the scheme was
capital intensive, requiring finance from multiple financial
H institutions;
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(ii) In view of the substantial financial investment which was A
required, financial institutions required identified target funds
which could be strictly monitored and controlled; and
(iii) There was a need to ensure timely inclusion and financial
closure.
33. On 12 October 2020, MSETCL filed its reply stating that it B
does not recommend the grant of a transmission licence for the HVDC
project to AEMIL on the grounds that: (a) In the transmission licence
granted to AEML-T on 11 August 2011 to R-Infra, there is no mention
of transfer of a part of the licence to another company; (b) AEMIL is a
separate legal entity and would have to make a fresh application to MERC C
for a transmission licence under Sections 14 and 15 of the Act; and (c)
If AEMIL satisfies the requirements under Section 14 and 15 of the Act,
the licence shall be granted at the discretion of MERC.
34. On 23 October 2020, a communication was addressed by CEA
to MSETCL recording that: D
“iii. It may be noted that considering the need for availability of
power supply in the Mumbai area and ROW problem in
constructing overhead transmission lines to Mumbai, CEA on the
request of AEML has already suggested a scheme for bulk power
injection to Mumbai i.e. 1000 MW VSC based HVDC from E
Kudus to Array along with future for another 1000 MW. This
suggestion was made based on the studies carried out for 2024-
25 conditions. Requisite land provision in AEML S/S at Kudus
and Array is available for construction of the VSC HVDC S/S.
This system would provide the required reliability of additional
independent feed to Mumbai area when the generation sources in F
TATA system is likely to do down.”
The need for implementing the HVDC Scheme as proposed was
highlighted in the following extracts of the letter:
“iv. Recent blackout incidence (12.10.2020) of Mumbai also the
G
need for immediate implementation of the 1000 MW VSC based
HVDC from Kudus to Aaray system so that the increasing load
of MMR can be met reliably. The multiple feeding points i.e. Kudus
Aaray VSC link and under implementation Phadge-New Mumbai-
Khargar 400 kV link would provide additional feeding point and
enhance the reliability of Mumbai system. H
652 SUPREME COURT REPORTS [2022] 19 S.C.R.

A v. Considering the fact that the present power demand of Mumbai
to be around 3700-3800 MW and the maximum embedded
generation available in TATA area is about 1349 MW against
generation capacity of 1627 MW. In Adani area generation about
350 MW against 500 MW is available. So presently under best
generation availability condition, more than 50% power demand
B
of MMR is required to be imported from 400 kV Pune, Phadge,
Boiser link. Since the link from Pune and Phadge are old and with
moose conductor so in case of outage of any link serious
transmission constraint for import of power into Mumbai area is
observed. This further get aggravated when the generation in
C TATA system is low. It is also a known fact that the machines in
TATA and Adani area are going to be phased out gradually. Under
that circumstances the whole of power demand of MMR has to
be met through import only.”
In this backdrop, the letter stated that an additional infeed to the
D Mumbai area from sources such as the 1000MV VSC based HVDC
from Kudus to Aarey as suggested by CEA was required to be
implemented on a priority basis.
35. On 24 December 2020, the EC conducted its fifth meeting. In
Agenda item 3 pertaining to the threshold limit (according to NTP 2016)
for development of intra state transmission projects through the TBCB
E route, the EC decided that:
(i) All projects in the STU plan costing Rs 500 crore or more
would be referred to the EC for execution under the TBCB
route;
(ii) If the STU proposed a project costing over 500 crore would
F not be taken under the TBCB route “for reasons peculiar
to the project” and would be executed under any other
mechanism, the justification would be placed before the EC
for its consideration”;
(iii) The threshold limit of Rs 500 crore would be reviewed
G annually; and
(iv) Once the EC decides to recommend the project under
TBCB route or otherwise, the STU is to petition MERC for
final approval “of fresh transmission licence or for extending
existing transmission licence by following due process of
H law”.
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Apart from the above decisions, the applicability of the limit of Rs A
500 crore to “new / old projects” was discussed and it was decided that:
“i. All the projects that are already part of license of a licensee as
decided by MERC and MERC has already allotted the work for
execution to the licensee, will not be forwarded for further
consideration to the committee. B
ii. Projects that are under active consideration of MERC where
STU has already recommended execution under a particular
mechanism and where MERC has initiated substantially the process
of inclusion of the project in scope of any existing or new
transmission license on the basis of this recommendation, may C
not be put to committee for fresh consideration. Any further
recommendation, if asked of STU by MERC or any other legal
forum, STU may agitate the committee for the same as per the
threshold limit decided above.”
36. Agenda Item No 4 of the same meeting dealt with the 1000MW D
HVDC Kudus- Aarey project. On this aspect, it was decided that STU
must place its recommendation on the tariff determination of the 1000MW
HVDC Kudus- Aarey project based on the decision in Agenda 3. The
relevant extract from the Minutes of the Meeting is extracted below:
“Agenda Item 4: Appraisal of inclusion of 1000 MW HVDC E
Kudus-Aarey project in the STU five Year plan
(2019-20 – 2024-25) referred to Empowered Committee in last
meeting.
The Agenda “1000 MW HVDC project of Kudus – Aarey to be
taken under TBCB” was discussed in 4th Empowered Committee F
meeting on 30th May 2020.”
At that time the HVDC project was not part of STU five-year
plan.
Hence the agenda item was deferred. Now the Empowered
Committee has been apprised about inclusion of 1000 MW HVDC G
project of Kudus – Aarey in the STU Five-year plan. Post appraisal
of inclusion, the Committee informed STU that they should
proceed as per the decision given by the Empowered Committee
vide Agenda No.3.”
H
654 SUPREME COURT REPORTS [2022] 19 S.C.R.

A 37. On 29 December 2020, the appellant filed objections before
MERC objecting to the transmission application filed by AEMIL and
AEML-T. In their response dated 31 December 2020, AEMIL and
AEML-T stated that the approval of the DPR was cancelled by MERC
only due to the proposal of MSETCL that the technology be altered
from HVDC to HVAC. However, the overhead HVAC scheme which
B
was proposed by MSETCL was not implemented. Hence, the HVDC
Scheme as a bulk power injection scheme for Mumbai was deliberated
which resulted in reconsideration of the transmission project based on
HVDC technology which had already been approved earlier.
38. In its additional submission dated 20 January 2021 filed before
C MERC, MSETCL adverted to the CEA report and stated that it would
proceed in accordance with the decision of the EC. On 27 January 2021,
MSETCL filed submissions indicating that:
(i) A 1000MW HVDC link between Kudus and Aarey for
which a licence had been sought was part of the five-year
D transmission plan prepared by the STU;
(ii) The HVDC Scheme was under consideration for several
years and was recommended by several committees;
(iii) The bulk power transmission scheme was essential for
E meeting the requirement of Mumbai’s transmission system;
(iv) While other alternatives had been explored including HVAC
technology, the HVDC Scheme was found to be more
reliable by the CEA in its letter dated 23 October 2020 which
emphasised the need to implement it on a priority basis;
F (v) The HVDC project is an old project; and
(vi) The threshold limit which was decided by the EC on 24
December 2020 is yet to be approved by MERC.
In this backdrop, MSETCL stated that following the TBCB route
would take between one to two years as was the experience in other
G MERC projects.
However, it was indicated that MERC may suggest a suitable
strategy for cost competitiveness which would benefit the consumers in
Maharashtra.

H
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B. Proceedings before MERC and APTEL A
39. On 21 March 2021, MERC issued an order granting AEMIL
the transmission licence to develop the Aarey-Kudus transmission project
based on HVDC technology where tariff was to be determined through
the RTM approach under Section 62 of the Act. The Commission
observed that: B
(i) The Kudus-Aarey project is essential for strengthening
Mumbai’s transmission system, and should be undertaken
for execution on an immediate basis as planned by STU;
(ii) The Supreme Court in Energy Watchdog v. Central
Electricity Regulatory Commission1 held that NTP 2016 C
is a ‘statutory policy’ and has the ‘effect of law’. NTP
2016 mandates that the State Commissions’ must notify a
threshold limit to determine the projects that will have to be
taken through the TBCB route. MERC has not notified the
threshold yet; D
(iii) GoM’s GR is an executive decision under Section 63 and
not subordinate legislation under Section 180 of the Act.
The relevant date for determining if a project is a ‘new’ or
an ‘existing’ project under the GR is 4 January 2019, that is
the date of notification of the GR forming the EC. As on 4 E
January 2019, the HVDC project was an ‘existing’ project
for the following reasons:
(a) The cancellation of the DPR by the Commission in
May 2016 was specific to the ‘technology’. The need
for the bulk power injection for Mumbai was never F
cancelled or withdrawn. The scope of the old
approved HVDC Scheme was changed by STU and
not by AEML-T ; and
(b) Once the approval of a scheme is cancelled, it ceases
to exist for consideration. However, the Kudus-
G
Aarey HVDC Scheme was proposed in November
2018, before the GoM’s GR was notified. Planning
and preparatory work such as technical studies, cost
estimation, identification of land, and preparation of
DPR had also been initiated.
1
(2017) 14 SCC 80 H
656 SUPREME COURT REPORTS [2022] 19 S.C.R.

A (iv) Multiple transmission licenses in the State of Maharashtra
have been granted under capital expenditure schemes under
Section 62 of the Act after the NTP 2016 was notified. If
the argument that projects cannot be undertaken under the
Section 62 route after the GR is notified is accepted, it would
mean that none of the other projects could have been
B
notified through the RTM route as well.
(v) Even if the GR is held to be applicable which would give
the EC statutory force for identification of projects under
the TBCB route, the HVDC Kudus-Aarey project is still
not mandated to be allotted through the TBCB route since:
C
(a) Merely because STU has listed the HVDC Scheme
in the agenda for the EC Meeting, it does not mean
that the scheme has been chosen for TBCB. STU
has only sought the opinion of the EC. Further, the
EC has not recommended that the HVDC Scheme
D is to be undertaken under the TBCB route;
(b) The EC in its meeting held on 24 December 2020
recommended that all the projects in the STU plan
that cost more than 500 Crore must be referred to
EC for consideration for execution under the TBCB
E route. However, it was decided that it would only be
applicable to new projects. It was recommended that
projects that are under active consideration of MERC
where the STU has already recommended execution
under a certain mechanism and where MERC has
F substantially initiated the process of inclusion of the
project in the scope of any existing or new
transmission licensee on the basis of its
recommendation shall not be put to the EC for fresh
consideration. The HVDC project is under active
consideration of MERC as the project has been
G included in STU’s five-year plan and the project has
been allotted to AEML-T. Since the HVDC project
falls under the exception, the EC has not
recommended that the HVDC Scheme must be
allotted through the TBCB route since it is an existing
H project and not a ‘new’ project.
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(vi) The GoM’s GR is not applicable to the Aarey-Kudus HVDC A
project, and even if applicable, it does not qualify as a ‘new’
project in view of the exceptions laid down by the EC. Thus,
MERC has the discretion to choose from either the Section
62 or the Section 63 route. MERC must choose the most
appropriate route for undertaking the project, considering
B
the need for the scheme, the urgency associated with the
scheme, the historical background, and the peculiarities of
the scheme. The HVDC Scheme according to the STU
Plan 2019-20 to 2024-25 should be undertaken under Section
62 because:
(a) The cost- benefits of the project if awarded under C
the TBCB route cannot be assessed since there is
no precedent of a completed HVDC Scheme being
awarded through the TBCB route;
(b) HVDC Scheme is a high-cost project with high end
technology with limited international suppliers. It has D
relatively limited scope for cost reduction when
compared to HVAC schemes;
(c) AEMIL has already taken steps to procure land at
Aarey and Kudus for the HVDC Scheme. It will
facilitate the timely completion of the project; E

(d) STU has expressed reservations regarding
undertaking the HVDC Scheme through the
competitive bidding route since the competitive
bidding process would take an additional two years
for completion. Two transmission projects that were F
decided to be undertaken under the TBCB route have
still not seen any progress even after the completion
of almost 3 years; and
(e) Projects undertaken under Section 62 of the Act can
be more closely monitored on aspects such as timely G
execution and cost escalation.
40. The summary of the conclusions drawn in the order of the
MERC are extracted below:
“38.61 In summary:
H
658 SUPREME COURT REPORTS [2022] 19 S.C.R.

A a) There is no right or wrong approach for undertaking this HVDC
Bulk Power Injection Scheme for Mumbai, in terms of whether
the Scheme is decided to be undertaken under Section 62 (RTM)
or Section 63 (TBCB) route, as both RTM and TBCB route can
be justified for its implementation;
B b) This is a case where the most appropriate route for undertaking
the Project has to be selected, considering the need for this Scheme,
the urgency associated with the Scheme, the historical background,
and the peculiarities of this Scheme;
c) This Project is being considered by the Commission because it
C is part of the STU Plan FY 2019-20 to FY 2024-25, wherein this
Scheme is allocated to AEML;
d) The cost benefits in case the Project is awarded under the
TBCB route cannot be assessed, as there is no precedent of any
completed HVDC Scheme with UG cabling being awarded
D through the TBCB route;
e) HVDC Scheme is a high-cost project with high-end technology
with limited international suppliers, and hence, has relatively limited
scope for cost reduction as compared to HVAC schemes;
f) Steps already taken by the Petitioners for procuring land at
E Aarey and Kudus for HVDC terminal station will facilitate timely
completion of the Project;
g) The Commission has asked IIT Bombay to evaluate the Scope,
design aspects, reasonability of cost, alternatives, etc., of the
Scheme to ensure a technically appropriate and cost-effective
F solution for mitigating Mumbai’s transmission constraints;
h) The contracting for the Project would be through international
competitive bidding as a pre-condition of the Licence, and hence,
the least cost is likely to be achieved. Further, the cost incurred on
the Scheme could be verified through experts after completion of
G the Scheme before allowing recovery through ARR;
i) The Commission allows recovery of capital cost for Section 62
Projects only after prudence check based on detailed scrutiny, so
that only justified and reasonable cost is recovered through tariff;
j) The STU has expressed reservations regarding undertaking the
H HVDC Scheme through the competitive bidding route, and has
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stated that additional time of 1-2 years may be required for A
completion of the competitive bidding process;
k) The two Transmission Schemes in Maharashtra that have been
decided to be undertaken under TBCB route, other than Kharghar
Vikhroli Transmission Project, have not seen any progress at all,
even after passage of almost 3 years in one case; B
l) It will be in no one’s interest if the Scheme is awarded under
TBCB route especially when the planning and feasibility of the
Scheme is at final stage, even if it is at a lower cost than that
estimated by AEMIL, if it either does not come up at all or does
not come up within the desired timelines; C
m) The rationale adopted at the Central level to undertake HVDC
Projects on RTM basis despite the high cost of such Schemes,
has been the intention of compressing the execution time schedule,
which is equally applicable to the present Mumbai transmission
system; D
n) Section 62 Projects can be closely and regularly monitored by
the Commission for aspects such as timely execution, cost
escalation, etc., unlike Section 63 Projects where the Bidders are
bound by the conditions and responsibilities stipulated in the TSA,
and on which the Commission has a limited regulatory oversight; E
o) The Commission has already constituted the Maharashtra
Transmission Committee (MTC) in accordance with the MEGC,
under the aegis of the Grid Coordination Committee (GCC), which
shall be responsible for planning and monitoring timely execution
of transmission projects in Maharashtra including Mumbai area. F
Considering the importance of HVDC Scheme for strengthening
the Mumbai Transmission system, the Commission will separately
notify a Committee for closely monitoring the progress of this
Project to ensure strict adherence to the planned timelines for its
identified milestones;
G
p) The Scheme has to be undertaken at the earliest in a time-
bound manner in the interest of strengthening Mumbai’s
transmission system, especially since almost 10 years have passed
since the HVDC Bulk Power Injection Scheme was first proposed
for Mumbai;
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660 SUPREME COURT REPORTS [2022] 19 S.C.R.

A q) The early and timely completion of the HVDC Bulk Power
Injection Scheme for Mumbai will provide access to alternative
power procurement sources as compared to the embedded
generating units; while there is no guarantee that power
procurement through competitive bidding will discover rates lower
than that of the embedded generating units, at least the option will
B
be available to the Mumbai Distribution Licensees and
Commission’s approval, and the lower power procurement costs
can be passed on to the consumers through reduction in tariff;
r) Considering the expected retirement of the embedded generation
capacity and Transmission constraints, import of potentially cheaper
C power into Mumbai through competitive bidding will be facilitated
by implementation of the HVDC Scheme, which is likely to reduce
the cost of power for the end-consumers.”
MERC therefore concluded that the HVDC Scheme in terms of
the STU plan for 2019-20 to 2024-25 would be undertaken by AEMIL
D under Section 62 with the safeguards stipulated in the order.
41. The appellant instituted proceedings under Article 226 of the
Constitution before the High Court of Judicature at Bombay. However,
it withdrew those proceedings with liberty to move APTEL under Section
111 of the Act. TPC-T filed an appeal under Section 111 of the Act
E before APTEL. APTEL, by its order dated 18 February 2022 dismissed
the appeal with the following findings:
(i) The argument that the TBCB route under Section 63 is the
dominant route is premised on a flawed reading of the Act.
RTM under Section 62 is recognized under the Act and it
F cannot be considered to be in a position subservient or
inferior to the TBCB route;
(ii) There was no infirmity in MERC’s order granting a
transmission licence as the HVDC Project was an old/
existing project in terms of the GoM’s GR dated 1 January
2019. The earlier cancellation by MERC of the in-principle
G
approval did not render the project a new scheme since the
STU changed its stance due to its objections on the
technology. The change in route from Nagothane to Kudus
was similar to modifications that are common to all
transmission projects and the project cannot be considered
H as a new project merely due to change of connection point;
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(iii) That while the change of stance of the STU is not proper A
and a decisive and timely approach is instead expected, the
same cannot be a ground to vitiate the decision taken by
MERC;
(iv) That the grant of licence was not contrary to Section 15
which requires the publication of a notice for suggestions B
and objections before granting a licence. MERC had issued
a public notice and the proceedings under
Section 15 cannot be conducted de hors the entity which
has to implement the project; and
(v) That even though there may be reasons justifying the C
adoption of the option under Section 63, this is not reason
enough for the Tribunal to sit in appeal and supplant the
views of the Commission. Furthermore, in light of the
criticality of the project for the region, interference by the
tribunal would be improper, considering the progress that D
has already been made.
42. The appeal has been instituted under Section 125 of the Act
for challenging the judgment of APTEL.
C. The Submissions
E
43. Mr Shyam Divan, learned senior counsel appearing on behalf
of the appellants has urged the following submissions:
(i) For all transmission projects, the rule for the award of
transmission licences is competitive bidding, subject to
certain exceptions;
F
(ii) The rule of competitive bidding is based on statute, statutory
policy, and guidelines of the and State Governments ;
(iii) Two methods have been statutorily prescribed for tariff
determination in Sections 62 and 63. However, in the facts
and circumstances, the TBCB route under Section 63 of G
the Act was required to be followed;
(iv) There were no exceptional circumstances warranting a
departure from the TBCB route;
(v) The present project must be considered as a new project,
adopting 4 January 2019 the date on which the government H
662 SUPREME COURT REPORTS [2022] 19 S.C.R.

A of Maharashtra issued a GR in consonance with the NTP
2016 as the cut-off date for determining as to whether the
project in question is old or new; and
(vi) APTEL has misconstrued the scope of Section 110 by
disregarding the legal position that the provision envisages
B a full appeal on facts and law to a specialised body.
44. On the other hand, Dr Abhishek Manu Singhvi and Mr Vikas
Singh, learned senior counsel appearing on behalf of the AEML-T and
AEMIL have urged the following submissions:
(i) On a proper construction of the provisions of Sections 61,
C 62 and 63, the legal position is that Sections 62 and 63 stand
on an equal footing and it would be incorrect to postulate
that Section 63 has a dominant character;
(ii) The concepts of the historicity of a project, the criticality of
a scheme and its urgency are factors that are embodied in
D Section 61;
(iii) Irrespective of the interpretation of Sections 62 and 63, the
application of the above test must render the award of the
contract to AEML-T valid;
(iv) MERC was correct in entering a finding of fact that the
E
appellant is only interested in delaying the project. The
Vikhroli transmission project was abandoned by the appellant
and was eventually secured by the second respondent. The
award of the HVDC project would inject much needed
power to Mumbai;
F
(v) TPC-T has not challenged the multi-year tariff order dated
30 March 2020 issued by MERC which was a product of a
detailed consideration where considering the critical nature
of the schemes and the time required for obtaining
regulatory approvals, MERC directed STU and AEML-T
G to initiate the necessary steps to implement the scheme.
The impugned order granting a transmission licence is only
consequential;
(vi) It was envisaged that from 2007 that AEML-T would obtain
the HVDC line. The HVDC project was delayed only
H because MSETCL proposed that it would implement an
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overhead transmission project from Kudus to Aarey, which A
never took off. Between 2007 and 2019 there was no
objection to the project which was envisaged to be executed
by R-infra and later by AEML-T;
(vii) Even as of date, no threshold limit has been prescribed by
MERC for adopting the TBCB route for the award of a B
licence for an intra-state transmission project; and
(viii) Both MERC and APTEL are statutory expert bodies at the
primary and appellate level and have taken a concurrent
view. Save and except in the case of perversity, the
interference of this Court is not warranted. C
D. Regulatory Framework
45. Before proceeding to analyse the issues that fall for
determination, it is important that we lay out the regulatory framework
on determination of tariff with reference to the provisions of the Electricity
Act, and the policies framed by the Central Government and the State D
of Maharashtra under the provisions of the Act.
D. 1 Electricity Act 2003
46. Before the enactment of the Electricity Act 2003, the Indian
electricity sector was governed by the Indian Electricity Act 1910, the
E
Electricity (Supply) Act 1948 and the Electricity Regulatory Commission
Act 1998. The Indian Electricity Act 1910 created a basic framework
for the electricity supply industry in India. The Electricity (Supply) Act
1948 mandated the creation of State Electricity Boards, which had the
responsibility of facilitating supply of electricity within the State. However,
the State Electricity Boards were unable to use their power to fix tariffs F
judiciously. It was noted that the State Governments were in practice
fixing tariffs. To distance the State Governments from the exercise of
tariff fixation, the Electricity Regulatory Commissions Act 1998 was
enacted.
47. Parliament enacted the Electricity Act 2003 to consolidate the G
laws relating to generation, transmission, distribution, trading and use of
electricity; to develop the electricity industry; and to promote competition.
The Electricity Act 2003 was enacted with the objective of encouraging
the participation of the private sector in the generation, transmission,
and distribution of electricity, and to harmonise and consolidate the
H
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A provisions into a self-contained code:
“With the policy of encouraging private sector participation in
generation, transmission and distribution and the objectives of
distancing the regulatory responsibilities from the Government to
the Regulatory Commissions, the need for harmonising and
B rationalising the provisions of the Electricity Act 1910, the
Electricity (Supply) Act 1948 and the Electricity Regulatory
Commissions Act 1948 in a new self-contained comprehensive
legislation arose.”
48. The long title to the Act indicates that its object is to consolidate
C the laws relating to generation, transmission, distribution, trading, and
use of electricity and to take measures conducive to the development of
the electricity industry; promote competition and protect the interest of
consumers; ensure the supply of electricity to all areas; rationalise
electricity tariffs and ensure transparent policies. The Statement of
Objects and Reasons of the Act states that “it gives the States enough
D flexibility to develop their power sector in the manner they consider
appropriate.”
49. Section 3 provides for the formulation of a National Electricity
Policy and National Tariff Policy:

E “Section 3. (National Electricity Policy and Plan) — (1) The
Central Government shall, from time to time, prepare the National
Electricity Policy and tariff policy, in consultation with the State
Governments and the Authority for development of the power
system based on optimal utilisation of resources such as coal,
natural gas, nuclear substances or materials, hydro and renewable
F sources of energy.
(2) The Central Government shall publish National Electricity
Policy and tariff policy from time to time.
(3) The Central Government may, from time to time, in consultation
with the State Governments and the Authority, review or revise,
G
the National Electricity Policy and tariff policy referred to in sub-
section (1) .
(4) The Authority shall prepare a National Electricity Plan in
accordance with the National Electricity Policy and notify such
plan once in five years:
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Provided that the Authority while preparing the National Electricity A
Plan shall publish the draft National Electricity Plan and invite
suggestions and objections thereon from licensees, generating
companies and the public within such time as may be prescribed:
Provided further that the Authority shall - (a) notify the plan after
obtaining the approval of the Central Government; (b) revise the B
plan incorporating therein the directions, if any, given by the Central
Government while granting approval under clause (a).
(5) The Authority may review or revise the National Electricity
Plan in accordance with the National Electricity Policy.”
In terms of the above provision, the Union Government has to C
formulate the NEP and NTP in consultation with the State Governments
and the CEA.
50. Part III of the Act deals with the generation of the electricity;
Part IV deals with licensing; Part V with transmission; Part VI with
distribution and Part VII with tariff. D
51. Section 38 provides that the Central Government may notify
any government company as the CTU. The CTU is statutorily
empowered to undertake the transmission of electricity through inter-
state transmission systems. The CTU has to also discharge functions of
planning and coordination relating to inter-state transmission systems. E
For this purpose, the CTU is required to coordinate with the STU, Central
and State Governments, generating companies, authorities and licensees.
52. Section 39 stipulates that the State Government may notify
the Board or any government company as the STU. The STU shall
undertake transmission of electricity through the intra-state transmission F
system and discharge functions relating to the planning and coordination
of the intra-state transmission system. While discharging its functions,
the STU is required to reflect the planning initiatives of intra-state
transmission system by publishing a five-year plan periodically.
53. Sections 76 and 82 constitute the Central Regulatory G
Commission and State Regulatory Commissions respectively. The Central
and State Regulatory Commissions shall among other functions, determine
and regulate the tariff for inter-state transmission of electricity and intra-
state transmission of electricity respectively. Sections 79(3) and 86(3)
stipulate that the Central and State Commissions shall while discharging
H
666 SUPREME COURT REPORTS [2022] 19 S.C.R.

A their functions ensure transparency, and ‘shall be guided’ by the NEP,
NTP and National Electricity Plan. The Central and the State
Commissions also discharge advisory functions, where they shall advise
the Central Government and State Government respectively on, inter
alia, promotion of competition in activities related to the electricity industry
and in matters concerning generation, transmission, and distribution of
B
electricity. Section 25 states that the Central Government may make a
region-wise demarcation of the country for the purpose of integrated
transmission of electricity to facilitate inter-state, regional and inter-
regional transmission of electricity. Section 30 provides that the State
Commission shall facilitate and promote transmission, wheeling, and inter-
C connection arrangements within its territorial jurisdiction for the
transmission of electricity.
54. Section 14 envisages that the Appropriate Commission, defined
in Section 2(4) to mean the Central or as the case may be the State
Regulatory Commission, may grant a licence to any person:
D (a) To transmit electricity as a transmission licensee;
(b) To distribute electricity as a distribution licensee; and
(c) To undertake trading and electricity in any area specified in
the licence.
E 55. Section 15 prescribes the procedure to be followed for the
grant of licences. The application for a licence under Section 14 has to
be filed in the manner prescribed by the Appropriate Commission. The
person who has applied for the grant of a licence must publish a notice
of the application. The licence shall not be granted by the Appropriate
F Commission until the objection(s), if any received, are considered by the
Commission. The application shall also be forwarded to the CTU or the
STU, as the case may be. The CTU or STU must send its
recommendation to the Appropriate Commission. The recommendation
of the CTU or the STU is however, not binding on the Commission. The
Appropriate Commission is also required to publish a notice of the
G application if it proposes to issue the licence. The Commission has to
consider the objections and the recommendations of the Transmission
Utility before granting the licence.
56. In enacting the above provisions of law, Parliament has made
a clear demarcation between intra-state and inter-state transmission of
H electricity. While the CTU, Central Government and the Central
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Regulatory Commission are responsible for the facilitation of inter-state A
transmission of electricity, the State Commission and the STU have been
granted full autonomy with respect to intra-state transmission of
electricity.
57. Part VII deals with tariffs. Part VII comprises of Section
61(tariff regulations), Section 62 (determination of tariff), Section 63 B
(determination of tariff by bidding process), Section 64 (procedure for
tariff order), Section 65 (provision of subsidy by the state government)
and Section 66 (development of market). In terms of Section 61, the
Appropriate Commission is entrusted, subject to the provisions of the
Act, to specify the terms and conditions for the determination of tariffs.
While specifying the terms and conditions, the Appropriate Commission C
shall be guided by the requirements specified in clauses (a) to (i). Amongst
them, in clause (i) is the NEP and tariff policy, while clause (c) emphasizes
the need to encourage competition, efficiency, economical use of
resources, good performance and optimum investment. Section 62(1)
empowers the Appropriate Commission to determine the tariff “in D
accordance with the provisions of this Act” for :
a. Supply of electricity by a generating company to a distributing
licensee;
b. Transmission of electricity;
c. Wheeling of electricity; and E
d. Retail sale of electricity.
Section 63 provides that notwithstanding the provisions of Section
62, the Commission shall adoptthe tariff determinedthrough the bidding
process if the tariff has been determined through a transparent process
in accordance with the guidelines issued by the Central Government. F
D.2 Policy framework
58. The Central Government has under the provisions of the Act
issued resolutions and framed policies. In order for us to understand the
gamut of the issues before us, it is necessary that we refer to the policies
notified by the Central Government and the State Government of G
Maharashtra.
D. 2.1 Central Policies
59. On 6 January 2006, the Ministry of Power notified the NTP
2006 in exercise of its power under Section 3 of the Act. The NTP 2006,
inter alia, emphasizes the need for transparency and competition in the H
668 SUPREME COURT REPORTS [2022] 19 S.C.R.

A power sector and the need to ensure the availability of electricity to
consumers at reasonable and competitive rates.
60. Clause 5.1 states that one of the key features of the Act is
that it introduced competition in different segments of the electricity
industry. The policy deals with transmission in clause 7. Clause 7.1(6)
B deals with transmission pricing where it is emphasised that “investment
of transmission developer other than CTU/STU would be invited through
competitive bids”. Clause 7.1(6) inter alia provides as follows:
“(6) Investment by transmission developer other than CTU-STU
would be invited through competitive bids. The Central Government
C will issue guidelines in three months for bidding process for
developing transmission capacities. The tariff of the projects to
be developed by CTU-STU after the period of five years or when
the Regulatory Commission is satisfied that the situation is right to
introduce such competition (as referred to in para 5.1) would also
be determined on the basis of competitive bidding.”
D
61. Clause 7.1(7) stipulates that after implementing the framework
for inter-state transmission, a similar approach shall be implemented by
SERCs for intra-state transmission within two years after considering
factors like voltage, distance, direction and quantum of flow. However,
Clause 5.1 dealing with the General Approach to Tariff notes that even
E for public sector projects, tariff for new projects must be determined
through the TBCB route after five years or when the Regulatory
Commission deems it fit. The relevant clause is extracted below:
“5.1 […] Even for the Public Sector projects, tariff of all new
generation and transmission projects should be decided on the
F basis of competitive bidding after a period of five years or when
the Regulatory Commission is satisfied that the situation is ripe to
introduce such competition.”
62. On 13 April 2006, the Union MoP notified Tariff Based
Competitive Guidelines for Transmission Services under Section 63 of
G the Act to promote competitive procurement of transmission services
and encourage private investment in the development of transmission
lines. The objects for making the guidelines are:
“
• Promote competitive procurement of transmission services.
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• Encourage private investment in transmission lines. A
• Facilitate transparency and fairness in procurement
processes.
• Facilitate reduction of information asymmetries for various
bidders.
B
• Protect consumer interests by facilitating competitive
conditions in procurement of transmission services of
electricity.
• Enhance standardization and reduce ambiguity and hence
time for materialization of projects; C
• Ensure compliance with standards, norms and codes for
transmission lines while allowing flexibility in operation to
the transmission service providers.”
63. On 13 April 2006, the MoP notified Guidelines for Encouraging
Competition in Development of Transmission Projects. In terms of Clause D
13, an Empowered Committee was constituted to identify projects to be
developed under the scheme. In terms of Clause 19, the selection of the
developer for identified projects would be through TBCB for transmission
services according to the guidelines issued by the MoP under Section
63. However, for intra-state projects the guidelines provide that the States
E
shall have the discretion to adopt the guidelines. Clause 24 noted as
follows:
24. As far as intra state projects are concerned the state
governments may adopt these guidelines and may constitute similar
committees for facilitation of transmission projects within the state.
F
64. On 28 January 2016, MoP issued the NTP 2016. Paragraph 5
of the policy spells out the “general approach to tariff”. Paragraph 5.1
indicates:
“5.1 Introducing competition in different segments of the electricity
industry is one of the key features of the Electricity Act 2003. G
Competition will lead to significant benefits to consumers through
reduction in capital costs and also efficiency of operations. It will
also facilitate the price to be determined competitively. The Central
Government has already issued detailed guidelines for tariff based
bidding process for procurement of electricity by distribution
licensees.” H
670 SUPREME COURT REPORTS [2022] 19 S.C.R.

A In a similar vein, paragraph 5.3 specifies that:
“5.3 The tariff of all new generation and transmission projects of
company owned or controlled by the Central Government shall
continue to be determined on the basis of competitive bidding as
per the Tariff Policy notified on 6th January, 2006 unless otherwise
B specified by the Central Government on case-to-case basis.
Further, intra-state transmission projects shall be developed by
State Government through competitive bidding process for projects
costing above a threshold limit which shall be decided by the
SERCs.”
C 65. Paragraph 5.3 which has been extracted above envisages
that a competitive bidding process should be followed for intra-state
transmission projects developed by the State government where the
project cost is above a threshold limit that is to be prescribed by the
SERCs.
D 66. On 22 September 2017, the Forum of Regulators in its 61 st
Meeting, while reiterating the NTP 2016, urged all members to determine
the threshold limits for their respective intra-state transmission projects
above which the TBCB route would be followed. The relevant portion
of the Minutes of Meeting is extracted below:
E “Agenda Item No. 5 (i) Action to be taken by States to define a
framework (including setting a threshold limit) for developing intra-
State transmission projects on competitive basis.
The FoR Secretariat updated the Forum that as per provisions of
the revised Tariff Policy notified by the Central Government,
F development of intra-State transmission projects is to be carried
out by the State Government through competitive bidding process
for projects costing above a threshold limit decided by the SERCs.
In this regard, it was placed before the Forum that in some States,
development of State-level transmission projects was carried out
through tariff based competitive bidding (TBCB) route and in some
G States, the conventional route of EPC based contracting is
reportedly followed. Further, SERCs have not determined the
threshold limit of the projects to be considered under TBCB route.
The Forum observed that in order to encourage transparency and
efficiency in project costs, threshold limit for intra-State transmission
H projects is required to be determined by the SERCs as provided
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for in the Tariff Policy. Therefore, the Forum urged the Members A
to determine the threshold limit for their respective State-level
transmission projects, while taking all relevant parameters of their
State into consideration.”
67. On 15 March 2021, the MoP addressed a communication to
the States and Union Territories recording that the NEP 2005 and the B
NTP 2006 had laid down the framework for ensuring optimal development
of transmission networks to promote efficient utilisation of generation
and transmission assets, attract investment in the transmission sector
and provide adequate returns. It noted that this had resulted in
(i) A lower tariff as compared to cost plus; and
C
(ii) Risk sharing.
In the above backdrop, the communication stated that:
“7. As intra-state transmission system has major share in the
transmission sector in the country, adoption of Tariff Based
Competitive Bidding (TBCB) in development of intra-state
D
transmission system can effectively reduce burden on State
Governments’ finances as well as reduce tariff of intra-State
transmission system leading to consumers’ benefit. The matter
was also discussed in a meeting taken by Hon’ble Union Minister
of State (Independent Charge) for Power and New and Renewable
Energy on 03.02.2021 and it was decided to request the State/ E
UT Governments to adopt TBCB in development of intra-
State transmission system.”
(emphasis supplied)
The communication urged that in the larger interest of consumers,
it was strongly recommended that TBCB may be adopted also for the F
development of the intra-state transmission system.
D. 2.2 State Policies
68. On 4 January 2019, the GoM notified a government resolution
with the object of setting up new transmission projects through TBCB in
line with MoP’s guidelines dated 13 April 2006, as subsequently modified. G
While notifying the guidelines, the object of the GR was spelt out in the
following terms:
“It would be possible to use state-of-the-art technology for
transmission projects if Tariff Based Competitive Bidding is
adopted for transmission projects in the state. Since this process H
672 SUPREME COURT REPORTS [2022] 19 S.C.R.

A is transparent, it will help in improving the standard and efficiency
of the project. Thus, transmission projects can be established
quickly. Since investment for establishing these projects is to be
done by the developers on external basis, it will ease the financial
burden on the state. Therefore, the government was considering
constitution of committees like Empowered Committee, Bid
B
Evaluation committee in accordance with the above-mentioned
guidelines of Central government for undertaking transmission
projects in the state through Tariff Based Competitive Bidding.”
The GR notes that:
“For establishing new Transmission Projects, after considering
C the guidelines issued by the Central Government the State
Government has decided to implement Tariff Based Competitive
Bidding-TBCB process for new Projects….”
In terms of the GR, an Empowered Committee was to be set up
to undertake transmission projects in accordance with the guidelines of
D the Central Government. The functions of the Committee were:
“
A) To provide impetus to new transmission projects in the state
through this plan.
B) Selection of transmission projects according to
E recommendations of State Transmission Undertaking.
C) Helping in evaluation of received tenders as well as formation
of Bid Empowered Committee.”
The Empowered Committee was required to appoint a Bid Process
Coordinator in terms of paragraph 3 of the GR to co-ordinate the bidding
F process as per Central Government’s guidelines. The GR also envisaged
setting up of a Bid Empowerment Committee inter alia for the
examination of technical bids and the fulfilment of the technical criteria
prescribed in bid documents. We have already laid out the decisions of
the said Empowered Committee relevant to the current proceedings in
G the earlier section.
E. The Analysis
69. In the backdrop of the factual narration, the essential aspect
that falls for consideration is whether the decision of MERC to allow the
joint licence petition submitted by AEML-T and AEMIL, granting a
H transmission licence for the 1000MW Aarey- Kudus HVDC project is
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vitiated by the failure to follow the TBCB route (the Section 63 route). A
In the course of answering this question, the following issues fall for
consideration:
(i) Whether the Electricity Act 2003 envisages the TBCB route
under Section 63 as the dominant method to determine tariff;
(ii) Whether the NTP framed under Section 3 of the Act is B
binding on the State Regulatory Commissions, particularly
in view of the observations made by this Court in Energy
Watchdog (supra);
(iii) Whether the Regulatory Commissions have the power to
prescribe the modalities to determine the tariff under the C
provisions of the Electricity Act 2003 (and the regulations
framed under it);
(iv) Whether MERC was bound to decide the tariff for the
HVDC Project through TBCB under Section 63 in view of
Government of Maharashtra’s Resolution dated 04 January D
2019 notifying the decision to allocate new intra-state
transmission projects through TBCB route and setting up
an Empowered Committee; and
(v) Whether MSETCL’s decision to not refer the HVDC
Project to the Empowered Committee for holding bidding
E
under the TBCB route is in breach of the GR.
E. 1 Section 63: The dominant route or the alternative route
70. Section 61 grants the Appropriate Commission the power,
subject to the provisions of the Act, to specify the terms and conditions
for the determination of tariff. The provision stipulates that in specifying F
the terms, the Commission shall be guided by principles that are listed in
the nine clauses of the provision. Of particular importance are clauses
(a), (c), and (i). Clause (a) provides that the Appropriate Commission
shall be guided by the principles and methodologies specified by the
Central Commission for determination of transmission tariff. Clause (c)
states that the factors that would encourage competition and efficiency G
must be followed. Clause (i) provides that the Commission shall be guided
by the NEP and NTP. Section 61 reads as follows:
“Section 61. (Tariff regulations):
The Appropriate Commission shall, subject to the provisions of
this Act, specify the terms and conditions for the H
674 SUPREME COURT REPORTS [2022] 19 S.C.R.

A determination of tariff, and in doing so, shall be guided by
the following, namely:-
(a) the principles and methodologies specified by the
Central Commission for determination of the tariff
applicable to generating companies and transmission
B licensees;
(b) the generation, transmission, distribution and supply of electricity
are conducted on commercial principles;
(c) the factors which would encourage competition,
efficiency, economical use of the resources, good
C performance and optimum investments;
(d) safeguarding of consumers’ interest and at the same time,
recovery of the cost of electricity in a reasonable manner;
(e) the principles rewarding efficiency in performance;
(f) multi year tariff principles;
D
(g) that the tariff progressively reflects the cost of supply of
electricity and also, reduces cross-subsidies in the manner specified
by the Appropriate Commission;]
(h) the promotion of co-generation and generation of electricity
from renewable sources of energy;
E
(i) the National Electricity Policy and tariff policy:
Provided that the terms and conditions for determination of tariff
under the Electricity (Supply) Act, 1948, the Electricity Regulatory
Commission Act, 1998 and the enactments specified in the
F Schedule as they stood immediately before the appointed date,
shall continue to apply for a period of one year or until the terms
and conditions for tariff are specified under this section, whichever
is earlier.”
(emphasis supplied)
G 71. Section 62 grants the Appropriate Commission the power to
determine the tariff for the (i) supply of electricity by a generating
company to a distribution licensee; (ii) transmission of electricity; (iii)
wheeling of electricity; and (iv) retail sale of electricity. While Section
61 stipulates the principles that shall guide the determination of tariff,
Section 62 grants the Commission the discretion to determine the tariff.
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Clause (3) of Section 62 fetters the discretion of the Commission in A
determining tariff. Section 62(3) provides that the Commission while
exercising its discretion to determine the tariff, shall not ‘show undue
preference to any customer of electricity but may differentiate according
to the customer’s load factor, power factor, voltage….’. Section 62(3)
reads as follows:
B
“(3) The Appropriate Commission shall not, while determining
the tariff under this Act, show undue preference to any consumer
of electricity but may differentiate according to the consumer’s
load factor, power factor, voltage, total consumption of electricity
during any specified period or the time at which the supply is
required or the geographical position of any area, the nature of C
supply and the purpose for which the supply is required.”
This method of tariff determination is commonly referred to as
the Regulated Tariff Mechanism.
72. Section 63 provides that notwithstanding anything contained D
in Section 62, the Appropriate Commission shall adopt the tariff
determined through bidding:
“63. Determination of tariff by bidding process -
Notwithstanding anything contained in Section 62, the Appropriate
Commission shall adopt the tariff if such tariff has been determined E
through transparent process of bidding in accordance with the
guidelines issued by the Central Government.”
73. Section 63 has five significant features: (i) Section 63 begins
with a non-obstante clause. The non-obstante provision overrides Section
62 alone and not all the provisions of the Act; (ii) as opposed to Section F
62 where the Commission is granted the power to determine the tariff,
under the Section 63 route, the bidding process determines the tariff; (iii)
the Commission is mandated to adopt such tariff that is determined by
the bidding process; (iv) the Commission has the discretion to not adopt
the tariff determined through the bidding process only if the twin conditions
as mentioned in the provision are not fulfilled; and (v) the twin conditions G
are that (a) the bidding process must have been transparent; (b) the
bidding process must have complied with the guidelines issued by the
Central Government.
74. Section 63 indicates that the provision would be invoked after
the tariff has been determined by the bidding process. There is nothing H
676 SUPREME COURT REPORTS [2022] 19 S.C.R.

A in Sections 62 or 63 that could lead us to interpret that Section 63 is the
dominant route for determination of tariff. Both the provisions provide
alternative modalities through which tariff can be determined. The non-
obstante clause in Section 63 must be read in the context of Sections 61
and 62. Section 62 bestows the Commission with wide discretion to
determine tariff. Section 63 seeks to curtail this discretion where a bidding
B
process for tariff determination has already been conducted. Section 63
contemplates that in such situations where the tariff has been determined
through the bidding process, the Commission cannot by falling back on
the discretion provided under Section 62 negate the tariff determined
through bidding. This interpretation of Section 63 is fortified by the use
C of the phrase ‘such’ in Section 63 - the Commission is bound to ‘adopt’
‘such’ tariff determined through bidding.
75. The Commission under Section 61 of the Act must frame
guidelines for deciding the modality to determine tariff. This is evidenced
from a reading of Section 61(a) which provides that the Appropriate
D Commission while specifying the terms and conditions for the
determination of tariff shall be guided by the principles and
‘methodologies’ specified by the Central Commission for the
determination of tariff applicable to transmission licensees.
76. In this backdrop, it is necessary to advert to the judgment of
E this Court in Energy Watchdog (supra). A two-Judge Bench of this
Court analysed the provisions of Section 63 and its interplay with Section
62. The relevant observations are extracted below.
“19…. It may be noticed that Section 63 begins with a non obstante
clause, but it is a non obstante clause covering only Section 62.
F Secondly, unlike Section 62 read with Sections 61 and 64, the
appropriate Commission does not “determine” tariff but only
“adopts” tariff already determined under Section 63. Thirdly, such
“adoption” is only if such tariff has been determined through a
transparent process of bidding, and, fourthly, this transparent
process of bidding must be in accordance with the guidelines issued
G by the Central Government. What has been argued before us is
that Section 63 is a standalone provision and has to be construed
on its own terms, and that, therefore, in the case of transparent
bidding nothing can be looked at except the bid itself which must
accord with guidelines issued by the Central Government. One
H thing is immediately clear, that the appropriate Commission
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does not act as a mere post office under Section 63. It must A
adopt the tariff which has been determined through a
transparent process of bidding, but this can only be done in
accordance with the guidelines issued by the Central
Government. Guidelines have been issued under this section on
19-1-2005, which guidelines have been amended from time to
B
time. Clause 4, in particular, deals with tariff and the appropriate
Commission certainly has the jurisdiction to look into whether the
tariff determined through the process of bidding accords with
Clause 4.”
(emphasis supplied)
C
The observations of this Court in Energy Watchdog (supra) are
summarised below:
(i) The Appropriate Commission while ‘adopting’ the tariff
determined through bidding is not a mere ‘post office’; and
(ii) The Commission is mandated by Section 63 to adopt the D
tariff determined through bidding only if the bidding process
was transparent, and such a process has been held in
accordance with the guidelines issued by the Central
Government under Section 63. If the bidding process does
not satisfy the two checks, then the Commission shall E
determine the tariff through the RTM route under Section
62.
77. Thus, the Appropriate Commission is not mandated to adopt
the tariff determined through the bidding process irrespective of the
fulfilment of the statutory requirements. The Commission can reject the F
tariff determined through the bid if the tariff process is not (i) transparent;
and (ii) in accordance with the guidelines issued by the Central
Government. Thus, if the Commission does not adopt the tariff determined
through bidding, and if the decision is challenged, the bidding process
can be reviewed substantively (on the ground of transparency) and
procedurally (on the ground of compliance with Central Government G
guidelines) to determine if the Commission could have exercised its
discretion to determine the tariff under Section 62 while rejecting the
tariff determined under Section 63. Therefore, Section 63 can only be
invoked after the tariff has been determined through bidding. The terms
and conditions notified by the Appropriate Commission under Section 61
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A will have to be referred for the purpose of choosing the modality of tariff
determination that the Commission should undertake. In view of the
above discussion, the argument of the appellant that a reading of Section
61, 62 and 63 indicates that the TBCB route is the dominant route of
tariff determination does not hold merit.
B E. 1.1. The value of TBCB Guidelines prescribed under
Section 63
78. Section 63 of the Act does not prescribe bidding as the dominant
route of tariff determination. The Guidelines framed by the Central
Government under Section 63 prescribe the mechanism and procedure
C for bidding. The Guidelines framed under Section 63 of the Act cannot
be used to determine whether the RTM route or the TBCB route ought
to be followed.
79. On 13 April 2006, the MoP framed the TBCB Guidelines under
Section 63 of the Act. Clause 2.2 of the Guidelines states that it shall
D apply for the procurement of transmission services through competitive
bidding according to the mechanism described in the notification. The
clause reads as follows:
“2.2. The guidelines shall apply for procurement of transmission
services for transmission of electricity through tariff based
E competitive bidding, through the mechanism described in this
notification and to select transmission service provider fora
new transmission line and to build, own, maintain and operate
the specified transmission system elements.”
(emphasis supplied)
F Clause 2.4 states that the procurement of transmission services
would include HVDC terminal stations and HVDC transmission lines:
“2.4 Procurement of transmission services would include all
activities related to survey, detailed project report formulation […]
and/or HVDC links including terminal stations and HVDC
G transmission line […].”
80. A reading of the above clauses indicates that the TBCB
Guidelines shall apply for (i) procurement of transmission services, which
would include HVDC links; and (ii) selecting the transmission provider
for a new transmission line. The TBCB Guidelines also advert to the
H appointment of a Bid Process Coordinator who would be responsible for
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coordinating the bid process for procurement of required transmission A
services. The TBCB Guidelines prescribe the procedure for conducting
bids for procurement of, among other services, transmission services.
Clause 3.3 states that for the procurement of transmission services
required for intra-state transmission, the State Government may notify
the organisation or the State Public Sector Undertaking to be the Bid
B
Process Coordinator. A reading of clauses 2.2 and 2.4 does not indicate
that that the tariff for all new transmission projects shall be determined
by competitive bidding. It notifies the procedural mechanism for
competitive bidding. As observed earlier, the reference in Section 63 to
the Guidelines framed by the Central Government is made to the limited
extent of determining whether the procedure of bidding was in accordance C
to the Guidelines framed thereunder, which is the TBCB Guidelines.
E. 2 General Regulatory Power of the Appropriate Commission
81. Since the guidelines framed under Section 63 only prescribe
the procedure for conducting the bidding, reference has to be made to
the general regulatory power of the Appropriate Commission under the D
provisions of the Act.
82. Section 181 of the Act stipulates that the State Commission(s)
may by notification, make regulations consistent with the Act and the
rules framed by the State Government under Section 180 of the Act to
carry out the provisions of the Act. Clause (zd) of Section 181 stipulates E
that the State Commission may make regulations on the ‘terms and
conditions for determination of tariff under Section 61.’ The relevant
portion of Section 181 is extracted below:
“181. Powers of State Commissions to make regulations.-
(1) The State Commissions may, by notification, make regulations F
consistent with this Act and rules generally to carry out the
provisions of this Act.
(2) In particular and without prejudice to the generality of the
power contained in sub-section (1), such regulations may provide
for all or any of the following matters, namely:- G
(a) […]
[…]
(zc) the terms and conditions for determination of tariff under
section 61;” H
680 SUPREME COURT REPORTS [2022] 19 S.C.R.

A However, as on the date when MERC granted AEMIL the licence
for the HVDC project from Kudus- Aarey, MERC had not framed any
regulation under Section 181(zc) of the Act for the determination of
Tariff.
83. At this juncture, it is necessary to refer to Section 86 of the
B Act. Section 86 lists the functions of the State Commission. Section
86(a) states that the State Commission shall discharge the function of
determining the tariff for transmission. Section 86(c) stipulates that the
State Commissions shall facilitate intra-state transmission of electricity.
Section 86(4) provides that in the discharge of its functions, which
includes the determination of tariff for the transmission of electricity
C under clause (a), the State Commission shall be guided by the NEP,
National Electricity Plan and NTP notified under Section 3 of the Act.
The relevant portion of Section 86 is extracted below:
“86. Functions of State Commission - (1) The State Commission
shall discharge the following functions, namely:-
D (a) Determine the tariff for generation, supply, transmission and
wheeling of electricity, wholesale, bulk or retail, as the case may
be, within the State.
[…]
(c) facilitate intra-State transmission and wheeling of electricity
E […]
(3) The State Commission shall ensure transparency while
exercising its powers and discharging its functions.
(4) In discharge of its functions, the State Commission shall be
guided by the National Electricity Policy, National Electricity Plan
F and Tariff Policy published under section 3.”
84. In Energy Watchdog (supra), this Court opined that the Central
Commission shall determine the tariff under the guidelines issued by the
Central Government under Section 63 of the Act. It is only in a situation
where no guidelines are framed or where the guidelines do not address
G a specific situation that the Central Commission’s repository of power
under Section 79 is invoked. The relevant observations of the judgment
are extracted below:
“20… The reason why Section 62 alone has been put out of the
way is that determination of tariff can take place in one of two
ways — either under Section 62, where the Commission itself
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determines the tariff in accordance with the provisions of the Act A
(after laying down the terms and conditions for determination of
tariff mentioned in Section 61) or under Section 63 where the
Commission adopts tariff that is already determined by a
transparent process of bidding. In either case, the general
regulatory power of the Commission under Section 79(1)(b) is
B
the source of the power to regulate, which includes the power to
determine or adopt tariff. In fact, Sections 62 and 63 deal with
“determination” of tariff, which is part of “regulating” tariff.
Whereas “determining” tariff for inter-State transmission of
electricity is dealt with by Section 79(1)(d), Section 79(1)(b) is a
wider source of power to “regulate” tariff. It is clear that in a C
situation where the guidelines issued by the Central Government
under Section 63 cover the situation, the Central Commission is
bound by those guidelines and must exercise its regulatory functions,
albeit under Section 79(1)(b), only in accordance with those
guidelines. As has been stated above, it is only in a situation where
D
there are no guidelines framed at all or where the guidelines do
not deal with a given situation that the Commission’s general
regulatory powers under Section 79(1)(b) can then be used.”
85. Thus, in the case of intra-state transmission of electricity, the
State Commission would be bound by the guidelines issued under Section
63. In addition to the guidelines under Section 63 of the Act, the State E
Commission shall also be bound by the regulations framed by it under
Section 181(zd) read with Section 61 while it discharges its function of
determining the tariff under Section 86 of the Act. However, if the
guidelines issued under Section 63 or the regulations framed under Section
181(zd) of the Act have not been notified or if the guidelines do not deal F
with a given situation, then the Commission shall exercise its general
regulatory power under Section 86(1)(a) of the Act to regulate tariff.
86. In PTC India Ltd. v. Central Electricity Regulatory
Commission,2 a Constitution Bench of this Court referred to Section
79 and observed that the Appropriate Commission is both a regulation- G
making authority and a decision-making authority. It was observed that
the Regulatory Commission while exercising its functions must conform
to the regulations that the Commission has formulated under Section
178 (the corresponding provision for the State Commission’s power to
2
(2010) 4 SCC 603 H
682 SUPREME COURT REPORTS [2022] 19 S.C.R.

A frame Regulations in Section 181). However, it was held that the
Commission would not be precluded from exercising its function under
Section 79 merely because there is no regulation framed by the
Commission. In the context of tariff determination, it was observed that
even in the absence of Tariff Regulations, it would be open to the
Commission to frame the terms and conditions of tariff determination
B
under Section 61 of the Act:
53. Applying the abovementioned tests to the scheme of the 2003
Act, we find that under the Act, the Central Commission is a
decision-making as well as regulation-making authority,
simultaneously. Section 79 delineates the functions of the Central
C Commission broadly into two categories —mandatory functions
and advisory functions. Tariff regulation, licensing (including inter-
State trading licensing), adjudication upon disputes involving
generating companies or transmission licensees fall under the head
“mandatory functions” whereas advising the Central Government
D on formulation of National Electricity Policy and tariff policy would
fall under the head “advisory functions”. In this sense, the Central
Commission is the decision-making authority. Such decision-making
under Section 79(1) is not dependent upon making of regulations
under Section 178 by the Central Commission. Therefore, functions
of the Central Commission enumerated in Section 79 are separate
E and distinct from functions of the Central Commission under
Section 178. The former are administrative/adjudicatory functions
whereas the latter are legislative.
The following observations were made on the general regulatory
power of the Regulatory Commission:
F
54. […] On reading Sections 76(1) and 79(1) one finds that the
Central Commission is empowered to take measures/steps in
discharge of the functions enumerated in Section 79(1) like to
regulate the tariff of generating companies, to regulate the inter-
State transmission of electricity, to determine tariff for inter-State
G transmission of electricity, to issue licences, to adjudicate upon
disputes, to levy fees, to specify the Grid Code, to fix the trading
margin in inter-State trading of electricity, if considered necessary,
etc. These measures, which the Central Commission is
empowered to take, have got to be in conformity with the
H regulations under Section 178, wherever such regulations
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are applicable. Measures under Section 79(1), therefore, A
have got to be in conformity with the regulations under
Section 178.
55. To regulate is an exercise which is different from making of
the regulations. However, making of a regulation under
Section 178 is not a precondition to the Central Commission B
taking any steps/measures under Section 79(1). As stated,
if there is a regulation, then the measure under Section 79(1) has
to be in conformity with such regulation under Section 178. This
principle flows from various judgments of this Court which we
have discussed hereinafter. For example, under Section 79(1)(g)
the Central Commission is required to levy fees for the purpose C
of the 2003 Act. An order imposing regulatory fees could be passed
even in the absence of a regulation under Section 178. If the levy
is unreasonable, it could be the subject-matter of challenge before
the appellate authority under Section 111 as the levy is imposed
by an order/decision-making process. Making of a regulation D
under Section 178 is not a precondition to passing of an
order levying a regulatory fee under Section 79(1)(g).
However, if there is a regulation under Section 178 in that
regard then the order levying fees under Section 79(1)(g)
has to be in consonance with such regulation.
E
56. Similarly, while exercising the power to frame the terms and
conditions for determination of tariff under Section 178, the
Commission has to be guided by the factors specified in Section
61. It is open to the Central Commission to specify terms
and conditions for determination of tariff even in the
absence of the regulations under Section 178. However, if a F
regulation is made under Section 178, then, in that event, framing
of terms and conditions for determination of tariff under Section
61 has to be in consonance with the regulations under Section
178.
(emphasis supplied) G
87. The TBCB Guidelines issued by the Central Government under
Section 63 of the Act prescribe the mechanism of the bidding process
and do not lay down the criteria or guidelines for choosing between the
alternative routes under Section 62 and 63 of the Act. MERC has neither
notified any Regulations under Section 181 nor has it notified the terms H
684 SUPREME COURT REPORTS [2022] 19 S.C.R.

A and conditions under Section 61 of the Act. That being the case, the
Commission could choose the modality of tariff determination by taking
recourse to the general regulatory power under Section 86.
E.2.1 The nature of NTP- binding or a material consideration
88. Even in the absence of guidelines under Section 61 or
B Regulations under Section 181 (zd), the Commission does not possess
unbridled power or discretion while choosing the modality to determine
tariff. Sub-Sections (3) and (4) of Section 86 provide that the State
Commission while discharging its functions must ensure transparency
and ‘shall be guided’ by the NTP and NEP.
C 89. Before proceeding to interpret the phrase ‘shall be guided’, it
is necessary that we refer to the prominent features of the NTP 2006
and NTP 2016 vis-à-vis modalities of tariff determination. A comparative
chart of the relevant provisions of NTP 2006 and NTP 2016 is set out
below:
D

E

F

90. Both NTP 2006 and NTP 2016 as a general rule prescribe
G
competitive bidding for determination of tariff for all ‘new projects’.
There are two prominent differences between NTP 2006 and NTP 2016.
Firstly, the projects owned or controlled by the Government were
exempted from bidding under NTP 2006. However, according to NTP
2016, the tariff for government owned projects is also to be determined
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by bidding, unless otherwise specified. Secondly, NTP 2016 introduced A
the threshold limit rule. State Commissions are required to notify the
threshold limit. If the cost of the project exceeds the threshold limit, then
the Commission is mandated to follow the bidding process for the
determination of tariff.
91. NTP 2016, by providing that state owned projects are not B
exempted from the TBCB process, has implemented the object of the
Act, which is to create a fine balance between promoting competition
and protecting the interests of the consumers. NTP 2006 was formulated
with the objective of enhancing the participation of private players in the
generation, transmission and distribution of electricity. The Central
Government adopted a policy decision to introduce the bidding process C
for the determination of the tariff for all new transmission projects in
2006 but excluded its application to State projects. However, the
distinction between State and private parties for the purpose of tariff
determination through bidding was removed in NTP 2016. This transition
between NTP 2006 and NTP 2016 depicts the intention of the D
Government to rationalise the tariff policy and to transfer the benefits of
the rationalised tariff to the consumers.
92. According to NTP 2016, the tariff for all new electricity
transmission projects that cost above the threshold amount notified by
the State Commission shall be determined through bidding. However, E
the MERC had not notified the threshold limit as on the date when it
passed the order granting transmission licence to AEML-T. MERC
notified the Maharashtra Electricity Regulatory Commission (Multi Year
Tariff) Regulations 2019 under Section 181 of the Act. The MERC MYT
Regulations does not provide the guidelines or the criteria for the choosing
the modality of tariff determination. The guidelines for choosing the F
modalities are sought to be introduced by the Maharashtra Electricity
Regulatory Commission (Multi Year Tariff) (First Amendment)
Regulations 2022. MERC circulated the draft of the MERC MYT
Amendment Regulations on 19 August 2022 for comments, suggestions
and objections. The preamble of the MERC MYT Amendment G
Regulations reads as follows:
“The State Electricity Regulatory Commission has been vested
with the responsibility to determine the tariff for generation, supply,
transmission and wheeling of electricity, wholesale, bulk or retail,
as the case may be, within the State under Section 86 of the H
686 SUPREME COURT REPORTS [2022] 19 S.C.R.

A Electricity Act 2003. The tariff for intra-State Transmission System
can be decided under Section 62 or Section 63 of the Electricity
Act, 2003. Section 63 provides for adoption of the tariff determined
through transparent process of bidding. Clause 5.3 of the Tariff
Policy 2016 as regards development of intra-State Transmission
System stipulates that the same shall be executed through
B
competitive bidding route provided for projects costing above a
threshold limit, which shall be decided by the State Electricity
regulatory Commission.
The Maharashtra Electricity Regulatory Commission (Multi Year
Tariff) (First Amendment) Regulations 2022 specifies such
C threshold limit and other conditions for intra-State Transmission
Projects to be developed through a Tariff Based Competitive
Bidding.”
The MERC MYT Amendment Regulations seeks to amend
Regulation 56 of the MERC MYT Regulations by adding Regulation
D 56.3. Regulation 56.3 states that ‘all new’ intra-state transmission systems
costing above a threshold limit shall be developed through the Section 63
route, provided all other conditions stipulated in Annexure IV are also
fulfilled. Regulation 56.3 reads as follows:
“56.3 All the new intra-State transmission systems costing above
E a Threshold Limit and meeting other conditions as laid down in
Annexure IV, shall be developed through Tariff Based Competitive
Bidding in accordance with the guidelines issued by the Central
Government under Section 63 of the Act.”
According to Annexure IV, which is proposed to be added to the
F MERC MYT Regulations, the threshold was determined at 200 Crores.
The relevant extract of the MERC MYT Amendment Regulations is as
follows:
“1. The Commission hereby determines the Threshold Limit of
Rupees Two Hundred (200) Crore.
G
2. All new Intra-State Transmission Systems costing Rupees Two
Hundred (200) Crore or more shall be implemented by STU
through Tariff Based Competitive Bidding in accordance with the
competitive bidding guidelines notified by the Central Government
from time to time.”
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The Annexure also states that the threshold limit shall be applied A
to all new Intra- State Transmission projects for which approval is yet to
be accorded by the Commission or where the Commission’s approval is
not valid or where the approval has been cancelled. The relevant portion
is extracted below:
“3. This Threshold Limit shall be applicable for all new Intra- B
State Transmission Systems (Projects) for which approval is yet
to be accorded by the Commission (excluding the projects for
which application for in-principle approval is already submitted to
the Commission and the same is under consideration by the
Commission) or Commission’s approval is not valid or approval
cancelled by the Commission as the case may be.” C

93. However, the MERC MYT Amendment Regulations are yet
to be notified. When the application seeking licence for the HVDC
Kudus- Aarey transmission project was filed, and when it was granted
by MERC, the threshold limit as required to be provided by NTP 2016
was not notified by MERC. Thus, the question is whether in the absence D
of any notification of the threshold by MERC, would MERC still be
mandated to determine tariff for the transmission project through the
TBCB route in view of NTP 2016.
94. The answer to this question turns on the interpretation of the
phrase ‘shall be guided’ in Section 86(3) of the Act. This Court has E
previously had the opportunity to interpret the phrase ‘shall be guided
by’ as it finds place in the Act. A two-Judge Bench of this Court in
Reliance Infrastructure Limited v. State of Maharashtra3 interpreted
the phrase with reference to Section 61 of the Act. This Court observed
that ‘shall be guided by’ comprises of two elements, ‘shall’ and ‘guided’ F
which would mean that the guiding factors provide considerations which
are material to the determination of tariffs by the appropriate Commission:
“29. Section 181 empowers the State Commissions to make
regulations consistent with the Act and the Rules to carry out the
provisions of the Act. Among the matters for which the regulations G
may provide are “the terms and conditions for the determination
of tariff under Section 61” [Section 181(2)(zd)] . In specifying
the terms and conditions for the determination of tariff, the
appropriate Commission (as Section 61 provides) “shall be guided”
3
(2019) 3 SCC 352 H
688 SUPREME COURT REPORTS [2022] 19 S.C.R.

A by the factors which are set out in clauses (a) to (i). The expression
“shall be guided” comprises of two elements : the “shall” and, the
“guidance”. Clauses (a) to (i) provide guidance to the Commission
in specifying the terms and conditions for the determination of
tariff. The expression “shall” indicates that the factors which are
specified in clauses (a) to (i) have to be borne in mind by the
B
appropriate Commission. As guiding factors, they provide
considerations which are material to the determination of
tariffs by the appropriate Commission.
[…]
C 32. The Tariff Policy provides guidance to the appropriate
Commission when it frames regulations. The power to frame
regulations is legislative in nature. It is conferred upon the
appropriate Commission. The Commission weighs numerous
factors. Its discretion in carrying out a complex exercise cannot
be constrained. The delegate of the legislature is therefore
D under a mandate to bring about a fair and equitable balance
between competing considerations.Standing at the forefront
of those considerations is above all the need to ensure
efficiency and to protect the interests of consumers. The
submission which has been urged on behalf of the appellant would
E reduce tariff fixation to a rather simplistic process of bringing
about equality between generating units which have the same
design and manufacturing origin. Such an approach overlooks the
complex factors which have to be borne in mind in the
determination of tariffs.

F (emphasis supplied)
This Court held that the principles prescribed in Section 61 are all
material considerations that must guide the Appropriate Commission while
it prescribes the terms and conditions for determining the tariff. It was
held that it was the responsibility of the Commission to ensure a delicate
G balance of the principles prescribed under Section 61. Thus, while the
NTP which is prescribed as one of the principles under Section 61 shall
be a material consideration, it cannot be interpreted to mean that it is the
‘only’ material consideration. This interpretation of ‘shall be guided’ is
equally applicable to the use of the phrase in Section 86(3).

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95. The counsel for the appellants has relied on observations made A
by a two-Judge Bench of this Court in Energy Watchdog (supra) that
the NTP 2016 is a ‘statutory document being issued under Section 3 of
the Act and has the force of law’ to argue that the NTP is binding on the
Commission. In Energy Watchdog (supra), Adani Enterprises
Consortium submitted its bid for the proposed project and it was selected
B
as the successful bidder. However, the law in Indonesia had changed in
2010 and 2011 which aligned the export price of coal from Indonesia to
international market prices instead of the price that was prevalent in the
last forty years. Adani Power filed a petition before CERC seeking relief
due to the impact of the Indonesian Regulation to either discharge them
from the performance of the Power Purchase Agreement on account of C
frustration, or to evolve a mechanism to restore the petitioners to the
same economic condition prior to the occurrence of the change in law.
Clause 4.7 of the Guidelines for determination of Tariff by Bidding
Process which was included through an amendment stipulates that:
“any change in law impacting cost or revenue from the business D
of selling electricity to the procurer with respect to the law
applicable on the date which is 7 days before the last date for bid
submission shall be adjusted separately. In case of any dispute
regarding the impact of any change in law, the decision of the
appropriate Commission shall apply.”
E
In this context, this Court held that ‘law’ means all laws including
electricity laws in force in India, and that electricity laws means the
Electricity Act, rules and regulations made thereunder and ‘any other
law’ pertaining to electricity. It was in this context that it was observed
that the NTP is ‘law’. However, to understand the context of the
observations, a brief historical background of the amendment to the F
guidelines will have to be noted. CERC issued a statutory advice under
Section 79(2) of the Act to the Central Government on the impact of
domestic coal non-availability and the additional cost of imported coal on
tariff. CERC advised that suitable amendments would have to be made
to the TBCB Guidelines that were issued under Section 63, the NEP, G
and NTP. The amendments allow the Appropriate Commissions to take
care of the situations arising out of the ‘change in policy of the Sovereign
Government.’ In view of the advice of CERC under Section 79(2), the
MoP issued an advisory on 31 July 2013 stating that in view of the shortfall
of domestic supply of coal, the cost of imported coal shall be considered
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690 SUPREME COURT REPORTS [2022] 19 S.C.R.

A for being made a pass through by the Appropriate Commission.
Subsequently, in pursuance of the advisory issued by the MoP, the NTP
2016 was amended to include Clause 6.1 providing relief as mentioned
in the advisory. The relevant extract is as under:
“6.1 Procurement of power
B As stipulated in Para 5.1, power procurement for future
requirements should be through a transparent competitive bidding
mechanism using the guidelines issued by the Central Government
from time to time. These guidelines provide for procurement of
electricity separately for base loan requirements and for peak
C loan requirements. This would facilitate setting up of generation
capacities specifically for meeting such requirements.
However, some of the competitively bid projects as per the
guidelines dated 19-1-2005 have experienced difficulties in getting
the required quantity of coal from Coal India Limited (CIL). In
D case of reduced quantity of domestic coal supplied by CIL, vis-à-
vis the assured quantity or quantity indicated in letter of assurance/
FSA the cost of imported market based e-auction coal procured
for making up the shortfall, shall be considered for being made a
pass through by appropriate Commission on a case-to-case basis,
as per advisory issued by Ministry of Power vide OM No. FU-
E 12/2011-IPC (Vol-III) dated 31-7-2013.”
96. It is pertinent to note that this Court in Energy Watchdog
(supra) did not interpret the phrase ‘shall be guided’ as it finds place in
the Act. This Court dealt with the interpretation of the phrase ‘change in
law’. It was held that the amendment in the NTP 2016 taking cognizance
F of the domestic coal shortage was a ‘change in law’ since it is a statutory
policy. There is no doubt that NEP and NTP are statutory policies since
they were framed under the provisions of the Act. However, the
observation in Energy Watchdog (supra) that the NTP is ‘law’ cannot
be held to bind the interpretation of the phrase ‘shall be guided’. Further,
G it must also be noted that this Court in Energy Watchdog (supra) was
dealing specifically with changes due to coal procurement and the
amendments in the policies were recommended to be made by the Central
Regulatory Commission.
97. A reading of the judgment of this Court in PTC India (supra)
and the provisions of the Act indicates that the determination of tariff
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and framing regulations for the determination of tariff fall within the A
exclusive domain of the Appropriate Commission. Section 61 stipulates
that the Appropriate Commission shall ‘specify the terms and conditions’
for the determination of tariff. Section 86 provides that one of the functions
of the State Commission is to determine tariff for transmission. Section
181 states that the Commission shall make regulations on the terms and
B
conditions for the determination of tariff. Thus, the regulation and
determination of tariff is the function of the Appropriate Commission.
98. While the determination and regulation of tariff falls within
the exclusive domain of the Regulatory Commission, it is crucial to note
that Sections 61 and 86 stipulate that the Commission shall be guided by
the NTP while specifying terms and conditions for determining tariff. C
The State Commission while exercising its power to make regulations
under Section 181(2)(zd) on the terms and conditions for determination
of tariff under Section 61 must conform to the provisions of the Act.
Thus, while framing regulations under Section 181(2)(zd), the Commission
must be guided by the principles mentioned in Section 61, which includes D
the NEP and NTP.
99. This Court in Reliance Infrastructure (supra) has already
held that the NTP is one of the material considerations. The NTP is one
of the many guidelines that the Commission must necessarily consider
while regulating tariff. The State and the Central Government only have E
an advisory role in the regulation of tariff. The Electricity Regulatory
Commissions Act 1998, which was consolidated with other statutes on
electricity while enacting the Electricity Act 2003, was enacted to
distance the governments from the determination of tariffs. Further, the
Act does not seek to centralise the power to regulate tariff with the
Centre. One of the objectives of the Act was to provide the “states F
enough flexibility to develop their power sector in the manner they
consider appropriate.” Thus, since the Appropriate Commissions possess
full autonomy in the determination and regulation of tariff, and the States
have been provided flexibility to develop their power systems for intra-
state transmission of electricity, the NTP 2016 shall be one of the material G
considerations. Further, even in the letter dated 15 March 2021, the MoP
only ‘strongly recommended’ that the states adopt TBCB for the
development of intra-state transmission systems.
100. In view of the above discussion, merely because the threshold
limit is not notified, it would not mean that MERC only had to determine H
692 SUPREME COURT REPORTS [2022] 19 S.C.R.

A tariff through the RTM route. It is open to MERC to determine the tariff
through either the Section 63 or the Section 62 route. When MERC is
exercising its general regulatory power under Section 86 to determine
tariff, the NTP is a material consideration. Thus, the absence of a
threshold limit would not affect the power that MERC holds to determine
tariff (and its modalities). Since MERC has the power to regulate and
B
determine tariff for the intra-state transmission of electricity, the guidelines
and regulations issued by MERC, if any, must be analysed to determine
if MERC was mandated to choose one of the two routes for the
determination of tariff or whether it could exercise its discretion to choose
the modality.
C 101. As already noted above, on the date when MERC determined
the tariff for the HVDC transmission project, it had neither notified
Regulations under Section 181(2)(zd) nor the terms and conditions under
Section 61 of the Act. On 4 January 2019, the Government of
Maharashtra passed a resolution ‘Regarding Adoption of new Tariff
D Based Competitive Bidding Process in the State’. The resolution states
that it has been issued in pursuance of the guidelines on competitive
bidding that were issued by the MoP by Gazette Notification No. 11/5/
2005-PG(I) dated 13 April 2006 which indicated that the ‘State
Government may adopt these guidelines for intra-state transmission
projects or having considered these guiding principles may constitute
E similar committees for facilitating establishment of state transmission
projects in the State.” The resolution further notes that the Government
has decided to constitute committees such as the Empowered Committee
and Bid Evaluation Committee for undertaking transmission projects
through TBCB. The resolution notes that the State Government has
F decided to implement TBCB for new intra-state projects. The constitution
of the Empowered Committee and Bid Evaluation Committee are traced
to the constitution of similar committees under the TBCB Guidelines
and Development Guidelines. The resolution notes that the Empowered
Committee is being constituted in accordance with the Central
Government’s guidelines. Paragraph 3 of the notification notes that the
G Bid Process Coordinator will be appointed by the Empowered Committee
to coordinate the bid process and that the functions of the Bid Process
Coordinator would be according to the Central Government’s guidelines.
E. 3 Value of GoM GR

H 102. The GoM’s GR raises two separate issues for consideration:
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a) the relevance of the GoM’s GR for MERC’s decision on A
the application for licence filed by AEML-T; and
b) the relevance of the GoM’s GR in terms of the decision of
the MSETCL to not hold bidding for the HVDC project.
103. However, before venturing into these two issues, it would be
important to discuss the applicability of the GoM GR to the HVDC project. B
The GoM GR was notified on 4 January 2019. The GR mandates that
tariff shall be determined through the TBCB route under Section 63 for
all ‘new projects’. Therefore, we need to analyse whether as on 4 January
2019, the HVDC Kudus-Aarey project could be considered as a ‘new
project’. C
E. 3.1 The New - Old Conundrum
104. The GoM’s GR does not provide any clarity on the term
‘new’ project leaving it open to MERC to interpret the phrase. MERC
by its order dated 21 March 2021 granted a licence for the HVDC
Kudus-Aarey transmission project under Section 62 of the Act to AEML- D
T holding that it was an ‘existing’ project as on the date the GoM’s GR
was notified, that is 4 January 2019. For arriving at this conclusion, MERC
referred to the application for grid connectivity for the Kudus- Aarey
HVDC project filed by AEML-T on 23 November 2018. By its letter
dated 23 November 2018, AEML-T sought an amendment to the letter E
issued by MERC granting grid connectivity to the 2 x 500 HVDC (VSC
based) scheme from Nagothane to Aarey. The amendment sought by
AEML-T to the letter issued by MERC must be read in the context of a
meeting that was held between MSETCL and AEML-T where MSETCL
suggested that the HVDC project be considered from Kudus substation
as opposed to Nagothane substation since it is closer to the Aarey F
substation. However, MSETCL did a turn-around and on 5 January 2015
cancelled the Nagothane- Aarey project of R-Infra and instead proposed
a Kudus-Aarey HVAC project by itself. By the proposal dated 5 January
2015, MSETCL altered the point from Nagothane to Kudus, and the
technology from HVDC to HVAC. Accordingly, MERC cancelled the G
in-principle approval granted to AEML-T for the HVDC Nagothane -
Aarey scheme. However, due to right of way issues in the construction
of the overhead line, the 400KV Aarey to Kudus HVAC scheme never
took off.

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A 105. MERC held that the cancellation of the in-principle approval
would generally amount to closure of the project. However, MERC
took into account the unique historical background of the HVDC project
when the Kudus-Aarey project was proposed by AEML-T in November
2018. The relevant extract from the order of MERC is set out below:
B However, the proposed HVDC Scheme, with the same
configuration, has historical background from November 2018.
The 1000 MW HVDC VSC based link between MSETCL Kudus
and AEML Aarey was proposed by AEML-T, vide its application
for grid connectivity, on 23 November, 2018. The said application
thus, pre-dates the GoM GR dated 4 January, 2019. Certain
C planning and preparatory work such as technical studies, cost
estimation, cable route survey, identification of land, preparation
of DPR along with feasibility studies were also initiated. This fresh
Connectivity Application also addresses TPC-T’s contention that
a fresh Connectivity Application has to be made when there is a
D change in the network configuration. Hence, the proposed HVDC
Scheme is a new Scheme qua the earlier approved Scheme, but
the fresh Connectivity Application for this HVDC Scheme was
filed before the notification of the GoM GR dated 4 January, 2019.
In its judgment dismissing the appeal against the order of MERC,
E APTEL concurred with the observation made by MERC that the HVDC
Scheme is an ‘existing scheme’. APTEL observed that the cancellation
of the in-principle approval cannot render it a new scheme since it was
the STU which took an about-turn on its objections to the HVDC
technology:

F “149. The cancellation of the in-principle approval earlier accorded
cannot render it a new scheme since the STU itself later took an
about-turn on its objections as to the technology for which reason
the cancellation had been earlier commended and so acted upon
by the Commission. The scheme has remained the same, the prime
change being with regard to modified route (to save distance and
G costs) the HVDC technology being the one initially proposed and
now eventually accepted by the STU upon endorsement by CEA.
The effect of the confusion caused by the flip-flop or re-think
more than once by the STU is being discussed by us in the section
that follows (under the caption “Shifting stand of STU on HVDC
H project”) and dwelling upon it here will make the discourse
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repetitive. Suffice it to say here that such confusion for A
reasons attributable to the indecisiveness of the STU cannot
divest the scheme of its “old” character because, with some
hiatus (again on account of doubts over HVDC as compared
to HVAC), the Scheme has consistently and throughout
remained, since FY 2013-14, part of the five- year plans of
B
the STU, as a project entrusted to the proponent R-Infra
(now AEML-T or its SPV), the GR of GoM having come in
much later in the day.
150. We, thus, do not find any error, infirmity or impropriety in the
conclusions reached by the Commission on the captioned issue.
The arguments of the appellant to the contrary are rejected.” C

[…]
“159. […] There was virtually no resistance on the suggestion for
change of route (Kudus rather than Nagothane being one end) as
the proponent readily agreed to it. The flip-flop vis-à-vis the D
appropriate technology (HVDC versus HVAC) is where the
progress came stuck for a prolonged period. We do not find merit
in the explanation of STU about exclusion from its published plans
for a few years in-between. […] The temporary uncertainty in
the mind of the STU, which had only a recommendatory role, has
only delayed the decision-making process. It, however, cannot E
vitiate the decision taken by MERC in whose hands the
jurisdiction is placed by the law to take a call on grant of
license.”
(emphasis supplied)
F
106. In view of the above discussion, the 1000MW Aarey-Kudus
HVDC project by AEMIL is an ‘existing’ or an ‘old’ project with reference
to the GoM GR for the following reasons:
106.1 Firstly, the GR does not provide or explain the meaning of
the phrase ‘new’ projects. Hence, MERC has the discretion
G
to formulate its understanding of the phrase ‘new’ projects
so long as it is reasonable and does not rely on factors
extraneous to the decision making process. In view of the
decisions of this Court discussed above and the provisions
of the Act, MERC has the power to regulate tariff
determination. MERC has not defined the phrase ‘new’ H
696 SUPREME COURT REPORTS [2022] 19 S.C.R.

A projects through the regulations. In this situation, MERC
has the discretion to interpret the phrase ‘new’ projects
which it did in the course of its judgment granting AEMIL
the transmission license. MERC held that generally the
cancellation of approval would amount to the closure of the
project, unless the peculiar nature of the facts leads to an
B
alternative conclusion (as in this case);
106.2 Secondly, on applying the facts to the interpretation of the
phrase ‘new’ project, MERC observed that the HVDC
Kudus-Aarey project is not a new project. APTEL, on
appeal, upheld the observations of MERC that it is an
C ‘existing project’. The appeal against the judgment of
APTEL before this Court under Section 125 of the Act can
only be on the grounds mentioned in Section 100 of CPC.
Section 125 reads as under:
“125. Any person aggrieved by any decision or order of
D the Appellate Tribunal, may, file an appeal to the Supreme
Court within sixty days from the date of communication
of the decision or order of the Appellate Tribunal, to
him, on any one or more of the grounds specified
in section 100 of the Code of Civil Procedure,1908.
E Provided that the Supreme Court may, if it is satisfied
that the appellant was prevented by sufficient cause from
filing the appeal within the said period, allow it to be
filed within a further period not exceeding sixty days.”
(emphasis supplied)
F
Section 100 of the Code of Civil Procedure 1908 stipulates that a
second appeal shall lie only if the court (in this case the Supreme Court)
is satisfied that the case involves a substantial question of law. It is
settled law that concurrent findings of fact recorded by the fora below
(MERC and APTEL) cannot be interfered with by this Court. In DSR
G (Steel) Pvt. Ltd. v. State of Rajasthan4,a two Judge Bench of this
Courtobserved that findings of fact by the Regulatory Commission and
the Tribunal cannot be reopened by this Court on appeal under Section
125 of the Act. The court held:
4
(2012) 6 SCC 782
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14. An appeal under Section 125 of the Electricity Act, 2003 is A
maintainable before this Court only on the grounds specified in
Section 100 of the Code of Civil Procedure. Section 100 CPC in
turn permits filing of an appeal only if the case involves a
substantial question of law. Findings of fact recorded by the
courts below, which would in the present case, imply the
B
Regulatory Commission as the court of first instance and
the Appellate Tribunal as the court hearing the first appeal,
cannot be reopened before this Court in an appeal under
Section 125 of the Electricity Act, 2003. Just as the High
Court cannot interfere with the concurrent findings of fact
recorded by the courts below in a second appeal under Section C
100 of the Code of Civil Procedure, so also this Court would be
loath to entertain any challenge to the concurrent findings of fact
recorded by the Regulatory Commission and the Appellate
Tribunal. The decisions of this Court on the point are a legion.
Reference to Govindaraju v. Mariamman [(2005) 2 SCC 500 :
D
AIR 2005 SC 1008] , Hari Singh v. Kanhaiya Lal [(1999) 7 SCC
288 : AIR 1999 SC 3325], Ramaswamy Kalingaryar v.
Mathayan Padayachi [1992 Supp (1) SCC 712 : AIR 1992 SC
115] , Kehar Singh v. Yash Pal [AIR 1990 SC 2212]
and Bismillah Begum v. Rahmatullah Khan [(1998) 2 SCC 226
: AIR 1998 SC 970] should, however, suffice. E
(emphasis supplied)
Since both APTEL and MERC have recorded concurrent findings
that the HVDC Aarey- Kudus project is an existing project, it would not
be open to this Court in an appeal under Section 125 of the Act to reopen
the findings.. F

Thirdly, even otherwise, we are in agreement with the findings of
MERC and APTEL that the 1000MV HVDC Scheme from Aarey to
Kudus is an old project considering the following factual position:
106.2.1 On 12 November 2007, MSETCL issued a G
communication to CEA setting out the steps proposed
to meet the growing demand of power for Mumbai’s
load centres. The communication stated that TPC had
proposed the setting up of overhead lines and
underground cables while REL had proposed connections
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A to Aarey by using the HVDC (VSC based) technology.
MSETCL notified a five-year plan for 2009-10 to 2013-
14 envisaging the use of the HVDC technology. The
plan specifically provided for the ongoing schemes of
R-infra together with new schemes including the HVDC
based link between Nagothane and Aarey. Similar details
B
were provided in relation to TPC’s ongoing and new
schemes. Both TPC and R-infra were in the fray from
the inception. While TPC was primarily in the overhead
transmission line segment, R-infra had proposed the
setting up of transmission lines on the HVDC technology.
C 106.2.2 The criticality of the HVDC technology assumes
importance after the grid failure which Mumbai
experienced in November 2010. The committee chaired
by a Professor of IIT recommended the HVDC
technology as a long-term solution for ensuring reliability
D of power supply for Mumbai. MERC granted a
transmission licence to R-infra on 11 August 2011. R-
infra submitted a DPR to MERC for the appointment of
a consultant for the transmission line from Nagothane
to Aarey on 1 February 2013. On 7 March 2013,
MSETCL confirmed that the Nagothane -Aarey project
E was a part of the STU five-year plan for FY 2013-14 to
2017-18. MERC approved the hiring of the consultant
on 5 April 2013. The application for the grant of grid
connectivity for the proposed HVDC project was
allowed on 21 August 2013. When matters were thus
F progressing, in November 2013 MSETCL had in a
meeting with R-Infra proposed that R-Infra can avail of
connectivity from the Kudus sub-station which was
closer to the Aarey sub-station as compared to the sub-
station at Nagothane. R-infra expressed its concern over
the proposed revision on the point of connectivity. On
G 10 April 2014, MERC granted an in-principle clearance
for the HVDC Scheme. In January 2015, MSETCL
proposed a revised scheme for where the 400KV Kudus-
Aarey HVAC scheme was proposed by MSETCL. On
2 May 2016, the in-principle clearance granted to the
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Nagothane-Aarey HVDC Scheme was cancelled by A
MERC.
106.2.3 However, since the HVAC scheme of MSETCL did not
take off, AEML-T submitted an application for HVDC
Scheme between Aarey to Kudus on 23 November 2018
where an amendment to the letter issued by MERC B
granting grid connectivity to the 2 x 500 HVDC (VSC
based) scheme from Nagothane to Aarey was sought.
106.2.4 The narration of facts indicates that AEML-T(or its
predecessor in interest) has been involved in the
execution of the HVDC Scheme since the inception of C
the scheme. The cancellation of the in-principle approval
accorded to AEML-T by MERC cannot be held to
terminate the project in view of the peculiar background
of this case. It is due to the indecisiveness of MSETCL
on the HVDC and HVAC technologies that AEML-T’s
clearance was cancelled. The HVDC Scheme was D
attributed to R-Infra or, as the case may be, AEML-T
since 2009. In the electricity regulatory sector, where
the State Regulatory Commissions and STUs’ have been
functioning in an ad-hoc manner running in many loops,
the question of whether the project is an old or a new E
project must be determined through a holistic purview
of the factual background. In view of the above factual
narration, it is evident that the HVDC Scheme is an old
project and the change in the location of the injection
point from Nagothane to Kudus would not lead to the
closure of the old project. F

107. Regardless, we deem it appropriate to also decide upon the
issues before us for consideration in terms of the relevance of the GoM
GR in the decision making of MERC and holding of the bidding process
by MSETCL.
G
E.3.2 Relevance of GoM GR for MERC’s Decision
108. The GR does not carry any reference to the provision of the
Act under which it was notified. The introduction of the resolution states
the following:
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700 SUPREME COURT REPORTS [2022] 19 S.C.R.

A “With the objective of setting up New Transmission Projects with
Tariff Based Competitive Bidding, the Ministry of Power,
Government of India has issued guidelines vide Gazette Notification
No. 11/5/2005-PG(I) dated 13.04.2006. In addition, modifications
were made vide Gazette Notifications on 04.07.2007 and
10.10.2008. Additionally, the revised directives dated 02.05.2012
B
indicate, that the State Government may adopt these guidelines
for intra-state transmission projects or having considered these
guiding principles may constitute similar committees for facilitating
establishment of state transmission projects in the State.
[…]
C
Therefore, the government was considering constitution of
committees like Empowered Committees, Bid Evaluation
Committee in accordance with the above-mentioned guidelines
of central government for undertaking transmission projects in
the state through Tariff Based Competitive Bidding. The
D government has, after thorough discussion, taken the following
decision in this regard.”
The GoI Guidelines referred to above are the TBCB Guidelines
and the Development Guidelines. Paragraph 3.3 of the TBCB Guidelines
states that for the procurement of transmission services for intra-state
E transmission, the appropriate State Government may notify any
organization or state public sector undertaking especially engaged for
bidding to be the Bidding Process Coordinator. Paragraph 24 of the
Development Guidelines stipulates that the State Governments may adopt
these guidelines and may constitute similar committees for facilitation of
F intra-state transmission projects. The Guidelines stipulate that the States
‘may’ adopt these guidelines for intra-state projects.
109. While the State Government has used the central guidelines
to formulate its own guidelines on competitive bidding, it does note that
the Empowered Committee being constituted will undertake transmission
G projects “in accordance with Central Government’s guidelines”.
Therefore, to the extent that the GoM GR deals with setting up of certain
bodies for conducting bidding to allocate projects under the TBCB route
in line with the Central Government’s TBCB Guidelines, it can be said to
be in furtherance of the guidelines referred under Section 63 of the Act.
However, the same is limited to committees being set up for the procedural
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aspects of the bidding process dealt by the Central Government’s A
guidelines.
110. Another contentious aspect of the GoM GR is the portion
wherein it notified that the State Government “has decided to implement
Tariff Based Competitive Bidding-TBCB process for new Projects.”
The GR did not define the term ‘new projects.’ The appellant has argued B
that the GR notified by the State Government being binding on MERC,
MERC had no option but to determine tariff through the bidding process
for all ‘new’ projects, and if the HVDC project is a ‘new project’ then
tariff could not have been determined through the Section 62 route. While
we have already held that the HVDC project was an existing project in
terms of the GoM GR, we also clarify the aspect of the binding value of C
GoM GR upon MERC.
111. As discussed above, the fixation of tariff falls within the
independent statutory domain of the Regulatory Commission. The State
Government has the power to issue directions to the State Commission
in matters of ‘policy involving public interest’ under Section 108 of the D
Act. While stating that the State Government may issue directions in
matters of policy involving public interest, Section 108(2) states that if
any question arises as to whether such direction relates to matters of
policy involving public interest, the decision of the State Government on
it shall be final. The provision further states that the State Commission E
shall be guided by the directions of the State Government in discharge of
its functions. Section 108 is extracted below:
“108. Direction by State Government.- (1) In the discharge of
its functions, the State Commission shall be guided by such
directions in matters of policy involving public interest as the State F
Government may give to it in writing.
(2) If any question arises as to whether any such direction related
to a matter of policy involving public interest, the decision of the
State Government thereon shall be final.”
112. Section 108 deals with “directions in matters of policy G
involving public interest as the State Government may give to it in
writing.” In the provision, the term ‘it’ refers to the State Commission.
The GoM’s GR does not mention the State Commission and has not
been issued as a direction to the MERC as envisaged in Section 108.
Therefore, the HVDC Project is, firstly, an existing project in terms of
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702 SUPREME COURT REPORTS [2022] 19 S.C.R.

A the GoM GR, and secondly, the GoM GR has not been issued in terms
of Section 108 as a direction to the State Commission.
E.3.3 Relevance of GoM GR vis-à-vis MSETCL’s decision
113. The GoM GR provides that all new projects would be allotted
under the TBCB route. Accordingly, the question arises whether
B MSETCL was bound to refer the HVDC Project to the Empowered
Committee for the bidding to be held and the tariff determined through
bidding to be thereafter referred to MERC under Section 63.
114. MSETCL or any STU performs the following functions in
terms of Section 39 of the Electricity Act:
C
“(2) The functions of the State Transmission Utility shall be–
(a) to undertake transmission of electricity through intra-State
transmission system;
(b) to discharge all functions of planning and co-ordination relating
D to intra-State transmission system with–
(i) Central Transmission Utility;
(ii) State Governments;
(iii) generating companies;
E (iv) Regional Power Committees;
(v) Authority;
(vi) licensees;
(vii) any other person notified by the State Government in this
F behalf;
(c) to ensure development of an efficient, co-ordinated and
economical system of intra-State transmission lines for smooth
flow of electricity from a generating station to the load centers;”
115. The Act clearly lays out the importance of the STU’s role in
G terms of planning, development and co-ordination of intra-state
transmission systems of any State. This role is carried out in co-ordination
with the other stakeholders listed in sub-clause (b) of Section 39(2). In
Maharashtra, MSETCL has been notifying five-year plans which reflect
the upcoming projects and planning initiatives regarding intra-state
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transmission system. The requirement for MSETCL to publish the five- A
year plans has also been captured in the MERC Gride Code 2006.
116. Paragraph 24 of the Development Guidelines allows the State
Governments to adopt the guidelines and constitute similar committees
for facilitation of intra-state transmission projects. In terms of the
Development Guidelines, the Empowered Committee has been set up B
which will perform its functions in line with the Guidelines. The GoM’s
GR has also notified that the Empowered Committee shall appoint the
Bid Process Coordinator and the Bid Empowerment Committee.
117. The functions of the Empowered Committee include “to
identify projects to be developed under this Scheme.” Further, it is C
this Empowered Committee which facilitates preparation of bid
documents, evaluation of bids as well as finalization of Transmission
Service Agreements between the developer and the concerned utilities.
118. Some of the relevant provisions of the Development
Guidelines, including the functions to be performed by the Empowered D
Committee, are reproduced below:
“14. The functions of the Empowered Committee will be the
following:
a) To identify projects to be developed under this Scheme.
E
b) To facilitate preparation of bid documents and invitation of bid
through a suitable agency.
c) To facilitate evaluation of bids.
d) To facilitate finalization and signing of Transmission Service
Agreement (TSA) between the developer and the concerned F
utilities.
e) To facilitate development of projects under this Scheme.
[…]
PROJECT FORMULATION G
17. Once the Perspective Plan, covering three five year plans,
the Short Term Plan and the Network Plan have been prepared;
some of these projects will be identified as projects to be covered
under this Scheme for competitive bidding. In order to attract
private investment in the transmission sector it is very important
H
704 SUPREME COURT REPORTS [2022] 19 S.C.R.

A to be able to make available all the information to the stakeholders,
regarding new projects and their technical and other specifications.
These identified projects would then need to be formulated with
adequate details to enable competitive bidding to take place.
Detailed Project Report (DPR) for these projects shall be
prepared….
B
[…]
SELECTION OF DEVELOPER
19. The selection of developer for identified projects would be
through tariff based bidding for transmission services according
C to the guidelines issued by the Ministry Of Power under section
63 of the Electricity Act, 2003. CTU/STUs and Joint Venture
Companies will also be eligible to bid, so that there is sufficient
competition among the bidders.
LICENSE FOR TRANSMISSION
D
20. Along with the recommendation of selection by the Empowered
Committee, the selected developer shall approach the Appropriate
Commission, within a period of 30 days, for grant of transmission
license. If it fails to apply for license within thirty days then it will
be liable for cancellation of its selection. Cancellation of selection
E as provided above will be done by the Empowered Committee
only after giving the selected private company an opportunity to
be heard.
(emphasis supplied)
119. In line with paragraph 17 of the Development Guidelines, it
F
shall be the Empowered Committee which shall identify projects from
the transmission utility’s network plan for being covered under the
competitive bidding process. In terms of paragraph 19 of the Development
Guidelines, the relevant STU will itself be eligible to be a participant in
the bid.
G 120. Accordingly, it is clear from a reading of these Development
Guidelines read with the functions of the State Utility in terms of Section
39(2) of the Act that while the State Transmission Utility shall be the
apex authority for planning of intra-state transmission projects, the
Empowered Committee is to identify projects to be undertaken under
H the TBCB route.
TATA POWER CO. v. MAHARASHTRA ELECTRICITY REGULATORY 705
COMMISSION [DR. DHANANJAYA Y CHANDRACHUD, CJI]

121. However, as we have already noted above, the HVDC Project A
was an existing/old project in terms of the GoM’s GR. Furthermore, this
is also brought out in terms of the Empowered Committee’s deliberations
recorded in its Minutes of Meetings.
122. Once the Empowered Committee was constituted, MSETCL
referred the HVDC Project to it in terms of the GoM’s GR. The Minutes B
of the 4th Empowered Committee Meeting dated 30 May 2020, record
Agenda No. 3 as the HVDC Project. The Empowered Committee was
apprised of the developments regarding this as well as the objection
from TPC that it should be allotted through TBCB. The Empowered
Committee did not take a decision in the said meeting.
C
123. In the 5th Empowered Committee meeting held on 24
December 2020, both the issue of the threshold limit for development of
intra-state transmission projects through TBCB as well as the HVDC
Project were once again discussed.
124. The Empowered Committee laid out the limit of Rs 500 crores D
as the threshold and decided upon the issue of “new/old” projects under
Agenda Item 3. Further, it once again took into consideration the HVDC
Project and decided that MSETCL shall proceed with the project in
terms of the recommendation in Agenda Item 3:
“Agenda Item 4: Appraisal of inclusion of 1000 MW HVDC E
Kudus-Aarey project in the STU five Year plan
(2019-20 – 2024-25) referred to Empowered Committee in last
meeting.
The Agenda “1000 MW HVDC project of Kudus – Aarey to be
taken under TBCB” was discussed in 4th Empowered Committee F
meeting on 30th May 2020.”
At that time the HVDC project was not part of STU five-year
plan.
Hence the agenda item was deferred. Now the Empowered
Committee has been apprised about inclusion of 1000 MW HVDC G
project of Kudus – Aarey in the STU Five-year plan. Post appraisal
of inclusion, the Committee informed STU that they should
proceed as per the decision given by the Empowered Committee
vide Agenda No.3.”
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706 SUPREME COURT REPORTS [2022] 19 S.C.R.

A 125. Based on the above decision, in its additional submission dated
20 January 2021 filed before MERC, MSETCL after adverting to the
aforementioned minutes of meeting of the EC stated that it would proceed
in accordance with the decision of the EC. Clarifying the same in its
written submission dated 08 February 2021 filed before the MERC, it
stated that this implied that the HVDC Project being an old project, it
B
would not be required to go through the TBCB route:
9. It is submitted that present HVDC Scheme was informed to
Empowered Committee Members during 4th Empowered
Committee meeting (as also recorded in MoM dated 30.05.2020)
in line with the Government of Maharashtra GR dt. 04.01.2019.
C Earlier Nagothane-Aarey HVDC project was submitted by
erstwhile Rinfra-T and was included in STU plan 2014-15 to 2018-
19. This project was approved by Hon’ble MERC to be
implemented by Rinfra-T. Subsequently HVAC Kudus - Aarey
scheme was submitted by MSETCL and was included in STU
D plan of 2015-16 to 2019-20. This project was approved by Hon’ble
Commission to be implemented by MSETCL. However this
HVAC project was subsequently cancelled. Further, M/s. AEML-
T has again submitted VSC based 1000 MW Kudus to Aarey
HVDC Scheme to STU on dated 23/11/2018 and the same was
included in STU five-year plan of 2018-19 to 2022-23 but later it
E was deleted as other HVAC schemes viz 400 kV Velgaon, 400
kV Kalwa 11 & 400 kV Kalwa - Padghe M/C line were explored
as alternative to HVDC Scheme. Subsequently after CEA
recommendation the scheme was again reinstated as submitted
by AEML-T in STU plan of 2019-20 to 2024-25. Hence it is seen
F that the said HVDC project is old project.
10. One of the most critical factors for timely execution of a
Transmission scheme is the availability of land for substations.
AEML EHV substation land utilization at Aarey can be optimized
to house the Inverter Terminal of the HVDC Scheme.
G 11. It is further submitted that in the 5th Empowered Committee
meeting, Empowered Committee decided the threshold to be applied
to the new schemes that can be referred to Empowered
Committee. HVDC being the scheme perceived since many years;
already recommended as submitted by AEML-T and also directed
by Hon’ble MERC to STU and AEML to implement the scheme
H expeditiously.
TATA POWER CO. v. MAHARASHTRA ELECTRICITY REGULATORY 707
COMMISSION [DR. DHANANJAYA Y CHANDRACHUD, CJI]

12. As is seen from above deliberations it is seen that HVDC A
project is old project. Moreover, the threshold limit as decided
by Empowered Committee in its meeting dated 24/12/2020 has
not yet been approved by Hon’ble Commission. However as per
Clause 6 (ii) this HVDC project can be considered as old project
and where MERC has initiated substantially the process of inclusion
B
of this project in scope of petitioner.
(emphasis supplied)
Notably, the EC too did not raise any objections to MSETCL’s
interpretation.
126. Furthermore, it is also important to note that the threshold C
limit which was mentioned by the EC was merely a recommendation in
response to the request of MERC so it could accordingly notify the limit
in line with the NTP 2016. The threshold limit has not yet been notified
by MERC.
127. Accordingly, it is clear that the MSETCL’s decision regarding D
the HVDC Project not being referred under the TBCB route was in line
with the Empowered Committee’s directions which have been set up in
terms of the GoM GR and which has been granted the power to select
projects to be taken up under the TBCB route.
F. Conclusion E
128. Based on the above discussion, we have reached the following
conclusions:
(i) The Electricity Act 2003 provides the States sufficient
flexibility to regulate the intra-state transmission systems,
F
wherein the Appropriate State Commissions possess the
power to determine and regulate tariff. The Electricity Act
2003 seeks to distance the State Governments from the
determination and regulation of tariff, placing such power
completely within the ambit of the Appropriate
Commissions; G
(ii) The provisions of the Electricity Act 2003 do not prescribe
one dominant method to determine tariff. Section 63
operates after the bidding process has been conducted.
Where the tariff has already been determined through
bidding, the Appropriate Commission has to adopt such H
708 SUPREME COURT REPORTS [2022] 19 S.C.R.

A tariff that has been determined. The Appropriate
Commission cannot negate such tariff determined through
bidding by using its powers under Section 62. The tariff
determined through the bidding process may not be adopted
by the Appropriate Commission only if the bidding process
was not transparent (undertaking a substantive review) or
B
the procedure prescribed by the Central Government
guidelines under Section 63 was not followed (undertaking
a procedural review);
(iii) Sections 62 and 63 stipulate the modalities of tariff
determination. The non-obstante clause in Section 63 cannot
C be interpreted to mean that Section 63 would take
precedence over Section 62 at the stage of choosing the
modality to determine tariff. The criteria or guidelines for
the determination of the modality of tariff determination
ought to be notified by the Appropriate State Commission
D either through regulations under Section 181 of the Act or
guidelines under Section 61 of the Act;
(iv) MERC has neither framed regulations nor notified guidelines
prescribing the criteria or guidelines for choosing the
modalities to determine tariff. Thus, MERC shall determine
E the tariff by exercising its general regulatory powers under
Section 86(1)(a) of the Act;
(v) MERC while exercising its general regulatory powers under
Section 86(1)(a) shall be guided by the NTP 2016, which
shall be a material consideration. Accordingly, while NTP
F 2016 requires intra-state transmission projects above the
threshold limit to be allotted through TBCB route, this
constitutes a material consideration to be taken into account.
The threshold value in the case of Maharashtra has not yet
been notified by MERC;

G (vi) The threshold limit not having been notified by MERC, it
was open to MERC to allot the HVDC project either under
the RTM or the TBCB route;
(vii) MERC and APTEL have arrived at concurrent findings that
the 1000MW HVDC Aarey-Kudus project is an ‘existing
project’ for the purpose of the applicability of the GoM’s
H
TATA POWER CO. v. MAHARASHTRA ELECTRICITY REGULATORY 709
COMMISSION [DR. DHANANJAYA Y CHANDRACHUD, CJI]

GR 2019. This Court deciding a statutory appeal under A
Section 125 of the Act cannot interfere with the concurrent
findings on a question of fact. Nonetheless, even on an
independent assessment of the facts, the HVDC project is
an existing project;
(viii) Even if the HVDC Project were to be considered a ‘new B
project’ in terms of the GoM’s GR, the same not having
been issued in terms of Section 108 as a direction to the
State Commission, MERC’s decision cannot be challenged
for failing to comply with the same as MERC is an
independent body with statutory powers to determine and
regulate tariff; and C

(ix) MSETCL has acted in terms of the GoM’s GR as it has
referred the HVDC project to the Empowered Committee
and the decision to not refer the HVDC project under the
TBCB route was in line with the Empowered Committee’s
directions. The Empowered Committee has the power to D
select projects to be taken up under the TBCB route under
the GoM’s GR.
129. The Electricity Act 2003 or the policy framework, particularly
NTP 2016 read with the GoM GR dated 4 January 2019, did not make it
binding upon MERC to allot the HVDC project only through the TBCB E
route. For the reasons mentioned above, the Regulatory Commission’s
decision to grant the HVDC project under Section 62 was within a
reasonable exercise of its powers.
130. This case has brought the ad-hoc nature of the functioning
of the STU to the notice of this Court. MSETCL has been changing its F
stance on the HVDC technology without following any due procedure.
The flip-flops by MSETCL have led to the loss of time and investment
while the demand in the electricity sector has been increasing
exponentially. We are cognizant of the fact that in matters dealing with
electricity regulation, the regulatory commissions and the transmission G
utilities are usually bogged down by factors such as technological
uncertainty, requirement of heavy investment and issues of right of way.
The ad-hoc functioning of the transmission utilities is also attributable to
the lacunae in the regulations guiding the exercise of their functions.
The Electricity Act 2003 was enacted with the objective of providing the
States with sufficient flexibility to regulate the intra-state electricity H
710 SUPREME COURT REPORTS [2022] 19 S.C.R.

A system and simultaneously provided the regulatory commissions with
the power to determine tariffs. Though the Government, both at the
Centre and in the States, have framed statutory policies and guidelines
regulating the electricity sector, we have noticed that the Regulatory
Commissions have not framed the necessary regulations to put into effect
the principles prescribed under the Act.
B
131. We direct all State Regulatory Commissions to frame
Regulations under Section 181 of the Act on the terms and conditions
for determination of tariff within three months from the date of this
judgment. While framing these guidelines on determination of tariff, the
Appropriate Commission shall be guided by the principles prescribed in
C Section 61, which also includes the NEP and NTP. Where the Appropriate
Commission(s) has already framed regulations, they shall be amended
to include provisions on the criteria for choosing the modalities to
determine the tariff, in case they have not been already included. The
Commissions while being guided by the principles contained in Section
D 61 shall effectuate a balance that would create a sustainable model of
electricity regulation in the States. The Regulatory Commission shall
curate to the specific needs of the State while framing these regulations.
Further, the regulations framed must be in consonance with the objective
of the Electricity Act 2003, which is to enhance the investment of private
stakeholders in the electricity regulatory sector so as to create a
E sustainable and effective system of tariff determination that is cost
efficient so that such benefits percolate to the end consumers.
132. For the reasons mentioned above, the appeal is dismissed.
133. Pending application(s), if any, are disposed of.
F
Ankit Gyan and Anurag Bhaskar Appeal dismissed.
(Assisted by : Iram Jan, LCRA)

G

H