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SUPREME COURT OF INDIA
DHANANJAYA Y. CHANDRACHUD, INDIRA BANERJEE, JJ.
Indsil Hydro Power & Manganese Ltd – Appellant
Versus
State of Kerala & Ors Etc – Respondents
Civil Appeal No(s). 5943-5945 of 2019 (@SLP(C) Nos. 28719-28721 of 2015)
Decided on : 30-07-2019
(a) Government contract - Government or its instrumentalities cannot act arbitrarily in dealings with private parties. (Para 33)
(b) Interpretation of contract - Contract must be read and understood in its entirety so as to attribute to it a business meaning which was within the understanding of the contracting parties. (Para 35)
Government contract - Instantly Clause 3 obligating appellant to commence commercial operations within thirty months - Clause 9 obligating KSEB to complete transmission lines - Reading in its entirety the agreement obligated KSEB to completes transmission lines within 30 months - Otherwise appellant could not fulfill its obligation of commencing commercial operations within stipulated period. (Para 36, 42)
(c) Administrative law - Policy matters - Not open to court to foist a particular measure of policy on the State. (Para 45)
Facts of the case:
The appellant is an EHT consumer with a contract demand of 14000 KVA. It has a power intensive unit for the manufacture of Ferro Alloys which was energized on 12 August 1994. The appellant commenced commercial production on 1 October 1994.
On 6 February 1992, the Government of Kerala provided incentives to new industrial units by providing an exemption for five years from the payment of enhanced tariff of electricity from 1 January 1992. This was made available to manufacturing units which commenced commercial production on or before 31 December 1996. The pre-1992 tariff concession was allowed to the appellant for the period from 1 October 1994 to 30 September 1999. Pursuant to a policy decision of the State Government, the appellant was also granted an extension of the pre-1992 tariff for a further period commencing from 1 October 1999 until 20 August 2000. From 21 August 2000, the appellant is being billed under the prevailing tariff. The pre-1992 tariff was at the rate of Rs 0.42 per unit as against the cost of thermal power purchased by the Kerala State Electricity Board which at the material time was Rs 3.30 per unit.
The appellant was allowed to set up a Hydro Electric Project (Kuthungal Phase I & II) with a capacity of 21 MW as a captive power project. On 25 July 1998, the Chief Engineer of KSEB called upon the appellant to deposit 2.13 crores for the construction of 4 km of the transmission line in pursuance of clause 9 of the agreement. The amount was deposited by the appellant on 5 October 1998. A further demand of Rs 20,55,075 /-made on 5 May 1999 was also fulfilled.
The appellant asserts that civil construction work was completed and one of the three generators was commissioned and synchronised with the grid on 15 May 2000. There was a delay in the setting up of the transmission lines without which it was not possible for the hydel unit to inject power into the KSEB grid. On 20 May 2000 and 30 June 2000, the appellant addressed representations in regard to the delay. On 21 August 2000, the remaining two generators of the project were also commissioned and a certificate was issued by the Chief Electrical Inspector of the Government of Kerala.
The delay in the construction of the transmission line led to institution by the appellant of a writ petition which was eventually dismissed.
Finding of the Court:
State Government and KSEB should re-assess the matter and decide the representation of the appellant.
Result: Appeals allowed.
JUDGMENT :
Dr. Dhananjaya Y. Chandrachud, J.
1. Leave granted.
2. These appeals arise from the judgment of a Division Bench of the High Court of Kerala dated 21 August 2015. The High Court has dismissed the writ proceedings instituted by the appellant under Article 226 of the Constitution of India.
3. On 7 December 1990, the State of Kerala issued G.O (Ms) No. 23/90/PD by which private entities were permitted to construct and operate Hydel Power Projects for the generation of power, subject to certain conditions. These conditions, broadly speaking were:
“• The Private Agencies would be allowed to set up sanctioned hydel schemes at their own cost.
• Where the power scheme is located in an area owned by the Respondents, the land would be leased for a period of 30 years from the date of commissioning of the same, after which the land with all structures would vest in the Government free from all encumbrances.
• The transmission line required for transferring power from the captive plant of the agency to the nearest grid sub-station would be built at the cost of the agency by the KSEB and after construction it would be transferred to the KSEB without any compensation.
• The captive plant energy fed into the KSEB grid - 12% wheeling charges loss would be delivered free of cost to the agency at their H.T. Terminals.
• The percentage of 12% for Transmission & Distribution losses, wheeling charges, etc. will be liable for review by Board during revisions of tariff rates periodically.
• Before implementation of the Scheme, an agreement setting forth all the above aspects and such other conditions as found necessary would be entered into between the agency and the KSEB.”
4. On 12 March 1992, the State government issued G.O (Ms) No. 5/92/PD by which the earlier Government Order was supplemented in terms of the following conditions:
“• The power generated by the agencies could be utilized by them in their own factories/business premises anywhere in the State or could be sold to the KSEB.
• For each project, the rate of purchase of electricity generated will be notional ensuring a minimum rate of return as prescribed by the Government.”
5. The appellant is an EHT consumer with a contract demand of 14000 KVA. It has a power intensive unit for the manufacture of Ferro Alloys which was energized on 12 August 1994. The appellant commenced commercial production on 1 October 1994.
6. On 6 February 1992, the Government of Kerala provided incentives to new industrial units by providing an exemption for five years from the payment of enhanced tariff of electricity from 1 January 1992. This was made available to manufacturing units which commenced commercial production on or before 31 December 1996. The pre-1992 tariff concession was allowed to the appellant for the period from 1 October 1994 to 30 September 1999. Pursuant to a policy decision of the State Government, the appellant was also granted an extension of the pre-1992 tariff for a further period commencing from 1 October 1999 until 20 August 2000. From 21 August 2000, the appellant is being billed under the prevailing tariff. The pre-1992 tariff was at the rate of Rs 0.42 per unit as against the cost of thermal power purchased by the Kerala State Electricity Board which at the material time was Rs 3.30 per unit.
7. In pursuance of the policy decision of the State Government to allow private agencies to set up hydel schemes, the appellant was allowed to set up a Hydro Electric Project (Kuthungal Phase I & II) at Kuthungal, Idukki District with a capacity of 21 MW as a captive power project in terms of the Government Order dated 7 December 1990. The allotment of the hydel project was confirmed in favour of the appellant in June and July 1992. An MoU was executed between the appellant and KSEB in pursuance of which the appellant was to set up a hydel project at Kuthungal in Idukki District.
Some of the relevant terms of the agreement contemplated that:
“‘Commercial Operation’ i.e. the date on which power genera
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