1. Hydroelectric project — Implementation Agreement for free power supply — Dispute over 13% cap under CERC Regulations, 2019 — Writ petition for contractual alignment. (Para 1 , 3 )
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2025 Supreme(SC) 1075
SUPREME COURT OF INDIA
PAMIDIGHANTAM SRI NARASIMHA, JOYMALYA BAGCHI, JJ.
The State Of Himachal Pradesh & Anr. – Appellants
Versus
JSW Hydro Energy Limited & Ors. – Respondents
Civil Appeal No. 12883 of 2024
Decided on : 16-07-2025
Important Points
The Court held that the 13% free power cap under CERC Regulations, 2019, applies only to tariff determination and does not prohibit higher contractual free power supplies. Consequently, such regulations do not override Implementation Agreements, and interpretation of these regulations remains the exclusive domain of the expert regulator (CERC).
Subject
Electricity Law - Regulatory Compliance
Act Referred
CENTRAL ELECTRICITY REGULATORY COMMISSION TERMS AND CONDITION OF TARIFF REGULATION: Reg.14(4), Reg.15, Reg.18, Reg.3(8), Reg.30, Reg.55, Reg.55(2)
CONSTITUTION OF INDIA: Art.226
ELECTRICITY ACT: S.10(2), S.185, S.2(71), S.61, S.62(1)(a), S.7, S.8
CONSTITUTION OF INDIA: Art.226
ELECTRICITY ACT: S.10(2), S.185, S.2(71), S.61, S.62(1)(a), S.7, S.8
Headnote
(A) Electricity Act, 2003 - Section 79 - Central Electricity Regulatory Commission Regulations, 2019 - Implementation Agreement concerning free power supply - The High Court directed respondents to align the Implementation Agreement with the CERC Regulations limiting free power supply to 13% - The Supreme Court held that the provisions of the CERC Regulations do not override the Implementation Agreement, which stipulates a higher free power supply obligation of 18%, and reaffirmed the need for contractual obligations to be recognized, rejecting the maintainability of the writ petition before the High Court and allowing the appeal of the State of Himachal Pradesh. (Paras 6, 40, 41)
(B) Judicial Review - The scope of judicial review concerning regulatory matters and contractual obligations - The Court emphasized that the interpretation and implementation of CERC Regulations falls within the expert domain of the Central Electricity Regulatory Commission and courts should avoid interfering in matters of tariff determination unless glaring issues of unreasonableness arise. (Paras 26, 34)
(B) Judicial Review - The scope of judicial review concerning regulatory matters and contractual obligations - The Court emphasized that the interpretation and implementation of CERC Regulations falls within the expert domain of the Central Electricity Regulatory Commission and courts should avoid interfering in matters of tariff determination unless glaring issues of unreasonableness arise. (Paras 26, 34)
Legal Category Hierarchy
- administrative law
- contract law
- practice and procedure
Advocates appeared:
For the Appellant(s) : Mr. Vaibhav Srivastava, A.A.G. Ms. Sugandha Anand, AOR
For the Respondent(s): Mr. P. Chidambaram, Sr. Adv. Dr. A.M. Singhvi, Sr. Adv. Mr. Mahesh Agarawal, Adv. Mr. Aman Anand, Adv. Mr. Shashwat Singh, Adv. Ms. Madhavi Agarwal, Adv. Mr. Chirag Nayak, Adv. Ms. Natasha Debroy, Adv. Mr. Shidharth Seem, Adv. Mr. E. C. Agrawala, AOR Mr. Anand K Ganesan, Adv. Mr. Amal Nair, Adv. Mr. Nitin Saluja, AOR Mrs. Shivani Verma, Adv. Ms. Preetika Dwivedi, AOR Mr. Abhisek Mohanty, Adv. Mr. Gurminder Singh, Sr. Adv. Mr. Nikunj Dayal, AOR Mr. Jatinder Singh Gill, Adv. Mr. Nikhil Nayyar, Sr. Adv. Mr. T. V. S. Raghavendra Sreyas, AOR Mr. Siddharth Vasudev, Adv. Mr. Brahma Prakash Soni, Adv. Mr. Kshitij Maheshwari, Adv.
For the Appellant(s) : Mr. Vaibhav Srivastava, A.A.G. Ms. Sugandha Anand, AOR
For the Respondent(s): Mr. P. Chidambaram, Sr. Adv. Dr. A.M. Singhvi, Sr. Adv. Mr. Mahesh Agarawal, Adv. Mr. Aman Anand, Adv. Mr. Shashwat Singh, Adv. Ms. Madhavi Agarwal, Adv. Mr. Chirag Nayak, Adv. Ms. Natasha Debroy, Adv. Mr. Shidharth Seem, Adv. Mr. E. C. Agrawala, AOR Mr. Anand K Ganesan, Adv. Mr. Amal Nair, Adv. Mr. Nitin Saluja, AOR Mrs. Shivani Verma, Adv. Ms. Preetika Dwivedi, AOR Mr. Abhisek Mohanty, Adv. Mr. Gurminder Singh, Sr. Adv. Mr. Nikunj Dayal, AOR Mr. Jatinder Singh Gill, Adv. Mr. Nikhil Nayyar, Sr. Adv. Mr. T. V. S. Raghavendra Sreyas, AOR Mr. Siddharth Vasudev, Adv. Mr. Brahma Prakash Soni, Adv. Mr. Kshitij Maheshwari, Adv.
Table of Contents
2. CERC Regulations cap free power for tariff calculation only — Implementation Agreement represents consideration for natural resources — Writ jurisdiction inappropriate for expert regulatory interpretation. (Para 15 , 16 , 17 , 18 , 19 , 20 , 21 , 23 , 24 , 26 , 27 , 28 , 29 , 30 , 31 , 32 , 33 , 34 , 35 , 36 , 37 , 38 , 39 )
3. Tariff regulations capping free power for cost recovery do not prohibit higher contractual free power supply — Specialized regulatory jurisdiction precludes parallel writ remedies. (Para 19 , 20 , 38 )
4. Appeal allowed — High Court order set aside — Implementation Agreement not overridden by CERC Regulations, 2019. (Para 40 , 41 )
5. Does the 13% cap on free energy for home state (FEHS) under CERC Regulations, 2019 prohibit supplying more free power?
No. The cap is intended for calculating saleable capacity and determining tariff and charges. It does not prohibit a generating company from supplying free power beyond 13% based on contractual obligations. (Para 17 , 18 , 19 , 20 )
6. Do CERC tariff regulations override existing contractual obligations regarding free power supply?
Regulations override contracts where they operate. However, since the FEHS cap only affects tariff fixation and not the actual supply, it does not override contractual obligations to provide higher free power. (Para 15 , 19 , 20 )
7. Is a writ petition maintainable to interpret regulatory provisions when a specialized regulator and appellate tribunal exist?
No. The Electricity Act is a complete code. Interpretation of regulations falls within the exclusive domain of the expert regulator, and challenges should be routed through the APTEL. (Para 26 , 27 , 32 , 33 , 34 , 38 )
8. Can a party claim a counterparty is a regulated entity to seek relief while avoiding the regulator's forum?
No. A party cannot approbate and reprobate by claiming the other is a regulated entity to justify the application of regulations while bypassing the regulator's jurisdiction via a writ petition. (Para 37 )
JUDGMENT :
PAMIDIGHANTAM SRI NARASIMHA, J.
| Table of Contents |
| I. Introduction |
| II. Facts |
| III. Impugned Order |
| IV. Submissions |
| V. Issue |
| VI. Analysis |
| VII. Regulation of Electricity Generation Under the ELECTRICITY ACT |
| VIII. Legal Effect of Note 3 of Regulation 55 |
| i) Interpretation of the CERC Regulations, 2019 |
| ii) CERC’s Order dated 17.03.2022 |
| IX. Maintainability of the Writ Petition: |
| i) CERC as an Expert and Specialised Regulator, and Extent of Judicial Interference |
| ii) Grant of Relief by the High Court |
| X. Conclusion |
I. Introduction:
1. Respondent no. 1, a generating company, installed and commissioned a 1045MW hydroelectric power project pursuant to a grant followed by an Implementation Agreement with the appellant-State of Himachal Pradesh. Under this Agreement, respondent no. 1 undertook to supply as consideration 18% of net generation free of cost1[The obligation to supply free power is 12% of net generation from 12.09.2011 to 12.09.2023, and 18% thereafter till 12.09.2051.] to the appellant-State. At the commencement of the obligation to supply 18% free power, respondent no. 1 approached the High Court by way of a writ petition to align the Implementation Agreement with the CERC (Terms and Conditions of Tariff) Regulations, 20192[Hereinafter “CERC Regulations, 2019”.], which provide for a maximum of 13% free power to the State Government, on the ground that contractual agreements, to the extent that they are inconsistent with the applicable regulations, shall stand overridden by their operation. Accepting the argument, the High Court entertained the writ petition and directed that the Implementation Agreement stood modified.
2. We have allowed the appeal by the State of Himachal Pradesh by interpreting the provisions of the ELECTRICITY ACT , 20033[Hereinafter “ ELECTRICITY ACT ”.] and the CERC Regulations, 2019 in the context of the subsisting and continuing contractual relationship between the parties. We have held that the Central Electricity Regulatory Commission4[Hereinafter “CERC”.] shall give effect to the Regulations and provide a pass-through to the extent of 13% free power but the remaining part of the obligation is contractual in nature and will be governed by the provisions of the Implementation Agreement. On interpreting the cap under Note 3 of Regulation 55 of the CERC Regulations, 2019, we have held that it does not restrain or prohibit respondent no. 1 from supplying free power beyond 13% but it is only meant for the calculation and fixation of tariff. Further, considering the expertise and specialisation of the CERC as a statutory regulator and the wide- ranging jurisdiction it exercises under the ELECTRICITY ACT , as well as respondent no. 1’s conduct in not seeking relief against the appellant before the CERC, we have held that the present writ petition was not maintainable before the High Court as the interpretation of the Regulations falls within the exclusive domain of the regulator.
II. Facts:
3. The facts, to the extent necessary are as follows. By a Memorandum of Understanding5[Hereinafter “MoU”.] dated 28.08.1993, the appellant- State allotted the Karcham Wangtoo Hydroelectric Project for an installed capacity of 900 MW to one Jaiprakash Industries Limited6[Hereinafter “JIL”.], which is a power generating company and the predecessor of respondent no. 1. Under Clause 6 of the MoU, JIL agreed to supply 12% of the power generated to the appellant-State free of cost.
3.1 Pursuant to the MoU, the appellant entered into an Implementation Agreement with JIL for an enhanced capacity of 1000 MW. The relevant clauses of the Implementation Agreement are as follows:
i. Article 1.2 is the definitions clause that defines “Law” as any Act, rule, regulation, notification, order, or instruction having the force of Law enacted or issued by any competent legislature, government, or statutory authority in India.
ii.
