Pawan Castings (Meghalaya) Private vs . Meghalaya Energy

WP(C) No. 5 of 2022 with WP(C) No. 6 of 2022 WP(C) No. 7 of 2022 WP(C) No. 8 of 2022 WP(C) No. 9 of 2022 WP(C) No. 10 of 2022 WP(C) No. 11 of 2022 WP(C) No. 12 of 2022 WP(C) No. 13 of 2022 WP(C) No. 14 of 2022 Date of Decision: 01.07.2022

Pawan Castings (Meghalaya) Private Vs. Meghalaya Energy Limited Corporation Ltd. & Ors. M/S Sriram Wire Products(Meghalaya) Vs. Meghalaya Energy Corporation Ltd. & Ors. RNB Cements (P) Ltd. Vs. Meghalaya Energy Corporation Ltd. & Ors. Hills Cements Company Limited Vs. Meghalaya Energy Corporation Ltd. & Ors. Green Valliey Industries Limited Vs. Meghalaya Energy Corporation Ltd. & Ors. Meghalaya Cast and Alloys Private Vs. Meghalaya Energy Limited Corporation Ltd. & Ors. Meghalaya Cements Limtied Vs. Meghalaya Energy Corporation Ltd. & Ors. M/S Ri Bhoi Ispat and Rolling Vs. Meghalaya Energy Mills Corporation Ltd. & Ors. Meghalaya Steels Limited Vs. Meghalaya Energy Corporation Ltd. & Ors. M/S Shillong Ispat and Rolling Vs. Meghalaya Energy Mills Corporation Ltd. & Ors.

1 Coram: Hon'ble Mr. Justice H. S. Thangkhiew, Judge

Appearance: For the Petitioner/Appellant(s) : Mr. K. Paul, Sr. Adv. with Ms. R. Dutta, Adv.

For the Respondent(s) : Mr. A. Kumar, AG with

Mr. A. Kharwanlang, GA.

Ms. R. Colney, GA.

Ms. S. Laloo, GA.

i) Whether approved for reporting in Yes/No Law journals etc.:

ii) Whether approved for publication in press: Yes/No

JUDGMENT AND ORDER

1. This batch of writ petitions being similar and on the same cause

of action are being disposed of by this common judgment and order.

2. That all the writ petitioners in these matters are members of the

Byrnihat Industries Association (BIA) engaged in the manufacture of

goods and are consumers of electricity under the respondents.

3. These said industries under the banner of the Byrnihat Industries

Association (BIA), entered into a Memorandum of Understanding on

07.10.2020, with the respondent Corporation for levy of special tariff

2 for the industries and upon execution of the said MoU, the respondent

No. 2 filed an application before the Meghalaya State Electricity

Regulatory Commission (MSERC) for Special Interim Tariff

proposal/offer for HT/EHT industrial consumers. This application was

registered as MSERC Case No. 10 of 2020, and the MSERC vide order

dated 19.10.2020, approved the special tariff for an initial period of 3

years as per the MoU between the BIA and the respondents.

Agreements thereafter were entered into individually by the writ

petitioners herein, with the respondents in terms of the order dated

19.10.2020, passed by the MSERC as per the special tariff on

01.11.2020.

4. It appears that thereafter, vide letter dated 26.10.2021, the

respondent No. 3, issued a notice for termination of the MoU dated

07.10.2020, by invoking Clause 17 of the MoU, on the allegation that

the petitioners had failed to maintain the minimum average load factor

of 68%. It was further stated in the notice that the said MoU would stand

void and invalid after a lapse of 90 days from the date of issuance of the

notice. To this notice the BIA had made a reply and prayed for recall

for withdrawal of the notice dated 26.10.2021. However, by the

impugned letter dated 17.01.2022, the respondents were informed that

3 pursuant to the termination notice dated 26.10.2021, the agreement for

supply of power under the special tariff would come to an end on

25.01.2022. It was also indicated in the impugned letter/notice that if

the petitioners desired to avail power from the respondents, the same

would be as per the regular/normal tariff applicable to such consumers

as determined by the MSERC vide order dated 25.03.2021. It was also

further given therein that non-compliance to the impugned notice,

would lead to disconnection of electricity supply w.e.f. 26.01.2022. The

writ petitioners being aggrieved are therefore before this Court by way

of these writ petitions assailing the impugned notice dated 17.01.2022.

5. The main contentions of the petitioners are, first that the

impugned notice dated 17.01.2022, had been issued by the respondents

inspite of the fact that individual agreements with the writ petitioners

are still subsisting and had not been determined by the respondents till

date, or any action taken upon them, and that the determination of the

MoU would not automatically annul these agreements. Secondly, that

the respondents after signing the MoU had themselves approached the

MSERC for approval of the special tariff, which was allowed vide order

dated 19.10.2020 and as such, therefore, the MoU between the parties

stood merged with the judicial order passed by MSERC, and for

4 withdrawal from the said MoU, the same cannot be executed

unilaterally without reference to the MSERC. Thirdly, it was contended

that under the Electricity Act 2003, it is only the concerned Electricity

Regulatory Commission which can fix tariff for supply of electricity by

a Distribution Licensee, and as the revised special tariff as per the MoU,

for a period of 3 years, having been allowed by the MSERC, unilateral

determination of the tariff by the respondents is not permissible in law.

6. Mr. K. Paul, learned senior counsel for the petitioners submits

that the unilateral revocation of the MoU is unsustainable, inasmuch as,

the MoU is not the sole basis for determination of the tariff. He refers

to the order dated 19.10.2020, more specifically Para-21 thereof, which

he submits the MSERC has recorded that "the MoU between the

petitioners and the respondents based on a consensus agreement

between the parties was also taken into consideration". It is contended

by the learned senior counsel that as the MoU is not the sole basis for

fixation of tariff, the respondent Corporation, is therefore bound by

Section 62 of the Electricity Act, 2003, which provides that the

appropriate Commission in this case, the MSERC, is to determine the

tariff in accordance with the provisions of the Act. In this context,

learned senior counsel had referred to the judgment in the case of BSES

5 Ltd. vs. Tata Power Co. Ltd. and Others reported in (2004) 1 SCC 195,

which he submits the Hon'ble Supreme Court has held that tariffs can

be charged by the generating companies only after approval from the

Commission and changing of tariff which has not been approved by the

Commission is an offence under Section 45 of the Act. He therefore

submits that, the action of the respondents in seeking to discontinue the

special tariff by invoking Clause 17 of the MoU cannot be sustained in

law, and as such, the impugned notice dated 17.01.2022 being illegal is

liable to be quashed and set aside.

7. Mr. A. Kumar, learned Advocate General for the respondents in

reply to the submissions has raised objections as to the maintainability

of the writ petition on the following grounds:

(a) Writ remedy is not maintainable for enforcement of

commercial contract.

(b) Prayer for specific performance of contract is contrary to

provisions of the Specific Relief Act, 1953.

(c) Writ petition is not maintainable as the disputes raised by

the petitioners involves disputed facts.

(d) Notice of termination dated 26.10.2021, not challenged

and only consequential letter dated 07.01.2022 is under

challenge.

6 8. On these premises of challenge, as elucidated above, the learned

AG submits that the petitioners are trying to invoke jurisdiction of

Article 226 of the Constitution, to settle a commercial dispute which is

not maintainable, as this is in the realm of private law. He submits that

even otherwise, Section 10, 14 and 41 of the Specific Relief Act, casts

a statutory prohibition on specific performance of a contract which is

determinable in nature, and that it is equally established that there can

be no injunction to restrain a party from determining a contract. It is

also submitted that, the dispute raised by the petitioners involves

adjudication of disputed facts, inasmuch as, though no reasons were

required under the MoU for terminating the agreement, the termination

was necessitated due to the failure of the BIA members to maintain an

average load factor. This it is submitted, is sought to be contested by

the petitioners, as to whether the average load factor was maintained or

not, which are clearly factual disputes which cannot be gone into in a

writ proceeding.

9. On merits, the learned Advocate General submits that the

MSERC had fixed the tariff for financial year 2020-2021, at

Rs.6.6/kVAh for Industrial High Tension and Rs. 6.2/kVAh for

Industrial Extra Tension, but the respondents conceived a package of

special tariff of Rs.6/kVAh for Industrial Consumers, but during the

7 subsistence of proceedings, the respondents had entered into the MoU

with the BIA, whereby it was agreed as a policy decision, that a special

power rate for BIA consumers at Rs.4.90/kVAh would be provided as

per Clause 4 and the same would be applicable only in case of minimum

load factor of 68% as per Clause 6. It is also submitted that, the MoU

was especially determinable with 3 months' notice by either party as

per Clause 17 thereof.

10. The learned AG submits that vide order dated 19.10.2020, the

MSERC had also taken note of the National Tariff Policy, 2016 which

allowed a licensee, the flexibility of charging lower tariff than the rate

approved by the State Commission, and thus, the National Tariff Policy

read with Section 62 of the Electricity Act, vested a licensee with the

power to charge lower tariff than the one fixed by the MSERC. It is also

submitted that, the MSERC simply approved the MoU as per the terms

and conditions provided therein, and that even otherwise, the special

tariff being a policy decision would be binding on the MSERC, as per

Section 108 of the Electricity Act, 2003. The MoU, it is submitted is

based on a policy decision of the respondents and it does not have a

statutory character and was entered into based only on policy

considerations.

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11. It is also contended that, the MSERC by the order dated

19.10.2020, has simply given effect to the provisions of the MoU

without any alteration and that the acceptance of the MoU, would leave

the parties to take recourse to any remedy, only under its terms. This he

submits, is evidenced in the order dated 19.10.2020 itself, wherein the

MSERC, had observed that the terms and conditions agreed between

the parties were legal and enforceable. As such, he submits the

impugned action was taken in terms of the MoU, which did not require

any sanction of the MSERC. It is also argued that, the termination of

the MoU is fully justified, as the respondent was suffering losses as a

consequence of the non-maintenance of the average load by the

petitioners. It is lastly submitted that, the petitioners has not even

challenged the notice of termination dated 26.10.2021, which is fatal to

the case of the petitioners, as the said notice in unequivocal terms stated

that the MoU stands void and invalid after a lapse of 90 days from the

date of issuance, and the same has attained finality, as there is no

challenge to the same whatsoever.

12. I have heard learned counsel for the parties. When the matter had

earlier been reserved for judgment, with the leave of the Court, the

petitioner had filed an affidavit on 24.05.2022, enclosing a copy of

Tariff Order dated 25.03.2022, whereby in Tariff Order Case No. 29 of

9 2021, for the financial year 2022-2023, the Regulatory Commission had

approved the tariff as per the previous rate that is, Rs.4.90/KvAh. This

was then refuted by the respondents who have stated in their reply

affidavit that there was no such approval nor any proposal by the

respondents, but rather had only indicated with reference to the records

about the special tariff, and the fact that the matter is pending before

this Court. In this view of the matter, this Court will not dwell or take

into record these affidavits but will consider this matter on the pleadings

as made out in the writ petition and the reply thereto.

13. The main issue that has to be examined in this matter, is only

with regard to the MoU, to determine its enforceability before this Court

in this proceeding under Article 226, its purport thereof, and whether

the same stood independent of other conditions or restrictions in the

execution of the same, to enable the respondents to invoke the

termination clause, or whether the same has the character of an order

approving tariff by the Regulatory Commission.

14. It is an undisputed position that, the Regulatory Commission by

the operation of Section 62 of the Electricity Act, 2003 is the body

which has been vested with the authority to determine the tariff in

accordance with the provisions of the Act. In the instant case, as has

been noted earlier, by the MoU a special tariff had been entered into

10 between the units under the BIA and the respondent Corporation for

supply of electricity at Rs.4.90/KvAh. It is to be noted that, this MoU

received the approval of the MSERC which incorporated the said MoU

in its order dated 19.10.2020, fixing the tariff below the rate which had

been approved at Rs.6.6/KvAh, for Industrial High Tension and

Rs.6.2/KvAh for Industrial Extra Tension, on the consideration that the

petitioner would maintain a minimum load factor of 68% as per the

MoU.

15. In the said order, the MSERC had also taken note of the National

Tariff Policy, 2016 which provided that a licensee had the flexibility of

charging of lower tariff than approved by the State Commission, if

conditions requires so, without having a claim on this count in

accordance with Section 62 of the Act. Further, the order of MSERC

also observed that "..................the terms and conditions agreed upon

between the parties are legal and enforceable between the parties and

accordingly the MoU dated 07.10.2020, is allowed, accepted and

incorporated in the present order.

In the result the Commission approves the petition for special

tariff for an initial period of 3 years to the industrial consumers of the

Respondent, BIA as per the terms and conditions provided in details of

11 the MoU executed between MePDCL and BIA, as reproduced at para

20 above".

16. It is pertinent to note herein that, the approval of the MoU by the

MSERC was after due consideration of the terms contained therein, and

in fact, while passing the order had also noted "The MoU between the

Petitioner and the Respondent based on a consensus agreement

between the parties was also taken into consideration". Other factors,

it appears regarding protection of consumer interest and the

Commissions duty to ensure that the distribution and supply of

electricity was done on commercial principles and that the cost of

electricity was recovered in a reasonable manner, as also the objective

of the special tariff as an impetus for industrial growth, were also taken

into consideration. The MSERC in the order had further stipulated that

"Amendment or modification of any clause in the MOU will only

be done with the mutual consent of the parties involved and with the

approval of MSERC. In case of any disputes the Electricity Act, 2003

will apply and shall be within the jurisdiction of MSERC".

17. The order of the MSERC therefore, took other relevant factors

into consideration while approving the MoU and the special tariff

agreed upon therein. The respondents apart from their objections as to

the non-maintainability of the writ petition, on the ground of the MoU

12 not being statutory in character, and that a commercial contract cannot

be enforced by way of a writ petition, had also sought to project the

MoU as an independent, stand-alone agreement and that the parties

were exclusively bound by the terms contained therein and that the

invocation of Clause 17 of the MoU was an action strictly in terms of

the MoU.

18. After noting the circumstances by which the special tariff came

to be implemented and further the order of the MSERC which has been

passed in exercise of its statutory functions as provided under Section

86 of the Electricity Act, 2003, together with the conditions for

determination of tariff as given in Section 62 of the Act, the arguments

as advanced by the respondents that the parties are bound by a mutually

exclusive contract in the form of the MoU cannot be accepted. Relevant

extracts of Section 62 and of Section 86 for the sake of convenience are

reproduced hereinbelow:

"62. Determination of tariff.- (1) The Appropriate Commission shall determine the tariff in accordance with the provisions of this Act for-

(a) Supply of electricity by a generating company to a distribution licensee:

Provided that the Appropriate Commission may, in case of shortage of supply of electricity, fix the minimum and maximum ceiling of tariff for sale or

13 purchase of electricity in pursuance of an agreement, entered into between a generating company and a licensee or between licensees, for a period not exceeding one year to ensure reasonable prices of electricity;

(b) transmission of electricity;

(c) wheeling of electricity;

(d) retail sale of electricity:

Provided that in case of distribution of electricity in the same area by two or more distribution licensees, the Appropriate Commission may, for promoting competition among distribution licensees, fix only maximum ceiling of tariff for retail sale of electricity. (2) ............................. (3) ............................... (4) ............................... (5) .............................. (6) ............................."

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:

Provided that where open access has been permitted to a category of consumers under section 42, the State Commission shall determine only the wheeling

14 charges and surcharge thereon, if any, for the said category of consumers;

(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."

19. Further, as observed earlier, the MoU dated 07.10.2020 was

accepted and incorporated and taken into consideration by the MSERC

while passing its order, wherein it was specifically noted that any

amendment or modification of the MoU was to be only with the

approval of the MSERC. This fact denotes the necessity of reverting to

the MSERC for any change in the arrangement that had been entered

into by the petitioners and the respondent Corporation, which however

was sought to be done unilaterally by the respondents.

20. This unilateral revocation in the manner sought to be done by the

respondent, in the backdrop of the nature of the order of the MSERC

and the mandate of the Electricity Act renders the said action

unsustainable. The instant case as put up by the petitioners, cannot be

said to be one only for the enforcement of a commercial contract, as it

questions and assails the impugned notice dated 17.01.2022 informing

15 the petitioners about the discontinuation of the special tariff and the

manner in which the same was done. It is also neither a case of

imposition of lower tariff than approved by the Commission as allowed

by the National Tariff Policy, inasmuch as, approval was sought from

the MSERC for the special tariff as agreed by the MoU. Section 108 of

the Electricity Act as urged by the respondent to try and bring the action

of the respondent Corporation within the scope of a policy decision,

will have no application, as there exists no such direction to the MSERC

by the State Government. The question of disputed facts being raised

and that the notice of termination dated 26.10.2021 is not challenged,

are but ancillary issues, when looking at the totality of the

circumstances of the case and will have no effect on its outcome.

21. In this context, the judgment rendered by the Hon'ble Supreme

Court in the case of BSES Ltd. vs. Tata Power Co. Ltd and Ors. (supra)

as cited by the Senior counsel for the petitioners is applicable in the

instant case as regards the approval of tariff by the Commission before

imposing the same upon the customers. Para 16 which is of relevance

is quoted herein below:-

"16. The word "tariff" has not been defined in the Act. "Tariff"

is a cartel of commerce and normally it is a book of rates. It will mean a schedule of standard prices or charges provided to the category or categories of customers specified in the tariff. Sub- section (1) of Section 22 clearly lays down that the State Commission shall determine the tariff for electricity

16 (wholesale, bulk, grid or retail) and also for use of transmission facilities. It has also the power to regulate power purchase of the distribution utilities including the price at which the power shall be procured from the generating companies for transmission, sale, distribution and supply in the State.

"Utility" has been defined in Section 2(l) of the Act and it means any person or entity engaged in the generation, transmission, sale, distribution or supply, as the case may be, of energy. Section 29 lays down that the tariff for the intra-State transmission of electricity and tariff for supply of electricity - wholesale, bulk or retail - in a State shall be subject to the provisions of the Act and the tariff shall be determined by the State Commission. Sub-section (2) of Section 29 shows that the terms and conditions for fixation of tariff shall be determined by Regulations and while doing so, the Commission shall be guided by the factors enumerated in clauses (a) to (g) thereof. The Regulations referred to earlier show that generating companies and utilities have to first approach the Commission for approval of their tariff whether for generation, transmission, distribution or supply and also for terms and conditions of supply. They can charge from their customers only such tariff which has been approved by the Commission. Charging of a tariff which has not been approved by the Commission is an offence which is punishable under Section 45 of the Act. The provisions of the Act and Regulations show that the Commission has the exclusive power to determine the tariff. The tariff approved by the Commission is final and binding and it is not permissible for the licensee, utility or anyone else to charge a different tariff."

(Emphasis supplied)

(Note: The Electricity Regulatory Commissions Act, 1998 referred to in the judgment above, has since been replaced by the Electricity Act of 2003, wherein the provisions are in pari materia as to the powers and functions of a State Commission. The Meghalaya State Electricity Regulatory Commission MSERC, has been set up in accordance with the provisions of the Electricity Act, 2003 and exercises its powers accordingly).

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22. The authorities as placed by the respondents dealing with

interference in contractual matters, cancellation of Government

contracts and the inapplicability of the Specific Relief Act are not

applicable in the facts of the instant case and are disregarded.

23. For the foregoing reasons, these writ petitions stand allowed and

are accordingly disposed of.

24. No order as to costs.

Judge Meghalaya 01.07.2022 "D.Thabah-PS"

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