IN THE APPELLATE TRIBUNAL FOR ELECTRICITY
(Appellate Jurisdiction)
APPEAL NO.313 OF 2018
Dated: 22nd February, 2024
Present: Hon’ble Mr. Justice Ramesh Ranganathan, Chairperson
Hon’ble Smt. Seema Gupta, Technical Member (Electricity)
In the matter of:
1. M/S GADRE MARINE EXPORT
Sandesh Salvi, Authorized Representative,
3298-A, Mirkarwada,
Ratnagiri - 415612 ... Appellant No.1
2. GADRE MARINE EXPORT PRIVATE LIMITED
Sandesh Salvi, Authorised Representative,
Plot No.FP-1, MIDC, Mirjole Block,
Ratnagiri - 415639 … Appellant No.2
VERSUS
1. MAHARASHTRA ELECTRICITY REGULATORY COMMISSION
Secretary,
13th Floor, Centre 1,
World Trade Centre, Cuffe Parade,
Mumbai - 400005 ... Respondent No.1
2. MAHARASHTRA STATE ELECTRICITY DISTRIBUTION
COMPANY LTD.
The Chief Engineer (Power Purchase)
Plot No.G-9, Anant Kanekar Marg,
Prakashgad, Bandra (East),
Mumbai - 400051 ... Respondent No.2
3. GOVERNMENT OF MAHARASHTRA,
The Principal Secretary,
Industry, Energy and Labour Department,
Judgment in Appeal No. 313 of 2018
Government of Maharashtra, 3rd Floor,
Mantralaya, Mumbai - 400032 ... Respondent No.3
4. MAHARASHTRA ENERGY DEVELOPMENT AGENCY
The Director General, MEDA,
MHADA Commercial Complex - II Floor,
S.No.191, Opp: Tridal Nagar,
Yerwada, Pune -411006 ... Respondent No.4
5. PRAYAS (ENERGY GROUP)
Shantanu Dixit, Group Coordinator,
Unit III A & B, Devgiri,
Joshi Railway Museum Lane,
Kothrud Industrial Area,
Kothrud, Pune - 411038 ... Respondent No.5
6. MAHARASHTRA CHAMBER OF COMMERCE, INDUSTRY &
AGRICULTURE
Santosh Mandlecha, President,
Oricon House,
6th floor, 12 K. Dubash Marg,
Fort, Mumbai - 400001 ... Respondent No.6
7. VIDARBHA INDUSTRIES ASSOCIATION,
Atul Pande, President,
1st Floor, Udyog Bhavan,
Civil Line,
Nagpur - 440001 … Respondent No.7
8. THANE BELAPUR INDUSTRIES ASSOCIATION
The General Secretary
Rabale Village, Post Ghansoli,
Plot P-14, MIDC,
Navi Mumbai - 400701 … Respondent No.8
9. MUMBAI GRAHAK PANCHAYAT
Shirish Deshpande, Chairman,
Grahak Bhavan, Sant Dynaneshwar Marg,
Behind Cooper Hospital,
Vile Parle (West),
Mumbai - 400056. … Respondent No.9
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Judgment in Appeal No. 313 of 2018
10. CHAMBER OF MARATHAWADA INDUSTRIES &
AGRICULTURE
Ram Bhogale, President,
Bajaj Bhavan, P-2,
MIDC Industrial Area,
Railway Station Road,
Aurangabad - 431005. … Respondent No.10
11. SHRI HEMANT ARUNCHANDRA KAPADIA
25, Shantiniketan Colony,
Near Shani Mandir,
Aurangabad - 431001. … Respondent No.11
Counsel on record for the : Divya Chaturvedi for App. 1& 2
Appellant(s)
Counsel on record for the : Udit Gupta
Respondent(s) Anup Jain
Vyom Chaturvedi
Prachi Gupta for Res. 2
JUDGMENT
(PER HON’BLE SMT. SEEMA GUPTA, TECHNICAL MEMBER)
1. The Appellants have initiated the present Appeal to contest the
Order dated 20.07.2018, passed by the Maharashtra Electricity
Regulatory Commission in Case No. 193 of 2017 (“impugned order”).
The said order disallowed the Appellants' plea for transitioning from
Independent Power Producer (IPP) status to Captive Power Producer
(CPP) subsequent to the execution of the Long-Term Energy
Purchase Agreement (EPA) dated 9.11.2011. This transition was
sought in accordance with the comprehensive Renewable Electricity
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Policy dated 20.07.2015 promulgated by the Government of
Maharashtra.
2. The Appellant No. 1, Gadre Marine Export (for short “GME”) is a
proprietary concern and is engaged in the business of packaging of
fish and fish products.
3. The Appellant No. 2, Gadre Marine Export Private Limited
(hereinafter "GMEPL"), is a corporate entity recognized as the
exclusive manufacturer of Crab Sticks within India. The Appellant
No.2 operates two plants located in Ratnagiri and Chorwad.
4. The Respondent No. 1 is the Maharashtra Electricity Regulatory
Commission (for short “MERC”), which is exercising its powers and
discharging functions under the provisions of the Electricity Act, 2003
as a sector regulator. The Respondent No. 2 Maharashtra State
Electricity Distribution Company Limited (for short “MSEDCL”) is the
State‟s deemed Distribution Licensee. The Respondent No. 3 is
Government of Maharashtra, Water Resources Department (for short
“WRD”). The Respondent No. 4 is the State Nodal Agency in
renewable energy sector and state designated agency in energy
conservation sector and it functions under the aegis of
MNRE, Government of India and provides assistance to State and
Central Government to promote and develop new and renewable
sources of energy and technologies and to promote and implement
energy conservation. Respondent Nos. 5 to 11, comprising
Institutional Consumer Representatives and Individual Consumer
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Representatives, have been included as party Respondents in the
instant Appeal.
5. The appellants had set-up their 1.5 MW Small Hydro Projects
(“SHP”) as Captive Power Plant under Government of Maharashtra
(“GoM”) 2002 State Hydro Policy (“2002 Policy”). However, prior to
the commencement of operations of the afore-mentioned SHP, GOM
on 15.09.2005, promulgated the State Hydel Policy for Development of
Small Hydro Power Projects through Private Sector Participation
(“2005 Policy”). In terms of Clause B-2 of the 2005 State Hydro
Policy, Independent Power Plants (“IPPs”) & Captive Power Plants
(“CPP”) are free to change their option in due course of time based on
certain conditions. The Appellant‟s SHP was commissioned on
03.07.2010 and subsequently, the Appellants, opted for the Change of
option from CPP to IPP in 2010 on account of shortfall in captive
consumption by the Appellant.
6. On September 9, 2010, a Short-Term Energy Purchase
Agreement (EPA) was executed between the Appellant and
Respondent No.2 (MSEDCL) for the procurement of Hydro Power over
a duration of 8 months, spanning from July 2010 to February 2011, at
a rate of Rs. 4.26 per unit (KWh) on a Real Time Continuous (RTC)
basis. Subsequently, the Appellant GME, submitted a proposal to
MSEDCL for the extension of the EPA to procure power for the
subsequent 6 month period, commencing from March 1, 2011, to
August 31, 2011. MSEDCL, through its letter dated February 21, 2011,
extended the validity of the aforementioned EPA by 6 months,
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facilitating the purchase of GME Power up to 1.5 MW on an RTC basis
from March 2011 to August 2011, in accordance with the orders of the
Maharashtra Electricity Regulatory Commission (MERC) and the rates
approved therein, as specified in the order dated July 14, 2010, i.e.,
Rs. 4.26/- per unit. Consequently, a Short-Term Power Purchase
Agreement was entered into between the Appellant GME and
MSEDCL
7. Thereafter, on July 18, 2011, the Appellant submitted another
proposal to MSEDCL, seeking an extension of the EPA for the
subsequent 9 month period, from September 1, 2011, to June 1, 2012.
MSEDCL, through its letter dated August 25, 2011, requested the
Appellant to confirm their willingness to enter into a long-term EPA
spanning 35 years, relying upon the Maharashtra Electricity
Regulatory Commission Renewable Energy (RE) Tariff Regulations of
2010 and the MERC RE Tariff order dated July 14, 2010, at a
Preferential Tariff. In accordance with this request, the Appellant
provided confirmation to MSEDCL for a fresh proposal for the sale of
power up to 1.5 MW (+ 20% tolerance) on an RTC basis from
September 1, 2011, with the intention to enter into a long-term Power
Purchase Agreement (PPA) for a duration of 35 years at Preferential
Tariff. Subsequently, the Appellant GME, through its communication
dated October 24, 2011, affirmed its readiness to execute the long-
term EPA with MSEDCL. Consequently, on November 9, 2011, an
Energy Purchase Agreement was executed between the Appellant
GME and MSEDCL, covering a span of 35 years from September 1,
2011, for the procurement of 1.5 MW power from their Small Hydro
Power facility.
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8. Subsequently, GoM introduced the Comprehensive Policy for
Grid Connected Power Projects based on New and Renewable (Non-
Conventional) Energy Sources dated 20.07.2015 (“2015 Policy”),
wherein Clause 8.2 provides the option to terminate the existing PPA
with MSEDCL and opt for open access. Clause 8.2 reads as under:
―8.2 Renewable power projects will have the option to
terminate their existing PPA with MAHADISCOM and opt for
open access, if they so desire.‖
9. Accordingly, the Appellants, in terms of Clause 8.2 of the 2015
Policy, vide its letters dated 04.02.2016 & 14.04.2016 to Managing
Director, MSEDCL and Chief engineer MSEDCL, respectively,
requested for termination of the EPA pursuant to their own
consumption increasing and desired to change their option (entity)
from IPP to CPP and for pre-mature termination of the EPA dated
09.11.2011.
10. However, on 27.07.2016, MSEDCL vide its letter no.
CEPP/NCE/Hydro/EPA – Gadre/023635 informed to GME that the
request of GME seeking permission for Captive Consumption by pre-
mature termination of EPA could not be agreed upon and could not be
considered. The said letter also informed that Clause 8.2 of GOM
Policy 2015 is applicable to those projects which will be installed under
the said Policy. The Appellants being aggrieved by the aforesaid
action on the part of MSEDCL, approached MERC which was
registered as case No. 193 of 2017. However, petition of Appellants
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in case No 193 of 2017 (along with Miscellaneous Application 02 of
2018 in case no 193 of 2017) was not allowed and the Respondent
No. 1, MERC passed the Impugned Order rejecting the claim of the
Appellants for change of option to convert from IPP to CPP, after
execution of the Long-term EPA dated 9.11.2011, in terms of the
comprehensive Renewable Electricity Policy dated 20.07.2015 issued
by the Government of Maharashtra. Aggrieved by the said order, the
Appellant has preferred the instant appeal.
11. The Appellants contend that they are currently receiving
compensation at the rate of Rs. 4.26/kWh from the Maharashtra State
Electricity Distribution Company Limited (MSEDCL) pursuant to a long-
term Electricity Purchase Agreement (EPA), while they are obligated to
pay MSEDCL approximately Rs. 11/kWh for their own power
consumption. The Appellants assert that the execution of the Long-
Term EPA on 09.11.2011 stemmed from MSEDCL's erroneous
assertion regarding the mandatory duration of 35 years for the EPA as
purportedly envisaged under the Maharashtra Electricity Regulatory
Commission (Renewable Energy) Tariff Regulations, 2010 ("Tariff
Regulations") and the Suo Motu Tariff Order dated 14.07.2010 issued
in Case No. 20 of 2010 ("Tariff Order"). Though the Appellants‟ made
a prior request to MSEDCL for continuation of procuring power on a
short-term basis, however, they had entered into the EPA based on
the afore-mentioned misrepresentation by MSEDCL
12. As soon as the 2015 Policy was notified, wherein Clause 8.2
provided that the generating companies are entitled to terminate their
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“existing” EPAs with MAHADISCOMS, Appellants approached
MSEDCL.
13. Furthermore, it is highlighted that, MSEDCL itself had relied
upon Clause B-2 of the 2005 Policy earlier and entered into short-term
EPAs, despite the Appellants SHP having been set-up under the 2002
Policy. The 2005 Policy did not impose any limitations on the exercise
of the option to change category. MSEDCL had created a legitimate
expectation for the Appellants to rely upon the 2015 Policy for exiting
long-term EPA as Short-term EPAs were also entered into between
the parties only because of exercise of change of option under the
2005 Policy.
14. Appellants had submitted that the EPA was entered into by the
parties on the basis of 2005 Policy, thereby with the implied term that
the SHP can be converted into CPP/IPP. The 2005 Policy, followed by
2015 Policy are implied into the terms and conditions of the EPA.
Thus, Clause 8.2 of the 2015 Policy remains available and exercisable
at the option of the Appellants. In this regard, reliance is placed on
“Satya Jain &Ors. vs. Anis Ahmed Rushdie &Ors.‖ (2013) 8 SCC
131 (Para 35).
―The business efficacy test, therefore, should be applied only in
cases where the term that is sought to the read as implied is
such which could have been clearly intended by the parties at
the time of making of the agreement. In the present case not
only the language of Clause (7) of agreement dated 22.12.1970
is clear and unambiguous there is no other clause in the
agreement which had obliged Plaintiff 1 to make any further
payment after the initial part-payment of Rs.50,000. The
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obligation of Plaintiff I was to pay any further amount(s) to the
Income Tax Authorities, at the request of the defendant, in
order to facilitate the issuance of the tax clearance certificate.
No payment to the defendant beyond the initial amount of Rs.
50,000 was contemplated by all. The above would appear to be
consciously intended by the parties so as to exclude the
possibility of any substantial monetary loss to the plaintiff in
the event the defendant is to resile from his commitment to
execute the sale document. The intent of the parties, acting as
prudent businessmen, appears to be clear. An obvious intent
to exclude any obligation of the plaintiff to pay any further
amount (beyond Rs.50,000) to the defendant is clearly
discernible. Consequently, resort to the principle of business
efficacy by the High Court to read such an implied term in the
agreement dated 22.12.1970, in our considered view, was not
warranted in the facts and circumstances of the present case.‖
15. Appellants submitted that MEDA [Nodal Agency in terms of
Regulation 44 of Tariff Regulations, vide its reply dated 15.01.2018
before MERC, acknowledged that the Appellants have the option to
exit the EPA as per Clause 8.2 of 2015 Policy. However, MSEDCL has
erroneously taken a contrary view to the aforesaid view of MEDA. In
this regard, the reliance is placed upon the judgment passed by the
Hon‟ble Supreme Court in “Vadilal Chemicals Ltd. vs. State of A.P.
& Ors.‖ (2005) 6 SCC 292 (Para 23), whereby the Hon‟ble Supreme
Court has held that the State, which is represented through its different
departments, ought to speak in one voice.
―23. There is another reason why the action of DCCT
cannot be upheld. The primary facts relating to the
processes undertaken by the appellant at its unit were
known to the Department of Industries and Commerce and
DCCT. The only question was what was the proper
conclusion to be drawn from these. The Department of
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Judgment in Appeal No. 313 of 2018
Industries and Commerce which was responsible for the
issuance of the 1993 GO accepted the appellant as an
eligible industry for the issuance of the 1993 GO accepted
the appellant as an eligible industry for the benefits. Apart
from the fact that it can be assumed that the Department of
Industries was in the best position to construe its own
order, we can also assume that in framing the Scheme and
granting eligibility to the appellant all the Departments of
the State Government involved in the process had been duly
consulted. The State, which is represented by the
Departments, can only speak with one voice. Having regard
to the language of the 1993 GO it was the view expressed by
the Department of Industries which must be taken to be that
voice.‖
16. In view of the above, the Appellants sought to be allowed to avail
the Change of option from IPP to CPP and the Impugned Order dated
20.07.2018 passed by MERC may be set aside by this Tribunal.
17. On the other hand, MSEDCL, the Respondent No.2 submitted
that Clause 8.2 of the 2015 Policy, relied upon by the Appellants,
covers only new RE generators commissioned after the said Policy
came into force. The MERC in its finding has rightly observed that the
policy has been particularly framed for the development of new and
renewable sources of energy in the State of Maharashtra in pursuance
with 175 GW target given by the Government of India and overall
target of 14400 MW to be achieved by the State of Maharashtra and
hence the Appellants‟ request to “terminate their existing PPA” in
terms of clause 8.2 (which is a general clause and cannot supersede
the main clause) and to opt for change from IPP to Captive would
defeat the purpose and intent of the policy besides affecting the RPO
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obligations of the 1st Respondent. Reference is made to Clause 1.1,
4, 4.1, 4.2 and 8.3 of the 2015 Hydro Policy
―1. Overall Target:-
1.1 The policy envisages setting up of grid-connected
renewable power projects as per the following capacities.
5000 MW of Wind Power Projects.
1000 MW of Bagasee – based Co-generation Projects.
400 MW of small Hydro Projects,
300 MW of Biomass-based Power Projects,
200 MW of Industrial Waste-based Power Projects
7500 MW of Solar Power Projects,
Thus a total of 14,400 MW capacity power projects based on
new and renewable energy sources are targeted to be installed in
the next 5 years.‖
―4. Small Hydro Power Projects:
―There is a large potential for generation of additional
electricity from ‗small hydro power projects. This includes
giving encouragement to projects up to 25 MW which are to
be developed by private developers through the Water
Resources Department, for this purpose all such projects up
to 25 MW are included in this policy.
4.1 There is a large potential for generation of electricity from
small hydro power projects in the state. In this context, 400
MW capacity of small hydro power projects of capacity up to
25 MW will be targeted for coverage under this policy.
4.2 It will be necessary for the project developers of small hydro
power projects to sell power primarily to any distribution
licensee in the state for fulfilling the Renewable Purchase
Obligation at a preferential tariff fixed by MERC. After
fulfilment of Renewable Purchase Obligation of the
distribution licensee, the project developers will have the
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option of captive use or third party sale within or outside the
state. The option of Renewable Energy Certificate
mechanism will be available.‖
8.3 Apart from all provisions mentioned above, the orders
relating to electricity tariff, energy purchase rate and
agreement, banking and wheeling charges, transmission and
distribution losses charges, cross subsidy surcharge and all
related matters, issued by MERC from time to time will be
applicable to the projects set up under this policy.‖
18. The Respondent No. 2 further submitted that the parties are
contractually bound by the terms delineated therein. The Appellants
having agreed to 35 year period vide its letter dated 29.08.2011 and
having entered into long term contract for a period of 35 years vide
EPA dated 09.11.2011, it is not open to wriggle out of the binding
obligations. Notably, Clause 8.5 of the EPA provides for premature
termination only in the event of force majeure which in any event solely
entitles the procurer i.e. MSEDCL to prematurely terminate the EPA.
Thus, it is submitted that since EPA is in force and there being no
contractual provision in favour of the Appellants to prematurely
terminate the same, there is no basis for the Appellant‟s to stand
against MSEDCL, and as such, the Appellants‟ claim was rightly
denied by MERC.
19. MERC had also rightly held that the Long Term EPA of 35 years
as entered into by the Appellants with MSEDCL is not at all tainted by
any misrepresentation and thus cannot be terminated prematurely. A
unilateral termination of existing PPAs would seriously impact the
power procurement plan of MSEDCL, especially when they are
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Judgment in Appeal No. 313 of 2018
mandated to meet the annual RPO targets. MERC held that it is not
open to the Appellants to either terminate the PPA or change from IPP
to CPP. In this regard, reliance is placed upon the following
observation of the Hon‟ble Supreme Court on the issue of mandate to
honour the binding contractual terms in the case of “Gujarat Urja
Vikas Nigam Ltd. v. Solar Semiconductor Power Co. (India) (P)
Ltd.,” reported as(2017) 16 SCC 498:
20. Respondent No.2 also submitted that it is well settled principle of
law that policies of State Government cannot alter or make inroads
into the binding terms of the contract, much less not to the extent of
taking away the entire basis/intent of the parties while entering into
such agreement. Even otherwise, the only permissible mode for the
State Government framed policies to be considered are limited within
the parameters of Section 108 of the Electricity Act, 2003, wherein
also the respective State Commissions are not bound to take into
consideration such polices rather would only seek guidance from such
policy, leaving the discretion of their decision upon themselves.
Moreover, Section 108 of the Act is guided by the principles of „Public
Interest‟ for any policy to be considered by the State Commission,
which in the present case would also not fall for consideration as
permitting a premature termination of a binding and valid PPA/EPA,
would tantamount to giving priority of „Commercial Interest‟ over
„Public Interest‟. Thus, there is no merit in the present Appeal.
Discussion and Analysis
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Judgment in Appeal No. 313 of 2018
21. After consideration of the arguments presented by counsel for
both parties and a review of the impugned order and case records, the
primary issue arises as to whether a state government policy can
prevail over a contractual agreement between private entities.
Additionally, whether the long-term Electricity Purchase Agreement
(EPA) in question incorporates implied implications of Government of
Maharashtra (GOM) policies and whether the Maharashtra Electricity
Regulatory Commission (MERC) erroneously denied the Appellants
right to exercise the option to transition from an Independent Power
Producer (IPP) to a Captive Power Producer (CPP) and terminate the
long-term EPA as provided under the Hydro Policy 2015.
22. Functions of the State commission are defined in Section 86 of
Electricity act 2003, which, inter alia, covers the following:
―Section 86. (Functions of State Commission): ---
(2) The State Commission shall advise the State Government
on all or any of the following matters, namely :-.
(i) promotion of competition, efficiency and economy in
activities of the electricity industry; (ii) promotion of
investment in electricity industry;
(iii) reorganization and restructuring of electricity industry in
the State;
(iv) matters concerning generation, transmission, distribution
and trading of electricity or any other matter referred to the
State Commission by that Government.
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(4) In discharge of its functions, the State Commission shall
be guided by the National Electricity Policy, National
Electricity Plan and tariff policy published under section 3.‖
23. Section 108 of the Electricity Act 2003, provides for Directions
by State Government, which reads as under:
―Section 108. (Directions by State Government): ---- (1) In
the discharge of its functions, the State Commission shall
be guided by such directions in matters of policy involving
public interest as the State Government may give to it in
writing.
(2) If any question arises as to whether any such direction
relates to a matter of policy involving public interest, the
decision of the State Government thereon shall be final.‖
24. The State commission works independently and have to carry
out functions as stipulated in the Electricity Act and to take guidance
from the National Electricity Policy, the National Electricity Plan and
the Tariff Policy published under section 3 of the Act as well as
guidance from the Directions issued by the State Government under
section 108 of the Act in the matter of policy involving public interest.
All the three hydro policies referred by the Appellants i.e. Hydro Policy
2002, Hydro policy 2005 and Hydro Policy 2015 have been issued
mainly to promote generation of energy through non-conventional
sources on the lines of Central Government policies to supplement
ever increasing demand of electricity in the State. These policies have
been issued by the State Government as part of Government
resolution with as such no specific direction under Section 108 of
Electricity Act 2003. This Tribunal in the case of “Polyplex
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Corporation Limited v. Uttrakhand Electricity Regulatory
Commission‖ (2011 SCC OnLineAPTEL15) : (2011) APTEL 15) has
held that Policy directions issued by the State Government are not
binding on the commission. The relevant portion reads thus:
―Summary of our findings:
62.(1) The State Commission is independent statutory
body. Therefore, the policy directions issued by the State
Government are not binding on the State Commission, as
those directions cannot curtail the power of the State
Government in the matter of determination of tariff. The
State Government may given any such policy direction in
order to cater to the popular demand made by the public
but while determining tariff the State Commission may take
those directions or suggestions for consideration but it is
for the State Commission which has statutory duty to
perform either to accept the suggestion or reject those
directions taking note of the various circumstances. It is
purely discretionary on the part of the State Commission
on acceptability of the directions issued by the State
Government in the matter of determination of tariff.‖
25. Thus, it is not binding on the Commission to accept such a policy
direction, which in the instant case the hydro policies that cannot be
treated as directions under Section 108 of Electricity Act. Further, it is
a fact that SHP of the Appellants was conceived as CPP under Hydro
Policy 2002 and by the time it was commissioned in 2010, the Hydro
Policy 2005 has been promulgated which provided the option of
conversion from CPP to IPP or vice versa. The Appellants have
submitted that it was allowed to exercise the option of converting from
CPP to IPP and entered into two short term EPAs and thereafter long
term EPA in 2011 for 35 years. We are not going into the analysis and
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discussion on conversion of Appellant‟s project from CPP to IPP under
2005 Hydro Policy, though the project was conceived as per Hydro
policy 2002, as the same is not the matter under consideration in the
present appeal.
26. As submitted by the Appellants, subsequent to conversion of
Appellants‟ project status from CPP to IPP, the Appellants requested
for signing of short term EPA with the Respondent No.2. For two
terms, namely, from July 2010 to February 2011 and from March 2011
to August 2011, such short term EPAs were signed and it is only at the
time of third extension beyond 31.08.2011, Respondent No. 2 had
asked for signing of long term EPA for 35 years relying upon MERC
RE Tariff regulations 2010 and MERC RE Tariff order dated
14.07.2010 at Preferential tariff vide their letter dated 25.08.2011. In
response, the Appellants vide their letter dated 29.08.2011 had
accepted such contention and conveyed their acceptance for signing
long term PPA. We find that in the said letter, no issue has been raised
by the Appellants regarding the non-applicability of MERC RE tariff
regulations 2010 and MERC RE Tariff order dated 14.07.2010 for
signing long term EPA for 35 years. The long term EPA was signed
on 09.11.2011 with detailed terms and conditions and with Appellants
being aware of its liabilities clearly defined in various clauses. Clause
4.4 (C) of EPA provides as under:
“4.4c This agreement is a valid, binding and enforceable
obligation of the Seller, except as the enforceability may be
limited by applicable bankruptcy, insolvency, amalgamation,
reorganization, moratorium or other similar laws affecting
creditors’ rights generally and to the extent that the remedies of
specific performance, injunctive relief and other forms of
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equitable relief are subject to equitable defenses, the discretion
of the court before which any proceeding therefore may be
brought and principles of equity in general”.
27. Further, in the long term EPA recital, only reference has been
made regarding the acceptance of generating company the letter of
permission of GOMWRD and plans to develop the 1X1.5 MW Deoghar
Hydroelectric project as CPP/IPP with its own funding under the
provisions of GOMWRD G.R.No ( 7/2004) HP dt 28.11.2002 and after
signing of two short term EPA with Respondent No. 2, they have been
asked to sign long term EPA for a period of 35 years as per the MERC
RE tariff regulations and MERC tariff order dated 14.07.2010.
However, applicability of hydro policy as announced from time to time
has not been mentioned and agreed upon by the Appellants and
Respondent No.2. Under long term EPA, there is no provision which
specifies the consent of parties for applicability of future hydro policies
of Government. In fact, Clause 8.5 of EPA provides for termination of
agreement by procurer i.e Respondent No. 2 under the Force Majeure
condition:
FORCE MAJEURE
“8.5 In case of Project Force Majeure, the Seller shall take
recourse to recover its cost through insurance until the
effect of such Force Majeure event ceases to exist. If such
Project Force Majeure continues for a period of 180 days,
then Purchaser shall have an option to terminate this
Agreement provided the Seller establishes the continuance
of the Project Force Majeure and approved by the
commission”.
28. Even though MEDA has interpreted the Clause 8.2 of Hydro
Policy 2015 to suggest that existing EPAs were also eligible for
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change of option, but the Appellants could not place any evidence for
such any confirmation from Government, though it would have as
such not become binding on the Commission to accept it. In our
opinion, reliance placed by the Appellants on “Vadilal Chemicals Ltd.
vs. State of A.P. &Ors.,‖ (2005) 6 SCC 292 (Para 23) has no
application to the present case.
29. Regarding the contention of the Appellants that Long term EPA
had an implied implication of GOM policies and therefore in spite of
signing a long term EPA, the Clause 8.5 of Hydro Policy was implied
and option of termination of EPA is applicable to them, we would like
to refer to the relevant portion of the judgment of this Tribunal in
“Talwandi Sabo Power Limited (TSPL) Village Banwala v. Punjab
State Power Corporation Limited &Ors.‖ (2016 SCC OnLine
APTEL 64).
―18. PPA dated 9/1/2008 is the controlling document. It is a
binding contract. Section 50 of the Indian Contract Act which
we have reproduced hereinabove clearly states that the
performance of any promise may be made in any manner or
at any time which the promisee prescribes or sanctions.
Section 50 therefore embodies the oft quoted legal principle
that when the contract expressly provides that a particular
thing relating to furtherance of contract has to be done in a
particular manner then it has to be done in that manner and
in no other manner. Thus if Article 6.1.1 of the PPA
prescribes notices to be given in a particular manner notices
have to be given in that manner and no other manner. If
Article 18.11 prescribes that notice to be served on the
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Judgment in Appeal No. 313 of 2018
Procurer has to be served on its authorised representative it
has to be served on him and on no other person. There is no
scope to urge that conduct of parties shows that there was
substantial notice. When the contract contains express and
unambiguous terms there can be no question of there being
any implied term or reading the contract as a whole. Search
for implied term on the specious ground that it is equitable is
not permissible. In this context following extracts from Chitty
on Contracts (Thirty First Edition Volume I) are material.
―Where term not implied: A term ought not to be
implied unless it is in all the circumstances equitable and
reasonable. But this does not mean that a term will be
implied merely because in all the circumstances it would be
reasonable to do so or because it would improve the contract
or make its carrying out convenient: the touchstone is
always necessity and not merely reasonableness ……..
………. A term will not be implied if it would be inconsistent
with the express wording of the contract ………‖‖
30. In ―Mosvolds Rederi A/S v. Ford Corporation of India‖ (1986
(2) Loyd's Reports 68), Steyn, J. spoke of three categories of
implied term. He said:—
―Sometimes it is said that a term is implied into the contract
when in truth a positive rule of law of contract is applied
because of the category in which a particular contract falls.
Another type of implied term is a term in order to give
business efficacy to the contract. The basis of such an
implication is that the contract is unworkable without it.
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Judgment in Appeal No. 313 of 2018
There is, however, another form of implication. It is not
permissible to imply a term simply because the Court
considers it to be reasonable. On the other hand, it is
possible to imply a term, if the Court or Arbitrator, as the
case may be, is satisfied that reasonable men faced with the
suggested term which ex hypothesis was not expressed in
the contract, would without hesitation say: ‗yes, of course
that is so obvious that it goes without saying.‘‖.
31. The Tribunal in its earlier orders have also emphasized the
importance of honoring binding contractual terms and highlighted that
the PPA was a legally enforceable agreement that could not be
unilaterally terminated by the Appellants. We would like reiterate that
the PPA holds a sacred status as the pivotal document governing the
relationship between contracting parties and it is essential to uphold
the agreed-upon terms of the agreement to maintain its sanctity and
ensure compliance with the parties' original intentions. Therefore, PPA
is the sacrosanct document between the contracting parties and no
interpretation averse to the consensus ad idem can be given to the
PPA. This Tribunal in the case of “Uttar Pradesh Power Corporation
Ltd. &Ors., vs. Uttar Pradesh Electricity Regulatory Commission”
(2021 SCC OnLine APTEL 31)has held as under:
“115. From a perusal of Para 11 (relied upon by the respondent)
of the abovementioned judgment, it is evident that a PPA is a
statutory contract only to the extent of tariff fixation as well as the
conditions as mentioned in Section 43A (2). Thus, the contention
of the respondent no. 2 is not only misplaced but also incorrect.
Further, the appellant is well within his rights to raise a legal
argument at any stage of the proceedings. Further, the Appellant
has taken a specific ground under the grounds to appeal
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Judgment in Appeal No. 313 of 2018
whereby the appellant has contended that the State Commission
while passing the impugned judgment and order dated
03.01.2018 has converted the PPA into a judicial direction
without considering that the PPA is the sacrosanct document
between the contracting parties and no interpretation averse to
the consensus ad idem can be given to the PPA.
...
338.PPA is a sacrosanct document since it is approved by a
regulatory authority created under a statute after parties sign and
submit the same for approval. Therefore, even a slightest
change or modification to it (PPA) cannot be done without
Commissions approval, hence it cannot be terminated without
the prior approval of the State Commission”
32. The Hon‟ble Supreme Court in Gujarat Urja Vikas Nigam
Limited‘s case (supra) on the issue of mandate to honour the binding
contractual terms held as under:
“60. In the case at hand, rights and obligations of the parties flow
from the terms and conditions of the Power Purchase Agreement
(PPA). PPA is a contract entered between GUVNL and the first
respondent with clear understanding of the terms of the contract.
A contract, being a creation of both the parties, is to be
interpreted by having due regard to the actual terms settled
between the parties. As per the terms and conditions of the PPA,
to have the benefit of the tariff rate at Rs 15 per unit for twelve
years, the first respondent should commission the solar PV
power project before 31-12-2011. It is a complex fiscal decision
consciously taken by the parties. In the contract involving rights
of GUVNL and ultimately the rights of the consumers to whom the
electricity is supplied, the Commission cannot invoke its inherent
jurisdiction to substantially alter the terms of the contract
between the parties so as to prejudice the interest of GUVNL and
ultimately the consumers.”
33. In the present matter, the long term EPA has clearly specified
the rights of parties for termination of EPA and applicability of future
Hydro Policies has not been defined, the EPA has been actively
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Judgment in Appeal No. 313 of 2018
enforced since its establishment in 2011. Consequently, we disagree
with the Appellants‟ argument that the previous allowance for
conversion from CPP to IPP under Hydro Policy 2005, despite the
project's origination under Hydro Policy 2002, implies the applicability
of Hydro Policy 2015 within the EPA.
34. For the afore-stated reasons, we do not find any error or infirmity
in the impugned order of the Commission i.e. the Respondent No 1.
No merit is found in the appeal and the same is hereby dismissed.
There shall be no order as to costs.
Pronounced in open court on this the 22nd February, 2024
(Seema Gupta) (Justice Ramesh Ranganathan)
Technical Member (Electricity) Chairperson
ts/dk
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