Transmission Corp.Of A.P Ltd. & Anr vs Sai R.P.Pvt. Ltd. & Ors

Eastern Power Distribution Company of Andhra Pradesh Ltd. & Anr. ...Appellants

Versus

M/s Vamshi Industries Ltd. & Ors. ...Respondents

WITH

CIVIL APPEAL NO. 5963 OF 2006

Southern Power Distribution Company of Andhra Pradesh Ltd. & Anr. ...Appellants

14 Versus

M/s Matrix Power Pvt. Ltd. & Ors. ...Respondents

WITH

CIVIL APPEAL NO. 5964 OF 2006

Northern Power Distribution Company of Andhra Pradesh & Anr. ... Appellants

Versus

15 M/s Gowthami Bio-Energies Ltd. & Ors. ...Respondents

WITH

CIVIL APPEAL NO. 3884 OF 2006

A P. Electricity Regulatory Commission ...Appellant

Versus

M/s Sia Renewable Power Pvt. Ltd. & Ors. ...Respondents

WITH

CIVIL APPEAL NO. 5966 OF 2006

A P Electricity Regulatory Commission ...Appellant

Versus

M/s Biomas Energy Developers Association & Ors. ...Respondents

16 WITH

CIVIL APPEAL NO. 5967 OF 2006

A P Electricity Regulatory Commission ...Appellant

Versus

Small Hydro Developers Association & Ors. ...Respondents

WITH

CIVIL APPEAL NO. 5968 OF 2006

A P Electricity Regulatory Commission ...Appellant

Versus

K.M. Power Pvt. Ltd. & Ors. ...Respondents

WITH

17 CIVIL APPEAL NO. 5969 OF 2006

A P Electricity Regulatory Commission ...Appellant

Versus

Manihamsa Power Projects Ltd. & Ors. ...Respondents

WITH

CIVIL APPEAL NO. 5970 OF 2006

A P Electricity Regulatory Commission ...Appellant

Versus

PMC Power Pvt. Ltd. & Ors. ...Respondents

WITH

CIVIL APPEAL NO. 5971 OF 2006

18 A P Electricity Regulatory Commission ...Appellant

Versus

Bhavani Hydro Power Projects Pvt. Ltd. & Ors. ...Respondents WITH

CIVIL APPEAL NO. 5972 OF 2006

A P Electricity Regulatory Commission ...Appellant

Versus

NCL Energy Limited & Ors. ...Respondents

WITH

CIVIL APPEAL NO. 5973 OF 2006

A P Electricity Regulatory Commission ...Appellant

19 Versus

M/s Active Power Corporation Pvt. Ltd. & Anr. ...Respondents

WITH

CIVIL APPEAL NO. 5974 OF 2006

A P Electricity Regulatory Commission ...Appellant

Versus

Kakatiya Cement Sugars & Industries Ltd. & Anr. ...Respondents

WITH

20 CIVIL APPEAL NO. 5975 OF 2006

A P Electricity Regulatory Commission ...Appellant

Versus

Kallam Spinning Mills Ltd. & Ors. ...Respondents

WITH

CIVIL APPEAL NO. 5976 OF 2006

A P Electricity Regulatory Commission ...Appellant

Versus

Fivess Power Projects Pvt. Ltd. & Ors. ...Respondents

21 WITH

CIVIL APPEAL NO. 5977 OF 2006

A P Electricity Regulatory Commission ...Appellant

Versus

Srinivasa Power Projects Pvt. Ltd. & Ors. ...Respondents

WITH

CIVIL APPEAL NO. 5978 OF 2006

A P Electricity Regulatory Commission ...Appellant

Versus

Janapadu Hydro Power Projects Pvt. Ltd. & Ors. ...Respondents

WITH

22 CIVIL APPEAL NO. 5979 OF 2006

A P Electricity Regulatory Commission ...Appellant

Versus

The South Indian Sugar Mills Association & Ors. ...Respondents

WITH

CIVIL APPEAL NO. 5980 OF 2006

A P Electricity Regulatory Commission ...Appellant

Versus

The South Indian Sugar Mills Association & Ors. ...Respondents

WITH

23 CIVIL APPEAL NO. 5981 OF 2006

A P Electricity Regulatory Commission ...Appellant

Versus

M/s Vensa Bio-Tec Limited & Ors. ...Respondents

WITH

CIVIL APPEAL NO. 5982 OF 2006

A P Electricity Regulatory Commission ...Appellant

Versus

Sagar Sugars & Allied Products Ltd. & Anr. ...Respondents

WITH

CIVIL APPEAL NO. 5983 OF 2006

24 A P Electricity Regulatory Commission ...Appellant

Versus

M/s Raus Power Ltd. & Anr. ...Respondents

WITH

CIVIL APPEAL NO. 5984 OF 2006

A P Electricity Regulatory Commission ...Appellant

Versus

M/s Balaji Energy Pvt. Ltd. & Ors. ...Respondents

WITH

CIVIL APPEAL NO. 5985 OF 2006

A P Electricity Regulatory Commission Appellant

25 Versus

Saraswati Power & Industries Pvt. Ltd. & Ors. ...Respondents

WITH

CIVIL APPEAL NO. 5986 OF 2006

A P Electricity Regulatory Commission ...Appellant

Versus

M/s Gayatri Sugars Ltd. & Ors. ...Respondents

WITH

CIVIL APPEAL NO. 5987 OF 2006

A P Electricity Regulatory Commission ...Appellant

26 Versus

Roshni Power Tech Ltd. & Ors. ...Respondents

WITH

CIVIL APPEAL NO. 3910 OF 2006

Transmission Corp of A.P. Ltd. & Ors. ...Appellants

Versus

Jeypore Sugar Company Ltd. & Anr. ...Respondents

WITH

CIVIL APPEAL NO. 5988 OF 2006

27 Transmission Corporation of A.P. Ltd. & Ors. ...Appellants

Versus

M/s GMR Industries Ltd. & Anr. ...Respondents

WITH

CIVIL APPEAL NO. 5989 OF 2006

Transmission Corporation of A.P. Ltd. & Ors. ...Appellants

Versus

South Indian Sugar Mills Association & Anr. ...Respondents

28 WITH

CIVIL APPEAL NO. 5991 OF 2006

Transmission Corporation of A.P. Ltd. ...Appellants

Versus

M/s. Kaktiya Alloys (P) Ltd. & Ors. ...Respondents

WITH

CIVIL APPEAL NO. 4106 OF 2006

Transmission Corporation of A.P. Ltd. ...Appellant

29 Versus

Chodavaram Coop Sugar Ltd. & Ors. ...Respondents

JUDGMENT

Swatanter Kumar, J.

1. Andhra Pradesh Electricity Regulatory Commission (for short

`Regulatory Commission') was created in furtherance to the

provisions of the Andhra Pradesh Electricity Reform Act, 1998

(hereinafter referred to as the `Reform Act, 1998') enacted by the

30 State legislature which received the assent of the President on 21 st

December, 1998 and became effective w.e.f. 1st February, 1999.

The Commission initiated suo motu proceedings for determination of

tariff applicable to the Non-Conventional Energy generation projects

of Andhra Pradesh, which was to take effect from 1st April, 2004

onwards. After hearing the Non-Conventional Power Project

Developers, the Non-Conventional Energy Development Corporation

of Andhra Pradesh Ltd. and Transmission Corporation of Andhra

Pradesh Ltd. (for short referred to as `NEDCAP' and `APTRANSCO'

respectively), the Regulatory Commission, vide its detailed order

dated 20th March, 2004, arrived at certain conclusions and fixed the

energy purchase rates at base unit price of Rs. 2.25 as on 1st

31 April,1994 and the escalation index of 5% p.a., but the escalation

would be simple and not to be compounded every year. In other

words, the base price as on 1st April, 2004 will be Rs.3.37 per kwh.

As these projects have no variable expenses and negligible increase

in maintenance cost, the tariff will be frozen for a period of five year,

which however, is to be reviewed thereafter. The Regulatory

Commission also issued certain instructions to restrict and regulate

various operations and other aspects. It restricted the sale,

procurement and distribution of electricity by the Developers to any

other party except APTRANSCO. After passing of the order dated

20th March, 2004 an application for review was filed by the

Developers before the Regulatory Commission. The order was

32 clarified to some extent on this review application vide order dated 7 th

July, 2004. Aggrieved from both these orders the Developers filed

independent appeals under Section 111(1) of the Electricity Act,

2003 collectively against the order dated 20th March, 2004 as

modified by order dated 7th July, 2004. These appeals came up for

hearing before the Appellate Tribunal for Electricity (for short the

`Tribunal') which decided all these appeals by a common order dated

2nd June, 2006. The Tribunal granted certain relief to the appellants

before it, who are the respondents in the present appeals, holding

that there was some element of duress in execution of the purchase

price agreements. The Power Purchase Agreement (for short `PPA')

was a statutory document and the Regulatory Commission had no

33 authority to interfere with the same. It could not even be altered by

the Regulatory Commission. One of the most important finding

recorded by the Tribunal was that the Regulatory Commission has

neither the power nor jurisdiction to compel the Developers to sell the

power generated by them to APTRANSCO and/or DISCOM. Feeling

seriously aggrieved from the order of the Tribunal the Transmission

Corporation of Andhra Pradesh Ltd. as well as Eastern Power

Distribution Company of Andhra Pradesh Ltd. have come up in

appeal before this Court under Section 125 of the Electricity Act,

2003. Though the controversy, in the present case, appears to be a

narrow one but on examination it is clear that there are various

ancillary questions, which need to be decided by the Court, prior to

34 answering the main controversy relating to the jurisdiction and

fixation of tariff by the Regulatory Commission. Arguments at great

length were addressed by different learned counsel appearing for the

parties. Before we notice the facts in detail or even refer to the

contentions raised, it will be appropriate to refer to the issues

involved in the case as the entire matter revolves around these

questions and answers thereto and the relief granted. For better

understanding of the same, let us refer to these questions and

answers. The comparative table of the points at issue, that were

raised, and the answers thereto are as under:

A. Whether a Regulatory On the point `A', we hold that the Commission has the power,Regulatory Commission has neither the authority and jurisdiction eitherpower nor the authority nor jurisdiction to

35 under the Electricity Act, 2003compel the Developers to sell the power or under the A Electricitygenerated by them TO APTRANSCO or Reform Act, 1998 to compelDISCOMS.

the Developers to sell the power generated by them to the State Transmission Utility or Distribution Company?

B. Whether the A.P.On the point `B'. we hold that the Regulatory Commission havingRegulatory Commission having approved approved and regulated thethe regulated the purchase price agreed purchase price of power into between the Developer and the

terms of arrangement andTRANSCO in terms of Section 21 (4)(b) PPA entered betweenand 11 (1)(e) of the Andhra Pradesh APTRANSCO and DevelopersElectricity Reform Act, 1998 read with in terms of Sec. 21 (4)(B) andSection 86 (1)(b) of 2003 Act cannot re- 11 (1)(e) of A.P. Reform Actfix the regulatory purchase price by read with Sec. 86(1)(b) of 2003resorting to tariff fixation under Section Act could re-fix the regulatory62; 64 read with Section 86(1)(a) of 2003 purchase price by resorting toAct, as Section 86(1)(b) being a special tariff fixation under Section 62;provision excludes the applicability of 64 read with Sec. 86(1)(a) ofSection 86(1)(a) of the 2003 Act to 2003 Act? private Generators.

36 C. Whether the A.P.On the point `C' and `F', we hold that the Regulatory Commission hasAndhra Pradesh Regulatory Commission the power or authority to alterhas no power or authority to alter the the policy directions issued bypolicy direction issued by the State the State Government withGovernment and the said Commission respect to NCE Developers?has no executive power nor a plenary Whether the Commissionpower as claimed by it.

could claim executive power with respect to NCE Developers and fixation of price for power generated by

NCE Developers and sold to APTRANSCO/DISCOM? D. Whether the plea ofThe points `D' & `E' are answered in estoppel advanced byfavour of the appellants and they are

Developers is sustainable onsubstantiated by the appellants. facts and law?

37 E. Whether the plea ofThe points `D' & `E' are answered in legitimate expectationfavour of the appellants and they are advanced by Developers issubstantiated by the appellants sustainable?

F. Whether the A.P. ElectricityOn the point `C' and `F', we hold that the Regulatory Commission isAndhra Pradesh Regulatory Commission possessed of Executivehas no power or authority to alter the Powers to issue policy andpolicy direction issued by the State executive directions in respectGovernment and the said Commission of NCE Developers in thehas no executive power nor a plenary State? power as claimed by it.

G. Is not the CommissionOn the point `G', we hold that the Andhra bound by directions alreadyPradesh Electricity Regulatory issued by the State in respectCommission is bound by policy directions of NCE Developers as well asalready issued by the State Government incentives directed by theso long as they are not modified or given to encourage them? altered.

H. Whether RegulatoryOn the point `H', we hold that the Commission could alter orRegulatory Commission has no authority change the PPAs enteredto alter or change the PPAs entered between the NCE Developersbetween the NCE Developers and and ElectricityElectricity Board/ APTRANSCO

38 Board/APTRANSCO?

I. Whether the procurement On the point `I', we hold that the arrangement / PPA entered isprocurement arrangement/PPA is a statutory contract and if so,statutory and the Commission has no whether it could be interferedauthority to interfere with the same. by the Commission?

J. Whether the Commission isOn the point `J', we hold that the just a regulator to approve theCommission is just a regulator or PPA entered or whether itapprove the PPA entered between the could determine tariff withappellant generator and the respect to NCE Developers? APTRANSCO by examining as to

whether the purchase is economical and it is in terms of State Policy.

K. Having approved PPA byIn the result on the `K', we hold that the exercise of Regulatory Power,appeals preferred by the NCE is it open to commission toDevelopers-Appellants in appeal Nos. undertake determination of1,2,5,6,7,8,9,10,12,15,16,17,18,19,20,21, tariff in respect of private22,34,46,47,52,58, 67 & 80 of 2005 are generation by NCEallowed and the impugned proceedings Developers? of the Regulatory Commission are set aside and there will be a direction to the

39 APTRANSCO, the Transmission Corporation of AP, the Central Power Distributing Company of AP Ltd., the Southern Power Distributing Company of AP Ltd., the Northern Power Distributing Company of AP Ltd. and the Eastern Power Distributing Company Limited of AP Ltd. to continue the Power Purchase and at the same rate at which the power generated by NCE Developers supplied to them are being paid before passing of

the impugned order of the Commission dated 20.03.2004 and 07.07.2004 made in R.P. No.84/2003 and O.P. No.1075/2000 with all differences and arrears thereof, up to date and continue to pay at the same rate, until a new PPA is entered by agreement between them in terms of State Government Policy direction, that may be made hereafter and approved by the Regulatory Commission. This Judgment shall be

40 given effect from the date of communication. For payment of tariff difference and arrears, the respondents shall have six weeks from the date of this Judgment, failing which the respondents shall be liable to pay interest at 9% per annum with effect from the month on which the difference in tariff rate remains to be paid ant till date of payment.

L. To what relief, if any? Consequently, the Appeal Nos. 46,48,49 and 50 of 2005 preferred by the AP

Transmission Corporation and the four Discoms will stand dismissed as there are no merits in them. The parties shall bear the respective cost throughout.

2. The above conclusions arrived at by the Tribunal on the factual

matrix that the Government of Andhra Pradesh on 18th January, 1997

by GO Ms. No. 93, with the object of encouraging generation of

41 electricity from renewable sources of energy, allowed uniform

charges to all such projects. After issuance of the above GO Ms. 93

certain ambiguities were noticed by the concerned parties. This

resulted in issuance of GO Ms. No. 112 dated 22nd December, 1998

and vide this GO clarifications were issued to the earlier Government

order and it clearly provided for uniform implementation of the

proposed scheme to all non-conventional energy

developers/generators of power. The Andhra Pradesh Electricity

Regulatory Commission was constituted under the said Reform Act,

1998 vide notification dated 3rd April, 1999 and the same Commission

performing the duties and functions under the above Act continued to

be a Commission under and within the meaning of Electricity Act,

42 2003 as well. This was done by virtue of Section 185 of the

Electricity Act, 2003. State Government of Andhra Pradesh notified

the Transmission Corporation of Andhra Pradesh to be the State

Transmission utility. We may also notice here that the Electricity

Regulatory Commissions Act, 1998 also contemplated under Section

3, constitution of a Central Electricity Regulatory Commission to

exercise the powers conferred and functions assigned to it under the

Act. In terms of Section 17 of this Act the State Government was

also to notify in the official gazette and establish, for the purposes of

this Act a Commission for the State to be known as the State

Electricity Regulatory Commission. In terms of Section 22 of this Act

the functions of the State Commission were defined, which included

43 determination of tariff for electricity, wholesale, bulk, grid or retail, as

the case may be. Under Section 11 of the Reform Act, 1998 it has

been spelt out as to what are the functions of the Regulatory

Commission, inter alia, it provides to aid and advise to the State

Government, in matters concerning electricity generation,

transmission, distribution and supply in the State, to issue licences in

accordance with the provisions of this Act and determine the

conditions to be included in the licences, to regulate the purchase,

distribution, supply and utilization of electricity, the quality of service,

the tariff and charges payable keeping in view both the interest of the

consumer as well as the consideration that the supply and

distribution cannot be maintained unless the charges for the

44 electricity supplied are adequately levied and duly collected, to

require licensees to formulate prospective plans and schemes in

cooperation with others for the promotion of generation,

transmission, distribution and supply of electricity. Besides these

powers, which have been noticed by us, inter alia, the residue clause

has been worded very widely to permit the Regulatory Commission to

undertake all incidental or ancillary things. Under Section 15, the

Regulatory Commission is vested with the power to issue licences

and to enter into agreements on specified terms and also to

determine the charges and establish tariff in terms of clause (5) of

Section 15 of the Reform Act, 1998. It needs to be noticed that the

State of Andhra Pradesh was vested with the powers and infact the

45 duty to constitute the Regulatory Commission in terms of Section 11

afore noticed.

3. The Regulatory Commission was constituted as per the

provisions of Reform Act, 1998 vide notification dated 3rd April, 1999

and it was to perform all regulatory functions pertaining to the

electricity industry in the State of Andhra Pradesh. It was commonly

agreed before us during the course of argument that it is the

Electricity Regulatory Commission for the State of Andhra Pradesh

for all intent and purposes under the Reform Act, 1998 as well as the

Electricity Act, 2003. We must notice, at this stage itself, that the

Tribunal has entertained the doubt that since no independent

46 notification was issued under Section 17 of Electricity Regulatory

Commission Act, 1998, therefore, it could not exercise the powers

vested in the Regulatory Commission under that Act. This may not

be the correct position in law. The Regulatory Commission was

constituted under the Reform Act, 1998 and an appropriate

notification in that behalf was issued. The Electricity Regulatory

Commission Act, 1998 stood repealed by the Electricity Act, 2003.

The Electricity Act, 2003 specifically recognized and accepted the

Commissions constituted under the enactments specified in the

schedule to the Act as appropriate Commission. In entry 3 of the said

schedule, Reform Act, 1998 has been specifically noticed. In other

words, the Regulatory Commission constituted under the Reform Act,

47 1998 became the appropriate commission under the Electricity Act,

2003 as well.

4. In exercise of its powers, the Regulatory Commission claims to

have issued licences to Transmission Corporation as well as

DISCOM for bulk and retail supply of electricity w.e.f. 1st April, 2001.

Vide order dated 20th June, 2001 made in OP No. 1075 of 2000, the

Regulatory Commission directed generators of Non-Conventional

Energy to supply power exclusively to APTRANSCO. The Non-

Conventional Energy Developers were not permitted to sell the

energy generated by them to 3rd parties. By the same order the

Regulatory Commission also approved the rate which was prevailing

48 earlier for such supply at Rs. 2.25 per unit with 5% escalation per

annum from 1994-95 being the base year. After coming into force of

the Electricity Act, 2003, Regulatory Commission issued notice on

23rd October, 2003 inviting objections from various Developers and

Generators to the proposals of APTRANSCO and NEDCAP in

regard to fixation of price to be paid by APTRANSCO for the

quantum of electricity purchased from non-conventional energy

projects w.e.f. 1st April, 2004. The objections, if any, were to be filed

on or before 5th November, 2003. NEDCAP and DISCOM were to

submit proposals for review of incentives. The proposal had been

received for review by the Regulatory Commission from

APTRANSCO. Within the extended time the Developers, individually

49 as well as acting through their Association, filed various objections in

response to the notice dated 23rd October, 2003. All the parties were

granted hearing by the Regulatory Commission which, then, passed

the order dated 20th March, 2004, reducing the price payable by

APTRANSCO to Non-Conventional Energy Developers towards the

supply of electricity. Some of the Developers moved to the Andhra

Pradesh High Court by filing a Writ Petition No. 7222 of 2004 in

which interim order dated 15th April, 2004 came to be passed

directing APTRANSCO to continue to pay to NCE Developers for the

power that may be supplied by them as per the earlier rates prevalent

on 1st April, 2004. By order dated 27th April, 2004, the High Court

disposed of the batch of the Writ Petitions while issuing the direction

50 to the Developers to approach the Regulatory Commission and seek

review of its order dated 20th March, 2004. The Regulatory

Commission was also directed to take up the review petition and

dispose of the same within 8 weeks. Till then, the interim order dated

15th April, 2004 was to remain in force. This resulted in filing of the

Review Petitions before the Regulatory Commission. In the

meanwhile the Govt. of Andhra Pradesh ordered that APTRANSCO

shall cease to engage in trading relating functions and that the PPAs

entered with the Developers shall vest in DISCOM(s) w.e.f. 10th

June, 2004 in terms of Section 39 read with Section 172(b) of the

Electricity Act, 2003. The Review Petitions filed by the Developers

before the Regulatory Commission came to be dismissed by different

51 orders passed on 5th July, 2004 and 10th July, 2004 respectively. The

Review Petition filed by APTRANSCO also came to be dismissed on

11th July, 2004. This resulted in approaching the High Court again, by

nine of the developers, filing Writ Petition No. 16621 of 2004. The

High Court, vide its order dated 16th September, 2004, permitted the

implementation of the revised tariff by APTRANSCO. It further

directed that 50% of the differential amount between the old and the

revised tariff shall also be paid for the actual power supplied. By GO

58 dated 7th June, 2005, an approval scheme came to be framed

under the Reform Act, 1998 to transfer and distribute the assets and

contracts of bulk supply and trading business of APTRANSCO to

DISCOM which was in furtherance to the earlier decision of the State

52 of Andhra Pradesh. Ultimately these Writ Petitions came to be

disposed of with the direction that the Developers shall approach the

Tribunal and the interim order shall continue to be in force for a

period of 8 weeks from 15th June, 2005 or till the Tribunal passes

order on the interim application, whichever is earlier. Same interim

order was passed by the Tribunal during the pendency of the appeal

which, were filed before it.

5. As is obvious from the above narrated facts and again, it is not

in dispute that the Regulatory Commission passed an order dated

20th June, 2001 which, in fact, attained finality and its correctness

was never been questioned by any of the parties including the

53 present appellants. Thus, the order dated 20th June, 2001 is of some

significance and certainly of some definite relevancy. The

proceedings were initiated suo motu by the Regulatory Commission

against all the Developers of Non-Conventional Energy including mini

hydro projects. The Regulatory Commission noticed, in its order

dated 20th June, 2001 that Govt. of India issued guidelines regarding

promotional and fiscal incentives to be given by the State

Governments for power generation through Non-Conventional

Energy sources. The Govt. of Andhra Pradesh issued order No. 19

dated 16th March, 1996 under which it accorded certain incentives in

respect of the Developers with whom NEDCAP had entered into the

memorandum of understanding. A review of these incentives was

54 taken after which GO Ms. 93 dated 18th November, 1997 was issued,

as already noticed and it was decided to provide uniformity to all the

projects based on renewable sources of energy like Waste, Wind,

Bio-mass, Co-generation, Municipal Waste and Mini Hydro projects.

6. The Regulatory Commission had passed an order dated 6th

March, 2000 giving certain directions including that the Developers

could sell the power generated by them to third party upto 17th

November, 2000. The rates were indicated, as we have already

noticed, and that there would be reviewed with regard to purchase

price with reference to each Developer on completion of 10 years

from the date of the commission of the project. After noticing various

55 objections that had been raised by the Developers it was stated that

the Regulatory Commission was not attempting to stop any incentive

while referring to the statistics and the market conditions. It was

specifically noticed that permitting Non-Conventional Energy

Developers to make third party sales would not, at all, be in the

interest of organized growth of electricity industry and it would create

discrimination between the industrial consumer drawing power from

Non-Conventional Energy Developers and the industrial consumers

drawing power from APTRANSCO and these two would have to pay

two different rates. It also noticed that there will be undue

enrichment of the Developers as they were permitted to establish

their generation plants with definite benefits which were carried out

56 for years together. While holding that the Regulatory Commission

had jurisdiction, it also noticed that the rate approved by the

Regulatory Commission on the basis of guidelines issued by the

Ministry of Non-Conventional Energy Sources are much higher than

the rate permitted by the State Government and in comparison to

other States they were favourable to the NCE developers. This

reasoning persuaded the Regulatory Commission to pass the

following directions:

"29. The existing incentives under G.O. Ms. No. 93, dated 18.11.1997, which are continued under the orders of the Commission from time to time till 24.06.2001 under our letter No. 2473, Dated 24-04- 2001 are extended for the time being till 24-07- 2001. The temporary extension has been given to enable the developers to finalise

57 agreements'/arrangements relating to supply of power to APTRANSCO prior to 24-07-2001). With effect from the billing month of August 2001, all generators of non-conventional energy shall supply power to APTRANSCO only as per the following terms:

(i) Power generated by non-conventional energy developers is not permitted for sale to third parties.

(i) Developers of non-conventional energy shall supply power generated to APTRANSCO/DISCOMS of A.P. only.

(i) Price applicable for the purchase by the supply licensee should be Rs. 2.25 per unit with 5% escalation per annum with 1994-95 as the base year.

APTRANSCO is simultaneously directed to arrange payment for the supply of power purchased from

58 developers of non-conventional energy by opening a Letter of Credit in favour of the suppliers of power.

30. A suo motu review of the incentives to take effect from 1st April, 2004, will be undertaken by the Commission after discussions with all the concerned parties. There will also be a review of the purchase price with specific reference to each developer on completion of 10 years from the date of commissioning of the project (by which time the loans from financial institutions would have been

repaid) when the purchase price will be reworked on the basis of return on enquity. O&M expenses and the variable cost.

31. However, if any developer wishes to raise any specific issue with reference to this order, he will be entitled to apply to the Commission in the manner provided in the regulations."

59

7. After passing of this order by the Regulatory Commission the

parties executed PPAs. These agreements were signed on the lines

of the directives given in the order of Regulatory Commission. In

fact, it was stated that the agreements were required to be and were

actually approved by the Regulatory Commission. In terms of Clause

5 of the PPA these agreements were enforceable subject to

obtaining consent of the Regulatory Commission as per Section 21 of

the Reform Act, 1998. Obviously, the rates and conditions specified

in the earlier proceedings of 11th November,1999, 1st April, 2000, 27th

January, 2001 and 13th July, 2001 were accepted by the parties.

Some of the clauses of the PPA, which have also been heavily relied

upon by the learned counsel for the parties, read as under:

60

"ARTICLE 2 PURCHASE OF DELIVERED ENERGY AND TARIFF

2 All the Delivered Energy at the interconnection point for sale to APTRANSCO will be purchased at the tariff provided for in Article 2.2 from and after the date of Commercial Operation of the Project.

Title to Delivered Energy purchased shall pass from the Company to the APTRANSCO at the Interconnection Point.

3 The Company shall be paid the tariff for the energy delivered at the interconnection point for sale to APTRANSCO at Rs. 2.25 paise per unit with escalation at 5% per annum with 1994-95 as base year and to be revised on 1st April of every year upto the year 2003- 2004. Beyond the year 2003-2004, the purchase price by APTRANSCO will be decided by Andhra Pradesh Electricity Regulatory Commission. There will be further

61 review of purchase price on completion of ten years from the date of commissioning of the project, when the purchase price will be reworked on the basis of Return on Equity, O & M expenses and the Variable Cost."

8. Besides the above clauses it also provided other terms and

conditions under different articles, which are not necessary for us to

be noticed at this stage. It required to be noticed with some

significance that no disputes of any kind were raised by the

Developers till and after passing of the order dated 20th March, 2004.

The order of 20th June, 2001 read in conjunction with the PPAs

executed by the parties controlled the entire field and all the persons

including the Regulatory Commission as well as the State therein.

62

9. This period of nearly three years, thus, was free of grievances

and objections and the order of 2001 appears to have been

implemented willingly by the parties. There was execution of the

PPAs completely bringing the matter between the parties into the

realm of contract. Thereafter, the Regulatory Commission in terms of

its 2001 order appears to have initiated suo motu proceedings for

determination of tariff for non-conventional energy projects of Andhra

Pradesh with effect from 1st April, 2004. The Regulatory

Commission, in its order dated 20th March, 2004 has also noticed the

background facts of the case and the determination of rates earlier.

It had given notice to all the developers and other shareholders to

submit their views and objections on the above issues. After hearing

63 the parties, the Regulatory Commission considered the proposal for

tariff. The proposal submitted by APTRANSCO and NEDCAP were

as under :

"APTRANSCO's Tariff Proposals

Particulars Unit Tariff (Levelised Tariff Year-on-year escalation over the life of the project) Existing New Plants Existing New

Plants Rs/kWhr.

Rs/kWhr.

Mini Hydel 2.42 2.31 --- --- Bagasse 2.23 2.25 2% 2% Biomass 2.27 2.27 2% 2% Waste to Nil 2.66 --- 1% Energy Wind 2.52 2.55 --- ---

NEDCAP Tariff proposals:

64 Bagasse Rs. 2.62 - Ist year Rs. 2.48 - 10th year Biomass Rs. 3.27 - Ist year Rs. 3.77 - 10th year Mini Hydel Rs. 2.96 - Ist year Rs. 2.26 - 10th year Wind Farm Rs. 4.54 - Ist year Rs. 3.19 - 10th year Waste to Energy Rs. 2.99 - Ist year Rs. 3.19 - 10th year

10. Objections to the above proposals were also received.

Interestingly and rightly so, the Regulatory Commission before

analyzing the proposal and objections, noticed:

"20....as mentioned herein above, the Commission, in this order is not examining any issues concerning the direction contained in the order dated 20.6.2001 that the NCE

65 Developers shall not sell electricity to third parties and they are required to sell electricity only to APTRANSCO. The Commission, in this order, is dealing with only those NCE Developers who had accepted the order dated 20.6.2001 and voluntarily agreed to sell electricity to APTRANSCO on the terms and conditions contained in the order dated 20.6.2001"

11. While the Regulatory Commission undertook the review of

prices in relation to sale of electricity by Non-Conventional Energy

developers, it specifically referred to order in O.P. No. 1075 of 2000,

which, in turn, provided for review of sale price and incentives given

earlier to the said developers with effect from 1st April, 2004. It also

noticed that the PPAs signed by the APTRANSCO and NCE

Developers include provisions for such review by the Regulatory

66 Commission with effect from 1st April, 2004. It took the view that

review of the price at which APTRANSCO shall purchase power from

the NCE developers is within the jurisdiction of the Regulatory

Commission under Section 21(4) of the Reform Act, 1998 and also

under Section 86(1) of the Electricity Act, 2003. Referring to Section

61 of the Electricity Act, 2003 which cast obligation upon the

Regulatory Commission to frame tariff regulations specifying the

terms and conditions for determination of tariff, in para 21 of that

order, the Regulatory Commission framed the following issues:

"Issues for consideration on merits:

The Commission has considered inter alia, the following issues:

67 (i) Whether the tariffs and incentives should be uniform for all the categories of NCE projects as provided earlier in MNES guidelines, GoAP orders and APERC's order OP. No. 1075/2000 dated 20.6.2001 or should they be different for different categories of NCE projects.

(i) Whether the tariff should be a single part tariff or a two part tariff.

(i) Whether the tariff should be project specific or uniform for all project falling in a category.

(i) Whether there should be a cap on tariff when a project exceeds the expected minimum performance.

(i) Social and environmental considerations.

(i) Control period."

68 12. The Regulatory Commission decided tariff fixation in relation to

Bagasse based co-generation plants, Bio-mass power generation

and Mini hydel projects separately. The specific issue raised by the

objectors was that the benchmarking of capital cost should be based

on market trends, confirmed through competitive bidding from time to

time. Though APTRANSCO accepted this in principle, but stated

that they expect a detailed procedure from the Regulatory

Commission for an effective competent bidding. The tariff basis was

questioned as well as it was submitted that tariff beyond threshold

limit should be limited to the variable cost and incentives only and not

the full tariff. This was opposed by APTRANSCO which preferred a

single time tariff in entire energy purchase. While taking into

69 consideration the applicability of depreciation and its extent the tariff

was fixed and the Regulatory Commission drew the following

conclusion:

"81. The tariffs arrived at along with escalation under each category will be applicable as detailed in the respective paragraphs under each category. The aforementioned tariffs are, however, also

subject to the following:

"i. In regard to tariff for Bagasse based co-

generation projects, where the Plant Load Factor during a settlement period exceeds 55% (the level at which the fixed cost is expected to be recovered), only incentive of 21.5 paise/unit and variable cost as indicated in para (47) above shall be paid for every unit delivered in excess of the 55% PLF.

70 ii. As regards to tariff for Biomass based power projects, where the Plant Load Factor during a settlement period exceeds 80% (the level at which the fixed cost is expected to be recovered), only incentive of 21.5 paise/unit and variable cost as indicated in para (63) above shall be paid for every unit delivered in excess of 80% PLF.

ii. The tariff for mini-hydel power projects is exclusive of Royalty.

ii. In the case of tariff for mini-hydel power projects, where the PLF during settlement period exceeds 35%, only an incentive of 21.5 paise/kwh shall be paid for every unit delivered in excess of 35%.

71 ii. The tariffs authorized above will be applicable w.e.f. 1.4.2004 to all NCE power plants of respective categories for sale to APTRANSCO.

ii. The above tariff structure is valid for control period of five years with effect from 1.4.2004. Thereafter, the Commission will review the prices and incentives after consultation with the Developers and licensees.

ii. A further review of the individual projects will be undertaken on completion of 10 years from the date of commissioning of the project, by which time the loan is expected to have been substantially repaid, and the purchase price will be based on O & M expenditure, return on equity, variable cost and residual depreciation, if any.

72 ii. For those developers' having captive consumption who supply excess energy to APTRANSCO after meeting their internal consumption, the current practice of meter reading at the interconnection point and grossing up for auxiliary consumption in order to arrive at PLF will be misleading as it will not take into consideration the captive consumption. The incentive payments begin after threshold PLF. In order to

ascertain the PLF levels, APTRANSCO should make arrangements for authenticated meter reading at the generator terminals so that the two-tier tariff is properly implemented.

ii. Developers will be entitled to dispatch 100% of the available capacity without reference to Merit Order Dispatch subject, however, to any system constrains."

73 13. After arriving at this conclusion the Regulatory Commission

also specifically clarified that as and when, however, trading function

of APTRANSCO is segregated and vested in new entity pursuant to

the Electricity Act, 2003, the terms and conditions contained therein

shall be binding on the new entity in the same manner as was

applicable to APTRANSCO.

14. As is clear from the order itself that it dealt with, primarily, the

question of refund/fixation of tariff in relation to various generation

projects. It decided no other matter and even these findings were

subsequently questioned by the Developers before the High Court

74 and in furtherance to the order of the High Court dated 15 th July,

2004, Review Petitions were filed, which finally resulted in filing of the

appeals before the Tribunal.

15. We may notice here that vide notification dated 28th May, 2004,

the State Government ordered that APTRANSCO shall cease to

engage in trading relating functions and that the PPAs entered with

the Developers shall vest in DISCOM w.e.f. 10th June, 2004 in terms

of Section 39 read with Section 172(b) of the Electricity Act, 2003.

On 9th June, 2004, the Central Government also authorized the State

Transmission Utility to engage in bulk purchase and sell it to

DISCOM for a period of one year from 10th June, 2004. With this

75 background, the appeals which were filed before the Appellate

Tribunal came up for hearing and some appeals were also filed by

DISCOM with APTRANSCO as a party. Appeals from both sides

came up, heard and decided by the order dated 2nd June, 2006

impugned in the present case.

16. Now with this factual background, we shall proceed to examine

the issues of law raised in the present appeals before this Court. As

already noticed, in paragraph 40 of the impugned judgment, the

Tribunal had framed as many as 12 points for determination which

76 were answered by it in paragraph 114. The points formulated by the

Tribunal, in fact, can be categorized in the following principal heads:

(i) Matters relating to jurisdiction of the Commission for fixation of tariff and sale of generated electricity to third party;

(i) Correctness of tariff fixation on merits of the case;

(ii) Is the principle of estoppel attracted in the present case, if so, to what extent?

(i) Does the plea of duress need to be accepted as per settled principles and with reference to the facts of the case?

(i) What is the effect of order dated 20.6.2001 having attained finality and even not being questioned in the present proceedings?

(i) What orders can be made by this Court to deal with these appeals to do complete justice between the parties?

77 17. Fixation of tariff is, primarily, a function to be performed by the

statutory authority in furtherance to the provisions of the relevant

laws. We have already noticed that fixation of tariff is a statutory

function as specified under the provisions of the Reform Act, 1998,

Electricity Regulatory Commissions Act, 1998 and the Electricity Act,

2003. These functions are required to be performed by the expert

bodies to whom the job is assigned under the law. For example,

Section 62 of the Electricity Act, 2003 requires an appropriate

Commission to determine the tariff in accordance with the provisions

of the Act. The Regulatory Commission has been constituted and

notified under the provisions of Section 3 read with Section 11 of the

78 Reform Act, 1998 which in terms of Section 11(1)(c)&(e) is expected

to fix the tariff as well as the terms of licence. There are three

different legislations in course and the Regulatory Commission has

been constituted under the Reform Act, 1998 which in turn would be

the Commission as contemplated under the Electricity Regulatory

Commission Act, 1998 and the Electricity Act, 2003. In terms of first

proviso to Section 82(1) of the Electricity Act, 2003 the State

Electricity Regulatory Commission established by the State

Government under Section 17 of the Electricity Regulatory

Commission Act, 1998 and the enactment specified in the schedule

shall be the State Commission for the purposes of this Act. Even in

terms of Section 185(3) of the Electricity Act, 2003 the said authority

79 would be deemed to be an appropriate Commission for all purposes

and intent as the Reform Act, 1998 has been specifically mentioned

in entry 3 of the Schedule to the Electricity Act, 2003. In other words,

as already noticed the Regulatory Commission constituted by the

said notification would be the appropriate Commission under all

these Acts and is required to perform the functions as contemplated

under Sections 11, 17 and 82 of the respective Acts. The functions

assigned to the Regulatory Commission are wide enough to

specifically impose an obligation on the Regulatory Commission to

determine the tariff. The specialized performance of functions that

are assigned to Regulatory Commission can hardly be assumed by

any other authority and particularly, the Courts in exercise of their

80 judicial discretion. The Tribunal constituted under the provisions of

the Electricity Act, 2003, again being a specialized body, is expected

to examine such issues, but this Court in exercise of its powers under

Article 136 of the Constitution would not sit as an appellate authority

over the formation of opinion and determination of tariff by the

specialized bodies. We would prefer to leave this question open to

be considered by the appropriate authority at the appropriate stage.

We do not consider it appropriate to go into the merit or de-merit of

determination of tariff rates in the appeals. Determination of tariff is a

function assigned legislatively to a competent forum/authority.

Whether it is by exercise of legislative or subordinate legislative

power or a policy decision, if the Act so requires, but it generally falls

81 in the domain of legislative activity and the Courts refrain from

adverting into this arena.

18. We have to further examine the legality of this issue in the light

of the findings that we have recorded on the issues in relation to

jurisdiction of the Regulatory Commission to determine/review the

tariff. The jurisdiction of this Court is limited in this aspect. This

Court has consistently taken the view that it would not be proper for

the Court to examine the fixation of tariff rates or its revision as these

matters are policy matters outside the preview of judicial intervention.

The only explanation for judicial intervention in tariff fixation/revision

is where the person aggrieved can show that the tariff fixation was

82 illegal, arbitrary or ultra virus the Act. It would be termed as illegal if

statutorily prescribed procedure is not followed or it is so perverse

and arbitrary that it hurts the judicial conscious of the Court making it

necessary for the Court to intervene. Even in these cases the scope

of jurisdiction is a very limited one. This Court in the case of

Association of Industrial Electricity Users v. State of Andhra Pradesh

[(2002) 3 SCC 711], while dealing with the provisions of tariff

fixation in terms of the provisions of the Reform Act, 1998, observed

that even where the Act did not envisage classification of consumers

according to the purpose for which electricity is used, Sub-Section(9)

of Section 26 of that Act does state that the tariff rate relatable to

classification of consumers would be permissible, of course,

83 depending upon various factors stipulated in Section 26(7) of the Act.

The Court finally held as under:

"11. We also agree with the High Court that the judicial review in a matter with regard to fixation of tariff has not to be as that of an Appellate Authority in exercise of its jurisdiction under Article 226 of the Constitution. All that the High Court has to be satisfied with is that the Commission has

followed the proper procedure and unless it can be demonstrated that its decision is on the face of it arbitrary or illegal or contrary to the Act, the court will not interfere. Fixing a tariff and providing for cross-subsidy is essentially a matter of policy and normally a court would refrain from interfering with a policy decision unless the power exercised is arbitrary or ex facie bad in law."

84 19. Similarly, in the case of West Bengal Electricity Regulatory

Commission v. CESC Ltd. [(2002) 8 SCC 715], this Court was

concerned with determination of tariff by the State Commission, the

applicability of principles of natural justice and the scope of

interference by the High Court in distinction to the power exercisable

by the appellate authority. Stating it to be a function in the nature of

legislative power, the Court felt that the principles of natural justice

were not attracted and the power of judicial review could hardly be

invoked. The Court held as under:

"39. Having considered the finding of the High Court, we are of the opinion that though generally it is true that the price fixation is in the nature of a legislative action and no rule of natural justice is applicable (see Shri Sitaram

85 Sugar Co. Ltd. v. Union of India SCC, para

45), the said principle cannot be applied where the statute itself has provided a right of representation to the party concerned.

Therefore, it will be our endeavour to find out whether, as contended by learned counsel for the appellants, the statute has provided such a right to the consumers or not.

xxx xxx xxx xxx

44. Having held on merits that the Regulations are not arbitrary and are in conformity with the provisions of the Act, we will now consider whether the High Court could have gone into this issue at all in an appeal filed by the respondent Company. First of all, we notice that the High Court has proceeded to declare the Regulations contrary to the Act in a proceeding which was initiated before it in its appellate power under Section 27 of the Act. The appellate power of the High Court in the instant case is derived from the 1998 Act. The Regulations framed by

86 the Commission are under the authority of subordinate legislation conferred on the Commission in Section 58 of the 1998 Act.

The Regulations so framed have been placed before the West Bengal Legislature, therefore they have become a part of the statute. That being so, in our opinion the High Court sitting as an appellate court under the 1998 Act could not have gone into the validity of the said Regulations in exercise of its appellate power."

20. In view of the above settled position of law we are of the

considered opinion that the present case is one where this Court

should examine determination of tariff on merits and particularly, in

view of the directions that we propose to pass finally in this case.

87

21. The issue relating to jurisdiction, again, would have to be

divided into two different parts. Firstly, whether the Regulatory

Commission could exercise the powers for determination and/or re-

fixing the price by resorting to tariff fixation powers under the Act and

secondly, with regard to sale of generated electricity by the

Generators to parties other than State Transmission Utility or

Distribution Company. In regard to first part of this issue the Tribunal

in its order, while answering issue B, held that Regulatory

Commission has no jurisdiction to re-fix the regulatory purchase price

by resorting to tariff fixation methods specified under the provisions

of law. Similarly, it also answered issue A in the negative and

against the Regulatory Commission. The primary reason recorded

88 by the Tribunal is that the original fixation of purchase price for

energy generated by NCE Developers is in terms of the policy

directions issued by the State and it was not within the jurisdiction

and scope of the powers conferred upon the Regulatory Commission

under the Reform Act, 1998. It was considered by the Tribunal that

policy decision of the State could not have been set at naught on the

assumption that the Regulatory Commission is vested with executive

powers. Also that Regulatory Commission had proceeded on the

basis that it has power to review the rate/incentives given to

developers or it has power to issue executive directions. The

Tribunal also felt that PPAs are final and binding and there is

assumption of power on the part of the Regulatory Commission that

89 they have authority to fix tariff with respect to power generators by

taking recourse to provisions of Sections 62, 64 read with Section

86(1) of Electricity Act, 2003.

22. Before we proceed to examine the various provisions under

different Acts afore referred, let us once again refer, in precise form,

the necessary facts. From the record it appears that on 7th

September, 1993 the Ministry of Non-Conventional Energy Sources,

New Delhi had written a letter to the Chief Secretary of the different

States informing them that under the new strategy and action plan of

the ministry special emphasis is sought to be given to generation of

grid quality power from non-conventional energy sources, noticing

that the average cost of power generation from non-conventional

90 energy sources compares quite favourably with new coal thermal/gas

based projects and captive diesel generating sets. While in future

the costs of the former are expected to drop, costs of conventional

electricity generation will only increase. Referring to the fact that

Central Government has introduced several fiscal and other

promotional incentives to attract private sector participation in the

generation and supply of energy from non-conventional energy

sources and consequently the States had also introduced measures

such as wheeling and banking, buy back, third party sale, capital

subsidies, industry status, sales tax exemption etc., it had also been

noticed that they were to vary in operation from State to State. In this

background the Ministry had drawn up guidelines which was

91 enclosed to that letter and asked all States to work towards a uniform

policy pertaining to the non-conventional energy sources. A

minimum buy back price of Rs. 2.25 per unit had been proposed and

it required the States to consider that these guidelines were not

exhaustive. Other matters, including additional incentives, attractive

packages could be formulated by the State and accordingly the

States were required to take further steps. The very opening part of

the guidelines dealt with the operative period and it was stated that

"The Scheme of promotional and fiscal incentives will come into

operation with immediate effect and will remain in force for a period

of five years." Besides this eligibility, facilities and tax relief etc. were

also indicated. The transmission of Electricity was to be undertaken

92 by the State Electricity Board and even the third party must be HT

consumer of the Board unless the stipulation was specifically

relaxed. SEB was to purchase the electricity from the producer at

the minimum specified rate without any restriction on time or

quantum of electricity. Importantly, Clause 3(iii) of the policy

guidelines suggested that the producer will have the option to sell the

electricity generated by him to a third party at mutually agreed rates

but within the State as per clause 1(i). On or before 14 th February

1994 two projects, namely wind farm and mini hydel projects were

transferred from Andhra Pradesh State Electricity Board to NEDCAP

by the Government of Andhra Pradesh. Later, vide letter dated 25th

November, 1994 the guidelines as indicated in the letter of 7th

93 September, 1993 were further clarified by the Government of India, in

relation to fixation of purchase price for power produced from non-

conventional energy. As per the guidelines commenting or clarifying

the earlier guidelines it was stated that the base price applicable to

non-conventional energy based power projects based on solar, wind

small hydro, biomass etc. shall be equal to the base price of the year

in which the PPAs are signed, clause 2 of the guidelines reads as

under:

"A promoter / developer shall be entitled to receive the base price set out in PPA for all electrical energy delivered from his project to the State grid for the duration of the Power Purchase Agreement. The rate shall be equal to base price in the year of signing of PPA, escalated at a rate of 5% per year for a period

94 of 10 years, from the date of signing of the Power Purchase Agreement. From the end of the 10 years, and for the remaining duration of the Power Purchase Agreement, the new purchase price shall be equal to the purchase price at the end of the 10th year, or the High Tension (HT) tariff prevalent in the State at that time which is higher."

23. In furtherance of the decision of the Govt. of India and the

guidelines published, the Govt. of Andhra Pradesh issued two

different GOs on which, the Tribunal as well as all the parties before

us have placed heavy reliance. They read as under:

95

ENERGY (RES) DEPARTMENT

G.O.MS. NO: 93 DATED: 18-11-1997

ORDER:-

"In the reference 1st read above, the Ministry of Non-Conventional Energy Sources, Government of India have issued guidelines

for promotional and Fiscal incentives to be given by State Government for power generation from Non-Conventional Energy Sources. The incentives are envisaged to encourage power generation in the Non- Conventional Sector which are renewable and encouragement from the Government for this Sector is necessary in view of the fact depletion of fossilfuels. Further, the Renewable/ Non-Conventional Energy Sources are least pollution-effecting.

96 In the G.O. third read above, the Government have accorded certain revised incentives in respect of the Developers with whom Non-

Conventional Energy Development Corporation of Andhra Pradesh had already entered into Memoranda of Understanding based on the guidelines existing prior to 15th November, 1995.

While reviewing the incentives made available

to the sectors, certain representations were received from some of the Non-Conventional Energy Developers, and they have requested for extending the benefits available to other sectors.

A review of the incentives made available to various sectors of non-conventional energy was made in the presence of official from Non-Conventional Energy Development Corporation of Andhra Pradesh and Andhra

97 Pradesh State Electricity Board, duly keeping in view the guidelines of Ministry of Non- Conventional Energy Sources, Government of India, dated: 13-9-1993, a view was taken to make available the incentives to all the Non- Conventional Energy Sources uniformly.

The Government after careful examination of the recommendations and with a view to encourage generation of electricity from renewable sources of energy hereby allow the

following uniform incentives to all the projects based on renewable sources of energy viz. Wind, Biomass, Co-generation, Municipal Waste and Mini Hydel :

S.No. Description

1. Power PurchaseRs. 2.25 price

2. Escalation 5% per annum with 1997-98 as

98 base year and to be revised on 1st April of every year upto the year 2000 A.D.

3. Wheeling Charges 2%

4. Third party sales Allowed at a tariff not lower than H.T. tariff of A.P.S.E. Board.

5. Banking Allowed upto 12

months

(a) Captive consumption Allowed throughout the year on 2% banking charges.

(b) Third party sale Allowed on 2% banking charges from August to March.

99 This order issues with the concurrence of Finance & Planning (Fin.) Department vide their U.O. No. 46291/351/EBS-EFES&T/97, dated: 18.11.1997.

(BY ORDER AND IN THE NAME OF THE GOVERNOR OF ANDHRA PRADESH)

V.S. SAMPATH SECRETARY TO GOVERNMENT

ENERGY (RES) DEPARTMENT

G.O. Ms. No. 112 Dated: 22.12.1998

ORDER:

100 "In the Government Order cited, certain uniform incentives were extended to the Developers of Power Projects using wind,

biomass co-generation, Municipal wastes and mini hydel for promotion of and to encourage generation of electricity from renewable sources of energy. In order to remove certain ambiguities in the implementation of uniform incentives scheme and also to ensure that the incentives contemplated are channelled for promotion and development of non-

conventional energy sources, in keeping with the spirit of Government Order cited, the following amendments are issued:

In the Government Order cited, certain uniform incentives were extended to the Developers of Power Projects using wind, biomass co-generation, Municipal wastes and mini hydel for promotion of and to encourage generation of electricity from renewable sources of energy. In order to remove certain

101 ambiguities in the implementation of uniform incentives scheme and also to ensure that the incentives contemplated are channelled for promotion and development of non-

conventional energy sources, in keeping with the spirit of Government Order cited, the following amendments are issued:

1. The uniform incentives specified in G.O. Ms. No.93, dated 18.11.1997 shall be available only to the power projects where fuel used is

from non-conventional energy sources which are on the nature of renewable sources of energy.

1. The operation of the incentives scheme shall be watched for a period of 3 years and at the end of 3 years period from the date of G.O. Ms. No.93 the Andhra Pradesh State Electricity Board shall come up with suitable proposals for review for further continuance of the incentives in the present form or in a

102 suitable modified manner to achieve the objectives of promotion of power generation through non-conventional sources.

1. Though there is a provision for banking and third party sale, in the absence of conferring the status of licences under Section 3 of the Indian Electricity Act, the Entrepreneurs/ Developers of non-conventional energy power may be handicapped in effecting third party sales to the needy and contracted consumers.

Therefore, it is hereby ordered that the Entrepreneurs/Developers covered by G.O.Ms. No.93, dated 18.11.1997 who made the third party sale of energy shall be deemed to be licencees for the purpose under Section 3 of the Electricity Duty Act, 1930 read with Section 28 of Indian Electricity Act."

(BY ORDER AND IN THE NAME OF GOVERNOR OF ANDHRA PRADESH)

103 S. SAMPATH SECRETARY TO GOVERNMENT

24. These were the declarations or representations stated to have

been made by the State to the Developers. The PPAs between

Transmission Corporation of Andhra Pradesh Ltd. and the

Developers were executed somewhere in May 1999 and some of the

agreements even prior thereto. However, despite all the above

guidelines and GOs, the Regulatory Commission passed an order on

20th June, 2001 determining the tariff as well as defining other rights

and obligations between the parties including that the generators

were not permitted to make sale in favour of third party. After the

104 passing of this order the Developers entered into PPAs between the

period August 2001 to 2002 and confirmed the acceptance and

implementation of the order of 20th June, 2001. While providing

different clauses relating to various facets of sale and distribution of

generated power, PPAs under Articles 2.1 and 2.2, which we have

already reproduced, contemplate specifically that the purchase of

energy by APTRANSCO will be at the tariff provided under Article

2.2. Article 2.2 determines the rate at Rs. 2.25 per unit with

escalation at 5% per annum with 1994-1995 as base year which is to

be revised on 1st April of every year upto the year 2003-2004, beyond

which the purchase price by APTRANSCO will be decided by the

Regulatory Commission. Still a further review of purchase price is

105 contemplated on completion of 10 years from the date of

commissioning of the project when it will be reworked. In other

words, there are specific stipulations provided under the PPAs, as

well as in the order dated 20th June, 2001, for revision/review of

purchase price. Clause 2.3 further clearly says that tariff is inclusive

of all taxes, duties and levies. In other words, all the documents

afore stated provide for a review including the guidelines issued by

the Govt. of India.

25. At this stage, we may notice that these guidelines are general

guidelines and every State was required to act as per its own needs,

convenience and by taking a general view, as to, which are the most

106 practical and affordable projects and how they should be carried on

by the State. To give meaning to the guidelines that they were

`absolutely mandatory', will not be in conformity with the law relating

to interpretation of documents as well as according to the canons of

exercise of executive and administrative powers. These guidelines

were certainly required to be moulded by the State to meet their

requirements depending on various factors prevailing in the State.

26. Now we will proceed to refer to the various legal provisions

relating to purchase price and/or tariff regulations. The principal

central legislation in this regard is the Indian Electricity Act, 2003.

Under Section 3, a national electricity policy and plan has to be

107 prepared by the Central Government which has to be notified. This

plan itself can be reviewed or revised by the appropriate authority

under the Act. Section 8 of the Electricity Act, 2003 requires every

State to notify and constitute, for the purposes of this Act, a

Commission for the State to be known as Electricity Regulatory

Commission of that State. Section 86 of this Act spells out the

functions of the State Commission. Under Section 86(1)(a) it is to

determine the tariff for generation, supply, transmission and wheeling

of electricity, wholesale, bulk and retail, as the case may be. It is

also to regulate electricity purchase and procurement process of

distribution licencees including the price at which electricity shall be

procured from the generating companies or licensees or from other

108 sources through agreements for purchase of power for distribution

and supply within the State as per Section 86(1)(b). Section 86(1)(d)

empowers this Commission to issue licences to persons seeking to

act as transmission licensees, distribution licensees and electricity

traders with respect to their operations within the State. Besides its

advisory functions it has also been given the general /residue powers

to do all other functions in terms of Section 86(1)(k). Sections 61 to

64 of the Electricity Act, 2003 place an obligation upon the

appropriate Commission to determine the tariff in accordance with

the provisions of this Act. An application for determination of tariff

shall be made by the generating company under Section 64 and the

tariff has to be determined by the appropriate Commission and it is

109 also required to specify the terms and conditions for determination of

the tariff as per the factors and the guidelines specified under

Section 61 of the Act.

27. The Reform Act, 1998 was enacted, primarily, with the object of

constituting two separate corporations; one for generation and other

for transmission and distribution of electrical energy. The essence

was restructuring, so as to achieve the balance required to be

maintained in regard to competitiveness and efficiency on the one

part and the social objective of ensuring a fair deal to the consumer

on the other. This Act is also intended for creation of a statutory

regulatory authority. Section 3 of the Act requires the State Govt. to

110 establish by notification a Commission to be known as Andhra

Pradesh Electricity Regulatory Commission. This was done by

notification dated 3rd April, 1999. As already noticed, section 11

detailed the functions of the Regulatory Commission and primarily it

had advisory as well as regulatory functions. In terms of Section

11(1)(c) it was required to issue licenses in accordance with the

provisions of the Act and determine the conditions to be included in

the license. However, 11(1)(e) gave it much wider power and duty to

regulate the purchase, distribution, supply and utilization of

electricity, the quality of service, the tariff and charges payable

keeping in view both the interest of the consumer as well as the

consideration that the supply and distribution cannot be maintained

111 unless the charges for the electricity supplied are adequately levied

and duly collected. In terms of Section 11(1)(l) it was to undertake

all incidental or ancillary things to the functions assigned to it under

the provisions of the Act. Section 12 of the Act vests the State Govt.

with the power to issue policy directions on matters concerning

electricity in the State including the overall planning and co-

ordination. All policy directions shall be issued by the State Govt.

consistent with the objects sought to be achieved by this Act and,

accordingly, shall not adversely affect or interfere with the functions

and powers of the Regulatory Commission including, but not limited

to, determination of the structure of tariffs for supply of electricity to

various classes of consumers. The State Govt. is further expected to

112 consult the Regulatory Commission in regard to the proposed

legislation or rules concerning any policy direction and shall duly take

into account the recommendation by the Regulatory Commission on

all such matters. Thus the scheme of these provisions is to grant

supremacy to the Regulatory Commission and the State is not

expected to take any policy decision or planning which would

adversely affect the functioning of the Regulatory Commission or

interfere with its functions. This provision also clearly implies that

fixation of tariff is the function of the Regulatory Commission and the

State Govt. has a minimum role in that regard. Chapter VII of this

Act deals with tariff. In terms of Section 26(2), the Regulatory

Commission, in addition to its power of issuing licence, is entitled to

113 fix terms and conditions for determination of the licensee's

revenue and tariffs by regulations which are to be duly published.

The expression `tariff' has not been defined in any of the Acts, with

which we are concerned in the present appeals, despite the fact that

the expression `tariff' has been used repeatedly in both the Acts.

Under the Electricity Act, 2003 `tariff' has neither been defined nor

explained in any of the provisions of the Act. Explanation (b) to

Section 26 of the Reform Act, 1998 states what is meant by `tariff'.

This provision states that `tariff' means a schedule of standard price

or charges or specified services which are applicable to all such

specified services provided to the type or types of customers

specified in the `tariff' notification. This is an explanation to Section

114 26 which deals with licenses, revenues and tariffs. In other words,

this explanation may not be of greater help to the Court in dealing

with the case of generating companies. Similarly, the expression

`purchase price' has neither been defined nor explained in any of the

afore-stated Acts.

28. Therefore, in the absence of any specific definition in any of

these Acts we will have to depend upon the meaning attached to

these expressions under the general law or in common parlance.

The expression `tariff' has been explained in the Law Lexicon with

legal Maxims, Latin terms and Words & Phrases (Second Edition

115 1997) as "determination, ascertainment, a table of rates of export and

import duties, in which sense the word has been adopted in English

and other European languages and as defined by the law dictionaries

the word `tariff' is a cartel of commerce; a book of rates; a table or

catalogue, drawn usually in alphabetical order, containing the names

of several kind of merchandise, with the duties or customs to be paid

for the same as settled by the authority or agreed between the

several princes and States that hold commerce together."

29. It has also been explained as a schedule, system, or scheme of

duties imposed by the Government of a country upon goods imported

or exported; published volume of rate schedules and general terms

116 and conditions under which a product or service will be supplied; a

document approved by the responsible regulatory agency listing the

terms and conditions including a schedule of prices, under which

utility services will be provided. The expression `purchase price' has

to be given its limited meaning, i.e. the price paid for purchasing a

good and in the context of the present case, price at which

generated electricity will be sold to the specified agencies. The term

`purchase price' indicated in the PPAs, as such, would be a matter

within the realm of contract but this is subject to the changes which

are contractually and/or even statutorily permissible. Purchase price

ultimately would form part of the tariff, as tariff relatable to a licensee

or a consumer would have essentially taken into account, the

117 purchase price. The purchase price may not include tariff but tariff

would always or is expected to include purchase price.

30. The Regulatory Commission is vested with very vast powers

and functions. Section 11 of the Reform Act, 1998 declares fixation

of tariff as one of the primary functions of the Regulatory Commission

in general more particularly, to the specified consumers under

Section 26 of the Reform Act, 1998. While under the Electricity Act,

2003, Sections 61 and 62 read with Section 86 (1)(a)(b) deal with

fixation of tariffs in relation to production, distribution and sale of

generated power to the end consumer. These provisions clearly

demonstrate that the Regulatory Commission is vested with the

118 function for determining the tariff for generation, supply, transmission

and billing of electricity etc., as well as regulation of electricity

purchase and procurement process of distribution licensees,

including price at which electricity shall be procured from the

generating companies. With these specific powers in the statute

book itself, it cannot be said that procurement of power from the

generating companies will not fall within the ambit of powers and

functions of the Regulatory Commission. It, as already noted, is a

common body performing functions, duties and exercising powers

under all these three Acts. This Court had the occasion to deal with

somewhat similar issues in the case of PTC India Ltd. v. Central

Electricity Regulatory Commission [(2010) 4 SCC 603]. The Court

119 was, amongst others, dealing with the provisions of Sections 61 to 63

of the Electricity Act, 2003 and regulation making power of the

Regulatory Commission. The Court was concerned with other issues

as well including the powers of the Tribunal in relation to judicial

review etc. but it will be of assistance to us to notice that the Court

referred to different kinds of delegated legislations under the

provisions of Electricity Act, 2003 and with regard to the power of the

Regulatory Commission and the scope of the term `tariff' the Court

held as under:

"23. Section 52 of the 2003 Act deals with trading of electricity activity. Under Section 52(1), the appropriate Commission may specify the technical requirement, capital adequacy requirement and creditworthiness

120 for being an electricity trader. Under Section 52(2), every trader is required to discharge its duties, in relation to supply and trading in electricity, as may be specified by the appropriate Commission.

24. The standards of performance of licensee(s) may be specified by the appropriate Commission under Section 57 of the Act.

25. The 2003 Act contains separate provisions for the performance of dual functions by the Commission. Section 61 is the enabling provision for framing of regulations by the Central Commission; the determination of terms and conditions of tariff has been left to the domain of the Regulatory Commissions under Section 61 of the Act whereas actual tariff determination by the Regulatory Commissions is covered by Section 62 of the Act. This aspect is very

121 important for deciding the present case. Specifying the terms and conditions for determination of tariff is an exercise which is different and distinct from actual tariff determination in accordance with the provisions of the Act for supply of electricity by a generating company to a distribution licensee or for transmission of electricity or for wheeling of electricity or for retail sale of electricity.

26. The term "tariff" is not defined in the 2003

Act. The term "tariff" includes within its ambit not only the fixation of rates but also the rules and regulations relating to it. If one reads Section 61 with Section 62 of the 2003 Act, it becomes clear that the appropriate Commission shall determine the actual tariff in accordance with the provisions of the Act, including the terms and conditions which may be specified by the appropriate Commission under Section 61 of the said Act. Under the 2003 Act, if one reads Section 62 with Section

122 64, it becomes clear that although tariff fixation like price fixation is legislative in character, the same under the Act is made appealable vide Section 111. These provisions, namely, Section 61, 62 and 64 indicate the dual nature of functions performed by the Regulatory Commissions viz. decision-making and specifying terms and conditions for tariff determination.

27. Section 66 confers substantial powers on

the appropriate Commission to develop the relevant market in accordance with the principles of competition, fair participation as well as protection of consumers' interests.

Under Sections 111(1) and 111(6) respectively, the Tribunal has appellate and revisional powers. In addition, there are powers given to the Tribunal under Section 121 of the 2003 Act to issue orders, instructions or directions, as it may deem fit, to the appropriate Commission for the

123 performance of statutory functions under the 2003 Act."

31. Similarly, another Bench of this Court in the case of Tata Power

Company Ltd. v. Reliance Energy Ltd., [2009 (7) SCALE 513], was

primarily, concerned with the role of the generating companies and

their right to make choice to sell power to any person or licensee and

while referring to the concept of open access, the Court in para 59 of

the judgment referred to the issues arising in the case which read as

under:

"Although before us a large number of contentions had been raised, the core questions, which arise for our consideration, are:-

124 (A) Whether recourse to Section 23 of the Act can be taken for issuance of any direction to the generating company? (B) Whether the Commission while applying the provisions of Section 86(1)(b) of the Act could also take recourse to Sections 23 and 60 thereof?

(C) Whether equitable allocation of power generated by a generating company is permissible?"

32. In the present case we are, primarily, concerned with the

answers given by the Court to questions (A) and (B) framed therein,

the discussion on the subject and finally the relevant conclusions

125 drawn by the Court in para 140 to 142. The Court elaborately

discussed the matter including the fact that some generating

companies had entered into PPAs while other had not. The Court,

amongst others, declare the following conclusions (of which we refer

only the relevant portions):

"7) if regulatory clause is sought to be applied

in relation to allocation of power, the same would defeat the de-licensing provisions.

Generating companies have the freedom to enter into contract and in particular long term contracts with a distribution company subject to the regulatory provisions contained in the 2003 Act.

8) PPA for a long term is essential for increasing and decreasing the capacity of

126 generation of electricity by the generating company, which purpose by the 2003 Act must be allowed to achieve.

13) Section 86(1)(b) of the 2003 Act clearly shows that the generating company indirectly comes within the purview of regulatory jurisdiction as and when directions are issued to the distributing companies by the appropriate Commission but the same would

not mean that while exercising the said jurisdiction, the Commission will bring within its umbrage the generating company also for the purpose of issuance separate direction."

33. In addition to the statutory provisions and the judgments afore

referred, we must notice that all the PPAs entered into by the

generating companies with the appropriate body, as well as the

127 orders issued by the State in GO Ms. Nos. 93 and 112, in turn, had

provided for review of tariff and the conditions. The Tribunal appears

to have fallen in error of law in coming to the conclusion that the

Regulatory Commission had no powers either in law or otherwise of

reviewing the tariff and so called incentives. Every document on

record refers to the power of the authority/Commission to take a

review on all aspects including that of the tariff. One of the relevant

consideration for determining the question in controversy is to

examine whether the matter falls within the statutory or contractual

domain. From various provisions and the documents on record it is

clear that Regulatory Commission is vested with the power to revise

tariff and conditions in relation to procurement of power from

128 generating companies. It is also clear from the record that in terms

of the contract between the parties, the APTRANSCO had reserved

the right to revise tariff etc. with the approval of the Regulatory

Commission.

34. With some emphasis, the parties had argued the question

relating to `estoppel' and `legitimate expectation' with reference to the

facts of the present case. The contention is raised that by the GOs

issued by the State Government as well as the letters of the ministry

a representation was made by the Government to the generating

companies and they, having altered their positions, have a right to

compel the State Government and the Regulatory Commission to

129 abide by those terms for ever and it is their legitimate expectation

that State is required to comply with those conditions and no other.

35. For proper analysis of the submissions made by the parties, it

is necessary for us to examine on what premises the appellants had

claimed and the Tribunal has accepted the plea of estoppel.

Admittedly, this all begins with the letter dated 7th September, 1993

issued by the Government of India, Ministry of Non-Conventional

Energy Sources, New Delhi to the Chief Secretary of the respective

States. In this letter, the new strategy action plan of the Ministry in

relation to generation of grid quality power from non-conventional

energy sources was mentioned in some elaboration and the Ministry

130 had referred to the fact that it had drawn certain guidelines and also

indicated the minimum buy-back price of Rs. 2.25 per unit which was

proposed by the Ministry and it was based upon the average cost of

generation, as noticed by the authorities, at the relevant point of time.

These guidelines were to constitute an attractive package to

encourage private sector and the respective States were required to

examine and alter or amend the same as conducive to a particular

State. Hereafter, a letter dated 25th November, 1994 was again

issued by the Ministry to the Managing Director of the Non-

Conventional Energy Development Corporation, Andhra Pradesh

annexing the guidelines which were subject to be amended. These

guidelines itself showed that Electricity Board, which was the

131 competent authority at that relevant point of time, to announce a

`base purchase price' every year for electrical energy purchased by

the Board from the non-conventional energy based projects. These

guidelines contemplated that the base price shall be escalated at a

minimum rate of 5% every year. Clause 2 of the Guidelines

stipulated that the promoter or a developer shall be entitled to receive

the base price set out in the PPA for all electrical energy delivered for

the duration of the PPA. The rate shall be equal to the base price in

the year of signing of PPA, escalated at the rate of 5% per year for a

period of ten years from the date of signing. Thereafter new

purchase price will be fixed as per the tariff prevalent in the State at

the relevant time. Thereafter, the Andhra Pradesh Government has

132 issued GO Ms. No. 93 dated 18th November, 1997 referring to certain

incentives required to be given to the projects. These incentives only

referred to the power purchase price, escalation of 5% with base

year 1997-98, wheeling charges, third party sales allowed to a limited

extent. These, again, were the guidelines which, in fact, we have

referred to in great detail above and were primarily intended to guide

the States in taking the respective decisions in that behalf. Again

vide GO. Ms. No. 112 dated 22nd December, 1998 referring to the

extension of all these uniform incentives, certain amendments were

carried out to GO Ms. No. 93 dated 18 th November, 1997. Clause 2

of this order referred that the operation of the incentive scheme shall

be watched for a period of three years and at the end of three years

133 the Electricity Board shall come up with suitable proposals for review

for further continuance of the incentives in that form, or to be

modified suitably. Keeping these guidelines in mind, the State of

Andhra Pradesh vide GO Ms. No. 93 dated 18th November, 1997,

while referring to the guidelines issued by the Government of India

for promotional and fiscal incentives, noticed the various

representations which were received from Non-conventional Energy

Developers for extension of benefits as afore-referred in relation to all

non-conventional energy resources uniformly. Thereafter, the parties

took up the matter for annual consideration, which exercise was

undertaken by them in terms of the guidelines issued by the State

and the Central Government. State of Andhra Pradesh reiterated the

134 incentives and directed that the same would continue for a period of

three years in terms of GO Ms. No. 93, whereafter it will be reviewed.

The incentives relied upon, on the basis of the guidelines and the

issued Government orders are primarily, related to fixation of

purchase price of the generated power from Non-Conventional

developer/generators and sale of such energy to third parties. In the

meanwhile, Regulatory Commission had been established under the

provisions of the Reform Act, 1998. This Regulatory Commission

was to take over all the functions of the said Electricity Board as well

as other authorities for generation, distribution and other matters

relating to electricity in the State. This resulted in initiation of suo

motu proceedings by the Regulatory Commission for determination

135 and fixation of tariff, which after hearing the parties finally passed the

order dated 20th June, 2001. This order as we have already noticed

was accepted by all the parties and has not been questioned till date.

This order provided for certain variations in the incentives, which as

already noticed, are related to the fixation of tariff or purchase price

and as stipulated, the Commission considered all objections at some

length and ordered that power generated by Non-conventional

Energy Developers is not permitted to be sold to third parties and

price was kept at Rs. 2.25 per unit price with 5% escalation per

annum with 1994-95 as the base year. The parties had entered into

agreements i.e. PPAs at different times after passing of this order

between June, 2001 to August, 2001 and even thereafter. Thus, at

136 that time, the entire matter between the parties was controlled by the

PPAs which fully contemplated that all the delivered energy at the

interconnection point for sale to TRANSCO will be purchased at the

tariff provided under Article 2.2 which in turn confirmed the order of

20th June, 2001 in that regard and it was stated that the matter will be

reviewed in April, 2004 and it could also be reviewed after 10 years

from the date of commissioning of the project. This PPA as well as

the order passed by the Regulatory Commission in the year 2001

remained in force without being questioned in any manner

whatsoever before any competent forum and in any case, not to any

benefit of respondents. Then came the order dated 20th March, 2004

passed by the Regulatory Commission again, by initiating suo motu

137 proceedings. In this order, the Commission had retained the basic

unit price of 2.25 as on 1st April, 1994 and the escalation index of 5%

per annum which was to be simple and not compounded every year.

In other words, on 1st April, 2001 the price was 3.37/kwh in relation to

Wind Power Purchasers. Except varying this price, the order of

2004, in turn, had reiterated the contents of the order of 2001 which,

as already noticed, has attained finality. Another factor which we

may notice is that in its order dated 7th July, 2004, while clarifying its

order dated 20th March 2004, the Commission has clearly observed:

"12. It is relevant to clarify that by the order dated 20-03-2004, the Commission is not mandating in any manner those NCE developers who have not accepted the earlier order dated 20-06-2001 passed by the

138 Commission, while their challenge to the order is pending the decision by the High Court. However, such of the NCE developers who had accepted the earlier order dated 20- 06-2001 and have been selling electricity generated by them to APTRANSCO cannot challenge the jurisdiction of the Commission to review the terms as per the stipulation contained in the order dated 20-6-2001."

36. On the basis of this factual matrix, the respondents claimed

that the State Government and the Regulatory Commission both

were bound to continue the incentives as were provided to them in

furtherance to the letters and orders of Central as well as the State

Governments discussed above. They have a legitimate right to

139 expect that these incentives were to be continued indefinitely in the

same manner and the authorities concerned are estopped from

altering the rates and/or imposing the condition of no sale to third

parties. We are unable to find any merit in this contention. In our

view, the Tribunal has erred in law in treating these inter-se letters

and guidelines between the Government of India, State Government

and the Commission/the State Electricity Board as unequivocal

commitments to the respondent/purchasers/generators/developers

so as to bind the State for all times to come. For the principle of

estoppel to be attracted, there has to be a definite and unambiguous

representation to a party which then should act thereupon and then

alone the consequences in law can follow. In the present case, the

140 policy guidelines issued by the Central Government were the

proposals sent to the State Government, which the State

Government accepted to consider, amend or alter as per their needs

and conditions and then make efforts to achieve the objects of

encouraging Non-conventional Energy Generator and Purchasers to

enter into this field. These are the matters, which will squarely fall

within the competence of the Regulatory Commission/the State

Electricity Board at the relevant points of time. Besides that, there

was no definite and clear promise made by the authorities to the

developers that would invoke the principle of promissory estoppel.

Undoubtedly, to encourage participation in the field of generation of

energy through non-conventional methods, some incentives were

141 provided but these incentives under the guidelines as well as under

the PPAs signed between the parties from time to time were subject

to review. In any case, the matter was completely put at rest by the

order of 20th June, 2001 and the PPAs voluntarily signed by the

parties at that time, which had also provided such stipulations. If

such stipulations were not acceptable to the parties they ought to

have raised objections at that time or at least within a reasonable

time thereafter. The agreements have not only been signed by the

parties but they have been fully acted upon for a substantial period.

We have already referred to various statutory provisions where the

Regulatory Commission is entitled to determine the tariff. In this

situation we are unable to agree with the view taken by the Tribunal

142 that Regulatory Commission had no jurisdiction and that fixation of

tariff does not include purchase price for buy back of the generated

power.

37. The principle of promissory estoppel, even if, it was applicable

as such, the Government can still show that equity lies in favour of

the Government and can discharge the heavy burden placed on it. In

such circumstances, the principle of promissory estoppel would not

be enforced against the Government as it is primarily a principle of

equity. Once the ingredients of promissory estoppel are satisfied

then it could be enforced against the authorities including the State

with very few extra ordinary exceptions to such enforcement. In the

United States the doctrine of Promissory Estoppel displayed

143 remarkable vigor and vitality but it is still developing and expanding.

In India, the law is more or less settled that where the Government

makes a promise knowing or intending that it would be acted upon by

the promissory and in fact the promissory has acted in reliance of it,

the Government may be held to be bound by such promise. It is a

settled canon of law that doctrine of promissory estoppel is not really

based on principle of estoppel but is a doctrine evolved by equity in

order to prevent injustice. There is no reason why it should be given

only a limited application by way of defence. It can also be the basis

of a cause of action. Even if we assume that there was a kind of

unequivocal promise or representation to the respondents, the

reviews have taken place only after the period specified under the

144 guidelines and/or in the PPAs was over. This is a matter which,

primarily, falls in the realm of contract and the parties would be

governed by the agreements that they have signed. Once these

agreements are singed and are enforceable in law then the

contractual obligations cannot be frustrated by the aid of promissory

estoppel.

38. Following the judgment of this Court in the case of Union of

India v. M/s. Indo-Afghan Agencies Ltd. [(1968) 2 SCR 366], this

Court in the case of Century Spinning and Manufacturing Company

Ltd. v. The Ulhasnagar Municipal Council [(1970) 1 SCC 582] held

that if the promise is made in regard to a present or existing fact, the

145 principle of estoppel can be enforced against the Government. But a

promise in relation to a future transaction or act may not fall within

the ambit of promissory estoppel. This law was further discussed

with some elaboration by the Court in the case of Motilal Padampat

Sugar Mills. Co. Ltd. v. State of Uttar Pradesh [(1979) 2 SCC 409],

where the Court after considering the position of law in England and

United States and comparing the same to the Indian Law, laid down

the basic concept of promissory estoppel that would determine its

enforceability. In the case of Pawan Alloys v. UPSEB [(1997) 7 SCC

251], the Court, though had enforced the principle of promissory

estoppel against the Board, but certain basic facts of that case needs

to be noticed by us. The appellants in that case had neither

146 expressly nor impliedly stated that it has the power to withdraw the

incentives and rebate at a time prior to the expiry of three years for

which it was granted. Secondly, none of the private parties had

voluntarily or even by remotest choice agreed to give up the benefits

given to them by clear representation held out by the Board. As is

obvious, the power of the Board to increase the general tariff was

accepted, but the incentive of rebate was de horse the tariff and thus,

promissory estoppel was enforceable against the Board.

39. Another very important dictum of the Court in this judgment

was that the power of the Board to fix general tariff as well as

discharge of other related functions was held to be quasi-judicial in

character. This power of the Board is exercised under the statute as

147 a power-cum-duty and is independent of granting or declining any

rebate. In the present case the order dated 20th June, 2001 was fully

accepted by the parties without any reservation. After the lapse of

more than reasonable time of their own accord they voluntarily

signed the PPA which contained a specific stipulation prohibiting sale

of generated power by them to third parties. The agreement also

had renewal clause empowering TRANSCO/APTRANSCO/Board to

revise the tariff. Thus, the documents executed by these parties and

their conduct of acting upon such agreements over a long period, in

our view, bind them to the rights and obligations stated in the

contract. The parties can hardly deny the facts as they existed at the

relevant time, just because it may not be convenient now to adhere

148 to those terms. Conditions of a contract cannot be altered/avoided

on presumptions or assumptions or the parties having a second

thought that a term of contract may not be beneficial to them at a

subsequent stage. They would have to abide by the existing facts,

correctness of which, they can hardly deny. Such conduct, would be

hit by allegans contraria non est audiendus.

40. Lastly, we may refer to a more recent judgment of this Court.

In the case of Kusumam Hotels (P) Ltd. v. Kerala Seb [(2008) 13

SCC 213], where the Court discussed in some elaboration the

different judgments of this Court on the subject and then declined to

enforce the principle of promissory estoppel as there was no

149 foundational facts and also indicated that the Government can alter,

amend or rescind its policy decision in public interest, the Court held

as under:

"27. Yet again in U.P. Power Corpn. Ltd. v. Sant Steels & Alloys (P) Ltd., it was held:

(SCC p.800, para 27)

"27. In this background, in view of various

decisions noticed above, it will appear that the Court's approach in the matter of invoking the principle of promissory estoppel depends on the facts of each case. But the general principle that emerges is that once a representation has been made by one party and the other party acts on that representation and makes investment and thereafter the other party resiles, such act cannot be stated to be fair and reasonable.

When the State Government makes a representation and invites the entrepreneurs by showing various benefits for encouraging

150 to make investment by way of industrial development of the backward areas or the hill areas, and thereafter the entrepreneurs on the representations so made bona fide make investment and thereafter if the State Government resiles from such benefits, then it certainly is an act of unfairness and arbitrariness. Consideration of public interest and the fact that there cannot be any estoppel against a statute are exceptions."

xxx xxx xxx

36. The law which emerges from the above discussion is that the doctrine of promissory estoppel would not be applicable as no foundational fact therefor has been laid down in a case of this nature. The State, however, would be entitled to alter, amend or rescind its policy decision. Such a policy decision, if taken in public interest, should be given effect to. In certain situations, it may have an impact from a retrospective effect but the same by itself would not be sufficient to be struck down on the ground of unreasonableness if the source of power is referable to a statute or statutory provisions. In our constitutional scheme, however, the statute and/or any

151 direction issued thereunder must be presumed to be prospective unless the retrospectivity is indicated either expressly or by necessary implication. It is a principle of the rule of law. A presumption can be raised that a statute or statutory rule has prospective operation only."

41. In our country, the law of promissory estoppel has attained

certainty. It is only an unambiguous and definite promise, which is

otherwise enforceable in law upon which, the parties have acted,

comes within the ambit and scope of enforcement of this principle

and binding on the parties for their promise and representation. It will

be difficult for the Court to hold that the guidelines can take the

colour of a definite promise which in the letters of the Central

Government itself were proposals to the State Government. Besides

152 that, if for the sake of argument, we treat the State letters/circulars as

promise or representations to the private parties like the

respondents, even then, they led to the execution of a definite

contract between the parties which will purely fall in the domain of

contractual law. These contracts specifically provided for review and

when reviewed in the year 2001 parties not only accepted the order

but executed contracts (PPAs) in furtherance of it. In these

circumstances, we are unable to accept the argument that the State

or the Regulatory Commission or erstwhile State Electricity Board

were bound to allow same tariff and permit third party sales for an

indefinite period. To this extent, authorities, in any case, would not

be bound by the principle of estoppel.

153

42. Now, we will proceed to examine the merits or otherwise of the

findings recorded by the Tribunal that the PPAs executed by the

parties, were result of some duress and thus, it will not vest the

authorities with the power to review the tariff and other granted

incentives. PPAs were executed prior and subsequent to the

issuance of the order dated 20th June, 2001. Different persons

executed the contracts at different times in full awareness of the

terms and conditions of such PPA. To frustrate a contract on the

ground of duress or coercion, there has to be definite pleadings

which have to be substantiated normally by leading cogent and

proper evidence. However, in the case where summary procedure is

154 adopted like the present one, at least some documentary evidence or

affidavit ought to have been filed raising this plea of duress

specifically. From the record before us, nothing was brought to our

notice to state the plea of duress and to prove the alleged facts

which constituted duress, so as to vitiate and/or even partially

reduce, the effect of the PPAs. On the one hand, the Tribunal

appears to have doubted the binding nature of the contracts stating

that it contained unilateral conditions introduced by virtue of Order

and approval of the Regulatory Commission, while on the other hand,

in para 53 of the Order, it proceeded on the presumption that PPAs

are final and binding and still drew the conclusion that the Regulatory

Commission could not revise the tariff. Even in the order, no facts

155 have been pointed out which, in the opinion of the Tribunal,

constituted duress within the meaning of the Contract Act so as to

render the contract voidable. Another aspect of the entire

controversy is that none of the generators had challenged the

agreements and in fact, except in arguments before the Tribunal no

case was made out for the purposes of vitality of the contract or any

part thereof. On the contrary, all the generators under all the

branches of Non-Conventional Energies, have accepted the contract

and proceeded on the basis that the said contracts are binding and

still the Regulatory Commission does not have any power or

jurisdiction to revise the tariff or deal with the concessions. If the

contracts are a result of duress and cannot be given effect, the

156 results could be disastrous for both the sides. If a contract suffers

from the defect of undue influence or duress, as the case may be

then the consequences in law should follow. It is a settled canon of

law that when the consent to agreement is caused by undue

influence the agreement is a contract voidable at the option of the

parties whose consent was so caused. Even if such party had

received any benefit under the terms of the contract the Court could

still pass orders as to the voidability or otherwise of the contract but

upon such terms and conditions as the Court may deem just. Undue

influence or duress is said to be subtle of the fraud whereby

mysteries burden over the mind of a victim by insidious approaches.

Firstly, there are no facts on record, much less, supported by any

157 documentary or any other evidence to sustain the plea that the

contracts (PPAs) are a result of undue influence or duress by the

State or its agencies upon the generators. Secondly, the generators

have already taken benefit of that contract which was based on the

policy of the State as well as the order of the Regulatory

Commission. Having attained those benefits, it will hardly be of any

help to the appellants, particularly, in the facts and circumstances of

the case, to substantiate, justify or argue the plea of duress.

43. In the case of Birla Jute Manufacturing Co. v. State of M.P.

[(2002) 9 SCC 667], the Supreme Court was concerned with a case

where validity of undertaking given under duress was the plea taken

158 by the appellant. This pleading on the same merits and noticing the

material, like the present case, the Court held as under:

"2. Learned counsel, appearing for the appellant urged that the undertaking given by the appellant Company was under duress and, therefore, it is not an undertaking in the eyes of law and the appellant is not liable to pay the water charges under such circumstances. There is no material before

us to come to this conclusion that the undertaking given by the appellant was under

duress. On the contrary we find that the appellant had given the solemn undertaking voluntarily. We, therefore, find no merit in the appeal."

44. The Tribunal in paras 45-47 of its order has used the

expression "out of compulsion some of the developers entered into

159 Power Purchase Agreement with APTRANSCO accepting the terms

and conditions set out in order dated 20th June, 2001". We are afraid

that there is hardly any material on record to substantiate such a

finding. What was the compulsion and what were the facts which

persuaded the Tribunal to take such a view are conspicuous by their

very absence. A compulsion leading to execution of a contract is a

matter entirely based upon facts. It is difficult for this Court,

originally, to infer duress or compulsion in absence of specific

pleadings and materials in that behalf. It may also be noticed at the

cost of repetition that the order dated 20th June, 2001 was never

questioned by any of the parties to any favourable results. Even in

these proceedings there is no challenge to the said order which,

160 admittedly, has been acted upon and has attained finality. The

power generators/Non-Conventional Energy developers have

executed the PPAs without any protest and, in fact, did nothing to

challenge such agreements or any part thereof, till passing of the

impugned order of 2004. There were some proceedings, without

questioning the validity and effectiveness of the order dated 20th

June, 2001, carried out by some of the generators before the Andhra

Pradesh High Court. Certain interim directions were passed in those

proceedings, as already noticed, but finally all proceedings

culminated into dismissal of the Writ Petitions and/or reference back

to the Regulatory Commission for grant of a hearing as per the

directions contained in the order of the High Court.

161

45. Another important aspect of the case is that the learned

counsel appearing for the respondents, particularly, in Appeal No.

2926 of 2006 had stated that they are not arguing in support of the

plea of estoppel and duress as decided by the Tribunal in their

favour. They had mainly concentrated their submissions on

jurisdiction of the Regulatory Commission with respect to withdrawal

of incentives and fixation of tariff. These are the contracts which

have been executed prior and after the issuance of the order dated

20th June, 2001 and have been acted upon by the parties without any

reservation. In view of the fact that no challenge was made to the

order dated 20th June, 2001, execution of PPAs and the conduct of

162 the respondents over the long period and particularly, while keeping

in mind the statutory provisions we are unable to sustain the plea of

duress in favour of the respondents.

46. The main emphasis of the judgment of the Tribunal is that the

Government had framed the policy under which, incentives were

given and as such, the Regulatory Commission had no power and

authority to fix tariffs or amend or alter the policy decision of the

State. We have already held that in law and in face of the contract

between the parties the Regulatory Commission is the Authority to fix

the tariff which includes within its ambit the purchase price of the

Non-conventional Energy under the policy of the State. It appears

163 that the Tribunal has taken a narrower view of the jurisdiction vested

in the Regulatory Commission which is discharging its statutory

functions under all the three Acts in accordance with law. In terms of

Section 12 of the Reform Act, 1998, which has been referred to by

the Tribunal, the power of the Government had been stated. The

power available to the Government to issue policy directions has two

restrictions. Firstly, the policy direction has to be on the matters

related to electricity in State including overall planning and

coordination. Secondly, all such policy directions have to be issued

by the State Government in consonance with the object sought to be

achieved by this Act and accordingly shall not adversely affect or

interfere with the functions and powers of the Regulatory

164 Commission including, but not limited to, determination of the

structure of tariff for supply of electricity to the consumers. Powers

vested in the Regulatory Commission to frame regulations under

Section 54 also intend that regulations are to be framed with an

object to ensure proper performance of its functions under the Act.

In other words, both the State and the Regulatory Commission, are

supposed to exercise their respective powers only for the purposes

of furthering the cause of the Act. The Commission discharging its

statutory functions within the ambit of Sections 11, 12 and 26 of the

Reform Act, 1998 as well as Sections 61, 62 and 86(1)(b) of the

Electricity Act, 2003 renders advisory functions to the State. All

these provisions, examined and analyzed cumulatively, do not

165 support the approach adopted by the Tribunal that the functions of

the Regulatory Commission in fixing tariff/purchase price was

contrary to or distinctive of the said policy. This cannot be supported

either on the basis of the statutory provisions of the various Acts as

well as with reference to the various documents on record including

the order dated 20th June, 2001 and the PPAs signed by the parties

at different stages. We are also unable to contribute to the view of

the Tribunal that the Regulatory Commission has acted in

contradiction or conflict with the State policy. The State was certainly

not intending to provide incentives and concessions with assurance

of buy-back to enable the Non-Conventional Energy

developers/generators to sell generated powers to third parties. It

166 must be kept in mind that the policy of the Government of India as

well as the State of Andhra Pradesh was for encouraging the

developers/generators of Non-conventional Energy to generate

electricity for the benefit of public at large with buy back of power

being one of the basic features of this policy. Such parameters are

obviously subject to change in larger public interest. All these issues,

in fact, loose much significance because of the fact that parties have,

by and large, entered into the field of contract simpliciter and their

rights are controlled by the contracts executed between them. There

is no challenge to these contracts and, therefore, it may be hardly

permissible for the Court to go behind these contracts and permit

167 questioning of the statutory jurisdiction vested in the Regulatory

Commission.

47. In the case of BSES Ltd. v. Tata Power Co. Ltd. [(2004) 1 SCC

195], the Court clearly held that after creation of the Regulatory

Commissions under the provisions of the Electricity Regulatory

Commission Act, 1998, the Commission has clear power and

jurisdiction to fix tariff. The Court should not adopt an interpretation

which should neither be strict nor narrower so as to oust the

jurisdiction of the Regulatory Commission, as it would defeat the very

object of enacting the said Act. The reliance placed by the

168 respondents upon the judgment of this Court in the case of Andhra

Pradesh Electricity Regulatory Commission v. R.V.K. Energy Private

Limited [(2008) 17 SCC 769] is, again, of not much help to them. In

that case also, the Court had upheld the exercise of statutory power

by the Regulatory Commission. Of course, the Court held that the

regulatory power u/s 11(1)(e) of the Reform Act, 1998 does not

ordinarily extend to prohibition or positive direction for entire supply to

APTRANSCO alone. Such prohibition may be resorted to in

exceptional situations. It reiterated the principle that the Government

policy as well as the Regulatory Commission should act in

consonance with the object of the Act.

169

48. The appellants have referred and relied upon the policy

directions and guidelines framed by the Central Government while

the respondents have relied upon these documents as well as the

circulars issued by the State of Andhra Pradesh. The respondents

have raised the plea of estoppel against the Regulatory Commission

on the basis of the averment that the State had framed policies,

which the Regulatory Commission instead of implementing, has

acted contrary thereto. There is no doubt that before the formation of

the Regulatory Commission it was the State Electricity Board which

was performing all the functions in relation to generation as well as

distribution of electricity. The Board was directly under the control of

170 the State and the State, in exercise of its general executive powers,

had framed policies to encourage Non-conventional Energy

developers and producers to come into the field of generation of

electricity and had issued the Government orders which we have

discussed in some detail above. Strange enough, the State of

Andhra Pradesh was neither impleaded as a party to the proceedings

before the Regulatory Commission nor before the Tribunal. In fact,

the Tribunal has referred to various acts and deeds of the State and

consequences thereof, but did not consider it appropriate to implead

the State Government as a party to the proceedings. We are of the

considered view that presence of the State Government before the

Tribunal could have certainly been appropriate, inasmuch as the

171 State would have placed before the Appellate Authority and the

Regulatory authorities, its views in regard to revision of incentives as

well as the purchase price. We are also constrained to observe that

the State of Andhra Pradesh was a necessary, in any case, a proper

party in these proceedings. This itself would be a ground for this

Court to remit the matter to the Competent Authority, in addition to

the other reasons recorded in this judgment.

49. In the present case, the restriction with regard to third party

sales was not only creation of a directive issued or approval granted

by the Regulatory Commission, but was actually in furtherance to the

contract entered into between the parties. Rights and liabilities

172 arising from a binding contract cannot be escaped on the basis of

some presumptions or inferences in relation to the facts leading to

the execution of the contract between the parties. The jurisdiction of

the Regulatory Commission, in the facts of the case, arises not only

from the statutory provisions under the different Acts but also in

terms of the contract executed between the parties which has binding

force. Lastly, but with great emphasis, it was argued on behalf of the

respondents that enforcement of the purchase price at the rate

determined by the Regulatory Commission along with complete

prohibition on the right of the Non-conventional Energy

Generator/Developers to sell generated power to the third parties

would compel them to shut down their projects. The rates are so

173 unfair that it would result in extinguishment of the power generating

units from the State of Andhra Pradesh on the one hand, while on the

other, it is bound to prejudicially affect the larger public interest.

According to the respondents they have invested large sums of

money in developing these generating units and it will be unfair to

compel their closure, particularly, when for all these years they have

supplied electricity generated by them solely to APTRANSCO or its

predecessors.

50. We find some substance in this submission and are of the view

that it is a matter of some concern, even for the State Government.

All these projects, admittedly, were established in furtherance to the

174 scheme and the guidelines provided by the Central Government

which, in turn, were adopted with some modification by the State

Government. The State Electricity Board implemented the said

scheme and initially had permitted sale of generated electricity to

third parties, however, subsequently and after formation of the

Regulatory Commission which, in turn, took over the functions of the

State Electricity Board, the incentives were modified and certain

restrictions were placed. The reasons for these restrictions have

been stated in the affidavit filed on behalf of the appellants which, as

already noticed by us, is not a matter to be examined by this Court in

exercise of its extra-ordinary jurisdiction. These matters, essentially,

175 must be examined by expert bodies particularly, when such bodies

are constituted under the provisions of a special statute.

51. The basic policy of both the Central as well as the State

Government was to encourage private sector participation in

generation, transmission and distribution of electricity on the one

hand and to further the objective of distancing the regulatory

responsibilities of the Regulatory Commission from the Government

and of harmonizing and rationalizing the provisions of the existing

laws relating to electricity in India, on the other hand. The object and

reasons of Electricity Act, 2003 as well as the Reform Act, 1998 are

definite indicators of such legislative intent. The basic objects of

176 these enactments were that the said Regulatory Commission may

permit open access in distribution of energy as well as to

decentralize management of power distribution through different

bodies. The Reform Act, 1998 stated in its objects and reasons that

the set-up of power sector in force, at that time, was virtually

integrated and functional priorities were getting distorted due to

resource-crunch. This has resulted in inadequate investment in

transmission and distribution which has adversely affected the quality

and reliability of supply. The two corporations proposed thereunder

were to be constituted to perform various functions and to ensure

efficiency and social object of ensuring a fair deal to the customer.

These objects and reasons clearly postulated the need for

177 introduction of private sector into the field of generation and

distribution of energy in the State. Efficiency in performance and

economic utilization of resources to ensure satisfactory supply to the

public at large is the paramount concern of the State as well as the

Regulatory Commission. The policy decisions of these constituents

are to be in conformity with the object of the Act. Thus, it is

necessary that the Regulatory Commission, in view of this object,

take practical decisions which would help in ensuring existence of

these units rather than their extinguishment as alleged.

52. In view of our above detailed discussion, we dispose of these

appeals with the following order:

178

(a) The order of the Tribunal dated 2nd June, 2006 is hereby set

aside.

(a) We hold that the Andhra Pradesh Electricity Regulatory

Commission has the jurisdiction to determine tariff which

takes within its ambit the `purchase price' for

procurement of the electricity generated by the Non-

conventional energy developers/ generators, in the facts

and circumstances of these cases.

(b) We hereby remand the matters to the Andhra Pradesh

Electricity Regulatory Commission with a direction that it

shall hear the Non-conventional energy generators

179 afresh and fix/ determine the tariff for purchase of

electricity in accordance with law, expeditiously.

(c) It shall also re-examine that in addition to the above or in the

alternative, whether it would be in the larger interest of

the public and the State, to permit sale of generated

electricity to third parties, if otherwise feasible.

(d) The Andhra Pradesh Electricity Regulatory Commission shall

consider and pronounce upon all the objections that may

be raised by the parties appearing before it, except

objections in relation to its jurisdiction, plea of estoppel

and legitimate expectancy against the State and/or

180 APTRANSCO and the plea in regard to PPAs being

result of duress as these issues stand concluded by this

judgment.

(e) We make it clear that the order dated 20th June, 2001 passed

by the Andhra Pradesh Electricity Regulatory

Commission has attained finality and was not challenged

in any proceedings so far. This judgment shall not,

therefore, be in detriment to that order which will operate

independently and in accordance with law.

(f) We also hereby direct that State of Andhra Pradesh shall be

added as a party respondent in the proceedings and the

Andhra Pradesh Electricity Regulatory Commission shall

181 grant hearing to the State during pendency of proceeding

before it.

53. In the facts and circumstances of the case parties are left

to bear their own costs.

........................................J. [DR. B.S. CHAUHAN ]

........................................J. [ SWATANTER KUMAR ]

182 New Delhi July 8, 2010

183