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2023 Supreme(SC) 362

SUPREME COURT OF INDIA
SANJAY KISHAN KAUL, S. RAVINDRA BHAT, M.M. SUNDRESH, JJ.
Gujarat Urja Vikas Nigam Limited and Others – Appellants
Versus
Renew Wind Energy (Rajkot) Private Limited and Others – Respondents
Civil Appeal Nos. 3480-3481 of 2020
Decided On : 13-04-2023

Advocates:
Advocate Appeared:
For the Appellants : Hemantika Wahi, Jesal Wahi, Srishti Khindaria.
For the Respondents: Nishtha Kumar, Vishal Gupta, Nikilesh Ramachandran, Nitin Saluja.

Headnote:(A) Electricity Act, 2003 - Section 125 - Section 86 - Tariff determination - The appellant challenges APTEL's orders affirming the State Commission's easing of tariff terms under the REC mechanism due to coercion claims. Findings indicate the trial parties entered the PPA willingly within the regulatory framework, thus highlighting issues of jurisdiction and enforceability of PPAs without prior state approval. (Paras 1-2, 4, 37-72)

(B) Power Purchase Agreements - Equitable bargaining - Concluded by creating mutual consent, PPAs require regulatory compliance and cannot be altered without substantiated claims of coercion or duress. Findings highlighting lack of evidence on coercion criticized as inadequate. Resultantly, the initial decisions of APTEL deemed unsustainable. (Paras 66-72)

Facts of the case:
Legal challenges were brought forth by Gujarat Urja against APTEL regarding tariff determinations in relation to PPAs concerning renewable energy procurement. The claim of coercion leading to contractual duress was not sufficiently supported by evidence, raising questions on the enforceability of tariffs set within the framework of the Electricity Act.

Findings of Court:
Court clarified that substantive law dictates prospective applicability, affirming the sanctity of parties’ contracts governing their mutual agreements. Additionally, the findings on coercion and bargain inequity were deemed unsubstantiated and thus disregarded.

Issues: The core issues involved jurisdiction over tariff determination and whether existing PPAs could be modified under new regulatory terms.

Ratio Decidendi: The court emphasized that existing contracts are binding unless substantial evidence of coercion or regulatory conflict exists. This reflects a strong adherence to contractual agreements’ sanctity and the necessity of proof when challenging fairness.

Result: Appeals allowed.

Table of Content
1. challenge orders under electricity act (Para 1 , 2)
2. regulatory framework for power procurement (Para 3 , 4 , 5 , 6 , 9)
3. jurisdiction of state commission over ppa (Para 14 , 15 , 16 , 17 , 18)
4. dynamic nature of appc and rec pricing (Para 26 , 27 , 28 , 29 , 30)
5. applicability of regulatory amendments to existing contracts (Para 60 , 61 , 62)
6. requirements for proving coercion in contracts (Para 66 , 67 , 68 , 69 , 70)
7. court's conclusion on appeals (Para 72)

JUDGMENT :

S. RAVINDRA BHAT, J.

1. The current civil appeals1 [Civil Appeals Nos. 3480 and 3481 of 2020] under Section 125 of the ELECTRICITY ACT , 2003, (hereafter, “the Act”) challenge orders of the Appellate Tribunal for Electricity (hereafter “APTEL”) dated 06.12.2018 (“first impugned order”)2 [in Appeal No. 209/2015] and order dated 24.07.2020 (“second impugned order”)3 [in Review Petition No. 03/2019]. The APTEL had, by those orders, rejected the appeals preferred by the present appellant, and the review petition, as well. Resultantly, the order of the Gujarat Electricity Regulatory Commission (hereafter “the State Commission”) dated 01.07.20154 [in petition No. 1363/2013] was affirmed.

2. The first appellant-Gujarat Urja Vikas Nigam Limited (hereafter “Gujarat Urja”) had approached this court previously challenging the order of APTEL, which was disposed of by this court5 [Civil Appeal No. 1253/2019 by order dated 15.02.2019] granting liberty to it, to seek review/rectification. Gujarat Urja then preferred a review petition, which was rejected by APTEL, by the second impugned order. When this appeal was taken up for hearing, on 14.10.2020, this court had issued notice and stayed the impugned order of APTEL.

Background

3. Gujarat Urja procures power in bulk on behalf of distribution licensees in the state of Gujarat; it is an authorized licensee within the meaning of the term under the Act. The second, third, fourth and fifth appellants are distribution licensees in the State of Gujarat. The first respondent, Renew Wind Energy (Rajkot) Pvt. Ltd. (hereafter “RWE”) is a wind generator which had set up 25.2 MW Wind Turbine Generators at District Rajkot, Gujarat under the Renewable Energy Certification scheme notified by the Central Electricity Regulatory Commission (hereafter, “Central Commission”). The second respondent is the Wind Independent Power Producers Association (hereafter “Association”). The Respondent No 3, Gujarat Electricity Regulatory Commission (hereinafter “the State Commission”) is the regulatory commission under the Act, for the State of Gujarat. The fourth respondent, Wish Wind Infrastructure LLP (“Wish Wind” hereafter) is a wind generator.

4. By Section 86 of the Act6 [The relevant extract of Section 86 is as follows: 86. Functions of State Commission: (1) The State Commission shall discharge the following functions, namely: (a) determine the tariff for generation, supply, transmission and wheeling of electricity, wholesale, bulk or retail, as the case may be, within the State. (b) regulate electricity purchase and procurement process of distribution licensees including the price at which electricity 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; (c) facilitate intra-State transmission and wheeling of electricity....(e) promote co-generation and generation of electricity from renewable sources of energy by providing suitable measures for connectivity with the grid and sale of electricity to any person, and also specify, for purchase of electricity from such sources, a percentage of the total consumption of electricity in the area of a distribution licensee....] State Commissions discharge several functions - which include the determination of tariff “for generation, supply, transmission and wheeling of e


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