TaxTMI 
TaxTMI 
2008 (5) TMI 680
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....8 Act) vis-a-vis the orders passed by the Andhra Pradesh Electricity Regulatory Commission (for short `the Commission') are involved in these appeals which arise out of the judgments and orders passed by a Division Bench of the Andhra Pradesh High Court. 2. The matter relating to generation, supply and distribution of electrical energy in the State of Andhra Pradesh used to be governed by the provisions of the Electricity (Supply) Act, 1948 (For short, the 1948 Act). 3. With a view to bring reforms in the Power Sector and to meet shortages in power supply, the State of Andhra adopted a policy decision for generation of power through MPPs of 30 MW capacity in private sector. For the said purpose it issued two G.Os. being G.O. No. 116 dated 5th August, 1995 and G.O. No. 152 dated 29th November, 1995. 4. In the said Government orders, the liberalization policy of the state in respect of its industrial economy so as to enable the State Government to attract investment from other parts of the country as also from outside the country was highlighted. It intended to bring about competition in the industry. It is stated to have taken a series of measures for augmenting power i....
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....in excess of the requirement of their consumers, the same can be purchased by the Andhra Pradesh State Electricity Board. Such purchases by the Andhra Pradesh State Electricity Board may be upto 15% of individual Mini Power Plant capacity. The Andhra Pradesh State Electricity Board may also purchase power beyond 15% of the Mini Power Plant capacity, at Andhra Pradesh State Electricity Board's option without conferring any pre-emptive right of sale on the Mini Power Plant. The price for supplies made to the Andhra Pradesh State Electricity Board will be weighted average price of purchase of power made by the Andhra Pradesh state Electricity Board from Central and other State Electricity Enterprises on a monthly basis. Settlement of accounts will be on a monthly basis. The above procedure would be in force upto the end of December 2000 AD and would be subject to review thereafter. 8. The Mini Power Plant developer shall necessarily sell power to the consumers above the Board's High Tension tariff rate 11. Indisputably, pursuant to or in furtherance of the said policy decision, 31 companies in the private sector showed their interest for setting up MPPs. The Govern....
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....e of the approval granted by the Government of Andhra Pradesh to the company for setting up of MPP it entered into Wheeling Agreement with APTRANSC wheeling power from generating station to the consumers. In terms of the Wheeling Agreement, the company was required to pay 8 % to 12 % of power generated as wheeling charges to APTRANSCO for utilizing their transmission lines. It also entered into Power Sales Agreements with 13 industrial consumers for sale of powers. 19. In the meantime in the year 1998, the Parliament enacted The Electricity Reforms Act, 1998. The State of Andhra Pradesh also enacted the 1998 Act; in terms whereof, Andhra Pradesh Electricity Regulatory Commission (for short `the Commission') was constituted on or about 23rd January, 2000. 20. Indisputably, after coming into force of the 1998 Act the MPPs applied for grant of exemption under the said Act as envisaged in Section 14 thereof, before the Commission. 21. The said Act provided for grant of licence and the exemption therefrom. The Company applied for grant of licence as provided in Section 15 of the Act. By an order dated 18th May, 2000 the Commission directed the company to come back to it for....
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....The Government of Andhra Pradesh, was, however, not represented. A contention, however, was raised by a letter representing that the permission may be given to MPPs for third party sales to HT Industrial consumers and in the event APTRANSCO loses on account of the said arrangement, the Commission can fix appropriate wheeling charges taking into account the cross subsidization forgone by APTRANSCO on account of third party sales. 27. The Commission stated that it was not inclined to permit third party sale for the following reasons: (19). For reasons already stated elaborately in our order in O.P. No. 2/1999 (GBR Projects Ltd.) and O.P. No. 348/2000 (Astha Power Corporation Pvt. Ltd.) the Commission is not inclined to permit third party sales. Currently the tariffs include substantial cross subsidy to the tune of about Rs. 2,000 crores by industrial and commercial consumers. If these consumers are supplied power by MPPs, instead of the Licensee, the cross subsidy element now existing will come down, calling for increased tariffs for agriculture and domestic consumers giving rise to a rate shock to them or alternatively, the GoAP may have to bear the increased burden in t....
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....e drawn up and submitted to the Commission for its approval under Section 21 of APER Act. If on the other hand they are not able to agree on the price and other terms and conditions, they may apply to the Commission for appropriate orders. 28. It noticed that pursuant to its interim order, the company had entered into a Wheeling Agreement with APTRANSCO on 25th February, 1999. While directing renegotiations regarding price and other terms and conditions at which they would be willing to supply power to APT it was directed: (22). The Commission hereby directs that the eight MPPs mentioned above send a specific proposal in writing based on the existing Central Government Notifications on the basis of their project costs to APTRANSCO within a fortnight of the receipt of this order, with a copy to the Commission. APTRANSCO shall respond by communicating views on the offer to the MPPs and the Commission within another fortnight. If the parties need more time for negotiations in the matter, they are free to approach the Commission in the matter. If APTRANSCO and the MPPs agree on the price and the other terms and conditions, a (fresh) PPWA may be drawn up and sent for the con....
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....oved Project cost from competent Authority latest by 30.11.2001, for the Commission to pass appropriate orders. 32. On or about 26th November, 2001 by a letter addressed to the Government of Andhra Pradesh, the APTRANSCO sought for its approval of the project cost stating that it was willing to purchase power from the company if the project cost was restricted to Rs. 125 crores. As the said consent was not forthcoming another extension was sought for by the APTRANSCO from the Commission for purchase of power till the end of January, 2002 by its letter dated 3rd December, 2001. The Commission by its letter dated 27th December, 2001 directed the APTRANSCO to submit firm proposal alongwith the approval of the capital cost of the project from the competent authority by 31st January, 2001. The matter was posted for hearing on 7th February, 2002. 33. The Government of Andhra Pradesh in the meantime sought for the opinion of the Central Electricity Authority as regards the reasonableness of the project cost. It may be noticed that the Central Electricity Authority by a letter dated 26th February, 2002 stated that the capital cost of the company is lowest among the similar type of pl....
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....ratio, exchange rate, taxes and duties, foreign exchange etc. GOAP may please take further action based on the above. 34. In the meanwhile, the APTRANSCO informed the Commission by its letters dated 6th February, 2002 that the plant may have to be backed down on account of high tariff cost as such the company may be advised to sell the power outside the State by paying wheeling charges as per the order of the Commission. The matter was heard on 7th February, 2002. APTRANSCO took a complete turn around stating that it was unable to purchase power on the ground that the plant may have to be backed down in the merit order dispatch due to high variable cost. A protest was made thereto by the company in terms of its order dated 22nd February, 2002. The discussion was held between the Managing Director of the Company and the Chief Engineer of APTRANSCO on 22nd March, 2002 when the company agreed to the demands of APTRANSCO for reduction in the cost of power to prevent further losses to the investors and the lenders. APTRANSCO increased the wheeling charges four fold. 35. It may, however, be noticed that the Commission by its order dated 23rd April, 2002 observed: At the he....
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....into Power Purchase Agreement and purchase the power from the appellant. 67. Now the further question that falls for consideration by this Court would be, what should happen to the generation plant which is ready for commercial operation till the Commission decides the issue as per law, in the light of the directions given by us? 68. It is not in dispute that apart from the investment made by the private entrepreneur, about 104 crores of rupees of public money was invested by various financial institutions, under the leadership of Industrial Development Bank of India (IDBI) and everyday the appellant has to suffer a loss of about rupees 8 lakhs towards interest component itself. If we allow the situation to continue, the losses of the unit will be mounting up and it may reach a point of no return and the public monies invested will go waste. The burden will again fall on the man with loin cloth in the shape of indirect taxes. Hence, we cannot allow the situation to continue further, more so, in the light of the permission given by the Commission on 18-8- 2001 to the APTRANSCO to purchase the power from the appellant. We therefore direct the APTRANSCO to purchase t....
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....e project from Residual Fuel to Natural Gas. On 2.4.99, the Andhra Pradesh Electricity Regulatory Commission (APERC) was constituted under the Reform Act. On 6.5.99, a Power Purchase Agreement was signed between RVK Pvt. Ltd. and Indian Cements Ltd. The Agreement inter-alia provided that as RVK was in the process of signing the Power Wheeling Agreement with APTRANSCO, India Cements thus had notice of the execution of the Wheeling Agreement between the parties as a pre-requisite of the implementation of the Agreement between it and RVK Pvt. Ltd. On 10.9.99, APTRANSCO requested APERC to approve the drafts of the Power Purchase and Wheeling Agreement with RVK Pvt. Ltd. On 20.9.99, RVK made an application being O.P. No. 2 of 1999 to APERC seeking exemption from the requirement of license to supply electricity to its consumers under Section 16 of the Reform Act. In response to the application of APTRANSCO dated 10.9.99, APERC by its letter dated 22.9.99, listed the requirements to be complied with which inter-alia included RVK Pvt. Ltd. to obtain a licence or exemption from APERC and to agree to APERC deciding third party sales including the extent and manner of the supply and affixing ....
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.... sale of electricity. The agreement referred to the Power Purchase agreement entered into between RVK and APTANSCO. 44. After hearing RVK on 28.3.2000, APERC by its order dated 31.3.2000. rejected the request of RVK for grant of licence/exemption from licence. It was held that G.O. Nos. 116 and 152 did not give any vested right to the mini power plants to get a licence or an exemption after the Reform Act had come into force. APERC directed RVK to sell electricity to APTRANSCO only and not to third parties at a fair and reasonable price to be mutually agreed to by the parties or in the event of the failure to do so, to be decided by the APERC. 45. Aggrieved by the said order, RVK preferred an appeal under Section 39 of the 1998 Act before the Andhra Pradesh High Court wherein the prohibition of the third party sales was challenged. By an order and judgment dated 8.6.2001, the High Court dismissed the said appeal. Upholding the order of APERC, the High Court was of the opinion that the license or sanction under the Reform Act was necessary, notwithstanding any previous licence or sanction that was granted under the 1910 Act. It furthermore held that any approval envisaged unde....
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....ent and manner of such supply and the tariff charged to the APERC. 51. On 23.12.1999, Astha made an application to APERC seeking exemption from the requirements of taking license to supply electricity to its consumers under Sections 15 & 16 of the Reform Act. 52. After hearing Astha on 18.4.2000, APERC by its order dated 1.7.2000. rejected its request for grant of licence/exemption from licence. It was held that G.O. Nos. 116 and 152 did not give any vested right to the mini power plants to get a licence or an exemption after the Reform Act had come into force. 53. APERC directed Astha to sell electricity to APTRANSCO only and not to third parties at a fair and reasonable price to be mutually agreed to by the parties or in the event of the failure to do so, to be decided by the APERC. 54. Aggrieved by the said order, on 24.7.00, Astha preferred an appeal under Section 39 of the Reform Act before the Andhra Pradesh High Court wherein the prohibition of the third party sales was challenged. 55. In the meanwhile, on 23.4.01, APERC after observing that Astha had not approached APTRANSCO as per its directions to arrive at an agreement for sale of electricity, directed Ast....
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....t, economic and competitive manner and for matters connected therewith or incidental thereto. 67. "APTRANSCO" has been defined in Section 2(b) of the 1998 Act to mean Transmission Corporation of Andhra Pradesh Limited incorporated as a transmission company under the Companies Act, 1956 (Central Act 1 of 1956) and as referred to in Section 13 thereof. 68. "Commission" has been defined in Section 2(c) of 1998 Act to mean the Andhra Pradesh Electricity Regulation Commission constituted under Sub-section (1) of Section 3. 69. "Licensee" or "licence holder" has been defined in Section 2(e) of 1998 Act to mean a person licensed under Section 14 of the Act to transmit or supply energy including APTRANSCO. 70. Section 3 of 1998 Act provides for establishment and constitution of the Commission. 71. Functions of the Commission have been dealt with in Section 11 of the 1998 Act, Clauses (e) and (f) whereof read as under: 11. Functions of the Commission,: (e) 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 consid....
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....ny consumer. 78. Section 14 of 2003 Act provides for grant of licence. 79. The Schemes of 1910 Act, 1948 Act and 1998 Act being different, any licence or sanction granted in terms of Section 3 and 28 of the 1910 Act or permission under Section 43A of the 1948 Act would not mean that no licence was required in terms of 1998 Act. The Regulatory Commission in absence of any direction issued by the State in terms of Section 12 of the Act, that too being an expert body was entitled to take its own decision. The power of the Commission to regulate supply would include a power to issue necessary direction (s) to supply electrical energy only to the licenses under the 1948 Act. The 1998 Act stipulates that the manner in which the power to regulate would be exercised has been left with only an expert body. 80. There are principally two categories of cases before us, viz.: i) Where the State of Andhra Pradesh had granted express permission to establish Mini Power Plants (for short MPP) prior to 1995 where residual fuel which were to be used as raw-material had been specified. ii) The Government of Andhra Pradesh also permitted the producer of electricity to supply ....
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.... 1) That sanction granted in terms of Section 28 of 1910 Act or permission granted under Section 43A of the 1948 Act would not lead to the conclusion that the MPPs were not required to take fresh licence or apply for grant of exemption. 2) Applications for grant of exemptions were filed by the MPPs, as even they as also the financial institutions thought that the same was necessary. 3) The Commission in its order did not interfere with the agreements which had been entered into by and between the MPPs and the third party prior to coming into force of the 1998 Act. 4) The decision to direct the MPPs to supply power to APTRANSCO was taken with a view to adjust the equities between the parties, as otherwise, whereas on the one hand MPPs would be supplying power to industrial companies and commercial concerns which would attract a higher tariff, the APTRANSCO would have been left with only agricultural consumers and domestic consumers for whom the tariff was on a lower side resulting in sufferance of loss by it 5) The Commission had the jurisdiction to issue such directions, apart from its power to grant licence or grant exemption in terms of Section....
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....and when the company, as an act of desperation, keeping in view its commitments to various financial institution, had even agreed therefore, took a complete turn about to contend that they do not require the power. 5) The Government of Andhra Pradesh having referred the matter to Central Electricity Authority for its opinion and having obtained the same, the Commission was bound to compel APTRANSCO to agree thereto. 6) In any event, as by reason of the stand taken by APTRANSCO, the company had to cancel all the agreements of supply entered into by and between the parties for supply of electrical energy, it could not have resiled from its representation and refused to purchase electrical energy from it. 7) Once it is contended by the APTRANSCO that the Commission had the power to direct the MMPs to sell their produce only to it, as a matter of policy, could not have contended that the Commission can have only half a power and it had no power to ask it to purchase the same. 8) The Commission which itself has made a mess of everything, was bound as an expert body to take the interim direction of the Commission to its logical conclusion. 9) ....
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.... only on the basis of misplaced conception. 90. The State took a policy decision. It was with a view to develop growth of generation and supply of electrical energy. Monopoly of the State Electricity Board was sought to be given a go bye. The intention of the State to lay down the policy decision in regard to privatization of generation and supply of electrical energy is manifest from the GOMs. issued by it. 91. There is absolutely no doubt whatsoever that the Commission, which is a statutory authority, is bound by the direction of the State but it would not be so bound if it is contrary to or inconsistent with any of the provisions contained in 1998 Act. Respondents herein sought for an exemption from the provisions thereof. They filed applications in terms of Section 16 of 1998 Act. Whether such an application was filed on a mistaken belief or not is one question but the action taken by the Commission must be construed upon taking a holistic view of the matter. 92. Respondents herein acted pursuant to the promise made by the State. They altered their position. They have invested a huge amount. They secured foreign collaboration, raised huge loans from financial instituti....
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....ule or order prescribed by a superior for the management of some business or for the government of a company or society or the public generally. 99. In State of Tripura and Ors. v. Sudhir Ranjan Nath [1997]2SCR29 , this Court held: This in turn raises the question, what is the meaning and ambit of the expression "regulate" in Section 41(1) of the Act? (Section 41(1) empowers the State government "to regulate the transit of all timber and other forest-produce".) The expression is not defined either in the Act or in the rules made by the State of Tripura. We must, therefore, go by its normal meaning having regard to the context in which, and the purpose to achieve which, the expression is used. As held by this Court in Jiyajeerao Cotton Mills Ltd. and Anr. v. Madhya Pradesh Electricity Board and Anr. AIR1989SC788 the expression "regulate" 'has different shades of meaning and must take its colour from the context in which it is used having regard to the purpose and object of the relevant provisions, and as has been repeatedly observed, the court while interpreting the expression must necessarily keep in view the object to be achieved and the mischief sought to be remed....
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....nts were entitled to produce electrical energy under Section 28 of 1910 Act. They were authorized to generate electrical energy. The question which arises is as to whether they were required to file appropriate applications for grant of licence or for exemption which should have been dealt with accordingly. At that point of time, the Commission was not exercising its other functions. A condition, which is per se unreasonable should not have been imposed. It is one thing to say that the statutory authority exercised its powers one way or the other but it is other thing to say that in the garb of exercising power of grant of licence and/or exemption thereunder, it issued a direction which has nothing to do directly therewith. 104. Commercial relationship between a generating company and the consumer has all along been accepted. Public interest would not mean the interest of APTRANSCO alone. Equity in favour of one of the generating companies could not have been the sole ground for coming out with such a policy decision and that too while considering application for grant of exemption from the purview of the licensing provision. 105. We will assume that the Legislature of the St....
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....the Reform Act, 1995 shall continue to be a licensee. In view of this finding the High Court held that the dispute is arbitrable under Section 37(1) read with Section 33 of the Reform Act, 1995. It is not seriously disputed that ICCL after a long-drawn correspondence with the Orissa Government had received no objection to put up the Captive Power Plant at Choudwar to generate power. Accordingly in 1989 the Captive Power Plant started generating power which was supplied to the OSEB. This arrangement continued till 1994 when MOU and agreement were entered into between ICCL and OSEB. The GRIDCO being a successor of OSEB, naturally the MOU of 1994 and agreement of 1995 will be binding upon the GRIDCO in the absence of any material to the contrary. It is not the contention of the GRIDCO that ICCL did not supply any power at all during the period for which the bills were raised on ICCL. Despite this factual position it appears that no formal licence was issued under Section 2(h) of the Indian Electricity Act, 1910 or under the Reform Act, 1995. It cannot be ignored that the investment of ICCL in putting up a Captive Power Plant at Choudwar is running into few hundred crores. Sections 2(e....
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....tered into and only by reason thereof, the APTRANSCO may generate a lot of revenue. The decision of the Commission, therefore, being illegal has rightly been set aside by the High Court. 113. This takes us to the case of LVS Powers Ltd. So far as LVS Powers Ltd. is concerned it had acted on the basis of the directions of the Commission. It for all intent and purport proceeded on the basis thereof. It not only held negotiations with APTRANSCO for the purpose of arriving at a mutually settled tariff, it having regard to huge loan taken by it and presumably on the pressure of IDBI accepted almost all the suggestions made by APTRANSCO. 114. From the letter dated 24th July, 1996 to M/s. LVS Power Ltd. it is evident that its consumers were Hindustan Shipyard Ltd.; Hindustan Zinc Ltd.; Essar Steels Ltd. and Andhra Cements Ltd. all situated at Visakhapatnam i.e. within the State of Andhra Pradesh. The Commission appears to have even succumbed to the pressure of the employees of the State Electricity Board. It allowed the employees to be impleaded as parties. It heard them. Why the employees of APTRANSCO had to be heard is beyond our comprehension. 115. From the order dated 4th May....
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....ommission itself would do it. The aforementioned order dated 4th May, 2001 has also not been challenged by APTRANSCO. 122. It is in the aforementioned backdrop that we will notice the letter dated 17th August, 2001 written by Chief Engineer, Vidyut Soudha to the Commission where after duly noticing that since finalization of PPA has to be done after the above cited GoAP approvals are received, it was proposed to purchase power produced at the above cited rate from the COI as the plant, subject to consent of the Commission. From the said letter it appears that APTRANSCO had reviewed the capital cost furnished by the developer. They were agreeable to the levelised tariff mentioned therein with payment on year to year basis as per CEA norms and variable charge. As per CEA, APTRANSCO was permitted to purchase the power from LVS Powers Ltd. at the rate specified in paragraph 5 of the letter which is to the following effect: 5. APTRANSCO's consultants have reviewed the capital cost furnished by the developer and opined that the capital cost can be brought down to the order of Rs. 125.00 Crs. The revised tariffs with this capital cost and CEA norms for unit generated will ....
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.... interim measure and directed APTRANSCO to send the firm tariff proposal with the approved project cost from competent authority latest by 30.11.2001 for the commission to pass appropriate order. 3) In this connection, the following are submitted - i) The GOAP have been requested vide this office letter dated 26.11.2001 ref (5) cited to limit the capital cost of the LVS Power Ltd. to Rs. 125.33 Crs. and for approval of the capital cost to fix the final fixed cost of the tariff and seek the approval of APERC to continue purchase of power. ii) After the project cost is approved by GOAP the tariff is to be worked out and a firm proposal is to be submitted to APERC for approval. iii) It may take some time for approval of capital cost and finalization of tariff and approval of power purchase from APERC. iv) APTRANSCO cannot take power from the project in the absence of provisional approval from APERC. 4) In view of the above, it is requested that the time limit of power purchase from M/s. LVS Limited may kindly be extended for a further period of two months i.e. from 30.11.2001 to 31.1.2002 early to enable APTRANSCO to avail supply b....
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....proval. APTRANSCO by its letter dated 11th April, 2002 addressed to the Commission, inter alia stated: After detailed examination of the above offer by APTRANSCO, I am directed to convey that in the context of surplus power situation and APTRANSCO's proposal to surrender NTPC Eastern Region Power and not to draw Power from Central Generating units due to Merit Order Dispatch, dispatch from the power station poses a serious problem. Further, APTRANSCO's inability to dispatch the station will lead to payment of fixed charges irrespective of generation by this power station. In view of the above, it is requested to take necessary action and pass appropriate orders in this regard. 132. It is in the aforementioned background that the order of the Commission dated 23rd April, 2002 stating that it had no jurisdiction to direct APTRANSCO to purchase power from LVS must be considered. 133. It is strange that while Commission was so conscious of is own power as envisaged under Clause (e) of Sub-section (1) of Section 11 of the Act in prohibiting third party sale so far as MPPs are concerned, it even could not take its own order to its logical conclusion. It is with som....
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....Act, the APTRANSCO shall discharge such powers and perform such duties and functions of the Andhra Pradesh State Electricity Board including those under the Indian Electricity Act, 1910 and the Electricity (Supply) Act, 1948 or the rules framed thereunder as the Commission may specify in the licence and it shall be the statutory obligation of the APTRANSCO to undertake and duly discharge the powers, duties and functions so assigned. 135. We have held hereinbefore that licence under Section 14 is necessary but the same is only for transmission and supply and not for generation of electrical energy. Such a licence is required so as to enable the Commissioner to effectively control and regulate transmission and supply. It is also relevant to note that Section 21 provides for restriction on licensees and generating companies. Sub-section (4) empowers a holder of supply or transmission licence to enter into arrangements for the purchase of electricity. Sub-section (5) provides that any agreement relating to any transaction of the nature described in any of the sub-sections unless made with or subject to such consent as aforesaid, shall be void. It, therefore, restricts the power and ....