Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2026 Supreme(Online)(CERC) 202

CENTRAL ELECTRICITY REGULATORY COMMISSION
Jishnu Barua, Chairperson, Ramesh Babu V., Member, Harish Dudani, Member
Chettinad Power Corporation Limited – Appellant
Versus
Power Grid Corporation of India Limited – Respondent
Petition No. 96/MP/2015

Advocates:
For the Appellants/Petitioners: Ms. Swapna Seshadri, Ms. Aishwarya Subramani
For the Respondents: Shri Sitesh Mukherjee, Ms. Deepriya Snehi, Ms. Abiha Zaidi, Shri Pritam Raman G, Ms. Suriti Chowdhary, Ms. Pragya Samal, Ms. Tanya Sharma, Ms. Arushi, Shri Swapnil Verma, Shri Ranjeet Rajput, Shri Lashit Sharma

Regulation 12(5) discretionary; bank guarantee encashment justified after reasoned exercise considering applicant's prolonged inaction despite extensions and no force majeure, to ensure regulatory seriousness without proving loss.

Headnote:(A) Electricity Act, 2003 - Sections 79(1)(c) and (f) - Central Electricity Regulatory Commission (Grant of Connectivity, Long Term Access and Medium Term Open Access in the inter-State transmission and related matters) Regulations, 2009 - Regulations 12(5) and 15 - Detailed Procedure - Clause 23.5 - Long-term access - Failure to sign long-term access agreement within stipulated time despite extensions - Encashment of bank guarantee furnished with application - Regulation 12(5) using word “may” held directory and discretionary, not mandatory - Encashment not automatic but to be exercised reasonably considering facts and circumstances of each case - Bank guarantee serves regulatory purpose to ensure seriousness of applicants and prevent indefinite blocking of transmission capacity - Mere pendency of litigation without prohibitory order or force majeure not excuse for non-execution - No signed contract, force majeure inapplicable - Prolonged inaction by applicant despite restored clearances justifies encashment after deliberations and opportunities - No requirement to prove actual loss; operates as statutory penalty. (Paras 12, 22-24, 32-35, 41-44)

(B) Appellate review - Remand directions - Commission to determine justification of encashment in specific facts post-finding that provision discretionary - Exercise of discretion by nodal agency upheld where reasoned after multiple reviews, extensions granted, undertakings given by applicant, and regulatory objectives served - No mechanical action. (Paras 5, 11, 23, 32, 35)

Facts of the case:
Applicant granted long-term access for thermal project but failed to sign agreement within 30 days despite repeated extensions over years, citing challenges to environmental clearance before tribunal. Nodal agency reviewed progress in regional meetings, obtained undertakings allowing encashment on default, issued final notice, then cancelled access and encashed bank guarantee of Rs.1.11 crore. Original dismissal upheld mandatory encashment; set aside on appeal as discretionary; remanded for fact-specific justification.

Findings of Court:
Nodal agency exercised discretion reasonably after deliberations in multiple meetings, granting extensions, considering project status and undertakings; applicant's inaction post-restoration of clearance not attributable to force majeure; encashment justified to uphold regulatory purpose.

Issues: Whether encashment of application bank guarantee justified under Regulation 12(5) despite failure to sign long-term access agreement, given environmental litigation and lack of committed resources by nodal agency; scope of discretion in invoking guarantee.

Ratio Decidendi: Discretionary power to encash bank guarantee under Regulation 12(5) must be exercised reasonably based on facts, including applicant's progress, extensions granted, undertakings, and regulatory need to ensure seriousness and avoid stranded capacity; prolonged inaction without valid excuse justifies invocation without proving actual loss.

Result: Prayer for refund of encashed bank guarantee rejected; petition disposed of.

Table of Content
1. remand by aptel on discretionary bg encashment (Para 1 , 2 , 3 , 4 , 5)
2. petitioner's environmental clearance challenges justified delays (Para 6 , 8 , 13 , 14 , 18 , 36 , 37 , 38 , 39)
3. ctuil's discretion exercised reasonably via extensions (Para 7 , 9 , 15 , 16 , 17 , 19)
4. factual timeline of lta grant, extensions, and cancellation (Para 10 , 11 , 24 , 25 , 26 , 27 , 28 , 29 , 30 , 31 , 32)
5. regulation 12(5) 'may' is directory, not mandatory (Para 20 , 21 , 22 , 23)
6. bg forfeiture as regulatory penalty, not unjust enrichment (Para 33 , 34 , 41 , 42)
7. pending litigation no bar without stay; inaction attributable to petitioner (Para 40 , 43)
8. ctuil justified in encashing bg; petition dismissed (Para 44 , 45)

ORDER

Chettinad Power Corporation Limited had filed the instant Petition No.96/MP/2015 under Section 79(1)(c) and (f) and other applicable provisions of the Electricity Act, 2003 (hereinafter referred to as the “Act”) read with Central Electricity Regulatory Commission (Grant of Connectivity, Long Term Access and Medium Term Open Access in the inter-State transmission and related matters) Regulations, 2009 (hereinafter referred to as the “2009 Connectivity Regulations”) against the cancellation of LTA issued under the 2009 Connectivity Regulations and encashment of bank guarantee (hereinafter referred to as “BG”) by CTUIL.

2. The Petitioner had made the following prayers in Petition No.96/MP/2015.

“A. Call for the records of the respondent comprised in the proceedings for the 18th Southern Regional meeting dated 5.3.2015, in so far as it relates to the Petitioner and the letter dated 5.3.2015 bearing No. C/CTU/Plg/LTA/NLTAA/Chettinad and quash the same as arbitrary and illegal and direct the provision of extension to the Petitioner to execute the LTA until disposal of Appeal No. 87 of 2014 pending before the Hon`ble NGT, Principal Bench, New Delhi upon such terms and conditions as this Hon`ble Commission may deem fit and pass such further or other orders as this Hon`ble Commission may deem fit in light of the facts and circumstances of this case and thus render justice.

B. Issue an interim injunction restraining the Respondent, its men and agents from in any manner seeking to enforce the decision arrived at in the 18th Southern Regional meeting dated 05.03.2015 with respect to the Petitioner’s project pending disposal of the petition C. Issue an interim stay of the Respondent’s communication dated 05.03.2015 bearing No. C/CTU/Plg/LTA/N-LTAA/Chettinad and all proceedings pursuant and consequent thereto pending disposal of this petition upon such terms, including extension of the Bank Guarantee of a value of Rs. 1,11,00,000.

D. Pass such other further order(s) as the Hon’ble Commission may deem just in the facts of the present case.”

3. The Commission, vide order dated 8.3.2017 in Petition No. 96/MP/2015, had disallowed the Petitioner’s plea against cancellation of LTA issued under the 2009 Connectivity Regulations and encashment of BG by CTUIL. The relevant portion of the order is as follows:

“24. The Petitioner has submitted that the CTU has granted extensions from time to time to the Petitioner to sign the LTA Agreement after appreciating the circumstances of the Petitioner and therefore, CTU is estopped from denying extension of time and encashing bank guarantee. CTU has submitted that it granted time to the Petitioner considering the hardship faced by the Petitioner but the extension cannot be ad infinitum which defeats the purpose of the Act and Connectivity Regulations. CTU has further submitted that there cannot be any estoppel against the statute. We are of the view that the Connectivity Regulations prescribes a time period of 30 days for signing the LTA Agreement failing which LTA should have been cancelled and bank guarantee should have been encashed. However, CTU, by taking into account the difficulties faced by the Petitioner has granted extension after discussion of the proposal in the Standin

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2026 Supreme(Online)(CERC) 202

CENTRAL ELECTRICITY REGULATORY COMMISSIONJishnu Barua, Chairperson, Ramesh Babu V., Member, Harish Dudani, MemberChettinad Power Corporation Limited – AppellantVersusPower Grid Corporation of India Limited – RespondentPetition No. 96/MP/2015

Regulation 12(5) discretionary; bank guarantee encashment justified after reasoned exercise considering applicant's prolonged inaction despite extensions and no force majeure, to ensure regulatory seriousness without proving loss.

CENTRAL ELECTRICITY REGULATORY COMMISSION
Jishnu Barua, Chairperson, Ramesh Babu V., Member, Harish Dudani, Member
Chettinad Power Corporation Limited – Appellant
Versus
Power Grid Corporation of India Limited – Respondent
Petition No. 96/MP/2015