JUDGMENT :

1. The petitioners who are “Generating Companies” in terms of Section 2(28) of the Electricity Act, 2003, have filed this petition under Article 226 of the Constitution of India to quash and set aside the communication dated 09.09.2020 issued by the Gujarat Urja Vikas Nigam Limited (‘GUVNL’ for short) by the Uttar Gujarat Vij Company Limited (‘UGVCL’ for short)

2. Facts in brief are as under:

2.1 The petitioners are generating solar power and in turn supplying such power to UGVCL, which is a distribution company. The same has been defined as “distribution licensee” under Section 2(17) of the Electricity Act 2003.

2.2 It is the case of the petitioners that the power supplied to UGVCL is in terms of the Power Purchase Agreements (‘PPAs’ for short). Article 6.2 obliges UGVCL to make payments towards the monthly tariff invoices raised by the petitioners within 30 days of receiving such invoices. It is the case of the petitioners that despite having raised invoices in September, 2020, for month of August 2020, no payments are being made on the basis of the instructions referred to herein above by the communication dated 09.09.2020. When the petitioners sought for details, the UGVCL by its communication dated 15.09.2020 informed the petitioners that the payments are not being made and are being so withheld as per the directives of GUVNL.

3. Mr.Saurabh Soparkar learned Senior Advocate with Mr.Tabish Samdani and Mr.Saunak Rajguru learned advocates for J Sagar Associates learned advocates for the petitioners would submit as under:

3.1 The action of withholding payments payable to the petitioners under Article 6.2 of the PPAs is bad inasmuch as no directives can be issued by the GUVNL who is not a party to the PPAs which is between the petitioners and the UGVCL. It is a settled position of law that the third party cannot dictate the terms of the bilateral contract. He would rely on the decision of Andhra Pradesh High Court in case of Renew Power Ltd. v. State of Andhra Pradesh, decision dated 24.09.2019 passed in Writ Petition No.9844 of 2019. He would submit that contractual rights and liabilities are confined only to the parties of contract. Once GUVNL had assigned all its rights and obligations to UGVCL by agreements on 22.06.2011 and 10.08.2011, only UGVCL is bound to perform the same.

3.2 Mr.Soparkar would further submit that withholding of the tariff payments is mala-fide, arbitrary and unreasonable and therefore violative of Article 14 of the Constitution of India. He would submit that UGVCL has failed to exercise its independent decision making powers and has thus acted against the ‘rule of dictation’.

3.3 He would submit that GUVNL and UGVCL are separate legal entities though UGVCL is a subsidiary of GUVNL, in Mr.Soparkar’s submission, a subsidiary company is a legal entity than its original company. They are two distinct legal persons. In support of this submission, Mr.Soparkar would rely on the decision in case of Vodafone International Holdings B.V. v. Union of India (UOI) and Ors. (2012) 6 SCC 613.

3.4 For the rule against dictation, Mr.Soparkar relied on the decision in case of Maha Premchandra v. Commercial Tax Officer, Calcutta & Ors. reported in AIR 1958 SC 667.

3.5 Mr.Soparkar would further submit that the GUVNL’s direction amounts to unlawful enticement to committing a breach of contract. He would call it “tortuous interference”.

3.6 Without prejudice to the contentions raised above, Mr.Soparkar would submit that the GUVNL’s claim against Biomass plants will no longer survive. For that submission, he would state as under:

(a) GUVNL’s direction to UGVCL was on the basis of the fact that it was entitled to recover certain sums of money from the petitioners’ sister concerns. This was pursuant to the order of Gujarat Electricity Regulatory Commission (‘GERC’ for short) dated 09.10.2020 in Petition No.1888 of 2020.

(b) that order of GERC has been set aside by the orders of the Supreme Court and the Appellate Tribunal for el