Supreme Court: The bench of L. Nageswara Rao and BR Gavai*, JJ has held that the conduct of Andhra Pradesh DISCOMS, which are instrumentalities of the State, of purchasing the power at a higher rate is contrary to public interest.

 DISCOMS,   lies   in purchasing the power at the rate of Rs.3.82 per unit from HNPCL or by purchasing it at the rate of Rs.4.33 per unit from KSK Mahanadi.

An initial PPA was entered into between Andhra Pradesh State Electricity Board (APSEB) and Hinduja   National Power Corporation Limited (HNPCL) on 9th  December, 1994. On 25th July, 1996, the Central Electricity Regulatory Commission (CERC) granted a Techno Economic Clearance for the power project for an estimated cost of Rs.4628.11 crores.

From the year 2012 onwards till January, 2018, it was the consistent stand of the State of Andhra Pradesh as well as the APDISCOMS that it would be purchasing 100% power generated from the project of HNPCL.  Application for grant of approval to the Continuation Agreement dated 28th  April,   2016   with the Amended and Restated PPA of 1998 was filed by the DISCOMS.  The matters were heard finally on 15th May, 2017 and closed for orders. However, for some unknown reasons, things turned topsy-turvy between 15th  May, 2017 and 4th  January, 2018, on which date, the DISCOMS did a somersault   and filed applications for withdrawal of the aforementioned application.

Holding that DISCOMS could not be permitted to change the decision at their whims and fancies and, particularly, when it is adversarial to the public interest and public good, the Court observed that every decision of the State is required to be guided by public interest and the power is to be exercised for public good.

“For reasons unknown, the DISCOMS took a decision to resile from their earlier stand, due to which, not only the huge investment made by HNPCL would go in waste, but also valuable resources of the public including thousands of acres of land would go in waste.”

The Court observed that DISCOMS are instrumentalities of the State and as such, a State within the meaning of Article 12 of the Constitution of India.

“Every action of a State is required to be guided by the touch¬stone of non-arbitrariness, reasonableness and rationality. Every action of a State is equally required to be guided by public interest. Every holder of a public office is a trustee, whose highest duty is to the people of the country.”

Stating that the acts done by the DISCOMS, are acts, which have been done wrongfully and wilfully without reasonable and probable cause, affecting public interest and public good, without there being any rational or reasonable basis for the same, the Court asked,

“… whether public interest, which is so vociferously pressed into service in the present matter by the   DISCOMS, lies in purchasing the power at the rate of Rs.3.82 per unit from HNPCL or by purchasing it at the rate of Rs.4.33 per unit from KSK Mahanadi. We strongly deprecate such a conduct of the appellants – DISCOMS, which are instrumentalities of the State.  The appellants – DISCOMS, rather than acting in public interest, have acted contrary to public interest.”

The Court, hence, imposed a cost of Rs. 5 lakhs and directed that the DISCOMS shall forthwith start purchasing the power from HNPCL at the rate of Rs.3.82 per unit.

[Southern Power Distribution Power Company Limited of Andhra Pradesh v. Hinduja National Power  Corporation Limited, 2022 SCC OnLine SC 133, decided on 02.02.2022]

*Judgment: Justice BR Gavai


For appellants: Senior Advocate C.S.   Vaidyanathan,

For HNPCL: Senior Advocates Dr. Abhishek Manu Singhvi and M.G. Ramachandran

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