Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2022 Supreme(SC) 82

SUPREME COURT OF INDIA
(From the Appellate Tribunal for Electricity, New Delhi)
L. NAGESWARA RAO, B.R. GAVAI, JJ.
Southern Power Distribution Power Company Limited Of Andhra Pradesh (APSPDCL) & Anr. - Appellants
Versus
M/s Hinduja National Power Corporation Limited & Anr. - Respondents
Civil Appeal No. 1844 of 2020
Decided on : 02-02-2022

Advocates appeared:
For the Appellant(s) : Mr. Mahfooz A. Nazki, AOR Mr. Polanki Gowtham, Adv Ms. Rajeswari Mukherjee, Adv
For the Respondent(s): Mr. M. G. Ramachandran, Sr. Adv. Mr. Abhishek Sharma, Adv. Ms. Harshita Agarwal, Adv. Mr. Shubham Arya, Adv. Mr. Alok Tripathi, AOR

IMPORTANT POINTS
(1) Determination of capital cost of project and rate of tariff at which power has to be purchased would always be subject to regulatory control of State Commission.
(2) Every action of State is required to be guided by touchstone of non-arbitrariness, reasonableness and rationality.

Headnote:
(A) Electricity Act, 2003 – Sections 61, 62, 64 and 86(1)(b) – Determination of tariff – It will also be required to take into consideration, as to whether terms agreed are fair and just while granting approval – While exercising power under Section 86(1)(b) of Act of 2003, Commission will have to regulate price at which electricity would be procured from generating companies – While doing so, Commission will be guided by factors mentioned in Section 61 of Act of 2003 and Regulations concerning the same – Under Section 86(1)(f) of Act of 2003, Commission is also empowered to adjudicate upon disputes between licensees and generating companies, and to refer any such dispute for arbitration – Determination of capital cost of project and rate of tariff at which power has to be purchased would always be subject to regulatory control of State Commission – While considering grant of approval to PPA, State Commission will have to keep in mind public interest – It will have to consider, as to whether PPA, which is subject to approval, subserves public interest – What has been done by APTEL is only directing State Commission to determine the same – Appellants-DISCOMS could not be permitted to change decision at their whims and fancies and, particularly, when it is adversarial to public interest and public good – Change in decision is arbitrary, irrational and unreasonable – Appellants-DISCOMS, which are instrumentalities of State, rather than acting in public interest, have acted contrary to public interest – No reason to interfere with impugned judgment – Appeal dismissed with costs, quantified at Rs.5,00,000/-. [Section 21 of Andhra Pradesh Electricity Reform Act, 1998; Regulation 5.2(b) of Andhra Pradesh Electricity Regulatory Commission (Terms and conditions for determination of tariff for supply of electricity by a generating company to a distribution licensee and purchase of electricity by distribution licensees) Regulation, 2008] (Paras 94, 104, 105, 109 and 112)
(B) Constitution of India – Article 12 – State – Appellants-DISCOMS are instrumentalities of State and as such, a State within meaning of Article 12 of Constitution of India – Every action of State is required to be guided by touchstone of non-arbitrariness, reasonableness and rationality – Every action of a State is equally required to be guided by public interest – Every holder of a public office is a trustee, whose highest duty is to people of the country – Public Authority is required to exercise powers only for public good. (Para 100)
Facts of the case:
Vide the impugned judgment and order dated 7th January, 2020, Appeal No.41 of 2018, filed by HNPCL has been allowed by the APTEL, correctness of which is under challenge in the present proceedings.
Findings of Court:
By merely filing an application, appellants–DISCOMS could not have avoided abiding with order of the APTEL dated 16th March, 2018, as maintained by this Court vide order dated 21st August, 2020.
Result : Appeal dismissed with costs.

JUDGMENT :

B.R. GAVAI, J.

1. The present appeal filed by the appellants - Distribution Companies (hereinafter referred to as “the appellants DISCOMS”) challenges the judgment and order dated 7th January, 2020, passed by the Appellate Tribunal for Electricity, New Delhi (hereinafter referred to as “the APTEL”) in Appeal No. 41 of 2018, thereby allowing the appeal filed by the respondent No.1 - M/s Hinduja National Power Corporation Limited (hereinafter referred to as “HNPCL”). By the impugned judgment and order, the APTEL has directed the Andhra Pradesh Electricity Regulatory Commission (hereinafter referred to as “the State Commission”) to dispose of O.P. No.21 of 2015 filed by HNPCL for determination of capital cost and O.P. No.19 of 2016 filed by the appellants - DISCOMS for approval of amended and restated Power Purchase Agreement (hereinafter referred to as “PPA”) (Continuation Agreement) on merits.

2. The facts, in brief, giving rise to the present appeal are as under:

3. The erstwhile Andhra Pradesh State Electricity Board (hereinafter referred to as “APSEB”) entered into a Memorandum of Understanding (hereinafter referred to as “MoU”) with HNPCL on 17th July, 1992. As per the said MoU, APSEB transferred all the licenses, approvals, clearance and permits, fuel linkage, water required for establishment of the power project at Visakhapatnam in the erstwhile State of Andhra Pradesh, to HNPCL to generate and supply the electricity to APSEB.

4. An initial PPA was entered into between APSEB and HNPCL on 9th December, 1994. On 25th July, 1996, the Central Electricity Regulatory Commission (CERC) granted a Techno Economic Clearance for the power project for an estimated cost of Rs.4628.11 crores (Rs. 4.45 crores per MW).

5. Owing to certain change in conditions, the parties agreed to amend the initial PPA. Accordingly, an Amended and Restated PPA dated 15th April, 1998, was entered into between APSEB and HNPCL. Between the years 1998 and 2007, the Amended and Restated PPA, for sale of power by HNPCL to APSEB, was not implemented. Subsequently, in the year 2007, HNPCL approached the Government of Andhra Pradesh to revive the power project mainly structuring it as a merchant plant, offering 25% of the power generated to the State and balance 75% power to third parties. However, it appears that there were negotiations between the parties, and the State Government had offered to purchase 100% power generated from the plant of HNPCL and that HNPCL had agreed to it. The same would be clearly evident from the material placed on record, to which we will be referring hereinafter.

6. The material placed on record would reveal that in the year 2011-2012, the Central Power Distribution Company of Andhra Pradesh Limited (hereinafter referred to as “APCPDCL”) for and on behalf of four Distribution Companies of Andhra Pradesh (hereinafter referred to as “APDISCOMS”) had initiated the process for procurement of power under Case-1 long term bidding route, to meet the base load requirements of APDISCOMS from the years 2014-2015 onwards. In the said bidding process, HNPCL participated and had successfully emerged as the second lowest bidder (L2 bidder). After the completion of the bidding process, APCPDCL had filed O.P. No.55 of 2013 before the State Commission for approval of the tariffs emerged in the said bidding process. However, the State Level Expert Committee for evaluation of Case-1 bidding (hereinafter to as “Bid Evaluation Committee”) in its meeting dated 28th September, 2012, had noted that, the State Government had informed that the entire capacity of HNPCL was encumbered to the State of A.P./APDISCOMS and was not available for consideration under the tender. Accordingly, the Bid Evaluation Committee had discarded HNPCL from the bidding process.

7. In the meanwhile, there was a correspondence between HNPCL and the State Government in the year 2012, with regard to the steps to be taken for the development of the project and requesting State sup

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2022 Supreme(SC) 82

IMPORTANT POINTS(1) Determination of capital cost of project and rate of tariff at which power has to be purchased would always be subject to regulatory control of State Commission.(2) Every action of State is required to be guided by touchstone of non-arbitrariness, reasonableness and rationality.

Cases Referred (18)