Case BriefsTribunals/Commissions/Regulatory Bodies

Central Electricity Regulatory Commission (CERC): The Coram of P.K. Pujari (Chairperson), I.S. Jha (Member) and Arun Goyal (Member) disposed of a petition while condoning the delay in the matter filed under Section 79(1)(k) of the Electricity Act, 2003 read with Regulation 15 of the Central Electricity Regulatory Commission (Terms and Conditions for Recognition and Issuance of Renewable Energy Certificates for Renewable Energy Generation) Regulations, 2010 seeking condonation of delay in submitting the application for issuance of Renewable Energy Certificate (REC) and other appropriate directions.

India Glycols Limited (the Petitioner) was engaged in the business of generation of electricity from its bio-mass based renewable energy cogeneration facility having an installed capacity of 12 MW located at Gorakhpur, Uttar Pradesh out of which 4 MW was accredited on 17-05-2016 and registered under REC mechanism on 08-06-2016. Based on the EIR received from REC Registry, the Petitioner had submitted online application on the portal on 20-08-2018 specifying the quantum for which REC needed to be issued. However, the Petitioner obtained the verified EIR report from UPSLDC only on 30-08-2018, and owing to internal processes of the Petitioner and the subsequent days i.e. 01-09-2018, 02-09-2018 and 03-09-2018 being non-working days, the Petitioner physically filed the application with NLDC on 04-09-2018. However, NLDC vide its email dated 13-09-2018 had refused to accept the request of the Petitioner. The Petitioner made another representation vide email dated 20-09-2018 which was again rejected by NLDC on 24-09-2018 based on the timelines prescribed under Regulation 7.1 of the REC Regulations, 2010. The Petitioner had filed the present petition seeking condonation of three days delay in submitting the application for issuance of RECs for the month of February 2018.

The issue before the Commission was that whether the procedural delay of 3 days in filing the application for issuance of RECs for the month of February 2018 can be condoned and whether the Respondent can be directed to issue equivalent RECs for the energy injected accordingly.

The Commission observed that as per the mandate of the REC Regulations, 2010 and the REC Issuance Procedures, the eligible entity has to apply for the issuance of REC on the Web-Based Application as per the details given in the Energy Injection Report (EIR issued by the SLDC/ on Recommendation of SERC for issuance of RECs) and shall also submit the same information in physical form with the Central Agency (NLDC) within six months. The Central Agency has to verify the application in terms of the Energy Injection Reports issued by the concerned State Load Despatch Centre in respect of the Eligible Entity, fee & charges for issuance of certificates and compliance auditors report, if any. It further observed that Petitioner had accepted the delay of three days in filing of the application for issuance of RECs for the month of February 2018 and that the delay was due to delay in approving EIR by UPSLDC and has prayed for condoning the delay and issuance of equivalent RECs. NLDC has submitted that it does not have the powers to condone the delay in the present case and under the extant Regulations/ Procedure.

The Commission condoned the delay in filing EIR by the Petitioner and held that the delay in filing physical EIR with NLDC for issuance of RECs for the month of February 2018 was because of late receipt of approval of UPSLDC which was beyond the control of the Petitioner and the same was procedural in nature and merits condonation.[India Glycols Ltd. v. National Load Despatch Centre (NLDC), 2021 SCC OnLine CERC 1, decided on 24-01-2021]


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Case BriefsTribunals/Commissions/Regulatory Bodies

Appellate Tribunal for Electricity (APTEL): A Coram of Manjula Chellur, J. (Chairperson) and S.D. Dubey (Technical Member), allowed an appeal which was filed under Section 111 of the Electricity Act, 2003 against order passed by the Uttar Pradesh Electricity Regulatory Commission (State Commission) whereby the State Commission had rejected the petition of the Appellant seeking loss of fixed charges on account of the lower plant availability of 54.78% only, during the year 2017-18, which was directly due to the Appellant being not able to declare capacity to the full extent wholly and exclusively due to the persistent non-payment of the bills in accordance with the terms of Power Purchase Agreement (PPA) by the Respondent No. 2, Uttar Pradesh Power Corporation Limited (UPPCL) for the Electricity generated and supplied by the Appellant.

Facts:

The Appellant is a generating company within the meaning of Section 2(28) of the Electricity Act, 2003 having established a 3 x 660 MW power plant in villages, existing under the provisions of the Companies Act, 2013 in the State of Uttar Pradesh. The Respondent 1 – State Commission is the Electricity Regulatory Commission for the State of Uttar Pradesh exercising powers and discharging its functions under the provisions of the Electricity Act, 2003, it determined the tariff for the supply of electricity and also exercises the powers to adjudicate and decide on any disputes that arise between the Appellant and UPPCL. The Respondent 2 UPPCL is the Apex Body in the State of Uttar Pradesh which is overseeing the distribution and supply of electricity for and on behalf of the Distribution Companies (Respondents 3-6). They have authorized UPPCL to execute/sign the Power Purchase Agreements and also to carry out all necessary actions on their behalf in relation to the power purchase and supply. For the establishment of the generating station of the appellant, a Memorandum of Understanding (MoU) dated 22-04-2010 was entered into between the Government of Uttar Pradesh (GoUP) and a consortium of companies led by Bajaj Hindusthan Sugar Limited (BHSL) under a Special Purpose Vehicle (SPV), the Appellant which had already been incorporated by Respondent 2. The Appellant and UPPCL had entered into a PPA. The State Commission had allowed provisional tariff of Rs 1.88 towards fixed cost and Rs 2.95 as variable charge computed on capital expenditure of Rs 12,868 crores incurred. The said provisional tariff of fixed charges was further revised to Rs 2.24 with effect from 07-03-2018. The final tariff of the Appellant was pending determination from the date of commercial operation. The Appellant had been supplying the entire capacity of the generating station to UPPCL in terms of the PPA however UPPCL had been making substantial delays in making payment of the Appellant’s invoices as per the provisions of the PPA and not been providing and maintaining the payment security mechanism as per PPA. The Appellant had filed a petition before the State Commission seeking directions for payments of the outstanding dues. The State Commission had dismissed the petition based on the undertaking of UPPCL to clear all the dues forthwith and that the escrow mechanism would be created at the earliest. during the year for the purchase of coal and the Appellant was left with only a sum of Rs 2,833 crore out of which the Appellant had to meet its debt service obligations, working capital cost and O&M Charges including salary payment as essential and inevitable cash outgo prior to incurring any amount on procurement of coal. The Appellant kept on financing the coal purchase during the period from working capital facilities to the extent best possible and finally consumed the entire working capital facilities limits as available from time to time. Due to non-payment by UPPCL and the Appellant became a defaulter of its lenders with respect to working capital facilities also in addition to the default of payment of interest and installments of its term loans. This forced the Appellant in a financially stressed situation and the lenders started adjusting the entire money they received towards their dues, owing to which there was no or very little money available with the Appellant.

Arguments:

The Counsel for the appellant, submitted that due to default on the part of UPPCL the appellant has suffered financial misery and was required to pay the coal companies 100% of the cost of coal and also pay 100% of the railway freight in advance, for which the Appellant is required to be paid in time to ensure adequate working capital. The UPPCL have not disputed the fact that it has continuously defaulted in payment of the monthly bills of the Appellant for continuously 10 months in a row. The only defense of UPPCL was that the Appellant was compensated by Late Payment Surcharge (LPSC).

Issues:

  1. Whether the Appellant has changed its prayers during the course of the proceedings in the matter and if so, should the change of prayer be allowed?
  2. Whether Second Respondent has paid the outstanding amounts to the Appellant in accordance with the terms of the PPA and the Regulations specifically in light of the contention of UPPCL that the average payment made during the period was never more than 90 days;
  3. If not, whether the Appellant has actually suffered losses solely due to the non-payment of its outstanding dues in time;
  4. Whether the Regulations can be relaxed to allow the Appellant to recover its full fixed cost for the impugned period and as a consequence, can the PAF of Appellant be reduced to 54.78% from 85%;
  5. Whether late payment surcharge as envisaged in the Regulations and PPA are adequate to compensate the loss;
  6. Whether in facts and circumstances of the case, the Appellant is entitled to carrying cost?

Findings:

The Tribunal while setting aside the order of the State Commission allowed the appeal explaining all the issues at length. The Court relied on the principle founded in 1848 in Robinson v. Harman which supported innocent parties in the event of breach of contract. The Court further answered the issues at length as follows:

Issue No. 1: that the Appellant has not changed its prayer during the course of the proceedings either through its short Rejoinder Note or in Final Written submissions, as alleged by the Second Respondent.

Issue No. 2: that the second Respondent (UPPCL) has not paid the outstanding amounts to the Appellant in accordance with the terms of the PPA and the Regulations. We dismiss the concept of average payments introduced by R2 to justify its default of non-payment. We further observe that the outstanding of the Appellant remained substantial during most of the period in financial year 2017-18. Further, Respondent UPPCL has failed to establish Escrow/ Payment Security Mechanism as yet despite repeated categorical directions by the State Commission in its various orders.

Issue No. 3: Having established a clear correlation between delayed payments and coal shortage, we hold that the Appellant has actually suffered losses solely due to the non-payment of its outstanding dues in time by R-2. As a result, the applicant was not able to procure sufficient coal to declare full Capacity in spite of its generating units being technically available.

Issue No. 4: Having regard to various rulings of his Tribunal and the Hon’ble Apex Court, we are of the view that the instant case is a fit case to relax the Norms to allow the Appellant to recover its full fixed cost for the impugned period at actual PAF of 54.78% instead of normative 85% in the interest of justice and equity.

Issue No. 5: that in view of the facts& circumstances of the matter, late payment surcharge as envisaged in the Regulations and PPA is not meant for or otherwise, adequate to compensate the consequential loss suffered by the Appellant in full. Hence, it is entitled to further relief over and above LPSC.

Issue No. 6: that as per the settled principles of law, the Appellant is entitled to restitution and thus, to carrying cost from the date of capacity lost to date of actual payment at the prevailing rate of interest in accordance with UPERC Regulations.

[Lalitpur Power Generation Co. Ltd. v. Uttar Pradesh Electricity Regulatory Commission, 2020 SCC OnLine APTEL 82, decided on 28-09-2020]


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Case BriefsTribunals/Commissions/Regulatory Bodies

Central Electricity Regulatory Commission (CERC): The Bench of P. K. Pujari (Chairperson) and I.S. Jha (Member), Arun Goyal (Member), rejected the petition of NTPC Limited after finding it contrary to the ASO regulations and RRAS.

NTPC Limited is a ‘generating company’ as defined under Section 2(28) of the Electricity Act, 2003 whereas the Respondent, POSOCO is the National Load Despatch Centre (NLDC) and is the implementing agency for scheduling and dispatch of electricity. Five gas-based generating stations of NTPC were directed by NLDC to operate so as to maintain the grid frequency, there was a huge difference in the energy charges received and actual fuel cost borne by these generating stations by participating in RRAS. This made NTPC incur losses and therefore, they filed the petition.

NTPC was represented by Swapna Seshadri, Advocate, and S.P. Kesarwani, Advocate, and POSOCO was represented by Gautam Chakraborty.

The petitioner formed their case under Regulation 15 and 16 of the ASO Regulations which discuss the Commission’s power to relax any of ASO’s regulation and Commission’s power to issue direction.  They further contest the intent of the ASO regulations by stating it to be one which intends that the generating companies recover all reasonable costs and expenses and also get incentivized to participate in RRAS and do not incur losses for such participation. The respondent’s contend  according to ASO regulations, no retrospective settlement shall be undertaken, therefore, ASO Regulations have to be read in their entirety.

Commission in deciding the retrospective settlement issue, went through the Statement of Reasons(SoR) for ASO regulations and found that “participation in RRAS is based on the prices intimated at the time of participation and same cannot be changed subsequently”. The relevant  extract from the Statement of Reason (SoR) of the CERC Regulations, 2015 was stated where it was clearly stated that “No retroactive settlement shall be undertaken even if the fixed or variable charge is modified at a later date.” (emphasis added) .  The petitioner’s request for retrospective change of variable cost of the imported RLNG based generating stations would go against this principle specified for implementation of RRAS and shall defeat the very purpose of making it a merit order based despatch . The Commission rejected the petition by finding that relaxing the provisions of the regulation and allowing true-up of the variable charges, would amount to changing the basic structure and principle of despatch of generating stations under RRAS. Therefore, relaxation sought by the petitioner in provisions of Regulation 13.3 by application of Regulation 15 and truing-up of the variable charges for RLNG was rejected.[NTPC Ltd. v .Power System Operation Corporation Limited, Petition No. 382/MP/2018, decided on 27-07-2020]

Case BriefsSupreme Court

Supreme Court: The bench of Sanjay Kaul and KM Joseph, JJ. has held that electricity dues, where they are statutory in nature under the Electricity Act and as per the terms & conditions of supply, cannot be waived in view of the provisions of the Act itself more specifically Section 56 of the Electricity Act, 2003, in pari materia with Section 24 of the Electricity Act, 1910, and cannot partake the character of dues of purely contractual nature.

The Court was hearing the case of an auction-purchaser of a unit owned by SB Beverages Private Limited, which failed to pay its dues, resulting in the auction by Syndicate Bank (Secured Creditor) under SARFAESI Act, 2002. The Court was called upon to decide whether the liability towards previous electricity dues of the last owner could be mulled on to the respondent.

The Auction Notice showed that the unit was being sold on “as is where is, what is there is and without any recourse basis”, as per Rules 8 & 9 of the Security Interest (Enforcement) Rules, 2002. The total outstanding dues were much larger, but the reserve price fixed was lower, and the actual sale consideration of the successful auctioneer was Rs.9,18,65,000, which is approximately Rs.10 lakh more than the minimum reserve price. The holistic reading of all the clauses showed that the auction notice provided for a reserve price, with a bid being made about Rs.10 lakh over and above that, and certain nature of charges, lien, encumbrances, including electricity dues were clearly beyond the sale consideration paid.

Relying on the decision in Dakshin Haryana Bijli Vitran Nigam Ltd. v. Paramount Polymers (P) Ltd., (2006) 13 SCC 101, the bench noticed that in such a scenario if a transferee desires to enjoy the service connection, he shall pay the outstanding dues, if any, to the supplier of electricity and a re-connection or a new connection shall not be given to any premises where there are arrears on account of dues to the supplier unless they are so declared in advance.

The Court noticed that the facts of the present case are more explicit in character as there is a specific mention of the quantification of dues of various accounts including electricity dues. The respondent was, thus, clearly put to notice in this behalf. It, hence, said,

“as an auction purchaser bidding in an “as is where is, whatever there is and without recourse basis”, the respondent would have inspected the premises and made inquiries about the dues in all respects.”

It, further, noticed that if any statutory rules govern the conditions relating to sanction of a connection or supply of electricity, the distributor can insist upon fulfillment of the requirements of such rules and regulations so long as such rules and regulations or the terms and conditions are not arbitrary and unreasonable. A condition for clearance of dues cannot per se be termed as unreasonable or arbitrary.

[Telangana State Southern Power Distribution Company Limited v. Srigdhaa Beverages, 2020 SCC OnLine SC 478, decided on 01.06.2020]

Case BriefsTribunals/Commissions/Regulatory Bodies

Central Electricity Regulatory Commission (CERC): A coram of Justice P.K. Pujari (Chairperson), M.K. Iyer (Member) and I.S. Jha (Member) disposed of a petition filed under Section 63 of the Electricity Act, 2003 seeking adoption of tariff for 1000 MW (Tranche-II) Wind Power Projects connected to the Inter-State Transmission System (ISTS) and selected through competitive bidding process as per the Guidelines issued by the Ministry of New and Renewable Energy (MNRE).

In terms of the above guidelines issued by the MNRE, the petitioner was designated as the nodal agency for setting up of the above Power Projects. The petitioner had issued the RfS document along with draft PPA and PSA documents and floated the same on the portal of Telecommunication Consultant India Limited. The successful bidders were selected by way of e-reverse auction of nine technically qualified bidders and the final tariff was arrived at after the completion of the same.

The petitioner had submitted that the projects will help the Buying Utilities in meeting their RPO requirements and provide power at very economical rates. The petitioner had also submitted that the tariff determined under the reverse auction process and even with the tariff margin discovered in the competitive bid process is lesser than the procurement cost of conventional power and thus, would be beneficial for the Buying Utilities and the consumer at large. The petitioner had prayed for adopting the trading margin of Rs. 0.07/kWh.

 The Commission was to examine if the process as per the provisions of the Guidelines has been followed in the present case for arriving at the lowest tariff and for the selection of the successful bidder. It was to also see whether to allow for the adoption of the tariff for the wind power plants under Section 63 of the Act.

 The Commission concluded that selection of the successful bidders and the tariff of the Project had been carried out by the petitioner through a transparent process of competitive bidding in accordance with Guidelines issued by MNRE. Accordingly, in terms of Section 63 of the Act, the Commission adopted the tariff for the Projects as agreed to by the successful bidders which should remain valid throughout the period of PSAs and PPAs.

With respect to the Trading margin, this Commission held that the Act read with the Central Electricity Regulatory Commission (Fixation of Trade Margin) Regulations, 2010 gives freedom and choice to the contracting parties to mutually agree on the Trading Margin for any kind of long term trading transaction. Accordingly, the Commission cannot adopt any Trading Margin for long term transactions under the Trading Margin Regulations. [Solar Energy Corporation of India Ltd. v. Ministry of New and Renewable Energy, 2019 SCC OnLine CERC 215, decided on 03-12-2019]

Case BriefsTribunals/Commissions/Regulatory Bodies

Central Electricity Regulatory Commission (CERC): The coram of P.K Pujari (Chairperson) and Dr M.K. Iyer (Member) allowed a petition filed by a successful bidder seeking an extension of time for implementation of project awarded to him.

In the instant case, a special purpose vehicle (SPV) was created in the name of petitioner company (DMTCL) for the implementation of a scheme for transmission of electricity in the eastern region. Accordingly, a Transmission Service Agreement (TSA) was entered into between the petitioner and Long Term Transmission Customers (LTTCs) who were beneficiaries under the said agreement.

The instant petition was filed under Sections 61, 63 and 79 of the Electricity Act, 2003 seeking an extension of the scheduled date of commercial operation (COD) and increase in transmission charges, due to change in law and certain unforeseen events. Respondent objected to the petition contending that as per the Transmission Service Agreement (TSA), petitioner was required to notify the change in law and force majeure events if it wished to claim any relief for the same. Since no such notice was ever served, no relief could be claimed.

The Commission noted that as per TSA, the affected party was mandatorily required to give notice to the other party of any event of force majeure as soon as reasonably practicable, but not later than seven days of the commencement of force majeure event. Petitioner had issued appropriate intimation to LTTCs under Articles 11 and 12 of TSA qua the ‘force majeure’ and ‘change in law’ events as soon as it became aware of the same. The occurrence and impact of these events were also intimated through petitioner’s monthly progress reports.

Petitioner’s claim in respect of unexpected expenditure incurred on account of obtaining forest clearance and an increase in taxes and duties was allowed holding that it was a ‘change in law’. However, new ROW compensation guidelines did not qualify as ‘change in law’ because, in a competitive bidding project, such contingent expenditure is expected to be factored in. Further, demonetization was also not a ‘change in law’ as it did not constitute any enactment, adoption, promulgation, amendment, modification or repeal of any law.

The Commission refrained from making any observations on merits regarding force majuere events such as prohibition on sand mining in Bihar due to NGT order, flooding of Gandak river, kidnapping of project staff, manhandling of officials, delay in railway crossing work due to public agitations, delay due to Assembly Elections in Bihar, delay due to supply of material, etc. However, it was held that the petitioner was prevented from discharging its obligations under TSA on account of delay in grant of forest clearance, and such delay was covered under force majeure.

In view of the above, COD was extended and the petitioner’s claims were partly allowed.[Darbhanga-Motihari Transmission Co. Ltd. v. Bihar State Power Transmission Co. Ltd., 2019 SCC OnLine CERC 21, Order dated 29-03-2019]

Case BriefsHigh Courts

Jharkhand High Court: A Single Judge bench comprising of Chandrashekhar, J. allowed a civil writ petition challenging legality of provisional assessment order passed by the respondent under Section 135 of the Electricity Act, 2003.

Brief facts of the case were that an electricity breakdown in the petitioner’s premises was rectified by the respondent’s officials and a report was prepared recording slight damage in meter chambering unit. However, at this stage, the report stated that the meter reading was correct and there was proper sealing; no evidence of electricity theft was found. An inspection was carried out by the respondents a few months later in the appellant’s premises, and on the basis of an inspection report, a case was lodged under Sections 379, 420 and 353 of the Penal Code, 1860 and under Sections 135, 137 and 138 of the Electricity Act. A provisional assessment order was passed by the respondent under Section 135 of the Electricity Act directing the petitioners to pay Rs 3,23,71,524. The said order was challenged by the petitioner as being devoid of jurisdiction and illegal in the present writ petition.

Relying on the judgment of Hon’ble Apex Court in Sanwarmal Kejriwal v Vishwa Co-operative Housing Society Ltd., (1990) 2 SCC 288, the court observed that challenge to an assessment order on the ground of lack of jurisdiction must be grounded in lack of jurisdictional facts and the same rests on the averments taken in the plaint or claim application. As such, the jurisdictional facts in the inspection report would be the facts that connect the consumer to the theft of electricity and the subjective satisfaction of the authorized officer in relation to the same must be reflected in the inspection report.

After a comprehensive analysis of Section 135(1-A) of the Act, the court observed that a provisional assessment order can be sustained only if the inspection report records a finding on the theft of electricity and evidence in support thereof.

It was also observed that Electricity Act is a special statute created to discourage electricity thefts and loss accruing to the Electricity Boards as a result thereto. It is for this reason that the provisions of the Act have been couched in a wide manner to include every incidence of unauthorized use of electricity within its ambit. The Act provides for drastic measures such as – disconnection of electricity; lodging of F.I.R.; provisional assessment order; consumer does not have an opportunity to object to the assessment order; no appeal lies against the said order, and electricity supply is resumed only on payment of assessed amount.

The Court relied on State v Brijesh Singh, (2017) 10 SCC 779 to opine that in such a scenario, the Act must be given a wholesome interpretation to achieve a fine balance between literal and purposive construction. Thus, in view of wide amplitude of the provisions of the Act, there must be a strict compliance of the procedural aspects.

It was held that the theft of electricity must be apparent and visible on a bare reading of the inspection report. If a strenuous exercise is required to infer the theft, then the matter shall be investigated and decided in trial; but before completion of such trial, the authorized officer cannot raise a presumption of theft clothing himself with jurisdiction to pass a provisional assessment order.

On the strength of aforesaid, it was opined that the inspection report in the present case did not record satisfaction of the authorized officer and also, there was no mens rea. As such, the provisional assessment order was quashed for being illegal and void and the respondent was directed to resume the supply of electricity to the petitioner on payment of Rs 25 lakhs adjustable against its future bills. [Himadri Steel Pvt. Ltd. v Jharkhand Urja Vikas Nigam Limited,2018 SCC OnLine Jhar 1184, Order dated 05-09-2018]

Case BriefsSupreme Court

Supreme Court: Deciding whether under the Electricity Act, 2003 it is mandatory to have a judicial mind presiding the Central and State Regulatory Commissions and whether the expression “may” should be read as “shall”, the bench of J. Chelameswar and S.K. Kaul, JJ held that Section 84(2) of the said Act is only an enabling provision to appoint a High Court Judge as a Chairperson of the State Commission of the said Act and it is not mandatory to do so. It was further held:

“It is mandatory that there should be a person of law as a Member of the Commission, which requires a person, who is, or has been holding a judicial office or is a person possessing professional qualifications with substantial experience in the practice of law, who has the requisite qualifications to have been appointed as a Judge of the High Court or a District Judge.”

The Court noticed that the State Commission, though defined as a ‘Commission’ has all the ‘trappings of the Court and that:

“Once it has the ‘trappings of the Court’ and performs judicial functions, albeit limited ones in the context of the overall functioning of the Commission, still while performing such judicial functions which may be of far reaching effect, the presence of a member having knowledge of law would become necessary. The absence of a member having knowledge of law would make the composition of the State Commission such as would make it incapable of performing the functions under Section 86(1)(f) of the said Act.”

The bench said that in any adjudicatory function of the State Commission, it is mandatory for a member having the aforesaid legal expertise to be a member of the Bench. It further held that in case there is no member from law as a member of the Commission, the next vacancy arising in every State Commission shall be filled in by a Member of law as mentioned above.

To avoid any confusion, the Court made it clear that it’s verdict will apply prospectively and would not affect the orders already passed by the Commission from time to time. [State of Gujarat v. Utility User’s Welfare Association, 2018 SCC OnLine SC 368, deciding 12.04.2018]

Case BriefsSupreme Court

Supreme Court:  In the issue involving the Power Purchase Agreement (PPA) entered into by the Government and the Adani Enterprises, where the Power Generating Company had pleaded that the rise in price of coal consequent to change in Indonesian law would be a force majeure event which would entitle the respondents to claim compensatory tariff, the bench of P.C. Ghose and R.F. Nariman, JJ held that the change in the Indonesian Law was neither the fundamental basis of the contract dislodged nor was any frustrating event and that alternative modes of performance were available, albeit at a higher price.

The respondents had pleaded before the Appellate Tribunal for Electricity to either discharge them from the performance of the PPA on account of frustration, or to evolve a mechanism to restore the petitioners to the same economic condition prior to occurrence of the change in law as the rise in the price of Indonesian coal, according to them, was unforeseen inasmuch as the PPAs have been entered into sometime in 2006 to 2008, and the rise in price took place only in 2010 and 2011 and that such rise in price was not within their control at all. The Tribunal had granted the relief of compensatory tariff to the respondents.

Setting aside the order of the Tribunal, the Court held that changes in the cost of fuel, or the agreement becoming onerous to perform, are not treated as force majeure events under the PPA itself. Taking note of the clauses of the PPA, the Court said that nowhere do the PPAs state that coal is to be procured only from Indonesia at a particular price. In fact, it is clear on a reading of the PPA as a whole that the price payable for the supply of coal is entirely for the person who sets up the power plant to bear. The fact that the fuel supply agreement has to be appended to the PPA is only to indicate that the raw material for the working of the plant is there and is in order. It was, hence, held that an unexpected rise in the price of coal will not absolve the generating companies from performing their part of the contract for the very good reason that when they submitted their bids, this was a risk they knowingly took.

Regarding the question as to whether the change in Indonesian Law would amount to change in law, the Court said that the change Indonesian law would not qualify as a change in law under the guidelines read with the PPA, change in Indian law certainly would. Rejecting the contention that a commercial contract is to be interpreted in a manner which gives business efficacy to such contract, that the subject matter of the PPA being “imported coal”, the expression “any law” would refer to laws governing coal that is imported from other countries, the Court said that there are many PPAs entered into with different generators. Some generators may source fuel only from India. Others, as is the case in the Adani Haryana matter, would source fuel to the extent of 70% from India and 30% from abroad, whereas other generators, as in the case of Gujarat Adani and the Coastal case, would source coal wholly from abroad. The meaning of the expression “change in law” under clause 13 of the PPA cannot depend upon whether coal is sourced in a particular PPA from outside India or within India. The meaning will have to remain the same whether coal is sourced wholly in India, partly in India and partly from outside, or wholly from outside.

The Court, hence, directed the Central Electricity Regulatory Commission to go into the matter afresh and determine what relief should be granted to those power generators who fall within clause 13 of the PPA, based on the decision of the Court. [Energy Watchdog v. Central Electricity Regulatory Commission, 2017 SCC OnLine SC 378, decided on 11.04.2017]

Case BriefsSupreme Court

Supreme Court: In an appeal preferred under Section 125 of the Electricity Act, 2003, the 3-Judge Bench of Dipak Misra, A.M. Khanwilkar and M.M. Shantanagoudar, JJ held that the Act is a special legislation within the meaning of Section 29(2) of the Limitation Act and, therefore, the prescription with regard to the limitation has to be the binding effect and hence, the delay cannot be condoned taking recourse to Article 142 of the Constitution.

In the present case, it was argued by the respondents that the appeal was barred by 71 days and hence, the Court erred in condoning the delay of 71 days in view of the language employed in Section 125 of the Act. Accepting the contention of the respondents, the Court noticed that as per Section 125 of the Act, this Court, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the period of 60 days from the date of communication of the decision or order of the appellate tribunal to him, may allow the same to be filed within a further period not exceeding 60 days. Hence, this Court has the jurisdiction to condone the delay but a limit has been fixed by the legislature, that is, 60 days. The Bench held that when the statute commands that this Court may condone the further delay not beyond 60 days, it would come within the ambit and sweep of the provisions and policy of legislation. It is equivalent to Section 3 of the Limitation Act.

The appeal was listed before the Bench on 29.1.2010 on which date this Court condoned the delay and admitted the appeal. In light of the said facts it was contended that when the delay in review was condoned by this Court, the parties should not be permitted to raise a preliminary objection. The Court, however, rejected the said contention and said that if the delay is statutorily not condonable, the delay cannot be condoned. There is no impediment to consider the preliminary objection at a later stage. [ONGC v. Gujarat Energy Transmission Corporation Ltd, 2017 SCC OnLine SC 223, decided on 01.03.2017]