Supreme Court of India
TRANSMISSION CORPN. OF A.P. LTD. & ANR.versusSAI RENEWABLE POWER PVT. LTD. & ORS.
- Citation
- 2010 INSC 391
- Decided
- 8 July 2010
- Disposal
- Disposed off
- Bench
- B S CHAUHAN
Holding
The Andhra Pradesh Electricity Regulatory Commission is vested with the statutory power to determine tariff, including the purchase price, and to impose restrictions on third‑party sales, and the Tribunal’s order is set aside.
Summary
The Supreme Court examined a dispute between the Andhra Pradesh Transmission Corporation and several non‑conventional energy developers over the purchase price of electricity and the restriction on third‑party sales imposed by the Andhra Pradesh Electricity Regulatory Commission (APERC). The developers had entered into Power Purchase Agreements (PPAs) based on an earlier APERC order of 20 June 2001, which fixed a base price of Rs 2.25 per unit with 5% annual escalation and prohibited sales to third parties. The developers later challenged the APERC’s subsequent orders that revised the tariff and maintained the sales restriction, invoking promissory estoppel, legitimate expectation, and duress. The Court held that APERC has statutory jurisdiction to determine tariffs, including the purchase price, and to impose such restrictions, and that the principles of estoppel and duress did not apply because the contracts were clear, reviewed, and not indefeasibly promised. Consequently, the Tribunal’s order was set aside and the matter remitted to APERC for fresh tariff determination and consideration of third‑party sales, with the State of Andhra Pradesh added as a party.
Issues considered
- Whether the Andhra Pradesh Electricity Regulatory Commission has jurisdiction to fix the tariff and purchase price for non‑conventional energy generators
- Whether the Commission can impose a restriction on sale of generated electricity to third parties
- Correctness of the tariff fixation by the Commission
- Whether the doctrine of promissory estoppel or legitimate expectation applies to the developers
- Whether the developers’ contracts were entered into under duress
- Effect of the APERC order dated 20 June 2001, which had attained finality
Legislation cited
- Andhra Pradesh Electricity Reform Act, 1998s. 11, s. 12, s. 15, s. 21(4)(b), s. 26, s. 54, s. 66
- Electricity Act, 2003s. 111(1), s. 111(6), s. 121, s. 26(2), s. 26(7), s. 3, s. 52, s. 57, s. 61, s. 62, s. 64, s. 86(1)(a), s. 86(1)(b)
- Electricity Regulatory Commission Act, 1998s. 17
Subjects
electricitytariff fixationregulatory commissionpromissory estoppelduressnon‑conventional energypower purchase agreementthird‑party salejurisdiction
Judgment
[2010] 8 S.C.R. 636
A TRANSMISSION CORPN. OF A.P. LTD. & ANR.
v.
SAi RENEWABLE POVVER PVT. LTD. & ORS.
(Civil Appeal No. 2926 of 2006 etc.)
JULY 8, 2010
B
[DR. B.S. CHAUHAN AND SWATANTER KUMAR, JJ.]
Electricity - Promotion of generation of grid quality power
from non-conventional sources -- Guidelines issued by
c Central Government indicating the purchase price of such
electricity - State Government granting uniform incentives
to all the projects based on renewable sources of energy -
Order reviewing the tariff and imposing restriction on sale to
third party - Non-conventional energy developers/generators
D accepted and acted upon the order by entering into Power
Purchase Agreements - Thereafter State Electricity
Regulatory Commission determining the purchase price for
procurement of such electricity and also imposing restriction
with regard to sale thereof to third party- Propriety of the order
E of the Regulatory Commission - Held: It is within the power
and jurisdiction of the Regulatory Commission to determine
the 'purchase price' and to impose restriction on sale to third
party - The Commission was not estopped from altering the
purchase rates or imposing restriction on the sale - The
incentives initially provided by the authorities under the
F
guidelines issued by the Central Government and the Power
Purchase Agreements were not for indefinite period, but were
subject to review - The contracts entered into by the parties
provided for review and the restriction for sale to third party -
Parties are bound by contractual obligation and such
G obligation cannot be frustrated by aid of promissory estoppel
- Agreements cannot be said to be result of duress - Duress
not proved, so as to render the contract voidable - Conditions
of a contract cannot be altered/avoided on presumptions or
H 636
TRANSMISSION CORPN. OF A.P. LTD v. SAi RENEWABLE 637
POWER PVT. LTD.
assumptions - Determination of tariff is a function assigned A
legislatively to Regulatory Commission - Supreme Court in
exercise of powers under Article 136 of the Constitution would
not sit as an appellate authority over the formation of opinion
and determination of tariff by the specialized bodies - Matters
remanded to the Regulatory Commission to fix/determine the B
tariff for purchase of electricity - Electricity Regulatory
Commission Act, 1998 - s. 17 - Andhra Pradesh Electricity
Reform Act, 1998 - s. 11 - Electricity Act, 2003 - ss. 61 and
62 r/w. s. 86(1)(a) and (b) - Contract - Promissory Estoppel
- Constitution of India, 1950 - Article 136. c
Administrative Law:
Principle of promissory estoppel - Nature and
applicability of - Discussed.
D
Principle of legitimate expectation - Applicability of
Judicial Review - Scope of, in policy matters.
Maxim - 'Al/egans contraria non est audiendus' -
Applicability of. E
Words and Phrases - 'Tariff' and 'Purchase price' -
Meaning of
Ministry of Non-Conventional Energy Sources of
Central Government wrote letter dated 7.9.1993 to F
different States informing that under new strategy and
action plan of the Ministry, special emphasis would be
given to generation of grici quality power from non-
conventional sources. Guidelines drawn up by the
Ministry were also enclosed with the letter, whereby a G
minimum buy back price of Rs. 2.25 per unit was
proposed. The transmission of electricity was required to
be undertaken by State Electricity Board.
In furtherance of the decision of the Central H
638 SUPREME COURT REPORTS (2010] 8 S.C.R.
A Government and the Guidelines, State of Andhra Pradesh
issued two different Government Orders dated 18.11.1997
and 22.11.1998 granting uniform incentives to all the
projects based on renewable sources of energy. The
Power Purchase Agreement (PPA) between the appellant-
s Corporation (APTRANSCO) and non-conventional power
project developers were executed. The A.P. Regulatory
Commission passed an order on 20.6.2001 determining
the tariff as well as defining other rights and obligations
between the parties including that the generators of
c electricity were not permitted to make sale in favour of
third party. After passing of this order, developers
entered into PPAs and confirmed the acceptance and
implementation of the order dated 20.6.2001. The PPAs
as well as the order dated 20.6.2001 specifically provided
for review/revision of purchase price. The order dated
0
20.6.2001 was never challenged.
Thereafter, pursuant to suo motu proceedings,
Andhra Pradesh Electricity Regulatory Commission
(which was constituted under Andhra Pradesh Electricity
E Reform Act, 1998) by its order dated 20.3.2004 fixed the
energy purchase rates at base unit price of Rs. 2.25 as
on 1.4.1994 and the escalation index of 5% p.a .. Thus, the
base price as on 1.4.2004 was 3.37 per kwh. The tariff was
frozen for five years. The Regulatory Commission also
F restricted the sale, procurement and distribution of
electricity by the developers to any other party except
APTRANSCO. This order was further clarified by order
dated 7.7.2004. The developers filed appeals against both
the orders. The Appellate Tribunal for Electricity held that
G there was some element of duress in execution of the
PPAs; that the PPA being a statutory document, the
Regulatory Commission had no authority to interfere with
the same; that the Regulatory Commission had neither
the power nor the jurisdiction to compel the developers
H
TRANSMISSION CORPN. OF A.P. LTD v. SAi RENEWABLE 639
POWER PVT. LTD.
to sell the power generated by them to APTRANSCO and/ A
or DISCOM.
The instant appeals were filed against the orders of
the appellate tribunal. The questions, broadly, for
consideration before the Supreme Court pertained to the
8
issues as under:
(i) Jurisdiction of the Regulatory Commission for
fixation of tariff and sale of generated
electricity to third party;
c
(ii) Correctness of tariff fixation;
(iii) Applicability of principle of estoppel and the
extent of its applicability;
(iv) Applicability of plea of duress; D
(v) Effect of order dated 20.6.2001 in view of its
having attained finality and for the same not
being questioned in the instant proceedings.
Disposing of the appeals and remanding the matters E
to Andhra Pradesh Electricity Regulatory Commission,
the Court
HELD: 1.1. The Andhra Pradesh Electricity
Regulatory Commission has the jurisdiction to determine F
tariff which takes within its ambit the 'purchase price' for
procurement of the electricity generated by the non-
conventional energy developers/ generators, in the facts
and circumstances of the instant cases. (Para 52] [717-
8] G
1.2. The Tribunal was not correct in holding that since
no independent notification was issued u/s. 17 of the
Regulatory Commission Act, 1998, therefore, the A.P.
Electricity Regulatory Commission could not exercise the
H
640 SUPREME COURT REPORTS [2010] 8 S.C.R.
A powers vested in the Regulatory Commission under that
Act. The Regulatory Commission was constituted under
the Andhra Pradesh Electricity Reform Act, 1998 and an
appropriate notification in that behalf was issued. The
Electricity Regulatory Commission Act, 1998 stood
B repealed by the Electricity Act, 2003. The Electricity Act,
2003 specifically recognized and accepted the
Commissions constituted under the enactments specified
in the Schedule to the Act as appropriate Commission.
In entry 3 of the said Schedule, Reform Act, 1998 has
c been specifically noticed. Thus, the Regulatory
Commission constituted under the Reform Act, 1998
became the appropriate Ccmmission under the Electricity
Act, 2003 as well. [Para 3] [665-F-H; 666-A-B]
1.3. Fixation of tariff is, primarily, a function to be
D performed by the statutory authority in furtherance to the
provisions of the relevant laws. Fixation of tariff is a
statutory function as specified under thQ provisions of
the Reform Act, 1998, Electricity Regulatory Commissions
Act, 1998 and the Electricity Act, 2003. These functions
E are required to be performed by the expert bodies as to
whom the job is assigned under the law. The Regulatory
Commission constituted by the notification dated
3.4.1999 would be the appropriate Commission under the
Reform Act, 1998, Electricity Regulatory Commissions
F Act, 1998 and the Electricity Act, 2003 and is required to
perform the functions as contemplated u/ss. 11, 17 and
82 of the respective Acts. The functions assigned to the
Regulatory Commission are wide enough to specifically
impose an obligation on the Regulatory Commission to
G determine the tariff. [Para 17] [678-F-H; 679-A-F]
1.4. The Regulatory Commission is vested with very
vast powers and functions. Section 11 of the Reform Act,
1998 declares fixation of tariff as one of the primary
functions of the Regulatory Commission in general more
H
TRANSMISSION CORPN. OF A.P. LTD v. SAi RENEWABLE 641
POWER PVT. LTD.
particularly, to the specified consumers u/s. 26 of the A
Reform Act, 1998. While under the Electricity Act, 2003,
Sections 61 and 62 r/w Section 86(1)(a) and (b) deal with
fixation of tariffs in relation to production, distribution and
sale of generated power to the end consumer. These
provisions clearly demonstrate that the Regulatory B
Commission is vested with the function for determining
the tariff for generation, supply, transmission and billing
of electricity etc., as well as regulation of electricity
purchase and procurement process of distribution
licensees, including price at which electricity shall be c
procured from the generating companies. With these
specific powers in the statute book itself, it cannot be said
that procurement of power from the generating
companies will not fall within the ambit of powers and
functions of the Regulatory Commission. It is a common D
body performing functions, duties and exercising powers
under all these three Acts. [Para 30] [694-F-H; 695-A]
PTC India Ltd. v. Central Electricity Regulatory
Commission (201 O) 4 sec 603, relied on.
E
Tata Power Company Ltd. v. Reliance Energy Ltd. 2009
(7) SCALE 513, referred to. '
1.5. All the Power Purchase Agreements (PPAs)
entered into by the generating companies with the F
appropriate body, as well as the orders issued by the
State in GO Ms. Nos. 93 and 112, in turn, had provided
for review of tariff and the conditions. The Tribunal
appears to have fallen in error of law in coming to the
conclusion that the Regulatory Commission had no
powers either in law or otherwise of reviewing the tariff G
and so called incentives. From various provisions and
the documents on record it is clear that the Regulatory
Commission is vested with the power to revise tariff and
conditions in relation to procurement of power from
generating companies. It is also clear from the record that H
642 SUPREME COURT REPORTS [2010] 8 S.C.R.
A in terms of the contract between the parties, the
APTRANSCO had reserved the right to revise tariff etc.
with the approval of the Regulatory Commission. [Para
33) [698-D-G]
1.6. The Tribunal has taken a narrower view of the
8
jurisdiction vested in the Regulatory Commission which
is discharging its statutory functions under all the three
Acts in accordance with law. The power available to the
Government to issue policy directions has two
C restrictions. Firstly, the policy direction has to be on the
matters related to electricity in the State including overall
planning and coordination. Secondly, all such policy
directions have to be issued by the State Government in
consonance with the object sought to be achieved by this
Act and accordingly shall not adversely affect or interfere
D with the functions and powers of the Regulatory
Commission including, but not limited to, determination
of the structure of tariff for supply of electricity to the
consumers. Powers vested in the Regulatory
Commission to frame regulations under Section 54 also
E intend that regulations are to be framed with an object to
ensure proper performance of its functions under the Act.
Both the State and the Regulatory Commission are
supposed to exercise their respective powers only for the
purposes of furthering the cause of the Reform Act. The
F Commission discharging its statutory functions within
the ambit of Sections 11, 12 and 26 of the Reform Act,
1998 as well as Sections 61, 62 and 86(1 )(b) of the
Electricity Act, 2003 renders advisory functions to the
State. [Para 46] [711-G-H; 712-A-D]
G
1.7. It is not correct to say that the Regulatory
Commission acted in contradiction or conflict with the
State policy. The State was certainly not intending to
provide incentives and concessions with assurance of
buy-back to enable the Non-Conventional Energy
H developers/generators to sell generated powers to third
TRANSMISSION CORPN. OF AP. LTD v. SAi RENEWABLE 643
POWER PVT. LTD.
parties. It must be kept in mind that the policy of the A
Government of India as well as the State of Andhra
Pradesh was for encouraging the developers/generators
of Non-conventional Energy to generate electricity for the
benefit of public at large with buy back of power being
one of the basic features of this policy. Such parameters B
are subject to change in larger public interest. All these
issues, in fact, loose much significance because of the
fact that parties have, by and large, entered into the field
of contract simpliciter and their rights are controlled by
the contracts executed between them. There is no c
challenge to ,these contracts and, therefore, it may be
hardly permissible for the Court to go behind these
contracts and permit questioning of the statutory
jurisdiction vested in the Regulatory Commission. [Para
46] [712-F-H; 713-A-B] D
1.8. After creation of the Regulatory Commissions
under the provisions of the Electricity Regulatory
Commission Act, 1998, the Commission has clear power
and jurisdiction to fix tariff. The Court should not adopt
an interpretation which should neither be strict nor E
narrower so as to oust the jurisdiction of the Regulatory
Commission, as it would defeat the very object of
enacting the said Act. [Para 47] [713-C-D]
1.9. The basic policy of both the Central as well as F
the State Government was to encourage private sector
participation in generation, transmission and distribution
of electricity on the one hand and to further the objective
of distancing the regulatory responsibilities of the
Regulatory Commission from the Government and of G
harmonizing and rationalizing the provisions of the
existing laws relating to electricity in India, on the other
hand. The object and reasons of Electricity Act, 2003 as
well as the Reform Act, 1998 are definite indicators of
such legislative intent. The objects and reasons clearly H
644 SUPREME COURT REPORTS [2010] 8 S.C.R.
A postulated the need for introduction of private sector into
the field of generation and distribution of energy in the
State. Efficiency in performance and economic utilization
of resources to ensure satisfactory supply to the public
at large is the paramount concern of the State as well as
B the Regulatory Commission. The policy decisions of
these constituents are to be in conformity with the object
of the Act. Thus, it is necessary that the Regulatory
Commission, in view of this object, take practical
decisions which would heli- in ensuring existence of
c these units rather than their extinguishment as alleged.
[Para 51] [716-A-G]
1.10. The restriction with regard to third party sales
was not only creation of a directive issued or approval
granted by the Regulatory Commission, but was actually
D in furtherance of the contract entered into between the
parties. Rights and liabilities arising from a binding
contract cannot be escaped on the basis of some
presumptions or inferences in relation to the facts leading
to the execution of the contract between the parties. The
E jurisdiction of the Regulatory Commission, in the facts of
the case, arises not only from the statutory provisions
under the different Acts but also in terms of the contract
executed between the parties which has binding force.
[Para 49] [714-G-H; 715-A-B]
F
1.11. However, the grievance of the respondents that
enforcement of the purchase price at the rate determined
by the Regulatory Commission along with complete
prohibition on the right of the Non-conventional Energy
G Generator/Developers to sell generated power to the third
parties would compel them to shut down their projects,
is a matter of concern, even for the State Government. All
these projects, admittedly, were established in
furtherance of the scheme and the guidelines provided
H by the Central Government which, in turn, were adopted
TRANSMISSION CORPN. OF AP. LTD v. SAi RENEWABLE 645
POWER PVT. LTD.
with some modification by the State Government. The A
State Electricity Board implemented the said scheme and
initially had permitted sale of generated electricity to third
parties, however, subsequently and after formation of the
Regulatory Commission which, in turn, took over the
functions of the State Electricity Board, the incentives B
were modified and certain restrictions were placed. The
reasons for these restrictions have been stated in the
affidavit filed on behalf of the appellants which is not a
matter to be examined by this Court in exercise of its
extra-ordinary jurisdiction. These matters, essentially, c
must be examined by expert ~odies particularly, when
such bodies are constituted ~nder the provisions of a
special statute. [Paras 49 and 50] [715-B-C-E-H]
2.1. It is not correct to say that the developers have
legitimate right to expect that the incentives as provided D
to them in furtherance of the letters and orders of the
Central as well as the State Government were to be
continued indefinitely and the authorities concerned
were estopped from altering the rates and I or imposing
the condition of no sale to third parties. For the principle E
of estoppel to be attracted, there has to be a definite and
unambiguous representation to a party which then
should act thereupon and then alone the consequences
in law can follow. The Tribunal has erred in law in
treating the inter-se letters and guidelines between the F
Government of India, State Government and the
Commission/the State Electricity Board as unequivocal
commitments to the respondent/purchasers/generators/
developers so as to bind the State for all times to come.
In the instant cases, the policy guidelines issued by the G
Central Government were the proposals sent to the State
Government, which the State Government accepted to
consider, amend or alter as per their ' needs and
conditions and then make efforts to achieve the objects
of encouraging non-conventional energy generators and H
646 SUPREME COURT REPORTS [2010) 8 S.C.R.
A purchasers to enter into this field. These are the matters,
which will squarely fall within the competence of the
Regulatory Commission/the State Electricity Board at the
relevant points of time. Besides that, there was no definite
and clear promi5-~ made by the authorities to the
s developers that would invoke t\e principle of promissory
estoppel:"Undoubtedly,
, . to encourage participation in the
field of generation of energy through non-conventional
methods, some incentives were provided but these
incentives ,u_nder the guidelines as well as under the
c PPAs signed between the parties from time to time were
subject to review. In any case, the matter was completely
put at rest by the order of 20th June, 2001 and the PPAs
voluntarily signed by the parties at that time, which had
also provided such stipulations. If such stipulations were
not acceptable to the parties they ought to have raised
0
objections at that time or at least within a reasonable time
thereafter. The agreements have not only been signed
by the parties but they have been fully acted upon for a
substantial period. [Para 36] [702-F-H; 703-A-F]
E 2.2. The principle of promissory estoppel, even if, it
was applicable as such, the Government can still show
that equity lies in favour of the Government and can
discharge the heavy burden placed on it. In such
circumstances, the principle of promissory estoppel
F would not be enforced against the Government as it is
primarily a principle of equity. [Para 37] [703-H; 704-A-B]
2.3. It is a settled canon of law that doctrine of
promissory estoppel is not really based on principle of
G estoppel but is a doctrine evolved by equity in order to
prevent injustice. There is no reason why it should be
given only a limited application by way of defence. It can
also be the basis of a cause of action. Once the
ingredients of promissory estoppel are satisfied then it
could be enforced against the authorities including the
H
TRANSMISSION CORPN. OF A.P. LTD v. SAi RENEWABLE 647
POWER PVT. LTD.
State with very few extra ordinary exceptions to such A
enforcement. [Para 37] [704-A-B]
2.4. Even if it is assumed that there was a kind of
unequivocal promise or representation to the
respondents, the reviews have taken place only after the
8
period specified under the guidelines and/or in the PPAs
was over. This is a matter which, primarily, falls in the
rea!m of contract and the parties would be governed by
the agreements that they have signed. Once these
agreements are signed and are enforceable in law then
the contractual obligations cannot be frustrated by the aid C
of promissory estoppel. [Para 37] [704-D-F]
2.5. If the Promise is made in regard to a present or
existing facts, the principle of estoppel can be enforced
against the Government. But a promise in relation to a D
future transaction or act may not fall within the ambit of
promissory estoppel. [Para 38] [705-G]
Union of India v. Mis. Inda-Afghan Agencies Ltd. (1968)
2 SCR 366; Century Spinning and Manufacturing Company
Ltd. v. The Ulhasnagar Municipal Council (1970) 1 SCC 582; E
Motilal Padampat Sugar Mills. Co. Ltd. v. State of Uttar
Pradesh (1979) 2 SCC 409, relied on.
2.6. In our country, the law of promissory estoppel
has attained certainty . It is only an unambiguous and F
definite promise, which is otherwise enforceable in law
upon which, the parties have acted, comes within the
ambit and scope of enforcement of this principle and
binding on the parties for their promise and
representation. In the instant case, the guidelines cannot G
take the colour of a definite promise which in the letters
of the Central Government itself was proposals to the
State Government. Besides that, even if the State letters/
circulars are treated as promise or representations to the
private parties like the respondents even then, they lead H
648 SUPREME COURT REPORTS [2010] 8 S.C.R.
A to the execution of a definite contract between the parties
which will purely fall io the domain of contractual law.
These contracts specifically provided for review and
when reviewed in the year 2001 parties not only accepted
the order but executed contracts (PPAs) in furtherance
B of it. In these circumstances, it is not correct to say that
the State or the Regulatory Commission or erstwhile
State Electricity Board were bound to allow same tariff
and permit third party sales for an indefinite period. To
this extent, authorities, in any case, would not be bound
C by the principle of estoppel. [Para 41] [707-F-H; 708-A-B]
2.7. Besides, the State of Andhra Pradesh was neither
impleaded as a party to the proceedings before the
Regulatory Commission nor before the Tribunal. In fact,
the Tribunal has referred to various acts and deeds of the
D State and consequences thereof, but did not consider it
appropriate to implead the State Government as a party
to the proceedings. The presence of the State
Government before the Tribunal could have certainly
been appropriate, inasmuch as the State would have
E placed before the Appellate Authority and the Regulatory
authorities, its views in regard to revision of incentives
as well as the purchase price. The State of Andhra
Pradesh was a necessary, in any case, a proper party in
these proceedings. [Para 48] [714-C-F]
F
BSES Ltd. v. Tata Power Co. Ltd. (2004) 1 SCC 195;
Andhra Pradesh Electricity Regulatory Commission v. R. V.K.
Energy Private Limited (2008) 17 SCC 769, relied on.
3.1. To frustrate a contract on the ground of duress
G or coercion, there has to be definite pleadings which
have to be substantiated normally by leading cogent and
proper evidence. However, in the case where summary
procedure is adopted like in the instant case, at least
some documentary evidence or affidavit ought to have
H been filed raising this plea of duress specifically. Nothing
TRANSMISSION CORPN. OF A.P. LTD v. SAi RENEWABLE 649
POWER PVT. LTD.
was brought to the notice of the Court to state the plea A
of duress and to prove the alleged facts which
constituted duress, so as to vitiate and/or even partially
reduce, the effect of the PPAs. On the one hand, the
Tribunal appears to have doubted the binding nature of
the contracts stating that it contained unilateral B
conditions introduced by virtue of Order and approval of
the Regulatory Commission, while on the other hand, it
proceeded on the presumption that PPAs are final and
binding and still drew the conclusion that the Regulatory
Commission could not revise the tariff. Even in the order, c
no facts have been pointed out which, in the opinion of
the Tribunal, constituted duress within the meaning of the
Contract Act so as to render the contract voidable. In the
instant case, it is significant to note that the PPAs were
executed prior and subsequent to the issuance of the 0
order dated 20th June, 2001. Different persons executed
the contracts at different times in full awareness of the
terms and conditions of such PPA. Therefore, the Tribunal
was not right in recording the findings that the PPAs
executed by the parties, were result of some duress and,
E
thus, it will not vest the authorities with the power to
review the tariff and other granted incentives. [Para 42]
[708-C-H]
3.2. Besides, none of the generators had challenged
the agreements and, in fact, except in arguments before F
the Tribunal no case was made out for the purposes of
vitality of the contract or any part thereof. On the
contrary, all the generators under all the branches of non-
conventional energies, have accepted the contract and
proceeded on the basis that the said contracts are G
binding and still the Regulatory Commission does not
have any power or jurisdiction to revise the tariff or deal
with the concessions. Even otherwise, firstly, there are
no facts on record, much less, supported by any
documentary or any other evidence to sustain the plea H
650 SUPREME COURT REPORTS (2010] 8 S.C.R.
A that the contracts (PPAs) are a result of undue influence
or duress by the State or its agencies upon the
generators. Secondly, the generators have already taken
benefit of that contract which was based on the policy
of the State as well as the order of the Regulatory
B Commission. Having attained those benefits, it will
hardly be of any help to the generators particularly, in the
facts and circumstances of the case, to substantiate,
justify or argue the plea of duress. [Para 42] [709-A-G]
C Bir/a Jute Manufacturing Co. v. State of M.P. (2002) 9
sec 667, relied on.
3.3. The finding of the Tribunal that "out of
compulsion some of the developers entered into Power
Purchase Agreement with APTRANSCO accepting the
D terms and conditions set out in order dated 20th June,
2001" is not substantiated by any material on record.
What was the compulsion and what were the facts which
persuaded the Tribunal to take such a view are
conspicuous by their very absence. A compulsion
E leading to execution of a contract is a matter entirely
based upon facts. It is difficult for this Court, originally,
to infer duress or compulsion in absence of specific
pleadings and materials in that behalf. [Para 44] [710-D-
F]
F
4. In the instant case, the order dated 20th June, 2001
was fully accepted by the parties without any reservation.
After the lapse of more than reasonable time of their own
accord they voluntarily signed the PPA which contained
a specific stipulation prohibiting sale of generated power
G by them to third parties. The agreement also had renewal
clause empowering TRANSCO/APTRANSCO/ Board to
revise the tariff. Thus, the documents executed by these
parties and their conduct of acting upon such
agreements over a long period, bind them to the rights
H and obligations stated in the contract. The parties can
TRANSMISSION CORPN. OF A.P. LTD v. SAi RENEWABLE 651
POWER PVT. LTD.
hardly deny the facts as they existed at the relevant time, A
just because it may not be convenient now to adhere to
those terms. Conditions of a contract cannot be altered/
avoided on presumptions or assumptions or the parties
having a second thought that a term of contract may not
be beneficial to them at a subsequent stage. They would B
have to abide by the existing facts, correctness of which,
they can hardly deny. Such conduct, would be hit by
allegans contraria non est audiendus. [Para 39] [705-F-H;
706-A-B]
Kusumam Hotels (P) Ltd. v. Kera/a Seb (2008) 13 SCC C
213, relied on.
Pawan Alloys v. UPSEB (1997) 7 SCC 251, referred to.
5.1. The expression 'tariff' as explained in the Law D
Lexicon* is a "determinatiorl,, ascertainment, a table of
rates of export and import duties, in which sense the word
has been adopted in English and other European
languages and as defined by the law dictionaries the
word 'tariff' is a cartel of commerce; a book of rates; a E
table or catalogue, drawn usually in alphabetical order,
containing the names of several kind of merchandise,
with the duties or customs to b~ paid for the same as
settled by the authcyity or agreeti between the several
princes and States that hold com"1erce together." It has
also been explained as a scheduil:!, system, or scheme F
of duties imposed by the Government of a country upon
goods imported or exported; published volume of rate
schedules and general terms and conditions under which
a product or service will be supplied; a document
approved by the responsible regulatory agency listing the G
terms and conditions including a schedule of prices,
under which utility services will be provided. [ Paras 28
and 29] [693-F-H; 694-A-C]
*Law Lexicon with legal Maxims, L[atin terms and Words H
652 SUPREME COURT REPORTS [2010] 8 S.C.R.
A and Phrases (Second Edition 1997) - referred to.
5.2. The expression 'purchase price' has to be given
its limited meaning, i.e. the price paid for purchasing a
good and in the context of the instant case, price at which
generated electricity will be sold to the specified
8
agencies. The term 'purchase price' indicated in the
PPAs, as such, would be a matter within the realm of
contract but this is subject to the changes which are
contractually and/or even statutorily permissible.
Purchase price ultimately would form part of the tariff, as
C tariff relatable to a licensee or a consumer would have
essentially taken into account, the purchase price. The
purchase price may not include tariff but tariff would
always or is expected to include purchase price. [Para 29]
(694-B-D]
D
6. The order dated 20th June, 2001 passed by the
Andhra Pradesh Electricity Regulatory Commission has
attained finality and was not challenged in any
proceedings so far. This judgment shall not, therefore,
E be in detriment to that order which will operate
independently and in accordance with law. [Para 52] [717-
H; 718-A-B]
7.1 The specialized performance of functions that are
assigned to Regulatory Commission can hardly be
F assumed by any other authority and particularly, the
courts in exercise of their judicial discretion. The Tribunal
constituted under the provisions of the Electricity Act,
2003, again being a specialized body, is expected to
examine such issues, but this Court in exercise of its
G powers under Article 136 of the Constitution would not
sit as an appellate authority over the formation of opinion
and determination of tariff by the specialized bodies. This
question is itself open to be considered by the
appropriate authority at the appropriate stage.
H Determination of tariff is a function assigned legislatively
TRANSMISSION CORPN. OF A.P. LTD v. SAi RENEWABLE 653
POWER PVT. LTD.
to a competent forum/authority. Whether it is by exercise A
of legislative or subordinate legislative power or a policy
decision, if the Act so requires, but it generally falls in the
domain of legislative activity and the courts refrain from
adverting into this arena. It would be termed as illegal if
statutorily prescribed procedure is not followed or it is so B
perverse and arbitrary that it hurts the judicial conscience
of the court making it necessary for the court to
intervene. Even in the instant case the scope of
jurisdiction is a very limited one. [Para 17, 18] [679-F-H;
680-A-B; D-E] C
Association of Industrial Electricity Users v. State of
Andhra Pradesh (2002) 3 SCC 711; West Bengal Electricity
Regulatory Commission v. CESC Ltd. (2002) 8 SCC 715,
relied on.
D
7.2. The matters are remanded to the Andhra Pradesh
Electricity Regulatory Commission with a direction that
it shall hear the Non-conventional energy generators
afresh and fix/ determine the tariff for purchase of
electricity in accordance with law, expeditiously. It shall E
also re-examine that in addition to the above or in the
alternative, whether it would be in the larger interest of
the public and the State, to permit sale of generated
electricity to third parties, if otherwise feasible. The
Andhra Pradesh Electricity Regulatory Commission shall F
consider and pronounce upon all the objections that may
be raised by the parties appearing before it, except
objections in relation to its jurisdiction, plea of estoppel
and legitimate expectancy against the State and/or
APTRANSCO and the plea in regard to PPAs being result G
of duress as these issues stand concluded by this
judgment. It is directed that State of Andhra Pradesh shall
be added as a party respondent in the proceedings and
the Andhra Pradesh Electricity Regulatory Commission
shall grant hearing to the State during pendency of
proceeding before it. [Para 52] [717-C-H; 718-A-C] H
654 SUPREME COURT REPORTS [2010] 8 S.C.R.
A Case Law Reference:
(2002) 3 sec 111 Relied on. Para 18
(2002) 8 sec 115 Relied on. Para 19
(2010) 4 sec so3 Relied on. Para 30
B
2009 (7) SCALE 513 Referred to. Para 31
(1968) 2 SCR 366 Relied on. Para 38
(1970) 1 sec 582 Relied on. Para 38
c
(1979) 2 sec 409 Relied on. Para 38
(1997) 1 sec 251 Referred to. Para 38
(2008) 13 sec 213 Relied on. Para 40
D (2002) 9 sec 667 Relied on. Para 43
(2004) 1 sec 195 Relied on. Para 47
(2008) 11 sec 769 Relied on. Para 47
E CIVIL APPELLATE JURISDICTION : Civil Appeal No.
2926 of 2006.
From the Judgment and Order dated 02.06.2006 of the
Appellate Tribunal for Electricity, New Delhi in Appeals No. 1,
2, 5, 6, 7, 8, 9, 10, 12, 15, 16, 17, 18, 19, 20, 21, 22, 34, 47,
F
52, 58, 67 and 80 of 2005.
With
C.A. No. 5940/2006
G C.A. No. 5941/2006
C.A. No. 5942/2006
C.A. No. 5943/2006
H C.A. No. 5944/2006
TRANSMISSION CORPN. OF A.P. LTD v. SAi RENEWABLE 655
POWER PVT LTD.
C.A. No. 5945/2006 A
C.A. No. 5946/2006
C.A. No. 5947/2006
C.A. No. 5948/2006
B
C.A. No. 5949/2006
C.A. No. 5950/2006
C.A. No. 5951/2006
c
C.A. No. 5952/2006
C.A. No. 5953/2006
C.A. No. 5954/2006
C.A. No. 5955/2006 D
C.A. No. 5956/2006
C.A. No. 5957/2006
C.A. No. 5958/2006 E
C.A. No. 5959/2006
C.A. No. 5960/2006
C.A. No. 5961/2006
F
C.A. No. 3091/2006
C.A. No. 5962/2006
C.A. No. 5963/2006
G
C.A. No. 5964/2006
C.A. No. 3884/2006
C.A. No. 5966/2006
H
656 SUPREME COURT REPORTS (2010] 8 S.C.R.
A C.A. No. 5967/2006
C.A. No. 5968/2006
C.A. No. 5969/2006
C.A. No. 5970/2006
8
C.A. No. 5971/2006
C.A. No. 5972/2006
C.A. No. 5973/2006
c C.A. No. 5974/2006
C.A. No. 5975/2006
C.A. No. 5976/2006
D C.A. No. 5977/2006
C.A. No. 5978/2006
C.A. No. 5979/2006
E C.A. No. 5980/2006
C.A. No. 5981/2006
C.A. No. 5982/2006
C.A. No. 5983/2006
F
C.A. No. 5984/2006
C.A. No. 5985/2006
C.A. No .. 5986/2006
G
C.A. No. 5987/2006
C.A. No. 3910/2006
C.A. No. 5988/2006
H
TRANSMISSION CORPN. OF AP. LTD v. SAi RENEWABLE 657
POWER PVT. LTD.
C.A. No. 5989/2006 A
C.A. No. 5990/2006
C.A. No. 5991/2006
C.A. No. 4106/2009 B
Gopal Subramanium S.G., L.N. Rao, Challa Kodandaram,
Raju Ramachandran, Shiva Rao P., A. Subba Rao, A.T. Rao,
K.V. Mohan, Suyodhan Byrapaneni, G Ramakrishna Prasad,
T.V. Ratnam, K Subba Rao, P. Ramesh Babu, T.V. George, Y
Vismai Rao, Y Raja Gopala Rao, K Parameshwar, C
Khwairakpam Nobin Singh, Rohit Rao, Kamal Bhudhiraja,
Siddharth Bawa, (for Dua Associates), B Kanta Rao, Sudha
Gupta, M Srinivas R Rao, S Chandra Shekhar, B Gopal Reddy,
Manoj Kumar, R.V. Kameshwaran, Ravi Shastri, Vinita
Sasidharan, S. Udaya Kumar Sagar, Bina Madhavan, (for D
Lawyers' Knit & Co.), Anil Kumat Tandale, V.G. Pragasam,
Anagha S. Desai, John Mathew Guntur Prabhakar, Rohit Rao
M., Ariban Guneshwar Sharma for the appearing parties.
The Judgment of the Court was delivered by
E
SWATANTER KUMAR, J. 1. Andhra Pradesh Electricity
Regulatory Commission (for short 'Regulatory Commission')
was created in furtherance to the provisions of the Andhra
Pradesh Electricity Reform Act, 1998 (hereinafter referred to
as the 'Reform Act, 1998') enacted by the State legislature F
which received the assent of the President on 21st December,
1998 and became effective w.e.f. 1st February, 1999. The
Commission initiated suo motu proceedings for determination
of tariff applicable to the Non-Conventional Energy generation
projects of Andhra Pradesh, which was to take effect from 1st G
April, 2004 onwards. After hearing the Non-Conventional Power
Project Developers, the Non-Conventional Energy
Development Corporation of Andhra Pradesh Ltd. and
Transmission Corporation of Andhra Pradesh Ltd. (for short
referred to as 'NEDCAP' and 'APTRANSCO' respectively), the H
658 SUPREME COURT REPORTS [2010] 8 S.C.R.
A Regulatory Commission, vide its detailed order dated 20th
March, 2004, arrived at certain conclusions and fixed the energy
purchnse rates at base unit price of Rs. 2.25 as on 1st
April,1994 and the escalation index of 5% p.a., but the
escalation would be simple and not to be compounded every
B year. In other words, the base price as on 1st April, 2004 will
be Rs.3.37 per kwh. As these projects have no variable
expenses and negligible increase in maintenance cost, the tariff
will be frozen for a period of five year, which however, is to be
reviewed thereafter. The Regulatory Commission also issued
c certain instructions to restrict and regulate various operations
and other aspects. It restricted the sale, procurement and
distribution of electricity by the Developers to any other party
except APTRANSCO. After passing of the order dated 20th
March, 2004 an application for review was filed by the
D Developers before the Regulatory Commission. The order was
clarified to some extent on this review application vide order
dated 7th July, 2004. Aggrieved from both these orders the
Developers filed independent appeals under Section 111 (1) of
the Electricity Act, 2003 collectively against the order dated 2oth
March, 2004 as modified by order dated 7th July, 2004. These
E appeals came up for hearing before the Appellate Tribunal for
Electricity (for short the 'Tribunal') which decided all these
appeals by a common order dated 2nd June, 2006. The
Tribunal granted certain relief to the appellants before it, who
are the respondents in the present appeals, holding that there
F was some element of duress in execution of the purchase price
agreements. The Power Purchase Agreement (for short 'PPA')
was a statutory document and the Regulatory Commission had
no authority to interfere with the same. It could not even be
altered by the Regulatory Commission. One of the most
G important finding recorded by the Tribunal was that the
Regulatory Commission has neither the power nor jurisdiction
to compel the Developers to sell the power generated by them
to APTRANSCO and/or DISCOM. Feeling seriously aggrieved
from the order of the Tribunal the Transmission Corporation of
H
TRANSMISSION CORPN. OF A.P. LTD v. SAi RENEWABLE 659
_POWER PVT. LTD. [SWATANTER KUMAR, J.)
Andhra Pradesh Ltd. as well as Eastern Power Distribution A
Company of Andhra Pradesh Ltd. have come up in appeal
before this Court under Section 125 of the Electricity Act, 2003.
Though the controversy, in the present case, appears to be a
narrow one but on examination it is clear that there are various
ancillary questions, which need to be decided by the Court, B
prior to answering the main controversy relating to the
jurisdiction and fixation of tariff by the Regulatory Commission.
Arguments at great length were addressed by different learned
counsel appearing for the parties. Before we notice the facts
in detail or even refer to the contentions raised, it will be c
appropriate to refer to the issues involved in the case as the
entire matter revolves around these questions and answers
thereto and the relief granted. For better understanding of the
same, let us refer to these questions and answers. The
comparative table of the points at issue, that were raised, and
D
the answers thereto are as under:
A. Whether a Regulatory On the point 'A', we hold that
Commission has the power, the Regulatory Commission
authority and jurisdiction has neither the power nor the
either under the Electricity authority nor jurisdiction to E
Act, 2003 or under the A compel the Developers to sell
Electricity Reform Act, 1998 the power generated by them
to compel the Developers to TO APTRANSCO or
sell the power generated by DISCOMS.
them to the State F
Transmission Utility or
Distribution Company?
B. Whether the A.P. On the point 'B'. we hold that
Regulatory Commission the Regulatory Commission
having approved and having approved the regulated G
regulated the purchase price the purchase price agreed to
of power in terms of between the Developer and
arrangement and PPA the TRANSCO in terms of
entered between Section 21 (4)(b) and 11
H
660 SUPREME COURT REPORTS (2010] 8 S.C.R.
A an (1 )(e) of the Andhra Prades
Developers i'n terms of Sec. Electricity Reform Act, 199
21 (4)(B) and 11 (1)(e) of read with Section 86 (1 )(b) o
A.P. Reform Act read with 2003 Act cannot re-fix th
Sec. 86( 1)(b) of 2003 Act regulatory purchase price b
B could re-fix the regulatory resorting to tariff fixation unde
purchase price by resorting Section 62; 64 read wit
to tariff fixation under Section 86(1 )(a) of 2003 Act
Section 62; 64 read with as Section 86( 1)(b) being
Sec. 86(1 )(a) of 2003 Act? sµecial provision excludes th
c applicability of Section 86(1 )(a
of the 2003 Act to privat
Generators.
C. Whether the A.P. On the point 'C' and 'F', w
Regulatory Commission has hold that the Andhra Prades
D the power or authority to Regulatory Commission has n
alter the policy directions power or authority to alter th
issued by the State policy direction issued by th
Government with respect to State Government and the sai
NCE Developers? Whether Commission has no executiv
E the Commission could claim power nor a plenary power a
executive power with claimed by it.
respect to NCE Developers
and fixation of price for
power generated by NCE
F Developers and sold to
APTRANSCO/DISCOM?
D. Whether the plea of The points 'D' & 'E' ar
estoppel advanced by answered in favour of th
Developers is sustainable appellants and they ar
G on facts and law? substantiated by the appellants
E. Whether the plea of The points 'D' & 'E' ar
legitimate expectation answered in favour of th
advanced by Developers is appellants and they ar
H
TRANSMISSION CORPN. OF A.P. LTD v. SAi RENEWABLE661
POWER PVT. LTD. [SWATANTER KUMAR, J.]
sustainable? substantiated by the A
appellants.
F. Whether- the A.P. On the point 'C' and 'F', we
Electricity Regulatory hold that the Andhra Pradesh
Commission is possessed Regulatory Commission has
B
of Executive Powers to no power or authority to alter
issue policy arid executive the policy direction issued by
directions in respect of NCE the State Government and the
Developers in the State? said Commission. has no
executive power nor a plenary
power as claimed by it. c
G. Is not the Commission On the point 'G', we hold that
bound by directions already the Andhra Pradesh Electricity
issued by the State in Regulatory Commission is
respect of NCE Developers bound by policy directions
as well as incentives already issued by the State D
directed by the given to Government so long as they
encourage them? are not modified or altered.
H. Whether Regulatory On the point 'H', we hold that
Commission could alter or the Regulatory Commission
E
change the PPAs entered has no authority to alter or
between the NCE change the PPAs entered
Developers and Electricity between the NCE Developers
Board/APTRANSCO? and Electricity Board/
APTRANSCO
F
I. Whether the procurement On the point 'I', we hold that
arrangement/ PPA entered the procurement arrangemenU
is a statutory contract and if PPA is statutory and the
so, wh-ether it could be Commission has no authority
interfered by the to interfere with the same.
G
Commission?
J. Whether the Commission · On the point 'J', we hold that
is just a regulator to approve the Commission is just a
the PPA entered or whether regulator or approve the PPA
H
SQ.2 SUPREME COURT REPORTS [2010] 8 S.C.R.
A it could determine tariff with entered between the appella11t
respect to NCE generator and the
Developers? APTRANSCO by examining
as to whether the purchase is
economical and it is in terms of
B State Policy.
K. Having approved PPA by In the result on the 'K', we hold
exercise of Regulatory that the appeals preferred by
Power, is it open to the NCE Developers-
commission to undertake Appellants in appeal Nos.
c determination of tariff in 1,2,5,6,7,8,9, 10, 12, 15, 16, 17, 1
respect of private 8,19,20,21,22,3
4,46,47,52,58, 67 & 80 of
2005 are allowed and the
impugned proceedings of the
D Regulatory Commission are
set aside and there will be a
direction to the APTRANSCO,
the Transmission Corporation
of AP, the Central Power
E Distributing Company of AP
Ltd., the Southern Power
Distributing Company of AP
Ltd., the Northern Power
Distributing Company of AP
F Ltd. and the Eastern Power
Distributing Company Limited
of AP Ltd. to continue the
Power Purchase and at the
same rate at which the power
generated by NCE
G
Developers supplied to them
are being paid before passing
of the impugned order of the
Commission dated
H
TRANSMISSION CORPN. OF A.P. LTD v. SAi RENEWABLE 663
POWER PVT. LTD. [SWATANTER KUMAR, J.]
generation by NCE 20.03.2004 and 07.07.2004 A
Developers? made in R.P. No.84/2003 and
O.P. No.1075/2000 with all
differences and arrears thereof,
up to date and continue to pay
at the same rate, until a new B
PPA is entered by agreement
between them in terms of State
Government Policy direction,
that may be made hereafter
and approved by the C
Regulatory Commission. This
Judgment shall be given effect
from the date of
communication. For payment of
tariff difference and arrears, the o
respondents shall have six
weeks from the date of this
Judgment, failing which the
respondents shall be liable to
pay interest at 9% per annum E
with effect from the month on
which the difference in tariff rate
remains to be paid ant till date
of payment.
F
L. To what relief, if any? Consequently, the Appeal Nos.
46,48,49 and 50 of 2005
preferred by the AP
Transmission Corporation and
the four Discoms will stand
dismissed as there are no G
merits in them. The parties shall
bear the respective cost
throughout.
H
664 SUPREME COURT REPORTS [2010] 8 S.C.R.
A 2. The above conclusions arrived at by the Tribunal on the
factual matrix that the Government of Andhra Pradesh on 18th
January, 1997 by GO Ms. No. 93, with the object of encouraging
generation of electricity from renewable sources of energy,
allowed uniform charges to all such projects. After issuance of
B the above GO Ms. 93 certain ambiguities were noticed by the
concerned parties. This resulted in issuance of GO Ms. No. 112
dated 22nd December, 1998 and vide this GO clarifications
were issued to the earlier Government order and it clearly
provided for uniform implementation of the proposed scheme
c to all non-conventional energy developers/generators of power.
The Andhra Pradesh Electricity Regulatory Commission was
constituted under the said Reform Act, 1998 vide notification
dated 3rd April, 1999 and the same Commission performing
the duties and functions under the above Act continued to be
a Commission under and within the meaning of Electricity Act,
0
2003 as well. This was done by virtue of Section 185 of the
Electricity Act, 2003. State Government of Andhra Pradesh
notified the Transmission Corporation of Andhra Pradesh to be
the State Transmission utility. We may also notice here that the
Electricity Regulatory Commissions Act, 1998 also
E contemplated under Section 3, constitution of a Central
Electricity Regulatory Commission to exercise the powers
conferred and functions assigned to it under the Act. In terms
of Section 17 of this Act the State Government was also to notify
in the official gazette and establish, for the purposes of this Act
F a Commission for the State to be known as the State Electricity
Regulatory Commission. In terms of Section 22 of this Act the
functions of the State Commission were defined, which included
determination of tariff for electricity, wholesale, bulk, grid or
retail, as the case may be. Under Section 11 of the Reform Act,
G 1998 it has been spelt out as to what are the functions of the
Regulatory Commission, inter alia, it provides to aid and advise
to the State Government, in matters concerning electricity
generation, transmission, distribution and supply in the State,
to issue licences in accordance with the provisions of this Act
H and determine the conditions to be included in the licences, to
TRANSMISSION CORPN. OF A.P. LTD v. SAi RENEWABLE 665
POWER PVT. LTD. [SWATANTER KUMAR, J.]
regulate the purchase, distribution, supply and utilization of A
electricity, the quality of service, the tariff and charges payable
keeping in view both the interest of the consumer as well as
the consideration that the supply and distribution cannot be
maintained unless the charges for the electricity supplied are
adequately levied and duly collected, to require licensees to B
formulate prospective plans and schemes in cooperation with
others for the promotion of generation, transmission, distribution
and supply of electricity. Besides these powers, which have
been noticed by us, inter alia, the residue clause has been
worded very widely to permit the Regulatory Commission to c
undertake all incidental or ancillary things. Under Section. 15,
the Regulatory Commission is vested with the power to issue
licences and to enter into agreements on specified terms and
also to determine the charges and establish tariff in terms of
clause (5) of Section 15 of the Reform Act, 1998. It needs to
D
be noticed that the State of Andhra Pradesh was vested with
the powers and intact the duty to constitute the Regulatory
Commission in terms of Section 11 afore noticed.
3. The Regulatory Commission was constituted as per the
provisions of Reform Act, 1998 vide notification dated 3rd April, E
1999 and it was to perform all regulatory functions pertaining
to the electricity industry in the State of Andhra Pradesh. It was
commonly agreed before us during the course of argument that
it is the Electricity Regulatory Commission for the State of
Andhra Pradesh for all intent and purposes under the Reform F
Act, 1998 as well as the Electricity Act, 2003. We must notice,
at this stage itself, that the Tribunal has entertained the doubt
that since no independent notification was issued under Section
17 of Electricity Regulatory Commission Act, 1998, therefore,
it could not exercise the powers vested in the Regulatory G
Commission under that Act. This may not be the correct
position in law. The Regulatory Commission was constituted
under the Reform Act, 1998 and an appropriate notification in
that behalf was issued. The Electricity Regulatory Commission
Act, 1998 stood repealed by the Electricity Act, 2003. The H
666 SUPREME COURT REPORTS [201 O] 8 S.C.R.
A Electricity Act. 2003 specifically recognized and accepted the
Commissions constituted under the enactments specified in the
schedule to the Act as appropriate Commission. In entry 3 of
the said schedule, Reform Act, 1998 has been specifically
noticed. In other words, the Regulatory Commission constituted
B under the Reform Act, 1998 became the appropriate
commission under the Electricity Act, 2003 as well.
4. In exercise of its powers, the Regulatory Commission
claims to have issued licences to Transmission Corporation as
C well as DISCOM for bulk and retail supply of electricity w.e.f.
1st April, 2001. Vide order dated 20th June, 2001 made in OP
No. 1075 of 2000, the Regulatory Commission directed
generators of Non-Conventional Energy to supply power
exclusively to APTRANSCO. The Non-Conventional Energy
Developers were not permitted to sell the energy generated by
D them to 3rd parties. By the same order the Regulatory
Commission also approved the rate which was prevailing earlier
for such supply at Rs. 2.25 per unit with 5% escalation per
annum from 1994-95 being the base year. After coming into
force of the Electricity Act, 2003, Regulatory Commission
E issued notice on 23rd October, 2003 inviting objections from
various Developers and Generators to the proposals of
APTRANSCO and NEDCAP in regard to fixation of price to
be paid by APTRANSCO for the quantum of electricity
purchas.ed from non-conventional energy projects w.e.f. 1st
F April, 2004. The objections, if any, were to be filed on or before
5th November, 2003. NEDCAP and DISCOM were to submit
proposals for review of incentives. The proposal had been
received for review by the Regulatory Commission from
APTRANSCO. Within the extended time the Developers,
G individually as well as acting through their Association, filed
various objections in response to the notice dated 23rd
October, 2003. All the parties were granted hearing by the
Regulatory Commission which, then, passed the order dated
20th March, 2004, reducing the price payable by APTRANSCO
H to Non-Conventional Energy Developers towards the supply of
TRANSMISSION CORPN. OF A.P. LTD v. SAi RENEWABLE 667
POWER PVT. LTD. [SWATANTER KUMAR, J.]
electricity. Some of the Developers moved to the Andhra A
Pradesh High Court by filing a Writ Petition No. 7222 of 2004
in which interim order dated 15th April, 2004 came to be
passed directing APTRANSCO to continue to pay to NCE
Developers for the power that may be supplied by them as per
the earlier rates prevalent on 1st April, 2004. By order dated B
27th April, 2004, the High Court disposed of the batch of the
Writ Petitions while issuing the direction to the Developers to
approach the Regulatory Commission and seek review of its
order dated 20th March, 2004. The Regulatory Commission
was also directed to take up the review petition and dispose c
of the same within 8 weeks. Till then, the interim order dated
15th April, 2004 was to remain in force. This resulted in filing
of the Review Petitions before the Regulatory Commission. In
the meanwhile the Govt. of Andhra Pradesh ordered that
APTRANSCO shall cease to engage in trading relating D
functions and that the PPAs entered with the Developers shall
vest in DISCOM(s) w.e.f. 10th June, 2004 in terms of Section
39 read with Section 172(b) of the Electricity Act, 2003. The
Review Petitions filed by the Developers before the Regulatory
Commission came to be dismissed by different orders passed E
on 5th July, 2004 and 10th July, 2004 respectively. The Review
Petition filed by APTRANSCO also came to be dismissed on
11th July, 2004. This resulted in approaching the High Court
again, by nine of the developers, filing Writ Petition No. 16621
of 2004. The High Court, vide its order dated 16th September,
2004, permitted the implementation of the revised tariff by F
APTRANSCO. It further directed that 50% of the differential
amount between the old and the revised tariff shall also be paid
for the actual power supplied. By GO 58 dated 7th June, 2005,
an approval scheme came to be framed under the Reform Act,
1998 to transfer and distribute the assets and contracts of bulk G
supply and trading business of APTRANSCO to DISCOM
which was in furtherance to the earlier decision of the State of
Andhra Pradesh. Ultimately these Writ Petitions came to be
disposed of with the direction that the Developers shall
approach the Tribunal and the interim order shall continue to H
668 SUPREME COURT REPORTS (2010] 8 S.C.R.
A be in force for a period of 8 weeks from 15th June, 2005 or till
the Tribunal passes order on the interim application, whichever
is earlier. Same interim order was passed by the Tribunal
during the pendency of the appeal which, were filed before it.
5. As is obvious from the above narrated facts and again,
8
it is not in dispute that the Regulatory Comrr»sston passed an
order dated 20th June, 2001 which, in faet, attained finality and
its correctness was never been questiorned by any of the parties
including the present appellants. Thu$, the order dated 20th
June, 2001 is of some significance and certainly of some
C definite relevancy. The proceedings were initiated suo motu by
the Regulatory Commission against all the Developers of Non-
Conventional Energy including mi~i hydro projects. The
Regulatory Commission noticed, in its order dated 20th June,
2001 that Govt. of India issued guidelines regarding
D promotional and fiscal incentives to be given by the State
Governments for power generation through Non-Conventional
Energy sources. The Govt. of Andhra Pradesh issued order No.
19 dated 16th March, 1996 under which it accorded certain
incentives in respect of the Developers with whom NEDCAP
E had entered into the memorandum of 1.:mderstanding. A review
of these incentives was taken after whiqh GO Ms. 93 dated 18th
November, 1997 was issued, as alre13dy noticed and it was
decided to provide uniformity to all the projects based on
renewable sources of energy like Waste, Wind, Bio-mass, Co-
F generation, Municipal Waste and Mini Hydro projects.
6. The Regulatory Commission had passed an order
dated 6th March, 2000 giving certain (:lirections including that
the Developers could sell the power g€1nerated by them to third
party upto 17th November, 2000. The rates were indicated, as
G we have already noticed, and that there would be reviewed with
regard to purchase price with referenae to each Developer on
completion of 10 years from the date of the commission of the
project. After noticirTg various objections that had been raised
by the Developers it was stated 'that the Regulatory
H
TRANSMISSION CORPN. OF A.P. LTD v. SAi RENEWABLE 669
POWER PVT. LTD. [SWATANTER KUMAR, J.]
Commission was not attempting to stop any incentive while A
referring to the statistics and the· market conditions. It was
specifically noticed that permitting Non-Conventional Energy
Developers to make third party sales would not, at all, be in the
interest of organized growth of electricity industry and it would
create discrimination between the industrial consumer drawing 8
power from Non-Conventional Energy Developers and the
industrial consumers drawing power from APTRANSCO and
these two would have to pay two different rates. It also noticed
that there will be undue enrichment of the Developers as they
were permitted to establish their generation plants with definite C
benefits which were carried out for. years together. While
holding that the Regulatory Commission had jurisdiction, it also
noticed that the rate approved by the Regulatory Commission
on the basis of guidelines issued by the Ministry of Non-
Conventional Energy Sources are much higher than the rate
permitted by the State Government and in comparison to other D
States they were favourable to the NCE developers. This
reasoning persuaded the Regulatory Commission to pass the
following directions:
"29. The existing incentives under G.O. Ms. No. 93, dated E
18.11.1997, which are continued. under the orders of the
Commission from time to time till 24.06.2001 under our
letter No. 2473, Dated 24-04-2001 -are extended for the
time being till 24-07-2001. The temporary extension has
been given to enable the developers to finalise F
agreements'/arrangements relating to supply of power to
APTRANSCO prior to 24-07-2001 ). With effect from the
billing month pf August 2001, all generators of non-
conventional energy shall supply power to APTRANSCO
only as per the following terms: G
(i) Power generated by non-conventional energy
developers is not permitted for sale to third
parties.
(ii) Developers of non-conventional energy shall H
670 SUPREME COURT REPORTS [2010] 8 S.C.R.
A supply power generated to APTRANSCO/
DISCOMS of A.P. only.
(iii) Price applicable for the purchase by the supply
licensee should be Rs. 2.25 per unit with 5% escalation
per annum with 1994-95 as the base year.
8
APTRANSCO is simultaneously directed to arrange
payment for the supply of power purchased from
developers of non-conventional energy by opening a Letter
of Credit in favour of the suppliers of power.
c
30. A suo motu review of the incentives to take effect
from 1st April, 2004, will be undertaken by the Commission
after discussions with all the concerned parties. There will
also be a review of the purchase price with specific
reference to each developer on completion of 10 years
D
from the date of commissioning of the project (by which
time the loans from financial institutions would have been
repaid) when the purchase price will be reworked on the
basis of return on enquity. O&M expenses and the variable
cost.
E
31. However, if any developer wishes to raise any
specific issue with reference to this order, he will be
entitled to apply to the Commission in the manner provided
in the regulations."
F
7. After passing of this order by the Regulatory
Commission the parties executed PPAs. These agreements
were signed on the lines of the directives given in the order of
Regulatory Commission. In fact, it was stated that the
agreements were required to be and were actually approved
G by the Regulatory Commission. In terms of Clause 5 of the PPA
these agreements were enforceable subject to obtaining
consent of the Regulatory Commission as per Section 21 of
the Reform Aot, 1998. Obviously, the rates and conditions
specified in the earlier proceedings of 11th November, 1999,
H
TRANSMISSION CORPN. OF A.P. LTD v. SAi RENEWABLE 671
POWER PVT. LTD. [SWATANTER KUMAR, J.]
1st April, 2000, 27th January, 2001 and 13th July, 2001 were A
accepted by the parties. Some of the clauses of the PPA, which
have also been heavily relied upon by the learned counsel for
the parties, read as under:
"ARTICLE 2 B
PURCHASE OF DELIVERED ENERGY AND TARIFF
2.1 All the Delivered Energy at the
interconnection point for sale to
APTRANSCO will be purchased at the tariff C
provided for in Article 2.2 from and after the
date of Commercial Operation of the Project.
Title to Delivered Energy purchased shall
pass from the Company to the APTRANSCO
at the Interconnection Point. D
2.2 The Company shall be paid the tariff for the
energy delivered at the interconnection point
for sale to APTRANSCO at Rs. 2.25 paise
per unit with escalation at 5% per annum with
1994-95 as base year and to be revised on E
1st April of every year upto the year 2003-
2004. Beyond the year 2003-2004, the
purchase price by APTRANSCO will be
decided by Andhra Pradesh Electricity
Regulatory Commission. There will be further F
review of purchase price on completion of ten
years from the date of commissioning of the
project, when the purchase price will be
reworked on the basis of Return on Equity,
0 & M expenses and the Variable Cost." G
8. Besides the above clauses it also provided other terms
and conditions under different articles, which are not necessary
for us to be noticed at this stage. It required to be noticed with
some significance that no disputes of any kind were raised by H
672 SUPREME COURT REPORTS [2010] 8 S.C.R.
A the Developers till and after passing of the order dated 2oth
March, 2004. The order of 20th June, 2001 read in conjunction
with the PPAs executed by the parties controlled the entire field
and all the persons including the Regulatory Commission as
well as the State therein.
B
9. This period of nearly three years, thus, was free of
grievances and objections and the order of 2001 appears to
have been implemented willingly by the parties. There was
execution of the PPAs completely bringing the matter between
the parties into the realm of contract. Thereafter, the Regulatory
C Commission in terms of its 2001 order appears to have initiated
suo motu proceedings for determination of tariff for non-
conventional energy projects of Andhra Pradesh with effect from
1st April, 2004. The Regulatory Commission, in its order dated
2oth March, 2004 has also noticed the background facts of the
D case and the determination of rates earlier. It had given notice
to all the developers and other shareholders to submit their
views and objections on the above issues. After hearing the
parties, the Regulatory Commission considered the proposal
for tariff. The proposal submitted by APTRANSCO and
E NEDCAP were as under :
"APTRANSCO's Tariff Proposals
Particulars Unit Tariff (Levelised Tariff Year-on-year
F over the life of the project) escalation
Existing New Existing New
Plants Plants
Rs/kWhr. Rs/kWhr.
Mini Hyde! 2.42 2.31 - -
G
Bagasse 2.23 2.25 2% 2%
Biomass 2.27 2.27 2% 2%
Waste to Nil 2.66 - 1%
Energy
H Wind 2.52 2.55 - -
TRANSMISSION CORPN. OF A.P. LTD v. SAi RENEWABLE 673
POWER PVT. LTD. [SWATANTER KUMAR, J.]
A
NEDCAP Tariff proposals:
Bagasse Rs. 2.62 - 1st year
Rs. 2.48 - 10th year
Biomass Rs. 3.27 - 1st year
Rs. 3.77 - 10th year B
Mini Hydel Rs. 2.96 - 1st year
Rs. 2.26 - 10th year
Wind Farm Rs. 4.54 - 1st year
Rs. 3.19 - 10th year
Waste to Energy Rs. 2.99 - 1st year c
Rs. 3.19 - 10th vear
10. Objections to the above proposals were also received.
Interestingly and rightly so, the Regulatory Commission before
analyzing the proposal and objections, noticed:
D
"20 .... as mentioned herein above, the Commission, in this
order is not examining any issues concerning the direction
contained in the order dated 20.6.2001 that the NCE
Developers shall not sell electricity to third parties and they
are required to sell electricity only to APTRANSCO. The E
Commission, in this order, is dealing with only those NCE
Developers who had accepted the order dated 20.6.2001
and voluntarily agreed to sell electricity to APTRANSCO
on the terms and conditions contained in the order dated
20.6.2001" F
11. While the Regulatory Commission undertook the review
of prices in relation to sale of electricity by Non-Conventional
Energy developers, it specifically referred to order in O.P. No.
1075 of 2000, which, in turn, provided for review of sale price G
and incentives given earlier to the said developers with effect
from 1st April, 2004. It also noticed that the PPAs signed by
the APTRANSCO and NCE Developers include provisions for
such review by the Regulatory Commission with effect from 1st
April, 2004. It took the view that review of the price at which
674 SUPREME COURT REPORTS [2010] 8 S.C.R.
A APTRANSCO shall purchase power from the NCE developers
is within the jurisdiction of the Regulatory Commission under
Section 21 (4) of the Reform Act, 1998 and also under Section
86(1) of the Electricity Act, 2003. Referring to Section 61 of the
Electricity Act, 2003 which cast obligation upon the Regulatory
B Commission to frame tariff regulations specifying the terms and
conditions for determination of tariff, in para 21 of that order,
the Regulatory Commission framed the following issues:
"Issues for consideration on merits:
C The Commission has considered inter alia, the following
issues:
(i) Whether the tariffs and incentives should be uniform
for all the categories of NCE projects as provided
D earlier in MNES guidelines, GoAP orders and
APERC's order OP. No. 1075/2000 dated 20.6.2001
or should they be different for different categories of
NCE projects.
(ii) Whether the tariff should be a single part tariff or a
E two part tariff.
(iii) Whether the tariff should be project specific or uniform
for all project falling in a category.
(iv) Whether there should be a cap on tariff when a project
F
exceeds the expected minimum performance.
(v) Social and environmental considerations.
(vi) Control period."
G
12. The Regulatory Commission decided tariff fixation in
relation to Bagasse based co-generation plants, Bio-mass
power generation and Mini hydel projects separately. The
specific issue raised by the objectors was that the
benchmarking of capital cost should be based on market
H
TRANSMISSION CORPN. OF A.P. LTD v. SAi RENEWABLE 675
POWER PVT. LTD. [SWATANTER KUMAR, J.]
trends, confirmed through competitive bidding from time to A
time. Though APTRANSCO accepted this in principle, but
stated that they expect a detailed procedure from the Regulatory
Commission for an effective competent bidding. The tariff basis
was questioned as well as it was submitted that tariff beyond
threshold limit should be limited to the variable cost and B
incentives only and not the full tariff. This was opposed by
APTRANSCO which preferred a single time tariff in entire
energy purchase. While taking into consideration the
applicability of depreciation and its extent the tariff was fixed
and the Regulatory Commission drew the following conclusion: c
"81. The tariffs arrived at along with escalation under
each category will be applicable as detailed in the
respective paragraphs under each category. The
aforementioned tariffs are, however, also subject to the
following: D
Iii. In regard to tariff for Bagasse based co-
generation projects, where the Plant Load Factor
during a settlement period exceeds 55% (the level
at which the fixed cost is expected to be E
recovered), only incentive of 21.5 paise/unit and
variable cost as indicated in para (47) above shall
be paid for every unit delivered in excess of the
55% PLF.
ii. F
As regards to tariff for Biomass based power
projects, where the Plant Load Factor ·during a
settlement period exceeds 80% (the level at
which the fixed cost is expected to be recovered},
only incentive of 21.5 paise/unit and variable cost
as indicated in para (63) above shall be paid for G
every unit delivered in excess of 80% PLF.
iii. The tariff for mini-hydel power projects is
exclusive of Royalty.
H
676 SUPREME COURT REPORTS [201 O] 8 S.C.R.
A iv. In the case of tariff for mini-hydel power projects,
where the PLF during settlement period exceeds
35%, only an incentive of 21.5 paise/kwh shall be
paid for every unit delivered in excess of 35%.
v. The tariffs authorized above will be applicable
8
w.e.f. 1.4.2004 to all NCE power plants of
respective categories for sale to APTRANSCO.
vi. The above tariff structure is valid for control
period of five years with effect from 1.4.2004.
c Thereafter, the Commission will review the prices
and incentives after consultation with the
Developers and licensees.
vii. A further review of the individual projects will be
D undertaken on completion of 10 years from the
date of commissioning of the project, by which
time the loan is expected to have been
substantially repaid, and the purchase price will
be based on 0 & M expenditure, return on equity,
variable cost and residual depreciation, if any.
E
viii. For those developers' having captive
consumption who supply excess energy to
APTRANSCO after meeting their internal
consumption, the current practice of meter
F reading at the interconnection point and grossing
up for auxiliary consumption in order to arrive at
PLF will be misleading as it will not take into
consideration the captive consumption. The
incentive payments begin after threshold PLF. In
G order to ascertain the PLF levels, APTRANSCO
should make arrangements for authenticated
meter reading at the generator terminals so that
the two-tier tariff is properly implemented.
ix. Developers will be entitled to dispatch 100% of
H
TRANSMISSION CORPN. OF AP. LTD v. SAi RENEWABLE 677
POWER PVT. LTD. [SWATANTER KUMAR, J.]
the available capacity without reference to Merit A
Order Dispatch subject, however, to any system
constrains."
13. After arriving at this conclusion the Regulatory
Commission also specifically clarified that as and when, B
however, trading function of APTRANSCO is segregated and
vested in new entity pursuant to the Electricity Act, 2003, the
terms and conditions contained therein shall be binding on the
new entity in the same manner as was applicable to
APTRANSCO.
c
14. As is clear from the order itself that it dealt with,
primarily, the question of refund/fixation of tariff in relation to
various generation projects. It decided no other matter and even
these findings were subsequently questioned by the Developers
before the High Court and in furtherance to the order of the High D
Court dated 15th July, 2004, Review Petitions were filed, which
finally resulted in filing of the appeals before the Tribunal.
15. We may notice here that vide notification dated 28th
May, 2004, the State Government ordered that APTRANSCO E
shall cease to engage in trading relating functions and that the
PPAs entered with the Developers shall vest inDISCOM w.e.f.
10th June, 2004 in terms of Section 39 read with Section 172(b)
of the Electricity Act, 2003. On 9th June, 2004, the Central
Government also authorized the State Transmission Utility to
F
engage in bulk purchase and sell it to DISCOM for a period of
one year from 10th June, 2004. With this background, the
appeals which were filed before the Appellate Tribunal came
up for hearing and some appeals were also filed by DISCOM
with APTRANSCO as a party. Appeals from both sides came
up, heard and decided by the order dated 2nd June, 2006 G
impugned in the present case.
16. Now with this factual background, we shall proceed to
examine the issues of law raised in the present appeals before
H
678 SUPREME COURT REPORTS [2010] 8 S.C.R.
A this Court. As already not~ed, in paragraph 40 of the impugned
judgment, the Tribunal had framed as many as 12 points for
determination which were answered by it in paragraph 114. The
points formulated by the Tribunal, in fact, can be categorized
in the following principal heads:
B
(i) Matters relating to jurisdiction of the Commission
for fixation of tariff and sale of generated electricity
to third party;
(ii) Correctness of tariff fixation on merits of the case;
c
(iii) Is the principle of estoppel attracted in the present
case, if so, to what extent?
(iv) Does the plea of duress need to be accepted as
per settled principles and with reference to the facts
D
of the case?
(v) What is the effect of order dated 20.6.2001 having
attained finality and even not being questioned in
the present proceedings?
E
(vi) What orders can be made by this Court to deal with
these appeals to do complete justice between the
parties?
17. Fixation of tariff is, primarily, a function to be performed
F by the statutory authority in furtherance to the provisions of the
relevant laws. We have already noticed that fixation of tariff is
a statutory function as specified under the provisions of the
Reform Act, 1998, Electricity Regulatory Commissions Act,
1998 and the Electricity Act, 2003. These functions are required
G to be performed by the expert bodies to whom the job is
assigned under the law. For example, Section 62 of the
Electricity Act, 2003 requires an appropriate Commission to
determine the tariff in accordance with the provisions of the Act.
The Regulatory Commission has been constituted and notified
H
'
TRANSMISSION CORPN. OF A.P. LTD v. SAi RENEWABLE 679
POWER PVT. LTD. [SWATANTER KUMAR, J.)
under the provisions of Section 3 read with Section 11 of the A
Reform Act, 1998 which in terms of Section 11 (1 )(c)&(e) is
expected to fix the tariff as well as the terms of licence. There
are three different legislations in course and the Regulatory
Commission has been constituted under the Reform Act, 1998
which in turn would be the Commission as contemplated under B
the Electricity Regulatory Commission Act, 1998 and the
Electricity Act, 2003. In terms of first proviso to Section 82(1)
of the Electricity Act, 2003 the State Electricity Regulatory
Commission established by the State Government under
Section 17 of the Electricity Regulatory Commission Act, 1998 c
and the enactment specified in the schedule shall be the State
Commission for the purposes of this Act. Even in terms of
Section 185(3) of the Electricity Act, 2003 the said authority
would be deemed to be an appropriate Commission for all
purposes and intent as the Reform Act, 1998 has been
D
specifically mentioned in entry 3 of the Schedule to the
Electricity Act, 2003. In other words, as already noticed the
Regulatory Commission constituted by the said notification
would be the appropriate Commission under all these Acts and
is required to perform the functions as contemplated under
Sections 11, 17 and 82 of the respective Acts. The functions E
assigned to the Regulatory Commission are wide enough to
specifically impose an obligation on the Regulatory
Commission to determine the tariff. The specialized
performance of functions that are assigned to Regulatory
Commission can hardly be assumed by any other authority and F
particularly, the Courts in exercise of their judicial discretion.
The Tribunal constituted under the provisions of the Electricity
Act, 2003, again being a specialized body, is expected to
examine such issues, but this Court in exercise of its powers
under Article 136 of the Constitution would not sit as an G
appellate authority over the formation of opinion and
determination of tariff by the specialized bodies. We would
prefer to leave this question open to be considered by the
appropriate authority at the appropriate stage. We do not
H
680 SUPREME COURT REPORTS (2010] 8 S.C.R.
A consider it appropriate to go into the merit or de-merit of
determination of tariff rates in the appeals. Determination of
tariff is a function assigned legislatively to a competent forum/
authority. Whether it is by exercise of legislative or subordinate
legislative power or a policy decision, if the Act so requires,
B but it generally falls in the domain of legislative activity and the
Courts refrain from adverting into this arena.
18. We have to further examine the legality of this issue in
the light of the findings that we have recorded on the issues in
relation to jurisdiction of the Regulatory Commission to
C determine/review the tariff. The jurisdiction of this Court is
limited in this aspect. This Court has consistently taken the view
that it would not be proper for the Court to examine the fixation
of tariff rates or its revision as these matters are policy matters
outside the preview of judicial intervention. The only explanation
D for judicial intervention in tariff fixation/revision is where the
person aggrieved can show that the tariff fixation was illegal,
arbitrary or ultra virus the Act. It would be termed as illegal if
statutorily prescribed procedure is not followed or it is so
perverse and arbitrary that it hurts the judicial conscious of the
E Court making it necessary for the Court to intervene. Even in
these cases the scope of jurisdiction is a very limited one. This
Court in the case of Association of Industrial Electricity Users
v. State of Andhra Pradesh ((2002) 3 SCC 711], while dealing
with the provisions of tariff fixation in terms of the provisions of
F the Reform Act, 1998, observed that even where the Act did
not envisage classification of consumers according to the
purpose for which electricity is used, Sub-Section(9) of Section
26 of that Act does state that the tariff rate relatable to
classification of consumers would be permissible, of course,
G depending upon various factors stipulated in Section 26(7) of
the Act. The Court finally held as under:
"11. We also agree with the High Court that the judicial
review in a matter with regard to fixation of tariff has not
to be as that of an Appellate Authority in exercise of its
H
TRANSMISSION CORPN. OF A.P. LTD v. SAi RENEWABLE 681
POWER PVT. LTD. [SWATANTER KUMAR, J.]
jurisdiction under Article 226 of the Constitution. All that the A
High Court has to be satisfied with is that the Commission
has followed the proper procedure and unless it can be
demonstrated that its decision is on the face of it arbitrary
or illegal or contrary to the Act, the court will not interfere.
Fixing a tariff and providing for cross-subsidy is essentially B
a matter of policy and normally a court would refrain from
interfering with a policy decision unless the power
exercised is arbitrary or ex facie bad in law."
19.' Similarly, in the case of West Bengal Electricity C
Regulatory Commission v. CESC Ltd. [(2002) 8 SCC 715],
this Court was concerned with determination of tariff by the
State Commission, the applicability of principles of natural
justice and the scope of interference by the High Court in
distinction to the power exercisable by the appellate authority.
Stating it to be a function in the nature of legislative power, the · D
Court felt that the principles of natural justice were not attracted
and the power of judicial review could hardly be invoked. The
Court held as under:
"39. Having considered the finding of the High Court, we E
are of the opinion that though generally it is true that the
price fixation is in the nature of a legislative action and no
rule of natural justice is applicable (see Shri Sitaram
Sugar Co. Ltd. v. Union of India SCC, para 45), the said
principle cannot be applied where the statute itself has F
provided a right of representation to the party concerned.
Therefore, it will be our endeavour to find out whether, as
contended by learned counsel for the appellants, the
statute has provided such a right to the consumers or not.
xxx xxx xxx xxx G
44. Having held on merits that the Regulations are not
arbitrary and are in conformity with the provisions of the
Act, we will now consider whether the High Court could
H
682 SUPREME COURT REPORTS (2010] 8 S.C.R.
A have gone into this issue at all in an appeal filed by the
respondent Company. First of all, we notice that the High
Court has proceeded to declare the Regulations contrary
to the Act in a proceeding which was initiated before it in
its appellate power under Section 27 of the Act. The
B appellate power of the High Court in the instant case is
derived from the 1998 Act. The Regulations framed by the
Commission are under the authority of subordinate
legislation conferred on the Commission in Section 58 of
the 1998 Act. The Regulations so framed have been
c placed before the West Bengal Legislature, therefore they
have become a part of the statute. That being so, in our
opinion the High Court sitting as an appellate court under
the 1998 Act could not have gone into the validity of the
said Regulations in exercise of its appellate power."
D 20. In view of the above settled position of law we are of
the considered opinion that the present case is one where this
Court should examine determination of tariff on merits and
particularly, in view of the directions that we propose to pass
finally in this case.
E
21. The issue relating to jurisdiction, again, would have to
be divided into two different parts. Firstly, whether the
Regulatory Commission could exercise the powers for
determination and/or re-fixing the price by resorting to tariff
F fixation powers under the Act and secondly, with regard to sale
of generated electricity by the Generators to parties other than
State Transmission Utility or Distribution Company. In regard
to first part of this issue the Tribunal in its order, while answering
issue B, held that Regulatory Commission has no jurisdiction
G to re-fix the regulatory purchase price by resorting to tariff
fixation methods specified under the provisions of law.
Similarly, it also answered issue A in the negative and against
the Regulatory Commission. The primary reason recorded by
the Tribunal is that the original fixation of purchase price for
energy generated by NCE Developers is in terms of the policy
H
TRANSMISSION CORPN. OF A.P. LTD v. SAi RENEWABLE 683
POWER PVT. LTD. [SWATANTER KUMAR, J.]
directions issued by the State and it was not within the A
jurisdiction and scope of the powers conferred upon the
Regulatory Commission under the Reform Act, 1998. It was
considered by the Tribunal that policy decision of the State
could not have been set at naught on the assumption that the
Regulatory Commission is vested with executive powers. Also B
that Regulatory Commission had proceeded on the basis that
it has power to review the rate/incentives given to developers
or it has power to issue executive directions. The Tribunal also
felt that PPAs are final and binding and there is assumption of
power on the part of the Regulatory Commission that they have c
authority to fix tariff with respect to power generators by taking
recourse to provisions of Sections 62, 64 read with Section
86(1) of Electricity Act, 2003.
22. Before we proceed to examine the various provisions
under different Acts afore referred, let us once again refer, in D
precise form, the necessary facts. From the record it appears
that on 7th September, 1993 the Ministry of Non-Conventional
Energy Sources, New Delhi had written a letter to the Chief
Secretary of the different States informing them that under the
new strategy and action plan of the ministry special emphasis E
is sought to be given to generation of grid quality power from
non-conventional energy sources, noticing that the average cost
of power generation from non-conventional energy sources
compares quite favourably with new coal thermal/gas based
projects and captive diesel generating sets. While in future the F
costs of the former are expected to drop, costs of conventional
electricity generation will only increase. Referring to the fact that
Central Government has introduced several fiscal and other
promotional incentives to attract private sector participation in
the generation and supply of ·energy from non-conventional G
energy sources and consequently the States had also
introduced measures such as wheeling and banking, buy back,
third party sale, capital subsidies, industry status, sales tax
exemption etc., it had also been noticed that they were to vary
H
684 SUPREME COURT REPORTS [2010] 8 S.C.R.
A in operation from State to State. In this background the Ministry
had drawn up guidelines which was enclosed to that letter and
asked all States to work towards a uniform policy pertaining to
the non-conventional energy sources. A minimum buy back
price of Rs. 2.25 per unit had been proposed and it required
B the States to consider that these guidelines were not exhaustive.
Other matters, including additional incentives, attractive
packages could be formulated by the State and accordingly the
States were required to take further steps. The very opening
part of the guidelines dealt with the operative period and it was
c stated that "The Scheme of promotional and fiscal incentives
will come into operation with immediate effect and will remain
in force for a period of five years." Besides this eligibility,
facilities and tax relief etc. were also indicated. The
transmission of Electricity was to be undertaken by the State
Electricity Board and even the third party must be HT consumer
0
of the Board unless the stipulation was specifically relaxed.
SEB was to purchase the electricity from the producer at the
minimum specified rate without any restriction on time or
quantum of electricity. Importantly, Clause 3(iii) of the policy
guidelines suggested that the producer will have the option to
E sell the electricity generated by him to a third party at mutually
agreed rates but within the State as per clause 1(i). On or
before 14th February 1994 two projects, namely wind farm and
mini hydel projects were transferred from Andhra Pradesh State
Electricity Board to NEDCAP by the Government of Andhra
F Pradesh. Later, vide letter dated 25th November, 1994 the
guidelines as indicated in the letter of 7th September, 1993
were further clarified by the Government of India, in relation to
fixation of purchase price for power produced from non-
conventional energy. As per the guidelines commenting or
G clarifying the earlier guidelines it was stated that the base price
applicable to non-conventional energy based power projects
based on solar, wind small hydro, biomass etc. shall be equal
to the base price of the year in which the PPAs are signed,
clause 2 of the guidelines reads as under:
H
TRANSMISSION CORPN. OF A.P. LTD v. SAi RENEWABLE 685
POWER PVT. LTD. [SWATANlER KUMAR, J.]
"A promoter I developer shall be entitled to receive the A
base price set out in PPA for all electrical energy delivered
from his project to the State grid for the duration of the
Power Purchase Agreement. The rate shall be equal to
base price in the year of signing of PPA, escalated at a
rate of 5% per year for a period of 10 years, from the date B
of signing of the Power Purchase Agreement. From the
end of the 10 years, and for the remaining duration of the
Power Purchase Agreement, the new purchase price shall
be equal to the purchase price at the end of the 10th year,
or the High Tension (HT) tariff prevalent in the State at that c
time which is higher."
23. In furtherance of the decision of the Govt. of India and
the guidelines published, the Govt. of Andhra Pradesh issued
two different GOs on which, the Tribunal as well as all the parties
before us have placed heavy reliance. They read as under: D
ENERGY(RES) DEPARTMENT
G.O.MS. NO: 93 DATED: 18-11-1997
ORDER:- E
"In the reference 1st read above, the Ministry of Non-
Conventional Energy Sources, Government of India have
issued guidelines for promotional and Fiscal incentives to
be given by State Government for power generation from F
Non-Conventional Energy Sources. The incentives are
envisaged to encourage power generation in the Non-
C o nve ntio n a I Sector which are renewable and
encouragement from the Government for this Sector is
necessary in view of the fact depletion of fossilfuels. G
Further, the Renewable/ Non-Conventional Energy
Sources are least pollution-effecting.
In the G.O. third read above, the Government have
accorded certain revised incentives in respect of the
H
686 SUPREME COURT REPORTS [2010] 8 S.C.R.
A Developers with whom Non-Conventional Energy
Development Corporation of Andhra Pradesh had already
entered into Memoranda of Understanding based on the
guidelines existing prior to 15th November, 1995.
While reviewing the incentives made available to the
B
sectors, certain representations were received from some
of the Non-Conventional Energy Developers, and they
have requested for extending the benefits available to other
sectors.
c A review of the incentives made available to various
sectors of non-conventional energy was made in the
presence of official from Non-Conventional Energy
Development Corporation of Andhra Pradesh and Andhra
Pradesh State Electricity Board, duly keeping in view the
D guidelines of Ministry of Non-Conventional Energy
Sources, Government of India, dated: 13-9-1993, a view
was taken to make available the incentives to all the Non-
Conventional Energy Sources uniformly.
The Government after careful examination of the
E
recommendations and with a view to encourage
generation of electricity from renewable sources of energy
hereby allow the following uniform incentives to all the
projects based on renewable sources of energy viz. Wind,
Biomass, Co-generation, Municipal Waste and Mini Hyde!:
F
S.No. Description
1. Power Purchase price Rs. 2.25
G
2. Escalation 5% per annum with
1997-98 as base
year and to be
revised on 1st April
H I of every year upto the
TRANSMISSION CORPN. OF AP LTD v. SAi RENEWABLE 687
POWER PVT. LTD. [SWATANTER KUMAR, J.]
year 2000 A.O. A
3. Wheeling Charges 2%
4. Third party sales Allowed at a tariff not
lower than H.T. tariff
of A.P.S.E. Board. B
5. Banking Allowed up to 12
months
(a) Captive consumption Allowed throughout
the year on 2%
c
banking charges.
(b) Third party sale Allowed on 2%
banking charges
from August to D
March.
This order issues with the concurrence of Finance &
Planning (Fin.) Department vide their U.O. No. 46291/351/
EBS-EFES&T/97, dated: 18.11.1997.
E
(BY ORDER AND IN THE NAME OF THE GOVERNOR
OF ANDHRA PRADESH)
V.S. SAMPATH
SECRETARY TO GOVERNMENT F
ENERGY(RES) DEPARTMENT
G.O. Ms. No.112 Dated: 22.12.1998
G
ORDER:
"In the Government Order cited, certain uniform incentives
were extended to the Developers of Power Projects using
wind, biomass co-generation, Municipal wastes and mini
H
688 SUPREME COURT REPORTS [2010] 8 S.C.R.
A hydel for promotion of and to encourage generation of
electricity from renewable sources of energy. In order to
remove certain ambiguities in the implementation of
uniform incentives scheme and also to ensure that the
incentives contemplated are channelled for promotion and
B development of non-conventional energy sources, in
keeping with the spirit of Government Order cited, the
following amendments are issued:
In the Government Order cited, certain uniform incentives
were extended to the Developers of Power Projects using
c wind, biomass co-generation, Municipal wastes and mini
hydel for promotion of and to encourage generation of
electricity from renewable sources of energy. In order to
remove certain ambiguities in the implementation of
uniform incentives scheme and also to ensure that the
D incentives contemplated are channelled for promotion and
development of non-conventional energy sources, in
keeping with the spirit of Government Order cited, the
following amendments are issued:
E 1. The uniform incentives specified in G.O. Ms.
No.93, dated 18.11.1997 shall be available
only to the power projects where fuel used is
from non-conventional energy sources which
are on the nature of renewable sources of
energy.
F
2. The operation of the incentives scheme shall
be watched for a period of 3 years and at the
end of 3 years period from the date of G.O.
Ms. No.93 the Andhra Pradesh State
G Electricity Board shall come up with suitable
proposals for review for further continuance
of the incentives in the present form or in a
suitable modified manner to achieve the
objectives of promotion of power generation
H
TRANSMISSION CORPN. OF AP. LTD v. SAi RENEWABLE 689
POWER PVT. LTD. [SWATANTER KUMAR, J.]
through non-conventional sources. A
3. Though there is a provision for banking and
third party sale, in the absence of conferring
the status of licences under Section 3 of the
Indian Electricity Act, the Entrepreneurs/ B
Developers of non-conventional energy
power may be handicapped in effecting third
party sales to the needy and contracted
consumers. Therefore, it is hereby ordered
that the Entrepreneurs/Developers covered C
by G.O.Ms. No.93, dated 18.11.1997 who
made the third party sale of energy shall be
deemed to be licencees for the purpose
under Section 3 of the Electricity Duty Act,
1930 read with Sedion 28 of Indian
Electricity Act." D
(BY ORDER AND IN THE NAME OF
GOVERNOR OF ANDHRA PRADESH)
S. SAMPATH
E
SECRETARY TO GOVERNMENT
24. These were the declarations or representations stated
to have been made by the State to the Developers. The PPAs
between Transmission Corporation of Andhra Pradesh Ltd. F
and the Developers were executed somewhere in May 1999
and some of the agreements even prior thereto. However,
despite all the above guidelines and GOs, the Regulatory
Commission passed an order on 20th June, 2001 determining
the tariff as well as defining other rights and obligations between G
the parties including that the generators were not permitted to
make sale in favour of third party. After the passing of this order
the Developers entered into PPAs between the period August
2001 to 2002 and confirmed the acceptance and
implementation of the order of 20th June, 2001. While providing
H
690 SUPREME COURT REPORTS [2010) 8 S.C.R.
A different clauses relating to various facets of sale and
distribution of generated power, PPAs under Articles 2.1 and
2.2, which we have already reproduced, contemplate
specifically that the purchase of energy by APTRANSCO will
be at the tariff provided under Article 2.2. Article 2.2 determines
B the rate at Rs. 2.25 per unit with escalation at 5% per annum
with 1994-1995 as base year which is to be revised on 1st
April of every year upto the year 2003-2004, beyond which the
purchase price by APTRANSCO will be decided by the
Regulatory Commission. Still a further review of purchase price
c is contemplated on completion of 10 years from the date of
commissioning of the project when it will be reworked. In other
words, there are specific stipulations provided under the PPAs,
as well as in the order dated 20th June, 2001, for revision/
review of purchase price. Clause 2.3 further clearly says that
0 tariff is inclusive of all taxes, duties and levies. In other words,
all the documents afore stated provide for a review including
the guidelines issued by the Govt. of India.
25. At this stage, we may notice that these guidelines are
general guidelines and every State was required to act as per
E its own needs, convenience and by taking a general view, as
to, which are the most practical and affordable projects and
how they should be carried on by the State. To give meaning
to the guidelines that they were 'absolutely mandatory', will not
be in conformity with the law relating to interpretation of
F documents as well as according to the canons of exercise of
executive and administrative powers. These guidelines were
certainly required to be moulded by the State to meet their
requirements depending on various factors prevailing in the
State.
G
26. Now we will proceed to refer to the various legal
provisions relating to purchase price and/or tariff regulations.
The principal central legislation in this regard is the Indian
Electricity Act, 2003. Under Section 3, a national electricity
policy and plan has to be prepared by the Central Government
H
TRANSMISSION CORPN. OF A.P. LTD v. SAi RENEWABLE 691
POWER PVT. LTD. [SWATANTER KUMAR, J.]
which has to be notified. This plan itself can be reviewed or A
revised by the appropriate authority under the Act. Section 8
of the Electricity Act, 20031 requires every State to notify and
constitute, for.the purposes of this Act, a Commission for the
State to be known as Electricity Regulatory Commission of that
State. Section 86 of this Act spells out the functions of the State 8
Commission. Under Section 86(1 )(a) it is to determine the tariff
for generation, supply, transmission and wheeling of electricity,
wholesale, bulk and retail, as the case may be. It is also to
regulate electricity purchase and procurement process of
distribution licencees including the price at which electricity C
shall be procured from the generating companies or licensees
or from other sources through agreements for purchase of
power for distribution and supply within the State as per Section
86(1)(b). Section 86(1)(d) empowers this Commission to issue
licer.c@s to persons seeking to act as transmission licensees,
distribBtion licensees and electricity traders with respect to their D
operations within the State. Besides its advisory functions it has
also been given the general /residue powers to do all other
functions in terms of Section 86(1 )(k). Sections 61 to 64 of the
Electricity Act, 2003 place an obligation upon the appropriate
Commission to determine the tariff in accordance with the E
provisions of this Act. An application .for determination of tariff
shall be made by the generating company under Section 64
and the tariff has to be determined by the appropriate
Commission and it is also required to specify the terms and
conditions for determination of the tariff as per the factors and F
the guidelines specified under Section 61 of th~ Act.
27. The Reform Act, 1998 was enacted, primarily, with the
object of constituting two separate corporations; one for
generation and other for transmission and distribution of G
electrical energy. The essence was restructuring, so as to
achieve the balance required to be maintained in regard to
competitiveness and efficiency on the one part and the social
objective of ensuring a fair deal to the consumer on the other.
This Act is also intended for creation of a statutory regulatory H
692 SUPREME COURT REPORTS (2010] 8 S.C.R.
A authority. Section 3 of the Act requires the State Govt. to
establish by notification a Commission to be known as Andhra
Pradesh Electricity Regulatory Commission. This was done by
notification dated 3rd April, 1999. As already noticed, section
11 detailed the functions of the Regulatory Commission and
primarily it had advisory as well as regulatory functions. In terms
8
of Section 11 (1 )(c) it was required to issue licenses in
accordance with the provisions of the Act and determine the
conditions to be included in the license. However, 11 (1 )(e) gave
it much wider power and duty LO regulate the purchase,
C distribution, supply and utilization of electricity, the quality of
service, the tariff and charges payable keeping in view both the
interest of the consumer as well as the consideration that the
supply and distribution cannot be maintained unless the charges
for the electricity supplied are adequately levied and duly
collected. In terms of Section ·11 (1 )(I) it was to undertake all
D incidental or ancillary things to the functions assigned to it under
the provisions of the Act. Section 12 of the Act vests the State
Govt. with the power to issue policy directions on matters
concerning electricity in the State including the overall planning
and co-ordination. All policy directions shall be issued by the
E State Govt. consistent with the objects sought to be achieved
by this Act and, accordingly, shall not adversely affect or
interfere with the functions and powers of the Regulatory
Commission including, but not limited to, determination of the
structure of tariffs for supply of electricity to various classes of
F consumers. The State Govt. is further expected to consult the
Regulatory Commission in regard to the proposed legislation
or rules concerning any policy direction and shall duly take into
account the recommendation by the Regulatory Commission
on all such matters. Thus the scheme of these provisions is to
G grant supremacy to the Regulatory Commission and the State
is not expected to take any policy decision or planning which
would adversely affect the functioning of the Regulatory
Commission or interfere with its functions. This provision also
clearly implies that fixation of tariff is the function of the
H Regulatory Commission and the State Govt. has a minimum
TRANSMISSION CORPN. OF A.P. LTD v. SAi RENEWABLE 693.
POWER PVT. LTD. [SWATANTER KUMAR, J.]
role in that regard. Chapter VII of this Act deals with tariff. In A
terms of Section 26(2), the Regulatory Commission, in addition
to its power of issuing licence, is entitled to fix terms and
conditions for determination of the licensee's revenue and tariffs
by regulations which are to be duly published. The expression
'tariff' has not been defined in any of the Acts, with which we B
are concerned in the present appeals, despite the fact that the
expression 'tariff' has been used repeatedly in both the Acts.
Under the Electricity Act, 2003 'tariff' has neither been defined
nor explained in any of the provisions of the Act. Explanation
(b) to Section 26 of the Reform Act, 1998 states-what is meant c
by 'tariff'. This provision states that 'tariff' means a schedule of
standard price or charges or specified services which are
applicable to all such specified services provided to the type
or types of customers specified in the 'tariff' notification. This
is an explanation to Section 26 which deals with licenses, D
revenues and tariffs. In other words, this explanation may not
be of greater help to the Court in dealing with the case of
generating companies. Similarly, the expression 'purchase
price' has neither been defined nor explained in any of the
afore-stated Acts.
E
28. Therefore, in the absence of any specific definition in
any of these Acts we will have to depend upon the meaning
attached to these expressions under the !iJeneral law or in
common parlance. The expression 'tariff' has been explained
in the Law Lexicon with legal Maxims, Latin terms and Words F
& Phrases (Second Edition 1997) as "determination,
ascertainment, a table of rates of export and import duties, in
which sense the word has been adopted in English and other
European languages and as defined by the law dictionaries the
word 'tariff' is a cartel of commerce; a book of rates; a table G
or catalogue, drawn usually in alphabetical order, containing the
names of several kind of merchandise, with the duties or
customs to be paid for the same as settled by the authority or
agreed between the several princes and States that hold
commerce together." H
694 SUPREME COURT REPORTS (2010] 8 S.C.R.
A 29. It has also been explained as a schedule, system, or
scheme of duties imposed by the Government of a country
upon goods imported or exported; published volume of rate
schedules and general terms and conditions under which a
product or service will be supplied; a document approved by
s the responsible regulatory agency listing the terms and
conditions including a schedule of prices, under which utility
services will be provided. The expression 'purchase price' has
to be given its limited meaning, i.e. the price paid for
purchasing a good and in the context of the present case, price
c at which generated electricity will be sold to the specified
agencies. The term 'purchase price' indicated in the PPAs, as
such, would be a matter within the realm of contract but this is
subject to the changes which are contractually and/or even
statutorily permissible. Purchase price ultimately would form
part of the tariff, as tariff relatable to a licensee or a consumer
0
would have essentially taken into account, the purchase price.
The purchase price may not include tariff but tariff would always
or is expected to include purchase price.
30. The Regulatory Commission is vested with very vast
E powers and functions. Section 11 of the Reform Act, 1998
declares fixation of tariff as one of the primary functions of the
Regulatory Commission in general more particularly, to the
specified consumers under Section 26 of the Reform Act, 1998.
While under the Electricity Act, 2003, Sections 61 and 62 read
'= with Section 86 (1 )(a)(b) deal with fixation of tariffs in relation
to production, distribution and sale of generated power to the
end consumer. These provisions clearly demonstrate that the
Regulatory Commission is vested with the function for
determining the tariff for generation, supply, transmission and
G billing of electricity etc., as well as regulation of electricity
purchase and procurement process of distribution licensees,
including price at which electricity shall be procured from the
generating companies. With these specific powers in the
statute book itself, it cannot be said that procurement of power
H from the generating companies will not fall within the ambit of
TRANSMISSION CORPN. OF A.P. LTD v. SAi RENEWABLE 695
POWER PVT LTD. [SWATANTER KUMAR, J.]
powers and functions of the Regulatory Commission. It, as A
already noted, is a common body performing functions, duties
and exercising powers under all these three Acts. This Court
had the occasion to deal with somewhat similar issues in the
case of PTC India Ltd. v. Central Electricity Regulatory
Commission [(2010) 4 SCC 603]. The Court was, amongst B
others, dealing with the provisions of Sections 61 to 63 of the
Electricity Act, 2003 and regulation making power of the
Regulatory Commission. The Court was concerned with other
issues as well including the powers of the Tribunal in relation
to judicial review etc. but it will be of assistance to us to notice c
that the Court referred to different kinds of delegated legislations
under the provisions of Electricity Act, 2003 and with regard to
the power of the Regulatory Commission and the scope of the
term 'tariff the Court held as under:
"23. Section 52 of the 2003 Act deals with trading of D
electricity activity. Under Section 52(1 ), the appropriate
Commission may specify the technical requirement, capital
adequacy requirement and creditworthiness for being an
electricity trader. Under Section 52(2), every trader is
required to discharge its duties, in relation to supply and E
trading in electricity, as may be specified by the
appropriate Commission.
24. The standards of performance of licensee(s) may be
specified by the appropriate Commission under Section F
57 of the Act.
25. The 2003 Act contains separate provisions for the
performance of dual functions by the Commission. Section
61 is the enabling provision for framing of regulations by
the Central Commission; the determination of terms and G
conditions of tariff has been left to the domain of the
Regulatory Commissions under Section 61 of the Act
whereas actual tariff determination by the Regulatory
Commissions is covered by Section 62 of the Act. This
aspect is very important for deciding the present case. H
696 SUPREME COURT REPORTS [2010] 8 S.C.R.
A Specifying the terms and conditions for determination of
tariff is an exercise which is different and distinct from
actual tariff determination in accordance with the ·
provisions of the Act for supply of electricity by a
generating company to a distribution licensee or for
B transmission of electricity or for wheeling of electricity or
for retail sale of electricity.
26. The term "tariff' is not defined in the 2003 Act. The term
"tariff' includes within its ambit not only the fixation of rates
but also the rules and regulations relating to it. If one reads
c Section 61 with Section 62 of the 2003 Act, it becomes
clear that the appropriate Commission shall determine the
actual tariff in accordance with the provisions of the Act,
including the terms and conditions which may be specified
by the appropriate Commission under Section 61 of the
D said Act. Under the 2003 Act, if one reads Section 62 with
Section 64, it becomes clear that although tariff fixation like
price fixation is legislative in character, the same under the
Act is made appealable vide Section 111. These
provisions, namely, Section 61, 62 and 64 indicate the dual
E nature of functions performed by the Regulatory
Commissions viz. decision-making and specifying terms
and conditions for tariff determination.
27. Section 66 confers substantial powers on the
appropriate Commission to develop the relevant market
F
in accordance with the principles of competition, fair
participation as well as protection of consumers' interests.
Under Sections 111 (1) and 111 (6) respectively, the
Tribunal has appellate and revisional powers. In addition,
there are powers given to the Tribunal under Section 121
G
of the 2003 Act to issue orders, instructions or directions,
as it may deem fit, to the appropriate Commission for the
performance of statutory functions under the 2003 Act."
31. Similarly, another Bench of this Court in the case of
H
TRANSMISSION CORPN. OF A.P. LTD v. SAi RENEWABLE 697
POWER PVT. LTD. [SWATANTER KUMAR, J.]
Tata Power Company Ltd. v. Reliance Energy Ltd., [2009 (7) A
SCALE 513], was primarily, concerned with the role of the
generating companies and their right to make choice to sell
power to any person or licensee and while referring to the
concept of open access, the Court in para 59 of the judgment
referred to the issues arising in the case which read as under: B
"Although before us a large number of contentions had
been raised, the core questions, which arise for our
consideration, are:-
(A) Whether recourse to Section 23 of the Act can be C
taken for issuance of any direction to the generating
company?
(B) Whether the Commission while applying the
provisions of Section 86(1 )(b) of the Act could also take D
recourse to Sections 23 and 60 thereof?
(C) Whether equitable allocation of power generated by
a generating company is permissible?"
32. In the present case we are, primarily, concerned with E
the answers given by the Court to questions (A) and (B) framed
therein, the discussion on the subject and finally the relevant
conclusions drawn by the Court in para 140 to 142. The Court
elaborately discussed the matter including the fact that some
generating c9mpanies had entered into PPAs while other had F
not. The Court, amongst others, declare the following
conclusions (of which we refer only the relevant portions):
''7) if regulatory clause is sought to be applied in relation
to allocation of power, the same would defeat the de- G
licensing provisions. Generating companies have the
freedom to enter into contract and in particular long term
contracts with a distribution company subject to the
regulatory provisions contained in the 2003 Act.
8) PPA for a long term is essential for increasing and H
698 SUPREME COURT REPORTS [2010] 8 S.C.R.
A decreasing the capacity of generation of electricity by the
generating company, which purpose by the 2003 Act must
be allowed to achieve.
13) Section 86(1 )(b) of the 2003 Act clearly shows that the
generating company indirectly comes within the purview of
B
regulatory jurisdiction as and when directions are issued
to the distributing companies by the appropriate
Commission but the s::ime would not mean that while
exercising the said jurisdiction, the Commission will bring
within its umbrage the generating company also for the
c purpose of issuance separate direction."
33. In addition to the statutory provisions and the judgments
afore referred, we must notice that all the PPAs entered into
by the generating companies with the appropriate body, as well
D as the orders issued by the State in GO Ms. Nos. 93 and 112,
in turn, had provided for review of tariff and the conditions. The
Tribunal appears to have fallen in error of law in coming to the
conclusion that the Regulatory Commission had no powers
either in law or otherwise of reviewing the tariff and so called
E incentives. Every document on record refers to the power of the
authority/Commission to take a review on all aspects including
that of the tariff. One of the relevant consideration for
determining the question in controversy is to examine whether
the matter falls within the statutory or contractual domain. From
F various provisions and the documents on record it is clear that
Regulatory Commission is vested with the power to revise tariff
and conditions in relation to procurement of power from
generating companies. It is also clear from the record that in
terms of the contract between the parties, the APTRANSCO
G had reserved the right to revise tariff etc. with the approval of
the Regulatory Commission.
34. With some emphasis, the parties had argued the
question relating to 'estoppel' and 'legitimate expectation' with
reference to the facts of the present case. The contention is
H
TRANSMISSION CORPN. OF A.P. LTD v. SAi RENEWABLE 699
POWER PVT. LTD. [SWATANTER KUMAR, J.]
raised that by the GOs issued by the State Government as well A
as the letters of the ministry a representation was made by the
Government to the generating companies and they, having
altered their positions, have a right to compel the State
Government and the Regulatory Commission to abide by those
terms for ever and it is their legitimate expectation thatState B
is required to comply with those conditions and no other.
35. For proper analysis of the submissions made by the
parties, it is necessary for us to examine on what premises the
appellants had claimed and the Tribunal has accepted the plea
of estoppel. Admittedly, this all begins with the letter dated 7th C
September, 1993 issued by the Government of India, Ministry
of Non-Conventional Energy Sources, New Delhi to the Chief
Secretary of the respective States. In this letter, the new strategy
action plan of the Ministry in relation to generation of grid quality
power from non-conventional energy sources was mentioned D
in some elaboration and the Ministry had referred to the fact
that it had drawn certain guidelines and also indicated the
minimum buy-back price of Rs. 2.25 per unit which was
proposed by the Ministry and it was based upon the average
cost of generation, as noticed by the authorities, at the relevant E
point of time. These guidelines were to constitute an attractive
package to encourage private sector and the respective States
were required to examine and alter or amend the same as
conducive to a particular State. Hereafter, a letter dated 25th
November, 1994 was again issued by the Ministry to the F
Managing Director of the Non-Conventional Energy
Development Corporation, Andhra Pradesh annexing the
guidelines which were subject to be amended. These
guidelines itself showed that Electricity Board, which was the
competent authority at that relevant point of time, to announce G
a 'base purchase price' every year for electrical energy
purchased by the Board from the non-conventional energy
based projects. These guidelines contemplated that the base
price shall be escalated at a minimum rate of 5% every year.
Clause 2 of the Guidelines stipulated that the promoter or a H
700 SUPREME COURT REPORTS (2010] 8 S.C.R.
A developer shall be entitled to receive the base price set out in
the PPA for all electrical energy delivered for the duration of
the PPA. The rate shall be equal to the base price in the year
of signing of PPA, escalated at the rate of 5% per year for a
period of ten years from the date of signing. Thereafter new
8 purchase price will be fixed as per the tariff prevalent in the
State at the relevant time. Thereafter, the Andhra Pradesh
Government has issued GO Ms. No. 93 dated 18th November,
1997 referring to certain incentives required to be given to the
projects. These incentives only referred to the power purchase
C price, escalation of 5% with base year 1997-98, wheeling
charges, third party sales allowed to a limited extent. These,
again, were the guidelines which, in fact, we have referred to
in great detail above and were primarily intended to guide the
States in taking the respective decisions in that behalf. Again
D vide GO. Ms. No. 112 dated 22nd December, 1998 referring
to the extension of all these uniform incentives, certain
amendments were carried out to GO Ms. No. 93 dated 18th
November, 1997. Clause 2 of this order referred that the
operation of the incentive scheme shall be watched for a period
of three years and at the end of three years the Electricity Board
E shall come up with suitable proposals for review for further
continuance of the incentives in that form, or to be modified
suitably. Keeping these guidelines in mind, the State of Andhra
Pradesh vide GO Ms. No. 93 dated 18th November, 1997,
while referring to the guidelines issued by the Government of
F India for promotional and fiscal incentives, noticed the various
representations which were received from Non-conventional
Energy Developers for extension of benefits as afore-referred
in relation to all non-conventional energy resources uniformly.
Thereafter, the parties took up the matter for annual
G consideration, which exercise was undertaken by them in terms
of the guidelines issued by the State and the Central
Government. State of Andhra Pradesh reiterated the incentives
and directed that the same would continue for a period of three
years in terms of GO Ms. No. 93, whereafter it will be reviewed.
H The incentives relied upon, on the basis of the guidelines and
TRANSMISSION CORPN. OF A.P. LTD v. SAi RENEWABLE 701
POWER PVT. LTD. [SWATANTER KUMAR, J.]
the issued Government orders are primarily, related to fixation A
of purchase price of the generated power from Non-
Conventional developer/generators and sale of such energy to
third parties. In the meanwhile, Regulatory Commission had
been established under the provisions of the Reform Act, 1998.
This Regulatory Commission was to take over all the functions B
of the said Electricity Board as well as other authorities for
generation, distribution and other matters relating to electricity
in the State. This resulted in initiation of suo motu proceedings
by the Regulatory Commission for determination and fixation
of tariff, which after hearing the parties finally passed the order c
dated 20th June, 2001. This order as we have already noticed
was accepted by all the parties and has not been questioned
till date. This order provided for certain variations in the
incentives, which as already noticed, are related to the fixation
of tariff or purchase price and as stipulated, the Commission D
considered all objections at some length and ordered that
power generated by Non-conventional Energy Developers is not
permitted to be sold to third parties and price was kept at Rs.
2.25 per unit price with 5% escalation per annum with 1994-
95 as the base year. The parties had entered into agreements
E
i.e. PPAs at different times after passing of this order between
June, 2001 to August, 2001 and even thereafter. Thus, at that
time, the entire matter between the parties was controlled by
the PPAs which fully contemplated that all the delivered energy
at the interconnection point for sale to TRANSCO will be
purchased at the tariff provided under Article 2.2 which in turn F
confirmed the order of 20th June, 2001 in that regard and it was
stated that the matter will be reviewed in April, 2004 and it
could also be reviewed after 10 years from the date of
commissioning of the project. This PPA as well as the order
passed by the Regulatory Commission in the year 2001 G
remained in force without being questioned in any manner
whatsoever before any competent forum and in any case, not
to any benefit of respondents. Then came the order dated 20th
March, 2004 passed by the Regulatory Commission again, by
H
702 SUPREME COURT REPORTS [2010] 8 S.C.R.
A initiating suo motu proceedings. In this order, the Commission
had retained the basic unit price of 2.25 as on 1st April, 1994
and the escalation index of 5% per annum which was to be
simple and not compounded every year. In other words, on 1st
April, 2001 the price was 3.37/kwh in relation to Wind Power
B Purchasers. Except varying this price, the order of 2004, in turn,
had reiterated the contents of the order of 2001 which, as
already noticed, has attained finality. Another factor which we
may notice is that in its order dated 7th July, 2004, while
clarifying its order dated 20th March 2004, the Commission has
c clearly observed:
"12. It is relevant to clarify that by the order dated 20-03-
2004, the Commission is not mandating in any manner
those NCE developers who have not accepted the earlier
order dated 20-06-2001 passed by the Commission,
D while their challenge to the order is pending the decision
by the High Court. However, such of the NCE developers
who had accepted the earlier order dated 20-06-2001 and
have been selling electricity generated by them to
APTRANSCO cannot challenge the jurisdiction of the
E Commission to review the terms as per the stipulation
contained in the order dated 20-6-2001."
36. On the basis of this factual matrix, the respondents
claimed that the State Government and the Regulatory
F Commission both were bound to continue the incentives as
were provided to them in furtherance to the letters and orders
of Central as well as the State Governments discussed above.
They have a legitimate right to expect that these incentives were
to be· continued indefinitely in the same manner and the
G authorities concerned are estopped from altering the rates and/
or imposing the condition of no sale to third parties. We are
unable to find any merit in this contention. In our view, the
Tribunal has erred in law in treating these inter-se letters and
guidelines between the Government of India, State Government
and the Commission/the State Electricity Board as unequivocal
H
TRANSMISSION CORPN. OF A.P. LTD v. SAi RENEWABLE 703
POWER PVT. LTD. [SWATANTER KUMAR, J.]
commitments to the respondent/purchasers/generators/ A
developers so as to bind the State for all times to come. For
the principle of estoppel to be attracted, there has to be a
definite and unambiguous representation to a party which then
should act thereupon and then alone the consequences in law
can follow. In the present case, the policy guidelines issued by B
the Central Government were the proposals sent to the State
Government, which the State Government accepted to
consider, amend or alter as per their needs and conditions and
then make efforts to achieve the objects of encouraging Non-
conventional Energy Generator and Purchasers to enter into this c
field. These are the matters, which will squarely fall within the
competence of the Regulatory Commission/the State Electricity
Board at the relevant points of time. Besides that, there was
no definite and clear promise made by the authorities to the
developers that would invoke the principle of promissory
0
estoppel. Undoubtedly, to encourage participation in the field
of generation of energy through non-conventional methods,
some incentives were provided but these ·incentives under the
guidelines as well as under the PPAs signed between the
parties from time to time were subject to review. In any case,
E
the matter was completely put at rest by the order of 20th June,
2001 and the PPAs voluntarily signed by the parties at that time,
which had also provided such stipulations. If such stipulations
were not acceptable to the parties they ought to have raised
objections at that time or at least within a reasonable time
thereafter. The agreements have not only been signed by the F
parties but they have been fully acted upon for a substantial
period. We have already referred to various statutory provisions
where the Regulatory Commission is entitled to determine the
tariff. In this situation we are unable to agree with the view taken
by the Tribunal that Regulatory Commission had no jurisdiction G
and that fixation of tariff does not include purchase price for buy
back of the generated power.
37. The principle of promissory estoppel, even if, it was
applicable as such, the Government can still show that equity H
704 SUPREME COURT REPORTS [2010] 8 S.C.R.
A lies in favour of the Government and can discharge the heavy
burden placed on it. In such circumstances, the principle of
promissory estoppel would not be enforced against the
Government as it is primarily a principle of equity. Once the
ingredients of promissory estoppel are satisfied then it could
B be enforced against the authorities including the State with very
few extra ordinary exceptions to such enforcement. In the United
States the doctrine of Promissory Estoppel displayed
remarkable vigor and vitality but it is still developing and
expanding. In India, the law is more or less settled that where
c the Government makes a promise knowing or intending that it
would be acted upon by the promissory and in fact the
promissory has acted in reliance of it, the Government may be
held to be bound by such promise. It is a settled canon of law
that doctrine of promissory estoppel is not really based on
principle of estoppel but is a doctrine evolved by equity in order
0
to prevent injustice. There is no reason why it should be given
only a limited application by way of defence. It can also be the
basis of a cause of action. Even if we assume that there was
a kind of unequivocal promise or representation to the
E respondents, the reviews have taken place only after the period
specified under the guidelines and/or in the PPAs was over.
This is a matter which, primarily, falls in the realm of contract
and the parties would be governed by the agreements that they
have signed. Once these agreements are singed and are
enforceable in law then the contractual obligations cannot be
F frustrated by the aid of promissory estoppel.
38. Following the judgment of this Court in the case of
Union of India v. Mis. Inda-Afghan Agencies Ltd. ((1968) 2
SCR 366], this Court in the case of Century Spinning and
G Manufacturing Company Ltd. v. The Ulhasnagar Municipal
Council ((1970) 1 SCC 582] held that if the promise is made
in regard to a present or existing fact, the principle of estoppel
can be enforced against the Government. But a promise in
relation to a future transaction or act may not fall within the ambit
H of promissory estoppel. This law was further discussed with
TRANSMISSION CORPN. OF A.P. LTD v. SAi RENEWABLE 705
POWER PVT. LTD. [SWATANTER KUMAR, J.]
some elaboration by the Court in the case of Motila/ Padampat A
Sugar Mills. Co. Ltd. v. State of Uttar Pradesh [(1979) 2 SCC
409], where the Court after considering the position of law in
England and United States and comparing the same to the
Indian Law, laid down the basic concept of promissory estoppel
that would determine its enforceability. In the case of Pawan B
Alloys v. UPSEB [(1997) 7 SCC 251], the Court, though had
enforced the principle of promissory estoppel against the
Board, but certain basic facts of that case needs to be noticed
by us. The appellants in that case had neither expressly nor
impliedly stated that it has the power to withdraw the incentives c
and rebate at a time prior to the expiry of three years for which
it was granted. Secondly, none of the private parties had
voluntarily or even by remotest choice agreed to give up the
benefits given to them by clear representation held out by the
Board. As is obvious, the power of the Board to increase the
0
general tariff was accepted, but the incentive of rebate was de
horse the tariff and thus, promissory estoppel was enforceable
against the Board.
39. Another very important dictum of the Court in this
judgment was that the power of the Board to fix general tariff E
as well as discharge of other related functions was held to be
quasi-judicial in character. This power of the Board is exercised
under the statute as a power-cum-duty and is independent of
granting or declining any rebate. In the present case the order
dated 20th June, 2001 was fully accepted by the parties without F
any reservation. After the lapse of more than reasonable time
of their own accord they voluntarily signed the PPA which
contained a specific stipulation prohibiting sale of generated
power by them to third parties. The agreement also had renewal
clause empowering TRANSCO/APTRANSCO/Board to revise G
the tariff. Thus, the documents executed by these parties and
their conduct of acting upon such agreements over a long
period, in our view, bind them to the rights and obligations
stated in the contract. The parties can hardly deny the facts as
they existed at the relevant time, just because it may not be H
706 SUPREME COURT REPORTS [2010] 8 S.S.?
A convenient now to adhere to those terms. Conditions of a
contract cannot be altered/avoided on presumptions or
assumptions or the parties having a second thought that a term
of contract may not be beneficial to them at a subsequent
stage. They would have to abide by the existing facts,
8 correctness of which, they can hardly deny. Such conduct, would
be hit by a/legans contraria non est audiendus.
40. Lastly, we may refer to a more recent judgment of this
Court. In the case of Kusumam Hotels (P) Ltd. v. Kera/a Seb
[(2008) 13 SCC 213], where the Court discussed in some
C elaboration the different judgments of this Court on the subject
and then declined to enforce the principle of promissory
estoppel as there was no foundational facts and also indicated
that the Government can alter, amend or rescind its policy
decision in public interest, the Court held as under:
D
"27. Yet again in UP. Power Corpn. Ltd. v. Sant
Steels & Alloys (P) Ltd., it was held: (SCC p.800, para
27)
"27. In this background, in view of various decisions
E noticed above, it will appear that the Court's approach in
the matter of invoking the principle of promissory estoppel
depends on the facts of each case. But the general
principle that emerges is that once a representation has
been made by one party and the other party acts on that
F representation and makes investment and thereafter the
other party resiles, such act cannot be stated to be fair and
reasonable. When the State Government makes a
representation and invites the entrepreneurs by showing
various benefits for encouraging to make investment by
G way of industrial development of the backward areas or
the hill areas, and thereafter the entrepreneurs on the
representations so made bona fide make investment and
thereafter if the State Government resiles from such
benefits, then it certainly is an act of unfairness and
H
TRANSMISSION CORPN. OF AP. LTD v. SAi RENEWABLE 707
POWER PVT. LTD. [SWATANTER KUMAR, J.)
arbitrariness. Consideration of public interest and the fact A
that there cannot be any estoppel against a statute are
exceptions."
xxx xxx xxx
36. The law which emerges from the above discussion is B
that the doctrine of promissory estoppel would not be
applicable as no foundational fact therefor has been laid
down in a case of this nature. The State, however, would
be entitled to alter, amend or rescind its policy decision.
Such a policy decision, if taken in public interest, should c
be given effect to. In certain situations, it may have an
impact from a retrospective effect but the same by itself
would not be sufficient to be struck down on the ground of
unreasonableness if the source of power is referable to a
statute or statutory provisions. In our constitutional scheme, D
however, the statute and/or any direction issued thereunder
must be presumed to be prospective unless the
retrospectivity is indicated either expressly or by necessary
implication. It is a principle of the rule of law. A
presumption can be raised that a statute or statutory rule E
has prospective operation only."
41. In our country, the law of promissory estoppel has
attained certainty. It is only an Unambiguous and definite
promise,. which is otherwise enforceable in law upon which, the
parties· have acted, comes within the ambit and scope of
F
enforcement of this principle and binding on the parties for their
promise and representation. It will be difficult for the Court to
hold that the guidelines can take the colour of a definite promise
which in the letters of the Central Government itself were
proposals to the State Government. Besides that, if for the sake G
of argument, we treat the State letters/circulars as promise or
representations to the private parties like the respondents, even
then, they led to the execution of a definite contract between
the parties which will purely fall in the domain of contractual law.
H
708 SUPREME COURT REPORTS [2010] 8 S.C.R.
A These contracts specifically provided for review and when
reviewed in the year 2001 parties not only accepted the order
but executed contracts (PPAs) in furtherance of it. In these
circumstances, we are unable to accept the argument that the
State or the Regulatory Commission or erstwhile State
s Electricity Board were bound to allow same tariff and permit
third party sales for an indefinite period. To this extent,
authorities, in any case, would not be bound by the principle of
estoppel.
42. Now, we will proceed to examine the merits or
C otherwise of the findings recorded by the Tribunal that the PPAs
executed by the parties, were result of some duress and thus,
it will not vest the authorities with the power to review the tariff
and other granted incentives. PPAs were executed prior and
subsequent to the issuance of the order dated 20th June, 2001.
D Different persons executed the contracts at different times in
full awareness of the terms and conditions of such PPA. To
frustrate a contract on the ground of duress or coercion, there
has to be definite pleadings which have to be substantiated
normally by leading cogent and proper evidence. However, in
E the case where summary procedure is adopted like the present
one, at least some documentary evidence or affidavit ought to
have been filed raising this plea of duress specifically. From
the record before us, nothing was brought to our notice to state
the plea of duress and to prove the alleged facts which
F constituted duress, so as to vitiate and/or even partially reduce,
the effect of the PPAs. On the one hand, the Tribunal appears
to have doubted the binding nature of the contracts stating that
it contained unilateral conditions introduced by virtue of Order
and approval of the Regulatory Commission", while on the other
G hand, in para 53 of the Order, it proceeded on the presumption
that PPAs are final and binding and still drew the conclusion
that the Regulatory Commission could not revise the tariff. Even
in the order, no facts have been pointed out which, in the
opinion of the Tribunal, constituted duress within the meaning
H of the Contract Act so as to render the contract voidable.
TRANSMISSION CORPN. OF AP. LTD v. SAi RENEWABLE 709
POWER PVT. LTD. [SWATANTER KUMAR, J.)
Another aspect of the entire controversy is that none of the A
generators had challenged the agreements and in fact, except
in arguments before the Tribunal no case was made out for the
purposes of vitality of the contract or any part thereof. On the
contrary, all the generators under all the branches of Non-
Conventional Energies, have accepted the contract and B
proceeded on the basis that the said contracts are binding and
still the Regulatory Commission does not have any power or
jurisdiction to revise the tariff or deal with the concessions. If
the contracts are a result of duress and cannot be given effect,
the results could be disastrous for both the sides. If a contract c
suffers from the defect of undue influence or duress, as the
case may be then the consequences in law should follow. It is
a settled canon of law that when the consent to agreement is
caused by undue influence the agreement is a contract voidable
at the option of the parties whose consent was so caused. Even D
if such party had received any benefit under the terms of the
contract the Court could still pass orders as to the voidability
or otherwise of the contract but upon such terms and conditions
as the Court may deem just. Undue influence or duress is said
to be subtle of the fraud whereby mysteries burden over the
E
mind of a victim by insidious approaches. Firstly, there are no
facts on record, much less, supported by any documentary or
any other evidence to sustain the plea that the contracts (PPAs)
are a result of undue influence or duress by the State or its
agencies upon the generators. Secondly, the generators have
already taken benefit of that contract which was based on the F
policy of the State as well as the order of the Regulatory
Commission. Having attained those benefits, it will hardly be
of any help to the appellants, particularly, in the facts and
circumstances of the case, to substantiate, justify or argue the
plea of duress. G
43. In the case of Bir/a Jute Manufacturing Co. v. State
of M.P. [(2002) 9 SCC 667], the Supreme Court was
concerned with a case where validity of undertaking given
under duress was the plea taken by the appellant. This pleading H
710 SUPREME COURT REPORTS [2010] 8 S.C.R.
A on the same ments and noticing the material, like the present
case, the Court held as under:
"2. Learned counsel, appearing for the appellant urged that
the undertaking given by the appellant Company was under
duress and, therefore, it is not an undertaking in the eyes
B
of law and the appellant is not liable to pay the water
charges under such circumstances. There is no material
before us to come to this conclusion that the undertaking
given by the appellant was t•rider duress. On the contrary
we find that the appellant had given the solemn
c undertaking voluntarily. We, therefore, find no merit in the
appeal."
44. The Tribunal in paras 45-47 of its order has used the
expression "out of compulsion some of the developers entered
D into Power Purchase Agreement with APTRANSCO accepting
the terms and conditions set out in order dated 20th June,
2001". We are afraid that there is hardly any material on record
to substantiate such a finding. What was the compulsion and
what were the facts which persuaded the Tribunal to take such
E a view are conspicuous by their very absence. A compulsion
leading to execution of a contract is a matter entirely based
upon facts. It is difficult for this Court, originally, to infer duress
or compulsion in absence of specific pleadings and materials
in that behalf. It may also be noticed at the cost of repetition
F that the order dated 20th June, 2001 was never questioned by
any ofthe parties to any favourable results. Even in these
proceedings there is no challenge to the said order which,
admittedly, has been acted upon and has attained finality. The
power generators/Non-Conventional Energy developers have
G executed the PPAs without any protest and, in fact, did nothing
to challenge such agreements or any part thereof, till passing
of the impugned order of 2004. There were some proceedings,
without questioning the validity and effectiveness of the order
dated 20th June, 2001, carried out by some of the generators
before the Andhra Pradesh High Court. Certain interim
H
TRANSMISSION CORPN. OF A.P. LTD v. SAi RENEWABLE 711
POWER PVT. LTD. [SWATANTER KUMAR, J.]
directions were passed in those proceedings, as already A
noticed, but finally all proceedings culminated into dismissal of
the Writ Petitions and/or reference back to the Regulatory
Commission for grant of a hearing as per the directions
contained in the order of the High Court.
B
45. Another important aspect of the case is that the learned
counsel appearing for the respondents, particularly, in Appeal
No. 2926 of 2006 had stated that they are not arguing in support
of the plea of estoppel and duress as decided by the Tribunal
in their favour. They had mainly concentrated their submissions C
on jurisdiction of the Regulatory Commission with respect to
withdrawal of incentives and fixation of tariff. These are the
contracts which have been executed prior and after the
issuance of the order dated 20th June, 2001 and have been
acted upon by the parties without any reservation. In view of the
fact that no challenge was made to the order dated 20th June, D
2001, execution of PPAs and the conduct of the respondents
over the long period and particularly, while keeping in mind the
statutory provisions we are unable to sustain the plea of duress
in favour of the respondents.
E
46. The main emphasis of the judgment of the Tribunal is
that the Government had framed the policy under which,
incentives were given and as such, the Regulatory Commission
had no power and authority to fix tariffs or amend or alter the
policy decision of the State. We have already held that in law F
and in face of the contract between the parties the Regulatory
Commission is the Authority to fix the tariff which includes within
its ambit the purchase price of the Non-conventional Energy
under the policy of the State. It appears that the Tribunal has
taken a narrower view of the jurisdiction vested in the Regulatory G
Commission which is discharging its statutory functions under
all the three Acts in accordance with law. In terms of Section
12 of the Reform Act, 1998, which has been referred to by the
Tribunal, the power of the Government had been stated. The
power available to the Government to issue policy directions
H
712 SUPREME COURT REPORTS [2010] 8 S.C.R.
A has two restrictions. Firstly, the policy direction has to be on
the matters related to electricity in State including overall
planning and coordination. Secondly, all such policy directions
have to be issued by the State Government in consonance with
the object sought to be achieved by this Act and accordingly
B shall not adversely affect or interfere with the functions and
powers of the Regulatory Commission including, but not limited
to, determination of the structure of tariff for supply of electricity
to the consumers. Powers vested in the Regulatory
Commission to frame regulations under Section 54 also intend
c that regulations are to be framed with an object to ensure proper
performance of its functions under the Act. In other words, both
the State and the Regulatory Commission, are supposed to
exercise their respective powers only for the purposes of
furthering the cause of the Act. The Commission discharging
its statutory functions within the ambit of Sections 11, 12 and
0
26 of the Reform Act, 1998 as well as Sections 61, 62 and
86(1 )(b) of the Electricity Act, 2003 renders advisory functions
to the State. All these provisions, examined and analyzed
cumulatively, do not support the approach adopted by the
Tribunal that the functions of the Regulatory Commission in
E fixing tariff/purchase price was contrary to or distinctive of the
said policy. This cannot be supported either on the basis of the
statutory provisions of the various Acts as well as with reference
to the various documents on record including the order dated
20th June, 2001 and the PPAs signed by the parties at different
F stages. We are also unable to contribute to the view of the
Tribunal that the Regulatory Commission has acted in
contradiction or conflict with the State policy. The State was
certainly not intending to provide incentives and concessions
with assurance of buy-back to enable the Non-Conventional
G Energy developers/generators to sell generated powers to third
parties. It must be kept in mind that the policy of the Government
of India as well as the State of Andhra Pradesh was for
encouraging the developers/generators of Non-conventional
Energy to generate electricity for the benefit of public at large
H
TRANSMISSION CORPN. OF A.P. LTD v. SAi RENEWABLE 713
POWER PVT. LTD. [SWATANTER KUMAR, J.]
with buy back of power being one of the basic features of this A
policy. Such parameters are obviously subject to change in
larger public interest. All these issues, in fact, loose much
significanee because of the fact that parties have, by and large,
entered into the field of contract simpliciter and their rights are
controlled by the contracts executed between them. There is B
no challenge to these contracts and, therefore, it may be hardly
permissible for the Court to go behind these contracts and
permit questioning of the statutory jurisdiction vested in the
Regulatory Commission.
47. In the case of BSES Ltd. v. Tata Power Co. Ltd. [(2004)
c
1 SCC 195], the Court clearly held that after creation of the
Regulatory Commissions under the provisions of the Electricity
Regulatory Commission Act, 1998, the Commission has clear
power and jurisdiction to fix tariff. The Court should not adopt
an interpretation which should neither be strict nor narrower so D
as to oust the jurisdiction of the Regulatory Commission, as it
would defeat the very object of enacting the said Act. The
reliance placed by the respondents upon the judgment of this
Court in the case of Andhra Pradesh Electricity Regulatory
Commission v. R. V. K. Energy Private Limited [(2008) 17 SCC E
769] is, again, of not much help to them. In that case also, the
Court had upheld the exercise of statutory power by the
Regulatory Commission. Of course, the Court held that the
regulatory power u/s 11 (1 )(e) of the Reform Act, 1998 does not
ordinarily extend to prohibition or positive direction for entire F
supply to APTRANSCO alone. Such prohibition may be
resorted to in exceptional situations. It reiterated the principle
that the Government policy as well as the Regulatory
Commission should act in consonance with the object of the
Aci. G
48. The appellants have referred and relied upon the policy
directions and guidelines framed by the Central Government
while the respondents have relied upon these documents as
well as the circulars issued by the State of Andhra Pradesh.
1-i
714 SUPREME COURT REPORTS [2010] 8 S.C.R.
A The respondents have raised the plea of estoppel against the
Regulatory Commission on the basis of the averment that the
State had framed policies, which the Regulatory Commission
instead of implementing, has acted contrary thereto. There is
no doubt that before the formation of the Regulatory
B Commission it was the State Electricity Board which was
performing all the functions in relation to generation as well as
distribution of electricity. The Board was directly under the
control of the State and the State, in exercise of its general
executive powers, had framed policies to encourage Non-
e conventional Energy developers and producers to come into
the field of generation of electricity and had issued the
Government orders which we have discussed in some detail
above. Strange enough, the State of Andhra Pradesh was
neither impleaded a~ a party to the proceedings before the
Regulatory Commission nor before the Tribunal. In fact, the
0
Tribunal has referred to various acts and deeds of the State
and consequences thereof, but did not consider it appropriate
to implead the State Government as a party to the proceedings.
We are of the considered view that presence of the State
Government before the Tribunal could have certainly been
E appropriate, inasmuch as the State would have placed before
the Appellate Authority and the Regulatory authorities, its views
in regard to revision of incentives as well as the purchase price.
We are also constrained to observe that the State of Andhra
Pradesh was a necessary, in any case, a proper party in these
F proceedings. This itself would be a ground for this Court to
remit the matter to the Competent Authority, in addition to the
other reasons recorded in this judgment.
49. In the present case, the restriction with regard to third
G party sales was not only creation of a directive issued or
approval granted by the Regulatory Commission, but was
actually in furtherance to the contract entered into between the
parties. Rights and liabilities arising from a binding contract
cannot be escaped on the basis of some presumptions or
H inferences in relation to the facts leading to the execution of the
TRANSMISSION CORPN. OF A.P. LTD v. SAi RENEWABLE 715
POWER PVT. LTD. [SWATANTER KUMAR, J.]
contract between the parties. The jurisdiction of the Regulatory A
Commission, in the facts of the case, arises not only from the
statutory provisions under the different Acts but also in terms
of the contract executed between the parties which has binding
force. Lastly, but with great emphasis, it was argued on behalf
of the respondents that enforcement of the purchase price at B
the rate determined by the Regulatory Commission along with
complete prohibition on the right of the Non-conventional Energy
Generator/Developers to sell generated power to t~e third
parties would compel them to shut down their projects. The rates
are so unfair that it would result in extinguishment of the power c
generating units from the State of Andhra Pradesh on the one
hand, while on the other, it is bound to prejudicially affect the
larger public interest. According to the respondents they have
invested large sums of money in developing these generating
units and it will be unfair to compel their closure, particularly,
D
when for all these years they have supplied electricity generated
by them solely to APTRANSCO or its predecessors.
50. We find some substance in this submission and are
of the view that it is a matter of some concern, even for the
State Government. All these projects, admittedly, were E
established in furtherance to the scheme and the guidelines
provided by the Central Government which, in turn, were
adopted with some modification by the State Government. The
State Electricity Board implemented the said scheme and
initially had permitted sale of generated electricity to third F
parties, however, subsequently and after formation of the
Regulatory Commission which, in turn, took over the functions
of the State Electricity Board, the incentives were modified and
certain restrictions were placed. The reasons for these
restrictions have been stated in the affidavit filed on behalf of G
the appellants which, as already noticed by us, is not a matter
to be examined by this Court in exercise of its extra-ordinary
jurisdiction. These matters, essentially, must be examined by
expert bodies particularly, when such bodies are constituted
under the provisions of a special statute. H
716 SUPREME COURT REPORTS [2010] 8 S.C.R.
A 51. The basic policy of both the Central as well as the State
Government was to encourage private sector participation in
generation, transmission and distribution of electricity on the
one hand and to further the objective of distancing the regulatory
responsibilities of the Regulatory Commission from the
B Government and of harmonizing and rationalizing the provisions
of the existing laws relating to electricity in India, on the other
hand. The object and reasons of Electricity Act, 2003 as well
as the Reform Act, 1998 are definite indicators of such
legislative intent. The basic objects of these enactments were
c that the said Regulatory Commission may permit open access
in distribution of energy as well as to decentralize management
of power distribution through different bodies. The Reform Act,
1998 stated in its objects and reasons that the set-up of power
sector in force, at that time, was virtually integrated and
functional priorities were getting distorted due to resource-
0
cru nch. This has resulted in inadequate investment in
transmission and distribution which has adversely affected the
quality and reliability of supply. The two corporations proposed
thereunder were to be constituted to perform various functions
and to ensure efficiency and social object of ensuring a fair deal
E to the customer. These objects and reasons clearly postulated
the need for introduction of private sector into the field of
generation and distribution of energy in the State. Efficiency in
performance and economic utilization of resources to ensure
satisfactory supply to the public at large is the paramount
F concern of the State as well as the Regulatory Commission.
The policy decisions of these constituents are to be in
conformity with the object of the Act. Thus, it is necessary that
the Regulatory Commission, in view of this object, take practical
decisions which would help in ensuring existence of these units
G rather than their extinguishment as alleged.
52. In view of our above detailed discussion, we dispose
of these appeals with the following order:
(a) The order of the Tribunal dated 2nd June,
H
TRANSMISSION CORPN. OFAP LTD v. SAi RENEWABLE717
POWER PVT. LTD. [SWATANTER KUMAR, J.]
2006 is hereby set aside. A
(b) We hold that the Andhra Pradesh Electricity
Regulatory Commission has the jurisdiction
to determine tariff which takes within its
ambit the 'purchase price' for procurement of 8
the electricity generated by the Non-
conventional energy developers/ generators,
in the facts and circumstances of these
cases.
(c) We hereby remand the matters to the Andhra C
Pradesh Electricity Regulatory Commission
with a direction that it shall hear the Non-
conventional energy generators afresh and
fix/ determine the tariff for purchase of
electricity in accordance with law, D
expeditiously.
(d) It shall also re-examine that in addition to the
above or in the alternative, whether it would
be in the larger interest of the public and the
E
State, to permit sale of generated electricity
to third parties, if otherwise feasible.
(e) The Andhra Pradesh Electricity Regulatory
Commission shall consider and pronounce
upon all the objections that may be raised by F
the parties appearing before it, except
objections in relation to its jurisdiction, plea
of estoppel and legitimate expectancy
against the State and/or APTRANSCO and
'the plea in regard to PPAs being result of G
duress as these issues stand concluded by
this judgment.
(f) We make it clear that the order dated 2oth
June, 2001 passed by the Andhra Pradesh H
718 SUPREME COURT REPORTS [2010J 8 S.C.R.
A Electricity Regulatory Commission has
attained finality and was not challenged in any
proceedings so far. This judgment shall not,
therefore, be in detriment to that order which
will ope.rate independently and in accordance
B with law.
(g) We also hereby direct that State of Andhra
Pradesh shall be added as a party
respondent in the proceedings and the
Andhra Pradesh Electricity Regulatory
c Commission shall grant hearing to the State
during pendency of proceeding before it.
53. In the facts and circumstances of the case parties are
left to bear their own costs.
D
K.K.T. AppealR disposed of.
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